Q3 2021 Petroleo Brasileiro SA Petrobras Earnings Call
Ah complexity weighted Oh.
In our refining operations send our acceptable maximum limit is 40. So we're below the target set for 2021 and in terms of Apple absolute GHT emissions for 'twenty 'twenty. One. We're also at a with we permitted 46 million tonnes of C. O tune. This in this year and is also a.
Compatible with the targets that would separate 2021 as well next please.
In terms of Soo Choo emissions are in terms of steel Chew Reinjection, sorry, we've been focus on Reinjection re injecting a relevant portion of our C. O two emissions and when we look at the what we've done since 2008, we've already re injected 20 $28.
One a million tons of Seo Chew and are only in 2020. One we've already re injected $6 7 million tonnes, which is very close to the level off for injections of 2020, and where are focused on achieving that our our commitment of reinjecting 40 medium tones of Seo true.
<unk> by the year 2025.
In a word.
We're focused on achieving that target and continually improving the lead.
All of our future re inject.
Okay.
Next please.
Yeah.
Please another important aspect of our ESG strategy.
He is of course, a recognition of improvements in our governance.
Yeah.
<unk> October Desir, we have completed the obligations that we have.
Under the agreement with the U.
S Department of Justice, a disagreement was signed in 2018.
And it is now closed and there are.
Our important recognitions that were made.
Okay.
<unk> and the conclusion of this process of course related both to the improvement of our internal controls.
And should evolution of our integrity program.
The companies are compliant system has evolved substantially since 2015.
Yeah.
<unk> and.
Of course, we're highly committed to continued improvements in our governance and compliance systems, but it's an important.
Achievement and recognition.
Yeah.
The conclusion of the agreement with the U S D O J.
There are of course the agreement also acknowledges that with Roswell says a victim of the corruption schemes that occurred.
In the past.
And as I mentioned.
Four we're focused on continually improving our governance are now compliant systems next please.
It can be in terms of our financial and operational highlights are of course.
We have to you too.
Of course highlight the fact that we purchase.
T.
Our target of 60 billion dollar of gross debt.
Uh huh.
More than a year before the expected deadline.
Yeah.
We expect that to achieve that in 2022 and.
With close.
Close third guard at 2021.
<unk> with gross debt of $59.6 billion, which is a.
Very important.
Orton.
[noise] achievement and.
That brings us to a capital structure that is much more compatible.
With our peers and allows us to compete.
Mcmahon.
[noise] efficiently in the oil and gas market with the matrix and other peers.
We had.
Our recurring EBITDA.
<unk> fell four $2 billion and our recurring net income of $3 $3 billion into third quarter of 2021.
I think.
A very solid operational performance.
<unk>.
Once we file higher sales.
As of oil products in domestic.
Get especially diesel gasoline and jet fuel.
Our oil and gas production also increased in the third quarter we.
Have pre salt representing more than 71% of our total production now.
So we had a very solid operational quarter.
The.
Order that resulted of course in the.
In our in our.
And Ah.
Unimportant generation.
Cash from our operations of $10 $5 billion, San our free cash flow.
<unk> of $9 billion.
<unk>.
During the third quarter, we also had.
Pads important inflows from.
<unk> our portfolio management strategy of.
The remaining shares that we had in pits registered we daughter.
Of course resulted in a cash inflow of $2.2 billion and we also have.
Had.
The payments after.
Yeah.
The corporate separation agreement for the Booz is field.
Oh $2.9 billion that was also a relevant.
On cash inflow and represented.
Are they at the entrance so far.
Our partners in the in the bushes.
And yesterday, our board of directors approved a new anticipation of dividends.
Okay.
<unk> of $6 billion.
Alongside with $6 billion that we had announced in August totals.
That.
<unk> $12 billion of anticipated shareholder remuneration for the year.
That.
Here and this is of course, a an important contribution and Ah represents the company's commitment.
With at generating value and distributing eats earnings are.
And an important contribution.
Yeah.
Both to its shareholders entered the Brazilian society.
<unk> not only in the form of dividend.
<unk> of course, but in the form.
Of taxpayer.
And our social responsibility as well so the company.
It's a.
We are getting stronger and healthier than being enabled shoe substantially contribute to the proceed into this.
Sided swell.
Well with relevant investments and our commitment with operational.
Next slide.
Yeah.
Please when we look at the external environment.
Okay.
<unk> Brent prices were 7% above our Q2 2021.
And the average exchange rate was a there was a little appreciation of the how when converted to U S dollar during the quarter.
But to me a relevant figure here is are the changing the end appeared exchange.
Yeah.
Right.
Which impacts our end of period.
Sure.
Sure.
The death.
That's when we translated into Britain highs our functional current.
C and it impacts our earnings so we had an important eight back into earnings.
The third quarter of 2021.
One that is of course a noncash.
Cash.
Fact, but it impacts a relevantly hour.
Our third card 2021 earnings.
<unk>.
Snacks.
Yeah.
Okay.
And when we look at the gross debt as I mentioned before we reached the target of $60 billion.
Please in anticipation, we originally forecasted two mediating 2022 and when we look at the.
The track record of the company since 2015, we had in the past 160.
$16 and gross debt when we considered a finance lease.
These and the multiple off.
Our cash flow from operations was in the past above seven so it's and impressive.
<unk> corporate turnaround journey that has been made by the company.
And of course allow us to be.
Even more focused now on operational efficiency and on returning.
Turning the cash that would generate.
In the third quarter of 2021, we prepaid $6.1 billion in gross debt and there was of course, the startup of the F. B S. Okay, Orca, which added another $3 billion in finance leases are theirs.
