Petrobras opportunities

in a new oil & gas scenario

Pedro Parente, CEO of Petrobras

Fonte: Bloomberg

Major corruption scandal: Car Wash

Challenging economic scenario

Huge fiscal imbalance

Deep and prolonged recession

Exchange rate volatility

Political transition

The Brazilian scenario

in 2016

—

Unemployment Rate (%)

0

2

4

6

8

10

12

14

jan/15

fev/15

mar/

15

abr/

15

mai/

15

jun/15

jul/

15

ago/15

set/

15

out/

15

nov/15

dez/

15

jan/16

fev/16

mar/

16

abr/

16

mai/

16

jun/16

jul/

16

ago/16

set/

16

out/

16

nov/16

dez/

16

jan/17

Source: PNAD Contínua

Industrial capacity utilization

687072747678808284

% 4

-quart

ers

movin

g

avera

ge

Source: FGV

12,6

2

External and domestic judicial disputes

High levels of debt, with concentrated maturities

Regulatory framework

Obligatory participation in pre-salt

Local content requirements

Very low internal motivation level, due to the

corruption scandal

Other risks related to the business not addressed

at that time

At the same time, Petrobras faced its

own challenges

—

3

2006 2016

17

2006 2016

21

26

(*) Operating cash generation Gross Debt

Petrobras

60

Operating cash generation Gross Debt

Peer group average of Exxon, BP, Chevron, Shell

Source: Evaluate Energy and Companies Reports

Rapid increase of gross debt, reaching more than 6 times the level of 2009, and much above

the industry level. Ratio net debt/OCG(*) reaching more than 5 times at the end of 2015

—

132

118

Gross Debt relative to Cash Generation

(US$ billion)

Gross Debt relative to Cash Generation

(US$ billion)

4

Peer group average of Exxon, BP, Chevron, Shell Petrobras

Interest payments

0

1

2

3

4

5

6

7

8

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

1.7

7.3

0

1

2

3

4

5

6

7

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

1.3

Source: Evaluate Energy and Companies reports

Four folds higher interest payments, compared to 2009, and almost 6 times the peer group

average

—

Interest payments (US$ billion) Interest payments (US$ billion)

5

0

100

200

300

400

500

600

jan/15

mar/

15

mai/

15

jul/

15

set/

15

nov/15

jan/16

mar/

16

mai/

16

jul/

16

set/

16

nov/16

jan/17

Source: Bloomberg

Credit Default Swap (Brazil 5 yrs)

20.000

25.000

30.000

35.000

40.000

45.000

50.000

55.000

60.000

65.000

70.000

jan/15

mar/

15

mai/

15

jul/

15

set/

15

nov/15

jan/16

mar/

16

mai/

16

jul/

16

set/

16

nov/16

jan/17

Source: Bloomberg

Bovespa Index

Since the political transition, financial indicators have anticipated improvements in the

Brazilian economy

—

6

40

41

42

43

44

45

46

47

48

jan/15

mar/

15

mai/

15

jul/

15

set/

15

nov/15

jan/16

mar/

16

mai/

16

jul/

16

set/

16

nov/16

Source: Central Bank

4,16

9,00

2

4

6

8

10

12

14

16

jan/15

abr/

15

jul/

15

out/

15

jan/16

abr/

16

jul/

16

out/

16

jan/17

abr/

17

jul/

17

out/

17

Source: Centrak Bank/Focus*

IPCA (% 12 months) Selic rate (%)

* The numbers for 2017 and 2018 are market forecasts collected by the central bank

The drop in inflation has allowed interest rates to fall, which could positively impact

consumption and investment

—

Inflation and Interest Rate Household Debt (% income)

7

1,9

3,0

0,5

-3,8 -3,6

0,48

-5

-4

-3

-2

-1

0

1

2

3

4

2012 2013 2014 2015 2016 2017

Source: BCB/Focus Forecasting

GDP annual real growth (%)

Some important economic measures have been implemented and others are being discussed

Government spending cap

Labor reform

Social security reform under discussion in Congress

Economic activity is starting to recover after a deep recession

—

8

Focus forecast

Petrobras Strategic Plan 2017-2021

—

An integrated energy company focused

on oil and gas that evolves with

society, creating high value, with a

unique technical capability

Our Vision

—

10

Safety is our priority

—

Source: Petrobras and subsidiaries

HSE: Health, security and environment

Reduction

36% on the Total Recordable Injury

Frequency Rate (TRIFR*)

