TNS LATAM
Petrobras informs that its Board of Directors approved, in a meeting held yesterday, the Strategic Plan for the 2020-2024 five-year period, in line with the company's strategic positioning, released on September 26, 2019, where we aim to be the best energy company in generating value for the shareholder, with focus on oil and gas and with safety, respect for people and the environment.
Defined as Mind the Gap, the Strategic Plan brings a transformational agenda that aims to eliminate the performance gap that separates us from the best global oil and gas companies, creating substantial value for our shareholders. In addition, the plan is consistent with the five strategic pillars that we have defined: (i) maximization of return on capital employed; (ii) reduction of the cost of capital; (iii) relentless search for low costs; (iv) meritocracy; (v) respect for people, environment and safety.
Petrobras undergoes a moment of cultural and digital transformation and seeking an effective return on capital employed by our shareholders, the company decided to incorporate a new management tool into the plan: the EVA® (Economic Value Added). The indicator represents the beginning of performance evaluation focused on value generation, transforming the company's culture through clear incentives for managers and professionals.
Petrobras of the future will be a company with an operational return higher than its capital cost, positioned in world-class assets, with operation focused on oil and gas, advancing in the exploration and production of the Brazilian pre-salt, with an efficient refining system, capable of processing 1.1 million bpd. In relation to renewable energy sources, the company will act in research seeking to acquire skills for the eventual positioning in the long term in wind and solar energy.
The plan has three top metrics focused on safety of people, debt reduction and value creation:
• Total Recordable Injuries per million man-hour frequency rate (TRI) below 1.0
• Net debt/ Adjusted EBITDA below 1.5x
• Delta of consolidated EVA® of US$ 2.6 billion
In addition, the company included an ambition of Zero Fatality.
We continue to pursue deleveraging through cash generation and divestment. In 9M19, we were able to reduce the company's gross debt by US$ 21 billion. We maintain our target to achieve a Net Debt/LTM EBITDA ratio of 1.5x in 2020. In 2021, we plan to reach US$ 60 billion in gross debt, which will increase shareholder remuneration, in line with the new dividend policy already announced.
We consider as an assumption for the plan a scenario of resilience, in which is used as a minimum breakeven price for projects lower oil prices, in the amount of US$ 50/bbl for the next five years and US$ 45/bbl in the long term, applying a careful governance for the selection and prioritization of projects.
The CAPEX forecasted for the five-year period is US$ 75.7 billion, of which 85% is allocated to the E&P segment. This allocation is in line with our strategic positioning, focusing on E&P assets, especially in the pre-salt, in which Petrobras has a competitive advantage and generates more return on investments.
The divestments forecasted in the plan vary between US$ 20-30 billion for the 2020-2024 period, being the highest concentration in the years 2020 and 2021.
Production of Oil, NGL and Natural Gas
The oil and gas production curve estimated in the new plan indicates a continuous growth. During the five-year period, 13 new production systems are expected to start-up operation, all of which are allocated to deepwater and ultra-deepwater projects.
The company decided to present a commercial production vision in order to represent the financial impact of production on the company's results, deducting from its natural gas production the volumes of gas reinjected into the reservoirs, consumed in E&P facilities and burned in production processes. In addition, the production curve does not include divestments, except of around 100 kboed, related to Nigerian fields and Tartaruga Verde field, which the sales transactions have already been signed and the closings are expected to occur in the short-term.
For the 2020 production target we consider a variation of plus or minus 2.5%. The oil production in this year mainly reflects losses in volumes related to natural decline of mature fields and higher concentration of production stoppages to increase the integrity of the systems, partially offset by the ramp-up of new platforms. In the long term, the growth trajectory is supported by the new production systems - mostly in the pre-salt, with higher profitability and value generation – and by Campos Basin production stability.
Financing
The significant operating cash generation results from a higher efficiency forecasted, greater cost control and the financial resources due to the active portfolio management. This will allow a gradual reduction in gross debt, with a consequent reduction in interest expenses and an increase in the estimated dividend distribution amounts, through the company's new Dividend Policy, generating greater remuneration for shareholders. The debt reaches a level of US$ 60 billion in 2021, and remains at this level throughout the five-year period.
In addition, by anticipating operating cash flow via divestments of assets, Petrobras will make its investments, reducing its indebtedness, without the need for new net fundraising in the Strategic Plan horizon.
Low carbon and sustainability commitments
So far, we have already advanced with a series of decarbonization actions in our processes, which involve reducing the flaring of natural gas, reinjection of CO2 and gains in energy efficiency. The company maintains its commitment to the decarbonization of processes and products, with a robust action plan in relation to carbon resilience and efficiency.
In this sense, the company provides ten commitments for the low carbon and sustainability agenda:
1. Zero growth in absolute operating emissions by 2025*
2. Zero routine flaring by 2030
3. Re-injection of ~40 MM ton CO2 up to 2025 in CCUS projects
4. 32% reduction in carbon intensity in the E&P segment by 2025
5. 30%-50% reduction in methane emission intensity in the E&P segment by 2025
6. 16% reduction in carbon intensity in refining segment by 2025
7. 30% reduction in freshwater capture in our operations with focus on increasing reuse by 2025
8. Zero increase in residues generation by 2025
9. 100% of Petrobras facilities with biodiversity action plan by 2025
10. Maintenance of investments in socio-environmental projects
*Carbon commitments related to 2015 base. Other commitments based on 2018.
With the execution of this Strategic Plan, Petrobras reaffirms its commitment to became a more financially solid company, with low indebtedness and cost of capital aligned with its industry peers, with a focus on oil and gas world-class assets, always acting with ethics and transparency, safety and respect for people and the environment.