webcast q306 ing
TRANSCRIPT
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PETROBRAS
Conference Call / Webcast3rd Quarter 2006
(Brazilian Corporate Law)
Almir BarbassaCFO and Investor Relations Officer
November, 13th 2006
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
1,779
1,736
1,751 1,757
1,725
3Q05 4Q05 1Q06 2Q06 3Q061.7001.7101.7201.7301.7401.7501.7601.7701.7801.790
Domestic oil and NGL productionth
ousa
ndbp
d
Δ = 3.1%Δ = 1.3%
• 1.3% increase due to P-50 (Albacora Leste) and FPSO Capixaba (Golfinho) platforms performances, both recently started operations;
• In the 3Q06, P-50’s contribution was around 18 thous. bpd above 2Q06 average, while FPSO Capixaba increased production around 8 thous. bpd in the same period.
3
PETROBRAS
US$
10.
80 b
bl
E&P – Oil Prices
• The spread between Brazilian oil and Brent decreased from US$ 11.42/bbl, in the 2Q06, to US$ 10.80/bbl, in the 3Q06.
36,14 35,1137,48
43,04
54,24
46,05
53,69
58,2 58,6951,59
69,4969,62
61,75
56,9
61,53
47,8344,00
41,59
38,9839,70 44,19
49,33
56,39
52,7
57,59
64,7466,07
3T04 4T04 1T05 2T05 3T05 4T05 1T06 2T06 3T06
US
$/bb
l
Average Sales Price Brent (average) Cesta OPEP
4
PETROBRAS
5.446.07 6.32 6.12 6.64
3Q 05 4Q 05 1Q06 2Q06 3Q06
Δ = 8.5% or US$ 0.52
Domestic Lifting Costs without Government ParticipationU
S$/b
bl
Main Causes• Higher expenditure in:
• Transportation, seismic and drilling for wells intervention;• Corrective maintenances;• Higher costs due to initial operational phase in Albacora Leste and Golfinho
fields.
5
PETROBRAS
Lifting Costs including Government Participation
• Government participation remained stable due to the stability of the Brent price, FX rate and production.
59%
3,0 3,4 4,3 6,0 5,4 5,4 6,1 6,3 6,64,0 5,1
6,47,7 8,4 9,7 10,0 11,0
6,1
11,511,4
69,569,6
24,828,8
38,2
47,551,6 61,5 56,9
61,8
-4
1
6
11
16
21
26
2002 2003 2004 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06
US$
/boe
-20
-10
0
10
20
30
40
50
60
70
Lifting Cost Gov. Participation Brent
7.08.5
10.7
13.6 13.915.2 16.1
17.3 17.5 18.1
57%
63%
62% 63
%
Obs.: Lifting Cost w/ gov. part. series was adjusted (retroactive to 2002) due to new ANP interpretation of the expense deductibility for the Finance Project of Marlim Field, calculated as special participation.
6
PETROBRAS
1.7951.8121.7611.804 1.753 1.7571.6841.6491.647
1.720
89
91 91
91 93
798180 80 79
1.000
1.200
1.400
1.600
1.800
2.000
2.200
2.400
3Q05 4Q05 1Q06 2Q06 3Q06505560
65707580
859095
D o mest ic o il pro ducts pro ductio n Oil pro ducts sales vo lume
P rimary pro cessed installed capacity - B razil (%) D o mest ic crude as % o f to tal
%
Thou
s. b
arre
ls/d
ay
Refining and Sales in the Domestic Market
• 4 pp reduction in throughput due to: • Oil supply limitation;• More scheduled stoppages compared to 2Q06;
• 1 pp decrease in domestic crude participation in processed feedstock due to operational problems in Golfinho (less light oil) and increase spread between fuel oil and domestic heavy oil (more profitable to export).
• Increase in sales volume due to seasonality in agricultural diesel consumption, industrial fuel oil and substitution of imported naphtha.
