Petrobras Slashes Oil Reserves to Lowest Level in 14 Years
Brazil's state-led oil company Petrobras slashed its oil and natural gas reserves 20 percent on Friday as a plunge in oil prices, a heavy debt load, high costs and a corruption scandal choke off the potential of a decade of giant but expensive discoveries.
The cut, reported in a securities filing, reduced proven reserves to 10.52 billion barrels of oil and natural gas equivalent as of Dec. 31, their lowest since 2001, according to standards set by the U.S. Securities and Exchange Commission. Petrobras booked 13.13 billion boe a year earlier.
The announcement is one of the strongest statements yet of the sharp reversal of fortune at Petroleo Brasileiro SA , as the company is formally known. Reserves are a key factor in determining the company's ability to borrow and provide a return on investment. When they fall, a company has drained existing fields, can no longer commercially exploit new discoveries, or both.
Petrobras has spent about $350 billion on expansion in the last decade, a period when it made some of the world's largest-ever offshore discoveries. The company, though, now has less commercially viable oil and gas than it did 14 years ago, when it was a scrappy, cash-poor oil producer slowly but steadily increasing reserves and output to reduce Brazil's crippling dependence on foreign imports.
In 2010, then-Chief Executive Officer Jose Sergio Gabrielli bragged that the company would have at least 30 billion of reserves by now.
Petrobras also released reserve figures based on Society of Petroleum Engineer standards, which are also used by Brazilian petroleum regulator ANP. Those standards are less strict about the commercial viability of reserves than the SEC standard.
Petrobras reserves fell 20 percent to 13.27 billion boe from 16.2 billion boe a year earlier, according to the SPE/ANP standard.
(By Jeb Blount; Additional reporting by Silvio Cascione in Brasilia. Editing by Alexander Smith and Lisa Von Ahn)
