Q2 2021 Petroleo Brasileiro SA Petrobras Earnings Call

Critics Officer van on the Baas is chief exploration and production officer.

Oh, and he hits and house, and Chief production and development Officer, Nicolas Simone Chief Digital transformation, and innovation officer of basketball and A&D, Chief Institutional relations and sustainability officer, but anyway, I wish him Chief financial and Investor Relations officer for legal costs and chief refining.

And he and natural gas officer, and Salvador debt home, Chief governance, and compliance officer to.

And to initiate our first delivery room.

And our CFO. Please go ahead.

Thank you Carla Thank you Hello, everyone and 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 be here with you today. Thank you.

Next slide please.

So starting with our safety metrics. This is very important to report debt.

We're continuing and should comply and the first half of 2021, we have <unk> 7 a level up 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 2020, 1, but we're always work.

And to improve safety and that's an unconditional value for Petrobras and we're always focused on improving safety and we're very glad to be a.

Below are alert level off and zero point and separate from several points 7 for 2021 and.

Next please.

With respect to our emission indicators are it's important to see that in terms of carbon intensity and our E&P operations. We are significantly below the level that was set as the target for 2020, 1 and we are already below 2020.

During the year of 2021, we had to ramp hop off.

Important production units and we have already re injected $4.3 million tons of steel true. 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 and it's important to realized that we had.

Several scheduled stoppage that we had 6 scheduled stoppages in 2020, 1 and Inspite of that we're still maintaining the same level of 2020 and our work.

We believe that we can recover during the second half of 2020, 1 and achieve our goal for a 40 year 'twenty 'twenty 1.

And Oh, we have already announced earlier this year are wrapped up program, which is a very important program focused on improving the energy efficiency of our refining operations and we are therefore highly focused on reducing and intensive carbon intensity and 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 with 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.

And it just portfolio to have a very resilient portfolio and that is preceded and to lower prices and also was able to capture the upside of scenarios like the 1 we're seeing in 2020.1.

We set the company for a $40 Brent price for the year 2021, and what we see is significantly above that and we have been able to show and second quarter of 2021 that our portfolio is capturing all the upside that is related to higher Brent prices.

We had a recurring adjusted EBITDA of $11.4 billion, and and they'd be down margin and up 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 and 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.

And 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 a pool being.

More and more recognized in the international market as well, we had and the second quarter higher margins and higher sales and the domestic market as.

As well from our refining operations, especially our diesel and gasoline and 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 and the second quarter of 2021.

When we look at our gross debt reduction, we reduced our debt and in the second quarter a.

By $7.3 billion, reaching a level that is substantially below the target that we set for 2020.1 of $67 billion were already and $63.7 billion for 2020, 1 and a force that we're highly focused on reaching our $60 billion debt target, which is something.

At continually.

And the just did this 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 flows from our portfolio management strategy, we had inflows of $3 billion in the first half of the year and ER and then the second part sorry, and we also had the follow on transaction of our of our remaining shares and B are just we do it.

Up to a point $2 billion this cash.

Cash inflow happened and the beginning of the third quarter and July we had a positive impact in our earnings for the second quarter of the reversal of the impairment that we had and badge with water.

The cash inflow actually happened in the second and the third quarter and the beginning of July.

And of course, we had a.

Earnings of $7.7 million and the second quarter of 2021. This was positively impact by our very substantial operational performance and we also had a positive impact on foreign exchange gains that are non cash, but they are impacted positively and our second quarter.

And our results with all of the debt reduction debt, we hand, and capex discipline and cost discipline that we have and portfolio management and strategy that we have in place are we.

We've been able to approve and announced anticipated dividend distribution of $6 billion for the second half of 2021a.

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 a balanced our our focus on debt reduction and and getting to the $60 billion debt 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, and the second quarter, which of course as I mentioned before we were able to capture just additional prices.

And with our portfolio, which is a very cost proceeding portfolio and when we considered the average exchange rate Oh dollar for pure and had a slight reduction of 3%. So.

