Q4 2020 Petroleo Brasileiro SA Petrobras Earnings Call
Taxes.
And.
We did it we delivered on our promise.
Petrobras today is better than much better than any to us either.
The best.
We managed to.
We reached an all time high production of oil and gas and all time high oil exports and all time high.
Exports of crude oil.
Alongside this Petrobras had a very strong cash flow generation.
Operational cash flow Brent.
$8 9 billion with doors and the free cash flow of $24 $1 billion. If we include.
Our revenues from divestments about $2 billion last year.
Costs were cut.
Across the board the operations in corporate activities.
Efficiency gains were realized.
Oh.
Digital transformation was accelerated as well.
<unk> status designation.
We enhanced the.
Information technology infrastructure and created excellent centers.
We use the startups.
Internal startups to found to find very fast solutions from some problems is working very well RJ agile teams.
<unk>.
Our research center was revamped.
Today, it's much more integrated into the company with a vision not only.
Technological vision, but also with economics, there is a note saying that.
You can ignore economics, but economics leveraging volume.
Sooner or later, if you get an order economics, you are going to get very negative consequences for you.
Bob.
In terms of sales to operations Petrobras performed very well, establishing a new record in terms of.
Sure.
Terms of the rate of recordable accidents per hour.
1 million man hour.
It was <unk>.
56.
A new benchmark for the global oil industry.
We managed to obtain some adverse in terms of.
Emissions.
In terms of diversity.
Number of executive managers of women as active managers more than double relative to 2018.
In our <unk>.
<unk> we have.
We had two women out of eight active directors now have one to one but.
Human team, we very soon.
It enhances.
By one by actor one women directors.
Well.
I am using a T shirt I liked this disrupt borrowed from the long lived underground weighted.
Logan mind, the GAAP and why that book pause why.
Wow.
We are not comparing ourselves.
An internal view comparing ourselves to.
Petrobras.
In the back but our goal.
Yes.
Sure.
Is to close the gap.
Yeah.
To our peers in the global.
Our oil industry.
Our goal is to share.
And outside view, that's much more healthier much more.
GAAP.
Yes.
Appropriate.
To incentivize the company to become the best the best oil and gas company.
<unk> gas.
Value generation to shareholders.
So the numbers speak for themselves.
Im not going to to elaborate about the numbers.
And about mind the GAAP.
It's important to say that Petrobras was the only company when in comparison with <unk>.
Major oil companies global Mizuho oil companies.
That managed to reduce.
Total debt in terms of.
Free cash flow cash.
Rice was number one.
And in addition to that surprise was the only company compare it again with major oil companies that was able to grow operational cash flow. There was no contractions us more cash.
I am very proud of our teams.
Moody's is a plenary.
Onshore teams that work.
Very strong determination two week day went for the extra mile to make the company better.
House of vans.
We did it.
It is.
Very important result.
In face of the.
Our growth scenario.
We have to do.
As I stated total company.
Is like.
We have several advantages relative to global private sector companies.
We did.
Five one employee.
We launched it.
Voluntary dismissal program.
The gain.
Two two which.
More than.
11000 people.
It's contributing to reduce cost.
More than 6000 left the company.
We have more and more.
People approximates approximately 5000 people, leaving Petrobras.
Its subsidiaries like spectrum.
So.
Thank you for your attention.
We've done the work to Carla to go ahead.
Video conference.
Thank you have asked them the Q&A session will begin.
First question, we received comes from Frank Mcgann with Bank of America Merrill Lynch.
There'll be foregoing to Frank's question.
Simple math on the management team that I'm going to read now.
First I would like to thank you all.
Openness transparency and directness and what has been a transformational period of restructuring and customer back.
So Frank first question comes from so Graham Andre them with stronger oil pricing.
Price environment that seems to be more sustainable than previous expected how nancy thanks, Joe for achieving some of your targets for debt reduction sooner than expected.