7
PETROBRAS
1.862.03
1.902.07
2.48
3Q 05 4Q 05 1Q 06 2Q 06 3Q 06
• 20% increase compared to the previous quarter due to the occurrence of more scheduled stoppages and restrictions to oil receipt.
Domestic Refining Costs (US$/bbl)
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PETROBRAS
20
40
60
80
100
Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06
ARP Brazil (US$/bbl) Brent Average Price ARP USA (w/ volumes sold in Brazil)
72,28
69,49
81,83
3Q06Average
70,66
69,62
81,78
2Q06Average
3Q05Average
60,26
61,54
72,43
Average Realization Price - ARP
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PETROBRAS
Thousand bpd 3Q06 2Q06 % Jan-Sept 06
Jan-Sept 05
%
Total Oil Products 1,757 1,684 4 1,697 1,658 2Alcohol, Nitrogen and others 35 13 169 26 26 0Natural Gas 250 239 5 240 224 7Total Domestic Market 2,042 1,936 5 1,963 1,908 3Exports 564 536 5 540 498 8International Sales 509 459 11 468 388 21Total International Market 1,073 995 8 1,008 886 14Total 3,115 2,931 6 2,971 2,794 6
Sales Volume
2006 includes ongoing exports
• Increase in the sales of fuel oil, diesel, LPG and gasoline.
10
PETROBRAS
6.959
11.267
13.614
21.260
37.948
7.085
10.303
12.912
27.066
43.363
Net Income
Operating Profit
EBITDA
COGS
Net Revenues
2Q06 3Q06
27.3%
1.8%
-5.2%
-8.6%
14.3%
Income Statement 3Q06 vs 2Q06R
$ M
illio
n
• Net Revenues: 5% increase in the domestic sales volume, oil exports (33%) and ARP (2%);
• COGS: ANP (National Petroleum Agency) new interpretation of special participation in the Marlim field (retroactive to 2002); expenses adjustment related to reinjected gas (Solimões, Campos and Esp. Santo Basins).
• Net Income: R$ 1.492 billion in benefits due to Interest on Own Capital provision, reduced in R$ 321 million relative to bonds buyback.
11
PETROBRAS
890
378
1.415
1.353
1.342
531
1.459
1.546
Others
Exploratory Costs
General andAdministrative Exp.
Sales Expenses
2Q06 3Q0614.3%
3.1%
40.5%
50.8%
Operating Expenses Analysis 3Q06 vs 2Q06
• Operating Expenses increase mainly because of:
• Sales Expenses: increase in domestic sales (5.5%) and oil exports volume (33%);
• Exploratory Costs: write-off of dried wells (Brazil and abroad);
• Others: hedge contract maturity with ANDINA (R$ 167 million) and others like consulting and technical consulting (R$ 285 million).
R$
mill
ion
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PETROBRAS
Changes in Operating Profit (3Q06 vs. 2Q06)- E&PChanges in Operating Profit – R$ million
Domestic Oil, NGL and Condensate – thousand bpd 1,7791,757
• Quarter characterized by the increase in production and accounting of extraordinary items.
10.938 18
1.040536
408420
6426 10.198
2Q06 Oper.Profits
Price effecton Net
Revenue
Volumeeffect on Net
Revenue
Average costeffect on
COGs
GasReinjection
Effect
Marlim part.Calculation
Effect
Volumeeffect on
COGs
OperatingExpenses
3Q06 Oper.Profits
Extraordinary Items:
R$ 834 million
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PETROBRAS
2.486
1.017
2.160
106 1.461
2.944
3.168
2Q06 Oper.Profit
Price effect onNet Revenue
Volume effecton Net
Revenue
Average costeffect on COG
Volume effecton COGs
Oper. Exp. 3Q06 Oper.Profit
Changes in Operating Profit (3Q06 vs 2Q06)- SupplyChanges in Operating Profit – R$ million
• Increase in oil products domestic sales volume (4%), offset by inventory sales with a higher average cost.
