Q1 2022 Petroleo Brasileiro SA Petrobras Earnings Call
Yeah.
He is priviledged comes alongside alongside a keen sense of responsibility towards our doors with us with their investments whether is more investors seeking higher returns for their retirement accounts such as thousands of workers, who uses a portion of their state.
Sponsored funds to buy our shares are largely in vessels.
We got the paper price as a world class company showcasing our highly successful Brazil.
First and foremost I would like to recognize all the efforts made by all of the company's employees and as victims.
Carrying out these strategies are proven by our board of directors, we're able to bring our policy our historical recovery of each financial situation as AOS.
Each EOG reputation and governance.
Our Pls story in the carefully towards such out one of the highest financial debt worldwide.
If I'm a privilege today to be charging off a solid year and resilient company. This is only thanks to the awards you have done and therefore I'd like to please you all we won't see again.
Remaining solid and resilient will be key to pave the way for Eniva better future.
We'll remain committed and focused on the strategies established in our strategic plan.
I special emphasis in the development of our pre salt assets, whereas you shoal deploy 13 of the CCT platforms is slated to come online so out in the next five years.
These new units will enable a significant and sustainable growth in oil and natural gas production.
We will keep on adjusting our portfolio to focus on assets in which we have competitive advantages and to divest out of lower return assets or assets, which do not fit our strategy.
We understand that these by investment process decides.
Our cash position all those other companies to develop those resources for the benefit of the economies and Brazilian sites. We shall also continue to divest assets.
That we see as noncore for the company and those agree that with the proceeds.
Proceeds of Fortitude search as their refineries in natural gas assets.
Most of the stress that we are not exceed those segments. What we are doing is a natural portfolio adjustments a regular process for a company our size.
This initiative will result in more competitive more open more dynamically and efficient markets. We plan to invest about $7 billion over the next five years and the refining and natural gas segments with a focus on safety and <unk>.
<unk> operational and environmental is tcf's.
Speaking of efficiency I cannot refrain from emphasizing that these will always be a lever for our operations.
Therefore, we cannot straight from the Brexit off market prices and necessary condition part wealth generation to attract investments and to ensure the supply of the fuse, which Brazil needs Shreveport I want also to emphasize.
Our commitment to energy transition, especially our net our net zero ambition.
Pilot training aligning to the various agreements.
We shall continue to be a real advanced and profitable player in the oil and natural gas business, but we saw March overlooks fore sights expirations or a more sustainable energy mix over the long run.
The first quarter.
We are present today is a strong demonstrated that <unk> is a company, which our shareholders and the Brazilians came be broke off and dresses.
A stronger Petrobras generates more availing in its operations and therefore higher returns for each shareholders <unk>, obviously Brazilians store sites.
Couple of rights is to be one of the largest failures of taxes and government fee run key.
Stop taxpayer in various stages and news.
Municipalities in Brazil.
In the first quarter of two 8.2 alone we have faced $70 billion. Those stacks produced more investments economic development higher jobs and income generation generation.
You can rest assured that we show work harder to generate even better results.
Very much for your attention we shoot you all on the <unk> date.
Thank you Simone.
I will now pass for Qunar.
Key financial Investor relation Officer Liberty mine hours in Princeton Review go ahead.
Thank you Carla.
Model.
Good afternoon, everyone and thank you for being with us today and for.
Watching our earnings call, we're very glad to have you with us today and present, our solid operational and financial results for the first quarter of 'twenty two.
We start with this relevant feature of the first <unk> on April 30.
The first.
Alright production system installed in the metal food.
Expected to bring relevant prospects for the company's future and were.
Im happy with the potential results that will come.
From the new system installed, but we can go ahead next slide please.
However.
Disclaimer about future prospects.
With <unk>.
Safety you already noted safety is quite relevant value for Petrobras and its always a priority will continue to be highly focused on.
Reducing our total recordable injuries per million man hours, and we're very happy to see that the results are below our.
Acceptable limit, even though we have the ambition.
Having zero fatalities, but unfortunately, we had two fatalities in the first quarter of 2022.
And that's that remind us Unfortunately, why safety needs to be a priority and we need to be focused on.
Improving our security our safety metrics over time, and we're quite engaged on doing that next.
Next slide please.
Next please.
Talking about our ESG agenda.
We have recently disclosed our sustainability report.
Mid April and our report is of course.
Focused on presenting the top tier indicators for our market.
B G R I the salary indicators into EPS indicators as well so we're focused on.
Having the most relevant metrics for the market and disclosing a petrobras contribution not only in terms of sustainability of the environment, but also the relevant investments that Petrobras does in terms of social responsibility. So would present a very.
<unk> comprehensive report disclosing our contributions to the environment and to the society overall.
When we talk about environment do you already know what our strategy is focused on.
Positioning ourselves as a low carbon low cost a major operator in the offshore industry and the award.
We're focused on.
Having a low carbon footprint portfolio, reducing our emissions, mostly scope, one and two making investments in either upstream or downstream to improve energy efficiency and to reduce the emissions of our portfolio. We also have a relevant.
Structure in Brazil that is offering natural gas and electricity that represents a relevant portion of the country's thermal power plants.
Plans and contributes choose sustaining a very clean energy matrix in Brazil.
We have a very high content of renewables, mostly hydro so our terminal plants have a very important role in maintaining the stability of the overall system. We're also investing in exploring new possibilities of a less carbon intensive business and products.
We have a very strong presence in terms of reducing the level of a sofa or products and developing products that have a lower carbon footprint.
We're also promoting R&D.
Focused on low carbon solutions, and we talk about bio jet fuel bio bunker several potential future solutions related to a lower carbon footprint from our own products and we also have a strong.
Presence in terms of forest rough reforestation and forest conservation.
