webcast 2 q12
TRANSCRIPT
2nd Quarter 2012 (IFRS) Conference Call/Webcast August 6th, 2012
DISCLAIMER
2
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 2012 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.
OPERATIONAL HIGHLIGHTS
P-56
» 2012-2016 Business and Management Plan of US$ 236.5 billion, of which US$ 208.7 billion related to projects under
implementation and US$ 27.8 billion to projects under evaluation (subjected to adequate return and financeability)
» Price increases for diesel (10%) and gasoline (8%)
P-55
» Advances in contracting and development of the local industry:
» Contracts for construction of 12 drilling rigs by Sete
Brasil (6 at Brasfels and 6 at Jurong Aracruz shipyards)
» New technical partner defined for Atlântico Sul Shipyard
» Contracts for the construction and integration of the first
topsides of 8 FPSOs for the Pre-salt
» 4 foreign built drilling rigs arrived to Brazil in 2Q12
Deck mating conclusion of P-55 in Rio Grande
Shipyard. The operation was the heaviest structure
ever lifted in the world (17 thousand tons)
» Domestic refining troughput record (2.01 million bpd)
3
2Q12 RESULTS
P-56
• Exchange rate devaluation (impact on debt and cost)
• Price differential for oil products sold in Brazil
• Lower production (operational stoppages and Frade) and lifting cost increases (start-up of PROEF*)
• Exploration expenses from dry/subcommercial wells drilled mainly between 2009 and 2012 in new exploratory
frontiers
• Increase of LNG imports due to higher natural gas demand from power generation
Principal factors underlying results
» Loss of R$ 1.3 billion in 2Q12 vs net income of R$ 9.2 billion in 1Q12
» EBITDA of R$ 10.6 billion in 2Q12 vs R$16.5 billion in 1Q12
These factors are less likely to occur jointly and with the same intensity in subsequent
quarters
4 *PROEF – Programa de Aumento da Eficiência Operacional da Unidade de Operações da Bacia de Campos (Operating Efficiency Improvement Program in Campos Basin Operational Unit)
EXCHANGE RATE
Source: Brazilian Central Bank (PTAX)
» A higher devaluation of the Real at the end of 2Q12 resulted in a Net Financial Loss of R$ 6.4 billion
» Average depreciation of the Real throughout 2Q12 negatively affected the Company’s main costs (lifting cost, government take,
imports of oil, oil products and LNG, and oil products logistics)
» However, FX has stabilized following the devaluation
5
R$/US$
1.60
0,00
July-12 June-12 May-12 Apr-12 Mar-12
2.30
2.20
2.10
1.70
1.80
1.90
2.00
1.72
1.79 1.84
1.79
Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 Sept-11 Aug-11 July-11 June-11 May-11 Apr-11 Mar-11 Feb-11 Jan-11
2.03 2.05
1.98
1.85
1.79
1.66 1.67 1.68.
1.77 1.74
1.60
1.56 1.59
1.61 1.59
2012 2011 2Q11
Average 1.60
1Q12
Average 1.77
2Q12
Average 1.96
DOMESTIC AND INTERNATIONAL PRICES
Diesel Imports Gasoline Imports ARP Brazil ARP USGC (with volumes sold in Brazil)
Imported V
olumns (kbbl / d)
Ave
rage
Rea
lizat
ion
Pric
e (R
$/bb
l)
2011
6
Average Realization Price in US Golf Coast
» Inventories recognized in COGS in 2Q12 were acquired during the period of the highest price differential (March-May/12)
» The differential with international prices decreased at the end of 2Q12 as a result of the decline in international oil prices and
the domestic increases in diesel and gasoline prices
2012
Period when 2Q12 inventories
were built
100
120
140
160
180
200
220
240
260
0
100
200
300
400
500
600
700
800
900
Apr-11 Mar-11 Feb-11 Jan-11 Jun-12 May-12 Apr-12 Mar-12 Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11 May-11 Jun-11
