Q3 2020 Petroleo Brasileiro SA Petrobras Earnings Call
We'll have a bluff falagountou dividends as Nicolas Sarkozy did.
Worldwide license renewal agreement the pop in Luton.
Okay.
Hi, Good morning, welcome to better manage that passed with analysts and investors about the third quarter results likely formula. That's all participants we have fallen to transmission by Internet as listeners after introduction appear on a session will begin.
Sam this questions by email better investors and better, but ice dot com docs here today.
Today, we have with us habeck ourselves, but also pick your brain CEO and they are medium chief financial and Investor Relations Officer, and easy Lattmann, Chief refining and natural gas officer, and that actually had any cheese trading and logistics officer.
I will go back at Entergy, Louisiana, Chief exploration and production Officer My sales link.
Each governance and compliance officer, Nicole lasting long chief digital transformation, and innovation Officer, Quebec, Softbank, Chief Investor Relations and sustainability officer.
Would you mind Linzess chief production development losses.
The presentation will be available throughout the Wildcats on our web site, we will start by leasing, but it relates to your crush Celebral, which the main real highlights of the results. So please come back.
Hi, Good day.
Pleasure to be here for.
To share with you our.
Third quarter results.
I believe that.
Rapid response to the outbreak of the crisis.
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.
We will follow with the highlights.
Basically the oil and gas production in the first nine months of the compared to the same views.
Abuse of last year, so about an increase of 9% it.
The Breeze salt production.
He greeted by 32%, which is an excellent result, given that the pre salt.
Is the lowest cost producer.
Reported suppose SPIL now with 70% of our production.
In the D. Our refineries the former very well after Lou.
Utilization factor.
Dave Richard levels above 80%.
During the quarter and continue on the same is best.
It's important to to comment that we are not operating with negative margins and leader.
Increases even tours on the kwanza pre inventories has been big producers is part of a broader it.
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.
In terms.
In terms of costs I would like to highlight with very low cost of the pre salt.
In the quarter $2.30 per barrel of oil equivalent oil very good result, I believe that this suggests the low breakeven price of 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 EPS.
We are fully denominated in Brazil, where ice naughton west goals.
The first nine months of.
This year there were the lowest in 10 years.
Taking the time.
Im series.
Beginning in 2010.
We are the lowest in Brazilian very eyes, luminal subs not real scope were affected 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.
Got it.
In terms of.
These events.
Who signed a very important agreement with our partners shell Repsol and gulp.
In order to integrate.
The operation of the the rules one to treat 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 straight flexibility increased for the GPG. It is it is a source of launch.
Value creation EPS.
We can a lot this through the spin off of these assets into one Luke openly into IPO.
Well unlock value.
Other important events in the quarter was the relocation of the east up above the 71.
Platform to stop operations. It's approved it's approved feud was acquired by Petrobras in November 629 gene.
The auction for fuel our of excess youre atrocities or rights and we.
We will dissipate.
Yes.
First oil in about a year.
And its approval.
Smaller than those of course, but is resilient at very low oil price assumption.
Something 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 three.
Free cash flow reaching.
$16.4 billion. The first nine months of the year and I'd like to highlight that 64% of the free cash flow was generating doing what I call the damaged quarters, the second and the third quarter not in the first quarter not the.
Brickell over 90 era.
So it reflects all the efforts of our.
Close integration in our teams the walk of agile agile teams to deliver on our promise and the acceleration and the exit of the fusion of the strategy.
Uh huh.
Our divestment program slowed todays COVID-19 drivers 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 sales in the market, we have some juice.
Close 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 a mine.
Minority only seven views the the initial phase of the divestiture Brew brothers, So we will who.
We can expect for the next few months.
Yes, this quarter indeed, the first half of 2021, several views being closed and improving capital location.
In generating cash to Petrobras when they are not an amendment to our dividend policy, it's very simple.
I believe that.
Some people you know the sales 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 husky.
During the months of April gas was even go up and so that's it and this is.
