MercoPress. South Atlantic News Agency

Petrobras plans to double oil output by 2015 and exit debt market in 10 years

Chief Financial Officer Almir Barbassa says cash flow and profits will be enough to cover operating and debt costs

Brazil’s government managed Petrobras said its plan to more than double oil output will boost cash flow and eliminate the need to tap debt markets after about 10 years. Profits from oil sales will be enough to cover operating and debt costs starting in about 10 years, said Chief Financial Officer Almir Barbassa.

Petrobras’s exit from the bond market will increase the value of existing notes because the amount of total debt will start declining, he said.

Petrobras last Friday unveiled its plan to 224.7 billion dollars through 2015, more than any other major oil producer in the world, as it develops some of the largest discoveries in about three decades.

As part of the plan, the company said it will raise as much as 91 billion dollars in debt and 13.6 billion dollars through asset sales and cost cuts.

“Cash flow will be enough to pay debt amortizations and the investments we will have,” Barbassa said. “Few companies in the world can say this.”

Petrobras is wrapping up the sale of a 50% stake of a block in Tanzania for about 100 million dollars, he said. The company hasn’t specified what other assets it plans to sell.

Petrobras aims to increase daily output to 4 million barrels of oil and equivalents by 2015 and to 6.4 million barrels by 2020. Output averaged 2.64 million barrels a day in June.

Under the five-year investment plan, the oil producer will raise as much as 12 billion dollars a year in net debt, excluding amortization costs. Total debt as a percentage of equity will increase to as much as 35% by the end of 2015, up from 17% at the end of the first quarter.

The 224.7 billion dollars program will invest 57% in the exploration and production segment; new projects in E&P account for 87% of total new projects spending and about 95% of the total spending is to be in Brazil.

The E&P segment spend will total 127.5 billion, of which 117.7bn will be allocated to Brazil, 65% for production development, 18% for exploration, and 17% for infrastructure. The pre-salt areas will absorb 45% of the total E&P investment in Brazil and approximately 50% of the total amount allocated for the production development.

The participation of the pre-salt in the total oil domestic production will increase from 2% in 2011 to 40.5% in 2020.