On average, we have unimportant improve and in margins and prices for the for the second quarter of 2021, and as I mentioned before when we considered it and a fever and exchange rate, we had and appreciation of the Brazilian how during the second quarter of 12% and.

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 and.

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 debt 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 for 2020, 1 which is a very impressive result.

And as I mentioned, we are already below the target that was set for 2020, 1 and with being 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.

And that we have and net debt to EBITDA ratio much closer to our peers. Now this of course positively impacted by the level of EBITDA 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 it's a very important.

And the trajectory of reducing our leverage and therefore, making the company more sustainable and more reliable and resilient and challenging scenarios on next slide please.

When we look at this 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 increase of exports as well and sales are.

It reflected and an increase and our recurring EBITDA of.

31%.

True 11, $4 billion and the second quarter of 2021 and of course, we also had a positive and when we look at the adjusted EBITDA. We have we had a positive impact of our decision the gain that we had related to the exclusion of the.

And the T. I C M S. A debt at a state level of taxation in Brazil from the calculation of musical fees, but it was a very impressive.

Impressive results in terms of operational performance for the second Clark and.

Next please.

Looking at the dynamics of the results by business segment.

And we can see debt our upstream SYGMA 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 on inquiries and our production we had a 2.8 medium barrels of oil equivalent production and the second quarter of 2021 and.

And 70% of debt is already represented by oil 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 retail software exploration and the pre salt area.

When we look at the refinery and 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 and sales diesel and gasoline into domestic markets.

And we also have a very a lower inventory turnover of fact, when we look at our results so far EBITDA with inventory turnover, but it's to a very important performance 40, RTC segment and.

And looking at the gas and power segment, we had a 20% increase and 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 and 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.

And $10.8 billion and the.

Investments off 1.5 so we had a free cash flow of $9.3 billion and.

And so your 0.3 inflows from our portfolio management strategy and that results and $9.6 billion of free cash flow after divestments, and we basically used all debt free cash flow.

To prepay debt and when I mention the debt that the airports that were making in terms of.

Liability management and it's also important to include the pension plans that we had a zero point for prepayment 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 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 debt, we have a way above what we expected for the year 2021, and the successful movement that we have towards achieving the $60 billion of 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 and second quarter of 2021, 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 and.

A history of the company and we also made substantial prepayments and repurchases, both and the debt capital market and also with bilateral transactions.

With the banking market as well.

Proved the average maturity of our debt to more than 12.5 years and reduce the cost of 5.9%. So this is this is a very important movement, especially considering the challenges are.

Around the energy transition.

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.

And alongside with reaching the 60 billion debt 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 and S&P announced an upgrade in our Standalone credit rating. So this was also very positive and.

Reflects the successful.

Financial recover Petrobras next please.

In terms of portfolio management is important to highlight the transaction involving the remaining shares that we had oh, if the artist daughter, and that's a $2.24 billion transaction as I mentioned before I've got a follow on transaction and kept on markets.

The largest transaction and in the Brazilian market for 2021 are the cash flow happened in the beginning of July So it's of course, our support and our deleveraging and dividend payment.

And we also had relevant and signings during year 2021.

Specially 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.

Fortunately our.

On refining plans, we also had a signing of guest bathroom.

And July as well so we had important movements and also what did.

Think about E&P operations, we also had signing off transactions and 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 and transactions.

And I already have on the cash and cash inflow of $2.8 billion.

Dollars in 'twenty, and 'twenty, 1 and excellence.

So this is just a general picture of whats happening.

Happening and all.

All of the portfolio management projects that we have and you can see that the ones that have the the yellow box on 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 than 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 a recurring net income for the second quarter of 2021 as I mentioned before this is the result.

So very important operational performance and alongside with a positive impact of a non cash foreign exchange gains given the appreciation of our of the proceeding and how the period and Brexit and how that impacts.

Our our exposure in terms of a dollar.