He is very clear easier Brazilian corporate law article too.
201.
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 no decision was made about dividend payment. The only decision was taken before.
In the aftermath of the start of the crisis when both supported the payment of the last tranche of the dividends of 2019 two December they will be paid on December 15 of this year.
It talk 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 government and a false one without any fundamental.
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 its own EPS 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 models.
Two acquired the rights to explore and produce oil.
In.
Some fields, including boosters and it's cool.
At the same time, we paid dividends of 1.8 billion brass.
Tiny fraction of the the best bad debts and bonuses beds to the government to Herndon 46 against 1.8. This year in the first nine months of the year, given the low oil price and low.
Auctions, we fell only 91 bill congrats.
And.
Okay.
As I said, we are going to be the last tranche of the 2009 dividends.
And.
The government will receive only.
900 million brass so it's again.
Out of question and not last but not least.
Out in this quarter.
Lifting costs at the pre salt as I said was $2.03.
And out.
Out of each basin producers in the pre salt the government receives $15 50.
$15 15, basketball's one slide.
So.
It is.
It's ridiculous.
Four way these militias speculation.
Who is really.
It makes those sales.
It to be lot intelligence to break some grew too.
To pay more dividends to the government and federal Bryce 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 without any deflation.
The purpose of the amendment to the dividend policy was to be more flexibility to the to be to the to the policies 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 accounting items.
Well.
I'd like to say that we may have won a battle a very important battle because the challenges in.
Late March into this year were very clearly see use.
And we will but.
We continued the sales pass accelerating our.
Stratasys execution going ahead, we just the transformation a cultural transformation.
Cutting costs in all.
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 extrusion to be much better than its now we are placing the seeds for great globally, our Petrobras stronger.
Agile.
And.
April to be the best oil and gas globally in the world in terms of value creation.
Thank you for your attention.
Best to Carlo Bernard.
Thanks, I'll hop back.
So now I'll ask.
Sorry.
The financial highlights.
Hello, everybody good.
Good morning, and happy to be with you presenting that at quarter without.
And it's a good start.
With them.
Corporate comments evolution that we have been through.
And very happy to announce that we lost that atlantico conduct for Petrobras supplier.
Totally in line 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 at two announced that EPS.
Turning to the financial highlights the next slide.
I believe thats already mentioned at that time.
Maybe this quarter.
The most important an item that we deliver was a very strong cash flow generation.
And this was a consequence of that strong.
Recovery in price.
But a recovering price.
Okay.
And our higher sales while fine.
In the end, we had a free cash flow up $7.5 billion. Another important highlight was the reduction of 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 some reports every season up that production targets of 2.4 million barrels equivalent a day.
This lake and how that's already mentioned that we have to.
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 term land, 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 billion in the top 22, we will do everything we can anymore to get there.
But with more flexibility, we will be able to propose dividends.
When they're in the reduction on the NASDAQ in the previous 12.
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 grow that significantly important to $79.6 million.
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 2.3 times.
As we mentioned already we had a strong cash generation, if we measure that through EBITDA add this 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.
The EBITDA is generated a positive impact on inventory turnover in refining.
If we look at our cash flow generation back again.
We had.
And operating cash flow of $8.6 billion, which was helped by the use of tax credits.
I think from that celebrated differentiation on EPS yeah.
We use our ATM activity continue 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 12 months.
If we look at that Thats NRT Batman three weeks after the investments we made to that free cash flow of seven 7.5 billion bond as Lynn mentioned already and we had a net financing and interest sort that spanned up $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.
Sorry achievements in our last bond issuance, where we got the lowest level for a 10 year bond in that Petrobras history.
Ghana with asked me to trade, where we repurchased more than $5 billion in mind.
We continue on anti patent strategy and allowance more T cells in the quarter and we are advancing the negotiations for the sale of refined.
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 so I pass the word to Gaba mechanism.
Okay.
Okay. So now, let's turn to our DNA session.
