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RESULTS ANNOUCEMENT 2nd Quarter 2007 (Brazilian Corporate Law)

Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

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Page 1: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

RESULTS ANNOUCEMENT2nd Quarter 2007

(Brazilian Corporate Law)

Page 2: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

1

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.

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.

Cautionary Statement for US investors

Disclaimer

Page 3: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

2

DOMESTIC OIL AND NGL PRODUCTION

1,7891,800

1Q07 2Q07

Δ = -0.6%

thou

sand

bpd

• Stable production reflecting the mature fields natural production decline rate partially offset by the production increase in FPSO Rio de Janeiro, P-34 and FPSO Capixaba units.

• 1Q07 – Scheduled Stoppage in P-37

• 2Q07 – Scheduled Stoppages: P-18, P-07 and P-09 and non-scheduled stoppages in FPSO-Seillan. Besides, operating problems in a pipeline in UM-SEAL and in platforms FPSO-Brasil and P-34, situations already normalized.

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E&P – OIL PRICES

US$

/bbl

57.0

47.848.7

58.758.2

53.7

46.1

54.2

43.0

61.8

51.6

61.5

56.9

69.6 69.5

59.757.8

68.8

64.9

54.856.1

66.164.757.6

52.7

56.4

49.3

2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07Average Sales Price Brent (average) OPEC Basket

Increase in E&P’s average oil sales/transfer price in line with international crude benchmarks.

Page 5: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

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REFINING IN BRAZIL AND SALES IN THE DOMESTIC MARKET

%Thous. barrels/day

• Increase in oil products sales – mainly diesel – due to market seasonality and growth of economic activities, specially agriculture and transportation.

1,7951,753

1,6961,684

1,7461,711

1,646

1,709

1,781 1,796

9085

89

93

8978

7780

7879

1,50 0

1,6 50

1,8 0 0

1,9 50

2 Q0 6 3 Q0 6 4 Q0 6 1Q0 7 2 Q0 750

6 0

70

8 0

9 0

D o mest ic o i l p ro d uct s p ro d uct io n Oil p ro d uct s sales vo lume

Primary pro cessed inst alled cap acit y - B raz i l ( %) D o mest ic crud e o i l as % o f t o t al

Page 6: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

5

20

40

60

80

100

Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07

ARP Brasil (US$/bbl)

Average Brent Price (US$/bbl)

ARP USA (US$/bbl w/sales vol.in Brasil)

68.,8

57.7

71.5

1Q07Average

2Q06Average

70.669.6

81.8

AVERAGE REALIZATION PRICE - ARP

• Seasonal increase in US ARP due to the start up of the American driving season;• Steady increase in Brazilian ARP reaffirms policy of aligning internal prices with international levels in the medium to long term, avoiding short term volatility;

82.4

68.7

78.2

2Q07Average

Page 7: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

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4.131

8.582

10.993

23.692

38.894

6.800

11.535

14.190

24.489

41.798

Net Income

Operational Profit

EBITDA

GOGS

Net Revenues

1Q07 2Q07

R$

mill

ion

INCOME STATEMENT 2Q07 VS 1Q07

34.4%

29.1%

• 64.6% increase in 2Q07 net income due to:• Price increases and higher volumes sold in the domestic market;• Higher oil prices in the international market;• Absence of extraordinary expense that occurred in 1Q07 related to Petros Pension Fund Plan; • Tax benefit due to provision for interest on own capital;

64.6%

3.4%

7.5%

Page 8: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

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1.871

299

655

1.545

1.415

1.239

323

391

1.498

1.443

Others

Taxes

Exploratory Costs

General andAdministrative

Sales Expenses

1Q07 2Q07

OPERATIONAL EXPENSES ANALYSIS 1Q07 VS 4Q06

R$

mill

ion

-33.8%

8.0%

-40.3%

-3.0%

2.0%

• Exploratory Costs: lower expenditures for seismic acquisition in 2Q07 • Others: 34% decline mainly due to absence of costs related to renegotiation of clauses in Petros Retirement

Fund Plan that occurred in 1Q07.

