Brazil’s Petrobras hopes to scale back spending in a bid to slash its debt burden, helping the beleaguered oil company rebound from a corruption scandal.
State-owned Petrobras said on Tuesday it planned to reduce investments by 25% between 2017 and 2021 to $74.1bn from a previous target of $98.4bn. Petrobras will also look to step up asset sales, aiming to raise $19.5bn between 2017 and 2018, an increase from its goal of $15.1bn in the 2015-2016 period.
The ambitious plan is the first under Petrobras’ new CEO Pedro Parente, who was appointed by new President Michel Temer in May. Parente set a priority of reducing the company’s nearly $125bn debt load, the largest in the oil industry.
Petrobras is reeling from the so-called “Car Wash” scandal, a kickback and bribery scheme that ensnared former company executives and politicians. Last year, the company wrote off $17bn, including $2 billion for alleged bribe payments.
Nymia Almeida, a senior credit officer at Moody’s, called Petrobras’ new business plan “challenging.”
“The company’s success in achieving its ultimate deleveraging goal, which would be positive for its credit profile, will depend on extreme managerial focus and discipline,” Almeida said in a report.
In February 2015, Moody’s stripped Petrobras of its investment grade rating citing concerns about the graft scandal.
Among other steps made public on Tuesday, Petrobras is aiming to reduce its leverage to 2.5x earnings before interest, taxes, depreciation and amortization in 2018, down from 5.3x in 2015.
While the plan helped push Petrobras’ share prices higher, some analysts expressed skepticism about the company’s production forecast.
Petrobras said it expects output of oil and natural gas to rise to 2.77m barrels a day by 2021, up from 2.07m barrels per day forecast next year.