Webcast 2Q14

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Operational and Financial Results
2nd Quarter 2014

Conference Call / Webcast
August, 11th 2014

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Webcast 2Q14

  1. 1. OPERATIONAL AND FINANCIAL RESULTS 2nd Quarter 2014 __ Conference Call / Webcast August, 11th 2014
  2. 2. DISCLAIMER FORWARD-LOOKING STATEMENTS: DISCLAIMER The presentation may contain forward-looking statements about future events 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 merely reflect the Company’s current views and estimates of future economic circumstances, industry conditions, company performance and financial results. Such terms as "anticipate", "believe", "expect", "forecast", "intend", "plan", "project", "seek", "should", along with similar or analogous expressions, are used to identify such forward-looking statements. Readers are cautioned that these statements are only projections and may differ materially from actual future results or events. Readers are referred to the documents filed by the Company with the SEC, specifically the Company’s most recent Annual Report on Form 20-F, which identify important risk factors that could cause actual results to differ from those contained in the forward- looking statements, including, among other things, 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. We undertake no obligation to publicly update or revise any forward- looking statements, whether as a result of new information or future events or for any other reason. Figures for 2014 on are estimates or targets. 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. NON-SEC COMPLIANT OIL AND GAS RESERVES: CAUTIONARY STATEMENT FOR US INVESTORS 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 (SEC) under new 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.
  3. 3. 3 Petrobras: Oil and NGL production in Brazil Production operated by Petrobras in 2Q14 was 2,072 th. bpd FPSO Cid. São Paulo (Sapinhoá) 2,300 1,950 1,900 2,350 1,850 2,050 2,400 2,250 2,200 2,000 2,150 2,100 2,019 Mar-14 2,017 Feb-14 2,152 Jun-14 2,120 May-14 2,078 Jul-14Apr-14 2,025 Aug-13 1,954 Jul-13 1,932 2,012 Jan-14 1,990 Dec-13 2,029 Nov-13 2,012 Oct-13 1,997 Sep-13 1,977 Mar-13 1,893 Feb-13 1,957 Jun-13 2,024 May-13 1,925 Apr-13Jan-13 1,996 Th. bpd 2013: 1.977 th. bpd 1Q13 Average 1.948 2Q13 Average 1.975 4Q13 Average 2.013 2Q14 Average 2.072 3Q13 Average 1.969 P-58 (Parque das Baleias) P-55 (Roncador) P-63 (Papa-Terra) 11/NovFPSO Cid. Paraty (Piloto de Lula NE) FPSO Cidade de Itajaí (Baúna) 16/Fev 5/Jan 17/Mar 31/DezCapacity: 120 th. bpd (45% Petrobras) 2013 – 11 th. bpd 2Q14 – 40 th. bpd Capacity : 80 th. bpd (100% Petrobras) 2013 – 36 th. bpd 2Q14 – 69 th. bpd Capacity : 120 th. bpd (65% Petrobras) 2013 – 10 th. bpd 2Q14 – 28 th. bpd Capacity : 140 th. bpd (62,5% Petrobras) 2013 – 1 th. bpd 2Q14 – 17 th. bpd Capacity : 180 th. bpd (100% Petrobras) 2Q14 – 18 th. bpd Capacity : 180 th. bpd (100% Petrobras) 2Q14 – 38 th. bpd Production Operated by Petrobras 6/Jun 1Q14 Average 2.006 P-62 (Roncador) 12/Mai Capacity : 180 th. bpd (100% Petrobras) 2Q14 – 8 th. bpd
