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PBR Petroleo Brasileiro S.A. Petrobras

Filed: 29 Oct 20, 12:30pm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the

Securities Exchange Act of 1934

 

For the month of October, 2020

 

Commission File Number 1-15106

 

 

PETRÓLEO BRASILEIRO S.A. – PETROBRAS

(Exact name of registrant as specified in its charter)

 

Brazilian Petroleum Corporation – PETROBRAS

(Translation of Registrant's name into English)

 

Avenida República do Chile, 65 
20031-912 – Rio de Janeiro, RJ
Federative Republic of Brazil

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. 

Form 20-F ___X___ Form 40-F _______

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes _______ No___X____ 

 

 

 

 

Quarterly Information- ITR

 

At September 30, 2020 and report on review of Quarterly Information

 

 

 

 

 

 

 
 

INDEX

PETROBRAS

 

 

Parent Company Interim Accounting Information / Statement of Financial Position - Assets3
Parent Company Interim Accounting Information / Statement of Financial Position - Liabilities4
Parent Company Interim Accounting Information / Statement of Income5
Parent Company Interim Accounting Information / Statement of Comprehensive Income6
Parent Company Interim Accounting Information / Statement of Changes in Shareholders’ Equity - 01/01/2020 to 09/30/20207
Parent Company Interim Accounting Information / Statement of Changes in Shareholders’ Equity - 01/01/2019 to 09/30/20198
Parent Company Interim Accounting Information / Statement of Cash Flows – Indirect Method9
Parent Company Interim Accounting Information / Statement of Added Value10
Consolidated Interim Accounting Information / Statement of Financial Position - Assets11
Consolidated Interim Accounting Information / Statement of Financial Position - Liabilities12
Consolidated Interim Accounting Information / Statement of Income13
Consolidated Interim Accounting Information / Statement of Comprehensive Income14
Consolidated Interim Accounting Information / Statement of Changes in Shareholders’ Equity - 01/01/2020 to 09/30/202015
Consolidated Interim Accounting Information / Statement of Changes in Shareholders’ Equity - 01/01/2019 to 09/30/201916
Consolidated Interim Accounting Information / Statement of Cash Flows – Indirect Method17
Consolidated Interim Accounting Information / Statement of Added Value18
1.   Basis of preparation19
2.   Summary of significant accounting policies19
3.   Context, resilience measures and impacts of the COVID-19 pandemic19
4   Cash and cash equivalents and Marketable securities22
5   Sales revenues24
6   Costs and expenses by nature25
7   Other income and expenses25
8   Net finance income (expense)26
9   Net  income by operating segment26
10   Trade and other receivables28
11   Inventories29
12   Taxes30
13   Short-term and other benefits32
14   Employee benefits (Post-Employment)33
15   Provisions for legal proceedings37
16   Provision for decommissioning costs40
17   The “Lava Jato (Car Wash) Operation” and its effects on the Company40
18   Property, plant and equipment41
19   Intangible assets43
20   Impairment44
21   Exploration and evaluation of oil and gas reserves49
22   Collateral for crude oil exploration concession agreements49
23   Investments49
24   Disposal of assets and other changes in organizational structure50
25   Assets by operating segment53
26   Finance debt54
27   Lease liabilities57
28   Equity58
29   Fair value of financial assets and liabilities59
30   Risk management60
31   Related-party transactions64
32   Supplemental information on statement of cash flows68
33   Subsequent events68
34   Correlation between the notes disclosed in the complete annual financial statements as of December 31, 2019 and the interim statements as of September 30, 202070
Statement of Directors on Interim Accounting Information and Report on the Review of Quarterly Information71
Independent Auditors' Report 72

 

 

Parent Company Interim Accounting Information / Statement of Financial Position - Assets

(R$ Thousand)

 

 

Account CodeAccount Description09.30.202012.31.2019
1Total Assets1,192,910,0001,129,118,000
1.01Current Assets119,393,000143,014,000
1.01.01Cash and Cash Equivalents3,480,0004,322,000
1.01.02Marketable Securities2,572,0003,200,000
1.01.03Trade and Other Receivables54,850,00078,813,000
1.01.04Inventories25,218,00028,206,000
1.01.06Recoverable Taxes22,128,00013,241,000
1.01.06.01Current Recoverable Taxes22,128,00013,241,000
1.01.06.01.01Current Income Tax and Social Contribution1,367,0009,456,000
1.01.06.01.02Other Recoverable Taxes20,761,0003,785,000
1.01.08Other Current Assets11,145,00015,232,000
1.01.08.01Non-Current Assets Held for Sale4,007,0008,615,000
1.01.08.03Others7,138,0006,617,000
1.01.08.03.03Others7,138,0006,617,000
1.02Non-Current Assets1,073,517,000986,104,000
1.02.01Long-Term Receivables121,834,00062,718,000
1.02.01.03Marketable Securities Measured at Amortized Cost218,000208,000
1.02.01.04Trade and Other Receivables10,727,0008,490,000
1.02.01.07Deferred Taxes69,030,00015,363,000
1.02.01.07.01Deferred Income Tax and Social Contribution52,436,000
1.02.01.07.02Deferred Taxes and Contributions16,594,00015,363,000
1.02.01.10Other Non-Current Assets41,859,00038,657,000
1.02.01.10.03Advances to Suppliers1,846,0001,029,000
1.02.01.10.04Judicial Deposits37,323,00032,861,000
1.02.01.10.05Other Long-Term Assets2,690,0004,767,000
1.02.02Investments257,916,000182,666,000
1.02.03Property, Plant and Equipment616,763,000662,816,000
1.02.04Intangible Assets77,004,00077,904,000

 

 

 

Parent Company Interim Accounting Information / Statement of Financial Position - Liabilities

(R$ Thousand)

 

 

Account CodeAccount Description09.30.202012.31.2019
2Total Liabilities1,192,910,0001,129,118,000
2.01Current Liabilities312,438,000274,047,000
2.01.01Payroll, Profit Sharing and Related Charges9,594,0006,056,000
2.01.02Trade Payables46,665,00034,453,000
2.01.03Taxes Obligations261,000218,000
2.01.03.01Federal Taxes Obligations261,000218,000
2.01.03.01.01Income Tax and Social Contribution Payable261,000218,000
2.01.04Current Debt and Finance Lease Obligations223,709,000191,196,000
2.01.04.01Current Debt99,386,000150,931,000
2.01.04.03Lease Obligations124,323,00040,265,000
2.01.05Other Liabilities25,180,00026,041,000
2.01.05.02Others25,180,00026,041,000
2.01.05.02.01Dividends and Interest on Capital Payable1,799,0006,165,000
2.01.05.02.04Other Taxes and Contributions18,099,00013,538,000
2.01.05.02.06Other liabilities5,282,0006,338,000
2.01.06Provisions3,837,0003,577,000
2.01.06.02Other Provisions3,837,0003,577,000
2.01.06.02.04Pension and Medical Benefits3,837,0003,577,000
2.01.07Liabilities Associated with Non-Current Assets Held for Sale and Discontinued3,192,00012,506,000
2.01.07.01Liabilities Associated with Non-Current Assets Held for Sale3,192,00012,506,000
2.02Non-Current Liabilities632,736,000559,530,000
2.02.01Non-Current Debt and Finance Lease Obligations444,330,000359,846,000
2.02.01.01Non-Current Debt356,457,000211,907,000
2.02.01.03Lease Obligations87,873,000147,939,000
2.02.02Other Liabilities1,859,0001,984,000
2.02.02.02Others1,859,0001,984,000
2.02.02.02.03Income Tax and Social Contribution1,859,0001,984,000
2.02.03Deferred Taxes9,974,000
2.02.03.01Deferred Taxes9,974,000
2.02.04Provisions186,547,000187,726,000
2.02.04.01Provisions for Tax Social Security, Labor and Civil Lawsuits10,446,00011,883,000
2.02.04.02Other Provisions176,101,000175,843,000
2.02.04.02.04Pension and Medical Benefits93,911,000101,192,000
2.02.04.02.05Provision for Decommissioning Costs69,992,00070,127,000
2.02.04.02.06Employee Benefits1,822,000153,000
2.02.04.02.07Other Provisions10,376,0004,371,000
2.03Shareholders' Equity247,736,000295,541,000
2.03.01Share Capital205,432,000205,432,000
2.03.02Capital Reserves2,665,0002,665,000
2.03.04Profit Reserves71,815,000124,613,000
2.03.08Other Comprehensive Income(32,176,000)(37,169,000)

 

 

 

Parent Company Interim Accounting Information / Statement of Income

(R$ thousand)

 

 

 

Account CodeAccount DescriptionAccumulated of the Current Quarter 07/01/2020 to 09/30/2020Accumulated of the Current Year 01/01/2020 to 09/30/2020Accumulated of the Previous Quarter 07/01/2019 to 09/30/2019Accumulated of the Previous Year 01/01/2019 to 09/30/2019
3.01Sales Revenues66,182,000183,222,00073,194,000208,538,000
3.02Cost of Sales(37,793,000)(115,144,000)(46,798,000)(134,601,000)
3.03Gross Profit28,389,00068,078,00026,396,00073,937,000
3.04Operating Expenses / Income(5,500,000)(59,538,000)(10,854,000)(4,729,000)
3.04.01Selling Expenses(5,153,000)(15,006,000)(4,714,000)(13,710,000)
3.04.02General and Administrative Expenses(1,289,000)(3,902,000)(1,625,000)(5,037,000)
3.04.05Other Operating Expenses(2,225,000)(55,056,000)(7,597,000)2,376,000
3.04.05.01Other Taxes(2,054,000)(3,616,000)(387,000)(851,000)
3.04.05.02Research and Development Expenses(496,000)(1,283,000)(578,000)(1,669,000)
3.04.05.03Exploration Costs(1,429,000)(2,238,000)(271,000)(1,310,000)
3.04.05.05Other Operating Expenses, Net1,706,0007,659,000(5,530,000)6,250,000
3.04.05.07Impairment of Assets Charges / Reversals48,000(55,578,000)(831,000)(44,000)
3.04.06Share of Profit / Gains on Interest in Equity-Accounted Investments3,167,00014,426,0003,082,00011,642,000
3.05Net Income Before Financial Results and Income Taxes22,889,0008,540,00015,542,00069,208,000
3.06Finance Income (Expenses), Net(24,287,000)(88,972,000)(16,255,000)(33,892,000)
3.06.01Finance Income698,0002,441,0001,495,0003,680,000
3.06.01.01Finance Income698,0002,441,0001,495,0003,680,000
3.06.02Finance Expenses(24,985,000)(91,413,000)(17,750,000)(37,572,000)
3.06.02.01Finance Expenses(9,454,000)(27,596,000)(8,665,000)(24,443,000)
3.06.02.02Foreign Exchange and Inflation Indexation Charges, Net(15,531,000)(63,817,000)(9,085,000)(13,129,000)
3.07Net Income Before Income Taxes(1,398,000)(80,432,000)(713,000)35,316,000
3.08Income Tax and Social Contribution(148,000)27,650,000490,000(13,197,000)
3.08.01Current(609,000)(489,000)1,328,000(3,988,000)
3.08.02Deferred461,00028,139,000(838,000)(9,209,000)
3.09Net Income from Continuing Operations(1,546,000)(52,782,000)(223,000)22,119,000
3.10Net Income from Discontinued Operations9,310,0009,865,000
3.10.01Income / (Loss) from Discontinued Operations9,310,0009,865,000
3.11Income / (Loss) for the Period(1,546,000)(52,782,000)9,087,00031,984,000
3.99.01Income per Share      
3.99.01.01Ordinary Shares (0.12) (4.05) 0.70 2.45
3.99.01.02Preferred Shares (0.12) (4.05) 0.70 2.45
3.99.02Diluted Income per Share    
3.99.02.01Ordinary Shares (0.12) (4.05) 0.70 2.45
3.99.02.02Preferred Shares (0.12) (4.05) 0.70 2.45
      

 

 

 

Parent Company Interim Accounting Information / Statement of Comprehensive Income

(R$ thousand)

 

 

Account CodeAccount DescriptionAccumulated of the Current Quarter 07/01/2020 to 09/30/2020Accumulated of the Current Year 01/01/2020 to 09/30/2020Accumulated of the Previous Quarter 07/01/2019 to 09/30/2019Accumulated of the Previous Year 01/01/2019 to 09/30/2019
4.01Net Income for the Period(1,546,000)(52,782,000)9,087,00031,984,000
4.02Other Comprehensive Income6,516,0004,977,000(3,842,000)959,000
4.02.01Actuarial Gains / (Losses) on Defined Benefits Plans8,610,000
4.02.02Deferred Income Tax and Social Contribution on Actuarial Gains / (Losses) on Defined Benefits Plans(939,000)
4.02.03Cumulative Translation Adjustments7,254,00067,920,00012,650,00011,393,000
4.02.04Unrealized Gains/(Losses) on securities measured at fair value through other comprehensive income(5,000)(1,000)(6,000)
4.02.07Unrealized Gains / (Losses) on Cash Flow Hedge  - Recognized in Shareholders' Equity(7,660,000)(122,100,000)(28,449,000)(24,888,000)
4.02.08Unrealized Gains / (Losses) on Cash Flow Hedge  - Reclassified to Profit and Loss6,179,00017,567,0002,752,0007,870,000
4.02.09Deferred Income Tax and Social Contribution on Cash Flow Hedge503,00035,541,0008,737,0005,786,000
4.02.10Share of Other Comprehensive Income of Equity-Accounted Investments240,000(1,617,000)469,000804,000
4.03Total Comprehensive Income for the Period4,970,000(47,805,000)5,245,00032,943,000
      

 

 

Parent Company Interim Accounting Information / Statement of Changes in Shareholders’ Equity - 01/01/2020 to 09/30/2020

(R$ thousand)

 

 

Account CodeAccount DescriptionShare CapitalCapital Reserves, Granted Options and Treasury SharesProfit ReservesRetained Earnings / Accumulated LossesOther Comprehensive IncomeShareholders' Equity
5.01Balance at the Beginning of the Period205,432,0002,665,000124,613,000(37,169,000)295,541,000
5.03Adjusted Opening Balance205,432,0002,665,000124,613,000(37,169,000)295,541,000
5.04Capital Transactions with Owners(16,000)16,000
5.04.09Realization of the Deemed Cost(16,000)16,000
5.05Total of Comprehensive Income(52,782,000)4,977,000(47,805,000)
5.05.01Net Income for the Period(52,782,000)(52,782,000)
5.05.02Other Comprehensive Income4,977,0004,977,000
5.07Balance at the End of the Period205,432,0002,665,000124,613,000(52,798,000)(32,176,000)247,736,000
 

Parent Company Interim Accounting Information / Statement of Changes in Shareholders’ Equity - 01/01/2019 to 09/30/2019

(R$ thousand)

 

 

 

Account CodeAccount DescriptionShare CapitalCapital Reserves, Granted Options and Treasury SharesProfit ReservesRetained Earnings / Accumulated LossesOther Comprehensive IncomeShareholders' Equity
5.01Balance at the Beginning of the Period205,432,0002,674,00095,148,000(26,029,000)277,225,000
5.03Adjusted Opening Balance205,432,0002,674,00095,148,000(26,029,000)277,225,000
5.04Capital Transactions with Owners(3,000)(3,916,000)3,000(3,916,000)
5.04.07Interest on Shareholders' Equity(3,913,000)(3,913,000)
5.04.08Change in Interest in Subsidiaries(3,000)(3,000)
5.04.09Realization of the Deemed Cost(3,000)3,000
5.05Total of Comprehensive Income31,984,000959,00032,943,000
5.05.01Net Income for the Period31,984,00031,984,000
5.05.02Other Comprehensive Income959,000959,000
5.07Balance at the End of the Period205,432,0002,671,00095,148,00028,068,000(25,067,000)306,252,000
 

Parent Company Interim Accounting Information / Statement of Cash Flows – Indirect Method

(R$ Thousand)

 

 

 

 

Account CodeAccount DescriptionAccumulated of the Current Year 01/01/2020 to 09/30/2020Accumulated of the Previous Year 01/01/2019 to 09/30/2019
6.01Net cash provided by operating activities50,095,00029,928,000
6.01.01Cash provided by operating activities102,860,00088,786,000
6.01.01.01Net Income (loss) for the period(52,782,000)31,984,000
6.01.01.02Pension and medical benefits (actuarial expense)5,807,0005,970,000
6.01.01.03Results in equity-accounted investments(14,426,000)(11,642,000)
6.01.01.04Depreciation, depletion and amortization52,225,00047,163,000
6.01.01.05Impairment of assets (reversal)55,578,00044,000
6.01.01.06Exploratory expenditures write-offs1,180,000248,000
6.01.01.08Foreign exchange, indexation and finance charges97,496,00033,807,000
6.01.01.09Deferred income taxes, net(28,139,000)9,209,000
6.01.01.10Allowance for expected credit losses522,000190,000
6.01.01.11Write-Off - Overpayments Incorrectly Capitalized391,000
6.01.01.13Revision and unwinding of discount on the provision for decommissioning costs2,591,0002,366,000
6.01.01.17Disposal/write-offs of assets and remeasurement of investment retained with loss of control(633,000)(20,688,000)
6.01.01.18PIS and COFINS recovery - exclusion of ICMS (VAT tax) from the basis of calculation(16,950,000)
6.01.01.19Net cash provided by operating activities from continuing operations(9,865,000)
6.01.02Decrease / (increase) in assets / increase/ (decrease) in liabilities(52,765,000)(58,858,000)
6.01.02.01Trade and other receivables, net(49,391,000)(24,202,000)
6.01.02.02Inventories2,596,000866,000
6.01.02.03Judicial deposits(4,462,000)(6,400,000)
6.01.02.04Escrow account - Class action agreement6,093,000
6.01.02.05Other assets1,176,000(2,139,000)
6.01.02.06Trade payables(3,817,000)(9,001,000)
6.01.02.07Other taxes payable12,157,000563,000
6.01.02.08Pension and medical benefits(4,220,000)(5,491,000)
6.01.02.09Provisions for legal proceedings(1,436,000)(9,615,000)
6.01.02.10Short-term benefits5,208,0001,169,000
6.01.02.11Income tax and social contribution paid(886,000)(8,246,000)
6.01.02.12Provision for Decommissioning Costs(1,546,000)(1,282,000)
6.01.02.14Other liabilities(8,144,000)(1,173,000)
6.02Net cash used in investing activities(31,098,000)(22,990,000)
6.02.01Acquisition of PP&E and intangibles assets(61,943,000)(28,082,000)
6.02.02Increase in investments in investees3,438,000(17,000)
6.02.03Proceeds from disposal of assets - Divestment4,014,00033,331,000
6.02.04Divestment (investment) in marketable securities21,199,000(43,733,000)
6.02.05Dividends received2,194,0006,016,000
6.02.08Discontinued operations – net cash provided by (used in) investing activities9,495,000
6.03Net cash used in financing activities(19,839,000)(5,615,000)
6.03.02Proceeds from financing120,169,000101,791,000
6.03.03Repayment of principal(82,625,000)(64,205,000)
6.03.04Repayment of interest(16,133,000)(13,327,000)
6.03.05Dividends paid to shareholders(4,426,000)(5,128,000)
6.03.08Settlement of lease liabilities(36,824,000)(24,746,000)
6.05Net increase/ (decrease) in cash and cash equivalents(842,000)1,323,000
6.05.01Cash and cash equivalents at the beginning of the year4,322,0006,334,000
6.05.02Cash and cash equivalents at the end of the period3,480,0007,657,000
 

Parent Company Interim Accounting Information / Statement of Added Value

(R$ Thousand)

 

 

Account CodeAccount DescriptionAccumulated of the Current Year 01/01/2020 to 09/30/2020Accumulated of the Previous Year 01/01/2019 to 09/30/2019
7.01Sales Revenues265,936,000322,397,000
7.01.01Sales of Goods and Services240,290,000275,175,000
7.01.02Other Revenues4,185,00024,807,000
7.01.03Revenues Related to the Construction of Assets to be Used in Own Operations21,983,00022,605,000
7.01.04Allowance for expected credit losses(522,000)(190,000)
7.02Inputs Acquired from Third Parties(130,066,000)(99,961,000)
7.02.01Cost of Sales(21,885,000)(37,623,000)
7.02.02Materials, Power, Third-Party Services and Other Operating Expenses(33,399,000)(40,891,000)
7.02.03Impairment Charges / Reversals of Assets(55,578,000)(44,000)
7.02.04Others(19,204,000)(21,403,000)
7.02.04.01Tax Credits on Inputs Acquired from Third Parties(18,813,000)(21,403,000)
7.02.04.02Inventory Write-Down to Net Realizable Value(391,000)
7.03Gross Added Value135,870,000222,436,000
7.04Retentions(56,045,000)(50,985,000)
7.04.01Depreciation, Amortization and Depletion(56,045,000)(50,985,000)
7.05Net Added Value Produced79,825,000171,451,000
7.06Transferred Added Value35,147,00031,764,000
7.06.01Share of Profit of Equity-Accounted Investments14,426,00011,642,000
7.06.02Finance Income2,441,0003,680,000
7.06.03Others18,280,00016,442,000
7.06.03.01Rentals, royalties and others1,330,0001,786,000
7.06.03.02Total Added Value from Discontinued operations to be distributed14,656,000
7.06.03.03PIS and COFINS recovery - exclusion of ICMS (VAT tax) from the basis of calculation16,950,000
7.07Total Added Value to be Distributed114,972,000203,215,000
7.08Distribution of Added Value114,972,000203,215,000
7.08.01Employee Compensation23,093,00021,422,000
7.08.01.01Salaries9,969,00012,523,000
7.08.01.02Fringe Benefits12,415,0008,087,000
7.08.01.03Unemployment Benefits (FGTS)709,000812,000
7.08.02Taxes and Contributions36,360,00094,707,000
7.08.02.01Federal19,277,00073,573,000
7.08.02.02State16,851,00020,970,000
7.08.02.03Municipal232,000164,000
7.08.03Return on Third-Party Capital108,301,00050,311,000
7.08.03.01Interest104,118,00041,441,000
7.08.03.02Rental Expenses4,183,0008,870,000
7.08.04Return on Shareholders' Equity(52,782,000)22,119,000
7.08.04.01Interest on Capital3,913,000
7.08.04.03Retained Earnings / (Losses) for the Period(52,782,000)18,206,000
7.08.05Others14,656,000
7.08.05.02Total distributed added value from discontinued operation - Taxes4,791,000
7.08.05.04Total distributed added value from discontinued operation - Shareholders9,865,000
10 
 

Consolidated Interim Accounting Information / Statement of Financial Position - Assets

(R$ Thousand)

 

 

Account CodeAccount Description09.30.202012.31.2019
    
1Total Assets965,430,000926,011,000
1.01Current Assets151,644,000112,101,000
1.01.01Cash and Cash Equivalents71,635,00029,714,000
1.01.02Marketable Securities3,782,0003,580,000
1.01.03Trade and Other Receivables12,905,00015,164,000
1.01.04Inventories29,790,00033,009,000
1.01.06Recoverable Taxes23,852,00014,287,000
1.01.06.01Current Recoverable Taxes23,852,00014,287,000
1.01.06.01.01Current Income Tax and Social Contribution2,678,00010,050,000
1.01.06.01.02Other Recoverable Taxes21,174,0004,237,000
1.01.08Other Current Assets9,680,00016,347,000
1.01.08.01Non-Current Assets Held for Sale4,130,00010,333,000
1.01.08.03Others5,550,0006,014,000
1.01.08.03.03Others5,550,0006,014,000
1.02Non-Current Assets813,786,000813,910,000
1.02.01Long-Term Receivables128,209,00071,306,000
1.02.01.03Marketable Securities measured at amortized cost219,000232,000
1.02.01.04Trade and Other Receivables12,879,00010,345,000
1.02.01.07Deferred Taxes73,057,00021,470,000
1.02.01.07.01Deferred Income Tax and Social Contribution55,853,0005,593,000
1.02.01.07.02Deferred Taxes and Contributions17,204,00015,877,000
1.02.01.10Other Non-Current Assets42,054,00039,259,000
1.02.01.10.03Advances to Suppliers801,0001,313,000
1.02.01.10.04Judicial Deposits37,688,00033,198,000
1.02.01.10.05Other Long-Term Assets3,565,0004,748,000
1.02.02Investments17,119,00022,166,000
1.02.03Property, Plant and Equipment590,854,000641,949,000
1.02.04Intangible Assets      77,604,000         78,489,000
    

 

 

11 
 

Consolidated Interim Accounting Information / Statement of Financial Position - Liabilities

(R$ Thousand)

 

 

