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Results Announcement2nd Quarter 2011
(IFRS)
Conference Call/Webcast
Almir Guilherme Barbassa CFO and Investor Relations Officer
August 17th, 2011
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 2011 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.
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2Q11 HIGHLIGHTS
o Net income totaled R$ 10.9 billion in 2Q11, in line with the 1Q11. In 2Q11, it went up 32% when compared with the same period last year.
o Second‐quarter domestic sales volume increased by 7% and 9% over 1Q11 and 2Q10, respectively. In the first half, sales moved up 8% Y‐O‐Y.
o Lula Pilot underlined the high productivity of the pre‐salt discoveries: output from the corresponding well averaged 36,322 boed in May.
o Three new extended well tests (EWTs) were implemented: Lula Northeast (Santos Basin), Aruanã and Brava (Campos Basin).
o Upgrade of Petrobras’ foreign currency rating from Baa1 to A3 (Moody’s). The upgrade also applied to debt of subsidiaries guaranteed by Petrobras.
Aruanã EWT
Lula Pilot
Lula NE EWT
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MAIN INDICATORS
2Q11 1Q11∆%
(2Q11 x 1Q11)
2Q10
EBITDA (R$/million) 16.139 16.093 ‐ 15.927
OPERATING INCOME¹ (R$/million) 12.047 12.536 ‐4% 12.303
NET INCOME² (R$/million) 10.942 10.985 ‐ 8.295
AVG. REALIZATION PRICE ‐ ARP (R$/bbl) 167,15 163,72 +2% 158,72
AVG. REALIZATION PRICE ‐ ARP (US$/bbl) 104,54 98,31 +6% 88,46
Brent (US$/bbl) 117,36 104,97 +12% 78,30
Average dollar sell price (R$) 1,60 1,67 ‐4% 1,79
Production (thousand bbl/day) 2.598 2.627 ‐1% 2.587
Domestic sales (thousand bbl/day) 2.498 2.344 +7% 2.283
¹ Income before financial result, profit sharing and taxes
² Net income attributable to Petrobras shareholders
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1H10 1H11
1,998 2,031
324 348
Oil Natural Gas
OIL AND GAS PRODUCTION – 1H11 vs. 1H10Expectations of accelerated output in the second half
2,322 2,379
(tho
usand bp
d)
+2%
+7%
+2%
Domestic Production (daily average)
1H10 1H11
2,322 2,379
246 234
Brazil International
2,568 2,613
(tho
usand bp
d)
+2%
‐5%
+2%
Total Production (daily average)
o 1H11 output influenced by scheduled maintenance.
o Higher production in 2H11, with start‐up of P‐56 (Marlim Sul), 100 thousand bpd of capacity, and additional production from P‐57.
o International production declined due to the initial collection of tax oil in Nigeria (Agbami field) and the termination of the E&P agreements in Ecuador.
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10% p.y
. in the la
st 30
years
10% p.y
. in the la
st 30
years
Thousand bpdThousand bpd
Onshore Shallow water Deep water Deep and ultra‐deep water
Pre‐salt
PRODUCTIONHistorically, Petrobras’ production has grown through expanding to new frontiers
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7
‘
High exploration success ratio (all wells have found oil occurrences)
High productivity in producing wells
High exploration success ratio (all wells have found oil occurrences)
High productivity in producing wells
30 wells drilled up to July 2011 (26 exploratory)Up to 15 wells scheduled for drilling in 20119 rigs in operation (July 2011) and another 5 scheduled for start‐up by year‐end
30 wells drilled up to July 2011 (26 exploratory)Up to 15 wells scheduled for drilling in 20119 rigs in operation (July 2011) and another 5 scheduled for start‐up by year‐end
SANTOS BASIN PRE‐SALT UPDATEAccelerated drilling campaign
Wells undergoing drilling, completion or appraisal
LULA PILOT
LULA NE EWT
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Significant production increase
After 2017
Phase 1b
Production > 1 MM bbl in 2017
2013/2017
• Guará Pilot
• Lula NE Pilot
• Guará N
• Cernambi S
• 8 definitive production systems (replicant)
• 4 production units in the Transfer of Rights area
Phase 1a
2008/2013
Phase 0
3 FPSOs in operation3 FPSOs in operation
In operation (only 4years after discovery)In operation (only 4years after discovery)
Already contracted (start‐up in2012 and 2013)Already contracted (start‐up in2012 and 2013)
Being contracted (conversion in the Inhaúma shipyard)Being contracted (conversion in the Inhaúma shipyard)
Under construction (hulls being built in the Rio Grande shipyard)Under construction (hulls being built in the Rio Grande shipyard)
Already contracted (start‐up in 2014)Already contracted (start‐up in 2014)
DEVELOPMENT OF PRE‐SALTAll first‐phase units under construction or being contracted
Acquisition of information
• Appraisal wells
• Extended well tests
• Lula Pilot
• Accelerated innovation
• Intensive use of new technologies specifically developed for pre‐salt conditions
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Rounds 7, 9 and 10
Rounds 5 and 6
Minimum limit by blockBetween 30% and 70% in the exploration and
production development phases
Rounds 1 to 4
Maximum limit50% in the exploratory phase
70% in the production development phase
No local content required Round 0Minimum and maximum limits by block:
In deep water, between 37% and 55% in the exploration phase, and between 55% and 65% in
the production development phase.
