pbr-6k_20170831.htm

 

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, 2017

 

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

FIRST HALF OF 2017 RESULTS

Derived from consolidated interim financial information reviewed by independent auditors, prepared in accordance with International Financial Reporting Standards - IFRS.

Rio de Janeiro – August 10, 2017

Main financial highlights

Net Income of R$ 4,765 million in 1H-2017, compared to a loss of R$ 876 million in 1H-2016, as a result of:

 

Increase of R$ 9,554 million in export revenues due to higher volume and oil prices;

 

Gain of R$ 6,977 million due to the sale of participation in Nova Transportadora do Sudeste (NTS);

 

Reduction of 68% in exploratory costs and 16% in sales, general and administrative expenses;

 

Reduction of 7% in oil products sales in the domestic market and lower import expenses;

 

Expenses with adherence to Tax Settlement Programs (R$ 6,234 million);

 

Higher production taxes due to a higher oil price; and

 

Provision for losses with receivables related to Vitória 10.000 drillship (R$ 818 million).

Net income of 2Q-2017 remained in the same level in relation to 2Q-2016, reflecting the lower oil products margins, the reduction in the sales volume and the lower operating expenses.

Rise of 6% of the Adjusted EBITDA* to R$ 44,348 million in 1H-2017, reflecting lower operational expenses and import costs. Adjusted EBITDA Margin* was 33% in 1H-2017.

In 1H-2017, Free Cash Flow* reached R$ 22,722 million, 70% higher than 1H-2016. This result reflects the combination of improvement in generation and reduction in investments. Free Cash Flow* in 2Q-2017 was positive for the ninth quarter in a row.

Gross debt decreased 2%, from R$ 385,784 million as of December 31, 2016 to R$ 376,587 million and Net Debt* decreased 6%, from R$ 314,120 million as of December 31, 2016 to R$ 295,300 million as of June 30, 2017.

In dollars, the decrease was of 7% (US$ 7,118 million) in Net Debt*, from US$ 96,381 million as of December 31, 2016 to US$ 89.263 million as of June 30, 2017. In addition, the liquidity management led to a weighted average maturity of outstanding debt to increase from 7.46 years as of December 31, 2016 to 7.88 years as of June 30, 2017.

Reduction of the ratio between Net Debt* and LTM Adjusted EBITDA*, from 3.54 as of December 31, 2016 to 3.23 as of June 30, 2017. During the same period, Leverage* decreased from 55% to 53%.

Petrobras employees as of June 30, 2017 were 63,152, a decrease of 18% compared to June 30, 2016, due to the voluntary separation incentive plan.

Main operating highlights

Total crude oil and natural gas production reached 2,791 thousand boed in 1S-2017, being 2,671 thousand boed in Brazil, 6% higher than 1H-2016.

In 2Q-2017, the FPSO P-66 started its operations in the Lula-South area, in the pre-salt of Santos basin and, in June, a record of operated production of crude oil and natural gas in the pre-salt area, of 1,686 thousand boed, was achieved. Furthermore, there were fewer expenses related to rig idleness.

In 1H-2017, output of domestic oil products decreased by 7% when compared to 1H-2016, to 1,805 thousand bpd. Domestic oil product sales decreased 7% to 1,943 thousand bpd.

The Company sustained its position of net exporter, with a balance of 401 thousand bpd in 1H-2017 (vs. 62 thousand bpd in 1H-2016) due to the increase in exports of 48% and reduction in imports of 25%, when compared to 1H-2016.

Contributed to the decrease in the import volumes in 1H-2017, the higher share of domestic crude in the processed feedstock and of domestic natural gas in the sales mix.

 

 

*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 and Net Debt.

 

1

 

 

 


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

BM&F BOVESPA: 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.

 

 

2

 

 

 


*Table 01 - Main Items and Consolidated Economic Indicators

 

R$ million

 

Jan-Jun

 

 

 

 

 

2017

2016

2017 x 2016 (%)

2Q-2017

1Q-2017

2Q17 X 1Q17 (%)

2Q-2016

Sales revenues

135,361

141,657

(4)

66,996

68,365

(2)

71,320

Gross profit

45,155

43,829

3

21,369

23,786

(10)

22,821

Operating income (loss)

29,260

15,332

91

14,990

14,270

5

7,184

Net finance income (expense)

(16,590)

(14,754)

(12)

(8,835)

(7,755)

(14)

(6,061)

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

4,765

(876)

644

316

4,449

(93)

370

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

0.37

(0.07)

629

0.03

0.34

(91)

0.03

Market capitalization (Parent Company)

167,538

138,434

21

167,538

193,926

(14)

138,434

Adjusted EBITDA*

44,348

41,643

6

19,094

25,254

(24)

20,450

Adjusted EBITDA margin* (%)

33

29

4

29

37

(8)

29

Gross margin* (%)

33

31

2

32

35

(3)

32

Operating margin* (%)

22

11

11

22

21

1

10

Net margin* (%)

4

(1)

5

7

(7)

1

Total capital expenditures and investments

22,993

29,028

(21)

11,451

11,542

(1)

13,435

Exploration & Production

18,300

25,705

(29)

9,088

9,213

(1)

11,935

Refining, Transportation and Marketing

1,875

1,777

6

1,059

816

30

825

Gas & Power

2,439

651

275

1,113

1,326

(16)

359

Distribution

148

220

(33)

77

71

8

121

Biofuel

33

325

(90)

15

18

(17)

54

Corporate

198

350

(43)

99

99

141

 

 

 

 

 

 

 

 

Average commercial selling rate for U.S. dollar

3.18

3.70

(14)

3.22

3.15

2

3.51

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

3.31

3.21

3

3.31

3.17

4

3.21

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

1.5

(17.8)

19

4.4

(2.8)

7

(9.8)

Domestic basic oil products price (R$/bbl)

223.55

230.30

(3)

219.48

227.62

(4)

228.95

Brent crude (R$/bbl)

164.51

145.90

13

159.97

169.04

(5)

159.79

Brent crude (US$/bbl)

51.81

39.73

30

49.83

53.78

(7)

45.57

Domestic Sales Price

 

 

 

 

 

 

 

Crude oil (U.S. dollars/bbl) 

48.98

34.54

42

47.25

50.70

(7)

39.86

Natural gas (U.S. dollars/bbl) 

37.61

30.07

25

38.90

36.18

8

29.90

International Sales price

 

 

 

 

 

 

 

Crude oil (U.S. dollars/bbl) 

45.03

44.37

1

43.77

46.21

(5)

47.24

Natural gas (U.S. dollars/bbl) 

19.94

22.45

(11)

20.17

19.73

2

21.74

Total sales volume (Mbbl/d)

 

 

 

 

 

 

 

Diesel

712

804

(11)

721

702

3

811

Gasoline

536

553

(3)

533

539

(1)

541

Fuel oil

53

72

(26)

50

56

(11)

64

Naphtha

145

142

2

125

165

(24)

172

LPG

231

227

2

238

224

6

236

Jet fuel

99

102

(3)

96

101

(5)

97

Others

167

183

(9)

170

164

4

188

Total oil products

1,943

2,083

(7)

1,933

1,951

(1)

2,109

Ethanol, nitrogen fertilizers, renewables and other products

105

111

(5)

112

99

13

111

Natural gas

335

338

(1)

350

319

10

316

Total domestic market

2,383

2,532

(6)

2,395

2,369

1

2,536

Crude oil, oil products and others exports

720

494

46

659

782

(16)

532

International sales

239

473

(49)

237

242

(2)

488

Total international market

959

967

(1)

896

1,024

(13)

1,020

Total

3,342

3,499

(4)

3,291

3,393

(3)

3,556

 

 

* See definitions of Adjusted EBITDA, Adjusted EBITDA Margin, Gross Margin, Operating Margin and Net Margin  in glossary and the reconciliation in Reconciliation of Adjusted EBITDA.

3

 

 

 


 

2Q-2017 x 1Q-2017 Results*:

Gross Profit

Gross profit was R$ 21,369 million, a 10% decrease, mainly due to lower diesel and gasoline margins, lower volume of oil exports (due to stock sales occurred in 1Q-2017) and higher costs with imports of oil and natural gas. On the other hand, there were higher sales of diesel and natural gas.

Operating Income

Operating income increased 5%, reaching R$ 14,990 million, reflecting the gains with NTS sale and the adherence to the Tax Settlement Program (Program de Regularização Tributária – PRT) which reversed provision for losses in legal proceedings of previous periods. There were higher sales expenses, due to third parties payments for the use of the gas pipelines as a result of the NTS sale and increase in tax expenses, due to the PRT and Special Tax Settlement Program (PERT) enrollment, in addition to provision for losses with receivables from Vitória 10.000 drillship. General and administrative expenses remained flat.

Net Financial Expenses

Net financial expenses were 14% higher due to adherence to the Tax Settlement Programs (see Note 20.2 of the interim financial statements).

Net Result

The quarterly net income reached R$ 316 million, a decrease of 93%, due to higher income tax as a result of the PERT program.

Adjusted EBITDA**

Adjusted EBITDA was 24% lower mainly due to lower oil products margins and lower export volume. The Adjusted EBITDA Margin** was 29% in 2Q-2017.

Free Cash Flow**

The Free Cash Flow was positive for the ninth quarter in a row, reaching R$ 9,354 million, 30% lower than 1Q-2017, mainly due to the reduction of the operating cash flow by 15% and investments increase by 4%.

 

 

* Additional information related to operating results 2Q-2017 x 1Q-2017, see item 6.

** See definitions of Free Cash Flow and Adjusted EBITDA, Adjusted EBITDA Margin in glossary and the respective reconciliations in Liquidity and Capital Resources and Reconciliation of Adjusted EBITDA.

4

 

 

 


1H-2017 x 1H-2016 Results*:

 

Gross Profit

Gross profit increased 3% to R$ 45,155 million mainly due to lower oil and natural gas import costs and higher oil and oil products exports. The increase of domestic oil production in addition to higher domestic oil share in the processed feedstock, and of domestic natural gas in the sales mix contributed to the result.

 

On the other hand, there was reduction in the sale of oil products in the domestic market of 7%, lower revenues from international operations, due to the sale of Petrobras Argentina S.A. (PESA) and of Petrobras Chile Distribuición Ltda. (PCD) and higher production taxes.