Frank Thank you very much for the question. This is a very good problem to have if we always have the problem of having price higher than expected I believe.
Thanks.
But as.
We always mentioned we had two thanks net we were lagging behind compared to the other big oil company. One is elaborating and second is dividend so.
If we really have a better scenario and if we are able to GAAP to our goal.
And the most important one is the total debt of $60 billion faster I believe it will be important for eye.
Two important goals, because we would be in a much better situation related to the cost of capital and to the total net thought that company and we wouldn't be able to pay even more day events to our to our shareholders.
I believe it's a good problem to have any if we can do faster we will do so but that day.
Prices are volatile, but it's very hard to say that that that these prices are going to be capped.
That's why we kept our long term pricing for that Brent and a 15 dollar per barrel, but thank you for the question.
He also has the second question is also for you.
So also caused this.
He means about higher prices than expected provide an opportunity to increase investments in pre salt or other projects beyond what has been planned until now.
So Frank we didn't revision of our portfolio.
At the end of last year, when we presented net new plans for 'twenty, one to 'twenty five plan.
And that's with visa and it was based on an on a resilient CAGR for our breakeven. So we said that we want to invest in new projects that have a breakeven below $35 per barrel. So this is a very strong guideline.
So we will keep that doesn't matter what is the scenario and actually when we did the revision that we already changed a little bit the prices. So I expect that.
We will see what is going to happen and maybe at the end of day or we have that non the revision, but as we have a very strong and I'm very.
Important guideline that is really to have.
Zillion hub project in our portfolio I don't expect big changes, but I'll pass the word to capital if he wants to complement.
Okay. Thank you.
Andre a nation.
Our projects in our portfolio are resilient to a breath of $35 per barrel and Thats ours.
Sure.
We always check of the project.
Our reserves to this price, but if the price in the future as though they were saying oil firms to be higher than the price. We estimated in our strategic plan and the anticipation could be something to be evaluated in the future, but it's important to check two things at this time, besides cash flow visibility.
Which will be higher with oil.
A higher price.
Which are the debt on the debt reduction strategy and we are always we have to have those targets.
Can keep at this target and the capacity of the suppliers as well to provide additional physical resource because thats. The day. They are facing some restrictions due to the worldwide effects caused by the pandemic of the COVID-19 zone.
It's not only something thats.
That's only a matter of Petrobras is doing or not because the market today regarding the fiscal response that we need and especially because we work in this particular scenario. If we saw net required resources.
Specific so we will look at the best of the market provides us both of those as well.
Thank you Andrea Thank you tackle the second question comes from for the <unk> journey with J P. Morgan.
He also send us a message to some of our vessels and their management team.
I'll begin some income now so first of all I think it's important to acknowledge that until years, even spacing and oil crisis.
<unk> became negative and a global pandemic current management was able to transform total price even in the short time period today. The company has a healthy balance sheet generates a lot of cash and it has high returns not to mention the transparency and Nelson non.
So in the capital markets Congress, congratulations comeback 17.
So now going to the question. So the first question is for her back to claw back book can you comment on how will be the transition process. So the new management.
Hello, Thank you for for your comments.
Behalf of.
Myself.
<unk> in all Petrobras employees because.
The performance is not only due to the action of.
Or is that too is that actors is.
Each one of the employees have.
A piece in the construction of our company.
Companys performance.
Well I don't know.
For the time I don't know about how this transition will be implemented the only thing.
I don't really believe it.
Is to guarantee that.
It's very open.
Very transparent as well and we'll try to help.
The transition to be various moves.
And productive.
This is our duty to.
Contribute to that process on this way.
For Maxim.
Our next question comes from Rich gas volume.
Oh, sorry, sorry.
We have a second question.
How far are those largely with J P. Morgan is Andre.
The company is generating a lot of cash keeps on de leveraging and has been showing declining financial expenses. Looking ahead, how many opportunities to have to continue to deleverage and engaging in liability management.