Transfer of Rights
Concession
Minimum exploration limit: 37%Minimum production development limit:
• Up to 2016: 55%• 2017‐2018: 58%• After 2019: 65%
Marlim SulSS P-56
Baleia AzulFPSO
Roncador FPSO P-62
Roncador SS P-55
Papa-Terra P-61 &FPSO P-63
Guará (Norte)FPSO
Parque das BaleiasFPSO P-58
Tiro/SidonFPSO
ESP/MARIMBÁFPSO
AruanaFPSO P-62
Guará Piloto 2FPSO Cid. São Paulo
Lula NEFPSO Cid. de Paraty
MarombaFPSO
SIRI2 jacket and FPSO
CernambiFPSO
Lula 3 Central FPSO
Franco 1 FPSO
Lula 4 Alto FPSO
BALEIA AZULFPSO
LOCAL CONTENTFlexibility in concession agreements
Lower local content requirements in the ANP’s initial concession rounds give local industry time to adapt.
Concession and Transfer of Rights agreements envisage withdrawal clauses due to non‐compatible responses (price, deadline and technology) from the local market in comparison with international parameters.
2011 2012 2013 2014 2015
2011‐2015 Projects
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Extensive experience of contracting FPSOs combined with operational scale and equipment standardization will help create an internationally competitive offshore industry.
DEVELOPMENT OF NATIONAL INDUSTRYDetailing of needs into critical categories permits long‐term strategy
▲Proportional share of FPSO cost
CATEGORYNATIONAL MARKET
AVAILABILITY FPSO cost
1 Process equipment ▲▲2 Turbomachinery ▲▲▲3 Mechanical equipment ▲4 Electrical equipment ▲▲5 Instrumentation/automation ▲6 Ship structure and systems ▲▲▲7 Pipeline and valves ▲8 Security
▲
9 Telecommunications 10 Ventilation and AC (VAC)11 Engineering services 12 Architecture 13 Commissioning services
11
20
40
60
80
100
120
140
160
180
2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11
US ARP Petrobras ARP
US$/bbl
49
6470 73 74 72
80
94
109
5968
75 76 78 7786
105117
20
40
60
80
100
120
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11
Petrobras (average) Brent
US$/bbl
98,31
108,84
Average 2Q10
85,55
88,46
Average 1Q11
104,54
122,62
AVERAGE REALIZATION PRICE (ARP)Volatile international prices
o Downward trajectory of U.S. ARP at the end of 2Q11 due to greater uncertainties in relation to global oil demand.
o Reduction of the spread between Petrobras oil price and Brent price (2Q11:US$8.39/bbl; 1Q11:US$ 10.93/bbl).
Average 2Q11
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78.30 76.86
86.48
104.97
117.36
140.16134.51
147.02
175.30
187.78
LIFTING COSTCosts pressured by higher oil prices
2Q10 3Q10 4Q10 1Q11 2Q11
17.54 18.46 17.34 19.00 20.93
26.37 24.26 26.1331.66
34.21
50.6643.91 42.72 43.47
30.48
24.50 24.67 25.58
US$/barrel
35.0055.14
R$/barrel
2Q10 3Q10 4Q10 1Q11 2Q11
9.79 10.6 10.29 11.38 13.12
14.71 14.07 15.2919.10
21.88
Lifting costBrent Government Take2Q11 vs. 1Q11:
o Higher expenses due to well interventions and preventive maintenance contributed to the upturn.
o Increase in government take reflects higher oil reference price.
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SalesProduction
PRODUCTION AND SALE OF OIL PRODUCTSAdaptation of refining facilities to supply domestic market needs
o Operational improvements:
o Installed capacity use of 92%, with domestic oil accounting for 81%.
o Higher output of middle distillates and gasoline, with lower production of fuel oil.
1H10 1H11
852 932
392460
10283
528568
Diesel+Jet Fuel Gasoline Fuel Oil Other
(tho
usand barrels/day)
1,8742,043
+9 %
1,8731,786
+5 %
1H10 1H11
767 826
343 392250
233426 423
14
1H10 1H11
36 39
78
Non‐Thermal Thermal
1H10 1H11
2632
2526
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Local Imported Bolivian Imported GNL
SupplySales
4347
5359
+12%+9 %
Million m
3 /d
o Continuous increase in non‐thermal consumption due to greater industrial demand.
o Expectations of reduced thermal demand in 2H11 due to high water levels in hydropower plant reservoirs.
