Petrobras Increases Exploration Spending 4% in Five-Year Plan

Petroleo Brasileiro SA (PETR4), the biggest oil producer in deep waters, increased investments in exploration and production and curbed spending on refining in its 2013-2017 business plan as it develops the largest discoveries in the Americas in almost four decades.

Petrobras, as the state-controlled company is known, increased exploration and production spending 4 percent to $147.5 billion for the five years through 2017 as it adds equipment to fields in the so-called pre-salt region in deep waters of the Atlantic Ocean, the company and said in a filing. It reduced refining investments $700 million to $65.5 billion because it plans to complete the Abreu e Lima refinery and other projects in 2016, it said.

Total investments rose 0.5 percent to $236.7 billion compared with the 2012-2016 plan, it said. Petrobras maintained its program to more than double oil and natural gas output in Brazil to 5.2 million barrels a day in 2020.

The Rio de Janeiro-based producer is increasing production at fields trapped under a layer of salt miles below the Atlantic seabed in an effort to more than double output by 2020. Petrobras was expected to announce a modest increase in its five-year plan to include 2017 investments, Frank McGann, a Bank of America (BAC) Corp. analyst, said in a March 13 research report.

The most indebted publicly-traded oil company is struggling with the dual priorities of expanding production and keeping debt low enough to maintain its investment grade rating. The five-year plan calls for $61.3 billion in borrowing to finance investments and service its debt.

The company expects cash flow to total $164.7 billion over the period and it plans to raise an additional $9.9 billion from asset sales and financial restructuring, it said.

To contact the reporter on this story: Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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