Sharing in Petrobras
         I   N V E S T O R         R   E L A T I O N S             •     Y   E A R    V I I     •    ...

                                  Record earnings of US$ 12.8 billion
                                                 Petrobras in Bolivia

Light oil in the Santos Basin

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Edition 22 - Sharing in Petrobras - number 1/2007


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Edition 22 - Sharing in Petrobras - number 1/2007

  1. 1. Sharing in Petrobras I N V E S T O R R E L A T I O N S • Y E A R V I I • N º 2 2 / M A R C H 2 0 0 7 HIGHLIGHTS Interest on Shareholders’ Equity ■ In 2006, Petrobras’ Board of Directors approved New frontiers two interim payouts to shareholders in the form of interest on equity capital for the gross amounts of R$ 1,00 (October 20) and R$ 0,45 (on December 15) in the Gulf of Mexico P per common and preferred share. The former value made some etrobras America Inc., a Petrobras affiliate company, was paid on January 4 and the latter on March 30. important advances in its activities in the United States Both were offset against the remuneration to be sector of the Gulf of Mexico during the year. On the Exploration distributed for the fiscal year 2006, for which a total and Production front, the company is operating in four different regions in dividend of R$ 1,80 per share was approved. the Gulf sedimentary basin. The Cottonwood project (Petrobras 100%), in These payments are subject to 15% income tax at the central part of the block, started operations, lifting production from a source and conversion to US$ on the payment day. Miocene age reservoir adjacent to the walls of a salt dome. Situated in a more For more details, please see “Press Releases” at mature area of the basin, estimated output is 20,000 barrels/day from two the address deepwater wells. Funding of US$ 500 million In the case of ultra-deep waters, where the Company has made four ■ In October 2006, Petrobras International Finance discoveries in the past five years in sub-Tertiary reservoirs (finds pio- Company, a wholly owned subsidiary of Petrobras, neered by Petrobras), in 2006 Chevron was able to verify the proven pro- made a successful placement of Global Notes in ductivity of reserves using a long duration test – part of the Jack field the international market worth US$ 500 million. project. According to Renato Tadeu Bertani, Petrobras America’s then The bonds offer a net annual yield to investors of 6.185% with a ten-year maturity, translating into production is slated to begin at Cascade and president, a rate of 1.55 pp above US Treasury Bills for a Chinook in 2009. Petrobras is to install a FPSO (Floating Production comparable term. The issue strategy is aligned Storage and Offloading), a platform using technology never before to policy for repurchasing old securities, recently employed in the Gulf of Mexico and for which a license has already been introduced by the company. obtained from the MMS (the industry regulator). Closer to the shoreline, Petrobras has prospects both on land and in Share Buyback Program shallow offshore waters. In spite of the interruption of the Blackbeard ■ On December 15, the Board of Directors project, for which Exxonmobil is operator (Petrobras 20%), due to high authorized a buyback of preferred shares for future cancellation. The principal objective behind this well temperatures and pressures, another prospect with excellent poten- initiative is to reduce cash and adjust the capital tial for significant gas reserves is being drilled onshore. Finally, in the structure, thus contributing to the reduction in the western part of the Gulf, close to the Mexican frontier, the company cost of capital. Over a 365-day period, the company holds prospects classified as an exploratory frontier area with seismic pat- is to buyback up to 91.5 million preferred shares terns very similar to projects that have been so successful in Brazil. corresponding to 4.9% of the total of this class of In the refining sector, Petrobras is investing in the share trading in the market. The share buyback will Pasadena Refinery, Texas, to expand its capacity to in no way compromise the business plan and the capital expenditures program, or will it substitute process the heavy Marlin-type oil exported by Brazil. Total usual dividend payments. investments from 2006 to 2009 are estimated at US$ 2.1 billion, 50% being for account of Petrobras. Record Petrobras Trade earnings of in volume US$ 12.8 billion Bolivia at the NYSE PAGE 2 PAGE 3 PAGE 4
