Petrobras Cuts Managers to Save $440 Million a Year in Rout

  • Deep-water producer reduces business divisions to six
  • Plans to cut non-operational management positions by 30%

Brazil’s state-controlled oil company is reducing management positions and streamlining operations to save 1.8 billion reais ($440 million) a year as it navigates the worst oil market in a generation and a sprawling corruption investigation.

Petroleo Brasileiro SA is reducing management positions in non-operational areas by about 30 percent and combining the refining and natural gas divisions to reduce its business units to six, it said in a statement Thursday. The company has nearly 7,500 management jobs, with 5,300 in non-operational areas. The changes will be presented to shareholders for approval, and the first phase of dismissals should be completed in about a month, Chief Executive Officer Aldemir Bendine told reporters in Rio de Janeiro.

“It’s a scenario of total stress,” Bendine said at a press conference. “The company has to adapt.”

The combination of collapsing crude prices, the largest debt load in the industry and a pay-to-play scandal that has seen some of Petrobras’s former executives go to jail and suppliers go bankrupt, has made the Rio de Janeiro-based producer the worst performing major oil stock in the past year, with a 49 percent plunge.

The board was granted the power to name and fire executives and will participate more in decisions, Bendine said. Internally, more decisions, such as signing billion-dollar contracts with suppliers, will be made collectively, inside committees. Carwash prosecutors have blamed part of the scandal on the super powers heads of division had to sign alone billionaire contracts.

Petrobras is preparing for oil prices as low as $20 a barrel and its main deep-water projects are still very competitive despite the price plunge, Bendine said. Projects in the so-called pre-salt region that holds Brazil’s largest crude discoveries will remain a priority under the new business model, he said.

“We’ve worked with lower Brent prices in the past,” Bendine said. “It’s not the end of the world.”

The company is also pursuing asset sales at “full speed” to raise cash for investments, he said. The company may delay a second train for its RNEST refinery in northern Brazil, and is seeking a partner for the Comperj refinery in Rio de Janeiro, he said. When asked it the company could sell majority stakes in some of its businesses units, Bendine said the company will keep an “open mind” on how to divest assets.

Before it's here, it's on the Bloomberg Terminal.