pbr-6k_20180803.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the

Securities Exchange Act of 1934

 

For the month of August, 2018

 

Commission File Number 1-15106

 

 

PETRÓLEO BRASILEIRO S.A. - PETROBRAS

(Exact name of registrant as specified in its charter)



Brazilian Petroleum Corporation - PETROBRAS

(Translation of Registrant's name into English)



Avenida República do Chile, 65 
20031-912 - Rio de Janeiro, RJ
Federative Republic of Brazil

(Address of principal executive office)


Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. 

Form 20-F ___X___ Form 40-F _______

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes _______ No___X____

 

 

 

 

 


FINANCIAL REPORT

1H-2018 RESULTS

Consolidated financial information revised by independent auditors, prepared in accordance with International Financial Reporting Standards - IFRS.

 

Rio de Janeiro – August 3rd, 2018

Results

Petrobras reported net income of R$ 17,033 million in 1H-2018, a growth of 257%, being the best semester result since 2011, determined by:

 

Increase in the Brent prices, which resulted in higher margins in oil exports and in oil product sales in Brazil, together with the depreciation of Brazilian real;

 

Reduction of interest expenses due to the decrease in indebtedness;

 

Lower general and administrative expenses and equipment idleness; and

 

On the other hand, the higher Brent prices led to an increase in production taxes.

The operational generation and the cash-in from divestments of US$ 4,914 million led to amortization and prepayment of debt, resulting in a significant 16% decrease in gross debt, which reached US$ 91,712 million and 13% in net debt of US$ 73,662 million.

Free Cash Flow * remained positive for the thirteenth quarter in a row, reaching R$ 29,366 million in 1H-2018, a 29% increase compared to the first half of the previous year, mainly due to the higher operating generation, combined with the lower investments.

Pursuant to the Shareholders' Remuneration Policy and taking into account the net income obtained in the quarter and the financial deleveraging target, the anticipation of interest on own capital, in the amount of R$ 0.05 per share, both for preferred and common shares, adopting the same amounts already distributed in 1Q-2018 of R$ 652.2 million. In view of that, the anticipation of interest on own capital totaled R$ 1,304.4 million in the semester.

Metric - Net Debt / Adjusted EBITDA

Adjusted EBITDA* increased 26% compared to 1H-2017, to R$ 55,835 million, due to higher oil products  domestic sales and oil export sales, both as a result of the increase in Brent prices and of the depreciation of Brazilian real. Adjusted EBITDA margin was 35%.

The net debt to LTM Adjusted EBITDA* ratio decreased to 3.23 in June 2018, compared to 3.67 in December 2017. Leverage* reduced from 51% to 50% in this period.

Excluding the provision for the Class Action agreement, the company would have presented the net debt / LTM Adjusted EBITDA ratio of 2.86, on a convergent path to the target of 2.5 until the end of 2018.

Operating highlights

Petrobras' total production of oil and natural gas in 1H-2018 was 2,669 thousand barrels of oil equivalent per day (boed), of which 2,572 thousand boed in Brazil, 4% less than 1H-2017, mainly reflecting divestments in Lapa and Roncador fields.

In this quarter, there was start-up of the first production system in the Transfer of Rights area, in Buzios field, with FPSOs P-74, and a new production system in the Campos Basin, in Tartaruga Verde field. It is also worth to highlight the increase of the exploratory portfolio, through the acquisition of areas with high potential, in the ANP Bid Rounds.

Compared to 1H-2017, domestic oil products production fell by 3%, while domestic oil products sales fell by 6% to 1,759 thousand barrels per day (bpd) and 1,823 thousand bpd, respectively, due to the reduction in sales of naphtha to Braskem and the loss of market share from gasoline to ethanol. Compared to 1Q-2018, there was an increase in the market share of diesel and gasoline, resulting in an increase in sales volume, especially diesel, which grew 15%.

The company maintained its position as a net exporter, with a balance of 372 thousand bpd in 1H-2018 (vs. 401 thousand bpd in 1H-2017).

 

* See definitions of Free Cash Flow, Adjusted EBITDA, LTM Adjusted EBITDA, Adjusted EBITDA Margin, Net Debt and Leverage in glossary and the respective reconciliations of such items in Liquidity and Capital Resources, Reconciliation of Adjusted EBITDA, LTM Adjusted EBITDA and Net Debt.

2

 

 

 


www.petrobras.com.br/ir

 

Contacts:

PETRÓLEO BRASILEIRO S.A. – PETROBRAS

Investor Relations Department

e-mail: petroinvest@petrobras.com.br / acionistas@petrobras.com.br

Av. República do Chile, 65 – 1002 – 20031-912 – Rio de Janeiro, RJ

Phone: 55 (21) 3324- 1510 / 9947 I 0800-282-1540

B3:  PETR3, PETR4

NYSE: PBR, PBRA

BCBA: APBR, APBRA

LATIBEX: XPBR, XPBRA

 

 

This release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to risks and uncertainties. The forward-looking statements, which address the Company’s expected business and financial performance, among other matters, contain words such as “believe,” “expect,” “estimate,” “anticipate,” “optimistic,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” and similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. There is no assurance that the expected events, trends or results will actually occur. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events or for any other reason.

 

* See definitions of Free Cash Flow, Adjusted EBITDA, Adjusted LTM EBITDA and Net debt in glossary and the respective reconciliations of such items in Liquidity and Capital Resources, Reconciliation of Adjusted EBITDA, Adjusted LTM EBITDA and Net debt.

 

 

 

3

 

 

 


 

* Table 01 - Main Items and Consolidated Economic Indicators

 

R$ million

 

Jan-Jun

 

 

 

 

 

2018

2017

2018 x 2017 (%)

2Q-2018

1Q-2018

2Q18 X 1Q18 (%)

2Q-2017

Sales revenues

158,856

135,361

17

84,395

74,461

13

66,996

Gross profit

58,396

45,155

29

31,623

26,773

18

21,369

Operating expenses

(23,915)

(15,895)

(50)

(14,957)

(8,958)

(67)

(6,379)

Operating income (loss)

34,481

29,260

18

16,666

17,815

(6)

14,990

Net finance income (expense)

(9,893)

(16,590)

40

(2,647)

(7,246)

63

(8,835)

Consolidated net income (loss) attributable to the shareholders of Petrobras

17,033

4,765

257

10,072

6,961

45

316

Basic and diluted earnings (losses) per share attributable to the shareholders of Petrobras

1.31

0.37

254

0.78

0.54

44

0.02

Market capitalization (Parent Company)

240,831

167,538

44

240,831

293,795

(18)

167,538

Adjusted EBITDA*

55,835

44,348

26

30,067

25,768

17

19,094

Adjusted EBITDA margin* (%)

35

33

2

36

35

1

29

Gross margin* (%)

37

33

4

37

36

1

32

Operating margin* (%)

22

22

20

24

(4)

22

Net margin* (%)

11

4

7

12

9

3

Total capital expenditures and investments*

21,259

22,994

(8)

11,311

9,948

14

11,452

Exploration & Production

18,660

18,303

2

9,717

8,943

9

9,089

Refining, Transportation and Marketing

1,519

1,864

(19)

930

588

58

1,057

Gas & Power

593

2,450

(76)

381

212

80

1,116

Distribution

195

148

32

111

84

32

77

Biofuel

31

33

(6)

11

20

(45)

15

Corporate

261

196

33

161

101

59

98

Average commercial selling rate for U.S. dollar

3.42

3.18

8

3.61

3.24

11

3.22

Period-end commercial selling rate for U.S. dollar

3.86

3.31

17

3.86

3.32

16

3.31

Variation of the period-end commercial selling rate for U.S. dollar (%)

16.6

1.5

15

16.0

0.5

16

4.4

Domestic basic oil products price (R$/bbl)

274.91

223.55

23

292.33

255.61

14

219.48

Brent crude (R$/bbl)

242.34

164.52

47

268.17

216.51

24

159.97

Brent crude (US$/bbl)

70.55

51.81

36

74.35

66.76

11

49.83

Domestic Sales Price

 

 

 

 

 

 

 

Crude oil (U.S. dollars/bbl) 

65.00

48.98

33

67.78

62.27

9

47.25

Natural gas (U.S. dollars/bbl) 

40.09

37.61

7

40.08

40.10

38.90

International Sales price

 

 

 

 

 

 

 

Crude oil (U.S. dollars/bbl) 

63.07

45.03

40

65.87

60.18

9

43.77

Natural gas (U.S. dollars/bbl) 

25.70

19.94

29

26.40

25.01

6

20.17

Total sales volume (Mbbl/d)**

 

 

 

 

 

 

 

Diesel

717

712

1

766

668

15

721

Gasoline

472

536

(12)

475

468

1

533

Fuel oil

42

53

(21)

35

49

(29)

50

Naphtha

94

145

(35)

91

97

(6)

125

LPG

228

231

(1)

238

218

9

238

Jet fuel

106

99

7

104

107

(3)

96

Others

164

167

(2)

167

161

4

170

Total oil products

1,823

1,943

(6)

1,876

1,768

6

1,933

Ethanol, nitrogen fertilizers, renewables and other products

64

105

(39)

65

63

3

112

Natural gas

345

335

3

349

340

3

350

Total domestic market

2,232

2,383

(6)

2,290

2,171

5

2,395

Crude oil, oil products and others exports

639

720

(11)

591

688

(14)

659

International sales

243

239

2

215

269

(20)

237

Total international market

882

959

(8)

806

957

(16)

896

Total

3,114

3,342

(7)

3,096

3,128

(1)

3,291

 

 

* See definition of Adjusted EBITDA, Adjusted EBITDA Margin, Gross Margin, Total capital expenditures and investments, Operating Margin and Net Margin in glossary and the respective reconciliation in Reconciliation of Adjusted EBITDA.21

** Operational data is not audited by the independent auditors.

4

 

 

 


 

1H-2018 x 1H-2017 Results*:

Net income for 1H-2018 was 3.6 times of the same period of previous year, reaching R$ 17,033 million. This result was possible due to the higher oil export margins, mainly due to the increase in Brent and the sale of oil products in Brazil, which more than compensated for the decrease in sales volume of oil products (mainly gasoline and naphtha) and export of oil.

 

The increase in operating expenses, due to higher sales expenses, negative results from oil hedges, lower gains from divestments and exchange rate variation on the Class Action balance, was offset by the reduction in equipment idleness, tax expenses and the improvement in financial results, reflecting the gain from the renegotiation of Eletrobras System debts and lower financing expenses.

 

Adjusted EBITDA and Free Cash Flow rose 26% and 29%, respectively, as a result of the increase in the domestic oil product sales margin and the oil export margin. In addition, the lower investments contributed to the increase in Free Cash Flow.

 

2Q-2018 x 1Q-2018 Results**:

Net income of R$ 10,072 million, compared to R$ 6,961 million in 1Q-2018, reflected the increase in the market share of diesel and gasoline, due to the reduction of imports by third parties, resulting in a 6% increase in sales in the domestic market, especially diesel, which grew 15%. There were also higher margins in oil exports, due to the increase in Brent and the sale of oil products, due to inventories formed at lower prices.

 

The increase in operating expenses, due to the negative result with the oil hedge and the price adjustments related to the closing of the sale of Roncador field and the exchange variation on the Class Action balance, was offset by the improvement in the financial result, reflecting the gain with the renegotiation of Eletrobras System debts and the reduction of financing expenses. It should also be noted that maintenance of administrative and sales expenses.

 

Adjusted EBITDA totaled R$ 30,067 million, an increase of 17% compared to R$ 25,768 million in 1Q-2018, due to higher sales margins.

 

Free Cash Flow reached R$ 16,373 million, an increase of 26%, reflecting the increase in operating cash generation due to higher oil export margins and sales of oil products in Brazil, combined with the lower investments.

 

* Additional information about operating results of 1H-2018 x 1H-2017, see item 6.

