Q4 2022 Petroleo Brasileiro SA Petrobras Earnings Presentation

Speaker 1: of quarter 2022 results. It's great to have you join us today. We'd like to inform you that all participants will follow the transmission via internet as listeners. After an introduction, a Q&A session will begin. You can send us questions via email at petroinvested at petrobras.com.br.

Speaker 1: Today we have with us Jean Paul Prattis, Petrobrei CEO , Claudio Macella, Chief Trading and Logistics Officer, Fernando Vosges, Chief Exploration and Production Officer, Joanne Hickie, Hitter's Housing, Chief Production Development Officer, Paolo Palaya, Chief Digital Trading and Innovation Officer, Rafael Chaves, Chief Institutional Relations and Sustainability Officer, Rodrigo Raújo, Chief Financial and Investor Relations Officer, Rodrigo Costa, Chief Executive Officer, Rodrigo Costa, Chief Executive Officer,

Speaker 1: Chief Refining and Natural Guests, Officer and Salvador Dahan, Chief Governance and Compliance Officer. To initiate, I will press the floor to Petrobras CEO , General Pradis, with love. Go ahead.

Speaker 2: Hello to all of you. It is an honor to speak to you and see you of Petrobras at a time when we are disclosing such an expressive and symbolic result for the company. At the same time, we met all our production targets.

Speaker 2: We advanced in the prospecting of new reserves and in the decarbonization of our operations. We maintained our competitiveness raising the utilization factor of our refineries while launching new products with renewable content. All these achievements are extremely important in the complex scenario.

Speaker 2: It is indisputable that this moment is getting closer and closer. We will maintain our leading role in oil and gas production while working to build a new future.

Speaker 2: Our main goal in the new management that starts now is to make Petrobras an increasingly balanced company strong and prepared to be the protagonist of the energy transition, drawing on its unique knowledge of Brazil's potential for this growing market.

Speaker 2: Investment in renewable energy sources such as hydrogen and offshore wind are already for seen in the current strategic plan. Our operations in deep and ultra deep water put us in privileged position for the generation of offshore wind energy even integrated with oil and gas production. We are major producers of natural gas that transition fuel for hydrogen.

Speaker 2: We will continue in irresponsible and transparent manner, seeking more opportunities to diversify our operation, attentive to the society's demands for a fair energy transition, guaranteeing energy that is available, accessible and sustainable for all. I reiterate our ambition to neutralize our operational emissions within a time frame compatible with that established by the Paris Agreement. To this end, we have invested in the decarbonisation of our operations. We already operate the world's largest offshore carbon rejection program.

Speaker 2: And we are implementing a series of state-of-the-art technologies to reduce emissions. We are a company in permanent transformation. We are working every day to make Petrobras a company that is increasingly stronger, more responsible, and connected to the future. Because we believe this is the best way to fulfill our responsibility to society and to our investors. Thank you very much. Welcome. Thank you, John . Now, pass the floor to Petrobras CFO Rodrigo Arles. Please, Rodrigo, go ahead.

Speaker 3: Thank you, Carla. Thank you, John . Thanks everyone for being with us today and enjoying our earnings call for the fourth part of 2022. I'm very glad to be here and to report the important and strong results that we have for the fiscal year 2022 and for the fourth part of 2022. I'd like to just shed my respect with my colleagues of the executive board and with the important work that has been done in terms of delivering the company, keeping our capital structure optimized, delivering the relevant projects that we have on time and within cost as we own.

Speaker 3: We have also reached the highest utilization factor of our refineries in the last five years, in a year in which we had relevant scheduled stoppages that were quite challenging to deal with, especially that were still in an environment where we still...

Speaker 3: facing the impact of COVID-19 not only on the teams, but also on the supply chains. We have also very important results in terms of our commercial and trading operations in N22. We were able to diversify our export based not only for the US market, but also for Europe and other Asian markets. We've been able to.

Speaker 3: in terms of reducing emissions of our operations and also in terms of digital transformation and governance. So I'm going to start with the earnings presentation. Next, please. Or usual disclaimer with respect to four looking statements and forecasts. Next, please. Oh.

Speaker 3: As we always do, we start discussing safety that is our number one value. We're very concerned about safety, about being able to deliver and create a strong value, but always maintaining the highest degree of safety standards in the industry. We, as you well know, were very concerned about safety.

Speaker 3: quite well positioned in terms of comparison with our peers, but as the results of 2022 show safety is always a substantial challenge. We have to be continuously looking for safety metrics and ways of improving and reducing the impact of incidence and occurrences that happened within the company. We have the ambition of zero fatalities, unfortunately. In 2022 we had five fatalities on the course for operations, so we're very sorry about that and focused on improving our safety conditions so that we're always performing.

