Surplus Volumes of Transfer of Rights

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Surplus Volumes of Transfer of Rights
Maria das Graças Silva Foster, CEO
Rio de Janeiro, June 27th of 2014

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Surplus Volumes of Transfer of Rights

  1. 1. 1 Surplus Volumes of Transfer of Rights Maria das Graças Silva Foster CEO Rio de Janeiro, June 27th of 2014
  2. 2. 2 Transfer of Rights Through the Transfer of Rights agreement, Petrobras acquired the rights to explore, evaluate and produce up to 5 billion boe in six areas of Santos basin pre-salt. For this transaction, Petrobras paid R$ 75 billion (US$ 42 billion) in 2010, subject to a review, after the declarations of commerciality. Area Volume MM boe Florim 467 Búzios 3,058 Sul de Guará 319 Entorno de Iara 600 Sul de Lula 128 NE Tupi 428 Total 5,000 Concessão Cessão Onerosa Partilha de Produção Contracted Volumes in 2010 Ongoing discussionson the Transfer of Rights will not be affected by the SurplusVolumes.
  3. 3. 3 Complying with regulations, Petrobras informed the ANP the estimates for volumes in Buzios, in the Declaration of Commerciality, in Dec/13, indicating the expectation of up to 7 billion boe in surplus volumes in this field (recoverable volume of 10 billion boe) Areas Additional Volumes to the Transfer of Rights Contract from 9.8 to 15.2 billion boe, according to ANP (million boe) Búzios Between 6.500 and 10.000 Entorno de Iara Between 2.500 and 4.000 Florim Between 300 and 500 Nordeste de Tupi Between 500 and 700 Source: CNPE Resolution N. 1, June, 24 2014. Transfer of Rights Areas Have Great Potential Already Known and Proven Búzios Module 1 (transfer of rights) P-74: First Oil: 2016 Capacity: 150 thousand barrels/day Physical Progress (may/14): 55.5%
  4. 4. 4 Field /Area Area(km2 ) Contracted Volume Transfer ofRights (bilionboe) Drilled wellsor in progress Tested wellsor with tests in progress CO2 contentin gas(%) Lula 1,523 Not applicable 36 24 10 - 20% Lula / área de Iracema Not applicable 16 5 very low Sapinhoá 233 Not applicable 19 7 15 - 20% Buzios 852 3.1 10 8 22 - 25% Entorno de Iara 611 0.6 3 1 25 - 35% NE Tupi 291 0.4 2 2 15 - 20% Florim 292 0.5 2 1 very low Sul de Lula 203 0.1 1 1 17% Sul de Guará 145 0.3 1 0 15% Libra 1,548 Not applicable 1 1 45% • Transfer of RightAreas alreadyhave a significant numberof wells drilled and tested, with excellentresults • Great potential perwell, in line with the projects alreadyin production of pre-salt Santos Basin, sanctioined with 20 thousand bpd and results that reach up to 35 thousand bpd • Projects underdevelopmentin progress, without any foreseeable additionalrisks related to volumes, reservoir properties, technologies and the availability of the required equipments and services to the projects • Surplus volumes projects can "replicate" Transfer of Rights projects, with large gains in the learning curve and cost optimization High Degree of Maturity Areas of the pre-salt Santos Basin LevelofMaturityin ReservoirKnowledge TransferofRightsSurplus 9.8to15.2billionboe TransferofRights
