Q2 2025 Petroleo Brasileiro SA Petrobras Earnings Call
Speaker #1: I really think about what it means to produce 125,000 barrels a day, especially with 500 free source oil wells. These efforts by Petrobras are ongoing.
Speaker #1: We are considering increased production. The needs for increased production in also are cost reduction needs. We are aware that we made our strategic planning last year considering an oil price level of 83 dollars per barrel.
Speaker #1: And today, the price is 67 dollars per barrel. We are absolutely aware of this fact. And we are ready to respond by increasing production and reducing cost.
Speaker #1: As for production increases, this year we have linked over 50 wells. What does that mean? This means that by the middle of the year, we had already linked more oil wells and also started production of more oil wells.
Speaker #1: Then in the entire year of 2024, this was only possible because of our joint efforts and a great partnership between all our top. Our executive suite members with lots of processes, collaboration, and processes, partnership, analysis, and also inventory optimization.
Speaker #1: From the perspective of our C-suite and their teams, we have delivered more and spent less. So we are congratulating all teams; we are expressing our total support and incentive for them to continue on this very good track.
Speaker #1: We are also presenting a new question. We will be soon presenting the beginning of the B78 platform operation. That will work with pre-sort with a capacity of an additional 180 barrels a day.
Speaker #1: I'd like to remind you that these platforms were inhabited in or vacant; they were they had no crews. So we changed this procedure. So now they have a crew; they go straight to their location or their sites, and that also anticipates production and operation of more oil.
Speaker #1: Again, to benefit our investors, government or private sector investors. That's another improved procedure that ultimately means more oil in our tanks.
Speaker #1: We also had more natural gas supply offered to the market. We increased our gas production by 15% for the market, and this was a result of our Route Three reaching the state of Rio de Janeiro.
Speaker #1: In the Boa Ventura complex, and this also means that in addition to a route three, there has been a lot of effort put into processing this gas in a gas processing unit in the Boa Ventura complex.
Speaker #1: In the Itaboraí hub, ladies and gentlemen, we are really happy to have all this good news for you. These deliveries are under our control.
Speaker #1: We're totally in control of them, so we are delivering them. We're roving on them, and you can rest assured that in our daily work, that means continuous improvement.
Speaker #1: And this is done when the company realizes that there are challenging geopolitical scenarios ahead of us when we consider the price of our final product.
Speaker #1: Crude oil and gas. As I said, these factors are not controlled. The price of crude oil is not under our control. However, mitigating the effects of these price variations is indeed under our control.
Speaker #1: So we are responding by increasing production with also increased production and also a very strong perspective in cost reduction. In the second order, you ow the second order was impacted by a falling oil price that was around 68 US dollars per barrel.
Speaker #1: That was 10% down as compared to last year, last semester. And we responded by increasing our production by 5%. And that mitigated that effect.
Speaker #1: Considerably, the effect of oil price falls. In our balance sheets, we are now working hard, and you can rest assured that we're doing this to make our projects increasingly more competitive in this scenario of uncertainty and in this scenario of price falls of our final project.
Speaker #1: Product in the major product is crude oil. You will see that we will have more earnings in our next business plan. That will be presented by the end of the year.
Speaker #1: So we are analyzing all possibilities of simplifying and optimizing our project to reduce costs and also to increase efficiency gains.
Speaker #2: Heavy sandbag. I'd like to repeat what I mentioned in the previous webcast. And what I have been saying since the beginning of my speech today: we are absolutely committed to looking for the best possible result for our investors.
Speaker #2: And for the Brazilian society as a whole, we will generate value even in challenging scenarios. In terms oil prices, our projects will be profitable.
Speaker #2: And valuable. For the portfolio of our company. We will dedicate to the things we do best, which is to explore and produce oil and gas and its projects selling these products efficiently and with quality.
Speaker #2: Always reconciling all these efforts considering our needs to provide a fair energy transition. Thank you very much for joining us. And now we will proceed to the presentation of our CFO.
Speaker #2: Fernando Melgarejo. Who will talk about the financial results our company, Fernando. The floor is yours. Good morning, everyone. Good morning to those who are listening to us.