Speaker 3: better and more focused on delivering our results with more safety. Next, please. So starting with our ESG results and an agenda, I would like to highlight what we had in terms of Arboning Tenth City, not only in the upstream segment in which we delivered results that were substantially below the acceptable limit that we set for 2022, but also in the downstream segment where we already see the results of our energy efficiency program called RAPTOB on our refineries, reducing the energy intensity of our refineries.

Speaker 3: And of course the overall carbon intensity of our operations. It's always important to remember that the pre-soil oil and we highlight of course the PNBusius fields in which we have between 9 and 9.5 kills of CO2 per belt with equivalent of emissions.

Speaker 3: It's quite competitive. It's one of the top notch frontiers in the world, so we're very glad with the results that we've been finding and focused, of course, on continually improving our reducing our carbon footprint and also on delivering substantial technology to help that happen. We bring forth our commitment with the targets that we set for carbon intensity for 2025.

Speaker 3: 2030 and we've been able to comply with all the targets that we've been setting and continue to challenge ourselves in terms of the future results. Next, please. Looking at our absolute emissions for 2020, it's important to highlight that we had a substantial decrease in total operational emissions when we compared to 2021. We should remember that in the end of 2021, we had the hydro crisis in Brazil that made us have a substantial increase in terms of our plants generation, increasing the consumption of natural gas and of course increasing the operational emissions.

Speaker 3: Looking at the carbon capture results, as you guys know, we have the largest offshore carbon capture program in the world. Since 08, we've been able to to to range act about 41 million tons of CO2. For 2022, we had about 11 million tons re-enjected.

Speaker 3: that process and to reduce the carbon footprint of the pre-salt oil. Next, please.

Speaker 3: Also, in terms of climate highlights, we also reduced methane emissions in 2022, a 60% reduction when we compared it to 2015, just to remind you that we always look at 2015 as the initial baseline for the targets that we set for methane reduction. We have also joined the UN Initiative, focusing on methane emission reduction and very glad to be precise.

Speaker 3: achievement, we do have targets for the executive teams to maintain our presence in the index. It's an important external acknowledgement and it's relevant to highlight that we got top marks for environmental reporting, social reporting, water related risks.

Speaker 3: We also stood out in terms of operational equificiency labor practices and human rights as well. It was a second consecutive year that we're part of the index and we're very glad you have achieved that result once again.

Speaker 3: in terms of operational equificiency, labor practices, and human rights as well. It was a second consecutive year that we're part of the index, and we're very glad you have achieved that result once again. Next, please.

Speaker 3: In terms of governance, it's important to highlight that we continue to join our efforts in terms of digital transformation and governance risk in control. So we have a strong internal controls automation process that is ongoing. We already have more than 30% of internal controls automated. And we continue to be focused on increasing the level. One of the best performers in the industry. We have also been certified by the party that follows the SOE in Brazil once again with their top tier governance certification.

Speaker 3: We have also updated our code of ethical conduct that is one of the most important guidelines that we have. We have that in our website. Any guys can check as well. Also we have been awarded in terms of transparency of our financial statements once again. And we've recently approved now in January 22, 23, our tax policy that reinforces our commitment to fair taxation, transparency and also accountability. We have alongside with the financial results for the year. We have also released our tax report yesterday as well. I welcome everyone to look at it. We have important reports in terms of company contribution to Brazil, into the Brazilian society as an important taxpayer and how the contribution of the company is going to be. We have reached a separate point.

Speaker 3: different Brazilian states, this is also quite relevant. Next, please. So in terms of tax payments for 2022, we have paid 279 bidon highs in Texas for 2022. Record level taxation, we also paid 72 bidon highs in dividends to the controlling group, to the federal government and the federal government related, and it is it's also important to remember that more than 60% of our cash flow generation returns to the to the Brazilian society, including taxes and also dividends that we pay to the to the to the.

Speaker 3: to the president's state as the company's controlling shareholder. Next, please. As I mentioned in the beginning, our focus on project management and our solid project implementation governance has been delivering substantial results over the course of the last years. In 2022, we had the startup of FBSO, one about it in the Merrill field. We have also anticipated the 71 that was expected to start production in 2023. We started production in 2022. In the end of 2022, in the ATAPO field, also we reached the full production capacity of P68 and the babygum in pseudo fields.

