Transcript
Conference Call / WebcastRESULTS ANNOUCEMENT4th Quarter 2006 and 2006 Brazilian Corporate Law)
Almir BarbassaCFO and Investor Relations Officer
February 14th 2007
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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 withthe SEC.
Cautionary Statement for US investors
Disclaimer
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DOMESTIC OIL AND NGL PRODUCTION
5.6% increase y-o-y due to the start-up of the following production units:
P-50 (Albacora Leste), in April 2006
FPSO Capixaba (Golfinho), in May 2006
P-34 (Jubarte), in December 2006
1,778
1,684
2005 2006
Δ = 5.6%
thou
sand
bpd
3
2,256
2,301
2,2732,278
2,334
4Q05 1Q06 2Q06 3Q06 4Q06
thous. boed
Δ = 3.5% Δ = 1.4%
• Increase in the 4Q06 production due to the start-up of new production wells linked to P-50 platform (Albacora Leste)• For the same period, decrease in the international oil and gas production, as a consequence of the contractual negotiations in Argentina that affected production in some fields (oil), lower demand for Bolivian gas and the finalization of some repairs in the duct of San Antonio (gas).
TOTAL OIL, NGL AND GAS PRODUCTION
4
35.1137.48
43.04
54.24
46.05
53.69
58.20 58.69
48.70
61.53 59.68
69.4969.62
61.75
56.9
51.5947.83
44.00
39.7044.19
49.33
56.39
52.7
57.59
64.74 66.07
56.08
4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06
US$
/bbl
Average sales price Brent (average) OPEC Basket
US$ 10.98 bbl
Stable spread between Brazilian oil and Brent (US$ 10.80/bbl in the 3Q06 and US$ 10.98/bbl in the 4Q06) despite of the oil prices decrease in the international market.
E&P – OIL PRICES
10.43
65.14
54.71
2006
Spread
Brent (Av.)
Aver. Sales Price
US$/bbl
-8.96
19.79%54.38
20.45%45.42
Δ2005
5
1,76 41,753
1,79 51,8 12
1,76 1
1,6 9 61,73 5 1,6 9 7
1,6 4 4
1,70 71,74 6
1,6 8 41,6 4 9
1,6 3 5
8 0
8 9
8 78 5
8 9 9 1 9 38 9
8 08 1 8 079 79 78
1, 500
1, 650
1, 800
1, 950
4Q05 1Q06 2Q06 3Q06 4Q06 2005 200650
55
60
65
70
75
80
85
90
95
D o mest ic o i l p rod uct s p ro duct ion Oil p ro duct s sales vo lume
Primary p rocessed inst al led capacit y - B raz il ( %) D omest ic crud e as % o f t o t al
%Thousand barrels/day
REFINING AND SALES IN THE DOMESTIC MARKET
Oil products production in 4Q06 decreased relative to 3Q06 because of programmed stoppages in REVAP, REFAP and REMAN refineries, also affecting capacity utilization;
Sales volume decreased due
to seasonal demand;
Slight decline in domestic crude participation was a consequence of greater competitive advantage to process more light oil, reducing production of fuel oil.
6
20
40
60
80
100
Dec-04 M ar-05 Jun-05 Sep-05 Dec-05 M ar-06 Jun-06 Sep-06 Dec-06ARP Brasil (US$/bbl) Average Brent Price (US$/bbl)ARP USA (US$/bbl w/sales vol.in Brasil)
69.49
81.83
3Q06Avrg
68.81
59.68
70.59
4Q06Avrg
4Q05Avrg
68.90
56.90
72.90
AVERAGE REALIZATION PRICE - ARP
Domestic prices aligned with the practiced prices in the American market in the 4Q06.After summer season in the northern hemisphere, international oil prices tended to decrease.
72.28
75.52
65.14
70.92
2006
ARP USA
Brent (Av.)
ARP Brazil
US$/bbl
15.93%65.14
19.79%54.38
21.07%58.58
Δ2005
7
7.085
10.609
13.218
27.066
43.363
5.200
7.829
10.594
26.696
41.041
Net Income
Operational Profit
EBITDA
COGS
Net Revenue
3Q06 4Q06
-1.4%
- 19.9%
- 26.2%
R$
mill
ion
- 26.6%
- 5.4%
INCOME STATEMENT 4Q06 VS 3Q06
• The decrease in oil (E&P) and realization (Downstream) prices and smaller sales volume led to a fall in net revenues in the 4Q06. In the other hand the drop in COGS wasn’t able to follow the decrease in the net revenues as inventories with a higher costs basis purchased during prior quarters were liquidated. (inventories evaluation using the average cost criteria).
• increase in operational expenses, specially Exploratory and General & Administrative.
