Q2 2021 Petroleo Brasileiro SA Petrobras Earnings Call
Total Q&A session will begin you get from this questions by email at Bachelor invested capital Bras that corn belt here.
We also own Formula that's always actors are participating either advance remotely and their individual rooms, respecting all the security and safety protocols.
So they would have a first cloud you must balance chief trading and logistics officer channel the barges chief exploration and production officer, John He hits in housing Chief production and development Officer, Nikolaj, Simone Chief digital transformation and innovation officer.
<unk>, Chief institutional relations and sustainability officer, but anyway, I wish him Chief financial and Investor Relations Officer, Rodrigo <unk>, Chief refining and natural gas officer, and Salvador, <unk>, Chief governance and compliance officer.
To initiate our phase II <unk>.
Our CFO <unk>, who will go ahead.
Thank you Carla. Thank you Hello, everyone. It's a great pleasure to be here with you today talking about our second quarter of 2021 results.
We had a very impressive hard with substantial results and it's I'm very glad to share with you today. Thank you.
Next slide please.
So starting with our safety metrics. This is very important to report that.
We're continuing to combine the first half of 2021, we have <unk> 7 a level off alert with respect to total recordable injuries per million man hours and of course, you always know that we have zero fatalities ambition and we unfortunately had 1 fatality in 2021what we're always were.
Working to improve safety says, that's an unconditional value for Petrobras and we're always focused on improving safety and we're very glad to be.
Below our alerts level off to zero point separate from 0.7.
7 for 2021 next please.
With respect to our emission indicators, it's important to see that in terms of carbon intensity in our E&P operations. We are significantly below the level that was set as a target for 2020.1 we're already below 2020.
During the year of 2021, we had to ramp up of our.
Important production units and we have already re injected 4.3 million tons of <unk>. During this year, which is already at the same level of 2019, and we expect to have a higher level when compared to 2020 as well. So we continue with our.
Lower carbon footprint and reducing our emissions.
Significantly when we talk about our carbon intensity and the refining operations. It is important to realized that we had <unk>.
Several scheduled stoppage that we had 6 scheduled stoppages in 2021 and Inspite of that we're still maintaining the same level of 2020 and.
We believe that we can recovered during the second half of 2021 and achieve our goal for a 40 year 2021.
We have already announced earlier this year, our rooftop program, which is a very important program focused on improving the energy efficiency offer refinery operations and were therefore, a highly focused on reducing the intensity carbon intensity in our refining operations next please.
When we look at the highlights of our operational and financial results for the second quarter of 2021.
These results reflect very clearly our commitment we are executing our business plan and our disciplined focus on our strategy. So we have very important results for <unk>, which is a something.
Something that the company's been working on since basically 2015.2016 to.
Manage its portfolio to have a very resilient portfolio that is resilient to lower prices and also was able to capture the upside of scenarios like the 1 we're seeing in 2021.
We set the company for a 40.
Dollar Brent price for the year 2021, and what we see is significantly above that and we have been able to show in the second quarter of 2021 that our portfolio is capturing all of the upside that is related to higher Brent prices.
We had a recurring adjusted EBITDA of $11.4 billion, and then they'd be down margin now 54%.
Also we had a.
$10.8 billion operating cash flow and are very substantial level of free cash flow was well.
After our investments of $9.3 billion in the second part of 2021. This is of course, a result of a very important operational performance with high oil exports of oil and oil products.
We're also diversifying are the destination of our exports of course always focused on generating value and are trying to find the best consumers for our oil and international market. This is a very important movement and we see a oils like to people's use pour being.
More and more recognized in the international market as well, we had in the second quarter higher margins and higher sales in the domestic market as.
As well, we're from our refining operations, especially our diesel and gasoline in the Brazilian market.
And it's good to highlight that our second quarter is not our highest volume in terms of seasonality. So it was a very important results you have such high volumes in the second quarter of 2021.
When we look at our gross debt reduction, we reduced our debt in the second quarter a buy.
By at $7.3 billion, reaching a level that is substantially below the target that we set for $2021.67 billion were already in $63.7 billion for 2021 and of course that we're highly focused on reaching our $60 billion debt target, which is something that.
Continuing with the.
The just did the space that we have now we believe that we can reach 60 billion dollar debt target by the end of the year 2021.
We also had the support of important to cash flow from our portfolio management strategy, we had inflows of $3 billion in the first half of the year and in the second quarter, sorry, and we also had the follow on transaction of our of our remaining shares in be artists, we daughter.
To your point you'll billion dollars. This cash inflow happened in the beginning of the third quarter in July we had a positive impact in our earnings for the second quarter of the reversal of the impairment that we had in bands we'd do it but the cash inflow actually happened in the second and the third quarter from the beginning.
July.
And of course, we had our earnings.
Earnings up $7.7 million in the second quarter of 2021.
This was positively impact by our very substantial operational performance and we also had a positive impact of foreign exchange gains that are non cash, but they are impacted positively in our second.
Second quarter results with all of the debt reduction that we had and with Capex discipline. The cost discipline that we have and our portfolio management strategy that we have in place.