Speaker #2: And I'd like also to greet everyone from the Spanish. Thank you for joining us for another Petrobras earnings webcast. And I'll begin by presenting the key figures for the second quarter of 2025.
Speaker #2: Well, Magda has already highlighted in her opening remarks the remarkable growth in our production this quarter on this slide. You can see that, while brand prices declined by 10% quarter over quarter, going from 75.7 to 60.7, we had an increase of 5% with new production systems and improved operational efficiency across our fields.
Speaker #2: As our CEO mentioned at first half of the year, we already reached the midpoint of our 2025 production target, which is 2.3 million barrels per day.
Speaker #2: Commercial gas production also grew significantly. Petrobras increased its gas supply to the market by 15%, mainly due to the progress of the road at three pipeline and the Boa Ventura gas prop system unit.
Speaker #2: When considering total production, we reached a new record of 4.2 million barrels of oil equivalent per day. This increased production of oil in quarter two was key to delivering financial results in line with the previous quarter and was only made possible through consistent CAPEX execution and strong engagement from our workforce.
Speaker #2: And our CAPEX has been discussed in many situations. If it would be productive, it would have an impact on our production and this is being presented now.
Speaker #2: Let's move on to slide six. Our operational slide six. So we reported net income excluding one of events of 4.1 billion US dollars and EBITDA also excluding one of events of 10.2 billion US dollars.
Speaker #2: These figures are on par with the previous quarter when brand prices were 10% higher. In other words, our strong operational results offset external factors which were beyond our control.
Speaker #2: For example, the price of the commodities. Efficient management of our commercial strategy also positively contributed to the results. We implemented three diesel price reductions in the quarter two and one gasoline price reduction during the period.
Speaker #2: Maintaining competitive margins and profitable operations and also the company's share. Operating cash flow was 7.5 billion US dollars. Here we saw a decline compared to the previous quarter.
Speaker #2: Mainly due to known events such as peace consistent credit related to last year's tax transaction. We had positively impacted quarter one, 25 results, but was not the case for this quarter.
Speaker #2: Additionally, the payment of variable remuneration which had a higher breadth, which is the basis to payment to government shareholders, and payment of variable remuneration, which usually impacts company cash flow in the quarter two after the shareholders' meeting.
Speaker #2: All events that will not happen in the next quarter. Additionally, in quarter two, we had higher selling expenses, mainly due to increased crude oil export volumes because of our production.
Speaker #2: Slide seven. Here we present our debt history. You can see that both financial debt and chartering remain under control. And that over 60% of total indebtedness relates to leases of platforms, vessels, and rigs.
Speaker #2: Which, according to accounting standards, must be recognized as debt. It is important to remember that this lease portion refers to assets generated. Production and consequently, revenue for the company.
Speaker #2: When we commissioned this year the SOS Alexandria and both chartered platforms, we had to record lease liabilities as debt. These two platforms added 3.7 billion to our debt this year, but on the other hand, we added 207,000 barrels per day of production capacity for our company.
Speaker #2: Considering other vessels and amortizations, leases added approximately 5 billion US dollars to our desk in the first half of 2025. So these leases are associated with more capacity, more production, and therefore they add revenue to our company.
Speaker #2: Well, regarding financial debt, this quarter we highlight a successful public offering of the ventures, totaling R$3 billion. It was successful with high demand and allowed us to raise funds in the local market.
Speaker #2: Something we hadn't done for eight years. With competitive costs in line with our liabilities management strategy. Slide eight, we are going talk about CAPEX.
Speaker #2: We invested 4.4 billion US dollars in quarter two. Which added to the first quarter leads to 18.5 billion US dollars for this year. We are according to our plan of our guidance, which is 18.5 for the year.
Speaker #2: We have a firm commitment to the market to execute what we planned. Accelerating value generating deliveries and anticipating revenue. Due to these efforts, we started production from the SPSO Alexandria de Guzmão, starting over two months ahead of schedule.
Speaker #2: As our CEO has already mentioned, the a huge platform began operating in February and already reached 200,000 barrels with only four producing wells. Soon we will reach peak of production.