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PETROBRAS
• COGS: influenced by extraordinary effects (R$ 426 million reinjected gas and R$ 408 million special participation costs in Marlim field) and sales of higher costs inventories;
• Operating Expenses: write-off of dried wells (Brazil and foreign); increase in the domestic sales and oil exports volume; maturity of the hedge with ANDINA and others.
Domestic Oil, NGL and Condensate – thousand bpd 1,7791,757
Changes in Net Profit – R$ million (3Q06 vs 2Q06)
6.959
5.415 4.982
573824341 321
1.603 149 7.085
2Q06 NetProfit
Revenues GOGS w/oextraordinary
items
Extr. Items Oper. Exp. Fin. and NonOper. Exp.
and Eq.Income
BondsBuyback
Taxes (Int.Own Cap.)
MinorityInterest
3Q06 NetIncome
Extraordinary Items andBonds Buyback:
R$ 1.145 million
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PETROBRAS
181263 262
257
355267233
209269
213249
228
2003 2004 2005 1Q06 2Q06 3Q06
Oil Oil Products
446536
512 519
409
450352 344
115
319 354 373
105 94
109
88137
2003 2004 2005 1Q06 2Q06 3Q06
Oil Oil Products
424 446 442459
559564510
Imports (thousand bpd)Exports (thousand bpd)
Net exports of oil and oil products
54 thous. bpd volume surplus in the 3Q06
2006 includes ongoing exports
• Oil exports increase due to scheduled stoppages in refineries with high complexity;• Oil products imports increase due to the seasonal increase in the diesel
consumption.
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PETROBRAS
R$ million 09/30/2006 06/30/2006Short Term debt (1) 11,858 12,214Long Term Debt (1) 32,280 31,307
Total Debt 44,138 43,521
Cash and Cash Equivalents 24,519 22,713
Net debt (2) 19,619 20,808
18%20%
26%24%
17%
28%26%
19% 23%
27%
set/05 dez/05 mar/06 jun/06 set/06
Net Debt/Net CapitalizationShort-Term Debt/Total Debt
LeveragePetrobras’ 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
(1)Includes debt contracted through leasing contracts of R$ 2,729 million on September 30, 2006, and R$ 2,815 million on June 30, 2006.(2)Total debt - cash and cash equivalents
• Decrease in total and net debt:
• Strong operating cash generation allows reduction of the debt (bonds buyback) and increase in cash balance.
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PETROBRAS
3Q06 2Q06(=) Net Cash from Operating Activities 10,209 11,365 (-) Cash used in Cap. Expend. (8,337) (6,640) (=) Free Cash Flow 1,872 4,725 (-) Cash used in Financing and Dividends (66) (4,995) Financing (60) (1,472) Dividends (6) (3,523) (=) Net Cash Generated in the Period 1,806 (270) Cash at the Beginning of Period 22,713 22,983 Cash at the End of Period 24,519 22,713
R$ million
• R$ 1,8 billion increase in Free Cash Flow.
Consolidated Cash Flow Statement
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PETROBRAS
Jan-Sept/06 % Jan-Sept/05 % %• Direct investments 20.264 90 14.751 87 37 Exploration & Production 11.404 51 8.907 53 28 Supply 2.800 13 2.184 13 28 Gas and Energy 1.203 5 1.098 6 10 International 3.923 17 1.871 11 110 Distribution 477 2 368 2 30 Corporate 457 2 323 2 41 • Special Purpose Companies 2.072 9 1.914 11 8
• Ventures under Negotiation 300 1 169 1 78
• Project Finance 1 0 87 1 0
Total Investments 22.637 100 16.921 100 34
R$ million
Investments (Capex)
• Following the targets established in its Business Plan, the company continues to invest primarily in Exploration and Production.
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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: [email protected]
Av. República do Chile, 65 - 22nd floor
20031-912 – Rio de Janeiro, RJ
(55-21) 3224-1510 / 3224-9947