Business Finance News takes a look at how Brazilian oil giant Petrobras aims to save around $440 million through jobs cuts and reduction in refinery units
In order to streamline its operations, Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR) announced to slash 30% of its managerial positions, Bloomberg reports. The energy company plans to save around $440 million or 1.8 billion Real, amidst falling crude oil prices and a multi-billion dollar corruption scandal.
Most of the cuts in the Brazilian oil corporation’s workforce are being made at the managerial level in non-operational areas. Of the total 7,500 managerial jobs, Petrobras has around 5,300 workers in the non-operational area.
On Wednesday, January 27, Reuters reported, citing people familiar with the matter that in crude oil price environment of $30 per barrel, thousands of managerial positions have “imprisoned” Petrobras. It has become expensive for the Rio de Janeiro-based company to maintain thousands of management jobs in face of the worst corruption scandal in the history of oil industry and a more than 70% decline in crude oil prices since June 2014.As the oil giant wants to adapt to the current market situation, it has also combined its natural gas and refinery units to reduce the number to six. The reduction will allow the management to focus its strategic priorities to the company’s “profitability and capital discipline.”
The corporation is trying hard to reduce its liabilities and bolster its balance sheet position. The cut in its workforce and refinery unit numbers would allow the federally operated oil and gas company to save funds to repay high liabilities of more than $130 billion. Currently, Petrobras is the most indebted oil company in Brazil.
The business is taking several austere measures to improve its liquidity position. In July, it announced to divest $15.1 billion worth of assets by the end of 2016. Earlier this month, it slashed 2015-2019 capital spending targets from $130.3 billion to $98.4 billion. The state-run energy giant is also revisiting its operating spending plan for the five-year period ending 2019.
The recent job cuts will help Petrobras to further lower its operating costs. The energy corporation had already reduced its operating spending target from $27 billion to $21 billion in October 2015.