Speaker 3: And we've been achieving important results in terms of efficiency in the new production units that we've started over the last couple of years. We also have FTSO and Ananadi that has arrived at the Marling field. And we also have Aminach Bahuosu and Anitagari Bahuja arriving at the shipyard in Brazil. So when we look at the units that are expected to come online in 23, we maintain our forecast that we expect you to have all the four units that were expected for 23 coming online.

Speaker 3: We have also done the contracting of three own platforms for the busiest field. A very important result in terms of continuing with the development of the busiest field. And they have also initiated contracting for other rather than FESOs like Bacquadas-Reveit, Alta Poodois and Sepet, Alta Poodchew and Sepetru. As you remember, we have 17 units coming online in the course of the business plan and we're continuing to be highly focused on achieving that substantial challenge. Next, please.

Speaker 3: Next, please. So looking at our key financial highlights for 22, several of the metrics were Petra Raspats historical results. We had very solid, Abidine 22, $66 billion, $50 billion of cash flow from our operations, our highest net income ever, $37, $36, $6 billion during the course of the year. We've paid about $3 per share in terms of dividends during the course of 22 on a cash basis. We have also been able, alongside with creating and distributing value, we have also managed to keep our capital structure close to what we think is optimal.

Speaker 3: We reduced our net debt by $6.1 billion when compared to 2021. We have also reduced growth stat. As I mentioned before, 279 billion high-speed in taxes over the course of the year. And also another important milestone with reached double digits, return on cap-to-employed for first time for very, very long time. And it's an important result of the...

Speaker 3: focus on value creation and profitability of the relevant projects that we've been implementing over time. And as I mentioned in the beginning, the highest incorporation of reserves and history of the company, 2 billion barrels of oil equivalent incorporating the Earth to the next. When we look at production KPIs, we've more than delivered the production target for the year. We were about 3% above the midpoint of the year's target for the oil production, for the commercial production, and also for the total production. We've increased production without jeopardizing our cost constants. The lifting cost for the year was a lower than $6 per barrel, so very, very competitive lifting cost. Of course, as you guys know, the lifting cost is a very small part of the equation. We have a substantial taxation. We have other costs associated and the return on capital employed that is necessary for an industry that has such a substantial risk after oil industry. So we're focused on being more efficient over time as well. We have also record level 10 ppm diesel sales with being phasing out.

Speaker 3: of the 500 PPMT to the 10 PPMT. So, and over the course of 22, it's also important to highlight that alongside with delivering record levels of 10 PPMT, so we were also able to maintain competitive prices, align with the international market over the course of the year. You guys know that it was a very challenging year, the racial crane war. Substantially, in fact, at the cracks grads, there were quite volatile over the course of the year. So, we were also able to maintain the healthy competitive environment in Brazil.

Speaker 3: without passing through all the volatility that was seen in the international market. We've also had record of patents registered in Brazil for the second consecutive year. The company has more than a thousand active patents focusing on innovation and being able to create value with our innovation system. I've already mentioned the startup production of P71FPSO, one about it and the full production capacity of P68. In terms of our portfolio of natural gas, selling contracts, we have been able to diversify and to improve the benchmarks of our contracts, you're probably?? FedExcom for machine production and

Speaker 3: but it's also relevant to highlight that we had the first batch of renewable diesel being produced and the first test of a batch of bunker also with renewable content reinforcing our commitment to diversifying our sources and diversifying.

Speaker 3: our products in terms of scope 3 as well. As I've mentioned, it was a very challenging year for the refining segment with a lot of schedule stopperages, but even though those stopperages.

Speaker 3: We're successfully handled during the year and we delivered the highest utilization factor in the last five years, 88% of utilization with healthy margins and optimizing the use of our refinements. So it's a very healthy and sustainable result as well. And again, the important results with respect to the Dow Jones index. Next, please. Of course, we had a positive and external environment in in in 22. We've we saw much higher prices when we compared to 21, but it's always important to highlight that we have seen similar crude prices in the past and the results that the company achieved were completely different.

Speaker 3: Next, please.

Speaker 3: Also, very solid EBITDA for Q4, $14 billion. When we compare Q3, we had lower prices and lower margins. We're going to talk about that. An important aspect is that the results were quite in line with what was expected. And...

Speaker 3: being able to deliver solid and predictable and stable results is also one of our main targets. The main difference between what was expected in terms of results and what we deliver was basically related to non-cash expenses that are very difficult for the analyst community to forecast, such as the write-offs of exploratory expenses. We've advanced with the development stage of the SAP area and some of the exploratory wells that were driven past were written off in Q4. We also have provisions for legal contingencies that are also very difficult to forecast. So I think that apart of those one-offs that we don't consider non-recurring because they always have, they always potentially impact the company's results.