We were we've been able to approve and announced anticipated dividend distribution of $6 billion for the second half of 'twenty or 'twenty 1 a.
Part of it in August part of it in December of 'twenty, 'twenty, 1 and we're very glad to announce that and of course, we're trying more and more to.
<unk> balanced our hour.
From debt reduction and getting to the $60 billion at target, but at the same time being able to add value to generate value to reduce our debt with the lowest cost possible for prepayments and for debt reduction at the same time being able to balance that with dividend distribution for our shareholders.
Next please.
When we look at the external environment, Brent prices were 13% above the first quarter of 2021 in the second quarter, which of course as I mentioned before we were able to capture this additional prices.
With our portfolio, which is a very cost resilient portfolio are when we considered the average exchange rate.
Al dollar for pure had a slight reduction of 3% so on.
On average, we have unimportant improve and in margins and prices, Florida for a second quarter of 2021 and as I mentioned before when we considered the end of period exchange rate, we had and appreciation of the Brazilian how during the second quarter of 12%.
And this of course impacted positively our earnings for Q2, 2021, but it's it's a noncash next slide please.
It's a it's very interesting to see the trajectory of our gross debt over time.
If we go back a couple of years. So we can see that in 2015, we had a.
Our total gross debt of $135 billion and without considering the the leases that only became part of our debt as of January 1st 2019, when we implemented <unk> 16.
So it's basically a $90 billion debt reduction from 2015 from 2021 which is a very impressive result.
And as I mentioned were already below the target that was set for 2021, and we've been more selective and trying to balance our value generation and.
And dividend distributions with reaching our gross debt level of $60 billion by the end of 2021.
Of course, it's very interesting to mention as well.
Net we have a net debt to EBITDA ratio much closer to our peers now this of course positively impacted by the level of Dod that we have so it's important to continue focusing on reducing our total debt as well.
But it's a very important result of 149 times and our when we look at the ratio between our cash flow from operations and our interest payments are we already have something around 12, which brings us much closer to our peers and that's a very important.
The trajectory of reducing our leverage and therefore, making the company more sustainable and more reliable and resilient challenging scenarios next slide please.
When we look at US the results are in terms of EBITDA for the second car as I mentioned before we.
We had a very important quarter, a very important operational results. So the increase in oil products margins and the increase of exports as well in sales are reflected in an increase in our recurring EBITDA of 31%.
$211.4 billion in the second quarter of 2021 and of course, we also had a positive EBITDA. When we look at day adjusted EBITDA, We have had a positive impact.
Ah the decision the gain that we had related to the exclusion of the.
T I C. M. S. A that is a state level of taxation in Brazil from the calculation of physical fees, but it was a very impressive.
Impressive results in terms of operational performance for our second card.
Next please.
Looking at the dynamics of the results by business segment.
We can see that our upstream stigma segment are captured on upside of 20% from from the.
The second quarter, when compared to the first quarter, we had higher Brent prices also an increase in our production. We had a 2.8 medium barrel of oil equivalent production in the second quarter of 2021.
And 70% of that is already represented by oils from the pre salt layer, which are very resilient in terms of costs and of course in terms of emissions as well. So we're very glad to see the successful results of our exploration in the pre salt area.
When we look at the refinery transport and commercialization segment.
Even when we look at the performance at replacement costs and.
Excluding the inventory turnover effect, we had a very positive quarter.
We basically are more than double the results from from Q1 to Q Chu with higher margins and higher volumes in the sale of distillate and gasoline in the domestic markets.
And we also have a.
Very a lower inventory turnover of fact, when we look at the results so far EBITDA with inventory turnover, but it's to a very important performance 40 RTC segment.
And looking at the gas and power segment, we had a 20% increase in the results of Q2 when compared to Q1.
With the recovery of the natural gas margins due to higher prices and of course due to a higher a non thermal demand and should improve in the Brazilian economy. That's also improved to levels that we sell off natural gas next slide please.
When we looked at the cash generation and how we use that cash from the acquirer as I mentioned before we have a cash flow from our operations of.
Around $10.8.
Dollars and investments of 1.5 so we had a free cash flow of $9.3 billion and 0.3 inflows from our portfolio management strategy and that results in $9.6 billion of free cash flow after divestments, and we basically used all that free cash flow.
To prepay debt.
And when I mentioned that the efforts that we're making in terms of liability.
Liability management. It's also important to include the pension plans that we had a zero point for prepayment in the in the second quarter of 'twenty, 1 which is of course, a more expensive debt that we have so we're also trying to manage.
Manage our liabilities.
More structured and consolidated way looking both at our finance debt and pension liabilities as well.
And of course, as I mentioned the level of free cash flow that we have.
Way above what we expected for the year 2021, and the successful movement that we have towards achieving the $60 billion debt target is.
Enabling us to anticipate dividends. So that's also very important for the company next please.
Yeah.
We're also focused on improving the profile off our remaining debt we had a very important.
