Santander says overweight Brazil's Petrobras bonds on asset-sale outlook
RIO DE JANEIRO Jan 25 (Reuters) - Santander Investment Securities said it has an "overweight" recommendation on the bonds of Brazil's state-led oil company Petroleo Brasileiro SA on expectation its asset-sale plans and cost cutting efforts will reduce debt.
After meeting company executives, analyst Aaron Holsberg said that executives at Petrobras, as the company is known, have made divestments a high priority and expect to raise $12 billion from asset sales this year and that in a best-case scenario all the proceeds could be used to pay principal on debt.
In the note to clients, Holsberg also praised cost-cutting efforts that cut long term annual spending averages to half what they were in recent years.
"Petrobras' greatest achievement in 2015, in our view, was the reduction of capex to a $20 billion/year run rate in the third quarter of 2015, the same level Petrobras is guiding to in both its 2016 budget and 2016-2020 plan," he said.
Petrobras' approximately $130 billion of debt is the largest in the world oil industry and one of the largest of any non-financial company. Executives in December promised to sell $15 billion of assets by the end of 2016.
Holsberg went on to say that he believes the company's $20 billion of planned annual capital spending is in line with the company's proposed cash flow as long as the exchange rate for the Brazilian real remains at about 4 reais to the U.S. dollar.
Petrobras officials were not immediately available for comment after normal business hours.
Other points in his note to clients.
* Petrobras officials told him the company is working on 16 different large asset sale projects. Continuación...