Page 9: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

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8.056

2.122 220 50 10.0241531

1Q07 Oper. Profit Price Effect onNet Revenue

Volume Effect onNet Revenue

Avrg Cost Effecton COGS

Volume Effect onCOGS

Oper. Exp. 2Q07 Oper. Profit

CHANGE IN QUARTER REVENUES (2Q07 VS 1Q07)Exploration & Production –Operating Profit Change– R$ millions

1,7891,800 Domestic Production of Oil, NGL and Condensate (thous. bpd)

• Increase in average sales/ transfer prices, following the trend internationally

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CHANGE IN QUARTER REVENUES (2Q07 VS 1Q07)

Downstream – Change in Operating Profit – R$ million

3.197

1.541

1.578

90 3.358

1.694

1.982

1Q07 Oper. Profit Price Effect on NetRevenue

Volume Effect onNet Revenue

Avrg Cost Effecton COGS

Volume Effect onCOGS

Oper. Exp. 2Q07 Oper. Profit

• Increase in average realization prices, due to higher oil prices in international market, higher sales volumes and liquidation of inventories with a lower cost basis purchased during prior quarters, partially offsetting the average cost increase.

Page 11: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

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EXPORTAÇÃO LÍQUIDA DE PETRÓLEO E DERIVADOS

354 373 408 340 410

88137 132

97

159

2Q06 3Q06 4Q06 1Q07 2Q07

510442 437540

267355

454377 321

281221

215247

271

2Q06 3Q06 4Q06 1Q07 2Q07Oil Oil Products

624548 576

669592 569

NET EXPORTS OF OIL AND OIL PRODUCTS187 tbpd Volume Surplus and US$ 242 million Financial Deficit in the 2Q07

Imports (thous barrels/day)Exports (thous barrels/day)

• Higher oil and oil products imports due to increase in demand, especially for lighter oil products.

Page 12: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

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1,7891,800

NET INCOME CHANGE – R$ million (2Q07 VS 1Q07)

Domestic Oil, NGL and Condensate – thousand bpd

• Increase in Net Income due to better domestic market sales volumes and higher prices (linked to international benchmarks);• Better COGS structure, due to liquidation of inventories with a lower cost basis purchased during the previous quarter; • Decrease in Operational Expenses given the absence of the effects of Petros Pension Plan amendment (R$ 1billion loss)

accrued in the 1Q07;• Lower Taxes impact because of fiscal benefits from the interest on own capital provision (R$ 746 million)

4,131

2,903 796 763 109 172 25 6,800

1Q07 Net Income Revenues COGS Oper. Exp. Fin. Exp, NonOper. and Others

Taxes Minority Interest 2Q07 Net Income

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16%

19%17%

28%27%

18%20%

26%24%

17%

28%26%

19% 23%

27%

27%

set/05 dez/05 mar/06 jun/06 set/06 dez/06 mar/07 jun/07

End. Líq./Cap. Líq. End. CP/End. Total

R$ million 06/30/2007 03/31/2007Short Term debt (1) 10.720 11.879Long Term Debt (1) 29.100 32.539

Total Debt 39.820 44.418

Cash and Cash Equivalents 17.854 20.463

Net Debt (2) 21.966 23.955

(1) Includes debt contracted through leasing contracts (R$ 1.980 million in 06.30.2007 and R$ 2.259 million in 03.31.2007).(2) Total debt - cash and cash equivalents

LEVERAGE

Petrobras’ Leverage Ratio

• 8% decline in net debt during the quarter as a consequence of strong net cash generation (R$ 2.498 million), despite material growth in CAPEX, dividend payment, and impact of dollar devaluation on the debt.