Speaker #2: In 2025, we have already connected more wells than in the entire previous years. 48 wells including 30 producing and 18 injecting wells. In the same period last year, we had 31 12 producers and 19 injectors.
Speaker #2: This is therefore a CAPEX that is very much focused on production that's now procedures line number nine. Petrobras investment has been bringing benefits to the company.
Speaker #2: Its shareholders and society. We are talking here about more production and consequently more operational cash flow. And we are now important exporters of commodities contributing to Brazil's trade balance.
Speaker #2: It's not just investment in new projects; we are improving efficiency by adjusting our maintenance schedules and managing reservoirs efficiently. All these contributions lead to growth in the production curve.
Speaker #2: Our CEO mentioned in her opening remarks, production in July which exceeded the previous quarter. We are talking here about 3 and an increase of 380 thousand barrels per day only in seven months.
Speaker #2: With this trend and ongoing efforts, we expect average oil and gas production in 2025 to be at the upper end of the target range, representing about 100,000 barrels per day above the midpoint.
Speaker #2: At a price of 70 US dollars, the US dollars we will have an additional 2.5 billion US dollars revenue. And this current planned production curve carries less risk today than when the plan was approved.
Speaker #2: In other words, for the same confidence level, we would have a higher curve today. Slide number 10. We have talked CAPEX production and now we will talk about dividends.
Speaker #2: I want to remind you of the strength of our shareholders' remuneration policy. The formula ensures dividends aligned with different oil prices. Without compromising the company's financial robustness.
Speaker #2: Accordingly, we apply the formula set both in our policy and we will distribute 45% of a free cash flow from quarter two. Therefore, the board approved a distribution of 8.7 billion Brazilian reals equivalent to 0.67 per share to be paid in two equal installments in November and December this year.
Speaker #2: Well, this concludes my presentation and thank you all again for your attention. So along with the other directors, I'm available to answer your questions.
Speaker #2: Now I hand over to Eduardo, who will then continue with the Q&A session. Thank you, Fernando. Thank you, Magda. So let's start with the Q&A session.
Speaker #2: Irene, can you hear us? You can proceed with the question. Good morning. Thank you very much for the call. So I will allow payback results with the what you mentioned yesterday.
Speaker #2: So that you work with natural gas distribution as CEO mentioned, Petrobras has been focusing CAPEX, particularly on upstream. Delivering operational results. We'd like to understand what we can expect in terms of new advancements in the next few years and how this is generated.
Speaker #2: Is this integrated into the business plan, including a strategy from the board and timing for this operation? Thank you for the question. We are a company that is already integrated.
Speaker #2: So, Petrobras is 71 years old, and it started and became what it is because it is a company that is integrated all over.
Speaker #2: So with that, we are looking at the possibility of reaching synergy. When we look at an increase in gas production, for example, we are looking at what it represents.
Speaker #2: For ample, in terms more LNG for the market, we import LNG and we will deliver more this margins. Related to our product, they also need to be captured.
Speaker #2: So what we did yesterday was to say the following. Well, here we have the product that will have an increasing production and if it's a good business for the company, if that's profitable and if this is properly attractive, why not have this additional synergy?
Speaker #2: So we have now the insight right now. No project to acquire LNG. There is nothing in Petrobras portfolio but we guarantee a make sure we wanted to make sure that the doors were open for a possibility if the project is good and profitable and if the project attractiveness is in line with what Petrobras demands.
Speaker #2: Well, maybe we can say that basically Petrobras has already been working to be the best choice for our customers. Being the best choice for our customers means having competitive prices and ensuring availability where there is demand for the product.
Speaker #2: So we have already been doing that to the extent that we have direct sales. We have been trying to have direct sales to big customers.
Speaker #2: So we are doing that already. We have tried to access terminals, channels, and advancing in way obviously this is a way of distributing. We will get to the source.
Speaker #2: It's something that is natural. As our CEO has mentioned, we will have a significant production of diesel. We will have an increase in production of LNG.
Speaker #2: So, all well. For that, we need markets. The market is the way to monetize, and it's the most profitable thing for our company.
