Solid plans: Jose Sergio Gabrielli
Petrobras cash plans on track
Petrobras chief executive Jose Sergio Gabrielli has insisted that the company is on course to financing its ambitious $174.4 billion capital expenditure after raising more than $30 billion at the height of the global credit crunch.
Petrobras financial managers were taken aback last week when credit rating agency Standard & Poors downgraded the company due to signs of financial overstretching in the five-year investment plan.
“We were very surprised that Standard & Poors downgraded us because it comes as the price of oil is rising and not falling, at a moment when we have practically raised all the finance we need over the full five years, at current prices,” Gabrielli said in an exclusive interview.
The rating agency last week downgraded Petrobras from BBB to BBB- with a stable outlook.
Gabrielli said Petrobras was in a robust financial state, having raised between $30 billion and $31 billion in financing since the five-year capex plan was unveiled in January, the exact amount depending on exchange rate factors.
“If the price of oil were to stay at $37 per barrel in 2009, at $40 in 2010 and $45 dollars in 2011 and beyond, we would still need just $30 billion in financing over the next two years, and we have already that," he said.
Gabrielli acknowledged that Petrobras would then have to “rethink its debt financing or investment plans" at that point, if oil prices were to stay so low.
The financing outlined by Gabrielli included $12.5 billion from the Brazilian national development bank (BNDES), $6.5 billion in bridging loans from six international banks and one Brazilian bank, $2 billion from the US Export-Import bank and $10 billion from the Chinese development bank.
“Our investment plan is sound and profitable over the long term,” Gabriell said.
Petrobras is in ongoing talks with export credit agencies around the world for further financing, including Norwegian, Japanese and British agencies.
Yet more cash may be tapped from sovereign investment funds in the Middle East, including a reported deal currently under wraps involving the United Arab Emirates.
Petrobras is already bucking an industry trend whereby many of its peers are either retrenching or freezing investment levels. The company's total Investments for 2009 are close to $37 billion.
A recent study by Barclays Capital showed the Brazilian company investing $18 billion in E&P, up 20% on the year, while all other of the top 15 upstream spenders either reduced or froze their investments. Shell’s upstream investments were highest, at $21 billion, but spending was down 7% year-on-year.
Brazilian upstream investments are expected to soar into hundreds of billions of dollars in the second half of the next decade, when investments in the huge pre-salt discoveries will be entering their peak.