** Additional information related to operating results 2Q-2018 x 1Q-2018, see item 7.

5

 

 

 


 

 

Table 02 - Exploration & Production Main Indicators

 

R$ million

 

Jan-Jun

 

 

 

 

 

2018

2017

2018 x 2017 (%)

2Q-2018

1Q-2018

2Q18 X 1Q18 (%)

2Q-2017

Sales revenues

88,958

65,055

37

48,250

40,708

19

31,804

Brazil

87,173

63,598

37

47,294

39,879

19

31,109

Abroad

1,785

1,457

23

956

829

15

695

Gross profit

37,455

22,269

68

20,835

16,620

25

10,448

Brazil

36,618

21,794

68

20,415

16,203

26

10,265

Abroad

837

475

76

420

417

1

183

Operating expenses

(2,447)

(5,248)

53

(3,297)

850

(488)

(3,315)

Brazil

(2,171)

(4,205)

48

(3,188)

1,017

(413)

(2,395)

Abroad

(276)

(1,043)

74

(109)

(167)

35

(920)

Operating income (loss)

35,008

17,021

106

17,538

17,470

7,133

Brazil

34,447

17,589

96

17,227

17,220

7,871

Abroad

561

(568)

199

311

250

24

(738)

Net income (loss) attributable to the shareholders of Petrobras

23,128

11,371

103

11,592

11,536

4,871

Brazil

22,735

11,598

96

11,366

11,369

5,243

Abroad

393

(227)

273

226

167

35

(372)

Adjusted EBITDA of the segment*

49,515

32,844

51

26,856

22,659

19

15,014

Brazil

48,348

32,810

47

26,211

22,137

18

15,447

Abroad

1,167

34

3332

645

522

24

(433)

EBITDA margin of the segment (%)*

56

50

5

56

56

47

Capital expenditures of the segment

18,660

18,303

2

9,717

8,943

9

9,089

Average Brent crude (R$/bbl)

242.34

164.52

47

268.17

216.51

24

159.97

Average Brent crude (US$/bbl)

70.55

51.81

36

74.35

66.76

11

49.83

Sales price - Brazil

 

 

 

 

 

 

 

Crude oil (US$/bbl)

65.00

48.98

33

67.78

62.27

9

47.25

Sales price - Abroad

 

 

 

 

 

 

 

Crude oil (US$/bbl)

63.07

45.03

40

65.87

60.18

9

43.77

Natural gas (US$/bbl)

25.70

19.94

29

26.40

25.01

6

20.17

Crude oil and NGL production  (Mbbl/d)**

2,134

2,237

(5)

2,122

2,146

(1)

2,225

Brazil

2,074

2,171

(4)

2,063

2,085

(1)

2,160

Abroad

39

42

(7)

38

40

(5)

42

Non-consolidated production abroad

21

24

(13)

21

21

23

Natural gas production (Mbbl/d)**

535

554

(3)

537

534

1

551

Brazil

498

500

500

497

1

498

Abroad

37

54

(31)

37

37

53

Total production

2,669

2,791

(4)

2,659

2,680

(1)

2,776

Lifting cost - Brazil (US$/barrel)

 

 

 

 

 

 

 

excluding production taxes

11.10

11.02

1

10.68

11.51

(7)

11.21

including production taxes

24.01

19.54

23

24.43

23.58

4

18.71

Lifting cost - Brazil (R$/barrel)

 

 

 

 

 

 

 

excluding production taxes

38.04

34.87

9

38.94

37.15

5

36.09

including production taxes

84.45

62.03

36

92.68

76.26

22

61.34

Lifting cost – Abroad without production taxes (US$/barrel)

5.40

5.12

5

5.87

4.91

20

5.67

Production taxes - Brazil

18,881

11,603

63

10,914

7,967

37

5,401

Royalties

8,365

5,969

40

4,658

3,707

26

2,847

Special participation charges

10,426

5,540

88

6,211

4,215

47

2,507

Retention of areas

90

94

(4)

45

45

47

Production taxes - Abroad

36

46

(22)

19

17

12

15

 

*

 

* See definition of Adjusted EBITDA and Adjusted EBITDA Margin in Glossary and reconciliation in Reconciliation of Consolidated Adjusted EBITDA Statement by Segment.

** Operational data is not audited by the independent auditors.

6

 

 

 


RESULT BY BUSINESS SEGMENT

 

EXPLORATION & PRODUCTION

 

 

1H-2018 x 1H-2017

 

2Q-2018 x 1Q-2018

Results

 

 

The growth in gross profit reflects the increase in Brent and the depreciation of Real, partially offset by lower production and higher production expenses.

The higher operating income was due to the increase in gross profit and the result of the assignment of the rights of Lapa, Iara and Carcará areas and the lower idleness of equipment.

 

The increase in gross profit was due to the growth in Brent and the depreciation of Real, partially offset by higher production expenses.

Operating Profit remained stable, despite the growth in gross profit, due to the price adjustments related to the closing of Roncador's disposal and the 1Q-2018 result with the assignment of rights to Lapa, Iara and Carcará area.

 

 

 

 

 

 

 

Operating Results

 

 

Production

 

 

The production of oil, NGL and natural gas decreased compared to the same period of last year, mainly due to the divestments in Lapa and Roncador fields, the natural decline of production, the end of the Extended Well Test in Itapu field, in Santos Basin, and the production stoppage at Hadrian South field in the USA.

 

Oil, NGL and natural gas production in 2Q18 decreased compared to 1Q18, mainly due to the maintenance stops in the second quarter of 2018 and the 25% stake sale of Roncador field, events that were partially offset by the start of production in Búzios field, with P-74.

 

 

Lifting Cost

 

 

The dollar indicator increased mainly due to the reduction in production and the higher expenses with well intervention.

In addition, we had higher production taxes as a result of the increase in international oil prices.

 

The dollar indicator decreased due to the appreciation of the dollar on the expenses in Reais, in addition to the lower expenses with well intervention.

In addition, we had higher production taxes as a result of the increase in international oil prices.

 

7

 

 

 


*Table 03 - Refining, Transportation and Marketing Main Indicators

 

R$ million

 

Jan-Jun

 

 

 

 

 

2018

2017

2018 x 2017 (%)

2Q-2018

1Q-2018

2Q18 X 1Q18 (%)

2Q-2017

Sales revenues

120,760

105,230

15

65,431

55,329

18

51,301

Brazil (includes trading operations abroad)

125,193

107,645

16

67,793

57,400

18

52,747

Abroad

5,356

2,840

89

2,998

2,358

27

1,877

Eliminations

(9,789)

(5,255)

(86)

(5,360)

(4,429)

(21)

(3,323)

Gross profit

15,357

14,017

10

9,185

6,172

49

6,639

Brazil

15,218

14,117

8

9,016

6,202

45

6,690

Abroad

139

(100)

239

169

(30)

663

(51)

Operating expenses

(4,321)

(4,119)

(5)

(1,953)

(2,368)

18

(1,997)

Brazil

(4,279)

(4,031)

(6)

(1,936)

(2,343)

17

(1,967)

Abroad

(42)

(88)

52

(17)

(25)

32

(30)

Operating income (loss)

11,036

9,898

11

7,232

3,804

90

4,642

Brazil

10,939

10,086

8

7,080

3,859

83

4,723

Abroad

97

(188)

152

152

(55)

376

(81)

Net income (loss) attributable to the shareholders of Petrobras

8,315

7,530

10

5,259

3,056

72

3,470

Brazil

8,251

7,654

8

5,159

3,092

67

3,523

Abroad

64

(124)

152

100

(36)

378

(53)

Adjusted EBITDA of the segment*

14,703

13,953

5

8,843

5,860

51

6,730

Brazil

14,506

14,048

3

8,640

5,866

47

6,760

Abroad

197

(95)

307

203

(6)

3483

(30)

EBITDA margin of the segment (%)*

12

13

(1)

14

11

3

13

Capital expenditures of the segment

1,519

1,864

(19)

930

588

58

1,057

Domestic basic oil products price  (R$/bbl)

274.91

223.55

23

292.33

255.61

14

219.48

Imports (Mbbl/d)**

266

316

(16)

353

179

97

341

Crude oil import

131

116

13

180

82

120

139

Diesel import

25

5

-

50

-

10

Gasoline import

5

10

(50)

7

3

133

7

Other oil product import

105

185

(43)

116

94

23

185

Exports (Mbbl/d)**

638

717

(11)

591

686

(14)

654

Crude oil export

462

548

(16)

429

496

(14)

487

Oil product export

176

169

4

162

190

(15)

167

Exports (imports), net

372

401

(7)

238

507

(53)

313

Refining Operations - Brazil (Mbbl/d)**

 

 

 

 

 

 

 

Oil products output

1,759

1,805

(3)

1,841

1,679

10

1,798

Reference feedstock 

2,176

2,176

2,176

2,176

2,176

Refining plants utilization factor (%) 

76

77

(1)

81

72

9

78

Processed feedstock  (excluding NGL)

1,661

1,686

(1)

1,752

1,569

12

1,691

Processed feedstock

1,717

1,735

(1)

1,810

1,623

12

1,745

Domestic crude oil as % of total processed feedstock

94

94

93

94

(1)

93

Refining Operations - Abroad (Mbbl/d)**

 

 

 

 

 

 

 

Total processed feedstock

110

84

31

110

109

1

112

Oil products output

106

86

23

110

102

8

113

Reference feedstock 

100

100

100

100

100

Refining plants utilization factor (%) 

102

79

23

103

101

2

102

Refining cost - Brazil

 

 

 

 

 

 

 

Refining cost (US$/barrel)

2.64

2.95

(11)

2.36

2.96

(20)

2.86

Refining cost  (R$/barrel)

9.05

9.38

(4)

8.57

9.58

(11)

9.28

Refining cost - Abroad (US$/barrel)

4.51

4.53

4.46

4.55

(2)

4.18

Sales volume (includes sales to BR Distribuidora and third-parties)**

 

 

 

 

 

 

 

Diesel

648

656

(1)

709

586

21

663

Gasoline

408

465

(12)

419

396

6

462

Fuel oil

42

57

(26)

35

50

(30)

57

Naphtha

94

145

(35)

91

97

(6)

125

LPG

228

231

(1)

238

217

9

239

Jet fuel

120

112

7

118

122

(4)

109

Others

181

183

(1)

181

179

1

181

Total domestic oil products (mbbl/d)

1,720

1,849

(7)

1,791

1,648

9

1,836

 

 

* See definition of Adjusted EBITDA and Adjusted EBITDA Margin in Glossary and reconciliation in Reconciliation of Consolidated Adjusted EBITDA Statement by Segment.

** Operational data is not audited by the independent auditors.

8

 

 

 


 

REFINING, TRANSPORTATION AND MARKETING

 

 

1H-2018 x 1H-2017

 

2Q-2018 x 1Q-2018

Results

 

 

The increase in operating income was due to the higher sales margin of oil products as a result of the realization of inventories formed at lower prices. On the other hand, there were lower sales volumes.

 

The increase in operating income was due to the higher sales margin of oil products due to the realization of inventories formed at lower prices. In addition, there was an increase in sales volume and the market share of diesel and gasoline. Operating expenses were lower due to the reversal of impairment at the closing of the sale of Petroquímica Suape.

 

 

 

 

 

Operating Performance

 

 

Imports and Exports of Crude Oil and Oil Products

 

 

There was a reduction in net oil exports due to lower production.

Net export of oil products was due to the loss of market share from gasoline to ethanol and a reduction in sales of naphtha to Braskem.

 

The export of oil decreased mainly due to increased processed feedstock. There was also an increase in the oil imports due to higher processed feedstock and to the imported volume for the next quarter.

There was net import of oil products due to the increase in sales in the domestic market, mainly of diesel and gasoline.

 

Refining Operations

 

 

Processed feedstock was lower, mainly due to gasoline loss of market to ethanol.

 

 

Processed feedstock was higher, mainly due to the reduction of imports by third parties.

 

Refining Cost

 

 

The reduction in the indicator is due to cost efficiencies.

 

Refining cost was lower mainly reflecting an increase in processed feedstock.