First question comes from has just got those Lewis credit Suisse, and it's far how that timing can you comment on particular brand initiatives concerning EPS cheap any particular, the transition to a low carbon economy.
Oh, Hello unrealistic for the question.
Yes, we are.
Very focused on the EPS PSG right now because this is the one area that we want not just to improve our process from a task to shorten the market. What we are doing we are one of the companies that have.
Has the lowest initial pair barrel that we are producing when we compare petrobras or other orphan diseases. Our 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 as.
Such as.
To continue to lower our initiatives to lower our use of fresh water.
And other.
Active that are including showing in our.
Documents that we have approval.
Recently that is the climate change Handbook.
Key in this area off.
Carbon emissions, we want also to take a look on our own process and see how we can improve the quality and how we can lower the initial.
When you consider for instance, the refining or.
The production of oil and gas in our installation.
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 the DSPG is not just.
Environmental is also.
Social and it's also governor.
Andrea has recommenced with in the presentation that we have.
Launched recently ethical conduct guidance for our supply chain.
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 along with 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 labeling, but nonetheless is the last but not the least is.
An area Thats. When you are up to continue to work if their 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 pursue.
Protect sea turtles in Brazil.
On the three.
Most and engineered pieces pieces ops, if you turn to slide 32 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 a project like like the one that we have here in the one of our amazing.
To work in the remote areas of the the may have collecting trash and trying to improve the quality of the wetlands and Marshall the areas that are located in these remote areas of one of our ability to improve the species.
Area and to improve the quality of the fishing for the small business. So it's not it's a very broad.
Broader program.
For this reason, we haven't decided also to create I specifically department in Petrobras.
Just to deal with climate change and we're going to pursue those objectives, but working.
Hello and seeing.
Maybe some proven core.
The new hope in more long term like like the offshore wind hydrant hydrogen.
Research that we have here in our facility with such facility real but also looking for our own process and see Wow, how we can improve also.
The process in terms of growing Denise how those are the two areas that we are very concentrated now.
And then the next question from has found that I am.
But I am with Nebraska has been to leverage incredibly fast can you comment on what factors have allowed that efficient bandwidth deferrals caprock capex running below budget.
Okay had net 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 a function of cash flow generation and now what we have been doing it on two separate track surpassed the crime.
Yes.
Really.
Asset that action that the company took us to generate more cash and so have I.
I would say a better and more sustainable company. So it's.
Starting with cost reduction so I think on Apple sold and that has in his presentation. The amazing evolution of lifting costs. So we presented interim brand they lifting costs up at 7.69 per barrel.
This quarter with 4.5 in the overall portfolio management off assets, we had been looking we tried the assets that aren't economic can we stop the production up those factors.
And trading on layer is at a lower cost so 70% of our production in the pre salt, where we see the lifting cost of 2.3 dollars per barrel into its a very importantly for our cash generation.
So now if we look at cost with that said it was an amazing year at where we were able to refinance 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 it's not.
The full 4 billion, we isolate wheel through time generate 4 billion, we asthma adoption I went AMA everybody.
The company, we had a change in our structure. So we do the number of managers in our construction and that generates a cost reduction related to personnel as well investments. We did of course, we are doing so we finished at least we are staffed.
Our staff and maintain a portfolio review our project. So we did 40 year and very important reduction of Capex from.
From $12 billion to $8.5 billion in SAP and cash, but we are looking at the 0.1 of our productivity, which ones are going to state that has a breakeven below $35 per barrel and in that and that that was the driver.
Well for England.
For the postponing postpone our patent 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 that its going to somehow to bring more value to the acquisition of that kinda, okay anything beyond the size of the entity.
Based on our production 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 14, well now we are streamlining that munis unhappy only the one that we need to add.
For for our people and even for such that we cannot.
Leaves the contract because if the plan year EPS contract we Iraqis.
Testing the maintenance expenses when Apple we are shutting down the viewing guarantee we are streamlining all the cash we have for a legal proceeding. So we have lots of cash deposits EPS guarantees in our legal team. We are streamline this process and really getting pushed.