  2. 2. PROFITABILITY (US GAAP) Record earnings of US$ 12.8 billion I n 2006, Petrobras reported net in 2007 are even brighter. In spite of a US$ 423 million, an improvement on income of US$ 12.8 billion, surpass- 20% decline in overseas output due to the US$ 352 million in 2005. ing the record set in 2005, due prin- contractual alterations in Venezuela, The unit cost of lifting oil in Brazil cipally to increases in oil and oil product Petrobras’ overall production still grew increased 15% in US dollars compared output as well as domestic and interna- by 4% in 2006. with 2005, a reflection of greater out- tional prices. This result represented the Throughput at company’s Brazilian lays with drilling rigs and labor over- largest growth in profits (in US dollars) refineries registered a year on year heads. The startup in operations of the among major world oil companies. increase of 2%, while overseas through- FPSO-Capixaba and P-34 also con- Cash generation (EBITDA) of US$ put was up by 23% with the inclusion tributed to the increase with higher ini- 22.9 billion provided the necessary of the Pasadena operations. Sales vol- tial unit costs. resources for capital expenditures, an ume to the domestic market was 3% Unit refining costs in Brazil increased improved financial profile and divi- higher than in 2005, due to higher sales 21% in US dollars (8% in Reais) due to dend payments. volumes of gasoline (7%), naphtha the greater complexity arising from The company’s internationalization (5%) and natural gas (7%). On the for- investments in the processing of heavy strategy was responsible for a 127% eign market, exports rose by 11% and oil and improving fuel quality. increase in investments in the international sales by 31%, thanks to The year was once more an extreme- International area, among which the enhanced offshore operations (the ly positive one for Petrobras’ shares. most notable was the acquisition of objective of which is to capture over- Despite the volatility of international oil the Pasadena refinery for US$ 370 mil- seas commercial opportunities), prices, the common shares appreciated lion. On the domestic front, there was among other factors. 31.94% and the preferred by 33.83%, a 6% increase in oil production in The year was also a good one for in line with the Ibovespa stock index 2006, despite operations at P-50, Petrobras’ physical trade balance: the (+32.93%). In New York, the compa- FPSO-Capixaba and P-34 still not final balance of net exports was 93,000 ny’s ADRs performed even better due being fully up to speed. With these barrels/day, an increase of 21% on to the foreign exchange impact, post- facilities now running at full capacity, 2005. The final financial surplus in the ing an increase of 44.51% (common) the prospects for increased production company’s commercial balance was and 44.10% (preferred). Petrobras ADRs versus DOW JONES and Amex Oil Indexes Economic and Financial Figures RESULTS & RETROSPECTIVE 760 Annual 720 566,8% (PBRA/ADR PN) 680 In US$ million 2006 2005 Variation (%) 566,1% (PBR/ADR ON) 640 172,2 (Amex Oil) Sales of products and services 93,893 74,065 26.8 600 560 48,1% (Dow Jones) Net operating revenues 72,347 56,324 28.4 520 480 Gross profit 28,613 23,570 21.4 440 400 Net income 12,826 10,344 24.0 360 320 Earnings per share 1,490 0,950 56.8 280 Net cash provided by operating activities 21,077 15,115 39.4 240 200 Capital expenditures 14,643 10,365 41.3 160 120 Net debt 8,650 11,306 (23.5) 80 Debt to equity ratio 55% 58% Feb-07 Dec-02 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Feb-03 Feb-04 Feb-05 Feb-06 Mar-03 Apr-03 Mar-04 Apr-04 Mar-05 Apr-05 Mar-06 Apr-06 Real Increase in Stock Price* Operating Performance Annual 500% In thousand barrels of oil equivalent 2006 2005 Variation (%) 421.1% ■ Ibovespa 400% Average daily crude oil ■ Petrobras PN and gas production 2,297 2,217 4 ■ Petrobras ON 300% 261.9% Oil product production 1,892 1,839 3 Net imports 93 77 21 200% 114.4% Refining and marketing operations 103.0% 98.4% 104.8% Brasil – Utilization 89% 87% 2 bps 100% 15.4% 4.0% Refining and marketing operations 2.6% 0% International – Utilization 81% 80% 1 bps 10 Years 5 Years 1 Year Domestic crude oil of total -100% feedstock processed 80% 80% - * Monthly changes discounted for inflation in accordance with IGP-DI index
