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PBR Petroleo Brasileiro S.A. Petrobras

Filed: 20 Feb 20, 11:13am

 

 

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 February, 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____


 

 

 

 


 

 

 

 

 


 

B3: PETR3 (ON) | PETR4 (PN)

NYSE: PBR (ON) | PBRA (PN)

 

www.petrobras.com.br/ir

petroinvest@petrobras.com.br

+ 55 21 3224-1510

 

 

 

Results Conference Call and Webcast – February 20, 2020

 

Portuguese: 10:00 am Rio de Janeiro / 8:00 am New York / 13:00 pm United Kingdom

Brazil: +55 11 3181-8565 or +55 11 4210-1803

USA: +1 412 717-9627

United Kingdom: +44 20 3795-9972

 

English: 11:30 am Rio de Janeiro / 09:30 am New York / 14:30 pm United Kingdom

Brazil: +55 11 3181-8565 or +55 11 4210-1803

USA: +1 412 717-9627

United Kingdom: +44 20 3795-9972

 

 

 

Disclaimer

These presentations may contain forward-looking statements. Such forward-looking statements only reflect expectations of the Company's managers regarding future economic conditions, as well as the Company's performance, financial performance and results, among others. The terms "anticipates", "believes", "expects", "predicts", "intends", "plans", "projects", "objective", "should", and similar terms, which evidently involve risks and uncertainties that may or may not be anticipated by the Company and therefore are not guarantees of future results of the Company and therefore, the future results of the Company's operations may differ from current expectations and the reader should not rely exclusively The Company does not undertake to update the presentations and forecasts in the light of new information or its future developments, and the figures reported for 2019 onwards are estimates or targets. These indicators do not have standardized meanings and may not be comparable to indicators with a similar description used by others. We provide these indicators because we use them as measures of company performance; they should not be considered in isolation or as a substitute for other financial metrics that have been disclosed in accordance with BR GAAP or IFRS. See definitions of Free Cash Flow, Adjusted EBITDA and Net Indebtedness in the Glossary and their reconciliations in the Liquidity and Capital Resources sections, Reconciliation of Adjusted EBITDA and Net Indebtedness. Consolidated accounting information audited by independent auditors in accordance with international accounting standards (IFRS).

 

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TABLE OF CONTENTS

 

 

 

 

 

 

 


4

 

 

 


 

MESSAGE FROM THE CEO

THE FIRST YEAR OF THE IMPLEMENTATION OF A NEW STRATEGY

 

I am pleased to share the results of a year of hard work, with the implementation of a new strategy for Petrobras, based on a transformational agenda supported by five pillars: maximization of the return on capital employed, reduction in the cost of capital, relentless search for low costs, meritocracy and respect for people and the environment and focus on the safety of operations.

The confidence in the quality of the strategy and in its efficient implementation was widely corroborated by the capital markets. Petrobras’ market capitalization increased by 25%, from US$ 80.9 billion at the end of 2018 to US$ 101.1 billion in December 2019, outperforming the major oil companies in the world.

In less than twelve months - from April 2019 to February 2020 - two secondary public offers for the distribution of Petrobras’ common shares owned by public banks were successfully carried out, totaling almost R$ 30 billion.

Two important aspects should be noted in the latter transaction, of R$ 22 billion: (a) it was carried out amidst a situation of high volatility in stock and oil prices, caused by the shock of the coronavirus on the global economy, and (b) 55,000 individual Brazilian investors bought our shares, which was remarkable for the development of the local capital market.

After years of stagnation, our oil and gas production surpassed the mark of 3 million barrels per day. The average cash lifting cost reached US$ 6.50 per boe in 4Q19, a reduction of US$ 3.0 in relation to the beginning of 2018. Pre-salt operations, with a lifting cost of approximately US$ 3.0 per boe1, played a relevant role in the reduction of the total average cost.

In 2019, our activities generated a net income of US$ 9.3 billion, despite the drop in average oil prices from US $ 71 per barrel in 2018 to US$ 64. We have paid to the governments royalties, taxes and signing bonuses in the total amount of R$ 246 billion, a historical record, which consolidates the company's position as the largest contributor in Brazil.

To support the focus on efficiency and value generation, we created two new executive directorships: (a) Institutional Relations, which is essential in a company such as Petrobras, given our size and level of interactions with governments and public bodies, and (b) Digital Transformation and Innovation.

In a rapidly changing world, digital transformation and the use of artificial intelligence are crucial for Petrobras' future. We are modernizing the information technology infrastructure, with a spike in high performance computing capacity (HPC), which, in 2019, was 3 times 2018’s capacity (9 PFLOPs) and in the end of 2020 will reach 10 times (30 PFLOPs)2. The increase in HPC capacity is necessary to enable the application of more sophisticated algorithms that will provide us with a substantially greater amount of information in exploration and in oil reservoirs

Portfolio management has resulted in divestments in which we are not natural owners in the amount of US$ 16.3 billion.

We were awarded the best Cross-Border M&A Deal of 2019 by Latin Finance magazine for TAG’s sale transaction, also the largest in Brazil last year.

BR Distribuidora's follow-on transaction was the first privatization of a state-owned company via capital markets in the history of Brazil, carried out in a transparent manner and contributing to the development of the capital markets, which is extremely relevant to economic development. Instead of a company with a single owner, the company emerged with diluted capital among thousands of shareholders, democratizing capitalism.

Divestments of mature fields, in addition to the positive effects for Petrobras due to the asymmetry of perceived value, have been contributing to the construction of a new oil industry in Brazil, with small and middle-sized producers, which invests in the recovery of fields with low productivity and high lifting costs, adding value to regional economies.

The maximization of the return on capital employed also includes discipline in its allocation and investments to create conditions to grow productivity.

Given the contracted credit lines available for immediate use, “revolving credit facilities” totaling US$ 9 billion, we are reducing the minimum cash target to US$ 5.5 billion. The retention of an excessive amount of cash acted as a drag on returns on capital employed.

We have raised the bar for the selection of projects, which will be assessed individually when competing for scarce capital. The selectivity in the allocation of capital was put to the test in the 3 auctions held by the ANP in October and November, when 45 blocks were auctioned off. The company submitted proposals for only five, winning four, C-M-477, Búzios, Itapu and Aram.

We managed to shorten the ramp-up period of the platforms to 9 months on average and when transporting P-70 from China to Rio de Janeiro, we used a dry-tow ship, which reduced travel time from 100 to 45 days. With the use of artificial intelligence, we are developing projects that have the potential to revolutionize oil exploration and project development, substantially reducing the probability of drilling dry wells and the period between discovery and first oil. Such projects will very positively influence the return on capital employed in a not-so-distant future.

Petrobras' excellence in innovation was recognized at the Offshore Technology Conference (OTC) Brazil 2019, by the Distinguished Achievement Award for the extended well test of the Libra project. For the 4th time since 1991, our competence was again recognized by the OTC 2020 Houston through the Distinguished Achievement Award for Companies, the main award in the global oil and gas industry, for the set of innovations developed to enable the production of the Búzios field.


 

1 

Does not consider platform leasing

2 

1 PFLOPS equals the processing capacity of a quadrillion mathematical operations per second.

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Divestments were paramount to help us focus on the assets in which we are the natural owners, allowing for total investment of US$ 27.4 billion, US$ 16.7 billion of which in bonus for the acquisition of the exploration and production rights in the blocks already mentioned. Buzios is very special because it is the largest offshore field discovered worldwide, a true world-class asset with huge reserves, low risk for Petrobras and lifting cost below US$ 4 per barrel.

It is not a matter of discussing whether Petrobras will be bigger or smaller in the future. Our goal is to be much better in the future, the best in value generation in the world. There is no downsizing, we are seeking smartsizing.

As well as enabling the financing of investments with expected high returns, divestments and the strong operational cash generation, in the amount of US$ 25.6 billion, allowed a US$ 24 billion debt reduction. In addition, the efficient liability management exchanged short and high-cost debt for long and lower-cost debt.

The combination of debt reduction and liability management allowed savings of US$ 1.2 billion in interest payments, with a reduction in the average cost of debt to 5.9% per year and an extension of its average tenor to 10.8 years.

We were very pleased to receive the Latin Finance award for the best Corporate Liability Management Program of 2019.

The three main credit risk agencies improved our stand-alone credit rating, which encourages us to continue our efforts to regain the investment-grade rating.

Another focus of our efforts has been the elimination of contingencies and off-balance liabilities. We managed to reduce litigation by R$ 35.5 billion, even after the effects of the monetary adjustments.

Owing to poor management over several years, our employees’ pension fund, Petros, suffered heavy losses, putting at risk the payment of pensions to thousands of people. Greenfield operation investigates the practice of illegal acts in several pension funds, including Petros.

We are working relentlessly to solve Petros' challenges. The pension plan for the employees who joined Petrobras before 2002 presents growing deficits and the attempts to solve this problem in the past have been unsuccessful. We are approving a much more effective equalization plan, which will reduce the impact on employees, and we are proposing a new defined contribution plan with a long-term solution.

Initiatives were launched with a focus on meritocracy, comprising incentives aligned with the interests of shareholders and helping to form a culture of value in the company.

Our Board of Directors approved an effective variable compensation plan with goals based on value generation. Bonuses relative to 2019 will be distributed after the General Shareholders' Meeting. At the same time, an EVA (economic value added) program will be phased in throughout 2020.

Among several efforts to reduce costs, we launched a family of voluntary dismissal programs, with the adhesion up to the end of 2019 of 3,294 employees, of which 995 have already left Petrobras.

Slow processes are an important source of high costs and low productivity. We are addressing this issue by delegating powers to managers, while, of course, keeping high standards of corporate governance and compliance. At the same time, the use of digital transformation begins to generate positive effects in corporate areas, such as the legal department, where we were able to eliminate the issuance of 20,000 documents per year in a first wave, which saves a significant number of man-hours and results in efficiency gains.

We are preparing the future of Petrobras, which relies on people and on the quality of its human capital stock. One of our most relevant tasks is the identification of young talents, promoting them to management positions and preparing them to be the future leaders of the company.

The training program for employees was reformulated to meet long-term strategic demands, with a more careful selection of employees to be trained. At the same time, we eliminate waste, seeking to do much more with less. In addition to the mandatory disciplines required by regulation, we are giving emphasis, for example, on leadership, finance, geosciences, artificial intelligence and mathematical methods.

Likewise, R&D activities in our research center (CENPES), previously focused on meeting regulatory requirements, were redesigned for alignment with the Company’s strategy.

In the social area, our programs are prioritizing investment in the early childhood, for children from 0 to 6 years old, where the social return rate is high, as it creates a powerful channel of economic and social mobility for those born in poor families. In addition, environment, science and sport for children and youth are priorities

Our efforts were recognized and in 2019 we reached a score of 46.6% on the Corporate Human Rights Benchmark, a result higher than that obtained in 2018, of 17.6%, and also than the average of 29% for companies in the mining and oil sectors.

Petrobras is strongly committed to sustainability. We are a member of the Oil and Gas Climate Initiative (OGCI) and we are prioritizing the decarbonization of our operations, with goals and initiatives to reduce CO2 and methane emissions and to increase carbon capture. The growth in water reuse is also an important concern, as our percentage is still low.

Our E&P operations discharged 17.3 kg of carbon equivalent per barrel of oil, which puts us in second place among the major oil companies in the world, only behind Equinor.

We continue to invest in research for the development of more environmental friendly fuels and in the acquisition of skills so that in the future we can enter the renewable business in a position to win.

Thanks to the quality of our oil, Petrobras is producing bunker oil with the low sulfur content of 0.5% required by the standards of the International Maritime Organization, IMO 2020. This new product helped to increase the utilization factor of our refineries to more than 80% in January, 2020.


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Safety is our top priority and, in 2019, we reached the lowest total recordable injuries per million men-hour frequency rate (TRI) level. There were 0.76 accidents / million man-hours, a decrease of 24.7% in relation to 2018, establishing a new landmark for the global oil industry.

Despite this achievement, we will not stop there. We continue to pursue the goal of zero fatalities, and it is with deep regret that we recorded two fatalities in 2019.