 

 

 

 

9

 

 

 


 

 

Table 04 - Gas & Power Main Indicators

 

 

 

R$ million

 

Jan-Jun

 

 

 

 

 

2018

2017

2018 x 2017 (%)

2Q-2018

1Q-2018

2Q18 X 1Q18 (%)

2Q-2017

Sales revenues

19,596

16,971

15

10,398

9,198

13

9,268

Brazil

19,519

16,921

15

10,347

9,172

13

9,240

Abroad

77

50

54

51

26

96

28

Gross profit

6,121

4,984

23

2,756

3,365

(18)

2,541

Brazil

6,118

4,981

23

2,757

3,361

(18)

2,545

Abroad

3

3

(1)

4

(125)

(4)

Operating expenses

(4,718)

3,561

(232)

(2,144)

(2,574)

17

4,449

Brazil

(4,697)

3,596

(231)

(2,133)

(2,564)

17

4,475

Abroad

(21)

(35)

40

(11)

(10)

(10)

(26)

Operating income (loss)

1,403

8,545

(84)

612

791

(23)

6,990

Brazil

1,420

8,577

(83)

623

797

(22)

7,020

Abroad

(17)

(32)

47

(11)

(6)

(83)

(30)

Net income (loss) attributable to the shareholders of Petrobras

752

5,624

(87)

271

481

(44)

4,603

Brazil

796

5,602

(86)

298

498

(40)

4,599

Abroad

(44)

22

(300)

(27)

(17)

(59)

4

Adjusted EBITDA of the segment*

2,613

3,139

(17)

1,297

1,316

(1)

883

Brazil

2,627

3,149

(17)

1,307

1,320

(1)

893

Abroad

(14)

(10)

-

(10)

(4)

(150)

(10)

EBITDA margin of the segment (%)*

13

18

(5)

12

14

(2)

10

Capital expenditures of the segment

593

2,450

(76)

381

212

80

1,116

Physical and financial indicators - Brazil**

 

 

 

 

 

 

 

Electricity sales (Free contracting market - ACL) - average MW

888

778

14

873

903

(3)

797

Electricity sales (Regulated contracting market - ACR) - average MW

2,788

3,058

(9)

2,788

2,788

3,058

Generation of electricity - average MW

2,108

2,351

(10)

2,248

1,966

14

2,682

Electricity price in the spot market - Differences settlement price (PLD) - R$/MWh

237

221

7

288

186

55

286

Avaliability of Brazilian natural gas (Mbbl/d)

321

334

(4)

318

324

(2)

338

LNG imports (Mbbl/d)***

22

17

29

29

14

107

21

Natural gas imports (Mbbl/d)

141

132

7

143

140

2

146

 

*

 

 

 

 

* See definition of Adjusted EBITDA and Adjusted EBITDA Margin in Glossary and reconciliation in Reconciliation of Consolidated Adjusted EBITDA Statement by Segment.

** Operational data is not audited by the independent auditors.

*** Imports of regasified LNG have been considered as from the RMF 2Q-2018. Until the RMF 1Q-2018, it considered imports of LNG, regardless of its regasification within the analyzed period.

10

 

 

 


 

 

GAS & POWER

 

 

1H-2018 x 1H-2017

 

2Q-2018 x 1Q-2018

Results

 

 

Slightly higher gas sales prices led to an increase in gross profit. Nevertheless, operating income was lower mainly due to higher selling expenses resulting from the payment of tariffs for the use of gas pipelines, to the provision for expected credit losses in the gas supply to the thermoelectric segment in the North region, as well as to the gain on the sale of NTS in 2Q17.

 

 

Despite higher volumes and prices of natural gas, gross profit dropped due to higher acquisition costs, with LNG import volume, as a result of lower delivery of domestic gas and higher consumption by the thermoelectrical market.

The decrease in operational income was due to the provision for expected credit losses in the gas supply to the thermoelectric segment in the North region

 

 

Operating Performance

 

 

Physical and Financial Indicators

 

 

Increased imports of Bolivian natural gas and LNG due to lower domestic gas availability.

There was an increase in sales in the Free Contracting Environment (ACL) due to short-term market opportunities. The volume reduction in the Regulated Contracting Environment (RCA) is due to the termination of contracts.

The volume of energy generation showed a small drop as a result of a higher acquisition cost of the gas.

 

Increased imports of Bolivian natural gas and LNG due to higher demand from the thermoelectric segment and lower availability of domestic gas.

The negative variation in sales in the ACL is due to a reduction in the expected demand for contracts with third parties and lower realization of additional sales.

The increase in energy generation was a reflection of an unfavorable hydrological scenario in 2Q-2018, which caused increases in the Settlement Price of Differences (PLD) and in the thermoelectric dispatch.

 

11

 

 

 


 

 

Table 05 - Distribution Main Indicators

 

R$ million

 

Jan-Jun

 

 

 

 

 

2018

2017

2018 x 2017 (%)

2Q-2018

1Q-2018

2Q18 X 1Q18 (%)

2Q-2017

Sales revenues

48,090

41,239

17

24,674

23,416

5

20,327

Brazil

45,562

39,098

17

23,321

22,241

5

19,258

Abroad

2,528

2,141

18

1,353

1,175

15

1,069

Gross profit

2,944

2,869

3

1,373

1,571

(13)

1,326

Brazil

2,758

2,690

3

1,278

1,480

(14)

1,238

Abroad

186

179

4

95

91

4

88

Operating expenses

(2,133)

(1,952)

(9)

(1,104)

(1,029)

(7)

(967)

Brazil

(2,007)

(1,867)

(7)

(1,038)

(969)

(7)

(935)

Abroad

(126)

(85)

(48)

(66)

(60)

(10)

(32)

Operating income (loss)

811

917

(12)

269

542

(50)

359

Brazil

751

824

(9)

240

511

(53)

304

Abroad

60

93

(35)

29

31

(6)

55

Net income (loss) attributable to the shareholders of Petrobras

393

604

(35)

122

271

(55)

235

Brazil

353

542

(35)

102

251

(59)

198

Abroad

40

62

(35)

20

20

37

Adjusted EBITDA of the segment*

1,038

1,138

(9)

378

660

(43)

459

Brazil

953

1,043

(9)

337

616

(45)

414

Abroad

85

95

(11)

41

44

(7)

45

EBITDA margin of the segment (%)*

2

3

(1)

2

3

2

 

 

 

 

 

 

 

 

Capital expenditures of the segment

195

148

32

111

84

32

77

 

 

 

 

 

 

 

 

Sales Volumes - Brazil (Mbbl/d)**

 

 

 

 

 

 

 

Diesel

290

290

292

288

2

295

Gasoline

168

190

(13)

165

170

(3)

191

Fuel oil

31

42

(26)

25

38

(35)

39

Jet fuel

53

50

5

51

54

(5)

48

Others

77

86

(10)

79

75

5

87

Total domestic oil products

619

659

(6)

612

625

(2)

659

 

*

 

* See definition of Adjusted EBITDA and Adjusted EBITDA Margin in Glossary and reconciliation in Reconciliation of Consolidated Adjusted EBITDA Statement by Segment.

** Operational data is not audited by the independent auditors.

 

12

 

 

 


 

 

 

DISTRIBUTION

 

 

1H-2018 x 1H-2017

 

2Q-2018 x 1Q-2018

Results

 

 

Higher gross profit reflected the increase in average sales margins, mitigated by the lower sale volumes. Operating income decreased mainly due to the impact of the reversals in 2017 of the provision for indemnities of Voluntary Separation Plan, due to the withdrawals in the period, associated to the registration of the provision in 2018 for the program reopening.

 

The decrease in gross profit was due to the reduction in margins mainly to the loss of inventories due to the decrease in the price of diesel, as a result of the truck drivers' strike.

 

 

 

 

13

 

 

 


Liquidity and Capital Resources

Table 06 – Liquidity and Capital Resources

 

R$ million

 

Jan-Jun

 

 

 

 

2018

2017

2Q-2018

1Q-2018

2Q-2017

Adjusted cash and cash equivalents* at the beginning of period

80,731

71,664

70,267

80,731

63,783

Government bonds and time deposits with maturities of more than 3 months  at the beginning of period

(6,237)

(2,556)

(3,905)

(6,237)

(2,909)

Cash and cash equivalents at the beginning of period

74,494

69,108

66,362

74,494

60,874

Net cash provided by (used in) operating activities

47,813

42,878

25,595

22,218

19,653

Net cash provided by (used in) investing activities

666

(11,311)

28

638

(3,049)

Capital expenditures, investments in investees and dividends received

(18,447)

(20,156)

(9,222)

(9,225)

(10,299)

     Proceeds from disposal of assets (divestment)

16,880

9,455

9,378

7,502

7,582

     Investments in marketable securities

2,233

(610)

(128)

2,361

(332)

(=) Net cash provided by operating and investing activities

48,479

31,567

25,623

22,856

16,604

Net financings

(64,806)

(23,487)

(34,199)

(30,607)

(2,257)

     Proceeds from long-term financing

27,231

43,988

7,973

19,258

30,960

     Repayments

(92,037)

(67,475)

(42,172)

(49,865)

(33,217)

Dividends paid to non- controlling interest

(903)

(410)

(903)

(410)

Acquisition of non-controlling interest

(23)

(142)

(144)

121

(12)

Effect of exchange rate changes on cash and cash equivalents

8,295

1,334

8,797

(502)

3,171

Cash and cash equivalents at the end of period

65,536

77,970

65,536

66,362

77,970

Government bonds and time deposits with maturities of more than 3 months  at the end of period

4,060

3,317

4,060

3,905

3,317

Adjusted cash and cash equivalents* at the end of period

69,596

81,287

69,596

70,267

81,287

Reconciliation of  Free Cash Flow

 

 

 

 

 

Net cash provided by (used in) operating activities

47,813

42,878

25,595

22,218

19,653

Capital expenditures, investments in investees and dividends received

(18,447)

(20,156)

(9,222)

(9,225)

(10,299)

Free cash flow*

29,366

22,722

16,373

12,993

9,354

 

As of June 30, 2018, the balance of cash and cash equivalents was R$ 65,536 million and the balance of adjusted cash and cash equivalents was R$ 69,596 million. The funds provided by net cash of operating activities of R$ 47,813 million, funding of R$ 27,231 million, receipts from the sale of assets of R$ 16,880 million were allocated to comply with debt service and financing of investments in the business areas.

Cash generation from operating activities was R$ 47,813 million, 12% higher than 1H-2017, due to the increase in oil exports margins and sale of oil product margins in the domestic market, partially offset by the decrease in volumes.

Capital expenditures totaled R$ 18,447 million in 1H-2018, a decrease of 8% compared to 1H-2017, being 89% in E&P business segment.

The above mentioned factors resulted in a positive Free Cash Flow* for the thirteenth consecutive quarter, from R$ 16,373 million in 2Q-2018 and R$ 29,366 million in 1H-2018, 29% higher than the first half of the previous year.

In 1H-2018, the company raised R$ 27,231 million, of which: (i) the offering of global notes in the international capital markets (maturities in 2029) amounting to R$ 6,359 million (US$ 1,962 million); (ii) funding in the national and international banking market, with an average term of 6.5 years, in the total amount of R$ 17,038 million and (iii) funding of R$ 3,549 in financing with export credit agencies.

In addition, the Company settled several loans and financing, with highlights to: (i) the repurchase and / or redemption of R$ 41,228 million (US$ 11,760 million) of global notes in the international capital market, with maturities between 2019 and 2043 with the payment of net premium to the holders of securities that delivered their securities in the operation in the amount of R$ 1,154 million; (ii) the prepayment of R$ 31,809 million of loans in the domestic and international banking market; and (iii) prepayment of R$ 2,385 million of financing from the BNDES.

Repayments of principal and interest were, respectively, R$ 81,506 million and R$ 10,531 million, totaling R$ 92,037 million in 1H-2018 and the nominal cash flow (cash view), including principal and interest payments, by maturity, is set out in R$ million, below:

 

Table 07 - Nominal cash flow including principal and interest payments

 

 

Consolidated

Maturity

2018

2019

2020

2021

2022

2023 and thereafter

06.30.2018

12.31.2017

Principal

4,572

10,403

25,361

32,404

51,324

233,384

357,448

365,632

Interest

10,479

20,553

19,771

18,351

16,356

128,096

213,606

200,887

Total

15,051

30,956

45,132

50,755

67,680

361,480

571,054

566,519

*

 

* See reconciliation of Adjusted Cash and Cash Equivalents in Net debt and definition of Adjusted Cash and Cash Equivalents and Free Cash Flow in glossary.

14

 

 

 


 

 

 

Consolidated debt

 

Between January and June 2018, gross debt in Reais fell 2%, mainly as a result of debt repayment, net debt increased 1% due to the depreciation of the real against the US dollar and the average maturity of the debt was 9.11 years (8.62 years as of December 31, 2017). The average financing rate increased from 6.1% in December 2017 to 6.2% in June 2018.

