Q3 2020 Petroleo Brasileiro SA Petrobras Earnings Call
Our beloved variable falagountou dividends as good cost solution.
Well, Paul I see little remedies to bump into them.
Okay.
Hi, Good morning, welcome to better manage that passed with analysts and investors about the third quarter results I would like to inform you that all participants will fall in the transmission by Internet at listeners after introduction appear on a session will begin.
Sams questions by email better investors and better but ice dotcom docs here today.
Today, we have with us how best to give us a little bit I'll get through but I see you and they are medium chief financial and Investor Relations Officer, and easy Aladdin, Chief refining and natural gas officer, Mbeki, Edeniq cheese trading and logistics officer.
Amazon back at Entergy, Louisiana, Chief exploration and production officer Mr. failing.
Each governance and compliance officer, Nicole lasting long chief digital transformation and innovation officer call back.
Banking, Chief Investor Relations and sustainability officer.
Would you mind loadings are cheaper production development losses.
The presentation will be available throughout though our cash on our website, we struck by leasing but the rest you cover cash celebral, which the main real highlights of the results of these hobbies.
Hi, Good day.
Pleasure to be here for.
To share with you our.
So quality results.
I believe that.
Rapid response to the outbreak of the prizes.
Was fundamental in order to.
So while it is starting to pay off.
The.
The quarter results the quarterly results.
Our very good.
We had a very strong operational performance.
You'd borrowed the highlights.
Basically the oil and gas production in the first and most of the compared to the same view.
We view the last two years.
About an increase of 9%.
The Breeze salt production.
Increases by 32%, which is a net after this result, given that the result is the lowest cost producer.
Reports post spin outs with 70% of our production.
In the D. Our refineries the former very will after a low.
Utilization factor.
Dave Richards levels above 80%.
During the quarter and continue on the C. diff.
Bass.
It's important to to comment that we are not operating with negative margins and leader.
Increasing even tours on the kwanza pre inventories have been be useful is part of a.
Brother.
Initiative to optimize the.
Inventory management across the board in the company and to liberate working capital for more productive use.
The natural gas energy area also performed well.
If.
In terms of costs I would like to highlight a very low cost of the pre salt.
In the quarter $2.03 per barrel of oil equivalent oil very good result.
I believe that this suggests the low breakeven price of our world class assets in the pre salt.
Second as an example of our cost 30.
Let me address the.
General and administrative expense in Brazil, rice enormous numbers interviews S.
They are fully denominated in Brazil, whereas north and west doors.
The first nine months of.
This year there were the lowest in 10 years.
Taking the time series.
Beginning in 2010.
They are the lowest gain Brazilian very eyes nominal terms not real scope, we're accessed by inflation. So lots of the Nexus result.
And there is much more to come now more important than that that's much more to come given the several initiatives. We are all in one.
In terms of.
These events.
We signed a very important agreements with our partners shell Repsol in Galp in order to integrate.
The operation of the.
The rules 123, the subs see gas pipelines that lead the pre salt to the.
Ross processing plants in the course of states have some Paulo and Rio de Janeiro.
This increased rate flexibility increased product Gigi is this a source of a large value creation as we can a lot of these through the spin off of these assets into one new company into.
IPO Weve too.
Well unlock value.
Uh huh.
Other important events in the quarter was the relocation of the east up above the Savage World.
Platform to stop operations. It's approved it's approved feud was acquired by Petrobras in November six two Mg 19.
The auction for fuel our of excess Europe for us the rights.
And we.
We will anticipate.
Yes.
First oil in about a year and it's a pool.
Smaller than boost of course, but is resilient at very low oil price some.
Some see below $20 per barrel so.
It enhance our capacity to generate cash our financial numbers are very good we reflect on all these initiatives.
We had a free.
Free cash flow reaching.
$16.4 billion, the first nine months of the year and they would like to highlight that 64% of the free cash flow was generating doing what I call. The damage quarters, the second and the third quarter not the first quarter not the.
Recall over 90 Iraq.
So it reflects all the efforts of our.
Close integration in our teams the walk of agile agile chains to deliver on our promise and the acceleration and the exit of the execution of the strategy.
Uh huh.
Our divestment program slowed to date, hopefully 19 prices of course.
We delivered only $1 billion in the first nine months of the year lower than we expected.
The beginning of this year, but.
But we have it's our program is alive and well we have 47 assets.
For sale in the market, we have some juice.
Gross to an end.
Refers to relocate.
The refinery Rima and other refinery leaky guys switching only for the approval by the antitrust supports by causing.
Gas pass through.
And.
Several orders.
The binding phase or Mike.
Minority only seven deals the initial phase of the divestiture Brew brothers, So we will who.