We are in a long-horizon industry, where we have the challenge of mitigating the negative effects of the many mistakes made in the past, taking care of the short term and preparing for the coming decades.

Advances have been made, but we are still far from our goals. Petrobras remains one of the most indebted oil company in the world, with gross debt of US$ 87.1 billion, leverage above the oil industry standards and high costs. In addition, the return on capital employed still remains below the cost of capital.

Thus, despite the ongoing strategic initiatives, production records and the very favorable accounting figures we are disclosing today, we cannot relax. There are many challenges ahead of us and, in order to overcome them, we need to continue with our efforts and to count on the talents of our professionals, the true jewel in Petrobras' crown.

Finally, I would like to acknowledge and thank the important role played by our Board of Directors, which has been very supportive throughout this journey.

Highlights of the 2019 result:

 

Adjusted EBITDA was US$ 32.7 billion, an increase of 3.8% in relation to 2018, due to lower production costs and lower contingencies.

 

Net income reached US$ 10.2 billion, mainly reflecting gains with asset sales.

 

The adjusted net debt / LTM Adjusted EBITDA ratio increased to 2.41x, applying the effects of IFRS 16, from 2.20x in 2018. Once these effects were eliminated, the index would have been 1.95x.

 

The remuneration to shareholders in the form of dividends and interest on capital was R$ 10.6 billion, equivalent to R$ 0.73 per common and R$ 0.92 per preferred share in circulation.

Highlights of the 4Q19 result:

 

Adjusted EBITDA was US$ 8.9 billion, an increase of 8.1% in relation to 3Q19, due to lower production costs, Brent appreciation and price improvement of our oil and fuel oil in relation to Brent.

 

Net income reached US$ 2.0 billion, mainly reflecting asset impairment.

 

The adjusted net debt / LTM EBITDA ratio increased to 2.41x from 2.40x in 3Q19, applying the effects of IFRS 16. Once these effects were eliminated, the index would have been 1.95x.

 

The board of Directors approved the remuneration to shareholders in the form of dividends in the amount R$ 1.7 billion to common shareholders and R$ 2.5 million to preferred shareholders.

 


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Main Items

Table 1 – Main items*

US$ million

 

4Q19

3Q19

4Q18

2019

2018

4Q19 x 3Q19

4Q19 x 4Q18

2019 x 2018

Sales revenues

19,868

19,416

21,736

76,589

84,638

2.3

(8.6)

(9.5)

Gross profit

9,004

7,561

7,876

30,857

32,454

19.1

14.3

(4.9)

Operating expenses

(5,358)

(4,069)

(4,971)

(10,243)

(15,666)

(32.0)

(8.0)

34.6

Consolidated net income (loss) attributable to the shareholders of Petrobras

1,981

2,289

551

10,151

7,173

(13.5)

259.5

41.5

Recurring consolidated net income (loss) attributable to the shareholders of Petrobras*

3,141

2,513

1,948

9,291

9,977

25.0

61.2

(6.9)

Net cash provided by operating activities

7,460

8,270

6,852

25,600

26,353

(9.8)

8.9

(2.9)

Free cash flow

5,650

6,480

4,262

18,376

15,245

(12.8)

33.1

20.5

Adjusted EBITDA

8,878

8,209

7,659

32,707

31,502

8.1

15.9

3.8

Recurring adjusted EBITDA *

9,049

8,853

8,090

34,093

33,665

2.2

11.9

1.3

Gross debt (US$ million)

87,121

89,901

84,360

87,121

84,360

(3.1)

3.3

3.3

Gross debt excluding IFRS 16 (US$ million)

63,260

66,070

84,175

63,260

84,175

(4.3)

(24.8)

(24.8)

Net debt (US$ million)

78,861

75,419

69,378

78,861

69,378

4.6

13.7

13.7

Net Debt excluding IFRS 16* (US$ million)

55,000

51,588

69,193

55,000

69,193

6.6

(20.5)

(20.5)

Net Debt/LTM Adjusted EBITDA (x)

2.41

2.40

2.20

2.41

2.20

0.4

9.5

9.5

Net Debt/LTM Adjusted EBITDA excluding IFRS 16 (x)

1.95

1.82

2.20

1.95

2.20

7.1

(11.4)

(11.4)

Average commercial selling rate for U.S. dollar

4.12

3.97

3.81

3.95

3.65

3.8

8.1

8.2

Brent crude (US$/bbl)

63.25

61.94

67.76

64.30

71.04

2.1

(6.7)

(9.5)

Crude Oil sales price (US$/bbl)

63.00

58.10

66.71

61.25

66.66

8.4

(5.6)

(8.1)

Domestic basic oil products price (US$/bbl)

74.97

73.05

82.11

75.04

81.46

2.6

(8.7)

(7.9)

TRI (toral recordable injuries per million men-hour frequency rate)

0.76

0.75

1.01

0.76

1.01

1.3

(24.8)

(24.8)

Adjusted Return on Capital Employed (without IFRS 16) - %**

8.22

7.42

8.54

8.22

8.54

8.5

(5.7)

(5.7)

 

 

* *See reconciliation of Net income and Recurring Adjusted EBITDA and IFRS 16 effects in the Non-recurring Items section. See IFRS effects in Adoption of IFRS 16 section.

** Ratio calculated based on Brazilian reais numbers.

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Consolidated Results

 

The main functional currency of the Petrobras Group is the Brazilian real, which is the functional currency of the parent company and its Brazilian subsidiaries. As the presentation currency of the Petrobras Group is the U.S. dollar, the Brazilian real-denominated results of operations in Brazilian reais are translated into U.S. dollars using the average exchange rates prevailing during the period. For detailed information about foreign exchange translation effects on the Company’s income statement, see item “Foreign Exchange Translation Effects on Results of Operations of 4Q 2019”.4

 

Net Revenues

Table 2 – Net revenues by products*

US$ million

4Q19

3Q19

4Q18

2019

2018

4Q19 X 3Q19

4Q19 X 4Q18

2019 X 2018

Diesel

5,609

6,030

6,241

23,007

23,450

(7.0)

(10.1)

(1.9)

Diesel subsidy

526

1,415

 

(100.0)

(100.0)

Gasoline

2,519

2,346

2,755

9,810

11,690

7.4

(8.6)

(16.1)

Liquefied petroleum gas (LPG)

984

1,075

1,114

4,159

4,490

(8.5)

(11.7)

(7.4)

Jet fuel

980

928

1,183

3,832

4,208

5.6

(17.2)

(8.9)

Naphtha

422

352

651

1,669

2,455

19.9

(35.2)

(32.0)

Fuel oil (including bunker fuel)

254

227

299

1,026

1,233

11.9

(15.1)

(16.8)

Other oil products

828

915

962

3,410

3,769

(9.5)

(13.9)

(9.5)

Subtotal Oil Products

11,596

11,873

13,731

46,913

52,710

(2.3)

(15.5)

(11.0)

Natural gas

1,495

1,501

1,468

5,929

5,425

(0.4)

1.8

9.3

Renewables and nitrogen products

43

61

98

245

366

(29.5)

(56.1)

(33.1)

Revenues from non-exercised rights*

137

174

271

645

687

(21.3)

(49.4)

(6.1)

Electricity

388

275

200

1,322

2,027

41.1

94.0

(34.8)

Services, agency and others

234

199

331

940

1,370

17.6

(29.3)

(31.4)

Total domestic market

13,893

14,083

16,099

55,994

62,585

(1.3)

(13.7)

(10.5)

Exports

5,435

4,856

4,096

18,085

15,413

11.9

32.7

17.3

Sales by international units

540

477

1,543

2,510

6,640

13.2

(65.0)

(62.2)

Total foreign market

5,975

5,333

5,639

20,595

22,053

12.0

6.0

(6.6)

Total

19,868

19,416

21,736

76,589

84,638

2.3

(8.6)

(9.5)

 

Net revenues reduced 9.5% in 2019 - despite higher volumes of oil and oil products exports and the increase in natural gas revenues, mainly due to the fall of 9.5% in Brent prices and to lower volumes of oil product sales, at lower prices, chiefly gasoline and naphtha. There was also a decrease in revenues by international units, as a result of divestments in the United States (E&P assets and Pasadena refinery) and of the distribution company in Paraguay. It is important to highlight that, although Brent prices have dropped significantly, the proportional impact in the company’s results was mitigated by the smaller spread of our oil and fuel oil to Brent, mainly due to IMO 2020.

In 4Q19, we exported higher volumes of oil and fuel oil with low sulphur content, at higher Brent prices, also reflecting the benefits of IMO 2020, which led to an appreciation of those products. In the domestic market, lower volumes of diesel, due to market share losses and seasonality, negatively impacted the results. Electricity and naphtha revenues were up because of higher volumes and prices.

The record oil production of 3,025 million barrels of oil equivalent per day (MMboed) in 4Q19 was not totally translated into revenues as 7.5 million  barrels of oil were, at the quarter’s end, remained as inventories, being registered as ongoing exports.

In terms of revenues breakdown, diesel remains the most relevant product, accounting for 48% of domestic sales, followed by gasoline, which represents 22% of sales, both in line with the previous quarter.

 

 

*Revenue arising from rights not exercised by customers in certain contracts with take or pay e ship or pay clauses.

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Regarding sales to the foreign market, we have the following distribution of export destinations:

Table 3 – Crude oil exports

Country

4Q19

3Q19

2019

China

68%

64%

71%

USA

8%

13%

10%

Chile

4%

6%

5%

India

3%

4%

4%

Others

16%

15%

10%

 

Table 4 – Oil products exports

Country

4Q19

3Q19

2019

Singapore

54%

31%

39%

USA

20%

50%

38%

Netherlands

0%

4%

3%

China

0%

1%

1%

Others

26%

14%

18%

 

China remains the main destination for our oil exports, followed by the USA and Chile. As to exports of oil products, there was strong growth to Singapore to the detriment of the United States in 4Q19.

 


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Cost of Goods Sold

Table 5 – Cost of goods sold

US$ million

4Q19

3Q19

4Q18

2019

2018

4Q19 x 3Q19

4Q19 x 4Q18

2019 x 2018

Brazilian operations

(10,546)

(11,494)

(12,515)

(43,702)

(46,583)

8.0

16.0

6.0

Acquisitions

(3,338)

(3,425)

(3,961)

(13,025)

(12,142)

3.0

16.0

(7.0)

Crude oil imports

(1,235)

(1,445)

(1,695)

(5,374)

(4,610)

15.0

27.0

(17.0)

Oil product imports

(1,144)

(1,144)

(1,897)

(4,304)

(4,655)

40.0

8.0

Natural gas imports

(959)

(836)

(369)

(3,347)

(2,877)

(15.0)

(160.0)

(16.0)

Production

(6,779)

(7,563)

(7,088)

(28,949)

(31,432)

10.0

4.0

8.0

Crude oil

(5,153)

(5,936)

(5,288)

(22,297)

(23,465)

13.0

3.0

5.0

Production taxes

(1,940)

(2,122)

(2,701)

(8,559)

(9,570)

9.0

28.0

11.0

Other costs

(3,213)

(3,814)

(2,587)

(13,738)

(13,895)

16.0

(24.0)

1.0

Oil products

(896)

(966)

(844)

(3,841)

(4,396)

7.0

(6.0)

13.0

Natural gas  

(730)

(661)

(956)

(2,811)

(3,571)

(10.0)

24.0

21.0

Production taxes

(162)

(154)

(251)

(698)

(895)

(5.0)

35.0

22.0

Other costs

(568)

(507)

(705)

(2,113)

(2,676)

(12.0)

19.0

21.0

Services rendered, electricity, renewables, nitrogen products and others

(429)

(506)

(1,466)

(1,728)

(3,009)

15.0

71.0

43.0

Operations abroad

(318)

(361)

(1,345)

(2,030)

(5,601)

12.0

76.0

64.0

Total

(10,864)

(11,855)

(13,860)

(45,732)

(52,184)

8.0

22.0

12.0

In 2019, the 12% reduction in the cost of goods sold, when compared to 2018, outpaced the 9.5% drop in Brent prices, due to (a) lower production costs, (b) reduction in costs with operations abroad, reflecting divestments of several assets, and (c) lower electricity generation, with lower prices. On the other hand, costs with oil imports increased due to higher volumes.