  5. 5. 5 2014 2010 Access to the Transfer of Rights Surplus: 1. Replaces the accumulated production of six years in the period 2020-2030 (replacement of 1.6 to 1.8 billion boe / year) 2. Assures in advance the potential volume with low exploration risk (Exploratory Success Ratios: 100%) 3. Allows higher selectivity in future bidding for exploration areas 4. Considering the current Finding Costs (US$ 2.66 / boe, Petrobras’ average in 2013), it would be necessary to invest around US$ 26 billion to acquire areas (bonus payment), discover and define (seismic, exploration wells and delineation) potential estimated volume of Transfer of Rights Surplus 5. Estimated Finding Costs savings: US$ 18 billion (2015-2021) Acquisition ofTransfer of Rights Surplus VolumesSignature ofTrasfer of Rights Agreement Transfer of Rights 4 years Surplus Volumes of The Transfer of Rights: 9.8 to 15.2 Billion of boe Great Potential with Low Risk Leading to Reduction of Investments in Exploration 2016 2021 1st Oil from Transfer of Rights 1st Oil from Transfer of Rights Surplus Exploration / Delineation Production Development Production Risco 3D Seismic (2,159 km²) 17 wells drilled in the 4 areas Formation Tests and EWT
  6. 6. 6 Transfer of Rights and ProductionSharing Contracts (PSC): Regulatory Frameworkand SimultaneousProduction- Búzios Case Production Sharing Contracts (6.5 a 10 Billion boe) (35 years) Transfer of Rights (3.058 Billion boe) (40 year / volume limit) Transfer of Rights Signature: Sep/10 End of production of contracted volume Transfer of Rights Units continue to produce under PSC End of SVRT Production Sharing term 2010 2040 Transfer of Rights Contract Transfer of Rights Contract + ProductionSharing Contract Production Sharing Contract 1st oil of Búzios SVRT: 2021 2050 End of Transfer of Rights term 20512021 1st oil of Búzios: 2016 Beginning of Production Sharing Contract term (SVTR*) 2016 Simultaneous Production *SVRT: Surplus Volume ofThe Transfer of Rights
  7. 7. 7 Petrobras Big Choice for the E&P segment Strategic Plan Approved by the Board of Directors on 02/25/2014 0 1 2 3 4 5 6 7 8 9 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Brazil*: Sustainable Pace Petrobras: PE 2030 Petrobras: SP 2030 + Abroad Petrobras: Média 2013-2020 Petrobras: Média Exterior 2013-2020 Petrobras: Média Exterior 2016-2020 Petrobras: Média 2016-2020 4,2 •Petrobras Average Production in Brazil* and Abroad 2020-2030: 4.0 million bpd Average 2020-2030 Petrobras Average Production in Brazil* 2020-2030: 3.7 million bpd Average Oil Production in Brazil* Petrobras (70%) + Third Parties (26%) + Government (4%) 2020-2030: 5.2 million bpd •Petrobras Average Production in Brazil* and Abroad 2013-2020: •3.0 million bpd Petrobras Average Production in Brazil* 2013-2020: •2.9 million bpd • Brazil’s productionaccordingtoPetrobras’sviewand reasoning,consideringdifferentpacesforthe bidroundsput forward by theGovernment To produce on average 4.0 million barrels of oil per day in the 2020-2030 period, under Petrobras’ ownership in Brazil and abroad, acquiring exploration rights to meet this objectiveE&P E&P Webcaston 02/26/2014andMeetingwithAnalysts on03/24/2014. Millionbpd
  8. 8. 8 Petrobras Contracted for a 100% of These Areas Ensures Our Reserves Reposition and Production Sustainability in the 2020-2030Horizon, with Higher Profitability 0 1 2 3 4 5 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Petrobras: 2030 SP 4,2 2020-2030Average 3.7 million of bpd (16 BIDs and SVTR = 50% Petrobras in 2026) The Surplus Volumes of Transfer of Rights (SVTR) allow that the 2020-2030 productionlevel be raised to up to 4.2 million barrel per day, maximizing profitability through a selective participation on bid rounds and portfolio management (divestments). 2020-2030 Petrobras Average Production in Brazil 4.2 million of bpd (14 BIDs and SVTR = 100% Petrobras in 2021) 500thous.bpd The Surplus Volumes ofthe Transfer ofRights Contracts implies: • Reduction of participation in new BIDS from 16 to 14 (2015-2030), according to Petrobras’s view and reasoning adopted in 2030 SP, which was approved by the Board of Director in 02/25/2014 Millionbpd
