PETROBRAS

Almir BarbassaCFO and Investor Relations Officer

May, 16th 2006

Conference Call / Webcast1st Quarter 2006

(Brazilian Corporate Law)

1

PETROBRAS

Disclaimer

The presentation may contain forecasts about future events. Such forecasts merely reflect the expectations of the Company's management. Such terms as "anticipate", "believe", "expect", "forecast", "intend", "plan", "project", "seek", "should", along with similar or analogous expressions, are used to identify such forecasts. These predictions evidently involve risks and uncertainties, whether foreseen or not by the Company. Therefore, the future results of operations may differ from current expectations, and readers must not base their expectations exclusively on the information presented herein. The Company is not obliged to update the presentation/such forecasts in light of new information or future developments.

Cautionary Statement for US investors

The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation, such as oil and gas resources, that the SEC’s guidelines strictly prohibit us from including in filings with the SEC.

2

PETROBRAS

Income Statement 1Q06 vs 4Q05

6.675

12.010

14.113

19.644

8.142

10.940

13.211

22.030

35,88638,638

Net Income

Operating Profit (1)

EBITDA

COGS

Net Revenues

1Q06 4Q05-7.1%

6.8%

9.8%

-10.8%

(1) Operating Profit and EBITDA of the previous quarters were readjusted in a form to purge the amount of provision for employee’s profit sharing program, accrued until the 3Q05 in other operating expenses.

-18.0%

• Operating result 9.8% higher than the previous quarter, mainly due to the absence of extraordinary items (operating expenses) occurred in 4Q05 as shown in the following slide.

R$

Mill

ions

More taxpayments

3

PETROBRAS

428

310

1,186

1,342

1,254

1,660

1,709

573Others

Exploratory Costs

General andAdministrative Exp.

Sales Expenses

1T06 4T05

Operating Expenses Analysis 1Q06 vs 4Q05

-21.5%

-28.6%

-75.3%

-25.3%

• Better operating expenses structure in the 1Q06 because of lack of extraordinary items occurred in 4Q05 such as: provisional expenses for doubtful receivables, personnel expenses, high exploratory costs and thermoelectric contractual pending expenses.

• In addition, there was a reduction on the maritime freight costs in 1Q06.

4

PETROBRAS

• 14% increase compared to last year same quarter due to the start-up in Campos Basin of P-43 and P-48 platforms (Barracuda & Caratinga) in December 2004 and February 2005 respectively. The production of both units stabilized in the second quarter of 2005.

• On April 21st 2006, platform P-50 (180 thous. bbld) began operation in Albacora Lest field and on May 8th the FPSO Capixaba (100 thous. bbld) started operating in Golfinho field. Two more units are expected for the 2H06: P-34 and Piranema.

thou

sand

bpd

Domestic oil and NGL production

1,795

1,543

1,7361,7251,730 1,751

1Q05 2Q05 3Q05 4Q05 1Q06 Apr/

∆ = 14% ∆ = 2.5%

06

5

PETROBRAS

61.53

46.05

51.59

44.0047.83

32.02

41.59

35.38

56.9061.75

35.1137.48

32.8836.14

29.53

43.04

54.24 53.69

44.1939.70

38.98

34.3830.77

49.33

56.3952.70 57.59

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06

US$

/bbl

Brent (average) Average Sales Price OPEC Basket

• The spread between the Brazilian average oil price and the Brentdecreased from US$ 10.84/bbl in 4Q-2005 to US$ 8.07/bbl in 1Q-2006. This heavy oil appreciation hindered refining margins.

US$

8.0

7 bb

l

E&P – Oil Prices

6

PETROBRAS

5.99 5.45 5.446.07 6.32

1Q 05 2Q 05 3Q 05 4Q 05 1Q06

∆ = +6% or US$ 0.25Domestic Lifting Costs w/o Gov. Part.(*)

(*) The company, in order to promote better indexes adherence to its operating and management models, has reviewed their concepts, recalculating the values of previous periods.

Main Causes+US$ 0.07/boe: decrease in production (in bpd the production was stable,

but considering the total amount, it was below 4Q05);+US$ 0.18/boe: effect of average exchange rate due to Real appreciation of

3%.• In Reais tern, this indicator remained stable relative to the previous quarter

(R$ 13,69 as to R$ 13,73 in 4Q05).