Thank you very much for the question I think we do have lots of opportunity to do a liability management, we still have a big that as we say so.
Those are locked 76 is that is the number that we never expected for last year, but it's but it's still a high number as you know we wanted to get to 16 per pound in 'twenty, two and we still have a lot to be done to reduce that.
The debt and to reduce the interest we pay.
On our on our loans. So so we still have a lot of opportunities to do prepayments in them in the bilateral and prepayments that in the capital markets and we will be exploring the opportunities to be doing that Henry dosing than that towards our goal that is the $60 billion in 2022.
Yeah.
Thank you all day in the next question comes from rich gas value with UBS.
We also sent a message to her bathroom the team that's I'm going to leave now so before we go to questions I'd like to take a moment to reinforce our positive view on the work that's being done in the company strategy and governance led by hub back over the past few years really well done.
So my first question goes to Andreas Sunday, there were a lot flow from lines over the past couple of things as we all know could you. Please share the most relevant changes on company bylaws NSO lease law that gives us.
Perfection and independence in several fronts.
Thank you Louise for the question.
Yes, there are some protection in that law.
303.
And some of them were even increase it in our bylaws. So one off one of them is that that same day law. We have the 20, 25% of net net members in the board and in our bylaws.
When did that to 40% of in depth and then board members, so, whereas we have.
Really a board that has independent people really acting.
We do have as well technical criteria for the selection of the board of directors and Executive Board members. So we have to cope with a certain criteria.
Even for me to join <unk> I have to prove that I had 10 years of experience in finance and reporting to the CFO of other company. So this is a technical criteria that is needed from us and from board of directors and there is additional.
So there is additional items that require the reputation of the demonstration and members of the physical console as well we do have other items like that we are in the three we are in the special level two of corporate governance, and and we do have to compliant.
The benchmark governance regulations for company.
We do have in the in the alloy and the <unk> 303, as well the obligation of the controlling entity to compensate that.
The company's non acting according to its on how can I say interest them.
Major shareholder has to compensate the company for that.
This was used in 2018 and I, we are very happy that we've done we don't need to use it right now because we are coping with that price policy as we already mentioned, we do have as well we changed.
This is why we added some more some more items to our bylaws are covering some benchmark from OECD that tap covers as well conflicts of interest. So so even if somebody from the board has the conflicts of interest in that in any situation.
Some has to declaring a conflict of interest, but if somebody else can declare that.
Flex up interest as well in that in the middle of that.
Can I say body after body. So we do have lots of extra protections to avoid.
Some are wrong actions against the company so that.
That's it thank you for the question.
<unk>.
Thank you Andrea and the next question also from <unk> Suisse UBS as per our Cagny getting companies now net crude exports.
<unk> gained market share on the few products supply and Brent could you. Please give more color on how the upstream versus downstream balance will play out on our results looking forwards.
Thank you Carlos Thanks for your question. Please we will continue to compete in the domestic market seeking the most appropriate market share, which optimizes the use of our refineries and of course maximize our margins and refining our goal always is to maximize the value part of the market will continue to be served by other players, which also ensures transparency.
Our price alignment with international markets by continuously monitoring and developing new oil markets globally on the other half we ensure access to the best alternatives in order to maximize the value of our orders in summary, we'll continue to optimize the value creation for the company combining refinery refining and export oil.
<unk> in the best possible way.
Thank you.
Okay.
Yes.
Okay.
The next question comes from hedges.
These hedges also sands.
Since two hub axles and the management team.
Hi, Beth with management team, one rising recognizing the achievements of previous management and to Bureau, net progress with no disruption in order to pursue a responsible business thing.
<unk> achieved a grin milestone after two years, including starting the process for opening the downstream and natural gas market in Brazil, Petrobras was a clear industry outperformance.
<unk> presented itself as one of the deepest prices 20, Ireland.