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R$ million2Q07 1Q07

(=) Net Cash from Operating Activities 13.548 7.493 (-) Cash used in Cap. Expend. (10.600) (7.951) (=) Free Cash Flow 2.948 (458) (-) Cash used in Financing and Dividends (5.557) (6.908) Financing (3.958) (1.035) Dividends (1.599) (5.873) (=) Net Cash Generated in the Period (2.609) (7.366) Cash at the Beginning of Period 20.463 27.829 Cash at the End of Period 17.854 20.463

CONSOLIDATED CASH FLOW STATEMENT

• Decrease in cash mainly due to net amortizations and prepayments of debt

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1H07 %Direct investments 17.030 86 Exploration & Production 9.092 45 Downstream 2.856 14 Gas & Energy 730 4 International 3.486 19 Distribution 547 3 Corporate 139 1 Special Purpose Companies (SPCs) 2.596 13 Ventures under Negociation 169 1 Project Finance - - Total Investments 19.795 100

R$ million

INVESTMENTS

• R$ 19.795 million invested in 1H07, primarily for the development of future oil and natural gas production capacity in Brazil (R$ 9.092 million) and abroad (R$ 3.129 million)

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7.207.246.64

6.127.33

2Q06 3Q06 4Q06 1Q07 2Q07

Δ = 1.81% or US$ 0.13

US$/bbl

DOMESTIC LIFTING COSTS WITHOUT GOVERNMENT PARTICIPATION

• 1.8% increase mainly due to the effect of Real appreciation (6%) on that portion of costs denominated in local currency;

• Deducting the FX rate effect, lifting costs decreased 3% due to lower expenditures with well interventions and maintenance.

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3,4 4,3 6,0 5,4 5,4 6,1 6,3 6,1 6,6 7,2 7,2 7,35,2

6,57,6 8,5 9,8 10,0 11,0 11,4 11,5 10,4 9,0 10,6

68,8

57,859,769,5

28,8

38,247,5

51,6

61,556,9

61,869,6

-4

6

16

26

2003 2004 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07

US$

/boe

-20

0

20

40

60

Lifting Cost Gov. Take Brent

8.610.8

13.6 13.9 15.2 16.1 17.3 17.5 18.117.6 16.2

17.9

65%61%

60%

59%56%

LIFTING COSTS INCLUDING GOVERNMENT PARTICIPATION

• Higher government take during 2Q07, mainly due to the increase in the domestic oil reference price, linked to international prices.

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2.692.542.712.48

2.07

2Q 06 3Q 06 4Q 06 1Q 07 2Q 07

Δ = 5.9% or US$ 0.15

REFINING COSTS IN BRAZIL (US$bbl)

• 5.9% increase due mainly to FX rate effect, partially offset by reduced number of scheduled stoppages;

• Expressed in Reais, a decrease of 0.9%.

Page 19: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

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COSTS IN REAIS

13,214,3

15,5 15,2 14,5

4,6 5,4 5,8 5,4 5,3

02468

1012141618

2Q06 3Q06 4Q06 1Q07 2Q071,8

1,9

2

2,1

2,2

Lifting Cost Refining Cost FX Rate

R$/

barr

elFX R

ate

• Stable lifting and refining costs over time, when expressed in Reais

Page 20: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

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NET INCOME COMPARISON 2Q07 vs 1Q07

Petrobras presented the highest quarter growth compared with the Majors Oil Companies

US$ billion 1Q07 2Q07 2Q07/1Q07Petrobras* 2,01 3,53 75,0%BP 4,66 7,38 58,1%Shell 7,28 8,67 19,0%Chevron 4,72 5,38 14,1%ExxonMobil 9,28 10,26 10,6%ConocoPhillips 3,55 0,30 -91,5%

*Petrobras results in R$ converted by the US dollar last price for the period (1T07: R$ 2,050 e 2T07: R$ 1,926).

Source: Evaluate Energy e Petrobras

Page 21: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

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QUESTION AND ANSWER SESSIONVisit our website: www.petrobras.com.br/ri

For more information contact:Petróleo Brasileiro S.A – PETROBRAS

Investor Relations DepartmentRaul Adalberto de Campos– Executive Manager

E-mail: [email protected]. República do Chile, 65 – 22o floor

20031-912 – Rio de Janeiro, RJ(55-21) 3224-1510 / 3224-9947

Page 22: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

20082008--20122012 Business Business PlanPlan

José Sergio Gabrielli de Azevedo

Chief Executive Officer

Page 23: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

2

Disclosure

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.