7

PETROBRAS

3.0 3.4 4.3 6.0 5.5 5.4 6.1 6.34.0 5.1

6.47.6 7.8 9.6 9.9 11.024.8

28.8

38.2

47.551.6

61.5 56.961.8

-4

1

6

11

16

21

26

2002 2003 2004 1Q05 2Q05 3Q05 4Q05 1Q06

US$

/boe

-8

2

12

22

32

42

52

62

Lifting Cost Gov. Participation Brent

7.08.5

10.7

13.6 13.315.0 16.0 17.3

Extraction Costs including Gov. Participation (*)

• Increase in government participation in the lifting cost due to higher Brent prices and start-up of highly productive fields.

57%

63 %

62 %

56 %

8

PETROBRAS

Changes in Operating Profit (1Q06 vs. 4Q05)- E&P

7.987

2.059 193807 10.523

96233

4Q05 Oper.Profits

Price effecton Net

Revenue

Volume effecton Net

Revenue

Average costeffect on

COGs

Volume effecton COGs

OperatingExpenses

1Q06 Oper.Profits

Changes in Operating Profit – R$ million

1,7511,736

• 31% increase in operating profit due to a rise in international oil price and a reduction of exploratory and drilling costs in the 1Q06.

• Although the average daily production increased, the total volume produced during the 1Q06 was lower due to smaller number of days.

Domestic Oil, NGL and Condensate – thousand bpd

9

PETROBRAS

1.761 1.8121.8041.6681.708

1.6491.6471.7311.6651.589

81

91

8783

91 91

81 8079 79

600

800

1.000

1.200

1.400

1.600

1.800

1Q05 2Q05 3Q05 4Q05 1Q0670

75

80

85

90

95

100

Domestic oil products production Oil products sales volume

Primary processed installed capacity - Brazil (%) Domestic crude as % of total

Refining and Sales in the Domestic Market

• Despite the increase of domestic oil in refinery throughput an increase of oil products production can be observed, resulting from operational improvements in refining, specially in the conversion of heavy oil.

10

PETROBRAS

20

40

60

80

100

Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06

ARP Brazil (US$/bbl) Brent Average Price ARP USA (w/ volumes sold in Brazil)

68.9

74.05

56.9

4Q05Average

70.261.8

71.0

1Q06Average

Average Realization Price - ARP

• The ARP Brazil aligned with international prices, which are still pressured by geopolitical issues and Asian demand;

• The ARP in Reais decreased 4.9% from R$ 161,11 (4Q05) to R$ 153,16 (1Q06).

11

PETROBRAS

1.741.96

1.862.03

1.90

1Q 05 2Q 05 3Q 05 4Q 05 1Q 06

Domestic Refining Costs (*) (US$/bbl)

(*) The company, in order to promote a better indexes adherence to its operating and management models, has reviewed their concepts, recalculating the values of previous periods.

• 6% reduction due to smaller number of programmed stoppages in the quarter;

• Taking out the Real appreciation of 3%, refining costs decreased 8%.

12

PETROBRAS

Changes in Operating Profit (1Q06 vs 4Q05)- SupplyChanges in Operating Profit – R$ million

• Increase in operating profit due to inventory consumption accumulated at lower prices in the previous period;

• Main effects of smaller sales volume:• less days in the 1Q06 (R$ 650 MM) • Contraction of oil exports by the Refining terminals (R$ 340 MM)• Offshore (R$ 300MM) and domestic market (R$ 160 MM) sales• Oil products exports (R$ 101 MM)

• Price effect on Net Revenue: increase of ARP for the oil products foreign market;

2.302123

696

42 3.0131.606

1.672

4Q05 Op. Profit Price effect onNet Revenue

Volume effecton Net Revenue

Average costeffect on COGs

Volume effecton COGs

OperatingExpenses

1Q06 Op. Profit

13

PETROBRAS

8.142 2.752 2.386

1.436850

1.0061.210

6.6751.483

4Q05 NetProfit

Revenues COGS Oper. Exp. Fin. and nonoper. exp.,others andEquity Inc.

EmployeesParticipation

MinorityInterest

Taxes 1Q06 NetProfit

Domestic Oil, NGL and Condensate – thousand bpd 1,7511,736

Changes in Net Profit – R$ million (3Q05 vs 4Q05)

• The 1Q06 net profit was negatively affected by:• Lower realization prices in Reais;• Higher income taxes (absence of tax benefit occurred in 4Q05 for the Interest on

Own Capital declaration);• appreciation of the Real by 3% causing losses on equity income line.

• These effects were partially offset by an improved expenses and costs structure.

14

PETROBRAS

10.940

2.536711 339 150 23 160

12.010

2.503

4Q05 Oper.Profit

E&P Downstream G&E Distribution International Corp. Elimin. 1Q06 Oper.Profit

Business areas’ share in Operating Profit – R$ million (4Q05 vs 1Q06)

• Results in other Areas affected by:• G&E: Lack of thermoelectric extraordinary contractual pending expenses (occurred

in 4Q05);• INTER: the higher oil & NG sales prices weren’t sufficient to offset the effect of the

Real appreciation on investments abroad; • DISTRIBUTION: market share decrease caused by aggressive competition.

