Q1 2022 Petroleo Brasileiro SA Petrobras Earnings Call
So Marc Overton, Luke's four sites 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 proud off.
And for Us.
Our stronger capital price generates more availing in its operations and therefore higher returns for each shareholders.
<unk>, obviously Brazilians store sites.
Therefore, bryce is to be one of the largest players of taxes and government peak run key.
Stop taxpayer in various stages and news.
Municipalities in Brazil.
In the first quarter of two eight points to along we have paid $70 billion. Those stacks produced more investments economic development, the higher jobs and income generation to generation.
You can rest assured that we show work harder to generate even better results.
<unk> very much for your attention we shoot you all on the <unk> date.
Thank you Simone.
I will now pass the floor to boot.
Key financial Investor relation Officer, Linda <unk> Pizza review go ahead.
Thank you Carla Thank you for the model.
Good afternoon, everyone and thank you for being with us today and for.
Watching our earnings call.
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 we're quite happy with the potential results that will come.
From the new system installed. So we can go ahead next slide please.
Whoever usual disclaimer about future prospects, so starting with <unk>.
Safety you already know that safety is a 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 ambitions of of having zero fatalities, but unfortunately, we had two fatalities in the first part of 2022, and that's that remind us enforce.
Charlie 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 slide please.
Next please.
Talking about our ESG agenda.
We have recently disclosed our sustainability report.
Mid April and our report is of course, a focused on presenting the top tier indicators for market.
B G R I, the Salisbury 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 thoughtful and 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 in the ward with <unk>.
<unk> 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.
<unk> structure in Brazil that is offering natural gas and electricity that represents a relevant portion.
<unk> the country's thermal flower pleased plants and contributes choose sustaining a very clean energy matrix in Brazil are weak.
Very high content of renewables, mostly hydro so our terminal plants have a very important role in maintaining the stability of the overall system.
Also in 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.
Our presence in terms of forest, a rough reforestation and forest conservation.
They were Gonna show following next slide please.
So Petrobras has a strong.
Presence in terms of reforestation Forest conservation.
Relevant program called flirt ester veeva 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 million hides for the next five years.
Focused on improving the management of more than 60 million acres of forest sorry.
Go back please.
Vic.
Okay.
Thank you.
So more than 60 million acres of forest 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 a b and they 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 the emissions that are below our target or acceptable limit in the first quarter, both in the upstream and downstream business and of course, we highlight are the levels of C. O two per barrel of oil equivalent from the pre salt fields, we have to be in Boozers AR with a level of nine five kilos of.
<unk> 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 are were below the targets of course, we are focused on continually improving those targets as we have shown in half.
<unk> potential.
<unk> results.
We also continue to be focused on achieving our goals in terms of reducing emissions.
On the five year timeframe and also to.
Achieve lower emissions by 2030.
We have very ambitious targets in terms of reducing emissions and brew pilot focused on delivering a having technology and portfolio management as they make to deliver our long term emissions targets.
Next please.
Yeah.
In terms of absolute emissions, we had a 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 on the first quarter. So we continue the trajectory of reducing total operational emissions and of course, we continue strongly delivering lower oil and gas operation of emissions as well. We also will 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 should position in storage program.
The industry is large it's offshore says U S program and we continue our with our target of Reinjecting 40 million tons of Seo to the accumulated Reinjection is $32 6 million tons, 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 huge who in the seabed for future units and we're focused on finding that kind of portfolio solution and finding new technological solutions that support our strong CIS U S capture program next please.
In terms of our social investments are we have provided several relevant donations are not only for COVID-19.
Impacts in Brazil, but also for our environmental and disaster situations that happen 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 developing new small businesses and developing science and technology in the regions that we operate we also have programs focused on the natural environment after areas, where we operate in other areas in Brazil was well and <unk>.
<unk> to mitigate the socioeconomic impacts all of our operations are highlight also our LPG donation program that was started back in 2021, we expect to donate 300 million highs of LPG into the end of 2022, we have already started delivering part of dose.
Nations 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.
Continuous improvement agenda for the company's corporate governance are as.
As you know alongside with our financial recovery trajectory, we have a very solid agenda in terms of.
Revamping the companies.
<unk> reputation and 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 governance and that's of course, one of our main factors for the future.
And are we have been recognized from 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.
On oil in the pre salt area on out of a couple of three central also we had the startup the first sorry off F. DSO went about that we expect you to continue to ramp up over the rest of 2022 and in a matter of a few in the pre salt of the central spacing, we expect.
