Petrobras Investment Plans at Risk From S&P Downgrade

  • S&P likely to downgrade Petrobras after Brazil cut: BTG
  • Petrobras fell most since Sept. 1 in Sao Paulo trading

Petroleo Brasileiro SA’s investment plans will be at risk if Standard & Poor’s downgrades the state-controlled producer to junk as it did with Brazil’s sovereign rating, said analysts at HSBC Holdings Plc and BTG Pactual.

“The company may face challenges to fund its Capex plan, due to the amount of debt to be raised over the next years,” HSBC analysts Luiz Carvalho and Filipe Gouveia said Thursday in a report to clients.

Petrobras plans to invest $108.6 billion on exploration and production through 2019, or 83 percent of its business plan, to expand production in the so-called pre-salt region that holds Brazil’s biggest oil discoveries. The company said yesterday it has already started re-negotiation drilling rig contracts.

Petrobras’s rating will “inevitably” be cut by S&P after the company dropped Brazil’s rating one step to BB+ with a negative outlook, because Petrobras’s credit risk is closely linked to the sovereign, BTG Pactual analysts Antonio Junqueira, Andres Cardona and Julia Ozenda said in a report to clients Thursday.

S&P didn’t respond to an e-mail requesting comment on a possible Petrobras downgrade. Moody’s Investors Service already slashed Petrobras to junk in February.

Petrobras fell 4.4 percent to 8.02 reais at 12:19 p.m. local time. Earlier is fell as much as 6.9 percent, the biggest intraday drop since Sept. 1.

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