We can expect for the next few months.
This quarter indeed, the first half of 2021, several views being closes and improving capital location.
In generating cash to Petrobras when they had an amendment to our dividend policy, it's very simple.
I believe that.
Some people didn't understand this is source.
Just to clarify the fact that Petrobras.
Can pay dividends even we.
Accounting losses.
We are not driven by accounting results were driven by cash cash a ski during the month of April gas was even go up and so that's it and this is.
It's very clear easier Brazilian corporate law article too.
Two hundreds one.
That.
Allows companies to pay dividends, even if they do not have accounting profits given that.
They have some accounting reserves and we do have bought we're not declaring dividends note. This decision was made about dividend payment. The only decision was taken before.
In the aftermath of the start of the crisis when both spoke to the payment of the last tranche of the dividends of 2019 two December they will be paid on December 15 of this year.
It talking about dividends I'd like to make a comment about some malicious speculation.
That Petrobras as is changing the rules.
To help its parent company the Brazilian states.
I would like to clarify this issue I'd like to show you that malicious formats and a false one without any from the mid.
Any any logical fundamentals.
First of all.
Brazil is state owned lease all.
Owns only 36% of the total capital of Petrobras.
Owns 50.5% of the voting shares but in total it owns only 36% second.
What's important for the government is the.
The the taxpayer by Petrobras and other players in the.
The oil industry in Brazil last year.
We paid to the government.
246 billion realize.
In Texas, and several Texas and.
Subscription bonds.
Two acquired the rights to explore and produce oil in.
Some fields, including Booze, an Easter pool.
At the same time, we paid dividends of 1.8 billion brass as tiny.
Tiny fraction of the the best bad debt and bonuses paid to the government 246 against 1.8. This year in the first nine months of the year, given the low oil price and low.
Auctions, we paid only nine two when bill congrats.
And.
Okay.
As I said, we are going to be the last tranche of the 2009 dividends too.
And.
The government will receive only.
900 million brass so it's again.
Out of question and not last but not least our.
Our this quarter our.
Lifting costs at the pre salt as I said was $2.03.
And.
Out of each basin producers in the pre salt the government's receives $15.
$15 15, basketball's, one slide so.
It's.
It's ridiculous.
Two four way these militias speculation.
Who is really.
It makes no sense.
It will be lot intelligent to break some grew too.
To pay more dividends to the government and Petrobras has no interference the manager of Petrobras has low in this years.
From the government we are free to.
Designers strategy to execute those strategies to price.
Our products, we doubt 80 deflation.
The purpose of the amendment to the dividend policy was to be more flexibility to the to be to the to the policy and.
Link it to cash flow not we pay dividends, we pay salaries, we pay taxes, we pay.
That we.
Distribute dividends, we invest with cash loss with the accounting items.
Well.
I'd like to say that we may have won a battle a very important better because the challenges in.
Late March into this year were very early shoes.
And we will bucks.
We continued the same path accelerating our.
Stratasys execution going ahead, we digital transformation a cultural transformation.
Cutting costs in all fronts, we have several initiatives many initiatives to cut costs.
Two.
Improved capital allocation not only to divestments, but also due to.
The approval of projects.
So we do expect the opening the future to be much better than its now we are placing the seeds for great company Petrobras stronger.
Joel.
In April to be the best oil and gas company in the world in terms of value creation. Thank you for your attention.
To best to Carlo Bernard.
Thanks, how bascome.
So now.
Hi.
So starts.
The financial highlights.
Okay.
Hello, everybody good.
Good morning, very happy to be with you presenting the third quarter results.
And it's a good start.
With them.
Corporate comment evolution that we have been through.
I'm very happy to announce that we launched the atlantico conduct for Petrobras supplier, they totally online and in compliance with the highest standards of integrity. Some training fireman's responsibility an ethical conduct.
In line at least four times zero tolerance for fraud, and corruption and in line with the downtime sustainability index I 43 between Andre. So we are very happy to announce that.
Entering to the financial highlights the next slide.
I believe thats already mentioned that maybe this quarter.
The most important an item that we deliver on was a very strong cash flow generation.
And this was a consequence of that strong.
Recovery in price not not somebody recovering price.
And higher sales while funding.
In the end, we had a free cash flow up $7.5 billion. Another important highlight was that.
Our gross debt by $11.6 billion.
And now we are.
Better than that goal, we had 40 year add that it wants to finish the year at $87 million. We are at 80 right. Now in addition to that we closed the quarter with that solid cash position after $2.4 billion.
And as a result of our excellent operating performance, we announced in October that semi part the reason of that reduction targets to 2.4 million barrels equivalent a day.
This week.
And how that's already mentioned that we have through.