Speaker #2: This is where our efforts go to and in this regard, we have been advancing in direct sales. In direct sales of LNG, where we have infrastructure available, we are talking with big customers to supply LNG directly to them.
Speaker #2: Capturing a margin as our CEO said. I would say that this vision is very natural. So we have a driver here. I think it's on the table for discussion and we will look at it.
Speaker #2: And obviously, finding this economic rationale as our CEO mentioned and we are going to look at it and this will be considered for approval going through our board.
Speaker #2: Well, just adding to that, from the point of view of governance, as we've already said, we will follow all the assessments by governance regarding the availability of funds in order to make investments when needed.
Speaker #2: So we are really sure that any product it will be implemented if it creates value for ur shareholders and if there's discipline, discipline in the capital to be used in the project.
Speaker #2: So it has to do with that limit we have and we have have been strongly managing our debt and we intend to reach the target we presented in our strategic plan for 2025-2029.
Speaker #2: Thank ou. Fernando Magna Mileni for the question asked estion by Bruno Montanari. Morgan Stanley. Good afternoon. Thank you for taking my question. I'd like to congratulate the company for the significant increase in production in such a short period of time.
Speaker #2: It's very clear the ramp-up of the new platforms and the pre-sort layer. I'd like to understand about the risk factors that is less than leading to a more conservative curve and connecting to a better execution.
Speaker #2: Try to advance a potential revitalization of Isapinhoa so that you have even greater production in the midterm. Thank you very much. Good morning, everyone.
Speaker #2: We are in a y special quarter. We had increase in our production reduction. Well, we spent last we produced more and we also strongly reduced our costs.
Speaker #2: So the issue production in this field, we are talking about this growth. And this really refers to this reservoir. We have a reservoir in the pre-sort layer and the effective response of this reservoir is only given when the field is connected.
Speaker #2: We have had very good surprises. Expectations have been confirmed in terms of increasing production. And wells that are really very productive. We have four wells with over 200,000 production and by the end of the year, we are planning to increase production but we'd like to remind you that we will have the digital platforms.
Speaker #2: We have started some big platforms and we will have the planned shutdown. So this increase will level off. But anyway, by the end of this year, we will have an increase reaching our target asked for plan.
Speaker #2: But at the upper portion of our target, we are looking at Isapinhoa and Tupi. Improving optimization with new units. To increase production there.
Speaker #1: Now adding to the question, you mentioned to be in particular, right? So as Sylvia mentioned, to be is being is having at least another two projects.
Speaker #1: Revitalizing Tupi and what we call complementary Tupi. Our challenge is to make Tupi reach the level of 1 million barrels of oil a day.
Speaker #1: Thank ou. Thank you, Sylvia. Thank you, Ma.
Speaker #2: Magda, thank you, Bruno, for your question. Now Vicente. Vicente of Bradesco. Bradesco so Vicente, over to you.
Speaker #3: Good afternoon, everyone. Thank you for taking my question. I'd like to discuss the GOP release. For LPG release you published last night. So any M&A movements in this sector, they ed to be approved in the November plans first and only then you would do any make any transactions.
Speaker #3: Then you also mentioned in the release that you would have partnership distribution partnerships according to, quote unquote, provisional contract provisions. So what kind of partnership is this?
Speaker #3: What are these contract provisions? Thank ou.
Speaker #2: As executive director or Claudio,
Speaker #1: Claudio Schlosser mentioned, as our production increases, our greatest challenge is to really to put these products onto the market and also to widen our market base.
Speaker #1: We have increasing production that means extending our refinery facility or refinery system. We want to increase diesel as as 10, which is highly profitable and at least an additional 200,000 barrels a day.
Speaker #1: As a result, there's more pressure for increasing our markets. So what are we what have we been doing? We knock at the door of our largest consumers including agri-business in Brazil, agri-business consumers.
Speaker #1: We are now having LGP LPG, not only industrial but also domestic. In other words, we are expanding our natural gas market. As you can see, RF words.