Current debt and non-current debt include finance lease obligations of R$ 87 million and R$ 666 million as of December 31, 2017, respectively (R$ 84 million and R$ 675 million on December 31, 2017).

The ratio between net debt and the LTM Adjusted EBITDA* decreased from 3.67 as of December 31, 2017 to 3.23 as of June 30, 2018 due to asset sales and positive free cash flow.

Table 08 - Consolidated debt in reais

 

R$ million

 

06.30.2018

12.31.2017

    Δ%

 Current debt 

15,353

23,244

(34)

Non-current debt

338,270

338,239

Total

353,623

361,483

(2)

  Cash and cash equivalents

65,536

74,494

(12)

  Government securities and time deposits (maturity of more than 3 months)

4,060

6,237

(35)

Adjusted cash and cash equivalents*

69,596

80,731

(14)

Net debt*

284,027

280,752

1

Net debt/(net debt+shareholders' equity) - Leverage

50%

51%

(1)

Total net liabilities*

780,686

750,784

4

(Net third parties capital / total net liabilities)

63%

64%

(1)

Net debt/Adjusted EBITDA ratio*

3.23

3.67

(12)

Average interest rate (% p.a.)

6.2

6.1

1

Net debt/Operating Cash Flow ratio*

3.11

3.25

(4)

Table 09 - Consolidated debt in dollar

 

U.S.$ million

 

06.30.2018

12.31.2017

    Δ%

Current debt 

3,982

7,026

(43)

Non-current debt

87,730

102,249

(14)

Total

91,712

109,275

(16)

Net debt*

73,662

84,871

(13)

Average maturity of debt (years)

9.11

8.62

0.49

*

Table 10 - Consolidated debt by rate, currency and maturity

 

R$ million

 

06.30.2018

12.31.2017

    Δ%

Summarized information on financing

 

 

 

By rate

 

 

 

Floating rate debt

179,529

176,943

1

Fixed rate debt

173,341

183,781

(6)

Total

352,870

360,724

(2)

By currency

 

 

 

Brazilian Real

66,396

71,129

(7)

US Dollars

263,624

263,614

Euro

13,593

17,773

(24)

Other currencies

9,257

8,208

13

Total

352,870

360,724

(2)

By maturity

 

 

 

2018

10,203

23,160

(56)

2019

10,007

21,423

(53)

2020

24,811

31,896

(22)

2021

31,838

42,168

(24)

2022

50,998

59,594

(14)

2023 on

225,013

182,483

23

Total

352,870

360,724

(2)

 

 

 

* See definition of Adjusted Cash and Cash Equivalents, Net Debt, Total Net Liabilities, Adjusted EBITDA, OCF and Leverage in glossary and reconciliation in Reconciliation of LTM Adjusted EBITDA and LTM OCF.

15

 

 

 


ADDITIONAL INFORMATION

 

 

1.

Reconciliation of Adjusted EBITDA

 

Our Adjusted EBITDA is a performance measure computed by using the EBITDA (net income before net finance income (expense), income taxes, depreciation, depletion and amortization). Petrobras presents the EBITDA according to Instrução CVM nº 527 of October 4, 2012, adjusted by items not considered as part of Company’s primary business, which include results in equity-accounted investments, results from disposal and write-offs of assets, impairment and cumulative foreign exchange adjustments reclassified to the income statement.

In calculating Adjusted EBITDA, we adjusted our EBITDA for the periods of 2018 by adding foreign exchange gains and losses resulting from provisions for legal proceedings denominated in foreign currencies. Legal provisions in foreign currencies primarily consist of Petrobras’s portion of the class action settlement provision created in December 2017. The foreign exchange gains or losses on legal provisions are presented in other income and expenses for accounting purposes but management does not consider them to be part of the Company’s primary business, as well as they are substantially similar to the foreign exchange effects presented within net finance income. No adjustments have been made to the comparative measures presented as amounts were not significant in these periods.

The LTM Adjusted EBITDA reflects the sum of the last twelve months of Adjusted EBITDA and represents an alternative measure to our net cash provided by operating activities. This measure is used to calculate the metric Net Debt/LTM Adjusted EBITDA, which is established in the Business Plan 2018-2022, to support management’s assessment of liquidity and leverage.

EBITDA, Adjusted EBITDA and LTM Adjusted EBITDA are not defined in the International Financial Reporting Standards – IFRS. Our calculation may not be comparable to the calculation of Adjusted EBITDA by other companies and it should not be considered as a substitute for any measure calculated in accordance with IFRS. These measures must be considered in conjunction with other measures and indicators for a better understanding of the Company's operational performance and financial conditions.

Table 11 - Reconciliation of Adjusted EBITDA

 

R$ million

 

Jan-Jun

 

 

 

 

 

2018

2017

2017 X 2016 (%)

2Q-2018

1Q-2018

2Q18 X 1Q18 (%)

2Q-2017

Net income (loss)

16,816

5,099

230

9,691

7,125

36

292

Net finance income (expense)

9,893

16,590

(40)

2,647

7,246

(63)

8,835

Income taxes

8,593

8,798

(2)

4,638

3,955

17

6,478

Depreciation, depletion and amortization

22,020

21,148

4

10,963

11,057

(1)

10,382

EBITDA

57,322

51,635

11

27,939

29,383

(5)

25,987

Share of earnings in equity-accounted investments

(821)

(1,227)

33

(310)

(511)

39

(615)

Impairment losses / (reversals)

(119)

207

(157)

(177)

58

(405)

228

Realization of cumulative translation adjustment

116

(100)

Gains/ losses on disposal/ write-offs of non-current assets*

(2,123)

(6,383)

67

1,138

(3,261)

135

(6,506)

Foreign exchange gains or losses on material provisions for legal proceedings

1,576

1,477

99

1,392

Adjusted EBITDA

55,835

44,348

26

30,067

25,768

17

19,094

Income Tax

(8,593)

(8,798)

2

(4,638)

(3,955)

(17)

(6,478)

Allowance of impairment of other receivables

1,483

1,458

2

1,040

443

135

1,464

Change in Accounts receivables

(5,034)

383

(1,414)

(6,844)

1,810

(478)

(1,130)

Change in inventory

(6,526)

823

(893)

(5,384)

(1,142)

(371)

(391)

Change in suppliers

1,046

(2,381)

144

2,403

(1,357)

277

909

Change in deferred income tax, social contribution

1,164

5,399

(78)

531

633

(16)

3,905

Change in tax and contributions

2,575

3,278

(21)

2,111

464

355

3,242

Other assets and liabilities

5,863

(1,632)

459

6,309

(446)

1,515

(962)

Funds generated by operating activities (OCF)

47,813

42,878

12

25,595

22,218

15

19,653

 

 

 

 

 

 

 

 

Adjusted EBITDA margin (%)

35

33

2

36

35

1

29

 

 

 

 

 

 

 

 

 

 

* In 2018, it primarily includes the results with divestments. In 2017, it primarily includes returned areas, canceled projects and the gain with NTS divestment.

 

 

16

 

 

 


 

 

2.

Reconciliation of Operating Cash Flow

 

 

 

 

 

Table 12 - Reconciliation of OCF

 

R$ million

 

Last Twelve Months

 

06.30.2018

31.12.2017

Net income (loss)

12,094

377

Net finance income (expense)

24,902

31,599

Income taxes

5,592

5,797

Depreciation, depletion and amortization

43,350

42,478

EBITDA

85,938

80,251

Share of earnings in equity-accounted investments

(1,743)

(2,149)

Impairment losses / (reversals)

3,536

3,862

Realization of cumulative translation adjustment

116

Gains/ losses on disposal/ write-offs of non-current assets*

(1,263)

(5,523)

Foreign exchange gains or losses on material provisions for legal proceedings

1,576

-

Adjusted EBITDA

88,044

76,557

Income Tax

(5,592)

(5,797)

Allowance of impairment of other receivables

2,296

2,271

Change in Accounts receivables

(8,557)

(3,140)

Change in inventory

(8,479)

(1,130)

Change in suppliers

3,267

(160)

Change in deferred income tax, social contribution

(2,783)

1,452

Change in tax and contributions

6,208

6,911

Other assets and liabilities

16,998

9,503

Funds generated by operating activities (OCF)

91,402

86,467

 

*

 

 

* In 2018, it primarily includes the results with divestments. In 2017, it primarily includes returned areas, canceled projects and the gain with NTS divestment.

17

 

 

 


ADDITIONAL INFORMATION

 

 

3.

Impact of our Cash Flow Hedge policy

 

Table 13 - Impact of our Cash Flow Hedge policy

 

R$ million

 

Jan-Jun

 

 

 

 

 

2018

2017

2018 x 2017 (%)

2Q-2018

1Q-2018

2Q18 X 1Q18 (%)

2Q-2017

Total inflation indexation and foreign exchange variation

(30,575)

(3,237)

(844)

(29,640)

(935)

(3,070)

(8,388)

Deferred Foreign Exchange Variation recognized in Shareholders' Equity

31,688

2,282

1,288

30,590

1,099

2,684

7,741

Reclassification from Shareholders’ Equity to the Statement of Income

(5,507)

(4,806)

(15)

(2,847)

(2,661)

(7)

(2,371)

Net Inflation indexation and foreign exchange variation

(4,394)

(5,761)

24

(1,897)

(2,497)

24

(3,018)

 

 

The reclassification of foreign exchange variation expense from Shareholders’ Equity to the Income Statement in the 1H-2018 was R$ 5,507 million, a increase of 15% compared to 1H-2017 due to the exchange rate.

The small increase in the reclassification of expenses with foreign exchange variation in Shareholders’ Equity for the 2Q-2018 result (R$ 2,847 million) in relation to the prior quarter (R$ 2,661 million), reflecting the exports done, protected by debts in dollars, with lower spread of foreign exchange (R$/US$) between initial dates of the designations and the actual exports dates.

Additional hedging relationships may be revoked or additional reclassification adjustments from equity to the income statement may occur as a result of changes in forecast export prices and export volumes following a review of the Company’s business plan. Based on a sensitivity analysis considering a US$ 10/barrel decrease in Brent prices stress scenario, when compared to the Brent price projections in our most recent update of the 2018-2022 Business and Management Plan (Plano de Negócios e Gestão – PNG), no reclassification adjustment from equity to the income statement would occur.

The expected annual realization of the foreign exchange variation balance in shareholders’ equity, on June 30, 2018, is set out below:

 

Table 14 - Expectation of exports volumes realization

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

2018

2019

2020

2021

2022

2023

2024

2025 a 2027

Total

 

 

 

 

 

 

 

 

 

 

Expected realization

(6,623)

(11,528)

(10,135)

(9,653)

(10,534)

(6,218)

(3,216)

1,662

(56,245)

 

18

 

 

 


ADDITIONAL INFORMATION

 

4.

Assets and Liabilities subject to Exchange Variation

 

The Company has assets and liabilities subject to foreign exchange rate variation, for which the main gross exposures are the Brazilian Real relative to the U.S. dollar and the U.S. dollar relative to the Euro. Beginning in mid-May 2013, the Company extended the use of hedge accounting to hedge highly probable future exports.

The Company designates hedging relationships between exports and its long-term debt obligations (denominated in U.S. dollars) to, simultaneously, recognize the effects of the existing natural foreign exchange hedge between those operations in its financial statements. Through the extension of the hedge accounting practice, foreign exchange gains or losses, generated by foreign exchange variation, are recognized in our shareholders’ equity and will only affect the statement of income at the moment of future exports realization.

During 2017, Petrobras, through its affiliate Petrobras Global Trading B.V. (PGT), made a cross currency swap derivative, aiming to protect the exposure to pounds against U.S. dollar, in view of the bond with notional value of GBP 700 million and GBP 600 million with maturity to December, 2026 and 2034 respectively. The Company does not have the intention to liquidate those transactions before the maturity date.

In 2Q-2018, Petrobras, through its indirect subsidiary Petrobras Global Trading B.V., entered into a non-forward forward derivative operation, in order to hedge against the euro versus the dollar exposure, due to the issue of bonds. The company has no intention to settle such contracts before the maturity date.

The balances of assets and liabilities in foreign currency of our foreign subsidiaries are not included in our foreign exchange rate variation exposure below when transacted in a currency equivalent to their respective functional currencies.