Transaction in second quarter of 'twenty or 'twenty, 1 we should $1.5 billion and we had a.
And almost simultaneous tender offer as well we were able to have the lowest historical use for a 30 year bond for Petrobras.
A history of the company and we also made substantial prepayments and repurchases both in the debt capital market and also with bilateral transactions.
With the banking market as well.
Prove the average maturity of our debt to more than 12.5 years and reduced the cost of 5.9%. So that says this is a very important movement, especially considering the challenges.
Around the energy.
Transition so it's very important for us to be able to continue improving the maturity and reducing the average cost of the remaining debt.
Alongside with reaching the 60 billion debt.
The target that we have and also we had important news from S&P during the second quarter. During the third quarter is starting to be in the month of July our S&P announced an upgrade in our Standalone credit rating. So this was also very positive and reflects the successful financial.
Our recover Petrobras next please.
In terms of portfolio management is important to highlight the transaction involving the remaining shares that we had off the artists, we daughter and that's a $2.24 billion transaction as I mentioned before I want to follow on transaction and capital markets.
The largest transaction in the Brazilian market for 2021.
The cash inflow happened in the beginning of July So it's of course, a support our deleveraging and dividend payment.
We also had relevant signings during year 2021, especially in the movements that we're making.
And in terms of opening day natural gas and the refining market, we had the signing off hit low fortunate.
Our refining plant. We also had the signing off gas Petro now in July as well. So we had important movements and also what do we think about E&P operations. We also had signing off transactions in both the onshore and shallow water fields that were very very substantial during the quarter.
So.
During the year, we had a total of $5.7 billion in transactions and already have on the cash a cash inflow of $2.8 billion.
In 2021 next please.
So this is just a general picture of whats happened.
Happening in all the portfolio management projects that we have and you can see that the ones that have the yellow box at the 1 that the ones that have movements in the second part. So you can see that several processes advanced during the second quarter, both in terms of signing or closing off rather from transactions. So.
We remain very committed to our portfolio management strategy next please.
Okay.
Next please.
Okay.
So in terms of earnings we had $7.7 billion of recurring net income for the second quarter of 2021 as I mentioned before this is the result.
A very important operational performance and alongside with a positive impact of a noncash foreign exchange gains given the appreciation of our of the preceding how the period in Brazil, and how that impacts.
Our our exposure in terms of a dollar index.
Gross debt.
So this was a positive impact for the second quarter of 2021. We also have had earnings are related to a reversal of impairment MBS spread daughter and also the unfortunate results Oh for asking in the second quarter of 2021 net.
Next please.
So finally as I mentioned, that's a way we approved our anticipated dividend distribution of $6 billion.
Which is a more than it is around 3 times the average dividend distribution for the last 3 years.
And.
It's divided into our first payment in August 2021 and the second 1 in December 2021, which is a very important movement from the company.
Reinforcing our commitment to true add value to our shareholders and of course, you do preceded society as a whole and.
Important movement of balancing our deleveraging strategy.
If there were munoz show off the remuneration of our shareholders and.
As I mentioned, where we're being more and more selective in terms of the next steps for our deleveraging. So that we can reach that $60 billion debt target.
By the end of 'twenty, 'twenty, 1, but generating the highest value possible. So that's my last.
Last slide thank you very much for being here with us today, and we can move on with cartilage for the Q&A session. Thank you.
Thank you.
So the first question that we received comes from <unk>.
Yes, and it's from my standpoint my.
Mr. Allen, we have been following the company pricing policy in a very detailed way for a long time.
Do you see changes on the approach for years and several times, we saw more frequent adjustments will now there's a gap closer to guarantee and now called the attention that price moves are less frequent and we saw higher GAAP than before.
Why do we see different approaches to this subject to overtime.
Yeah.
Yeah.
Thank you flow through for your question.
Can you clarify.
So some niches in the subjects sumit firms.
Is it from being too low or being too high so weighted.
Uh huh.
Firstly.
With me it has to do 1.
Revenue from prices wage international markets.
To ensure that the Brazilian market continues to be supply recovery slippage.
It made a difference.
Distributors importers.
Other producers there's issues with Petrobras.
The first quarter.
Okay.
Great.
Increased.
Sure.
The exchange rate.
Oh go ahead more frequent adjustments.
Gross.
More recently.
Months.
Variations in price.
This.
Is it at the same time.
Moving to rates.
Oh.
The actions, we hit a certain compensation for children.
As a result of this.
That's sweeping price Jason Stewart.
Yes.
Yeah.
Oh.
Well so prices continue to stick knows maybe traditionally low.
All of these changes.
Yes.
Exchange rates.
So avoid.
Boston Toronto lines Chaucer to total flows.
Total growth.
Yeah.
Caused by Covid, you had the snow events.
Well.
Please continue.
1 day.
Lucas.
It remains unchanged.
Which includes.
On the procedures.
Daily computation and wounds.
Right.
In relation to.
Total classes.
2 places.
And plenty of actions to correct those issues.
<unk>.
The wrangler.
Terrific.
Please visit our book, especially with waters.