Speaker #1: To have natural gas in Brazil's free market meant that a large number of companies are now part of this movement led by Petrobras. This is why we extended this gas market by 15%.
Speaker #1: Now what we cannot have is limitations. To make strides to ake progress in this area. So whatever is needed B to B or sales to large consumers, sales to final consumers, in gas stations, or even in terms of gas.
Speaker #1: What we want is to have open doors to make choices to choose the best company that will add the most value possible. And in the most efficient way of really placing our product in the market.
Speaker #1: Now after we understood that Petrobras over time, Petrobras has chosen to leave some markets behind. We had this duty. So why having this duty of leaving some markets?
Speaker #1: Why can't we leave the store open? So that this door may be used in best possible way. And this is what we did yesterday.
Speaker #1: Thank you, Magda. Thank you for your question. Now Gabriel Bardo of City. Gabriel, you have the floor.
Speaker #4: Thank ou, Nat. President Magda Fernando's thank you for taking my question. My point here is just one. One of the major topics that has been discussed with investors are, of course, your investment plan for next year.
Speaker #4: We have a perspective and taking the cue of the last commitment when you discussed efficiency gains and the difficulty we have today hiring new personnel in tighter industry environment.
Speaker #4: We have a software price movement for probes I think what I need to understand better is about what's going to happen, what can we expect next year.
Speaker #4: When you look at our plans. For the future and also considering your previous CAPEX data. So how flexible are you for next year? And what solutions could you provide or improve for 2026?
Speaker #4: And what are MMAs and also LPG or other fuels. So how does that mean more CAPEX efficiency? Or a market that is a little more uncertain in terms of oil pricing the next few months or even next few years.
Speaker #4: Okay, I'll start answering and then I'll give the floor to Fernando. And also Sylvia and Renata if they believe they should also comment on the estion.
Speaker #4: Well, what we are what we've been telling you is that we do have extremely relevant business opportunities in exploration and production of oil. The company has the major focus.
Speaker #4: Its major focus is exploration and production. With highly profitable projects you saw the profitability level of these projects. So when we show results, in the second quarter we have decreased prices that were offset by increased production levels.
Speaker #4: So when we look at these projects, first we will check whether they're profitable. And number two, whether they're itability level is desired. If this is the case, then we move on.
Speaker #4: In other words, we will not destroy value rather we will move on with profitable projects and in a way we should also inform you that for the first time in all Petrobras's life, a project changed its phase.
Speaker #4: So we had projects that were progressing in our portfolio advancing. In their phases moving on in their phases. You know, you have zero, one, two, three, and four assigned to our projects.
Speaker #4: Four means the project is totally mature. So we had projects that were expected to migrate from phase three to phase four. Now when we look at them, with this new level, they went to level two.
Speaker #4: The idea was that these projects should be optimized. In other words, we won't leave these projects behind. They are still profitable. They used to be profitable before.
Speaker #4: But the profitability level they had at that time with the current oil price, we decided to put them a few phases back, back to the drawing board so that these projects to be better optimized.
Speaker #4: I'll now give the floor to Fernando and then Renata. So that they can give you a little more details. Thank you, Gabriel, for your question.
Speaker #4: First, I should stress that the current scenario is more challenging in that reflects on our business plan. And as we have a this commitment with a capital discipline, all our business plans structure needs to be adequate.
Speaker #4: To reflect the needs for this new scenario. In other words, we'll be le to restructure all our CAPEX that will then meet the needs of our investing capacity.
Speaker #4: Considering our new production curve. That we will deliver until a potentially even above the margin, but within the margin or even in the upper range than Brent.
Speaker #4: Brent is lower, so we need to offset that. And then the cash flow generation that is possible. So I believe the greatest goal or greatest commitment is really to reduce cost for the company and also optimizing projects that are present mentioned.
Speaker #4: It's the first time we went back to phase one to consider engineering aspects and then also productivity. So all these factors together, they are integrated into our business plan.
Speaker #4: The idea is for us to devise a business plan that shows all this capital discipline with adjusted debt, adjusted to our size. We do not want to increase our debt.