15

PETROBRAS

450322 333 393 360

8399

65

344319

115

109

46105

2003 2004 1Q05 2Q05 3Q05 4Q05 1Q0

Oil Oil Products

Oil

Imports (thousand bpd)Exports (thousand bpd)

Net exports of oil and oil products

• 58 thous. bpd volume superavit in the 1Q06;• only US$ 41 million in deficit.(Exports: US$ 2.54 billion / Imports: US$ 2.58 billion)

181 161

343249 301

221246

250

262233

255213

235228

2003 2004 1Q05 2Q05 3Q05 4Q05 1Q06

Oil Oil Products

446 396

551 517564495

409424

368 425 459416492

559

16

PETROBRAS

(25.000)

(15.000)

(5.000)

5.000

15.000

25.000

12/31/2004 3/31/2005 6/30/2005 9/30/2005 12/31/2005 3/31/2006

(1.200)

(800)

(400)

0

400

800

1.200

1.600

Abroad In Brazil w/ FX correction**In Brazil CDI CashFinancial Income

Cash Breakdown (R$ millions)

• Financial revenues influenced by the US dollar indexed cash as hedge against the debt and costs linked to dollar.

Cas

h

Fina

ncia

l Rev

enue

s

FX rate change*

*Price of US Dollar at end of the period** The line ‘Fundos de investimentos financeiros - cambial " was restated to “..investimentos exclusivos" in order to fullfill CVM requirements CVM 411 and 413/2004.

∆0.4% ∆-11.8% ∆-5.5% ∆5.3% ∆-7.2%

17

PETROBRAS

Leverage

R$ million 03/31/2006 03/31/2005Short-term debt (1) 11,384 11,116

Long-term debt (1) 33,083 37,126

Total debt 44,467 48,242

Net debt (2) 21,484 24,825

24%26%

37%

32%

20%

23%19%20% 19%

26%

1Q05 2Q05 3Q05 4Q05 1Q06Net Debt / Net. Cap.Short-Term Debt / Total Debt

Petrobras’ Leverage Ratio

(1)Includes debt contracted through leasing contracts of R$ 3.300 million on December 31, 2005, and R$ 4.021 million on December 31, 2004.(2)Total debt - cash and cash equivalents

• The short-term debt increased because PRI Bonds maturing in 2007. • Long-term debt decrease of 4 base points compared to 12.31.05 due to:

• Real appreciation;• Financing amortizations.

18

PETROBRAS

1Q06 4Q05 (1)

(=) Net Cash from Operating Activities 10,144 8,513 (-) Cash used in Cap. Expend. (6,020) (7,025) (=) Free Cash Flow 4,124 1,488 (-) Cash used in Financing and Dividends (4,558) (718) Financing (499) (768) Dividends (4,059) 50 (=) Net Cash Generated in the Period (434) 2,206 Cash at the Beginning of Period 23,417 21,210 Cash at the End of Period 22,983 23,417

R$ million

Consolidated Cash Flow Statement

(1) As of January 1, 2005, the Special Purpose Companies whose activities are directly or indirectly controlled by Petrobras were included in the Consolidated Financial Statements, as per CVM Instruction No. 408/2004.

• Cash at the end of period affected by the payment of interest on own capital during the 1T06.

19

PETROBRAS

Investments

2006 % 2005 % %• Direct investments 5.386 91 4.740 89 14 Exploration & Production 3.359 57 2.834 54 19 Supply 799 13 681 13 17 Gas and Energy 149 3 433 8 (66) International 703 12 545 10 29 Distribution 138 2 112 2 23 Corporate 238 4 135 2 76 • Special Purpose Companies 494 8 457 9 8 • Ventures under Negotiation 33 1 45 1 (27) • Project Finance 1 - 39 1 (97) Exploration & Production 1 - 39 1 (97) Espadarte/Marimbá/Voador 1 - 39 1 (97) Total Investments 5.914 100 5.281 100 12

Jan-Mar

**

20

PETROBRAS

QUESTION AND ANSWERSESSION

Visit our website: www.petrobras.com.br/ri/english

For further information please contact:

Petróleo Brasileiro S.A – PETROBRAS

Investor Relations Department

Raul Adalberto de Campos– Executive Manager

E-mail: petroinvest@petrobras.com.br

Av. República do Chile, 65 - 22nd floor

20031-912 – Rio de Janeiro, RJ

(55-21) 3224-1510 / 3224-9947