Account CodeAccount Description09.30.202012.31.2019
2Total Liabilities965,430,000926,011,000
2.01Current Liabilities140,706,000116,147,000
2.01.01Payroll, Profit Sharing and Related Charges10,609,0006,632,000
2.01.02Trade Payables24,439,00022,576,000
2.01.03Taxes Obligations740,0001,114,000
2.01.03.01Federal Taxes Obligations740,0001,114,000
2.01.03.01.01Income Tax and Social Contribution Payable740,0001,114,000
2.01.04Current Debt and Lease Obligations68,368,00041,139,000
2.01.04.01Current Debt37,779,00018,013,000
2.01.04.03Lease Obligations30,589,00023,126,000
2.01.05Other Liabilities28,880,00028,025,000
2.01.05.02Others28,880,00028,025,000
2.01.05.02.01Dividends and Interest on Capital Payable2,010,0006,278,000
2.01.05.02.04Other Taxes and Contributions18,445,00013,800,000
2.01.05.02.06Other liabilities8,425,0007,947,000
2.01.06Provisions3,837,0003,577,000
2.01.06.02Other Provisions3,837,0003,577,000
2.01.06.02.04Pension and Medical Benefits3,837,0003,577,000
2.01.07Liabilities Associated with Non-Current Assets Held for Sale and Discontinued3,833,00013,084,000
2.01.07.01Liabilities Associated with Non-Current Assets Held for Sale3,833,00013,084,000
2.02Non-Current Liabilities574,363,000510,727,000
2.02.01Non-Current Debt and Finance Lease Obligations380,561,000310,022,000
2.02.01.01Non-Current Debt286,971,000236,969,000
2.02.01.03Lease Obligations93,590,00073,053,000
2.02.02Other Liabilities1,903,0002,031,000
2.02.02.02Others1,903,0002,031,000
2.02.02.02.03Income Tax and Social Contribution1,903,0002,031,000
2.02.03Deferred Taxes782,0007,095,000
2.02.03.01Deferred Taxes782,0007,095,000
2.02.04Provisions191,117,000191,579,000
2.02.04.01Provisions for Tax Social Security, Labor and Civil Lawsuits11,404,00012,546,000
2.02.04.02Other Provisions179,713,000179,033,000
2.02.04.02.04Pension and Medical Benefits95,768,000103,213,000
2.02.04.02.05Provision for Decommissioning Costs70,418,00070,377,000
2.02.04.02.06Employee Benefits1,822,000153,000
2.02.04.02.07Other Provisions11,705,0005,290,000
2.03Shareholders' Equity250,361,000299,137,000
2.03.01Share Capital205,432,000205,432,000
2.03.02Capital Reserves2,449,0002,449,000
2.03.04Profit Reserves72,031,000124,829,000
2.03.08Other Comprehensive Income(32,176,000)(37,169,000)
2.03.09Non-controlling interests2,625,0003,596,000
    
    

 

 

12 
 

Consolidated Interim Accounting Information / Statement of Income

(R$ Thousand)

 

 

 

 

Account CodeAccount DescriptionAccumulated of the Current Quarter 07/01/2020 to 09/30/2020Accumulated of the Current Year 01/01/2020 to 09/30/2020Accumulated of the Previous Quarter 07/01/2019 to 09/30/2019Accumulated of the Previous Year 01/01/2019 to 09/30/2019
3.01Sales Revenues70,730,000197,097,00077,051,000220,474,000
3.02Cost of Sales(36,961,000)(113,495,000)(47,045,000)(135,425,000)
3.03Gross Profit33,769,00083,602,00030,006,00085,049,000
3.04Operating Expenses / Income(15,737,000)(101,990,000)(15,703,000)(17,483,000)
3.04.01Selling Expenses(6,305,000)(18,971,000)(4,968,000)(12,037,000)
3.04.02General and Administrative Expenses(1,664,000)(5,052,000)(2,012,000)(6,333,000)
3.04.05Other Operating Expenses(6,851,000)(74,522,000)(9,169,000)(524,000)
3.04.05.01Other Taxes(2,147,000)(3,969,000)(560,000)(1,172,000)
3.04.05.02Research and Development Expenses(495,000)(1,283,000)(578,000)(1,669,000)
3.04.05.03Exploration Costs(1,447,000)(2,265,000)(276,000)(1,324,000)
3.04.05.05Other Operating Expenses, Net(2,834,000)(1,776,000)(5,345,000)6,132,000
3.04.05.07Impairment of Assets Charges / Reversals72,000(65,229,000)(2,410,000)(2,491,000)
3.04.06Share of Profit / Gains on Interest in Equity-Accounted Investments(917,000)(3,445,000)446,0001,411,000
3.05Net Income Before Financial Results and Income Taxes18,032,000(18,388,000)14,303,00067,566,000
3.06Finance Income (Expenses), Net(22,910,000)(56,396,000)(10,874,000)(27,869,000)
3.06.01Finance Income667,0002,044,0001,344,0003,616,000
3.06.01.01Finance Income667,0002,044,0001,344,0003,616,000
3.06.02Finance Expenses(23,577,000)(58,440,000)(12,218,000)(31,485,000)
3.06.02.01Finance Expenses(9,778,000)(23,292,000)(9,623,000)(22,558,000)
3.06.02.02Foreign Exchange and Inflation Indexation Charges, Net(13,799,000)(35,148,000)(2,595,000)(8,927,000)
3.07Net Income Before Income Taxes(4,878,000)(74,784,000)3,429,00039,697,000
3.08Income Tax and Social Contribution3,209,00020,578,000(3,938,000)(17,393,000)
3.08.01Current(26,000)(1,233,000)758,000(6,072,000)
3.08.02Deferred3,235,00021,811,000(4,696,000)(11,321,000)
3.09Net Income from Continuing Operations(1,669,000)(54,206,000)(509,000)22,304,000
3.10Net Income from Discontinued Operations9,349,00010,128,000
3.10.01Income / Loss from Discontinued Operations9,349,00010,128,000
3.11Income / (Loss) for the Period(1,669,000)(54,206,000)8,840,00032,432,000
3.11.01Attributable to Shareholders of Petrobras(1,546,000)(52,782,000)9,087,00031,984,000
3.11.02Attributable to Non-Controlling Interests(123,000)(1,424,000)(247,000)448,000
3.99.01Income per Share      
3.99.01.01Ordinary Shares (0.12) (4.05) 0.70 2.45
3.99.01.02Preferred Shares (0.12) (4.05) 0.70 2.45
3.99.02Diluted Income per Share    
3.99.02.01Ordinary Shares (0.12) (4.05) 0.70 2.45
3.99.02.02Preferred Shares (0.12) (4.05) 0.70 2.45
  
      

 

13 
 

Consolidated Interim Accounting Information / Statement of Comprehensive Income

(R$ Thousand)

 

 

 

Account Code                  Account DescriptionAccumulated of the Current Quarter 07/01/2020 to 09/30/2020Accumulated of the Current Year 01/01/2020 to 09/30/2020Accumulated of the Previous Quarter 07/01/2019 to 09/30/2019Accumulated of the Previous Year 01/01/2019 to 09/30/2019
4.01Net Income for the Period(1,669,000)(54,206,000)8,840,00032,432,000
4.02Other Comprehensive Income6,646,0006,227,000(3,594,000)1,174,000
4.02.01Actuarial Gains / (Losses) on Defined Benefits Plans9,075,0004,000
4.02.02Deferred Income Tax and Social Contribution on Actuarial Gains / (Losses) on Defined Benefits Plans(1,006,000)
4.02.03Cumulative Translation Adjustments7,384,00069,157,00012,898,00011,608,000
4.02.04Unrealized Gains/(Losses) on securities measured at fair value through other comprehensive income(5,000)(1,000)(6,000)
4.02.07Unrealized Gains / (Losses) on Cash Flow Hedge  - Recognized in Shareholders' Equity(7,660,000)(122,100,000)(28,448,000)(24,910,000)
4.02.08Unrealized Gains / (Losses) on Cash Flow Hedge  - Reclassified to Profit and Loss6,147,00018,174,0002,962,0008,709,000
4.02.09Deferred Income Tax and Social Contribution on Cash Flow Hedge515,00035,335,0008,665,0005,508,000
4.02.10Share of Other Comprehensive Income of Equity-Accounted Investments260,000(2,403,000)330,000261,000
4.03Total Comprehensive Income for the Period4,977,000(47,979,000)5,246,00033,606,000
4.03.01Attributable to Shareholders of Petrobras4,970,000(47,805,000)5,245,00032,943,000
4.03.02Attributable to Non-controlling Interests7,000(174,000)1,000663,000
      

 

14 
 

Consolidated Interim Accounting Information / Statement of Changes in Shareholders’ Equity - 01/01/2020 to 09/30/2020

(R$ Thousand)

 

 

 

Account CodeAccount Description        Share Capital

Capital Reserves,

Granted Options

and Treasury Shares

Profit Reserves

Retained Earnings /

Accumulated Losses

Other

Comprehensive

Income

Shareholders' Equity

Non-controlling

interest

Shareholders' Equity

Consolidated

5.01Balance at the Beginning of the Period205,432,0002,665,000124,613,000(37,169,000)295,541,0003,596,000299,137,000
5.03Adjusted Opening Balance205,432,0002,665,000124,613,000(37,169,000)295,541,0003,596,000299,137,000
5.04Capital Transactions with Owners(16,000)16,000(797,000)(797,000)
5.04.06Dividends(357,000)(357,000)
5.04.08Capital Transactions(440,000)(440,000)
5.04.09Capital Transactions(16,000)16,000
5.05Total of Comprehensive Income(52,782,000)4,977,000(47,805,000)(174,000)(47,979,000)
5.05.01Net Income for the Period(52,782,000)(52,782,000)(1,424,000)(54,206,000)
5.05.02Other Comprehensive Income4,977,0004,977,0001,250,0006,227,000
5.07Balance at the End of the Period205,432,0002,665,000124,613,000(52,798,000)(32,176,000)247,736,0002,625,000250,361,000
15 
 

Consolidated Interim Accounting Information / Statement of Changes in Shareholders’ Equity - 01/01/2019 to 09/30/2019

(R$ Thousand)

 

 

Account CodeAccount DescriptionShare Capital

Capital Reserves,

Granted Options

and Treasury Shares

Profit Reserves

Retained Earnings /

Accumulated Losses

Other

Comprehensive

Income

Shareholders' Equity

Non-controlling

interest

Shareholders' Equity

Consolidated

5.01Balance at the Beginning of the Period205,432,0002,674,00095,148,000(26,029,000)277,225,0006,318,000283,543,000
5.03Adjusted Opening Balance205,432,0002,674,00095,148,000(26,029,000)277,225,0006,318,000283,543,000
5.04Capital Transactions with Owners(3,000)(3,916,000)3,000(3,916,000)(3,480,000)(7,396,000)
5.04.06Dividends(825,000)(825,000)
5.04.07Interest on Shareholders' Equity(3,913,000)(3,913,000)(3,913,000)
5.04.08Capital Transactions(3,000)(3,000)(2,655,000)(2,658,000)
5.04.09Realization of the Deemed Cost(3,000)3,000
5.05Total of Comprehensive Income31,984,000959,00032,943,000663,00033,606,000
5.05.01Net Income for the Period31,984,00031,984,000448,00032,432,000
5.05.02Other Comprehensive Income959,000959,000215,0001,174,000
5.07Balance at the End of the Period205,432,0002,671,00095,148,00028,068,000(25,067,000)306,252,0003,501,000309,753,000
16 
 

Consolidated Interim Accounting Information / Statement of Cash Flows – Indirect Method

(R$ Thousand)

 

 

 

 

 

Account Code

 

 

 

 

Account Description

Accumulated of the Current Year 01/01/2020 to 09/30/2020Accumulated of the Previous Year 01/01/2019 to 09/30/2019
6.01Net cash provided by operating activities110,404,00071,073,000
6.01.01Cash provided by operating activities97,627,00092,925,000
6.01.01.01Net Income (loss) for the period(54,206,000)32,432,000
6.01.01.02Pension and medical benefits (actuarial expense)6,099,0006,167,000
6.01.01.03Results in equity-accounted investments3,445,000(1,411,000)
6.01.01.04Depreciation, depletion and amortization46,203,00043,557,000
6.01.01.05Impairment of assets (reversal)65,229,0002,491,000
6.01.01.06Exploratory expenditures write-offs1,180,000248,000
6.01.01.08Foreign exchange, indexation and finance charges64,259,00026,691,000
6.01.01.09Deferred income taxes, net(21,811,000)11,321,000
6.01.01.10Allowance for expected credit losses617,000268,000
6.01.01.11Write-Off - Overpayments Incorrectly Capitalized1,518,00032,000
6.01.01.13Revision and unwinding of discount on the provision for decommissioning costs2,603,0002,375,000
6.01.01.17Disposal/write-offs of assets and remeasurement of investment retained with loss of control(559,000)(21,118,000)
6.01.01.18PIS and COFINS recovery - exclusion of ICMS (VAT tax) from the basis of calculation(16,950,000)
6.01.01.19Net cash provided by operating activities from continuing operations(10,128,000)
6.01.02Decrease / (increase) in assets / increase/ (decrease) in liabilities12,777,000(21,852,000)
6.01.02.01Trade and other receivables, net(1,164,000)10,807,000
6.01.02.02Inventories4,317,000501,000
6.01.02.03Judicial deposits(4,480,000)(6,420,000)
6.01.02.04Escrow account - Class action agreement7,424,000
6.01.02.05Other assets2,586,000(3,337,000)
6.01.02.06Trade payables1,912,000(2,982,000)
6.01.02.07Other taxes payable11,724,000974,000
6.01.02.08Pension and medical benefits(4,228,000)(5,524,000)
6.01.02.09Provisions for legal proceedings(1,274,000)(14,553,000)
6.01.02.10Short-term benefits5,659,0001,361,000
6.01.02.11Income tax and social contribution paid(1,486,000)(8,968,000)
6.01.02.12Provision for Decommissioning Costs(1,550,000)(1,282,000)
6.01.02.14Other liabilities761,000(1,077,000)
6.01.02.15Discontinued operations – net cash provided by operating activities1,224,000
6.02Net cash used in investing activities(21,620,000)23,985,000
6.02.01Acquisition of PP&E and intangibles assets(22,518,000)(21,021,000)
6.02.02(Increase) decrease in investments in investees(5,309,000)(90,000)
6.02.03Proceeds from disposal of assets – Divestment5,229,00035,685,000
6.02.04Divestment (investment) in marketable securities(66,000)(1,047,000)
6.02.05Dividends received1,044,0003,262,000
6.02.08Discontinued operations – net cash provided by (used in) investing activities7,196,000
6.03Net cash used in financing activities(62,530,000)(100,081,000)
6.03.01Investments by non-controlling interest(432,000)(152,000)
6.03.02Proceeds from financing79,204,00017,899,000
6.03.03Repayment of principal(101,362,000)(81,625,000)
6.03.04Repayment of interest(13,151,000)(14,607,000)
6.03.05Dividends paid to shareholders(4,426,000)(5,128,000)
6.03.06Dividends paid to non-controlling interests(198,000)(349,000)
6.03.08Settlement of lease liabilities(22,165,000)(14,137,000)
6.03.09Discontinued operations – net cash used in financing activities(1,982,000)
6.04Effect of exchange rate changes on cash and cash equivalents15,678,0006,051,000
6.05Net increase/ (decrease) in cash and cash equivalents41,932,0001,028,000
6.05.01Cash and cash equivalents at the beginning of the year29,729,00053,854,000
6.05.02Cash and cash equivalents at the end of the period71,661,00054,882,000
    

 

17 
 

Consolidated Interim Accounting Information / Statement of Added Value

(R$ Thousand)

 

 

 

 

 

Account Code

 

 

 

 

Account Description

Accumulated of the Current Year 01/01/2020 to 09/30/2020Accumulated of the Previous Year 01/01/2019 to 09/30/2019
    
7.01Sales Revenues274,637,000337,224,000
7.01.01Sales of Goods and Services254,613,000287,528,000
7.01.02Other Revenues(2,172,000)26,293,000
7.01.03Revenues Related to the Construction of Assets to be Used in Own Operations22,813,00023,671,000
7.01.04Allowance for expected credit losses(617,000)(268,000)
7.02Inputs Acquired from Third Parties(148,094,000)(106,983,000)
7.02.01Cost of Sales(23,075,000)(44,400,000)
7.02.02Materials, Power, Third-Party Services and Other Operating Expenses(41,222,000)(40,775,000)
7.02.03Impairment Charges / Reversals of Assets(65,229,000)(2,491,000)
7.02.04Others(18,568,000)(19,317,000)
7.02.04.01Tax Credits on Inputs Acquired from Third Parties(17,050,000)(19,285,000)
7.02.04.02Inventory Write-Down to Net Realizable Value(1,518,000)(32,000)
7.03Gross Added Value126,543,000230,241,000
7.04Retentions(50,023,000)(47,379,000)
7.04.01Depreciation, Amortization and Depletion(50,023,000)(47,379,000)
7.05Net Added Value Produced76,520,000182,862,000
7.06Transferred Added Value16,208,00034,183,000
7.06.01Share of Profit of Equity-Accounted Investments(3,445,000)1,411,000
7.06.02Finance Income2,044,0003,616,000
7.06.03Others17,609,00029,156,000
7.06.03.01Rentals, royalties and others659,0001,312,000
7.06.03.02Total Added Value from Discontinued operations to be distributed27,844,000
7.06.03.03PIS and COFINS recovery - exclusion of ICMS (VAT tax) from the basis of calculation16,950,000
7.07Total Added Value to be Distributed92,728,000217,045,000
7.08Distribution of Added Value92,728,000217,045,000
7.08.01Employee Compensation26,113,00024,418,000
7.08.01.01Salaries12,014,00014,808,000
7.08.01.02Fringe Benefits13,264,0008,706,000
7.08.01.03Unemployment Benefits (FGTS)835,000904,000
7.08.02Taxes and Contributions46,345,000102,198,000
7.08.02.01Federal28,289,00079,941,000
7.08.02.02State17,471,00021,789,000
7.08.02.03Municipal585,000468,000
7.08.03Return on Third-Party Capital74,476,00040,281,000
7.08.03.01Interest71,192,00035,397,000
7.08.03.02Rental Expenses3,284,0004,884,000
7.08.04Return on Shareholders' Equity(54,206,000)22,304,000
7.08.04.01Interest on Capital3,913,000
7.08.04.03Retained Earnings / (Losses) for the Period(52,782,000)18,206,000
7.08.04.04Non-controlling Interests on Retained Earnings / (Losses)(1,424,000)185,000
7.08.05Others27,844,000
7.08.05.01Total distributed added value from discontinued operation - Employees and administration907,000
7.08.05.02Total distributed added value from discontinued operation - Taxes16,358,000
7.08.05.03Total distributed added value from discontinued operation - Financial Institutions and Supliers450,000
7.08.05.04Total distributed added value from discontinued operation - Shareholders10,129,000

 

 

18 
 

 

NOTES TO THE FINANCIAL STATEMENTS

PETROBRAS

This interim financial information should be read together with the Company’s audited annual financial statements

(Expressed in millions of reais, unless otherwise indicated)

 

1.Basis of preparation

These interim financial statements present the significant changes in the period, avoiding repetition of certain notes to the financial statements previously reported, and present the consolidated information, considering Management’s understanding that it provides a comprehensive view of the Company’s financial position and operational performance, complemented by certain information of the Parent Company. Hence, this interim financial information should be read together with the Company’s audited annual financial statements for the year ended December 31, 2019, which include the full set of notes.

The interim consolidated and separate financial statements (Parent Company) have been prepared and are presented in accordance with IAS 34 – “Interim Financial Reporting” as issued by the International Accounting Standards Board (IASB), and with the pronouncement CPC 21 (R1) – Demonstrações Intermediárias as issued by the Brazilian Accounting Pronouncements Committee (Comitê de Pronunciamentos Contábeis - CPC) and released by the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários – CVM). All financial statements relevant information is being evidenced and corresponds to the ones used by the Company’s Management.

In July 2019, after the additional sale of its interest in Petrobras Distribuidora S/A (BR) through a secondary public offering of shares (follow on), Petrobras’ interest was reduced to 37.50% of the share capital, ceasing to be a Petrobras subsidiary. This operation was characterized as a “discontinued operation”. Thus, the consolidated statements of income and cash flow, for the compared period ended September 30, 2019, present the results and cash flows from operating, investing and financing activities in separate lines, as net income of discontinued operations. The statements of added value for the compared period ended September 30, 2019 also show the total added value to be distributed and the total added value distributed from discontinued operations, separately. The opening of the effects on the results for the period and cash flows of September 30, 2019, related to the discontinued operation are presented in note 7 of the Quarterly Information of September 30, 2019.

These interim financial statements were approved and authorized for issue by the Company’s Board of Directors in a meeting held on October 28, 2020.

2.Summary of significant accounting policies

The same accounting policies and methods of computation were followed in these consolidated interim financial statements as those followed in the preparation of the annual financial statements of the Company for the year ended December 31, 2019.

3.Context, resilience measures and impacts of the COVID-19 pandemic

3.1    Context

In January 2020, China reported having identified a new variant of coronavirus, causing the disease COVID-19, which was spreading quickly in its population. On March 11, 2020, COVID-19 was a declared a pandemic by the World Health Organization (WHO). Social isolation measures arising from this pandemic affected the global economic environment, reducing the demand for oil and its oil products and triggering a shock in the oil and gas industry.

In early April, members of the Organization of the Petroleum Exporting Countries (OPEC +) and other countries announced a new agreement providing for the reduction of their combined production by 9.7 million barrels per day (bpd) for May and June 2020. In July 2020, at a new meeting, OPEC decided not to change the planned schedule for implementing the combined production cuts, maintaining for July the reduction of 9.7 MM bpd (barrels of oil day) and 7.7 MM bpd as of August, remaining at this level until December 2020. In September 2020, the entity decided not to change the schedule planned for implementation of combined production cuts, maintaining reduction in 7.7 MM bpd. This agreement provides for a predefined cut schedule by the end of 2021.

The adversity in the global scenario caused the company to revise its top metric of indebtedness contained in the Strategic Plan 2020-2024, replacing the indicator of net debt / EBITDA by the indicator of gross debt. The approved gross debt target for 2020 was US$ 87 billion, the same level as that of 2019, being overtaken in the third quarter of 2020, mainly by prepaying loans and repurchasing and redeeming securities in the international capital market.

The company's projections indicate that the price of Brent oil converges to US$ 50 per barrel in the long run. This price assumption has not been modified for the preparation of the financial statements of September 30, 2020, in relation to those practiced in the first and second quarters of 2020. In addition, the company also regularly monitors the projection of its reference price assumptions of the short-term, compared to realized prices, with no change compared to those used in previous quarters.

19 
 

3.2    Resilience measures

The Company, in line with the recommendations of the WHO and the Ministry of Health, announced measures to preserve the health of its employees and support the prevention of contagion in its administrative and operational areas home office, reduced work shifts in operational areas to minimize the number of workers commuting, rigorous cleaning of workplaces, distribution of PPE, testing of suspected cases, measuring body temperature and fast testing on pre-shipment for oil platforms, medical monitoring and access to telemedicine services.

The Brazilian governmental authorities, in turn, implemented a series of measures to face the collateral economic effects imposed by the current pandemic, at the time of growing and still uncertain dimensions, thus helping the productive sector, among which we highlight: Federal Government measures - (i) PIS and Cofins and Social Security-Companies’ Contribution - had the due amounts of competencies from March to May 2020 deferred for collection in August, October and November 2020, respectively; (ii) FGTS - had the collection of the amounts from March to May deferred in six equal installments to be paid from July to December 2020; (iii) System S (employer contributions to social entities that train and support employees) - 50% reduction in rates from April to June 2020; (iv) IOF - reduction from 3% to zero in certain operations carried out from April 3 to December 31 2020; and State of Pernambuco - (v) VAT tax rate on import of fuel (from April 9 to December 31 2020) - deferral of up to 30 days.

