BRAZIL PETROBRAS: On troubled waters

Mar 1, 2014

When it comes to pursuing its ambitious investment program, Petrobras remains undeterred by a mounting debt burden. Concern among equity investors, however, is growing. By Thierry Ogier

Petrobras, one of the most powerful companies in Latin America, is in a quandary. The Brazilian state-run oil company needs to increase production and revenues, and pursue an ambitious investment program to explore oil reserves in hard to access, ultra-deep waters.

But, at the same time, investors - some of whom pumped $70 billion in a record share offering in September 2010 - have become increasingly wary of the company's mounting debt burden.

The reason is simple: in recent years, Petrobras' oil output has been flat. Moreover, it has failed to meet its own production targets.

Yet Petrobras' ambitions remain undiminished. The company says it intends to double its output by the end of the decade. But is this achievable? It took 60 years for it to pump 2 million barrels per day; it now proposes to add the same amount to its daily output in just seven years.

Its not-so-secret...

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