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Petrobras Slashes 2021-2025 E&P CapEx Guidance Amid Coronavirus

Zacks Equity Research
·3 min read

Petroleo Brasileiro S.A. or Petrobras PBR recently curbed its capital spending guidance involving oil exploration and production (E&P) for the next four years in response to the coronavirus-induced weak market scenario.

Petrobras expects to spend approximately $40-$50 billion for exploration and production between 2021 and 2025 compared with the prior outlook of $64 billion announced in the 2020-2024 strategic plan. 

Nearly 71% of the total exploration and production investment for 2021-2025 will be devoted to the Buzios deepwater field (and other pre-salt assets) as the field becomes more and more important for Petrobras. In June 2020, despite such challenging market conditions, this Rio de Janeiro-based company was able to produce record fuel at its deepwater Buzios oil field. The production at this world’s largest oil field with P-74, P-75, P-76 and P-77 platforms totalled 664,000 barrels of oil per day (bpd) and 822,000 barrels of oil equivalent per day (boed).

Management confirmed that the weak Brazilian real and the overall lower Brent crude prices trimmed the investment view in dollar terms. The company is now targeting projects that will break even at $35 per barrel of oil.

Petrobras is also planning new asset sales as part of its policy to regain financial footing by divesting its assets and reducing debt. This is because the company continues to grapple with issues of the unexpected drop in oil prices and a dent in global demand due to the novel coronavirus outbreak that took a toll on oil and energy entities, thereby forcing the industry players to delay their expansion plans and decrease capital expenditures to preserve liquidity.

Company Profile

Petrobras is the largest integrated energy firm in Brazil and one of the biggest in Latin America. The company’s activities include exploration, exploitation and production of oil from reservoir wells, shale and other rocks. The operations also include refining, processing, trading and transportation of oil and oil products, natural gas and other fluid hydrocarbons apart from other energy-related operations.

Zacks Rank & Key Picks

Petrobras currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Murphy USA Inc. MUSA, CNOOC Limited CEO and SilverBow Resources Inc. SBOW, each presently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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