They were Gonna show following next slide please.
So Petrobras has a strong.
Our presence in terms of reforestation Forest conservation we have.
Relevant program called Forest, Aviva or living forest.
There is a partnership between several companies in Brazil, with the National Development Bank and better bus has match fund contribution of 100 meet them here for the next five years.
Focused on improving the management of more than 60 million acres of forest sorry.
Go back please.
Okay.
Thank you so more than 60 million acres of.
First in the Brazilian territory around 3% of the of the Brazilian territory.
It's a project that involves several partnerships with universities research institutes and environmental agencies in Brazil.
A quite relevant project that we're highly focused on alongside with being asked the Brazilian development Bank.
Next please.
In terms of our emissions are we continue to be focused on delivering our targets of lower emissions we have.
Achieved.
That are below our target or acceptable limit in the first quarter, both in the upstream and a downstream business and of course, we highlight.
The levels of C O two per barrel of oil equivalent from the pre salt fields, we have to be in boozers.
With a level of nine five kilos of C. O two per barrel of oil equivalent that represents less than the industry doesn't have the industry's average we have also improved our energy efficiency and our carbon intensity in the in our refining assets were below the targets of course, we are focused on continually improving those.
Targets as we have shown and have achieved potentially.
Favorable results.
We also continue to be focused on achieving our goals in terms of reducing emissions.
The five year time frame and also to achieve.
Achieve lower emissions by 2030.
We have very ambitious targets in terms of reducing emissions and we're highly focused on delivering a having technology and portfolio management as a domain to deliver our long term emissions targets.
Next please.
Yeah.
In terms of absolute emissions, we had in the fourth quarter of 'twenty. One are our emissions our total emissions operational emissions have increased.
Given the scenario of higher thermal power plant generation in Brazil, given the low levels of the reservoirs are but he has already came down in the first quarter. So we continue the trajectory of reducing total operational emissions and of course, we continue strongly delivering lower oil and gas.
Operational emissions as well.
We also have a relevant targets are on those areas to reduce by 30% our operational emissions in the long run and we continue to be strongly committed on delivering those those targets next please.
So we have a very strong carbon capture Ah shall position in storage program.
The industry is large it's offshore says U S program and we continue.
With our target of Reinjecting 40 million tons of Sidoti <unk>. They accumulated reinjection is $32 6 million tones, and we continue to developing high technology and I mentioned high <unk> that is a technology that will provide a very good prospects in terms of capturing.
You chew into sea bed for future units and we're focused on finding that kind of portfolio solution and finding new technological suite.
Okay.
Best capture program next please.
In terms of our social investments.
We have provided several relevant donations are not only for COVID-19.
Impacts in Brazil, but also for our environmental and disaster situations that happened in in 'twenty, one and 'twenty two.
In several areas, where we operate in Brazil, we have a very strong.
Social and environment, our relationship projects focused on culture sports are developing new small businesses and developing science and technology in the regions that we operate.
So have programs focused on the natural environment after areas, where we operate in other areas in Brazil was well and projects to mitigate the socioeconomic impacts all of our operations I highlight also our LPG donation program that was started back in 2021, we expect huge.
One eight 300 million highs of LPG into the end of 2022, we have already started delivering part of those donations in there is that we operate in we continue to be a company that is highly focused on our relevant corporate social responsibility next please.
Okay.
As our CEO has mentioned before our contribution in terms of our tax payments and in government take for the Brazilian Society is quite substantial almost 60% of our operational cash flow.
Returns for the Brazilian Society, and we're focused on generating more value in having a very solid strategy. So that we continue to be able to create and deliver that value to our shareholders and of course.
The Brazilian society.
The our largest individual shareholder and so we're quite.
Responsive in terms of delivering and creating more value next please.
Yeah.
In terms of governance, we continue our.
Continuous improvement agenda for the company's corporate governance.
As you know alongside with our financial recovery trajectory, we have a very solid agenda in terms of.
Revamping the company's reputation, though an image and also streamlining and improving overtime. The company's governance, we have a very solid governance. We have made several relevant achievements over time and we continue to be focused on finding new opportunities to improve the company Scott governance and Thats of course.
One of our main factors for the future and are we have been recognized by several different international institutions and domestic institutions in terms of the quality of our corporate governance and we expect to continue to do so next please.
Next.
So in terms of our operational and financial highlights for the first quarter of 'twenty true, we had several relevant milestones and I start by the discovery of a.
Rather than oil in the pre salt area on out of a couple of three central also we had the startup the first shy off F. DSO went about or that we expect to continue to ramp up over the rest of 2022 and in a matter of a few are in the pre salt of the central spacing, we expect a very good prospects coming from that the development of the.
<unk>, we also had a the environmental preliminary license for a direct we've retaliation project of the mining field.
And we have a broken record in terms of reducing the time for construction of of warehousing amounting to 35 days and as you know we continue to be quite focused on.
Improving our capex efficiency, and making sure that we deliver the projects on time and on budget and of course, reducing well construction time. It's one of the project improvements that we have made over time and we continue to be focused on finding new solutions to.
Streamline our topics ended up coming future. We also had a record sales of 10 P. P M to low sulfur diesel in Brazil, which already accounts for 60, almost 60% 58% of total diesel sales.
We have our refineries are producing 60 running with 65% of pre salt oil low sulfur oil that supports our target of delivering a high quality and low sulfur and lower carbon footprint projects. So the oil from the pre salt has substantially improved in terms of participation in an hour.
Refinery throughput.
We finished march with a very high utilization factor of 91% and it's important to highlight that as a utilization factor that is not only a sustainable in terms of our operations and economic conditions. It's also a quite profitable in terms of operating our assets.
And also with very high safety standards, So we're quite concerned.