  4. 4. 4 Petrobras: Oil and NGL production in Brazil Petrobras Production in 2Q14 was 1,972 th. bpd, an increase of 50 th. bpd over 1Q14 Main factors influencing 2Q14 oil production, as compared to 1Q14  Start-up of production for P-62 (Roncador)  Contribution from new wells for P-55 (Roncador), P-58 (Parque das Baleias) and FPSO Cidade de São Paulo (Sapinhoá).  Sustainable production growth (from 1,926 th. bpd in March to 2008 th. bpd in July), i.e., +82 th. bpd production throughout 2Q14. FPSO Cid. São Paulo (Sapinhoá) 2,050 2,150 2,100 1,900 2,400 2,200 2,250 1,850 2,300 1,950 2,350 2,000 2,024 May-13 1,892 1,925 Apr-13 1,977 Mar-13 1,846 1,893 Feb-13 2,120 1,920 1,957 Jan-13 1,924 1,996 1,997 Jun-14 2,008 Sep-13 1,979 2,025 Aug-13 2,152 1,965 2,049 1,908 Jul-14 1,954 Jul-13 1,888 1,932 Jun-13 1,979 May-14 1,975 2,078 Apr-14 1,933 2,019 Mar-14 1,926 2,017 Feb-14 1,923 2,012 Jan-14 1,917 1,990 Dec-13 1,964 2,029 Nov-13 1,957 2,012 Oct-13 1,960 Th. bpd 2013: 1,931 th. bpd 1Q13 Average 1,910 2Q13 Average 1,931 4Q13 Average 1,960 2Q14 Average 1,972 3Q13 Average 1,924 P-58 (Parque das Baleias) P-55 (Roncador) P-63 (Papa-Terra) 11/NovFPSO Cid. Paraty (Piloto de Lula NE) FPSO Cidade de Itajaí (Baúna) 16/Fev 5/Jan 17/Mar 31/DezCapacity: 120 th. bpd (45% Petrobras) 2013 – 11 th. bpd 2Q14 – 40 th. bpd Capacity: 80 th. bpd (100% Petrobras) 2013 – 36 th. bpd 2Q14 – 69 th. bpd Capacity: 120 th. bpd (65% Petrobras) 2013 – 10 th. bpd 2Q14 – 28 th. bpd Capacity: 140 th. bpd (62,5% Petrobras) 2013 – 1 th. bpd 2Q14 – 17 th. bpd Capacity: 180 th. bpd (100% Petrobras) 2Q14 – 18 th. bpd Capacity: 180 th. bpd (100% Petrobras) 2Q14 – 38 th. bpd 6/Jun 1Q14 Average 1,922 P-62 (Roncador) 12/Mai Capacity: 180 th. bpd (100% Petrobras) 2Q14 – 8 th. bpd Petrobras ProductionProduction Operated by Petrobras
  5. 5. 5 302 169 119 41 153 546 0 50 100 150 200 250 300 350 400 450 500 550 201420132012201120102009200820072006200520042003 Oil Production in the Pre-Salt Daily Record of 546 th. bpd on July/13 with 25 wells Th. bpd High productivity of Pre-salt wells contributed to lower lifting costs (LF) for these projects. Lula field has a lifting cost of US$ 9/boe (2013), whereas Petrobras LF was US$ 14.76/boe. Sequential records in Pre-Salt production:  February 18th: connection of the 1st buoy (BSR1) to FPSO Cid. São Paulo, with 36 th. Bpd (best well in the country);  March 17th: P-58 1st oil;  April 3rd: interconnection of the 2nd well to BSR1, with 35 th. Bpd;  April 15th: Start-up of gas exports from FPSO Cid. São Paulo;  May 9th: interconnection of the 1st well to BSR2 (FPSO Cid. Paraty), with 31 th. bpd;  May 9th: Installation of BSR4 finalized, the last of the 4 Buoyancy Supported Risers;  June 25th: Start-up of gas exports from FPSO-Cid. Paraty;  June 28th: Start-up of gas exports from P-58. Note: 2014 value refers to daily record reached on 07/13/2014 P-58FPSO Cidade de São Paulo Capacity: 180 th. bpd (100% Petrobras) 1Q14: 2 th. bpd 2Q14: 38 th. bpd Capacity: 120 th. bpd (45% Petrobras) Total Production: 2013: 24 th. bpd / 1Q14: 44 th. bpd / 2Q14: 89 th. bpd(01/05/13) (03/17/14) )
