Webcast 2 q12

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2nd Quarter 2012 (IFRS)
Conference Call/Webcast
August 6th, 2012

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Webcast 2 q12

  1. 1. 2nd Quarter 2012 (IFRS)Conference Call/WebcastAugust 6th, 2012
  2. 2. DISCLAIMERFORWARD-LOOKING STATEMENTS:DISCLAIMERThe presentation may contain forward-looking statements We undertake no obligation to publicly update orabout future events within the meaning of Section 27A of revise any forward-looking statements, whether asthe Securities Act of 1933, as amended, and Section 21E a result of new information or future events or forof the Securities Exchange Act of 1934, as amended, that any other reason. Figures for 2012 on areare not based on historical facts and are not assurances of estimates or targets.future results. Such forward-looking statements merelyreflect the Company’s current views and estimates offuture economic circumstances, industry conditions, All forward-looking statements are expresslycompany performance and financial results. Such terms qualified in their entirety by this cautionaryas "anticipate", "believe", "expect", "forecast", "intend", statement, and you should not place reliance on"plan", "project", "seek", "should", along with similar or any forward-looking statement contained in thisanalogous expressions, are used to identify such forward- presentation.looking statements. Readers are cautioned that thesestatements are only projections and may differ materiallyfrom actual future results or events. Readers are referred NON-SEC COMPLIANT OIL AND GAS RESERVES:to the documents filed by the Company with the SEC, CAUTIONARY STATEMENT FOR US INVESTORSspecifically the Company’s most recent Annual Report onForm 20-F, which identify important risk factors that could We present certain data in this presentation, suchcause actual results to differ from those contained in the as oil and gas resources, that we are not permittedforward-looking statements, including, among other to present in documents filed with the Unitedthings, risks relating to general economic and business States Securities and Exchange Commission (SEC)conditions, including crude oil and other commodity under new Subpart 1200 to Regulation S-K becauseprices, refining margins and prevailing exchange rates, such terms do not qualify as proved, probable oruncertainties inherent in making estimates of our oil and possible reserves under Rule 4-10(a) of Regulationgas reserves including recently discovered oil and gas S-X.reserves, international and Brazilian political, economicand social developments, receipt of governmentalapprovals and licenses and our ability to obtain financing. 2
  3. 3. OPERATIONAL HIGHLIGHTS» 2012-2016 Business and Management Plan of US$ 236.5 billion, of which US$ 208.7 billion related to projects under implementation and US$ 27.8 billion to projects under evaluation (subjected to adequate return and financeability)» Price increases for diesel (10%) and gasoline (8%)» Domestic refining troughput record (2.01 million bpd)» Advances in contracting and development of the local industry: » Contracts for construction of 12 drilling rigs by Sete Brasil (6 at Brasfels and 6 at Jurong Aracruz shipyards) » New technical partner defined for Atlântico Sul Shipyard » Contracts for the construction and integration of the first topsides of 8 FPSOs for the Pre-salt» 4 foreign built drilling rigs arrived to Brazil in 2Q12 P-55 Deck mating conclusion of P-55 in Rio Grande Shipyard. The operation was the heaviest structure ever lifted in the world (17 thousand tons) P-56 3
  4. 4. 2Q12 RESULTS » Loss of R$ 1.3 billion in 2Q12 vs net income of R$ 9.2 billion in 1Q12 » EBITDA of R$ 10.6 billion in 2Q12 vs R$16.5 billion in 1Q12 Principal factors underlying results • Exchange rate devaluation (impact on debt and cost) • Price differential for oil products sold in Brazil • Lower production (operational stoppages and Frade) and lifting cost increases (start-up of PROEF*) • Exploration expenses from dry/subcommercial wells drilled mainly between 2009 and 2012 in new exploratory frontiers • Increase of LNG imports due to higher natural gas demand from power generation These factors are less likely to occur jointly and with the same intensity in subsequent quarters P-56*PROEF – Programa de Aumento da Eficiência Operacional da Unidade de Operações da Bacia de Campos (Operating Efficiency Improvement Program in Campos Basin Operational Unit) 4
  5. 5. EXCHANGE RATE R$/US$ 2011 2012 2.30 2Q11 1Q12 2Q12 2.20 Average 1.60 Average 1.77 Average 1.96 2.10 2.05 2.03 1.98 2.00 1.90 1.84 1.85 1.77 1.79 1.79 1.79 1.80 1.74 1.72 1.68. 1.67 1.66 1.70 1.60 1.59 1.61 1.59 1.60 1.56 0,00 Jan-11 Feb-11 Mar-11 Apr-11 May-11 June-11 July-11 Aug-11 Sept-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 June-12 July-12 » A higher devaluation of the Real at the end of 2Q12 resulted in a Net Financial Loss of R$ 6.4 billion » Average depreciation of the Real throughout 2Q12 negatively affected the Company’s main costs (lifting cost, government take, imports of oil, oil products and LNG, and oil products logistics) » However, FX has stabilized following the devaluationSource: Brazilian Central Bank (PTAX) 5
  6. 6. DOMESTIC AND INTERNATIONAL PRICES 2011 2012 260 900 Period when 2Q12 inventories were built 800 240 Average Realization Price in 700 220 US Golf CoastAverage Realization Price (R$/bbl) Imported Volumns (kbbl / d) 600 200 500 180 400 Average Realization Price in Brazil 160 300 140 200 120 100 100 0 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 ARP USGC (with volumes sold in Brazil) ARP Brazil Gasoline Imports Diesel Imports » Inventories recognized in COGS in 2Q12 were acquired during the period of the highest price differential (March-May/12) » The differential with international prices decreased at the end of 2Q12 as a result of the decline in international oil prices and the domestic increases in diesel and gasoline prices 6
  7. 7. OIL AND NGL PRODUCTION (BRAZIL) Kbpd 2011 20122,200 2Q11 1Q12 2Q12 Average: 2,018 Average: 2,066 Average: 1,9702,150 2,110 2,084 2,0982,100 2,069 2,061 2,040 2,0472,050 2,020 2,002 1,989 2,0012,000 2,003 2,003 1,993 1,968 1,963 1,961 1,9601,950 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 » 5% decrease in production 2Q12/1Q12 (- 96 kbpd) as a result of: » Operational stoppages (-54 kbpd), lower operational efficiency (-18 kbpd) and Frade (-15 kbpd) » Decline of potential as expected » 2 new systems will start-up on 2H12: » FPSO Cidade de Anchieta (Baleia Azul), 100 kbpd, in August » FPSO Cidade de Itajaí (Baúna e Piracaba), 80 kbpd, in October » Maintenance of 2012 oil production target (flat when compared to 2011, +/-2%) » Production recovery only in 4Q12 (scheduled stoppages will continue on 3Q12) 7
  8. 8. BALEIA AZUL (FPSO ANCHIETA): S-CURVE OF PHYSICAL PROGRESS FOR THE WHOLE PROJECT Cumulative until 06/30/12: Planned: 84.7% Actual: 78.2% Projected Exp. 2 - Delay in cumulative physical advance: Cumulative physical advance belowExp. 1 - Schedule delay: 1-month delay in operating start-up (first oil) due to baseline due to the delay in the project’s wells construction and flexible linesthe delay in the FPSO’s conversion works manufacturing 8 8 Confidencial
  9. 9. BAÚNA E PIRACABA (FPSO ITAJAÍ): S-CURVE OF PHYSICAL PROGRESS FOR THE WHOLE PROJECT Projected Exp. 2 - Delay in cumulative physical advance- Delay of 12.48% in physicalExp.1: schedule delay - The 3-month delay in the operational start-up is due advance until 06/30/12 due to delays in the FPSO construction (0.21%), delay into the postponement of the production unit ‘s arrival date on site because of Baúnas’ wells completion (7.81%), postponement of interconnecting materialsthe low construction performance in the Jurong shipyard in Singapore arrival (1.55%), postponement in pre-anchoring and disbursement of the unit(especially mechanical completion and systems comissioning) mobilization tax (2.93%) and unplanned environmental analysis (0.02%) Confidencial 9 9
  10. 10. LIFTING COST (R$/barrel) 65.11 » Expenses related to workovers and subsea engineering 60.04 61.73 55.14 increased 35%, from R$ 1,024 million on 1Q12 to R$ 1,385 54.11 million in 2Q12, principally due to higher number of units 38.48 and of drilling rigs/days allocated to maintenance activities 37.57 39.03 (from 443 to 760 days in Campos Basin) 34.21 31.80 » This increase in activities and disbursements is due to the PROEF (Operational Efficiency Improvement Program). The 20.93 22.31 22.47 22.70 26.63 recovery in UO-BC’s operational efficiency will be seen by 4Q12 2Q11 3Q11 4Q11 1Q12 2Q12 » Government Take: decrease due to lower production in fields with a higher Special Participation bracket Govt Take Lifting Cost 10 10
  11. 11. EXPLORATORY ACTIVITIES: DRY WELLSR$ million Dry Hole Expenses3.5003.000 2.7372.5002.0001.5001.000 896 561 615 536 473 572 577 528 500 274 415 204 174 229 0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12-500 Dry/abandoned/subcommercial wells » Write-off - 41 dry or subcommercial wells in 2Q12, which were drilled between 2009 and 2012, the majority in new frontiers: » Activities in new frontiers imply lower success ratio than Pre-Salt’s over the last years, higher logistic costs and, consequently, higher expenses related to dry/subcommercial wells 11
  12. 12. 2Q12 DRY WELLS Pecém (New Discovery) 41 wells » By type 21 dry, 8 subcommercial, 9 cancelled projects, 2 abandoned e 1 mechanic accident » By area 13 in Post-salt, 15 onshore, 2 in Pre-Salt and 11 cancelled or abandoned projects Total Cost: R$ 2.7 billion • 5 wells responsible for R$ 1.539 billion (57%) 12
  13. 13. OIL PRODUCTS SALES IN BRAZIL +6% +3% » 2Q12 vs. 2Q11: Increase of 6% in oil products sales : 2,168 2,237 » 16% growth in gasoline volumes due to increase 2,118 in fleet and lower prices relative to ethanol 439 431 441 » 5% increase in diesel volumes due to retail growth 228kbpd 227 214 » Increase of 3% on the 2Q12 x 1Q12 comparison due to 545 557 demand seasonality 481 » Incremental volume supplied by imports, especially diesel, reduced downstream margins 969 970 1021 2Q11 1Q12 2Q12 Diesel + Jet Fuel Gasoline LPG Others 13 Confidencial
  14. 14. TRADE BALANCE Exports Imports Balance 703 714 764 721 724 554(mil barris/dia) 358 341 347 kbpd 480 497 351 374 406 383 223 217 203 2T11 2Q11 1T12 1Q12 2T12 2Q12 2T11 2Q11 1T12 1Q12 2T12 2Q12 2T11 2Q11 1T12 1Q12 2T12 2Q12 -18 -50 Oil Oil Products -170 » Lower domestic oil production reduced oil exports during 2Q12 » Higher volumes of domestic oil processed in our refineries also contributed to lower exports » Growth in domestic consumption (mainly diesel) required increased imports of oil products with negative margins 14
  15. 15. HIGHER THERMAL DEMAND: LNG IMPORTS Demand Million m³/day 2011 2012 60 2Q11 1Q12 2Q12 Average: 64.0 Average: 67.2 Average: 79.4 50 Non Thermal 40 26,5 30 23,8 18,6 20 Refineries and Fertllizer plants 10 15,5 11,6 Thermal 8,1 0 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 SupplyMillion m³/day » Higher thermo-electric consumption (+96% compared to 1Q12) +16% due to lower rainfall in 2Q12 80.7 69.4 » Increase in domestic supply and imported gas in 2Q12, especially 66.0 LNG, to meet thermo-electric demand 44.4 Domestic 38.7 42.6 » Increase of PLD (settlement price of differences) resulted in Bolivia negative impact on power trading margins 27.2 LNG 25.7 26.2 » Reduction of thermal demand at the end of 2Q12 with the 1.6 0.7 9.0 recovery of hydroelectric reservoir levels 2Q11 1Q12 2Q12 15
  16. 16. INTERNATIONAL PRODUCTION Oil and Natural Gas Production kboed 2011 2012270 2Q11 1Q12 2Q12260 Average: 227 Average: 239 Average: 240 249250 246 246 244 242 242 241 238240 236 237 237 238 239230 231 233 232 226 230 21980 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12* Até 11 de julho 19 » Highlight: Cascade (U.S.) production ramp-up » Lower sales volume in Nigeria due to lower participation in the Akpo field, as a result of the termination of the recovery of past costs » Lower commodity prices in 2Q12 resulted in a higher impairment of inventories in the U.S. and Japan (R$ 509 million) » Provision related to the agreement of the Pasadena refinery (R$ 140 million) 16
  17. 17. FINANCIAL RESULTS
