Company Update and Outlook for 2010
Almir Guilherme Barbassa
Chief Financial Officer
March 30, 2010
1
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
CORPORATE ORGANIZATION AND KEY OPERATING RESULTS
Exploration &
Production
Downstream
(Supply)
Gas &
Energy
Distribution
International
Biofuels
Petrochemicals
Summary Financials
Operating Income*
(US$ billion- USGAAP)
(US$ billion- USGAAP)
18,9
20
Net Revenues
EBITDA
2007
87.7
25.6
2008
118.3
31.1
2009
91.9
28.9
Net Income
Capex
Total Debt(1)
Cash & Cash Equivalents
Net Debt
Total Equity
Total Assets
13.1
21.0
21.9
7.0
14.9
65.2
129.7
18.9
29.9
27.1
6.5
20.6
61.9
125.7
15.5
35.1
57.1
16.2
40.9
94.1
200.3
15
10
5
0
-5
2007
Domestic E&P
Distribution
(1)
*
Includes capital leases
Excludes Corporate and Elimination
15,5
13,1
2008
Downstream
International
2009
Gas &Energy
2009 HIGHLIGHTS
Accomplishments on the path to meeting long term vision
○
Installed 5 new production systems – 375 TBPD of new capacity
○
6% Increase in national oil production
○
Initiated first Santos pre-salt production
○
Completed 3 new hydro-refining treatment units
○
Began distribution of S-50 diesel in major cities
○
Initiated LNG imports and neared completion of Nat. Gas infrastructure
○
Completed consolidation of the petrochemical sector
○
Raised US$ 35 billion of debt capital
○
Proposal of new Regulatory framework for the O&G sector in Brazil
○
Renewed participation in Dow Jones Sustainability Index
STABLE FINANCIAL RESULTS DESPITE VOLATILE YEAR
4
2009 RESERVE REPLACEMENT:
17th consecutive year of fully replacing brazilian production
ANP/SPE Criteria
Billion boe
International Reserves
Brazil Reserves
14.093
14.169
2.124
2.113
0.992
0.495
0.203
RRI: 110%
11.969
2008
Oil & NGL
0.696
12.056
2009
Natural Gas
0.497
0.493
2008
Oil & NGL
2009
Natural Gas
o 18 years of reserves to production in Brazil, 8 year reserves to production internationally
o Pre-salt discoveries from Espirito Santo Basin contributed with 182 million boe. Estimated reserves
in Santos Basin pre-salt are still under appraisal and therefore not included in proved reserves
o Decrease in international reserves as constitutional changes in Bolivia eliminate reserve recognition
5
2009
PRODUCTION:
PRODUÇÃO
SEGUE TRAJETÓRIA SUSTENTADA
Significant
production increases in Brazil and internationally
DE CRESCIMENTO
Thous. boed
Oil & Gas Average Total
Production
2,400
2,526
Oil & Natural Gas Average
Domestic Production
2,176
2,288
224
238
321
317
2,176
2,288
1,855
1,971
2008
National
2009
International
2008
2009
Oil & NGL
Natural Gas
o 6% increase in national oil production from ramp-ups of P-52, P-54 and P-53 and start-up of 5 new
units;
o 6% increase in international production from Akpo and Agbami fields in Nigeria;
o Natural Gas production declined because of reduced demand in Brazil