Operating Income

Operating income was R$ 29,260 million, 91% higher due to the gains with NTS sale, lower expenses associated with employees, due to the voluntary separation plan’s impact, the reduced costs with asset write-off of dry and/or subcommercial well and the decrease in drilling rigs idleness.

 

There was a reduction in operating expenses, despite the adherence to the Tax Settlement Programs (see Note 20.2 of the interim financial statement) and the provision for losses with receivables from Vitoria 10.000 drillship.

Net Finance Expense

Net finance expense of R$ 16,590 million, a R$ 1,836 million increase due to the lower foreign exchange losses of the U.S. dollar against the Euro and charges related to the Tax Settlement Programs.

Net Income (loss) attributable to the shareholders of Petrobras

Net income attributable to the shareholders of Petrobras was R$ 4,765 million in 1H-2017, compared to a net loss of R$ 876 million in 1H-2016, mainly due to increase in exports, lower import costs, reduction in operational expenses and adherence to the Tax Settlement Programs.

Adjusted EBITDA**

Adjusted EBITDA increased by 6% when compared to 1S-2016, to R$ 44,348 million, mainly due to lower costs associated with imports and operating expenses. The Adjusted EBITDA Margin** reached 33% in 1H-2017.

Free Cash Flow**

The higher operating cash flow and lower investments resulted in a positive Free Cash Flow of R$ 22,722 million, 70% higher than 1H-2016.

 

 

* Additional information about operating results of 1H-2017 x 1H-2016, see item 7.

** See definitions of Free Cash Flow, Adjusted EBITDA and Adjusted EBITDA Margin in glossary and the respective reconciliations in Liquidity and Capital Resources and Reconciliation of Adjusted EBITDA.

5

 

 

 


Table 02 - Exploration & Production Main Indicators

 

R$ million

 

Jan-Jun

 

 

 

 

 

2017

2016

2017 x 2016 (%)

2Q-2017

1Q-2017

2Q17 X 1Q17 (%)

2Q-2016

Sales revenues

65,055

53,297

22

31,804

33,251

(4)

29,622

Brazil

63,598

50,394

26

31,109

32,489

(4)

28,185

Abroad

1,457

2,903

(50)

695

762

(9)

1,437

Gross profit

22,269

10,862

105

10,448

11,821

(12)

8,024

Brazil

21,794

9,907

120

10,265

11,529

(11)

7,549

Abroad

475

955

(50)

183

292

(37)

475

Operating expenses

(5,248)

(8,754)

40

(3,315)

(1,933)

(71)

(5,143)

Brazil

(4,205)

(7,983)

47

(2,395)

(1,810)

(32)

(4,585)

Abroad

(1,043)

(771)

(35)

(920)

(123)

(648)

(558)

Operating income (loss)

17,021

2,108

707

7,133

9,888

(28)

2,881

Brazil

17,589

1,924

814

7,871

9,718

(19)

2,965

Abroad

(568)

184

(409)

(738)

170

(534)

(84)

Net income (loss) attributable to the shareholders of Petrobras

11,371

1,557

630

4,871

6,500

(25)

2,162

Brazil

11,598

1,492

677

5,243

6,355

(17)

2,208

Abroad

(227)

65

(449)

(372)

145

(357)

(46)

Adjusted EBITDA of the segment*

32,844

21,110

56

15,014

17,830

(16)

11,893

Brazil

32,810

20,009

64

15,447

17,363

(11)

11,549

Abroad

34

1,101

(97)

(433)

467

(193)

344

EBITDA margin of the segment (%)*

50

40

11

47

54

(6)

40

Capital expenditures of the segment

18,300

25,705

(29)

9,088

9,213

(1)

11,935

Average Brent crude (R$/bbl)

164.51

145.90

13

159.97

169.04

(5)

159.79

Average Brent crude (US$/bbl)

51.81

39.73

30

49.83

53.78

(7)

45.57

Sales price - Brazil

 

 

 

 

 

 

 

Crude oil (US$/bbl)

48.98

34.54

42

47.25

50.70

(7)

39.86

Sales price - Abroad

 

 

 

 

 

 

 

Crude oil (US$/bbl)

45.03

44.37

1

43.77

46.21

(5)

47.24

Natural gas (US$/bbl)

19.94

22.45

(11)

20.17

19.73

2

21.74

Crude oil and NGL production  (Mbbl/d)

2,237

2,145

4

2,225

2,248

(1)

2,223

Brazil

2,171

2,056

6

2,160

2,182

(1)

2,133

Abroad

42

63

(33)

42

42

63

Non-consolidated production abroad

24

26

(8)

23

24

(4)

27

Natural gas production (Mbbl/d)

554

565

(2)

551

557

(1)

581

Brazil

500

467

7

498

501

(1)

479

Abroad

54

98

(45)

53

56

(5)

102

Total production

2,791

2,710

3

2,776

2,805

(1)

2,804

Lifting cost - Brazil (US$/barrel)

 

 

 

 

 

 

 

excluding production taxes

11.02

10.75

3

11.21

10.83

4

11.00

including production taxes

19.54

15.47

26

18.71

20.38

(8)

17.37

Lifting cost - Brazil (R$/barrel)

 

 

 

 

 

 

 

excluding production taxes

34.87

38.68

(10)

36.09

33.65

7

37.64

including production taxes

62.03

55.05

13

61.34

62.73

(2)

58.93

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

5.12

5.56

(8)

5.67

4.56

24

5.49

Production taxes - Brazil

11,603

6,612

75

5,401

6,202

(13)

4,453

Royalties

5,969

4,385

36

2,847

3,122

(9)

2,472

Special participation charges

5,540

2,137

159

2,507

3,033

(17)

1,938

Retention of areas

94

90

4

47

47

43

Production taxes - Abroad

281

518

(46)

148

133

11

244

 

*

 

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

6

 

 

 


RESULT BY BUSINESS SEGMENT

 

EXPLORATION & PRODUCTION

 

 

1H-2017 x 1H-2016

 

2Q-2017 x 1Q-2017

 

Gross Profit

 

 

Gross profit increased due to higher oil prices and higher production in Brazil, partially offset by increase in production taxes.

 

The decrease in gross profit was a result of lower revenues, derived from lower oil prices, slightly offset by lower production taxes.

 

 

Operating Income

 

 

Operating income reflects higher gross profit and lower expenses with assets write-off of dry and/or sub commercial wells and drilling rigs idleness.

 

Decrease in operating income due to lower gross profit and provisions for losses with receivables related to Vitória 10.000 drillship.

 

 

Operating Results

Production

 

 

Domestic crude oil and NGL production increased by 6% and domestic natural gas production by 7% due to ramp-ups and new wells in Lula, Sapinhoá, Parque das Baleias and Marlim Sul fields and the start-up of production on new systems: FPSOs Cid. de Caraguatatuba (Lapa field), Cid. de Saquarema  and P-66 (Lula field).

The production of oil and NGL abroad declined 33%, as a result of the sale of Petrobras Argentina in 2016, balanced by the start of production of new wells at Saint Malo and Lucius fields in the USA.

Natural gas production abroad decreased 45% due to the sale of participation in PESA in 2016 and to the lower demand of Bolivian gas from Brazil.

 

 

Domestic crude oil and NGL production decreased by 1% mainly due to scheduled stops by Lula (FPSO Cidade de Mangaratiba), Barracuda e Caratinga (P-43), Albacora (P-25) e Marlim (P-37 e P-19).

Domestic natural gas production remained stable.

International crude oil and NGL production remained stable.

 

Lifting Cost

 

 

Lifting cost increased mainly due to foreign exchange charges over the costs denominated in Brazilian Real. This result was partially offset by lower expenditures associated with maintenance, logistics services and personnel and higher production.

Additionally, higher production taxes were caused by higher oil prices.

Lifting cost abroad decreased 8% due to the sale of PESA in 2016, partially offset by the higher charter costs in the U.S.A, in the Cascade and Chinook fields.

 

The indicator in US dollar increased due to higher costs associated with well intervention and maintenance of rigs.  

On the other hand, there were lower production taxes caused by decrease in oil prices.

Lifting cost abroad increased 24% mainly in the U.S.A, due to submarine inspections in the Cascade and Chinook fields.

 

 

 

 

7

 

 

 


*Table 03 - Refining, Transportation and Marketing Main Indicators

 

R$ million

 

Jan-Jun

 

 

 

 

 

2017

2016

2017 x 2016 (%)

2Q-2017

1Q-2017

2Q17 X 1Q17 (%)

2Q-2016

Sales revenues

105,230

109,032

(3)

51,301

53,929

(5)

55,947

Brazil (includes trading operations abroad)

107,645

109,331

(2)

52,747

54,898

(4)

56,220

Abroad

2,840

6,192

(54)

1,877

963

95

3,306

Eliminations

(5,255)

(6,491)

19

(3,323)

(1,932)

(72)

(3,579)

Gross profit

14,017

28,067

(50)

6,639

7,378

(10)

14,081

Brazil

14,117

27,902

(49)

6,690

7,427

(10)

13,798

Abroad

(100)

165

(161)

(51)

(49)

(4)

283

Operating expenses

(4,119)

(6,227)

34

(1,997)

(2,122)

6

(3,736)

Brazil

(4,031)

(6,008)

33

(1,967)

(2,064)

5

(3,618)

Abroad

(88)

(219)

60

(30)

(58)

48

(118)

Operating income (loss)

9,898

21,840

(55)

4,642

5,256

(12)

10,345

Brazil

10,086

21,894

(54)

4,723

5,363

(12)

10,180

Abroad

(188)

(54)

(248)

(81)

(107)

24

165

Net income (loss) attributable to the shareholders of Petrobras

7,530

15,184

(50)

3,470

4,060

(15)

7,208

Brazil

7,654

15,234

(50)

3,523

4,131

(15)

7,048

Abroad

(124)

(50)

(148)

(53)

(71)

25

160

Adjusted EBITDA of the segment*

13,953

26,962

(48)

6,730

7,223

(7)

13,514

Brazil

14,048

26,899

(48)

6,760

7,288

(7)

13,299

Abroad

(95)

63

(250)

(30)

(65)

54

215

EBITDA margin of the segment (%)*

13

25

(11)

13

13

24

Capital expenditures of the segment

1,875

1,777

6

1,059

816

30

825

Domestic basic oil products price  (R$/bbl)

223.55

230.30

(3)

219.48

227.62

(4)

228.95

Imports (Mbbl/d)

316

422

(25)

341

290

18

359

Crude oil import

116

160

(28)

