Petroleo Brasileiro SA - Petrobras : Brazil's Petrobras to Raise Fuel Prices June 25
06/22/2012| 07:18pm US/Eastern
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--Petrobras to raise gasoline, diesel prices next week to bolster investment plan
--Tax cuts will offset price increase for consumers
--Petrobras will detail investment plan starting next week
(Adds tax cut in third paragraph, analyst comment in sixth paragraph.)
By Paulo Winterstein
SAO PAULO--Petroleo Brasileiro SA (PBR, PETR4.BR), Brazil's state-controlled oil company, said Friday it will increase fuel prices to offset the costs of its investment program.
Petrobras, as the company is known, will increase gasoline prices by 7.83% and diesel prices by 3.94% starting Monday, according to a regulatory filing. The price increases don't raise taxes on fuel, Petrobras said.
Brazil's Finance Ministry said shortly after the price increase was announced that it would cut to zero federal taxes on fuels, cancelling the price increase for consumers at the pump.
In the regulatory filing, Petrobras said the increase "seeks to align the price of derivatives to the values practiced on international markets with perspective to the medium and long term."
Petrobras released its $236.5 billion investment plan for 2012-16 on June 14, when it announced plans to invest more than previously forecast while at the same time reducing output estimates.
In a note published the day after the investment plan was announced, BTG Pactual analyst Gustavo Gattass wrote that "ultimately, without a price increase of relevance (we are budgeting 15%), Petrobras' valuations are not appealing and its balance sheet is at serious risk."
According to the plan, Petrobras expects a 15% increase in revenue to help cover investment costs.
Petrobras will meet with investors starting next week to provide more details about its investment plan.
In the latest five-year plan, which is revised annually, the largest slice of the spending, 60%, will go to exploration and production. The company said it wants to "recover the production curve for oil and natural gas" and will prioritize its efforts in Brazil.
However, Petrobras said in the plan that by 2020 it aims to be producing a total of 5.7 million barrels a day of oil and gas world-wide, down 11% from its previous estimate of 6.4 million barrels of oil and gas.
Write to Paulo Winterstein at paulo.winterstein@dowjones.com
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