Very good prospects coming from that the development of the Mero field. We also had a the environmental preliminary license for a direct.
Utilization project of the myeloma 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 the 10 P. P. M. The 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 and all.
Refinery throughput.
Throughput.
We finished march with a very high utilization factor of 91% and it's important to highlight that is 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 with 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 acid access to the Guatemala are 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 and steps are on that direction and we will 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 a has a continuing through 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 the 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 a strong operational result in 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 value that we create so we announced a $3 72 highs.
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 of 2021 as well we have seen a slight appreciation of the Brazilian how over the dollar for the for the average of the period 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 that we saw.
And impact in terms of.
The 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 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 is a much more healthy.
Healthy level of that a very 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 company is not only generating more faith.
Verbal results, but also distributing 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 the 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.
The sales volume quarter, when we compare to the to the fourth quarter.
There is a.
A quarter with a higher seasonality in the domestic market. So it is lower.
Sales volume in the domestic market, but despite that impact we have a very solid <unk>.
Now for the Q1 'twenty true next please.
Yeah.
When we look at the EBITDA by business segment.
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>.
We had we also had.
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.
Course, when 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 Thats, 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 higher margins in the domestic market and.
That was offset partially by lower sales volumes as I mentioned.
When we compare Q1 with Q4.
We have.
Higher sales volumes in Q4 and that offset partially the the impacts in Q1.
Looking at the gas and power segment are.
We had lower costs with imports of LNG. They had a very relevant impact in Q4. This impact was mitigated in Q1 'twenty. Two are we also working on improving the conditions of our commercial contracts and we have we have recently hosted an event a two detail.
Oh and explain a little bit more how the gas and power segment works.
The nature of the contracts.
Yes.
Supply distribution in terms of different supply sources in our portfolio and also how the company's strategy for that segment is design and I invite you to look at our website those slides are in <unk>.
And in our website and I think there 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 in the par are 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.
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 to settle 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 beating around the latest bidding round the signature bonuses for the surplus of the transfer of right area of stepped that up.
Almost a billion dollars that were paid in the first quarter of 2022.
Including divestments and the pushes.
Transfer of Friday surplus transfer Friday agreement, we go to $9 seven free cash flow after divestments.
That free cash flow was mainly used to 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 may 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 balance 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 would 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 seven.
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 when whenever we had we have a higher volatility we use those opportunities to prepay debt and to reduce.
Reduce our our exposure to more expensive debt managing our our liability over time next 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.
Yeah.
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 at <unk> last year those were relevant projects that were signed.
After we had our latest earning calls earnings call for the for Q4 'twenty one.
We have also closed.
The export their blocks in Panama and basin.
The 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> is now back at al and a N T S.
Transport the midstream transport he answered that we sold in the past. So we have almost $2 billion of additional cash flow coming from those assets that were sold a couple of years ago.
Back to positively our cash generation in Q1 'twenty true next please.
So overall, we had a very good quarter.
Recurring net income was $8 $4 billion as I mentioned before the company has had a very solid operational performance, we had the 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 families where your Soc that impacted positively in Q4.
Didn't impact Q1, so that offset a little bit the results for Q1, 'twenty true, but again, we had a very very solid results in Q1 2002 next please.
So finally as I've mentioned before.
We have also approved a distribution of a write up in dividends based on not only the formula does 60% format of our dividend policy that results in a $1 86 <unk> 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 focused 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 2022, and we announced OCI additional dividends for the quarter.
We think it's quite important to maintain our focus on creating value and having a solid and profitable investments that generates better that we can.
Distribute for our shareholders and of course.
There are a group of shareholders. The most relevant individual shareholders shareholder is the is the Brazilian.
And the government and the Brazilian society as well.
Next please.
So that's the that's the overall piece.
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 Aldo value that we've created in all of the cash flow that will generate over the current. 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.
Question.
In July Hilton.
Given the strong demand environment.
And he has any potential to increase output from short cycle projects.
Okay.
Good afternoon Frank.
No.
India is an undue glibly ma'am please begin.
So Beth.
We remain committed to doing it.
And to the brand.
200000 sic.
We approved the deal.
Upstream.
20% higher.
Yeah.
Yeah.
Youre basically, Illinois strategy maximizing ports.
Portfolio for chemo.
The ultra deepwater assets.
Our production development cycles are long cycle and is based in la loomed game resilient pricing.
And you can see little element of wounds for Schwartz.