Sure I'm more.
I'm trying to get an adolescent weekend cash on those that produce Alan the legal proceedings that guarantee that spread. So you saw this quarter and $900 million that at flat granted it's impacting our cash flow generation I would say that lots I can be speaking here.
Half an hour and our more about and we see this company did to the crisis to surpass that perhaps the cap the crisis and to be more sustainable over time I think that's why we are deleveraging so much.
Thank you and that I am.
Next question comes from restocking by new with you'll be asked so it's for you as well just a follow up on the divestment proceeds what was presenting Petrobras to move forward with our.
Distribuidora share sales.
Is it only the right price up the assets.
So thank you for the question at what we did we ask you to add the board of directors to work to add the sales. So as we have more flexibility to decide the timing.
The seasonal timing of asset sales that go 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 come back and another thing that we have to take it.
The race indefinitely, the price you know Petrobras and strong guideline according to the Q and now when App.
And we'll be all eight 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 sales, but it's a combination of price and it's a combination of very good when off time to execute the capital market transactions.
[noise] interim Brian next question also from Leach Istar Cadient also I mean, even so on the share price policy.
From company was a beep more active recently, but import 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 Oh, 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 this can be easily check our commitment is to have competitive prices. So competitively.
Quarters, we'll always have their market share that's for the utilization rates of the refinery. It's also important to clarify that we don't see it as our coke are targeted to be followed its.
Its across West 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 Petrobras.
Crack 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.
And from that said, we are monitoring the market seem on daily basis, adjusting our refinery proud to profile to maximize economic results.
Utilization rate is a consequence of this optimization.
But I have to say that the they hand off of its fine I'm not comfortable at all when the crack spread margin of our oil products globally.
The refining margins are they lower level since 2000. The year 2015 is that growth equates of these steel inventories scores like that that is still very high end caps to demand that is still very low, but as you know as I am today.
As you can tell you we could see then black Friday to price that takes into account not only they crack spread margins, but the exchange rate shipping any analgesia total 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 positive margin in our timing back even if international internationally. It may not be the case.
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 students once it reaches the $60 million crust that target, it's going to be on a quarterly basis.
So.
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%.
Operating free cash flow operating cash flow minus capex.
If it is going to be quarterly or semi annually. We have flexibility. That's maybe we'll pay twice a year, but nothing.
Nothing that.
We can and chain asset in a bike or more so that there is no fixed through around that and and other than the apprentice only that when we have negative earnings that we will be able to stay already when we have.
Retained earnings and whenever we have a reduction of the land that I think that that 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 game for shareholders.
Oh, Thank you for your question Bill.
There is a long list of initiatives.
So of cutting costs in terms of gaining morris's efficiency that will come on stream in the next few months as others were already implemented but the the no Mitch.
It will be shown only implemented 21, one of them is the voluntary dismissal program.
It's a program that has a b payback of 12 months. So it's for the future the returns will come.
In large part the.
Second half of 2012.
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 costs.
Two two.
Good good to use.
The 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.
On brokers and some of them we are learning tool to implement.
Going to see the results.
Andrea mentioned about the beauties.
Wow.
But then talk.
28 gene bedrock Bryce.
But.
Clinton three administrative duties.
We started this year with 17 beauties.
For the either.
Today, though the first quarter next year, we have only eight units we already three two buildings on by the end of September early October and this is Brent. 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.
So.
Loans grew year to reduce costs become more efficient.
As in terms of gross as would the amount that we.
Hey platforms gum streamed from 2018 two diseases.
Q2 thousand 25, we will have more 12 plus forms.
You will see is more oil and oil are much lower costs with resilient to low price.
We have the the individual products.
Focusing on exploration production of oil and gas to reduce the breakeven price is.
Well allow us to explore it more successfully area.
Areas of the pre salt with higher concentration of CEO too.
Making operating costs, both capex and operating cost much lower than the are now so there is there's a wide spread.