<unk> Index <unk>.

Gross debt. So does force a positive impact for the second quarter of 2021. We also have had earnings are related to a reversal of impairment and be honest, daughter, and also will do and portrait results.

After asking in the second quarter of 2021.

Next please.

So finally as I mentioned, it's a when we approved our anticipated dividend distribution of $6 billion.

Which is a more and it's around 3 times day average dividend distribution for last 3 years and.

And it's.

It's divided into our first payment and August 2021 and the second 1 and December 2021, which is a very important movement from the company.

Reinforcing our commitment to add value to our shareholders and of course should it proceed and society as a whole and.

Important movement of balancing our deleveraging strategy.

If there were munoz shown on 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 the $60 billion debt target.

By the end of 'twenty, 'twenty, 1, but generating the highest value possible.

And that's my last.

Last slide thank you very much for being here with us today, and we and move on with cartilage for the Q&A session. Thank you.

Thank you ladies and.

So the first question that we receive comes from risk on file.

Yes, and it's from my Salem.

Mr. Allen, we have been following the company pricing policy and a very detailed way for a long time and when.

Do you see changes on the approach for years and several times, we saw more frequent adjustments will now on theirs and gas closer to parity and now.

I'll close on our attention that price moves and less frequent and we saw higher GAAP than before.

Why do we see different approaches to this subject to overtime.

Yeah.

Thank you for your question.

Let me clarify.

And some submissions and the subjects on these loans.

And.

And just from being too low or too high so weighted.

Firstly.

And most of it is through July and Newport.

<unk> will use international markets and you just.

To ensure that the Brazilian market continues to be supplied with interest of swap interest.

Ladies and.

Distributors and partners.

Other producers and addition to Petrobras.

And the first quarter.

More specifically for Christian.

Increased.

Sure.

The exchange rate.

And the adult required and more frequent adjustments.

Gross.

More recently.

Gross.

And the Asia and these are essential.

Yes.

And let's see.

Great.

Exchange rates.

Oh.

And actions, we hit a certain compensation of achieving.

And as always.

And that's sweeping planks and Jason Stewart.

And of course.

Yeah.

Oh.

Well, so oil prices continue to signals and distribution model.

And we changed from.

And it.

Exchange rate.

And so avoid.

And bosses turning to avoid Johnson to total price as well.

Total gross.

And.

Caused by Cogent remains low.

Does it continue.

1 day.

Luke on the team.

And Chi.

Which includes.

On the procedures.

And computation and low.

Uh-huh price.

In relation to.

Total classes.

Thanks to price.

And the plane and.

Just 2 questions.

Okay.

And wrangler.

Terrific.

And other players in Brazil.

Essentially waters.

Yes.

<unk> net.

Right.

The new lines.

Good.

Thank you.

Thank you Mr. Allen.

The second question from Mr Hassan and.

Let's go on HUD video growth.

So on.

On the this bathroom divestment, we saw some recent news and on the petition Ram and these pits could be imposed by the antitrust Brian.

Company has interactions with other potential solutions to move forward and the process prior to the binding space.

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 to the agreement that we have with debt Brazilian antitrust body with respect to the should've.

Opening after that and natural gas market.

And the Kashi our antitrust bodies is closely following all our movements and of course, just following up on all of the all the sales processes that we have and force guests that there was a relevant 1 within this context and it's good and 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 and does a natural gas distribution companies. So they have.

The preferred rights are debt.

Debt cannot cannot be exercised and then later on we used to have Mitsui, which is our partner and and guest bathroom, which can exercise their right as well and and then we have to the Brazilian antitrust body analysis debt of course, so we expect to be a complex 1.

Given the nature of the natural gas distribution market and the complexity of the debt transaction.

We are highly focused on concluding this transaction and we are positive.

And that the resolution with the antitrust body antitrust body will be positive and the and then we'll be able to.

Conclude the divestment of gas bathroom.

With respect to Brascan and.