A change in the dividend policy and the main objective is really to give management more flexibility to propose payments. According to the cash generation of the company and.
If any near Atlanta, where we want to have accounting profit.
Important to note that we remain absolutely committed to the reduction of the growth that and we expect to reach the level of $60 million in the top 22, we will do everything we can and more to get there.
But with more flexibility, we will be able to propose a dividend.
When they're in the reduction on the NASDAQ in the previous swell.
Period, if we understand the company had strong cash generation and it is financially sustainable.
So it's really a change to bring more flexibility.
Whenever we have retained in Darlington something that is not allowed by the law 6404.
As previously mentioned, we do start growth that you just completed quarter to $79.6 billion.
We were able to reach an average term of our data 11 point 19 years with an average cost of 5.8%.
And that the language measured by the net debt to EBITDA reached two point 33 times.
As we mentioned already we had a strong cash generation. If we measure that we did not add that that means $6.9 billion.
And it was driven by higher brand price.
That runs around 27% in the quarter higher sales revenue lower costs, partially offset by lower crack spreads in our oil products.
Specifically in the business areas, Brent prices recovering to explain it.
And the EBITDA is generated a positive impact on inventory turnover in refining.
If we look at our cash flow generation back again.
We have.
And operating cash flow of $8.6 billion, which was helped by the use of tax credits.
Finally from the accelerated depreciation on the Antioch.
The use of that CMS is 14 started in October, but we will see that coming in the next quarter.
And we shouldn't expect to use those spread in the next summer months.
If we look at that Thats NRT Fastlane, we just after the investments we have free cash flow of 77.5 billion bond as Lynn mentioned already and we had a net financing and interest sort that spans of $13.3 billion that was what how.
I'll get to a lower gross debt.
As I mentioned earlier, we are back liability management exercise and we are very proud off of historic achievement in our last bond issuance, where we thought that the lowest level for a 10 year bond in that Petrobras history.
Together with that we did to trade, where we repurchased more than $5 billion in mind.
We continue on anti patent strategy and allowance more seasoned in the quarter and we are advancing the negotiations for the sale of refining so.
So we had a very strong third quarter and now we are very happy to be here, presenting and we'll be very happy to answer all the questions you have.
That's the worst Gaba mechanism.
Okay.
Okay. So now, let's turn to our DNA session.
The first question comes from hedges because those are with credit Suisse and it's far how that something can you comment on Petrobras initiatives concerning yes, cheap and in particular, the transition to a low carbon economy.
Oh, Hello unrealistic for the questions.
Yes, we are.
Very focused on the yes, yes, Gee right now because these are not one area that we want not just to improve our process must ask to show to the market. What we are doing we are one of the companies that has the lowest initial peer barrel that we are producing when we compare petrobras.
Other companies. This is a benchmark we we have in the market and we want to continue to improve.
This.
Objective with a series of.
Commitments, we have already announced to the market.
Such as.
To continue to lower our initiatives to lower our use of fresh water.
And other.
Factors that are including showing in our.
Documents that we have approval.
Recently that is the climate change Handbook.
In this area off.
Carbon emission we want also to take a look on our own process and.
How we can improve the quality and how we can lower the emissions.
When you consider for instance, the refining or.
The production of oil and gas in our installations.
For instance, the renewable diesel that we are establishing in the refining area is one of the initiatives that I could mention here as very important to this a both a DSPG is not just.
Environmental is also.
Social and it's also governor.
Andrea has already mentioned with the presentation that we have.
Launched recently ethics.
Ethical conduct guidance for our supply chain as you.
Which we want to be very street regarding any kind of corruption or.
And we have to fight is very strong in.
In the governance area also we are launching.
Launching other initiatives like human rights Handbook, which we also are showing how our policies. We got in this area is also.
Implemented in the company and the lead the list, but nonetheless is the last but not least is.
An area that we you are up to continue to work if the environmental project Petrobras has been working very strongly over the years in some flagship program back this summer program, which we have been able to.
Protect sea turtles in Brazil.
On the three.
Both ends and injured Pcs pieces of his sister to sister two in Brazil, we have been able to increase the population of two of them.
You too these tamar projects that have been supported by Petrobras for more than 40 years. We also are working on other projects like like the one that we have here in the one of our amazing.
To work in the remote areas of the the May they are collecting trash and trying to improve the quality of the wetlands and Marshall the areas that are located in these remote areas of the one of our ability to improve the species.
Area and to improve the quality of the fishing for the more vivid. So it's it's a very broad.
Broader program.
For this reason, we Havent decided also to create I, specifically department in Petrobras as just to deal with climate change and we're going to pursue those objectives, but working.
Hello and seeing.
Maybe some roadmap core.