  6. 6. 6 3Q14 4Q14 2014 Average: 2.075 th. bpd +/- 1% Factors that support production growth:  New systems: P-61/TAD (4Q14), FPSO Cidade de Ilhabela (4Q14) and FPSO Cidade de Mangaratiba (4Q14).  Planned connection of 33 production wells in 2H14. 30 were connected in 1H14. - PLSV FLEET INCREASE: 11 vessels in 1Q14, 13 in 2Q14, 16 in 3Q14 and 19 in 4Q14. - PRODUCTIVITY INCREASE: from 84 km / PLSV / year in 2Q13 to 114 km / PLSV / year in 2Q14 (+36%). - READINESS: Reduction in PLSV downtime: from 33% in 2Q13 to 31% in 2Q14 (-2 p.p.). Th bpd 2,400 2,600 2,500 2,300 2,200 2,100 2,000 1,900 1,800 0 Dec-14 Nov-14 Oct-14 Sep-14 Aug-14 2,103 Jul-14 2,049 Jun-14 2,008 May-14 1,975 Apr-14 1,933 Mar-14 1,926 Feb-14 1,923 Jan-14 1,917 Dec-13 1,964 Nov-13 1,957 Oct-13 1,960Sep-131,979 Aug-13 1,908 Jul-13 1,888 Jun-13 1,979 May-13 1,892 Apr-13 1,924 Mar-13 1,846 Feb-13 1,920 Jan-13 1,965 2Q13 Average 1,931 3Q13 Average 1,924 4Q13 Average 1,960 2013 Average: 1,931 th. bpd 1Q13 Average 1,910 1Q14 Average 1,922 P-62 Actual FPSO Cid. São Paulo FPSO Cid. Paraty Jun/6 FPSO Cidade de Itajaí Feb/16 Jan/5 P-55 P-63 Nov/12 Dec/31 4Q 4Q P-61 TAD P-58 Mar/17 Illustration 2Q14 Average 1,972 Cid. Ilhabela Cid. Mangaratiba 4Q 4Q Oil and NGL production in Brazil – 2014 projection Production target of 7.5 (± 1 p.p.) maintained May/12 * Actual on August (preliminary) * As of 08/09
  7. 7. 7 Oil and Natural Gas Production Costs in Brazil Higher productivity leads to stable lifting cost 2Q14 Cost reduction in Reais when compared to 1Q14, due to the increase in total production (+2.6%), resulting from ramp-up of new systems (P-58, P-55, P-62 and FPSO São Paulo). Small increase in cost when expressed in US$, due to FX appreciation 11.38 13.12 12.49 12.91 13.28 15.24 14.76 15.02 14.96 14.33 14.57 14.16 9 12 15 18 13.37 13.80 14.15 2012 20132011 19.00 20.93 22.31 22.47 22.57 30.79 28.33 29.49 31.25 34.28 32.66 33.14 32.30 32.57 10 20 30 40 26.39 2014 US$/boe 2014 Projection R$/boe Average: US$ 12.59 /boe Average: US$ 13.79 /boe Average: US$ 14.76 /boe +9% +7% US$ 14.57 /boe 2012 20132011 2014 Projection Average: R$ 21.19 /boe Average: R$ 26.97 /boe Average: R$ 31.94 /boe +27% +18% R$ 32.30 /boe 2011 2012 2013 1Q14 2Q14 Average FX (R$/US$) 1.67 1.96 2.16 2.37 2.23 % of Costs in US$ 18 18 32 35 33 Oil Production (th. bpd) 2,022 1,980 1,931 1,922 1,972 Pre-salt production (th. bpd) 100 138 249 299 347 # of production units in operation 121 122 124 124 125 Days of workovers (PROEF) 1,402 2,966 3,479 872 647 2Q14 +3% -3% +2% -4% 4Q13 1Q141Q134Q123Q122Q121Q124Q113Q112Q111Q11 3Q132Q13 2Q14