An important achievement with respect to refuse.
A L. P S. Okay, orca as well.
He is a we're very close to start producing the second producing field.
<unk>.
Puma P S OCA, the orca and continuing with the ramp.
Out of the platform.
Sure.
Which adds a relevant production shore portfolio.
Ed Spanish Chu our truck port.
Yeah.
Photo overall and when we look at our leverage in terms of net debt should be down.
Uh huh.
Yeah.
Uh huh.
Sure.
Close to Q3, 2021 at 117.
<unk>, which is very in line.
With with four peers, if majors and of course.
When we think about the $60 billion debt target that we set.
Course is is the level.
Allows us to.
<unk>.
To be committed with the company's financial sustainability.
<unk> aims to navigate scenario is much more challenging than the one that we're seeing now.
Yes.
Now $60 billion that allows us to.
To go through scenarios like the one we saw last year when we.
And Brent prices around 40.
A barrel within.
Substantially increasing our lab.
So.
Average brings us.
A very optimized capital structure and allows us to look very enthusiastically.
So it.
<unk> to the future next please.
Yeah.
Yeah.
Please in terms of our EBITDA, we had a very solid quarter as well.
Well we.
Okay.
<unk>.
Proved our recurring EBITDA by 7%.
<unk>, Inc.
Uh huh.
Sam.
Total IV Dowf, a trough point $2 billion of recurring it would be dying.
<unk>.
The third quarter of 2021.
One as I mentioned before this is of course, a result of a very solid operational.
On a performance.
Both the upstream and downstream segments.
<unk>.
Please.
Please.
Yeah.
Next looking at the performance by segment.
It's a we had have an important impact.
<unk> Brent prices for the upstream.
Of.
<unk> Oh.
Predict and of course, our inquiry.
The.
<unk> by around 1% the squad as well.
And we saw these.
Improving its share in terms of our total.
Paul.
Which also adds value to.
<unk>.
Sure.
Through our portfolio and our results.
In terms of our RTC segment are we had.
It's also important results in the second quarter.
And despite the.
The improving.
And in the operational performance we.
Had higher expenses, we've legal proceedings that offset.
Seth and dumping prove in the operational performance and with respect to our gas and power segment.
And of course, we had no lower natural gas margins.
<unk> substantially D should the inquiries and LNG costs.
I believe.
LNG costs.
Internationally our substantially.
Higher and we have a longer term contracts.
<unk>.
So we had an impact.
Tougher LNG costs, and our long term contracts in this quarter.
But are the annual result is also very solid and in line with.
Sure.
Sure.
Planning for this year as well.
Next.
<unk>.
Please in terms of cash generation and the distribution of our cash.
Cash alongside with our EBITDA, we had a the impact of income taxes and working capital that was relevant in at the acquirer.
For we're seeing higher prices.
So we see some increase in terms of our working capital as well.
Sure.
As I mentioned before we had.
We had $9 billion.
And free cash flow in third quarter of 2021 and when we include the inflows are from the portfolio management strategy and from the Booze used co participation agreement.
So.
A we have a free cash flow after divestments.
14.
So <unk>.
Point.
$3 billion and of course that was mainly used to reduce our gross debt.
Tap we would.
We'd be paid six point.
Billions of dollars of gross debt and we also had.
One additional scheduled payments so the total payments in terms of that was $6.
Got.
$8 million.
The squad.
Got it.
And we also had the first payment after dividends that we announced in August.
It was a $4 billion. So in terms of cash are.
And we have.
The positive cash change.
1 billion dollar in.
In the third quarter of 2020.
Next please.
Okay.
One in terms of our liability management strategy of course.
Where in terms of that level.
Oh quite comfort.
<unk>.
With debt.
The current capital structure.
Of course, this is something that the company continually monitors.
Sure well, we believe that 60 billion dollar debt level allow us to.
<unk>.
To be able to manage the company efficiently and challenging scenarios.
But when we look.
Profile off the remaining debt.
At the ports, we see opportunities to.
Dan.
Increase its maturity and to reduce costs or current costs is 6%.
And we improved the maturity in the third quarter of 2021 from around 12 five to $13 five.
When we look at the amortization schedule for the next year next years is quite compatible with the company's cash flow generation and we see that we have a very.
Smooth amortization profile down at all as to make the relevant investments that we need to make and to distribute dividends are without meeting the company's financial sustainability.
We also had a we have a revolving credit facility lines.
Sorry, $8 $7 billion and a cash level of 11 five are when we think about the cash level are we see that we're we have a cash level that is higher than our optimal cash level that we believe that is around $8 billion to $10 billion, but of course, we still have.
A potential challenges coming from that.
Pandemic scenario that is of course, it's improving but we still see a potential challenges in the upcoming future. So we're we have a higher cash level than we think it's optimal at least for the short term.
But would you expect to bring our cash levels to lower level closer to.
To a range from $8 billion to $10 billion in third quarter. We also had a the early redemption.
Of $1.3 billion in our bones.
The make whole of some of our bond series. We also have $3 $5 billion in prepayments of our bank loans and we have very we had very positive news in terms of credit profile Moody's upgraded our credit risk.
From BH, who choose to be a one are in the third quarter of 2021 next.
Yeah.
In terms of portfolio management are as you can see are the highlighted transactions, we had six signings and forecloses and third borrow 2021.
Please.
Of course relevant transactions that support our deleveraging and.
And help us achieve.
The optimal portfolio focused Don Ward class, our upstream assets and world class refining assets in Brazil.
Of course, especially in the ultra deepwater pre salt and workout class at refining assets in the South East software Xu.