As a result of the abrupt reduction on the demand and prices of oil and fuel, the Company adopted a set of measures aiming at reducing costs, postponing cash outflows and optimizing its working capital, in order to ensure its financial strength and resilience of its businesses. The main measures are:

·disbursement of committed credit lines (Revolving Credit Lines) in the total amount of US$ 8 billion, as well as two new lines of R$ 3.5 billion. In the third quarter of 2020, there was a total prepayment of credit lines committed abroad in the amount of US$ 7.6 billion (note 26). With the prepayment, these resources were available for new withdrawals;
·postponement of the payment of the remaining dividends based on the annual result of 2019 (note 28);
·postponement of judicial deposits to 2021, in particular of a tax nature;
·reduction and postponement of expenses with human resources, with emphasis on: (i) postponement of payment for the 2019 Performance Award Program (note 13.1); (ii) postponement of the payment of 30% of the total monthly remuneration of the Board of Directors, President, Executive Officers and upper management, and between 10% to 30% of the monthly remuneration of lower management and consultants, from April to June 2020, settled in September 2020; and (iii) temporary change from shift and alert systems to administrative regime until December 31, 2020, being reassessed monthly or earlier according to the return to operational work;
·reduction of capital expenditures scheduled for 2020 from US$ 12 billion to US$ 8.5 billion, mainly due to the postponement of exploratory activities of interconnection of wells and construction of production, refining facilities and the depreciation of the Brazilian real against the U.S. dollar;
·reduction of 200 thousand bpd (barrels of oil per day) of oil production from April 2020 (included the reduction of 100 thousands bpd announced in the end of March 2020), and a reduction in the utilization factor of refineries from 79% to 60% that contributed to the maintenance of reasonable clearance in the storage capacity, consequently avoiding the adoption of costly measures such as the chartering of ships to store liquids. However, with the evolution of the demand for our products performing better than expected, the Company opted for the gradual return to the previous level of average oil production, accompanied by an increase in the utilization factor of the refining facilities;
·reduction in operating expenses with an additional decrease of US$ 2 billion, mainly through: (i) hibernation of platforms operating in shallow waters, with higher lifting costs per barrel, and for which, due to the drop in oil prices, the Company estimates negative cash flows; (ii) lower expenses with stoppages in wells and optimization of production logistics; and (iii) postponement of new relevant contracts for a period of 90 days, between April 1 and June 30, 2020;
·negotiation efforts with suppliers resulted in a postponement of disbursements and reductions in the amount of R$ 7.3 billion in 2020, including agreements/order cancellations, scope reduction and price reduction. Deferred payments will be paid throughout 2021 and may include financial charges, according to individual negotiations with suppliers;
·as a result of the structural reduction in the demand for natural gas in the entire Brazilian market, the company, according to the contractual provision, notified a declaration of force majeure resulting from the pandemic in the natural gas purchase agreement related to the Campo de Manati (GSA). The company maintained negotiations with the other agents in the natural gas chain with the same aim of reducing the effects resulting from the pandemic, remaining in constant monitoring of the current scenario and its developments on
20 
 

the gas market. Accordingly, Petrobras worked together with the sellers of the natural gas purchase agreement for the Campo de Manati to seek to mitigate the effects of Force Majeure in this agreement and reduce potential controversies. In this sense, in view of the recovery of natural gas consumption with the mitigation of the effects of the pandemic, Petrobras signed an agreement with the Sellers that resulted in the reduction of potential controversies from June 2020 and reduce potential controversies.

Despite the challenging context imposed by COVID-19, the company achieved the following results in the period from January to September 2020: (i) increase in the average production of oil, NGL and natural gas; (ii) monthly production records reached in Búzios; (iii) increased oil exports; (iv) increased sales and production of oil products.

As a result of the implementation of the aforementioned measures, the Company, after simulating several stress scenarios, estimates that will be able to balance its financing and its cash flows. Thus, management believes that it has adequate resources to continue its operations in the short-term and, therefore, the going concern assumption is applied in the preparation of these interim financial statements.

3.3Effects on these interim financial statements

The impacts of COVID-19 pandemic on the economic environment were considered in the preparation of these interim financial statements. Information on key estimates and judgments that require a high level of judgment and complexity in their applications and that could materially affect the Company's financial condition and results, were disclosed in the financial statements of December 31, 2019 and revised for this interim financial statements, in order to determine possible changes in assumptions and judgments arising from current market conditions.

The results of the revision of these assumptions and others came from COVID-19 are presented below:

·the oil price and expectations for the growth of the world economy suffered a consistent decline throughout the 1st half of 2020, especially from the end of the 1st quarter of 2020. With the economic impacts, the global demand for oil products was also severely affected in that period. In this context, short, medium and long-term planning scenarios for macroeconomic and price assumptions were no longer compatible with those approved in the 2020-2024 Strategic Plan (SP), which meant that the company anticipated approval of a new set of premises. As a result, impairment losses on assets were recognized in the 1st quarter of 2020 in the amount of R$ 65 billion (note 20);
·expected export values ​​and consequently highly probable export values ​​were impacted by the effects of the oil price war and COVID-19. Thus, the values ​​of exports whose exchange variations were designated in hedge relationships for the months of April to December / 2020 and August to December / 2021 were no longer foreseen and there was a significant increase in the company's dollar x Real exchange exposure on 30 September 2020. As a result, the amount of R$ 2.6 billion was reclassified from shareholders’ equity to the statement of income, mainly in the first quarter of 2020 (note 30.2);
·inventories adjusted to net realizable value, mainly from the first quarter of 2020, of R$ 1.5 billion (note 11);
·the recognition of expected credit losses (PCE) in financial assets that are not measured at fair value through profit or loss maintained the criterion applied in recent quarters, due to the company's expectations of a prolongation of the current economic effects generated by combating COVID-19. For financial assets whose counterparties had ratings published by risk agencies, where the notes already reflected the effects of the pandemic, the information disclosed by such agencies was used to calculate the PCE. For other financial assets, in general, the expected effects of COVID-19 were incorporated into the PCE by identifying the deterioration in the probability of default based on observable data that considered the stratification of the debtor by area of ​​operation, type of product and region. No relevant effects have been identified;
·deferred tax credits were recognized based on the projected taxable profit for subsequent years (note 12.2);
·reserve volume estimates are prepared reflecting, in an integrated manner, the projects in the company's Strategic Planning portfolio, technical uncertainties and assumptions such as prices and costs. The current estimates of the provision for the dismantling of the company's areas largely reflect liabilities that will be realized in the medium and long terms. Such assumptions used for the estimates are supported by the company's Strategic Planning and reserve estimates cycle, processes that express long-term views. In this context, the company evaluated, up to the third quarter of 2020, the main assumptions that form the cost of dismantling areas vis-à-vis the temporal formation structure of its abandonment liabilities and concluded that there are no relevant effects, so far, which impact the update of the provision set up in the annual financial statements for 2019. Additionally, in the third quarter of 2020, the company defined macro guidelines for the deployment of Strategic Planning 2021/2025 of E&P projects, which resulted in the recognition of loss as a result of the devaluation the Camarupim field, due to the decision not to continue its operations;
21 
 
·there were no changes in assumptions in the recognition of revenue contracts with customers. The expectation of the customer's completion of the obligation remains at the maturity of each transaction, classified as highly probable, subject only to the fulfillment of the precedent conditions contained in the sales contracts. Customers did not indicate their intention to breach or revise the contractual terms and conditions signed;
·in the scope of the company's legal litigation, there are no cases related to COVID-19 with a risk of financial disbursement that directly impact the financial statements on September 30, 2020. However, the company became aware of some public civil actions in the labor field brought by unions, whose objects are related to the COVID-19 Crisis and to the Resilience Plan to reduce expenses. Such actions represent obligations to do and are divided into three groups, basically questioning: (i) two measures to contain personnel expenses contained in the Resilience Plan; (ii) sufficiency of preventive measures against the spread of COVID-19 and criterion for removing people from the risk group; and (iii) the union's participation in the Organizational Response Structure (Estrutura Organizacional de Resposta - EOR). The company is taking the appropriate legal measures for each case and the best estimate at the moment, when there is still no decision on the merits at first instance, is that the likelihood of loss is not probable;
·In the second and third quarters of 2020, the Company accounted for R$ 1,262 within other income and expenses, as a result of the reduction in the level of activity, of which R$ 495 in the second quarter related to the lower processed feedstock at the refineries, and effect in the gas and energy plants, being R$ 330 in the third quarter and R$ 437 in the second quarter, due to rigs and platforms without programming.
4Cash and cash equivalents and Marketable securities
4.1Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, term deposits with banks and short-term highly liquid financial investments that are readily convertible to known amounts of cash, are subject to insignificant risk of changes in value and have a maturity of three months or less from the date of acquisition.

 Consolidated
 09.30.202012.31.2019
Cash at bank and in hand2,7312,306
Short-term financial investments 
   - In Brazil 
         Brazilian interbank deposit rate investment funds and other short-term deposits19,4856,849
         Other investment funds16316
 19,6486,865
   - Abroad 
 Time deposits10,68527
Automatic investing accounts and interest checking accounts36,42318,622
 Other financial investments2,1481,894
 49,25620,543
Total short-term financial investments68,90427,408
Total cash and cash equivalents71,63529,714

 

 

Short-term financial investments in Brazil primarily consist of investments in funds holding Brazilian Federal Government Bonds that can be redeemed immediately, as well as reverse repurchase agreements that mature within three months as of the date of their acquisition. Short-term financial investments abroad comprise time deposits that mature in three months or less from the date of their acquisition, highly-liquid automatic investment accounts, interest checking accounts and other short-term fixed income instruments.

The main funds generated were substantially provided by operating cash generation of R$ 110,404, proceeds from divestments of R$ 5,229, exchange rate effect on the balances of cash and cash equivalents of R$ 15,678 and a set of measures to reduce cash outflows and preserve cash in this scenario of uncertainty, in order to reinforce its financial strength and resilience of the company’s businesses.

 

The main use of these funds in the period ended September 30, 2020 were for servicing debt, net of proceeds from financing through the offering of securities in the international market, including prepayment of loans in the national and international banking market, repurchase and redemption of securities in the international capital market and lease amortizations totaling R$ 57,474, investments in the business segments in the amount of R$ 22,518 and acquisition of additional interest in shares in Tupi B.V. and Iara B.V. in the amount of R$ 5,034.

 

22 
 

4.2         Marketable securities

  Consolidated
 09.30.202012.31.2019
Fair value through profit or loss3,1593,528
Fair value through other comprehensive income2228
Amortized cost820256
Total4,0013,812
Current3,7823,580
Non-current219232
 

 

Marketable securities classified as fair value through profit or loss refer mainly to investments in Brazilian Federal Government Bonds. These financial investments have maturities of more than three months and are generally classified as current assets due to their maturity or the expectation of their realization in the short term.

5Sales revenues
  Consolidated
 20202019
 Jul-SepJan-SepJul-SepJan-Sep
Gross sales92,668254,61399,972287,528
Sales taxes  (*)(21,938)(57,516)(22,921)(67,054)
Sales revenues70,730197,09777,051220,474
Diesel19,59351,13223,93067,684
Gasoline9,17422,4169,30828,343
Liquified petroleum gas4,59512,3874,26712,349
Jet fuel1,0045,1343,68411,080
Naphtha2,3356,6831,3954,841
Fuel oil (including bunker fuel)8182,6429002,991
Other oil products3,8859,6483,63410,047
Subtotal oil products41,404110,04247,118137,335
Natural gas4,04313,3415,95617,227
Renewables and nitrogen products67218241783
Breakage7241,9006911,975
Electricity5052,1831,0903,599
Services, agency and others1,1183,0597912,730
Domestic market47,861130,74355,887163,649
Exports20,91760,60119,27149,244
Sales abroad (**)1,9525,7531,8937,581
Foreign market22,86966,35421,16456,825
Sales revenues70,730197,09777,051220,474
(*) Includes, mainly, CIDE, PIS, COFINS and VAT rate (VAT).
(**)Sales revenues from operations outside of Brazil, including trading and excluding exports.
 

 

In the period from January to September 2020 and 2019, sales to BR Distribuidora represent more than 10% of the Company sales revenues, mainly associated with the refining, transportation and marketing segment.

5.1Remaining performance obligations

The company has sales contracts for products or services in force and signed until September 30, 2020, with terms longer than 1 year, where there is established a quantity of goods or services for sales in the next years with their respective payment terms.

Revenues will be recognized through transfers of goods and services to the respective customers, their values ​​and period of recognition being subject to future demands, changes in the value of commodities, exchange rates and other market factors.

The following are the remaining amounts of these contracts at the end of September 30, 2020 or practiced in recent sales when they reflect the most directly observable information:

23 
 

 

 Consolidated
 TotalExpected recognition within 1 year
Domestic Market  
Gasoline6,1586,158
Diesel11,90411,904
Natural gas60,9125,138
Services and others48,99425,746
Naphtha3,3093,309
Electricity16,6383,457
Other oil products125125
Jet fuel3,4073,407
Foreign Market  
Exports51,9778,372
Total203,42467,616

The table above does not include information on contracts with original expected duration of one year or less, such as spot-market contracts, variable considerations which are constrained, and information on contracts only establishing general terms and conditions (Master Agreements), for which volumes and prices will only be defined in subsequent contracts.

In addition, electricity sales are manly driven by demands to generate electricity from thermoelectric power plants, according the Brazilian National Electric System Operator (ONS) requests. These requests are substantially affected by Brazilian hydrological conditions, thus, the table above presents fixed amounts representing sales of certified capacity in accordance with the installed capacity of the Company.

5.2Contract liabilities

As of September 30, 2020, the company has R$ 403 in advances related mainly to take and ship or pay contracts, to be offset against future sales of natural gas or the non-exercise of the right by the client, classified as other accounts and expenses payable in current liabilities.

6Costs and expenses by nature

6.1  Cost of sales

  Consolidated
 20202019
 Jul-SepJan-SepJul-SepJan-Sep
Raw material, products for resale, materials and third-party services (*)(13,490)(47,201)(22,134)(61,173)
Depreciation, depletion and amortization(12,193)(36,110)(12,487)(36,144)
Production taxes(8,504)(21,684)(9,117)(28,371)
Employee compensation(2,774)(8,500)(3,307)(9,737)
Total(36,961)(113,495)(47,045)(135,425)
(*) It Includes short-term leases and inventory turnover.    

6.2  Selling expenses

  Consolidated
 20202019
 Jul-SepJan-SepJul-SepJan-Sep
Materials, third-party services, freight, rent and other related costs(5,355)(16,201)(4,160)(9,648)
Depreciation, depletion and amortization(862)(2,099)(542)(1,610)
Allowance for expected credit losses147(7)(34)(137)
Employee compensation(235)(664)(232)(642)
Total(6,305)(18,971)(4,968)(12,037)

 

The increase in selling expenses mainly reflects the increase in tariffs for greater use of TAG gas pipelines since the sale in June 2019, for higher export volumes, mainly oil, and for higher freight price.

6.3  General and administrative expenses

  Consolidated
 20202019
 Jul-SepJan-SepJul-SepJan-Sep
Employee compensation(1,229)(3,724)(1,434)(4,334)
Materials, third-party services, rent and other related costs(291)(933)(439)(1,510)
Depreciation, depletion and amortization(144)(395)(139)(489)
Total(1,664)(5,052)(2,012)(6,333)

 

 

 

24 
 
7Other income and expenses
  Consolidated
 20202019
 Jul-SepJan-SepJul-SepJan-Sep
Unscheduled stoppages and pre-operating expenses(1,569)(5,634)(1,151)(3,881)
(Expenses)/Reversions of Voluntary Separation Incentive Plan – PDV(415)(5,437)(269)(604)
Pension and medical benefits – retirees(1,135)(3,489)(1,348)(4,043)
Gains / (losses) related to legal, administrative and arbitration proceedings(1,206)(2,088)(3,658)(5,824)
Gains/(losses) with Commodities Derivatives(257)(1,940)252(1,197)
Reclassification of comprehensive income (loss) due to the disposal of equity-accounted investments(225)(225)(127)
Variable compensation program(73)95(1,141)(1,932)
Fines imposed on suppliers113415581881
Amounts recovered from Lava Jato investigation84515446755
Results on disposal/write-offs of assets and on remeasurement of investment retained with loss of control1,132784(645)21,244
Early termination and change on payments of lease agreements139873(4)(9)
(Expenses)/Reimbursements from E&P partnership operations9192,199532902
Equalization of expenses - Production Individualization Agreements(733)3,74112995
PIS and Cofins recovered - VAT tax exclusion from PIS and Cofins tax basis7,675
Others392740931(128)
Total(2,834)(1,776)(5,345)6,132

 

8Net finance income (expense)
  Consolidated
 20202019
 Jul-SepJan-SepJul-SepJan-Sep
Finance income6672,0441,3443,616
Income from investments  and marketable securities (Government Bonds)2518256361,557
Discount and premium on repurchase of debt securities612719
Gains from signed agreements (electricity sector)(4)310
Others4101,2077051,730
Finance expenses(9,778)(23,292)(9,623)(22,558)
Interest on finance debt(5,224)(14,323)(5,094)(14,880)
Unwinding of discount on lease liabilities(1,845)(5,039)(1,464)(4,490)
Discount and premium on repurchase of debt securities(2,814)(4,071)(2,641)(3,335)
Capitalized borrowing costs1,1483,5381,2483,912
Unwinding of discount on the provision for decommissioning costs(792)(2,504)(770)(2,347)
Other finance expenses and income, net(251)(893)(902)(1,418)
Foreign exchange gains (losses) and indexation charges(13,799)(35,148)(2,595)(8,927)
Foreign Exchange (*)(7,636)(26,701)23(840)
Expenses (*)(6,147)(18,174)(2,962)(8,709)
Pis and Cofins inflation indexation income -  exclusion of ICMS (VAT tax) from the basis of calculation9,250
Other foreign exchange gains (losses) and indexation charges, net(16)477344622
Total(22,910)(56,396)(10,874)(27,869)
(*) For more information, see notes 30.2.c and 30.2.a.  

 

9Net income by operating segment

 

Consolidated Statement of Income by operating segment - Jul-Sep/2020
 Exploration and ProductionRefining, Transportation & Marketing

Gas

&

Power

Corporate and other businessEliminationsTotal
Continuing operations      
Sales revenues50,35264,3178,5091,209(53,657)70,730
     Intersegments49,1829243,188363(53,657)
     Third parties1,17063,3935,32184670,730
Cost of sales(25,101)(55,670)(4,101)(1,090)49,001(36,961)
Gross profit25,2518,6474,408119(4,656)33,769
Expenses(3,355)(4,575)(2,753)(4,107)(30)(14,820)
Selling(1)(3,595)(2,647)(34)(28)(6,305)
General and administrative(152)(255)(111)(1,146)(1,664)
Exploration costs(1,447)(1,447)
Research and development(343)(9)(6)(137)(495)
Other taxes(1,996)5(40)(116)(2,147)
Impairment(70)173(31)72
Other income and expenses654(721)(122)(2,643)(2)(2,834)
Net income (loss) before financial results and income taxes21,8964,0721,655(3,988)(4,686)18,949
    Net finance income (expenses)(22,910)(22,910)
    Results in equity-accounted investments42(570)312(701)(917)
Net Income (loss) before income taxes21,9383,5021,967(27,599)(4,686)(4,878)
    Income taxes(7,445)(1,384)(562)11,0081,5923,209
Net income from continuing operations for the period14,4932,1181,405(16,591)(3,094)(1,669)
Attributable to:     
Net income attributable to shareholders of Petrobras14,4992,1661,304(16,421)(3,094)(1,546)
Net income from continuing operations14,4992,1661,304(16,421)(3,094)(1,546)
Non-controlling interests(6)(48)101(170)(123)
25 
 

 

Net income from continuing operations(6)(48)101(170)(123)
 14,4932,1181,405(16,591)(3,094)(1,669)
 
Consolidated Statement of Income by operating segment – Jan-Sep/2020
 Exploration and ProductionRefining, Transportation & Marketing

Gas

&

Power

Corporate and other businessEliminationsTotal
Continuing operations
Sales revenues125,618176,80327,1333,158(135,615)197,097
     Intersegments122,3263,0649,398827(135,615)
     Third parties3,292173,73917,7352,331197,097
Cost of sales(70,215)(163,667)(13,318)(3,018)136,723(113,495)
Gross profit55,40313,13613,8151401,10883,602
Expenses(68,533)(15,721)(9,290)(4,909)(92)(98,545)
    Selling(3)(10,245)(8,553)(86)(84)(18,971)
    General and administrative(658)(797)(332)(3,265)(5,052)
    Exploration costs(2,265)(2,265)
    Research and development(841)(30)(25)(387)(1,283)
    Other taxes(2,481)(450)(92)(946)(3,969)
  Impairment(64,374)(208)173(820)(65,229)
  Other income and expenses2,089(3,991)(461)595(8)(1,776)
Net income (loss) before financial results and income taxes(13,130)(2,585)4,525(4,769)1,016(14,943)
    Net finance income (expenses)(56,396)(56,396)
    Results in equity-accounted investments(764)(2,759)434(356)(3,445)
Net Income (loss) before income taxes(13,894)(5,344)4,959(61,521)1,016(74,784)
    Income taxes4,464879(1,538)17,119(346)20,578
Net income (loss) from continuing operations for the period(9,430)(4,465)3,421(44,402)670(54,206)
Attributable to:      
Net income attributable to shareholders of Petrobras(9,412)(4,247)3,127(42,920)670(52,782)
Net income from continuing operations(9,412)(4,247)3,127(42,920)670(52,782)
Non-controlling interests(18)(218)294(1,482)(1,424)
Net income from continuing operations(18)(218)294(1,482)(1,424)
 (9,430)(4,465)3,421(44,402)670(54,206)

 

 

 

Consolidated Statement of Income by operating segment - Jul-Sep/2019
 Exploration and ProductionRefining, Transportation & Marketing

Gas

&

Power

Corporate and other businessEliminationsTotal
Continuing operations      
Sales revenues49,80667,94711,7501,124(53,576)77,051
     Intersegments48,7245,7093,512191(53,576)4,560
     Third parties1,08262,2388,23893372,491
Cost of sales(26,978)(63,048)(8,077)(1,070)52,128(47,045)
Gross profit22,8284,8993,67354(1,448)30,006
Expenses(5,050)(3,854)(2,510)(4,723)(12)(16,149)
    Selling2(2,108)(2,850)(11)(1)(4,968)
    General and administrative(332)(335)(126)(1,219)(2,012)
    Exploration costs(276)(276)
    Research and development(393)(9)(12)(164)(578)
    Other taxes(76)(138)(35)(311)(560)
    Impairment(2,343)(53)(14)(2,410)
  Other income and expenses(1,632)(1,211)527(3,018)(11)(5,345)
Net income (loss) before financial results and income taxes17,7781,0451,163(4,669)(1,460)13,857
    Net finance income (expenses)(10,874)(10,874)
    Results in equity-accounted investments82(269)168465446
Net Income (loss) before income taxes17,8607761,331(15,078)(1,460)3,429
    Income taxes(6,045)(355)(395)2,360497(3,938)
Net income (loss) from continuing operations for the period11,815421936(12,718)(963)(509)
Net income from discontinued operations for the period(18)9,3679,349
Net income for the period11,815421918(3,351)(963)8,840
Attributable to:      
Net income attributable to shareholders of Petrobras11,820479783(3,032)(963)9,087
Net income from continuing operations11,820479804(12,363)(963)(223)
Net income from discontinued operations(21)9,3319,310
Non-controlling interests(5)(58)135(319)(247)
Net income from continuing operations(5)(58)132(355)(286)
Net income from discontinued operations33639
 11,815421918(3,351)(963)8,840

 

26 
 

 

Consolidated Statement of Income by operating segment – Jan-Sep/2019
 Exploration and ProductionRefining, Transportation & Marketing

Gas

&

Power

Corporate and other businessEliminationsTotal
Continuing operations
Sales revenues142,353194,14933,9383,577(153,543)220,474
     Intersegments139,48935,04310,248615(153,543)31,852
     Third parties2,864159,10623,6902,962188,622
Cost of sales(79,389)(178,536)(23,031)(3,431)148,962(135,425)
Gross profit62,96415,61310,907146(4,581)85,049
Expenses(9,371)(10,827)14,859(13,465)(90)(18,894)
    Selling(2)(5,776)(6,101)(91)(67)(12,037)
    General and administrative(923)(1,024)(414)(3,972)(6,333)
    Exploration costs(1,324)(1,324)
    Research and development(1,152)(36)(39)(442)(1,669)
    Other taxes(185)(275)(128)(584)(1,172)
    Impairment(1,242)(1,234)(15)(2,491)
  Other income and expenses(4,543)(2,482)21,556(8,376)(23)6,132
Net income (loss) before financial results and income taxes53,5934,78625,766(13,319)(4,671)66,155
    Net finance income (expenses)(27,869)(27,869)
    Results in equity-accounted investments3622663374461,411
Net Income (loss) before income taxes53,9555,05226,103(40,742)(4,671)39,697
    Income taxes(18,222)(1,627)(8,760)9,6281,588(17,393)
Net income from continuing operations for the period35,7333,42517,343(31,114)(3,083)22,304
Net income from discontinued operations for the period1210,11610,128
Net income for the period35,7333,42517,355(20,998)(3,083)32,432
Attributable to:      
Net income attributable to shareholders of Petrobras35,7473,50616,973(21,159)(3,083)31,984
Net income from continuing operations35,7473,50616,973(31,024)(3,083)22,119
Net income from discontinued operations9,8659,865
Non-controlling interests(14)(81)382161448
Net income from continuing operations(14)(81)370(90)185
Net income from discontinued operations12251263
 35,7333,42517,355(20,998)(3,083)32,432

 

 

The consolidated amounts of intersegment sales (remaining after eliminations) relates to sales from the RT&M to BR Distribuidora, which is presented as discontinued operation within Corporate and other business, after Petrobras ceased to be the parent company of BR Distribuidora.

10Trade and other receivables

10.1           Trade and other receivables, net

 Consolidated
 09.30.202012.31.2019
Receivables from contracts with customers
Third parties18,11218,057
Related parties  
Investees (note 31.6)2,3783,201
Receivables from the electricity sector1,0351,347
Subtotal21,52522,605
Other trade  receivables  
 Third parties  
Receivables from divestments (*)8,3275,781
Lease receivables2,6901,941
Other receivables4,0443,348
Related parties  
Petroleum and alcohol accounts - receivables from Brazilian Government (note 31.7)1,2391,226
Subtotal16,30012,296
Total trade receivables37,82534,901
Expected credit losses (ECL) - Third parties(11,839)(9,214)
Expected credit losses (ECL) - Related parties(202)(178)
Total trade receivables, net25,78425,509
Current12,90515,164
Non-current12,87910,345
(*)It comprises receivable from the divestment of NTS and contingent payments from the sale of interest in Roncador field

 

 

Trade and other receivables are generally classified as measured at amortized cost, except for receivables with final prices linked to changes in commodity price after their transfer of control, which are classified as measured at fair value through profit or loss. Changes in such prices on September 30, 2020 amounted to R$ 2,481.