Page 24: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

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Business Environment Vision in 2020

Environmental Pressures

Climate Change

Technology

Geopolitics

Social Responsibility

TransparencyStakeholders

Cleaner Energies

Biofuels

Energy: Oil and Natural Gas

Economic Growth

Brazil, China and India

?

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We will be one of the five largest integrated energy companies in the world and the

preferred choice among our stakeholders

Vision 2020

Our operations will be notable for:

• Strong international presence • World scale prominence in biofuels• Operational excellence in management, technology and

human resources• Profitability• Benchmark in social and environmental responsibility• Commitment to sustainable development

Vision 2020 Characteristics

Vision 2020 and Characteristics

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MissionOperate in a safe and profitable manner in Brazil

and abroad, with social and environmental responsibility, providing products and services

that meet clients’ needs and that contribute to the development of Brazil and the countries in which it

operates.

Vision 2020 and Mission

We will be one of the five largest integrated energy companies in the world and the preferred choice

among our stakeholders

Vision 2020

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Management ChallengesNew Strategic Projects Focusing:

• Capital Discipline• Ensure adequate returns on capital employed by the

different business segments of the Company:• Strive for greater efficiency in project execution

(Deadlines and Costs);

• Streamline Inventory Management;

• Decrease Operating and Administrative Costs;

• Manage Portfolio Efficiently.

• Human Resources• To be an international benchmark for personnel

management in the energy segment, having our employees as our most valuable asset.

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• Social Responsibility

• To be a world class reference for social responsibility, contributing to the development of sustainable business models.

• Climate Change

• Achieve levels of excellence within the energy industry for reducing the intensity of greenhouse gas emissions in our processes and products, contributing to the sustainability of the energy business and the mitigation of global climate change.

• Technology

• To be a world class contributor to technologies that lead to thesustainable growth of the Company in the oil, natural gas, petrochemical and biofuels industry.

Management ChallengesNew Strategic Projects Focusing:

Page 29: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

8

Cor

pora

te S

trat

egy

Develop and lead the Brazilian

natural gas market and operate on an integrated basis in the gas and electric

energy markets with a focus on

South America

To expand integrated

operations in refining,

commercialization, logistics and

distribution with a focus on the

Atlantic Basin

Operate on a global basis in biofuels

commercialization and logistics, leading the domestic production

of biodiesel and expanding

participation in the ethanol segment

Expand operations in petrochemicals in Brazil and South America on

an integrated basis with the PETROBRAS

Group’s other businesses

To grow production and oil and gas reserves sustainably, being

recognized for excellence in E&P

operations

Expand operations in target markets for oil, oil products, petrochemicals, gas and energy, biofuels and distribution, being a world benchmark as an

integrated energy company

Confidencial

Commitment to sustainable development

Gas & EnergyE&P Downstream (RTC) Distribution Petrochemicals Biofuels

Operational, management, technological and human resources excellence

Integrated Growth Profitability Social and Environmental Responsibility

Corporate Strategy

Business Segment Strategy

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9

Linked to international market prices, without changes in

relative prices

2.50

4.0

3.7

4.2

2007-2011

Linked to international market prices, without changes in

relative pricesOil Products Prices

4.3GDP – World (% p.y.) – PPP(*)

3.9GDP – Latin America (% p.y.) – PPP

2.18FX rate (R$/US$)

4.0GDP – Brazil (% p.y.)

2008-2012Indexes

Macroeconomic Assumptions

(*) PPP – purchase power parity

Page 31: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

10

55

45 3550

3535353540

2008 2009 2010 2011 2012

Oil prices: Brent curves

Price curve BP 2007/11

Price curve BP 2008/12

BP – Business Plan

Page 32: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

1111

6%4%

1%2%26%

58%

2%

65.1

29.6

6.74.3

2.62.6

Investment Plan by Business Segment

2008-12 PeriodUS$ 112.4 billion

E&P RTC G&EPetrochemical Distribution Corporate Biofuel

1.5

• US$ 65.1 billion directed to E&P:

• Exploration: US$ 13.8 billion

• Production: US$ 51.3 billion

13%

87%

Brasil Internacional

97.4

15.0

Note: Includes International

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Investment Plan

87.1

1.8

0.7

2.3

3.3

7.3*

21.9*

49.3

Petrobras2007-11

29112.4Total

392.5Corporate

1141.5Biofuels

132.6Distribution

304.3Petrochemical

-26.7G&E

2929.6RTC

3265.1E&P

Difference (%)

Petrobras2008-12Business Segment

* 2007-2011 Plan included biofuels investments.