When many were struggling to stay solvent better of gas generated cash and reduced its financial average all of that was a key despite the challenging posed by the pandemic and the necessity to low cost of People's health and business continuity congratulations for the excellent results.
He has a question also for her bathroom. So go back to what changes what changes were made to the health plan, how does it impact net financial statements going forward.
First of all I would like to thank you for your message.
Gross profit.
The awards.
Mike Thank you on behalf of myself.
<unk> Dot Echo Jim.
In all Petrobras employees.
Because as I've always say people are.
Our most important assets.
The pre salt is not.
X or y.
People people is the most important.
Regarding your question.
About the health plan.
First Brent was bedroom manage because.
We don't have a specialist in managing health insurance plan health insurance plans.
It's not our business saw it had a very big depths.
Actuarial lie.
Our liabilities was huge more about a 45 billion bras.
And what we did.
Two.
The spin off.
The surest plan health insurance plan.
Nonprofit.
Institution.
We.
Professionals.
With larger experienced.
Type of business.
And they are entitled to.
Increase efficiency reduce cost.
Yes.
Improve the quality of service.
One of the problems of the.
The award.
Jamie is that.
Supplier or service to the employees there was a lot of complaints it was the number one complaint.
Made by employees last year.
<unk> 2894 complaints made by the employees. So we had to change we had two big problems of balance sheet problems.
Health Brent.
And.
The potential flow.
These problems are being solved.
Vessels with professional management with.
The two new brands.
The newest one is.
The final contribution plan instead of.
Benefit.
The final benefit plan.
And also we prepaid.
Operations.
The pension fund in order to recapitalize.
Petrobras had.
<unk> debt with depression plant to us first.
2008.
With us with a P.
All in 'twenty 'twenty, so part of this was repaid.
On the benefit of the of the.
Plan.
These gains.
And also solvency.
The situation that was terrible.
By the same token we address is the problem of the.
Of the health insurance plan.
Beachhead.
A lot of progress that end up reducing.
Sure.
Our net net loss to Petrobras of almost 3 billion Reais. So I believe that the impact in our.
Balance sheet and our cash flow.
We will improve significantly over time the plan. According to our estimates there is a significant significant quality needs to be made over the next 10 years.
Yeah.
Okay.
Thanks I'll hop after the next question also from hedges with Apple and it's regarding oil production thats with operating generate.
So it's about maintenance, where the maintenance stoppage completed in general are there is more or less could impact production in 2021.
Well.
As you know some subsidy wherever you schedule for the 2021.
And Fortunately, we have a lot of topics during the year, but the start for 2020, where that came from the deposit growth.
They were rearranged we've also optimized the <unk>.
Of the total liquidity was so what we see today is that we have already a prediction in January that is in line with what we expected and this is above the prediction of the last quarter. So.
We don't see that the maintenance that we were.
Have postponed into 2021 impact on the production of oil in the target of production.
We told you last year, which is the 272 billion barrel looks like revenue per vehicles today, a variation of losing less.
4% so.
Nothing changes.
With this prediction and generally that is above the last quarter, but it was we have already estimated that it would be like that.
Hum.
The next question comes from Brent <unk> with modest Tommy and he's also.
Send us a message to hub affluenza and the management team that I'm going to need.
So congratulations for the solid results in the year with an impressive cash generation I believe speaks to the efforts and success our strategy outlined by the company under the leadership of hub.
He also has a question for capital.
Thinking about copper and who's thinking about a scenario filed price since having to $70 per barrel. This year, what sources of upsides could come.
Other than increase in cash generation and leap day.
A&P segment would it be possible to advance projects and expect the production growth.
And related to that can you comment on the maintenance schedule funding Dsos now for the first months of the year.
Well I think that I have already mentioned before that our projects in our portfolio they are resilient.
The resilience, what Brent of $35 per barrel. So we have to consider that all projects are two best.
Target in this.
And so is the price in the future day.
Firms.
To be higher than the price that we estimated in our strategic plan anticipation could be equally.