We are maintaining very high safety standards, and we see very good results in terms of utilization picture, maintaining safety and maintaining the profitability of all of our refining assets.
We have also continue on the trajectory of opening up the natural gas market in Brazil. So we have provided asset access to Oh, I might add natural gas processing units and we continue to deliver on our natural gas market opening process and also continue to be focus on opening up the refining market in Brazil.
And we have seen relevant these steps are on that direction and we'll continue to work on that sense in terms of financial results for the partner its important to highlight the recurring EBITDA of $15 billion, our operating cash flow of $10 billion, our free cash flow of $8 billion. So we were able to.
Translate our solid operational performance into solid financial performance as well.
We have maintained our leveraged.
Pretty close to the to the optimal range. So our net debt or gross debt has has continuing true to just stay within the optimal range of $55 billion to $65 billion.
We posted a recurring net income of $8 $4 billion and as our CEO has mentioned we have only the first quarter of 'twenty true already paid 70 beta and he is in terms of taxes and government take a very relevant contribution should or should the Brazilian society as well by having.
The strong operational results and solid financial conditions, we were able to announce a solid distribution of dividends that reinforces our commitment.
With value creation and with the distribution of the better that we create so we announced a $3 72 highs.
The dividend per ordinary and preferred shares for the first quarter of 2022.
And we were also able to maintain our leverage when looking at the net debt to EBITDA below one.
Eight times so it shows that our financial sustainability is well preserved and we continue to be focused on maintaining our costs and our leverage under control next please.
Okay.
Talking about the external environment, we have seen higher crude oil prices in the first quarter and of course, when compared to the first quarter was 2021 as well we have seen a slight appreciation of the Brazilian how over the dollar for the for the average of the Beard and we also saw.
An appreciation of the Brazilian how when we compare to peers and FX for the first quarter of 2022 with a Q4 'twenty one.
It impacted positively our or our financial results for the quarter. So it's a noncash impact, but we saw them.
And he back in terms of our exchange rate impact for the first part of 2020 troops next please.
Of course, the external environment is relevant in terms of the company's financial results, but as you know we're focused on being able to create and add a lot of value even in scenarios that are much more challenging than the one that we're seeing now and.
We have done a very good job in terms of improving the company's operational performance and restructuring the company over the last five to six years and when we think about the last time, we saw a brent prices above $100 per barrel on our first quarter, we can see that.
It's a it's the same price, but a very different company, we have relevantly reduced our lifting cost by more than half are we have reduced our refining cost in real terms by 30% G&A by more than 60%.
The interest payments.
We had more than $8 billion interest payments over the year and fast now it's less than $2 billion.
When we look at our gross debt of course, and we think about the upcoming future.
<unk>.
That that is scheduled to mature in the next five years.
First quarter of 2014 was $58 $1 billion that represents basically our entire debt now not only the financial debt, but also the leases and the debt that is expected to mature in the next five years.
<unk> less than $17 billion now that it's a much more healthy.
Healthy level of debt various a very healthy debt profile as well in terms of maturity with the which gives us very confidence that the company has a very solid financial situation and of course in terms of taxes paid the company's performance is also much higher the companies are not only generating more favor.
Verbal results, but also our distributor and those results are with tax payments dividend payments and corporate social responsibility as well next please.
In the first quarter of 'twenty, two we have a very solid EBITDA.
$15 billion as I mention of recurring EBITDA for the quarter.
That's up 35% when we compare to the fourth quarter of of 2021.
We had higher crude oil exports and we had a positive impact of our crude oil prices and acquire a even though it's a lower sales.
Sales volume quarter, when we compare to the fourth quarter.
There is a quite.
Quite a bit of a higher seasonality in the domestic market. So it is the lower sales.
Sales volume in the domestic market, but despite that in fact, we have a very solid.
EBITDA for Q1 'twenty true next please.
Okay.
When we look at the EBITDA by business segment are our results from the upstream segment.
<unk> have improved substantially by 28% and acquire.
We have a very relevant impact coming from the ramp ups of the platforms that we have installed. Most recently so we have a ramp up of fpl's, okay, all kind of separate field and <unk> Subaru.
We had we also had a.
Fewer stoppages into into.
Q1 'twenty two.
We had relevant stoppages into fourth quarter, given that we had to postpone somewhat some of those stoppages.
Uh huh.
Because of the Covid situation in 2020, so we had a relevant impact in Q4 'twenty. One are of course, one when we look at our management system. We're focused on the on the long run development of our reservoirs. So it's important to have those interventions and you'll have those tough, but just so that we can maximize the return of the reservoirs.
Over the long run and that's how we manage how we manage to the definition of interventions and even though we have a short term cost increase it generates a lot of value in the long run.
In terms of the RTC of the downstream segment. The refining segment, we had a higher margins in the domestic market and that was offset partially by lower sales volumes as I mentioned.
When we compare Q1 with Q4 Uh huh.
Higher sales volumes in Q4 and that offset partially the impact in Q1 are.
Looking at the gas and power segment.
We had lower costs with imports of LNG. They had a very relevant impact in Q4. This impact was mitigated in Q1 'twenty two we're.
We're also working on improving the conditions of our commercial contracts and we have recently hosted an event a two detail and explain a little bit more how the gas and power segment works are the nature of the contracts the.
Supply.
Distribution in terms of different supply sources in our portfolio and also how the company's strategy for that segment is design I invite you to look at our website. Those slides are in <unk> and in our website and I think they are quite relevant you too to understand in more detail to the gas and power segment next please.
As I mentioned before we had a very strong cash generation and the partner.
Going from EBITDA to operating cash flow apart from income taxes, we see an increasing working capital given the high level of prices that we have now and we have also prepaid part of our pension liability I've mentioned this before but whenever we look at liability management.