The forecast indicates annual average capital investment of US$ 22.5 billion for the period 2008 - 2012.

US$ billion

Page 34: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

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The Business Plan assumes Brazilian Content to be 65% of total capital spending, generating annual average purchases of US$ 12.6 billion from local suppliers

Annual average purchases in the domestic market for the previous Plan was approximately US$ 10 billion

65%63.197.4Total80%1.92.3Corporate Areas100%2.42.5Distribution76%5.06.6G&E77%24.331.4Downstream54%29.554.6E&P

Brazilian Content (%)

Purchased In the Domestic Market

2008-12

Domestic Investments

2008-12Business Segment

US$ billion

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PN 2007-1183.571

Outros-2.435

Aumento de Custo10.912

Melhoria do grau de

Definição2.835

Alteração da Taxa de Câmbio

4.224

Projetos Novos13.267

Of the 34% increase in total capital spending, US$ 13.3 billion (or 16%) was due to the inclusion of new projects

• 13% increase in costs, in alignment with industry pressures

New Projects• Exploration & Production:

• Exploration• Enhanced Recovery from Mature

Fields • Support and Infra-structure• Plangás

• Refining, Transportation and Distibution:

• Plangás Downstream • Petrochemical

• New units COMPERJ

• 5% increase in CAPEX due to change in FX Rate premise

Costs Increase

US$ 10,912 bi

FX Rate Change

US$ 4,224 bi

New Projects

US$ 13,267 bi

Betterdegree of Definition

2,835

Others

-2,435

* 2008-2012 Amounts

*

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•Increase oil production in a sustainable manner, preserving the country’s self-sufficiency.

•Guarantee access to natural gas reserves and production to ensure domestic supply.

•Expand operations in areas of major E&P potential, where operating, technical and technological skills represent a competitive differential.

•Adopt practices and new technologies into declining fields in order to optimize recovery factors.

•Strengthen the Company’s position in deep and ultra deep water exploration.

•Develop exploratory efforts in new frontiers to ensure a sustainable reserve/ production ratio.

•Guarantee a high replacement of reserves, maintaining the annual Reserve Replacement Index (RRI) above 100%.

Strategies by Segment

E&P Business Segment

To grow production and oil and gas reserves in a sustainable manner, and to be recognized for excellence in E&P operations

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2 , 4 2 12 , 8 1 2

6 3 7

6 4 3

5 1 5

1 5 1

1 8 3

2 8 5

F o r e s c a s t

2 0 1 5

1 , 7 7 81 , 4 9 3 1 , 6 8 4

2 6 52 7 4 2 7 71 6 8

1 6 3 1 4 29 49 6

1 0 1

2 0 0 4 2 0 0 5 2 0 0 6

O i l + N G L B r a z i l N a t u r a l G a s B r a z i l

O i l + N G L I n t e r n a t i o n a l N a t u r a l G a s I n t e r n a t i o n a l

2,0202,217 2,298

3,494

4,1537.2% p.y.

6.8% p.y.

Total Production – Oil, NGL and Natural Gas - TargetsThousand boed

Target 2012

* Includes non consolidated production

*

*

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1717

Growth opportunities for E&P in Brazil ensure continued self-sufficiency

Oil, Condensates, and NGL Production

2,050

2,1912,296

2,374 2,421

1,922 1,9682,039

2,1012,170

2,337

2,812

1500

1700

1900

2100

2300

2500

2700

2900

2008 2009 2010 2011 2012 2015

Thou

sand

bpd

BP 2008-2012 Demand

Page 39: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

1818

Total US$ 65 billion

Exploration in Brazil and Abroad

Production Development in Campos Basin: Roncador (P-52, P-54, P-55), MarlimSul (P-51, P-56), Papa Terra, Maromba, Jubarte Phase II (P-57), Cachalote, BaleiaFranca and Baleia Anã