  3. 3. INTERNATIONAL Petrobras in Bolivia I nvestors will have been following the Petrobras’ recoverable costs. Once Total Reserves: 15.02 billion boe (*) repercussions for Petrobras of the these are settled, the remaining bal- > Brazil: 13.75 billion boe enactment of the Supreme Decree ance will be split between YPFB and > International: 1.27 billion boe 28,701 in the media. The Decree was Petrobras according to a table that Bolivia 2.9% signed by the Bolivian president, Evo takes into account volumes produced, Morales, on May 1 2006 and regulates rate of depreciation, prices, taxes and Others 5.5% existing requirements under the Bolivian new investments. constitution and the Hydrocarbons Law, As to the gas supply contract (GSA), Brazil approved on May 17 2005. Three issues negotiations between executives of 91.6% are under discussion and affect Petrobras and YPFB reached a mutually * SPE criteria Petrobras’ operations in Bolivia. We give beneficial agreement. At prevailing 2006 data below the current state of play follow- prices on the international market, ing the innumerous rounds of negotia- Petrobras agreed to pay YPFB for Total Production: 2,298 thousand boed > Brazil: 2,055 thousand boed tions that have already taken place. the liquid hydrocarbon fractions in the > International: 243 thousand boed Firstly, according to the agreement natural gas effectively delivered, thus Bolivia 2.5% signed in October 2006 on the elevating its calorific power to values of Exploration and Production area, more than 8,900 kcal/m3 (1,000 BTU Others 8.1% Petrobras continues responsible for per cubic foot). No changes were made operations in the San Alberto and San to volumes or the natural gas acquisition Brazil Antonio fields. Both produce natural price formula provided for in the pur- 89.4% gas and LNG, the Bolivian state-owned chase and sale contract signed between petroleum company (YPFB) being the two companies. Currently, under 2006 data responsible for sales of the output. The the terms of the GSA, the calorific power current assets remain the property of of the natural gas delivered to Petrobras 50% plus one share in the refineries. Petrobras until the end of the contract is at least 9,200 kcal/m3 (1,034 BTU/ A valuation of the shares is currently – now with a 30-year expiry cubic foot), reflecting the presence of being undertaken as part of ongoing date. At the end of the period, natural gas liquids (ethane, butane, negotiations. The refineries continue the assets will be handed over propane and natural gasoline) worth to operate normally and are responsi- to YPFB, as foreseen in the more in the international market than ble for satisfying the country’s total original contract. The Bolivian methane, the basic component of natu- demand for special, premium kerosene government will receive in ral gas for thermal use. and gasoline and aviation fuel and for the form of royalties, partici- The third topic of discussion relates more than 70% of the Bolivian diesel pations and direct hydro- to the ownership of Petrobras’ two fuel requirement. carbons taxes (IDH), 50% refineries in Bolivia, Gualberto Villaroel Petrobras’ total investments in of the production value, in Cochabamba, and Guillermo Elder Bolivia amounted to about US$ 1 bil- calculated on the average Bell in Santa Cruz de La Sierra. lion between 1996 and 2004. In 2005, prices practiced in the Together, the two refineries process Petrobras Bolivia reported a net various outstanding sales an average of 40,000 barrels/day of oil income of R$ 250 million, which rep- contracts. The remain- and LNG. The Bolivian government resented 1.1% of the company’s total ing 50% will be used firstly to meet envisages acquiring a stake of at least net income for that year. Green fuels take center stage BIODIESEL P etrobras’ first industrial biodiesel one of the world leaders in process engi- tives – all with the objective of reaching unit is to be built in Candeias, neering of seeds and vegetable oils. the target of producing 855 thousand Bahia, the state which pioneered The biofuels area is one of the many cubic meters/year of biodiesel by 2011. oil production in Brazil. A further two new fronts on which Petrobras is work- The National Production and Use of plants are to be installed in Montes ing and instrumental in transforming it Biodiesel Program rules make the addi- Claros (MG) and Quixadá (CE). into an integrated energy company. tion of 2% biodiesel to conventional Petrobras has signed a contract worth The company is examining about fif- diesel compulsory by January 2008 US$ 227 million with the engineering teen projects in various regions of the although this mixture can go as high as company Intecnial S.A. to build the country in partnership with various 5%, a percentage that will become plants. American technology is to be investors. These range from major eco- mandatory from 2012 on, contributing used – supplied by Crown Iron Works, nomic groups to rural workers’ coopera- to the expansion of the market.