Speaker 3: 4 is important to highlight that as we've been managing the company's pricing policy, we avoid passing through all the volatility and on Q3 prices came down fast and sharply. So basically we didn't pass through all the volatility so we were able to capture higher margins on Q3.

Speaker 3: On Q4, our prices were closer to alignment to international markets. I still with positive margins, but closer when we compared to Q3, so we of course managed to keep our prices aligned. But we had lower margins when we compared Q3. In terms of the DS and power segment, I've already mentioned that we had important impacts in terms of improving our contract mixed. But we had no recurring gains that were recording Q3 and that reduced the comparison between Q3 and Q4. But when we compare Q4, Q4, Q22 with Q4, Q21.

Speaker 3: We already see important results of our improvements in terms of commercial policy for our natural gas contracts. Next, please. Looking at our cash flow generation, $15 billion of cash flows from our operations. Interesting to see that companies paying income tax once again. We've used all the income tax credits that we have from prior periods where the company incurred in losses. Basically, we also had $10 billion of investments over the course of the year. We can see that on Q4, we had important impacts of advancements for the new platforms that were contracted. But we also see, a ramp up in terms of investments for Q4, especially considering that when we compare 23 and 22, on 23, we expect to invest $15 billion.

Speaker 3: compared to $10 billion in 22. So this 50% increase has already reflected in terms of a ramp up of investments for 22 after the investments and the cash inflow from the transfer of rights, surplus auction. We had $52 billion off of free cash flow in the year. This was basically used to maintain our capture structure at the optimal level and to distribute the value that we've created to the transfer shareholders. Next, please.

Speaker 3: Looking at our leverage, as I mentioned in the beginning, we reduced the gross debt from $59 billion to around $54. This was already expected since we have FBSOs coming online in 2022 and we expect our leverage to increase accordingly. So we prepared ourselves for a certain leverage increase that's going to occur in in 2023. When we look at the maturity profile, also quite healthy, if we look at the maturity schedule for the next couple of years.

Speaker 3: quite manageable and leverage is expected to be kept stable. Next, please. In terms of port photo management, we've highlighted the transactions that were closed in Q4. Basically, the Hemantan 6 refineries, the onshore fuels of Kahmau Police and Papatea offshore, and also ABACOA last year, those transactions were closed over the course of Q4. Next, please. In terms of net income, I mentioned the record level net income for 2022, and also per-solid results on Q4.

Speaker 3: As I've mentioned, we had lower print prices, lower margins on oil products as well. We also had our business plan that was released on Q4, so we update our forecast and we had some impacts in terms of impairment of assets, over the course of Q4, nothing that jeopardized the companies and results or concern in terms of future results. And this was also partially offset by financial gains coming from the SAP Yatapuan Boosts transfer of rights options.

Speaker 3: and also from the appreciation of the end period resident HAL that impacts favorably our finisher result. Next, please. So in terms of dividend payments, the executive board proposed to the board of directors the payment in June's stallments of 1.37 hz per share, total 2.75. This is basically the 60% of free cash flow formula and the distribution of the remaining part of the net income of 2022.

Speaker 3: approved the suggestion of the board of directors approved the suggestion of the executive board, but also recommended to the shareholders the creation of a statutory reserve to retain 50 cents per share, 50 cents per share in highs, and also if the shareholders do not agree with the suggestion that was made by the board of directors, they've suggested that the dispayment of 50 cents per share occur by the end of 2023. Next, please. So here I conclude my presentation once again, thank you all for being with us today for our earnings call. Very proud of the results that we've achieved once again, thanking and congratulating my peers at the executive board level.

Speaker 3: for the important work that they've done over the course of the last two years that we've been together and also thanking all of the investors and shareholders for the trust that you gave us over the last two years. And I'll pass the floor back to Chukala. Thank you. Thank you, Hildedy. The walk-in move to our Q&A session. And the first question that we receive from Bruno Montanay with Morgan Stanley , Bruno also sent us a message. I'd like to give you a very warm welcome to Mr. Jean-Paul Pradges and hope that that their rights can perpetuate the governance standards, design, and strengthen over the past years.

Speaker 3: that they've done over the course of the last two years that we've been together and also thanking all of the investors and shareholders for the trust that you gave us over the last two years. And I'll pass the floor back to Chukala. Thank you. Thank you. Thank you, Heathery. We'll can move to our community sessions and the first question that we receive from Bruno Moncanoi with Morgan Stanley . Bruno also sent us a message. I'd like to give you a very warm welcome to Mr. Jean-Paul Pradges and hope that the Tuberais can perpetuate the governance standards, design, and strengthen over the past years.

