Pandemic and abrupt reduction in oil prices and demand make Petrobras take a series of measures to reduce disbursements and preserve cash

In view of the impacts of the coronavirus pandemic and the oil price shock, Petrobras informs this Thursday, March 26, about the measures it has been adopting to reduce disbursements and preserve cash amid this scenario of uncertainties.  Petrobras cuts gasoline prices by 15% and reduces refining due to the impacts of the expansion of the coronavirus

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The company announced a series of measures to preserve the health of its employees and support the prevention of the coronavirus in its operational and administrative areas.

The coronavirus pandemic has caused significant reductions in demand for derivatives, as a result of the abrupt reduction in prices and demand for oil and fuels, the company is adopting a series of measures to reduce disbursements and preserve cash in this scenario of uncertainties and has decided to implement the measures described below, in order to balance its cash flow in the year 2020.

– Reduce a total of 100 bpd of its oil production by the end of March, due to the oversupply of this product in the foreign market and the reduction in world demand for oil caused by the effect of COVID-19. The company will assess market conditions and, if necessary, make further adjustments to oil production, always ensuring safety conditions for people, operations and processes.

– Reduction of operating expenses, with an additional decrease of US$ 2 billion taking the following actions:

• Hibernation of platforms operating in shallow water fields, with a higher extraction cost per barrel, which, due to the drop in oil prices, began to have negative cash flow. The current production of these fields is 23 thousand bpd and divestments in these assets are still ongoing.
• Lower expenses with interventions in wells and optimization of production logistics.
• Postponement of new relevant hires for a period of 90 days.

– Reduction of investments scheduled for 2020 from US$ 12 billion to US$ 8,5 billion (US$ 7 billion in cash), mainly due to postponements of exploratory activities, interconnection of wells and construction of production and refining facilities and the devaluation of the Real against the US dollar.

– The disbursement of two new lines totaling R$ 3,5 billion and committed credit lines in the amount of approximately US$ 8 billion, as announced on 20/03/2020 by Click Petróleo e Gás.

– Reduction and postponement of expenses with human resources in the total amount of R$ 2,4 billion.

Petrobras reinforces its commitment to managing its portfolio and its strategy based on five pillars: maximizing return on capital, reducing the cost of capital, relentlessly seeking low costs, meritocracy and respect for people, the environment and safety. The current crisis highlights the importance of these pillars that must continue to be implemented with even more focus and intensity.

Reflecting its commitment to transparency, Petrobras will keep the market informed about future movements.