The near both in more long term like like the offshore wind hydro to hydrogen.
Research that we have here in our facility with such facility real but also looking for our own process and see well how we can improve also.
The process in terms of growing Denise how those are the two areas that we are very concentrated now.
Okay.
Thank you. The next question from hedges from that I am.
But I am.
As has been the leverage incredibly fast can you comment on what factors have allowed that efficient payable deferrals capital capex running below budget.
Okay had that's now thank you hedged for the question that there is an important question I believe that the leveraging in a function in has been this year function off cash flow generation and now what we have been doing it on to subtract surpassed the crime.
Right.
Once mainly.
Interest in fact action that the company took add to generate more cash and to have that I would say a better and more sustainable company. So.
Starting with cost reduction so I think.
Apple sold and that has in his presentation. The amazing evolution, our lifting costs. So we present any petrobras. They lifting costs are passed 7.6 dollars per barrel and we are in this quarter with 4.5 in the overall portfolio management off assets. So we have been looking we tried the asset.
Economic can we stop the production up those factors concentrating on layers down lower cost so 70% of our production in the pre salt, where we see the lifting cost of 2.3 dollars per barrel into it's a very importantly for our cash generation.
So now so if we look at cost with that and it was an amazing year at where we were able to implement lopped off that reductions in cost of personnel. We had a very important voluntary dismissal program, where a lot more than 10000 people to decide to leave the company in the program this will generate not.
The full 4 billion way I, but it will through time generate formulary adds reductions I went AMA everybody I left the company, we had a change in our structure. So we reduced the number of managers in our construction and that generates a cost reduction related to personnel as well in fact.
This meant we did of course, we are doing so we finished at least Leah standby staff and maintain a portfolio review approach. So we did for the year and very important reduction of Capex.
$12 billion to $8.5 billion in SAP and cash, but we are looking at the portfolio approach doesn't see which ones are going to stay that have a breakeven below $35 per barrel and in that and that that was the driver.
And now for.
Even for the postponing postpone our Bakken that ballet, SDN and NFV very important and an innovative thing we did a deep dive into one that is going to generate any added value over the long run them going to somehow break out more as the acquisition of that into how can I think the other side.
Anticipation offer that so and that in line with that we made to the Capex for the next five years from Dnbi to $40 billion to $50 billion.
We haven't lost some other strategy. So let's talk about beauty, if we talk about building the cost reduction we are happy because we had so many buildings available for peak when now we are streamlining that muni than having only the one that we need to add four.
For for our people and even for SAP that we cannot.
Leaves the contract because it's a 20 year contract we Iraqis.
Testing the maintenance expenses when Apple we are shutting down the building guarantee we are streamlining all the cash we have for a legal proceeding. So we have lots of Catlin ponticelli guarantees in our legal proceedings, we aren't streamline this process and really getting push.
Sure I'm more.
I'm trying to get at last weekend cash on those that produce Alamo legal proceedings that guarantee that spread. So you saw this quarter and $900 million that at SSAT granted it's impacting our cash flow generation I would say that lots I can be speaking here.
Half an hour hour more about and we see this company did to the crisis to surpass our PRASM asset prices and to be more sustainable over time I think that's why we are deleveraging so much.
Thank you on that I am.
Next question comes from which combine new with CMBS. So it's for you as well just a follow up on the divestment proceeds what is presenting better brands to move forward with BR distribuidora share sale.
Is it only the right price up the assets.
So thank you for the question at what we did we ask you to that the board of directors to accrue.
So as we have more flexibility to decide the timing.
The decision on that timing on by asset sale that goes through capital markets definitely will be impacted by the window of opportunity and you know this window of opportunity is linked to what is happening in the world and in Brazil. So the volatility of the markets will be Mac and another thing that we have to take it.
Duration definitely the price you are not as rapid as strong guidelines. According to you.
And when asked.
And we'll be always looking at our internal valuation compared to what what is the price of the stock in the market to decide when is the right time of the sale, but it's a combination of fat right and it's a combination of that.
England, when our time to execute capital market transaction.
Thank you and Brian next question also from some Leach Istar Ghedini and also any isn't so on the share price policy.
Some company wasn't meets more active recently, but in part seems close to private players at the current moment I'm comfortable with the refinery utilization rates and spreads.
Oh. Thank you for your question with I'd like to start by saying that we are following international prices and imports are not close to 21 distributors trading companies are still operating and it can be easily check our commitment is to have competitive prices. So competitively.
Quarters, we'll always have their market share as further utilization rates of the refinery. It's also important to clarify that we don't see it as our all our targets before.
It's a consequence basically a result of our sales and operations planning, which takes into account local and international demand current and projected crack spreads of each product among other variables. So I can say that we are comfortable that given the conditions of the market. Currently we are running our overall production systems.
