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http://www.investidorpetrobras.com.br 11
http://investidorpetrobras.com.br 11
http://homologa.investidorpetrobras.com.br 9
http://www.petrobras.com.br 7
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  • 1. PETROBRAS Conference Call / Webcast 2nd Quarter 2006 (Brazilian Corporate Law) Almir Barbassa CFO and Investor Relations Officer August, 15th 2006
  • 2. PETROBRAS Disclaimer The presentation may contain forecasts about future events. Such forecasts merely reflect the expectations of the Company's management. Such terms as "anticipate", "believe", "expect", "forecast", "intend", "plan", "project", "seek", "should", along with similar or analogous expressions, are used to identify such forecasts. These predictions evidently involve risks and uncertainties, whether foreseen or not by the Company. Therefore, the future results of operations may differ from current expectations, and readers must not base their expectations exclusively on the information presented herein. The Company is not obliged to update the presentation/such forecasts in light of new information or future developments. Cautionary Statement for US investors The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation, such as oil and gas resources, that the SEC’s guidelines strictly prohibit us from including in filings with the SEC. 1
  • 3. PETROBRAS Domestic oil and NGL production ∆ = 1,6% 1,757 1,751 thousand bpd 1,760 1,750 1,736 1,740 1,730 1,725 1,730 1,720 1,710 1,700 2Q05 3Q05 4Q05 1Q06 2Q06 • 2Q06 average production reflects the start-ups of P-50 (April) and FPSO Capixaba (May), partially offset by the concentration of scheduled stoppages of the following platforms: • May: P-33, P-35 and P-43; • June: P-26, P-40, FPSO Brasil, P-27, P-25 and P-31. 2
  • 4. PETROBRAS E&P – Oil Prices US$ 11.42 bbl 69.62 61.75 61.53 56.90 57.59 64.74 US$/bbl 56.39 51.59 47.83 58.20 44.00 52.70 41.59 54.24 53.69 39.70 49.33 35.38 38.98 44.19 34.38 43.04 46.05 36.14 37.48 35.11 32.88 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 Brent (average) Average Sales Price OPEC Basket The spread between Brazilian oil average price and Brent increased from US$ 8.07/bbl to US$ 11.42/bbl, due to reduced oil products inventory in the international market, which resulted in a higher value of light oil compared to heavy oil. 3
  • 5. PETROBRAS Domestic Lifting Costs w/o Gov. Part. ∆ = -3% or US$ 0.20 6.07 6.32 6.12 5.99 5.45 5.44 1Q 05 2Q 05 3Q 05 4Q 05 1Q06 2Q06 -US$ 0,12/boe: higher expenditures with turbine maintenance, gas pipelines repair and P-32 collection and flowage line substitution, all in the 1Q06; • -US$ 0,07/boe: higher oil and gas production • In reais, extraction cost decreased from R$ 13,84 in the 1Q06 to R$ 13,16 in the 2Q06. 4
  • 6. PETROBRAS Lifting Costs including Gov. Participation % 2002 – 2Q06 26 Brent = 181% 70 Lifting Cost = 103% 61.5 56.9 69.6 51.6 60 21 Gov. Participation = 185% 47.5 61.8 50 38.2 17,3 17,5 16,0 16 15,0 40 28.8 13,6 13,3 US$/boe 24.8 65% 63% 30 10,7 11.0 11.4 62% 59% 11 9.9 7.6 9.6 8,5 7.8 20 7,0 6.4 6 5.1 10 57% 4.0 6.0 5.5 5.4 6.1 6.3 6.1 0 3.0 3.4 4.3 1 -10 2002 2003 2004 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 -4 -20 Lifting Cost Gov. Participation Brent • Government Participation per barrel increased 4%, reflecting larger share in total production of fields that are currently in a highly productive phase (Barracuda and Caratinga) and a 9% increase in the reference price in reais for Brazilian oil. 5