<unk> that is the focus of our portfolio.
Next please.
And in terms of highlights of this third quarter, we had.
The follow on off our remaining shares in Badger <unk>, daughter that I mentioned before we also had relevant signings both in terms of our agreement with a catchy with respect to the refining assets.
You answered the natural gas assets, so we signed a.
Yes, it's the SBA for him on that it's our north refinery and also we sign guest bathroom and auto relevant assets and in the natural gas agreement with the preceding them to Tricia authorities.
And also we had the closing of the hobbled Bronco fields.
<unk> 2021 so our total cash inflows into <unk> in 2021 is $2.9 billion and the total value of the already signed transactions in 'twenty 'twenty 156.
Billions of dollars and that of course supports our deleveraging strategy and distribution of earnings. So it's a very positive.
Inflow in terms of.
Six of cash next please.
In terms of our earnings for the quarter, we had $3 $3 billion off our recurring earnings in the third quarter of 'twenty 'twenty. One we had a 5% increase in gross profit and as I mentioned before we also had a negative impact are with respect to the depreciation of the how that.
Impacted our.
As I mentioned, it's noncash, but it impacted substantially our earnings. We also had a reversal of impairments are from upstream assets given the more positive.
So price scenario.
And capital gains from the losers.
Losers co participation agreement those were partially offset by our actuarial losses related to our corporate health plan.
We had a.
Ziv.
We had a relevant change in terms of legislation here in Brazil, because of the Salt says you should raise debt was part of our.
Labor agreement with the with the unions and it impacted negatively the third quarter 2021.
Next.
One.
Finally, as I mentioned before our board of directors approved.
Please.
In 2021 in anticipation of $12 billion 6 billion were approved in the second quarter of 2021 and an additional 6 billion has been approved now in third quarter.
This anticipation of shareholder remuneration of course is compatible with our financial sustainability and reinforces our focus on I'll focus on capital discipline on optimizing our capital allocation and of course on distributing alder earnings that we generate that of course is very.
Positive both to our shareholders and to the Brazilian Society that India and receives a relevant portion.
After dividends that we pay so this is a very important in terms of <unk> contribution should a Brazilian society as well and we believe.
Having a stronger and more solid Petrobras is a very positive for the Brazilian society, So and as I mentioned before we continue to be highly committed with the execution of our strategy and we believe that the results that we havent deterred acquirer represent.
Important achievements in terms of delivering our strategic plan.
Thank you I'll pass the floor back Chicago. Thank you.
Thank you Brittany.
We can now.
A Q&A session and the first question that we received from strong shrank in the game.
We think of America Merrill Lynch.
With that.
Right.
And then Anne what cost pressures are you seeing more relative to operations announcements.
Could this affect future capex disease.
<unk>.
Yeah.
Thank you Frank for your question we.
We do not expect cost impact this year since the contract.
<unk> of goods and services have been dealt with before.
And also because even inflation corrections do not apply at the same time for all of our contracts.
With respect to the future investments we continuously access.
Oh, the applicable variables not only cost.
The exchange rates rents in Manhattan.
Short and long terms also.
But possible.
Project organizations analyze them.
Our consolidated on the future.
Capex decisions.
We are concluding and grows to announce.
By the end of November beginning December 'twenty, two train six strategic plan.
Which we'll detail all investment choices.
Your question.
Thank you and the second question from St.
He's fong.
The living.
The significant improvement in the Companys balance sheet and expected.
Global supply and demand.
As expected over the next few years could the company moved to increasing that Nip stream projects over the next several years.
Frank.
Okay.
Thank you for your question Frank.
Of course, the more positive oil price scenario.
Yes.
<unk> of the increase in Capex in upstream assets.
When we look.
Super.
Look at portfolio in terms.
The future perspectives, where of course concerned with long term prices and.
So committed.
To invest in assets that are both environmentally and.
The low price resilient, so we have a very.
Solid threshold in terms of a project decision of 35.
Brent price in terms of.
Barry or long term projects and we can expect some increase in terms of capex for the 'twenty to 'twenty six business plan that.
Spectra announced by the end of November beginning of December, but again, all the cap six increases that were.
We are that we eventually make.
We will be related to recede in assets and that are able to.
Be profitable and have adequate returns even in quite challenging scenarios, but thank you for your question.
Okay.
Thank you everybody and the second question comes from Lisa <unk> with UBS.
So the company has been very vocal in this sense of highlighting slipping some contribution to the society in the pharma business.
<unk>.
How can we see developing in the next 12 to 18 months.
And Michael and the country undergoes a challenging macro situation.
But I think we even.
To benefit the country.
Vince.
How could we understand the potential limits funding solution could be the case.
<unk> Park with initial high percentage than the 60% of the different muscle breaking cash flow and topics.
Okay.
Thank you. Thank you for your question Louise Ah well of course 'twenty 'twenty. One is a is a transition year in which we achieved our 60 billion gross debt target 6 billion dollar of gross debt target.
<unk>.
<unk> and we have of course of course managed shoe.
Balance, reducing our leverage this year with distributing our earnings as well. So this is.
This has been a an important part of our strategy for 2021 a.
Of course that depending on the results of the fourth quarter of 2021, we may see additional dividend distributing depending on the scenario of the results and the company's financial sustainability as well.
Is but in terms of the future for 2022 we expect you to comply with our dividend policy and distribute 60%.
Well off hour.
Free cash flow.
Starting from 2022.
And then of course, a depending on the scenario and and and and the results that we have.
We may think about additional distribution, but again it will be depending on the scenario and the upsides that we have in terms of what happens next year.
Of course, we're now looking at the 'twenty to 'twenty six.
