Wednesday, 28 January 2009

Petrobras's Gabrielli Tells Bloomberg that Company Won't Borrow in Bond markets This Year. Got Scared with Pemex?

They got terrified. Petroleo Brasileiro, the oil giant, suspended plans to borrow in the bond markets because borrowing costs are ''too expensive,” Bloomberg cited Chief Executive Officer Jose Sergio Gabrielli as saying in an interview. The company, which has secured $17.5 billion in financing from Brazil’s BNDES and other lenders, has no need to tap bond investors for funding, for now ...

Well, if Petrobras has to invest more than $170 billion by 2014 to extract oil form the ocean sea bed, I would assume that they need more cash (that because the Brazilian state is such a big sucker of cash that ... yes, they would simply need it.) And they might need that money sooner rather than later -- to take advantage of a dramatic drop in exploration costs from the records we saw last year. For 2010, Petrobras needs $18.9 billion in financing, with about $10 billion having been guaranteed from the BNDES, Gabrielli told investors in NYC. But it is probably correct not going to the markets at this very moment, because Petrobras would have been badly hammered.

Remember that Pemex, the Mexican oil company, sold $2 billion of ten-year debt at 8.25 percent, or about 5.7 percentage points more than U.S. Treasury yields of equivalent maturity.

1 comment:

  1. Petrobras doesn't need money right yet. They have a promise of about $5 billion from a group of international banks for two years according to CFO Almir Barbassa in a conference call from NYC Jan. 27. He said he hopes the crisis ends by the start of 2011 so they can refinance in the bond markets. Petrobras' situations is neither as bad as some people think or as good as execs. say. Petrobras' cash generation is huge. They refine all the oil for 190 million people in Brazil and export lots of gasoline and other fuels. Their costs are not terribly high and their projections are based on low prices and high costs, giving them room to benefit from higher prices and lower costs.

    Sure, some of the stuff in the plan is political, but it could happen, and the company won't invest if they are going to lose big.

    As Goldman Sachs said today, they are well positioned and if their investment is made and oil prices rise, they will be well positioned to reap the benefits of a rebound.

    If oil prices fall, Brazil has always been largely pragmatic, they will call in the foreign companies, and because Brazil hasn't vilified them and has promised to protect contracts even if they change rules, the foreigners will come.