  9. 9. 9 Production Units Planned in the Business Plan and Petrobras Strategic Plan 1st Oil 2014-2020 SVTR SVTR SVTR SVTR SVTR SVTR SVTR SVTR SVTR P-62 Roncador IV Cid Ilhabela Sapinhoá Norte P-61 Papa-Terra Cid Mangaratiba Iracema Sul Cid Itaguaí Iracema Norte Cid. Maricá Lula Alto Cid Saquarema Lula Central P-74 Búzios 1 P-66 Lula Sul P-67 Lula Norte Cid Caraguatatuba Lapa P-75 Búzios 2 P-68 Lula Ext. Sul e CO Sul de Tupi P-69 Lula Oeste P-76 Búzios 3 Tartaruga Verde and Mestiça P-70 Iara Horst P-77 Búzios 4 Júpiter Búzios 5 Deep Water ES P-72 NE de Tupi P-71 Iara NW Marlim I Revitalization Sul Pq. Baleias Deep Water I SE Carcará Maromba I P-73 Iara Surrounding Libra Deep Water II SE Espadarte III Marlim II Revitalization Florim SVTR Planning includes: projects already announced in BMP, projects to be announced in the nextBMPs, projects to revitalize the p roduction, new units planned in areas with volumes under long term evaluation and appraisal for the next discoveries Surplus Volumes of Transfer of Rights: Increase of Investments From 2019 On for a 1st Oil Beginning in 2021 2017 2018 2019 2020 2021 2026 2027 2028 20292022 2023 2024 20302025201520142013 2016 Cid Itajaí Baúna P-61 Papa-Terra Cid Paraty Lula NE Pilot P-63 Papa-Terra P-58 Norte Pq. Baleias P-55 Roncador III Cid São Paulo Sapinhoá Pilot P-62 Roncador IV TAD Papa-Terra P-58 Norte Pq. Baleias TAD Papa-Terra Maturity Increase of Naval and Offshore industry in Brazil 9 Units Completed Surplus Volume of Transfer of Rights (SVTR) Other Areas under Concession or Production Sharing Agreement Transfer of Rights Unit Completed in 2013 with 1st Oil in 2014 Sete Brasil Drilling Rigs Construction:28 units by 2020
  10. 10. 10 201720162015 20272026202520142013 20242023 202820192018 20302029202220212020 US$billion Average ex-E&PInvestments:US$ 10.6 billion/year Average ex-E&PInvestments:US$ 3.8 billion/year Petrobras Investments Will Be Even More Concentrated in E&P Lower Investments in the Other Segments Enable Additional Investments in E&P in Brazil Petrobras ex-E&Pinvestments in Brazilin the 2014-2018 BMP/ 2030 Strategic Plan Average annualinvestments will fall from US$ 45.6 billion between 2013 and 2020 to US$ 26.6 billion between 2021 and 2030, mainly due to the conclusion, by 2020, of Downstream projects (RNEST, Comperj, Premium I, Premium II) and G&P projects (UFN-III, UFN-V, Routes 2 and 3) Petrobras TotalE&P Investments in Brazilin the 2014-2018 BMP/ 2030 Strategic Plan Investments in “Under Implementation” Portfolio + “Under Bidding process” Portfolio (Partnerships in the Premiums Refineries) Average Investments in E&P: US$ 35 billion/year PetrobrasAverage Production in Brazil: 2.9 million bpd Average Investments in E&P: US$ 22.8 billion/year PetrobrasAverage Production in Brazil: 3.7 – 4.2 million bpd Numberofproductionplatforms/year + +