  8. 8. 8 Oil Products Sales - Brazil Considers only Downstream sales (*) Others – Lubricants, Asphalt, Coke, Propene, Solvent, Benzene, Kerosene and Intermediates. * Oil Products Output and Sales in Brazil 2Q14 production up 3% when compared to 1Q14, due to higher diesel and gasoline output Oil Products Output Th. bpd +2% 855 822 857 501 483 496 146 135 245 290 284 203 208 219 125 879288 102105100 +3% 2Q14 2,180 1Q14 2,124 2Q13 2,138 2Q14 x 1Q14  Oil products output grew 3% due to the production of REPLAN’s destillation unit, following scheduled turnaround in 1Q14.  Higher utilization factor (from 96% to 98%). 2Q14 x 1Q14  Diesel (5% growth) – seasonality effect, following reduction of industrial and agricultural activity at the beginning of the year.  Gasoline (3% growth) – increase in light vehicles fleet and increasing competitiveness to ethanol.  LPG (7% growth) – lower average temperatures and increase in economic activity. Diesel Gasoline LPG Naphtha Jet Fuel Fuel Oil Others 978 947 999 583 601 619 233 222 237 170 178 162 201 202 204 108111104 114110103 +3% 2.443 2Q141Q14 2.371 2Q13 2.372 +3% 5% 3% +4,3% +2,6% July/14: Output: 2,236 th. bpd (500 Gasoline and 896 Diesel)
  9. 9. 9 Oil Products Output Record in Brazil: 12 Refineries Throughput of 2,172 th. bpd of oil in June 2,100 2,150 2,200 1,850 2,050 2,000 1,950 1,900 1,800 1,750 1,700 1,650 1,600 1,550 2013 2,074 2012 1,944 2011 1,862 2010 1,798 2009 1,799 2008 1,765 2007 1,779 2014 1,746 2005 1,727 2004 20062003 1,588 2,172 +228 th. Bpd +12% 1,704 Note: 2014 value refers to the monthly record achieved in June/14. Th. bpd New production records in the refining segment • Excellent efficiency levels: utilization factor of 98% in 2Q14. • New monthly record of 2,172 th. bpd in June, 21 th. bpd above the previous record achieved in March 2014 Paulínia Refinery – REPLAN Capacity: 415 th. bpd The significant increase in the level of output resulted from better performance achieved by the start-up of new quality and conversion units, as well as the optimization of refining processes and the removal of logistics bottlenecks.
  10. 10. 10 Trade Balance: Oil and Oil Products 2Q14 vs. 1Q14: Higher oil imports lowers gasoline imports 2Q14 vs. 1Q14  Reduction in oil exports due to export cargos in transit (and therefore not yet recognized) and higher refining throughput.  Lower product imports as a result of higher gasoline production.  Higher oil imports during 2Q14, particularly in June, based on market conditions that should favor refining higher volumes of imported oil. Additionally, REPLAN’s stoppage in 1Q14 distorts basis for comparison. -396 -164 -285 -237 -253-64 200200180 2858 13 17916668 534 359 447 343638 136135159 138195162 941 -417 2Q13 2Q14 366 1Q14 359 783 2Q13 708 308 1Q14 -16% 2Q14 -633 -349 1Q14 +52% +20% 2Q132Q14 th.bpd -14% +33% +82% Oil Oil ProductsGasolineDieselOthers Oil ProductsFuel Oil Exports Imports Balance July/14: Oil exports 321 th. bpd Oil imports 193 th. bpd