He's.
As shown net of.
Right.
Moving along.
Good.
Okay.
Thank you Mr. Allen.
The second question from Mr volume.
Didier.
Good day.
So on.
From the guest bathroom divestment, we saw some recent news around the potential remedies that could be imposed by the end of transplant.
Did the company has interactions about the potential solutions to move forward the process prior to the binding phase.
And what amount of Baskin any news on this potential divestment.
Thank you Luis Thank you for your question well first of all with respect should the agreement that we have with the Brazilian antitrust body with respect to the truth.
Opening up the natural gas market.
The Kashi our antitrust bodies is closely following all our movements and of course, just following up on all of the all the sale processes that we have and the first gas that there was a relevant 1 within this context and it's good also should give you a more general perspective in terms of next.
Steps because well first of all we have they state level governments that have shares in those natural gas distribution companies. So they have.
The preferred rights.
That cannot cannot be exercised then later on we used to have Mitsui, which is our partner in guest bathroom, which can exercise their right as well and then we have the the Brazilian antitrust body analysis that of course, so we expect to be a complex 1.
Given the nature of the natural gas distribution market and the complexity of the transaction.
But we are highly focused on concluding this transaction and we are positive.
That the resolution with the antitrust body antitrust body will be a positive in the end and we'll be able to conclude the.
Divestment of guest bathroom.
With respect to Braskem.
Of course with our we've been following up on the movements are all far.
Oh off of novel, nor that is of course, a rather from shareholders shareholder of <unk>.
We're asking as well and we have already engaged financial advisors to support support us in several possible strategies for conclusion of the divestment and to add value for our portfolio. So we don't have a definite answer with respect to that at this point, but.
We are moving forward with potential different paths and we're focused.
Now on realizing the highest value possible in the divestment of Brascan. Thank you for your question.
Okay.
Thank you for video growth.
The next question comes from Bill <unk> with J P. Morgan and it's the mash standard Mr. Allen.
So a mouthful heal pricing how it talks with the government about the possible fund just underlines price has different brands being involved into discussions with the government.
Thank you.
No as I said.
Consumers can choose to practice prices imbalanced suites, the competitive markets.
Please.
Ladies and.
Blake smoothly to destroy deposits 100.
Commodities traders and Brazilian markets.
Of course as such.
Such as food Glory, Mutuals, who also have their prices associated with variations in international market.
Ex cigarettes.
Well using this does come from.
Logic.
Hercules varies mutually.
<unk> disclaims essence interaction with payers to get to which.
Contribute.
To increase local awesome.
We've got a nice benefits to consumers.
Yeah.
Price is low to the room in the market.
Yes.
Good compromise industries.
Yes.
Yes.
Which can lead to cash.
It's from sources.
Can we get the base growth shops.
So price.
To actually contribute to discussions.
We assumed bridges in Brazil.
Possible terms such as stabilization.
Okay.
Yeah.
Thank you Mr. Allen.
Second question from adult who is 200 <unk> hundred.
Good day.
About the asset sale. Please provide an update on refinery in <unk>, yes.
You are on mute.
Sorry last time it wasn't feasible now I was mute.
Thank you for your question well first of all it's as I mentioned during the presentation. We had of course, the signed and closed important transactions during the year 2021 and of course be artists, we do it as the most relevant 1 that happened at the beginning of July and as I mentioned, we are highly focused.
On concluding the transactions both in the agreement that we have with <unk>, a 4 day natural gas market and for the refining market as well.
We are of course are highly focused on closing the transaction regarding halo, which was signed in.
In March this year.
And looking.
Looking at the process as a whole where we have him on ILUVIEN on in 6 a little bit more advanced than we are in the negotiations are in different stages for a hip hop you hiccup P internationally.
We have the day agreements with Sky gene in terms of of deadlines, and we're focused and and committed huge combined with with those deadlines.
And in terms of other relevant assets are in the presentation I showed a slide regarding the advancement of our auto processes as I mentioned, we had the signing of gas petrol region recently.
And we also have other important assets both in onshore and shallow water E&P assets. So we're very glad with the with the evolution of our portfolio management strategy and focused on concluding additional transactions for the year 2021. Thank you.
Yeah.
Thank you Anthony is going to the next question comes from within the molten.
With Morgan Stanley and also from you.
So regarding enhanced dividend policy once the net targets are met how should we think about the actual implementation of the policy with the higher payments come only at the end of the fiscal year B, It's 2021 or 'twenty 'twenty 2 artwork management clients as Tom distributions with some lift.
From that aspect is there a preference for quarterly semiannually or annually dividend distribution.
Okay.
Thank you. Thank you Bruno for your question well first our first of all it's important to see that 2021 is of course.
A transition of the years are an important year in terms of ours.
It should reduce gross debt, we expect to choose to reach the $60 billion debt target only in 2022 and of course, given the much more favorable conditions in 2020, 1 we've been able to move much faster and.
At the current pace, we expect that we may be able to choose to reach to $60 billion debt target closer to the end of the year.
2021so it's it's now it's a it's a.
