RIO DE JANEIRO (Reuters) - Brazil’s Petrobras said on Thursday it would cut oil production by 100,000 barrels per day, or around 3%, making it the first major state-run oil company to announce a significant reduction in output in response to the coronavirus pandemic.
In a securities filing, Petroleo Brasileiro SA (PETR4.SA), as the firm is formally known, said it also delayed a dividend payment and slashed 2020 investments by nearly a third to $8.5 billion.
While the production cut only lasts until the end of March and is relatively small for Petrobras, which produced over 3 million barrels of oil equivalent per day (boepd) in the fourth quarter, the firm left the door open to further reductions as it monitors the market. As part of those cuts, the firm will idle some shallow-water platforms with higher production costs, which are responsible for 23,000 barrels per day (bpd) of output.
Petrobras’ capex reduction comes after various other major oil companies, including Chevron Corp (CVX.N), announced similar measures. Crude oil prices have crashed by 60% since January as Saudi Arabia and Russia battled for their share of a market that has already slumped and seen demand shrink amid the coronavirus pandemic.
Demand worldwide is expected to fall by more than 12 million bpd, or more than 10% of daily demand.
Petrobras did not announce any changes to plans to sell $20 billion to $30 billion in assets by 2024 in a bid to reduce debt, a key component of its five-year business plan.
On a conference call with investors and analysts on Thursday, Petrobras Chief Executive Roberto Castello Branco said he had not received any indication that there was less demand among potential buyers for Petrobras assets.
Downstream Chief Anelise Lara added that she did not believe that recent market developments would affect the prices of eight refineries the firm is selling, a process expected to fetch several billion dollars.
Executives said they were renegotiating contracts with service firms and analyzing potential changes to individual investments on a daily basis. But, they added, they were reticent about making long-term adjustments given ongoing market uncertainties.
Still, Castello Branco said the company was not forecasting a “significant recovery” in oil prices barring some unforeseen event.
In its Thursday filing, Petrobras also said it was delaying a 1.7 billion-real ($336 million) dividend payment scheduled for May 20 until Dec. 15. Its next general shareholders meeting is set to be delayed by three days, from April 24 to April 27.
In addition to capex cuts, the firm is also cutting 2 billion reais in operational expenditures in the short term by suspending new contracting processes for 90 days, among other measures.
Petrobras also said it is drawing $700 million from its revolving credit lines, in addition to the $8 billion it said it would draw last week.
Brazil-listed preferred shares in Petrobras were up 1.3% in afternoon trade. The country's benchmark Bovespa equities index .BVSP was up 3.3%.
($1 = 5.06 reais)
Reporting by Gram Slattery; Editing by Bernadette Baum and Steve Orlofsky