Oil Crisis And Pandemic Lead Petrobras To Hibernate Platforms, Reduce Investments And Take Other Emergency Measures

Pandemic And Abrupt Reduction In Oil Prices And Demand Lead Petrobras To Take A Series Of Measures To Reduce Disbursements And Preserve Cash

In light of the impacts of the coronavirus pandemic and the shock in oil prices, Petrobras informed 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 Coronavirus Expansion

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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 oil and fuel prices, the company is adopting a series of measures to reduce disbursements and preserve cash amid this scenario of uncertainties and has decided to implement the measures described below, in order to balance its cash flow in 2020.

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

– Reduction of operational expenses, with an additional decrease of US$ 2 billion by taking the following measures:

• Hibernation of platforms operating in shallow water fields, with higher extraction costs per barrel, which due to falling oil prices have incurred negative cash flow. The current production from these fields is 23 thousand bpd and divestments in these assets are ongoing.
• Lower spending on well interventions and optimization of production logistics.
• Postponement of new significant hires for 90 days.

– Reduction of the planned investments for 2020 from US$ 12 billion to US$ 8.5 billion (with US$ 7 billion in the cash view), mainly due to the postponement of exploratory activities, well interconnections, and the construction of production and refining facilities, and the depreciation of the Real against the US dollar.

– The disbursement of two new lines totaling R$ 3.5 billion and of committed credit lines amounting to approximately US$ 8 billion, as announced on March 20, 2020, by Click Petróleo e Gás.

– Reduction and postponement of human resources spending totaling R$ 2.4 billion.

Petrobras reinforces its commitment to managing its portfolio and with its strategy supported by five pillars: maximizing return on capital, reducing capital cost, relentless pursuit of low costs, meritocracy, and respect for people, the environment, and safety. The current crisis emphasizes the importance of these pillars, which 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.