In a way that maximizes value for veterans.
Spreads are very low nowadays, although still generating positive margins in the refiners are lazy why don't you comment further on that.
And yes.
Everyone that said, we are monitoring the market seen on daily basis, adjusting our refineries pronto profiles to maximize economic results utilization rate is that consequence of this optimization.
I have to say that they have is fine I'm not comfortable at all when the crack spread margin of our oil products globally diverse.
The refining margins are they lower LOE.
Level since 2000, the year 2000.
Is that close equates of Bcl inventory scores like that that is still very high end caps to demand that is still very low but as you know as I understand you could review we could see then flat panel price that takes into account not only they crack.
Express margins, but the exchange rate shipping any analogue each floor GP costs to establish the price of our products and also we are working very hard to reduce our refining costs. That's why we have been able to keep bonds Piedmont.
In our timing back even if international you can nationally it may not be the case. Thanks.
Thank you Lisa.
Thank you kit Kat anything going into the next question comes from tandem and they asked us and it's fun and games.
So M&A considering the changes in dividend policy announced how is the company considering to distribute dividends once it reaches the $60 million crust that target, it's going to be on a quarterly basis.
So thats.
Thank you for the question nothing changed when and how we beat the $16 billion Sally whenever we meet the 60 billion lower paid 60% right.
Turning free cash flow operating cash flow minus capex.
The the easily monthly quarterly or attend the annually we have flexibility to do that maybe we'll pay twice a year, but as I sat napping.
That we can and change as a buyer or more so that there is no fixed through around that.
Ana and other than the apprentice only that when we have negative earnings that we will be able to pay only when we have retained.
Retained earnings and whenever we have a reduction of the number that I think that that's that's the change.
So the second question also from Ketamine, there as we see it Sebastien SaaS application you rank all the major initiatives under implementation for the coming 12 months that can generate most gain for our shareholders.
Oh, Thank you for your question below.
There is a long list of initiatives.
Well cutting costs.
So gaining more increases efficiency that will come on stream in the next few months as others.
We're already implemented but the the no Mitch.
It will be shown only implemented 21, one of the thing is the voluntary dismissal program.
It's a program that has a payback of 12 months. So is for the future the returns will come.
In large part just.
Second half of 2000 and 2022.
Several of the measures have been taken believed that Andrea.
Mention several Dan is initiative to improve inventory management to optimize lead to liberate working capital too.
Got personal cost.
Two.
Two.
Yeah good to use.
Digital transformation to gain more efficiency across the board not only in operational advantages, but also in bulk or did you just say Fiji.
You've got an environment.
So it's impossible to list all the measures that we have.
All brokers and some of them we are learning tool to implement.
We're going to see good results.
And Graham mentioned about the buildings.
Wow.
But the end of.
28 gene bedrock Bryce.
Hi, Ed.
Clinton three administrative duties.
We started this year with 17 beauties.
For the either.
There is also the first quarter next year, we have only eight duties we already three two buildings on by the end of September early October and this is a drain. This same time, we are selling 50 550.
Duties.
Across the country.
Uhhuh Petrobras is also a real estate company.
I can't say that Petrobras had 50000 tons of scrap in storage.
Who who now we are also in the scrap business [laughter].
So.
As a lounge rule, yet to reduce costs become more efficient.
As in terms of gross as would the amount that we.
We.
Hey platforms common stream from 2018 two diseases.
Due 2025, we will have more 12 plus forms.
And we will see is more oil and oil are much lower costs remain resilient to low price.
We have the.
Good innovation products.
Focusing on exploration production of oil and gas to reduce the breakeven price is.
Well allow us to explore it more.
Acceptably.
Areas of the pre salt with higher concentration of C will do.
Making operating costs, both capex and operating cost much lower than the are now so there is there's a wide spread.
Airport on the savings are actually become a low cost and much more efficient producer.
Thanks.
The next question comes stone Bruno Montanari with Morgan Stanley So from that I am and I at the term last faces a perfect storm in its free cash flow generation, leading to a very strong seeking.
Working capital account seems very benign while capex very low in the quarter, what can we expect for working capital and Capex into the fourth quarter of 20 trend should there be a strong reversal of fortune kept on shark, increasing capex, assuming that causes related restrictions seems to have been east.
Thank you for the question.
So regarding investment Capex.
We executed up to now $5.4 billion out of the seven so I don't expect into I extend a fourth quarter that we that we completed a $7 billion cash for the year that that's what we expect and ice we need to say where I'd like to be.
Paul I believe it will be bending down balls, you say can I pass Quintette are the places where we.