Cost of goods sold totaled US$ 10.9 billion in 4Q19, an 8% reduction compared to 3Q19 even with the increase in Brent prices. This drop is evidenced by the lower lifting cost in the quarter, which was reduced by 15%, to US$ 8.22/boe, as a result of the increase of pre-salt in the production mix. In addition, inventory built at lower prices in the previous quarter was realized in 4Q19, with a positive effect of US$ 0.5 billion, and there was a lower share of imported oil in the throughput.

Operating Expenses

Table 6 – Operating expenses

US$ million

4Q19

3Q19

4Q18

2019

2018

4Q19X 3Q19

4Q19 X 4Q18

2019 x 2018

Selling, General and Administrative Expenses

(1,880)

(1,759)

(938)

(6,600)

(6,066)

(6.9)

(100.4)

(8.8)

Selling expenses

(1,386)

(1,252)

(369)

(4,476)

(3,827)

(10.7)

(275.6)

(17.0)

Materials, third-party services, rent and other related costs

(1,190)

(1,048)

(1,119)

(3,664)

(3,445)

(13.5)

(6.3)

(6.4)

Depreciation, depletion and amortization

(134)

(137)

(29)

(549)

(145)

2.2

(362.1)

(278.6)

Allowance for expected credit losses

(13)

(9)

831

(49)

(32)

(44.4)

(101.6)

(53.1)

Employee compensation

(49)

(58)

(52)

(214)

(205)

15.5

5.8

(4.4)

General and administrative expenses

(494)

(507)

(569)

(2,124)

(2,239)

2.6

13.2

5.1

Employee compensation

(348)

(351)

(421)

(1,427)

(1,500)

0.9

17.3

4.9

Materials, third-party services, rent and other related costs

(112)

(121)

(124)

(539)

(626)

7.4

9.7

13.9

Depreciation, depletion and amortization

(34)

(35)

(24)

(158)

(113)

2.9

(41.7)

(39.8)

Exploration costs

(455)

(70)

(122)

(799)

(524)

(550.0)

(273.0)

(52.5)

Research and development expenses

(146)

(146)

(166)

(576)

(641)

12.0

10.1

Other taxes

(319)

(141)

(289)

(619)

(670)

(126.2)

(10.4)

7.6

Impairment of assets

(2,221)

(607)

(1,656)

(2,848)

(2,005)

(265.9)

(34.1)

(42.0)

Other income and expenses, net

(337)

(1,346)

(1,800)

1,199

(5,760)

75.0

81.3

120.8

Total

(5,358)

(4,069)

(4,971)

(10,243)

(15,666)

(31.7)

(7.8)

34.6

 

 


11

 

 

 


Operating expenses reduced significantly in 2019 due to the gains with divestments in the amount of US$ 6.7 billion, mainly related to TAG and E&P assets. On the other hand there were higher impairment charges, mainly in 4Q19, and higher selling expenses, due to the payment of tariffs for the use of TAG gas pipelines of approximately US$ 760 million and higher logistic costs for exports associated with the stronger freight market and increase in export volumes.

Selling, general and administrative expenses totaled US$ 1.9 billion in 4Q19, an increase of 6.9% over 3Q19, mainly due to the higher logistics expenses associated with the stronger freight market and the increase in exports volumes.

Exploration costs for oil and gas in 4Q19 also increased to US$ 455 million due to higher expenses with non-commercial wells and to the acquisition of regional seismic data to support the assessment of new areas. Tax expenses increased due to the adhesion to State Amnesties programs.

Impairment expenses, usually concentrated in the last quarter, increased 265.9% mainly as a consequence of the revision of assumptions on the new Strategic Plan, as well as the postponement of the investments in the 2nd train of RNEST and the cancellation of the fertilizer unit (UFN III). On February 10th, we launched a new sales process for UFN III.

On the other hand, other expenses reduced mainly due to gains in the asset sales and lower contingencies.

The following is a breakdown of impairments recognized in the quarter:

Table 7 - Impairments

Assets by nature

Impairment

Details

E&P producing fields

(1,601)

Revision of Brent assumptions in the new Strategic Plan

RNEST – 2nd train

(534)

Postponement of the beginning of operations on the 2nd train

UFN III

(200)

Full impairment of the asset

PO&G

(89)

Closing of the sale with price adjustment

Vitoria 10,000 drillship

(47)

Sale conclusion on January, 2020

Thermoelectric plant Termocamaçari

(25)

Mothballing of the plant

Transpetro’s fleet of vessels

103

Improvement in the freight market

E&P fields – under sale

89

Signing of Frade and Lagoa Parda cluster fields

Comperj

50

Comperj’s units will start to render services to the gas processing plant

Termobahia

38

 

Other

(4)

 

Total

(2,221)

 

 

In 4Q19, the assets linked to the E&P segment showed losses as a result of the significant reduction in the prices of oil and natural gas projected for the 2020-2024 horizon and the consequent increase in the provision for the dismantling of areas. The losses are largely linked to the Papa-Terra field, Uruguá cluster (Uruguá and Tambaú fields) and CVIT cluster (Golfinho and Canapú fields).

 

In relation to RNEST, the forecast for the beginning of operations of the second train has been pushed back for more than 3 years, affecting the present value of the asset.

UFN III had a 100% impairment charge due to the absence of the company's intention to complete the project and the lack of firm offers to buy the asset. In February, 2020 we launched a new sales process of this asset.

However, there were several impairment reversals especially for the Transpetro ships, the E&P fields held for sale (Frade and Lagoa Parda cluster fiels), for which the amounts to be received exceed book values, and the gas processing plant at Comperj, which will use the utilities, becoming a service provider and thus having cash inflows.

Adjusted EBITDA

2019 Adjusted EBITDA reached US$ 32.7 billion, 3.8% higher than 2018 due to the reduction in production costs (US$ 2.5 billion) and lower contingencies (US$ 763 million) and the adoption of IFRS16 (US$ 4.4 billion). This positive result was partially offset by the sharp reduction in Brent prices and higher abandonment (US$ 776 million) and selling expenses (US$ 649 million), besides the reduction of margins for oil products.

In 4Q19, Adjusted EBITDA reached US$ 8.9 billion, an increase of 8% in relation to 3Q19, reflecting the improvement in operating performance and margins due to: (i) lower production costs (ii) price improvement of our oil and fuel oil in relation to Brent and (iii) improvement in Brent prices.  This result was offset by lower margins for diesel, gasoline and LPG, higher exploration costs and higher tax expenses due to the adhesion to State Amnesties programs.

12

 

 

 


*

 

 

 

The increase in Adjusted Ebitda/boe in 4Q19, relative to 3Q19, reflects the good production performance, with the increase of pre-salt in the production mix, with lower lifting costs, due to the ramp-up of new systems in the Lula and Búzios fields.

On a long-term view, we observed a significant increase, mainly reflecting the good performance and greater cost efficiency of the pre-salt, which represented 59% of oil production in Brazil in 2019.

 

The increase in Adjusted EBITDA/bbl in Refining in 4Q19 reflects higher refining margins due to the IMO 2020. In addition, there was a positive inventory turnover effect in the quarter, due to the quarterly increase in oil prices.7


 

* ratio calculated using economic production of 2.39 MMboed, 86% of total production.

 

13

 

 

 


Financial results

Table 8 – Financial result

(US$ million)

4Q19

3Q19

4Q18

2019

2018

4Q19 X 3Q19

4Q19 X 4Q18

2019 x 2018 (%)

Finance income

402

339

471

1,330

2,381

18.6

(14.6)

(44.1)

Income from investments  and marketable securities (Government Bonds)

159

160

141

558

563

(0.6)

12.8

(0.9)

Discount and premium on repurchase of debt securities

2

22

5

323

(100.0)

(100.0)

(98.5)

Gains from signed agreements (electric sector)

(1)

150

79

724

(100.0)

 

(89.1)

Other income, net

243

178

158

688

771

36.5

53.8

(10.8)

Finance expenses

(1,293)

(2,425)

(1,272)

(7,086)

(5,675)

46.7

(1.7)

24.9

Interest on finance debt

(1,016)

(1,284)

(1,360)

(4,847)

(5,920)

20.9

25.3

(18.1)

Unwinding of discount on lease liabilities*

(360)

(369)

(2)

(1,514)

(10)

2.4

(17,900.0)

15,040.0

Discount and premium on repurchase of debt securities

(10)

(665)

(45)

(860)

(651)

98.5

77.8

32.1

Capitalized borrowing costs

325

314

430

1,332

1,814

3.5

(24.4)

(26.6)

Unwinding of discount on the provision for decommissioning costs

(190)

(194)

(152)

(795)

(652)

2.1

(25.0)

21.9

Other finance expenses and income, net

(42)

(227)

(143)

(402)

(256)

81.5

70.6

57.0

Foreign exchange gains (losses) and indexation charges

(711)

(654)

(1,078)

(3,008)

(3,190)

(8.7)

34.0

(5.7)

Foreign exchange

143

6

(216)

(72)

(66)

2,283.3

166.2

9.1

Reclassification of hedge accounting from Shareholders’ Equity to the Statement of Income

(896)

(746)

(904)

(3,136)

(3,315)

(20.1)

0.9

(5.4)

Other foreign exchange gains (losses) and indexation charges, net

42

86

42

200

191

(51.2)

4.7

Total

(1,602)

(2,740)

(1,879)

(8,764)

(6,484)

41.5

14.7

35.2

 

In 2019 we were very active in liability management, strongly accessing the international capital markets, with the repurchase of US$ 10 billion in debt securities. This movement, essential for the continuous debt reduction, resulted in a US$ 860 million premium paid to bondholders. Lease expenses also increased substantially due to the introduction of IFRS16 in 2019. This big debt reduction effort resulted in a 18% decrease of interest on finance debt, from US$ 5.9 billion in 2018 to US$ 4.8 billion in 2019.

In 4Q19, financial expenses improved 41.5% as a consequence of the lower level of bond repurchases in the period. Interest on finance debt continued to decrease as a result of the continuous debt reduction.


 

* Since 2019, the Company adopted the IFRS 16 prospectively and brought impacts in depreciation. For more information, see financial results report, footnote 3.1, and Adoption of IFRS 16 section.

14

 

 

 


Net income attributable to Petrobras’ shareholders

Net income in 2019 reached US$ 10.2 billion, a 41.5% increase compared to 2018, mainly as a result of capital gains on divestments (mainly TAG, BR Distribuidora and E&P assets), partially offset by higher financial expenses associated with liability management, higher impairments and lower Brent prices.

In 4Q19, net income decreased 13.5% to US$ 2 billion, mainly due to the capital gain of US$ 2.4 billion with the sale of BR Distribuidora in 3Q19 and higher impairments. On the other hand, there were improvement of oil margins, lower financial expenses and capital gains on the sale of E&P assets.

Recurring net income attributable to Petrobras’ shareholders and recurring adjusted EBITDA

In 2019, net income and adjusted EBITDA excluding the impact of non-recurring items were US$ 9.3 billion and US$ 34.1 billion, respectively.

In 4Q19, net income and adjusted EBITDA excluding the impact of non-recurring items were US$ 3.2 billion and US$ 9.0 billion, respectively. On net income, non-recurring items totaled US$ 1.8 billion before taxes, especially impairment (US$ 2.2 billion). On Adjusted EBITDA, non-recurring items totaled US$ 173 million.

