RIO DE JANEIRO (Reuters) - Brazil’s state-led oil company, Petrobras (PETR4.SA), plans to cut between 5 billion reais and 15 billion reais ($2.5 billion and $7.5 billion) from operational costs next year, sources with direct knowledge of the plans said on Friday.
The cuts are part of Petrobras’ “Procop” cost-optimization program that will start in January. They were announced in an internal company presentation on Thursday by Chief Executive Maria das Graças Foster, the sources said.
Petrobras has not published an official estimate of the value of the expected savings.
The plan is aimed at helping Foster find ways to revive stagnant production and boost cash flow to pay for a $237 billion, five-year expansion, one of the world’s largest corporate investment programs.
Despite heavy spending and the discovery of some of the world’s largest offshore oil fields in the past five years, Petrobras has missed its annual production targets for a decade. August oil and gas output fell to a 22-month low.
For the second quarter, Petrobras posted a 1.35 billion real loss, its first in 13 years.
Preferred shares of Petrobras (PETR4.SA), the company’s most widely traded class of stock, slipped 0.8 percent to 22.31 reais in Friday trading, compared with a 1.6 percent drop in the Bovespa stock index .BVSP. Shares of the company are up 19 percent this year.
Petrobras spent 199 billion reais last year between cost of goods and operating expenses. Of that, the company considers 64 billion “manageable costs” where the Procop cost-cutting program is targeting savings, the company said on Thursday.
The statement said the company had identified 28 areas where costs and “optimizations” could be made, but did not publicly announce how much it planned to save with its program.
The company declined to comment immediately on the scale of the cost savings.
($1 = $2.02 Brazilian reais)
Reporting by Jeb Blount and Sabrina Lorenzi; editing by Lisa Von Ahn, Gerald E. McCormick, Leslie Gevirtz and Matthew Lewis