139

93

49

122

Diesel import

5

23

(78)

10

-

Gasoline import

10

46

(78)

7

13

(46)

41

Other oil product import

185

193

(4)

185

184

1

196

Exports (Mbbl/d)

717

484

48

654

779

(16)

515

Crude oil export

548

324

69

487

609

(20)

341

Oil product export

169

160

6

167

170

(2)

174

Exports (imports), net

401

62

547

313

489

(36)

156

Refining Operations - Brazil (Mbbl/d)

 

 

 

 

 

 

 

Oil products output

1,805

1,939

(7)

1,798

1,811

(1)

1,919

Reference feedstock 

2,176

2,176

2,176

2,176

2,176

Refining plants utilization factor (%) 

77

84

(7)

78

77

1

84

Processed feedstock  (excluding NGL)

1,686

1,828

(8)

1,691

1,681

1

1,820

Processed feedstock

1,735

1,869

(7)

1,745

1,725

1

1,869

Domestic crude oil as % of total processed feedstock

94

90

4

93

95

(2)

91

Refining Operations - Abroad (Mbbl/d)

 

 

 

 

 

 

 

Total processed feedstock

84

138

(39)

112

56

100

136

Oil products output

86

141

(39)

113

59

92

138

Reference feedstock 

100

230

(57)

100

100

230

Refining plants utilization factor (%) 

79

56

23

102

55

47

56

Refining cost - Brazil

 

 

 

 

 

 

 

Refining cost (US$/barrel)

2.95

2.37

24

2.86

3.04

(6)

2.46

Refining cost  (R$/barrel)

9.38

8.65

8

9.28

9.49

(2)

8.56

Refining cost - Abroad (US$/barrel)

4.53

4.00

13

4.18

5.22

(20)

4.00

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

 

 

 

 

 

 

 

Diesel

656

766

(14)

663

648

2

769

Gasoline

465

500

(7)

462

469

(1)

487

Fuel oil

57

68

(16)

57

57

61

Naphtha

145

142

2

125

165

(24)

172

LPG

231

227

2

239

223

7

235

Jet fuel

112

117

(5)

109

114

(4)

110

Others

183

199

(8)

181

184

(1)

203

Total domestic oil products (mbbl/d)

1,848

2,020

(8)

1,836

1,860

(1)

2,038

 

 

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

8

 

 

 


 

REFINING, TRANSPORTATION AND MARKETING

 

1H-2017 x 1H-2016

 

2T-2017 x 1T-2017

 

Gross Profit

 

 

Gross profit decreased due to lower sales margins, mainly of diesel and gasoline, influenced by increase in Brent and in domestic oil prices, as well as reduction in oil products sales volume in the domestic market.

 

 

Gross profit decreased due to lower prices of oil products sold that were not followed by cost reduction with acquisition/transfer of oil and oil products, due to stock sales of the previous quarter, at higher costs.

 

Operating Income

 

 

Operating income decreased due to the lower gross profit, partially offset by lower selling expenses and impairment .

 

Operating income decreased due to the lower gross profit, partially offset by lower sales expenses.

 

Operating Performance

Imports and Exports of Crude Oil and Oil Products

 

 

Net crude oil exports increased as a result of domestic production growth and of decrease in processed volume in refineries, both domestic and imported.

The reduction in net oil products imports, especially diesel and gasoline, is due to lower domestic sales along with the increase in market share of our competitors in the Brazilian market.  

 

Net crude oil exports decreased as a result of fewer stock sales in 2Q‑2017 and higher crude imports, capturing market opportunities.

 

The balance of net imports of oil products remained flat.

Refining Operations

 

 

Processed feedstock was 7% lower, mainly due to increase in imports by third parties.

 

Processed feedstock remained stable.

Refining Cost

 

 

Refining cost was higher mainly reflecting a decrease in processed feedstock along with higher employee compensation costs attributable to the 2016 Collective Bargaining Agreement, partially compensated by lower expenses with third party services and materials.

 

Refining cost remained stable.

 

 

 

 

 

 

 

 

9

 

 

 


Table 04 - Gas & Power Main Indicators

 

R$ million

 

Jan-Jun

 

 

 

 

 

2017

2016

2017 x 2016 (%)

2Q-2017

1Q-2017

2Q17 X 1Q17 (%)

2Q-2016

Sales revenues

16,971

17,151

(1)

9,268

7,703

20

7,760

Brazil

16,921

15,996

6

9,240

7,681

20

7,163

Abroad

50

1,155

(96)

28

22

27

597

Gross profit

4,984

3,974

25

2,541

2,443

4

2,146

Brazil

4,981

3,792

31

2,545

2,436

4

2,065

Abroad

3

182

(98)

(4)

7

(157)

81

Operating expenses

3,561

(1,980)

280

4,449

(888)

601

(1,246)

Brazil

3,596

(1,939)

285

4,475

(879)

609

(1,222)

Abroad

(35)

(41)

15

(26)

(9)

(189)

(24)

Operating income (loss)

8,545

1,994

329

6,990

1,555

350

900

Brazil

8,577

1,853

363

7,020

1,557

351

843

Abroad

(32)

141

(123)

(30)

(2)

(1,400)

57

Net income (loss) attributable to the shareholders of Petrobras

5,624

1,302

332

4,603

1,021

351

545

Brazil

5,602

1,078

420

4,599

1,003

359

433

Abroad

22

224

(90)

4

18

(78)

112

Adjusted EBITDA of the segment*

3,139

3,489

(10)

883

2,256

(61)

1,642

Brazil

3,149

3,326

(5)

893

2,256

(60)

1,577

Abroad

(10)

163

(106)

(10)

          -

65

EBITDA margin of the segment (%)*

18

20

(2)

10

29

(19)

21

Capital expenditures of the segment

2,439

651

275

1,113

1,326

(16)

359

Physical and financial indicators - Brazil

 

 

 

 

 

 

 

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

778

864

(10)

797

759

5

866

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

3,058

3,172

(4)

3,058

3,058

3,172

Generation of electricity - average MW

2,352

2,224

6

2,682

2,017

33

1,616

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

221

74

199

286

156

83

79

LNG imports (Mbbl/d)

26

54

(52)

37

16

131

33

Natural gas imports (Mbbl/d)

132

184

(28)

146

118

24

174

 

*

 

 

 

 

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

10

 

 

 


 

GAS & POWER

 

1H-2017 x 1H-2016

 

2Q-2017 x 1Q-2017

 

Gross Profit

 

 

The increase of gross profit was due to lower acquisition costs, mainly due to a higher domestic natural gas supply, which resulted in lower natural gas an LNG imports.

 

The increase of gross profit was due to higher natural gas sales, mainly to the thermoelectric sector, partially offset by higher acquisition costs of natural gas, due to higher share of imported gas in the sales mix.

 

Operating Income

 

 

Operating income increased due to the higher gross profit, as well as to gains with the sale of Company’s interest in NTS.

 

Operating income increased due to the higher gross profit, as well as to gains with the sale of Company’s interest in NTS. On the other hand this sale resulted in higher sales costs associated with the pipeline use.

 

Operating Performance

Physical and Financial Indicators

 

 

The increase of domestic gas supply led to reduction in imports of natural gas from Bolivia and LNG.

 

 

Natural gas sales increased, mainly due to higher thermoelectric demand, which led to higher imports from Bolivia and of LNG.

 

 

 

11

 

 


Table 05 - Distribution Main Indicators

 

R$ million

 

Jan-Jun

 

 

 

 

 

2017

2016

2017 x 2016 (%)

2Q-2017

1Q-2017

2Q17 X 1Q17 (%)

2Q-2016

Sales revenues

41,239

49,449

(17)

20,327

20,912

(3)

24,218

Brazil

39,098

43,083

(9)

19,258

19,840

(3)

21,036

Abroad

2,141

6,366

(66)

1,069

1,072

3,182

Gross profit

2,869

3,744

(23)

1,326

1,543

(14)

1,804

Brazil

2,690

3,057

(12)

1,238

1,452

(15)

1,431

Abroad

179

687

(74)

88

91

(3)

373

Operating expenses

(1,952)

(3,524)

45

(967)

(985)

2

(1,537)

Brazil

(1,867)

(3,045)

39

(935)

(932)

(1,293)

Abroad

(85)

(479)

82

(32)

(53)

40

(244)

Operating income (loss)

917

220

317

359

558

(36)

267

Brazil

824

12

6767

304

520

(42)

138

Abroad

93

208

(55)

55

38

45

129

Net income (loss) attributable to the shareholders of Petrobras

604

159

280

235

369

(36)

184

Brazil

542

(38)

1526

198

344

(42)

58

Abroad

62

197

(69)

37

25

48

126

Adjusted EBITDA of the segment*

1,138

505

125

459

679

(32)

410

Brazil

1,043

230

353

414

629

(34)

249

Abroad

95

275

(65)

45

50

(10)

161

EBITDA margin of the segment (%)*

3

1

2

2

3

(1)

2

 

 

 

 

 

 

 

 

Capital expenditures of the segment

148

220

(33)

77

71

8

121

 

 

 

 

 

 

 

 

Market share – Brazil**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales Volumes - Brazil (Mbbl/d)

 

 

 

 

 

 

 

Diesel

290

314

(8)

295

285

3

317

Gasoline

190

191

191

190

1

187

Fuel oil

42

57

(27)

39

45

(13)

50

Jet fuel

50

50

48

53

(9)

47

Others

86

102

(15)

87

86

1

104

Total domestic oil products

659

715

(8)

659

658

706

 

*

 

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

**Petrobras adopts in Brazil the Sindicom data, whose methodology is under review.

12

 

 


 

DISTRIBUTION

 

1H-2017 x 1H-2016

 

2Q-2017 x 1Q-2017

 

Gross Profit

 

 

The decrease in gross profit reflected lower sales volumes, caused by a reduction in economic activity in Brazil and reduced sales margins.

 

The decrease in gross profit reflected lower commercialization margins in gasoline, diesel and ethanol.

 

Operating Income

 

 

Operating income increased, reflecting the losses suffered in 2016 with receivables from the electricity sector and with administrative and judicial claims, as well as the reversal, in 2017, of provision related to the voluntary separation incentive plan (PIDV 2016), as a result of cancellation of enrollments by some employees.

 

Operating income decreased mainly due to the reduction in gross profit and to lower reversal of losses with receivables from the electricity sector, partially offset by reversal of provision related to the voluntary separation incentive plan (PIDV 2016).