So it's more of a transition time and S. A we announced in this quarter, we want to make sure that we can balance our focus from reaching to $60 billion debt target with a potential dividend distributions and we went to do that adding as much value as possible. So we see that the the time.
Me off the prepayments is relevant.
Of course, we want to get you the $60 billion debt target, but we also want you to do that generating more value.
So once we reach the 60 billion dollar debt target of course that we expect to improve our dividend payments and start applying to 60 per cent dividend policy of 60 per cent of our free cash flow but.
But as I mentioned, the 2021 as a transition year. So we will try to balance those 2 aspects of distributing more dividends and reaching to $60 billion debt target.
In terms of a preference with respect to quarterly semiannual or annual we don't have a an explicit preference of course, we want to balanced financial sustainability of the company and we.
We will continue to monitor the scenario huge sea.
How can we best balance balanced to sustainability of the company with the distribution.
But it's important to highlight that we are highly focused on improving dividend payments and complying with our dividend policy. Thank you.
Yeah.
Thank you Anthony is low.
Bruno has another question for you as well so thinking about energy transition the company to hinted that's upcoming business plan would bring more emphasis on this important topic.
And does the company expect to announce the updated plan the mindset, increasing the investment level to address energy transition easy net surprise is generating very healthy cash flows or is the mindset to stay at the similar investment range with a different composition between plus infused in energy transmission.
It's.
Okay.
Thank you Bruno for your question well first with respect to the timing of the business plan. We expect you to announced business plan closer to the end of year November or beginning of December.
But in terms of the general.
General feature where of course are analyzing closely the energy transaction transition.
The subject and are of course, we have to be a very careful with the movements that are would may, especially considering that we have a very resilient portfolio. We have a portfolio that has a significant competitive advantages both in terms of being resilient to lower oil prices.
And being environment, everybody environmentally resilient as well.
And we see that are a profitable diversification is a challenge it's a challenge for the for the industry. So we want to make sure that.
Whatever decision, we're making terms of diversification is a is 1 that is accretive in terms of value and create value to our shareholders. So this is a very important aspect for us.
And of course, we want to keep our commitment with a having a 35 dollar price.
Our target for approving projects and are being environmentally resilient as well. So we we we acknowledged that you have we have to keep moving towards a.
The ESG agenda, but we want to make very.
Movements that are both sustainable and that we are always focused on adding value to our shareholders. I think if you want to jump in Israel. Thank you yeah, just to just to add to that the what's called the Geneva, Jeff just mentioned.
Mentioned that that we don't see.
Ah Ah competition of project when do we see as fossil fuels and energy, but rather.
Synergy.
And Petrobras has been very a focus on on that since the early stages of our production in the census, bathing day pre salt that we have been very focused on the reinjection of C. O..2 for instance, and this create a double.
The advantage, we are not putting in the atmosphere.
All D C O 2 that has been locked it in the reservoir flow meters of years, but also we are able to improve the recovery factor for the there is it the same happens when Luis third day right now the second generation of <unk>.
Biofuels.
The green diesel and the jet.
Bio jet aviation bio jet.
And then we are going to be using a room that we have on hydrogen planting or refining plant to foster the use for those planes with debt and.
So they're working on.
1 process understanding how we can improve our.
Our carbon.
Our results in terms of oil is and.
In the other product is key to the future of this energy transition because with.
With the strategy, we are going to be able to offer to the market in the future a broad range of products that are competitive in price, but also low in terms of carbon emissions that is the strategy and we are going to be studying.
Those kind of projects in the upcoming strategic events that we'll be announcing end of day. Thank you.
Okay.
Thanks, a lot. Thank you. So the next question is from.
And as Shane with total Lithia.
Yeah.
With the upcoming transfer of rights auction with Petrobras has the right to be the sole later on this huge orange the company actively discussing each partners.
Our strategic plan.
As a guideline for us to track.
Partnership.
And with them with this approach we share risk we share cost we share investments and benefits. So that's what whereas as secant. We're good partners for the next bid world.
Thank you.
Okay.
Thank you for your numbers and the next question comes from we thank you for a longer lease.
Bradesco and it's a much talent must Allen.
Incurring losses working diesel in the quarter ECS could you provide us a ballpark estimate on how much.
Yeah.
Thank you for your question distinction.
I can answer that but anyway.
Bye bye.
Some other agents in visiting book, especially issuer partners indicate to the Brazilian prices are in line.
Guarantee.
Who are your reference.
Our diesel market share decreased from second quarter.
T cell growth.
7%.
In the first quarter to 83% from the second.
That's great too.
The increase in crude price.
So other suppliers.
With national debt.
Price.
Sue.
Taking a look at multiple interventional prices, but also things.
And it's again such as net costs.
In sum this all subtracted.
Uh huh.
Yeah.
Reservoir.
As prices such as all of you.
He is.
Volume.
Obligations.
Which is a cost.
Well, there's racism gasoline.
Diesel price.
To remove that through price.
Yes.
Compose.
Our third system business, we saw the net.