 

15

 

 

 


Special Items*

US$ million

4Q19

3Q19

4Q18

2019

2018

4Q19 X 3Q19

4Q19 X 4Q18

2019 X 2018

Net income  

2,075

2,228

781

10,363

7,414

(6.9)

165.7

39.8

Nonrecurring items

(1,843)

378

(2,115)

2,448

(3,787)

(587.6)

12.9

164.6

Nonrecurring items that do not affect Adjusted EBITDA

(1,670)

1,021

(1,682)

3,837

(1,620)

(263.6)

0.7

336.9

Impairment of assets and investments

(2,223)

(606)

(1,689)

(2,852)

(1,979)

(266.8)

(31.6)

(44.1)

Realization of cumulative translation adjustments - CTA

(34)

 

 

 

Gains and losses on disposal / write-offs of assets

621

(163)

(203)

6,046

417

481.0

405.9

1,349.9

Gains on BR  Distribuidora follow on

3,515

3,515

(100.0)

 

 

Foreign exchange gains or losses on provisions for legal proceedings

(141)

83

(120)

(456)

(100.0)

(100.0)

73.7

Agreements signed for the electricity sector *

(1)

150

79

724

(100.0)

(100.0)

(89.1)

Discount related to prepayment of receivables from electricity sector

(128)

(128)

(100.0)

 

 

Write-off of deferred tax assets

(57)

(792)

(1,815)

92.8

 

 

Discount and premium on repurchase of debt securities

(10)

(664)

(24)

(855)

(328)

98.5

58.3

(160.7)

    Other nonrecurring items

(173)

(643)

(433)

(1,387)

(2,166)

73.1

60.0

36.0

PDV

(45)

(68)

(199)

2

33.8

 

(10,050.0)

Careers and remuneration plan

(4)

(2)

(293)

 

(100.0)

99.3

Amounts recovered from Lava Jato investigation

29

112

17

220

456

(74.1)

70.6

(51.8)

Gains / (losses) on decommissioning of returned/abandoned areas

(154)

(1)

621

(155)

621

(15,300.0)

(124.8)

(125.0)

State Amnesties Programs

(221)

(109)

(221)

(234)

 

(102.8)

5.6

Expected credit losses related to the electricity sector

1

632

(17)

(241)

(100.0)

(100.0)

92.9

Gains / (losses) related to legal proceedings

241

(719)

(1,310)

(1,016)

(2,285)

133.5

118.4

55.5

Equalization of expenses - Production Individualization Agreements

(22)

33

(279)

2

(279)

(166.7)

92.1

100.7

Income from contractual penalty for the non-occurrence of Liquigas disposal

88

 

 

(100.0)

Net effect of nonrecurring items on IR / CSLL

683

(601)

719

(1,588)

983

213.6

(5.0)

(261.5)

Recurring net income

3,234

2,451

2,178

9,501

10,217

31.9

48.5

(7.0)

Shareholders of Petrobras

3,141

2,513

1,948

9,291

9,977

25.0

61.2

(6.9)

Non-controlling interests

94

(62)

230

211

241

251.6

(59.1)

(12.4)

Effects of IFRS 16 on net income

(127)

(232)

(723)

45.3

 

 

Adjusted EBITDA

8,878

8,209

7,659

32,707

31,502

8.1

15.9

3.8

Nonrecurring items

(173)

(643)

(433)

(1,387)

(2,166)

73.1

60.0

36.0

Recurring Adjusted EBITDA

9,049

8,853

8,090

34,093

33,665

2.2

11.9

1.3

Effects of IFRS 16

1,273

950

4,353

34.0

 

 

 

In Management's judgment, the special items presented above, although related to the Company's business, were highlighted as complementary information for a better understanding and evaluation of the result. Such items do not necessarily occur in all periods and are disclosed when relevant. In 3Q19, the write-off of deferred tax assets and goodwill / negative goodwill on debt securities repurchases were classified as non-recurring items, resulting in reclassifications in the comparative period results.

 

* Registered in Financial results.

16

 

 

 


Adoption of IFRS 16

The table below shows the impacts on the main lines of the Balance Sheet, Income Statement and Cash Flow.

Table 10 – Effects of the adoption of IFRS16

US$ million

As disclosed as of 12.31.2019

Effects of the adoption of IFRS 16

Balance without effects of IFRS 16 as of 12.31.2019

 

 

 

 

Balance Sheet

 

 

 

Assets

229,740

22,492

207,248

Liabilities and equity

229,740

22,492

207,248

Statement of Income

 

 

 

Gross profit

30,857

224

30,633

Operating expenses

(10,243)

193

(10,436)

Operating income (loss)

20,614

419

20,195

Net finance income (expense)

(8,764)

(1,514)

(7,250)

Results in equity-accounted investments

153

153

Income (loss) before income taxes

12,003

(1,096)

13,099

Income taxes

(4,200)

371

(4,571)

Net income (loss)  from continuing operations

7,803

(723)

8,526

Net income (loss)  from descontinued operations

2,560

2,560

Net income (loss)

10,363

(723)

11,086

Statement of Cash Flow

 

 

 

Net cash provided by operating activities

25,600

3,952

21,648

Net cash provided by (used in) investing activities

(1,684)

1,256

(2,940)

Net cash used in financing activities

(32,069)

(5,207)

(26,862)

Cash and cash equivalents at end of the period

7,377

7,377

Net Debt

78,861

23,684

55,177

Adjusted EBITDA

32,707

4,353

28,354

Net debt/LTM Adjusted EBITDA ratio

2.41

0.46

1.95

 

The adoption of IFRS 16 does not change Petrobras' deleveraging strategy, as we maintained the goal of reducing the net debt / Adjusted EBITDA ratio to 1.5x by 2020.

17

 

 

 


Investments

Investment amounts (Capex) encompass acquisition of property, plant and equipment, including expenses with leasing, intangible assets, investments in subsidiaries and affiliates, expenses with geology and geophysics, expenses with research and development and pre-operating expenses. For the Capex presented in this report session, the international accounting standard IFRS16 - Leasing is not applicable.

Table 10 - Investments

US$ millions

4Q19

3Q19

4Q18

2019

2018

4Q19 / 3Q19

4Q19 / 4Q18

2019  / 2018

Exploration and Production

2,394

1,924

2,682

8,410

10,760

24%

(11)%

(22)%

Refining

444

464

375

1,463

1,107

(4)%

18%

32%

Gas and Power

217

169

152

543

433

29%

43%

25%

Others

113

75

99

328

307

50.6%

13.7%

6.8%

Total - ex Bonus

3,168

2,632

3,308

10,743

12,607

20%

(4)%

(15)%

Signing Bonus

16,671

 

18

16,671

832

 

 

 

Total - including bonus

19,838

2,632

3,326

27,413

13,439

654%

496%

104%

 

In 2019, we reached US$ 27.4 billion in investments, US$ 10.7 billion of which without signing bonuses, in line with the target of US$ 10 to 11 billion, disclosed in 2Q19.

Investments in 4Q19 totaled US$ 3.2 billion. Investments in E&P were 24% up on 4Q19 mainly due to higher expenses in the construction of exploratory wells. On the Gas and Power segment, the quarterly increase relates to the execution of stoppages in thermal plants and gas processing units, which had been postponed. Approximately 70% of investments corresponds to capital investments.

Capital investments are those whose main objective is to increase the capacity of existing assets, implement new production, offloading and storage assets, increase efficiency or profitability of the asset and implement essential infrastructure to enable other capital investment projects. They include acquisitions of assets/companies and investments in exploratory activities.

On the other hand, the objective of current investments is to maintain the operation of existing assets (i.e., they do not aim at increasing the capacity of facilities), restoring capacity, in addition to investments in infrastructure whose implementation is not essential to enable another capital investment project.

In 4Q19, investments in Exploration and Production totaled US$ 2.4 billion, with approximately 80% of which in capital investments. Investments were mainly concentrated: (i) in the production development of Santos Basin pre-salt (US$ 1.2 billion); (ii) new projects in mature fields (US$ 0.2 billion); and (iii) exploratory investments in the pre-salt (US$ 0.2 billion).

In 4Q19, US$ 16.7 billion were invested in the acquisition bonuses of the Búzios and Itapu fields (bidding round for the Transfer of Rights surplus), the C-M-477 block (16th bidding round in the Concession Regime), and the Aram block (6th round PSC). The bonus payment was effected on the same date that Petrobras received US$ 9 billion in reimbursement for the revision of the Transfer of Rights contract.

In the Refining segment, investments totaled US$ 0.4 billion in 4Q19, approximately 20% of which were capital investments. Investments in the Gas and Power segment totaled US$ 0.2 billion in 4Q19, approximately 60% of which were capital investments

The following table presents the main information on the new oil and gas production systems.


18

 

 

 


Table 12 – Main projects

Project

Start-up

FPSO capacity (bbl/day)

CAPEX Petrobras spent

US$ bi

Total CAPEX

20-24

Petrobras US$ bi

Petrobras Share

Status

Atapu 1 P-70 (Owned unit)

2020

150,000

1.7

3.9

89.3%

Project in execution phase with the platform’s physical completion above 98%. 10 wells drilled and 3 completed.

Sépia 1 FPSO Carioca (Owned unit)

2021

180,000

0.3

3.1

97.6%

Project in execution phase with the platform’s physical completion above 80%. 5 wells drilled and 3 completed.

Mero 1 FPSO Guanabara (Chartered unit)

2021

180,000

0.1

1.1

40.0%

Project in execution phase with the platform’s physical completion above 80%. 5 wells drilled and 1 completed.

Búzios 5 FPSO Alm. Barroso (Chartered unit)

2022

150,000

0.1

3.0

100%

Project in execution phase with the platform’s physical completion above 10% and 1 well drilled.

Marlim 1 FPSO Anita Garibaldi (Chartered unit)

2022

80,000

0.04

2.3

100%

Project in execution phase, letter of intent signed for charter of the platform in October 2019.

Marlim 2 FPSO Ana Néri (Chartered unit)

2023

70,000

0.01

1.8

100%

Project in execution phase. Letter of intent signed for platform chartering in October 2019.

Mero 2 FPSO Sepetiba (Chartered unit)

2023

180,000

0.01

1.1

40%

Project in execution phase with the platform’s physical completion above 10%. 4 wells drilled and 2 completed.

10

 

 

19

 

 

 


Portfolio Management

Improvements in capital allocation are being implemented through portfolio management, with divestments of assets with low returns on capital employed. In 2019, we managed to make significant divestments, with signed and completed transactions contributing to a total of US$16.3 billion, including transactions signed in 2018 and completed in 2019 (with cash inflow of US$ 14.7 billion as detailed below). The main assets divested during the year were TAG gas pipelines, BR Distribuidora and Tartaruga Verde field.

In 4Q19, we concluded the sale of Tartaruga Verde field, Pargo cluster, onshore fields in Rio Grande do Norte and, in January 2020, PO&G BV, which, together with the cash inflows relative to the signing of the Frade field, resulted in a cash inflow of US$ 1.75 billion in the period. We also signed the sale of Liquigás, in the amount of US$ 879 million.

Table 13 – Signed transactions

Asset

Transaction Amount
(US$ million)

Amounts received in 2019 and 2020
(US$ million)

Maromba field

90

20

Pasadena refinery

562

467

TAG

8,722

8,722

Tartaruga Verde field

1,294

950

Onshore fields - RN

384

295

BR Distribuidora

2,553

2,553

Pampo & Enchova cluster

851

53

Baúna field

665

50

Macau cluster

191

48

Belém Bioenergia Brasil

6

0

Ponta do Mel e Redonda

7

0

Lagoa Parda cluster

9

1

Frade field

100

7.5

Liquigás

879

0

Pargo cluster

Signed in 2018

324

Distribution in Paraguai

Signed in 2018

381

PO&G BV

Signed in 2018

806

Total amount

16,313

14,678

In addition, we have the following divestments in our portfolio, as well as several other projects, approved in the new Strategic Plan 2020-2024, undergoing structuring phase, with teasers to be launched soon. The ones to highlight are the sale of gas transportation and distribution, offshore gas pipelines and thermal power plants.

Table 14 - Assets in divestment process

Teaser / Non-binding phase

Binding phase

TAG (10%)

Mega

Mangue Seco 1 and 2

Refineries
(RNEST, RLAM, REPAR, REFAP, REGAP, REMAN, LUBNOR e SIX)

Golfinho & Camarupim Cluster (ES)

Uruguay assets
(PUDSA)

Papa-Terra field (RJ)

Deep-water fields
(SE-AL Basin)

 Exploratory concessions (PA-MA, RS)

Onshore fields
(AM, CE, SE, BA and ES)

 

Shallow water fields
(ES and RJ)

 

Exploratory concessions (ES)

Petrobras reinforces the importance of portfolio management focusing on core assets, in order to improve our capital allocation, enable debt and capital cost reduction, and the consequent increase in value generation to the company and to our shareholders.

