In Brazil, if you look offshore and under the sea, there are billions of barrels trapped below the salt line. The good news is everyone knows it is there, the bad news to bring the oil to the country will cost billions. Petrobras has been linked to many payments to politicians as it boosted its debt load of $88 billion. To lessen the debt load, and still keep investing according to an article by Gram Slattery and Alexander Alper of Reuters will try to raise $26.9 billion in asset sales and partnerships from now to 2023.
Petrobras in early December released its 5 year plan, and the assumption is oil prices will have a reasonable increase in prices to help the producer. Brazil also has a new government coming in that will need the oil revenues to balance the government books.
The oil company expects a rate of return on capital of 11% in 2020 and the ratio of net debt to earnings should fall to 1.5 from 2.5.
Linking to dividend paying stocks, state oil companies can be tremendous drivers of wealth as can be seen in Norway, but somewhere along the line it seems many countries do not spread the wealth as much as others. It seems Petrobras helped the political elite rather than the average consumer, but things can change as long as those billions of barrels lie under the ocean.
There are more questions than answers, till the next time – to raising questions.