 

27 
 
10.2Aging of trade and other receivables – third parties
  Consolidated
 09.30.202012.31.2019
 Trade receivablesExpected credit losses (ECL)Trade receivablesExpected credit losses (ECL)
Current20,053(641)18,776(567)
Overdue:    
1- 3 months983(59)1,011(154)
3 - 6 months210(110)98(33)
6 - 12 months329(123)197(51)
More than 12 months11,598(10,906)9,045(8,409)
Total33,173(11,839)29,127(9,214)
10.3Changes in provision for expected credit losses
 Consolidated
 09.30.202012.31.2019
Opening balance9,39216,682
Additions877867
Write-offs(327)(4,964)
Transfer of assets held for sale(3,412)
Cumulative translation adjustment2,099219
Closing balance12,0419,392
Current5,0684,443
Non-current6,9734,949

 

As of September 30, 2020, the additions include a provision of R$ 312 on receivables in foreign currency, basically due to the 40% exchange rate devaluation in the period of January to September of 2020, as well as the recording of a supplementary provision in face of the impacts of COVID-19 (R$ 65).

 

 

In the year ended December 31, 2019, the write-offs of R$ 4,964 primarily relate to the termination of a lawsuit relating to the electricity sector, according to note 13.4

11Inventories
 Consolidated
 09.30.202012.31.2019
Crude oil11,96515,738
Oil products9,6209,165
Intermediate products2,1972,362
Natural gas and LNG (*)426699
Biofuels89114
Fertilizers57112
Total products24,35428,190
Materials, supplies and others5,4364,819
Total29,79033,009
(*) Liquefied Natural Gas
 

Consolidated inventories are presented net of losses to adjust to their net realizable value, these adjustments arising mainly from fluctuations in the international quotations of oil and its oil products and when constituted are recognized in the income for the year as costs of products and services sold. In the period from January to September 2020, a provision of R$ 1,518 was recorded (provision of R$ 32 in the period from January to September 2019). Adjustments to net realizable value mainly impacted the first and second quarters of 2020 due to the significant reduction in the prices of oil and its oil products in the market, due to COVID-19 and the shock of oil prices.

As of September 30, 2020, the company had an inventory volume of oil and / or derivatives given as a guarantee of the Terms of Financial Commitment - TCF, signed in 2008 with Petros, with no relevant changes in relation to the values ​​disclosed on December 31 2019.

28 
 
12Taxes
12.1Income taxes and other taxes
Income tax and social contributionConsolidated
 Current assetsCurrent liabilitiesNon-current liabilities
 09.30.202012.31.201909.30.202012.31.201909.30.202012.31.2019
Taxes in Brazil
Income taxes1,87710,018400288-
Income taxes - Tax settlement programs2702281,9032,031
 1,87710,0186705161,9032,031
Taxes abroad80132705980
Total2,67810,0507401,1141,9032,031

 

 

 Consolidated
Other taxesCurrent assetsNon-current assetsCurrent liabilitiesNon-current liabilities (*)
 09.30.202012.31.201909.30.202012.31.201909.30.202012.31.201909.30.202012.31.2019
Taxes in Brazil: 
Current / Deferred VAT Rate (VAT) (a)2,2262,2371,9431,4694,9553,058
Current / Deferred PIS and COFINS (b)1,7611,68110,97410,4426,4251,014209176
PIS and COFINS – Exclusion of VAT tax rate from PIS and COFINS tax bases ( c )16,950
PIS and COFINS - Law 9,718/98 (d)  3,5323,304    
CIDE17123193182
Production taxes5,8927,7756331,071
Withholding income taxes344937
Others1651297026175597611,135905
Total in Brazil21,1194,17017,15115,83218,36813,7271,9772,152
Taxes abroad556753457773
Total21,1744,23717,20415,87718,44513,8001,9772,152

(*) Other non-current taxes are classified as other non-current liabilities.

 

 

Exclusion of VAT tax from PIS and COFINS tax basis

In June 2020, the company obtained a favorable and definitive court decision on the exclusion of VAT Tax from the calculation basis of PIS and Cofins contributions and recognized the amount of R$ 16,925, recorded in current assets as taxes and contributions. The credits refer to amounts unduly paid in competencies between the months of October 2001 and August 2020, which included dates that preceded the validity and mandatory of the electronic invoice and digital fiscal bookkeeping (SPED), causing greater complexity in the calculation of values. In this context, the amount of R $ 16,925 represents Management's best estimate based on prevailing calculation assumptions and available documents.

The net gain in the result, registered in the second quarter of 2020, was R$ 10,887, of which R$ 7,675 was recovered from taxes on other operating income, R$ 9,250 from monetary restatement in the financial result, partially offset by R$ 430 of tax expenses and R$ 5,608 of expenses with income tax and social contribution.

As of September 30, 2020, the amount monetarily restated by the Brazilian basic interest rate (Selic) is R$ 16,950, whose use of the credit will be made by offsetting it with federal taxes. The company enabled part of these credits related to PIS, of which R$ 2,371 were used in October 2020, while the portion of Cofins is pending for qualification, which is expected to be used in up to 12 months.

12.2       Tax amnesty programs – State Tax (Programas de Anistias Estaduais)

State of Rio de Janeiro

Petrobras, based on the management of risks associated with litigation and in line with the strategy of generating value through contingency management, decided to seek an agreement aiming at the payment of infraction notices and the carrying out of spontaneous denunciation with the state of Rio de Janeiro. The agreement, signed on the basis of VAT Tax Agreement 51/2020 and Law RJ 9,041/2020, allows a reduction of 90% of the amounts due as a fine and interest, resulting in a disbursement of approximately R$ 1,803.

The aforementioned agreement will allow the closing of contingencies related to the collection of VAT Tax and fines in the internal consumption operations of diesel oil used by the maritime units chartered by the company, considering the approval, in the same legal provision, of a reduction of the VAT Tax calculation base for 4.5% in internal supplies of marine diesel oil, instead of the previously required rate of 12%, thus reaching a definitive solution to the cause of these contingencies. The disbursement will occur in installments, 50% in cash and the remainder in installments until December 2020.

State of Espírito Santo

29 
 

In the case of adhesion to the remission and amnesty program with the State of Espírito Santo, entered into under the terms of the VAT Tax Agreement 146/2019 and Decree 4.709-R / 2020, upon payment of R$ 197 in October 2020, tax debts will be terminated arising from differences in the appropriation of VAT Tax credits on property, plant and equipment and from differences in VAT Tax in oil and oil products operations. Additionally, the presumed VAT Tax credit system will be implemented, based on VAT Tax Agreement 146/2019, providing a definitive solution to the origin of this contingency.

The summary of the agreements signed with the states is presented below:

StateState Law/DecreeBenefits receivedOutstanding debt (*)Reduction BenefitAmount considering benefit
RJLaw 9,041/202090% reduction in interest and 90% in fines related to tax credits3,110(1,307)1,803
ESVAT Tax Decree 4,709-R/2020Remission of 50% of the Tax due, 90% of the fine and interest due783(586)197
   3,893(1,893)2,000

(*) R$ 3,188 billion of debts were classified as possible loss, and R$ 705 refers to spontaneous reporting.

 

Accordingly, on September 30, 2020, a provision of R$ 2,000 was recognized in current liabilities, as a counterpart to tax expense (R$ 1,931) and net finance income (expense) (R$ 69).

12.3Deferred income taxes - non-current

The changes in the deferred income taxes are presented as follows:

 Consolidated
Balance at January 1, 20197,848
Recognized in the statement of income for the year(11,036)
Recognized in the statement of income of discontinued operation (*)(2,520)
Recognized in shareholders’ equity6,486
Cumulative translation adjustment253
Use of tax credits(1,224)
Transfers to held for sale(1,138)
Others(171)
Balance at December 31, 2019(1,502)
Recognized in the statement of income for the year21,811
Recognized in shareholders’ equity34,331
Cumulative translation adjustment708
Use of tax credits(333)
Transfers to held for sale30
Others26
Balance at September 30, 202055,071
Deferred tax assets5,593
Deferred tax liabilities(7,095)
Balance at December 31, 2019(1,502)
Deferred tax assets55,853
Deferred tax liabilities(782)
Balance at September 30, 202055,071

(*) Deferred income taxes on the remeasurement of the remaining interest in BR Distribuidora, as set out in note 30 to the audited consolidated financial statements as of December 31, 2019.

 

The company conducts annual studies to determine the recognition of deferred tax credits in the financial statements. Exceptionally, due to COVID-19 and the impacts observed on the company's operations, this study was reviewed quarterly in 2020, based on the main assumptions such as the price of brent oil and the exchange rate approved by the Board of Directors. These quarterly reviews of the study confirmed the existence of future taxable income to support the maintenance of the balances of tax losses and deferred income and social contribution taxes recorded in assets, with realization expected to occur in the period from 2021 to 2027.

The increase in deferred tax credits in the period from January to September 2020 is mainly due to the exchange rate variation on the debt recorded for the most part in other comprehensive income in the amount of R$ 35,257, loss adjustments in the amount of recovery of assets of R$ 18,877 and constitution of tax losses in the amount of R$ 7,908, offset by R$ 4,493 of deferred income tax / social contribution referring to fixed assets.

 

12.4Reconciliation between statutory tax rate and effective tax expense rate

The following table provides the reconciliation of Brazilian statutory tax rate to the Company’s effective rate on income before income taxes:

30 
 

 

  Consolidated
 20202019
 Jul-SepJan-SepJul-SepJan-Sep
Net income (loss) before income taxes(4,878)(74,784)3,42939,697
Nominal income taxes computed based on Brazilian statutory corporate tax rates (34%)1,65925,427(1,166)(13,497)
Adjustments to arrive at the effective tax rate:    
Interest on Shareholders’ Equity, net(2)(5)8841,325
Different jurisdictional tax rates for companies abroad (*)3,7932,560(323)2,404
Income from companies abroad taxed in Brazil (**)(1,089)(3,471)(102)(420)
Tax incentives4122661,352
Tax loss carryforwards (unrecognized tax losses)(52)(1,098)(2,141)(2,497)
Non-taxable income (non-deductible expenses), net (***)(929)(2,648)(1,405)(6,275)
Others(175)(199)49215
Income taxes expense3,20920,578(3,938)(17,393)
Deferred income taxes3,23521,811(4,696)(11,321)
Current income taxes(26)(1,233)758(6,072)
Total3,20920,578(3,938)(17,393)
Effective tax rate of income taxes65.8%27.5%114.8%43.8%

 

(*) Review of estimate of companies abroad in 3Q20, reflecting tax adjustments in the Netherlands.

(**) Income tax and social contribution in the country referring to income earned in the years by investees abroad, in accordance with the provisions of Law 12.973 / 2014.

(***) Includes results of equity-accounted investments, actuarial expense and effect on judicial agreements.

13Short-term and other benefits

The balance of the main short-term benefits for employees, current and non-current, is presented as follows:

 Consolidated
 09.30.202012.31.2019
Accrued vacation pay3,6262,659
Profit sharing12565
Employees variable compensation program1,8632,640
Voluntary seveerance program (PDV)5,247565
Salaries and related charges1,570856
Total12,4316,785
Current10,6096,632
Non current1,822153

 

13.1Variable compensation

Performance Award Program

In the first quarter of 2020, the company paid, in advance, the amount of R$ 655 referring to the variable remuneration program obtained on the goals achieved for the year 2019, whose final payment is expected to occur until December 2020.

On April 28, 2020, the Board of Directors approved the program for 2020 that will be effective if the company presents a net income in the year 2020, associated with the fulfillment of the company's performance metrics and the individual performance of employees and results of the areas.

In the current scenario, where the company does not present net income from the period of January to September 2020, there was no provision for variable remuneration for the year 2020.

13.2Voluntary Severance Programs

As of September 30, 2020, the company has four voluntary severance programs (PDV) and incentive retirement programs (PAI) that provide for the same legal and indemnity benefits whose registration deadlines ended between June and September 2020, totaling an average of 11,005 adhesions, including 505 from Transpetro:

i. PDV 2019 for retirees by the Social Security until promulgation of the Pension Reform;

ii. Specific PDV for employees working in assets/units in the process of divestment;

iii. Exclusive PDV for employees working in the company's corporate segment;

iv. PAI for employees entitled to retirement valid after promulgation of the Pension Reform; and

v. PDV for employees of Transpetro's sea and land staff.

31 
 

The changes in the provision as of September 30, 2020 are shown below:

 Consolidated
 09.30.202012.31.2019
Opening Balance565141
Discontinued operations(83)
Enrollments5,674798
Revision of provisions(237)(8)
Separations in the period(755)(283)
Closing Balance5,247565
Current3,425394
Non-current1,822171
 

 

 

On April 7, 2020, the Board of Directors approved adjustments to the current severance programs that generated an additional provision of R$ 1,290 in the second quarter of 2020, referring to the enrolled and already dismissed public, as well as approving the creation of the Incentive Retirement Program (PAI), a severance program with an enrollment period between May 6, 2020 and July 31, 2020, aimed at employees entitled to retirement who, after the promulgation of the Pension Reform, were unable to participate in the 2019 PDV.

The recognition of the provision for expenses on retirement programs occurred as employees joined them.

The expected impact of the indemnities on the company's cash will be diluted over the next three years, according to the expected dismissal date. In addition, the company chose to defer the payment of severance payments in two installments, one at the time of dismissal and the other in July 2021 or one year after the dismissal, whichever is greater.

14Employee benefits (Post-Employment)
 ConsolidatedParent Company
 09.30.202012.31.201909.30.202012.31.2019
Liability    
Pension plan Petros Renegotiated30,65541,23930,69041,239
Pension plan Petros Non-Renegotiated8,84813,1548,81313,154
Pension plan Petros Renegotiated Pre-707,3327,332
Pension plan Petros Non-Renegotiated Pre-705,2425,242
Pension plan Petros 22,5483,9872,1553,455
Health Care (AMS)44,87548,31243,51646,921
Other plans10598
Total99,605106,79097,748104,769
Current3,8373,5773,8373,577
Non current95,768103,21393,911101,192
Total99,605106,79097,748104,769
 

 

14.1Pension and medical benefits

On December 27, 2019, the Previc authorized the split of PPSP-R and PPSP-NR plans, aiming to gather participants of “Pre-70 group” in “PPSP-R Pre-70” and “PPSP-NR Pre-70”.

On March 18, 2020, the Petros Foundation's Deliberative Council approved the financial statements for 2019 with accumulated deficits of R$ 2,309 and R$ 1,093 for the Petrobras System Renegotiated (PPSP –R) and Petrobras System Non-Renegotiated (PPSP-NR) plans, respectively, in accordance with accounting practices adopted in Brazil applicable to entities regulated by the Conselho Nacional de Previdência Complementar (CNPC).

The deficits determined by Petros have been calculated annually by an independent actuary and are already recognized in Petrobras' financial statements for 2019, in accordance with the technical pronouncements issued by the Comitê de Pronunciamentos Contábeis (CPC), approved by the Comissão de Valores Mobiliários (Brazilian Securities Commission) (CVM).

The main differences in accounting practices adopted in Brazil (CNPC and CVM) between Pension Fund and Sponsor to calculate the actuarial commitment, are shown below:

32 
 

 

  
  2019
 PPSP-RPPSP-NR
Deficit registered by Petros2,3091,093
Financial assumptions13,4073,653
Ordinary and extraordinary sponsor contributions13,3193,269
Changes in fair value of plan assets (*)8,9384,810
Others (including Actuarial valuation method)3,266330
Net actuarial liability registered by the Company41,23913,154
(*) Balance of accounts receivable arising from the Term of Financial Commitment - TFC signed with Petrobras, which Petros recognizes as equity.

New deficit settlement plan (New PED)

On April 28, 2020, the new Deficit Equation Plan (New PED) of the Petros plans of the Petrobras Renegotiated and Non-Renegotiated System (PPSP-R and PPSP-NR), as well as the changes in the regulation referring to the reduction of the lump sum death benefit and others were approved by the Secretariat for Coordination and Governance of State-owned Companies (Secretaria de Coordenação e Governança das Empresas Estatais) (Sest) and, on May 5, 2020, by the National Superintendence of Supplementary Pension Plans (Superintendência Nacional de Previdência Complementar) (Previc).

The New PED, which covers deficits from 2015 to 2018 and incorporates 2019 results, was valued at R$ 33,700 on December 31, 2019. Of the total amount, the amount of R$ 15,620 will be borne by Petrobras in compliance with the principle of the contributory parity provided for in Constitutional Amendment No. 20/1998, of which R$ 13,566 through extraordinary contributions throughout the existence of the plans and R$ 2,054 from contributory contributions in 20 years as a counterpart of the company for the reduction of the lump sum death benefit.

The remaining deficit will be borne by the other sponsors and participants in the PPSP-R and PPSP-NR plans.

The current model differs from that applied in PED-2015 and aimed to reduce the extraordinary contributions to the monthly budget of most of the participants by: (i) extending the collection time to a lifetime, replacing 18 years; (ii) adoption of a single rate for assets and another for assisted; (iii) institution of an annual contribution of 30% on the 13th benefit; and (iv) reduction in the amount of the lump sum death benefit.

The New PED includes changes to some rights and changes in the regulations of the PPSP-R and PPSP-NR in accordance with Resolution 25 of CGPAR (Interministerial Commission for Corporate Governance and Administration of Corporate Participation of the Union), of December 6, 2018, which establishes guidelines and parameters for federal state companies regarding the sponsorship of pension plans.

The main changes in the regulation were: (i) establishment of a new criterion for calculating the amount of lump sum death benefit; (ii) disconnection from the Social Security, (iii) calculation of the benefit and (iv) readjustment by the IPCA. Since, except for item (i), these changes are only applicable to active participants without acquired rights (assets that did not retire by the Social Security before the regulation was amended).

Mid-term review of PPSP-R and PPSP-NR plans

In May 2020, with the approval of the New PED that included the amendment of the regulations, in addition to the contributory contribution obligation, the liability of the PPSP-R and PPSP-NR pension benefit plans decreased by R$ 1,479, with recognition of:

(i) R$ 51 of net gain in net income (loss), referring to the cost of the past service, of which R$ 2,430 of gain due to the reduction of the lump sum death benefit, R$ 325 of expenses due to other changes in regulations and R$ 2,054 of expenses due to the assumption the contributory contribution obligation; and

(ii) R$ 1,428 of net gain in other comprehensive income in shareholders’ equity, referring mainly to the increase in the discount rate, partially offset by the loss in guarantee assets and by the recalculation of extraordinary contributions.

The value of the cost of past service calculated is the result of changes in the plan's regulations, mainly due to the reduction of the lump sum death benefit and the disconnection of the Social Security and the establishment of a reference unit of the plan (UR), which sets a single value, of R$ 4 thousand, adjusted annually by the IPCA, necessary to determine the value of Petros supplementation, replacing the value of the Social Security estimated, the active participants not granted.

The disconnection from the Social Security provides that the Petros benefit is granted to the participant regardless of retirement by Social Security.

The average duration of the actuarial liabilities of the PPSP-R and PPSP-NR plans, on May 31, 2020, is 13.14 years and 12.34 years, respectively (13.78 years and 11.05 years on December 31, 2019, respectively).

a) Debt instrument

The company entered into an obligation with Petros under the New PED in the amount of R$ 2,054, calculated based on the Previc rules, referring to the contributory contribution, equivalent to the revision of the lump sum death benefit for solving the deficit, provided for in the rules of the New PED. This contribution differs from the R$ 2,430 reduction in actuarial liabilities, calculated in accordance with CVM rules, basically due to the difference in the discount rate.

33 
 

The debt instrument will be paid in 40 semiannual installments for a period of up to 20 years and updated based on the fixed actuarial goal of the plans, which is reviewed annually. In December 2019, the rate was 4.43% + IPCA for PPSP-R and 4.37% + IPCA for PPSP-NR.

 

As of September 30, 2020, the balance of the updated Debt Instrument totaled R$ 2,115.

b) Pension plan assets - PPSP-R and PPSP-NR plans

The balance of guaranteeing assets, considered in the mid-term review, positioned on May 31, 2020, of the PPSP-R and PPSP-NR plans, in the amount of R$ 38,431 and R$ 9,945, respectively (R$ 43,081 and R$ 10,847 in 2019), had a reduction in relation to the year of 2019 due to the devaluation of investments linked to the index of the Brazilian stock exchange (Ibovespa) and those linked to the index of federal government bonds indexed to inflation (IMAB5 +).

The assets are basically represented by investments in fixed income and variable income, according to the allocation limit provided for in the current regulation.

 

c) Update of liabilities of other plans - Petros 2, AMS and others

In view of the mid-term review of the PPSP-R and PPSP-NR plans, the company assessed the need to update the liabilities, net of guarantee assets, positioned in May 2020, of the other pension and health plans with the new discount rate calculated, given its representativeness in the value of the obligation, in order to obtain uniformity between the plans, using the sensitivity analysis of the year of 2019 (effect of the rate variation on the obligation) as a parameter for registration, as well as the guaranteeing assets positioned in May 2020. This update resulted in a reduction in liabilities and gains in other comprehensive income in shareholders' equity of R$ 7,647 mainly due to the increase in the discount rate.

 

d) Actuarial assumptions

The actuarial assumptions used to carry out the interim actuarial valuation of May 2020, compared with those adopted in the actuarial valuation of December 2019 were revisited and have not changed, except for the discount rate assumption presented below:

34 
 

 

    09.30.2020   12.31.2019
 PPSP-RPPSP-NRPP2AMSPPSP-RPPSP-NRPP2AMS
Real discount rate4.18%4.12%4.56%4.34%3.40%3.37%3.56%3.46%
 

 

Changes in obligations with pension and health plans recognized in the Statement of Financial Position and in the Statement of Income

The movement of these events occurred with pension and health plans with defined benefit characteristics is shown below:

 Consolidated
 Pension Plans Health Care 
 PPSP Renegotiated (*)PPSP Non-Renegotiated(*)Petros 2AMSOther PlansTotal
Balance at January 1, 201927,71111,1611,59147,41127588,149
Discontinued operations(1,574)(694)(68)(2,569)(3)(4,908)
Remeasurement effects recognized in other comprehensive income17,1013,3572,1703651823,011
Current service cost2002415481381,199
Net interest over net liability (asset)2,0138101404,037187,018
Contributions paid(1,350)(428)(1,745)(28)(3,551)
Payments related to Term of financial commitment(2,862)(1,076)(3,938)
Others(190)(190)
Balance at December 31, 201941,23913,1543,98748,31298106,790
Current1,4046561,5163,576
Non-current39,83512,4983,98746,79698103,214
Balance at December 31, 201941,23913,1543,98748,31298106,790
Remeasurement effects recognized in other comprehensive income      
(Gains) / Losses - financial assumptions(984)(611)(1,878)(5,749)(20)(9,242)
(Gains) / Losses - experience - extraordinary  contributions292471763
Experience (gains) / losses(2,266)1,670(596)
Debt instrument - contribution for the equalization of the deficit1,6294862,115
Cost of past service - regulation change
Reduction in the lump sum death benefit(1,877)(553)(2,430)
Other changes25273325
Current service cost20421788361,130
Net interest over net liability (asset)1,5935702182,566124,959
Contributions paid(1,035)(324)(1,136)(6)(2,501)
Payments related to Term of financial commitment(880)(847)(1,727)
Others4(3)4(1)1519
Balance at September 30, 202037,98714,0902,54844,87510599,605
Current1,5767441,5173,837
Non-current36,41113,3462,54843,35810595,768
Balance at September 30, 202037,98714,0902,54844,87510599,605
(*) Includes the balances of the Plans PPSP-R Pre70 and PPSP-NR Pre-70
 

The net actuarial gain of R$ 9,242 in the financial hypothesis is due to the increase in the discount rate on the actuarial liability in the amount of R$ 16,900, partially offset by the loss in the return on guarantee assets of R$ 7,658, mainly in the PPSP-R plans and PPSP-NR.

35 
 

 

The net expense for pension and health plans is shown below:

 Consolidated
 Pension Plans Health Care 
 Petros Renegotiated (*)Petros Non-Renegotiated(*)Petros 2AMSOther PlansTotal
Related to active employees3921483661,686182,610
Related to retired employees1,225432691,7633,489
Net costs for Jan-Sep/20201,6175804353,449186,099
Net costs for Jan-Sep/20191,6606262223,637226,167
Related to active employees86131225626789
Related to retired employees374152225871,135
Net costs for Jul-Sep/20204601651441,14961,924
Net costs for Jul-Sep/2019553209741,21342,053
(*) Includes the balances of the Plans PPSP-R Pre70 and PPSP-NR Pre-70

 

The Petros 2 Plan has a defined contribution portion whose payments are recognized in the income statement. In the period from January to September 2020, the company's contribution to the defined contribution portion of the Petros 2 Plan was R$ 640 (R$ 678, for the period from January to September 2019). In the period from July to September 2020, the contribution was R$ 230 (R$ 230 in the same period of 2019).