 

20

 

 

 


Liquidity and Capital Resources

Table 15 – Liquidity and capital resources

US$ million

4Q19

3Q19

4Q18

2019

2018

Adjusted cash and cash equivalents at the beginning of period

14,482

17,847

15,227

14,982

24,404

Government bonds and time deposits with maturities of more than 3 months at the beginning of period

(1,303)

(641)

(1,040)

(1,083)

(1,885)

Cash and cash equivalents at the beginning of period

13,179

17,206

14,187

13,899

22,519

Net cash provided by (used in) operating activities

7,460

8,270

6,852

25,600

26,353

Net cash provided by operating activities from continuing operations

7,460

8,203

6,300

25,277

25,447

Discontinued operations – net cash provided by operating activities

67

552

323

906

Net cash provided by (used in) investing activities

(7,760)

(643)

(1,457)

(1,684)

(4,504)

Net cash provided by (used in) investing activities from continuing operations

(7,760)

(2,506)

(1,409)

(3,496)

(4,460)

Acquisition of PP&E and intangibles assets (except for the Transfer of Rights surplus and other signature bonus) and investments in investees

(1,810)

(1,790)

(2,590)

(7,224)

(11,108)

Signature bonus

(1,331)

(18)

(1,339)

(841)

Transfer of Rights surplus

(15,341)

(15,341)

Proceeds from disposal of assets - Divestment

1,303

(1)

876

10,413

5,791

Reimbursement of Transfer of rights agreement

8,361

8,361

Dividends received

600

20

288

1,436

994

Divestment (Investment) in marketable securities

458

(735)

35

198

704

Discontinued operations – net cash provided by (used in) investing activities

1,863

(48)

1,812

(44)

(=) Net cash provided by operating and investing activities

(300)

7,627

5,395

23,916

21,849

Net cash provided by (used) in financing activities from continuing operations

(6,379)

(12,178)

(5,590)

(31,561)

(29,694)

Net financings

(4,185)

(10,544)

(5,362)

(24,310)

(29,009)

Proceeds from  financing

2,735

4

1,999

7,464

10,707

Repayments

(6,920)

(10,548)

(7,361)

(31,774)

(39,716)

Repayment of lease liability

(1,585)

(1,384)

(5,207)

Dividends paid to shareholders of Petrobras

(573)

(298)

(309)

(1,877)

(625)

Dividends paid to non-controlling interest

(49)

(3)

(11)

(138)

(103)

Investments by non-controlling interest

13

51

92

(29)

43

Discontinued operations – net cash used in financing activities

(13)

(97)

(508)

(156)

Net cash provided by (used) in financing activities

(6,379)

(12,191)

(5,687)

(32,069)

(29,850)

Effect of exchange rate changes on cash and cash equivalents

877

537

4

1,631

(619)

Cash and cash equivalents at the end of period

7,377

13,179

13,899

7,377

13,899

Government bonds and time deposits with maturities of more than 3 months at the end of period

888

1,303

1,083

888

1,083

Adjusted cash and cash equivalents at the end of period

8,265

14,482

14,982

8,265

14,982

Reconciliation of Free Cash Flow

 

 

 

 

 

Net cash provided by operating activities

7,460

8,270

6,852

25,600

26,353

Acquisition of PP&E and intangibles assets (except for the Transfer of Rights surplus and other signature bonus) and investments in investees

(1,810)

(1,790)

(2,590)

(7,224)

(11,108)

Free cash flow

5,650

6,480

4,262

18,376

15,245

As of December 31st, 2019, cash and cash equivalents totaled US$ 7.4 billion and adjusted cash and cash equivalents totaled US$ 8.3 billion. Our goal is to reach a minimum cash of US$ 5.5 billion.

In 4Q19, inflow of funds from net cash provided by operating activities totaled US$ 7.5 billion, which, alongside cash inflows related to divestments of US$ 1.3 billion and cash and cash equivalents, were used (i) to pay the signature bonus of the Transfer of Rights Surplus auction, in the net amount of US$ 7.0 billion, (ii) to prepay debt and amortize principal and interest due in the period (US$ 6.9 billion) and (iii) as capex in the business areas (US$ 1.8 billion).

Net cash provided by operating activities dropped 10% in the quarter, mainly due to increase in inventories and accounts receivable in the amount of US$ 957 million.


21

 

 

 


In 2019, the Company settled several loans and financial debt, in the amount of US$ 31.8 billion, with the following highlights : (i) US$ 10 billion relating to repurchase of global bonds previously issued by the Company in the capital market, with net premium paid to bondholders amounting to US$ 860; (ii) pre-payment of banking loans in the domestic and international market totaling US$ 13.5 billion; and (iii) pre-payment of US$ 578 million with respect to financings with the Brazilian Development Bank (Banco Nacional de Desenvolvimento Econômico e Social – BNDES).

In 4Q19 we repaid US$ 6.9 billion in loans and financial debt, the most relevant being the prepayment of a US$ 5 billion of the China Development Bank loan. We raised US$ 2.7 billion and the most noteworthy transaction was the issuance of debentures in Brazil, in the amount of R$ 3 billion (US$ 722 million).

EBITDA x OCF x FCF x FCFE reconciliation

Adjusted EBITDA reached US$ 8.9 billion in 4Q19, 8.1%, above 3Q19. Operating cash flow plus divestments during the year enabled the acquisition of new acreage and debt prepayment. The line showing the balance of the signing bonus includes the payment of US$ 15.3 billion related to Transfer of Rights surplus, offset by the receipt of US$ 8.4 billion related to the revision of the original contract, besides participation in other bids.

 

 

22

 

 

 


Debt

Our commitment to deleveraging generated significant results in 2019. The inflow of divestment resources led to a 25% fall in gross debt as of December 31st, 2019, reaching US$ 63 billion without the effects of IFRS16. Including IFRS16, which added US$ 23.9 billion to our debt, we managed to have a gross debt of US$ 87 billion, roughly in line with the amount in December 31, 2018, which did not include leases.

In 4Q19, even with the strong cash outflow due to the payment of the signing bonus of the ToR surplus auction, we still managed to reduce gross debt by 4%.

In addition, liability management helped to increase the average maturity from 9.14 years in December 31st, 2018 and 10.42 years in September 30th, 2019 to 10.80 years in December 31st, 2019, while, in the same periods, leverage reduced from 46% and 45% to 44%. Average interest rate reduced from 6.1% on December 31st, 2018 to 5.9% in September 30th and remained in the same level on December 31st, 2019.

Net debt increased 4.6% due to the use of cash to pay the signing bonus of the ToR surplus auction in December, 2019.

Deleveraging is a priority for Petrobras. Our goal is to reduce the Net Debt/Adjusted LTM EBITDA ratio to 1.5x by 2020, considering the effects of IFRS 16. At December 31, 2019, the Net Debt/Adjusted LTM EBITDA ratio was 2.41x considering the effects of IFRS 16, an increase from 2.40x at September 30th, 2019. Excluding the effects of the IFRS16, the Net Debt/Adjusted LTM EBITDA ratio increased from 1.82x to 1.95x in the same period.

Table 16 – Debt indicators

Debt (US$ million)

12.31.2019

09.30.2019

Δ %

12.31.2018

Gross debt (without IFRS 16)

63,260

66,070

(4.3)

84,175

Capital Markets

35,944

34,815

3.2

42,947

Banking Market

21,877

25,249

(13.4)

33,700

Development banks

1,967

1,950

0.9

3,387

Export Credit Agencies

3,233

3,812

(15.2)

3,881

Related parties

 

Others

239

244

(2.0)

260

Finance leases (IFRS 16)

23,861

23,831

0.1

185

Gross debt (with IFRS 16)

87,121

89,901

(3.1)

84,360

Adjusted cash and cash equivalents

8,260

14,482

(43.0)

14,982

Net debt

78,861

75,419

4.6

69,378

Net debt (without IFRS 16)

55,000

51,588

6.6

69,193

Net Debt/(Net Debt + Market Cap) - Leverage

44%

45%

(1.0)

46%

Average interest rate (% p.a.)

5.9

5.9

6.1

Weighted average maturity of outstanding debt (years)

10.80

10.42

3.6

9.14

Net debt/LTM Adjusted EBITDA ratio

2.41

2.40

0.4

2.20

Gross debt/LTM Adjusted EBITDA ratio

2.66

2.86

(6.7)

2.68

 

 

 

23

 

 

 


Results per segment

Exploration and Production

US$ million

4Q19

3Q19

4Q18

2019

2018

4Q19 x 3Q19

4Q19 x

4Q18

2019 x 2018

Sales revenues

13,868

12,551

13,333

50,463

52,382

10.5

4.0

(3.7)

Gross profit

6,991

5,753

6,523

23,158

23,414

21.5

7.2

(1.1)

Operating expenses

(1,781)

(1,273)

(3,059)

(4,181)

(5,068)

(39.9)

41.8

17.5

Operating income (loss)

5,210

4,480

3,464

18,977

18,346

16.3

50.4

3.4

Net income (loss) attributable to the shareholders of Petrobras

3,440

2,979

2,296

12,624

12,190

15.5

49.8

3.6

Adjusted EBITDA of the segment

8,824

8,100

6,764

31,720

28,271

8.9

30.5

12.2

EBITDA margin of the segment (%)

64

65

51

63

54

(1)

13

9

Average Brent crude (US$/bbl)

63.25

61.94

67.76

64.30

71.04

2.1

(6.7)

(9.5)

Sales price - Brazil

 

 

 

 

 

 

 

 

Crude oil (US$/bbl)

63.00

58.10

66.71

61.25

66.66

8.4

(5.6)

(8.1)

Lifting cost - Brazil (US$/boe)*

 

 

 

 

 

 

 

 

excluding production taxes

8.22

9.67

10.24

9.62

10.90

(15.0)

(19.8)

(11.7)

Onshore

17.50

18.19

19.79

18.89

20.02

(3.8)

(11.5)

(5.7)

without lease

17.50

18.19

19.79

18.89

20.02

(3.8)

(11.5)

(5.7)

Shallow waters

27.94

30.56

26.20

30.27

25.69

(8.6)

6.6

17.8

without lease

25.65

28.58

24.61

28.22

24.07

(10.2)

4.2

17.2

Deep and ultra-deep post-salt

11.18

14.21

11.61

12.53

12.59

(21.3)

(3.7)

(0.5)

without lease

9.59

12.48

10.25

10.77

11.20

(23.2)

(6.4)

(3.8)

Pre-salt

5.02

5.03

6.29

5.61

6.53

(0.3)

(20.2)

(14.0)

without lease

3.20

3.07

3.57

3.52

3.66

4.4

(10.4)

(3.9)

including production taxes

18.94

19.50

23.77

20.95

24.39

(2.9)

(20.3)

(14.1)

Production taxes - Brazil

2,447

2,298

2,618

10,641

10,872

6.5

(6.5)

(2.1)

Royalties

1,210

1,175

1,223

4,676

4,898

3.0

(1.1)

(4.5)

Special Participation

1,226

1,111

1,382

5,918

5,923

10.4

(11.3)

(0.1)

Retention of areas

11

12

13

47

51

(8.3)

(15.4)

(7.8)

 


 

* Leasing only refers to the plataform rentals

24

 

 

 


The reduction in gross profit in 2019 is due to lower Brent prices, partially offset by higher production and lower lifting costs. Operating income increased due to lower expenses with legal contingencies and higher results with divestments, mitigated by higher impairment losses and exploratory expenses.

Lifting cost in 2019, without government take, was US$ 9.62/boe, a 12% reduction compared to the previous year (US$ 10.90/boe). The drop is mainly explained by the increase in production, with the start-up and ramp-up of pre-salt platforms, mainly in the Búzios and Lula fields.

The drop in Brent prices from 2018 to 2019 explains the reduction in government take in the period, partially offset by the payment of the unification of Parque das Baleias, in 2019. In unit terms, the relationship also benefited from the increase in production in the Transfer of Rights, which is not subjected to special participation taxes.

As disclosed in the 2020-2024 Strategic Plan, Petrobras will segregate the cost of chartering platforms with third parties (leasing cost) from the lifting cost without government take. This portion represents, in 2019, US$ 1.8/boe and US$ 2.0/boe in 2018, of a total of US$ 9.62/boe and US$ 10.90/boe, respectively.