  11. 11. 11 Financial Planningwith the Surplus Volumes 2014-2018 BMP: No material impact in results and debt ratios I – 2014-2018 BMP ASSUMPTIONS: • Oil Production: 7.5% Growth (+/- 1pp) in 2014, 3.2 million bpd in 2018, 4.2 million bpd in 2020 • Price Readjustments:According to the policy presented to the Board in Nov/2013. • Divestments: Assumes US$ 11 billion in divestments in the 2014-2018 period. • Business Model Restructurings (Change of Capex for Opex): Assumes inflows of US$ 9.9 billion in the 2014-2018 period. • Brent Prices: 104.72 US$/bbl in 2014, 100 US$/bbl from 2015 to 2017 and 95 US$/bbl from 2018 on. • Weaker FX: 2014 = 2.44 R$/US$; 2015 = 2.56 R$/US$; 2016 on = 2.59 R$/US$. • Stronger FX: 2014 = 2.23 R$/US$; 2015 = 2.10 R$/US$; 2016 on = 1.92 R$/US$. II – IMPACTS IN INVESTIMENTS: Investments (US$ billion) 2014-2018 2019-2020 2021-2030 2014-2018BMP– Implementation+Bidding 206.8 - - Bonus – Surplus Volumes 0.8 0 0 Antecipation ofProfit Oil – Surplus Volumes 5.0 0 0 AdditionalInvestments 1.2 9.7 39.8
  12. 12. 12 2014-2018 BMP Financiability (US$ 206.8 billion)+ Surplus Volumes of the Transfer of Rights 2014-2018 BMP: No material impact in results and debt ratios. Depreciated FXRate 2014 2015 2016 2017 2018 2019 2020 2021-2030 Net Debt/EBITDA 2014-2018BMP 4.61 2.73 1.93 1.68 1.41 1.06 0.95 1.04 to 1.13 +Transfer of Rights Surplus 4.64 2.77 1.91 1.76 1.53 1.17 1.02 0.95 to 1.21 Leverage BMP 2014-2018 44.6% 42.0% 37.0% 33.3% 29.3% 25.1% 25% 25% +Transfer of Rights Surplus 44.7% 42.3% 37.3% 34.2% 31.1% 26.3% 25.1% 25% AverageAnnualGross Borrowing (AverageAnnualNet Borrowing) BMP 2014-2018 8.2 (-0.2) 10.5 (-2.5) * +Transfer of Rights Surplus 10.2 (1.7) 13.3 (-4.2) * III – IMPACTS IN THE FINANCIABILITY DURING THE PERIOD OF THE 2014-2018 BMP :  In the 2014-18 BMP: 3.5 % growth in investment (including bonus)  Net Debt/EBITDA and Leverage: No material impact IV – EQUITY ISSUANCE IS NOT CONTEMPLATED (CAPITALIZATION) * Borrowings during the period 2021-2030 aim at maintaining leverage at25% in this simulation and are not related to the investment volume, which will be totally financed by cash generation.
  13. 13. 13 Conclusions Price Convergence, Divestments and Financial Restructuring Assumptions for the BMP 2014-108 are kept I – The direct contract for 100% of the Surplus Volume of the Transfer of Rights (SVTR) grant Petrobras: • Areas with excelent potential, with low risk, already known and proven • Potential recoverable volumes between 9.8 and 15.2 billion boe • Possibility to increase production in Brazil between 2020 and 2030 to up to 4.2 million bpd • Maximize the profitability for the selective participation in future bids and E&P portfolio management (divestments in areas under concession) II – The simultaneous production in SVTR will allow the optimization of production and infrastructure resources, as well as anticipate the production of the volumes of the surplus III – In the 2014-2018 period investment will grow by 3.5% and the SVTR does not bring material impact to the financiability indicators IV – Between 2020-2030 the average annual total investment will decrease and will be more concentrated in E&P, and oil production in Brazil will be at a higher level relative to the average of the period 2013-2020 V – Equity Issuance is not contemplated (capitalization) VI – The SVTR contract is aligned with the Strategic Plan 2030, approved by the Board of Directors in February 25th 2014
  14. 14. The End

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