Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) intends to raise more money from the sale of some of its assets than it previously reported. The company also intends to cut its capital spending to preserve cash and pay down debt. Petroleo has nearly $135 billion in debt.
Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) expects to unlock nearly $14 billion from divestment of assets in and outside of home country Brazil. The assets are planned for sale this year and in 2016, a move that is expected to enable the debt-riddled oil company to cut its outstanding debt.
In the previous target, Petroleo announced plans to sell assets worth about $5-$11 billion. However, the management of the company seems to have realized that selling more assets would be a better strategy to deal with existing financial woes.
New CEO attempts to right the ship
Petroleo last year announced a five-year spending plan of $221 billion. Since taking over the leadership at Petroleo about a month ago, CEO, Aldemir Bendine, has primarily focused on asset sale and spending cuts to restore confidence in the company. There have been serious allegations about high-profiling looting in the state-run oil company. Some 54 lawmakers and other state officials are accused of looting Petroleo for political gains.
Corruption scandals in Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) have made it difficult for the company to raise funds in the capital market. That explains why Bendine would most likely make more investment cuts and offload more assets to address debts and avoid cash shortage.
Asset divestment strategy
There were reports that Petroleo tapped JPMorgan Chase & Co. (NYSE:JPM) to assist with the asset sale. According to the sources privy to the matters at Petroleo, the company intends to woo a large number of potential buyers before it embarks on restructuring divestment of the assets.
Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) is expected to offer assets such as drilling licenses and certain properties for sale as it seeks to unlock cash. Besides offloading assets, Petroleo also hopes to focus on investment with better returns.
Meanwhile, Petroleo has tapped PricewaterhouseCoopers to be its financial auditor for the two the financial years 2015 and 2016.