6
PRODUÇÃO
2010 TARGET:
2010
PRODUCTION
Growth from new systems and enhanced recovery
2ND QUARTER
1ST QUARTER
3RD QUARTER
4TH QUARTER
Natural Gas
EWT Tiro and Sidon
20 th bpd
Uruguá Tambaú
10 million m3/d
35 th. bpd
Mexilhão
15 million m3/d
Cachalote e
Baleia Franca
100 th. bpd
3.2 million m3/d
TUPI Pilot
100 th. bpd
5 million m3/d
Heavy oil
Pre salt
EWT Tupi Northeast
30 th. bpd
EWT Guará
30 th. bpd
79
2,100
+- 2.5%
2,171
2,050
2009 Target
71
200
Difference
2009 Target–
Production 2009
Difference
Target 2010 –
Target 2009
(BP 09-13)
Target 2010
Ajusted
(BP 09-13)
Projects
postponed
NEW 2010
TARGET
7
2009 and 2010 PRE-SALT:
Accelerating activities in the santos cluster
o EWT currently producing 20 thous. bpd
o 2 wells being drilled: Tupi O/A, North of Guará
o 1 well being drilled for ANP in the North of Iara
o 1 well being completed and evaluated in Guará
and Tupi NE test finished with high productivity
of 30 th. bpd
o During 2010, 11 new wells expect to be drilled in
the pre salt cluster
o Bids in progress:
Parati
Iara
(i) FPSO for Guará pilot
IracemaTupi NE
(ii) FPSO for the second pilot in the BM-S-11 (still
being defined)
Tupi O/A
(iii) 8 hulls for the Santos cluster
Tupi
Jupiter
Guará
North
Bem-te-vi
Carioca
Iguaçu
Abaré
Guará
Tupi
South
Tupi 660
Tupi 646
Wells drilled
Drilling for ANP
Azulão
Caramba
Guarani
Drilling
Completing / testing
EWT
8
DOWNSTREAM:
Strong investments in fuel quality and expansion
Downstream Investments in 2009
US$ 10.5 billion
Oil Products output (th. bpd)
1,823
1,787
Fuel Quality
30%
Complexity
153
159
255
243
135
142
34%
143
136
New projects*
2%
331
343
9%
Logistics
74
65
25%
Others
737
694
Construction in progress (US$ bn)
2008
2009
US$ 11.9
US$ 22.7
2008
Diesel
Jet fuel
2009
Gasoline
Nafta
LPG
Fuel Oil
Others
o 6.2% increase in diesel output and 5% reduction in fuel oil output yoy
o 6 million barrel reduction in diesel imports
○ Acid and ultra-acid oils processing up 178% yoy
○ Comply with more strict environmental standards
○ Start up of Diesel S-50 production in 3 refineries (REDUC, REPLAN and REGAP)
○ 1new HDT unit and 2 new Propene units
* Includes Northeast refinery, Comperj, Suape Petrochemical plant and Plangás
9
2009 PRICE IMPACT:
Volatile international oil prices, stable domestic product prices
Petrobras Oil Price (US$/bbl)
121
120.00
R$/bbl
Brent (US$/bbl)
ARP EUA: 130.06
100.58
89
US$/bbl
200
97
100.00
86.13
150
80.00
75
40.00
ARP Petrobras: 157.77
115
105.46
60.00
2009 average
250
64.42
76.75
68
59
55
47.95
75
70.24
64.00
2008 average
100
48.68
44
ARP EUA: 194.71
ARP Petrobras: 176.41
50
32.23
20.00
3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
0
Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09
o Growing crude oil exports benefit from higher crude oil prices, improving quarterly earnings during the year.
Lower discount between benchmark light and Petrobras oil also contributed
o Following long term pricing policy, Petrobras average realization price (ARP) declined less than international
prices, recovering shortfalls experienced in 2008
o Oil product pricing in Brazil continue to converge with international pricing
o Pricing policy contributed to positive refining margins in 2009 (stable revenues, declining costs)
10
2009 CRUDE OIL AND PRODUCT SALES:
Growth in domestic sales and higher export volumes
Oil Products
Thous.barrels/day
1,762
1,810
Natural Gas
1,849
434
492
489
211
222
212
364
327
366
753
769
782
4Q08
Diesel
3Q09
Gasoline
4Q09
LPG
Others
311
4Q08
244
247
3Q09
4Q09
o Diesel sales increased with the Brazilian economy recovery (although imports decreased 43%)
o Higher level of gasoline sales due to reduced competitiveness of ethanol
o Reduced levels of natural gas sales due primarily to lower thermoelectric demand
11
NATURAL GAS AND ENERGY GENERATION:
Creating a new industry in Brazil
o Natural Gas logistic and Energy
generation Infrastructure
consolidation. Highlights:
o
Urucu-Coari-Manaus
pipeline and Gasoduc III
– 844 KM and 44.1
MMm3/d NG capacity
o
LNG Regasification
Terminals:
- Guanabara Bay and
Pecém - 27 MMm3/d
o
Auctions and bi-lateral
agreements to sell shortterm NG supply (average
sales of 4.7 MMm3/d de
NG in 9 auctions)
o Portfolio diversification
concluding first investment cycle
12
2009 CAPEX AND 2010 ESTIMATE:
Substantially above the peer group to meet growth targets
50.000
45.000
40.000
35.000
US$ MM
30.000
25.000
2009
average
without
Petrobras
2010
average
without
Petrobras
20.000
15.000
10.000
5.000
2010
2009
2010
2009
2010
2009
2010
2009
*
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
0
Source: Evaluate Energy and Company Reports
2010 Petrobras CAPEX , of R$ 88.5 Bi, was converted using FX rate of 1,87 R$/US$ (2010 Petrobras premise). For 2009, preliminary results in
USGAAP – Not audited
13
2009 CAPEX SPENDING:
Reflects continued ramp-up of long-term plan
Investments 2008
US$ 29.9 billion
Investments 2009
US$ 35.1 billion
0,3
0,3 0,6
0,8
3,0
E&P
2,1
5,6
0,05
1,1
RTM
1,3
Gas & Power
5,1
4,2
14,3
3,8
16,5
6,1
7,2
10,1
International
24,7
Distribution
10,5
Others
EBITDA (in US$ billions)
31
29
Stable cash generation supports
Petrobras’s growing capital
expenditures
2008
2009
14
2009 CASH FLOWS:
Investments suported by cash flow and incremental debt
Jan-Dec 2008
Jan-Dec 2009
4Q09
6,987
6,499
16,595
28,220
24,920
6,915
(29,466)
(35,120)
(9,598)
Net cash from financing activities
(2,778)
(16,935)
(2,311)
Effect of exchange rate on cash
(2,020)
2,935
(54)
6,499
16,169
16,169
97
62
75
1,84
2,00
1,74
US$ Million
Cash at the beging of the period
Net cash from operating activities
Net cash used in investment activities
Cash at the end of the period
Brent (US$/bbl)
FX Rate (R$/USD)
o Stable operating cash flow, despite lower oil prices
o Increase in investments was supported by additions to debt
o Build-up in cash balances as of year end 2009 (despite advance payment of dividends), undrawn
term loans and stable pricing, will support capex during 2010
15
2009 CAPITAL CONTRACTED:
Successful efforts to raise debt capital from long term sources
Market Capital Bond issuance
6.5
+
Others Loans
US$ 28.05 billions
6.75
1.5
Oct-30 (Maturity 2040)
Yield: 7.00%
2.5
Oct-30 (Maturity 2020)
Yield: 5.875%
U S Eximbank
(US$ bilion)
BNDES
Others
2
2.75
(*)
13.3
1.25
Jul-09 (Maturity 2019)
Yield: 6.875%
10
China
Development
Bank
1.5
Brigde Loan
Bond issue
Feb-11 (Maturity 2019)
Yield: 8.125%
(*)
R$ 25 billions converted by FX tax in 07.30.09
In 2009, US$ 34.8 billion were raised
with an average life of 10.6 years
2009 CAPITAL STRUCTURE:
Higher leverage due to growing capex
30%
25%
25%
21%
27%
27%
22%
19%
15%
12%
12/31/2008
Net Debt/Net Capt.
6/30/2009
US$ Billion
12/31/2009
12/31/2008
12/31/2007
Short Term Debt
8.5
5.9
1.5
Long Term Debt
48.6
20.6
19.6
Total Debt
57.1
27.1
21.8
Cash and Cash
Equivalents
16.2
6.5
6.9
Net Debt
40.9
20.6
14.9
Net Debt/Ebitda
1.4X
0.7X
0.6X
Average life
7.46
6.49
4.21
12/31/2009
Short Term Debt/Total Debt
o Debt profile improved with new borrowings: longer tenor, competitive costs and diversified
sources
o Leverage sustained within the target range (25% to 35%)
17
CAPEX 2010 vs. 2009:
Growth in capex, from additional upstream and downstream spending
Investments 2009
R$ 70.8 billions
Annual Business Plan 2010
R$ 88.5 billion
25%
0,6
0,9
3,8
2,6
E &P
6,2
6,8
D owns tream
8,1
G as & E nergy
31,6
10,5
36,7
International
17,4
34,0
D is tribuition
Others
16.6
(0.7)
(0.9)
88.5
5.1
(R$ billion)
70.8
(2.4)
CAPEX 2009
E&P
Downstream
G&E
International Distribution, CAPEX 2010
Biofuels and
Corporate
CAPEX FOR GROWTH:
Expansion is responsible for increase in capex spending
US$ MM
47,326
50.000
Others
45.000
40.000
35,134
Gas & Energy
35.000
30.000
Downstream
24,920
25.000
20.000
14,500
15.000
10.000
5.000
-
OCF 2009
(1)
(2)
Capex 2009 (1) Capex 2010 (2)
In USGAAP
R$ 88.5 billion converted by FX rate of 1,87 R$/US$ (Petrobras forecast to 2010)
Est.
Maintenance
Capex
E&P
BUSINESS PLAN 2010 – 2014:
Commitment to a strong capital structure
INVESTMENT 2010 – 2014 BETWEEN US$ 200 TO US$ 220 BILLIONS:
MONITORING FINANCIAL RATIOS
o Leverage between 25% and 35%
o Net Debt/ EBITDA up to 2.5X
o Investment revenue maintenance in the different segments
RELEVANT ASSUMPTIONS FOR THE PROJECTIONS
o Brent curve – upward trend
o Capitalization – value and timing
o Funding needs for the new Business Plan 2010-2014
20
FINANCIABILITY SIMULATION:
Higher crude Long term oil price guarantee funding requirements
ASSUMPTIONS
Minority shareholders participation in the capitalization (US$ Bn)
Investments (US$ bn)
Average Brent Price (US$ bbl)
15
25
200
64
220
77
32%
2.2
27%
1.6
Financiability Simulation (Average 2010 - 2014)
Leverage
Net Debt/EBITDA
21
NEW REGULATORY MODEL
Production
Sharing
Agreement
Pre-salt
and
Strategic Areas
Transfer
of Rights with
compensation
Petrobras 100%
Petrobras Operator
Other companies
through Bidding
Process
Other Areas
Up to 5 billion boe
Current
Concession
Model
There will be no regulatory changes in the areas under concession, including the presalt area already granted
22
TRANSFER OF RIGHTS APPRAISAL
Based on common variables standard throughout the industry
Appraisal need to consider
Production
Curve
Capex
Production
Costs
Oil Volume
Oil reservoir
Future Oil
prices
Discount
Rate
Reserves
development/
Knowledge
Fiscal
Environment
(government
participation)
CAPITALIZATION UPDATE:
Bills approved in lower house, now before senate
Valuation of
the barrels
Size of
capitalization
Transparency and
fairness
Timing
o
Only completed after areas defined
o
One well drilling, another scheduled
o
Appraisal by at least 2 independent
certification companies
o
Future revaluation to ensure fairness
o
STILL TO BE DETERMINED
o
Variables value of the barrels +
funding needs + capital structure
o
Board Committee to represent
minority and preferred shareholders
o
All shareholders will
subscription rights
o
Full and Transparent disclosure of all
relevant information
o
All Bills for capitalization and new
regulatory regime now passed by
Lower House
o
Senate has up to 45 days to approve,
modify or reject the bill. If modified,
must reconcile with lower house
o
Completion of Capitalization 60 to 90
days after bill becomes law
have
equal
Results of
capitalization
o Access to 5
billion barrels
o Greater
Financial
strength
o Participation
of all
shareholders
in a larger
company
with more
opportunities
24
BILL 5941/09 COURSE OF ACTION (CAPITALIZATION):
Fast track procedure since arrival in the Senate
25 days
Arrival in the Senate,
appreciation of the bill
and forward1
o Bill is sent to commissions and timeline is open for
amendments 2
o After deadline for amendments the bill shall be voted and sent
to plenary
Presidential message
requesting fast track
procedure Art.64 F.C.
Subject
inclusion
Voting
process
Up to 35 days
03/22/10
05/06/10
After 45 days, subject is ceased
05/17/10
Appreciation and
amendment
voting
Up to 10
days
Up to 15
business days
Art 66 FC
Returns to the
Lower House
Presidential
approval
06/04/10
Approval with
amendments
Up to 15
business days
Art 66 FC
Approval
05/27/10
Rejected
1
Bills sent to commission
2
Amendments are presented in the CCJ
Filled
25
2009 PRICE IMPACT:
Volatile international oil prices, stable domestic product prices
Petrobras Oil Price (US$/bbl)
121
120.00
R$/bbl
Brent (US$/bbl)
ARP EUA: 130.06
100.58
89
US$/bbl
200
97
100.00
86.13
150
80.00
75
40.00
ARP Petrobras: 157.77
115
105.46
60.00
2009 average
250
64.42
76.75
68
59
55
47.95
75
70.24
64.00
2008 average
100
48.68
44
ARP EUA: 194.71
ARP Petrobras: 176.41
50
32.23
20.00
3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
0
Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09
o Growing crude oil exports benefit from higher crude oil prices, improving quarterly earnings during the year.
Lower discount between benchmark light and Petrobras oil also contributed
o Following long term pricing policy, Petrobras average realization price (ARP) declined less than international
prices, recovering shortfalls experienced in 2008
o Oil product pricing in Brazil continue to converge with international pricing
o Pricing policy contributed to positive refining margins in 2009 (stable revenues, declining costs)
26
Information:
Investor Relations
+55 11 3224-1510
petroinvest@petrobras.com.br
27
FULL YEAR 2009 OPERATING INCOME:
Higher income with efficient cost controls
(R$ MILLION)
45,950
2008
Operating Income (1)
(32,408)
Net Operating
Revenue
32,586
COGS
-
Operating
Expenses
46,128
2009
Operating Income (1)
o Decrease in operating income due to lower oil prices (2008: R$ 149.80; 2009: R$ 104.88) and
lower ARP of oil products (2008: R$ 176.41; 2009: R$ 157.77)
o COGS decrease due to lower lifting cost with government participation and oil and oil products
import price decrease
o Operating expenses were flat despite Marlin Special Participation (R$ 2.065 bi)
(1) Operating income before financial result, equity balance and taxes
28
FULL YEAR 2009 NET INCOME:
Small decline, largely from exchange related variations
(R$ MILLION)
32,988
178
5,985
(5,967)
(4,992)
28,982
790
2008
Net Income
Operating
Income
Financial
Result
Equity
Income
Taxes
Minority Interest
and Employees
Part.