NATURAL GASGrowing demand met by increased domestic supply
Million m
3 /d
* Sales do not consider internal transference (Refining, Fertilizers Plants and own TPPs ) neither BR sales
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1Q11 Operating Income
Sales Revenue COGS Expenses Other Expenses 2Q11 Operating Income
12,536 12,047
6,669
(153)
(R$ million)
(6,630)
(375)
OPERATING INCOME 2Q11 vs. 1Q11 (CONSOLIDATED)Higher import volume and prices affected operating income
o Domestic sales volume climbed by 7% while exports grew by 8%.
o Higher imports of oil and oil products to supply domestic demand.
o Increased exploratory and drilling expenses (2Q11/1Q11: +R$257 million) and higher provisions for the adjustment of inventories to market value (2Q11/1Q11: +R$119 million).
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‐489873 ‐111 ‐57 ‐259
1Q11 Net Income
Operating Income Financial Result Interest in Investments
Taxes Minority Interest 2Q11 Net Income
10,985 10,942
(R$ Million)
NET INCOME 2Q11 vs. 1Q11 (CONSOLIDATED)Stable net income in the quarter
o Increase in the financial result (2Q11: +R$2.9bn) due to the appreciation of the Real (2Q11/1Q11: +4%) and financial investments (cash and cash equivalents adjusted*1Q11: R$62.9bn vs. 2Q11: R$59.5bn).
o Minority interest from the positive exchange variation on the debt of the SPEs.
* Including cash and cash equivalents plus tradeable securities (maturing in more than 90 days)
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1Q11 Operating Income
Price Effect on Revenue
Cost Effect on COGS Volume Effect on Revenues
Volume Effect on COGS
Operat. Expenses 2Q11 Operating Income
(R$ million)
16,017
14,142
3,10728
‐857‐65 ‐338
o Higher domestic and export sales prices (1Q11: US$94.04 / 2Q11: US$108.97), pushed by the upturn in heavy crude prices.
o Increased in lifting cost and higher government take, in line with international prices.
o Higher exploratory and drilling expenses (2Q11/1Q11: + R$ 178 mi).
EXPLORATION AND PRODUCTION: OPERATING INCOME 2Q11 vs. 1Q11Increase in operating income due to higher international oil prices
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(R$ million)
DOWNSTREAM: OPERATING INCOME 2Q11 vs 1Q11Higher costs impacted the operating income
o Higher oil and oil product export prices and higher prices of products sold in the local market whose prices are linked to international prices in the short term.
o Cost increase outpaces revenue upturn, reflecting higher oil, diesel and gasoline import volumes and prices.
o Increase in refining costs due to higher expenses from scheduled stoppages and materials.
Volume Effect on Revenues
Volume Effect on COGS
Operat. Expenses
2Q11Operat. Income
1Q11Operat. Income
Cost Effect on COGS
Price Effect on Revenues
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Operating Income:Gas & Power
International
Distribution
2Q11
R$ 1,131
1Q11
R$ 745
VS.
Operating Income:
2Q11
R$ 649
1Q11
R$ 903
VS.
Operating Income:
2Q11
R$ 336
1Q11
R$ 559
VS.
o Higher industrial demand supplied by increased gas output in Brazil
o Higher margins of energy sales, due to thermoelectric generation to export, non occurred in 1Q11
o Reduced output from the Agbami field in Nigeria due to the lower production quota allocated to Petrobras
o Increase of 6% sales volumes in line with the seasonal upturn in demand with narrower sales margins
GAS & POWER, INTERNATIONAL and DISTRIBUTION (2Q11 vs. 1Q11)(R$ Million)
20
14,8
12,3
1,81,9
0,2 0,4 0,6
*Includes projects developed by SPCs
1H2011
INVESTMENTS1H10 investments influenced by the completion of major projects
o Around 40% of our investments are pegged to the U.S. dollar. Given the appreciation of the Real against the Dollar (10%), the Company spends less Reais on a given investments in Dollars.
o Reduction in 2011 investment guidance from R$93.7 billion to R$84.7 billion
1H2010
16,0
14,0
3,8
2,5
0,8 0,3 0,7
E&P*
RTM*
Gas&Power*
International
Biofuels
Distribution
Corporate
*
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LEVERAGE AND LIQUIDITYSolid balance sheet with high liquidity
o Stable leverage, with maintenance of high cash position.
o Upgrade of Petrobras’ foreign‐currency risk rating from Baa1 to A3 (Moody's).
1.550.96 1.03 1.03 1.07
35%
16% 17% 17% 17%
‐20%
0%
20%
40%
‐0,5
0,5
1,5
2,5
3,5
4,5
5,5
2Q10 3Q10 4Q10 1Q11 2Q11
Net Debt/EBITDA Net Debt/Net Cap.