<unk> is the only opportunity that you have.
<unk> bookings.
Yes.
Element for the total Petrobras for Luke.
Yeah.
And I'm looking through.
Yeah.
What I can say that.
Scott.
Production growth rate.
Around 20%.
The coming years and annual result.
I'll start off with the 15 new schools.
Sure.
Could you walk us through run about a ramp up.
Production growth.
We have actions related to the start of complimentary wells such as Hong.
Won't come to review with two new wells.
That came on stream this first quarter.
In addition to the implementation of those 15, new production systems.
Mandy complement dairy projects, we're seeing your strategic plan.
Constantly monitors.
Perfect.
Gas markets additional.
An additional opportunity.
That may arise and there is also the change in the external.
Current environment, we will be analyzed in the comp.
Thanks.
Glen.
'twenty three 'twenty Glenn seven currently.
Bill.
Thank you.
Thank you. Thank you. Thank you next.
The next question from Frank If I heard you right I was limited inflation trends globally become more pronounced.
Any particular areas where cost trends are particularly troubling.
Thank you I think of Frankfurt question as their only 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 contracts 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.
<unk> 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.
Exactly yeah.
Tim Glenn.
Or or project robust even in a scenario.
Please.
Uh huh.
Good shape before.
All of these challenges.
The door that they are looking a lot of.
Sure.
So players.
Thank you so I hate to think you have the next question comes from what you're saying.
Thanks, <unk>, Matt this can be beyond.
Do you think Joseph Santos, our message Mark I'm going to meet but congrats.
Congratulations on the excellent financial management and all the best places amount.
Great.
My first question is for Alan.
Okay.
So I have two engine.
The company's commercial strategy, Okay, China increases silent watch conversion.
Well thank you.
Sorry for my voice.
And do my best.
Well.
What's your question remember last year's Pittsburgh.
Mark can you help us towards Brazilian grades crude.
He has a commercial office in Asia European and U S trade constantly.
And monitoring market opportunities.
Complex for Petrobras crude oil production.
This is a very solid and diversified client portfolio.
Distributed.
Our geographic regions.
These expense reaction to market changes like China mining amortization line.
And as long as the company, it's taking advantage of the arbitrage.
And then just say it was made consistently quality alternatives and assuring the maximization of our results.
Thank you Mrs.
Good morning, guys.
Thank you America China.
And Andres information was in Asia.
We have no.
Okay.
Payments on any market.
Great.
Mark.
In particular.
Alright established close relationship with private and state.
<unk>.
Partners.
So regular volumes every times a destination.
Among the best alternatives.
The Brazilian currency.
Thank you Mr. Allen. The next question comes from Greg <unk> with Citi.
I'm going to read this is Matt.
Thank you 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 that Nebraska decision, making process in relation to pricing.
Okay.
Thank you Gabriel.
Thanks Ryan.
As clear as possible.
No.
It's important.
Okay.
Traditional prior to price could be.
Estimated wood market.
<unk>.
TVT any company right debating.
Logistics.
And international markets.
Regarding our decision making process.
He is the right price position compared to the international market daily.
Daily base.
We do not predict.
We think it.
It looks great.
Market growth however, the exchange rate.
No.
International prices.
And.
Exchange rates.
Yes.
Just for price.
Good luck.
Thank you.
Thank you Mr. Allen. The next question also from somebody else.
Some of them could you tell us what additional measures.
We are taking in addition to those already included in the bylaws and current legislation.
The conference call.
Thanks, Scott good morning.
We have several initiatives already.
Ongoing for <unk> in the next two years I'd like to highlight some of them here first.
We are focusing on applying automation artificial intelligence and data mining and our internal control environment to secure those critical transactions.
In terms of integrity real time monitoring 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 as we originally started 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 commitment 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 individually individual decisions.
We supported by technical lines statutory committees. So there's no single critical decision for Petrobras there is taken by one individual one with every decision must be taken.
Bye.
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 pretty validate any relevant subject before board decision. So we have people community investment community all the comedians once before.
Sure.
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.
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 for the lender and the next question comes from Liliana Yang with HSBC.
She's very glad to see Petrobras delivering consistent results.
The first question as to how film.
Now I'll review the tax regime benign.
Any discussion of proposals by the Brazilian government on Brazilian Congress towards high government stake or special effects 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 adjustments.
Moving Brazilian fundamentals towards strong situations 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 this type of decision that has not.