TO

1.4

in 2018

FROM

2 .2 in 2015

1.6 in 2016

Safety metric

On going assessment of safety

procedures

Stricter rules and enforcement

of HSE procedures in all

supplier contracts

Systemic treatment of HSE

issues

“Commitment to Life” Program

11

On going training program on

HSE Golden Rules

FINANCIAL

Reduction in

LEVERAGE Net Debt/EBITDA

TO

2.5 by 2018

FROM

5.1 in 2015

3.5 in 2016

Increased capex productivity

Increased opex efficiency

Partnerships and divestments

New pricing policy

DRIVERS

Strategic Plan: financial target and drivers

—

12

13

A new boost for partnerships —

Petrobras is intensifying its partnerships… —

...with operators ...with service companies ...with research institutions

18

Total area:

149,000 km² SANTOS BASIN

CAMPOS

BASIN

CAMPOS BASIN Cutting edge

technological

development

Lower research

costs

Faster production

growth

Lower CAPEX

Lower lifting cost

Competitive

breakeven

This is boosting produtivity in upstream activities

—

19

SANTOS BASIN

Technological partnerships help the company to overcome challenges

—

Canada

USA

Europe

Japan

Australia Argentina

16

COMPANIES AND SUPPLIERS

Partnerships with more than 62 universities and 25 R&D

institutions worldwide

Partnerships with 120 Brazilian universities

Process safety, integrity and reliability of

plant and equipment

Opening up new exploratory frontiers

Reduce breakeven oil prices and operating

costs

Fostering the company's environmental and

social values

Transition to low carbon matrix

Increase process safety and plant integrity & reliability of management capabilities to ensure operational continuity

Provide technology and technological capability to back up exploratory efforts

Boost E&P profitability by cutting CAPEX and OPEX

Provide technology to satisfy environmental legislation and social responsibilities, while ensuring cost optimization

Boost capabilities and identify new business opportunities in the long term, while transitioning to a low carbon energy matrix

CO2

Main technological focuses of the 2017-2021 Business Plan

—

17

Downstream in Brazil: 6th largest market for oil consumption worldwide

long-position in crude oil, short-position in oil products, and far from main markets

Petrobras is also interested in finding partners for downstream activities, maintaining its

integrated supply chain strategy —

18

Crude Oil

Oil Products

Privileged geographic position for

spreads

0

500

1000

1500

2000

2500

3000

2017 2021 2025 2030

917 997 1097 1225

529 476 493 527

863 956

1023 1093

Brazilian oil product market

(Million bpd)

2.3 2.4 2.6

2.8

Diesel Others Gasoline

Petrobras refining capacity —

LUBNOR

REMAN RPCC

RNEST

RLAM

REGAP

REDUC

REVAP

RPBC

REPLAN

RECAP

REPAR

SIX

REFAP

PRSI

Distillation Capacity:

> 2.2 MM bpd

Refineries:

14

19

Petrobras pipeline and terminal infrastructure —

Terminals:

48

Pipelines:

7.517 km Operation supporting vessels:

180

20

TRANSPORTE MARÍTIMO

OLEODUTO

GASODUTO

TERMINAL GNL

TERMINAL TERRESTRE

TERMINAL AQUAVIÁRIO

GASODUTO BRASIL/BOLÍVIA

(GASBOL) DUTOS DE ESCOAMENTO

REFINARIA

UNIDADE DE PROCESSAMENTO

DE GÁS NATURAL

PLATAFORMA

Partnerships and divestments

2017-2018

US$ 21 B

2015-2016

Partnership and divestment program took off last year and will continue to be our focus

—

Strategic Partnership

with Total

US$ 13,6 B

Strategic Partnership

with Statoil

21

Strategic Partnership

with Galp

Petrochemicals

Biofuels

Gas Pipelines

Gas Distributors

Foreign assets

Strategic Partnerships

RECENT DEVELOPMENTS —

22

Macroeconomic risks

Geopolitical risks

Material changes in market conditions

Other Petrobras risks

Judicial disputes

Class action, DoJ, SEC

Labor and tax issues

Regulatory and environmental licensing risks

Partnerships and divestments below target

Top Risks

—

23

Total Recordable Injury Frequency Rate** (TRIFR) change over the past year

—

Petrobras TRIFR

24 * Data for 2015 is year to date (YTD) * *TRIFR = number of reportable injuries per million man-hours

