CORRECTED-UPDATE 1-Petrobras seeks to cut costs by $15.4 bln
(Corrects company name in first paragraph)
* Plan comes as debt rises, output falls
* Cost cutting seeks to increase cash flow
RIO DE JANEIRO, Dec 19 (Reuters) - Brazil's state-led oil company Petrobras plans to cut costs by 32 billion reais ($15.4 bln) between 2013 and 2016 to stanch the impact of falling output and rising debt on its ambitious expansion plan.
The plan will focus on 39 areas that accounted for 43 billion reais of spending in 2011 and seek to reduce these costs by about 8 billion reais a year, the company, known as Petrobras, said in a statement released on Wednesday.
Petrobras is seeking to slash costs and increase revenue after a decline in output, a government fuel-price freeze, soaring prices for offshore oil development and rising debt, all put its $235 billion 2012-2016 investment plan, the world's largest corporate spending program, at risk.
To help finance the plan Petrobras is also selling an estimated $14.8 billion of non-Brazilian assets in the United States, Japan, Argentina and other countries. On Dec. 5 Reuters reported that Petrobras has been having trouble selling some of those assets. The company may also have trouble getting the prices it expects if it does sell the assets.
Moody's Investors Service could lower Petrobras' "A3" ratings within the next 12 months should debt keep increasing considerably.
Reuters has reported that Petrobras debt has exceeded its own ceiling of 2.5 times EBITDA, or earnings before interest, taxes, depreciation and amortization, rising to 2.6 times EBITDA, according to a source with direct knowledge of the company's finances.
By cutting costs, the program, known as PROCOP, seeks to increase cash flow, increase productivity and increase the efficiency of its spending and measure improvements using international benchmarks, the statement said.
Preferred shares of Petrobras, the company's most-widely traded class of stock, jumped 2.9 percent to 20.73 reais in early afternoon trading in São Paulo.
NOT TOO COST-EFFICIENT
According to company and industry sources, Rio de Janeiro-based Petrobras often spends far more than rivals to drill wells, build refineries, purchase ships and distribute its product than other major oil companies.
In the exploration and production division, Petrobras hopes to reduce the cost of fuels for offshore operations, reduce spending on on-shore oil and gas well work, increase productive days on drill ships, increase activity at natural gas processing facilities and reduce the number of ships that serve each offshore operation.
Its refining and supply operations seek to cut maintenance costs and reduce the use of chemicals at refineries. It wants to increase the efficiency of its tanker fleet and cut transportation costs.
It also seeks savings in its gas and energy division, Transpetro transport unit and lower information technology, communications and travel costs.
Petrobras also on Wednesday received approval for a 2.2 billion real loan from Brazil's state development bank BNDES to build a nitrogen-based fertilizer plant, BNDES said in a statement.
($1 = 2.08 Brazilian reais) (Reporting by Jeb Blount and Reese Ewing; Editing by Gerald E. McCormick and Nick Zieminski)
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