Brazil’s Petrobras will cut its spending by 37 percent through the next four years in an effort to tame its enormous $110 billion debt.
The state-owned company said it will slash expenditures across its four segments by a little over a third through 2019.
The company now plans to spend $130 billion from 2015 to 2019, with exploration and production accounting for $108.6 billion of the budget plan.
Petrobras said 86 percent of its exploration and production budget will be allocated to production development, 11 percent to exploration and 3 percent for operational support.
The company added that exploration activities within Brazil will be concentrated on meeting the minimum exploratory program for each block.
The downstream segment will receive $12.8 billion of investments, with 69 percent going towards maintenance and infrastructure, 11 percent for the conclusion of the Abreu and Lima refinery and 10 percent for distribution.
The Gas & Power area will be allotted $ 6.3 billion, primarily for the construction of pipelines and processing units to treat gas from the company’s pre-salt plays.
The cost cuts were accompanied by a downward revision in the company’s domestic oil production target.
Petrobras now expects to produce an average of 2.8 million barrels a day by 2020, a huge drop from the company’s previous 4.2 million barrel per day target, Bloomberg Business said.
The spending cuts may silence critics who worried that recently appointed Petrobras CEO Aldemir Bendine is too cozy with political insiders to make major changes that the troubled company.
“For the first time in many years we see a business plan that fits the company’s reality and international scenario. It shows this management has a mandate,” head of Rio-based infrastructure consulting firm CBIE Adriano Pires told Bloomberg.
The spending plan also anticipates additional efforts in the restructuring of businesses, demobilizing of assets and additional divestments, totaling $42.6 billion during 2017 and 2018.
Petrobras is currently the most indebted oil and gas company in the world with about $110 billion in net debt.
The company is still grappling with a corruption scandal that has landed several former executives in jail and prompted the resignation of former CEO Maria das Graças Foster.