Speaker #4: For no reason, of course. Our target is still 65 billion. This will remain. So we want to create a portfolio in a business plan that is safe and secure and adapted to the current situation and scenario.
Speaker #4: Hello, Gabriel. I think they've said everything that had to be said, but I'd just like to add one more point. Whatever the value of our business plan in 2026 rests assured that we will realize make it happen this year.
Speaker #4: In the first quarter of last year, it was at 30% and this quarter it is aligned to what we had planned. It was 30 below the expected level.
Speaker #4: So, whatever value we execute as planned. Now, Magda, Fernando, Renata. Thank you, and thank you, Gabriel, for your question. Now, Lilian Yan of HSBC.
Speaker #4: You have the floor, Liliani. Hello and thank you for the opportunity. Can you please tell us about how different the results are today as compared to what you promised in your strategic plan?
Speaker #4: Of course, it's better than expected. You broke me at the top of the guidance, but again, can you please make comments about your CAPEX, your 18.5 billion investment plan?
Speaker #4: So in summary, is it safe to say that today there's a higher likelihood of this CAPEX being higher this year? Are you feeling pressure from providers, suppliers, can you can you expect Petrobras put more money into Braskem and that might be a good consumer of your gas?
Speaker #4: Thank you. Hello Liliana, thank you for your question. All contracts for our 2025 plan and part of 2026, they are already the contracts have already been signed.
Speaker #4: So there's no possibility of our or any idea of really exceeding our guidance. We will meet whatever was set on our guidance. Our commitment is a short.
Speaker #4: There are no surprises ahead. Petrobras team. If you allow me, to just go out of protocol and pinpoint some of the things you've discussed.
Speaker #4: You have 470 product that was the production number for July. And then new platforms this year. So I'd like to confirm something that you said earlier.
Speaker #4: That the curve with two 470 is still growing and then there's the effect of schedule shutdowns. Maybe you can give me more details. This, I ink, has to do with previous comments I wanted to repeat.
Speaker #4: These points and maybe if you could clarify them a little bit more. And then the question is about the last auction with the Amazonas blocks.
Speaker #4: And in particular, what was that partnership with Axon like? Do you believe there's synergy? With the Guyanas and Suriname? Thank you. Okay, Regis. With regard to the ramp-up, there was indeed a production increase in our reports.
Speaker #4: You can see that you have efficiency in the linking of the wealth. Of the wealth. I'm ing to talk about the labels you said seven.
Speaker #4: And the reservoir then responded well, and we had a rapid production increase. However, this growth will be offset by the other large platforms that are programmed to start production.
Speaker #4: So I can confirm that there's safety. We want our platform to have a long life and also we want to make re that we have future operations.
Speaker #4: So, scheduled shutdowns are essential. They need to be done. But we are within our plan goal and, in fact, in the upper range. That's about four.
Speaker #4: So we will have a very positive result. It is important to mention that the pre-sort layer is really surprising in terms of productivity. It's been a very positive surprise.
Speaker #4: With very good results and earnings. We have an oil column that's as high as the Pontius Hooker Mountain and the size of the Guanabara Bay and boozes is twice as large as the Guanabara Bay.
Speaker #4: And this is only confirmed when you start producing. As for the auction, yes, we did. I had the auction and defined the 10 blocks.
Speaker #4: We now have 16. Blocks in the in Amapa. We're just waiting for environmental licensing to test our productivity out. I should stress that the blocks we have there, they're very similar to the one that we have in Venezuela and Guyana.
Speaker #4: And very similar to what we have here in the campus basin as well. So we know them really well. And then the partnership with Axon and Shell.
Speaker #4: We we have over 30 partners here. Petrobras has over 30 partners. So choosing or this choice of working with Axon which is a great operator has meant very significant results.
Speaker #4: At that Guyana and that's very similar to the equatorial margin results. So and so best operator for us to share risks and knowledge. Thank you, Sylvia.
Speaker #4: And hat for your question. Regis for your question. Now Nick Greco of Itau Monique. Monique, you have the floor, Monique.
Speaker #5: Hello, good afternoon and thank you for taking my questions. By the ay, congratulations for your operating performance. It's really impressive. Congratulations to the entire team.