As of June 30, 2018, the Company had a net liability exposure to foreign exchange rates, of which the main exposure is the relationship between the U.S. dollar and the Brazilian real.

Table 15 - Assets and Liabilities subject to exchange variation

ITEMS

R$ million

 

06.30.2018

12.31.2017

Assets

47,409

44,013

Liabilities

(292,906)

(261,358)

Hedge Accounting

226,068

193,189

Cross Currency Swap

6,616

5,813

Non Delivery Forward (NDF)

12,159

Total

(654)

(18,343)

Table 16 - Assets and Liabilities subject to exchange variation by currency

BY CURRENCY

R$ million

 

06.30.2018

12.31.2017

Real/ U.S. Dollars

(2,428)

(4,208)

Real/ Euro

(13)

(76)

Real/ Pound Sterling

(76)

(69)

U.S. Dollars/ Yen

(390)

(316)

U.S. Dollars/ Euro

1,685

(14,172)

U.S. Dollars/ Pound Sterling*

568

498

Total

(654)

(18,343)

Table 17 - Foreign exchange and inflation indexation charges

 

R$ million

 

Jan-Jun

 

 

 

 

Foreign exchange and inflation indexation charges

2018

2017

2018 x 2017 (%)

2Q-2018

1Q-2018

2Q18 X 1Q18 (%)

2Q-2017

Foreign exchange variation Dollar x Euro

125

(1,468)

109

482

(357)

235

(1,171)

Foreign exchange variation Real x Dollar

877

46

1807

704

174

305

245

Foreign exchange variation Dollar x Pound Sterling

(125)

(181)

31

(282)

157

(280)

(117)

Reclassification of hedge accounting from Shareholders’ Equity to the Statement of Income

(5,507)

(4,806)

(15)

(2,847)

(2,661)

(7)

(2,371)

Foreign exchange variation Real x Euro

(5)

(55)

91

(4)

(1)

(300)

(54)

Others

241

703

(66)

50

191

(74)

450

Net Inflation indexation and foreign exchange variation

(4,394)

(5,761)

24

(1,897)

(2,497)

24

(3,018)

 

19

 

 

 


ADDITIONAL INFORMATION

 

5.

Special Items

 

Table 18 – Special itens

 

R$ million

For the first half of

 

 

 

 

 

2018

2017

 

Items of Income Statement

2Q-2018

1Q-2018

2Q-2017

 

 

 

 

 

 

 

2,123

6,383

Gains (losses) on Disposal of Assets

Other income (expenses)

(1,138)

3,261

6,506

2,068

Renegotiation of Eletrobras System debts

Several

2,068

(1,576)

Foreign exchange gains or losses on material provisions for legal proceedings

Other income (expenses)

(1,477)

(99)

140

(182)

Impairment of assets and investments

Several

204

(64)

(140)

(116)

Cumulative translation adjustment – CTA

Other income (expenses)

(4,331)

Impacts of Brazilian federal settlement programs on Income Taxes

Several

(4,331)

(1,375)

(72)

Impairment of trade receivables from companies in the isolated electricity system

Selling expenses

(967)

(408)

(181)

(261)

96

(Losses)/ Gains with judicial contingencies

Other income (expenses)

(261)

741

(125)

(129)

State Tax Amnesty Program

Other taxes

(45)

(80)

(129)

(12)

669

Voluntary Separation Incentive Plan – PIDV

Other income (expenses)

11

(23)

394

286

Revenue with a contractual penalty for the non-realization of the sale of Liquigás

Other income (expenses)

286

1

89

Refundt of values – "Lava Jato" Operation

Other income (expenses)

1

89

(818)

Vitória 10.000 drillship

Other taxes

(818)

(3,972)

Federal Debt Settlement Programs

Share of earnings in equity- acconted investments

(3,972)

1,269

(2,383)

Total

 

(1,344)

2,613

(1,841)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impact of the impairment of assets and investments on the Company´s Income Statement:

 

 

 

 

 

 

 

119

(207)

Impairment

 

177

(58)

(228)

21

25

Share of earnings in equity-accounted investments

 

27

(6)

88

140

(182)

Impairment of assets and investments

 

204

(64)

(140)

 

These special items are related to the Company’s businesses and based on Management’s judgement have been highlighted and are presented as additional information to provide a better understanding of the Company’s performance. These items are presented when relevant and do not necessarily occur in all periods.

20

 

 

 


 

 

 

ADDITIONAL INFORMATION

6. Results 1H-2018 x 1H-2017:

Sales revenues of R$ 158,856 million, R$ 23,495 million higher than the same period of 2017 (R$ 135,361 million), mainly due to:  

 

Increase in domestic revenues (R$ 13,649 million), mainly as a result of:

 

higher average prices of oil products, especially diesel (R$ 7,553 million), gasoline (R$ 4,691 million) and GLP (R$ 2,308 million), reflecting price readjustments, and other oil products (R$ 3,771 million) following the increase in international prices and the depreciation of the Brazilian Real against the U.S. Dollar;

 

higher revenues of natural gas (R$ 1,455 million), as a consequence of higher prices and demand growth;

 

lower sales volumes of oil products in the domestic market (R$ 4,600 million), mainly:

 

gasoline (R$ 3,191 million), as a consequence of market loss to ethanol; and

 

nafta (R$ 1,579 million), due to sales reduction to Braskem;

 

Increase in export revenues of oil and oil products (R$ 6,497 million), due to higher prices, following the increase in international prices and the depreciation of the Brazilian Real against the U.S. Dollar, partially offset by the reduction of oil exports; and

 

Increase in revenues of activities abroad (R$ 3,602 million), as a consequence of higher international prices.

 

Cost of sales were R$ 100,460 million, R$ 10,254 million higher than the same period of 2017 (R$ 90,206 million), as a consequence of:

 

higher government participation expenses and oil imports, influenced by the increase of international commodities prices;

 

higher costs associated with activities abroad, reflecting international prices increase; and

 

lower expenses with oil products import, especially nafta and gasoline, due to the reduction of domestic sales of oil products.

 

Selling expenses were R$ 8,876 million, 41% higher, due to higher logistics costs resulting from the payments of tariffs for the use of the pipeline after the sale of NTS in 2Q-17 (R$ 1,074 million) and the expected credit losses in the electricity sector (R$ 1,303 million).

General and administrative expenses of R$ 4,348 million, 4% lower, reflecting lower expenses with administrative services rendered by third parties.

Exploration costs were R$ 1,026 million, 14% higher, due to provisions related to contractual penalties of local content (R$ 204 million), partially offset by lower expenses with projects without economic viability (R$ 92 million).

Tax expenses of R$ 840 million, R$ 2,520 million lower, mainly due to the enrollment of the Federal Tax Settlement in the 2Q-2017 (R$ 2,298 million).

 

Other operating expenses were R$ 7,737  million, R$ 7,794 million higher than other operating revenues of the 1H-2017, mainly:

 

gains from the sale of  Nova Transportadora do Sudeste (NTS) in the 1H-2017 of R$ 6,977 million;

 

negative variation in market value of put options contracted to protect the price of part of oil (R$ 1,957 million);

 

higher provision for losses and contingencies with judicial processes (R$ 1,745 million), highlighting the negative exchange variation related to the passive exposure of the Class Action (R$ 1,576 million); and

 

net gains on the disposal/write-off of assets of R$ 2,123 million, mainly due to the sale of Lapa, Iara and Carcará areas (R$ 3,223 million), partially offset by losses incurred after the final price adjustment of the sale of 25% stake in Roncador field (R$ 801 million); and

 

lower expenses with equipment idleness (R$ 811 million).

 


21

 

 

 


 

 

 

 

Negative net financial result of R$ 9,893 million, R$ 6,697 million lower than the 1H-2017, due to:

 

reduction of R $ 5,330 million in net financial expenses, especially:

 

recognition of the gain arising from the renegotiation of Eletrobras System debts (R$ 2,068 million);

 

charges arising from the enrollment in the Federal Tax Settlement Programs in 1H-2017 (R$ 1,674 million); and

 

reduction of interest expenses due to prepayments of debts (R $ 1,241 million).

 

negative monetary and exchange variation of R $ 1,367 million, due to:

 

positive exchange variation of R$ 125 million due to the appreciation of 2.7% of the US dollar over the net passive exposure in euro, compared to the negative exchange variation of R$ 1,468 million due to the 8.2% depreciation over the net passive exposure in euros in 1H-2017 (R $ 1,593 million);

 

greater depreciation of the Brazilian Real over net active exposure in U.S. Dollars, compared to 1H-2017 (R$ 832 million);

 

negative exchange variation of R $ 125 million due to the 2.4% appreciation of the US dollar over the net asset exposure in sterling, compared to the negative exchange variation of R$ 181 million due to the 4.9% depreciation over the net passive exposure in 1H-2017 (R$ 56 million);

 

reduction of the passive exposure in Brazilian real over euros generated a positive variation (R$ 50 million);

 

higher reclassification of the exchange variation accumulated in the shareholders' equity to the result by the realization of the protected exports in the scope of hedge accounting (R$ 702 million); and

 

higher expenses with other monetary and exchange rate adjustments (R$ 462 million).

 

Positive result of participation in investments of R$ 821 million, 33% lower, mainly reflecting the lower result in participations in the petrochemical sector.

Income tax and social contribution expense of R$ 8,593 million, 2% lower, due to the better result obtained in the period, offset by the effects of joining the Federal Tax Settlement Programs in 2Q-2017 (see note 19.6 of the Quarterly Report).

The negative result with non-controlling shareholders was R$ 217 million, R$ 551 million lower, mainly due to the effect of the depreciation of the Brazilian Real over the U.S. Dollar of structured entities, partially offset by the positive result of BR Distribuidora.

 

22

 

 

 


 

 

 

ADDITIONAL INFORMATION

7. Results of Operations of 2Q-2018 compared to 1Q-2018:

Sale revenues of R$ 84,395 million was 13% higher than the 1Q-2018, reflecting:

revenue growth in the domestic market (R $ 8,754 million), mainly due to:

higher average prices of oil products (R $ 4,589 million), especially diesel (R$ 2,522 million) and gasoline (R$ 1,309 million), largely following fluctuations in international prices;

higher sales volumes of oil products (R$ 3,550 million), mainly:

Diesel (R$ 3,232 million), as a consequence of lower sales by other players and the effect of the seasonality of diesel consumption, due to the reduction of economic activity in the beginning of the year;

LPG (R$ 385 million), higher consumption influenced by lower temperatures and greater economic activity; and

increase in natural gas sales revenue (R$ 602 million), reflecting higher volumes and prices in the thermoelectric and non-thermoelectric market

revenue growth from export of oil and oil products (R$ 853 million), due to higher selling prices (R$ 2,595 million), influenced by the behavior of international prices and the depreciation of the Brazilian real against the US dollar, partially offset by lower export volumes (R$ 1,742 million).

Cost of sales was R$ 52,772 million, 11% higher than the 1Q-2018, with the following factors:

higher expenses with government participation and oil imports, influenced by the increase in international commodity prices and the devaluation of the Brazilian real against the US dollar;

higher expenditures with diesel imports, reflecting its greater participation in sales and higher acquisition costs; and

higher LNG imports reflecting the greater participation in the sales mix.

Selling expenses of R$ 4,748 million, up 15% from 1Q-2018, due to the higher expected credit losses in the electric sector (R$ 559 million), and by the higher sales of oil products in the domestic market.

Exploration costs for oil and natural gas extraction of R $584 million, 32% higher than the 1Q-2018, as a result of higher expenses for projects without economic viability (R$ 180 million).

Other operating expenses totaled R$ 6,467 million, R$ 5,197 million higher than the 1Q-2018, mainly:

net losses with sale and disposal of assets of R$ 1,138 million in the 2Q-2018, mainly due to the loss of the adjustment of the final price of the 25% sale of the Roncador field (R$ 801 million), in contrast to the gain in the 1Q-2018 of R$3,261 million, mainly due to the sale of Lapa, Iara and Carcará areas in 1Q-2018 (R$ 3,223 million);

higher expenses with exchange variation over the passive exposure of the Class Action (1,378 million)

higher losses with negative variation in the market value of the put options contracted to protect the price of part of the oil production (R$ 547 million); and

reversal of impairment of R$ 177 million in the 2Q-2018, basically impacted by the price variation at the close of the operation of sale of Petroquimica Suape and Citepe, an amount R$ 235 million higher than the expense recognized in the 1Q-2018 (R $ 58 million).