Do we expect <unk> as a company, but in my view I do not expect any policymakers increasing their share.
The 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.
I do not expect an increase.
Thanks for your questions and for your comments.
Thank you. The next question comes from <unk>.
Wow.
She's been.
And as far as the only he keeps it from.
The business plan stays at $8 $8 million for E&P Capex in 2022, which is an average of two 2 billion.
What do all of that $1 $4 billion level.
In the first quarter up 22 the company he sees.
Yes, E&P capex for 2022.
Good thanks for the question.
Our capex for 2022 remains.
Eight $8 billion.
We're planning an inquiry using level.
It was already blended going into the year 2022.
In addition, we have had some will be the thick.
In January .
You had some Boston Mint postponements.
It looks really good.
Sure.
A month.
Indeed.
However.
We see it.
I think we'll be by the end of the deal.
He is expanding.
Okay.
Yes.
We'd like to cope with that.
Hello.
Hey, good.
I would like to open up there.
The level of investment will increase during throughout this year.
Good such as Bush's.
Payments milestones, where it goes.
Six eight.
Happens during this year.
Yeah, we'll.
With the connection of new Wells neighborhood.
So when a banner.
Events that.
You will contribute for these.
Increasing lateral opportunities.
Investments between 2002.
Thank you.
Thank you Fernando Thank you.
Next question comes from the line ophthalmologists.
We'll go there.
Well they request that when I was with Goldman salmon.
The last few months, we have seen a new dynamic in the domestic steel market conditions.
Users, gaining prominence and imports and playing a major role guaranteeing that demand is next.
This new context, how does Petrobras evaluate the knee company.
Just starting to contribute to meeting total demand demand.
Either by increasing refinery utilization rates or by importing from Congress.
Hi.
Many of you kind of look.
<unk>.
Hello. Thanks.
Thank you very much.
Very good.
Concerning your question.
Yes.
Yes.
Distributors large and medium sized ones.
On the media reports.
Played by the trading companies.
But.
Yeah.
Is it all coming months.
A couple of years.
This changed place obviously due to the Companys largest companies.
Also reduced scale of operations.
Thanks Mark.
And also could.
Logistics infrastructure.
It represents a competitive advantage over <unk>.
Okay.
So the distributors.
Hi, Brian .
Possible for park.
Imports pit.
I'm not too distant past where carrier exclusively exclusively.
Chris.
Okay.
Have a moving dynamic.
Market, which is can we challenging.
Also greater sharing of the risks and investments, which is good for both economic exchange him for at this point.
In this context.
We continue working hard to meet our contractual commitments and in the ratings business opportunities with safety and profitability Peter Lowry internal production.
Which may eventually be supplemented by imports.
Okay.
Yes.
Uh huh.
So I think that you cover all the aspects for.
Fourth.
We are already operate at the maximum level that we are currently available in our facilities, we must taken 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 and 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.
Online. These Karen days of May we are all at 90, 293% of utilization sector.
Thank you Linda Heasley, Thank you Ms Dallas and the second question.
What progress has been made on the new FCS so contracts announced in the last movement.
Should any weaker than we expected considering the recent high volatility in oil prices and the inflationary pressure on offshore service costs.
And we had to be one about if this rule is that the duration left.
At the end of April and will continue to employ manpower planning to set up another 14 units.
Until 2026.
11 of them are already on the consumption and the per year on the.
<unk> was these three we'd say it was 19 and DCF.
Or do you need to the scheduled for 2002.
Going to bleed.
Models lifting.
Please go ahead and complete the DMD or in progress.
<unk> will display mirror chewing it up.
In the myelin true are already complete.
Complete the broadest for mining one.
We are constantly monitoring our project costs.
Scheduled impact trying to anticipate problems in that.
The mitigation plans.
People know.
We both heavy and all relevant impact.
These could play in here.
Last year.
Yeah.
And because.
As I said most of them I would add the conflicted so.
You book It for these units in our point of view is very good.
Thank you.
Thank you so I hate to my next question is from who has a diagnosis facet of our U S. Now.
Considering the contract 100 predictions.
At this time in the next few years is that protection for higher costs in light of the current high inflation rate.
Yes, that's what Beth.
Yes.
Okay.
Third leg mix of Qantas and abuse of opioids.
We used to be.
Vic.
Four alone.
The new bids we are discussing.
Layers mechanisms in order to reduce the risks for both parts.
The mainly booty Wayne were booked.
But we see no major impact in the <unk> of your content.
One thing that Oh.