  4. 4. Light oil in the Santos Basin NEWS BOARD ENVIRONMENT Tests made by pioneer well (1-RJS-628A) in a new exploratory frontier in the Santos Basin have confirmed significant volumes of 30º API light oil with an indicated flow of 4,900 barrels per day of oil and 150,000 cubic meters/day of natural gas. The tests confirmed a highly productive reservoir beneath a 2,000 thick salt base (subsalt). The well is located in block BM-S-11, operated by Petrobras (65%), in A Chico Mendes consortium with BG (25%) and Petrogal (10%). Additional investments for the Amazon are now to be made, initially through the drilling of the first extension Rain Forest well for a complete evaluation of reservoir oil volume. A new character has arrived in the Amazon Rain Forest to carry out environmental monitoring over this P-34 goes into Increasing the vast region. The new kid on the block production shareholder base is the Chico Mendes robot, the result of two years of research by the Submarine T he platform went into F or the second time running, Robotics Technology Laboratory – part production in the Jubarte Field Petrobras received the São Paulo of Cenpes, Petrobras’ Research and in December 2006. However, Stock Exchange (Bovespa) award Development Center. it will still be some months before as the listed company with the The robot is currently undergoing the platform is operating at its largest business turnover and the tests in the waters of the Solimões River. full capacity of 60,000 barrels highest financial volume. Chico Mendes is made of glass fiber – this will only be the case when In December 2006, the company’s all wells are producing at their common and preferred shares and polycarbonate, with four special expected capacity. When P-34 accounted for 16.6% of total stock drive wheels that allow it to move reaches peak production, exchange turnover, the shares across the most varied of forest terrains. the state of Espírito Santo’s output being the front-runners in liquidity. It is the only vehicle able to successfully will rise to 135,000 barrels/day. Following the stock split in confront land and water environments, September 2005, the company has mangrove swamps and flooded areas attracted some 50,000 new as well as climb over aquatic vegetation investors to its shareholder base. characteristic of the Amazon region. In the first four months of 2007, Non-polluting, it is powered by a solar Petrobras continues to enjoy the energy rechargeable electric battery. heaviest weighting in the Ibovespa The robot has been projected to theoretical portfolio: 16,2%. gather data in real time and is equipped with two TV cameras. It also uses GPS in three dimensions Trade volume at the NYSE and has an electronic arm for collect- ing specimens. This purpose built Petrobras-issued American Depositary Receipts (ADRs) were the ones environmental machine is one of the that traded the most at the New York Stock Exchange (NYSE) in 2006, with an average daily financial volume of US$ 326 million. During the year, items of equipment used by Piatam the share value rose 44.51% (common) and 44.10% (preferred), well above the (Oil and Gas Industry Potential Dow Jones Index in the same period (+6.71%), and with excellent liquidity. Impacts and Environmental Risk Projects) research workers. 326 242 232 227 212 172 154 153 114 105 100 99 93 90 87 This technological contraption has aroused the curiosity of the local river- side communities which have already proposed further uses for the equip- Million US $ ment – this time as an ambulance or in the event of emergencies during sea- sonal flooding. By 2008, the compa- ny’s objective is to have some 100 (Total) (Total) (Common) (Common) (Series L) (Preferred) Petrobras BP CVRD Petrobras Nokia CVRD America Movil America Movil BHP Billiton Cemex Total Petrobras Taiwan Semiconductor RD Shell Ellan small, medium and large robots moni- toring the 420 kilometers of the bed and banks of the Solimões River. Newssheet edited by Petrobras' Investor Relations Department • Executive Manager: Raul Campos • Coordinator: Marcos Vinícius Guimarães • Edition: Petrobras' Institutional Communications Department • Editors: Cláudio Paula and Tereza Lobo • Contact: Petrobras' Shareholders Department • Tel.: (55-21) 3224- 1540/4914 Fax: (55-21) 2262-3678 • 0800 282-1540 • Av. República do Chile, 65 / 2202-A • Centro – Rio de Janeiro – RJ – 20031-912 • E-mail: Depositary Bank: Citibank N.A.• Tel.: 1 212 657 1925 • Fax: 1 212 825 5398/825 21 03 • E-mail: Visit our website at