Our plan then.
Business, considering aspects like the timing of dividend distribution and we want to have.
A more consistent distributions.
Distribution in terms of timing as well.
Considering potentially quarterly or half year distribution, where we don't have a straightforward answer now, but it's something that we're looking for.
And we're.
We're looking at and.
We may have.
Does discussions concluded bye bye.
The the announcement of our 'twenty to 'twenty six business plan. Thank.
Thank you for your question.
And you heard me well we received the questions now please.
I'll break I break it down.
Tweets on the first part will be for the Washington, what changes for Panther brands and divestments up numerous times. This was <unk> first the additional investments by other players in the market.
Don.
But thankfully in new refineries.
Second part is for my family.
So how do you see the Brazilian.
Refining market advantage after they've been finding their suite also how the company sees the guarantee of domestic fuel supply. Once there are other players in the market.
And what will be dependent on brands.
In this scenario and the third party saw who'd be glad I wished so following the housing.
At the same process farhan asking him.
<unk>.
How are those claims from the final optimal could quantify that.
You said your rent considering changes.
Needless configurations or can we expect as a company to continue to focus on the only refinery you somehow even in the long term.
Yeah.
Louise we.
In Spain, our company to this new environment implementing free action plan.
The first one is regarding improving our efficiency through a program that we are calling here have stopped.
This program.
To put our refineries in the first quartile of benchmark Solomon.
That if we use the reference of United States refinery.
<unk> performance.
Larry.
Yeah.
We are trying through this project.
Isaac it's optimized.
Our.
Officials.
Looking for to reduce costs as things change in natural gas and power.
Actually we are in the Fi.
Okay.
We're always Yates.
It's around $300 million in Capex.
Aurizon until two.
2025.
The second line that we are working here is prepare our hardware to follow market conditions, we are increasing.
Our hydro treating capacity.
Around 10000 cubic meters per day.
And we are looking for increasing our conversion capacity around 9.7.
<unk> thousand cubic meters per day.
To implement those broad.
Our current.
<unk> business plan.
Right.
He is a point to a capex around three $7 billion.
The Florida.
Lionel faction.
Yes.
Capturing the opportunities that we have in image transitional horizon.
He gardening bio refining here.
Here, we are trying.
So I'm gonna lies the opportunity to produce bio that fuse.
<unk> and renewable diesel.
<unk>.
So that's through two Mastella to answer your second question.
Thank you.
Your question please.
I'll talk in a month.
New refiners.
No.
Competition.
Refiners will occur in nature.
Yes.
<unk> tends to be positive to the market supply.
Sure.
<unk>.
Besides I think.
We will create to healthy tissue.
Tissue semi.
Yeah.
Yeah.
Thank you both.
It's important to highlight.
In Brazil.
And he has his hands for three years.
Two environment most diesel gasoline.
Best of luck.
Especially with different teams.
Already occur.
Mainly in Fourteens pools.
Talking about two to competition, a little Petrobras, who have already demonstrated that.
That's.
Arrival.
Please thank.
Thank you.
Well Louise Ah. Thank you.
For for your question in terms of the third.
Our warehouse costs with respect should it should the house.
Part of the process is a finish and have poppy and whether we have.
Any changes in terms of strategy and portfolio no. We don't have any any any changes of course, we will.
<unk> continues to be.
We are committed we are complying with the agreement of the agreement that we have with the Brazilian antitrust authorities to divert.
Pete.
S a of a relevant portion of our refineries.
Given a more general perspective are we already have.
The signings of Halo.
And Hema.
That were.
Often the person second quarter of 2021, and we're moving faster towards concluding the six we also have a look not in <unk> that are more.
Yeah.
<unk> advanced.
In terms of the ones that were unsuccessful.
Dan meaning.
And the gap and sorry, Hiphop you had bought in the and in that she.
We expect to continue our conversations with the Brazilian antitrust authorities, so that we can.
<unk>.
Relaunched our the processes are in a way that we can be more effective and successful in and actually be able to.
<unk>.
You should conclude the transactions in this in the second opportunity.
So we've been having discussions in terms of timing and strategy of our household to launch the processes in terms of timing as well so that we can improve the competition in the.
In the M&A process and be able to successfully sign and close them.
So this is a where we are now but thank you for your question.
Thank you.
<unk>.
The next question comes from Noah <unk> with J P. Morgan.
And it's for sale, whether you can you give us an update on the process I'll say off the refining park, what can be done to make these assets wanting to buyers and lots would be a reasonable timeframe.
Thank you. Thank you for your part of your question who do.
Ah well as I mentioned before are where.
Considering the timing and the strategy.
<unk> Oh of how to to relaunch the processes that were.
Successful they were.
Unsuccessful for.
For different reasons.
For Pip off for example are the bids that we received.
We're substantially below.
So our minimum valuation and have poppy, we could not agree.
<unk> on the terms of the transaction.
Unfortunately, but a N S C. We didn't receive.
Binding offers.
So we expect schuh to relaunch dose dose transactions are after we conclude discussions with the preceding ounce addressed alternatives.
But we are concerned.
Uh huh.
See improving the level of competition in the transactions and how can we.
Ensure that we were able to relaunch in and sign and close them successfully. So we're working on this now and this is where we are in terms of the order processes I've already.
I've already mentioned, where we we are in terms of timing.
Ready, but thank you for your question.
Okay.
Thank you Rodrigo.
No also.
Maybe a question as well so it was wrong can you give us an update on the option of Cowen.
And I think each restaurant companies to partner up.
Different brands.
Good.
Yeah.
Thanks for both of them for a question.