 

Operating Performance

 

 

The decrease in sales volume was mainly due to lower sales to thermoelectric power plants.

 

Sales volume remained stable reflecting higher diesel sales, due to its seasonality and lower sales to thermoelectric power plants.

 

 

 

 

 

13

 

 


Liquidity and Capital Resources

Table 06 - Liquidity and Capital Resources

 

R$ million

 

Jan-Jun

 

 

 

 

2017

2016

2Q-2017

1Q-2017

2Q-2016

Adjusted cash and cash equivalents* at the beginning of period

71,664

100,887

63,783

71,664

80,521

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

(2,556)

(3,042)

(2,909)

(2,556)

(2,743)

Cash and cash equivalents at the beginning of period

69,108

97,845

60,874

69,108

77,778

Net cash provided by (used in) operating activities

42,878

39,415

19,653

23,225

22,108

Net cash provided by (used in) investing activities

(11,311)

(25,277)

(3,049)

(8,262)

(10,759)

Capital expenditures, investments in investees and dividends received

(20,156)

(26,079)

(10,299)

(9,857)

(11,153)

     Proceeds from disposal of assets (divestment)

9,455

14

7,582

1,873

3

     Investments in marketable securities

(610)

788

(332)

(278)

391

(=) Net cash provided by operating and investing activities

31,567

14,138

16,604

14,963

11,349

Net financings

(23,487)

(37,099)

(2,257)

(21,230)

(19,594)

     Proceeds from long-term financing

43,988

32,679

30,960

13,028

25,464

     Repayments

(67,475)

(69,778)

(33,217)

(34,258)

(45,058)

Dividends paid to non- controlling interest

(410)

(165)

(410)

(165)

Acquisition of non-controlling interest

(142)

189

(12)

(130)

43

Effect of exchange rate changes on cash and cash equivalents

1,334

(11,968)

3,171

(1,837)

(6,471)

Cash and cash equivalents at the end of period

77,970

62,940

77,970

60,874

62,940

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

3,317

2,430

3,317

2,909

2,430

Adjusted cash and cash equivalents* at the end of period

81,287

65,370

81,287

63,783

65,370

 

 

 

 

 

 

Reconciliation of  Free Cash Flow

 

 

 

 

 

Net cash provided by (used in) operating activities

42,878

39,415

19,653

23,225

22,108

Capital expenditures, investments in investees and dividends received

(20,156)

(26,079)

(10,299)

(9,857)

(11,153)

Free cash flow*

22,722

13,336

9,354

13,368

10,955

As of June 30, 2017, the balance of cash and cash equivalents was R$ 77,970 million and the balance of adjusted cash and cash equivalents was R$ 81,287,287 million. Our principal uses of funds in 1H-2017 were for repayment of financing (and interest payments) and for capital expenditures. We partially met these requirements with cash provided by operating activities of R$ 42,878 million and with proceeds from financing of R$ 43,988 million and from divestments of R$ 9,455 million. The balance of adjusted cash and cash equivalents was positively impacted in 2016 by the application of the foreign exchange effect to the foreign financial investments.

Net cash provided by operating activities of R$ 42,878 million was mainly generated by (i) the reduction of import costs due to lower sales in Brazil, reflecting the higher share of national oil in the processed feedstock and national gas in the sales mix, and (ii) higher export volumes of crude oil and oil products and higher prices. These factors were partially offset by higher production taxes.

Capital expenditures, investments in investees and dividends received totaled R$ 20,156 million in 1H-2017, a decrease of 23% compared to 1H-2016, being 80% in E&P business segment.

Free Cash Flow* was positive, amounting to R$ 22,722 million in 1H-2017, 1.7 times 1H-2016.

From January to June 2017, proceeds from financing amounted to R$ 43,988 million. These funds were raised through commercial banking, capital markets transactions and development banks, and used to refinance the debt and pay capital expenditures. Global notes were issued in international capital markets in the amount of US$ 8 billion, with maturities at 2022, 2027 and 2044. The proceeds of those offerings, together with cash and new funding in other markets, of US$ 3.86 billion, were used for pay-down debt (tender offer and make whole) a US$ 7.36 billion value. In addition, the Company pre-paid debts of US$ 1.13 billion with BNDES, operations in the national and international capital markets of US$ 3,16 billions and a structured operation in the amount of US$ 0.13 billion.

Repayments of principal and interest totaled R$ 67,475 million in 1H-2017 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

2017

2018

2019

2020

2021

2022 and thereafter

06.30.2017

12.31.2016

Principal

9,556

30,801

55,139

41,602

62,535

178,812

378,445

390,227

Interest

10,817

21,644

19,557

16,673

13,219

114,233

196,143

190,352

Total

20,373

52,445

74,696

58,275

75,754

293,045

574,588

580,579

*

 

* 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

 

Gross debt in Brazilian Reais decreased by 2% when compared to December 31, 2016, mainly as a result repayments of principal and interest offset by 1.5% real depreciation. Net debt reduced 6%.

Current debt and non-current debt include finance lease obligations of R$ 73 million and R$ 718 million as of June 30, 2017, respectively (R$ 59 million and R$ 736 million on December 31, 2016).

The weighted average maturity of outstanding debt reached 7.88 years as of June 30, 2017 (compared to 7.46 years as of December 31, 2016).

The ratio between net debt and the LTM Adjusted EBITDA* decreased from 3.54 as of December 31, 2016 to 3.23 as of June 30, 2017 due to the reduction in debt and increase in LTM Adjusted EBITDA.

Table 08 - Consolidated debt in reais

 

R$ million

 

06.30.2017

12.31.2016

    Δ%

 

 

 

 

 Current debt 

25,985

31,855

(18)

Non-current debt

350,602

353,929

(1)

Total

376,587

385,784

(2)

  Cash and cash equivalents

77,970

69,108

13

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

3,317

2,556

30

Adjusted cash and cash equivalents*

81,287

71,664

13

Net debt*

295,300

314,120

(6)

Net debt/(net debt+shareholders' equity) – Leverage*

53%

55%

(2)

Total net liabilities*

726,767

733,281

(1)

(Net third parties capital / total net liabilities)

64%

66%

(2)

Net debt/LTM Adjusted EBITDA ratio*

3.23

3.54

(9)

Average interest rate (% p.a.)

6.1

6.2

(1)

Table 09 - Consolidated debt in dollar

 

U.S.$ million

 

06.30.2017

12.31.2016

    Δ%

 Current debt 

7,855

9,773

(20)

Non-current debt

105,980

108,597

(2)

Total

113,835

118,370

(4)

Net debt* 

89,263

96,381

(7)

Weigthed average maturity of outstanding debt (years)

7.88

7.46

0.42

*

Table 10 - Consolidated debt by rate, currency and maturity

 

R$ million

 

06.30.2017

12.31.2016

    Δ%

Summarized information on financing

 

 

 

By rate

 

 

 

Floating rate debt

197,968

208,525

(5)

Fixed rate debt

177,828

176,464

1

Total

375,796

384,989

(2)

By currency

 

 

 

Brazilian Real

74,592

78,788

(5)

US Dollars

276,344

276,876

Euro

16,754

21,637

(23)

Other currencies

8,106

7,688

5

Total

375,796

384,989

(2)

By maturity

 

 

 

2017

13,956

31,796

(56)

2018

31,084

36,557

(15)

2019

54,559

68,112

(20)

2020

41,027

53,165

(23)

2021

61,963

61,198

1

2022 on

173,207

134,161

29

Total

375,796

384,989

(2)

 

 

 

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

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, impairment, cumulative foreign exchange adjustments reclassified to the income statement and gains and losses on disposal and write-offs of assets.

In 2016, we revised our presentation of Adjusted EBITDA to better reflect management’s views of the performance of its primary business, by adding back gains and losses derived from dispositions; such as: disposal and write-offs of assets, the amount of cumulative translation adjustments reclassified to the income statement and re-measurement of remaining interest at fair value.  We have applied the same methodology to data for earlier periods in this report for comparative purposes.

Adjusted EBITDA is not a measure 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. The Company reports its Adjusted EBITDA to give additional information and a better understanding of the Company's income from its primary business and it must be considered in conjunction with other measures and indicators for a better understanding of the Company's operational performance.

Table 11 - Reconciliation of Adjusted EBITDA

 

R$ million

 

Jan-Jun

 

 

 

 

 

2017

2016

2017 X 2016 (%)

2Q-2017

1Q-2017

2Q17 X 1Q17 (%)

2Q-2016

Net income (loss)

5,099

518

884

292

4,807

 

899

Net finance income (expense)

16,590

14,754

12

8,835

7,755

14

6,061

Income taxes

8,798

846

940

6,478

2,320

179

622

Depreciation, depletion and amortization

21,148

24,598

(14)

10,382

10,766

(4)

11,949

EBITDA

51,635

40,716

27

25,987

25,648

1

19,531

Share of earnings in equity-accounted investments

(1,227)

(786)

(56)

(615)

(612)

(94)

(398)

Impairment losses / (reversals)

207

1,478

(86)

228

(21)

1,184

Realization of cumulative translation adjustment

116

116

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

(6,383)

235

(2,816)

(6,506)

123

133

Adjusted EBITDA

44,348

41,643

6

19,094

25,254

(24)

20,450

 

 

 

 

 

 

 

 

Adjusted EBITDA margin (%)

33

29

4

29

37

(8)

29

 

2.

Reconciliation of LTM Adjusted EBITDA

 

Table 12 - Reconciliation of LTM Adjusted EBITDA

 

R$ million

 

Last 12 months (LTM) until

 

30.06.2017

31.12.2016

 

 

 

Net income (loss)

(8,464)

(13,045)

Net finance income (expense)

29,021

27,185

Income taxes

10,294

2,342

Depreciation, depletion and amortization

45,093

48,543

EBITDA

75,944

65,025

Share of earnings in equity-accounted investments

188

629

Impairment losses / (reversals)

19,026

20,297

Realization of cumulative translation adjustment

3,809

3,693

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

(7,569)

(951)

Adjusted EBITDA

91,398

88,693

 

Adjusted EBITDA is a component of a metric included in the Company’s Business and Management Plan: Net debt / LTM Adjusted EBITDA ratio.

 

 

 

* includes results with disposal and write-offs of assets and re-measurement of remaining interests at fair value.

 

 

16

 

 

 


ADDITIONAL INFORMATION

3.