We look at it in a very broad sense not only focused on the finance that but we also manage the pension liability and we also look for potential opportunities just seto contingent liabilities for whenever we have relevant and favorable terms for the company.
After the investments we have a free cash flow of $7 $9 billion in the quarter our investments in the first quarter were impacted by the.
The payment of the bidding round the latest bidding round of signature bonuses for the surplus the trend.
Fried area, a setback that pool.
Almost $1 billion that were paid in the first quarter of 2022.
Including divestments and the pushes.
Transfer of Friday at surplus transfer fried agreement are we go to $9 seven free cash flow after divestments.
That free cash flow was mainly used a true either prepay debt or to maintain the.
The expected service payments for the debt.
Dividend payments from the fourth quarter of 2022 are expected to be made now in EMEA and the dividend payments from the Q1 'twenty two.
We will also be made in the next month. So we ended the first quarter with a very high cash balances that we don't expect to maintain over time as you guys know our optimal level was between eight and 10 million billion dollars optimal cash level, we expect to go back to that level over time and <unk>.
After investments and maintaining our leverage our expectation is of course to continue to distribute the free cash flow that we generate.
It's also important to highlight in the first quarter.
We were quite active in terms of open market repurchase transactions.
We prepaid almost $1 billion 0.7.
Billions of dollars in the first quarter.
Given the volatility that we had so as I've mentioned a couple of times before.
We use those opportunities whenever we had we have a higher volatility we use those opportunities to prepay debt and to reduce.
Reduce our exposure to more expensive debt managing our liability over time.
Please.
We continue to maintain our leverage within the optimal range from $55 billion to $65 billion.
So we look at our maturity profile as I've mentioned before is a quite a healthy maturity profile.
We've been able to increase the duration of our debt and choose to bring that closer to the maturity of the of the upstream projects, especially.
After the end of the quarter, we also announced by mid April We also announced a.
Tender offer a repurchase transaction then we closed that on April 14th So we prepaid around $2 billion.
Mostly from the from the bonds mature in the beginning of the of the curve, but from bonds maturing between 24 and 2051.
Next please.
Okay.
When we look at our portfolio management projects.
We have.
Important developments in the first quarter of 2022.
We started in the binding phase for the Gulf of Mexico assets.
Have signed I think he Mika antibody quarter last year those were relevant projects that were signed.
After we had our latest earning calls earnings call for the for Q4 'twenty one are we.
We have also closed.
The exploratory blocks in Panama and basin.
First quarter of 2022, we also had a relevant cash inflows coming from projects that we signed and closed in the past we had.
The contingent payments and earn outs coming from those projects are I mean, <unk> that is now back at al and a N T S.
Transport the midstream to transporting answered that we sold in the past so we had almost $2 billion.
The additional cash flow coming from those assets that were sold a couple of years ago.
In fact, it positively our cash.
Cash generation in Q1 'twenty true next please.
So overall, we had a very good car are.
Recurring net income was $8 $4 billion as I mentioned before the company has had a very solid operational performance, we had a positive impact.
From foreign exchange rate gains.
They're noncash as I've mentioned before that but they impacted positively net income. We also had lower gains from asset sales and from <unk> family and we were so that impacted positively in Q4 and did it impact Q1, so that offset a little bit the results for Q1 'twenty two.
Again, we had a very very solid results in Q1 'twenty two next please.
So finally as I've mentioned before.
We have also approved a distribution of a relevant dividend based on not only the formula the 60% format of our dividend policy that results in a $1 86 has per share for ordinary and common shares and preferred share.
But also we have approved extraordinary dividends given the company's substantial cash flow in the first quarter.
Of course, we focus on the on the pillars of our dividend policy.
Respecting the company's financial sustainability, but committing ourselves to distribute the maximum we can.
From our results and from our cash flow generation.
That was the.
The case in the first quarter of 2020, Chew and we announced OCI additional dividends for the quarter.
We think it's quite important to maintain our focus on creating value in having a solid and profitable investments that generate the value that we can.
Distribute for our shareholders and of course.
There are a group of shareholders are the most relevant individual shareholders shareholder is the.
Is the Brazilian government and the Brazilian society as well.
Next please.
So that's the that's the overall.
A picture of our first quarter of 2022 that was a very solid quarter not only in terms of our operational performance, but also we were very solid.
Cash flow generation, we were able to maintain our leverage in costs under control.
And of course, we're able to announce a relevant dividend distributions coming from all of the value that we've created in all of the cash flow that will generate over the part. Thank you. Thank you for being with US today for our earnings call I'll pass the floor back to Colin Thank you Carl.
Thank you we can now move to our Q&A session and the first question that we received strong Frank Mcgann with Bank of America Merrill Lynch. My first question.
July Hilton.
Given the strong lumber demand environment does the company have any potential to increase output from short cycle projects.
Okay.
Well definitely nothing.
Hello.
India is an undue Cleveland now please.
Hello Beth.
<unk> remains committed to bid.
Let them into the brand.
2006.
We approved the deal on Capex.
Upstream.
20% higher.
Yeah.
Yeah.
This increase Bayer deal and I always thought the joke amongst maximizing <unk>.
Our portfolio, focusing on deep and ultra deep water assets.
Our production development cycles are long cycle.
Based in La Luna game resilient pricing.
And you can see little element of opportunity for Schwartz <unk> is the only opportunity that you have.
You feel the drilling, but it would not be in.
It is not the relevant for the total pet look desperate Luke.
Oh.
And I'm looking at.
Uh huh.
Yeah.
What I can say that flipped over to ask a few on production growth rate.
Around 20%.
The five coming years and annual result.
Well the 50 new swaps.
Sure.
Could you walk out and this will run about a ramp up.
Production growth.