15Provisions for legal proceedings
15.1Provisions for legal proceedings, judicial deposits and contingent liabilities

The Company recognizes provisions based on the best estimate of the costs of proceedings for which it is probable that an outflow of resources embodying economic benefits will be required and that can be reliably estimated. These proceedings mainly include:

·Labor claims, in particular: (i) opt-out claims related to a review of the methodology by which the minimum compensation based on an employee's position and work schedule (Remuneração Mínima por Nível e Regime - RMNR) is calculated; and (iii) actions of outsourced employees;
·Tax claims including: (i) claims relating to Brazilian federal tax credits applied that were disallowed; and (ii) alleged misappropriation of VAT tax credits; and (iii) fines for non-compliance with accessory tax obligation;
·Civil claims relating to: (i) litigations involving the company Sete Brasil; (ii) claims involving contracts; (iii) royalties and special participation charges, including royalties over the shale extraction; and (iv) penalties applied by ANP relating to measurement systems.
·Environmental claims related to: (i) indemnity and fines related to the environmental accident that occurred in 2000 in the State of Paraná; and (ii) fines related to the company's offshore operation..
36 
 

 

Provisions for legal proceedings are set out as follows:

 Consolidated
Current and Non-current liabilities09.30.202012.31.2019
Labor claims3,6973,608
Tax claims2,4341,865
Civil claims3,8186,138
Environmental claims1,460935
Total11,40912,546
Current liabilities (*)5
Non-current liabilities11,40412,546
 

 

(*) Amounts classified in other accounts payable in current liability.

 Consolidated
 09.30.202012.31.2019
Opening Balance12,54628,695
Additions, net of reversals1,2944,449
Use of provision(3,347)(21,050)
Accruals and charges7761,492
Transfer to assets held for sale(1,136)
Others14096
Closing balance11,40912,546
 

 

 

In preparing its consolidated financial statements for the period ended on September 30, 2020, the Company considered all available information concerning legal proceedings in which the Company is a defendant, in order to estimate the amounts of obligations and probability that outflows of resources will be required.

In the period from January to September 2020, the reduction in liabilities arises mainly from changes in the following cases: (i) a reduction of R$ 2,801 due to civil litigation involving contractual issues; and (ii) a reduction of R$ 331 referring to the agreement approved by the STF in claim for compensation of loss of profit in a lawsuit filed by Sergás and the State of Sergipe; mainly offset by: (iii) R$ 509 in the provision for civil litigation involving contractual matters; (iv) R$ 359 in the provision for lawsuits involving a refinery engineering contract; (v) R$ 397 for the transfer to probable loss in actions of environmental fines related to the company's operation; (vi) R$ 168 for the transfer to probable loss in an VAT Tax collection action in Refining domestic consumption operations; (vii) R$ 471 in fines at the Brazilian state level related to accessory obligations.

15.2Judicial deposits

Judicial deposits made in connection with legal proceedings are set out in the table below according to the nature of the corresponding lawsuits:

 Consolidated
Non-current assets09.30.202012.31.2019
Tax26,72923,885
Labor4,4484,258
Civil5,4094,361
Environmental608645
Others49449
Total37,68833,198
 

 

 

 Consolidated
 09.30.202012.31.2019
Opening Balance33,19826,003
Additions4,1007,942
Use(320)(739)
Accruals and charges6971,300
Transfer to assets held for sale(1,305)
Others13(3)
Closing balance37,68833,198

In the period of January to September 2020, the Company made judicial deposits in the amount of R$ 4,100, including: (i) R$ 1,279 related to the chartering of platforms due to the legal dispute related to the withholding income tax (IRRF); (ii) R$ 1,024 referring to IRPJ and CSLL for not adding the income of subsidiaries and affiliates domiciled abroad to the IRPJ and CSLL calculation basis; (iii) R$ 848 referring to the Unification of Fields (Cernambi, Tupi, Tartaruga Verde and Tartaruga Mestiça); and (iv) R$ 421 of deposit in guarantee abroad for the foreclosure of a ship.

15.3Contingent liabilities

As of September 30, 2020, the contingent liabilities indexed to inflation and updated by applicable interest rates, estimated for legal proceedings, whose likelihood of loss is considered possible, are shown in the table below:

37 
 

 

 Consolidated
Nature09.30.202012.31.2019
Tax126,951130,499
Labor41,83639,235
Civil – General21,21424,097
Civil – Environmental6,9666,352
Total196,967200,183
 

 

 

The main contingent liabilities are:

·Tax matters comprising: i) withholding income tax (IRRF), Contribution of Intervention in the Economic Domain (CIDE), Social Integration Program (PIS) and Contribution to Social Security Financing (COFINS) on remittances for payments of vessel charters; (ii) income from foreign subsidiaries and associates located outside Brazil not included in the computation of taxable income (IRPJ and CSLL); (iii) requests to compensate federal taxes disallowed by the Brazilian Federal Tax Authority; (iv) collection and crediting of VAT tax by several states; and (v) collection of social security contributions on payments of bonuses.
·Labor matters comprising mainly actions requiring a review of the methodology by which the minimum compensation based on an employee's position and work schedule (Remuneração Mínima por Nível e Regime - RMNR) is calculated;
·Civil matters comprising: (i) litigations regarding Sete Brasil; (ii) administrative proceedings challenging an ANP order requiring Petrobras to pay additional special participation fees and royalties (production taxes) with respect to several fields; (iii) a public civil action that discusses the alleged illegality of the gas supply made by the Company to its Nitrogen Fertilizer Production Unit; and (iv) fines from regulatory agencies.
·Environmental lawsuits, with emphasis on indemnities for collective material and moral damages to the environment and environmental fines related to the company's operation.

In the period from January to September 2020, in addition to the increase resulting from the monetary restatement of the amounts, there were reductions related to the following events: i) R$ 3,645 in civil litigation involving contractual issues; ii) R$ 2,447 reclassified to remote loss, related to differences in VAT tax rates on jet fuel sales made based on State Law 4,181 / 2003, of Rio de Janeiro, which was declared unconstitutional by the Federal Supreme Court, but later remitted by state legislation, in accordance with VAT tax Agreement 190/2017; (iii) R$ 2,381 reclassified to remote loss of assessment notices on VAT tax payment on natural gas imports from Bolivia; and (iv) R$ 3,188 of tax assessment notices on VAT Tax payment to the states of Rio de Janeiro and Espírito Santo for adhering to the amnesty program according to Note 12.2.

15.4Legal proceedings arising from divestments

As of September 30, 2020, Petrobras is responsible for certain legal proceedings classified as possible loss in the amount of R$ 4,049 (R$ 2,470 on December 31, 2019) arising from the sale of 90% of the interest in Transportadora Associada de Gás ( TAG) in April 2019 and in the amount of R$ 296 (R$ 9 on December 31, 2019) arising from the sale of shares of Companhia Petroquímica de Pernambuco (PetroquímicaSuape) and Companhia Integrada Têxtil de Pernambuco (Citepe). The increase in the period is mainly due to the receipt of administrative procedures, pending by the Federal Revenue of Brazil, which question the partial approval of federal tax offset declarations.

15.5Class action and related proceedings

With regard to collective action in the Netherlands, on January 29, 2020, the Court determined that shareholders who understand Portuguese and / or who bought shares through intermediaries or other agents who understand that language, among other shareholders, are subject to the clause of arbitration provided for in the company's Bylaws, remaining out of the collective action proposed by the Foundation. The Court also considered the binding effect of the agreement signed to close the United States' class action. In this way, the Foundation needs to demonstrate that it represents a sufficient number of investors to justify pursuing collective action in the Netherlands. The Foundation answered some of the questions raised by the Court on May 6, 2020 and Petrobras submitted its statement in relation to such responses on August 11, 2020.

In Argentina's arbitration, described in item 19.4.4 of the financial statements for the year ended December 31, 2019, the appeal filed by the Association has not yet been judged by the Argentine Supreme Court.

Regarding the criminal actions in Argentina, detailed in item 19.5 of the financial statements for the year ended December 31, 2019, it should be noted that, in the context of the action related to the alleged fraudulent offer of securities, the judge accepted the company's defense on September 14, 2020 and decided that Petrobras cannot be sued in a criminal action before the Argentine Justice. The Association appealed against this decision, and the appeal is pending judgment.

38 
 
15.6Arbitrations in Brazil

Petrobras responds to six arbitrations instituted before the Market Arbitration Chamber (CAM), linked to B3 - Brasil, Bolsa, Balcão. Five of these arbitrations were initiated by multiple national and foreign investors. The other, established by an association that is not a shareholder of the company, intends to be collective, through representation of all minority shareholders of Petrobras that acquired shares in B3 between January 22, 2010 and July 28, 2015. Investors intend that the company indemnify them for the alleged financial losses caused by the decrease in the price of Petrobras shares listed on the stock exchange in Brazil, resulting from the acts revealed by Operation Lava Jato.

These arbitrations involve very complex issues, which are subject to substantial uncertainties and which depend on factors such as: unprecedented legal theses, schedules yet to be defined by the Arbitral Courts, the obtaining of evidence in the hands of third parties or opponents and expert analysis.

Furthermore, the claims made are broad and span several years. The uncertainties inherent in all of these issues affect the amount and timing of the final decision on these arbitrations. As a result, the company is unable to produce a reliable estimate of the potential loss in these arbitrations.

Depending on the outcome of all these cases, the company may have to pay substantial amounts, which could have a material adverse effect on its financial condition, consolidated results or consolidated cash flow in a given period. However, Petrobras does not acknowledge responsibility for the supposed losses alleged by investors in these arbitrations, nor is it appropriate for collective arbitration.

Most of these arbitrations are still far from an outcome, either in preliminary stages or beginning the evidence production phase, so that there is no provision for the judgment of the respective arbitral courts. However, in one of the arbitrations, proposed by two institutional investors, on May 26, 2020, a partial arbitral award was issued that indicates the company's responsibility, but does not determine the payment of amounts by Petrobras, nor does it end the procedure. This arbitration is confidential, as well as the others in progress, and the partial award - which does not represent a CAM position, but only the three arbitrators that make up this arbitration panel - does not extend to the other existing arbitrations.

On July 20, 2020, Petrobras filed a lawsuit for the annulment of this partial arbitration award, as it understands that it contains serious flaws and improprieties. This lawsuit is still pending and has not yet been judged. In compliance with CAM rules, the lawsuit is pending in secret. Petrobras reiterates that it will continue to defend itself vigorously, out of respect for its current shareholders, in all arbitrations to which it is a party.

16Provision for decommissioning costs
 Consolidated
 09.30.202012.31.2019
Opening balance70,37758,637
Adjustment to provision6423,228
Transfers related to liabilities held for sale (*)(874)(12,261)
Payments made(1,451)(1,986)
Interest accrued2,1982,749
Others10410
Total70,41870,377

 

 

(*) In 2019, includes transfers related to the Campos basin (R$ 10,404); concessions in Rio Grande do Norte (R$ 149); Bahia concessions (R$ 60); Frade field (R$ 471) and Baúna field (R$ 1,177), according to note 24.

The review of the key assumptions in the company's planning, when preparing the financial statements of March 31, 2020, impacted by the effects of COVID-19 and the supply and demand crisis in the oil and gas industry, did not result in material changes in the provision for decommissioning costs, given its formation, for the most part, long term, and composition of its cost structure, basically in dollars. This position has not been changed for the preparation of the financial statements of September 30, 2020.

17The “Lava Jato (Car Wash) Operation” and its effects on the Company

The Company has monitored the progress of investigations under the “Lava Jato” Operation and, in the preparation of these unaudited interim financial statements for the period ended September 30, 2020, did not identify any additional information that would affect the adopted calculation methodology to write off, in the third quarter of 2014, amounts overpaid for the acquisition of property, plant and equipment. The Company will continue to monitor these investigations for additional information in order to assess their potential impact on the adjustment made.

During the period from January to September 2020, it was recognized, as a result of leniency agreements and collaboration and repatriation agreements, the reimbursement of R$ 515. These funds are presented as other operating income and add up to the amount of R$ 4,151 recognized in previous periods, aiming at the accumulated position.

39 
 
17.1U.S. Commodity Futures Trading Commission – CFTC

On May 30, 2019, Petrobras was contacted by the U.S. Commodity Futures Trading Commission - CFTC with requests for information on the trading activities that are the subject of investigation in Operation Lava Jato. Petrobras will continue to cooperate with the authorities, including the CFTC, with respect to any investigation.

17.2Order of civil inquiry - Brazilian Public Prosecutor’s Office

On December 15, 2015, the State of São Paulo Public Prosecutor’s Office issued the Order of Civil Inquiry 01/2015, establishing a civil proceeding to investigate the existence of potential damages caused by Petrobras to investors in the Brazilian stock market. The Brazilian Attorney General’s Office (Procuradoria Geral da República) assessed this civil proceeding and determined that the São Paulo Public Prosecutor’s Office has no authority over this matter, which must be presided over by the Brazilian Public Prosecutor’s Office. The Company has provided all relevant information. 

18Property, plant and equipment
18.1By class of assets
 ConsolidatedParent Company
 

Land, buildings

and

improvement

Equipment and other assets (*)

Assets under

construction (**)

Exploration and development costs (oil and gas producing properties) (***)Right-of-use assetsTotalTotal
Balance at January 1,201920,189294,592112,085182,963609,829483,375
Adoption of IFRS 16102,970102,970194,523
Additions311,26820,5105939,22041,59477,082
Additions to / review of estimates of decommissioning costs22,63322,63322,699
Capitalized borrowing costs5,2545,2545,175
Reimbursement under the Transfer of Rights Agreement(34,238) (34,238)(34,238)
Write-offs              (15)(374)(1,168)(1,674)(86)(3,317)(3,314)
Transfers1,81822,950(40,251)19,2424704,2298,668
Transfers to assets held for sale(3,159)(19,461)(2,436)(4,716)(5,265)(35,037)(12,892)
Depreciation, amortization and depletion(910)(24,044)(18,772)(19,792)(63,518)(69,657)
Impairment recognition(5)(5,231)(5,903)(3,041)(662)(14,842)(10,963)
Impairment reversal9713251,8013,0972,358
Cumulative  translation adjustment173,00264541583,295
Balance at December 31, 201917,938283,67388,480164,84587,013641,949662,816
Cost27,839501,808135,599292,930107,2331,065,4091,022,399
Accumulated depreciation, amortization, depletion and impairment(9,901)(218,135)(47,119)(128,085)(20,220)(423,460)(359,583)
Balance at December 31, 201917,938283,67388,480164,84587,013641,949662,816
Additions20,5148,1444812,41841,12482,907
Constitution / revision of the provision for decommisioning costs (note 16)6464
Capitalized borrowing costs3,5383,5383,487
Write-offs              (25)(123)(489)(31)(32)(700)(18,843)
Transfers(1,533)4,788(4,582)2,857(243)1,287609
Transfers to assets held for sale(109)(212)(2,300)(1)(2,622)(2,617)
Depreciation, amortization and depletion(560)(19,049)(15,002)(15,061)(49,672)(55,820)
Impairment recognition (note 20)(24)(33,533)(14,339)(16,075)(1,616)(65,587)(55,893)
Impairment reversal (note 20)192192117
Cumulative  translation adjustment22217,4051,5774091,66821,281
Balance at September 30, 202016,018273,75882,117134,81584,146590,854616,763
Cost28,386546,650135,369299,433119,8421,129,6801,077,032
Accumulated depreciation, amortization, depletion and impairment(12,368)(272,892)(53,252)(164,618)(35,696)(538,826)(460,269)
Balance at September 30, 202016,018273,75882,117134,81584,146590,854616,763
Weighted average useful life in years

40

(25 to 50) (except lands)

20

(3 to 31)

 

 Units of production method

8

(2 to 47)

 
(*) It is composed of platforms, refineries, thermoelectric power plants, natural gas processing plants, pipelines and other operating, storage and production plants, including subsea production equipment and oil and gas depreciated by the units produced method.
(**) See note 25 for assets under construction by operating segment.

(***) It is composed of exploration and production assets related to wells, abandonment and dismantling of areas, signature bonuses associated to proved reserves and other costs directly associated with the exploration and production.

 

 

 

 

The rights-of-use comprise the following underlying assets:

 

40 
 

 

 

 ConsolidatedParent Company
 PlatformsVesselsBuildings and othersTotalTotal
Balance at September 30, 202042,92137,7213,50484,146142,206
Cost57,68955,4826,671119,842193,581
Accumulated depreciation, amortization, depletion and impairment(14,768)(17,761)(3,167)(35,696)(51,375)
Balance at December 31, 201949,16233,5944,25787,013172,111
Cost58,61843,1195,496107,233206,743
Accumulated depreciation, amortization, depletion and impairment(9,456)(9,525)(1,239)(20,220)(34,632)
 

 

Expenses and Volumes Equalization Agreements

Petrobras has Production Individualization Agreements (AIP) signed in Brazil with partner companies (Shell, Petrogal, Repsol and Total) in E&P consortia. These agreements will result in equalizations payable or receivable for expenses and production volumes related to the Tupi, Sépia, Atapu, Berbigão, Sururu, Albacora Leste and others fieldands.

Tupi, Sépia and Atapu

On April 30, 2020, Petrobras and partner companies in the shared deposits of Tupi, Sépia and Atapu signed the Expenses and Volumes Equalization Agreements (AEGV) from which Petrobras received R$ 2,347 on May 29 2020, due to the equalization as a result of the increase in participation in the three deposits, of which R$ 3,860 is recorded in other operating income and R$ 1,513 is recorded in property, plant and equipment.

On May 1, 2020, as a result of these Agreements, PNBV, a Petrobras subsidiary, signed Share Purchase Agreements for the additional 2.589% interest in Tupi BV (Tupi), for the amount of R$ 509 (US$ 84 million), and an additional 47.613% interest in Iara BV (Atapu) for R$ 4,525 (US$ 805 million), subject to price adjustments. The allocation of the acquisition price of the participations was based on the relative fair values ​​of the assets acquired and liabilities assumed, generating an increase in the amount of R$ 5,034 (US$ 889 million), mainly in property, plant and equipment.

On September 15, 2020, a price adjustment occurred, resulting in additional payments on the acquisition of interest in Tupi BV and Iara BV, in the amount of R$ 73 (US$ 13 million), impacting property, plant and equipment.

Equalization provisions: Berbigão, Sururu, Albacora Leste and others

As of September 30, 2020, Petrobras has an estimated amount to pay for the execution of the AIPs submitted to the ANP for approval of R$ 281 (R$ 456 on December 31, 2019). In the period from January to September 2020, these agreements resulted in payments and recognition of additions and write-offs in fixed assets, in addition to other net expenses of R$ 119, reflecting the best available estimate of the assumptions used in calculating the calculation base. In the third quarter of 2020, the revision of estimates of amounts payable of deposits, mainly Berbigão, resulted in R$ 733 in other operating expenses.

18.2Capitalization rate used to determine the amount of borrowing costs eligible for capitalization

The capitalization rate used to determine the amount of borrowing costs eligible for capitalization was the weighted average of the borrowing costs applicable to the borrowings that were outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. For the nine-month period ended September 30, 2020, the capitalization rate was 6.05% p.a. (6.30% p.a. for the same period of 2019).

41 
 
19Intangible assets
19.1By class of assets
 ConsolidatedParent Company
 Rights and ConcessionsSoftwaresGoodwillTotalTotal
Balance at January 1, 20199,0241,06078610,8709,268
Additions5,5054235,9285,823
Concession for exploration of oil and natural gas - Oil Surplus on the Transfer of Rights Agreement63,14163,14163,141
Capitalized borrowing costs191919
Write-offs(38)(22)(60)(49)
Transfers(324)(190)(539)(1,053)5
Amortization(42)(315)(357)(303)
Impairment recognition(5)(5)
Cumulative  translation adjustment156
Balance at December 31, 201977,26197625278,48977,904
Cost77,7555,92925283,93682,449
Accumulated amortization and impairment(494)(4,953)(5,447)(4,545)
Balance at December 31, 201977,26197625278,48977,904
Additions18254272246
Capitalized borrowing costs666
Write-offs(911)(16)(927)(902)
Transfers(12)(21)(33)(26)
Amortization(28)(222)(250)(224)
Impairment recognition(32)(32)
Cumulative  translation adjustment2535179
Balance at September 30, 202076,35398027177,60477,004
Cost76,8056,30930483,41881,791
Accumulated amortization and impairment(452)(5,329)(33)(5,814)(4,787)
Balance at September 30, 202076,35398027177,60477,004
Estimated useful life in years(*)5Undefined  
 

(*) Mainly composed of assets with indefinite useful lives, which are reviewed annually to determine whether events and circumstances continue to support an indefinite useful life assessment.

All agreements whose signature bonuses were paid in the last quarter of 2019, were signed with the regulatory authorities in the first quarter of 2020.

In the third quarter of 2020, a write-off of R$ 800 was recognized related to the Peroba exploratory block.

42 
 
20Impairment

The Company annually tests its assets for impairment or when there is an indication that their carrying amount may not be recoverable.

In the period from January to September 2020, two events occurred, concentrated in the first quarter, with significant and adverse effects on the oil and oil products market: (i) the outbreak of the COVID-19 pandemic, with an abrupt reduction in the circulation of people, causing a double supply and demand shock with retraction in world activity and (ii) failure in negotiations between members of the Organization of Petroleum Exporting Countries and other producers, led by Russia, to define production quotas, which contributed to the increase global oil supply and price reduction in early March.

These events led the company to adopt a series of measures aimed at preserving cash generation, in order to reinforce its financial strength and resilience of its businesses, as well as to review, and approve in the Board of Directors, some of its key premises planning, such as Brent price, exchange rate, derivative spreads, among others. It should be noted that this set of assumptions remains the same, with no changes until the third quarter. Additionally, in order to monitor relevant fluctuations between its planning cycles, the company controls the projection of its short-term reference price assumptions, compared to realized prices, without identifying effects that would result in the modification of the assumptions used in previous quarters.

Reserve volume estimates are prepared reflecting, in an integrated manner, the projects in the company's Strategic Planning portfolio, technical uncertainties and assumptions such as prices and costs. As of September 30, 2020, there was no change in the company's portfolio of projects, except the one mentioned in Note 3.3, or in the reserve volumes that impacted the quarterly financial statements.

In this scenario, the company assessed the economic recoverability of its assets and in the period from January to September 2020, impairment losses of R$ 65,229 were recognized, fully concentrated in the first quarter of 2020, with emphasis on:

i) the effect of a new set of planning assumptions on the recoverable amount of several E&P fields, mainly in the CGUs Roncador, Marlim Sul; Polo Norte, Albacora Leste, Polo Berbigão-Sururu, Polo CVIT, and Mexilhão;

ii) hibernation of fields and platforms in shallow waters, affecting the CGUs Polo Norte, Polo Ceará-Mar, Polo Ubarana  and the Caioba, Guaricema and Camorim fields.

The indicative assessments conducted by the company during the third quarter of 2020 pointed to the need for additional registrations of losses for devaluation in the Camarupim oil and gas production field in the amount of R$ 258, due to the cancellation of the project highlighted in the note 3.3. This loss was offset by reversals of impairment that occurred in shallow water fields and onshore fields, reclassified to the group of assets held for sale, in the amount of R$ 188 and in FAFEN SE and BA, reflecting the lease agreements started in the third quarter of 2020, in the amount of R$ 117.

In the period from January to September 2019, property, plant and equipment, intangible and assets held for sale recorded net losses in their recoverable amounts in the amount of R$ 2,491, as highlighted in note 20.1.3.

The following is the total impairment loss on assets, net of reversal, by nature of assets or CGUs, recognized in the income for the year:

43 
 

 

 Consolidated
Asset or CGU by nature (*)

Carrying

amount

Recoverable amount (**)

Impairment

 

Business

segment

Comments
 09.30.2020
Property, plant and equipment and intangible assets   
Producing properties relating to oil and gas activities in Brazil (several CGUs)182,717117,294(64,502)E&P - Brazilitem (a)
Others1,085163(925)Severalitem (b)
   (65.427)    
Assets classified as held for sale       
Producing property relating to oil and gas activities – several projects82306198E&P – Brazilitem 20.3
Others   Several 
Total  (65,229)
 

Carrying

amount

Recoverable amount (**)

Impairment

(***)

Business

Segment

Comments
 09.30.2019
Property, plant and equipment and intangible assets       
Producing properties relating to oil and gas activities in Brazil (several CGUs)8,0011,936872E&P - Brazilitem (a1)
Equipment and facilities linked to the production activity1,264(1,264)E&P - Brazilitem (c)
NS-30 Drill Ship1,388261(1,127)E&P, abroaditem (d)
Comperj1,064(1,064)RTM, Brazilitem (e)
Others11(11)Others 
   (2,594)    
Assets held for sale       
Others  103Others 
Total  (2,491)    

(*) The net book values ​​and recoverable values ​​presented refer only to assets or CGUs that have suffered losses due to impairment or reversals.

