Credit: Shutterstock photoPetróleo Brasileiro S.A. or PetrobrasPBR ,the largest integrated energy firm in Brazil and the sole operator of the country's oilfields, reported that its Executive board has approved a voluntary dismissal program which is open to all the employees. The move is an effort by the company to cut spending, reduce its indebtedness and strengthen its balance sheet.
The Rio de Janeiro-based producer is planning to lay off 15% of its staff or around 12,000 workers between 2016 and 2020 in a bid to save up to 33 billion reais or $9.20 billion. This voluntary retrenchment program is expected to cost around 4.4 billion reais, with each employee receiving between 212,000 reais and 706,000 reais to take redundancy.
With the help of this program, the company intends to trim its workforce of 57,000 people to suit the needs of its business plan. This should not only enhance productivity but also generate value for the company. This program will be the second cost-reducing measure adopted by Petrobras since Jan when it announced plans to reduce the number of managers to save 1.8 billion reais a year and strengthen accountability.
Petrobras - with more than $130 billion in liabilities - is the most indebted energy company in the world. The company's financials have been severely affected by the ongoing oil price slump under which crude oil price has nosedived from the $100 per barrel mark Jun 2014 to the current trading level of around $36 per barrel. Also, Petrobras' goodwill as well as share price has been severely affected by its involvement in a multi-billion dollar money laundering and bribery case. Hence, to offset the effect of such headwinds, Petrobras has resorted to cutting costs, reducing capital spending and selling assets.
Headquartered in Rio de Janeiro, Petrobras engages in the exploration, development, and production of crude oil, natural gas liquids, and natural gas. Additionally, the company sells crude oil and oil products produced at natural gas processing plants in domestic and foreign markets. It is also involved in the refining, logistics, transport, and trading of crude oil and oil products. Moreover, the firm exports ethanol and invests in petrochemical companies.
For the fourth quarter, the company reported a massive loss of 36.9 billion reais after booking large writedowns for its assets as oil prices slumped and refinery projects faltered. It is expected to cut its 2016-2020 capital spending by 20% to $80 billion.
Currently, the company carries a Zacks Rank #3 (Hold), implying that it will perform in line with the broader U.S. equity market over the next one to three months.
Some better-ranked players in the energy sector include Sasol Ltd. SSL , Murphy USA Inc. MUSA and Vanguard Natural Resources, LLC VNR . All these stocks sport a Zacks Rank #1 (Strong Buy).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