Production Development in Santos Basin: Mexilhão, Uruguá-Tambaú, Pirapitanga

Production Development in Espírito Santo Basin: Golfinho and Peroá-Cangoá

Production Development of fields in Brazilian other basins: (Pólo Juruá-Aracacanga, Manati, D. João Mar, Sergipe-Alagoas)

Production Development in the United States (Cascade, Chinook, Cottonwood)

Production Development in Argentina, Nigeria (Akpo, Agbami), Angola, Venezuela, Colombia and Turkey)

Projects

E&P Business Segment – Main Projects

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Corporate Targets – E&PLifting Costs

5.72

6.596.13

2.903.36 3.52

2005 2006 Target 2012

Lifting Cost - Brazil Lifting Cost - International

US$

bbl

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• Increase refining capacity in Brazil, maximizing the throughput of domestically produced oil.

•Expand refining capacity in Brazil and abroad, seeking to maintain a balance between refining capacity and the growth of PETROBRAS’s oil production.

•Develop the portfolio of PETROBRAS’s products, services, and technologies, with an emphasis on the client’s needs.

• Increase the volume products and services sold, expanding sales activities, as well as logistics and processing, in Brazil and abroad.

•Adapt the existing refinery complex and expansions in Brazil and abroad to meet the standards and expectations of product quality in target markets.

• Develop commercial and logistics partnerships in alternative models.

Strategies by Segment

Downstream Business Segment

To expand integrated operations in refining, sales, logistics and distribution in Brazil and abroad with a focus on the Atlantic Basin

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237 257333 340 386 432241 282 281 28176 96 129 173706

779902

1105

116

138

153228

287

345

204 217

11095

0

500

1000

1500

2000

2500

3000

2006 2010 2015 2020

LPG Gasoline Naphta Jet Fuel Diesel Fuel Oil Others

Domestic Oil Products Market

Thous. bpd

2,337

1,824

2,732

2,039

2.93% p.y.

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US$ 29.6 billion investments in the Downstream area....

Downstream Investments

28%

13%

18%

4%

8%

8%

21%

Fuel QualityConversion

ExpansionHSE

TransportationPipelines

Others 6,112

2,264

2,270

1,083

5,353

3,938

8,619

US$ million

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International285**

Production Brazil2,421

256

Throughput in Brazil 2,061

Oil Products Consumptionin Brazil ** 2,170

208Imported Oil

5Oil Products Exports ***

International Oil Sales762

114

Thousand bpd

The production flow of liquids in 2012 shows the high degree of integration among the business segments in the Brazil and abroad.

29256*

Throughput Abroad348

Oil Purchase Abroad 23

296 158 1.853

(*) Includes non-consolidated production (**) Biodiesel Portion not included(***) Liquid Exports of Oil Products

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Corporate Targets – DownstreamRefining Costs

1.90

2.29

3.69

1.30

1.73

2.24

2005 2006 Target 2012

Refining Cost - BrazilRefining Cost - International

US$

/bbl

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Corporate Targets – Downstream

Throughput (Brazil and Abroad) and Processing of Domestic Oil Production in Brasil (Thousand bpd)

205348

348

2,0611,7922,659

92

90

80

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2008 2012 201571

76

81

86

91

96

BP 2008-12 - Throughput - International (thousand bpd)

BP 2008-12 - Throughput - Brazil (thousand bpd)

Domestic Crude Oil as a % of Total

1,997

2,4093,007

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•Lead the Brazilian market in the distribution of oil products and biofuels to achieve maximum market share, under profitable terms.

•Make the PETROBRAS brand name the preferred choice among consumers, offering excellence in quality of products and services, both in Brazil and abroad.

•Expand participation in the natural gas distribution market with a focus on the largest markets.

Strategies by Segment

Distribution Business SegmentTo expand operations in refining, commercialization, logistics and distribution in Brazil and abroad with a focus on the Atlantic Basin.