Speaker 2: The firstabilization fund or account was a proposition made in a crisis period, in a very critical crisis period of the last, the latest heights of oil and gas and fuel prices worldwide and also in Brazil.

Speaker 2: and especially in Brazil during electoral period, et cetera, et cetera. I still believe it would be a part of the solution. It's not the whole solution when you talk about government policy, about sectorial policy, about economics, microeconomics in the country. So this would be to the Congress to decide if this is a part of the solution, if that bill of law that is still in the Congress was approved and standard, it wasn't to go went to the chamber of deputies and is there still for voting, if that can be enhanced or should sleep forever, whatever. But in terms of importality and in terms of what Petrobras

Speaker 2: would see as pricing policy. Again, I should emphasize what I always said to the domestic market, to the press in general, here even before being where I am. Petrobras sells fuels, majorly, in the Brazilian market. So it has to go with the best, the more competitive, the more if necessary aggressive policy of price and commercial terms, as it can make effective to retain its market shares and its position. Wherever it wants to stay or whatever it wants or understand us important. It is a way to be in the Brazilian market mostly. So it is not up to us to command, to lead, to strongly suggest or anything like that, the pricing policy for the country.

Speaker 2: We have to deal with our own policy, with our own clients, with our own markets of selection or preference. And this is basically what we will do. We can help in government policy, we can give suggestions, yes. We can participate in study groups for that, yes. No problem with that, as any other company would do. Through entities, directly, but our role is to take care of our own policy. And this is what we will do. Import parity policy is the best price for our competitors. It's not as necessarily our best price.

Speaker 1: We have refiners here. We compete in different conditions because we can. And if we need to use these weapons, if we need to use these strategies or tools, we will use them. I think that answers pretty much the question right now. Thank you, Jean. The next question is also for you. And it's about temporary taxation of IOT sports. Do you see risks of such tax to become permanent in the industry? And even if temporary, does it jeopardize the investment climate in the IOT industry, especially on foreign direct investments?

Speaker 2: Look, I think especially when we are oil companies, we have to be resilient and accustomed to government rules to changes in perspectives, especially when we have changes in my elections, democratic elections. So the risks are there. Nowadays I would believe that the risk is more on the government side than in ours. I think the risk of not having disapproved.

Speaker 2: the risk of not having enough votes to pass this temporary tax. I believe the origin of this is in the issue of the reestablishment of taxes in gasoline that was recently discussed. So it may have been used as a type of compensation or temporary compensation for that kind of division in the timing of the of the of the taxes to come back.

Speaker 2: they divided it into two periods, 75% of the burden would be coming back at first time and the rest of the burden would be delayed. So this may have been born as a compensation for that. For us, we have to deal with it. We're not necessarily in favor of that because even in Congress that was clear, myself and the company, that's a position that we are mutually understanding about that. In Congress, this was not an initiative that I liked as a leisurely and I had the opportunity to take this out of one of the propositions of legal documents that was in which that was included. But anyway, we have to deal with it. Government has a challenge which is to get support to have this approved. I prefer the expectation of inducing domestic market or domestic sales in other ways.

Speaker 2: And also, there are certainly other ways for the oil sector to contribute with the state government. The contribution of Petrobras in the last year, for instance, which was pretty much high and maybe a record, 280 billion reais were paid in tributes in general, not only in taxes, but also tributes regarding the concession agreements. Individed 70 billion reais, that's to 35 billion reais, which in dollars translates around 63 billion dollars in one year contribution only by Petrobras to the Brazilian state and similar entities in state governments, municipalities, etc. This export tax will represent around 9 million dollars per day, maybe 120 days, 1 billion dollars.

Speaker 2: So it's kind of this proportional. So it's maybe much more an interest of the government to compensate what I said about gasoline taxes rather than a consistency, a consistent policy to tax exports of oil.

Speaker 2: But if it becomes by any chance, we will have to understand the reasons and we will have to deal with it. Remind me that we should remind that we are exporting at this point 1.3 million dollars a day. And we need to do it sometimes, maybe not everything, but we need to do export somehow. And other companies export much more in us. At this time, if I'm not mistaken, we have around 65% of the exports of oil in Brazil are from other companies rather than Petrobras.

