Webcast: Results Announcement - 1st Quarter 2006 (Brazilian Corporate Law)
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PETROBRAS
Almir BarbassaCFO and Investor Relations Officer
May, 16th 2006
Conference Call / Webcast1st Quarter 2006
(Brazilian Corporate Law)
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
Income Statement 1Q06 vs 4Q05
6.675
12.010
14.113
19.644
8.142
10.940
13.211
22.030
35,88638,638
Net Income
Operating Profit (1)
EBITDA
COGS
Net Revenues
1Q06 4Q05-7.1%
6.8%
9.8%
-10.8%
(1) Operating Profit and EBITDA of the previous quarters were readjusted in a form to purge the amount of provision for employee’s profit sharing program, accrued until the 3Q05 in other operating expenses.
-18.0%
• Operating result 9.8% higher than the previous quarter, mainly due to the absence of extraordinary items (operating expenses) occurred in 4Q05 as shown in the following slide.
R$
Mill
ions
More taxpayments
3
PETROBRAS
428
310
1,186
1,342
1,254
1,660
1,709
573Others
Exploratory Costs
General andAdministrative Exp.
Sales Expenses
1T06 4T05
Operating Expenses Analysis 1Q06 vs 4Q05
-21.5%
-28.6%
-75.3%
-25.3%
• Better operating expenses structure in the 1Q06 because of lack of extraordinary items occurred in 4Q05 such as: provisional expenses for doubtful receivables, personnel expenses, high exploratory costs and thermoelectric contractual pending expenses.
• In addition, there was a reduction on the maritime freight costs in 1Q06.
4
PETROBRAS
• 14% increase compared to last year same quarter due to the start-up in Campos Basin of P-43 and P-48 platforms (Barracuda & Caratinga) in December 2004 and February 2005 respectively. The production of both units stabilized in the second quarter of 2005.
• On April 21st 2006, platform P-50 (180 thous. bbld) began operation in Albacora Lest field and on May 8th the FPSO Capixaba (100 thous. bbld) started operating in Golfinho field. Two more units are expected for the 2H06: P-34 and Piranema.
thou
sand
bpd
Domestic oil and NGL production
1,795
1,543
1,7361,7251,730 1,751
1Q05 2Q05 3Q05 4Q05 1Q06 Apr/
∆ = 14% ∆ = 2.5%
06
5
PETROBRAS
61.53
46.05
51.59
44.0047.83
32.02
41.59
35.38
56.9061.75
35.1137.48
32.8836.14
29.53
43.04
54.24 53.69
44.1939.70
38.98
34.3830.77
49.33
56.3952.70 57.59
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06
US$
/bbl
Brent (average) Average Sales Price OPEC Basket
• The spread between the Brazilian average oil price and the Brentdecreased from US$ 10.84/bbl in 4Q-2005 to US$ 8.07/bbl in 1Q-2006. This heavy oil appreciation hindered refining margins.
US$
8.0
7 bb
l
E&P – Oil Prices
6
PETROBRAS
5.99 5.45 5.446.07 6.32
1Q 05 2Q 05 3Q 05 4Q 05 1Q06
∆ = +6% or US$ 0.25Domestic Lifting Costs w/o Gov. Part.(*)
(*) The company, in order to promote better indexes adherence to its operating and management models, has reviewed their concepts, recalculating the values of previous periods.
Main Causes+US$ 0.07/boe: decrease in production (in bpd the production was stable,
but considering the total amount, it was below 4Q05);+US$ 0.18/boe: effect of average exchange rate due to Real appreciation of
3%.• In Reais tern, this indicator remained stable relative to the previous quarter
(R$ 13,69 as to R$ 13,73 in 4Q05).
7
PETROBRAS
3.0 3.4 4.3 6.0 5.5 5.4 6.1 6.34.0 5.1
6.47.6 7.8 9.6 9.9 11.024.8
28.8
38.2
47.551.6
61.5 56.961.8
-4
1
6
11
16
21
26
2002 2003 2004 1Q05 2Q05 3Q05 4Q05 1Q06
US$
/boe
-8
2
12
22
32
42
52
62
Lifting Cost Gov. Participation Brent
7.08.5
10.7
13.6 13.315.0 16.0 17.3
Extraction Costs including Gov. Participation (*)
• Increase in government participation in the lifting cost due to higher Brent prices and start-up of highly productive fields.
