Petrobras Weighs Lower Spending Plan on Bearish Oil Outlook
(Bloomberg) -- Brazil’s state-controlled oil producer Petrobras is weighing a reduction in capital spending to $106 billion for its next five-year plan, reflecting bearish expectations for crude prices.
The discussions are ongoing and the final number could change, said people familiar with the situations, who asked not to be named discussing private deliberations. The plan still needs the approval of Petroleo Brasileiro SA’s board of directors before its scheduled presentation to the market on Nov. 28.
Petrobras publishes five-year spending plans annually. The number being considered by management would represent a 4.5% decline from the $111 billion unveiled last year for the 2025-2029 period. Petrobras said in a statement that its next plan is still under review and will be discussed at a Nov. 27 board meeting.
The capex plan is closely watched by investors because it will help determine how much cash the company distributes via dividends. Petrobras has already said this year that extraordinary dividends are unlikely because of weaker oil prices.
Petrobras’s spending also has an important political dimension in Brazil because the company is a major source of cash for the federal budget. Brazil has presidential elections next year and Petrobras usually comes under pressure ahead of the vote to boost investments to help the economy and create jobs.
The company’s common shares rose 0.9% to close at 34.66 reais in Sao Paulo Thursday. The potential for lower capex ahead is positive, Citibank said in a note to clients, adding that the lower investment plan could make the company more resilient amid low oil prices and allow it to pay dividends.
The Rio de Janeiro-based company last week reported higher-than-expected capital expenditures in the third quarter, driven by construction of new oil platforms.
That left some analysts skeptical about its ability to reduce spending for the upcoming business plan. However, Jefferies analysts said in a a Nov. 7 note that they see scope for a 5%-10% moderation in the 2026-2030 capex budget, which should help sustain Petrobras’s annual dividend at $8 billion-$9 billion “in a $60-$70 Brent oil world.”
The current spending plan is based on a crude price assumption of $83 a barrel. Brent crude is currently trading at around $63. Management is considering a range of $60-$65 for 2026-2030, the people said.
Petrobras’s strategy will remain focused on exploration and production, with most spending directed there, said the people. The oil producer is accelerating production to support revenues. It has recently increased the Marechal Duque de Caxias oil platform’s capacity above its nominal design and is accelerating production from Buzios, the world’s biggest deepwater field.
Of the total spending provisionally earmarked for 2026-2030, the company plans to direct $91 billion to projects that have been approved, the people said. The other $15 billion is for capital projects whose financial sustainability has yet to be determined.
The company said on a webcast with investors last week it isn’t considering changing its debt ceiling of $75 billion or its dividend policy.
(Updates with company comment in third paragraph.)
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