* FinMin says to 'certainly' grant 2013 fuel rise
* Petrobras seeks $15.4 bln of cuts in 2013-2016
* Cuts to increase cash flow as debt level soars
By Jeb Blount
RIO DE JANEIRO, Dec 19 Shares of Brazil's
state-led oil company Petroleo Brasileiro SA rose on
Wednesday, closing at a six-week high, after the government said
it would allow it to raise fuel prices in 2013 and the company
moved to cut $15.4 billion of costs.
Brazil will "certainly" raise gasoline prices in 2013,
Finance Minister Guido Mantega told reporters early Wednesday,
raising expectation that Petrobras, Brazil's only refiner, will
be able to stem more than $8 billion in 2012 fuel sales losses.
Later Wednesday, Petrobras said it will cut costs by 32
billion reais ($15.4 billion) between 2013 and 2016 to stanch
the impact of falling output and rising debt on its ambitious
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 put
its $235 billion 2012-2016 investment plan at risk. It is the
world's largest corporate spending program.
"Without more revenue, Petrobras can't carry out its plans.
It needs a fuel increase, but we've heard this before and the
government keeps putting it off," said Lucas Brendler, oil and
gas company analyst with Banco Geração Futura in Porto Alegre
"As for costs, they are doing the right thing, but I think
it will take a long time for them to get the savings they
expect," he added.
Petrobras preferred shares, the company's most-traded class
of stock, rose 3.77 percent to 20.93 reais on the Sao Paulo
BM&FBovespa exchange in its biggest one-day jump in three months
and its highest close since Nov. 7.
The Bovespa index of the exchange's most-traded stocks rose
The cost-cutting 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 said in
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 them.
Moody's Investors Service could lower Petrobras' "A3"
ratings within the next 12 months should debt keep increasing
Reuters has reported that Petrobras' debt has exceeded its
own ceiling of 2.5 times EBITDA, or earnings before interest,
taxes, depreciation and amortization, and risen to 2.6 times
EBITDA, according to a source with direct knowledge of the
The company seeks to increase cash flow, increase
productivity and increase the efficiency of its spending and
measure improvements using international benchmarks, the
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
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
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