Page 48: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

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BR Participation in the Brazilan Market (%)

3141

24

36

2006 2012

BR Participation in Total Brazilian Market (%)

BR Participation in the Brazilian Automotive Market (%)

Corporate Targets – Distribution

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•Expand operations in 1st and 2nd generation processes, increasing the production of petrochemicals, while adding value to the products of the Group’s refineries by capturing synergies related to the production of oil, gas, refining and petrochemicals.

•Develop new technologies for the chemical industry based on the technological evolution of petrochemical fluid catalytic cracking (FCC) and biodegradable polymers and biopolymers.

Strategies by Segment

Petrochemical Business SegmentExpand operations in petrochemicals in Brazil and South America on an integrated basis with the PETROBRAS Group’s other businesses

Page 50: Webcast: Results Announcement - 2nd Quarter 2007 (Brazilian Corporate Law)

2929

Main Projects: Petrochemical Segment

COMPERJ - Intermediate (Styrene, PTA and Ethylene glycol)COMPERJ – Thermoplastic Resin ( Polyethylene, Polypropylene and PET)

Total investments: US$ 4.3 billionComplexo AcrílicoPetroquímica Paulínia - PolypropyleneInternational Petrochemical ProjectsCompanhia de Coque Calcinado de PetróleoCompanhia Integrada Têxtil de Pernambuco – CITEP (POY)Petroquímica SUAPE (PTA)

COMPERJ – Basic Petrochemicals UnitMain Projects

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•Develop and consolidate the natural gas business in the Brazilian market, ensuring the flexibility and reliability of supply.

•Operate vertically in the LNG business on an integrated basis, prioritizing meeting the demands of the Southern Cone market.

•Profitably consolidate electric power generation assets by optimizing the existing thermoelectric power plant portfolio.

•Play a role in the energy integration of South America.

•Capitalize on the opportunities for generating electricity from biomass, oil products and natural gas.

•Promote the mastering of necessary technologies along the entire natural gas chain.

Strategies by Segment

Gas & Energy Business Segment

Develop and lead the Brazilian natural gas market and operate on an integrated basis in the gas and electric energy markets with a focus on South America.

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Domestic Natural Gas Market*

24

42.1

16.2

43.9

72.9

30.0

31.1

48.0

6.10

20

40

60

80

100

120

140

160

2006 2012

Thermoelectric Industry Other

Million m3/day134 134

(*) considering maximum dispatch of every thermoelectric power plant• Other: vehicular, residential / commercial, refineries and fertilizer units.

E&P

Bolívia

LNG

46.3

Supply 2012

19.4% p.y.

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3232

Main Projects: Gas & EnergyUS$ million

Gas Pipelines: Gasene, Northeast and Southeast Network, South Section of Gasbol, Urucu-Coari-Manaus and Gasduc III

LNG – Liquified Natural Gas

Thermo-Electrics: Cubatão, Três Lagoas, Canoas and Termoaçu

Wind Power Generation

G&E in Argentina and Other Countries

Total investments US$ 6.7 billion

Main Projects

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Corporate Targets – G&E

Domestic Natural Gas Sales – G&E* (million m3/day)

57

82

2008 2012

BP 2008-12 - Domestic Natural Gas Sales – G&E (million m3/day)

* Does not include Petrobras consumption

6.2% p.y.

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Power Sales – Petrobras (TOTAL Brazil + International) (Average MW)

718 722

2,234

3,741118

976

5,439

3,070

0

1,000

2,000

3,000

4,000

5,000

6,000

2008 2012BP 2008-12 - Expansion Opportunities in Thermoplants (Average MW)BP 2008-12 - Thermoplants and Co-generation - Brazil (Average MW)BP 2008-12 - International (Average MW)BP 2008-12 - Petrobras (Total Brazil + International) (Average MW)

Corporate Targets – G&E

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•Expand operations in the ethanol business by participating in the domestic production chain to develop international markets, focusing on logistics and sales.

•Develop and spearhead the production of biodiesel for meeting the requirements of the Brazilian market, as well as to capitalize on opportunities in overseas markets.

