RIO DE JANEIRO: Brazil's heavily indebted state-led oil company Petrobras will likely cut planned investment by about a sixth and its 2020 output goal by 14 percent under a five-year strategic plan that could be released as early as Monday after markets close, according to analysts.
Petroleo Brasileiro SA, as the company is formally known, is expected to announce a 2017-2021 capital budget of $82.7 billion, or an average of $16.6 billion a year, according to the average estimate of eight analysts surveyed by Reuters.
That would be Petrobras' smallest five-year capital budget since 2006 and 16 percent less than the Rio de Janeiro-based company's 2015-2019 plan revised in January.
The cuts would be part of Chief Executive Officer Pedro Parente's fight to curb the company's nearly $125 billion of debt, the largest in the world oil industry, and focus spending on crude oil exploration and production needed to pay it.
Parente's efforts are complicated by oil prices at some of their lowest levels in a decade, a corruption scandal that has undermined investor confidence and huge losses on money-losing refineries and domestic fuel subsidies.
Petrobras' said last week that its board of directors on Monday would "appreciate" the plan, under development since June. If approved, Petrobras is expected to release the plan immediately.
"This plan is very important for setting expectations at a company that has consistently missed expectations," said Luana Sigfried, oil and gas analyst with Raymond James in Houston. "The company will have to cut enough to show it's being realistic, but not so much that its future output falls too far."
When combined with a promise to sell $15 billion of oilfields, pipelines and other assets by year-end and $43 billion through 2018, Parente said he hopes the plan will focus cash on the company's portfolio of giant offshore oil discoveries south of Rio de Janeiro.
Petrobras' controlling shareholder, the Brazilian government, is also counting on those fields to kick-start Brazil's recession-mired economy. Petrobras is responsible for about 10 percent of Brazil's gross domestic product.
The plan will also show how far Parente, appointed by new President Michel Temer, is prepared to go to let the company reverse the policies of former Brazilian President Dilma Rousseff, removed from office for breaking budget laws in August.
A former Petrobras board chairwoman, she built up Petrobras during a commodities boom only to see her plans unravel along with nearly $250 billion of shareholder value.
"The new five-year business plan is the most important trigger in the short term," said Diego Mendes, analyst at Banco Itau BBA in Sao Paulo in a note to clients. "If the plan is sufficiently robust it will help sustain the positive dynamic for Petrobras shares."
Petrobras' preferred shares, its most traded class of stock, have risen 96 percent so far this year.
LOWER OUTPUT
Lower spending, though, will also cut future crude output in Brazil to about 2.32 million barrels a day (bpd), according to the average estimate of six analysts surveyed by Reuters. That's 14 percent below the company's current 2020 outlook of 2.70 million bpd.
In 2012, before the corruption scandal, cash crunch and oil price plunge, Petrobras said it planned to produce 4.9 million bpd in Brazil in 2020. At the time Petrobras was investing more than $45 billion a year.
Some analysts also expect Petrobras' to cut asset sale plans after success in refinancing short-term debt and after a strengthening Brazilian currency reduced the cost of Petrobras debt, most of it in dollars.
"It is our view that they would likely lower (asset sale) goals as the urgency for selling assets has decreased," Mendes said a note to clients.
Debt-hit Petrobras to cut output goal by 14%
Debt-hit Petrobras to cut output goal by 14%
AI will never replace human creativity, says SRMG CEO
- Speaking to Maya Hojeij, senior business anchor at Asharq with Bloomberg, Jomana R. Alrashid expressed pride in SRMG platforms that had absorbed and adopted AI
RIYADH: Jomana R. Alrashid, CEO of Saudi Research and Media Group, highlighted how AI cannot replace human creativity during a session at The Family Office’s “Investing Is a Sea” summit at Shura Island on Friday.
“You can never replace human creativity. Journalism at the end of the day, and content creation, is all about storytelling, and that’s a creative role that AI does not have the power to do just yet,” Alrashid told the investment summit.
“We will never eliminate that human role which comes in to actually tell that story, do the actual investigative reporting around it, make sure to be able to also tell you what’s news or what’s factual from what’s wrong ... what’s a misinformation from bias, and that’s the bigger role that the editorial player does in the newsroom.”
Speaking on the topic of AI, moderated by Maya Hojeij, senior business anchor at Asharq with Bloomberg, the CEO expressed her pride in SRMG platforms that had absorbed and adopted AI in a way that was “transformative.”
“We are now translating all of our content leveraging AI. We are also now being able to create documentaries leveraging AI. We now have AI-facilitated fact-checking, AI facilities clipping, transcribing. This is what we believe is the future.”
Alrashid was asked what the journalist of the future would look like. “He’s a journalist and an engineer. He’s someone who needs to understand data. And I think this is another topic that is extremely important, understanding the data that you’re working with,” she said.
“This is something that AI has facilitated as well. I must say that over the past 20 years in the region, especially when it comes to media companies, we did not understand the importance of data.”
The CEO highlighted that previously, media would rely on polling, surveys or viewership numbers, but now more detailed information about what viewers wanted was available.
During the fireside session, Alrashid was asked how the international community viewed the Middle Eastern media. Alrashid said that over the past decades it had played a critical role in informing wider audiences about issues that were extremely complex — politically, culturally and economically — and continued to play that role.
“Right now it has a bigger role to play, given the role again of social media, citizen journalists, content creators. But I also do believe that it has been facilitated by the power that AI has. Now immediately, you can ensure that that kind of content that is being created by credible, tier-A journalists, world-class journalists, can travel beyond its borders, can travel instantly to target different geographies, different people, different countries, in different languages, in different formats.”
She said that there was a big opportunity for Arab media not to be limited to simply Arab consumption, but to finally transcend borders and be available in different languages and to cater to their audiences.
The CEO expressed optimism about the future, emphasizing the importance of having a clear vision, a strong strategy, and full team alignment.
Traditional advertising models, once centered on television and print, were rapidly changing, with social media platforms now dominating advertising revenue.
“It’s drastically changing. Ultimately in the past, we used to compete with one another over viewership. But now we’re also competing with the likes of social media platforms; 80 percent of the advertising revenue in the Middle East goes to the social media platforms, but that means that there’s 80 percent interest opportunities.”
She said that the challenge was to create the right content on these platforms that engaged the target audiences and enabled commercial partnerships. “I don’t think this is a secret, but brands do not like to advertise with news channels. Ultimately, it’s always related with either conflict or war, which is a deterrent to advertisers.
“And that’s why we’ve entered new verticals such as sports. And that’s why we also double down on our lifestyle vertical. Ultimately, we have the largest market share when it comes to lifestyle ... And we’ve launched new platforms such as Billboard Arabia that gives us an entry into music.”
Alrashid said this was why the group was in a strong position to counter the decline in advertising revenues across different platforms, and by introducing new products.
“Another very important IP that we’ve created is events attached to the brands that have been operating in the region for 30-plus years. Any IP or any title right now that doesn’t have an event attached to it is missing out on a very big commercial opportunity that allows us to sit in a room, exchange ideas, talk to one another, get to know one another behind the screen.”
The CEO said that disruption was now constant and often self-driving, adding that the future of the industry was often in storytelling and the ability to innovate by creating persuasive content that connected directly with the audience.
“But the next disruption is going to continue to come from AI. And how quickly this tool and this very powerful technology evolves. And whether we are in a position to cope with it, adapt to it, and absorb it fully or not.”