We'll have that Capex in applied we got actions out working capital for the fourth quarter, we have been and we don't see a lot I think how we are the best quarter since 2019 off.
All that being centric. So I believe that logistic team has been and been doing a great great amount of job a great job of reducing advance rate and we have been reducing a lot in terms of time accounts receivable that it will the ban on fourth quarter. If we have more sales in the local market.
Cash or export. So this quarter, we had a lot of that we had the demand went up and we were able to have more sales than in the local market and you know those get to revenues faster whenever we are exporting that then it gets 45 days so as we get into revenue so it really.
Then on the mix up but I believe is everything takes the same we won't have any negative.
Negative impact we might expect to see the same trend we signed the third quarter in working capital.
If we look at inventory and then and accounts receivables, our bad news I would say that to be the case.
I don't know if what you might want to say anything else about capping.
Oh there thank you.
You were very completed thank you.
Thanks.
Thank you. So the second question also some room on Tonight with Morgan Stanley for Caplan capital regarding the production platforms. That's why most borrowing during the crisis.
Good idea to keep them I donated indefinitely.
Onto some of those assets ourselves.
Yes with contributed so keep the lifting cost at low levels is that a fair assumption.
Hello Hello.
Well, what I can say about that is so far.
There is not an economic reason to reopen.
Those fields to put all stay again.
Platforms.
And particularly in this current scenario of oil prices, where we do see that they are very low and where we also see that there is a lot of volatility.
Dave It's important that we see that there are a lot of resource that contributed for a total reduction of 43% that we saw on the the lifting costs and.
They have cost increase of production.
For sure.
The mothballing of those platform they have contributed with something but it was just as low amount of the 43% of the total reduction that we have I could say that something like 5% of this 43% is due to this motion balling effect.
Okay, I hope I have answered as for your question.
The next question comes from and that our Shane with its own BB eight when you're looking to Petrobras current roster of new platforms in the current capacity of bank lines. The roots. It seems that the bulk of the new projects will continue to use gas.
Injection is there any outlook considering the units planned for the coming years.
So it is to increase the capacity.
Adding these new projects off the Offloading pipelines and this.
Fighting the gas so.
First I think its caf, one and then and it is the right.
Right.
Okay I started them.
Well.
For the time being our installed capacity for the platform that produced from the pre salt they comprise the.
The hotter and hotter Lewis and the Lextar rule to the hot today is it will be available by 2022. So we.
We think that this structure is sufficient to formulate the projects that we have in the horizontal of our strategic plan, but.
It's something that we have to continually be evaluating as we also have some exploratory activity and also the development of other fields that are they are more gas grill approach, so, but I would like to pass the word to what it is and I think thats you can complement with.
The sows with with some more aspects about the subject.
Thank you and.
And as Scott said, considering the current projects under development, we don't foresee any sense to find new cancer.
But if you take into account the new projects that have already an exploratory success increased Soc area like Brock BMC 33, Chukka Hello, we.
He and we foresee any sense to fund new grass root beer.
These sad block is operated by equity now, having Petrobras and Repsol as partners.
Also the signing of the integration of the gas moves and that processing gas plant.
We think that Pete. This is also an important step for monetization of assets, we checked correctly be static by our team.
Thank you.
Let me, let me complement a little bit about the road three yeah.
We have we have is we still have a a goods fixation for starting up the road three at the end of this 21, okay to 2021. Thank you.
Okay. Thank aninese, thank you, which matched so and that also has another question and this one's for example, so while the details of the new business plans.
Actually release could you comment on your expectations for the Compass basing recovery, while we understand there are a lot of promising opportunities there and this capital restrictions intense scene.
Less interesting than the Simpsons baking in this we got could you expect more divestments in this region.
Well the projects that we see for the IND our brands that we have in our plan for the renovation of Compass Beijing, They are very resilient to low.
Lower price so.
For a couple of these remains for sure one important target for US one important part that park in our exploration production portfolio.
Couples base is very well aligned with our strategy thing reversed in world class assets that are located in deeper water deepwaters due to the fact that the the producers are very resilient day. They scale. They can be viable under oil price of the 35 targets that we have stopped service inside the company. So.
We continue to pursue the same goal that we had on the strategic plan of the 2000 22024, which is to produce in 2024 similar voyage that we have pre incident in the 2013 in lighting.
We were going to show more details about this when we disclose or the strategic plan 2021 compared to 25, but I can anticipate that we asked you keeping.
The best to two.
To put the investment is on the phasing and where we see a lot of potential.
Yes.
Okay. Thank you I don't know if I have answered your question. Thank you very much.
Thank you Pat for the next question comes from Krish analogy, he just sense so.
Some questions so.