 


23

 

 

 


 

 

 

 

Negative net financial result of R$ 2,647 million, R$ 4,599 million lower than the 1Q-2018, due to:

Decrease of R$ 3,999 million in net financial expenses, especially:

recognition of the gain arising from the renegotiation of Eletrobras System debts (R$ 2,068 million);

gains on repurchase of debt securities in the capital market, net of costs, in the amount of R$ 265 million, R$ 1,611 million higher than losses registered in the 2Q-2018 (R$ 1,346 million);

Negative monetary and exchange variation, R$ 600 million lower, caused by:

Positive exchange variation of R$ 482 million due to the 5% appreciation of the US dollar over the net passive exposure in euro, compared to the negative exchange variation of R$ 357 million due to the depreciation of 2.4% of the US dollar over the net passive exposure in euros in the 1Q-2018 (R$ 839 million);

greater depreciation of the real on net active exposure in dollars, compared to 1Q-2018 (R$ 530 million);

lower revenues from other monetary and exchange rate adjustments (R$ 141 million);

greater reclassification of the negative exchange variation accumulated in the shareholders' equity in the result for the realization of the exports protected in the scope of hedge accounting (R$ 186 million); and

negative exchange variation of R $ 282 million due to the appreciation of 5.9% of the US dollar over net asset exposure in sterling, compared to a positive exchange variation of R$ 157 million due to the depreciation of 3.7% of the US dollar over net asset exposure in the 1Q-2018 (R$ 439 million);

 

Income tax and social contribution expenses of R$ 4,638 million, R$ 683 million higher than the 1Q-2018, mainly due to a better result in the period (see note 19.6 of the Quarterly Report).

Positive result for non-controlling shareholders of R$ 381 million, R$ 545 million higher than the negative result of the 1Q-2018, mainly reflecting the effect of the depreciation of the Brazilian real over the U.S. dollar denominated debt of structured entities.

24

 

 

 


FINANCIAL STATEMENTS

Income Statement - Consolidated

 

R$ million

 

Jan-Jun

 

 

 

 

2018

2017

2Q-2018

1Q-2018

2Q-2017

Sales revenues

158,856

135,361

84,395

74,461

66,996

Cost of sales

(100,460)

(90,206)

(52,772)

(47,688)

(45,627)

Gross profit

58,396

45,155

31,623

26,773

21,369

Selling expenses

(8,876)

(6,279)

(4,748)

(4,128)

(3,889)

General and administrative expenses

(4,348)

(4,528)

(2,206)

(2,142)

(2,221)

Exploration costs

(1,026)

(899)

(584)

(442)

(603)

Research and development expenses

(1,088)

(886)

(593)

(495)

(549)

Other taxes

(840)

(3,360)

(359)

(481)

(3,069)

    Other income and expenses, net

(7,737)

57

(6,467)

(1,270)

3,952

 

(23,915)

(15,895)

(14,957)

(8,958)

(6,379)

Operating income (loss)

34,481

29,260

16,666

17,815

14,990

Finance income

5,697

1,984

4,596

1,101

1,051

Finance expenses

(11,196)

(12,813)

(5,346)

(5,850)

(6,868)

Foreign exchange and inflation indexation charges

(4,394)

(5,761)

(1,897)

(2,497)

(3,018)

Net finance income (expense)

(9,893)

(16,590)

(2,647)

(7,246)

(8,835)

     Share of earnings in equity-accounted investments

821

1,227

310

511

615

Income (loss) before income taxes

25,409

13,897

14,329

11,080

6,770

Income taxes

(8,593)

(8,798)

(4,638)

(3,955)

(6,478)

Net income (loss)  

16,816

5,099

9,691

7,125

292

Net income (loss) attributable to:

 

 

 

 

 

Shareholders of Petrobras

17,033

4,765

10,072

6,961

316

Non-controlling interests

(217)

334

(381)

164

(24)

 

16,816

5,099

9,691

7,125

292

 

25

 

 

 


Statement of Financial Position – Consolidated

ASSETS

R$ million

 

06.30.2018

12.31.2017

Current assets

144,255

155,909

Cash and cash equivalents

65,536

74,494

Marketable securities

4,060

6,237

Trade and other receivables, net

19,385

16,446

Inventories

35,534

28,081

Recoverable taxes

9,006

8,062

Assets classified as held for sale

1,542

17,592

Other current assets

9,192

4,997

Non-current assets

706,027

675,606

Long-term receivables

80,530

70,955

Trade and other receivables, net

19,091

17,120

Marketable securities

200

211

Judicial deposits

22,545

18,465

Deferred taxes

15,606

11,373

Other tax assets

10,010

10,171

Advances to suppliers

3,074

3,413

Other non-current assets

10,004

10,202

Investments

12,287

12,554

Property, plant and equipment

605,484

584,357

Intangible assets

7,726

7,740

Total assets

850,282

831,515

 

 

 

LIABILITIES

R$ million

 

06.30.2018

12.31.2017

Current liabilities

84,649

82,535

Trade payables

20,769

19,077

Finance debt and Finance lease obligations

15,353

23,244

Taxes payable

17,423

16,036

Employee compensation (payroll, profit-sharing and related charges)

6,013

4,331

Pension and medical benefits

2,805

2,791

Provisions for legal proceedings

12,398

7,463

Liabilities associated with assets classified as held for sale

165

1,295

Other current liabilities

9,723

8,298

Non-current liabilities

478,185

479,371

Finance debt and Finance lease obligations

338,270

338,239

Taxes payable

2,180

2,219

Deferred taxes

1,637

3,956

Pension and medical benefits

71,522

69,421

Provisions for legal proceedings

13,376

15,778

Provision for decommissioning costs

47,335

46,785

Other non-current liabilities

3,865

2,973

Shareholders' equity

287,448

269,609

Share capital

205,432

205,432

Profit reserves and others

76,707

58,553

Non-controlling interests

5,309

5,624

Total liabilities and shareholders' equity

850,282

831,515

 

 

 

 

26

 

 

 


Statement of Cash Flows Data – Consolidated

 

R$ million

 

Jan-Jun

 

 

 

 

2018

2017

2Q-2018

2Q-2018

2Q-2017

Net income (loss)  

16,816

5,099

9,691

7,125

292

(+) Adjustments for:

30,997

37,779

15,904

15,093

19,361

Pension and medical benefits (actuarial expense)

3,882

4,352

1,939

1,943

2,175

Share of earnings in equity-accounted investments

(821)

(1,227)

(310)

(511)

(615)

Depreciation, depletion and amortization

22,020

21,148

10,963

11,057

10,382

Impairment

(119)

207

(177)

58

228

Inventory write-downs to net realizable value (market value)

55

249

(5)

60

178

Allowance (reversals) for impairment of trade and others receivables

1,483

1,458

1,040

443

1,464

Exploration expenditures writen-off

232

324

206

26

300

(Gains) / losses on disposal / write-offs of non-current assets

(2,123)

(5,685)

1,138

(3,261)

(5,808)

Foreign exchange and inflation indexation and finance charges

14,830

16,153

6,234

8,596

8,299

Deferred income taxes, net

1,164

5,399

531

633

3,905

Revision and unwinding of discount on the provision for decommissioning costs

1,191

1,211

597

594

608

Reclassification of cumulative translation adjustment - CTA

185

Gain on remeasurement of investment retained with loss of control  

(698)

(698)

Trade and other receivables, net

(5,034)

383

(6,844)

1,810

(1,130)

Inventories

(6,526)

823

(5,384)

(1,142)

(391)

Judicial deposits

(3,971)

(1,608)

(2,259)

(1,712)

(657)

Trade payables

1,046

(2,381)

2,403

(1,357)

909

Taxes payable

6,289

3,904

4,356

1,933

3,604

Pension and medical benefits

(1,879)

(1,364)

(1,217)

(662)

(873)

Income tax and social contribution paid

(3,714)

(626)

(2,245)

(1,469)

(362)

Other assets and liabilities

2,992

(4,428)

4,938

(1,946)

(2,157)

(=) Net cash provided by (used in) operating activities

47,813

42,878

25,595

22,218

19,653

(-) Net cash provided by (used in) investing activities

666

(11,311)

28

638

(3,049)

Capital expenditures and investments in operating segments

(18,447)

(20,156)

(9,222)

(9,225)

(10,299)

Proceeds from disposal of assets (divestment)

16,880

9,455

9,378

7,502

7,582

Investments in marketable securities

2,233

(610)

(128)

2,361

(332)

(=) Net cash flow provided by operating and investing activities

48,479

31,567

25,623

22,856

16,604

(-) Net cash provided by (used in) financing activities

(65,732)

(24,039)

(35,246)

(30,486)

(2,679)

Proceeds from long-term financing

27,231

43,988

7,973

19,258

30,960

Repayment of principal

(81,506)

(55,345)

(37,645)

(43,861)

(26,339)

Repayment of interest

(10,531)

(12,130)

(4,527)

(6,004)

(6,878)

Dividends paid to non-controlling interest

(903)

(410)

(903)

(410)

Acquisition of non-controlling interest

(23)

(142)

(144)

121

(12)

Effect of exchange rate changes on cash and cash equivalents

8,295

1,334

8,797

(502)

3,171

(=) Net increase (decrease) in cash and cash equivalents in the period

(8,958)

8,862

(826)

(8,132)

17,096

Cash and cash equivalents at the beginning of period

74,494

69,108

66,362

74,494

60,874

Cash and cash equivalents at the end of period

65,536

77,970

65,536

66,362

77,970

 

27

 

 

 


SEGMENT INFORMATION

Consolidated Income Statement by Segment –1H-2018

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Sales revenues

88,958

120,760

19,596

434

48,090

(118,982)

158,856

Intersegments

85,377

26,816

5,762

403

624

(118,982)

Third parties

3,581

93,944

13,834

31

47,466

158,856

Cost of sales

(51,503)

(105,403)

(13,475)

(404)

(45,146)

115,471

(100,460)

Gross profit

37,455

15,357

6,121

30

2,944

(3,511)

58,396

Expenses

(2,447)

(4,321)

(4,718)

(39)

(2,133)

(10,185)

(72)

(23,915)

Selling expenses

(141)

(2,915)

(3,684)

(3)

(1,560)

(523)

(50)

(8,876)

General and administrative expenses

(456)

(689)

(232)

(34)

(410)

(2,525)

(2)

(4,348)

Exploration costs

(1,026)

(1,026)

Research and development expenses

(758)

(19)

(33)

(1)

(277)

(1,088)

Other taxes

(192)

(205)

(85)

(8)

(38)

(312)

(840)

Other income and expenses, net

126

(493)

(684)

6

(124)

(6,548)

(20)

(7,737)

Operating income (loss)

35,008

11,036

1,403

(9)

811

(10,185)

(3,583)

34,481

       Net finance income (expense)

(9,893)

(9,893)

       Share of earnings in equity-accounted investments

13

747

90

(32)

3

821

Income (loss) before income taxes

35,021

11,783

1,493

(41)

811

(20,075)

(3,583)

25,409

Income taxes

(11,903)

(3,752)

(477)

3

(276)

6,593

1,219

(8,593)

Net income (loss)

23,118

8,031

1,016

(38)

535

(13,482)

(2,364)

16,816

Net income (loss) attributable to:

 

 

 

 

 

 

 

 

Shareholders of Petrobras

23,128

8,315

752

(38)

393

(13,153)

(2,364)

17,033

Non-controlling interests

(10)

(284)

264

142

(329)

(217)

 

23,118

8,031

1,016

(38)

535

(13,482)

(2,364)

16,816

 

Consolidated Income Statement by Segment – 1H-2017

 

R$ million

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Sales revenues

65,055

105,230

16,971

317

41,239

(93,451)

135,361

Intersegments

62,805

25,103

4,579

303

661

(93,451)

Third parties

2,250

80,127

12,392

14

40,578

135,361

Cost of sales

(42,786)

(91,213)

(11,987)

(343)

(38,370)

94,493

(90,206)

Gross profit

22,269

14,017

4,984

(26)

2,869

1,042

45,155

Expenses

(5,248)