  • 7. PETROBRAS Refining and Sales in the Domestic Market 95 2,400 90 87 91 91 2,200 91 91 83 85 2,000 80 81 80 81 80 79 79 1,800 75 70 1,600 65 1,400 1,804 1,731 1,7951,684 1,708 1,589 1,668 1,665 1,761 1,647 1,812 1,649 60 1,200 55 1,000 50 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 Dom estic oil products production Oil products sales volum e Prim ary processed installed capacity - Brazil (%) Dom estic crude as % of total • Brazilian oil products production slightly lower than in the previous quarter due to more frequent scheduled stoppages in refineries; • Higher nominal capacity utilization. 6
  • 8. PETROBRAS Domestic Refining Costs (US$/bbl) 2.07 2.03 1.96 1.90 1.86 1.74 1Q 05 2Q 05 3Q 05 4Q 05 1Q 06 2Q 06 • 9% increase with respect to previous quarter due to: • +US$ 0,12/bbl: scheduled stoppages; • + US$ 0,04/bbl: Materials; • + US$ 0,04/bbl: FX Rate effect; • - US$ 0,04/bbl: Increase in the throughput. • Refining cost raised from R$ 4.19 in the 1Q06, to R$ 4.55 in the 2Q06 7
  • 9. PETROBRAS Average Realization Price - ARP 100 2Q05 4Q05 1Q06 Average Average Average 80 71.0 80.0 60.7 70.2 70.7 60 55.3 61.8 69,6 51.6 40 20 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 ARP Brazil (US$/bbl) Brent Average Price ARP USA (w/ volumes sold in Brazil) • Unraveling from US ARP due to the beginning of US summer, reduced gasoline inventories and Middle East conflicts that threaten supply; • Higher quality requirements in the American market (MTBE). 8
  • 10. PETROBRAS Sales Volume Thousand bpd 2Q06 1Q06 % 1H06 1H05 % Total Oil Products 1,684 1,649 2 1,666 1,627 2 Alcohol, Nitrogen and others 13 30 -57 21 26 -19 Natural Gas 239 232 3 236 218 8 Total Dom estic Market 1,936 1,911 1 1,923 1,871 3 Exports 536 519 3 527 486 8 International Sales 459 437 5 448 376 19 Total Interational Market 995 956 4 975 862 13 Total 2,931 2,867 2 2,898 2,733 6 • Oil products sales volume increased 2% in the domestic market due to: • Gasoline – reduction of the alcohol mixed with gasoline (from 25% to 20%) and loss of alcohol competitiveness, due to its higher prices; • Naphtha – attractive prices in comparison to international market; • Diesel - consumption stable as a result of reduced agricultural demand. • Natural Gas sales volume increased 3%. 2006 includes ongoing exports 9
  • 11. PETROBRAS Income Statement 2Q06 vs 1Q06 1Q06 2Q06 37.948 5.7% Net Revenues 35.886 21.260 R$ Million COGS 8.2% 19.644 13.614 EBITDA -3.5% 14.113 11.267 Operating Profit -6.2% 12.010 6.958 Net Income 4.2% 6.675 • Reduced operating profit due to higher oil price and COGS including government participation; • Lower operating profit reflects mainly increases in general and administrative expenses and others, as described in the next slide; • Increase in Net Income due to Real depreciation (0.5%) over equity income of investments abroad. 10
  • 12. PETROBRAS Operating Expenses Analysis 2Q06 vs 1Q06 1Q06 2Q06 1.353 Sales Expenses 0.8% 1.342 General and 1.415 Administrative Exp. 1.186 19.3% 378 Exploratory Costs 310 21.9% 890 Others 428 107.9% • Increase in the number of employees under training (2000 new employees); • Increase in other operating expenses due to higher provisions for personnel and expenses not directly related to the core business activities. 11
  • 13. PETROBRAS Changes in Operating Profit (2Q06 vs. 1Q06)- E&P Changes in Operating Profit – R$ million 1,751 Domestic Oil, NGL and Condensate – thousand bpd 1,757 1.376 372 233 165 521 10.938 10.523 1Q06 Oper. Price effect on Volume effect Average cost Volume effect Operating 2Q06 Oper. Profits Net Revenue on Net effect on COGs on COGs Expenses Profits Revenue • E&P results improvement due to better transfer and export prices; • Volume growth limited by scheduled stoppages. 12
