Petrobras cash flow hurt by currency, spending cuts -Moody's
SAO PAULO Nov 3 (Reuters) - Brazilian state-run oil company Petrobras' credit rating will remain under pressure in coming years as its ability to generate cash is hurt by a weaker local currency and deep cuts in its investment program, Moody's Investors Service said on Tuesday.
A 25 percent decline of the Brazilian real is expected to cut Petrobras' earnings before interest, taxes, depreciation and amortization by half, while spending cuts will limit the company's production growth as of next year, Moody's analyst Nymia Almeida said in a report.
Petroleo Brasileiro SA, as Petrobras is formally known, suffers with a weaker real because it imports gasoline and other fuels to meet Brazil's demand but has limited ability to increase local prices. Much of its debt is also denominated in dollars and the company does not use foreign exchange hedges.
"We believe that the 28 percent devaluation of the real during the third quarter of 2015 effectively eliminated the premiums between local prices and international prices of gasoline and diesel," Almeida said in the report.
Moody's, which rates Petrobras at Ba2 with a stable outlook, noted that the company has roughly $24 billion in debt maturing in 2016-17, compared to approximately $25 billion that it keeps in cash at all times, of which about $10 billion is operating cash.
"We believe that Brazilian banks' ability to continue to lend to Petrobras has declined and that the company will have to maintain strong liquidity in a context of a weak Brazilian economy, volatile oil prices, difficult prospects for asset sales and political uncertainties," Almeida said. (Reporting by Walter Brandimarte; editing by Grant McCool)
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