•Develop technologies which ensure worldwide leadership in biofuels production, including technologies based on low value-added raw materials (residual biomass).

Strategies by Segment

Biofuels Business Segment

To be a global company in biofuels sales and logistics, leading the domestic production of biodiesel and expanding participation in the ethanol segment

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3636

Main Projects: Biofuels

29%

46%

21%

4%

Biodiesel Pipelines and Ethanol Pipelines Others H-Bio

US$ 1.5 billion Investments

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Corporate Targets – Biofuels

Biodiesel Available Capacity (thousand m3/year)

329

1,182938

844

2,705

1,254

0

500

1,000

1,500

2,000

2,500

2008 2012 20150

500

1,000

1,500

2,000

2,500

3,000

BP 2008-12 - Biodiesel Available Capacity (thousand m3/year)

Dopmestic Biodiesel M arket (thousand m3/year)

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Ethanol Exports (Thousand m3)

500

4,750

0

1,000

2,000

3,000

4,000

5,000

2008 2012

BP 2008-12 - Ethanol Exports (Thousand m3)

Corporate Targets – Biofuels

45.5% p.y.

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Main Fincancial Indicators

1.5

25

3.5

3.1

16

AverageBP 2007-2011

1.4

20

3.1

3.9

14

AverageBP 2008-2012

Free Operating Cash Flow (US$ billion)

Cash Balance (end of the year) (US$ billion)

Net Debt/ Net Debt + Shareholders’ Equity (Leverage) (%)

Long Term Funding (US$ billion per year)

Return on Capital Employed (ROCE) (%)

Indicators

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Accumulated EVA value generation(US$ billons)

81.5

103.1

Period 2007-2012 Period 2007-2015

Value Generation BP 2008-2012

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Sources and Uses – BP 2008-2012

104.4

19.4

2004-2010FinancingCash Flow

(84.3%)

(15.7%)

In the BP 2007-11, required financing was 13%

(US$ 123.8 Billion)

112.4

11.4

Debt AmortizationCAPEX

(90.8%)

(US$ 123.8 Billion)

(9.2%)

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Other Corporate Targets

3.933.56Total Avoided Greenhouse Gas Emissions (Million Ton CO2 Equivalent)

2.182.23

0.500.68

601694

Business Plan 2008-2012HSE Targets

20122008

Lost Time PercentageEmployees (%)

Maximum Admissible Spill Volume (m3)

Lost Time Injury Frequency (LTIF) (Injuries / Millions Man Hours Worked)

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Social and Environmental Responsibility Targets

8178Social Responsibility Image (%)

8382Corporate Image (%)

7771Image as an Energy Company

185,78365,049Social and Environmental Responsibility Capacitating (Number of Hours)

9897Employees’ Commitment to Social and Environmental Responsibility (%)

8885Employees Knowledge of Social and Environmental Responsibility (%)

344339.5Ethos Scores- Government and Society (#)

344342Ethos Scores- Values, Transparency and Government (#)

344341Ethos Scores - Community (#)

Business Plan 2008-2012Social and Environmental Responsibility Targets 20122008

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Human Resources Corporate Targets

8379Commitment to the Company (%)

7369Employees’ Satisfaction Index (%)

82.380.4Management Competence Index (%)

91.790.5Individual Competence Index (%)

92.991.7Individual Results Index (%)

Business Plan 2008-2012Human Resources Targets

20122008

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The Investment Plan in Brazil will require an average annual work force of approximately 917,000, of which 228,000 will be directly employed by the industry

917 Total Work Force

338 Indirect Work Force (Income Effect)

350 Indirect Work Force (Productive Chain)

228 Direct Work Force

Annual Average 2008-12

Work Force (Thousand)

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Macroeconomic Effect

The Added Value in Brazil generated by Petrobras’ activities and the impact of its investments and operating expenditures along the production chain are presented below, representing on average approximately 10% of Brazilian income.

R$ Billion

50Investments along the Production Chain

141Petrobras in Brazil

55Operating Expenditures along the Production Chain

246Total Added Value

Annual Average 2008-2012Added Value by: