Webcast 3Q09
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The document summarizes the company's 3rd quarter 2009 results. Domestic oil production increased 5% due to new production units coming online. Pre-salt exploration activities are accelerating with new wells planned. Lifting costs were stable despite higher oil prices. Net income was flat after adjusting for currency effects. Exploration and production saw solid operating performance while downstream income normalized with increasing international prices. Capex was in line with business plans and the company continues to successfully raise long-term capital.
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Webcast 3Q09
- 1. Conference call / Webcast RESULTS ANNOUCEMENT 3rd Quarter 2009 (Brazilian Corporate Law) Almir Guilherme Barbassa CFO and Investor Relations Officer November 17th, 2009
- 2. 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. 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
- 3. CONTINUED GROWTH OF DOMESTIC AND INTERNATIONAL PRODUCTION Domestic Production - 3Q09 VS 3Q08 Total Production (Oil, NGL and Natural Gas) - 3Q09 VS 3Q08 2,437 3Q08 3Q09 2,534 +8% 2,213 2,293 +5% TWO CONSECUTIVE MONTHS WITH DOMESTIC OIL PRODUCTION ABOVE 2 MILLION BPD -3% +4% Thousand bpd Thousand bpd 3Q08 3Q09 Increase in total production due to higher domestic production and the start-up of Akpo field, in Nigeria 5% increase in domestic oil production due to increased output from P-52 and P-54, coupled with the start-up of P-51, P-53, FPSO Cidade de Niterói and FPSO Cidade de São Vicente Natural gas production restricted by the decrease in demand, specially from thermo-electric plants
- 4. P-51 P-51 FPSO Cidade de Niterói P-53 FPSO Cidade de Niterói NEW PRODUCTION UNITS WILL CONTINUE RAMP-UP TO INCREASE PRODUCTION PLATFORM/ FIELD CAPACITY (thous. bpd) AVERAGE 3Q09 (thous. bpd) NUMBER OF WELLS EXPECTED WELLS P-53 / Marlim Leste 180 90 7 producers 3 injectors 13 producers 8 injectors P-51 / Marlim Sul 180 88 5 producers 6 injectors 10 producers 9 injectors FPSO-Cidade de Niterói / Marlim Leste 100 38 2 producers (oil) 9 producers (oil) 1 producer (gas) Total 460 216 - -
- 5. Drilling of the 4th well of the Evaluation Plan of Tupi was concluded, confirming the potential of the area Excellent performance of Tupi EWT, with production of approximately 20 thousand bpd Formation Test in wells Iara, Iracema and Tupi Northeast Drilling and completion of the 1st well in the Tupi pilot BM-S-10 BR 65% BM-S-11 BR 65% BM-S-24 BR 80% BM-S-9 BR 45% BM-S-22 BR 20% BM-S-21 BR 80% BM-S-8 BR 66% Legend: Drilled Wells Formation Test Drilling and Completion Parati Iara Iracema Tupi NE Tupi Tupi P1 Extensão - Tupi Júpiter Guará Carioca Iguaçu Abaré Azulão Guarani Caramba Bem-te-vi PRE-SALT ACTIVITIES ACCELERATING, REAFIRMING POTENTIAL AND INCREASING UNDERSTANDING Next steps: new wells in the Tupi pilot; new exploratory wells in BMS-9, BMS-11 and BMS-10 Rigs: 3 new drilling rigs until 1H/2010 Ongoing biddings: (i) FPSO chartered for the Guará pilot; (ii) 8 hulls for the Pre-salt project in Santos Basin
- 6. (US$/barrel) REDUCED HEAVY OIL DISCOUNT IMPROVES MARGINS Decrease in global supply of heavy oil contributed to the significant reduction in the Brent discount Improvement in relative price for Petrobras export basket increased export revenues
- 7. LIFTING COSTS STABLE, IN SPITE OF HIGHER OIL PRICES R$/barrel Lower lifting costs without government take, in Reais, despite increase in international oil prices In Dollars, the increase was due to FX rate appreciation Increase in the government take due to higher international oil prices and increase in tax rates applied to certain fields, especially Marlim Sul e Marlim Leste 54.40 41.48 34.24 38.86 41.62 US$/barrel 30.27 18.11 14.69 19.50 22.86
- 8. US$/bbl R$/bbl ARP Petrobras ARP EUA Comparing with the 2Q09 the ARP decreased in Reais due to reduction of gasoline and diesel price and the strengthening of the Real Express in Dollars, average sales price increased 5,4% due to strengthening of Real SUCCESSFUL LONG TERM PRICING POLICY US$/bbl 2Q09 3Q09 3Q08 70.37 81.54 62.23 77.34 129.81 112.49 0 20 40 60 80 100 120 140 160 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 R$/bbl 128.41 160.79 152.65 131.52 215.62 187.02 2Q09 3Q09 3Q08 0 50 100 150 200 250 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09
- 9. 1,998 1,824 2,054 Oil Products and Natural Gas in Brazilian Market Thousand bpd +3% INCREASE IN SALES VOLUMES, IN LINE WITH ECONOMIC RECOVERY 2,085 2,118 +10% +2% -2% -13% Oil product sales increased with resumption of Brazilian economic growth, accentuated by seasonal aspects Natural gas sales decreased due to lower thermoelectric demand, partially compensated by higher industrial consumption
- 10. 9M09 9M08 628 633 5 152 562 714 vs + US$ 1,795 - US$ 1,813 IMPROVING OPERATIONS REFLECTED IN GROWING TRADE BALANCE Oil Oil products (thousand barrel/day) Financial Volume (US$ Million) Boost in oil production led to higher oil export Imports decreased (specially diesel imports) due to economic slow down, lower thermoelectric generation and increase in production of domestic oil products (diesel)
- 11. AVERAGE COST METHODOLOGY INFLUENCES COST OF GOODS SOLD Inventories acquired in previous quarters affected the company’s operating results (inventories’ average cost methodology). -
- 12. NET REVENUE (IN MILLION R$ - 2Q09 VS 3Q09) 2Q09 Operating Income Net Operating Revenue COGS Operating Expenses 3Q09 Operating Income 13,896 3,272 (4,401) (2,520) 10,247 12,295 P.E. MARLIM = 2,048 OPERATING INCOME IMPACTED BY SPECIAL PARTICIPATION PROVISIONING Higher oil prices, lower spread between light and heavy oil and increase in oil products sale generated higher net operating revenue Higher sales volumes and higher import prices led to increase in COGS Decline in operating income is explained by a provisioning for special participation tax related to Marlim field (R$ 2.05 billion)
- 13. NET INCOME (R$ MILLION – 2Q09 VS 3Q09) 7,734 (3,649) 3,168 7,303 (836) (63) 949 1,677 Net Monetary Variation Better financial result due to lower FX rate appreciation and net monetary variation from the BNDES loan (R$ 1.7 Billion) Counterpart of hedge gains was higher COGS Taxes Increased due to the higher fiscal benefit from interest on equity along with higher recovery of fiscal credits in exploratory activities abroad in 2Q09 Reduction in minority interest due to lower FX gains on SPCs debts 533 Hedge NET INCOME FLAT, AFTER ADJUSTING FOR FX VARIATIONS Financial Result Taxes Equity Income Operating Income Minority Interest 2Q09 Net Income 3Q09 Net Income
- 14. 2,806 (425) (820) 418 (2,419) 7,806 8,246 Reduced spread between light and heavy oil contributed to the increase in revenues Increase in inventories caused slight reduction in sales volumes Increase in COGS due to higher production taxes due to higher oil prices Increase in operating expenses due to the extraordinary provision for Marlim field Government take EXPLORATION AND PRODUCTION –SOLID OPERATING PERFORMANCE EXPLORATION & PRODUCTION – OPERATING INCOME (R$ MILLION – 2Q09 VS 3Q09) 2Q09 Oper. Income Price Effect on Revenues Volume Effect on Revenues Operational Expenses 3Q09 Oper. Income Volume Effect on COGS Cost Effect on average COGS
- 15. DOWNSTREAM – OPERATING INCOME (R$ MILLION – 2Q09 VS 3Q09) (636) (5,278) 2,911 (2,316) 205 2,800 7,914 Despite reduction in ARP in Reais (2Q09: R$ 160.79; 3Q09: R$ 152.75), increase in the volumes sold, led by economic growth, increased revenues Higher oil and oil products import costs and reduced heavy/ light oils spread led to increase in COGS DOWNSTREAM – INCOME NORMALIZING WITH INCREASES IN INTERNATIONAL PRICES 2Q09 Oper. Income Price Effect on Revenues Volume Effect on Revenues Cost Effect on average COGS Operational Expenses 3Q09 Oper. Income Volume Effect on COGS
- 16. INCREASING CONTRIBUTIONS FROM GAS & ENERGY, INTERNATIONAL AND DISTRIBUTION (2Q09 VS 3Q09) Gas & Energy International Operating Result: 2Q09 R$ 576 million VS. Operating Result : 2Q09 R$ 224 million VS. Operating result: 2Q09 R$ 466 million VS. 7% increase in sales margins and 9% in volumes supported continued strength for our distribution segment 3Q09 R$ 651 million 3Q09 R$ 363 million 3Q09 R$ 620 million Distribution Higher volumes sold in non-thermo electric markets Decrease in natural gas imports/transfer costs, following the levels of international reference prices Reduction in the energy generation income partially offset by better results from power sales Higher realization prices and increase in production contributed to higher operating income Akpo start-up in Nigeria was main contributor to the trend of increasing production
- 17. vs 1,5 2,8d 0,1 0,4 0,4 7,1 1,0 1,1 23.2 10.6 4.5 5.5 0.4 1.5 3.8 1.2 3.7 4.1 15.8 0,5 6.4 2.2 0.3 0.7 Capex 9M08 - R$ 34.1 billions E&P International 0.9 Capex in line with the Company´s opportunities CONTINUED GROWTH IN CAPEX, CONSISTENT WITH BUSINESS PLAN G&E Distribution Corporate Downstream SPE Projects under Negociation Capex 9M09 - R$ 50.7 billions
- 18. SUCCESSFUL EFFORTS TO RAISE CAPITAL FROM LONG TERM SOURCES 6.5 (US$ bilion) Market Capital Bond issuance China Development Bank BNDES U S Eximbank Others (*) (*) R$ 25 billions converted by FX tax in 07.30.09 Others Loans + US$ 28.05 billions In 2009, US$ 34.8 billion were raised with an average life of 10.6 years 6.75
- 19. LIQUIDITY STRENGTHENED, LEVERAGE WITHIN TARGETS Increase in liquidity due to the increase in cash and decrease in short term debt. Net Debt/Net Capitalization stable and within the target range (25%-35%)
- 20. STABLE CASH FLOWS SUPPORT INVESTMENT PLAN R$ million * End of period ** last 12 months Higher operating cash flow, despite lower oil prices Increasing CAPEX supported by higher borrowings during the year New loans improved average life of debt stock 6.38 6.38 4.21 Average Life of Debt (years)* 1.11** 1,00 0.85 Net Debt/ EBITDA 30,088 30,088 10,776 Cash at the end of period 36,987 (9,835) (12,442) (50,622) 38,180 15,889 Jan-Sep 2009 25,441 3,581 Financing (3,426) (6,187) Dividends (1,765) (198) Free Cash Flow (18,446) (34,534) Investment 16,681 34,337 Operating Cash Flow 10,072 13,071 Cash at the beginning of period 3Q09 Jan-Sep2008 2.08 118.87 1.87 1.69 Average Exchange Rate (R$/US$) 127.68 187.62 Average Brent (R$/bbl)
- 21. For more information: Investor Relations www.petrobras.com.br/ri +55 21 3224-1510 [email_address]
Editor's Notes
- #5: Ùltima informação de agosto a produção estava: P 51: 94,7 P 53: 90,6 Jabuti: 36,5
- #7: No conference call would be complete without a brief update on the Santos Basin Pre-Salt cluster. As we announced last quarter, With the completion of the Guara, Iara and Jupiter wells, we have completed the Minimum Exploratory Program of the exploration phase for all of the blocks we operate in the cluster. The only exploration well to be drilled will be in block BM-S-22, operated by Exxon. That well has been spud, and it should contribute substantially to our understanding of the basin. We continue preparation for the extended well test of Tupi planned for the first quarter of next year. The test, as well as the pilot system, are on schedule. We can also report that we produced 18,000 barrels per day from well 1 ESS-103A in the pre-salt of the Espirito Santos and found the carbonate reservoir as productive as we had hoped. We are now evaluating where additional well tests and pilot systems will be installed in the cluster. We also continue to make long term plans for installing full production systems by 2015. The turmoil in the world’s financial markets and the fall in the price of oil have had no impact on our thinking regarding the timing or feasibility of the Santos pre-salt development. We and our partners remain confident about our prospects and we continue to believe these reserves are economical, even at crude oil prices well below those of today.
- #9: The reduction of gasoline and diesel prices in June, and the strengthening of the Real reduced our average realization price in Reais during the quarter. Our average sales price in Dollars increased by 5.4 %. Our pricing policy has benefited both the consumer and Petrobras by avoiding the volatility of the international markets, while achieving parity between the two markets over time.
- #10: Brazilian GDP growth bottomed during the 1st quarter of this year and has rebounded sharply since. The Brazilian market for derivatives and natural gas has tracked the growth in the economy, with consumption now higher than one year ago. Diesel is recovering in line with GDP growth, as is the case with many of our other products. Gasoline consumption is lower as a result of increasing competition with ethanol. Natural gas sales to the industrial sector are improving, but this growth has been offset by continued lack of demand for gas from the thermo-electric sector.
- #11: Higher oil production, improvements to our refining system, and reduced demand have contributed to a substantial improvement in our trade balance. As we continue to reduce product imports by increasing our domestic capacity to produce these products, we improve our overall margin. /for the nine months year over year, we have swung to a substantial net export position and improved our trade surplus by 3.6 billion dollars during the period.
- #13: Let’s turn now to financial results. Net revenues increased as a result of higher sales volumes and higher prices for our exports, offset by lower average realization costs. Higher prices for imports and less benefit from inventory averaging led to higher cost of goods sold. The provisioning for Special Participation tax related to Marlim production, higher costs from greater volumes of sales and new units abroad, and charges related to the new collective bargaining agreement led to higher operating costs. The result was a decline in operating income of 26% .