Tuesday, March 29, 2011

Petrobras: U.S. 35B In Cash, And No More U.S. Dollars Investments

Petrobras, PBR on the NYSE, the Brazilian giant, has $35B in the bank. There are two significant facts on this. First is the size of the balance, and, second, it's that it announced today that it will no longer invest in U.S. dollar denominated bonds.

CFO and Investor Relations at Petrobras, Almir Barbassa said today that the company has $35 billion in cash. He said that this is close to the average annual value of $ 31 billion related to cash generation over the past five years. Barbassa also said that out of the $ 55billion projected for investment in 2011, 10 to 15% should not be executed. According to him, this is a normal practice. Last year, Petrobras invested approximately $45 billion.

He stressed that for the production of 5 billion barrels of pre-salt oil (worth roughly $0.5T), there needs to be an investment of about $8 billion by 2014. However, the total may be $10 billion may be feasible too," he said.

The CFO also said the company may return to the international bond market this year. "We can capture in yen or euro or pound sterling. But there is no volume set, date or currency, " he said. "But certainly we will not capture any do U.S. dollars this year because we recently got $6 billion (in January) in bonds," he said.

According to Barbassa, the eventual decision to exclude U.S. dollars is part of a policy of diversification of the company that is not related to the weakening U.S. dollar.

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