RIO DE JANEIRO (Reuters) - Brazil’s Petroleo Brasileiro SA sold its entire oil hedge position amid a sharp fall in crude prices, the company said in a filing on Wednesday night, saying it has eliminated uncertainties regarding its cash flow thanks in part to divestments.
Petrobras, as the state-run company is known, said in March it was spending $320 million on put options, hedging part of its output at $60 per barrel. Petrobras said the options expired at year-end.
Brent crudes prices </LCOc1> were around $67 per barrel when Petrobras bought the options, but prices have been hit by an intensifying U.S.-China trade war among other factors and are now hovering around $57 per barrel.
“The liquidation of these options is based on the significant reduction in cash flow uncertainties related to the execution of the company’s 2019 management and business plan, with a capex revision from $16 billion to the $10 to $11 billion range, $12.8 billion of cash coming in thanks to divestments and the beginning of a wide-ranging cost-cutting plan,” the company said.
Petrobras has been steadily selling off billions of dollars of assets this year to reduce debt and sharpen focus on offshore oil exploration and production. Last week, it also cut its capex projection for 2019 significantly.
Reporting by Gram Slattery; Editing by Steve Orlofsky