The increase in gross profit in 4Q19 is mainly due to higher production, higher Brent prices, the price appreciation of our oil due to IMO 2020. Higher operating profit reflects the increase in gross profit and the gain on divestments, especially the Pargo cluster, partially offset by impairment losses and exploratory expenses.

Pre-salt lifting cost in the quarter, without government take, was US$ 5.02/boe, in line with 3Q19 figures. The good results achieved in the pre-salt platforms explain the metric’s stability.

In the post-salt, we had a 21% drop in lifting cost without government take in 4Q19. We observed a reduction in the costs of platforms P-33 and P-37, which interrupted production with no expected return, as well as a reduction in intervention costs between quarters.

In shallow water, there was a 9% reduction in lifting cost in 4Q19 compared to the previous quarter, mainly due to the divestment of the Pargo and Vermelho fields, which had higher unit costs.

In onshore fields, the lifting cost without government take decreased by 4% in dollars in 4Q19 due to the impact of the 3.6% devaluation of the real against the dollar in the period.

Onshore and shallow water fields are not the Company’s core assets and recent transactions showed that there is a great interest from companies capable of adding more value to those assets than Petrobras. At the same time, the sale of these assets has been impacting positively the economic activity, since the new owners have significantly increased investments in these assets, creating jobs and fostering the development of the oil and gas services industry. In 2019, we recorded approximately US$1.0 billion in gains from the sales of these assets and US$ 645 million in impairment reversals.

There was an increase in the payment of government take in 4Q19 relative to the previous quarter, mainly due to increase in production.

25

 

 

 


Refining

 

US$ million

4Q19

3Q19

4Q18

2019

2018

4Q19 x

3Q19

4Q19 x

4Q18

2019 x

2018

Sales revenues

17,606

17,124

18,929

67,538

73,448

2.8

(7.0)

(8.0)

Gross profit

1,946

1,236

42

5,960

6,437

57.4

4533.3

(7.4)

Operating expenses

(1,562)

(973)

(1,381)

(4,334)

(3,437)

(60.5)

(13.1)

26.1

Operating Income (Loss)

384

263

(1,339)

1,626

3,000

46.0

128.7

(45.8)

Net income (loss) attributable to the shareholders of Petrobras

108

121

(870)

1,021

2,393

(10.7)

112.4

(57.3)

Adjusted EBITDA of the segment

1,572

938

(279)

4,984

57,674

67.6

663.4

(12.2)

EBITDA margin of the segment (%)

9

5

(1)

7

8

4

10

(1)

Refining cost (US$ / barrel) - Brazil

2.29

2.40

2.49

2.46

2.51

(4.6)

(8.0)

(2.0)

Refining cost (R$ / barrel) - Brazil

9.70

9.53

9.44

9.77

9.12

1.8

2.8

7.1

Domestic basic oil products price (US$/bbl)

74.97

73.05

82.11

75.04

81.46

2.6

(8.7)

(7.9)

 

In 2019 the reduction in gross profit was due to lower margins and volumes of diesel and gasoline sold in the domestic market, as well as the exchange translation effect and the reduction in the positive effect of inventory turnover of approximately US$ 0.8 billion between the years. In 2019, the inventory turnover was approximately US$ 1.0 billion. These factors were partially offset by higher volumes and margins in exports of fuel oil and crude oil.

Lower operating profit was due to higher selling expenses, higher impairment (RNEST, Comperj and Pasadena) and higher expenses with lawsuits related to environmental taxes as well as contingencies related to the OSPAR pipeline.

In 4Q19, the improvement in gross profit was mainly due to the inventory turnover effect of approximately US$ 0.5 billion, due to the realization of inventories at prices above acquisition costs, as a result of the increase in Brent between quarters.

Diesel sales volumes dropped in the domestic market, due to seasonality. There were lower margins and volumes of LPG in the domestic market. On the other hand, there were higher volumes exported and higher fuel oil crack spreads, of 5.1 US$/bbl. Natural gas, an input to the refineries, was purchased at lower prices, due to the reduction in unit costs, favoring results.

Refining unit cost decreased due to lower personnel costs in dollars combined with the exchange rate variation in the period. Although there was higher demand for low sulphur fuel oil, the utilization factor reduced to 76% in 4Q19, against 80% in the 3Q19, due to lower overall demand in the domestic market.

Operating profit was higher in the quarter, reflecting the increase in gross profit, partially offset by higher impairment expenses in RNEST's 2nd Train, in addition to higher selling expenses, due to the increase in shipping costs, and tax expenses, due to the adhesion to State Amnesties programs.

 

 

 

26

 

 

 


Gas and Power

US$ million

4Q19

3Q19

4Q18

2019

2018

4Q19 x

3Q19

4Q19 x

4Q18

2019 x

2018

Sales revenues

2,749

2,961

3,121

11,493

12,241

(7.2)

(11.9)

(6.1)

Gross profit

974

926

876

3,780

3,218

5.2

11.2

17.5

Operating expenses

(1,199)

(631)

(175)

2,580

(2,461)

(90.0)

(585.1)

(204.8)

Operating income (loss)

(225)

295

701

6,360

757

(176.3)

(132.1)

740

Net income (loss) attributable to the shareholders of Petrobras

(156)

198

462

4,180

482

(178.8)

(133.8)

767

Adjusted EBITDA of the segment

187

500

1,020

1,862

1,613

(62.6)

(81.7)

15.4

EBITDA margin of the segment (%)

7

17

33

16

13

(11)

(79.2)

3

Natural gas sales price - Brazil(US$/bbl)

42.70

45.57

49.45

46.29

42.87

(6.3)

(13.7)

8.0

 

In 2019, the higher gross profit was due to better margins on natural gas sales to the non-thermoelectric sector and on energy in the Free Contracting Environment (ACL) due to the reduction in spot prices, reducing the costs of settling sales contracts at the Chamber of Commercialization of Electric Energy (CCEE).

Operating profit increased due to the sale of a 90% interest in TAG in June 19, despite higher selling expenses with the payment of TAG's tariffs.

In 4Q19, gross profit was higher due to better margins in sales of natural gas in the thermoelectric and non-thermoelectric sectors.

The operating loss reflects the increase in operating expenses due to the mothballing of ANSA and the impairment of UFN-III, besides the end of a tax dispute with the adhesion to State Amnesties programs.

 

27

 

 

 


Reconciliation of Adjusted EBITDA

EBITDA is an indicator calculated as the net income for the period plus taxes on profit, net financial result, depreciation and amortization. Petrobras announces EBITDA, as authorized by CVM Instruction 527 of October 2012.

In order to reflect the Directors' view regarding the formation of the company's current business results, EBITDA is also presented adjusted (Adjusted EBITDA) as a result of: investments, impairment, results with divestments and write-off of assets, and cumulative exchange effects of (CTA) reclassified to income.

In the calculation of adjusted EBITDA, the Company added, for the periods of 2018, foreign exchange gains and losses resulting from provisions for lawsuits in foreign currencies. Provisions for legal proceedings in foreign currencies consist mainly of Petrobras' share of the Class Action agreement, which ended in December 2017. Exchange gains or losses on provisions of legal proceedings are presented in Other Income and Expenses for accounting purposes, but Management does not consider them as part of the Company's current activities, as they are similar to the exchange effects presented in the Net Financial Result. No adjustments were made in the comparative periods presented, since the values ​​were not significant.

Adjusted EBITDA, reflecting the sum of the last twelve months (Last Twelve Months), also represents an alternative to the company's operating cash generation. This measure is used to calculate the Net Debt to Adjusted EBITDA metric established in our Strategic Plan 2020-2024, helping to evaluate the company's leverage and liquidity.

EBITDA and adjusted EBITDA are not provided for in International Financial Reporting Standards and should not serve as a basis for comparison with those disclosed by other companies and should not be considered as a substitute for any other measure calculated in accordance with IFRS. These measures should be considered in conjunction with other measures and indicators for a better understanding of the company's performance and financial condition.

Table 20 - Reconciliation of Adjusted EBITDA

US$ million

4Q19

3Q19

4Q18

2019

2018

4Q19 X 3Q19

4Q19 X 4Q18

2019 X 2018

Net income (loss)  from continuing operations

2,075

(128)

360

7,803

6,571

1,721

476

19

Net finance income (expense)

1,602

2,740

1,879

8,764

6,484

(42)

(15)

35

Income taxes

(241)

992

698

4,200

4,256

(124)

(135)

(1)

Depreciation, depletion and amortization

3,631

3,776

2,842

14,836

11,912

(4)

28

25

EBITDA

7,067

7,380

5,779

35,603

29,223

(4)

22

22

Results in equity-accounted investments

210

(112)

(32)

(153)

(523)

288

756

71

Impairment

2,221

607

1,656

2,848

2,005

266

34

42

Reclassification of cumulative translation adjustment - CTA

34

 

 

 

Results on disposal/write-offs of assets and on remeasurement of investment retained with loss of control

(620)

162

204

(6,046)

(416)

(483)

(404)

(1,353)

Foreign exchange gains or losses on provisions for legal proceedings

141

(83)

120

456

(100)

(100)

(74)

Adjusted EBITDA from continuing operations

8,878

8,178

7,524

32,406

30,745

9

18

5

Adjusted EBITDA from descontinued operations

31

135

301

757

(100)

(100)

(60)

Adjusted EBITDA

8,878

8,209

7,659

32,707

31,502

8

16

4

Adjusted EBITDA margin (%)

45

42

35

42

36

3

10

6

Foreign Exchange Translation Effects on Results of Operations of 2019

The main functional currency of the Petrobras Group is the Brazilian real, which is the functional currency of the parent company and its Brazilian subsidiaries. However, the presentation currency of this financial report is the U.S. Dollar to facilitate the comparison with other oil and gas companies. Therefore, the Brazilian real-denominated results of operations real were translated into U.S. dollars using the average exchange rates prevailing during the period.

When the Brazilian real appreciates against the U.S. dollar, the effect is to generally increase both revenues and expenses when expressed in U.S. dollars. When the Brazilian real depreciates against the U.S. dollar, as it did in 2019, the effect is to generally decrease both revenues and expenses when expressed in U.S. dollars.

In order to isolate the foreign exchange translation effect on results of operations, the table below presents a reconciliation of income statement to financial information on a constant currency basis, assuming the same exchange rates between each quarter for translation. In 2019, the results on a constant currency basis were computed by converting the 1Q-2019, 2Q-2019, 3Q-2019 and 4Q-2019 results from Brazilian real into U.S. dollars based on the same average exchange rates used in 1Q-2018, 2Q-2018, 3Q-2018 and 4Q-2018 (3.2433, 3.6056, 3.9505 and 3.8084, respectively).


28

 

 

 


The amounts and respective variations presented in constant currency are not measures in accordance with – IFRS. Our calculation may not be comparable to the calculation of other companies and it should not be considered as a substitute for any measure calculated in accordance with IFRS.

 

As reported

Financial information in a constant currency basis

 

Jan-Dec

Variation

Jan-Dec2019

Variation *

 

U.S.$ million

 

U.S.$ million

 

 

2019

2018

Δ

Δ(%)

Foreign exchange translation effects

Results on a constant currency basis

Δ

Δ(%)

Sales revenues

76,589

84,638

(8,049)

(10)

(6,359)

82,948

(1,690)

(2)

Cost of sales

(45,732)

(52,184)

6,452

12

3,856

(49,588)

2,596

5

Gross profit

30,857

32,454

(1,597)

(5)

(2,503)

33,360

906

3

Selling expenses

(4,476)

(3,827)

(649)

(17)

347

(4,823)

(996)

(26)

General and administrative expenses

(2,124)

(2,239)

115

5

183

(2,307)

(68)

(3)

Exploration costs

(799)

(524)

(275)

(52)

74

(873)

(349)

(67)

Research and development expenses

(576)

(641)

65

10

46

(622)

19

3

Other taxes

(619)

(670)

51

8

49

(668)

2

Impairment of assets

(2,848)

(2,005)

(843)

(42)

184

(3,032)

(1,027)

(51)

Other income and expenses

1,199

(5,760)

6,959

121

(134)

1,333

7,093

123

Operating income

20,614

16,788

3,826

23

(1,753)

22,367

5,579

33

Net finance income (expense)

(8,764)

(6,484)

(2,280)

(35)

694

(9,458)

(2,974)

(46)

Results of equity-accounted investments

153

523

(370)

(71)

(16)

169

(354)

(68)

Income before income taxes

12,003

10,827

1,176

11

(1,075)

13,078

2,251

21

Income taxes

(4,200)

(4,256)

56

1

325

(4,525)

(269)

(6)

Net income from continuing operations for the period

7,803

6,571

1,232

19

(750)

8,553

1,982

30

Net income from discontinued operations for the year

2,560

843

1,717

204

(38)

2,598

1,755

208

Net income for the year

10,363

7,414

2,949

40

(788)

11,151

3,737

50

* Variation after isolating foreign exchange translation effects between periods used for translation.