Port on the sales and got action become a low cost and much more efficient producer.
Thanks.
The next question comes from Bruno Montanari with Morgan Stanley So trend that I am and that I have the Trump last phase of the 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 chain 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 investments on Capex.
We executed up to now have $5.4 billion out of that seven so I don't expect enough I expect the fourth quarter that we that we completed a 7 billion bond cash for the year that that's what we expect and ice we need to say where I like to be.
Paul I believe it will be may be down, but would you say can add that quintette are the places where we.
It will have that capex being applied regarding that working capital for the fourth quarter, we have been and we do thing a lot I think how we are the best quarter since 2019 off.
Okay.
Inventories. So I believe that logistics team has been doing a great great amount of job a great job of reducing advance rates and we have been reducing a lot in terms on time accounts receivable that it will the ban on the fourth quarter. If we have more sales in the local markets or X.
Port. So this quarter, we had lots are 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 when ammo you're exporting that then it gets 45 days so as we get into revenue. So it really depends on the mix up but.
I believe that everything kicks the same we won't have any.
Net sales impact we might expect to see the same trend we sign the third quarter in working capital.
If we look at inventories and and accounts receivables, our bad news I would say that to be the case.
I don't know if would you might want to say anything else about capping.
Oh there thank you.
Youre very completed thank you.
Thanks.
Thank you. So the second question also somebody Montanari with Morgan Stanley Caplan capital regarding the production platforms, that's where most borrowing during the crisis.
Good idea to keep them iterated indefinitely.
Onto some of those assets are sold.
This was contribution 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.
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 just don't see that they are very low and where we also see that there is a lot of volatility.
David It's important that we see that there are a lot of resources that contributed for the total reduction of 43% that we saw on the.
Lifting costs and the.
Optimization of cost increase of to production.
For sure.
The mothballing of those platform they have contributed with something but it was just a small 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.
Okay, I hope I have answered as for your question.
After the next question comes from that as Shane with its own BB eight when you are 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 cash.
Injection.
Lorraine outlook, considering the units planned for the coming years.
So it is to increase the capacity.
During this new projects of the Offloading pipelines and this.
Tightening the gas so.
First I think its cap one and then and it is the right.
Okay.
Okay I started them.
Well.
For the time being our installed capacity for the platform that produced from the pre salt they comprise.
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 horrors and all 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 that she can complement with those sales with some more aspects about.
The subject.
Thank you and EPS ex cat percent considering the current projects under development, we don't foresee been assessed on new castle.
But if you take into account the new project that cannot Randy and exploratory success increased Soc area like Brock BMT territory Chukka Hello.
We and we foresee any sector for a new gas root beer is sad block is operated by equity now, having Petrobras and repsol as part of.
Also the signing off the integration of the gas food and that processing gas plant.
We think that this is also an important step for monetization of assets, we track correctly be static by our team.
Thank you on the line.
Let me, let me complement a little bit about the route 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 Andy speaking of which matched so and that also has another question and this one's for capital so while the details of the new business plans.
Actually release could you comment on your expectations for the company spacing recovery, while we understand there are a lot of promising opportunities there and this capital restrictions intense scene.
Less interesting than the Simpsons basing in this we got could you expect more divestments in this region.
Well the projects that we see for the in our pre orders we have in our plan for the renovation of couple of spacing. 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 part in our exploration production portfolio.
Comms base is very well aligned with our strategy between reversed in world class assets that are located in deeper water deepwaters due to the fact that the approaches are very resilient day, there's kids they can be viable under an oil price of the fully five targets that we have stopped service inside the company. So.
We continue to pursue the same goal that we had on the strategic plan. After 2000 22024, which is to produce in 2024 similar volume that we have presences in the 2013 in lighting.
We were able to show more details about this when we disclose or the strategic plan, 2021% to 25, but I can anticipate that we asked you keeping.
The best to two.
To put our investments on the spacing and where we see a lot of potential.
Yes.
Okay. Thank you bye, although if I have answered your question. Thank you very much.
