Moody's downgrades Petrobras

Moody's Investors Service said it downgraded Petroleo Brasileiro SA's global foreign-currency and local-currency debt ratings to Baa2 from Baa1. The outlook remains negative.

The downgrade reflects Petrobras' high financial leverage and Moody's belief that it is only likely to decline significantly well after 2016, contrary to the agency’s original expectations, given downward pressures on oil prices and the local currency as well as high capex commitments.

Petrobras' Baa2 ratings are supported by its large-scale reserve base and dominance in the Brazilian oil industry, its sizable new pre-salt discoveries and renowned technological expertise, by its growing production and by government support, the agency said.

Moody’s said the negative outlook reflects the probability that the company's leverage may increase further due to lower international oil prices and limited flexibility to reduce cost, with negative impact on margins.

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