 

 

 

29

 

 

 


FINANCIAL STATEMENTS

Table 22 - Income Statement - Consolidated

US$ million

4Q19

3Q19

4Q18

2019

2018

Sales revenues

19,868

19,416

21,736

76,589

84,638

Cost of sales

(10,864)

(11,855)

(13,860)

(45,732)

(52,184)

Gross profit

9,004

7,561

7,876

30,857

32,454

Selling expenses

(1,386)

(1,252)

(369)

(4,476)

(3,827)

General and administrative expenses

(494)

(507)

(569)

(2,124)

(2,239)

Exploration costs

(455)

(70)

(122)

(799)

(524)

Research and development expenses

(146)

(146)

(166)

(576)

(641)

Other taxes

(319)

(141)

(289)

(619)

(670)

Impairment of assets

(2,221)

(607)

(1,656)

(2,848)

(2,005)

Other income and expenses

(337)

(1,346)

(1,800)

1,199

(5,760)

 

(5,358)

(4,069)

(4,971)

(10,243)

(15,666)

Operating income (loss)

3,646

3,492

2,905

20,614

16,788

Finance income

402

339

472

1,330

2,381

Finance expenses

(1,293)

(2,425)

(1,272)

(7,086)

(5,675)

Foreign exchange gains (losses) and inflation indexation charges

(711)

(654)

(1,079)

(3,008)

(3,190)

Net finance income (expense)

(1,602)

(2,740)

(1,879)

(8,764)

(6,484)

Results in equity-accounted investments

(210)

112

32

153

523

Income (loss) before income taxes

1,834

864

1,058

12,003

10,827

Income taxes

241

(992)

(698)

(4,200)

(4,256)

Net income (loss)  from continuing operations

2,075

(128)

360

7,803

6,571

Net income (loss)  from descontinued operations

2,356

421

2,560

843

Net Income (Loss)

2,075

2,228

781

10,363

7,414

Net income (loss) attributable to:

 

 

 

 

 

Shareholders of Petrobras

1,981

2,289

551

10,151

7,173

Net income (loss)  from continuing operations

1,981

(56)

250

7,660

6,572

Net income (loss)  from descontinued operations

2,345

301

2,491

601

Non-controlling interests

94

(61)

230

212

241

Net income (loss)  from continuing operations

94

(72)

110

143

(1)

Net income (loss)  from descontinued operations

11

120

69

242

 

30

 

 

 


Table 23 - Statement of Financial Position – Consolidated

ASSETS - US$ million

12.31.2019

12.31.2018

Current assets

27,812

37,062

Cash and cash equivalents

7,372

13,899

Marketable securities

888

1,083

Trade and other receivables, net

3,762

5,746

Inventories

8,189

8,987

Recoverable taxes

3,544

2,035

Assets classified as held for sale

2,564

1,946

Escrow account - Class action agreement

1,881

Other current assets

1,493

1,485

Non-current assets

201,928

185,006

Long-term receivables

17,691

22,059

Trade and other receivables, net

2,567

5,492

Marketable securities

58

53

Judicial deposits

8,236

6,711

Deferred taxes

1,388

2,680

Other tax assets

3,939

4,376

Advances to suppliers

326

666

Other non-current assets

1,177

2,081

Investments

5,499

2,759

Property, plant and equipment

159,265

157,383

Intangible assets

19,473

2,805

Total assets

229,740

222,068

LIABILITIES - US$ million

12.31.2019

12.31.2018

Current liabilities

28,816

25,051

Trade payables

5,601

6,327

Finance debt

4,469

3,667

Lease liability

5,737

23

Taxes payable

3,700

3,767

Dividends payable

1,558

1,109

Short-term benefits

1,645

1,658

Pension and medical benefits

887

810

Provision for legal and administrative proceedings

3,482

Liabilities related to assets classified as held for sale

3,246

983

Agreement with US Authorities

783

Other current liabilities

1,973

2,442

Non-current liabilities

126,709

123,842

Finance debt

58,791

80,508

Lease liability

18,124

162

Income taxes payable

504

552

Deferred taxes

1,760

654

Pension and medical benefits

25,607

21,940

Provision for legal and administrative proceedings

3,113

3,923

Provision for decommisioning costs

17,460

15,133

Other non-current liabilities

1,350

970

Shareholders´ equity

74,215

73,175

Share capital  (net of share issuance costs) 

107,101

107,101

Profit reserves and others

(33,778)

(35,557)

Non-controlling interests

892

1,631

Total liabilities and shareholders´ equity

229,740

222,068

 

31

 

 

 


Table 24 - Statement of Cash Flows – Consolidated

US$ million

4Q19

3Q19

4Q18

2019

2018

Cash flows from Operating activities

 

 

 

 

 

Net income for the period

2,075

2,228

781

10,363

7,414

Adjustments for:

 

 

 

 

 

Net income from discontinued operations

(2,356)

(421)

(2,560)

(843)

Pension and medical benefits (actuarial expense)

499

517

481

2,086

2,018

Results of equity-accounted investments

210

(112)

(32)

(153)

(523)

Depreciation, depletion and amortization

3,631

3,776

2,842

14,836

11,912

Impairment of assets (reversal)

2,221

607

1,656

2,848

2,005

Allowance (reversals) for credit loss on trade and others receivables

18

31

(805)

87

91

Exploratory expenditure write-offs

243

1

15

308

87

Disposal/write-offs of assets, remeasurement of investment retained with loss of control and reclassification of CTA

(620)

162

204

(6,012)

(416)

Foreign exchange, indexation and finance charges  

1,596

2,604

1,653

8,460

7,941

Deferred income taxes, net

(69)

1,183

203

2,798

370

Revision and unwinding of discount on the provision for decommissioning costs

338

201

(469)

950

31

Inventory write-down (write-back) to net realizable value

9

16

385

15

421

Decrease (Increase) in assets

 

 

 

 

 

Trade and other receivables, net

(542)

1,720

1,033

2,233

(1,535)

Inventories

(415)

751

539

(281)

(2,108)

Judicial deposits

(488)

(571)

(479)

(2,144)

(2,040)

Escrow account - Class action agreement

2,801

51

1,819

(2,019)

Other assets

652

47

(281)

(219)

461

Increase (Decrease) in liabilities

 

 

 

 

 

Trade payables

(204)

58

(684)

(989)

858

Other taxes payable

(25)

(769)

(431)

225

2,265

Pension and medical benefits

(477)

(910)

(304)

(1,882)

(1,002)

Provisions for legal proceedings

(90)

(2,487)

1,189

(3,767)

1,686

Short-term benefits

(165)

223

(103)

185

529

Provision for decommissioning costs

(181)

(75)

(619)

(512)

(500)

Agreement with US authorities

(88)

(768)

(85)

Other liabilities

(700)

222

667

(319)

996

Income taxes paid

(56)

(1,665)

(683)

(2,330)

(2,567)

Net cash provided by operating activities from continuing operations

7,460

8,203

6,300

25,277

25,447

Operating discontinued activities

67

552

323

906

Net cash provided by operating activities

7,460

8,270

6,852

25,600

26,353

Cash flows from Investing activities

 

 

 

 

 

Acquisition of PP&E and intangibles assets (except for the Transfer of Right surplus)

(3,156)

(1,778)

(2,594)

(8,556)

(11,905)

Transfer of rights surplus

(15,341)

(15,341)

Investments in investees

15

(12)

(14)

(7)

(44)

Proceeds from disposal of assets - Divestment

1,303

(1)

876

10,413

5,791

Reimbursement of Transfer of rights agreement

8,361

8,361

Divestment (Investment) in marketable securities

458

(735)

35

198

704

Dividends received

600

20

288

1,436

994

Net cash provided (used) by investing activities from continuing operations

(7,760)

(2,506)

(1,409)

(3,496)

(4,460)

Investing discontinued activities

1,863

(48)

1,812

(44)

Net cash provided (used) by investing activities

(7,760)

(643)

(1,457)

(1,684)

(4,504)

Cash flows from Financing activities

 

 

 

 

 

Investments by non-controlling interest

13

51

92

(29)

43

Financing and loans, net:

 

 

 

 

 

Proceeds from financing

2,735

4

1,999

7,464

10,707

Repayment of finance debt - principal

(6,187)

(9,129)

(6,142)

(27,273)

(34,013)

Repayment of finance debt - interest

(733)

(1,419)

(1,219)

(4,501)

(5,703)

Repayment of lease liability

(1,585)

(1,384)

(5,207)

Dividends paid to Shareholders of Petrobras

(573)

(298)

(309)

(1,877)

(625)

Dividends paid to non-controlling interests

(49)

(3)

(11)

(138)

(103)

Net cash provided (used) in financing activities from continuing operations

(6,379)

(12,178)

(5,590)

(31,561)

(29,694)

Financing discontinued activities

(13)

(97)

(508)

(156)

Net cash provided (used) in financing activities

(6,379)

(12,191)

(5,687)

(32,069)

(29,850)

Effect of exchange rate changes on cash and cash equivalents

877

537

4

1,631

(619)

Net increase (decrease) in cash and cash equivalents

(5,802)

(4,027)

(288)

(6,522)

(8,620)

Cash and cash equivalents at the beginning of the period

13,179

17,206

14,187

13,899

22,519

Cash and cash equivalents at the end of the period

7,377

13,179

13,899

7,377

13,899

 

32

 

 

 


FINANCIAL INFORMATION BY BUSINESS AREAS

Table 25 - Consolidated Income by Segment – 12M19

US$ million

E&P

RTM

GAS & POWER

CORP. AND OTHERS

ELIMIN.

TOTAL

Sales revenues

50,462

67,538

11,493

1,221

(54,125)

76,589

Intersegments

49,400

9,432

3,308

226

(54,125)

8,241

Third parties

1,062

58,106

8,185

995

68,348

Cost of sales

(27,304)

(61,578)

(7,713)

(1,167)

52,030

(45,732)

Gross profit

23,158

5,960

3,780

54

(2,095)

30,857

Expenses

(4,181)

(4,334)

2,580

(4,280)

(28)

(10,243)

Selling expenses

(2,164)

(2,260)

(31)

(21)

(4,476)

General and administrative expenses

(254)

(336)

(134)

(1,401)

1

(2,124)

Exploration costs

(799)

(799)

Research and development expenses

(394)

(11)

(15)

(156)

(576)

Other taxes

(127)

(151)

(152)

(189)

(619)

Impairment of assets

(1,956)

(697)

(195)

(2,848)

Other income and expenses

(651)

(975)

5,336

(2,503)

(8)

1,199

Operating income (loss)

18,977

1,626

6,360

(4,226)

(2,123)

20,614

Net finance income (expense)

(8,764)

(8,764)

Results in equity-accounted investments

86

(151)

103

115

153

Income (loss) before income taxes

19,063

1,475

6,463

(12,875)

(2,123)

12,003

Income taxes

(6,451)

(552)

(2,162)

4,244

721

(4,200)

Net income (loss)  from continuing operations

12,612

923

4,301

(8,631)

(1,402)

7,803

Net income (loss)  from descontinued operations

3

2,557

2,560

Net Income (Loss)

12,612

923

4,304

(6,074)

(1,402)

10,363

Net income (loss) attributable to:

 

 

 

 

 

 

Shareholders of Petrobras

12,624

1,021

4,180

(6,272)

(1,402)

10,151

Net income (loss)  from continuing operations

12,624

1,021

4,179

(8,762)

(1,402)

7,660

Net income (loss)  from descontinued operations

1

2,490

2,491

Non-controlling interests

(12)

(98)

124

198

212

Net income (loss)  from continuing operations

(12)

(98)

121

132

143

Net income (loss)  from descontinued operations

3

66

69

 

12,612

923

4,304

(6,074)

(1,402)

10,363


33

 

 

 


Table 26 - Consolidated Income by Segment – 12M18

US$ million

E&P

RTM

GAS & POWER

CORP. AND OTHERS

ELIMIN.