  11. 11. 11 3.47 3.91 4.20 3.83 3.14 3.37 3.14 3.08 3.26 2.88 2.75 2.94 .3,03 2 3 4 5 6 3.50 3.74 2012 20132011 5.80 6.25 7.00 6.94 6.60 6.25 6.98 6.24 6.37 6.62 6.48 6.56 6.95 4 6 8 10 4Q13 1Q14 20141Q134Q123Q12 7.07 2Q121Q124Q113Q112Q111Q11 7.45 3Q132Q13 US$/bbl R$/bbl Average: US$ 3.86 /bbl Average: US$ 3.44 /bbl Average: US$ 3.09 /bbl -11% -10% US$ 2.94 / bbl 2012 20132011 Average: R$ 6.51 /bbl Average: R$ 6.73 /bbl Average: R$ 6.67 /bbl +3% 0% R$ 6.56 /bbl Refining Cost in Brazil Reduction in costs due to the increases in productivity and throughput 2011 2012 2013 1T14 2T14 Average FX (R$/US$) 1,67 1.96 2.16 2.37 2.23 Headcount 9,231 9,289 9,078 9,017 8,938 Throughput (th. bpd) 1,866 1,944 2,074 2,058 2,101 Utilization Factor (%) 91 94 97 96 98 Complexity (UEDC/d) 12.94 14.39 15.02 16.16 16.58 2Q14 2Q14 +7% +1,2% 2014 Projection 2014 Projection In Reais, unit cost stable. Increase of 7% in US$ due to FX appreciation. Cost stability a result of optimizing operational costs (PROCOP) and from increasing sustainable levels of throughput (PROMEGA). 2Q14 +4% -2%
  12. 12. 12 2Q14 x 1Q14  Gas supply to the market totaled 96 million m3/day, a 6% growth over 1Q14. Increase in supply led primarily by LNG imports to meet higher thermoelectric demand.  Petrobras power generation reached 4.7 GW (4.1 GW in 1Q14), with margin gains, since spot price for energy was stable (approximately R$ 650/MWh) while unit cost of imported LNG was 8% lower than 2Q14. Natural Gas Supply and Demand Increase in thermoelectric demand in 2Q14 when compared to 1Q14 and 2Q13 39,9 Million m³/dia National Bolivia LNG Non-thermoelectric Thermoelectric Downstream/Fertilizers SUPPLYDEMAND 40,2 37,0 11,7 39,3 +6% +6% +6% 2Q14 96.3 2.013.4 41.9 38.9 1Q14 91.1 1.913.0 37.8 38.4 2Q13 91.2 1.812.1 38.1 39.2 18.8 32.8 39.5 2Q13 91.2 18.3 31.6 41.2 22.1 33.0 41.2 1Q14 91.1 +6% 2Q14 96.3 +11% +18% +4%+1% Gas to the System* July/14:  Demand: 94.3 MM m³/d Thermoelectric: 41,3 MM m³/d  Supply: 94.3 MM m³/d National: 45,8 MM m³/d
  13. 13. 13 Growth in 2Q14 Operating Income mainly due to the absence of the provision in 1Q14 for Voluntary Separation Incentive Plan (PIDV) 7.6 +17% 8.8 1Q14 2Q14 R$ Billion 2Q14 Results Operating Income up 17% from 1Q14 2Q14 x 1Q14 Operating Income  Lower unit import costs due to the appreciation of the Real  Absence of the PIDV provision in 1Q14  Lower oil exports volumes  Lower asset sales gains  Write-downs of E&P projects Operating Income
  14. 14. 14 5.4 7.6 -8% +17% 5.0 8.8 1Q14 2Q14 R$ Billion Growth in 2Q14 Operating Income due mainly to the absence of the provision for Voluntary Separation Incentive Plan (PIDV) in 1Q14. Reduction in Net Income due to change in net financial results and a higher effective income tax rate. 2Q14 Results Operating Income up 17% on 1Q14. Net Income down 8%. 2Q14 x 1Q14 Net Income  Lower unit import costs due to the appreciation of the Real  Absence of the PIDV provision in 1Q14  Lower oil exports volumes  Lower gains from asset sales  Write-offs of E&P projects  Lower net financial results, due to the increase in interest expense and the reduction in financial revenue  Higher effective income tax rate due to 1Q14 fiscal credits Operating Income Net Income