Impact of our Cash Flow Hedge policy

 

Table 13 - Impact of our Cash Flow Hedge policy

 

R$ million

 

Jan-Jun

 

 

 

 

 

2017

2016

2017 x 2016 (%)

2Q-2017

1Q-2017

2Q17 X 1Q17 (%)

2Q-2016

Total inflation indexation and foreign exchange variation

(3,237)

44,756

(107)

(8,388)

5,151

(263)

23,275

Deferred Foreign Exchange Variation recognized in Shareholders' Equity

2,282

(43,479)

105

7,741

(5,459)

242

(21,465)

Reclassification from Shareholders’ Equity to the Statement of Income

(4,806)

(5,397)

11

(2,371)

(2,435)

3

(2,497)

Net Inflation indexation and foreign exchange variation

(5,761)

(4,120)

(40)

(3,018)

(2,743)

(10)

(687)

 

The reclassification of foreign exchange variation expense from Shareholders’ Equity to the Income Statement in the 1H-2017 was R$ 4,806 million, a reduction of 11% compared to the 1H-2016, due to the absence of planned exports that were no longer expected to occur.

 

The reclassification of foreign exchange variation expense from Shareholders’ Equity to the Income Statement in the 2Q-2017, compared to the 1Q-2017, was roughly stable, since there were no anticipated reclassifications of foreign exchange variation expenses from Shareholders’ Equity to the Income Statement as a result of planned exports that were no longer expected to occur or did not occur.

 

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 2017-2021 Business and Management Plan (Plano de Negócios e Gestão – PNG), a R$ 2 million 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, 2017, is set out below:

 

Table 14 - Expectation of exports volumes realization

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

2017

2018

2019

2020

2021

2022

2023

2024 a 2027

Total

 

 

 

 

 

 

 

 

 

 

Expected realization

(5,491)

(10,531)

(7,302)

(5,611)

(5,026)

(5,699)

(3,024)

7,150

(35,534)

 

17

 

 

 


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 1H-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 maturity to December, 2026. The Company does not have the intention to liquidate those transactions 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, 2017, 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 euro.

Table 15 - Assets and Liabilities subject to exchange variation

ITEMS

R$ million

 

 

 

 

06.30.2017

12.31.2016

Assets

37,703

44,303

Liabilities

(241,690)

(271,531)

Hedge Accounting

182,552

201,292

Cross Currency Swap

3,010

Total

(18,425)

(25,936)

 

 

 

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

BY CURRENCY

R$ million

 

 

 

 

06.30.2017

12.31.2016

 

 

 

Real/ U.S. Dollars

1,078

2,402

Real/ Euro

(154)

(149)

Real/ Pound Sterling

(59)

(56)

U.S. Dollars/ Yen

(474)

(599)

U.S. Dollars/ Euro

(16,515)

(21,453)

U.S. Dollars/ Pound Sterling

(2,301)

(6,081)

Total

(18,425)

(25,936)

Table 17 - Foreign exchange and inflation indexation charges

 

R$ million

 

Jan-Jun

 

 

 

 

Foreign exchange and inflation indexation charges

2017

2016

2017 x 2016 (%)

2Q-2017

1Q-2017

2Q17 X 1Q17 (%)

2Q-2016

Foreign exchange variation Dollar x Euro

(1,468)

(533)

(175)

(1,171)

(297)

(294)

910

Foreign exchange variation Real x Dollar

46

529

(91)

245

(199)

223

(141)

Foreign exchange variation Dollar x Pound Sterling

(181)

970

(119)

(117)

(64)

(83)

644

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

(4,806)

(5,397)

11

(2,371)

(2,435)

3

(2,497)

Foreign exchange variation Real x Euro

(55)

(226)

76

(54)

(1)

(5300)

32

Others

703

537

31

450

253

78

365

Net Inflation indexation and foreign exchange variation

(5,761)

(4,120)

(40)

(3,018)

(2,743)

(10)

(687)

 

18

 

 

 


ADDITIONAL INFORMATION

5.

Special Items

Table 18 – Special itens

 

 

 

R$ million

 

 

 

For the first half of

 

 

 

 

 

2017

2016

 

Items of Income Statement

2Q-2017

1Q-2017

2Q-2016

6,979

-

Gains (losses) on Disposal of Assets

Other income (expenses)

6,977

2

-

669

(1,213)

Voluntary Separation Incentive Plan – PIDV

Other income (expenses)

394

275

(1,212)

96

(866)

(Losses)/Gains on legal proceedings

Other income (expenses)

741

(645)

(569)

89

79

Amounts recovered - "overpayments incorrectly capitalized"

Other income (expenses)

89

-

79

(72)

(1,050)

Impairment of trade receivables from companies in the isolated electricity system

Selling expenses

(181)

109

(506)

(116)

-

Cumulative translation adjustment - CTA

Other income (expenses)

-

(116)

-

(182)

(1,478)

Impairment of assets and investments

Several

(140)

(42)

(1,184)

(818)

-

Vitória 10.000 drillship

Other income (expenses)

(818)

-

-

(3,972)

-

Reduction of Tax Litigation Program

Several

(3,972)

-

-

(129)

(51)

State Tax Amnesty Program

Other taxes

(129)

-

-

(4,331)

-

Income Taxes

Income Taxes

(4,331)

-

-

(1,787)

(4,579)

Total

 

(1,370)

(417)

(3,392)

 

 

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

 

 

 

 

 

 

 

(207)

(1,478)

Impairment

 

(228)

21

(1,184)

25

-

Share of earnings in equity-accounted investments

 

88

(63)

-

(182)

(1,478)

Impairment of assets and investments

 

(140)

(42)

(1,184)

 

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.

 

 

5.1

Impacts of tax settlement programs (PRT and PERT) within statement of income

 

Table 19 – Impacts of tax settlement programs (PRT and PERT) within statement of income

 

 

R$ million

 

 

PRT

PERT

Total

Tax expense

(544)

(1,754)

(2,298)

Finance income

(802)

(872)

(1,674)

Income taxes - note of deficiency

(314)

(1,730)

(2,044)

Total - after reliefs

(1,660)

(4,356)

(6,016)

Income taxes - deductible expenses

(164)

673

509

Other income and expenses - reversal of provision (*)

1,560

1,560

Total

(264)

(3,683)

(3,947)

Income taxes -  reversal of unused tax losses from 2012 to 2017

-

(2,287)

(2,287)

Impacts within the statement of income

(264)

(5,970)

(6,234)

(*) Part of PRT within the statement of income was recognized in the first quarter 2017 in the amount of R$ 627 million.

 

19

 

 

 


ADDITIONAL INFORMATION

6. Results of Operations of 2Q-2017 compared to 1Q-2017:

Sales revenues of R$ 66,996 million, a 2% decrease when compared to the 1Q-2017 (R$ 68,365 million), mainly due to:

Lower export revenues (R$ 1,708 million), mainly of crude oil, due to decreased sales volume with inventory formation abroad;

Domestic revenues remained relatively flat, mainly as a result of:

 

Lower domestic oil product prices (R$ 1,613 million), mainly of diesel and gasoline, following, respectively, the 5.2% and 5.5% decreases came from cumulative price revisions in the period;

 

Increased electricity revenues (R$ 829 million), due to higher thermoelectric dispatch and increased differences settlement price;

 

Higher natural gas revenues (R$ 724 million), mainly due to increased thermoelectric demand and higher prices; and

 

Increased oil product demand (R$ 272 million), due the seasonal consumption for diesel and LPG, partially offset by lower naphtha sales.

 

Cost of sales of R$ 45,627 million increased 2% compared to the 1Q-2017 (R$ 44,579 million), reflecting:

Increased electricity expenses due to higher thermoelectric dispatchs, increased differences settlement price and the higher share of LNG and of Bolivian gas on power generation;

Increased share of natural gas import on sales mix, following the higher thermoelectric demand; and

Higher share of crude oil imports on domestic processed feedstock.

Selling expenses were R$ 3,889 million, a 63% increase compared to the 1Q-2017 (R$ 2,390 million), due to:

Higher transportation expenses due to the sale of Nova Transportadora do Sudeste – NTS (R$ 1,010 million); and

Allowance for impairment of trade receivables from companies in the electricity sector (R$ 183 million), compared to a reversal of R$ 109 million in the 1Q-2017.

 

Other taxes were R$ 3,069 million, R$ 2,778 million higher compared to the 1Q-2017 (R$ 291 million), mainly as a result of the Company’s decision to benefit from the Tax Settlement Programs (Programas de Regularização Tributária) (R$ 2,298 million) and from the State Tax Amnesty Program (R$ 129 million).

Other operating income of R$ 3,952 million, compared to other operating expenses of R$ 3,895 million in the 1Q-2017, as a result of:

Gain on the sale of the Company’s interest in Nova Transportadora do Sudeste (NTS) (R$ 6,279 million) and on the fair value remeasurement of the remaining assets (R$ 698 million);  

Lower provision for legal, administrative and arbitral proceedings (R$ 92 million) in 2Q-2017, compared to R$ 1,255 million in 1Q-2017 due to:

 

Reversal of provision for tax proceedings (R$ 1,560 million), following the Company’s adhesion to the Tax Settlement Programs (Programas de Regularização Tributária);

 

The effect of the provision for contingency arising from the disapproval of tax credit compensation at Termomacaé Ltda, recognized in 1Q‑2017 (R$ 645 million);

 

Higher provision for contingencies (R$ 591 million), mainly as a result of the updating of the civil liability lawsuit filed by SERGAS (R$ 331 million); and

 

Loss on legal proceeeding, as a result of an agreement to close an individual lawsuit at the United States Federal Court (Class Action) in June 2017 (R$ 230 million).

Provision for losses with receivables related to Vitória 10.000 drillship of R$ 818 million (see Note 7.3.1 to the Company’s interim consolidated financial statements);

Amounts received through the leniency agreement signed by Rolls Royce in June 2017 (R$ 81 million).

 

 

 

 

 

 

 

 


20

 

 

 


Net finance expense of R$ 8,835 million, a 14% increase compared to 1Q-2017 (R$ 7,755 million), due to:

Increased finance expenses in R$ 923 million, due to:

 

 

Charges came from the Company’s decision to benefit from the Tax Settlement Programs (Programas de Regularização Tributária) (R$ 1,674 million);

 

A decrease in financing expenses abroad, in light of lower costs resulting from the repurchase of bonds in the 2Q-2017, compared to the 1Q‑2017 (R$ 483 million); and

 

Lower finance expense in Brazil due to prepays (R$ 306 million).