Speaker #5: I have one question only. The message that that your CAPEX and gas was very that message was very clear. Now we know that there are some potential movements on the radar in the on the horizon in the next few months like President Magda Chambriard mentioned.
Speaker #5: Movements in ethanol, for instance. You know that the government will hold auctions for areas in the pre-sort layer that were not hired this year still.
Speaker #5: So can you clarify about what we're ecting in terms of CAPEX execution in addition to the 18.5 billion when you consider these additional movements that are on the short term horizon?
Speaker #5: Can you maybe explain especially in the non-hired areas? Thank ou. Hello, Monique. Thank you for your question. Okay. Petrobras will always be present. When we discuss any opportunity of auctions.
Speaker #5: The Brazilian territory is our home. In other words, when pre-sort layer areas are being offered, we will always be present at such auctions. This is really in our interest.
Speaker #5: However, irrespective of any other factor, this will only happen if it makes economic sense to us. No one is considering embarking on a wild adventure, of course.
Speaker #5: If the project is worth it and if it is on our business plan, this is the direction we'll be taking. The same thing applies to ethanol.
Speaker #5: Our project portfolio includes investment in renewable fuels. In the energy transition, and also in biofuels, we expect considerable effort. For instance, in electricity, including thermal power plants.
Speaker #2: Again, we will do it provided to the project is profitable and attractive. Provide the project meets the attractiveness and expectations of our company in terms economic returns.
Speaker #2: Thank you, Magda. Thank you, Monique, for your question. Next question by Luis Cavallo from BTG. Luis, the floor is yours. Good afternoon. Thank you for taking my question.
Speaker #2: I would like to congratulate you on your production ramp-up. It's really nice to see it. I have a question. I'd like to reconcile it.
Speaker #2: I don't know. Maybe to our CEO, Magda Chambriard, or Fernando Melgarejo, the initial estimates for this year have planned oil at $83 per barrel.
Speaker #2: As Fernando said, now it's around $67, $68. That's the oil price right now. And in this scenario, you have a gap, a delta for cash generation that is below what was initially planned when we look at that graph.
Speaker #2: We know that it's a five years plan, but this year cash generation should be less than planned. And you are keeping that cup as guidance for this year and also for next year.
Speaker #2: So my question is, what is the flexibility depending on oil prices and changes in oil prices? Vis-à-vis this investment plan, and also vis-à-vis the debt or indebtedness limit the company has.
Speaker #2: Of course, considering also the payment of dividends. In this scenario with lower oil prices, you are talking a lot about the profitability of projects.
Speaker #2: They have to show that they are profitable to be approved. But what in which level of oil prices could we see not cancellation of progress, but maybe postponing projects towards the end of the plan because of lower cash generation more in the short term?
Speaker #2: Thank you, Luis. Well, let's talk a bit about this topic. I think that the first thing is that last year we I suggested our debt level so that we could have a little bit more flexibility.
Speaker #2: So, we could consider this scenario that occurred: a reduction in brand prices and thus a reduction in revenue. So it's still a little limiting for our debt.
Speaker #2: We can still take some investments. In the short term, meaning for this year, we have this CAPEX of $18.5 billion. We have many contracts that have already been signed.
Speaker #2: So we have scheduled that, and this should happen. The flexibility will take place when we build the strategic plan for 2030. There, we'll have to reevaluate some projects. Actually, we will look again at all assumptions and include these assumptions on the projects and see which ones are feasible.
Speaker #2: Those who are not, they will be along the way, or maybe they will be postponed, or we will look for engineering alternatives. That will lead to lower CAPEX, so that it's financially feasible.
Speaker #2: As our CEO said, we had one project in the first time it went back so that we could rethink how our engineering would work and whether that would be more profitable alternatives because we understand that at the current price levels, with these very volatile world scenario, we should have some flexibility for that.
Speaker #2: Well, dividends will continue at the same levels. There are no discussions going on in terms of changes regarding the ordinary now for the extraordinary with lower revenue.
Speaker #2: We would have a harder time paying extraordinary dividends. Even though we would really like very much to have surplus cash in order to pay extraordinary dividends.
