June 1, 2017 / 3:06 PM / a year ago

UPDATE 1-Brazil's Petrobras says political turmoil unlikely to affect asset sales

(Adds details from presser, context)

By Daniel Flynn

RIO DE JANEIRO, June 1 (Reuters) - Brazil’s state-controlled oil company Petroleo Brasileiro SA does not expect political turmoil caused by a massive corruption investigation to affect its asset sales and debt reduction program, Chief Executive Officer Pedro Parente said on Thursday.

The Petrobras CEO also said the company will not stop deleveraging once the target of debt at 2.5 times EBITDA is reached. He said a level of 1.5 times EBITDA, or earnings before interest, tax, depreciation and amortization, is more appropriate.

“We don’t see the country’s current condition as altering our plans to reduce debt,” he said, referring to the sweeping “Car Wash” graft probe that centers on political kickbacks on Petrobras contracts and has now led to the investigation of President Michel Temer, among scores of other lawmakers.

Parente, speaking to a small group of foreign journalists, did say that some developments, such as Moody’s changing its outlooks to negative from stable for several major Brazilian firms on Wednesday, along with the political turbulence, did have some consequences for Petrobras.

“Our outlook for a new upgrade to our credit rating is now more complicated, but that has nothing to do with the operations of the company,” Parente said.

Parente’s remarks underscore the challenges still faced by the company.

During the course of the “Car Wash” probe, federal judge Sergio Moro has put dozens of Petrobras industry and engineering firm executives behind bars in the investigation into political kickbacks on contracts at state companies.

Oil prices near decade lows and losses incurred over many years because of government-mandated fuel subsidies also pose challenges to Petrobras.

Petrobras’ aggressive turnaround helped the firm post a record operating profit in the first quarter and move ahead of schedule in reducing a debt burden that is the largest of any major oil firm. (Reporting by Daniel Flynn; Writing by Ana Mano; Editing by Alistair Bell)

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