Price is too low.
<unk> cannot be foreseen this soon.
Individual groups.
Hope to be.
Clear.
2 questions.
<unk>.
Thank you Mr. Allen the second question Colin Thank you for joining.
Could you please provide updates on the elevation of our homes.
And 1 quarter of 2022, our operations expected to start up.
Good afternoon. Thank you.
Yeah.
Thank you for the question.
If there's some natural boldly used to be.
And you when you talked a little skewed.
It is Sunday took sandy gross shipyard in China.
We already is that the.
Lifting the models and the April 2001.
We are.
Facing some challenges.
About <unk> will be the magazine.
But until now we will have.
Tabled.
We expect the production you'll D&O book.
<unk> 22 in Q.
I'd like to address the need.
Development that you'll do have yet.
I would add before you went into the operation.
It.
We just 5678 already hired.
And the only if non solution.
Okay.
In the bidding day.
Is he loses 9 E 80 unique.
Yeah.
Extreme segment.
And Mr. Glenn on the boy's isn't working.
We're working hard in order to reduce the.
The time, we start production with the ELD use new unions indeed.
He had the highest you seem to you when it is when they start.
Operations.
It will just you'll do is bringing a lot of value.
In the standard that is very important to the speed.
For used oil.
Date book your older units.
Yeah.
In depots through from Ts. Thank.
Thank you for the question.
Yeah.
Thank you Sheila.
Next question comes from Cliche analogy with some from me.
So he sends a message Lisa congratulations for the results and also with the anticipated payments of treatments.
And his first question is for her day Eagle about Capex. So even the very strong cash flow generation and payments of dividends I was wondering if this may allow you to also adjust capex up in.
In order to incorporate new higher return projects for example in exploration and production or any other segments.
Thank you. Thank you Christian for your question well.
As I mentioned before we are always going to be draft appetite for projects that are accretive in terms of value.
Of course, those projects that are are resilient to lower Brent prices and that support that 35, a breakeven price that we have for approving projects. So we're in the middle of the revision of our business plan and of course whenever we have projects that add value to the portfolio and in that are resilient.
Both in terms of lower Brent price and environment, though behavior, especially in terms of emissions, we will be looking into those projects and of course as I mentioned, our AR in the in the in our Portuguese earnings call as well, we have projects that are able to.
Add value to the remaining portion of our refining portfolio.
Like Gaslog B for example, and we are also focused on that kind of projects projects that create.
Create value that are connected with our refining plants, especially in the southeast and that can enjoy the benefits of the oil and natural gas from the pre salt. So whenever we have projects that are resilient and value adding projects are will be of course always interested in looking at them.
And of course, we want to maintain our commitment with a much higher level of dividend payments. So this is something that we will.
Always balanced, but we want to maintain.
Our 60 per cent a free cash flow.
60 per cent of the paying dividends that represents 60 per cent of a free cash flow. So this is what we're going to be focused on thank you for the question.
Okay.
Thank you Jose.
<unk> also has another question for you and it's about use of cash.
Given 1 how strong cash flow generation to natural almost at $60 billion gross debt target entry that the large payment of events. How would you prioritize your uses of cash going forward.
That reduction Capex and distance.
Thank you. Thank you our accretion well first of all as I mentioned before we're highly focused on reaching our $60 billion debt target.
And we believe that given the current base, we'd be able to do that.
The end of this year and the end of 2020.1.
But of course, we once you do that in the most are value accretive accretive form possible. So we want to make sure that our prepayments have the lowest cost possible once you balance that.
Going forward, so that we can add value to our shareholders and be able to reach the $60 billion debt target.
At the same time.
In terms of Capex of course, we have a very robust business plan and then a significant level of capital that's for the upcoming years in our 2021'twenty 'twenty 5 business plan. We are currently reviewing the business plan for 'twenty to 'twenty 6 but as I mentioned, we are always going to be focused on only.
Adding projects that are resilient to lower prices and that add value to the portfolio. So we may see future increases in capex, but with unexpected substantial increases and we.
We do expect that whatever increase in our Capex is always a very resilient.
Resilient and value adding projects.
Project.
And again as I mean should we.
Or are expecting to improve substantially dividend payments in Q.
2 as soon as possible, we start paying the 60%, though far fee free cash flow that that is a.
That is the.
The expected dividend policy. Thank you.
Yeah.
The next question.
Cash and comes from hedges.
We've previously and it's hard to answer.
Enjoy it.
It's about E&P project, so lot to E&P projects can be included in that sort of a nice production can.
Can you comment specifically about the status of <unk> and <unk>.
Okay.
Thank you for the question on hedges.
In addition to the.
The third thing you instead do we start production until 2 antigens, but we hadn't started it was 90 and accept C E.
Douglas Brooklyn does eating through us in the first half of <unk>.
This is mine.
The ATM will be advisory under the EPC.
On the ABC warrants it.
We will use the high capacity.
Project.
Belongs to Petrobras.
In Seattle.
That is in the U S. B 81 will get either the losing the <unk> model.