We will wait.
About the <unk>.
Anticipation of simple it, but we still have to check.
That besides cash availability, we have to check the impact on the debt reduction strategy.
Which is our goal and the capacity of the suppliers as I mentioned to provide additional physical resource because the supply is today or they are facing some recession.
The effects of the COVID-19.
Regarding the other question.
About the maintenance schedule.
For the F P S.
In the first quarter of 2021, we are projecting a reduced EBITDA actually the number of scheduled stops compared to before.
Quarter because of the 2020.
And together with the continued ramp up of the platform P 17 P 68.
<unk>.
Those factors will lead us to the possible increase in production in relation to the two therefore.
At quarter. So we expect to have more prediction at this first.
Quarter than the last quarter of the year.
Karla.
Yes. The question was very well served by my count.
I have morphed into it.
Thank you.
So the next question comes some rationing we thought.
He also standard a message to a bathroom and management team I'm going to need right. Now first of all we would like to congratulate hub battle in this axis on the tenure over the past few years. The company has made great strides in advancing on it.
Collaboration efforts asset sale program and disclosure.
As a whole the company has improved tremendously.
So he has a question for Rob asked the silver Vasco in your view.
What are the greatest challenges.
SaaS or if that's a rise of faith in what suggestions would you provide hand width.
Hi, Thank you so much for your quotes very general comments about us.
Thank you for on behalf of myself the management team is all.
All the pets authorized employees.
Well.
Net.
Sure.
Our heads.
Have an opportunity to meet my successor.
<unk> approved by the board of directors will not I don't know.
And when.
Himself order.
You.
Take the helm.
Year to replace me as CEO.
I'll be very free is it too.
Lupin too to engage into an open discussion.
Two.
Okay.
Make my.
Very.
Frank comments about the company about suggestions.
And.
About the challenges for the time being.
To be very too early to say anything about that.
Thank you I'll hop back to the next question comes from can you share analogy with something NAV accretion also sense since you a message.
So first first of all her back I would like to congratulate you on the amazing work you have and central price just thinking over a CEO siggi.
And is currently improving the strategy direction and focus of the company as well as its operational performance, while strengthening the company financially.
You will be missed.
So he has a question also for you have asked them. So how should we think about the asset sale program given that all the nice surrounding the pricing policy might impact say of refinery.
Recent thank you so much for your performance.
On behalf of myself.
Management team and all Petrobras employees.
I don't know what's going to happen.
Hi.
It depends on the board of directors depends of the new management of the company so at the moment.
<unk> about that.
Thank you <unk> next question comes from Bruno Maureen with Goldman Sachs.
He also has a message for you so before my questions I'd like to thank her back when the theme for the good work and transparency with the market doing.
<unk>. So he has all he also had the questions about asset sale. So has the recently led to any change in the asset sale program. So far will the company move ahead with those process and to the change in management is completed.
Thank you for your performance book.
As far as I know there were no changes there no changes of course some of the business.
Sure.
We're.
Olson above above.
Events, but did not show any signal that they are going to leave the process I hope the maintaining the same position.
Thank you and we have our last question from debt and therefore CFO with Seaspan.
He also has a message for you so before my questions I'd like to leave a record Michael regulations took a bathroom and his team for the excellent results achieving.
Their tenure in Petrobras as well for the legacy they will leave for the company.
So he has a question for cash.
That evening, so steady and could you comment on the balance of supply and demand for iron products. Since he was in Brazil market.
In particular, what levels of utilization rates of the refining park are currently stands.
Can we say that the impact of COVID-19 over fuel demand in Brazil.
Has already normalized is the company parking oil products, such as gasoline and diesel if so could you comment on the magnitude of moving parts compared to the recent results.
Thank you Carla.
Yes, we already answered this question in the Portuguese version.
Should we go ahead or go to the next question.
Yes. Please.
We have we may have like a different audience.
Okay.