Average Realization Price in Brazil
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12
OIL AND NGL PRODUCTION (BRAZIL)
2Q11
Average: 2,018
1Q12
Average: 2,066 2Q12
Average: 1,970
2,001
1,968
2,002
1,963
2,047
2,003 2,020
2,003
2,040
2,069
2,050
2,000
1,950
1,993
2,098
1,989
1,961
2,200
2,150
2,100
1,960
2,061
2,110
2,084
2012 2011 Kbpd
7
» 5% decrease in production 2Q12/1Q12 (- 96 kbpd) as a result of:
» Operational stoppages (-54 kbpd), lower operational efficiency (-18 kbpd) and Frade (-15 kbpd)
» Decline of potential as expected
» 2 new systems will start-up on 2H12:
» FPSO Cidade de Anchieta (Baleia Azul), 100 kbpd, in August
» FPSO Cidade de Itajaí (Baúna e Piracaba), 80 kbpd, in October
» Maintenance of 2012 oil production target (flat when compared to 2011, +/-2%)
» Production recovery only in 4Q12 (scheduled stoppages will continue on 3Q12)
8 Confidencial 8
Exp. 2 - Delay in cumulative physical advance: Cumulative physical advance below
baseline due to the delay in the project’s wells construction and flexible lines
manufacturing
Exp. 1 - Schedule delay: 1-month delay in operating start-up (first oil) due to
the delay in the FPSO’s conversion works
BALEIA AZUL (FPSO ANCHIETA):
S-CURVE OF PHYSICAL PROGRESS FOR THE WHOLE PROJECT
Projected
Cumulative until 06/30/12:
Planned: 84.7%
Actual: 78.2%
9 Confidencial
BAÚNA E PIRACABA (FPSO ITAJAÍ):
S-CURVE OF PHYSICAL PROGRESS FOR THE WHOLE PROJECT
Exp.1: schedule delay - The 3-month delay in the operational start-up is due
to the postponement of the production unit ‘s arrival date on site because of
the low construction performance in the Jurong shipyard in Singapore
(especially mechanical completion and systems comissioning)
Exp. 2 - Delay in cumulative physical advance- Delay of 12.48% in physical
advance until 06/30/12 due to delays in the FPSO construction (0.21%), delay in
Baúnas’ wells completion (7.81%), postponement of interconnecting materials
arrival (1.55%), postponement in pre-anchoring and disbursement of the unit
mobilization tax (2.93%) and unplanned environmental analysis (0.02%)
9
Projected
LIFTING COST
10
20.93 22.31 22.47 22.70 26.63
34.21 31.80 37.57 39.03
38.48
2Q11 3Q11 4Q11 1Q12 2Q12
Lifting Cost Govt Take
10
» Expenses related to workovers and subsea engineering
increased 35%, from R$ 1,024 million on 1Q12 to R$ 1,385
million in 2Q12, principally due to higher number of units
and of drilling rigs/days allocated to maintenance activities
(from 443 to 760 days in Campos Basin)
» This increase in activities and disbursements is due to the
PROEF (Operational Efficiency Improvement Program). The
recovery in UO-BC’s operational efficiency will be seen by
4Q12
» Government Take: decrease due to lower production in
fields with a higher Special Participation bracket
65.11
54.11
61.73 55.14
60.04
(R$/barrel)
EXPLORATORY ACTIVITIES: DRY WELLS
473174
561 572 577274 229
415 528615
204
896536
2.737
-500
0
500
1.000
1.500
2.000
2.500
3.000
3.500
2Q12 1Q12 4Q11 3Q11 2Q11 1Q11 4Q10 3Q10 2Q10 1Q10 4Q09 3Q09 2Q09 1Q09
Dry/abandoned/subcommercial wells
R$ million Dry Hole Expenses
» Write-off - 41 dry or subcommercial wells in 2Q12, which were drilled between 2009 and 2012, the majority in new frontiers:
» Activities in new frontiers imply lower success ratio than Pre-Salt’s over the last years, higher logistic costs and,
consequently, higher expenses related to dry/subcommercial wells
11
2Q12 DRY WELLS
Total Cost: R$ 2.7 billion
• 5 wells responsible for R$ 1.539 billion (57%)