Speaker 1: to anyway to survive with this or no. The next question comes from Regis Cardoso, we've produced this. He also senses a message congratulations to all Patreveras team for another quarter of excellent results. I also take the opportunity to congratulate Jean Paul on his new position and wish him much success. Regis first question is about pricing policy. The recent discussion about FioTax Hikes has once again put the Patreveras pricing policy in the spot line. The company reduced prices this week, very remains aligned with international parity. This pressurized intent to change the way it prices products in the domestic market. If so, what would be the conditions that this new price policy would need to meet?

Speaker 2: Yes, yes. I think I pretty much started to answer your question before, but one expression you use is very important to enhance. International parity is one thing. Import parity is another thing. They are very different. I believe nobody is crazy enough today in the world or being big and oil and gas to get out of international reference. That is pretty much impossible. Unless you are a big exporter and you have a small market at your country and you want to give gas or diesel almost for free for other reasons in the country because you have so much to export that it doesn't make any difference for you. Or you are a state company that are not aligned or doesn't need investment partners from the private sector. Otherwise you have to be consistent with whatever happens in the world with the commodities related to the world. The oil and gas. Being said, that being said.

Speaker 2: in Brazil for the domestic market, import parity, which is the part from outside, the price from outside plus the freight and all the cost to put this at the door of our refineries. This price to me, this is this price is the best price for our competitors, not necessarily for us. Maybe the maximum you can reach in a market where you're not disturbed by your competitors. But once you are competitive, you are disturbed by any competitor, we must move and we must use our competitiveness, our investment which was made here and has to be paid and remunerated, which is our refineries, our domestic logistics, our competitive advantages in being the leading company, not the monopolistic, not a gemonic.

but the leading company in Brazil in the market sector of fuels. So we will operate at our best domestic market price. The most competitive price per region, per point of delivery, per good client or even bad client where we need to do price differentiation for that. That is tetrobras policy of price. It is not a government affair. It is a company affair. And this is up to us to decide. Another thing is the government to decree anything different from that. That may help, that may happen in two levels. The government acting as government and this decree or whatever it is will be valid to all the agents, including petrobras but all the agents. And as a second instance, it may be an order to petrobras as a majority shareholder. Or a dominant shareholder. And then we will discuss with the government.

if whatever command is given, if that is viable, if that is suitable for the company, what are the consequences of that? But I don't believe we would have a problem with that. We will practice, again, we will go back to practice the best domestic price for our projects, for our products, using all our tools to be the most competitive, most attractive price to our clients. That is our policy. Thank you, Jean. The second question from HES is also for you, and it's about strategic priorities. What are impressions of these first few weeks leading petrobrates? Is it possible to outline what the new management strategy priorities will be for the company? Which aspects of the current strategic plan should be maintained, and which should be revised?

I'm not coming back coming to Petrobras for the first time. I'm returning to Petrobras. I know the company I was here almost more than 30 years ago in the end of 80s, beginning of the 90s. So this is a return for me. And the return to the company and to be back with this exceptional staff. So that's our review.

technical, managerial teams, the workforce in general puts in me and in them I think great expectations with the great pride and great energy to deliver great news for you guys and for the Brazilian people, for our consumers, for our clients in the near future. We will discuss the new strategic priorities together, including with you guys, which are management managers of the money of our investors.

So we will do these discussions openly, transparently, certainly in a big company like this, we don't give big switches. So we do have things in the current strategic plan that will stay there. I would say, I would risk to say the majority of them, but we will have our own suggestions as well to implement. And we will discuss that together together the new time. We will start this after the stress of these first weeks. We are establishing our teams. We are changing the board of directors. We will have changes in the board of administration and the facility and the instruction. So it's think at the time we already have the teams together. The company is one only company, one only team. So we will work with them.

and we will deliver some ideas, put some suggestions at the table, discuss with you guys and others, and then we will build together this new strategic plan. Thank you, Jean. The next question comes from Luis Carvalho with UBS. He also sent us a message. First, we would like to congratulate the company's management and team on the solid results. We also would like to congratulate Mr. Praches and wish a good luck in the new role. The first question from Luis is SEO. How to avoid conflict of interest between the control issue holder minorities.

politicians and the company best interests in the decision making process. Luis, first of all, try to change the orientation. You're the cell guy, cell guy, change that. Well, I think the challenge here, and this question is very good because it's very common, Luis.

because of the recent past and the not so recent past as well, it is fair to have this kind of impression or conclusion that Petrobras will be subject to politicians and so on and so on. Not that it was not subject to this in the recent years as well. We had and we have to remember that. We had very recently 2019, 2020, politicians and government.

when we are present in New Regions, when we have to deliver new projects with the communities, with the mayors, with the city councils, etc., etc. This has to be an advantage. Since it's a reality, and it's not going to change.

