Petrobras has gotten mixed reception from an agreement unexpectedly announced Tuesday that will allow it to exploit more oil than initially planned in premier pre-salt areas off Brazil.
The state oil company has agreed to contract directly with Brazil regulators to produce beyond 5 billion barrels from four areas in unlicenced acreage known as the Cessao Onerosa.
But Petrobras must also hand over hefty government payments summing to 15 billion reais ($6.8 billion) though 2018, concerning investors given the company is already committed to a $220.6 billion investment plan over that timeframe.
Markets are "concerned about incremental cash outflow but Petrobras has further enhanced its leading resource position amongst the global majors," Tudor Pickering Holt wrote in a note to clients, calling the move a short-term negative but long-term positive.
Petrobras chief executive Maria das Gracas Foster downplayed concerns at a news conference late Tuesday, calling the new agreement an "exceptional opportunity," according to Dow Jones.
The company expects to increase its 2014-2018 investment budget by about 3% as a result, the news wire quoted her as saying. Production from the areas is slated to kick off in 2021 with peak output in 2026 at about 1 million barrels per day, Dow Jones reported.
New asset sales or project restructuring are both possibilities for the national oil company to rework its budget in the next five years, Gracas Foster said according to Bloomberg.
Shares dipped more than 3% late on Tuesday and were trading down more than 1% in Sao Paulo on Wednesday morning. Morgan Stanley on Wednesday morning dropped the company's rating to Hold from Buy.
Critics also questioned the no-bid contract's steep government take at a time when Brazil is under pressure to meet federal budget targets.
"The goal was definitely not fiscal," Energy Minister Edison Lobao told reporters according to the O Globo newspaper.
Allotting rights in the area to other companies could open the contracts to delays and to judicial risk, the newspaper quoted officials as saying.