As the company.
Publicly announced on April with robots.
That has breadth.
Ramp to drive to work as operator on both areas are stepping up.
If a minimum of 30% working interest.
Unfortunately, as you know.
No.
<unk> disease is ongoing.
Yeah.
And we are not be able to Shannon perceptions of the other companies that do small.
And finally, we reinforced it with robots lung things are in patients who work in partisan issue.
E b areas in order to reduce the risks and costs. Thank you again.
Again for the question.
Yeah.
Yeah.
The next question comes from going on with English Goldman Sachs.
And it's the Mustang so much Darren do you attribute the recent rise in demand. Okay. Congrats he is for November so much stronger demand in the domestic market overall on Harrington to Ashish to Ardmore internal sourcing investments of less imports minus yields to users.
Okay.
Bruno Thank you for your question.
We haven't noticed anything that could support.
To go.
We demand.
This demanding November reaches.
No.
Seasonally a weaker.
Yeah.
They look to.
<unk>.
A typical demands.
With less products.
November.
We must continue.
Yes.
We have almost 200 clients each with different perspectives.
On the market soon so.
I can speak.
Each of them with if so who are you some perspectives.
Which you don't ship share.
Sure.
Yeah.
Yeah.
Thank you Ms Tyler.
Second question from Blu 200 Eagle.
Can you please clarify the rationale for the time.
Determining the size and timing of schooling colleagues isn't.
Isn't that great start sorry, now behind it so is it reasonable to expect Hunter company to pay out 60%.
Thank you off operating cash flow minus capex on a quarterly base.
<unk>.
Okay.
Thank you and thank you for your question Bruno.
Ah well as I mentioned before are the.
No anticipated dividends.
Did that we've already announced.
Of course, we took into account balancing achieving our $60 billion gross debt target.
We've been able to chew distributing our earnings.
<unk>.
<unk> and being able to start.
Improving the level of dividend distributions.
2021 is of course is a transition year.
And we expect to have a start from 'twenty 'twenty true forward paying that 60% of our free cash flow.
Our consistently and complying with our dividend policy.
So currently discussing wetter.
Uh huh.
To choose to have a more consistent dividend payment in terms.
Of timing as well.
Thinking about whether we do it quarterly or half annually, but we expect <unk>.
To keep.
A closer timeframe in terms of dividend payments as well.
Shoot.
And with respect to 2021.
As I mentioned before depending on the Q4 results and the scenario companies, our financial sustainability and performance for the fourth quarter, we may see the announcements.
One for additional dividends depending on the.
On the scenario. Thank you for your question.
Okay.
We now have quaintance film Bruno Montanari with Morgan Stanley and the questions well not so much.
Fuel prices in Brazil have been making the headlines since the beginning of the Hopkins erythroblast contribute to make this price adjustments less volatile to final consumers without taking on additional margin.
How can the company contribute to the discussions regarding potential tax changes on the implementation a few price stabilization funds in the country.
In order to reduce the negative impact of high price to final consumers.
Thank you Ruud.
Regarding our contribution to the reduction of.
Well until we do avoid.
Great.
I see them onto customers.
And all of the volatility of the Florida markets.
Standards.
And the exchange rates.
This translates into a loan lower frequency adjustments, but doesn't prohibit us true following structural.
Dangerous.
Additional pumps lens.
Okay.
Finally with regard to <unk>.
Its policies.
<unk> was very silent when requested.
He has contributed rebates.
Technical knowledge.
To the various government agencies.
Most of these various issues.
Related to marketing.
Sure.
Thank you.
Yeah.
Thank you my.
Second question Bruce.
Uh huh.
So compared to peer supervise has adopted.
Hum pragmatic approach towards energy transition.
<unk>.
Focusing more on short term goal.
And at least kept its capital.
Does management expect to implement.
Any changes to this approach in the new.
Mhm.
Considering the high level of free cash flow generation and the entire.
Then I have prices could it make sense for the company to increase investments in research when you energy in order to be better positioned in context.
Of energy transition.
Yeah.
Thank you. Thank you Bruno for for your question.
Next.
Ah I think that we have.
<unk>.
Several.
Effective choking to this question.
Perfect.
<unk>.
The first of them is a of course the quality of our portfolio.
Yeah.
So both in terms of environmental and low price resilience.
As we saw.
In 2020, the Companys portfolio was quite resilient.
Much lower oil price scenario and a $40.
Around $40.
Yeah.
Of average of Brent prices in 2020.
Okay.
So we of course have a very resilient and strong portfolio in our hands. So this allow us to think about this does discretion much more carefully.
And look at.
And a more pragmatic way as you mentioned of course, our we're focused on.
Reducing the level of our emissions and we have already set targets and as we have an S.
Ah I explained earlier, we also announced the.
Ambition align with D O GCI.
As well.
And.
Of course, alongside with reducing the level of emission in or our operations.
<unk>.
<unk>, which is something that we're continually investing on and looking for projects that allow us to reduce the emissions in our operations.
Yeah.
Bohlken to upstream.
And the downstream segment in a more efficient way.
<unk>.
I like to have top project that we announced this year that is focused on reducing our own improving energy efficiency in the refining operations.
We also think about our developing.
Framework.
Yeah.
Org and the Gulf.
And this process should look into.
This future potential projects energies.
Uh huh.
Future.
And potential scenarios as well, but of course is not something that.
We expect to substantially.
Prove or increased Capex are.
<unk> related should dose alternative.
Businesses.
Entity for the 'twenty to 'twenty six business plan. So we expect you to continue to be focused on the current portfolio that we have.
And on improving the level of emissions in our in our own operations.