Of course with our we've been following up on the movements and Alfaro.

Uh huh.

All off of novel, nor debt is of course, a rather from shareholders and shareholder.

Brascan and swell and we have already engaged financial advisors to support support us and 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 debt at this point, but we are moving forward.

And with potential different paths and we're focused now on realizing the highest value possible in the divestment of Brascan and thank you for your question.

Okay.

Thank you for video games.

And the next question comes from and elsewhere, and Jimmy <unk> with J P Morgan and its the Mustang Mr. Allen.

So a mouthful heal pricing how on talks with the government about the possible Sun just on the line strength.

And lastly involved into discussions with the government.

Thank you.

And as I said and then.

Total debt.

And this continues to practice prices in balance suites and Copa.

On today's markets.

Yes.

Lisa.

Dozens of play exclusively to Israel and products.

Other commodities traders and Brazilian markets.

Since the market.

Such as food clothing, and Mutuals, who also have their prices associated with 2 variations and traditional market and.

Sure Bruce.

Well using this does come from.

Logic.

And this varies mutually.

Vintage claims incidence and catching new players to Covid.

Contribute.

So the increase and local Oh.

Oh.

We've got other benefits to it.

Could you ever have.

Price its room and the market.

And then.

Good compromise the industries.

And I'm convinced.

And just which can lead to cash.

It's from sources and.

The lease growth shops.

The price.

To actually contribute to discussions.

And as Joe bridges and presume.

And 1 possible children's such as trans stabilization.

Thank you.

Yeah.

Thank you Mr. Allen.

Question from adult use 2 <unk>.

Good day about.

About the asset sale. Please provide an update on refineries in other key assets.

You're on mute.

Sorry, less time and wasn't feasible and hours mute.

Thank you for your question well first of all it's as I mentioned during the presentation and we had a force the signed and closed important transactions during the year 2021 and of course be artists. We do it is the most relevant 1 that happened in the beginning of July and.

And as.

And as I mentioned, and we are highly focused on concluding the transactions both AR and the agreement that we have with God G..4 day natural gas market, and Florida 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 at the process as a whole where we have him on ILUVIEN on and 6 a little bit more advanced and we are and the negotiations and different stages for a hip hop you had got P internationally.

We have the debt agreements with Sky gene in terms of of deadlines, and we're focused and and and committed to to comply with with those deadlines and.

And in terms of other relevant assets are and the presentation I showed a slide regarding the advancement of our other processes as I mentioned, we had the signing of gas petrol region recently and.

And we also have other important assets, both non 4 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 air and to anyone.

And you.

Yeah.

Thank you for video games and the next question comes from within the multinational.

Morgan Stanley and also from you.

And regarding enhanced dividend policy once the debt targets are met how should we think about the actual implementation of the policy.

The higher payments come only at the end of the fiscal year be it 2021, or 2022 or would management being clients as Tom distributions and so that's possible.

That aspect is there a preference for quarterly semiannually or annually and distribution.

Yeah.

Thank you. Thank you Bruno for your question well first of all it's important to see that 2020..1 is of course and transition years are unimportant ear in terms of ours targets should reduce gross debt, we expect to choose to reach the $60 billion debt target only in 2020.2.

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.

It's more of a transition time and S. A we announced and this quarter, we want to make sure that we can balance our focus on reaching the $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 as it's 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 debt, 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 as I.

And the 2021 as a transition year. So we will try true 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 and explicit preference of course, we want to balanced financial sustainability of the company and.

We will continue to monitor the scenario huge sea.

And how can we best balance this balance 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 heard any of them and.

And the owner has another question for you as well so thinking about energy transition. The company painted that's upcoming business plan would bring more emphasis on this important topic.

And does the company expect to announce the updated plan and the mindset increasing investment level to address and it's translation using debt that's stabilized and generating very healthy cash flows or is the mindset to stay at the similar investment range with a different composition between Boston and fuse and energy transition.

And it's.

