SAO PAULO – Brazilian state-controlled oil giant Petrobras said Thursday it is working to ensure the “transparent and accurate” disclosure of its 2014 results after credit rating agency Moody’s Investors Service this week downgraded the company debt to junk status.
The company said in a statement that it is reviewing its financial plan and that it will likely be necessary for it to reduce its investments, undertake further divestments and study other options for securing financing and increasing cash flow.
Petrobras also said it is working to shore up its internal controls amid a massive and ongoing corruption scandal, which has already resulted in formal charges being filed against three of the company’s former directors and executives from several of the country’s leading construction firms.
The company said it is continually looking to improve the results of its operational activities, as evidenced by its successive production records in the pre-salt (a recently discovered ultra-deep offshore frontier), refining and natural gas supply.
Petrobras noted in the statement that it is under no obligation to take any specific measures in connection with the ratings downgrade.
Moody’s on Tuesday lowered Petrobras’ credit rating by two notches to Ba2, two levels below investment grade, becoming the first of the big-three rating agencies to classify Petrobras’ debt as junk.
The ratings action, which comes amid an ongoing federal investigation into allegations that a cartel of construction firms paid kickbacks to the company for several years, could lead conservative investment funds to sell their Petrobras holdings.
Moody’s said the downgrade of Petrobras debt reflects “increasing concern about corruption investigations and liquidity pressures that might result from delays in delivering audited financial statements.”
That was a reference to PricewaterhouseCoopers’ refusal to certify Petrobras’ accounts.
Moody’s also said that it expects “the company will be challenged to make meaningful reduction in its very high debt burden over the next several years.”
The downgrade also reflects “the challenges related to the corruption investigations, which create management distractions that may hinder efforts to improve operations as well as ongoing concerns about corporate governance and the need to sustainably improve internal controls,” the agency added.
Petrobras, which represents 12 percent of Brazilian GDP, is under investigation following disclosure of widespread corruption said to have cost the company billions of dollars since the mid-1990s.
The scandal, in which money also was allegedly funneled to politicians, has led to the resignation of top company executives, including Maria das Graças Silva Foster, who was replaced as Petrobras’ CEO by Aldemir Bendine, former chief executive of state-run bank Banco do Brasil.
President Dilma Rousseff, who served on Petrobras’ board of directors from 2003 to 2010, said Wednesday that Moody’s ratings action was the result of ignorance about the company’s situation.
She expressed confidence that Petrobras will recover from the scandal “without major consequences.”