Thank you Pat for the next question comes from Krish analogy. He just sent some.
Some questions so.
So from a back to back to you have a solid liquidity position that 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 question Christian first of oil, but first of all sorry first of all.
Divestments are not driven by.
Liquidity by the deferred over liquidity across the company has a solid liquid liquid positions there was no need.
By this reason does no need to sell assets the need to have boozy is selling off assets, but assets sales asset divestment is guy and then by strategic.
Roofs first of all as we have declared media times.
Our focus is on assets.
With the R&D natural owners of assets in which we can extract the maximum return. So we are best for.
World Class assets.
In order to increase with dawn of capital employed in the future above our cost of capital and generate positive easy to our shareholders delivering value to our shareholders is.
One important reason for divestitures.
Second is to de leverage although we have bad the last 21 months three $1.5 billion that we lost you.
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 oh.
Expenses with interest.
Two.
[noise] to free cash to invest in our world class assets.
We ended the quarter with the girls the EPS of $79.6 billion. So we were still well above our target of $60 billion $19.6 billion of.
Hi, Def we should.
Eliminate.
It is.
The case, you've got refineries there is a third factor the risk the company because the Petrobras 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.
Meat deflation if you already the only player.
Although it hasn't B. drew we are overbuilt the last at least the last couple of years you are seen as the monopolies and then when price full price rise there are political pressures too.
Gotcha.
Global integration is it full 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 sales 2002 in a market.
Several players.
We understand the risk dismissed we minimize.
And regarding our refineries.
Well the two we have plans to improve the efficiency of refiners do scores one major focus.
His energy efficient efficiency as it rich.
Dual goals one is to reduce costs.
Second.
To reduce greenhouse gas gas. This mission is one of our goals as you know up yet SG agenda. Thank you.
Okay.
And coming back to Chris amount. You also has another question for you. So the questions is about Braskem Braskem continues to improve on several fronts, which is positive for the potential sale of your stake what else do you think it's important to take place to accelerate this divestiture. So good.
Yes, another good question Kristen.
Bras King has improved but it has improved it has to improve much more.
In terms of.
Solving all the environmental liabilities and 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 list.
Brascan shares.
The local Mac cargo in order to increase.
The tool to improve significant devaluation of the company to be able to sell our stake. We don't once we have no intention to continue as a minority shareholder in petrochemical company would like to sell.
Our stake in order to use cash to invest in now.
In our world class assets to.
Reduce debt and to pay dividends to our shareholders. So to submit this to the capital management process.
Oh back on to the next question from grown our money, which Goldman Sachs and find the right.
And then what's the sustainable level of cash on their normal cells circumstance and so how much more that can be paid only by using current current cash balance as opposed to asset sales our free cash flow generation.
Okay. Thank you for the question I believe.
Before the crisis, we were at trying to reach the level of $6 billion 5.5 to 6 billion laws that is still the case that is still the operational and minimum cash that the company can add 10 companies. They can.
Greetings and that but but we still believe we sat and we need to see how the pricing is going to be wrapped from now on we are seeing that the second wave into the country. So we believe we will still need to keep maybe a higher cash why we see a higher volatility and then.
And go back to that.
Billion dollars sold so if you look at our cash balance right now it's around 30 million point Fourx, but you have to take into account that we Ana it's important to mention that we have back our insurance that is our committed bank facilities, we have backed that $17.6 billion our committed bank.
And so after volatility is gone we can work with them the catch up $6 billion add but we still don't know when when it's going to be the case.
Thank you Andrea there's one more question for US now so could you. Please update us on the asset sales program, what's the status of the sales the refineries.
Stake on the adjustable done and also on the assets related to guess.
Okay. No I mean, that's already gave an update on that May fine. So we are negotiating with them with a buyer for hilla Tamar Alley, we are analyzing the proposals received a and his family might be proposals that Indiana the year.