12
Pecém
(New Discovery)
41 wells
» By type
21 dry, 8 subcommercial, 9 cancelled projects,
2 abandoned e 1 mechanic accident
» By area
13 in Post-salt, 15 onshore, 2 in Pre-Salt and
11 cancelled or abandoned projects
Confidencial
OIL PRODUCTS SALES IN BRAZIL
969 970 1021
481 545 557
227 214 228
441 439431
2Q11 1Q12 2Q12
2,118 2,237 2,168
Diesel + Jet Fuel Gasoline LPG Others
kbpd
» 2Q12 vs. 2Q11: Increase of 6% in oil products sales :
» 16% growth in gasoline volumes due to increase
in fleet and lower prices relative to ethanol
» 5% increase in diesel volumes due to retail growth
» Increase of 3% on the 2Q12 x 1Q12 comparison due to
demand seasonality
» Incremental volume supplied by imports,
especially diesel, reduced downstream margins
13
+3%
+6%
TRADE BALANCE
(mil
barr
is/d
ia)
» Lower domestic oil production reduced oil exports during 2Q12
» Higher volumes of domestic oil processed in our refineries also contributed to lower exports
» Growth in domestic consumption (mainly diesel) required increased imports of oil products with negative margins
Exports Imports
14
Balance
480 497
351
554
203
714
217 223
703
347358 341
724
383
764
406 374
721
2T12 1T12 2T11 2T12 1T12 2T11
2T12 1T12 2T11
-170
-50 -18
Oil Products Oil
kbpd
2Q11 1Q12 2Q12
2Q11 1Q12 2Q12
2Q11 1Q12 2Q12
HIGHER THERMAL DEMAND: LNG IMPORTS
Million m³/day
8,111,6
15,5
26,523,8
18,6
0
10
20
30
40
50
60
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12
Non Thermal
Thermal
Refineries and Fertllizer plants
2012 2011 2Q11
Average: 64.0 1Q12
Average: 67.2
2Q12
Average: 79.4
Demand
9.00.71.626.2
42.644.4
LNG
Bolivia
Domestic
2Q12
80.7
27.2
1Q12
+16%
69.4
2Q11
66.0
25.7
38.7
Million m³/day
Supply
15
» Higher thermo-electric consumption (+96% compared to 1Q12)
due to lower rainfall in 2Q12
» Increase in domestic supply and imported gas in 2Q12, especially
LNG, to meet thermo-electric demand
» Increase of PLD (settlement price of differences) resulted in
negative impact on power trading margins
» Reduction of thermal demand at the end of 2Q12 with the
recovery of hydroelectric reservoir levels
INTERNATIONAL PRODUCTION
16
» Highlight: Cascade (U.S.) production ramp-up
» Lower sales volume in Nigeria due to lower participation in the Akpo field, as a result of the termination of the recovery of
past costs
» Lower commodity prices in 2Q12 resulted in a higher impairment of inventories in the U.S. and Japan (R$ 509 million)
» Provision related to the agreement of the Pasadena refinery (R$ 140 million)
kboed
Mar-12
246
237
Jul-12
230
Feb-12
80
Dec-11
242
238
Aug-11 Oct-11
249
Sep-11
237
Jul-11 May-12
233
Nov-11
246
Mar-11
241
Jun-11
236
Jan-11
226
Apr-11
219 232
Feb-11
238
May-11
231
240
250
260
Jan-12
270
230
244
Apr-12
239
242
Até 11 de julho
*
2012 2011
2Q11
Average: 227
1Q12
Average: 239
2Q12
Average: 240
Até 19 de julho
Oil and Natural Gas Production
Jun-12
FINANCIAL RESULTS
OPERATING INCOME 2Q12 VS 1Q12
1Q12
Operating Income
Sales Revenue COGS SG&A 2Q12
Operating Income
Other Expenses
11,771
1,913
(6,142)(292)
(1,968)
5,282
(R$ million)
18
» Reduction in operating income:
» Increase in sales revenues, due to higher domestic demand (4%) and FX depreciation effect on export prices
» Increase in COGS due to higher sales volume on domestic market, sales from inventories acquired at higher costs and
FX effect over costs in dollars
» Higher exploratory costs (2Q12/1Q12:+238% ) due to dry and sub-commercials wells – exploration of new frontiers
NET INCOME 2Q12 VS 1Q12
9,214
(6,489)
(6,872)(562)
2,624 739
(1,346)