Thank you. Thank you put on them for your question well first with respect to the timing of the business plan. We expect you to announce the business plan and closer to the end of year November or beginning of December and.

But in terms of the general.

General picture, where of course are analyzing closely the energy transaction and transition.

And the subject and 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 and environmentally resilient as well.

And we see debt a profitable diversification is it's a challenge it's a challenge for the for the industry. So we want to make sure that.

Whatever decision we would make in terms of diversification is a is it is 1 that it's accretive in terms of value and creates 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 a dollar price.

Our target for approving projects and are being environmentally receding as well. So we acknowledge that you have we have to keep moving towards the.

The ESG agenda, but we want to make very make.

Movements that are both sustainable and debt we are always focused on adding value to our shareholders. I think if you want to jump in Israel and thank you yeah, just to just to add to the vertical and deliver Jeff just mentioned debt that we don't see a.

Ah Ah competition of project when do we see as fossil fuels and energy to and the history, but rather.

Synergy.

And Petrobras has been very a focus on on debt since the early stages off on our production in the census, based and the pre salt and we have been very focused on the Reinjection Hawk C. O..2 for instance, and this create a double.

The advantage, we are not putting any atmosphere.

All of these seal chew that hadn't been locked it in the reservoir flow meters of years and but also we are able to improve the recovery factor for the there is and what are the same happens when we study right now the second generation of <unk>.

Biofuels.

The green diesel and the jet.

Bio jet aviation and bio jet.

And then we are going to be using a room that we have even on hydrogen plants and or refining and plant to foster the use for those planes with debt and.

So the working in our own process understanding how we can improve our carbon.

Our results in terms of oil and.

And other products is key to the future of this energy transition because with.

With the strategy and we're going to be able to offer to the market in the future a broader.

Our range of products that are competitive and price, but to also low in terms of carbon emission debt is the strategy and we are going to be and studying.

Those kind of projects.

Projects in the upcoming strategic advance debt really announcing end of day. Thank you.

Okay.

Thanks, a lot and thank you so and the next question.

And as Shane with it on a linear and it.

And on.

On the steel with the upcoming transfer of rights auction with fits and events has the appetite to be so later on and Skus are in the company actively discussing these partners.

And our strategic plans on it.

And it has 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 Petrobras is seat and we're good partners what are the next big World.

Thank you.

Yeah.

Okay.

Thank you Tim on the next question comes from and we thank you for longer.

And.

And it's a much talent must Allen.

And I was encouraged and losses and parking diesel and acquired ECS could you provide us a ballpark estimate on how much.

Yeah.

And thank you for your question decision.

And I can answer that but anyway.

And repeats and the Brexit and some other agents and visiting.

Especially Shaw and partners indicate that Brazil and prices are in line with intellectual guarantee.

Yeah.

And who are you a reference on our diesel market share decreased from second quarter.

Routine.

7% on.

And first quarter, 283% growth second.

We'd like to.

And increased presence and other suppliers.

With national debt competitive price and Brazil, taking into account not only international prices, but also David.

And as the data suggests that costs.

And so on dissolved subtracted.

And so.

Yeah.

Residue.

And your experiences such as our view.

It is.

Obligations.

Which is a cost.

Well, there's choices on gasoline.

Diesel and U S.

And here too removed and through price.

Yes.

Compose.

Ordinary system business as well.

Prices and margins came on to pursue this from.

Individual price.

Hope to be.

Clear.

2 questions.

And.

And you must Allen and the second question comes and thank you for joining so it was on he could you. Please provide updates on the elimination of on housing.

And 1 quarter of 2022, our operations expected to Cerner.

Good afternoon, and thank you.

And.

Thank you for the question.

If there's some on the energy bubble as we used to be.

And you and you talked a little skewed.

And it is Sunday of construction and the of course the shipyard in China.

We already is that the lifting the models and on April 2001.

We are facing.

Facing some challenges.

About the or eat and 19.

And until now we will have a scheduled to start.

And <unk>.