2009
Net Income
o The deterioration in the financial results were due to: Real revaluation (2008: depreciated
32%; 2009: appreciated 26%) and increase in debt indexed to the exchange rate
o Increase in equity income reflects better results from petrochemical sector (R$ 682 million)
and international subsidiaries (R$ 127 million)
o Decrease in taxes due to lower income, results increase in units abroad which present
differentiated tax regimes and losses in some subsidiaries
o Negative results in Minority Interest reflect FX gains in debt of consolidated SPE’s
29
FULL YEAR 2009 SEGMENT RESULTS - E&P:
Lower average oil price reduces operating income
(R$ MILLION)
57,232
(33,093)
5,689
Jan-Dec/08
Oper. Income
Price Effect
on Revenues
Cost Effect
on COGS
3,050
Volume Effect
on Revenues
(1,195)
(1,711)
Volume Effect
on COGS
Operational
Expenses
29,972
Jan-Dec/09
Oper. Income
o Revenue decline from 30% decrease in petroleum price and 44% decrease in gas transfer price
o Higher sales volume due to 5% growth in domestic oil and gas production
o 17% decrease in lifting cost, primarily a reduction in Royalties and Special Participation
contributed to the decrease in COGS
o Increase in operational expenses due to non-recurring charge for adjustment to Special
Participation tax for Marlim field
30
FULL YEAR 2009 SEGMENT RESULTS – DOWNSTREAM:
Stable prices and declining COGS lead to turnaround
(R$ MILLION)
53,457
2,240
(2,203)
234
20,482
Operational
Expenses
Jan-Dec/09
Oper. Income
(28,648)
(4,598)
Jan-Dec/08
Oper. Income
Price Effect
on Revenues
Cost Effect
on COGS
Volume Effect
on Revenues
Volume Effect
on COGS
o Lower export prices and ARP in the domestic market contributed to revenue reduction
o Decrease in downstream COGS reflected: strong reduction in domestic oil and international oil
products acquisition cost as well as lower average inventory costs
o 6% increase in diesel production therefore an import reduction amounting 6 million barrels
o Margin in 2009 of 14%, versus -3% in 2009
31
FULL YEAR 2009 SEGMENT RESULTS - GAS AND POWER:
Margins improve, offsetting reduction in demand
(R$ MILLION)
3,388
(2,879)
546
1,541
Operational
Expenses
Jan-Dec/09
Oper. Income
2,497
(529)
(1,482)
Jan-Dec/08
Oper. Income
Price Effect
on Revenues
Cost Effect
on COGS
Volume Effect
on Revenues
Volume Effect
on COGS
o Revenue decrease due to lower gas sales volume (19% decrease), gas price reduction (7%
decrease) as well as reduced power dispatch
o Higher gross margins (from 11% to 28%) due to lower acquisition costs for gas and electrical
energy
o Ongoing completion of gas infrastructure has led to avoided penalties and higher electricity sales
32
FULL YEAR 2009 SEGMENT RESULTS - DISTRIBUTION:
Growing market share leading to higher sales increased earnings
(R$ MILLION)
7,401
(6,786)
(318)
1,833
(4,887)
4,792
Jan-Dec/08
Oper. Income
Price Effect
on Revenues
Cost Effect
on COGS
2,035
Volume Effect
on Revenues
Volume Effect
on COGS
Operational
Expenses
Jan-Dec/09
Oper. Income
o Decrease in sales price more than offset by increase in sales volume (+13%) and higher
market share following acquisiton of Alvo Distribuidora (2008: 34.9%; 2009: 38.6%)
o Increase in operational expenses due to higher SG&A from increased sales activities
33
FULLY YEAR 2009 SEGMENT RESULTS - INTERNATIONAL:
Production growth and better refining margins improve results
(R$ MILLION)
(1,025)
1,146
813
Operational
Expenses
Jan-Dec/09
Oper. Income
1,452
(1,294)
(2,748)
Jan-Dec/08
Oper. Income
Price Effect
on Revenues
3,282
Cost Effect
on COGS
Volume Effect
on Revenues
Volume Effect
on COGS
o Decrease in prices for crude and product sales (petroleum:-15%;gas:-26%) partially offset by
production increase in Agbami ( Start up July 08) and Akpo (Start up March 09)
o Lower acquisition prices and higher refining margins in US and Japan contributed to COGS
decrease
o Reduced losses from devaluation of inventories (-R$ 261mi) and improvement in the
impairment account (2008:-330 mi; 2009:+7mi) explain lower expenses and gains in operating
margin
34