Webcast: Transfer of Rights Agreement


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Webcast about the approval of the terms and conditions of the Transfer of Rights Agreement.

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Webcast: Transfer of Rights Agreement

  1. 1. TRANSFER OF RIGHTS CONTRACT Novo Marco Regulatório de Exploração e Produção Conference Call / Webcast José Sergio Gabrielli CEO Almir Guilherme Barbassa Contrato de Cessão Onerosa CFO and Investor Relations Officer Lei 12.276/2010 September 2nd, 2010 1º de setembro de 2010 1
  2. 2. DISCLAIMER This material is a presentation of general background information about Petróleo Brasileiro S.A. – PETROBRAS (“Petrobras”) as of the date of this presentation. Information contained herein has been summarized and does not purport to be complete. This presentation shall not be considered investment advice to potential investors. This presentation is strictly confidential and may not be disclosed to any person. No representation or warranty, express or implied, is made concerning, and no reliance should be placed on the accuracy, fairness, or completeness of the information presented herein, which shall not support any investment decision. We present certain data in this presentation, such as oil and gas resources, that we are not permitted to present in documents filed with the United States Securities and Exchange Commission under Subpart 1200 to Regulation S-K because such terms do not qualify as proved, probable or possible reserves under Rule 4-10(a) of Regulation S-X. The issuer has filed a registration statement (including a prospectus) with the SEC and a Prospecto Preliminar and a Formulário de Referência with the CVM. Before you invest, you should read the prospectus in that registration statement and other documents the issuer will filewith the SEC and the Prospecto Preliminar and Formulário de Referência the issuer will file with the CVM for more complete information about Petrobras. You may obtain these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov or on the CVM Web site at www.cvm.gov.br. Alternatively, Petrobras, any underwriter or any dealer participating in the offering will arrange to send you the prospectus upon a request. This presentation does not constitute an offer, invitation or solicitation of an offer to subscribe for or purchase any securities. Neither this presentation nor anything contained herein shall form the basis of any contract or commitment whatsoever. Recipients of this presentation are not to construe the contents of this summary as legal, tax or investment advice and recipients should consult their own advisors in this regard. This presentation contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are not based on historical facts and are not assurances of future results. Such forward-looking statements are generally identifiable by the use of words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” or any other words or phrases of similar meaning. Forward-looking statements in this presentation may concern, among other things, Petrobras’ plans, forecasts, expectations regarding future events, strategies and projections, all of which are based on Petrobras’ current views and estimates of future economic circumstances, industry conditions, company performance and financial results that involve inherent risks and uncertainties. Readers are cautioned that the statements are only projections and may differ materially from actual future results or events. Among the factors that could cause actual future results to differ materially from those indicated in the forward- looking statements are risks relating to general economic and business conditions, including crude oil and other commodity prices, refining margins and prevailing exchange rates, uncertainties inherent in making estimates of our oil and gas reserves including recently discovered oil and gas reserves, international and Brazilian political, economic and social developments, receipt of governmental approvals and licenses and our ability to obtain financing, in addition to the other risks and uncertainties described in the “Risk Factors” section of the prospectus supplement that Petrobras will file with the Securities Exchange Commission (“SEC”) relating to the offering and Petrobras’ Annual Report on Form 20-F for the year ended December 31, 2009 and in the Prospecto Preliminar and the Formulário de Referência that Petrobras has or will file with the Comissão de Valores Mobiliários (“CVM”) The forward-looking statements speak only as of the date they were made, and Petrobras’ undertakes no obligation to update or to review any forward-looking statement because of new information, future events or for any other reason. All forward-looking statements are expressly qualified in their entirety by this cautionary statement, and you should not place reliance on any forward-looking statement contained in this presentation. Neither Petrobras nor any of its affiliates, directors, officers, agents or employees shall be liable before any third party (including investors) for any investment or business decision made or action taken in reliance on the information and statements contained in this presentation or for any consequential, special or similar damages. The market and competitive position data, including market forecasts, used throughout this presentation was obtained from internal surveys, market research, publicly available information and industry publications. Although we have no reason to believe that any of this information or these reports are inaccurate in any material respect, we have not independently verified the competitive position, market share, market size, market growth or other data provided by third parties or by industry or other publications. Petrobras and the underwriters do not make any representation as to the accuracy of such information. This presentation and its contents are proprietary information and may not be reproduced or otherwise disseminated in whole or in part without Petrobras’ prior written consent. 2
  4. 4. VALUES AND VOLUMES Volume of the contract 3C Volume Value Block Area (km²) (MM boe) (MM boe) (US$/boe) Florim 292 467 467* 9.01 Franco 1,255 3,058 6,056 9.04 Iara (Surround) 611 600 1,088 5.82 Tupi Northeast 291 428 428* 8.54 Guará South 144 319 319* 7.94 Tupi South 203 128 128* 7.85 Peroba 1,069 - 1,796* - (contingent block) Volume of the Contract Average Value Total Area (Km2) 3,865 5,000 boe) 8.51 (US$/boe) Total (MM 3,865 5,000 8.51 Total: US$ 42,533 million * Pmean values used for the prospective volumes. For the contingent volumes, when incorporating 3C volumes, a interpolation among values 2C and 3C was applied. 4