0

0,5

1

1,5

2

2,5

3

3,5

Dez2015*

Jan2016

Feb2016

Mar2016

Apr2016

May2016

Jun2016

Jul2016

Aug2016

Sep2016

Oct2016

Nov2016

Dec2016

Jan2017

Feb2017

Série1 Linear (Série1)TRIFR Trendline

Net Debt / EBITDA*

FINANCIAL

*Adjusted EBITDA

Total Recordable Injury Frequency

Rate*

SAFETY

2.3 2.2

1.6

2015 2014

-24%

2016

-30%

4.71 5.11

3.54

2016

-31%

2014 2015

-25%

* TRIFR = Number of reportable injuries per million man-hours

Indicators show that we are moving towards the 2017-2022 Business Plan target

—

13

0

1

2

3

4

2017 2021

Oil+ NGL Brazil

Oil + gas International

2.52

3.34

2.07

2.77

Natural gas Brazil

2.62

3.41

Oil , NGL and Gas production (million boed)

Also committed to boosting production

—

26

Lifting Cost*

(US$/boe)

2014 2015 2016

14.1

11.7

10.3

-27%

-11%

*Brazil + International

Lifting Cost in Pre-Salt

< 8.0 US$/boe

While reducing production and refining cost

—

Refining Cost

(US$ thousand/UEDC1)

1 Unit of equivalent distillation capacity

-37%

-16%

2014 2015 2016

0,49

0,37

0,31

27

28

In a nutshell…

* Source: EvaluateEnergy

Safety 24% decrease of TRIFR (Total Recordable Injury Frequency Rate) yoy

Progress in the efficiency of

investments and costs

In 2016, reduction of:

32% in investments, without reduction of the production curve increased capex productivity

6% in manageable operating costs

6% in SG&A

20% in the workforce

Records in oil and natural gas production

Average oil production in Brazil reached a historic annual record in 2016 (2,144 kbpd)

Production target was met for two consecutive years

Petrobras became recently a net exporter, with exports growing 12% in the 4Q16

29

In a nutshell…

* Source: EvaluateEnergy

Constant improvement of economic and

financials results

Free cash flow positive for the 7th quarter in a row and 162% above 2015

Operating income of R$ 17 Billion in 2016 (vs loss of R$ 12 Billion in 2015)

2016 yoy increase of 16% of adjusted EBITDA

Petrobras posted the highest operating cash flow among its peers companies, as well as the highest EBITDA margin (31% vs 18% on average*)

Acceleration of deleverage

process

6% decrease in gross debt US dollars and 22% in Reais

Pre-payment and amortization of debt with proceeds from divestments and operating cash flow

31% reduction in Net Debt/adjusted EBITDA, from 5.11 to 3.54

Partnerships Successful conclusion of US 13.6 billion in deals in 2015-2016

US 21 billion target kept for 2017-2018

New systematic for divestments fully endorsed by the Court of Accounts

Note: Considers 16 institutions

B+ BB-

B3 B2

B1

May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17

Investment Grade

S&P

Moodys

Credit Agency Ratings

21% 14% 14% 20% 13% 13% 13% 13% 13% 13% 13%

79% 86% 79% 60%

47% 38% 31% 31% 31% 25%

13%

7% 20%

40% 50% 56% 56% 56% 63%

75%

May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Buy

Neutral

Sell

Sell Side Recommendation – Rating for Petrobras shares

Improvements are seen by credit agencies and in sell side recommendations

—

30

Petrobras 5-Year Bond since 2015 – bid yield

First LM*

* LM: Liability Management

Second LM*

Third LM*

4,99%

Source: Bloomberg

Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17

Consistent reduction in the cost of debt

—

31

Petrobras Market Value vs Brent (01/01/2015=100)

Petrobras Market Value

Brent

Despite lower oil prices,

Petrobras shares rose

significantly in value during 2016

67%

-1%

Source: Bloomberg

Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17

Increased market value shows confidence in Petrobras recovery

—

32

Thank You!

Pedro Parente