Petrobras Plans To Save $12 Billion By 2019

The article takes a look at why Petrobras has cut expenditure on chauffeured cars, parties, other benefits to save $12 billion by 2019.

Petroleo Brasileiro Petrobras is planning to reduce its corporate expenses by almost $12 billion, by the end of year 2019. According to Bloomberg, the company has planned to cut spending on Chauffeur driven cars, expensive trips, parties for training & development programs, and also some of the other benefits.

Because of deteriorating oil market situation and multibillion dollar corruption scandal; the company is keen to save costs, wherever it is possible. Currently, the plan to reduce its spending also involves dismissals of full time workers and outsourced jobs as well. Petrobras has planned to increase its production to around 5.3 million oil barrel each day, the efforts of the company has been spoiled by political interference, mismanagement and the corruption scandal.

After that, the company has reduced its production target for the year 2020 by approximately 1.6 million barrels per day, to 3.7 million bpd. Petroleo Brasileiro Petrobras is currently seeking other options as well, to increase its production and improve operational efficiency. The company is surrounded by a $125 billion debt. Petrobras market value has dropped currently to $44 billion from $310 billion in the year 2010. In an attempt to lessen the debt, the management of the company is planning to dispose some of the assets.

In terms of market cap, Petrobras is the biggest oil firmin the Southern Hemisphere. Brazil economy is 2nd largest in Western Hemisphere, behind United States. In terms of 2011 revenues , it is the largest in Latin America, but it is falling quickly.

Earlier in July, the company made an announcement that by 2018, it os going to raise around $57.7 billion via divestment and restructuring. The announcement came in when oil prices had already tumbled by more than 50% over the past 12 months. Announcements came in along with the second quarter earnings pointed out the oil companies have started to reduce capital spending.

In addition, the company has been assaulted by a continuing interrogation into accusations that its top officials were involved in billions of dollar kickbacks. Many companies and politicians were accused partners. Petrobras rejects all the allegations and claims to be victim of whole incident, while it has already paid a huge price. Petrobras has already seen the exit of Maria das Gracas, Chief executive officer and five top officials. The company has also suffered a loss worth of $1.6 billion, earlier in February.

Petrobras stock was down 6.09% to $5.16 at market close on Friday September 4.