Petrobras downsizing, sharpens sub-salt: Update
The company?s board of directors yesterday approved a reduction of its non-operational management staff of 5,300 by as much as 30pc, and a merger of the gas and energy division with the downstream division in a first phase of a corporate reorganization.
The company?s upstream division, now its main focus, will have a separate sub-division dedicated to development of 8bn-12bn bl offshore sub-salt deposit Libra.
The plan will also eliminate one of seven current board seats, and cut the number of managers directly reporting to the board from 54 to 41.
The company says the initiatives will save around R1.8bn (\\$444mn) annually.
Petrobras currently has around 7,500 managers, including 2,200 operational managers. A reorganization of operational management is planned to commence after the non-operational changes are implemented, which should happen over the next few months, Petrobras chief executive Aldemir Bendine told reporters today in Rio de Janeiro.
"It's a revolutionary model, I believe. We need to improve the management model and control mechanisms," Bendine said.
The plan requires a change to Petrobras' corporate statutes, which is expected to occur at an extraordinary board meeting in the next 30 days. After the board approval, the company will announce the directors appointed to its six divisions.
Market reaction to the restructuring has been cautious so far. "It is a positive step for the company. But is it meaningful as a whole? Not necessarily. The company needs to take a series of steps to improve cash generation," Lucas Aristizabal, senior director with Fitch Ratings, told Argus. The credit rating agency recently stripped Petrobras of its investment grade status.
Bendine and Petrobras' current seven directors were appointed in February 2015 following the resignation of former chief executive Maria das Gracas Foster and her team of directors.
Foster and her team left amid a widening kickback scandal linking contractors to top politicians, systemic corruption that predated her tenure and which is still under investigation. State banker Bendine was appointed by president Dilma Rousseff in an effort to clean up the company's troubled finances.
Bendine says the envisaged reorganization is permanent and aimed at transforming Petrobras into a leaner firm focused on its core business of oil and gas production. The changes would improve oversight and diffuse risk among executive managers, as opposed to sole directors.
Bendine says the company will now appoint all executives based on technical qualifications and without the involvement of the federal government, the company's controlling shareholder.
Critics have long complained about political interference in the company?s management.
Pummeled by low oil prices and the massive corruption scandal, Petrobras is trying reduce its almost \\$130bn debt load while keeping the development of strategic sub-salt fields on track.
Bendine says Brent prices at \\$30/bl are a concern for the firm, but it continues to focus long term. Sub-salt development remains competitive, he said.
Earlier this month, Petrobras cut around \\$32bn in capital expenditures from its \\$130.3bn 2015-19 business plan and trimmed oil production targets. The company plans to invest \\$20bn this year, with the lion's share earmarked for its upstream division.
The company's investment plan will be financed in part by the around \\$14bn it hopes to generate this year through an aggressive divestment plan.
Petrobras plans to generate another \\$42.6bn in asset sales and corporate streamlining in 2017-18, according to the current 2015-19 business plan.
Bendine said a new five-year business plan would include comprehensive changes, but did not give a deadline for its approval. Petrobras traditionally releases business plans in the first quarter of each year, often followed by adjustments in the subsequent months.
In October 2015, Petrobras cut around half of its 1,000-strong communications staff. Petrobras said the reduction cut expenses for the area by around 30pc.
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