 

 

Higher foreign exchange and inflation indexation charges in R$ 275 million, generated by:

 

 

Increased depreciation of the U.S. dollar against the Euro on the Company’s net debt in the 2Q-2017, compared to the 1Q‑2017 (R$ 874 million);

 

Positive foreign exchange variation of R$ 245 million due to the 4.4% depreciation of the Brazilian Real over the exposure of assets in U.S. dollar in the 2Q‑2017, compared to the negative foreign exchange variation of R$ 199 million due to the 2.8% foreign exchange appreciation in the 1Q‑2017 (R$ 444 million);

 

Higher revenues with other foreign exchange and inflation indexation variations, net (R$ 185 million);

 

Lower reclassification of cumulative foreign exchange variation from shareholders’ equity to net income due to occurred exports designated for cash flow hedge accounting (R$ 64 million); and

 

Higher dollar depreciation against the net exposure to the pound in 2Q-2017 (R$ 53 million).

 

Income taxes (corporate income tax and social contribution) were R$ 6,478 million in the 2Q-2017, R$ 4,158 million higher compared to the 1Q‑2017 (R$ 2,320 million), mainly as a result of the Company’s decision to benefit from the Tax Settlement Programs (Programas de Regularização Tributária) and also to the taxable income of the periods (see Note 20.6).

 

21

 

 

 


ADDITIONAL INFORMATION

7. Results of Operations of 1H-2017 compared to 1H-2016:

Sales revenues of R$ 135,361 million, a 4% decrease when compared to 1H-2016 (R$ 141,657 million), due to:

Decreased domestic revenues (R$ 8,531 million), as a result of:

Lower oil products revenues, reflecting the decreased sales share (R$ 7,643 million);

Lower oil products average prices (R$ 600 million), partially offset by a 12.3% increase of bulk LPG price as from December 7;

Increased eletricity revenues (R$ 590 million).

Lower revenues from operations abroad (R$ 7,318 million), due to the disposal of interests in Petrobras Argentina S.A. (PESA) and in Petrobras Chile Distribución Ltda (PCD); and

Higher export revenues (R$ 9,554 million), mainly due to increased crude oil volume, as a result of increased domestic production, together with lower domestic demand, as well as increased crude oil and oil product prices, following higher international prices.

 

Cost of sales were R$ 90,206 million, a 8% decrease compared to the 1H-2016 (R$ 97,828 million), reflecting:

Lower import costs of natural gas and crude oil and products, generated by higher share of domestic oil processed in the refineries and lower sales of oil products in the domestic market;

Lower import costs of natural gas due to higher share of domestic natural gas on sales mix;

Decreased costs from operations abroad mainly attributable to the disposal of Petrobras Argentina S.A. (PESA) and Petrobras Chile Distribución Ltda. (PCD);

Lower depreciation as a result of provision for impairment losses in 2016;

Higher government take expenses, due to increased international commodity prices and to the rise of crude oil export volume; and

Increased electricity expenses, as a result of higher differences settlement price and of increased sales volume.

 

Selling expenses were R$ 6,279 million, a 16% decrease compared to 1H-2016 (R$ 7,441 million), mainly due to the higher reversal of allowance for impairment of trade receivables from companies in the electricity sector in 1H-2016 (R$ 874 million).

 

Other taxes were R$ 3,360 million, which were R$ 2,372 million higher compared to 1H-2016 (R$ 988 million), mainly as a result of the Company’s decision to benefit from the Tax Settlement Programs (Programas de Regularização Tributária) (R$ 2,298 million) and from the State Tax Amnesty Program (R$ 129 million).

 

Exploration costs were R$ 899 million in 1H-2017, a 68% decrease compared to 1H-2016 (R$ 2,788 million), mainly due to lower expenses with write‑off of dry and/or sub-commercial wells.

Other operating income of R$ 57 million, compared to other operating expenses of R$ 10,774 million in the 1H-2016, mainly due to:

Gain on the sale of the Company’s interest in Nova Transportadora do Sudeste (NTS) (R$ 6,279 million) and on the fair value remeasurement of the remaining assets (R$ 698 million);  

Reversion of expenses related to the voluntary separation incentive plan (PIDV), as a result of the withdrawal of some participants in the 1H‑2017 (R$ 669 million), compared to the PIDV expenses in the 1H-2016 (R$ 1,213 million);

Lower unscheduled stoppage expenses, mainly due to equipment idleness (R$ 1,591 million);

Lower impairment of assets of R$ 1,271 million;

Reversion of several tax lawsuits, following the Company’s decision to benefit from the Tax Settlement Programs (Programas de Regularização Tributária) (R$ 933 million);

Provision of losses with receivables related to Vitória 10.000 drillship (R$ 818 million) due to the end of the leasing contract (see Note 7.3.1); and

Loss on legal proceeding, as a result of an agreement to close an individual lawsuit at the United States Federal Court (Class Action) in June 2017 (R$ 230 million).

 

 

 

 

 

 

 

 

 


22

 

 

 


Net finance expense was R$ 16,590 million, a 12% increase when compared to the 1H-2016 (R$ 14,754 million), due to:

 

Higher foreign exchange and inflation indexation charges in R$ 1,641 million, generated by:

 

 

(i)

Negative foreign exchange variation of R$ 181 million generated by the impact of a 4.9% depreciation of the U.S. dollar against the Pound Sterling on the Company’s net debt in the 1H-2017, compared to the positive foreign exchange variation of R$ 970 million due to the 10.7% foreign exchange appreciation in the 1H-2016 (R$ 1,151 million);  

 

(ii)

Increased depreciation of the U.S. dollar against the Euro on the Company’s net debt in the 1H‑2017, compared to the 1H‑2016 (R$ 935 million);

 

(iii)

Lower reclassification of cumulative foreign exchange variation from shareholders’ equity to net income due to occurred exports designated for cash flow hedge accounting (R$ 592 million);

 

(iv)

Positive foreign exchange variation of R$ 46 million due to the 1.5% depreciation of the Brazilian Real over the exposure of assets in U.S. dollar in the 1H-2017, compared to the positive foreign exchange variation of R$ 529 million due to the 17.8% appreciation of the Brazilian Real against the U.S. dollar on the Company’s net debt in the 1H-2016 (R$ 484 million); and

 

(v)

Higher revenues with other foreign exchange and inflation indexation variations, net (R$ 171 million).

 

Increased finance expenses in R$ 529 million, due to:

 

 

(i)

Charges came from the Company’s decision to benefit from the Tax Settlement Programs (Programas de Regularização Tributária) in the 1H‑2017 (R$ 1,674 million);

 

(ii)

Lower interest expenses, due to the decreased average debt in the period (R$ 1,658 million); and

 

(iii)

An increase in financing expenses abroad, in light of the costs resulting from the repurchase of bonds and funds raised in December 2016 by its subsidiary Petrobras Global Finance B.V. (PGF), partially offset by a lower exchange rate (R$ 640 million).

 

Results in equity-accounted investments were R$ 1,227 million, a 56% increase when compared to the 1H-2016 (R$ 786 million), mainly due to the improved results of some companies.

Income taxes (corporate income tax and social contribution) were R$ 8,798 million in the 1H-2017, R$ 7,952 million higher compared to the 1H‑2016 (R$ 846 million), mainly as a result of the Company’s decision to benefit from the Tax Settlement Programs (Programas de Regularização Tributária) and also to the taxable income of the periods (see Note 20.6).

Loss related to non-controlling interests were R$ 334 million in the 1H-2017 (a R$ 1,394 million in the 1H-2016), mainly reflecting the impact of foreign exchange variation on debt of structured entities in U.S. dollars in the periods.

 

 

 

23

 

 

 


FINANCIAL STATEMENTS

Income Statement - Consolidated

 

R$ million

 

Jan-Jun

 

 

 

 

2017

2016

2Q-2017

1Q-2017

2Q-2016

Sales revenues

135,361

141,657

66,996

68,365

71,320

Cost of sales

(90,206)

(97,828)

(45,627)

(44,579)

(48,499)

Gross profit

45,155

43,829

21,369

23,786

22,821

 

 

 

 

 

 

Selling expenses

(6,279)

(7,441)

(3,889)

(2,390)

(3,690)

General and administrative expenses

(4,528)

(5,496)

(2,221)

(2,307)

(2,844)

Exploration costs

(899)

(2,788)

(603)

(296)

(1,641)

Research and development expenses

(886)

(1,010)

(549)

(337)

(507)

Other taxes

(3,360)

(988)

(3,069)

(291)

(446)

    Other income and expenses, net

57

(10,774)

3,952

(3,895)

(6,509)

 

(15,895)

(28,497)

(6,379)

(9,516)

(15,637)

Operating income (loss)

29,260

15,332

14,990

14,270

7,184

Finance income

1,984

1,650

1,051

933

764

Finance expenses

(12,813)

(12,284)

(6,868)

(5,945)

(6,138)

Foreign exchange and inflation indexation charges

(5,761)

(4,120)

(3,018)

(2,743)

(687)

Net finance income (expense)

(16,590)

(14,754)

(8,835)

(7,755)

(6,061)

     Share of earnings in equity-accounted investments

1,227

786

615

612

398

Income (loss) before income taxes

13,897

1,364

6,770

7,127

1,521

Income taxes

(8,798)

(846)

(6,478)

(2,320)

(622)

Net income (loss)  

5,099

518

292

4,807

899

Net income (loss) attributable to:

 

 

 

 

 

Shareholders of Petrobras

4,765

(876)

316

4,449

370

Non-controlling interests

334

1,394

(24)

358

529

 

5,099

518

292

4,807

899

 

24

 

 

 


Statement of Financial Position – Consolidated

ASSETS

R$ million

 

06.30.2017

12.31.2016

Current assets

142,435

145,907

Cash and cash equivalents

77,970

69,108

Marketable securities

3,317

2,556

Trade and other receivables, net

14,477

15,543

Inventories

26,621

27,622

Recoverable taxes

8,361

8,153

Assets classified as held for sale

6,771

18,669

Other current assets

4,918

4,256

Non-current assets

665,619

659,038

Long-term receivables

67,520

66,551

Trade and other receivables, net

17,424

14,832

Marketable securities

715

293

Judicial deposits

14,782

13,032

Deferred taxes

9,853

14,038

Other tax assets

10,181

10,236

Advances to suppliers

3,791

3,742

Other non-current assets

10,774

10,378

Investments

12,307

9,948

Property, plant and equipment

575,242

571,876

Intangible assets

10,550

10,663

Total assets

808,054

804,945

 