(4,119)

3,561

(14)

(1,952)

(8,237)

114

(15,895)

Selling expenses

(211)

(2,667)

(1,989)

(3)

(1,556)

20

127

(6,279)

General and administrative expenses

(482)

(725)

(283)

(42)

(429)

(2,566)

(1)

(4,528)

Exploration costs

(899)

(899)

Research and development expenses

(539)

(19)

(35)

(1)

(292)

(886)

Other taxes

(100)

(113)

(679)

(13)

(37)

(2,418)

(3,360)

Other income and expenses, net

(3,017)

(595)

6,547

44

71

(2,981)

(12)

57

Operating income (loss)

17,021

9,898

8,545

(40)

917

(8,237)

1,156

29,260

Net finance income (expense)

(16,590)

(16,590)

       Share of earnings in equity-accounted investments

151

966

175

(63)

(1)

(1)

1,227

Income (loss) before income taxes

17,172

10,864

8,720

(103)

916

(24,828)

1,156

13,897

Income taxes

(5,787)

(3,365)

(2,905)

13

(312)

3,951

(393)

(8,798)

Net income (loss)

11,385

7,499

5,815

(90)

604

(20,877)

763

5,099

Net income (loss) attributable to:

 

 

 

 

 

 

 

 

Shareholders of Petrobras

11,371

7,530

5,624

(90)

604

(21,037)

763

4,765

Non-controlling interests

14

(31)

191

160

334

 

11,385

7,499

5,815

(90)

604

(20,877)

763

5,099

 

28

 

 

 


 

 

 

 

 

Consolidated Income Statement by Segment –2Q-2018

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Sales revenues

48,250

65,431

10,398

214

24,674

(64,572)

84,395

Intersegments

46,363

14,693

3,005

201

310

(64,572)

Third parties

1,887

50,738

7,393

13

24,364

84,395

Cost of sales

(27,415)

(56,246)

(7,642)

(197)

(23,301)

62,029

(52,772)

Gross profit

20,835

9,185

2,756

17

1,373

(2,543)

31,623

Expenses

(3,297)

(1,953)

(2,144)

(18)

(1,104)

(6,404)

(37)

(14,957)

Selling expenses

(72)

(1,472)

(1,847)

(2)

(805)

(527)

(23)

(4,748)

General and administrative expenses

(206)

(346)

(110)

(19)

(210)

(1,313)

(2)

(2,206)

Exploration costs

(584)

(584)

Research and development expenses

(423)

(9)

(20)

(141)

(593)

Other taxes

(28)

(125)

(50)

(4)

(16)

(136)

(359)

Other income and expenses, net

(1,984)

(1)

(117)

7

(73)

(4,287)

(12)

(6,467)

Operating income (loss)

17,538

7,232

612

(1)

269

(6,404)

(2,580)

16,666

       Net finance income (expense)

(2,647)

(2,647)

       Share of earnings in equity-accounted investments

12

307

15

(27)

3

310

Income (loss) before income taxes

17,550

7,539

627

(28)

269

(9,048)

(2,580)

14,329

Income taxes

(5,963)

(2,459)

(208)

1

(92)

3,206

877

(4,638)

Net income (loss)

11,587

5,080

419

(27)

177

(5,842)

(1,703)

9,691

Net income (loss) attributable to:

 

 

 

 

 

 

 

 

Shareholders of Petrobras

11,592

5,259

271

(27)

122

(5,442)

(1,703)

10,072

Non-controlling interests

(5)

(179)

148

55

(400)

(381)

 

11,587

5,080

419

(27)

177

(5,842)

(1,703)

9,691

 

Consolidated Income Statement by Segment – 1Q-2018

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Sales revenues

40,708

55,329

9,198

220

23,416

(54,410)

74,461

Intersegments

39,014

12,123

2,757

202

314

(54,410)

Third parties

1,694

43,206

6,441

18

23,102

74,461

Cost of sales

(24,088)

(49,157)

(5,833)

(207)

(21,845)

53,442

(47,688)

Gross profit

16,620

6,172

3,365

13

1,571

(968)

26,773

Expenses

850

(2,368)

(2,574)

(21)

(1,029)

(3,781)

(35)

(8,958)

Selling expenses

(69)

(1,443)

(1,837)

(1)

(755)

4

(27)

(4,128)

General and administrative expenses

(250)

(343)

(122)

(15)

(200)

(1,212)

(2,142)

Exploration costs

(442)

(442)

Research and development expenses

(335)

(10)

(13)

(1)

(136)

(495)

Other taxes

(164)

(80)

(35)

(4)

(22)

(176)

(481)

Other income and expenses, net

2,110

(492)

(567)

(1)

(51)

(2,261)

(8)

(1,270)

Operating income (loss)

17,470

3,804

791

(8)

542

(3,781)

(1,003)

17,815

Net finance income (expense)

(7,246)

(7,246)

       Share of earnings in equity-accounted investments

1

440

75

(5)

511

Income (loss) before income taxes

17,471

4,244

866

(13)

542

(11,027)

(1,003)

11,080

Income taxes

(5,940)

(1,293)

(269)

2

(184)

3,387

342

(3,955)

Net income (loss)

11,531

2,951

597

(11)

358

(7,640)

(661)

7,125

Net income (loss) attributable to:

 

 

 

 

 

 

 

 

Shareholders of Petrobras

11,536

3,056

481

(11)

271

(7,711)

(661)

6,961

Non-controlling interests

(5)

(105)

116

87

71

164

 

11,531

2,951

597

(11)

358

(7,640)

(661)

7,125

 

29

 

 

 


 

Other Income (Expenses) by Segment – 1H-2018

 

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

(Losses)/gains on legal, administrative and arbitral proceedings

(257)

(231)

(427)

(1)

(167)

(1,825)

(2,908)

Pension and medical benefits

(2,702)

(2,702)

Gains/(losses) with Commodities Derivatives

(1,957)

(1,957)

Unscheduled stoppages and pre-operating expenses

(1,533)

(43)

(192)

(4)

(1,772)

Profit Share

(470)

(225)

(39)

(366)

(1,100)

Institutional relations and cultural projects

(1)

(4)

(39)

(241)

(285)

Operating expenses with thermoeletric plants

(172)

(172)

Expenses with Health, safety and environment

(56)

(27)

(2)

(1)

(50)

(136)

Provision for doubtful receivables

8

(56)

26

(58)

(80)

Voluntary Separation Incentive Plan - PIDV

(1)

3

(16)

2

(12)

Reimbursment of expenses regarding "Car Wash" operation

1

1

Ship/Take or Pay Agreements with Gas Distributors

8

30

21

14

5

78

Impairment of assets

1

183

(65)

119

Government Grants

8

7

120

6

141

(Expenditures)/reimbursements from operations in E&P partnerships

467

467

Gains / (losses) on disposal/write-offs of assets; returned areas and cancelled projects (*)

2,044

(1)

(10)

10

80

2,123

Others

(92)

(129)

56

1

75

567

(20)

458

 

126

(493)

(684)

6

(124)

(6,548)

(20)

(7,737)

 

Other Income (Expenses) by Segment – 1H-2017

 

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

(Losses)/gains on legal, administrative and arbitral proceedings

(238)

(227)

(575)

(1)

(181)

59

(1,163)

Pension and medical benefits

(3,058)

(3,058)

Unscheduled stoppages and pre-operating expenses

(2,378)

(53)

(150)

(2)

(2,583)

Profit Share

(113)

(64)

(11)

(110)

(298)

Institutional relations and cultural projects

(1)

(3)

(58)

(242)

(304)

Operating expenses with thermoeletric plants

(158)

(158)

Expenses with Health, safety and environment

(15)

(6)

(5)

(1)

(73)

(100)

Provision for doubtful receivables

(1,317)

(19)

(1)

(1)

(25)

(1,363)

Voluntary Separation Incentive Plan - PIDV

87

(30)

182

114

316

669

Cumulative Translation Adjustment - CTA

(116)

(116)

Remeasurement of remaining interests at fair value

698

698

Reimbursment of expenses regarding "Car Wash" operation

89

89

Ship/Take or Pay Agreements with Gas Distributors

2

113

827

14

956

Impairment of assets

29

(236)

(207)

Government Grants

9

18

95

5

127

(Expenditures)/reimbursements from operations in E&P partnerships

662

662

Gains / (losses) on disposal/write-offs of assets; returned areas and cancelled projects*

(368)

(246)

6,257

9

32

1

5,685

Others

653

(107)

(376)

32

151

180

(12)

521

 

(3,017)

(595)

6,547

44

71

(2,981)

(12)

57

 

* In 2018, primarily includes the results with divestments. In 2017, primarily includes returned areas, cancelled projects and the gain with NTS divestment.


30

 

 

 


Other Income (Expenses) by Segment – 2Q-2018

 

 

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

(Losses)/gains on legal, administrative and arbitral proceedings

(177)

(68)

(46)

(1)

(89)

(1,255)

(1,636)

Pension and medical benefits

(1,351)

(1,351)

Gains/(losses) with Commodities Derivatives

(1,252)

(1,252)

Unscheduled stoppages and pre-operating expenses

(881)

(24)

(90)

(2)

(997)

Profit share

(278)

(132)

(22)

(217)

(649)

Institutional relations and cultural projects

(1)

(2)

(31)

(138)

(172)

Operating expenses with thermoeletric plants

(90)

(90)

Health, safety and environment

(16)

(13)

(1)

(1)

(25)

(56)

Provision for assumption of debts of suppliers with subcontractors

14

(54)

22

(40)

(58)

Voluntary Separation Incentive Plan - PIDV

1

2

6

2

11

Reimbursment of expenses regarding "Car Wash" operation

Ship/Take or Pay Agreements with Gas Distributors

1

48

17

13

(14)

65

Impairment of assets

1

240

(64)

177

Government grants

5

3

52

3

63

(Expenditures)/reimbursements from operations in E&P partnerships

286

286

Gains / (losses) on disposal/write-offs of assets; returned areas and cancelled projects

(1,040)

1

(34)

9

(74)

(1,138)

Others

101

(2)

139

5

20

79

(12)

330

 

(1,984)

(1)

(117)

7

(73)

(4,287)

(12)

(6,467)

 

Other Income (Expenses) by Segment – 1Q-2018

 

 

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

 

 

 

 

 

 

 

 

 

(Losses)/gains on legal, administrative and arbitral proceedings

(80)

(163)

(381)

(78)

(570)

(1,272)

Pension and medical benefits

(1,351)

(1,351)

Gains/(losses) with Commodities Derivatives

(705)

(705)

Unscheduled stoppages and pre-operating expenses

(652)

(19)

(102)

(2)

(775)

Profit share

(192)

(93)

(17)

(149)

(451)

Institutional relations and cultural projects

(2)

(8)

(103)

(113)

Operating expenses with thermoeletric plants

(82)

(82)

Health, safety and environment

(40)

(14)

(1)

(25)

(80)

Provision for doubtful receivables

(6)

(2)

4

(18)

(22)

Voluntary Separation Incentive Plan - PIDV

(2)

1

(22)

(23)

Reimbursment of expenses regarding "Car Wash" operation

1

1

Ship/Take or Pay Agreements with Gas Distributors

7

(18)

4

1

19

13

Impairment losses/ (reversals)

(57)

(1)

(58)

Government Grants

3

4

68

3

78

(Expenditures)/reimbursements from operations in E&P partnerships

181

181

Gains / (losses) on disposal/write-offs of assets; returned areas and cancelled projects

3,084

(2)

24

1

154

3,261

Others

(193)

(127)

(83)

(4)

55

488

(8)

128

 

2,110

(492)

(567)

(1)

(51)

(2,261)

(8)

(1,270)

 


31

 

 

 


Consolidated Assets by Segment – 06.30.2018

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Total assets

495,722

174,866

59,769

650

19,961

118,357

(19,043)

850,282

Current assets

15,038

47,646

5,798

209

10,016

83,938

(18,390)

144,255

Non-current assets

480,684

127,220

53,971

441

9,945

34,419

(653)

706,027

Long-term receivables

28,834

11,591

6,008

11

3,299

31,286

(499)

80,530

Investments

4,591

4,661

2,867

146

22

12,287

Property, plant and equipment

442,331

110,305

44,165

284

5,901

2,652

(154)