57%
63 %
62 %
56 %
8
PETROBRAS
Changes in Operating Profit (1Q06 vs. 4Q05)- E&P
7.987
2.059 193807 10.523
96233
4Q05 Oper.Profits
Price effecton Net
Revenue
Volume effecton Net
Revenue
Average costeffect on
COGs
Volume effecton COGs
OperatingExpenses
1Q06 Oper.Profits
Changes in Operating Profit – R$ million
1,7511,736
• 31% increase in operating profit due to a rise in international oil price and a reduction of exploratory and drilling costs in the 1Q06.
• Although the average daily production increased, the total volume produced during the 1Q06 was lower due to smaller number of days.
Domestic Oil, NGL and Condensate – thousand bpd
9
PETROBRAS
1.761 1.8121.8041.6681.708
1.6491.6471.7311.6651.589
81
91
8783
91 91
81 8079 79
600
800
1.000
1.200
1.400
1.600
1.800
1Q05 2Q05 3Q05 4Q05 1Q0670
75
80
85
90
95
100
Domestic oil products production Oil products sales volume
Primary processed installed capacity - Brazil (%) Domestic crude as % of total
Refining and Sales in the Domestic Market
• Despite the increase of domestic oil in refinery throughput an increase of oil products production can be observed, resulting from operational improvements in refining, specially in the conversion of heavy oil.
10
PETROBRAS
20
40
60
80
100
Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06
ARP Brazil (US$/bbl) Brent Average Price ARP USA (w/ volumes sold in Brazil)
68.9
74.05
56.9
4Q05Average
70.261.8
71.0
1Q06Average
Average Realization Price - ARP
• The ARP Brazil aligned with international prices, which are still pressured by geopolitical issues and Asian demand;
• The ARP in Reais decreased 4.9% from R$ 161,11 (4Q05) to R$ 153,16 (1Q06).
11
PETROBRAS
1.741.96
1.862.03
1.90
1Q 05 2Q 05 3Q 05 4Q 05 1Q 06
Domestic Refining Costs (*) (US$/bbl)
(*) The company, in order to promote a better indexes adherence to its operating and management models, has reviewed their concepts, recalculating the values of previous periods.
• 6% reduction due to smaller number of programmed stoppages in the quarter;
• Taking out the Real appreciation of 3%, refining costs decreased 8%.
12
PETROBRAS
Changes in Operating Profit (1Q06 vs 4Q05)- SupplyChanges in Operating Profit – R$ million
• Increase in operating profit due to inventory consumption accumulated at lower prices in the previous period;
• Main effects of smaller sales volume:• less days in the 1Q06 (R$ 650 MM) • Contraction of oil exports by the Refining terminals (R$ 340 MM)• Offshore (R$ 300MM) and domestic market (R$ 160 MM) sales• Oil products exports (R$ 101 MM)
• Price effect on Net Revenue: increase of ARP for the oil products foreign market;
2.302123
696
42 3.0131.606
1.672
4Q05 Op. Profit Price effect onNet Revenue
Volume effecton Net Revenue
Average costeffect on COGs
Volume effecton COGs
OperatingExpenses
1Q06 Op. Profit
13
PETROBRAS
8.142 2.752 2.386
1.436850
1.0061.210
6.6751.483
4Q05 NetProfit
Revenues COGS Oper. Exp. Fin. and nonoper. exp.,others andEquity Inc.
EmployeesParticipation
MinorityInterest
Taxes 1Q06 NetProfit
Domestic Oil, NGL and Condensate – thousand bpd 1,7511,736
Changes in Net Profit – R$ million (3Q05 vs 4Q05)
• The 1Q06 net profit was negatively affected by:• Lower realization prices in Reais;• Higher income taxes (absence of tax benefit occurred in 4Q05 for the Interest on
Own Capital declaration);• appreciation of the Real by 3% causing losses on equity income line.
• These effects were partially offset by an improved expenses and costs structure.