We have actions related to the start of complimentary wells such as won't come to review, we have two new wells.
That came on stream this first quarter.
In addition to the implementation of those.
<unk> 15, new production systems.
Manley complement dairy projects, we're seeing in our strategic plan.
Constantly monitors the effect on the oil and gas markets additional.
In addition opportunity.
That may arise and there is also the change.
There are new Marlin will be analyzed in the context of leased.
Glen.
23 27 currently.
Bill.
Thank you.
Thank you. Thank you.
The next question from Frank It's 400, even with limited inflation trends globally become more pronounced.
Any particular areas where cost trends are particularly troubling.
Thank you. Thank Frank for the question I was wrong. He has mentioned before and in the Portuguese call them out of our 15 units that are coming online between the business plan. We have 12 of them already contracted and we have a strategy to tackle critical resources in advance and have longer term.
<unk> for critical resources.
Such as.
Flow lines Pls fees et cetera.
Of course that the some of the suppliers in the supply chain that are most impacted by commodities are on our rates are already discussing with the company. The scenario of the commodities increase but it's not something that we have.
I have seen any impact up to now and.
Given the company's procurement strategy and a scenario over time.
We expect that we can navigate that without a major problems.
And of course, we don't see in forecast any impacts for the business plan up to now.
You always want you to add something.
That's exactly what they're equal you Tim Glenn.
Sure sure.
Robust even in a scenario.
Please.
Would shape before.
All of these challenges.
The door.
We are putting a lot of press.
Sure.
Players.
Thank you so I hate to think of them. Many of them. Your next question comes from.
How long ago that this can be behind.
Do you think Joseph Santos, our message coming going to meet.
Gratulation as for the excellent financial management and all the best places amount.
Yeah.
The first question is for Mr. Allen, our stellar has spoken about.
Our opportunity.
<unk> what is the company's commercial strategy increased China increased imports from Russia.
Okay.
Well. Thank you. Thank you for your question sorry for my voice I will try to do my best.
Well.
What's your question over the last years.
Okay.
Mark can you help us towards Brazilian grades fruit.
Commercial office in Asia, European and U S trade constantly Corey and Morgan screen market over.
And at the Houston complex for Petrobras coming down production.
This is a very solid and diversified declined petroleum.
You too.
Geographical regions permitted transfer reaction to market changes like China mining more erosion.
Andrew just allows the company to take advantages of the hydrogen.
Thanks.
I would just say it was needed.
All the alternatives and assuring the maximization.
<unk>.
Thank you Mrs.
Americas China.
This information was in Asia.
We have no.
Payments on it.
Margaret.
Regarding the Indian market.
Particularly.
Alright is accomplished clearly relationship with private and state.
Refineries.
So regular volumes every time to destination is among the best alternatives are diverse.
Great.
Thank you Mr. Allen. The next question comes from Anthony <unk> with Citi.
I'm going to read this.
Once again, congratulations on the results and good luck on the new management.
The first question is also for you Mr. Allen.
The company currently trading at prices below international parity.
For both gasoline and diesel could you explain to us the Nebraska decision, making process in relation to pricing.
Thank you Gabriel.
<unk>.
As clear as possible.
First.
Right.
International parity price could be.
Estimated with marketed public information.
Thanks, TVT any company it may vary a lot.
Good evening.
Logistics.
Scale and international markets.
Regarding our decision making process.
Easily price position compared to the international market daily.
Daily base.
We do not project.
That's great.
Market growth however, the exchange rate.
Sure.
International prices.
And.
Exchange rates.
Yes.
Just for price so you can pretty much.
Thank you.
Thank you Mr. Allen. The next question also from somebody else.
Some of them could you tell us what additional measures are being.
In addition to those already included in the bylaws and current legislation.
The conference call.
Thanks, Scott good morning.
We have several initiatives are already.
Our ongoing for <unk> in the next two years.
Like to highlight some of them here first.
We are focusing on applying automation artificial intelligence and data mining now.
Internal control environment too.
Secured those critical transactions.
In terms of integrity real time, when entering early detection and response.
We've been working.
Enhancing and identify what can be.
<unk> automated in order to avoid human error to avoid delays and so on.
Second I'd like to mention we are we are focusing not only on fraud in Peru and corruption risks.
The original the start to the program in the beginning in 2015, but also focusing now on what.
What we call emerging risks in line with our strategic plan and our ESG ambition and commitments. So.
To foster transparency integrity and fair competition in the oil gas energy market. So we are tackling with.
Privacy for example, human rights due diligence and our supply chain network.
Enhancing conflict minerals diversity and inclusion now with the war in Ukraine. The sanctions on export controls program, our specialty in Portland.
And my last comment on the continuous improvement process, we have in our corporate governance. So we have an ongoing revision.
Already in place for our policies procedures by law et cetera to secure a strong a timely and effective decision making process. This is not something that we started now.
Our governance has been enhanced year over year.
For example, having a diverse board of directors composition, and actually today, 80% zero off hour.
Board members are independent.
Having a solid eligibility criteria and appointment process.
Formal delegation of authorities limited interviewed individual decisions.
Supported by technical and statutory committees. So there's no single critical decision for Petrobras there is taken by one individual longer.
The decision must be taken.
Hi.
Our community level at least.
Of course, having the independents and oversight for the governance and compliance officer, we have an active board committee structure responsible to pre validate any relevant subject before board decision. So we have people community investment community all due course comedians once before.
So there is no specific action here, but it is important to mention this is a continuous improvement process that every year.
Update our rules our procedures.
And it's important to say that we are absolutely engaged and committed to ensure their respect the value creation and the right balance among all shareholders. So thanks for your question.
Thank you Fernando.
Next question comes from Liliana Yang with HSBC.
She is very glad to see Petrobras the Leerink conference.