Already in place, we will have <unk> that the <unk> gain.
Going through the impacts of these events.
Thank you thank.
Thank you Joanne.
Next question comes from <unk> <unk> with UBS.
And that's about the results congratulations on the results.
Dividends.
First question nice.
Nice tailwind.
Oh supply important pricing.
Specifically.
Several agents.
We have become more vocal challenge to find we can volumes in the international market and that no favorable scenario for once.
How is the company in the supply to the content and how our preparations for an eventual challenge and their supply to the country.
Thank you Luis.
Christopher.
I would like to.
Do a huge screamer.
Okay.
Right.
Scripted my agents harder than enterprise.
We are operational planning and takes into account our commercial commitments, which we are.
<unk>.
Fulfilling.
Are there opportunities there.
Thanks Amy.
And profitability.
We do not have visibility on.
What's the other agents.
We're a railroad chair of the countries are doing.
As we are.
Do you think movements and their own supply and logistics and business models.
Yes.
I can talk about how Petrobras itself.
These risks.
We see D.
It's a great caution.
We were there low diesel inventories still remain in storage hubs.
Hi, very high volatility.
We understand that these are a result of recent events.
The conflict in Ukraine.
To deal with is it deserves.
Areas.
We strengthened.
We have strengthened.
Our trading companies abroad.
Great and remain well.
Thank you Tim sure visuals can maintain contact with various agents refiners.
Chris owners and service providers.
So.
Good morning.
The diesel flows.
Louise fragile demands.
Mortgage.
As we can.
So in Spain risks and adopt short or long positions.
Physical core contract.
In line with the use of hormones.
<unk> parent logistics.
To provide resilience and competitiveness.
Two are <unk>.
Playing.
To supply your customers.
Thank you.
Thank you Ms Valor second question Lee.
You still have file a file in the lake with strategic plan synchronized announces a new governance structure to evaluate potential what's funny.
We'd like to ask how the discussions have.
There's a specific timeline in the market, that's the market could wait or future announcements or.
This is a more timely process.
Okay, Karla Hi, Louise Yes, you should expect formal position on such evaluation by the end of this year after our board approved.
Our next strategic plan some decision will be taken and you can expect either there's decisions 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 with you what we're doing right now.
Or it can be one can expect a petro grass Roswell investing our second core off value value creation, new operations aligned with energy transitions that are much discussions discussions thats place right. Now we are looking more to discipline in our way.
For example, our financial look to be sure that MPV is strong and positive even even in a resilience of prices also a 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's where brands have four big projects.
<unk> Capital Inc.
In technological solutions, so we need to find a business that it must be a good business and at the same time petrograph must be the a good owner and a good operator for this business. So I'm not going to give any spoiler, we need to wait a little bit more.
Just to highlight that there are many discussions right now inside Petrograph and we expect by the end of the year when the strategic plan as approved by the board we may have.
Some decisions on this subject thanks for your question.
So how far out.
The next question comes from Bruno Montanari with Morgan Stanley .
He also sensor message. Thanks for taking my questions now your interest in the company following a strategic plan and the shareholder remuneration policy.
First question goes to do quite well.
On the backup of piping that mantle.
Global fertilizers prices recently with both the Rascals reviewing strategy to this.
Our good Sam.
After Brian projects of the company.
In this area.
That were made in the past makes sense at this point in terms of returns what is the current strategy one of the things like voice brand could think of that as to a similar strategy in this case.
Is that more to conclude construction before offerings again to the market.
Through our strategic plan to until two in Essex does not consider any kind of investment.
Fertilizer segment. This segment is doesn't belong to all our businesses and that's very clear to us now.
Our strategic plan in relation to 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 ran last 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.
And.
We try to synchronize our plans to finish the second train waste this new.
Divestment of schedule.
Thank you have many of them.
Your next question comes.
So <unk> with Jpmorgan.
You also centers a message.
Good to 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.
Since the NUCYNTA announcements show their commitment to shareholder value.
And it's easy to have a buy rating at the company in this call.
And his question is 400 in.
The company has a large free cash flow continues to divest can you comment about potential use.
Net cash.
On dividend.
Thank you. Thank you for your question for Anna.
Also a similar question from from a broad I'm wondering in the Portuguese call as well.
I'll give you a broader perspective, so first of all in terms of portfolio management or.
No.
<unk> 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 toward 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 but.
Given the level of.
Free cash flow that we're generating and the inflows.
Or are there additional inflows that are coming.