(**) The recoverable amount used to evaluate the test is the value in use, except for the assets of equipment and facilities linked to the activity of oil and gas production and drilling of wells and assets held for sale, for which the recoverable value used for testing is the fair value.

(***) Amounts in parenthesis refer to reversals of impairment losses.

 

 

20.1Impairment of property, plant and equipment and intangible assets

20.1.1. Review of Cash Generating Units:

From January to September 2020, the company identified and assessed changes in CGU Polo Norte (E&P Segment):

i) Polo Norte: exclusion of the PCH-1, PCH-2 and PNA-2 platforms and of the fields of Anequim, Bagre, Cherne, Congro, Garoupa, Malhado, Namorado, Parati and Viola, which had their productions hibernated and without forecast of resumed. The CGU Polo Norte starts to be formed by the Marlim, Albacora and Voador fields and remaining platforms;

ii) Polo Fazenda Alegre: exclusion of Campo Grande, Córrego Cedro Norte, Córrego Cedro Norte Sul, Córrego Dourado, Fazenda São Jorge, Inhambu, Jacutinga, Lagoa Bonita, Seriema and Tabuiaiá fields. The CGU Polo Fazenda Alegre is now formed by the Cancã and Fazenda Alegre fields.

20.1.2. Planning assumptions used in Impairment tests:

On March 31, 2020, the company's Board of Directors approved a new set of planning assumptions. The estimates of the key assumptions used in the cash flow projections to determine the value in use of the CGUs, for the tests carried out on March 31, 2020, were:

 20202021202220232024Long term Average
Average Brent (US$/bbl)253035404550
Average Brazilian Real (excluding inflation) - Real /U.S. dollar exchange rate (2019 prices)5.095.044.694.464.283.78
 

At December 31, 2019, average Brent prices and Brazilian real/U.S. dollar average exchange rates used were:

 20202021202220232024Long term Average
Average Brent (US$/bbl)656565656565
Average Brazilian Real (excluding inflation) - Real /U.S. dollar exchange rate (2018 prices)3.853.793.753.723.703.60

 

The company changed its set of macroeconomic planning assumptions, presented in the table above, as it considers, among other factors, that there will be a slow recovery in demand, with a moderate change in habits in developed economies, in which it is believed that long-term equilibrium occurs at a lower level of demand. This assessment considers that:

·structural change in the world economy, with permanent effects arising from this economic shock, including changes observed in consumer habits, which tend to be permanent;
·increased world oil inventories, slowing down the rebalancing of supply and demand; and
44 
 
·oil consuming industries, given the new scenario, will not keep their previously projected demands in the long-term, reducing consumption levels.

 

20.1.3. Main results of the tests for impairment of assets:

From January to September 2020, information on the main impairment losses on property, plant and equipment or on intangible assets, concentrated in the first quarter of 2020, is presented below:

 

a) Producing properties in Brazil – Jan-Sep/2020

Our valuations of assets linked to oil and gas production fields in Brazil resulted in the recognition of net losses in the amount of R$ 64,502 (losses of R$ 258 in the period from July to September 2020). The post-tax discount rate in constant currency, applied in the recoverability tests of March 31, 2020, to the exploration and production sector in Brazil, was 7.3% p.a (6.7% p.a. on December 31, 2019). This amount was mainly due to:

·Losses in the amount of R$ 57,877 (loss of R$ 258 in the period from July to September 2020), mainly related to the CGUs and corporate assets that provide services in the fields below, reflecting the new set of key planning assumptions for the medium and long term vision, in particular, a drop in Brent price, devaluation of the Real against the Dollar and retractions in GDP and demand. The main losses were:

 

CGUBasinAreaImpairment
RoncadorCampos BasinPost-Salt(16,650)
Marlim SulCampos BasinPost-Salt(11,717)
Polo NorteCampos BasinPost-Salt(9,952)
Albacora LesteCampos BasinPost-Salt(3,033)
Polo Berbigão-SururuSantos BasinPre-Salt(2,195)
Polo CVITEspírito Santo BasinPost-Salt(1,556)
MexilhãoSantos BasinPost-Salt(1,009)
Polo Parque das BaleiasCampos BasinPost-Salt(913)
Polo SapinhoáSantos BasinPre-Salt(704)
Papa-TerraCampos BasinPost-Salt(687)
AraçásReconcavo BasinLand and Shallow Waters(599)
CarmópolisSergipe BasinLand and Shallow Waters(586)
Polo UruguáSantos BasinPost-Salt(506)
Others  (7,770)
Total  (57,877)
    

 

For these CGUs, the impairment assessment carried out on December 31, 2019 for Polo CVIT, Papa-Terra and Polo Uruguá resulted in the recognition of losses, while Roncador, Mexilhão and Araçás presented recoverable values ​​close to the respective book values.

·Losses in the amount of R$ 6,625 (fully recognized in the first quarter of 2020), resulting from hibernation in the production of fields in shallow waters, mainly affecting the Ubarana oil and gas production fields (R$ 2,114); Namorado (R$ 1,140), Cherne (R$ 563), Malhado (R$ 507), Congro (R$ 461) and Viola (R$ 281).
45 
 

a1) Producing properties relating to oil and gas activities in Brazil (several CGUs) – Jan-Sep/2019

From January to September 2019, in our recoverability assessments, the company recognized reversals of impairment losses of R$ 872 (losses of R$ 636 in the period from July to September 2019) due to:

·approval of the sale of 10 concessions located in shallow waters in the Campos Basin (Rio de Janeiro). As a result of this operation, the company assessed the recoverability of the book value of the assets of these concessions, considering the net fair value of selling expenses, which resulted in a reversal of an impairment loss in the amount of R$ 1,936;
·revision of the composition of the Parque das Baleias pole, excluding the Cachalote and Pirambu fields, which started to be tested individually, resulting in the recognition in the second quarter of 2019 of losses due to devaluation in the amount of R$ 428; and
·on September 30, 2019, the Corvina field, which produced exclusively through the P-09 platform, was excluded from the CGU Polo Norte, as the company decided not to reuse that platform in this CGU, resulting in the recognition of losses due to devaluation in the amount of R$ 636.

b) Others – Jan-Sep/2020

Corporate asset

The company decided to hibernate an administrative building, in the state of Bahia, as a result of the vacancy of the facilities, resulting in the recognition of loss of the right to use asset in the amount of R$ 788.

SIX – shale plant

The Company recognized a R$ 208 impairment loss on this asset, due to the drop in the estimates for fuel oil prices, which are linked to the Brent prices, whose projections were revised by the Company. The post-tax discount rate in constant currency applied to the refining sector in Brazil is 6.2% p.a.

c) Equipment and facilities linked to the production activity - Brazil - Jan-Sep / 2019

From January to September 2019, the company decided not to reuse the P-37 platform in the Marlim field, which resulted in its exclusion from CGU Polo Norte and in its classification as an isolated asset, with the recognition of losses due to devaluation in the amount of R$ 1,264 (fully registered from July to September 2019).

d) NS-30 drill ship - Jan-Sep/2019

After approval of the sale of the asset by the company's management, Drill Ship International BV (DSI), a subsidiary of PIB BV, recognized impairment losses of R$ 1,127 (R$ 444 in the period from July to September 2019), due to the difference between the expected sale value and the book value of the asset.

e) Comperj – Jan-Sep/2019

From January to September 2019, in addition to the investments made in the utilities of Comperj Train 1, which are part of the joint infrastructure necessary for the flow and processing of natural gas from the Santos Basin pre-salt pole, investments in environmental licensing were recognized , resulting from a conduct adjustment term to end a public civil action that questioned the environmental licensing of Comperj, in the amount of R$ 814. Since in the last business plan approved by the Management, the decision on the resumption of works related to Train 1 remains conditioned to the identification of partners for its continuity, such amounts resulted in additional losses recognized in the period from January to September 2019, totaling R$ 1,064 (R$ 68 in the period from July to September 2019), considering that there is no expectation of future cash flows that return the respective investments.

20.2Book values ​​of assets close to their recoverable values

The amount of impairment loss is based on the difference between the carrying amount of the asset or CGU and its respective recoverable amount. The following table contains information about the assets or CGUs that presented estimated recoverable values ​​close to their book values ​​and, therefore, would be more susceptible to the recognition of impairment losses in the future, considering the assessments made in the first quarter of 2020, period impacted by the effects of the COVID-19 and the oil and gas industry supply and demand crisis. The sensitivity presented below considers the estimated impairment loss if there was a 10% reduction in the recoverable value of the aforementioned CGUs:

46 
 

 

  Consolidated
  

 

Assets close to their recoverable values

 

Business

segment

Carrying

amount

Recoverable amountSensitivity
Producing properties relating to oil and gas activities in Brazil (2 CGUs)E&P89,46691,622(7,006)
 

 

 

 

20.3Assets classified as held for sale

In the period from January to September 2020, as a result of the approval of the Company's Management for the sale of fields associated with projects in the E&P segment, the company recognized reversals of losses in the amount of R$ 198 (R$ 188 in the period from July to September 2020), considering the net fair value of the sales expenses.

In the period from January to September 2019, the company recognized reversals related to assets held for sale of R$ 103 (R$ 12 in the period from July to September 2019), mainly the production field of Maromba and Pasadena Refinery.

20.4Investments in associates and joint ventures (including goodwill)

Value in use is generally used for impairment test of investments in associates and joint ventures (including goodwill). The basis for estimates of cash flow projections includes: (i) projections covering a period of 5 to 12 years, zero-growth rate perpetuity, budgets; (ii) forecasts and assumptions approved by management; and (iii) a post-tax discount rate derived from the WACC or the CAPM models, when applicable.

20.4.1       Investment in publicly traded associate (Petrobras Distribuidora S.A. - BR)

In July 2019, with the follow-on of BR Distribuidora's shares, the company started to be considered as an associated company. Considering the shares traded on the stock exchange (active market), on December 31, 2019, the recoverable amount of BR Distribuidora was evaluated based on the fair value, without showing any indication of loss.

On August 26, 2020, the Board of Directors of Petrobras (CA) approved the process of divesting all of its interest in the company. In this context, the company assessed the recoverability of the investment based on the value in use, which includes the sale value, considering the intention to sell the shares. As the value in use obtained was lower than the registered investment value, the recoverability assessments indicated the existence of impairment losses in the amount of R$ 778.

The post-tax discount rate applied was 11.1%, in nominal terms, taking into account the cost of equity, given the methodology adopted in the value in use.

20.4.2       Impairment losses on equity-method investments

The company recognized, in results of equity-accounted investments, net losses due to devaluation, concentrated in the first quarter of 2020, in the total of R$ 160 (R$ 7 in 2019). This loss was mainly due to the recognition of a loss due to devaluation on investment in a jointly controlled venture abroad, MP Gulf of Mexico, in the amount of R$ 287, due to the revision of the price assumptions resulting from the drop in market prices. International. The real post-tax discount rate, applied to the exploration and production sector in the USA, was 6.0% p.a.

21Exploration and evaluation of oil and gas reserves

The exploration and evaluation activities include the search for oil and gas reserves from obtaining the legal rights to explore a specific area to the declaration of the technical and commercial viability of the reserves.

Changes in the balances of capitalized costs directly associated with exploratory wells pending determination of proved reserves and the balance of amounts paid for obtaining rights and concessions for exploration of oil and natural gas (capitalized acquisition costs) are set out in the following table:

47 
 

 

 Consolidated
Capitalized Exploratory Well Costs / Capitalized Acquisition Costs (*)09.30.202012.31.2019
Property plant and equipment
Opening Balance17,17516,010
    Additions1,8022,024
Write-offs(154)(877)
Transfers(481)
Cumulative translation adjustment18818
Closing Balance18,53017,175
Intangible Assets (**)75,36376,256
Capitalized Exploratory Well Costs / Capitalized Acquisition Costs93,89393,431
(*) Amounts capitalized and subsequently expensed in the same period have been excluded from this table.

(**) The bonuses referring to the results of the 16th ANP bidding round and Bidding for oil surplus of Transfer of rights agreement, in the amount of R$ 63,141, are described in note 24.1 to the financial statements of December 31, 2019. In the third quarter of 2020, the write-off of R$ 800 of Peroba exploration block was recognized.

 

 

 

Exploration costs recognized in the statement of income and cash used in oil and gas exploration and evaluation activities are set out in the following table:

  Consolidated
 20202019
Exploration costs recognized in the statement of incomeJul-SepJan-SepJul-SepJan-Sep
Geological and geophysical expenses3379113181,050
Exploration expenditures written off (includes dry wells and signature bonuses)9981,1805248
Contractual penalties64116(43)11
Other exploration expenses4858(4)15
 1,4472,2652761,324
Cash used in:    
Operating activities3859693251,076
Investment activities5851,9326541,418
 9702,9019792,494
 

 

22Collateral for crude oil exploration concession agreements

The Company has granted collateral to ANP in connection with the performance of the Minimum Exploration Programs established in the concession agreements for petroleum exploration areas in the total amount of R$ 8,308 of which R$ 7,850 were still in force as of September 30, 2020, net of commitments undertaken. The collateral comprises crude oil from previously identified producing fields, pledged as collateral, amounting to R$ 6,529 and bank guarantees of R$ 1,321.

23Investments
23.1Investments in associates and joint ventures (Parent Company)

 

 Balance at 12.31.2019 InvestmentsTransfer to held for saleRestructuring, capital decrease and othersResults of equity-accounted investmentsCTAOCIDividendsBalance at 09.30.2020
Subsidiaries164,831630(2,715)17,05866,106779(1,424)245,265
Joint operations18651(59)178
Joint ventures33719(60)(23)52(36)289
Associates (*)17,293(1,084)(2,930)1,814(2,403)(525)12,165
Total182,647649(60)(3,822)14,23167,920(1,624)(2,044)257,897
Other investments19 19
Total of Investments182,666649(60)(3,822)14,23167,920(1,624)(2,044)257,916
Results of companies classified as held for sale    195 7  
     14,426 (1,617)  

(*) Includes Petrobras Distribuidora and Braskem S / A, highlighting the result with hedge for future exports and sales and provisions for closing the rock salt wells of Braskem S/A.

 

 

48 
 
23.2Changes in investment (Consolidated)
 Balance at 12.31.2019

Capital

increase

Transfer to assets held for saleRestructuring, capital decrease and othersResults of equity-accounted investmentsCTAOCIDividendsBalance at 09.30.2020
Joint ventures4,81320(60)(8)(424)947(436)4,852
Associates (*)17,33339(1,004)(3,021)1,832(2,403)(529)12,247
Other investments2020
Total22,16659(60)(1,012)(3,445)2,779(2,403)(965)17,119
(*)Includes Petrobras Distribuidora and Braskem, highlighting the result with hedge for future exports and sales and provisions for the closure of Braskem S / A's rock salt wells.

 

24Disposal of assets and other changes in organizational structure

 

At September 30, 2020, assets and related liabilities are classified as held for sale whenever the closing of the transactions are highly probable, still subject to some conditions precedent as provided for in the agreements.

To date, buyers have not indicated any intention to breach or review the signed contractual terms and conditions.

The major classes of assets and related liabilities classified as held for sale are shown in the following table:

 Consolidated
     09.30.202012.31.2019
 E&PRTMGas and EnergyCorporate and other businessesTotalTotal
Assets classified as held for sale      
Cash and Cash Equivalents7192618
Trade receivables294294277
Inventories424252
Investments11460751,429
Property, plant and equipment2,1531,2143,3678,248
Others326326309
Total2,1611,909604,13010,333
Liabilities on assets classified as held for sale      
Trade Payables3100103108
Finance debt151554705572
Provision for decommissioning costs2,6382,63811,934
Others387387470
Total2,6416385543,83313,084
  
      

 

 

As of September 30, 2020, the main assets and liabilities transferred after approval of sale include: (i) Liquigás Distribuidora S.A.; (ii) the Baúna field (concession area BM-S-40); (iii) 30% of the Frade field; (iv) the onshore fields in Ceará, Bahia and Espírito Santo; and (v) assignment of the remaining rights in the concession area called Lapa (referring to the exercise of the put option for the remaining 10% of its interest).

The description of these operations, which are classified as assets held for sale, was presented in note 30 to the financial statements of December 31, 2019, except for the assets described below in item Uncompleted operations.

24.1. Uncompleted operations

a) Sale of the Baúna field

On July 24, 2019, Petrobras signed an agreement to sell 100% of its interest in the Baúna field (BM-S-40 concession area), located in shallow waters in the Santos Basin, to Karoon Petróleo & Gás Ltda, subsidiary of Karoon Energy Ltd. in the amount of US$ 665 million. Due to the impact caused by the COVID-19 and the consequent difficulty in meeting the precedent conditions initially defined, the parties defined adjustments to the terms of the agreement and the division of the transaction value as follows: (i) a portion of US$ 380 million, comprising: US$ 49.9 million already paid by Karoon on July 24, 2019 and another US$ 150 million to be paid on the closing date with the price adjustments due. The remaining amount will be paid in 18 months after the completion of the transaction in addition to a contingent installment of US$ 285 million to be paid by 2026.

The conclusion of the transaction is subject to the fulfillment of the preceding conditions, such as the ANP approval.

b) Sale of onshore fields in Ceará

49 
 

On August 14, 2020, Petrobras signed with SPE Fazenda Belém SA, a wholly owned subsidiary of 3R Petroleum e Participações S.A., an agreement for the sale of its entire interest in the onshore Fazenda Belém and Icapuí fields, called Polo Fazenda Belém, located in the Potiguar Basin, in the state of Ceará.

The sale value is US$ 35.2 million, of which (i) US$ 8.8 million was paid upon signing the agreement; (ii) US$ 16.4 million at the close of the transaction and; (iii) US$ 10 million to be paid in twelve months after the closing of the transaction.

The amounts do not consider the adjustments due and are subject to the fulfillment of precedent conditions, such as the ANP approval.

c) Sale of land fields in Bahia

On August 21, 2020, Petrobras signed with SPE Rio Ventura S.A., a wholly owned subsidiary of 3R Petroleum e Participações S.A., an agreement for the sale of its entire interest in eight onshore exploration and production fields, called Polo Rio Ventura, located in the state of Bahia.

The sale value is US$ 94.2 million, of which (i) US$ 3.8 million was paid on the date the agreement was signed; (ii) US$ 31.2 million at the close of the transaction; (iii) US$ 16 million to be paid in thirty months after the closing of the transaction; and (iv) US$ 43.2 million in contingent payments provided for in the agreement.

The amounts do not consider the adjustments due and the closing of the transaction is subject to the fulfillment of precedent conditions, such as CADE and ANP approval and that the buyer has obtained the Environmental Licenses from the inspection agencies and / or IEMA.

d) Sale of Espírito Santo onshore fields

On August 27, 2020, Petrobras signed with Karavan SPE Cricaré S.A., (SPE), a contract for the sale of its entire interest in 27 onshore exploration and production concessions, located in Espírito Santo, jointly called Polo Cricaré. Karavan O&G Participações e Consultoria Ltda. will hold 51% of the SPE, while Seacrest Capital Group Limited, which is an equity provider, will hold the remaining 49%.

The sale value is US$ 155 million, of which (a) US$ 11 million was paid on the date the agreement was signed; (b) US$ 26 million, to be paid at the closing of the transaction and (c) US$ 118 million to be paid under contingent conditions set forth in the agreement.

The amounts do not consider the adjustments due and the closing of the transaction is subject to the fulfillment of precedent conditions, such as ANP approval and that the buyer has obtained the Environmental License from IEMA.

24.2 Completed operations

a)Sale of Petrobras’s interest in Petrobras Oil & Gas B.V. (PO&GBV)

On October 31, 2018, Petrobras International Braspetro BV (“PIBBV”) signed a contract for the full sale of its 50% equity interest in Petrobras Oil & Gas BV (“PO & GBV”), with the company Petrovida Holding BV (PETROVIDA ). PO & GBV is a joint venture in the Netherlands, with assets located in Nigeria.

On December 31, 2019, the company recognized impairment of R$ 366 (in 2018, reversal of R$ 181 recognized as equity-accounted investments).

On January 14, 2020, the transaction was completed and involved a total amount of US$ 1.530 billion, adjusted to US$ 1.454 billion, reflecting the incidence of interest on the acquisition price and the deduction of the portion that fell to Petrobras from the payment of fees for approval of the transaction by the Nigerian Government. Of the total of US$ 1.454 billion, Petrobras received US$ 1.030 billion in the form of dividends paid by PO & GBV since the base date of the transaction (January 1, 2018). At the closing date, it received US$ 276 million, and US$ 25 million in June 2020, leaving US$ 123 million (face value) that will be received after the completion of the Abgami field redetermination process and in up to 5 years from the closing of the transaction. The gain from the operation was R$ 7, recognized in other operating income.

 

b)Sale of fields in the Potiguar Basin

On August 9, 2019, Petrobras signed an agreement to sell all of its interest in a set of production fields, land and sea, called Polo Macau, in the Potiguar Basin, located in the State of Rio Grande do Norte, with SPE 3R Petroleum S.A., wholly owned subsidiary of 3R Petroleum e Participações S.A.

50 
 

Polo Macau includes the fields of Aratum, Macau, Serra, Salina Cristal, Lagoa Aroeira, Porto Carão and Sanhaçu. Petrobras holds a 100% interest in all concessions, with the exception of the Sanhaçu concession, in which it is the operator with a 50% interest, while the remaining 50% is held by Petrogal.

On May 29, 2020, the transaction was concluded after the fulfillment of all precedent conditions, for the amount of R$ 862, including the adjustments provided for in the contract and the amount received on August 9, 2019, upon signing the contract, referring to the first installment. The gain from the operation was R$ 421, recognized in other operating income.

c)Sale of the 10% interest in Transportadora Associada de Gás

On July 20, 2020, Petrobras entered into a share purchase and sale agreement, referring to its remaining 10% stake in Transportadora Associada de Gás S.A. (TAG), with the group formed by ENGIE and the Canadian fund Caisse de Dépôt et Placement du Québec (CDPQ).

The transaction was concluded at the amount of R$ 1,006, fully paid on the date of the signing of the contract, after the deduction of R$ 110 of dividends paid to Petrobras in June 2020 and other price adjustments. The gain from the operation was R$ 147, recognized in other operating income.

In addition, as a result of this operation, the loss of R$ 225 with accumulated cash flow hedge since the sale of TAG's control in June 2019 was reclassified to income statement, as other net expenses, recognized as other comprehensive income in shareholders’ equity of Petrobras in a way that reflects the values ​​registered with TAG.

d)Sale of the Pampo and Enchova Poles

On July 24, 2019, Petrobras signed an agreement for the total sale of its stake (100%) in exploration and production assets in shallow waters in the Campos Basin, on the coast of Rio de Janeiro, referring to the Pampo and Enchova Poles, which encompass the fields of Enchova, Enchova Oeste, Marimbá, Piraúna, Bicudo, Bonito, Pampo, Trilha, Linguado and Badejo, to Trident Energy do Brasil LTDA, a subsidiary of Trident Energy L.P.

On July 15, 2020, Petrobras completed the sale of its entire stake in the ten fields that comprise the Polos Pampo and Enchova to Trident Energy do Brasil LTDA, after the fulfillment of all the preceding conditions.

The transaction was concluded with the payment of US$ 365.4 million to Petrobras, considering the adjustments provided for in the contract and other conditions subsequently agreed between the parties, which provide for the payment of conditioned amounts of up to US$ 650 million classified as contingent assets and will only be recognized when the agreed conditions are met.

The amount received at the closing of the transaction adds up to the amount of US$ 53.2 million paid to Petrobras upon signing the sales contracts, totaling US$ 418.6 million. The gain from the operation was R$ 1,610, recognized in other operating income.

e)Sale of fields in Espirito Santo

On September 30, 2020, Petrobras concluded the sale of its entire stake in a set of onshore production fields, called Polo Lagoa Parda, located in the state of Espírito Santo, to the affiliated company Imetame Energia Lagoa Parda Ltda. of Imetame Energia Ltda.

The Lagoa Parda Polo comprises three onshore concessions in production: Lagoa Parda, Lagoa Parda Norte and Lagoa Piabanha.

The operation was concluded after the fulfillment of all precedent conditions for the amount of R$ 58, including the adjustments provided for and the amount received on October 11, 2019 on signing the contract, referring to the first installment. The gain from the operation was R$ 69, recognized in other operating income.

 

f)Merger of Petrobras Negócios Eletrônicos S.A. (E-Petro)

On March 4, 2020, the Petrobras Board of Directors approved the merger of E-Petro, with its consequent extinction, without increasing Petrobras' share capital.

 

51 
 
24.3Cash flows from sales of interest with loss of control

The sales of equity interest that resulted in loss of control and the cash flows arising from these transactions are shown below:

 Cash receivedCash and cash equivalents of subsidiaries with loss of controlNet Proceeds
Jan-Mar/2020 
Petrobras Oil & Gas B.V.(PO&GBV) (*)1,1441,144
Jan-Mar/2019 
Petrobras Paraguay1,4743031,171

(*) Amount of US$ 276 received on the closing date of the transaction.