So from a back to back to you have left solidly competition. That's there is no urgency to sell assets that said, how do you balance it with the fact that you want to divest assets to help in the de leveraging process.
Thank you for questions gruesome first of all oil well first of all sorry first of all.
Divestments are not driven by.
Liquidity by the solid over liquidity across the company has a solid liquid liquid positions there was no need.
By this reason does no need to sell assets than you do.
Boozy is selling off assets, but assets sales asset divestments is guy avidan by strategic.
Roofs first of all as we have declared many times.
Our focus is on assets.
With the on the National owners.
Assets in which we can extract the maximum return so we are best for.
World Class assets.
In order to increase return on capital employed in the future above cost of capital and generate positive BV to our shareholders delivering value to our shareholders is one important reason for that.
Festers.
Second is to de leverage although we have bad the last 21 months three $1.5 billion of that we are still.
Overleveraged.
Net debt to EBITDA as shown by Andrea is 2.3 times.
We need to de leverage the company to de risk its balance sheet to reduce our.
Our.
It stays with aegis.
Two.
[noise] to free cash to invest in our world class assets.
We ended the quarter with gross debt of $79.6 billion. So we were still well above our target of six $2 billion $92.6 billion of death, we should.
Eliminate.
It is the.
The case because refineries there is a third factor the risk the company because the Petro brides the only player in the Brazilian refining market with 98% of capacity of installed capacity it won't be to always be exposed to the risk of.
Mr Page if you are the only player.
Although it hasn't B. drew we are overbuilt the last at least the last couple of years you are seeing as the monopolies and then when price full price rise there are political pressures stool.
Our goal.
Well the integration is the SWU price.
As we have seen in the past several times, although the Brazilian law establish that full price. Our three disease was offset by lower since 2002 in a market that several cliffs.
We understand the risk does we will minimize.
And regarding our refineries.
We too we have plans to improve the efficiency of refiners, who use cost one major focus.
His energy efficiency efficiency as it rich.
Dual goals, one is to reduce costs and.
Second.
To reduce greenhouse gas gases. Its mission is one of our goals as in our yeah SG agenda. Thank you.
Okay.
Tanker have after Chris analogy also has another question for you. So the questions is about Braskem Braskem continues to improve on several fronts, which is positive for the flotation sale off your stake what else do you think it's important to take place to accelerate this divestiture.
Good person another good person gruesome.
Braskem has improved but it has improved as has to improve much more.
In terms of.
Solving all the environmental liabilities is to improve significantly the governments.
We.
We have a.
Discussions with the controlling shareholder that order brach in order to reach an agreement that we allow us to lead brass.
Roskind shares in the local macabre in order to increase.
The two two improved significant devaluation of the company to be able to sell our stake. We don't want we have no intention to continue as a minority shareholder.
Petrochemical company would like to sell our stake in order to use cash to invest in our.
Uh huh.
Our world class assets to.
Reduce debt and to pay dividends to our shareholders. So to submit this to the capital management process.
Now back to the next question from grown our marine which Goldman Sachs and find the right.
And then what's the sustainable level of cash on their normal circumstance and so how much more that can be paid only by using current current cash balance as opposed to asset sale, our free cash flow generation.
Okay. Thank you for the question I believe.
Before the crisis, we were trying to reach the level of $6 billion type like five to 6 billion Mark that is still the case that is still the operational and minimum cash that the company can add 10 companies. They can.
Can link.
Nah, but but we still believe we sat and we need to see how the pricing is going to be right from now on we are seeing that the second way into the country. So we believe we will still need to keep maybe a higher cash why we see a higher volatility and then go back to that.
$6 billion. Those are if you look at our cash balance right now it's around 13 billion point Fourx, but you have to take into account that we and it's important to mention that we have back our insurance that is our committed bank facilities, we have back that $17.6 billion our committed bank.
I'll add slap that volatility is gone we can work with them that catch up $6 billion add but we still don't know when when it's quite meaningful.
Thank you Andrea that's one more question for US now so could you. Please update us on the asset sale program, what's the status of the Sei off the refineries are your stake on the adjustable Diana and also on the assets related to guess.
Okay. No I think about that already gave an update on that may fine. So we are negotiating with them with a buyer for hilla, Hey, mom Alley, we are analyzing the proposals received a and his family might be proposals at the end of the year.
Ah at TPG and that is that the one related to gas is one that we are waiting and speed to define new tasks. So we are waiting.
The regulators and to add to their parts when they can go on and got staff to we see proposals and we are right.
Right now.
About waiting the proposal.
We talked.
Already today about the offshore gas pipelines.
That we are discussing with other.
Other players.
We are going to go for a new entity and Labatt to mention so put all the.