I'll start with.
The.
Pardon regarding the demand because we have already recovered the COVID-19 levels.
And then I'll pass to two legal cost Thats a complement.
The answer regarding the utilization factor of the refinery.
So.
We have already recovered the demand of the Covid peak.
Free COVID-19 regarding the fuel.
Marketing in Brazil in fact, we have already.
Gross grew.
Also in diesel.
About 28%.
In comparison to January 'twenty with a very interesting result for the low sulfur sulfur diesel that grew 37, 5% in terms of gasoline a weighted.
In January our sales were $8 five higher at 5% higher than in January of 'twenty.
Yes, it's also very important.
Some gasoline and diesel just because we have now going we're going into the through the maintenance.
Our refinery and lower pass through with regard to complement the answer thank you.
Yes.
We increased our utilization rate in this year now we are at the level of eight 6% right at this moment.
Thank you Kevin you. Thank you Henry we have one last question is from Brad This growth. Thank you following the St. Charles.
It also has a message to have asthma.
Congratulations for bank performed encouraged to affect changes.
These changes were never before maintenance Petrobras system.
He has a question to them than I am and what can we expect in terms of working capital for the year of 2021 2020. It was a solid recovery in that figure, yes, now oil prices seem to be strong and moving up.
Thank you. Thank you for the question, we will keep doing I think we optimize down inventories and oil and all of the oil products. So I think this will continue we optimized the inventories as well off of material. So that will continue and in terms of receivables.
We are working with the financial institution, because we believe they're out working capital transactions that can be done.
To reduce the term off of those payable. So so we are engaging with our financial institutions to.
To do transactions to discount receivables and and we are doing as well with transactions.
We are we are getting our support for our suppliers. So so I believe this work in the working capital.
Arena is going to continue in 2021 very strong. This is a very important focus for us as well so.
So that there will be very important in 2021.
Okay. So thank you Brian.
Since she has another question and its forecasting so Kenny the media reports of Brazil has no risk cost me on their supply.
Stating that Patrick O'brien, who will not be able to comply with its diesel cargos in March is any of that too and what spectrum brands doing to avoid the risk of shortage.
Thank you for your questions. We thank you first of all it's important to say that the Brazilian market is served by federal players, but the rest of course is a very relevant supplier, but it has been a long time since trading companies and distributors have become relevant actors regarding imports of gasoline and diesel in Brazil. So.
Said that Petrobras alone cannot predict any risks of fuel shortages in the country as a relevant part of the market is still served by third party.
As for our portion Petrobras has contractual agreements.
With our customers and we will serve all of them without any exception there were requests from customers for an increase in the volume of products far beyond our contractual obligation and Petrobras is not only for funeral fulfilling the contractual volumes of delivery our base, but also is offering volume is far beyond the <unk>.
So we are meeting our commitments and we are going further in relation to reducing the risk of fewer shortages.
We're also keeping following the price and policy, which is all you know is aligned with international market.
Yes.
Thank you Kenny.
With that we conclude our Q&A session.
Have any further questions you can send them to our Investor Relations team will now make his final remarks. So please her basket.
Sure.
Well my thank you for you.
For attendee videoconference entities the vessels and.
I'd say that.
We.
Accomplish our mission.
<unk> was to restructure Petrobras.
And we will.
Accordingly.
<unk> According to the judgment of the market we may have several adverse.
However.
There's much more to be zone.
The.
We won only some vessels, but not the war so.
However barrels have to be fought.
In the future.
Petrobras should preserve should lead.
Price has human capital.
High quality human capital.
LOL edge technological knowledge.
Yes.
The capacity interface.
And.
To be very easy to we the combination of these.
Three elements are Petrobras has now flow through of value creation is improving significantly.
And I would say thats firing on all cylinders.
So much I appreciate it very much.
This contract is very Frank and transparent conversations with you.
Over the last couple of years and.
Sooner or later thank you.
Sure.