Petrobras Confirms Investments Estimated at $90 Billion by 2024

With Highest Value Approved Since The Last Strategic Plan Of The State-Owned Company, Petrobras Will Invest Heavily In Several Sectors

Petrobras informs that its Board of Directors approved, in a meeting held yesterday (11/27), the Strategic Plan for the five-year period 2020-2024, in line with the company’s strategic positioning, disclosed on September 26, 2019, where we aim to be the best energy company in generating value for shareholders, focusing on oil and gas and with safety, respect for people and the environment.

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Defined as Mind the Gap, the Strategic Plan brings a transformational agenda, aimed at eliminating the performance gap that separates us from the best global oil and gas companies, creating substantial value for our shareholders. In addition, the plan is consistent with the five strategic pillars we defined: i) maximizing return on invested capital; ii) reducing capital costs; iii) relentless pursuit of low costs; iv) meritocracy; v) respect for people, the environment, and safety.

Petrobras is undergoing a moment of cultural and digital transformation and, seeking an effective return on invested capital for its shareholders, decided to incorporate a new management tool into the plan: EVA® (Economic Value Added). The indicator represents the beginning of a performance evaluation focused on value generation, transforming the company culture through clear incentives for managers and professionals.
The Petrobras of the future will be a company with operational returns above its capital costs, positioned in world-class assets, with operations focused on oil and gas, advancing in the exploration and production of Brazilian pre-salt, an efficient refining park, with a capacity to process 1.1 million bpd. With respect to renewable energy sources, the company will engage in research seeking to acquire competencies for potential long-term positioning in wind and solar energy.

The plan includes three top metrics focused on people’s safety, reducing debt, and generating value:

•    Recordable Injury Rate per Million Man-Hours (TAR) Below 1.0  
•    Net Debt/Adjusted EBITDA Below 1.5x
•    Consolidated EVA® Delta of US$ 2.6 Billion

In addition, we set an ambition of Zero Fatality.

We continue to pursue deleveraging through cash generation and divestitures. In 9M19, we managed to reduce the company’s gross debt by US$ 21 billion. We maintain the goal of achieving a Net Debt/LTM EBITDA ratio of 1.5x still in 2020. In 2021 we plan to reach US$ 60 billion in gross debt, which will increase shareholder returns in line with the new dividend policy already announced.

We consider a resilience scenario as a premise for the plan, which is used as the minimum breakeven price for projects, lower oil prices at US$ 50/bbl for the next five years and US$ 45/bbl in the long term, applying stringent governance for project selection and prioritization.

The projected CAPEX for the five-year period is US$ 75.7 billion, of which 85% is allocated to the E&P segment. This allocation aligns with our strategic positioning, focusing on E&P assets, especially in the pre-salt, where Petrobras has a competitive advantage and generates more return on investments.

The divestitures forecasted in the plan range between US$ 20-30 billion for the period 2020-2024, with the largest concentration in the years 2020 and 2021.

Oil, NGL, and Natural Gas Production

The estimated oil and gas production curve for the period 2020-2024 indicates continuous growth. Throughout this period, the entry into operation of 13 new production systems is expected, all located in deep and ultra-deepwater projects.

The company decided to present a commercial production view in order to represent the economic impact of production on the company’s results, deducting from its natural gas production the volumes of gas reinjected into reservoirs, consumed in E&P facilities, and flared in production processes. In addition, the production curve does not account for divestments, except for about 100 mboed, related to fields in Nigeria and Tartaruga Verde, whose transactions have already been signed and the closures are nearing.

The production estimates are presented below.

Oil and Natural Gas Production (Million boed)

For the 2020 production target, we consider a variation of 2.5% up or down. This year’s oil production primarily reflects the loss of volumes related to the natural decline of mature fields and the greater concentration of production shutdowns to increase the integrity of systems, partially offset by the ramp-up of new platforms. In the long term, the growth trajectory is supported by new production systems—mostly in the pre-salt, with higher profitability and value generation—and by the stabilization of production in the Campos Basin.

Financability

The significant operational cash generation will result from greater projected efficiency, expense control, and financial resources through active portfolio management. This will allow for a gradual reduction in gross debt, with a consequent decrease in interest expenses and an increase in estimated dividend distribution values, through the company’s new Dividend Policy, generating greater remuneration for shareholders. The debt reaches the level of US$ 60 billion as early as 2021 and remains at that level throughout the five-year period.

Additionally, by anticipating operational cash flow through the divestments of assets, Petrobras will carry out its investments, reducing its indebtedness without the need for new net issuances in the Strategic Plan horizon.

Low Carbon Commitments And Sustainability

So far, we have made progress with a series of decarbonization actions in our processes, which involve reducing the flaring of natural gas, CO2 reinjection, and energy efficiency gains. The company maintains its commitment to the decarbonization of processes and products, with a robust action plan regarding resilience and carbon efficiency.

In this sense, we have set ten commitments to the low carbon and sustainability agenda:

1. Zero Growth In Absolute Operational Emissions By 2025*
   2.    Zero Routine Flaring By 2030
   3.    Reinject ~40 MM Tons CO2 By 2025 In CCUS Projects
   4.    32% Reduction In Carbon Intensity In The E&P Segment By 2025
   5.    30%-50% Reduction In Methane Emission Intensity In The E&P Segment By 2025
   6.    16% Reduction In Carbon Intensity In Refining By 2025
   7.    30% Reduction In Freshwater Withdrawal In Our Operations With A Focus On Increasing Reuse By 2025
   8.    Zero Growth In Process Waste Generation By 2025.
   9.    100% Of Petrobras Installations With An Action Plan For Biodiversity By 2025.
   10.   Maintenance Of Investments In Socio-Environmental Projects

* Carbon commitments are related to the 2015 baseline. Other commitments are based on 2018.

With the execution of this Strategic Plan, Petrobras reaffirms its commitment to becoming a financially stronger company, with low indebtedness and cost of capital, aligned with its industry peers, and focused on world-class oil and gas assets, always acting ethically and transparently, with safety and respect for people and the environment.

Source: Petrobras