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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: BigBull who wrote (53306)	10/20/1999 8:11:00 PM
From: BigBull	Respond to of 95453

The Offshore Pie just grows and grows. Petrobras to spend $33 BBBBBBBBBilllion in the next 5 years. Hey, a billion here, a billion there ... Bloomberg Energy Wed, 20 Oct 1999, 7:58pm EDT 10/20 0:00 Brazil's Petrobras Plans to Invest $32.9 Bln to Double Oil Output by 2005 By Jeb Blount (Adds share price and plan highlight table at end of story.) Rio de Janeiro, Oct. 20 (Bloomberg) -- Petroleo Brasileiro SA, Brazil's largest company, is looking to cut costs and boost profits in hopes of raising the $32.9 billion it needs to nearly double oil production by 2005. To attract investment, the company aims raise the return on exploration and production capital to at least 12 percent a year from negative figures today, generate cash flow of $5.7 billion a year. It also plans to and to slash refining costs by a fifth and oil extraction costs, or ``lifting fees,' by almost half. ``This is a big step forward. It's already boosted my confidence in the company,' said Mary Quinn, Latin American oil and gas analyst at Warburg Dillon Read in New York. ``In terms of openness it finally gives us targets by which we can judge their performance. Now we have to see if they can deliver.' Without such changes, few believe the traditionally secretive company, run for nearly half a century as a virtual arm of the Brazilian government, will be able to get at much of the estimated $30 billion of oil that sits below Brazil's continental shelf in ocean waters over a kilometer deep. The plan could boost confidence in Petrobras as government officials get ready to sell a third of the company's voting stock. Petrobras non-voting preferred shares, its most traded class of stock jumped for a second straight day, rising 2.5 percent to 292 reais. Production Delays Delays in raising capital have forced Petrobras to cut its 2000 production target by 13 percent to 1.13 million barrels a day. High costs and investments in unproductive fields have also reduced access to funds that could have been better used elsewhere. Petrobras released a strategy book full of production, investment and exploration targets, though specific measures designed to reach such goals were largely missing in a series of presentations to the press, investors and stock market analysts in Rio de Janeiro today. ``We know now more or less what they want to do,' said Pedro Martins Jr., a vice president and Petrobras analyst for Chase Manhattan Corp.'s Brazilian unit. ``Now we have to see how they will do it.' He expects the company will move ahead with plans to sell off or find partners for smaller, older and less profitable fields on land and in shallow water to concentrate resources further offshore. ``It's my expectation they will give up a lot of fields in' Brazil's Northeast Region, he said. Petrobras is trying to sell part of its portfolio of under- producing fields and could have a plan in place by the end of the year. Third parties are expected to make investments worth 40 percent of total assets by 2005 The sale of these blocks, though, is not considered part of the strategic plan, said Petrobras President Philippe Reichstul. ``By 2005 we want to be an energy company, not just an oil or gas company,' he said. ``We want to remain the leader in an open Brazilian market and to expand internationally.' Petrobras' international expansion is expected to include the purchase for refineries abroad and the creation of distribution networks overseas. Plan Highlights Petrobras' strategic plans commits Petrobras to meeting the following goals by 2005. They are based on an average oil price of about $15 a barrel. FINANCE Invest $32.9 billion Of that: -70 percent from own resources and debt -20 percent project finance off income statement -10 percent to be decided Raise 14 percent of the investment abroad Increase gross sales to $35 billion EXPORATION AND PRODUCTION Produce 2.15 million barrels/day Of that: -1.85 barrels/day in Brazil -300,000 barrels/day outside Brazil Boost proven reserves to 13 billion barrels Cut oil extraction costs to $2.80/barrel from $5.10/barrel Earn at least 12 percent on capital in area Area to get 68 percent of Petrobras investments REFINING, TRANSPORT AND SALES Refine 2.1 million barrels a day Of that: -1.8 million barrels/day in Brazil -300,000 barrels/day abroad Reduce operating costs to $0.80/barrel from $1.08/barrel Earn at least 10 percent on capital in area Area to get 17 percent of Petrobras investments DISTRIBUTION Remain largest distributor in Brazil Extend distribution abroad Earn at least 15 percent on capital in area Area to get 5 percent of Petrobras investments NATURAL GAS Sell 82 mln cubic meters of gas Of that: -70 mln cubic meters in Brazil -12 mln cubic meters abroad Make at least 12 percent on capital in area PETROCHEMICALS Participate as shareholder where industry can be integrated with refining. Make at least 12 percent on capital in area -------------------------------------------------------------------------------- ¸ Copyright 1999, Bloomberg L.P. All Rights Reserved.