605,484

Operating assets

318,923

96,336

34,826

270

5,126

1,712

(154)

457,039

Assets under construction

123,408

13,969

9,339

14

775

940

148,445

Intangible assets

4,928

663

931

745

459

7,726

 

Consolidated Assets by Segment – 12.31.2017

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Total assets

478,400

168,927

61,383

626

20,246

121,554

(19,621)

831,515

Current assets

25,056

41,912

5,992

213

9,795

90,878

(17,937)

155,909

Non-current assets

453,344

127,015

55,391

413

10,451

30,676

(1,684)

675,606

Long-term receivables

25,206

11,014

7,924

12

3,553

24,772

(1,526)

70,955

Investments

4,727

4,937

2,747

108

16

19

12,554

Property, plant and equipment

418,421

110,488

43,767

293

6,158

5,388

(158)

584,357

Operating assets

302,308

96,652

34,999

280

5,300

4,320

(158)

443,701

Assets under construction

116,113

13,836

8,768

13

858

1,068

140,656

Intangible assets

4,990

576

953

724

497

7,740

 

 

 

 

 

 

 

 

 

 

32

 

 

 


 

Reconciliation of Consolidated Adjusted EBITDA Statement by Segment – 1H-2018

 

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Net income (loss)

23,118

8,031

1,016

(38)

535

(13,482)

(2,364)

16,816

Net finance income (expense)

9,893

9,893

Income taxes

11,903

3,752

477

(3)

276

(6,593)

(1,219)

8,593

Depreciation, depletion and amortization

16,552

3,849

1,135

10

237

237

22,020

EBITDA

51,573

15,632

2,628

(31)

1,048

(9,945)

(3,583)

57,322

Share of earnings in equity-accounted investments

(13)

(747)

(90)

32

(3)

(821)

Impairment losses / (reversals)

(1)

(183)

65

(119)

Foreign Exchange gains or losses on material provisions for legal procedings

1,576

1,576

Gains / (losses) on disposal / write-offs of assets**

(2,044)

1

10

(10)

(80)

(2,123)

Adjusted EBITDA*

49,515

14,703

2,613

1

1,038

(8,452)

(3,583)

55,835

Reconciliation of Consolidated Adjusted EBITDA Statement by Segment – 1H-2017

 

 

R$ million

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Net income (loss)

11,385

7,499

5,815

(90)

604

(20,877)

763

5,099

Net finance income (expense)

16,590

16,590

Income taxes

5,787

3,365

2,905

(13)

312

(3,951)

393

8,798

Depreciation, depletion and amortization

15,455

3,838

1,313

6

253

283

21,148

EBITDA

32,627

14,702

10,033

(97)

1,169

(7,955)

1,156

51,635

Share of earnings in equity-accounted investments

(151)

(966)

(175)

63

1

1

(1,227)

Impairment losses / (reversals)

(29)

236

207

Realization of cumulative translation adjustment

116

116

Gains / (losses) on disposal / write-offs of assets**

368

246

(6,955)

(9)

(32)

(1)

(6,383)

Adjusted EBITDA*

32,844

13,953

3,139

(43)

1,138

(7,839)

1,156

44,348

Reconciliation of Consolidated Adjusted EBITDA Statement by Segment – 2Q-2018

 

 

R$ million

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Net income (loss)

11,587

5,080

419

(27)

177

(5,842)

(1,703)

9,691

Net finance income (expense)

2,647

2,647

Income taxes

5,963

2,459

208

(1)

92

(3,206)

(877)

4,638

Depreciation, depletion and amortization

8,279

1,852

587

6

118

121

10,963

EBITDA

25,829

9,391

1,214

(22)

387

(6,280)

(2,580)

27,939

Share of earnings in equity-accounted investments

(12)

(307)

(15)

27

(3)

(310)

Impairment losses / (reversals)

(1)

(240)

64

(177)

Foreign Exchange gains or losses on material provisions for legal procedings

1,477

1,477

Gains / (losses) on disposal / write-offs of assets**

1,040

(1)

34

(9)

74

1,138

Adjusted EBITDA*

26,856

8,843

1,297

5

378

(4,732)

(2,580)

30,067

 

Reconciliation of Consolidated Adjusted EBITDA Statement by Segment – 1Q-2018

 

 

R$ million

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Net income (loss)

11,531

2,951

597

(11)

358

(7,640)

(661)

7,125

Net finance income (expense)

7,246

7,246

Income taxes

5,940

1,293

269

(2)

184

(3,387)

(342)

3,955

Depreciation, depletion and amortization

8,273

1,997

548

4

119

116

11,057

EBITDA

25,744

6,241

1,414

(9)

661

(3,665)

(1,003)

29,383

Share of earnings in equity-accounted investments

(1)

(440)

(75)

5

(511)

Impairment losses / (reversals)

57

1

58

Foreign Exchange gains or losses on material provisions for legal procedings

99

99

Gains / (losses) on disposal / write-offs of assets**

(3,084)

2

(24)

(1)

(154)

(3,261)

Adjusted EBITDA*

22,659

5,860

1,316

(4)

660

(3,720)

(1,003)

25,768

 

* See definitions of Adjusted EBITDA in glossary.

** In 2018, it primarily includes the results with divestments. In 2017, it primarily includes returned areas, canceled projects and the gain with NTS divestment.

 

33

 

 

 


 

 

 

 

 

Glossary

 

ACL – Ambiente de Contratação Livre (Free contracting market) in the electricity system.

ACR – Ambiente de Contratação Regulada (Regulated contracting market) in the electricity system.

Adjusted cash and cash equivalents – Sum of cash and cash equivalents, government bonds and time deposits from highly rated financial institutions abroad with maturities of more than 3 months from the date of acquisition, considering the expected realization of those financial investments in the short-term. This measure is not defined under the International Financial Reporting Standards – IFRS and should not be considered in isolation or as a substitute for cash and cash equivalents computed in accordance with IFRS. It may not be comparable to adjusted cash and cash equivalents of other companies, however management believes that it is an appropriate supplemental measure to assess our liquidity and supports leverage management.

Adjusted EBITDA – Net income plus net finance income (expense); income taxes; depreciation, depletion and amortization; results in equity-accounted investments; impairment, cumulative translation adjustment, foreign exchange gains and losses resulting from provisions for legal proceedings denominated in foreign currencies and gains/losses on disposal/write-offs of assets. Adjusted EBITDA is not a measure defined by IFRS and it is possible that it may not be comparable to similar measures reported by other companies, however management believes that it is an appropriate supplemental measure to assess our profitability. Adjusted EBITDA shall be considered in conjunction with other metrics for a better understanding on our performance.

Adjusted EBITDA Margin – Adjusted EBITDA divided by sales revenues.

ANP Brazilian National Petroleum, Natural Gas and Biofuels Agency.

Basic and diluted earnings (losses) per share - calculated based on the weighted average number of shares.

Consolidated Structured Entities Entities that have been designated so that voting or similar rights are not the determining factor that decides who controls the entity. Petrobras has no share of earnings in investments in certain structured entities that are consolidated in the financial statements, but the control is determined by the power it has over its relevant operating activities. As there are no interests, the result came from certain consolidated structured entities is attributable to non-controlling interests in the income statement, and it is not considered on net income attributable to shareholders of Petrobras.

CTA – Cumulative translation adjustment – The exchange variation cumulative amount that is recognized on Shareholders’ Equity should be transferred to the Statement of Income at the moment of the investment disposal.

Domestic crude oil sales price – Average of the internal transfer prices from Exploration & Production to Refining, Transportation and Marketing.

Domestic natural gas production Natural gas production in Brazil less LNG plus gas reinjection.

Effect of average cost in the Cost of Sales – In view of the average inventory term of 60 days, the crude oil and oil products international prices movement, as well as foreign exchange effect over imports, production taxes and other factors that impact costs, do not entirely influence the cost of sales in the period, having its total effects only in the next period

Feedstock processed (excluding NGL) – Daily volume of crude oil processed in the Company´s refineries in Brazil and is factored into the calculation of the Refining Plants Utilization Factor.

Feedstock processed – Brazil – Daily volume of crude oil and NGL processed.

Free cash flow - Net cash provided by operating activities less capital expenditures and investments in investees. Free cash flow is not defined under the International Financial Reporting Standards – IFRS and should not be considered in isolation or as a substitute for cash and cash equivalents calculated in accordance with IFRS. It may not be comparable to free cash flow of other companies, however management believes that it is an appropriate supplemental measure to assess our liquidity and supports leverage management.

Gross Margin – Gross profit over sales revenues.

Jet fuel – Aviation fuel.

Leverage – Ratio between the Net Debt and the sum of Net Debt and Shareholders’ Equity. Leverage is not a measure defined in the International Standards - IFRS and it is possible that it may not be comparable to similar measures reported by other companies,. however management believes that it is an appropriate supplemental measure to assess our liquidity.

 

 

 

 

 

Lifting Cost – Crude oil and natural gas lifting cost indicator, which considers expenditures occurred in the period.

LNG – Liquified natural gas.

LPG – Liquified crude oil gas.

LTM Adjusted EBITDA – sum of the last 12 months (Last Twelve Months) of Adjusted EBITDA. LTM Adjusted EBITDA is not a measure defined by IFRS and it is possible that it may not be comparable to similar measures reported by other companies, however management believes that it is an appropriate supplemental measure to assess our liquidity and supports leverage management. Adjusted EBITDA shall be considered in conjunction with other metrics for a better understanding on our liquidity.

LTM OCF Sum of last 12 months (Last Twelve Months) of OCF and represents the most directly comparable measure in relation to the LTM Adjusted EBITDA.

Net debt – Gross debt less adjusted cash and cash equivalents. Net debt is not a measure defined in the International Standards IFRS and should not be considered in isolation or as a substitute for total long-term debt calculated in accordance with IFRS.  Our calculation of net debt may not be comparable to the calculation of net debt by other companies. Management believes that net debt is an appropriate supplemental measure that helps investors assess our liquidity and supports leverage management.

Net Income by Business Segment – Company’s segment results. Petrobras is an integrated energy company and most of the crude oil and natural gas production from the Exploration & Production segment is transferred to other business segments of the Company. Our results by business segment include transactions carried out with third parties, transactions between companies of Petrobras’s Group and transfers between Petrobras’s business segments that are calculated using internal prices defined through methodologies based on market parameters. On April 28, 2016, the Extraordinary General Meeting approved the statutory adjustments according to the new organizational structure of the company and its new management and governance model, to align the organization to the new reality of the oil and gas sector and prioritize profitability and capital discipline.  On June 30th, 2018, the presentation related to the business segment information reflects management’s assessment related to the performance and the business resources allocation.

Net Margin – Net income (loss) over sales revenues.

NGL – Natural gas liquids.

OCF – Net Cash provided by (used in) operating activities (operating cash flow).

Operating indicators – indicators used for businesses management and are not reviewed by independent auditor.

Operating Margin operating income (loss) over sales revenues.

PLD (differences settlement price) Electricity price in the spot market. Weekly weighed prices per output level (light, medium and heavy), number of hours and related market capacity.

Reference feedstock or installed capacity of primary processing Maximum sustainable feedstock processing reached at the distillation units at the end of each period, respecting the project limits of equipment and the safety, environment and product quality requirements. It is lower than the authorized capacity set by ANP (including temporary authorizations) and by environmental protection agencies.

Refining plants utilization factor (%) – Feedstock processed (excluding NGL) divided by the reference feedstock.

Total feedstock processed – Volume of crude oil processed abrod in destilation units in the refineries, plus the volume of intermediate products acuired from third parties and used as cargo in other refining units.

 

Total Capital Expenditures and Investments – Capital expenditures based on the cost assumptions and financial methodology adopted in our Business and Management Plan, which include acquisition of PP&E and intangibles assets, investment in investees and other items that do not necessarily qualify as cash flows used in investing activities, primarily geological and geophysical expenses, research and development expenses, pre-operating charges, purchase of property, plant and equipment on credit and borrowing costs directly attributable to works in progress.

Total liabilities net – Total liability less adjusted cash and cash equivalents.

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: August 3, 2018.

PETRÓLEO BRASILEIRO S.A—PETROBRAS

By: /s/ Rafael Salvador Grisolia

______________________________

Rafael Salvador Grisolia

Chief Financial Officer and Investor Relations Officer