We understand that that is their report can be steps in the development of Sheffield.
The Baltic looped in throughput.
These are fields that you had.
Our high volume, but you would need.
<unk> challenges.
Your true content.
Are you studying had the day.
You'll take them all as you enter the project in order to to make it feasible.
Did they loved it has fueled.
Our our approval scenario that you would need to have is India project.
Yes.
Okay.
<unk> ability.
Did you approach that you are studying indeed.
Got it.
Thank you for the question.
Justice the restaurant a little bit more.
1 the Sergipe Alagoas.
Sure.
In the market for a bit from the bidding process.
Bring production, we expect in 2026.
As Joe said, the Duke we are progressing with the bottlenecking of the 2.
The technological challenges with the highest step.
We are going to go to the market.
Florida, I said growth metal 3.
These.
And the company move Oops.
It's a key element.
Yeah.
Having a robust design for hooked up.
<unk> element once we have.
Very big volume moving joked at and we have to manage a day highest yield to call that in price that these are a very good way.
We're injecting this phase.
Direct from the Subaru.
And considering the next bit wrong for uplift circa areas for sure.
No worries or there are extra volumes that can encompass as new projects for Sip infor.
This will not be released with the bidding process.
And we have the continuity of the develop of losers.
We have until now.
We are from President Bush's 9 but the whole.
The progression of the <unk> project for the blues as growing gas is up to 12 units and for sure. That's 1.
Yeah.
New production tool or next business spread.
Let's see.
We can talk no.
First of all we will have a greater fourth an exploration that's where she will bring.
Some more discoveries to be developed in the coming years. Thank you.
Okay.
Thank you.
And the next questions also from has is too much talent so much talent regarding fuel crisis.
So congrats seems to be taking a growing share of gasoline and diesel imports in recent months can you explain.
Weighted to the recent maintenance stoppage in the refining park or if this could be the result of the company not passing through all day.
Upward volatility in brain in Brent prices to the pump.
Thank you Andreas.
You are right the motives supergene and creative imports from.
<unk> seen in this first half from opt into them.
A greater amount of the scheduled maintenance.
Due to the restrictions imposed.
And then the Q2 thousand 20, which came into the difficulty.
It was almost impossible to put sort of 3000 people.
The sites too.
Moving schedule.
It could mean for them so.
He had a concentration of really in the fourth.
Scott.
In this way to ensure the commitment to our gross loops.
We do imported oil products to meet this temporary reduction in production.
Oh.
So.
So as to ensure the regular presence.
<unk>.
Markets, especially shoeboxes indicates.
With prices in Brazil are in line.
Net.
Another important likely this decision of course is based.
Oh, Oh Oh.
Imports we book.
Cost of products is always subject to cash.
Reported so.
And again, we're going to growth.
<unk>.
Thank you.
Yeah.
Thank you Mr. Allen. The next question is from Indiana Yang with HSBC.
100, or so but there is a new belief it's now a good time to receipt that Nebraska investment strategy.
Yeah.
Thank you. Thank you we'd be down up for your question well as I mentioned before.
We're in the process of reviewing our business plan and we expect to announce our tiny tiny true 26 business plan closer to the end of the year end of November beginning of December.
But of course, we don't expect a major changes in terms of the overall strategy. We want to continue to be a company that is a GAAP.
That has a significant cost our resilience.
That is focused on approving projects that are resilient to lower oil prices and are also environmentally resilient as well.
Of course, we are looking into projects that can add value to our portfolio as I mentioned both in upstream.
And related should should the integration between the oil from the pre salt.
Especially in the southeast with the remaining portion of the refining portfolio that we have like that gas will be for example.
But we don't expect substantial changes of course that energy transition is an important subject and we want to.
Take further steps toward our energy transition strategy, but as I mentioned.
Having a profitable the diversification strategy is still is still a challenge for the industry as a whole.
So this is a what we can we can.
Share with you for a moment and we expect to announce our business plan closer should end of the year. Thank you for your question.
Okay.
Thank you. The next question comes from Channel Blotchy, we message.
<unk> Tau in from you as well so it's about distance so in online in the first half of 'twenty 'twenty..1 profit earnings would be about $17 billion in 2021, given the <unk> that were announced yesterday are equivalent to a payout of about 36% are other.
The 25% minimum.
Can we assume that the company is already anticipating dividends, assuming the form a 60% payout.
The free cash flow.
Thank you for your question, our Changzhou as I mentioned before 2021 is a transition year as you as you all know we expected to reach the $60 billion of debt target in 2022, and given the current base and then a more positive scenario.
We think that at the space, we may be able to reach by the end of the year.
But our dividend policy gives us gives us enough flexibility to approve our extraordinary dividends.
So we as I mentioned, we are trying to balance.
What we still have to do in terms of debt reduction share reached a $60 billion debt target and adding value for our shareholders through our dividend payment. So this this is not an anticipation after formula after 60% of free cash flow as I mentioned, we're still focused on.
Reaching the 60 billion.
<unk> at target and prospectively.
