EXCLUSIVE: Petrobras sticks to rapid divestment plans

EXCLUSIVE: Petrobras sticks to rapid divestment plans

Bonds Debt Capital Markets M&A People Energy Event Exclusives Brazil Project & Infrastructure Finance Fixed Income

Brazil's state-owned oil company Petrobras will stick to an aggressive divestment plan in 2020, seeking to substitute low-earning assets with high-return holdings as quickly as possible, said CFO Andrea Almeida.

"We need to execute and we need to execute fast," Almeida said. "Because that window of time does not stay open forever."

Market liquidity, investor interest and a Federal Supreme Court decision to lift an injunction on state-owned asset sales earlier this year are part of the window of opportunity. But the rush to sell assets does not only derive from Petrobras' drive to offload underperforming assets and lower capital costs, it also comes from the company's aim to limit the possibility of future interference in fuel prices by the government, Almeida said.

Petrobras raised $16 billion from asset sales in 2019 and set aside some of the proceeds to lower debt, which stood at $89.9 billion at the end of the third quarter last year, according to the company's latest financial results.

"The goal is $60 billion, so we're getting there," Almeida said, referring to the company's debt levels. "We are also generating cash to invest in assets that we think are the future of Petrobras."

Petrobras still plans to sell shallow-water oilfields and onshore exploration and production (E&P) assets, where smaller companies have more ability to extract value. It also intends to transform the downstream market by selling eight refineries that account for 50% of market capacity, according to Almeida.

"It is the right time to bring competitors to that market," she said, referring to the fuels sector, adding that there is a lot of investor interest in the assets because the country still depends on roads for transportation. 

In July, Petrobras sold 34% of the fuel distribution business BR Distribuidora for BRL9.63 billion ($2.28 billion) and lowered its stake to 37.5%. The company has reportedly hired seven investment banks to sell an additional stake in BR.

Other planned asset sales include thermal power plants, biofuels subsidiary BSBios and its remaining stake in the natural gas pipeline company Transportadora Associada de Gás (TAG).

"It's amazing how many assets we are selling at the same time. People are knocking on the door and talking about the assets that are in the portfolio," Almeida said.

Petrobras will hold on to its offshore natural gas pipelines, but it will likely invest in the projects through partnerships with other companies. Eventually, it will focus on deep-water production, while retaining some refining and natural gas activities, she said.

 

PHOTO: Andrea Almeida, Chief Financial Office of Brazil's state-owned energy company, Petrobras, speaking at the LatinFinance 5th Latin America Capital Markets Summit in New York on January 29, 2020. Photo by Leandro Justen