Further spending cuts likely by Petrobras as old plan is obsolete

Rio de Janeiro

BRAZIL'S state-run oil company Petrobras, which slashed its five-year spending plan by 40 per cent in June, will likely cut back further as growing debt costs, falling oil prices and a weak currency have already made the plan obsolete, two company sources told Reuters on Thursday.

Standard & Poor's decision to cut Brazil's sovereign credit rating to "junk" grade on Wednesday was followed by a separate downgrade for Petroleo Brasileiro SA, as Petrobras is known, on Thursday.

The sources said the downgrade will raise the cost of refinancing Petrobras's more than US$130 billion of debt and reduce the capital available to drill wells, build production ships and refineries and pay for infrastructure to boost output and…