If somebody doesn't want to be a partner of the state of Brazil, it has other options. People have other options. Then you will be right to say sell. But right now, this is a reality for us. And it never changed. It didn't change on the Lula, on the Duma, on the Bolsonaro, on the Tamer. And it will not change.

They have other problems. They have other natures. They have other difficulties. There are companies that are in oil and gas in countries that have no oil and gas anymore.

Can you think of a problem bigger than that? You have to deal with foreign governments every time to increase your reserves. So let's kind of think out of the box a little bit and see advantages and not only these advantages. And deal whenever they are these advantages deal with them. Go frankly and talk to the politicians, to the government, to the president and say this is not policy, this is not good for us, this is not good for Petrobras.

Let me take this another way of doing this. Let me give you part or the entire result that you are expecting in another way. With my investors, with my functioners, with my workers, with my team, I will bring something different, but with the same result or almost. So this is possible. This is possible. I believe that.

Thank you, Jean. The second question for Luis is also for you. So there has been a lot of comments on what Petrobras focus will be, particularly with non-core investments. What is, in your view, the optimum portfolio for Petrobras? Thank you.

If we could list a few potential options, you can see the company venturing to renewable power generation of show wind, fertilizers, biofuels, fuel distribution, new refiners, or some other sector. Is there a target in your consideration of how much this could represent of the company's future investment plan?

Luis, one thing is not to be in the energy transition or being late as we are now. The other thing is talking a lot about the subject and giving the impression, which is not true, that we will, all of a sudden switch completely to another type of source or a type of business. We will not do that.

we need to be focused not only in operational point of view but also in financial point of view and in terms of investment put in that in our exploration and production of hydrocarbons sector. So upstream oil and gas will keep being our main focus.

And this represents already 83% of our investment portfolio. So it may stay about that.

I could try to guess, and this is my responsibility individually, that we would not in the short term, not even in the mid term, go over 20 to 25% of that amount in investments into other things, including refineries transformed into biorefineries.

or natural gas into new segments, but also on offshore wind or bio whatever components in fuels, etc. Renewables in general. This will not be a transition that will make very fast, but certainly has to be a transition that we

effectively have to be done doing. We cannot stop one day to think about the energy transition. That doesn't mean that we are going to do the transition, all of a sudden. There's a big difference between these two things. We will look at a way of

putting more bio components into our refinery, yes. That is the fastest way of merging the oil and gas industry or the traditional conventional oil and gas industry into the future. We will search for new segments for our natural gas production. Yes, because...

Burning natural gas is part of the energy transition. It's better than burning diesel or burning fuel oil or burning coal. It is better. We are evolving doing that for the humanity in 4.0, 4.0, etc. And we know how to do it. We can fuel trucks.

in Brazil instead of diesel with natural gas. We will go through that path. And also we can evidently go to operational fields that are similar to ours in oil, but to generate from renewable sources.

That is the case of offshore wind. That's why we quote offshore wind as an example of that. So it's not, it's natural for Petrobras being the offshore company that it is to go offshore for wind. It's much more simple to keep a wind mill in the middle of the water offshore than doing dynamic position and standing a platform, millimetrically precise.

stocked in the high seas of Brazil. So it should be something natural for us. Fertilizes, we will have to analyze, petrochemicals, we will have to analyze. They are not in the strategic plan big time right now. We will go and revisit the circumstances of the Brazilian market for that. And we will see how we can contribute with our raw materials to that.

But certainly, petrochemicals, bio-petrochemicals with gas as well, is something we have to reflect about because the oil era will start ending by the transportation sector. And the final phase of it will be petrochemicals. So we can also prolong our flow, our cash flow in oil and gas business.

through that segment. But this is something we will have to confirm with all our open and transparent discussions that I just mentioned.

Thank you, Jean. The next question comes from Frank McGame with Bank of America Merlinch.

And the first question is for you, the crisis expected continues to generate significant free cash flow. What should be the priorities in using that cash flow? If cash flow is sufficiently strong, should the payout above the legal minimums continue to be paid to shareholders?