Thank you for a <unk>.
Okay.
Yeah.
Question <unk>.
The next question comes from those.
Previously he also for you.
So you can about additional distribution.
2021.
Cash flow generation was strong.
<unk> 2021.
Now with you it would be possible cognizant Raj <unk>.
Beauty even more.
Yeah.
Sure the cash generated until the end of 2021 should weeks.
We expect to announce one evening.
Thanks.
Would you depend on the balance sheet two year results.
Okay.
Alright. Thank you. Thank you hedge as for your question.
As I mentioned before are depending on the scenario for the fourth quarter of 2021 and what we have in terms of earnings and cash flow generation, we may see.
<unk>.
And additional dividend.
Yeah.
<unk> for the fourth quarter, but again it will all depend on the company's financial sustainability and on the future scenario.
Leo.
Yeah.
On the on the portfolio of 2021 and of course, our as I mentioned during the presentation or a cash level now is above the one that we think it's optimal but we do see.
We still see challenges.
In terms of.
The overall scenario, so we expect to be able.
Ah the short to medium term to being to bring our cash level choose somewhere closer to $8 billion to $10 billion that where we expect.
Spec.
Our optimal cash level should be but again this will all depend on the scenario and in the upcoming months and.
Yeah.
As a as I mentioned before.
Of course.
For we're committed to.
Start applying our dividend policy and Sarbanes, 60%.
Cent of our free cash flow.
For the year 2022 as well so this this this.
This will all be taken into account.
And to analyze our financial sustainability.
It's an order that we can announce additional dividends. Thank you for your question.
Thank you heard many of them.
Question from Hans to Mustang Mustang.
Yeah.
Alan.
And gasoline.
Yeah.
And recently there were some.
<unk> seen the central brands not feeling additional fuel demand from these two years.
Yeah.
Above contracted volumes.
We just confirmed.
Mike.
Could you comment on that.
That's obviously the capacity often times to supply local demand for your product.
Vince planting seeds, Nebraska capacity do you believe this.
Current levels a few price.
Provide enough incentive to court.
Makes sense.
To not supply.
Markets were in parks could make more sense for example.
On the cost of the north and northeast regions.
Okay.
Thank you. Thank you for the question.
So first of all.
That's the wrong is truly complying with its contractual obligation.
Patients, it's very important to me.
Specifically for the wound revenues in Singapore, we received and we are typical.
Additional demand.
Much much kind of dealer interest.
Yes.
So even with slightly as a breakeven.
New leads.
<unk>.
Yes.
It was not possible to lease the extra demand overall.
20% of season, 2% gas.
Yeah.
Yeah.
The Brazil market.
We will not be short space currently several other players besides bitumen.
Atlas distributors trading companies require.
Yeah.
Which produce any thoughts.
Gasoline and diesel.
Absolutely.
Well my team can do it.
Cool.
Talking about our commercial strategy.
Okay.
We don't.
Uh huh.
Avoid mark.
The two loans.
That's.
We will continue to operate in.
In another location, where we find profitability.
And competitiveness.
Including coastal markets.
Steve.
Yeah.
Okay.
Thank you MS. Taylor. The next question comes from we think for Longhorn.
But in these islands.
So once again.
It seems like that sort of answers the balance sheet to pay margin 16 stance.
Operating cash flow minus.
Yeah.
There's the company.
The entity <unk>.
Yeah.
Thank you for your question with St. Jude.
Well as I mentioned before 'twenty, one is a transition year.
So we're <unk>.
Of course, we were highly focused on reaching the $60 billion gross debt target.
But that we've reached now in the third quarter.
And of course that depending on the results for the fourth quarter and the companies are.
For sustainability in the in the scenario.
<unk>.
So for the short term we may announce.
Additional dividends and as I mentioned for 2022.
Our expectation is to start complying with our dividend policy and just start distribute and 60% of our free cash.
Flow and of course, whenever we have scenarios that allows us to have stronger cash flow generation.
We will be taken into account and considering.
Being potential additional dividends.
Evidence, but thank you for your question.
Thank you Jose.
The.
The next question also from thanks displeasure.
Those don't hospital Blackman.
Starting.
And with potential partners funded T O our auction.
How is the interest from current incumbents.
Thanks for a question.
As I mentioned for.
Sure.
For the transfer of rights.
Grosses victory on bone and <unk>.
<unk>.
Unfortunately I can't.
At close.
This information on both.
Thank goodness.
Compared to this time.
<unk>.
Great. Thanks a.
A lot for your question.
Sure.
Yeah.
Yes.
Thank you John.
The next question comes from Indiana Young.
<unk>.
It's fahad.
Can you please update us with demand.
Monetization process.
Baskin.
Uh huh.
I hadn't taken so long to materialize.
Thank you Liana. Thank you for your question.
Well currently we're we have ongoing discussions with novel nor that of course is another relevant shareholder.
Yeah.
Or in terms of.
Next taps and trying to reach a some kind of come on point in terms of.
The conditions of a potential sale transaction.
So this is where we are now.
Of course, we continue to be committed to divesting our interests in baskin, but we want to maximize value.
So we're currently.
Having <unk>, having discussions with are in Oakland.
Or with respect.
The conditions of a potential sale. Thank you for the question.
Sure.
Indiana also has another question for you about Capex.
Brands.
No.
Making more money and whatnot.
Thanks.
Factored in our branches.
Thanks.
It's never an easy task.
And has announced an entirety.
Isn't the time to increase.
Above cost inflation.
Eastern.
Well make more sense to allocate cash.
No.
Cash management preferred to recommend for Manav directors to distribute more distance.