  5. 5. TRANSFER OF RIGHTS WITH COMPENSATION CONTRACT Assumptions of revision ► Year base of cash flow: 2010 ► Prices ► Oil: fixed price based on NYMEX – forward 18 months, minus ANP concept spread ► Gas: price of RJ-SP market, minus transportation costs, processing costs and offloading ► Actual costs ► Investments and estimated costs according to best industry practices ► Analyses based on existing pre-salt develop conception modules 5
  6. 6. TRANSFER OF RIGHTS WITH COMPENSATION CONTRACT ► Petrobras will exercise activities of petroleum production taking full risk and will be the owner of produced volumes ► Royalties of 10% will be paid by Petrobras and distributed according to the law nº 9,478/97 and Decree nº 2,705/98 ► There is no special participation tax on the transfer of rights areas ► The company will be subjected to the tax regime (federal, states and municipalities) ► ANP will regulate and to do the supervision of the activities done by Petrobras, approving unitization agreements for these areas, when necessary 6
  7. 7. TERMS OF THE CONTRACT • Operations under Petrobras performance and risk similar to concession contracts • Differences from the concession contracts: • Contract assure volumes • Price adjustment mechanism • Maturity: Declaration of Commercial Feasibility Exploratory Phase Production Phase Stage Development Variable , according Maturity : 4 years extendable , to the development for 2 years more plan Total maturity: 40 years Extendable for 5 years, according to specific criteria , • Property of the volumes produced Volume per block as attached to the contract CO2 not considered in volume quantification 7
  8. 8. ENFORCEABLE EXPLORATORY PROGRAM Block Activity Florim 1 well + 3D seismic Franco 2 wells + EWT + 3D seismic Iara (surrondings) 1 well + 1 contingent well + EWT (contingent) + 3D seismic Tupi (NE) 1 well + EWT (contingent) + 3D seismic Guará (South) 1 well + 3D seismic Tupi (surrondings) 1 well + 3D seismic Peroba (contingent block) 1 well + EWT (contingent) + 3D seismic ► In the enforceable exploratory program there is no risk of losing the block. Differently from the concession model, if the program is not performed in the appropriate time the company is only subject to fine ► The enforceable exploratory program was designed with the intention to gathering the necessary information for the later revisions of the value 8
  9. 9. TRANSFER OF RIGHTS WITH COMPENSATION CONTRACT Mechanisms to guarantee the contracted volume (5 billion bbl) 1) Inclusion of the contingent block : Can occur up to 4 years after contract signing, in case additional volumes are needed to reach the 5 billion barrels. If it occurs, it will be in the exploratory phase. 2) Revision: After the obligatory exploratory program there will be a verification of each block’s volume. There may be a rearrangement of volumes among the blocks. 3) Realocation: lower production in one block might be compensated for a additional production in another block, limited to the 5 billion barrels of total volume. Reallocation Revision Contingent block 9
  10. 10. TRANSFER OF RIGHTS WITH COMPENSATION CONTRACT Revision of the value of the contract • Technical and economical assumptions establish in contractual attachment • Price revision will take into consideration: oil price variation, production curve, cost assumptions updates, maintaining the discount rate and the base evaluation date. • Done for each block after the fulfillment of the minimum exploratory program and the declaration of commercial feasibility • Based on technical appraisals and assumptions establish in contractual attachment • If the value is higher, Petrobras might: • Pay the difference to the Brazilian Government • Ask for a reduction in the volume • If the value is lower the Brazilian government will pay the difference to Petrobras The conclusion of the revision (compensations) will take place after the last declaration of commercial feasibility. 10
  11. 11. TRANSFER OF RIGHTS WITH COMPENSATION CONTRACT Reallocation volumes ► In accordance with technical foundation, base on differences from the geologic features originally considerate, which make impossible the production of the oil ► Not based on convenience to Petrobras ► It could imply in reduction of produced volume, if valued reallocated oil is higher ► It could imply indenization by the government, if it would result in a volume above 5 billion barrels The mechanism is based in the financial value set in the revision 11
  12. 12. TRANSFER OF RIGHTS WITH COMPENSATION CONTRACT Volumes adjustment mechanisms ► Notice three years prior to the end of the production or depletion ► Information about additional volumes and infrastructure condition ► In case of greater volumes than what was bought in the contract the terms for continuing operations were set in the contract ► Petrobras must present in advance at 1 year a program of deactivation Abandonment and Deactivation ► Petrobras will be responsible for the assets in proportion to your production volumes 12
  13. 13. LOCAL CONTENT REQUIREMENTS • Local Content • Global Content - Exploration, Appraisal and Development • Content for items and sub item • Similar penalties as applied in concession model • Global Content • Exploration: 37% • Development: average content of 65% First oil Up to 2016 LC module 55% 2017-2018 LC module 58% 2019 ahead LC module 65% Petrobras bidding strategy in line with local content requirements 13
  14. 14. STRATEGIC VIEW Increase in production ► Possible increase in the the company’s production growth rate, helping Petrobras to reach the position as the larger oil and gas producer among the supermajors 35% increase in proved reserves, strengthening the production growth in a sustainable manner ► Replacing reserves is becoming harder, in light of the restricted access to new exploratory frontiers throughout the world Increase in financial resources to implement projects 14
  15. 15. FINAL CONSIDERATIONS ► Similar to the concession contract in terms of regulation and surveillance ► Volume assured and maturity of the contract (40 years, extendable for 5 more) adequate to produce to contracted volume. ► Revision after the declaration of commercial feasibility for each block ► Independent companies used market assumption to define the volume and value of the areas. When the revaluation takes place, uncertainties will be reduced. ► Declaration of commercial feasibility is not mandatory (in case the block is not commercial) ► Adjustments will take place after evaluation of possible differences in each block. Reallocation to be defined according to financial volumes. ► In case the contracted volume cannot be produced, the government will reimburse Petrobras 15
  16. 16. Information: Investor Relations +55 21 3224-1510 petroinvest@petrobras.com.br 16 16