  18. 18. OPERATING INCOME 2Q12 VS 1Q12 (R$ million) 1,913 11,771 (6,142) 5,282 (292) (1,968) 1Q12 Sales Revenue COGS SG&A Other Expenses 2Q12 Operating Income Operating Income» Reduction in operating income: » Increase in sales revenues, due to higher domestic demand (4%) and FX depreciation effect on export prices » Increase in COGS due to higher sales volume on domestic market, sales from inventories acquired at higher costs and FX effect over costs in dollars » Higher exploratory costs (2Q12/1Q12:+238% ) due to dry and sub-commercials wells – exploration of new frontiers 18
  19. 19. NET INCOME 2Q12 VS 1Q12 (R$ million) 9,214 (6,489) 2,624 739 (1,346) (6,872) (562) 1Q12 Operating Income Financial Results Equity Income Taxes Minority Interest 2Q12 Net Income Net Income» Losses: » Reduction of operating income » Financial expenses of R$ 6.4 billlion due to FX depreciation (11%) on debt 19
  20. 20. E&P 2Q12 vs 1Q12 Operating Income (R$ million) 1,213 (1,442) 18,846 (902) 621 (2,164) 16,172 1Q12 Price Effect Volume effect Average Cost Volume Effect Operational 2Q12 Operational on Revenue on Revenue effect in COGS on COGS Expenses Operational Results Results» Higher domestic oil prices due to depreciation of the Real» Lower level of domestic oil production» Higher maintenance costs and well interventions partially offset by lower governament take» Increase in geology, geophysics and dry/subcommercial wells expenses 20
  21. 21. DOWNSTREAM 2Q12 vs 1Q12 Operating Income (R$ million) 487 (7,101) (272) 53 150 (3,285) (9,968) 1Q12 Price Effect Volume Effect Average Cost Volume Effect Operational 2Q12 Operational on Revenue on Revenue Effect in COGS on COGS Expenses Operational Results Results» Higher sales prices only at the end of quarter» Lower oil and oil products exports – domestic oil production chanelled to supply Brazilian domestic market» Higher level of acquisition costs/internal transfer prices and sales of inventories acquired at higher costs 21
  22. 22. DOMESTIC OUTPUT OF OIL PRODUCTS Oil products output * Throughput and Utilization Factor Refining Cost (R$/bbl) 2500 92.5% 94.3% 100 2,035 89.9% 1,894 1,967 90 1,884 1,927 2000 1,837 80 Utilization factor (%) Throughput (kbpd) 349 350 70 353 1500 60kbpd 50 +2% 1000 40 1,484 1,534 1,576 30 500 20 10 0 0 2Q11 1Q12 2Q12 Diesel + Jet Fuel Gasoline LPG Others Utilization Factor Imported Oil Domestic Oil » Increase in oil products output due to higher throughput as a result of higher operational availability and higher utilization in conversion and quality units » Higher utilization factor in existing refineries, and a record in monthly processing in June (98.7%) » Small increase in refining cost, in Reais, due to higher costs associated to maintenance stoppages with no impact on throughput. In US dollars, it decreased 8% * Includes E&P’s LPG production 22 Confidencial
  23. 23. CAPITAL STRUCTURE 1 2 Net debt/EBITDA Net debt/Net Capitalization 50% 5,5 28% 40% 4,5 22% 24% 24% 30% 3,5 17% 2.46 20% 2,5 1.66 1.61 10% 1.07 1.41 1,5 0% 0,5 -10% -0,5 -20% 2Q11 3Q11 4Q11 1Q12 2Q12 R$ Billion 06/30/12 03/31/12 Short-term Debt 17.7 18.0 » 2Q12 weak results do not reflect expectations for Long-term Debt 161.5 146.1 the remaining quarters Total Debt 179.2 164.1 » Divestment plans continue as targeted (-) Cash and cash equivalents 3 45.9 57.9 = Net Debt 133.2 106.2 » No change in estimates and leverage limits US$ Billion 06/30/12 03/31/12 established on the 2012-2016 Business and Net Debt 65.9 58.3 Management Plan1) Net Debt / ((EBITDA 1Q12 + EBITDA 2Q12) x 2)2) Net Debt / (Net Debt + shareholder’s equity)3) Includes tradable securities (maturing in more than 90 days) 23
  24. 24. INVESTMENTS 1H2011 1H2012 R$ 32.0 billion R$ 38.7 billion (US$ 19.6 billion) (US$ 20.7 billion) 1% 1% 2% 1% 0% 2% 6% 5% 6% 5% 38% 34% E&P Downstream G&E International Distribution Biofuel Corporate 24
  25. 25. ‘Finally, I would like to reaffirm my confidence in Petrobras’ privilegedposition in the oil and gas sector. Our reserves, highly qualifiedpersonnel, R&D investments and track record of overcomingchallenges will lift the Company to levels of excellence that willgenerate consistent returns for our shareholders.’ Presidente Maria das Graças Silva Foster
  26. 26. Information:Investor Relations+55 21 3224-1510petroinvest@petrobras.com.br 26

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