Distribute 60 per cent of our free cash flow, but a F 'twenty to anyone as a it's a transition year and we're seeing a much more favorable scenario and given the prospects that we have both in terms of earnings and free cash flow, we have been able to announce the anticipated dividends and a 4.
The remaining part of 2021, we're going to be focused on balancing our value generation for our shareholders and getting to the 60.
Billion dollar debt target by the end of the year. Thank you for your question.
Thank you <unk>.
Now we received questions from a little normally with Goldman Sachs and it's for US now so it doesn't matter has been successfully selling non core assets and becoming a leaner and more efficient company.
From much lower leverage and now similar to global peers, what's next.
And consistent increase in dividend how to reconcile this with the need to comply with Esg's tenders in the future.
Thank you. Thank you for your question Bruno.
Well, it's it's a it's a.
When we look at the results of 2020 in 2021.
They they show how important it is for us to have a leaner and more resilient portfolio.
When we think about 2020, we had 40 dollar average price in our portfolio showed that showed that it was a resilient 2 should that level off prices. So this was very important and at the same time in 2021, when we have an important upside with higher prices are our portfolio shows that itself so able to capture.
The additional value that comes from higher prices. So this is this is very important for us and of course, a part of our future strategy is to become a more consistent and higher dividend payments are you guys already know that we have to 60 per cent that our free cash flow our dividend policy and we're studying how it should.
The more consistent as well in terms of paying dividend, even when we have lower.
Brent price scenarios.
And with respect to the ESG agenda as I mentioned before.
We acknowledged that we have to continue moving towards that direction, reducing our emissions are but we also want to true to be conservative in that sense. So that we don't destroy value to our shareholders. So we want to make sure that the steps that we take both towards.
New projects or reducing emissions are always value accretive and always generate value to our shareholders. So this is how we see this now.
And.
As I mentioned, we expect to announce our 'twenty 'twenty true basics business plan by the end of the year. Thank you for your question.
Now we have a question from non wood at harbor starts with Jpmorgan.
Now we know the pace of the zone redemption decelerate from here.
The significant change to capital allocation strategy, and it's funny like Inc.
Thank you. Thank you for your question Barbara No, we don't see substantial changes to the capital allocation strategy as.
As I've already mentioned.
We expect to continue to invest in projects that are resilient to lower prices into our event from environmentally resilient as well and with respect to the bond redemption.
Yeah.
Oh I'll divide your question into 2 different parts of course at this moment, we're focused on reaching the $60 billion debt target. So we want to be able to both doodads and generate value to our shareholders. So we're always looking for the cheapest opportunities to reduce our gross debt.
But even when we achieved a $60 billion debt target.
With the remaining debt that we will still have a we will be focused on.
Doing liability management transactions, so that we can.
<unk> improved the maturity and reduce the cost of our debt. So so that's also an important our action in terms of the of resilience for.
For the energy transition scenarios, so even when we reached the $60 billion debt target, we still want to be able to continue.
Continue doing Egypt, cash neutral or cash negative transactions that.
Reduce the cost and improve the maturity of our gross debt. Thank you for a question.
Yes.
Thank you for that he would have 1 last question from me that immortality Lockheed.
Barclays.
And so you're right now so it's about liability management, we have less debt redemptions to be a priority once you reach the $60 billion Mark.
To keep the 60 billion gross debt target are you measuring our credit profile by another metric when the company continued to do liability management. After the 60 day Mark.
Thank you. Thank you for the question better, whereas as I mentioned in the prior question. Once we reached the $60 billion debt target of course, we will continue to do liability management, we want to improve the profile of the of the remaining debt.
So that's that's a of course are going to happen, but it happened, but but but always focused on our Egypt cash neutral or a cash negative transactions that improved our maturity.
And reduce the cost of our debt.
In terms of credit profile as I mentioned during the presentation, we can see that through several different lenses.
We've been able to have a very a positive credit profile, we have a very.
Very substantial level of a cash flow from operations compared to the interest expense that we have and that's of course very very positive for us in terms of of resilience.
When we look at the at the future of our business plan, we can see that with our additional units coming online we see an increase in the level of our leases. So that's of course, a something that is.
It's important for us and it's it's necessary true to reduce our finance staff. So that we can remain in the $60 billion.
Target after with Richard So we want to be able to make that level sustainable in the long run and of course, we will continue to monitor it now we don't expect you to reduce debt levels substantially, but we even in that scenario, we would have to travel on imports of liability management.
Our strategy so that we can sustain our 60 billion dollar debt level going forward. Thank you for your question.
And well I think that's the last question that we have right column.
Yes, that's right.
Well, thank you everyone for being with us today.
We're very glad to chew announced a very positive operational and financial results for the second quarter. We also great glad shoe to announce some anticipated dividend distribution that is part of our strategy.
To be able to deleverage the company and at the same time generate value for our shareholders. So we're very happy with the results.
It's of course, a very relevant work from all of the Petrobras team. So I want also to thank all of the Petrobras team and an all day officers for for this impressive results and thank you for being with US today have a great day.
Yeah.