 

 

 

25Assets by operating segment

The segmented information reflects the evaluation structure of senior management in relation to performance and the allocation of resources to the business.

Consolidated assets by operating segment - 09.30.2020 
 Exploration and ProductionRefining, Transportation & Marketing

Gas

&

Power

CorporateEliminationsTotal
Current assets18,81847,1207,78698,657(20,737)151,644
Non-current assets547,232124,01342,282100,359(100)813,786
Long-term receivables26,25614,4315,51082,0084128,209
Investments2,3329913,18410,61217,119
Property, plant and equipment442,953108,07932,9496,977(104)590,854
Operating assets386,78294,56321,2886,208(104)508,737
Under construction56,17113,51611,66176982,117
Intangible assets75,69151263976277,604
Total Assets566,050171,13350,068199,016(20,837)965,430
 
Consolidated assets by operating segment - 12.31.2019 
 Exploration and ProductionRefining, Transportation & Marketing

Gas

&

Power

CorporateEliminationsTotal
Current assets23,11449,4677,78951,186(19,455)112,101
Non-current assets598,746125,95143,45145,911(149)813,910
Long-term receivables26,02213,2965,51726,47171,306
Investments2,3874,4724,29911,00822,166
Property, plant and equipment493,746107,65932,9757,718(149)641,949
Operating assets428,58995,24522,5937,191(149)553,469
Under construction65,15712,41410,38252788,480
Intangible assets76,59152466071478,489
Total Assets621,860175,41851,24097,097(19,604)926,011

 

26Finance debt
26.1Balance by type of finance debt
 Consolidated
 09.30.202012.31.2019
Banking Market27,04421,452
Capital Market12,96413,980
Development banks7,2367,766
Others4953
Total47,29343,251
Banking Market85,08666,727
Capital Market170,658130,899
Development banks1,128163
Export Credit Agency19,40913,033
Others1,176909
Total277,457211,731
Total finance debt324,750254,982
Current37,77918,013
Non current286,971236,969

 

 

The amount classified in current liabilities comprises:

52 
 

 

 Consolidated
 09.30.202012.31.2019
Short-term financing13,7238,891
Portion of long-term financing20,0475,550
Accrued interest (current and long-term)4,0093,572
Current37,77918,013

 

As of September 30, 2020, there were no defaults, breaches of covenants or adverse changes in clauses that resulted in changes in the payment terms of loans and financing contracts. There was no change in the guarantees required in relation to December 31, 2019.

26.2Changes in finance debt and reconciliation with cash flows from financing activities
 Balance at 12.31.2018AdditionsPrincipal amorti zation (*)Interest amorti zation (*)Accrued interest (**)Foreign exchange/ inflation indexation chargesCTA   Modification of contractual cash flowsTransfer to liabilities classified as held for saleBalance at 12.31.2019
In Brazil62,9718,565(21,665)(2,925)3,246439(7,380)43,251
Abroad263,19020,894(82,197)(15,138)15,2612,1297,474118211,731
Total326,16129,459(103,862)(18,063)18,5072,5687,474118(7,380)254,982
           

 

 

 

Balance

at

12.31.2019

AdditionsPrincipal amortization (*)Interest amorti zation (*)Accrued interest (**)Foreign exchange/ inflation indexation chargesCumulative translation adjustment (CTA)Modification of contractual cash flowsTransfer to liabilities classified as held for saleBalance at 09.30.2020
In Brazil43,2517,294(4,198)(1,444)1,57281847,293
Abroad211,73171,910(93,093)(11,419)12,5899,70076,443(404)277,457
Total254,98279,204(97,291)(12,863)14,16110,51876,443(404)324,750
Debt restructuring (4,071)      
Deposits linked to financing (288)      
Cash flow from financing activities 79,204(101,362)(13,151)      
(*)It includes pre-payments.
(**)It includes premium and discount over notional amounts, as well as gains and losses by modifications in contractual cash flows.

 

In the period from January to September 2020, loans and financing were mainly used to settle old debts and manage liabilities, aiming at improving the debt profile and better adapting to the maturity terms of long-term investments and the cash reserve, aimed at maintaining the company's liquidity.

In the same period of 2020, the company raised R$ 79,204, notably: (i) funding in the national and international banking market, in the amount of R$ 15,885, (ii) draw down of R$ 38,628 in committed lines (Revolving Credit Facilities) with national and international banks; and (iii) proceeds from financing through the offering of bonds in the international capital market (Global Notes) in the amount of R$ 16,666, of which R$ 7,771 with the issuance of a new bond maturing in 2031 and R$ 8,895 with the issuance of a new bond maturing in 2050.

The company settled several loans and financing, in the amount of R$ 114,513, notably: (i) the prepayment of R$ 13,533 of loans in the national and international banking market; (ii) the repurchase and redemption of R$ 28,357 of securities in the international capital market, with the payment of a net premium to the security holders who delivered their papers in the transactions in the amount of R$ 4,059; and (iii) total prepayment of its committed credit lines (Revolving Credit Lines) abroad, in the amount of R$ 40,748 (US$ 7.6 billion).

Additionally, the company carried out debt swap operations that did not involve financial settlements in the international banking market, in the total amount of R$ 10,719.

53 
 
26.3Summarized information on current and non-current finance debt
  Consolidated
 Maturity in202020212022202320242025 onwardsTotal (**)Fair value
  
 Financing in U.S.Dollars (US$)(*):5,33730,19813,23122,03925,152163,879259,836280,646
 Floating rate debt2,49718,22911,99316,16120,29936,416105,595 
 Fixed rate debt2,84011,9691,2385,8784,853127,463154,241 
 Average interest rate4.9%4.7%4.9%4.9%5.2%6.5%6.0% 
 Financing in Brazilian Reais (R$):9653,6056,0689,0988,03414,81942,58943,746
 Floating rate debt2522,4704,8348,2736,2216,16428,214 
 Fixed rate debt7131,1351,2348251,8138,65514,375 
 Average interest rate3.5%3.2%3.9%5.1%4.8%4.4%4.1% 
 Financing in Euro (€):3861,1881,0052,139797,48212,27913,391
 Fixed rate debt3861,1881,0052,139797,48212,279 
 Average interest rate4.6%4.5%4.7%4.6%4.7%4.7%4.7% 
 Financing in Pound Sterling (£):3529,69210,04411,079
 Fixed rate debt3529,69210,044 
 Average interest rate6.1%6.3%6.3% 
 Financing in other currencies:222
 Fixed rate debt22 
 Average interest rate8.5%8.5% 
 Total on September 30, 20207,04234,99120,30433,27633,265195,872324,750348,864
 Average interest rate4.7%4.5%4.8%5.0%5.2%6.4%5.8% 
 Total on December 31, 201918,01316,00218,90432,39234,410135,261254,982305,044
 Average interest rate5.1%5.2%5.3%5.3%5.3%6.3%5.9% 
  
 (*) Includes debt raised in Brazil (in Brazilian reais) indexed to the U.S. dollar. 
(**)The average maturity of outstanding debt as of September 30, 2020 is 11.19 years (10.80 years as of December 31, 2019). 
           

 

As of September 30, 2020, the fair values ​​of financing are mainly determined by using:

Level 1 - prices quoted in active markets, when applicable, in the amount of R$ 189,362 (R$ 152,397, on December 31, 2019); and

Level 2 - cash flow method discounted by the spot rates interpolated from the indexes (or proxies) of the respective financing, observed to the pegged currencies, and by the credit risk of Petrobras, in the amount of R$ 159,502 (R$ 152,647, on December 31, 2019).

The sensitivity analysis for financial instruments subject to foreign exchange variation is set out in note 30.2.

 

The nominal (undiscounted) flow of principal and interest on financing, by maturity, is shown below:

 Consolidated
Maturity202020212022202320242025 onwards09.30.202012.31.2019
Principal2,69735,35820,94532,77634,765205,868332,409263,147
Interest3,62514,48813,57912,73611,723169,004225,155176,783
Total (*)6,32249,84634,52445,51246,488374,872557,564439,930

(*)The nominal flow of leases is found in note 27.

.

 

26.4       Lines of credit

  Amount
CompanyFinancial institutionDateMaturity

Available

(Lines of Credit)

UsedBalance
Abroad (in US$ million)       
PGT BVSyndicate of banks3/7/20182/7/20234,350-4,350
PGT BVSyndicate of banks3/27/20192/27/20243,250-3,250
PGT BVBNP Paribas12/22/20161/9/202135033614
PGT BVThe Export - Import Bank of China12/23/201912/27/202175071436
Total    8,7001,0507,650
In Brazil       
PetrobrasBanco do Brasil3/23/20181/26/20232,0002,000
PetrobrasBradesco6/1/20185/31/20232,0002,000
PetrobrasBanco do Brasil10/4/20189/5/20252,0002,000
TranspetroCaixa Econômica Federal11/23/2010Undefined329329
Total    6,3292,0004,329
        
   

 

 

54 
 

On March 20, 2020, Petrobras made withdrawal of committed credit lines (Revolving Credit Lines), in the amount of US$ 7.6 billion and R$ 2.0 billion, to reinforce its liquidity and protect itself within the context of the COVID-19 crisis and the oil price shock.

In the third quarter of 2020, Petrobras totally prepaid its committed credit lines abroad (Revolving Credit Lines), in the amount of US$ 7.6 billion. These funds are available for new withdrawals, if necessary.

27Lease liabilities

The leases mainly include oil and natural gas production units, drilling rigs and other exploration and production equipment, ships, support vessels, helicopters, land and buildings. The movement of lease contracts recognized as liabilities is shown below:

 Consolidated
 Balance at   12,31,2019 Remeasurement / new contractsPayment of principal and interestInterest expensesForeign exchange gains and lossesCumulative translation adjustmentTransfersBalance at   09,30,2020
Brazil22,183 2,769(5,786)1,0674,883(48)25,068
Abroad73,996 8,737(16,098)3,95915,65812,85999,111
Total96,179 11,506(21,884)5,02620,54112,859(48)124,179
Payments relating to liabilities held for sale   (281)     
Cash Flow   (22,165)     

 

 

As of September 30, 2020, the value of the lease liability of Petrobras Parent Company is R$ 212,196 (R$ 188,204 on December 31, 2019), including leases and sub-leases with investees, mainly platforms with PNBV and vessels with Transpetro.

As of September 30, 2020, the nominal flow (not discounted) without considering future inflation projected in the lease contract flows, by maturity, is shown below:

 Consolidated
Maturity202020212022202320242025 onwardsTotal
Balance at September 30, 20207,42332,85922,88915,49212,29775,490166,450
Balance at December 31, 201923,78520,08614,15510,6288,72352,631130,008

 

 

Payments in certain lease agreements vary due to changes in facts or circumstances occurring after their inception other than the passage of time. Such payments are not included in the measurement of the lease obligations. Variable lease payments in the period from January to September of 2020 amounted to R$ 2,792, representing 13% in relation to fixed payments (R$ 2,426 and 17% related to fixed payments in the same period of 2019).

Extension options were considered when measuring lease obligations.

The sensitivity analysis of financial instruments subject to exchange rate variation is presented in note 30.2.

In the period from January to September of 2020, the company recognized lease expenses in the amount of R$ 491 (R$ 2,614 in the same period of 2019), referring to contracts with a term of less than one year.

As of September 30, 2020, the balances of lease agreements that had not yet been initiated due to the related assets being under construction or not being made available for use, represent the amount of R$ 344,830 (R$ 200,788 on December 31, 2019).

28Equity
28.1Share capital (net of share issuance costs)

As of September 30, 2020, subscribed and fully paid share capital, net of issuance costs, was R$ 205,432, represented by 7,442,454,142 common shares and 5,602,042,788 preferred shares, all of which are registered, book-entry shares with no par value.

Preferred shares have priority on returns of capital, do not grant any voting rights and are non-convertible into common shares.

There are treasury shares, constituted since 2018, with 222,760 common shares and 72,909 preferred shares.

 

55 
 

28.2 Distributions to shareholders

As a result of the COVID-19 and the restrictions imposed or recommended by the World Health Organization (WHO) and the Brazilian authorities in relation to travel and meetings, the General Shareholders’ Meeting took place on 22 July 2020, as extended by the Securities and Exchange Commission.

The company will pay the remaining balance of dividends and interest on equity of the Parent Company for the year 2019, updated by SELIC, at the parent company, in the amount of R$ 1,799, on December 15, 2020.

The postponement of the payment of dividends was one of the measures adopted by the company to preserve its cash, due to COVID-19 and the shock of oil prices.

28.3       Earnings per share

  Consolidated and Parent Company
 20202019
 Jul-SepJan-SepJul-SepJan-Sep
Basic and diluted numerator    
Net income from continuing operations    
Common(882)(30,114)(127)12,620
Preferred(664)(22,668)(96)9,499
 (1,546)(52,782)(223)22,119
Net income from discontinued operations    
Common5,3125,628
Preferred3,9984,237
 9,3109,865
Net income of the period    
Common(882)(30,114)5,18518,248
Preferred(664)(22,668)3,90213,736
 (1,546)(52,782)9,08731,984
     
Basic and diluted denominator - Weighted average number of common and preferred shares outstanding    
Common7,442,231,3827,442,231,3827,442,231,3827,442,231,382
Preferred5,601,969,8795,601,969,8795,601,969,8795,601,969,879
 13,044,201,26113,044,201,26113,044,201,26113,044,201,261
     
Basic and diluted income per share (R$ per share) from continuing operations    
Common(0.12)(4.05)(0.02)1.70
Preferred(0.12)(4.05)(0.02)1.70
     
     
Basic and diluted income per share (R$ per share) from discontinued operations    
Common0.720.75
Preferred0.720.75
     
     
Basic and diluted income per share (R$ per share)    
Common(0.12)(4.05)0.702.45
Preferred(0.12)(4.05)0.702.45

 

 

Basic earnings per share are calculated by dividing the net income (loss) attributable to shareholders of Petrobras by the weighted average number of outstanding shares during the period.

Diluted earnings (losses) per share are calculated by adjusting the net income (loss) attributable to shareholders of Petrobras and the weighted average number of outstanding shares during the period taking into account the effects of all dilutive potential shares (equity instrument or contractual arrangements that are convertible into shares).

Basic and diluted earnings (losses) are identical as the Company has no potential share in issue.

56 
 
29Fair value of financial assets and liabilities
 Fair value measured based on
 Level ILevel IILevel III

Total fair

value

recorded

Assets    
Marketable securities3,1813,181
Balance at September 30, 20203,1813,181
Balance at December 31, 20193,5562353,791
     
Liabilities    
Foreign currency derivatives (2,385)(2,385)
Commodity derivatives(3)(3)
Interest rate derivatives(43)(43)
Balance at September 30, 2020(3)(2,428)(2,431)
Balance at December 31, 2019(112)(445)(557)

 

The estimated fair value for the Company’s long-term debt, computed based on the prevailing market rates, is set out in note 26.

Certain receivables are classified as fair value through profit or loss, according to note 10.

The fair values of cash and cash equivalents, short-term debt and other financial assets and liabilities are equivalent or do not differ significantly from their carrying amounts.

30Risk management

A summary of the positions of the derivative financial instruments held by the Company and recognized in other current assets and liabilities as of September 30, 2020 , as well as the amounts recognized in the statement of income and other comprehensive income and the guarantees given is set out as follows:

 

 Statement of Financial Position
 Notional value

Fair value

Asset Position (Liability)

Maturity
 09.30.202012.31.201909.30.202012.31.2019 
Derivatives not designated for hedge accounting
Future contracts - total (*)(1,806)(10,383)(3)(112) 
Long position/Crude oil and oil products5,3079,8652020
Short position/Crude oil and oil products(7,113)(20,248)2020
      
Forward contracts     
Long position/Foreign currency forwards (BRL/USD) (**)-            US$ 273                      (1)                  2020
Long position/Foreign currency forwards (EUR/USD)  (**)-EUR 2,245(183)2020
Long position/Foreign currency forwards (GPB/USD)  (**)GPB 388GPB 388(24)402020
Short position/Foreign currency forwards  (GPB/USD)  (**)GPB 34GPB 224-(58)2020
Swap     
Foreign currency / Cross-currency Swap (**)GPB 615GPB 700(40)1262026
Foreign currency / Cross-currency Swap (**)GPB 600GPB 600(787)(203)2034
Swap – IPCA3,0083,008(43)242029/2034
Foreign currency / Cross-currency Swap (**)US$ 729US$ 729(1,534)452024/2029
Total recognized in  the Statement of Financial Position  (2,431)(322) 
(*)Notional value in thousands of bbl.
(**) Amounts in US$, GBP and EUR are presented in million.

 

 

57 
 

 

 Gains/ (losses) recognized in the statement of income
  2020 2019
 Jul-SepJan-SepJul-SepJan-Sep
Commodity derivatives    
Oil - 30,1 (a) (b)(259)(2,847)75(831)
Gasoline - 30,1 (b)2944
Diesel - 30,1 (b)(86)(48)
Other operations - 30,1 (c)2907234(362)
Recognized in other operating expense(257)(1,940)252(1,197)
Currency derivatives    
Swap GPB x Dollar  - 30,2 (b)591(701)(301)(677)
NDF – Euro x Dollar - 30,2 (b)(48)(518)(799)
NDF – GPB x Dollar - 30,2 (b)72(23)(53)(86)
Swap CDI x Dollar  - 30,2 (b)(140)(1,567)(26)(26)
Others(1)(8)227
 522(2,347)(896)(1,561)
Interest derivatives    
Swap - CDI X IPCA(45)(90)4141
Total(45)(90)4141
Cash flow hedge on exports (*)(6,147)(18,174)(18,174)(8,709)
Recognized in finance income (expense)(5,670)(20,611)(3,817)(10,229)
Total(5,927)(22,551)(3,565)(11,426)
(*) According to note 30,2,

 

 Gains/ (losses) recognized in other comprehensive income in the period
  2020 2019
 Jul-SepJan-SepJul-SepJan-Sep
Cash flow hedge on exports (*)(1,513)(103,926)(25,486)(16,201)
     
(*) According to note 30.2.

 

 Guarantees given as colateral
 09.30.202012.31.2019
Commodity derivatives47244
Currency derivatives724637
 771881

 

 

A sensitivity analysis of the derivative financial instruments for the different types of market risks as of September 30, 2020 is set out as follows:

  Consolidated
Financial InstrumentsRiskProbable Scenario (*)

Reasonably possible

scenario

Remote

Scenario

Derivatives not designated for hedge accounting
Future contracts and forward contracts (swap)Crude oil and oil products - price changes(119)(237)
 (119)(237)

* The probable scenarios were calculated considering the following variations for risks: Oil and Derivatives Prices: fair value as of September 30, 2020 / Real x Dollar - 6% appreciation of the real. Source: Focus. Reasonably possible and remote scenarios consider 25% and 50% deterioration in the associated risk variables, respectively.

30.1Risk management of crude oil and oil products prices

Petrobras has a preference for exposure to the price cycle to the systematic protection of transactions for the purchase or sale of goods, whose objective is to meet its operational needs, using derivative financial instruments. However, subject to the analysis of the business environment and the prospects for carrying out the Strategic Plan, the execution of an occasional hedging strategy with derivatives may be applicable.

a)Crude oil

In March 2020, in order to preserve the Company's liquidity, Petrobras approved a protection strategy for systemic oil operations in order to protect the revenue flows arising from these transactions against uncertainties in the prices of exports of oil feedstock already loaded, but not priced, due to the high volatility of the current context, generated both by the effects of falling oil prices and by the effects of COVID-19 on world consumption of oil and oil products.

As a result of this strategy, forward and swap transactions were carried out between April and May 2020, with effects on the result between April and August this year. Swap transactions do not require an initial disbursement, whereas future transactions require margin deposits, depending on the volume contracted.

58 
 

b)Protection Strategy adopted in 2019

For more information on these operations, see note 36.1 of Petrobras financial statements of December 31, 2019.

c)Other commodity derivative transactions

Petrobras, using its assets, positions and proprietary and market knowledge from its operations in Brazil and abroad, seeks to capture market opportunities through the purchase and sale of oil and oil products, which can occasionally be optimized with the use of commodity derivative instruments to manage price risk in a safe and controlled manner.

30.2       Foreign exchange risk management

a)Cash Flow Hedge involving the Company’s future exports

The carrying amounts, the fair value as of September 30, 2020, and a schedule of expected reclassifications to the statement of income of cumulative losses recognized in other comprehensive income (shareholders’ equity) based on a US$ 1.00 / R$ 5.6407 exchange rate are set out below:

    Present value of hedging instrument notional value at September 30, 2020
Hedging Instrument Hedged Transactions 

Nature

of the Risk

 

Maturity

Date

US$

million

R$
Foreign exchange gains and losses on proportion of non-derivative financial instruments cash flows Foreign exchange gains and losses on a portion of highly probable future monthly exports  revenues 

Foreign Currency

– Real vs U.S. Dollar

Spot Rate

 From out/2020 to sep/2030 51,824292,323
          

 

.

Changes in the present value of hedging instrument notional valueUS$ millon                 R$
Amounts designated as of December 31, 201987,651353,295
Additional hedging relationships designated, designations revoked and hedging instruments re-designated(5,102)(31,670)
Exports affecting the statement of income(10,564)(51,282)
Principal repayments / amortization(20,161)(100,119)
Foreign exchange variation  122,099
Amount on September 30, 202051,824292,323
Nominal value of hedging instrument (finance debt and lease liability) on September 30, 202057,246322,907
 

 

.

From January to September of 2020, the expected export values ​​and consequently the highly probable export values ​​were impacted by the effects of the oil price war and the COVID-19.

Thus, the value of exports designated for hedge relationships are no longer considered highly probable, but are still expected to occur, and as a consequence the hedge relationships were revoked at March 31, 2020, in the amount of US$ 35,774 (R$ 185,982). The foreign exchange variation accounted for these operations within other comprehensive income up to the end of the quarter remains in shareholders' equity, and will be reclassified to the statement of income when exports occur. These revocations were responsible for the relevant increase in Dollar/Real exposure, which on September 30, 2020 was negative by R$ 229,960, according to the table 30.2 c - “Sensitivity analysis for foreign exchange risk on financial instruments”.

In addition to the impacts reported above, exports whose exchange variations were designated in hedge relationships for the months of April to December / 2020 and August to December / 2021 are no longer foreseen, and were reclassified from shareholders’ equity to the statement of income for the period from January to September 2020, in the amount of R$ 2,570, mainly in March 2020.

In the period from January to September 2020, the Company also recognized a R$ 5 loss within foreign exchange gains (losses) due to ineffectiveness (a R$ 18 loss in the first half of 2019).

The ratio of future exports for which cash flow hedge accounting was designated to the highly probable future exports is 100% (91.2% on December 31, 2019).

59 
 

A roll-forward schedule of cumulative foreign exchange losses recognized in other comprehensive income as of September 30, 2020 is set out below:

 Exchange rateTax effectTotal
Balance at January 1,2019(50,414)17,141(33,273)
Recognized in shareholders' equity(13,469)4,580(8,889)
Reclassified to the statement of income - occurred exports12,397(4,215)8,182
Balance at December 31, 2019(51,486)17,506(33,980)
Recognized in shareholders' equity(122,100)41,514(80,586)
Reclassified to the statement of income - occurred exports15,604(5,305)10,299
Reclassified to the statement of income - exports no longer expected to occur2,570(874)1,696
Balance at September 30, 2020(155,412)52,841(102,571)

 

 

 

Changes in expectations regarding the realization of export prices and volumes in future revisions of the business plans may determine the need for additional reclassifications of the exchange variation accumulated in shareholders' equity to results. A sensitivity analysis with an average Brent oil price of US$ 10/barrel lower than in the last review of the 2020-2024 Strategic Plan, it would indicate the need to reclassify the deferred exchange variation and registered in shareholders' equity for exports from October 2020 to December 2023, in the amount of R$ 4.3 billion.

A schedule of expected reclassification of cumulative foreign exchange losses recognized in other comprehensive income to the statement of income as of September 30, 2020 is set out below:

 Consolidated
 20202021202220232024202520262027 to 2030Total
Expected realization(6,430)(25,720)(27,253)(23,583)(18,852)(13,774)(12,102)(27,698)(155,412)
 

 

 

b) Information about open contracts

As of September 30, 2020, the company has outstanding swap contracts - IPCA x CDI and CDI x Dollar, swap - Pound sterling x Dollar and Non Deliverable Forward (NDF) - Pound sterling x Dollar.

Cross currency swap –IPCA x CDI and CDI x dollar

Changes in future interest rate curves (CDI) may have an impact on the company's results, due to the market value of these swap contracts. A sensitivity analysis on future interest rate curves (CDI) with a constant increase (parallel shock) of 100 basis points, keeping all other variables constant, would result in a positive impact on the result of approximately R$ 21, while a constant reduction (parallel shock) of 100 basis points, keeping all other variables constant, would result in a negative impact of approximately R$ 15.

For more information on such contracts, see note 36.2 to Petrobras' financial statements of December 31, 2019.

c)Sensitivity analysis for foreign exchange risk on financial instruments

A sensitivity analysis is set out below, showing the probable scenario for foreign exchange risk on financial instruments, computed based on external data along with stressed scenarios (a 25% and a 50% change in the foreign exchange rates), except for assets and liabilities of foreign subsidiaries, when transacted in a currency equivalent to their respective functional currencies.

