Petrobras has announced a range of measures to preserve the health of its employees and to support the prevention of coronavirus in its operational and administrative areas.

The initiatives are in line with the recommendations of the World Health Organization (WHO) and the Ministry of Health and aim to contribute to the efforts of the population and Brazilian authorities to mitigate the risks of the disease. With the support of a special committee, we are monitoring on a daily basis the evolution of the coronavirus and evaluating the need for new measures.



In addition, Petrobras have donated to the Brazilian Unified Health System 600,000 tests for the Covid-19 diagnosis which were imported from the United States and will arrive in Brazil in April. The company also created a multidisciplinary group of professionals from its research center (Cenpes) to evaluate and propose solutions in partnership with universities, companies and institutions that can help in the fight against the coronavirus.



As a result of the sharp decrease in oil and fuel prices and demand, the company is taking a series of measures to reduce disbursements and preserve liquidity in this scenario of uncertainties in order to strengthen its financial soundness and business resilience, among which we highlight:



• Disbursement of Revolving Credit Lines amounting to approximately US$8 billion, as announced on March 20, 2020, which was encashed this week.
 


• Disbursement of two new lines amounting to R$ 3.5 billion.


• Postponement of the dividend payment announced on February 19, 2020 based on the 2019 annual result, in the amount of R$ 1.7 billion, to December 15, 2020. This proposal will be submitted to the approval of the Annual Shareholders Meeting, which was rescheduled from April 22, 2020 to April 27, 2020.


• Reduction and postponement of spending on human resources, in the total amount of R$ 2.4 billion:



• postponement of the 2019 Performance Bonus Program payment;



• postponement of overtime payment;



• postponement of FGTS collection and vacation bonus payment, according to the Executive Provisional Measure  no. 927 of 2020;



•  postponement of the payment of 30% of the total monthly remuneration of the CEO, Chief Officers, Executive Managers and General Managers;



•  cancellation of the level advancement and promotion processes for employees and level advancement of management in 2020;



• 50% reduction in the number of employees on partial on-call in the next three months and temporary suspension of all training;



• Working capital optimizations;



• Reduction of planned investments for 2020 from US$ 12 billion to US$ 8.5 billion (being U$7 billion in cash view), mainly due to postponements of exploratory activities, interconnection of wells and construction of production and refining facilities, and of the devaluation of the Real against the US dollar.



• Speeding-up reduction of operating expenses, with an additional decrease of US$ 2 billion, highlighting:


• Mothballing of the platforms in operation in shallow water fields, with higher lifting cost per barrel, which due to the fall in oil prices started to have negative cash flow. The current oil production of these fields is 23 thousand bpd and the divestments in these assets are still in progress;



• Lower costs with well interventions and optimization of production logistics;



• Postponement of new material contracts for a period of 90 days.

As a result of the implementation of the measures described, the company estimates that will balance its cash flow in 2020.



Regarding oil and oil products sales, Petrobras is continuously monitoring the internal and external markets, as well as managing inventories and oil refining at its refineries, in line with the variations in market demands. The COVID-19 crisis has led to significant reductions in the demand for oil products, especially diesel, gasoline, and jet fuel in Brazil and worldwide.  

In this sense, the company decided to reduce a total of 100 thousand bpd of its oil production by the end of March, due to the oversupply of this product in the foreign market and the reduction of global demand  for oil caused by the effect of COVID-19. The company will evaluate the market conditions and, if necessary, will do new adjustments in oil production, always ensuring safety conditions for people, operations and processes.



The company continues to explore opportunities for further cuts in administrative and operating costs. Given the high level of uncertainty prevailing in the global economy, we believe it is premature to make revisions in the baseline scenario and oil price projections. Such revisions will be made when the uncertainties and the consequent price volatility diminish.

Petrobras reinforces its commitment to managing its portfolio and to its strategy supported by the five pillars: maximizing the return on capital, reduction of the cost of capital, relentless search for low costs, meritocracy and respect for people, environment and safety. The current crisis highlights the importance of these pillars that must continue to be implemented with even more focus and intensity.



Reflecting its commitment to transparency, Petrobras will keep the markets informed about future movements.