Petrobras confirms investments in the order of US$ 90 billion until 2024

With the highest amount approved since the state-owned company's last strategic plan, Petrobras will invest heavily in several sectors

Petrobras informs that its Board of Directors approved, in a meeting held yesterday (27/11), 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, which aims to eliminate the performance gap that separates us from the best global oil and gas companies, creating substantial value for our shareholders. Furthermore, the plan is consistent with the five strategic pillars that we have defined: i) maximization of return on capital employed; ii) reduction in the cost of capital; iii) relentless search for low costs; iv) meritocracy; v) respect for people, the environment and safety.

Petrobras is going through a moment of cultural and digital transformation and, seeking an effective return on the capital employed by its shareholders, it decided to incorporate a new management tool into the plan: EVA® (Economic Value Added). The indicator represents the beginning of a performance assessment that focuses on generating value, transforming the company's culture through clear incentives for managers and professionals.
The Petrobras of the future will be a company with an operating return greater than its cost of capital, positioned in world-class assets, with operations focused on oil and gas, advancing in the exploration and production of the Brazilian pre-salt, an efficient refining park, with capacity to process 1,1 million bpd. With regard to renewable energy sources, the company will carry out research in order to acquire skills for a possible long-term positioning in wind and solar energy.

The plan has three top metrics focused on people's safety, debt reduction and value creation:

• Recordable injury rate per million man-hours (TAR) below 1,0  
• Net debt/adjusted EBITDA below 1,5x
• $2,6 billion consolidated EVA® delta

In addition, we stipulate a Zero Fatality ambition.

We continue to pursue deleveraging through cash generation and divestments. In 9M19, we managed to reduce the company's gross debt by US$ 21 billion. We maintain the goal of reaching a Net Debt/LTM EBITDA ratio of 1,5x still in 2020. In 2021, we plan to reach US$ 60 billion of gross debt, which will increase the remuneration to shareholders in line with the new dividend policy already announced.

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

CAPEX forecast for the five-year period is US$ 75,7 billion, of which 85% is allocated to the E&P segment. This allocation is in line 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 divestments foreseen in the plan vary between US$ 20-30 billion for the period 2020-2024, with the highest concentration in the years 2020 and 2021.

Production of oil, NGL and natural gas

The estimated oil and gas production curve for the period 2020-2024 indicates continued growth. During this period, 13 new production systems are expected to start operating, all of which will be allocated to projects in deep and ultra-deep waters.

The company decided to present a vision of commercial production, 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 in the reservoirs, consumed in E&P facilities and burned in the production processes. In addition, the production curve does not include divestments, with the exception of around 100 mboed, related to the fields in Nigeria and Tartaruga Verde, whose transactions have already been signed and the closures are close to occur.

Production estimates are shown below.

Oil and natural gas production (million boed)

For the 2020 production target, we consider a variation of 2,5% for more or less. This year's oil production mainly reflects volume losses related to the natural decline of mature fields and the greater concentration of production stoppages to increase the integrity of the systems, partially offset by the ramp up of new platforms. In the long term, the growth trajectory is supported by the new production systems – mostly in the pre-salt layer, with greater profitability and value creation – and by the stabilization of production in the Campos Basin.

financeability

The expressive operational cash generation will be due to the greater projected efficiency, cost control and financial resources due to the active management of the portfolio. This will allow for a gradual reduction in gross debt, with a consequent decrease in interest expenses and an increase in estimated amounts for dividend distribution, through the company's new Dividend Policy, generating greater remuneration for shareholders. The debt reaches the level of US$ 60 billion in 2021, and remains at this level throughout the five-year period.

Additionally, by anticipating operating cash flow via asset divestments, Petrobras will carry out its investments, reducing its indebtedness, without the need for new net funding over the horizon of the Strategic Plan.

Low carbon and sustainability commitments

So far, we have already taken steps forward with a series of decarbonization actions in our processes, which involve reducing the burning of natural gas by flare, reinjection of CO2 and gains in energy efficiency. The company remains committed to the decarbonization of processes and products, with a robust action plan regarding resilience and carbon efficiency.

In this sense, we stipulate ten commitments with the low carbon and sustainability agenda:

1. Zero growth in absolute operating emissions by 2025*
   2. Zero routine burn in flareup to 2030
   3. Reinjection of ~40 MM ton CO2 by 2025 in CCUS projects
   4. 32% reduction in carbon intensity in the E&P segment by 2025
   5. 30%-50% reduction in the intensity of methane emissions in the E&P segment by 2025
   6. 16% reduction in carbon intensity in refining by 2025
   7. 30% reduction in freshwater abstraction in our operations with a focus on increasing reuse by 2025
   8. Zero growth in process waste generation by 2025.
   9. 100% of Petrobras facilities with a biodiversity action plan by 2025.
   10. Maintenance of investments in socio-environmental projects

* Carbon commitments in relation to the 2015 base. Other commitments based on 2018.

With the execution of this Strategic Plan, Petrobras reaffirms its commitment to becoming a more financially robust company, with low debt 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

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