Bloomberg News

Petrobras Platform Arrivals to Accelerate Reserve Growth

January 16, 2012

(Updates to add CFO comment on domestic bond sales in 10th paragraph.)

Jan. 13 (Bloomberg) -- Petroleo Brasileiro SA, the state- controlled oil producer, will accelerate reserve growth over the next four years as it deploys more production equipment in deep waters of the Atlantic Ocean, the chief financial officer said.

Petrobras, as the Rio de Janeiro-based company is known, needs equipment at discovery sites to meet requirements to classify the oil as proven reserves, CFO Almir Barbassa said in an interview. The company expects to receive 19 production platforms by the end of 2015, he said.

“Each one of these platforms has a potential area it can drain of close to 600 million barrels,” said Barbassa yesterday in a telephone interview from Rio de Janeiro. “This oil will turn into proven oil at the end of 2015.”

Petrobras is developing the largest oil finds in the Americas since Mexico discovered Cantarell in 1976 and plans to invest more than any other oil company to more than double output by 2020. Petrobras borrowed $18 billion from bond markets and banks last year to finance investments and plans to borrow a similar amount this year, Barbassa said.

The company’s oil and natural-gas proven reserves have climbed 10 percent over the past five years to 12.9 billion barrels at the end of 2011, according to the U.S. Securities and Exchange Commission’s Standards.

Growth in reserves slowed to 1 percent last year from a 2.8 percent increase in 2010.

‘Attractive’ Opportunity

With almost $30 billion in cash, Petrobras can wait for an “attractive” opportunity to sell bonds abroad, Barbassa said. The company plans to borrow $15 billion to $18 billion this year through bond sales and bank loans to help finance $224.7 billion in investments in the five years through 2015, he said.

“It’s a flexible target, depending on the appetite in the market,” Barbassa said. “We could go for a year without doing an operation.”

Petrobras hasn’t hired any banks yet to sell bonds this year, he said. Last year Petrobras sold $6 billion in dollar bonds and sold more bonds in euros and pounds. Any dollar bond sales this year will be a “benchmark” size, Barbassa said, without elaborating.

The company may offer bonds in the domestic market this year after selling 405 million reais ($228 million) of debt that matures in 12 to 17 years last month, Barbassa said.

Yields on Petrobras’s 5.75 percent bonds due in 2020 rose four basis points to 4.85 percent yesterday. The yield has gained nine basis points so far this year. Petrobras rose 0.7 percent in Sao Paulo to 23.08 reais yesterday.

Japanese Refinery Sale

The first asset Petrobras plans to sell as part of a $13.6 billion divestment and cost-cutting program is its Okinawa refinery in Japan, Barbassa said.

“We started with the refinery in Japan and we expect to have various other announcements in the first half,” Barbassa said.

Petrobras is considering selling oil exploration and production assets in Brazil and abroad, and refining and power and electricity assets, Barbassa said.

--Editors: Robin Saponar, Dale Crofts

To contact the reporter on this story: Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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