<unk> results.
First question as to how file hopefully ill now review the tax regime benign.
Are you seeing any discussion a proposal by the Brazilian government for Brazilian Congress towards high government's sake or special tax that would capture.
Got it.
Good afternoon, Colin good afternoon, everybody. Thanks for being here with US today. Thanks, Liana for your comments I'm very glad as well.
Regarding your questions looking to the actual performance and not only actions both announcements performance by the Brazilian policymakers in charge off economic actions recently, we have seen fiscal adjustment.
Moving Brazilian fundamentals to a strong situational targeting Brazilian local currency appreciation with good effects on reducing inflation and also in some sectors some tax reductions to attract more investor and more investments in Brazil. So of course it is.
I hope this season that has not to do that sort of rise as a company, but in my view I do not expect any policymakers increasing their share in our profit. So I have no expectations of increasing decks, especially if you look to other countries with the energy crisis every country is trying to.
On the other hand, reducing tax rates to relief. This sector. So objectively I do not expect any.
Thanks for your questions and for your comments.
Thank you have found the next question comes from Zao.
<unk> bin.
So I hate to see him.
The business plan stayed at $8 $8 million for E&P Capex in 2022, which is an average of $2 2 billion per quarter.
The $1 4 billion dollar level of Capex in the first quarter up 22, the company do you see the E.
E&P Capex for 2022.
Thanks for the question.
Our capex for 2022 remains.
Eight $8 billion.
No we're planning and we're using lingo.
It was already.
During the year of 2022.
In addition, we have had some will be the thick.
In January .
You had some postponement of fundamentals in the <unk>.
Excellent.
Months.
And then <unk>.
However.
We see it.
I think we'll be by the end of the year of abuse expanding.
Okay.
I would like to cope with that.
Hello go.
I would like to open a bit.
The level of investment, where we created two throughout this year.
Yeah.
<unk> such as Bush's payment.
Payments milestones or rules of six eight.
Eight happens during this year.
The connection of new wells.
Yeah.
<unk> went up on them.
Events that.
You will contribute for this.
Increasing lateral opportunities.
Moving to 2000.
Alright, thank you.
Yeah.
Okay.
Thank you. The next question comes from Neal and ophthalmologists.
We will get there.
And are they request that <unk> done over the last few months, we have seen a new dynamic in the domestic market.
Users gain prominence in imports and playing a major role and guarantee that demand.
This new context, how does Petrobras evaluate the need for companies.
Just starting to contribute to meeting total demand demand.
Either by increasing refinery utilization rates or my importing from Congress.
Danny.
Okay.
Oh thanks.
Thanks for the magazine.
No.
To answer your question.
Yes, it is true.
Distributors large and medium sized ones.
So on the leading role reports.
Played by the trading companies.
But.
Oh.
Yeah.
It is not coming months.
A couple of years has.
This changed place obviously due to the Companys largest companies.
Also reduced scale of operations.
Thanks Mark.
And could.
Logistics infrastructure.
This represents a competitive advantage over 30 countries.
So the distributors.
Hi, Brian .
Part of the imports fifth.
Now to some past work.
Cary will exclusively exclusively.
Yes.
Pete.
Has a more dynamic.
Thanks Margaret.
Which is can be challenging.
Also create sharing.
Sharing risks.
The investments.
Which is good for most economic exchange him Princess point.
In this context.
<unk> working hard to meet our contractual commitments and evaluating business opportunities with safety and profitability.
A lot of internal production.
May eventually be supplemented by imports.
Okay.
Yes.
Ah yes.
Yes, My Sal I think I'll, let you cover all the aspects I mean for.
And for Us.
We are already operate at the maximum level that we are currently available in our facilities, we must take a knock out the capacity of each year.
Process safety conditions, and Astellas said, the logistical restrictions the profile of the demand of our company and produce more than 60 products and a must thickening accountants restrictions of our clients.
The behavior of these markets the grade of the iOS and the profitability of these process. So.
Considering all of these on April we closed the mouth around 19%, 92% of utilization factor and line. These current days of May we are all at 90, 293% of utilization sector.
Thank you ladies them. Thank you Mr. Allen the second question.
Hello.
What progress has been made on the new FCS So contract announced in the last meeting.
Should any of the program will be expected considering the recent high volatility in oil prices and the English generic pressure on offshore services costs.
Hello Madam.
We had to be one about if this rule is that the duration left D.
At the end of April and will continue to implement our branding to picked up another 14 units.
Until 2026.
Most of them are already on the consumption and the per year on the call.
Page was.
These three we'd say it was 19 and DCF.
Or do you need to just scheduled for 2023.
Models lifting.
Blair, Greg complete the dnb or in progress.
You can see we will display mirror tooling in it.
And the modeling tool to complete the <unk> program for modeling one.
We are constantly monitoring project costs.
Schedule impacts thing to anticipate problems developing mitigation plans.
People know who have been.
We both heavy.
Anything baked in your strategic plan.
After a year.
Yeah.
And because.
As I said most of them are already contracted so the broadcast for these new units and our point of view is very good.
Thank you.
Thank you. Thank you. The next question is who has a magnet for you as well.
I mean, the context funded production expected to start in the next few years is that protection for higher costs.
Of the current high inflation rate.
Yes Beth.
Yes.
Okay.
Baird Larry to mix of Qantas.
And at <unk>, we used to be.
Perfect.
Four alone.
For the new bids we are discussing with suppliers mechanisms.
To reduce the risks for both parts.
With the mainly.
When war.
But we see no major impact.
Indeed, <unk> two of your content.
One thing that Theyre already in place it will have an acre news was that the web game.
Through the impacts of these events.
Thank you thank.
Thank you Tony.
Next question comes from <unk> <unk> with UBS. He also sensor message about the results congratulations on the results.
