Petrobras Puts the Freeze on All New Deepwater Rig Leases

ODN Tay IV is operating in the Bacia de Campos for Petrobras, image: Odebrecht Oil and Gas

(Bloomberg) — Petroleo Brasileiro SA, the world’s largest deep-water oil producer, will stop leasing new rigs as it struggles to contain costs and lift profits.

Petrobras, as the Rio de Janeiro-based state-run company is known, “managed to optimize its portfolio of deep-water drilling rigs and won’t need additional ones,” the company’s press office said in an e-mailed response to questions, while declining to say how long the leasing freeze will last. Last year Petrobras said it would lease a rig in 2013 and another in 2014 to add to the 40 it has for drilling in 2,000 meters (6,562 feet) of water.

Petrobras has become the most indebted publicly-traded oil producer as it accelerates investments to extract and refine so- called pre-salt deposits. It plans to spend $236.5 billion in the five years through 2016 as it develops the biggest crude discoveries this century that are beneath the Atlantic Ocean seabed. The producer announced 32 billion reais ($16.3 billion) of cost cuts in December to slow spending growth.

Profits at Petrobras fell to the lowest since 2004 last year after production waned and the company sold imported diesel and gasoline at a loss as part a government policy to curb inflation.

The oil producer has also announced it will hire 28 new rigs from Sete Brasil Participacoes SA between 2015 and 2020. Petrobras declined to say whether the freeze would affect the plan to lease the rigs from Sete.

Sete has made no changes to its rig delivery program and hasn’t been notified of any cancellations, an official at the company’s press office, who declined to be named because of company policy, said by phone.

Transocean Ltd., Diamond Offshore Drilling Inc., Noble Drilling Corp., Odebrecht Oleo e Gas SA, Ensco Plc, Ocean Rig UDW Inc., Schahin Petroleo e Gas SA and QGOG Constellation SA are among Petrobras’s deep-water rig suppliers.

– Rodrigo Orihuela and Peter Millard, Copyright 2013 Bloomberg.

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