14
PETROBRAS
10.940
2.536711 339 150 23 160
12.010
2.503
4Q05 Oper.Profit
E&P Downstream G&E Distribution International Corp. Elimin. 1Q06 Oper.Profit
Business areas’ share in Operating Profit – R$ million (4Q05 vs 1Q06)
• Results in other Areas affected by:• G&E: Lack of thermoelectric extraordinary contractual pending expenses (occurred
in 4Q05);• INTER: the higher oil & NG sales prices weren’t sufficient to offset the effect of the
Real appreciation on investments abroad; • DISTRIBUTION: market share decrease caused by aggressive competition.
15
PETROBRAS
450322 333 393 360
8399
65
344319
115
109
46105
2003 2004 1Q05 2Q05 3Q05 4Q05 1Q0
Oil Oil Products
Oil
Imports (thousand bpd)Exports (thousand bpd)
Net exports of oil and oil products
• 58 thous. bpd volume superavit in the 1Q06;• only US$ 41 million in deficit.(Exports: US$ 2.54 billion / Imports: US$ 2.58 billion)
181 161
343249 301
221246
250
262233
255213
235228
2003 2004 1Q05 2Q05 3Q05 4Q05 1Q06
Oil Oil Products
446 396
551 517564495
409424
368 425 459416492
559
16
PETROBRAS
(25.000)
(15.000)
(5.000)
5.000
15.000
25.000
12/31/2004 3/31/2005 6/30/2005 9/30/2005 12/31/2005 3/31/2006
(1.200)
(800)
(400)
0
400
800
1.200
1.600
Abroad In Brazil w/ FX correction**In Brazil CDI CashFinancial Income
Cash Breakdown (R$ millions)
• Financial revenues influenced by the US dollar indexed cash as hedge against the debt and costs linked to dollar.
Cas
h
Fina
ncia
l Rev
enue
s
FX rate change*
*Price of US Dollar at end of the period** The line ‘Fundos de investimentos financeiros - cambial " was restated to “..investimentos exclusivos" in order to fullfill CVM requirements CVM 411 and 413/2004.
∆0.4% ∆-11.8% ∆-5.5% ∆5.3% ∆-7.2%
17
PETROBRAS
Leverage
R$ million 03/31/2006 03/31/2005Short-term debt (1) 11,384 11,116
Long-term debt (1) 33,083 37,126
Total debt 44,467 48,242
Net debt (2) 21,484 24,825
24%26%
37%
32%
20%
23%19%20% 19%
26%
1Q05 2Q05 3Q05 4Q05 1Q06Net Debt / Net. Cap.Short-Term Debt / Total Debt
Petrobras’ 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
• The short-term debt increased because PRI Bonds maturing in 2007. • Long-term debt decrease of 4 base points compared to 12.31.05 due to:
• Real appreciation;• Financing amortizations.
18
PETROBRAS
1Q06 4Q05 (1)
(=) Net Cash from Operating Activities 10,144 8,513 (-) Cash used in Cap. Expend. (6,020) (7,025) (=) Free Cash Flow 4,124 1,488 (-) Cash used in Financing and Dividends (4,558) (718) Financing (499) (768) Dividends (4,059) 50 (=) Net Cash Generated in the Period (434) 2,206 Cash at the Beginning of Period 23,417 21,210 Cash at the End of Period 22,983 23,417
R$ million
Consolidated Cash Flow Statement
(1) As of January 1, 2005, the Special Purpose Companies whose activities are directly or indirectly controlled by Petrobras were included in the Consolidated Financial Statements, as per CVM Instruction No. 408/2004.
• Cash at the end of period affected by the payment of interest on own capital during the 1T06.
19
PETROBRAS
Investments
2006 % 2005 % %• Direct investments 5.386 91 4.740 89 14 Exploration & Production 3.359 57 2.834 54 19 Supply 799 13 681 13 17 Gas and Energy 149 3 433 8 (66) International 703 12 545 10 29 Distribution 138 2 112 2 23 Corporate 238 4 135 2 76 • Special Purpose Companies 494 8 457 9 8 • Ventures under Negotiation 33 1 45 1 (27) • Project Finance 1 - 39 1 (97) Exploration & Production 1 - 39 1 (97) Espadarte/Marimbá/Voador 1 - 39 1 (97) Total Investments 5.914 100 5.281 100 12
Jan-Mar
**
20
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: petroinvest@petrobras.com.br
Av. República do Chile, 65 - 22nd floor
20031-912 – Rio de Janeiro, RJ
(55-21) 3224-1510 / 3224-9947
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