April 28, 2020 / 10:45 PM / 3 months ago

UPDATE 1-Brazil's Petrobras revises debt outlook amid lower crude prices

(Adds details throughout on Petrobras’ decision to revise debt target)

RIO DE JANEIRO, April 28 (Reuters) - Brazil’s Petrobras has scrapped its 2020 debt reduction target due to market volatility, the state-run oil firm said in a securities filing on Tuesday, a widely expected move that underlines the significant challenges it faces.

Petroleo Brasileiro SA, as the firm is formally known, is now seeking to end 2020 with $87 billion in gross debt, the same level as it ended 2019, according to the filing.

Previously, the company said it was planning to end 2020 with a ratio of net debt to earnings before interest, taxes, depreciation and amortization (EBITDA) of 1.5.

That would have represented a sharp fall from the current level of around 2.4, and its success was dependent on a steady flow of divestments by Petrobras, which is selling an array of refineries and oilfields.

However, swings in Brent crude prices, which serves as the benchmark for Brazilian oil, has made net debt an extremely volatile metric, the firm said. Low oil prices have also tempered demand for assets Petrobras has on the block, while some sale processes have already been formally delayed.

“The approved gross debt target for 2020 is $87 billion, the same level as the end of 2019, due to the current adverse global market environment,” the company said in the filing.

Petrobras Chief Executive Roberto Castello Branco had repeatedly warned that the company’s debt reduction target might be too ambitious given current oil market conditions, calling the possibility of reaching its target a “question mark” in a March interview with CNN. (Reporting by Gram Slattery; Editing by Sandra Maler and Richard Chang)

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