 

 

LIABILITIES

R$ million

 

06.30.2017

12.31.2016

Current liabilities

69,968

81,167

Trade payables

17,001

18,781

Finance debt and Finance lease obligations

25,985

31,855

Taxes payable

12,087

12,238

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

5,217

7,159

Pension and medical benefits

2,665

2,672

Liabilities associated with assets classified as held for sale

701

1,605

Other current liabilities

6,312

6,857

Non-current liabilities

476,942

471,035

Finance debt and Finance lease obligations

350,602

353,929

Taxes payable

2,922

Deferred taxes

3,526

856

Pension and medical benefits

72,988

69,996

Provisions for legal proceedings

11,215

11,052

Provision for decommissioning costs

33,674

33,412

Other non-current liabilities

2,015

1,790

Shareholders' equity

261,144

252,743

Share capital

205,432

205,432

Profit reserves and others

53,203

44,798

Non-controlling interests

2,509

2,513

Total liabilities and shareholders' equity

808,054

804,945

 

 

 

 

25

 

 

 


Statement of Cash Flows Data – Consolidated

 

R$ million

 

Jan-Jun

 

 

 

 

2017

2016

2Q-2017

1Q-2017

2Q-2016

Net income (loss)  

5,099

518

292

4,807

899

(+) Adjustments for:

37,779

38,897

19,361

18,418

21,209

Pension and medical benefits (actuarial expense)

4,352

4,023

2,175

2,177

2,018

Share of earnings in equity-accounted investments

(1,227)

(786)

(615)

(612)

(398)

Depreciation, depletion and amortization

21,148

24,598

10,382

10,766

11,949

Impairment

207

1,478

228

(21)

1,184

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

249

1,250

178

71

74

Allowance (reversals) for impairment of trade and others receivables

1,458

1,237

1,464

(6)

734

Exploration expenditures writen-off

324

1,810

300

24

1,231

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

(5,685)

235

(5,808)

123

133

Foreign exchange and inflation indexation and finance charges

16,153

14,596

8,299

7,854

5,845

Deferred income taxes, net

5,399

(2,702)

3,905

1,494

(1,289)

Revision and unwinding of discount on the provision for decommissioning costs

1,211

1,145

608

603

568

Reclassification of cumulative translation adjustment - CTA

185

185

Gain on remeasurement of investment retained with loss of control  

(698)

(698)

0

Trade and other receivables, net

383

2,984

(1,130)

1,513

(600)

Inventories

823

(2,141)

(391)

1,214

(468)

Judicial deposits

(1,608)

(1,284)

(657)

(951)

(901)

Trade payables

(2,381)

(4,971)

909

(3,290)

(1,196)

Taxes payable

3,904

(181)

3,604

300

2,039

Pension and medical benefits

(1,364)

(1,230)

(873)

(491)

(792)

Income tax and social contribution paid

(626)

(579)

(362)

(264)

(308)

Other assets and liabilities

(4,428)

(585)

(2,157)

(2,271)

1,386

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

42,878

39,415

19,653

23,225

22,108

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

(11,311)

(25,277)

(3,049)

(8,262)

(10,759)

Capital expenditures and investments in operating segments

(20,156)

(26,079)

(10,299)

(9,857)

(11,153)

Proceeds from disposal of assets (divestment)

9,455

14

7,582

1,873

3

Investments in marketable securities

(610)

788

(332)

(278)

391

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

31,567

14,138

16,604

14,963

11,349

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

(24,039)

(37,075)

(2,679)

(21,360)

(19,716)

Proceeds from long-term financing

43,988

32,679

30,960

13,028

25,464

Repayment of principal

(55,345)

(56,188)

(26,339)

(29,006)

(39,090)

Repayment of interest

(12,130)

(13,590)

(6,878)

(5,252)

(5,968)

Dividends paid to non-controlling interest

(410)

(165)

(410)

(165)

Acquisition of non-controlling interest

(142)

189

(12)

(130)

43

Proceeds from sale of interest without loss of control

Effect of exchange rate changes on cash and cash equivalents

1,334

(11,968)

3,171

(1,837)

(6,471)

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

8,862

(34,905)

17,096

(8,234)

(14,838)

Cash and cash equivalents at the beginning of period

69,108

97,845

60,874

69,108

77,778

Cash and cash equivalents at the end of period

77,970

62,940

77,970

60,874

62,940

 

26

 

 

 


SEGMENT INFORMATION

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

Consolidated Income Statement by Segment – 1H-2016

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Sales revenues

53,297

109,032

17,151

445

49,449

(87,717)

141,657

Intersegments

50,688

31,621

4,230

427

751

(87,717)

Third parties

2,609

77,411

12,921

18

48,698

141,657

Cost of sales

(42,435)

(80,965)

(13,177)

(493)

(45,705)

84,947

(97,828)

Gross profit

10,862

28,067

3,974

(48)

3,744

(2,770)

43,829

Expenses

(8,754)

(6,227)

(1,980)

(137)

(3,524)

(8,071)

196

(28,497)

Selling expenses

(298)

(3,341)

(1,484)

(3)

(2,478)

(49)

212

(7,441)

General and administrative expenses

(655)

(721)

(380)

(43)

(439)

(3,257)

(1)

(5,496)

Exploration costs

(2,788)

(2,788)

Research and development expenses

(438)

(103)

(32)

(2)

(435)

(1,010)

Other taxes

(121)

(137)

(390)

(5)

(84)

(251)

(988)

Other income and expenses, net

(4,454)

(1,925)

306

(84)

(523)

(4,079)

(15)

(10,774)

Operating income (loss)

2,108

21,840

1,994

(185)

220

(8,071)

(2,574)

15,332

Net finance income (expense)

(14,754)

(14,754)

       Share of earnings in equity-accounted investments

8

561

204

(2)

16

(1)

786

Income (loss) before income taxes

2,116

22,401

2,198

(187)

236

(22,826)

(2,574)

1,364

Income taxes

(717)

(7,425)

(678)

63

(75)

7,111

875

(846)

Net income (loss)

1,399

14,976

1,520

(124)

161

(15,715)

(1,699)

518

Net income (loss) attributable to:

 

 

 

 

 

 

 

 

Shareholders of Petrobras

1,557

15,184

1,302

(124)

159

(17,255)

(1,699)

(876)

Non-controlling interests

(158)

(208)

218

2

1,540

1,394

 

1,399

14,976

1,520

(124)

161

(15,715)

(1,699)

518

 

27

 

 

 


 

Consolidated Income Statement by Segment –2Q-2017

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Sales revenues

31,804

51,301

9,268

154

20,327

(45,858)

66,996

Intersegments

30,674

12,340

2,365

146

333

(45,858)

Third parties

1,130

38,961

6,903

8

19,994

66,996

Cost of sales

(21,356)

(44,662)

(6,727)

(165)

(19,001)

46,284

(45,627)

Gross profit

10,448

6,639

2,541

(11)

1,326

426

21,369

Expenses

(3,315)

(1,997)

4,449

(19)

(967)

(4,583)

53

(6,379)

Selling expenses

(108)

(1,290)

(1,754)

(1)

(808)

13

59

(3,889)

General and administrative expenses

(237)

(358)

(115)

(19)

(214)

(1,277)

(1)

(2,221)

Exploration costs

(603)

(603)

Research and development expenses

(377)

(9)

(22)

(1)

(140)

(549)

Other taxes

(66)

(56)

(617)

(4)

(18)

(2,308)

(3,069)

Other income and expenses, net

(1,924)

(284)

6,957

5

74

(871)

(5)

3,952

Operating income (loss)

7,133

4,642

6,990

(30)

359

(4,583)

479

14,990

       Net finance income (expense)

(8,835)

(8,835)

       Share of earnings in equity-accounted investments

117

423

86

(8)

(1)

(2)

615

Income (loss) before income taxes

7,250

5,065

7,076

(38)

358

(13,420)

479

6,770

Income taxes

(2,425)

(1,578)

(2,376)

10

(123)

177

(163)

(6,478)

Net income (loss)

4,825

3,487

4,700

(28)

235

(13,243)

316

292

Net income (loss) attributable to:

 

 

 

 

 

 

 

 

Shareholders of Petrobras

4,871

3,470

4,603

(28)

235

(13,151)

316

316

Non-controlling interests

(46)

17

97

(92)

(24)

 

4,825

3,487

4,700

(28)

235

(13,243)

316

292

Consolidated Income Statement by Segment – 1Q-2017

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Sales revenues

33,251

53,929

7,703

163

20,912

(47,593)

68,365

Intersegments

32,131

12,763

2,214

157

328

(47,593)

Third parties

1,120

41,166

5,489

6

20,584

68,365

Cost of sales

(21,430)

(46,551)

(5,260)

(178)

(19,369)

48,209

(44,579)

Gross profit

11,821

7,378

2,443

(15)

1,543

616

23,786

Expenses

(1,933)

(2,122)

(888)

5

(985)

(3,654)

61

(9,516)

Selling expenses

(103)

(1,377)

(235)

(2)

(748)

7

68

(2,390)

General and administrative expenses

(245)

(367)

(168)

(23)

(215)

(1,289)

(2,307)

Exploration costs

(296)

(296)

Research and development expenses

(162)

(10)

(13)

(152)

(337)

Other taxes

(34)

(57)

(62)

(9)

(19)

(110)

(291)

Other income and expenses, net

(1,093)

(311)

(410)

39

(3)

(2,110)

(7)

(3,895)

Operating income (loss)

9,888

5,256

1,555

(10)

558

(3,654)

677

14,270

Net finance income (expense)

(7,755)

(7,755)

       Share of earnings in equity-accounted investments

34

543

89

(55)

1

612

Income (loss) before income taxes

9,922

5,799

1,644

(65)

558

(11,408)

677

7,127

Income taxes

(3,362)

(1,787)

(529)

3

(189)

3,774

(230)

(2,320)

Net income (loss)

6,560

4,012

1,115

(62)

369

(7,634)

447

4,807

Net income (loss) attributable to:

 

 

 

 

 

 

 

 

Shareholders of Petrobras

6,500

4,060

1,021

(62)