<unk> and.

22 and cool.

I'd like to other ASD.

Development that you'll do have yet.

I would add before you and cause operation.

And.

We'll just by boutique sales and 8 already hired.

And then on the solution.

And the beating day.

Okay.

E 80 unique.

Yeah.

Upstream segment.

Media and music and other boys is working.

We're working hard in order to reduce the.

And the time, we start production on with the ELD use new units and indeed.

And the highest you can see when it is when the stay at the low.

Operations.

And we'll just fuel D and he is bringing a lot of value to the company and the standard debt is very important to us.

For used oil.

The date of your older units debt.

Yeah.

In the construction and please thank.

Thank you for the question.

Okay.

Thank you, Joe and I hate the.

Next question comes from Greece, and Aldi, which stem from me.

So he sends a message with our home credit durations from the results and also with the anticipated payments of <unk> and <unk>.

His first question is for her day Eagle about Capex, so even the very strong cash flow generation and payments of dividends and I was wondering if this may allow you to also and just capex.

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.

Well as I mentioned before we are always going to be appetite for projects that are accretive in terms of value.

Of course are those projects debt are resilient and to lower Brent prices and it support and 35, a breakeven price debt we have for approving projects.

So we're in the middle of the revision of our business plan and of course, our whenever we have projects that add value to the portfolio and air and debt are resilient, both in terms of lower Brent price and environment, though.

Behavior, especially in terms of emissions will be looking into those projects and.

And of course, as I mentioned and the and the Portuguese earnings call as well we have projects that are able to add value to the remaining portion of our refining portfolio.

That gas will be for example, and we are also focused on that kind of projects projects that.

Create value that are connected with our refining plans, especially in the southeast and debt 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 will be of course always interested and 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 balance, but we want to maintain.

Our 60 per cent a free cash flow.

60 per cent of the payment paying dividends our debt 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.

And also has another question for you and it's about use of cash.

So given 1 how strong cash flow generation to natural almost at $60 billion drop debt target entry that the large payment of dividends. How would you prioritize your uses of cash going forward between debt reduction capex and distance.

Thank you. Thank you our accretion well first of all as I mentioned before we're highly focused on on reaching our $60 billion debt target and.

And we believe debt given the current base, we'd be able to do that and the end of this year and the end of 'twenty 'twenty 1.

But of course, we want you to do that in the most value accretive accretive form possible. So we want to make sure that our prepayments have the lowest cost possible once your balance debt.

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 done and a significant level of capex for the upcoming years and.

And our 2021.2020 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 and to lower prices and and and that adds value to the portfolio. So we may see future increases and <unk>.

Capex, but with unexpected substantial increases and we do expect debt whatever increase in our Capex is always a very.

Resilient and value, adding and project.

And again as I mentioned, we are expecting.

Expecting to improve substantially dividend payments and <unk>.

2 as soon as possible, we start paying the 60% of our fee free cash flow debt that is no.

Yeah.

That is debt.

The expected dividend policy. Thank you.

Okay.

The next question comes from hedge.

And we've previously and it.

Now on to Android.

About E&P project, so lots of the E&P projects can be included and that sort of a nice production.

Can you comment specifically about the status of <unk> and <unk>.

Yeah.

And thank you for the question on hedges.

In addition to the.

The other thing you instead do we start production until 2 and different phase we hadn't started it was 90 and it's yeah.

Daedalus book those building through us in the first half of this year.

This is mine.

On the 18th.

We will be under the EPC and.

On the APC is going with it.

We will use the high capacity.

And project.

Belongs to Petrobras.

And <unk> debt.

And that is will you in M. U S E 81 will.

I did the ruling the <unk> model.

And we understand that debt is fair and board can be stepped on the development of <unk> field.

And the bulk of Yolked and <unk>.

Yields debt.

Ah Ah high volume, but you would need.

And <unk> challenges.

Your true content, we are studying had the day, you'll take a mall is and the project in order to to make it feasible.

