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Petrobras Cuts Spending Plan Again on Low Oil, Weak Real

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Brazilian state-run energy player Petroleo Brasileiro S.A. or PetrobrasPBR has decided to slash its capital spending program for 2015 and 2016. The company has adjusted its spending plan in the face of low crude prices and a weak Brazilian currency.

For 2015, Petrobras has reduced its planned investment from $28 billion to $25 billion. For 2016, the company's spending plan has been hugely cut from $27 billion to $19 billion. Considering both years, the debt-laden company has lowered its future capital investment by $11 billion.

It can be concluded that Petrobras has been hit hard by low oil prices and the weakness in real. As the Brazilian currency slipped against the U.S. dollar, the company's debt in real mounted. And with the decline in oil prices, its revenues plummeted. The double whammy forced the company to adjust its capital spending program.

This is, in fact, the second time in three months that Petrobras has been compelled to slash its capital investment plan.

Headquartered in Rio de Janeiro, Petrobras is the largest integrated energy firm in Brazil and one of the largest in Latin America. The company's activities include: exploration, exploitation and production of oil from reservoir wells, shale and other rocks, as well as refining, processing, trading and transportation of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities.

However, we are concerned about the company's future as a high debt burden and weak credit rating are weighing on its fundamentals.

As a result, Petrobras currently carries a Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, some better-ranked players in the energy sector are Tesoro Corporation TSO , Cobalt International Energy Inc. CIE and Matrix Service Company MTRX . Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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TESORO CORP (TSO): Free Stock Analysis Report

PETROBRAS-ADR C (PBR): Free Stock Analysis Report

MATRIX SERVICE (MTRX): Free Stock Analysis Report

COBALT INTL EGY (CIE): Free Stock Analysis Report

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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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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