Dividends.
First question So my phone.
Yeah.
Oh supply important pricing.
Specifically.
Several agents.
We have become more vocal challenge to find decent volumes in the international market and that little favorable scenario for imports.
How is the company, let's apply to the content and how I feel.
Operations quantum eventual challenge and their supply to the country.
Yeah.
Thank you Luis.
Or is there.
I would like to.
Sure.
You allude screamer.
We like.
Right.
Correct.
Scripted my agents harder than enterprise.
We are operational planning.
Account aracoma visual commitments, which we are.
Always.
Fulfilling.
Are there opportunities there.
Let's see.
We can profitably.
We do not have visibility.
What's the other agents.
We are available chair of the countries are doing.
As Dr.
Doing good movement there.
<unk> supply logistics and business models.
I can talk about how Petrobras.
Itself and seeing places risks.
We see the currency.
Peter Great caution.
We were there low diesel inventories remain in storage hubs.
Hi, very high volatility.
<unk>.
A result of recently rates.
The conflict in Ukraine.
To deal with is it deserves.
The areas.
We strengthened.
We have strengthened.
Our trading companies abroad.
Great and remain.
Mark Thank you too sure visuals can maintaining contact with various agents refiners.
Chris owners and service providers.
So.
Good morning.
The diesel flows.
Stories fragile demands and main movements.
As we can so in Spain risks.
Short term loan positions.
Physical or contract.
In line with the use of hormones.
Pam logistics.
To provide resilience and competitiveness to our supply.
To supply your customers.
Thank you.
Thank you Ms Valor second question Lee.
Hi, Phil.
In the lake with strategic announcements, a new governance structure to evaluate potential portfolio.
We'd like to ask.
The discussions have gone.
There's a specific timeline in the market, that's the market could weights or future announcements or.
This is a more timely corrosive.
Okay, Karla Hi, Louise Yes, you should expect formal position on such evaluation by the end of this year after our broad approved.
Our next strategic plan some decision will be taken and you can expect either this decision can be to keep the focus on oil and gas and also process and the use of oil and gas of course with ESG responsible decarbonize inauguration social actions and also strong governance, which is what we are doing right now.
Or it can be one can expect.
Petrograph Roswell investing our second core of valid value creation, and our new operations aligned with energy transitions that are much discussions discussions thats place right. Now we are looking multi disciplined way for example, our financial look to be sure that NPV.
<unk> is strong and positive even if even in a resilience of prices also have technological look to be sure that we have all the conditions to provide a new business and also Q2 or in our type of company, which are the attributes and vocations that Petrobras had four big projects.
When capital Inc.
In technological solutions, so we need to find a business that it must be a good business and at the same time the progress must be the a good owner and a good operator for this business. So I am not going to give and its boiler we need to wait a little bit more than just to highlight.
That there are many discussions right now inside Petrobras and we expect that by the end of the year when the strategic plan as approved by the board we may have.
Some decisions on the subject thanks for your question.
So how far out.
Your next question comes from Bruno Montanari with Morgan Stanley .
He also sensor message. Thanks for taking my question can I hope you feel the company following a strategic plan and the shareholder remuneration policy.
First question goes to do quite well.
On the back of <unk> medical.
Global fertilizers prices recently, but the rest consider reviewing strategy to fully exiting this business or could some.
After Brian projects of the company.
This area.
That were made in the past makes sense at this point in terms of lead times. What is the current strategy one of the things like voice brand could take advantage of.
Seamless strategy asthma Nash.
<unk>.
Is that more to conclude construction before offerings again to the market.
But all of our strategic plan to an it tool to an Essex does not consider any kind of investment in our fertilizer segment. This segment is doesn't belongs to all of our businesses and that's very clear to us in our strategic plan in relation.
So today's <unk> plan.
We has been taken and steps to close the current sales process and are we trying to launch as soon as possible the new process.
Regarding <unk>, we are speaking with our antitrust authorities about our new scandal of the divestment process and as soon as possible. We will have news about this.
Yeah.
We try to synchronize our plans to finish the second train with these new.
Divestment of schedule.
Thank you have any of them.
Your next question comes from.
<unk> <unk> with Jpmorgan.
Yeah also centers and message.
You see the results you posted this quarter well operation standpoint, everything is growing right around the company's healthy and generate a lot of cash besides the NUCYNTA announcements show the commitment shareowner value and it's easy to have a buy rating at the company in this call.
And his question is 400 <unk> hundred.
Company has a large free cash flow and continue to divest can you comment about potential use.
Off with cash.
On dividend.
Thank you. Thank you for your question for Anna.
Also a similar question from from.
Brent I'm wondering in the Portuguese call as well.
So I'll.
I'll give you a broader perspective.
<unk>. So first of all in terms of portfolio management or <unk>.
We've done a very.
Solid job and we still have a relevant portfolio management jobs are to do so we're going to continue focusing our portfolio on the towards class assets.
That were the best owner and the and the ones that we have a higher competitive advantage.
Of course.
Whenever we look at our cash flow generation.
We are going to continue to apply our 60% of free cash flow formula.
Given the level of of free cash flow that we're generating and the inflows.
Or are there additional inflows that are coming.
We'll look at the cash generation and we focus on of course, making the investments that are committed and as as you well know.
We don't expect to make relevant changes to the <unk>.
Short term investments most of our investments for 22 to 24 are already committed and the level of committed and this is something that we included in the latest business plan as well the level of commitment of Capex for the first years of the of the business plan is pretty high as a fan out which we don't have mentioned before.
We don't have a relevant short term opportunities to boost capex or anything like this and on the other hand.
We didn't have any capital.