369

(7,886)

447

4,449

Non-controlling interests

60

(48)

94

252

358

 

6,560

4,012

1,115

(62)

369

(7,634)

447

4,807

 

28

 

 

 


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

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Pension and medical benefits

(3,058)

(3,058)

Unscheduled stoppages and pre-operating expenses

(2,378)

(53)

(150)

(2)

(2,583)

Provision for doubtful receivables

(1,317)

(19)

(1)

(1)

(25)

(1,363)

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

(238)

(227)

(575)

(1)

(181)

59

(1,163)

Institutional relations and cultural projects

(1)

(3)

(58)

(242)

(304)

Profit Share

(113)

(64)

(11)

(110)

(298)

Impairment of assets

29

(236)

(207)

Operating expenses with thermoeletric plants

(158)

(158)

Cumulative Translation Adjustment - CTA

(116)

(116)

Expenses with Health, safety and environment

(15)

(6)

(5)

(1)

(73)

(100)

Reimbursment of expenses regarding "Car Wash" operation

89

89

Government Grants

9

18

95

5

127

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

662

662

Voluntary Separation Incentive Plan - PIDV

87

(30)

182

114

316

669

Remeasurement of remaining interests at fair value

698

698

Ship/Take or Pay Agreements with Gas Distributors

2

113

827

14

956

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

 

Other Income (Expenses) by Segment – 1H-2016

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Pension and medical benefits

(2,478)

(2,478)

Unscheduled stoppages and pre-operating expenses

(3,943)

(135)

(89)

(7)

(4,174)

Provision for doubtful receivables

(20)

(54)

(1)

(67)

(142)

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

(658)

(153)

(34)

(692)

(1,037)

(2,574)

Institutional relations and cultural projects

(11)

(9)

(1)

(26)

(385)

(432)

Impairment of assets

(353)

(1,125)

(1,478)

Operating expenses with thermoeletric plants

(208)

(208)

Expenses with Health, safety and environment

(36)

(33)

(11)

(2)

(75)

(157)

Reimbursment of expenses regarding "Car Wash" operation

79

79

Government Grants

8

53

198

9

1

269

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

1,123

1,123

Voluntary Separation Incentive Plan - PIDV

(565)

(267)

(51)

9

(339)

(1,213)

Ship/Take or Pay Agreements with Gas Distributors

2

357

359

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

(70)

(146)

(42)

7

16

(235)

Others

69

(56)

188

(93)

181

213

(15)

487

 

(4,454)

(1,925)

306

(84)

(523)

(4,079)

(15)

(10,774)

 

 

 

 

 

 

 

 

 

 

* Includes returned areas and cancelled projects and the gain on the divestment of NTS in the 2Q-2017.


29

 

 

 


Other Income (Expenses) by Segment – 2Q-2017

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Pension and medical benefits

(1,529)

(1,529)

Unscheduled stoppages and pre-operating expenses

(1,081)

(26)

(116)

(1)

(1,224)

Provision for doubtful receivables

(1,234)

(1)

(17)

(1,252)

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

(140)

(90)

144

(101)

279

92

Institutional relations and cultural projects

(2)

(38)

(104)

(144)

Profit share

(6)

(10)

(4)

(20)

Impairment of assets

8

(236)

(228)

Operating expenses with thermoeletric plants

(83)

(83)

Expenses with Health, safety and environment

(9)

(8)

(3)

(1)

(37)

(58)

Reimbursment of expenses regarding "Car Wash" operation

89

89

Government Grants

4

6

37

3

50

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

372

372

Voluntary Separation Incentive Plan - PIDV

(31)

56

3

93

273

394

Remeasurement of remaining interests at fair value

698

698

Ship/Take or Pay Agreements with Gas Distributors

2

113

547

14

676

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

(305)

(168)

6,254

28

(1)

5,808

Others

504

(163)

(288)

3

79

181

(5)

311

 

(1,924)

(284)

6,957

5

74

(871)

(5)

3,952

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

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

 

 

 

 

 

 

 

 

 

Pension and medical benefits

(1,529)

(1,529)

Unscheduled stoppages and pre-operating expenses

(1,297)

(27)

(34)

(1)

(1,359)

Provision for doubtful receivables

(83)

(19)

(1)

(8)

(111)

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

(98)

(137)

(719)

(1)

(80)

(220)

(1,255)

Institutional relations and cultural projects

(1)

(1)

(20)

(138)

(160)

Profit share

(107)

(54)

(11)

(106)

(278)

Impairment of assets

21

21

Operating expenses with thermoeletric plants

(75)

(75)

Cumulative Translation Adjustment - CTA

(116)

(116)

Expenses with Health, safety and environment

(6)

2

(2)

(36)

(42)

Government Grants

5

12

58

2

77

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

290

290

Voluntary Separation Incentive Plan - PIDV

118

(86)

179

21

43

275

Ship/Take or Pay Agreements with Gas Distributors

280

280

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

(63)

(78)

3

9

4

2

(123)

Others

149

56

(88)

29

72

(1)

(7)

210

 

(1,093)

(311)

(410)

39

(3)

(2,110)

(7)

(3,895)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Includes returned areas and cancelled projects and the gain on the divestment of NTS in the 2Q-2017.

30

 

 

 


Consolidated Assets by Segment – 06.30.2017

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Total assets

457,205

167,987

62,726

982

18,171

117,074

(16,091)

808,054

Current assets

18,131

36,992

4,412

186

7,860

89,152

(14,298)

142,435

Non-current assets

439,074

130,995

58,314

796

10,311

27,922

(1,793)

665,619

Long-term receivables

23,536

11,700

8,287

423

3,316

21,893

(1,635)

67,520

Investments

4,616

4,916

2,688

52

16

19

12,307

Property, plant and equipment

403,264

113,802

46,284

321

6,252

5,477

(158)

575,242

Operating assets

296,882

99,613

37,987

310

5,368

4,250

(158)

444,252

Assets under construction

106,382

14,189

8,297

11

884

1,227

130,990

Intangible assets

7,658

577

1,055

727

533

10,550

Consolidated Assets by Segment – 12.31.2016

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Total assets

456,594

171,359

63,515

1,699

20,304

110,057

(18,583)

804,945

Current assets

18,262

40,609

11,707

1,319

9,906

81,262

(17,158)

145,907

Non-current assets

438,332

130,750

51,808

380

10,398

28,795

(1,425)

659,038

Long-term receivables

24,870

10,793

6,539

12

3,314

22,285

(1,262)

66,551

Investments

4,722

3,597

1,520

43

47

19

9,948

Property, plant and equipment

401,057

115,745

42,675

325

6,308

5,929

(163)

571,876

Operating assets

295,656

101,520

38,659

315

5,389

4,798

(163)

446,174

Assets under construction

105,401

14,225

4,016

10

919

1,131

125,702

Intangible assets

7,683

615

1,074

729

562

10,663

 

 

 

 

 

 

 

 

 

 

31

 

 

 


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 – 1H-2016

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Net income (loss)

1,399

14,976

1,520

(124)

161

(15,715)

(1,699)

518

Net finance income (expense)

14,754

14,754

Income taxes

717

7,425

678

(63)

75

(7,111)

(875)

846

Depreciation, depletion and amortization

18,579

3,851

1,453

13

292

410

24,598

EBITDA

20,695

26,252

3,651

(174)

528

(7,662)

(2,574)

40,716

Share of earnings in equity-accounted investments

(8)

(561)

(204)

2

(16)

1

(786)

Impairment losses / (reversals)

353

1,125

1,478

Realization of cumulative translation adjustment

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

70

146

42

(7)

(16)

235

Adjusted EBITDA*

21,110

26,962

3,489

(172)

505

(7,677)

(2,574)

41,643

Reconciliation of Consolidated Adjusted EBITDA Statement by Segment – 2Q-2017

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Net income (loss)

4,825

3,487

4,700

(28)

235

(13,243)

316

292

Net finance income (expense)

8,835

8,835

Income taxes

2,425

1,578

2,376

(10)

123

(177)

163

6,478

Depreciation, depletion and amortization

7,576

1,928

609

3

128

138

10,382

EBITDA

14,826

6,993

7,685

(35)

486

(4,447)

479

25,987

Share of earnings in equity-accounted investments

(117)

(423)

(86)

8

1

2

(615)

Impairment losses / (reversals)

(8)

236

228

Realization of cumulative translation adjustment

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

305

168

(6,952)

(28)

1

(6,506)

Adjusted EBITDA*

15,014

6,730

883

(27)

459

(4,444)

479

19,094

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

 

R$ million

 

 

 

 

 

 

 

 

 

 

E&P

RTM

GAS & POWER

BIOFUEL

DISTRIB.

CORP.

ELIMIN.

TOTAL

Net income (loss)

6,560

4,012

1,115

(62)

369

(7,634)

447

4,807

Net finance income (expense)

7,755

7,755

Income taxes

3,362

1,787

529

(3)

189

(3,774)

230

2,320

Depreciation, depletion and amortization

7,879

1,910

704

3

125

145

10,766

EBITDA

17,801

7,709

2,348

(62)

683

(3,508)

677

25,648

Share of earnings in equity-accounted investments

(34)

(543)

(89)

55

(1)

(612)

Impairment losses / (reversals)

(21)

(21)

Realization of cumulative translation adjustment

116

116

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

63

78

(3)

(9)

(4)

(2)

123

Adjusted EBITDA*

17,830

7,223

2,256

(16)

679

(3,395)

677

25,254

 

 

 

 

 

 

* See definitions of Adjusted EBITDA in glossary.

** Includes the accounts of gains / losses on disposal of assets and gains / losses at remeasurement of remaining interests at fair value.

 

32

 

 


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 that helps investors 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 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.

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 between the prices of exports and 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 SalesIn 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, government take 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 that helps investors 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.

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.

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.

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

NGL – Natural gas liquids.

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

Operating Margin - calculated based on operating income (loss) excluding write-offs of overpayments incorrectly capitalized.

 

PESA – Petrobras Argentina S.A.

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

On June 30th, 2017, the presentation related to the business segment information reflects the Chief Operating Decision Maker assessment related to the performance and the business resources allocation.

 

 

33

 

 


 

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 11, 2017

PETRÓLEO BRASILEIRO S.A—PETROBRAS

By: /s/ Ivan de Souza Monteiro______________________________

Ivan de Souza Monteiro

Chief Financial Officer and Investor Relations Officer