Add PBG at that is that the one related to gas sales one that will be awaiting am Pete to define new tasks. So we are waiting some of the regulator to attitude that parts, what where they can go on and GAAP EPS faster, we may see proposal than we are.
Right now.
Evaluating the proposal.
We talk to an already today about the offshore gas pipelines.
That we are discussing with the other players.
If we are going to go for a new entity as Beth mentioned, so put all that and 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, but we are still discussed discussing is this these option.
And M&A optionality on the partner that still under discussions become I.
I believe those are the most important ones to update you all I believe.
Thanks, Andrea next question comes from chat with the Black sheep, which BTG pactual, so truck ample capital it's interesting to see that 60% of the year on year lifting cost reduction is explained by sectors that are on the companys control such as Ashish.
Thinking for example, catering the prospect for increased production in pre salt areas. How much was the company say two possible to deliver on cost reduction in the next year.
Well.
We have made an important therefore.
In order to reduce costs.
Most of the risk cost reduction is due to the reduction of costs on the index has also negatives that they 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 costs and to continue to proceed to sales and 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 where we we are into 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 sales.
The same.
Same good performance that we have seen in the 2020, but for years to come we will win.
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 if so how bad.
Basket can you. Please comment on the rationale of changing the dividend policy to allow management to stay a deepen even when reporting accounting losses.
It goes against the prime assets after leverage first decent later Faro compensation isn't later in this change to cater to our largest shareholder base, namely the retail investors or to allow your cash strapped parents, so get some extra funds.
Leila I do believe that this question was a rare.
He addressed by Embraer and myself.
Particularly on the on the militias specs they speculation on the left in our guests rapid parent company that owns 36% or to go to capital. This totally false I have given numbers to that again he will.
Arguments, there's no reason for that is a drop in the ocean give the speed by Petrobras.
Drop in the Washington.
Against this total taxes paid by Petrobras with disease.
Yes.
2019, we delivered to the government 246 billion to realize.
In Texas and subscription bundles is only 1.8 billion realized we give guidance this year.
Q September 30, we bet 91 billion brass be Texas.
In December.
As part of that as part of the last tranche of the deal will be referred to 2019, we are going to be 900, new reacts to the go look 246 against 1.8.
91 against 0.9.
And.
Also the Wu way.
We our lifting costs.
The pre salt and this quarter was $2.30 per barrel.
Each barrel of oil.
Bed 15 west goals to the Brazilian goal. So these lakes no sales. Please your skews analyst.
This is.
Total totally out of question.
As managers of the company was committed to deliver value to shareholders. We are not going to put our credibility at risk with search hubris. Both book a decision neither our sales 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 we'll have the loan that you were laser focused on reducing debt and leverage.
There's no doubt about that youre going to see you diffusion and sales to distribute dividends to our shareholders. It's normal we do barrick any rule.
We did.
Miss any movement strange movement.
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 Neil weight or does.
Yes, it's legal it's provided by again.
Scope to all one of our corporate law, that's it so nothing changes.
We are.
Two deals step only to clarify a situation that was not clear.
Yeah.
As Petrobras said in the past that is to.
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 a contribution Petrobras may.
Just to do dividends, even with the accounting loss if net debt has been reduced over the last 12 months. That's it that's it no change please capital management remains the same.
Just as Andrea.
Hi license to do more flexibility to oppose that's it.
It's a whole basket. So at this time Vicki many sessions over if you have any further questions you can sense, our investor relations team. So now back to make his final remarks. Please okay.
Now I'd like to thank you for participating de sales or video conference.
I.
Take the opportunity to invite you for the analysts and investors to Twentytwenty two.
Two entities you of course on November 12.
This will be a forward too.
Tore that's being allowed by our progress in digital transformation that is due to be very important.
Petrobras because to me up better company.
We do fundamentals remain the same.
Our strategy remains the same it is intact remains intact.
And ER we are.
They bought the base or Sweet Oh.
GAAP purpose, which is big to become the best.
Oil and gas company in the World.
Jeff.
In value creation. Thank you.
And stay healthy and safe by take care.