Did they loved it is fueled on the.

Our our approval scenarios that we needed to have is good.

And as the.

Okay.

And into both did.

And your approach that you guys thought immediate deed.

Got it.

Thank you reported question.

On Justice the restaurant a little bit more.

P..1 decision pillar was on there.

Sure.

In the market for a bit on their bidding process debt.

2 other bring production and we expect 2026.

As Joe said and Duke.

Sure.

ASC with the bottlenecking of debt.

Technological challenges with the highest step.

And you got on a go to the market.

And if I said growth metal 3 and.

These.

And the economy move and such.

A key element.

Hum.

And our robust designs per hooked up.

And you've element once we have.

B.

Volume moving Jupiter and we have.

To manage a day high field <unk> debt and <unk> is a very good way, we can re injected this phase.

I went through on this tomorrow.

And considering the next bid wrong for uplift circa areas for sure. There are there are.

The extra volume that can income basis, new projects 4.6 and 4.

Cool.

And we're gonna be realism with the bidding process.

And we have the continuity of the dividend loses.

We have until now on correct.

We are from Brexit and Boozers 9 but the whole.

The production on New Zealand project, Florida book is growing and passes up to 12 units and for sure that's going on.

Ed.

New production tool or next business book.

Issued debt.

And we can talk no.

And for sure we will have a greater fourth and explorations that force who will bring.

And 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.

And congrats seems to be taking and growing share of gasoline and diesel imports in recent months can you explain it.

And to the recent maintenance stoppage in the refining Park alright.

And if this could be the result of the company not passing through on the upward volatility in brain and Brent prices to the pump.

Thank you Andreas.

We were ranked the mountains and the niche marketing and creative and imports and all refineries and maintenance too and this.

First half and to whom it wasn't going to amount of scheduled maintenance.

And due to the restrictions imposed.

And then we can and 2020, which came into the difficulty.

It was almost impossible to put some 3000 people.

And the songs too.

The scheduled per day.

And so we had a concentration of really and the first 1 day.

And in this way to ensure the commitment to our customers.

We do imported oil products to meet this temporary reduction.

And.

Oh.

No.

Just to ensure that the regular presence with other engines.

And markets, especially Shaw and partners educates.

And with prices and Brazil County line.

Yes.

Because the issue debt.

So on the working quickly this decision and of course is based on.

Oh on the imports.

A lot of products is always subject to income.

Loans to support and so.

And again, we're going to go into remission.

And.

Okay.

Thank you my style and the next question is from Indiana, Yang with HSBC and.

400, and so do you believe it's now a good time to receive that Nebraska investment strategy.

Yeah.

Thank you. Thank you we'd be down up for your question well as I mentioned before.

And we're in the process of reveal when you're on our business plan and we expect to announce our 2022.26 business plan closer to the end of the year end of November beginning of December.

But of course, we don't expect major changes in terms of the overall strategy. We want to continue to be a company that is a debt.

That has a significant cost.

Resilience.

That is focused on approving projects that are resilient and lower oil prices and are also environmentally resilient as well.

Of course.

We were looking into projects that can add value to our portfolio as I mentioned, both in upstream and a related should should the integration between the oil from the pre salt and especially on in the southeast with the remaining portion of the refining portfolio debt. 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 what we can we can.

Share with you for a moment and we expect you to announce our business plan closer should and of the year. Thank you for your question.

Okay.

Thank you and the next question comes from Channel Blotchy, we mitigate Maxwell and.

And from you as well, so and so and when.

On line need and the first half on 2021 profit and earnings would be about $17 billion in 2020, 1 given and then that were announced yesterday Cleveland to pay out about 36% are above the 25% meaning can.

Can we assume that other companies already anticipating dividends, assuming the form a 60% payout.

And the free cash flow.

Thank you for your question, our Changzhou as I mentioned before 2020, 1 as a transition year as you as you all know we expected to reach the $60 billion of debt target in 2020, 2 and and given the current base and then a more positive scenario.