1Q12Net Income
Operating Income Financial Results Equity Income Taxes Minority Interest 2Q12Net Income
(R$ million)
19
» Losses:
» Reduction of operating income
» Financial expenses of R$ 6.4 billlion due to FX depreciation (11%) on debt
E&P 2Q12 vs 1Q12
18,846 1,213 (1,442)
(902) 621 (2,164)
16,172
1Q12Operational
Results
Price Effecton Revenue
Volume effecton Revenue
Average Costeffect in COGS
Volume Effecton COGS
OperationalExpenses
2Q12Operational
Results
Operating Income (R$ million)
20
» Higher domestic oil prices due to depreciation of the Real
» Lower level of domestic oil production
» Higher maintenance costs and well interventions partially offset by lower governament take
» Increase in geology, geophysics and dry/subcommercial wells expenses
DOWNSTREAM 2Q12 vs 1Q12
Operating Income
(7,101)
487
(272)
(3,285)
53 150
(9,968)
1Q12Operational
Results
Price Effecton Revenue
Volume Effecton Revenue
Average CostEffect in COGS
Volume Effecton COGS
OperationalExpenses
2Q12Operational
Results
(R$ million)
21
» Higher sales prices only at the end of quarter
» Lower oil and oil products exports – domestic oil production chanelled to supply Brazilian domestic market
» Higher level of acquisition costs/internal transfer prices and sales of inventories acquired at higher costs
Confidencial
DOMESTIC OUTPUT OF OIL PRODUCTS
kbpd
1,894 1,967 2,035
Diesel + Jet Fuel Gasoline LPG Others
22
» Increase in oil products output due to higher throughput as a result of higher operational availability and higher utilization in
conversion and quality units
» Higher utilization factor in existing refineries, and a record in monthly processing in June (98.7%)
» Small increase in refining cost, in Reais, due to higher costs associated to maintenance stoppages with no impact on
throughput. In US dollars, it decreased 8%
353 349 350
89.9% 92.5% 94.3%
0
10
20
30
40
50
60
70
80
90
100
0
500
1000
1500
2000
2500
2Q12
1,927
1,576
1Q12
1,884
1,534
2Q11
1,837
1,484
Domestic Oil Imported Oil Utilization Factor
Throughput and Utilization Factor Oil products output * Refining Cost (R$/bbl)
Thr
ough
put (
kbpd
)
Util
izat
ion
fact
or (
%)
+2%
* Includes E&P’s LPG production
1.071.41 1.66 1.61
2.4617%
22% 24% 24%28%
-20%
-10%
0%
10%
20%
30%
40%
50%
-0,5
0,5
1,5
2,5
3,5
4,5
5,5
2Q11 3Q11 4Q11 1Q12
Net debt/EBITDA Net debt/Net Capitalization
23
CAPITAL STRUCTURE
R$ Billion 06/30/12 03/31/12
Short-term Debt 17.7 18.0
Long-term Debt 161.5 146.1
Total Debt 179.2 164.1
(-) Cash and cash equivalents 3 45.9 57.9
= Net Debt 133.2 106.2
US$ Billion 06/30/12 03/31/12
Net Debt 65.9 58.3
2Q12
» 2Q12 weak results do not reflect expectations for
the remaining quarters
» Divestment plans continue as targeted
» No change in estimates and leverage limits
established on the 2012-2016 Business and
Management Plan
1 2
1) Net Debt / ((EBITDA 1Q12 + EBITDA 2Q12) x 2)
2) Net Debt / (Net Debt + shareholder’s equity)
3) Includes tradable securities (maturing in more than 90 days)
INVESTMENTS
1H2011 1H2012
R$ 32.0 billion
(US$ 19.6 billion)
R$ 38.7 billion
(US$ 20.7 billion)
38%
6%
1% 1% 2%
6%
34%
5%
1% 0% 2%
5%
E&P Downstream G&E International Distribution Biofuel Corporate
24
‘Finally, I would like to reaffirm my confidence in Petrobras’ privileged
position in the oil and gas sector. Our reserves, highly qualified
personnel, R&D investments and track record of overcoming
challenges will lift the Company to levels of excellence that will
generate consistent returns for our shareholders.’
Presidente Maria das Graças Silva Foster