60 
 

 

    
Financial InstrumentsExposure at   09.30.2020RiskProbable Scenario (*)

Possible Scenario

(∆ of 25%)

Remote Scenario

(∆ of 50%)

Assets23,410Dollar / Real(1,414)5,85311,705
Liabilities(542,685) 32,778(135,671)(271,342)
Exchange rate - Cross currency swap(3,008) 182(752)(1,504)
Cash flow hedge on exports292,323 (17,656)73,081146,162
 (229,960) 13,890(57,489)(114,979)
Assets23Euro / Real(1)612
Liabilities(133) 6(33)(67)
 (110) 5(27)(55)
Assets12,130Euro / Dollar2063,0336,065
Liabilities(24,975) (424)(6,244)(12,488)
 (12,845) (218)(3,211)(6,423)
Assets18Pound Sterling / Real(1)59
Liabilities(126) 6(32)(63)
 (108) 5(27)(54)
Assets9,993Pound Sterling / Dollar1102,4984,997
Liabilities(20,119) (221)(5,030)(10,060)
Exchange rate - Cross currency swap8,858 972,2154,429
Non Deliverable Forward (NDF)2,577 286441,289
 1,309 14327655
Total(241,714) 13,696(60,427)(120,856)

 

(*) On September 30, 2020, the probable scenario was computed based on the following risks: R$ x U.S. Dollar - a 6% appreciation of the Real; Euro x U.S. Dollar: a 1.8% appreciation of the Euro; Pound Sterling x U.S. Dollar: a 1.17% appreciation of the Pound Sterling; Real x Euro: a 4.3% appreciation of the Real; and Real x Pound Sterling - a 4.9% appreciation of the Real . Source: Focus and Thomson Reuters.

30.3       Interest rate risk management

The table below informs, in the probable scenario, the amount to be disbursed by Petrobras with the payment of interest related to the debts with floating interest rate on September 30, 2020. The possible and remote scenarios express a sensitivity analysis in which there is an increase of 25% and 50%, respectively, in the interest rates of these debts (Libor, TJLP, CDI, TR and IPCA). The results presented for the probable scenario and the sensitivity scenarios are associated with a period of 12 months.

 

  Consolidated
OperationsRiskProbable Scenario (*)

Possible Scenario

(∆ of 25%)

Remote Scenario

(∆ of 50%)

FinancingFloating Rates   4,2284,9135,598
(*) The probable scenario was calculated considering the quotations of currencies and floating rates to which the debts are indexed.
        

 

30.4Liquidity risk

The company regularly evaluates market conditions and can carry out repurchase transactions for its securities or its subsidiaries in the international capital market, by various means, including tender offers, securities redemptions and / or open market operations, provided they are in line with the company's liabilities management strategy, which aims to improve the amortization profile and the cost of debt.

 

Measures to protect the Company's liquidity

As a result of the abrupt reduction on the demand and prices of oil and fuel, caused by the impact of the escalation of the COVID-19 all over the world, in the same time of an increase in oil supply, the Company adopted a set of measures to reduce cash outflows and cash preservation in a scenario of uncertainty, in order to ensure its financial strength and the resilience of its businesses.

The measures adopted by the Company to protect liquidity are described in note 3.

31Related-party transactions

The Company has a related-party transactions policy, which is annually revised and approved by the Board of Directors, in accordance with the Company’s by-laws.

 

61 
 
31.1Transactions with entities of Petrobras group (Parent Company)
 09.30.202012.31.2019
 CurrentNon-currentTotalCurrentNon-currentTotal
Assets
Trade and other receivables
 Trade and other receivables, mainly from sales14,06614,06617,77417,774
 Dividends receivable259259397397
 Intercompany loans1010
 Advance for capital increase33
 Amounts related to construction of natural gas pipeline734734750750
 Leases163163
 Other operations 8836081,4918714211,292
Advances to suppliers1161,5391,655108572680
Total15,3242,88418,20819,3131,75321,066
Liabilities      
Lease liabilities (*)(99,421)(34,135)(133,556)(21,188)(104,585)(125,773)
Intercompany loans(2,886)(2,886)(28,555)(28,555)
Prepayment of exports(54,083)(297,373)(351,456)(56,066)(159,769)(215,835)
Accounts payable to suppliers(29,158)(29,158)(22,936)(22,936)
 Purchases of crude oil, oil products and others(26,957)(26,957)(19,125)(19,125)
 Affreightment of platforms(993)(993)(2,022)(2,022)
 Advances from clientes(1,208)(1,208)(1,789)(1,789)
Other operations(46)(46)(263)(470)(733)
Total(185,594)(331,508)(517,102)(129,008)(264,824)(393,832)

(*) Includes amounts referring to lease and sub-lease transactions between investees required by IFRS 16.

 

 

 

 20202019
 Jul-SepJan-SepJul-SepJan-Sep
Profit or Loss    
Revenues, mainly sales revenues41,336114,63243,631124,307
Foreign exchange and inflation indexation charges (**)(13,179)(67,525)(10,002)(13,737)
Financial income (expenses), net (**)(7,853)(22,933)(6,476)(18,454)
Total20,30424,17427,15392,116

(**) Includes the amounts of R$ 45,454 of passive exchange variation and R$ 7,205 of financial expenses related to leasing and sub-leasing operations required by IFRS 16.

31.2Annual rates for intercompany loans
  Parent Company
 AssetLiability
 09.30.202012.31.201909.30.202012.31.2019
From 3.01 to 4%(17,075)
From 4.01 to 5%(2,886)(11,480)
More than 9.01%10
Total10(2,886)(28,555)

 

 

31.3Non standardized receivables investment fund (FIDC-NP)

The parent company maintains funds invested in the FIDC-NP that are mainly used for the acquisition of performing and / or non-performing credit rights for operations carried out by affiliates. The amounts invested are recorded in accounts receivable.

Assigned and non-performed credit rights assignments are recorded as financing in current liabilities.

 Parent Company
 09.30.202012.31.2019
Accounts receivable, net33,66052,550
Credit rights assignments(25,914)(61,142)

 

 

 

 20202019
 Jul-SepJan-SepJul-SepJan-Sep
Financial Income FIDC-NP3971,6259671,766
Financial Expenses FIDC-NP(367)(1,680)(924)(1,980)
Net finance income (expense)30(55)43(214)

 

31.4Guarantees

Petrobras has the procedure of granting guarantees to subsidiaries and controlled companies for some financial operations carried out in Brazil and abroad, with no significant variations in guarantees compared to December 31, 2019.

62 
 

The guarantees offered by Petrobras, mainly personal, are made based on contractual clauses that support the financial transactions between the subsidiaries / controlled companies and third parties, ensuring assumption of compliance with the third party's obligation, in case the original debtor does not do so.

The financial transactions carried out by the subsidiaries and guaranteed by Petrobras are presented in note 37.6 to Petrobras' financial statements as of December 31, 2019.

31.5Investment fund of subsidiaries abroad

As of September 30, 2020, a subsidiary of PIB BV maintained resources invested directly or through an investment fund abroad that held, among others, debt securities of PGF and a consolidated structured entity related to the CDMPI project, equivalent to R$ 5,788 (R$ 3,967, as of December 31, 2019).

31.6Transactions with joint ventures, associates, government entities and pension plans

The company does, and expects to continue to do, business in the normal course of various transactions with its joint ventures, affiliates, pension funds, as well as with its controlling shareholder, the Brazilian federal government, which includes transactions with banks and other entities under its control, such as financing and banking services, asset management and others.

Significant transactions resulted in the following balances:

  Consolidated
 09.30.202012.31.2019
 AssetLiabiltyAssetLiabilty
Joint ventures and associates
Petrobras Distribuidora (BR)591234904191
Natural Gas Transportation Companies4729526052,889
State-controlled gas distributors (joint ventures)1,0454491,361421
Petrochemical companies (associates)2919188116
Other associates and joint ventures241545143818
Subtotal2,3782,1993,2014,435
Brazilian government – Parent and its controlled entities    
Government bonds6,5496,367
Banks controlled by the Brazilian Government40,12318,73034,60019,765
Receivables from the Electricity sector1,0351,347
Petroleum and alcohol account - receivables from the Brazilian Government (note 31.7)1,2391,226
Brazilian Federal Government – dividends85171,679
Empresa Brasileira de Administração de Petróleo e Gás Natural – Pré-Sal Petróleo S.A. – PPSA80
Others94209185176
Subtotal49,04819,45643,72521,700
Pension plans241218240443
Total51,66721,87347,16626,578
Current assets11,6375,89511,4857,676
Non-current assets40,03015,97835,68118,902

 

 

The income/expenses of significant transactions are set out in the following table:

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  Consolidated
 20202019
 Jul-SepJan-SepJul-SepJan-Sep
Joint ventures and associates    
Petrobras Distribuidora (BR)15,41540,00411,37111,371
Natural Gas Transportation Companies (*)(1,474)(6,232)(2,753)(4,958)
State-controlled gas distributors (joint ventures)1,9076,4412,8738,134
Petrochemical companies (associates)3,89810,6672,8038,650
Other associates and joint ventures6976597231,748
Subtotal20,44351,53915,01724,945
Brazilian government – Parent and its controlled entities    
Government bonds2913798300
Banks controlled by the Brazilian Government263(1,348)(445)(2,063)
Receivables from the Electricity sector641782721,078
Petroleum and alcohol account - receivables from the Brazilian Government313(4)5
Brazilian Federal Government – dividends(2)(17)(33)
Empresa Brasileira de Administração de Petróleo e Gás Natural – Pré-Sal Petróleo S.A. – PPSA(334)(540)43(229)
Others43(5)(196)(301)
Subtotal66(1,582)(232)(1,243)
     Pension plans(950)(950)--
Total19,55949,00714,78523,702
     
Revenues, mainly sales revenues21,88259,64918,45230,614
Purchases and services(1,657)(8,522)(3,486)(6,001)
Operating income and expenses(950)(950)
Foreign exchange and inflation indexation charges, net198(1,109)(327)(1,151)
Finance income (expenses), net86(61)146240
Total19,55949,00714,78523,702

(*) Includes results of TAG up to July 2020, the date on which the company entered into a purchase and sale agreement for its remaining stake (note 24.2)

The liability with pension plans of the company's employees and managed by the Petros Foundation, which include debt instruments, is presented in note 14.1. - Pension and health plans.

31.7Petroleum and alcohol account - receivables from the Brazilian Government

On March 11, 2020, the Federal Union filed a Challenge to the Compliance with the Judgment and was determined to Petrobras to express its opinion on this challenge.

After the company's statement, through which Petrobras recognized the excess of execution, the judge partially accepted the Union's challenge, only with regard to the update (interest and monetary correction) of the principal amount, since June 30, 2004. Other federal claims, such as compensation and prescription, were rejected.

On June 23, 2020, the judge approved the calculations presented by the Federal Union on the base date of February 2020 and with which Petrobras agreed. However, the Union filed an appeal for a declaration embargo, which was largely dismissed on August 31, 2020.

On September 14, 2020, the Union petitioned agreeing with the content of the decision rendered and, at the same time, requested that the National Treasury manifest itself in order to comply with the Legal Process Business signed between Petrobras and the National Treasury.

On September 22, 2020, Petrobras indicated the tax foreclosures for which the amounts relating to the precatory to be issued will be allocated. Petrobras is awaiting final settlement by the Federal Court and the final decision of the process.

As of September 30, 2020, the amount to be reimbursed by the Federal Government, plus interest and adjusted by the TR rate, is R$ 1,239 (R$ 1,226 on December 31, 2019), and is classified in long-term accounts receivable. The update regarding the IPCA-E claimed by the company remains classified as a contingent asset and totals R$ 1,203 on September 30, 2020.

31.8Compensation of key management personnel

The compensations of Executive Officers and Board Members of Petrobras parent company are governed by the Secretariat of Management and Governance for the State-owned Companies (Secretaria de Coordenação e Governança das Empresas Estatais – SEST), Ministry of Economy and Ministry of Mines and Energy of Brazil, and are set out as follows:

 

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 Jan-Sep/2020Jan-Sep/2019
 OfficersBoard MembersTotalOfficersBoard MembersTotal
Wages and short-term benefits9.70.510.28.00.68.6
Social Security and other employee-related taxes2.40.12.52.80.12.9
Post-employment benefits (pension plan)0.70.70.70.7
Variable compensation7.77.7
Benefits due to termination of tenure0.50.51.31.3
Total compensation recognized in the statement of income13.30.613.920.50.721.2
Total compensation paid13.30.613.917.00.717.7
Average number of members in the period (*)9.009.4418.447.339.6717.00
Average number of paid members in the period (**)9.004.3313.337.225.3312.55
 
(*) Monthly average number of members.
(**) Monthly average number of paid members.

 

In the period from January to September 2020, the consolidated expense with the total compensation of the company's officers and directors totaled R$ 43.7 (R$ 58.2 in the period from January to September 2019, excluding discontinued operations).

The remuneration of the members of the Advisory Committees to the Board of Directors must be considered in addition to the global remuneration limit set for the managers, that is, the perceived values ​​are not classified as management remuneration.

The members of the Board of Directors who participate in the Statutory Audit Committee waive the remuneration of the Board Member, as established in art. 38, § 8 of Decree No. 8,945, of December 27, 2016 and they were entitled to a total remuneration of R$ 1,641 thousand in the period from January to September 2020 (R$ 1,969 thousand, considering social charges). On September 30, 2019, the accumulated remuneration in the period was R$ 1,323 thousand (R$ 1,587 thousand, considering social charges).

On July 22, 2020, the Annual Shareholders' Meeting set the remuneration of the administrators (Executive Board and Board of Directors) at up to R$ 43.3 as the global compensation limit to be paid in the period between April 2020 and March 2021. In relation to what was approved by the Extraordinary General Meeting (AGE) 2019, no adjustment in monthly fees was proposed.

32Supplemental information on statement of cash flows
 Consolidated
 20202019
 Jan-SepJan-Sep
Amounts paid/received during the period:
Withholding income tax paid on behalf of third-parties5,8253,667
Capital expenditures and financing activities not involving cash  
Purchase of property, plant and equipment on credit290
Lease12,3544,181
Provision/(reversals) for decommissioning costs64(70)
Use of deferred tax and judicial deposit for the payment of contingency38
 

 

 

65 
 
33Subsequent events

Petros 3 Plan (PP-3)

On October 1, 2020, the Board of Directors approved the submission of the PP-3 for analysis by the Secretariat for Coordination and Governance of State-owned Companies (Secretaria de Coordenação e Governança das Empresas Estatais - SEST) and to the National Superintendence of Private Pension Plans (Superintendência Nacional de Previdência Complementar - PREVIC), after adjustments to the Plan's regulations.

PP-3 will be an exclusive pension plan option for voluntary and punctual migration of participants and assisted by the PPSP-R and PPSP-NR plans, both post-70.

Before being effectively created, the new plan will also undergo a technical and administrative feasibility study, which can only be completed after defining the mass of participants who have opted for PP-3. If the viability is not confirmed, the participants who have opted for the migration will continue on the plan of origin.

Sale of Petrobras Uruguay Distribución S.A. (PUDSA)

On October 2, 2020, Petrobras Uruguay Sociedad Anónima de Inversiones (PUSAI) signed with DISA Corporación Petrolífera S.A. (Disa), a contract for the sale of its entire stake in Petrobras Uruguay Distribución S.A. (PUDSA), in Uruguay.

The transaction amounted to US$ 61.70 million, to be paid in two installments: (a) US$ 6.17 million paid upon signing the contract; and (b) US$ 55.53 million at the close of the transaction. The final amount of the transaction is subject to adjustments until the closing date of the transaction.

The conclusion of the transaction is subject to the fulfillment of precedent conditions.

Global bond pricing and repurchase offer

On October 13, 2020, Petrobras announced the pricing of the new bond issue through the reopening of the PGF 5.60% Global Notes maturing in January 2031, in the total volume of US$ 1 billion, through its wholly owned subsidiary Petrobras Global Finance BV (PGF). On the same date, Petrobras announced an offer to repurchase securities in the international capital market, by PGF, in the limit of US$ 2 billion.

The global bond repurchase offer made by PGF was completed on October 22, 2020 and the principal volume delivered by investors was US$ 1,666 million equivalent, with a total payment of US$ 1,943 million according to the conditions proposed in the offer, excluding capitalized and unpaid interest.

Acquisition of FPSO P-71

On October 27, 2020, after discussions with its partners in the BM-S-11 Consortium (Tupi field), the company signed a commitment to purchase the FPSO P-71 (Floating Production Storage and Off-Take), under construction, through its subsidiary Petrobras Netherlands BV - PNBV, subject to the fulfillment of precedent conditions. Then, the estimated disbursement of Petrobras will be US$ 353 million, equivalent to the share of the partners' participation in the Consortium. The P-71 will have a production capacity of 150 mbpd and will be allocated in the Itapu field.

Review of the Shareholder Remuneration Policy

On October 27, 2020, the Board of Directors approved the revision of the Shareholder Remuneration Policy, in order to allow Management to propose the payment of dividends compatible with the company's cash generation, even in years when it is not determined accounting income.

With the changes approved, in the scenario in which the company's gross indebtedness is above US$ 60 billion, the proposal for the distribution of dividends may be presented, without accounting income, when there is a reduction of net debt in the previous twelve-month period, in case Management believes that the company's financial sustainability will be preserved. The distribution proposal should be limited to reducing net debt.

The company may also, in exceptional cases, propose the payment of extraordinary dividends, exceeding the mandatory minimum legal dividend or the annual amount determined from the formula (Remuneration = 60% x (Operating cash flow - capital expenditure (CAPEX)) , when its gross indebtedness is less than US$ 60 billion, even in the event of non-verification of accounting income.

In all cases, the distribution of dividends must comply with the provisions of the applicable legislation, including article 201 of the Brazilian Corporation Law (Law No. 6,404/1976).

66 
 

 

34Correlation between the notes disclosed in the complete annual financial statements as of December 31, 2019 and the interim statements as of September 30, 2020
 Number of notes
Notes to the Financial Statements

Annual

for 2019

Quarterly information for 3Q-20
Basis of preparation and presentation of financial statements21
Summary of significant accounting policies32
Cash and cash equivalents and Marketable securities74
Sales revenues85
Costs and Expenses by nature96
Other income and expenses107
Net finance income (expense)118
Segment information – Statement of Income129
Trade and other receivables1310
Inventories1411
Taxes1612
Short-term benefits1713
Employee benefits (Post-Employment)1814
Provisions for legal proceedings1915
Provision for decommissioning costs2016
The “Lava Jato (Car Wash) investigation” and its effects on the Company2117
Property, plant and equipment2318
Intangible assets2419
Impairment2520
Exploration and evaluation of oil and gas reserves2621
Collateral for crude oil exploration concession agreements2722
Investments2923
Disposal of Assets and other changes in organizational structure3024
Segment information – Asset3125
Finance debt3226
Leases3327
Equity3428
Fair value of financial assets and liabilities3529
Risk management3630
Related-party transactions3731
Supplemental information on statement of cash flows3832

 

 

The notes to the annual report 2019 that were suppressed in the Quarterly Financial Statements of September 30, 2020 because they do not have significant changes and / or may not be applicable to interim financial information are:

 

Notes to the Financial StatementsNumber of notes
The Company and its operations1
Accounting estimates4
New standards and interpretations5
Trade payables15
Commitment to purchase natural gas22
Legal proceedings – tax recoverables31.5
Insurance36.6

 

67 
 

STATEMENT OF DIRECTORS ON INTERIM ACCOUNTING INFORMATION AND REPORT ON THE REVIEW OF QUARTERLY INFORMATION

PETROBRAS

 

 

 

In compliance with the provisions of items V and VI of article 25 of CVM Instruction No. 480, of December 7, 2009, the Chief Executive Officer and directors of Petróleo Brasileiro S.A. - Petrobras, a publicly-held company, headquartered at Avenida República do Chile, 65, Rio de Janeiro, RJ, registered with CNPJ under number 33.000.167/0001-01, declare that the financial statements were prepared in accordance with the law or the bylaws and that:

(i) reviewed, discussed and agreed with Petrobras' interim financial information for the period ended September 30, 2020;

(ii) reviewed, discussed and agreed with the opinions expressed in the KPMG Auditores Independentes report, regarding Petrobras' interim financial information for the period ended September 30, 2020.

 

Rio de Janeiro, October 28, 2020.

  

Roberto Castello Branco Andrea Marques de Almeida

 

Chief Executive Officer

 

 

Chief Financial Investor Relations Officer

   
   
Anelise Quintão Lara Carlos Alberto Pereira de Oliveira
   
Chief Refining and Natural Gas Executive Officer Chief Exploration and Production Executive Officer
   
   
André Barreto Chiarini Roberto Furian Ardenghy

 

Chief Logistics Executive Officer

 Chief Institutional Relations Executive Officer

 

Rudimar Andreis Lorenzatto Marcelo Barbosa de Castro Zenkner

 

Chief Production Development Executive Officer

 

 

Chief Governance and Compliance Executive Officer

   
   
Nicolás Simone 
   
Chief Digital Transformation and Innovation Officer 
   

 

68 
 

 

 

KPMG Auditores Independentes

Rua do Passeio, 38 - Setor 2 - 17º andar - Centro

20021-290 - Rio de Janeiro/RJ - Brasil

Caixa Postal 2888 - CEP 20001-970 - Rio de Janeiro/RJ - Brasil

Telefone +55 (21) 2207-9400, Fax +55 (21) 2207-9000

www.kpmg.com.br

 

 

Report on the review of quarterly information - ITR

(A free translation of the original report in Portuguese, as filed with the Brazilian Securities and Exchange Commission (CVM), prepared in accordance with the accounting practices adopted in Brazil, rules of the CVM and of the International Financial Reporting Standards - IFRS)

 

To the Board of Directors and Shareholders of

Petróleo Brasileiro S.A. - Petrobras

Rio de Janeiro - RJ

 

Introduction

We have reviewed the interim accounting information, individual and consolidated, of Petróleo Brasileiro S.A. - Petrobras (“the Company”), identified as Parent Company and Consolidated, respectively, included in the quarterly information form - ITR for the quarter ended September 30, 2020, which comprises the balance sheet as of September 30, 2020 and the respective statements of income and comprehensive income for the three-months and six-months period then, and statements of changes in shareholders' equity and of cash flows for the nine-months period then ended, including the explanatory notes.

 

The Company`s Management is responsible for the preparation of these interim accounting information in accordance with the CPC 21(R1) and the IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board - IASB, as well as the presentation of these information in accordance with the standards issued by the Brazilian Securities and Exchange Commission, applicable to the preparation of quarterly information - ITR. Our responsibility is to express our conclusion on this interim accounting information based on our review.

 

Scope of the review

We conducted our review in accordance with Brazilian and International Interim Information Review Standards (NBC TR 2410 - Revisão de Informações Intermediárias Executada pelo Auditor da Entidade and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries primarily of the management responsible for financial and accounting matters and applying analytical procedures and other review procedures. The scope of a review is significantly less than an audit conducted in accordance with auditing standards and, accordingly, it did not enable us to obtain assurance that we were aware of all the material matters that would have been identified in an audit. Therefore, we do not express an audit opinion.

 

KPMG Auditores Independentes, uma sociedade simples brasileira e firma-membro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça.KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

 

 

69 
 

 

 

Conclusion on the individual and consolidated interim accounting information

Based on our review, we are not aware of any fact that might lead us to believe that the individual and consolidated interim accounting information included in the aforementioned quarterly information was not prepared, in all material respects, in accordance with CPC 21(R1) and IAS 34, issued by the IASB, applicable to the preparation of the quarterly review - ITR, and presented in accordance with the standards issued by the Brazilian Securities and Exchange Commission.

 

 

Other matters - Statements of added value

The individual and consolidated statements of value added for the nine-months period ended September 30, 2020, prepared under the responsibility of the Company's management, and presented as supplementary information for the purposes of IAS 34, were submitted to the same review procedures followed together with the review of the Company's interim financial information. In order to form our conclusion, we evaluated whether these statements were reconciliated to the interim financial information and to the accounting records, as applicable, and whether their form and content are in accordance with the criteria set on Technical Pronouncement CPC 09 - Statement of Value Added. Based on our review, nothing has come to our attention that causes us to believe that the accompanying statements of value added were not prepared, in all material respects, in accordance with the individual and consolidated interim financial information taken as a whole.

 

 

Rio de Janeiro, October 28, 2020

 

 

KPMG Auditores Independentes

CRC SP-014428/O-6 F-RJ

Original report in Portuguese signed by

Marcelo Gavioli

Accountant CRC 1SP201409/O-1

 

KPMG Auditores Independentes, uma sociedade simples brasileira e firma-membro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça.KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

 

70 
 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: October 29, 2020

 

PETRÓLEO BRASILEIRO S.A–PETROBRAS

By: /s/ Andrea Marques de Almeida

______________________________

Andrea Marques de Almeida

Chief Financial Officer and Investor Relations Officer