Frank McGahn, first of all, I have to say hello, special hello to Frank McGahn, because maybe is the first, the only guy in this meeting that knows me for so many years. So welcome back my friend. I heard that you're living in Buenos Aires or in Argentina anyway. So congratulations and welcome back. Frank, I think the priorities. Thank you.

to use cash flow must be in any company solid projects if people wanted to stay with their money in their pockets they would not invest in companies so they invest in companies because they believe companies are an excellent vehicle to multiply their their their their monies with something interesting being done for the society for humanity and for the countries or for the markets they are interested in

So I believe the, of course, this is, this maybe is sounding very obvious, but this is what sometimes people doubt about when they ask these questions to the new government. Solid projects, excellent and recognized partners together, and that's very important for us in the transition, the energy transition, because we made it the best company in oil and gas of fraud and et cetera, but we are not.

necessarily yet recognize as the best company in other things. So in order to go into these new frontiers, we may be well accompanied by pair companies, not different companies, not smaller than us, but companies that are the same level doing the same type of quests into the future than us.

And above all, as I said already, we should continue doing what we know at best in our core areas, because this is as essential as the transition. And more than that, this is...

a condition for the transition. Otherwise, we don't know to do anything else than getting oil out of the deep waters, and not the deep waters of Brazil, for instance, or of the equatorial margin. So we have to get more emphatic and get focused in what we know what to do to get good results and reinvest part of that at least.

in new areas to keep being alive for the next 70 years. This year we are celebrating 70 years of better brass. I want to deliver a better brass when my term is ended, whenever it is, a company that has the certainty that will exist into 70 years ahead and not become a company that is evaluated like a start-up, a garage start-up.

Petrobras is a huge vehicle of investment and investors should look at Petrobras as a secure investment.

It may be not the high hit of every day in the markets, but it must be the most secure destiny of the money of our investors. The one that people can trust, the one can give, probably can give shares to their sons and the...

Grand Suns, a company will be there in the future and will be following the tendencies and even the cutting edge technologies and activities of energy generation, energy production, energy distribution in any type in the near future and in the long time future. So that's what we expect.

Thank you, Jean. The second question also from Frank and also our last question. It's also for you. Would the traversals consider expanding in petrochemicals as a further expansion of its downstream segments? Why not?

Maybe right now to be strict with the rules in general I would say that I need to approve a new strategic plan But nothing is ruled out. I mean when you think about a new strategic plan after looking at what the strategic teams have as historical and as a base to think about

As I mentioned several times here, we will talk to people, we will revisit some point of use and we may go back to Petrochemicals, yes, there are some good opportunities in our screen right now. We have also fertilizers to look at, we have also international activities to look at.

So, and I'm taking this from the, because I saw Frank was asking this in the Portuguese questions here. Talked about internationalization, I think, yes, why not? But we need, again, solid projects with good or excellent recognized partners will make us go through that. But we will have to decide.

all this under a new strategic plan that will start to discuss still. So we will need a little more time to be precise, but nothing is excluded, except if something so so different that we never were present at or doesn't make at all part of our

efforts of historic efforts or visions of the future. But things that we're already in our portfolio, things that are complimentary or supplementary to the activity of oil and gas or into the site of the energy transition with what we have in hand. Offshore abilities, an excellent super research center that can develop several things and have already things in portfolio.

All that will be used into the strategic plan. We will never do crazy things or things out of nothing. This will all have origins in the company, in the technical teams and in managerial decisions that will be taken talking to the investors and talking to our shareholders.

Thank you, John . Thank you all at this time. The Q&A session is over. If you have any further questions, you can send it to our Investor Relations team. Peter Bracias-Fol, Rodrigo Raúz, will now make his final remarks. Please Rodrigo. Thank you. Thank you, Carla. Thank you, John .

Thanks everyone for being with us today, once again, for the results of the fourth part of 2022. I'd like once again to congratulate and thank my peers at the Executive Board with the brilliant work that they've done and also on behalf of the Executive Board, thank all the investors and shareholders for having placed.

your trust in us as executives of the company, and also would like to congratulate Kahla for the brilliant work in conducting our earnings call. Thank you once again and have a great day. Thank you, Hudaegu, very much. And I hope I support to put the rights of CEO Jean-Paul Pratt. Please, please, Jan.

Thank you Carla. No, it was I just asked to have a final voice here to welcome all to this kind of conversation. We will make this more often not only at the announcement of results. I promise that to some of you sometime ago, especially the ones that were representing shareholders in Brazil. We hope to meet you each one of you.

or for everyone that is here and others in the next month around the corner or in other places. We were planning to go out to Houston, then another time we will be in New York visiting some of these investors. So we will be together in person or by video.

Even before changing plans and projects, as I said, so this will be very important and we will always be with the channels open here. As much as we are saying that to also our workers, our workforce, these are two things that we will have to have in mind. Shareholders and workforce.

We will help us, they will help us to build this future. Thank you.