Speaker #2: But I think the probability for this year is pretty low. I would like to add and then give the floor to Director Renata to further elaborate on that.
Speaker #2: But often we are dealing not only with engineering of the project but how we contract projects. So when we look, for example, at this issue of contracting Renes so the mere change in the way we contract and publicizing the price and the dilution of the lots in a larger number of lots these meant a saving of one billion Brazilian reals for our company.
Speaker #2: We had a word forbidding; we changed how these packages would be contracted, and we diluted them into a larger number of packages to encourage more competition. With that, we could save 1 billion Brazilian reais. We are multiplying this effort in other projects, and I'll give the floor to Renata to further elaborate on that, because after all, this is a major effort being carried out by her team.
Speaker #2: So, we really have been thinking outside the box when the CEO invited us to take this position. She said we should do it differently, and this is what we have been doing.
Speaker #2: And one of the things we have been doing differently which is POT just to give you an idea BOT enables us to change specifications during the bidding process.
Speaker #2: Because this is a conceptual concept it's designed so you can change requirements in this conceptual design. With this initiative and with a lot of discussions with the market we in the past we had some restrictions but only with this move along we could reduce the weight of CI platforms between 15 to 20%.
Speaker #2: That alone represents a cost reduction that is very significant. We will open these packages on September 30th, and we expect that with that, we will really have a significant reduction in prices.
Speaker #2: And our CEO said that depending on the market scenario, depending on the demand, depending on how the world is, depending on geopolitics, every contract has a different strategy so that we can take the most, the best of our contracts.
Speaker #2: Thank you, Magda. Thank you, Fernando, Renata. Thank you, Luis, for your question. So, we are coming to the end of our webcast. We will close the Q&A session.
Speaker #2: If you have any additional questions, you can send them to our Investor Relations team, and we will answer them later. So I'd like to thank you all for joining our webcast.
Speaker #2: And I'll give the floor to Fernando and to Magda for their final remarks. Fernando, Magda, the floor is yours. Well, I'd like to thank you all for joining us.
Speaker #2: I'd like to say that our team is really available if you have any further questions. We are all always at our disposal. Well, to close, I'd like to say that we are really happy because we could show what a properly well thought out and planned CAPEX can do.
Speaker #2: Which was to increase production. In our view, this will really stay for a very long time, with very positive prospects looking forward. And with new equipment coming, with new production equipment starting up.
Speaker #2: So I think that our increase will be more than our decrease, and in the next five years, we are really sure that this will take place.
Speaker #2: Production was better, and with that, it offset reductions and brand prices. This was very important for our earnings, allowing us to complete our decision plan as we planned.
Speaker #2: And all contracts regarding distribution will be complied with. We have contracts—no, there is no discussion, no argument. We will comply with all these contracts.
Speaker #2: This is a commitment we have. So, thank you all very much. We are available, and also during this week, to discuss any issues you deem necessary.
Speaker #2: Well, to close, I would like to thank you all for joining us in this webcast. And thank you all for the attention you give to Petrobras and Petrobras' businesses.
Speaker #2: I agree with Fernando, and I would like to again say that we are really willing to meet everything that has been planned. We are offering our investors—be they government or private investors—assurance that Petrobras truly wants to have profitable projects. We aim to optimize our projects portfolio and focus on making investments and projects that are as efficient as possible.
Speaker #2: We have wonderful actions from exploration and production, very attractive projects, including refining and sales. We are making money; we have 24% renewable energy in Asia and are expanding our market.
Speaker #2: We are making money. We are expanding production of diesel, and profitability is at very high levels. So you can all be reassured that Petrobras is making an effort and that this board is really making an effort so that we can achieve the best results possible.
Speaker #2: Thank you all very much. Our doors are open, and our investors' relationship with Eduardo Molinari is available so that we can answer all the questions you may have.
Speaker #2: And so, whatever questions you have, you just ask. Thank you very much, and have a nice day. Thank you, Magda. Thank you, Fernando. The presentation will be made available on the Investor Relations website, and soon we will also make the audio available.