Restrictions in the latest business plan all the projects that are resilient to low price levels and our and our NPV positive were sanctioned we're approved so we didn't have capex restrictions. So we don't expect to have additional capex in the short term.
Given the prospects of our debt portfolio and the maturity of our debt.
We expect to continue to manage manage our debt, but we don't expect the level to change relevantly.
So all the additional cash flow.
It's going to be directed towards our dividend distribution and the way. We expect you to run. This is of course are applying to the 6% formula as I mentioned.
And whenever we decide like we did this quarter on additional dividend distribution would try to look at a longer time frame from 12 to 24 months and we'll have very solid risk analysis to evaluate the prospects for the upcoming months.
We look at the price scenarios that leverage scenario the cash flow generation scenario just see weather.
We're confidence you'll maintain the company as our financial sustainability.
And of course, we.
We look at the framework.
Focusing not only on the 55 to 65 range for the gross debt, but also bringing the cash level closer to the optimal level from <unk> to $10 billion. So that's how we would go to this question, but again as I mentioned.
The additional cash flow is going to be directed towards our dividends. Thank you.
Thank you for being the next question comes from kind of flattish.
As a backdrop.
We also send us a message.
First of all I would like to congratulate management on the company, who transformation delivered over the past.
Yes.
He has a question we will have our hefei them you have mentioned the importance of improving communication with all its stakeholders, including society.
That's it.
The Spanish of fuel pricing dynamics.
Could you address this.
In order to make it more tangible correct.
It doesn't close and communication.
Our active participation with government in order to find solutions to price volatility that are not incurred by <unk>.
Color in that sense, we will be well.
Thank you Carla Thank you for your questions and for your.
First of all regarding our consistent statistical plan.
Explaining our communication is more focus on general public debt to follow market prices regarding prices as your question I'll address that to follow market price is the best and the only <unk> that mitigates the risk off on the supply in the market and also it's a requirement.
Rosemont compliance with the law and the bylaws. So you must follow the market price. So we need to explain this for general population.
That it is very important to show that we are practicing the best comps.
Company breath.
So of course, we have available to discuss technical inside of it.
Experienced operator in the energy markets, both in oil and gas and also in the re refining solutions. So we are very open to available to provide the technical insights, but as I said in the previous questions in my in my previous answer we.
We separate our company view as a company we are a company listed so we have a very specific.
Michelle.
We separate these actions from.
Policymakers the seasons and public policy is not to do.
Petrobras, but we are more than happy to provide any insights.
That policymakers.
Requires.
Yeah.
Thank you have found the next question comes from Chris analogy or something there.
We also focus on that.
I would like to congratulate you all on the continuous free cash flow generation, which allows the payments.
Excellent amount.
First question for me when I was.
Any updates regarding the thing off your stake Raskin.
Okay.
Thank you. Thank you Kash and thank you for the question.
And thank you for it a part of it for the message.
We continue should we focused on divesting our stake in an brascan.
We tried to divesting our preferred shares and the beginning of the year and the market conditions were unfavorable.
So we continue to monitor market conditions are.
For the best timing to true return with our with the sell off our stake.
Of course, we monitor.
Potential utter a venue yourself divestment divesting of our interest in breast <unk>, we don't have anything.
Concrete as of the moment and we are not conducting any any specific M&A transaction, but we continue to chew.
To have a significant interest in divesting our interest and continuing to monitor the market too.
You should do that.
As soon as we can.
Thank you for your question.
Thank you for being on the second question completion is also for you Linda.
Can you give us an update regarding the refinery sales closely what's feasible for 2022 versus only 2017 any changes in the pharmacy.
So safe.
Thank you Christian so I'll give you an overall perspective, so so first of all with respect.
So the one that stat that we've already signed.
Talking about six and him on we are expecting for the Brazilian antitrust authority just to conclude there their analysis.
So that we can.
Go on in and close those those transactions.
We're still negotiating for ILUVIEN audit heck optically it'll be an audience is more advanced a hiccup.
With that behind us.
And with respect to our hip Phi and SG&A are probably the ones that we've already.
Attempted wants to divest.
We are discussing with the antitrust authorities and monitoring the market.
To evaluate the best timing to relaunch the process, we don't expect at least for now.
Relevant changes to the format of the of the divestment.
We're mostly are waiting on the right timing and a more favorable market conditions. So that we can relaunch and we expect to relaunch those processes.
Thank you.
Yeah.
Thank you how many of them. The next question comes from Scott who was previously.
Some centers a message that I am going to leap congratulations on the excellent results.
They are an equivocal Avalon snacked goods professional management.
Significant provided to the company and to Society.
His question responsibly.
What kind of expectations around timing for the closing of the transaction, a 5% stake purchase option exercise nicely.
We tried to remaining precedent conditions for the closing.
Hello. This is.
If those issues to be closed through July .
The effectiveness of this transaction is subject to the approval of the National Petroleum Agency the Ministry of finance the images.
And the payments to be made by <unk>.
Good to have a fight that D.
Victor has <unk> date.
In September .
Yeah.
Last year.
Because of the agreements.
Yeah.
On the final closing all.
Oh, the Valassis and imbalances will be gone in.
We are really close.
All of these.
Komatsu.
He has additional personnel being bushels paducah sharing contract. Thank you.
Thank you Phil.
Thank you all and this time the Q&A session is over if you have any further questions you guys very much.
Our Investor Relations team and they will now make final remarks, please many of them.
Thank you Carla thanks, everyone for being with US today for our first quarter of 2022 earnings call.
Very glad with the company's operational and financial results and we expect to continue to Cree.
Create a lot of valuable if a.
Sensible and investment risk.
And responsible investments and.
Generated a lot of value and distribute debated that would create from our investments. Thank.
Thank you for taking part of our earnings call when to go.
C C.
See you again in the next part thank you.