8
1.036
262
531
1.459
1.546
1.059
356
818
1.728
1.550
Others
Taxes
Exploratory Costs
General andAdministrative
Sales Expenses
3Q06 4Q06
18,4%
54,0%
2,2%
0,3%
OPERATIONAL EXPENSES ANALYSIS 4Q06 VS 3Q06
R$
mill
ion
• Sales Expenses: stable despite decrease in total volume sold in the domestic market. There was an increase in gasoline and diesel sales volumes;
• General & Adm.: higher personnel expenses due to increase in labor force and collective bargaining agreement;• Exploratory Costs: write-off of dry and non-commercial wells and update of provision for area abandonment.
These costs usually are concentrated in the fourth quarter.
35,9%
9
1,8231,779
CHANGE IN QUARTER REVENUES (4Q06 VS 3Q06)
Exploration & Production –Operational Profit Change– R$ millions
Domestic Oil, NGL and Condensate – thousand bpd
E&P’s operational result in 4Q06 was particularly affected by the decrease in the international oil prices
10.313 3.748
776796
363 3657.409
3Q06 OperatingProfit
Price Effect onNet Revenue
Avrg Cost Effecton COGS
Volume Effect onNet revenue
Volume Effect onCOGS
OperationalExpenses
4Q06 OperatingProfit
10
1.533 3,557
326634 2.315
319 142
3Q06 OperatingProfit
Net Effect Volume Effecton COGS
OperatingExpenses
4Q06 OperatingProfit
CHANGE IN QUARTER REVENUES (4Q06 VS 3Q06)Downstream – Change in Operating Profit – R$ million
• ARP’ drop reduced the operational revenues on the Downstream by R$ 3,557 million;• The decrease on the transfer prices (E&P to Supply) and the lower offshore operating costs contributed to the
reduction in the average costs (R$ 4.191 million);• R$ 634 million net effect as inventories with a higher costs basis purchased during prior quarters were liquidated.
Price Effecton Net Rev
Volume Effecton Net
Revenues
Avrg Cost Effecton COGS
4.191
11
7.085 2.322
370828
640361 43
5.20063
3Q06 NP Income COGS Oper. Expen. Fin. Expen.,Non Oper.,
Others and IncPar
Taxes Non Control.Shareholder
Part.
Employee Part. 4Q NP
1,8231,779
NET PROFIT CHANGE – R$ million (4Q06 VS 3Q06)
Domestic Oil, NGL and Condensate – thousand bpd
• Profit decrease in 4Q06 mainly due to smaller average realization prices of exports and oil products in the domestic market;;
• Liquidated inventories with a higher costs basis purchased during prior quarters (average cost criteria) halted a steeper drop in the COGS.
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BUSINESS AREAS CONTRIBUITION TO OPERATIONAL PROFIT
10.609 2.904
782327 45
542377 21 7.829
3Q06 Oper.Prof.
E&P Downst G&E Distr. Inter. Corp. Elim. 4Q06 Oper.Prof.
4Q05 vs. 3Q05 (R$ million)
G&E: improvement related to the previous quarter due to:• Increase in gross profit as a result of better
commercialization energy margins; • Loss accrued in the 3Q06 as a result of the closing of
the hedge contract for the reduction of natural gas price volatility.
International: decrease mainly due to:• Decrease in the international oil prices;• Lower trade oil volume in Argentina (oil workers strike);• Lower sales volume in Bolivia (repairs in the Santo Antonio pipe);• Write-off of well in the USA and expenses with seismic in
Argentina and USA
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263335
181
228
246260
2004 2005 2006
Oil Oil Products
NET EXPORTS OF OIL AND OIL PRODUCTS
Imports (thous barrels/day)Exports (thous barrels/day)
2006 includes ongoing exports
• The lower percentage of domestic crude participation in the throughput (due to the commercial advantages of processing light oil, reducing the fuel oil production) allowed an increase in the heavy oil exports and a decrease in the fuel oil exports;
• On the other side there was an increase in the light oil imports and stability in the oil products imports.
Volume Surplus 128 thous bpd in 4Q06 and 93 thous bpd in the year
267355
454262
215
270221
281
1Q06 2Q06 3Q06 4Q06
442459 510669 540
409
581 576548532488
446
559
354 373 408344
132115
13788
1Q06 2Q06 3Q06 4Q06
352 370450
10911894
2004 2005 2006
523
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Cash Breakdown (R$ millions)
(25.000)
(15.000)
(5.000)
5.000
15.000
25.000
'jun/05 'sept/05 'dec/05 'mar/06 'jun/06 'sept/06 'dec/06
(1.200)
(800)
(400)
0
400
800
1.200
1.600
Abroad In Brazil w/ FX correctionIn Brazil CDI CashFinancial Income
FX rate change* Δ-5.5% Δ5.3% Δ-7.2%
* Price of US Dollar at end of the period
Δ0.5% Δ-1.7%Δ-0.4%
Cas
h
• Financial revenues influenced by the US dollar indexed cash as hedge against the debt and costs linked to dollar.