  15. 15. 15 Structuring Programs and Net Income Impact Positive effect of R$ 3.1 Billion in 2Q14 PROCOP 1.6 2Q14 Net Income 5.0 0.3 R$ -3.1 Billion (-63%) 2Q14 Net Income Without Structuring Programs 1.9 PROEF 1.2 PRODESIN Outcome 2.4 0.3 1.8 Income Tax -0.8 - -0.6 Net Income 1.6 0.3 1.2 R$ Billion PROCOP (R$ 1.6 Billion), PRODESIN (R$ 0.3 Billion) and PROEF (R$ 1.2 Billion) positively impacted Net Income by 63% (R$ 3.1 Billion). Structuring Programs PROCOP: Operating Costs Optimization Program. PRODESIN: Divestment Program. PROEF: Program to Increase Operational Efficiency
  16. 16. 16 3.5 3.6 3.5 3.5 3.5 3.6 3.1 R$Million +1.6% +7.8% +15.8% 1H14 5,140 2H13 5,691 1H13 5,060 2H12 5,146 1H12 4,696 2H11 4,589 1H11 4,057 2012 2013 1H14 General and Administrative Expenses Strong slowdown of the growth rate due to Procop and PIDV 2011 +1.6% Petrobras Holding Others 1H14 5,140 3,552 (69%) 1,587 1H13 5,060 3,507 (69%) 1,554 % of Revenue +1% Personnel 1H14 3,552 1,891 (53%) 1,661 (47%) 1H13 3,507 1,856 (53%) 1,651 (47%) Typeof Expenditure Data Processing, Services, Rentals, Training, Consulting and Depreciation Flight Tickets Ground Transportation Building Management ICT Evolution from 2011 to 2014 Petrobras System Holding Initiatives PROCOP PIDV*: 581 employees departured from Apr/14 to Jun/14 Jan-14 -7% 7.6 May-14 7.9 Apr-14 8.2 Mar-14 8.2 Feb-14 8.3 Jan-14 8.2 Dec-13 8.2 thous emp. * PIDV: Voluntary Separation Incentive Plan
  17. 17. 17 4,00 3,94 39% 40% 0% 10% 20% 30% 40% 50% 1,5 2,5 3,5 4,5 1Q14 2Q14 Net Debt / EBITDA ¹ Net Debt / Net Capitalization ² LEVERAGE ND/EBITDA Financial Ratios  Total debt stable  Decrease of cash and cash equivalents due to yearly dividend payment and investments during the period.  Leverage steady, at 40%.  ND/EBITDA decreases from 4.00x to 3.94x due to the dilution of 1Q14 PIDV provision Indebtedness Debt Ratios R$ Billion 03/31/14 06/30/14 Short-term Debt 21.8 23.5 Long-term Debt 286.3 284.2 Total Debt 308.1 307.7 (-) Cash and Cash Equivalent3 78.5 66.4 = Net Debt 229.7 241.3 US$ Billion Net Debt 101.5 109.6 1) Net Debt / (adjusted EBITDA 1H14 x 2). Adjusted EBITDA= EBITDA excluding earnings of equity-accounted investments and impairments 2) Net debt / (Net Debt + Shareholders Equity) 3) Includes tradable securities maturing in more than 90 days
  18. 18. 18 2014 Projections Oil Products Output (th. bpd) Yield improvement: more Diesel and Gasoline in 2H14 850 840 917 491 489 520 783 823 803 +4% Diesel Gasoline Others 2H14 Forecast 2,240 1H14 2,152 2013 2,124 Oil Production (th. bpd) Production target maintained 2014 Forecast 2013 1,931 7,5% +/- 1p.p. Oil Exports (th. bpd) Sustainable growth of oil exports 250 166 207 +51% 2S14 Forecast 1S142013 9% 6% th. bpd th. bpd th. bpd Domestic Natural Gas Supply (MM m³/day) Higher domestic supply to reduce LNG imports 40 49 41 +21% 2H14 Forecast 1H142013 MM m³/day
  19. 19. OPERATIONAL AND FINANCIAL RESULTS 2nd Quarter 2014 __ Information: Investor Relations +55 21 3224-1510 investors@petrobras.com

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