And 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 our debt reduction share reached to $60 billion debt target and adding value for our shareholders through our dividend payment. So this this is not and anticipation after formula after 60 per cent of free cash flow as I mentioned and we're still focused on.

Reaching the 60 billion.

Billion dollar debt target and prospectively.

Distribute 60 per cent of our free cash flow, but as strength 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.

And the remaining part of 2020, 1 we're going to be focused on 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 and now we received questions from a little normally with Goldman Sachs and it's for US now so pets.

And Matthew has been successfully selling non core assets and becoming a leaner and more efficient company with a much lower and language and now similar to global peers, What's next and see.

Can you frequent and consistent increasing dividends and how to reconcile on this list and need to comply with Esg's 10 years in the future.

Thank you and thank you for a question and Bruno are well, it's it's a it's it's.

And then when we look at the results of our 2020 and 'twenty 'twenty 1.

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 and our portfolio showed that showed that it was resilient and <unk> should that level of prices. So this was very important and at the same time and 2021, when we have and important upside with higher prices our portfolio shows debt 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 the 60% that on a free cash flow our dividend policy and we're studying how it should.

Be more consistent as well in terms of paying dividends, 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 and reducing our emissions, but we also want to choose to be conservative in that sense. So that we don't destroy value to our shareholders. So we want to make sure debt.

Are the steps that we take book towards Oh.

New projects or are reducing emissions are always value accretive and always generate value to our shareholders. So this is how we see this now and.

And as I mentioned.

And we expect to announce our 'twenty 'twenty true basics business plan by the end of the year. Thank you for your question.

Thank you ladies and.

Now we have a question from non wood and how their start with Jpmorgan.

We know the pace of the non redemption decelerate from here and a significant change to capital allocation strategy and it's funny.

Thank you. Thank you for your question Barbara No, we don't see substantial changes to the capital allocation strategy.

And as I've already mentioned.

We expect to continue to invest and projects that are resilient and lower prices and our event from environmentally resilient as well and with respect to the bond redemption.

Yeah.

And 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 do that 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.

And doing liability management transactions, so that we can.

Improved debt maturity and reduce the cost of our debt. So so that's also on important our action in terms of the of resilience for.

For the energy transition scenario, so even when we reached the $60 billion debt targets, we still want to be able to continue.

Continue doing either cash neutral or cash negative transactions debt.

Reduce the cost and improved and maturity of our gross debt. Thank you for a question.

Yeah.

Thank you from getting we have 1 last question from me.

Data and mortality and Lockheed.

Barclays and.

And so realized now so it's about liability management, we have less debt redemptions to be a priority once you reach the $60 billion Mark and <unk>.

And to keep the 60 billion gross debt target are you measuring our credit profile by another metric with a coke and continued to do liability management. After the 60 day Mark.

Thank you. Thank you for the question later, whereas as I mentioned and the private question. Once we reached the $60 billion debt target of course, we will continue to do liability management and want to improve the profile of the remaining debt.

So that's that's a of course are going to happen, but it happened, but always focused on our Egypt cash neutral or a cash negative transactions debt improved debt maturity and.

And reduce the cost of our debt in terms of credit profile as I mentioned during the presentation, we can see debt, but through a separate different lenses.

And we've been able to have a very positive credit profile, we have a very.

Very substantial level of our cash flow from operations compared to the interest expenses 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 debt with additional units coming on line, we see an increase in the level of our leases. So that's of course, a something that is.

And the quarter and for us and it's it's necessary true to reduce our finance debt. So that we can remain in the $60 billion.

Target after we've Richard so we want to be able to make debt levels sustainable in the long run and of course, we will continue to monitor it and now we don't expect you to reduce debt levels substantially, but we even in that scenario, we would have to travel and important 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 very glad shoe to announce some anticipated dividend distribution debt as 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.

And that'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 and and all day officers for for this impressive results and thank you for being with US today have a great day.

Yes.