Those pipeline into our company and then do an IPO, where we can get the future investments into this company. So that's one option that we are still discussed discussing it did these auction or an M&A option with the other partner absolute Stevie Wonder.
Discussions will come.
I believe those are the most important ones to update you all I believe.
Thanks, Andrea next question comes from Shagun Black sheep with BTG Pactual, So truck capital capital, it's interesting to see that 60% of that year on year lifting cost reduction is explained by factors that are on the companys control such as the official.
Thinking for example, considering the prospects for increased production in pre salt areas, how much would the company say two possible to de lever on cost reduction in the next year.
Well.
We have made an important therefore.
In order to reduce costs as part of the risk cost reduction is due to the reduction of course. There is if there is also an activity that we have so.
The core of it.
Is something that was a kimco and impacts on cost and potential for sure. We've made a lot of effort, but our goal is to continue to work with low cost and to continue to proceed to save cost reduction.
And.
As I mentioned for the next quarter, we expect to have an increase on the lifting costs as we will have some.
Reduction on the production to the stoppage that we we have postponed it.
From the beginning to the end of this year, but.
For the years to come out we we are and particularly for the 2021 as I also mentioned the intention was to to continue to pursue a reduction in cost and to compete.
Same perspective same.
The same.
Same good performance that we have seen in the 2020, but for years to come will.
We'll show our gas guidance when we open our strategic plan.
Ecopoint and we have time for one last question and the last question comes from Indiana Young from HSBC and it's far how best to come back to can you. Please comment on the rationale of changing the dividend policy.
She to allow management to pay a dividend, even when reporting accounting losses.
He goes against the prime assets after leverage first deep than later Faro compensation. Even later in this change to cater for a larger shareholder base, namely the retail investors or to allow your cash strapped parents to get some extra funds.
Lilyanna I do believe that this question was a rare.
The aggressive buyers and rare and myself.
Uh huh.
Particularly on the on the militias specs they speculation on the left in our guests rapid parent company that owns 36% or two total capital this totally false I have given numbers.
To that I guess, he will arguments there's no reason for that is a drop in the ocean given speeds by Petrobras our drop in the Washington.
Against the total taxes paid by Petrobras repeat these.
2019, we delivered to the government 246 billion of real nice.
In Texas and subscription Bono's is only 1.8 billion realized gives us this year.
Q September 30, we bet 91 billion brass in Texas.
In December.
As part of that as part of the last tranche of the deep will be referred to 2019, well going to be 900, new reacts to the go look 246 against 1.8.
91 against 0.9.
And.
Also the Wu.
We our lifting costs of the pre salt in this quarter was $2.30 per barrel.
Each barrel of oil.
Yeah.
But she gene less doors to the Brazilian goal. So this makes no sense. Please you our skews analyst.
This is.
Total totally out of question.
As managers of the company, we're committed to deliver value to shareholders. We are not going to put our current liabilities of risk would search hubris. Both book a decision neither our selves, nor the our board of directors.
And the.
Capital management remains the same we have to allocate funds to finance our investments in world class assets or two.
To provide funds for sustaining capital to payback did that who have been doing that and you were laser focused on reducing debt and leverage there's no doubt about that youre going to see in the future and third to distribute dividends to our share.
Holders, it's normal we do Barrick any rule it is.
Miss any movement stories movement up.
We have accounting profits, we are not driven by accounting were driven by cash we have examples of peers that in 2015 2016.
England.
Revvy accounting losses, they distribute dividends to shareholders, we are not a needle weight or.
It is it's legal it's provided by again, our scope to all one of our corporate law. That's it so nothing changes.
We are.
To give you step only to clarify a situation that was not clear.
Yes.
As Petrobras said in the past that it's.
We will not be.
Dividends if it is to have an accounting loss.
At that time, Petrobras is a very weak cash flow.
And we put the contribution Petrobras may.
Just to do dividends, even with accounting loss, if net debt has been reduced over the last 12 months. That's it that's it no chase please capital management remains the same.
Just as Andrea highlighted to give more flexibility to oppose that's it.
Into her back so at this time Vicki many sessions almost if you have any further questions you can sense, our investor relations team. So now back to make his final remarks. Please okay.
All I'd like to thank you for participating D. So.
Video conference.
I.
The opportunities to invite you for the analysts and investors to Twentytwenty twist to entities. You of course on November 12, this will be a forward too.
Sure that's been allowed by our progress in digital transformation that is due to be very important for Petrobras, becoming better company Oh, we do fundamentals remain the same our strategy to bring.
The same is intact remains intact and we are.
They bought a b or C. Our purpose, which is big to become the best.
Oil and gas company in the World.
In value creation. Thank you.
And stay healthy and safe by take care.