We'll look at the at the cash generation and we focus on of.
Of course, making the investments that are committed and as you well know.
We don't expect to make relevant changes to the short term investments most of our investments for 22 to 24 are already committed and the level of commitment 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.
In other words, we don't have mentioned before.
We don't have a relevant short term opportunities.
<unk> capex or anything like this and on the other hand, we do.
Didn't have any capital risk.
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, so far that portfolio and the maturity of our debt.
We expect to continue to manage and 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 distributions.
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. We tried 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 into cash flow generation scenario just see weather.
We are confident to maintain the company's financial sustainability.
And of course.
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 $8 billion 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 dividends. Thank you.
Thank you.
Our next question comes from kind of flattish.
As a backdrop.
That's a message.
First of all I would like to congratulate management on the company full transformation delivered over the past.
Yes.
He has a question for <unk>, how far along you have mentioned the importance of improving communication with all its stakeholders, including society.
So that there isn't a better understanding of fuel pricing.
Could you address this.
In order to make it more tangible correct.
It does include in communication.
Our active participation with government in order to find solutions to price volatility.
Goodbye.
Any color in that sense.
Welcome.
Thank you Carla Thank you for your questions and for your.
First of all regarding our comprehensive strategic 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 breadth depth mitigates the risk off on the supply in the market and also it's a requirement.
<unk> compliance with the law and the bylaws. So you must follow market price. So we need to explain this quarter general population.
Is that it is very important to show that we are practicing the best comp.
Company breath.
So of course, we have available to discuss technical insight.
Experienced operator in the energy markets, both in oil and gas and also in refining and distribution. So we are very open to available to provide the technical insights, but as I said in the previous questions you might be in my previous answer.
We separate our company view as a company we are a company listed so we have a very specific.
Yeah.
We separate these actions from them.
Policymakers decisions in public policy is not to do that.
Petrobras, but we are more than happy to provide any insights.
That policymakers.
Requires.
Thank you.
Thank you have found the next question comes from Chris <unk> with Santander.
Also sensor networks.
I would like to congratulate you all on the continuous free cash flow generation, which allows the payments.
Smith amount.
The first question.
Sure.
When did you any updates regarding the sale of your stake Raskin.
Thank you. Thank you Kash and thank you for the question.
And thank you for the message.
We continue to be 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.
For the best timing to true.
Return with the 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.
Concrete as of the moment and we're not.
Conducting any any specific M&A transaction, but we continue to chew.
Do you have a significant interest in divesting our anchors and continue to monitor the market to choose to do that as soon as we can.
Thank you for your question.
Thank you for being with the second question completion is also for you.
Can you give us an update regarding the refinery sales process what is feasible for 2022 versus only 2017 any changes in the form of a potential sale.
Thank you Christian so I'll give you an overall perspective.
First of all with respect.
So the ones that we've already signed.
I'm talking about six and her mom, we're expecting for the Brazilian antitrust authority just to conclude there their analysis and so that we can go on and close those those transactions.
We're still negotiating for ILUVIEN order and had gotten a little bit and audience is more advanced a hick up is a little bit behind.
And with respect to our hip Phi and SG&A are probably the ones that we've already attempt.
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 all have any of them. The next question comes from has just gone Crazy suite also centers a message that I am going to Lee Congratulations from me excellently.
They are an equivocal Avalon snacked goods professional management.
And provided to the company and to Society.
His question is what's the Hogan.
What kind of expectations around timing for the closing of the transaction, a 5% stake purchase option exercise nicely.
We tried the remaining precedent conditions for the closing.
We expect those issues to be closed through July .
The effectiveness of this transaction is subject to the approval of the National Petroleum Agency Ministry of Pioneer's images.
And the payments to be made by <unk>.
Good to have foresight that D.
The transaction has I think Dave Dave.
In September .
First.
Of last year.
Because of the agreements.
Yeah.
Upon the final closing.
Oh the.
Balances and imbalances will be drawn into.
We're really close.
All of these income or soup.
He has additional vice versa emptying bushels paducah sharing contract. Thank you.
Yeah.
Thank you Phil now thank you all and this time the Q&A session is over if you have any further questions.
Investor Relations team.
But they will now make final remarks please.
Thank you Carla thanks, everyone for being with US today for our first quarter of 2022 earnings call.
We're very glad with the company's operational and financial results and we expect to continue to.
Create a lot of value with.
A sensible 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 we see it we.
See you again in the next part thank you.