  • 14. PETROBRAS Changes in Operating Profit (2Q06 vs 1Q06)- Supply Changes in Operating Profit – R$ million 160 748 441 3.013 96 249 35 2.486 1Q06 Op. Profit Price effect on Volum e effect Average cost Volum e effect Operating Off Shore 2Q06 Op. Profit Net Revenue on Net effect on COGs on COGs Expenses effect on Vol., Revenue Rev. and COGs • Increase in COGS due to: • Higher E&P transfer costs; • Higher imported oil costs; • Increase in refining costs; • Increase in operating expenses. 13
  • 15. PETROBRAS Changes in Net Profit – R$ million (2Q06 vs 1Q06) 1,751 Domestic Oil, NGL and Condensate – thousand bpd 1,757 1.320 839 1.143 24 543 6.958 6.675 378 1Q06 Net Profit Revenues COGS Oper. Exp. Fin. and non Employees Minority 2Q06 Net Profit oper. exp., others Participation Interest/Taxes/Off- and Equity Inc. shore Sales • Net income in 2Q06 reflected stability in production, sales and FX rate, with increase in oil prices and costs. Not including off-shore operations in Revenues and COGs 14
  • 16. PETROBRAS Net exports of oil and oil products Exports (thousand bpd) Imports (thousand bpd) 94 thous. bpd volume superavit in the 1Q06 536 559 504 519 446 109 446 459 442 338 409 241 257 269 105 94 115 88 213 228 450 233 352 344 354 263 262 267 233 181 2003 2004 2005 1Q06 2Q06 2003 2004 2005 1Q06 2Q06 Oil Oil Products Oil Oil Products • Net exports growth limited by: • Production stability due to scheduled stoppages; • Domestic gasoline consumption increase due to ethanol reduction (mix reduced from 25% to 20%); • Oil inventories stored in new production units. 2006 includes ongoing exports 15
  • 17. PETROBRAS Leverage Petrobras’ Leverage Ratio R$ million 06/30/2006 03/31/2006 32% Short Term debt (1) 12.213 11.399 28% 26% 26% Long Term Debt (1) 31.306 33.100 24% Total Debt 43.519 44.499 19% 20% 19% 23% 18% Cash and Cash 22.713 22.983 Equivalents Net debt (2) 20.806 21.516 6/30/2005 9/30/2005 12/31/2005 3/31/2006 6/30/2006 Net Debt/Net Capitalization Short-Term Debt/Total Debt • R$ 710 million decrease in net debt due to financing amortization, resulting in a 2 b.p. reduction of the leverage. (1)Includes debt contracted through leasing contracts of R$ 3.300 million on December 31, 2005, and R$ 4.021 million on December 31, 2004. (2)Total debt - cash and cash equivalents 16
  • 18. PETROBRAS Consolidated Cash Flow Statement R$ million 2Q06 1Q06 (=) Net Cash from Operating Activities 11.366 10.144 (-) Cash used in Cap. Expend. (6.641) (6.020) (=) Free Cash Flow 4.725 4.124 (-) Cash used in Financing and Dividends (4.995) (4.558) Financing (1.472) (499) Dividends (3.523) (4.059) (=) Net Cash Generated in the Period (270) (434) Cash at the Beginning of Period 22.983 23.417 Cash at the End of Period 22.713 22.983 • R$ 600 million increase in Free Cash Flow. As of January 1, 2005, the Special Purpose Companies whose activities are directly or indirectly controlled by Petrobras were included in the Consolidated Financial Statements, as per CVM Instruction No. 408/2004. 17
  • 19. PETROBRAS Investments 1H06 % 1H05 % % • Direct investments 12.345 91 9.790 89 26 Exploration & Production 7.195 53 5.786 53 24 Supply 1.538 11 1.350 12 14 Gas and Energy 1.041 8 940 9 11 International 1.889 14 1.231 11 53 Distribution 333 2 242 2 38 Corporate 349 3 241 2 45 • Special Purpose Companies 1.156 8 1.008 9 15 • Ventures under Negotiation 142 1 111 1 28 • Project Finance 1 - 81 1 - Exploration & Production 1 - 81 1 - Espadarte/Marimbá/Voador 1 - 52 - - Others - - 29 - - Total Investments 13.644 100 10.990 100 24 18
  • 20. PETROBRAS QUESTION AND ANSWER SESSION Visit our website: www.petrobras.com.br/ri/english For further information please contact: Petróleo Brasileiro S.A – PETROBRAS Investor Relations Department Raul Adalberto de Campos– Executive Manager E-mail: petroinvest@petrobras.com.br Av. República do Chile, 65 - 22nd floor 20031-912 – Rio de Janeiro, RJ (55-21) 3224-1510 / 3224-9947 19