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R$ million 12/31/2006 12/31/2005
Short Term debt (1) 13.074 11.116
Long Term Debt (1) 33.531 37.126
Total Debt 46.605 48.242
Cash and Cash Equivalents 27.829 23.417
Net Debt (2) 18.776 24.825
18% 17% 16%
28% 27%24%
26%
37%
32%
20%23%19%20%
19%
26%28%
Mar-05 Jun-05 Sept-05
Dec-05 Mar-06 Jun-06 Sept-06
Dec-06
Net Debt/Net CapitalizationShort-Term Debt/Total Debt
(1) Includes debt contracted through leasing contracts of R$ 2.540 million on December 31, 2006, and R$ 3.300 million on December31, 2005.(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.
LEVERAGE
Petrobras’ Leverage Ratio
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CONSOLIDATED CASH FLOW STATEMENT
R$ 3,3 billion cash increase.
4Q06 3Q06 (=) Net Cash from Operating Activities 13.244 10.209 (-) Cash used in Cap. Expend. (12.061) (8.341) (=) Free Cash Flow 1.183 1.868 (-) Cash used in Financing and Dividends 2.127 (62) Financing 2.128 (60) Dividends (1) (2) (=) Net Cash Generated in the Period 3.310 1.806 Cash at the Beginning of Period 24.519 22.713 Cash at the End of Period 27.829 24.519
R$ million
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INVESTMENTS
Primarily Investing in the development of oil and gas production capacity using own resources and partnerships.
2006 % 2005 % %Direct investments 29.769 90 22.927 89 30 Exploration & Production 15.314 51 13.934 54 10 Downstream 4.181 13 3.286 13 27 Gas & Energy 1.566 5 1.527 6 3 International 7.161 17 3.153 12 127 Distribution 642 2 495 2 30 Corporate 905 2 532 2 70 Special Purpose Companies (SPCs) 3.507 9 2.385 10 47 Ventures under Negociation 409 1 311 1 32 Project Finance 1 - 87 - -Total Investments 33.686 100 25.710 100 31
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6.646.126.326.077.24
4Q 05 1Q06 2Q06 3Q06 4Q06
Δ = 9% or US$ 0.60
US$/bbl
DOMESTIC LIFTING COSTS WITHOUT GOVERNMENT PARTICIPATION
MAIN CAUSES
Higher expenditures:• Drilling rigs• Specialized services and materials• Well interventions and repairs • Personnel expenses resulting from wage readjustment• High initial unitary costs from FPSO-Capixaba (Golfinho) and P-34 (Jubarte) projects, which will tend to
decrease with the production grow.
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Lower government participation in the quarter due to the decrease in the average reference priceof the domestic oil, linked to the international quotations.
LIFTING COSTS INCLUDING GOVERNMENT PARTICIPATION
3,0 3,4 4,3 6,0 5,4 5,4 6,1 6,3 6,1 6,6 7,24,0 5,1
6,47,7 8,4 9,7 10,0 11,0 11,4 11,5 10,4
59,769,569,6
24,828,8
38,2
47,551,6
61,556,9
61,8
-4
6
16
26
2002 2003 2004 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06
US$/boe
-20
0
20
40
60
Lifting Cost Participação Gov. Brent
7,08,5
10,7
13,6 13,9 15,216,1
17,3 17,5 18,1 17,6
65%64% 64%
59%
59%
57%
20
2.712.48
2.071.902.03
4Q 05 1Q 06 2Q 06 3Q 06 4Q 06
9% increase in 4Q06 relative to the previous period reflecting an increase in personnel expenses as due to Collective Work Agreement 2006/2007 and programmed stoppages
REFINING COSTS IN BRAZIL (US$bbl)
Δ = 9% or US$ 0.23
21
US$ billion 2005 2006 2006/ 2005Petrobras* 9,74 11,92 22,3%Chevron 14,10 17,14 21,6%ConocoPhillips 13,53 15,55 14,9%Exxon 36,13 39,50 9,3%Shell 25,31 25,44 0,5%BP 22,34 22,00 -1,5%Média 11,2%
NET INCOME COMPARISON 3Q06 Vs 4Q06 AND 2006 Vs 2005
Petrobras presented the higher y-o-y growth among majors...
...however 4Q06 results were affected by the decrease in Brent price.
US$ bilhões 3Q06 4Q06 4T06/3T06Exxon 10,49 10,25 -2,3%Shell 5,94 5,28 -11,1%ConocoPhillips 3,88 3,20 -17,5%Chevron 5,02 3,77 -24,8%Petrobras* 3,26 2,42 -25,8%BP 6,23 2,88 -53,8%Média -22,5%
* Petrobras results converted by the average dollar prices from their corresponding periods.Source: Evaluate Energy
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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: petroinvest@petrobras.com.brAv. República do Chile, 65 – 22o floor
20031-912 – Rio de Janeiro, RJ(55-21) 3224-1510 / 3224-9947
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