Thank you Liana.
Uh huh.
Anna it's as I mentioned during the presentation and when we think.
[noise] about.
The.
For some of the more favorable oil price scenario.
It's supportive of.
<unk> are increasing.
<unk> capex in upstream projects and we expect to see a certain level of Capex increase for the 'twenty to 'twenty six.
Plan, especially related to.
Business projects that.
Two.
We're both stone given the more challenging.
Two.
<unk> price scenario last year.
Year end debt.
It could be anticipated specialty projects that are closer to.
To do.
And portion of the business plan.
<unk>.
<unk>.
But again will.
We will continue to be focused on.
Assets that are resilient both in terms.
<unk> emissions and the residents to low price scenario.
So.
So this is how we.
Of this and are the kind of projects that we will be focused on.
Look at.
Of course, depending on the scenario.
Leo.
Even considering the potential capex improve we could see additional dividends.
But this is something that would.
Vince will depend on the upcoming scenario.
Area, but thank you for your question.
Thank you how do you now have questions from Christian Audi Santander.
And the first question to you is about uses of cash so how would you prioritize your uses of cash growing problems.
Yeah.
Well, Thank you Christian for your question.
<unk> are of course.
As a as I mentioned.
As I mentioned before.
We believe.
The $60 billion gross debt level.
That is a is an inadequate level in.
In terms of capital structure.
Sure, but we do need some flexibility around that level.
Especially after reaching.
<unk>.
We believe we need some flexibility.
A flexibility around.
60 billion, so that we can.
Managed the company's future financial sustainability more efficiently.
Uh huh.
N a as I mentioned, the higher oil price scenarios is support.
Or do.
For increases in Brazilian projects are in terms of upstream capex.
Picks are and of course, our additional dividend distribution, depending on the upcoming scenario.
So R R.
Yeah.
Our future capital allocation will be focused on.
One of course.
Having.
The Capex that is already committed and in our 'twenty, one 'twenty five minutes.
Lan.
Does this have and are focusing on some.
Some a certain level of Capex increase that we expect for 'twenty through 'twenty six.
Yeah.
But of course complying with the 60%.
And our free cash flow of our dividend policy and eventually they mod into 60 per se.
Whenever we have.
Have a supportive scenarios.
Like the one.
We've been saying.
But thank you for the question.
Thank you Anthony will now have questions from that.
<unk> with Citi.
Now the first question's for you so looking at the company's strong cash generation.
Divestments.
And current leverage situation.
<unk>.
How can you read the current dividend policy.
<unk>.
Will there be room for payments beyond what was already been disclosed by the company.
Yeah.
Well, thank you Paul for the question.
Yeah.
As I mentioned before.
Or it's 'twenty one is it is a transition year, but again.
With.
We've been able to restart to reach our $60 billion of gross debt target.
Before we expected.
Target and depending on the upcoming scenario.
Ill from Oh, you know, depending on our earnings and cash flow generations.
For the fourth quarter of 2020 one.
For.
One.
We may see additional dividends.
<unk>.
<unk> announced.
But again it will depend on.
Sure.
On how things play out in the fourth quarter of 2020.
But thank you for your question.
Thank you.
The next question from them the al.
Now is too much gallons unless there are currently one of the major discussions in that regard.
Yeah.
Yes.
Mhm spiky ponds.
Looking at the current scenario for FX and I, we believe that pressure will continue.
Yeah.
At least in the short term.
However, when we look at theme parks parity.
You see the company charging prices.
Yeah.
This is below the impact.
Yeah.
Therefore, I would like to understand a needle badenhop with Nebraska.
Mountains.
Pricing policy.
<unk>.
On the current moment in the future.
Yeah.
Is there any possibility of changing that strategy.
Thank you and thank you for the question.
Yes.
Do you understand that the alignment.
Zero prices with a global market utilization.
The material.
The competitive market.
In Brazil.
With respect.
Several AG.
That will be encouraged to make investments fine.
<unk> logistics.
<unk>.
<unk> also share risks.
Yeah.
You bet.
It can be.
The stronger market.
Sure.
With Swisscom.
No.
Super.
Yeah.
One key figures.
So we continue to seek this smells.
We can moderate.
We don't see volatility.
Mice.
Woods.
Since <unk>.
Yes.
Yeah.
Thank you Mike.
Now we have questions.
And any new.
Bank of America Merrill Lynch, we have one question.
Brittany.
Yeah.
And 60 billion that target has been met.
That's what will be the next goals or targets.
Under that management language.
Trump.
Okay.
Yeah.
Oh. Thank you. Thank you Ani for for a question are we think that 60 billion is inadequate level that allow us to.
Who should navigate through challenging scenarios like the one we saw last year.
Here without.
Jeopardizing the company financials sustainability, even in lower prices.
This lower price scenarios like the one we saw in 2020.
But again of course, we do need some some level of flexibility.
Yeah.
<unk>.
Around the $60 billion a level.
Okay.
Evel.
Yeah.
So so that we can efficiently manage the company's cash and.
And of course.
Okay.
Distribute our earnings and pay future dividends, so we expect to.
To work on some level of flexibility.
Around 60.
Early in the upcoming future, but we don't expect you to bring this debt level substantially lower.
<unk>.
Sure.
Actually one that we have now.
Now.
We think that.
Okay.
Uh huh.
Okay.
From looking at this from different perspectives.
<unk>.
The 60 billion gross debt level allows us to be quite resilient and have a strong financial sustainability for the future.
Thank you for your.
Yeah.
Thank you.
Question now and half questions.
It grew slightly.
This is the backdrop.
The first questions when you so with.
And then grant that target now achieved.
What should we expect in terms of capital allocation in the coming quarters.
<unk>.
Could you provide enough.
Nate under medium levels.
Okay.
Cash.
Baidu com.
Can we expect.
Back payments beyond the 60.
60% of operating cash flow.
So minus capex.
Okay.
Pivotal for your question.
As I mentioned before our optimal cash level, which is somewhere around $8 billion to $10 billion.
This is where we expect to be working in the future.
Sure, but again was to have certain challenges.
Seeing the Independencia scenario that we.
Yeah.
We are.
We're expecting huge seeing the upcoming future.
We think about.
So.
Short term trajectory to being to bring our cash level closer to eight to 10 level that I mentioned.
In terms of gross that I've mentioned before we.
Back to substantially reduce the companies that we don't want to under leveraged the company as well so we think.
That 60 billion is inadequate level for now.
And of course, this assumption that we continually monitor but for the current scenario, we think that.
60 billion dollar or so.
Uh huh.
Sustainable level and then.
It's like this is.
<unk>.
Optimal in terms of our cash allocation and supporting our.
Our dividend distribution in the future Capex strategy.
And in terms of additional dividend payments of course, depending on the upcoming scenario.
Whenever we have a constructive.
Once the constructive scenarios like the ones.
The one we have now.
Yes.
We can.
Now.
Propose additional dividend.
Payments and have additional payments.
Dividend, but we're now focused on complying with the existing dividend policy and.
And paint is 60% of our free cash.
For.
Sure.
Thank you for the.
Question. Thank you.
So the next question also from Kansas lines is to her new cars.
Yeah.
Refinery utilization rates that currently of Thailand.
Can we expect some utilization reduction in the coming months.
As distributors are expected to increase healing ports.
Pedro.
<unk>.
Our utilization rate is related to the aware for value generation out.
This is one condition in the second one is the.
Mike.
Yeah.
At demand.
Matt.
And the third one is how are you guarding in our hardware.
He guarding availability.
Of our refineries.
So the first.
Yeah.
First quarter, we achieved 85.
Yes.
Were sent off of utilization rate.
Right and now.
At the October.
Our forecast point to 90% of utilization rate.
Thank you Rajiv Malhotra.
<unk> our.
Less fashion.
Last question.
It's from Barcelona.
Yeah.
Almost start with chicken margins. He has two questions. So the first one would be.
<unk> two <unk>.
In terms of capital structure, assuming a divestment program is completed.
What's the level.
That the company would be comfortable with.
Thank you Bob.
But a few.
There are question.
Sure.
With.
Yeah.
We would think that $60 billion.
Yeah.
Our debt is a it's an adequate level in terms of capital structure.
Or I mean, we do need some flexibility around that number.
But with unexpected bring it much lower than 55 are much higher than 65.
Some flexibility around 60 would be more than that.
So that we can manage the company's capital structure efficiently.
No.
And.
No.
And that value to our shareholders so that that is where.
Is that true.
We expect you to have our gross.
Level set.
That and of course.
This is something that we will continue to monitor in the future.
Yeah.
Sure Budd.
60 billion allows us to go through challenging scenarios of lower prices like the one we saw this year.
Thank.
Here.
Thank you.
Uh huh.
One more question.
Has in its funding cost.
But did you can you provide more color.
When the natural gas engine is.
In LNG.
The business is doing.
Yeah.
We into.
Fourth quarter 2020.
We heard many companies complaining about.
Faith Com.
And Brian can counter the same issues for Allen.
Key part.
How is the pass through.
Mecca.
In this case.
Yes.
Keith.
Hi, Bob.
That's what I'm rice is a hell of a player in Brazilian natural gas market works, we have a portfolio bowfin supply and the demand side.
Syed.
We also have multiple contracts the lines with different commercial conditions.
In <unk>.
Periods contracts, we have pass through mechanisms that reflect the conditions of the moment.
<unk> of the market.
Yeah.
If we see the fourth quarter, we expect a high demand in our markets.
Because we see high demands in Tampa electric.
And our industrial markets for the supplier we have all our production.
Pipeline imports from believing in Ireland.
<unk>.
G.
<unk>.
And the way Crees hour.
He gas.
Bassi in Rio Janeiro terminal.
As kipp.
Around.
<unk>, 50% and need capacity.
<unk> taken the and expand our capacity.
Okay.
Lastly for the LNG supply, we already bought around 112 with cargoes and though we are assessing the need of additional approaches depending on the supply and the demand conditions.
Especially in the power generation.
<unk>.
We.
According to our profile, we didn't face problems wasteful that fried costs consider that Brazil is in the athletic amazing market.
<unk>.
So we have we also have our own.
That allow us to manage punctual market and our operational issues.
Thank you for your question.
Thank you Rajeev.
Yeah.
At this time and thank you.
M&A session as elegant Felicia have any further questions you can send it to our investor relations team.
So the way I will now make his final remarks. So please continue.
Go ahead.
Well. Thank you. Thank you Carlo Thanks, everyone for your time this morning.
Sure.
Any as we presented were very happy with the solid acquired that we have.
Had both in terms of operational and financial.
So performance, we've been able to reach our gross.
Our gross debt level.
Our gross dollar debt level TARP.
Target that we'd set up $60 billion gross.
And of course, we are.
Quite happy with the results we've had.
In the year 2021, we've announced relevant dividend payments, we were able to make.
Relevant investments.
Two relevantly contribute to the Brazilian society as well so.
Thank you for your time today.
And thank you for all your questions.
If you.
Any further questions. Please feel free to contact our investor relation team.
You have.
Thank you.