TOTAL

Sales revenues

52,382

73,448

12,241

1,731

(55,164)

84,638

Intersegments

50,052

16,655

3,701

205

(55,164)

15,449

Third parties

2,330

56,793

8,540

1,526

69,189

Cost of sales

(28,968)

(67,011)

(9,023)

(1,611)

54,429

(52,184)

Gross profit

23,414

6,437

3,218

120

(735)

32,454

Expenses

(5,068)

(3,437)

(2,461)

(4,662)

(38)

(15,666)

Selling expenses

(80)

(1,777)

(1,867)

(76)

(27)

(3,827)

General and administrative expenses

(257)

(376)

(152)

(1,453)

(1)

(2,239)

Exploration costs

(524)

(524)

Research and development expenses

(443)

(11)

(21)

(166)

(641)

Other taxes

(115)

(207)

(65)

(283)

(670)

Impairment of assets

(1,391)

(442)

(190)

18

(2,005)

Other income and expenses

(2,258)

(624)

(166)

(2,702)

(10)

(5,760)

Operating income (loss)

18,346

3,000

757

(4,542)

(773)

16,788

Net finance income (expense)

(6,484)

(6,484)

Results in equity-accounted investments

75

362

95

(9)

523

Income (loss) before income taxes

18,421

3,362

852

(11,035)

(773)

10,827

Income taxes

(6,236)

(1,020)

(257)

2,994

263

(4,256)

Net income (loss)  from continuing operations

12,185

2,342

595

(8,041)

(510)

6,571

Net income (loss)  from descontinued operations

15

828

843

Net Income (Loss)

12,185

2,342

610

(7,213)

(510)

7,414

Net income (loss) attributable to:

 

 

 

 

 

 

Shareholders of Petrobras

12,190

2,393

482

(7,382)

(510)

7,173

Net income (loss)  from continuing operations

12,190

2,393

471

(7,972)

(510)

6,572

Net income (loss)  from descontinued operations

11

590

601

Non-controlling interests

(5)

(51)

128

169

241

Net income (loss)  from continuing operations

(5)

(51)

124

(69)

(1)

Net income (loss)  from descontinued operations

4

238

242

 

12,185

2,342

610

(7,213)

(510)

7,414

 


34

 

 

 


Table 27 - Quarterly Consolidated Income by Segment – 4Q19

US$ million

E&P

RTM

GAS & POWER

CORP. AND OTHERS

ELIMIN.

TOTAL

Sales revenues

13,868

17,606

2,749

298

(14,653)

19,868

Intersegments

13,547

369

669

68

(14,653)

Third parties

321

17,237

2,080

230

19,868

Cost of sales

(6,877)

(15,660)

(1,775)

(281)

13,729

(10,864)

Gross profit

6,991

1,946

974

17

(924)

9,004

Expenses

(1,781)

(1,562)

(1,199)

(810)

(6)

(5,358)

Selling expenses

(678)

(697)

(7)

(4)

(1,386)

General and administrative expenses

(16)

(74)

(28)

(376)

(494)

Exploration costs

(455)

(455)

Research and development expenses

(96)

(2)

(5)

(43)

(146)

Other taxes

(79)

(80)

(119)

(41)

(319)

Impairment of assets

(1,649)

(381)

(191)

(2,221)

Other income and expenses

514

(347)

(159)

(343)

(2)

(337)

Operating income (loss)

5,210

384

(225)

(793)

(930)

3,646

Net finance income (expense)

(1,602)

(1,602)

Results in equity-accounted investments

(8)

(223)

17

4

(210)

Income (loss) before income taxes

5,202

161

(208)

(2,391)

(930)

1,834

Income taxes

(1,771)

(130)

76

1,750

316

241

Net income (loss)  from continuing operations

3,431

31

(132)

(641)

(614)

2,075

Net income (loss)  from descontinued operations

Net Income (Loss)

3,431

31

(132)

(641)

(614)

2,075

Net income (loss) attributable to:

 

 

 

 

 

 

Shareholders of Petrobras

3,440

108

(156)

(797)

(614)

1,981

Net income (loss)  from continuing operations

3,440

108

(156)

(797)

(614)

1,981

Net income (loss)  from descontinued operations

Non-controlling interests

(9)

(77)

24

156

94

Net income (loss)  from continuing operations

(9)

(77)

24

156

94

Net income (loss)  from descontinued operations

 

3,431

31

(132)

(641)

(614)

2,075

 


35

 

 

 


Table 28 - Quarterly Consolidated Income by Segment – 3Q19

US$ million

E&P

RTM

GAS & POWER

CORP. AND OTHERS

ELIMIN.

TOTAL

Sales revenues

12,551

17,124

2,961

284

(13,504)

19,416

Intersegments

12,278

1,439

885

48

(13,504)

1,146

Third parties

273

15,685

2,076

236

18,270

Cost of sales

(6,798)

(15,888)

(2,035)

(270)

13,136

(11,855)

Gross profit

5,753

1,236

926

14

(368)

7,561

Expenses

(1,273)

(973)

(631)

(1,190)

(2)

(4,069)

Selling expenses

1

(531)

(718)

(4)

(1,252)

General and administrative expenses

(83)

(85)

(32)

(308)

1

(507)

Exploration costs

(70)

(70)

Research and development expenses

(100)

(2)

(3)

(41)

(146)

Other taxes

(19)

(35)

(9)

(78)

(141)

Impairment of assets

(590)

(13)

(4)

(607)

Other income and expenses

(412)

(307)

135

(759)

(3)

(1,346)

Operating income (loss)

4,480

263

295

(1,176)

(370)

3,492

Net finance income (expense)

(2,740)

(2,740)

Results in equity-accounted investments

21

(68)

42

117

112

Income (loss) before income taxes

4,501

195

337

(3,799)

(370)

864

Income taxes

(1,522)

(89)

(100)

594

125

(992)

Net income (loss)  from continuing operations

2,979

106

237

(3,205)

(245)

(128)

Net income (loss)  from descontinued operations

(5)

2,361

2,356

Net Income (Loss)

2,979

106

232

(844)

(245)

2,228

Net income (loss) attributable to:

 

 

 

 

 

 

Shareholders of Petrobras

2,979

121

198

(764)

(245)

2,289

Net income (loss)  from continuing operations

2,979

121

203

(3,114)

(245)

(56)

Net income (loss)  from descontinued operations

(5)

2,350

2,345

Non-controlling interests

(15)

34

(80)

(61)

Net income (loss)  from continuing operations

(15)

33

(90)

(72)

Net income (loss)  from descontinued operations

1

10

11

 

2,979

106

232

(844)

(245)

2,228

 

36

 

 

 


Table 29 - Other Income and Expenses by Segment – 12M19

US$ million

E&P

RTM

GAS & POWER

CORP. AND OTHERS

ELIMIN.

TOTAL

Gains / (losses) related to legal, administrative and arbitration proceedings

(119)

(513)

80

(968)

(1,520)

Pension and medical benefits - retirees

(1,371)

(1,371)

Unscheduled stoppages and pre-operating expenses

(1,187)

(14)

(117)

(3)

(1,321)

Variable compensation program

(263)

(128)

(30)

(222)

(643)

Gains/(losses) with Commodities Derivatives

(370)

(370)

Gains / (losses) on decommissioning of returned/abandoned areas

(155)

(155)

Voluntary Separation Incentive Plan - PDV

(71)

(66)

(3)

(58)

(198)

Institutional relations and cultural projects

(4)

(176)

(180)

Operating expenses with thermoelectric power plants

(128)

(128)

Profit sharing

(1)

(35)

(1)

(6)

(43)

Employee Career and Compensation Plan - PCR

(1)

(1)

(2)

Agreement with US Authorities

Equalization of expenses - Production Individualization Agreements

5

(3)

2

Amounts recovered from Lava Jato investigation

16

204

220

Government grants

6

4

33

195

238

Expenses/Reimbursements from E&P partnership operations

383

383

Results on disposal/write-offs of assets and on remeasurement of investment retained with loss of control (**)

700

(204)

5,361

189

6,046

Others

36

(15)

141

87

(8)

241

 

(651)

(975)

5,336

(2,503)

(8)

1,199

Table 30 - Other Income and Expenses by Segment –12M18

US$ million

E&P

RTM

GAS & POWER

CORP. AND OTHERS

ELIMIN.

TOTAL

Gains / (losses) related to legal, administrative and arbitration proceedings

(1,640)

(97)

(144)

(402)

(2,283)

Pension and medical benefits - retirees

(1,401)

(1,401)

Unscheduled stoppages and pre-operating expenses

(1,126)

(28)

(125)

(3)

(1,282)

Variable compensation program

(141)

(63)

(61)

(265)

Gains/(losses) with Commodities Derivatives

(416)

(416)

Gains / (losses) on decommissioning of returned/abandoned areas

621

621

Voluntary Separation Incentive Plan - PDV

1

1

2

Institutional relations and cultural projects

(3)

(175)

(178)

Operating expenses with thermoelectric power plants

(107)

(107)

Profit sharing

(171)

(110)

(20)

(141)

(442)

Employee Career and Compensation Plan - PCR

(132)

(45)

(10)

(106)

(293)

Agreement with US Authorities

(895)

(895)

Equalization of expenses - Production Individualization Agreements

(279)

(279)

Amounts recovered from Lava Jato investigation

10

447

457

Government grants

3

4

53

188

248

Expenses/Reimbursements from E&P partnership operations

331

331

Results on disposal/write-offs of assets and on remeasurement of investment retained with loss of control

462

(90)

(19)

63

416

Others

(197)

(193)

206

200

(10)

6

 

(2,258)

(624)

(166)

(2,702)

(10)

(5,760)

 


37

 

 

 


Table 31 - Other Income and Expenses by Segment – 4Q19

US$ million

E&P

RTM

GAS & POWER

CORP. AND OTHERS

ELIMIN.

TOTAL

Gains / (losses) related to legal, administrative and arbitration proceedings

(64)

(80)

(6)

119

(31)

Pension and medical benefits - retirees

(328)

(328)

Unscheduled stoppages and pre-operating expenses

(299)

(1)

(21)

(1)

(322)

Gains / (losses) on decommissioning of returned/abandoned areas

(155)

(155)

Variable compensation program

(57)

(28)

(12)

(53)

(150)

Institutional relations and cultural projects

(1)

(76)

(77)

Gains/(losses) with Commodities Derivatives

(56)

(56)

Voluntary Separation Incentive Plan - PDV

(12)

(11)

(22)

(45)

Government grants

1

2

(73)

(70)

Operating expenses with thermoelectric power plants

(31)

(31)

Equalization of expenses - Production Individualization Agreements

(19)

(3)

(22)

Profit sharing

(4)

(3)

(7)

Employee Career and Compensation Plan - PCR

Agreement with US Authorities

Amounts recovered from Lava Jato investigation

9

20

29

Expenses/Reimbursements from E&P partnership operations

153

153

Results on disposal/write-offs of assets and on remeasurement of investment retained with loss of control

865

(217)

(69)

42

621

Others

92

(7)

(20)

91

(2)

154

 

514

(347)

(159)

(343)

(2)

(337)

 


38

 

 

 


Table 32 - Other Income and Expenses by Segment – 3Q19

US$ million

E&P

RTM

GAS & POWER

CORP. AND OTHERS

ELIMIN.

TOTAL

Gains / (losses) related to legal, administrative and arbitration proceedings

(92)

(203)

72

(699)

(922)

Pension and medical benefits - retirees

(340)

(340)

Unscheduled stoppages and pre-operating expenses

(265)

(1)

(22)

(2)

(290)

Gains / (losses) on decommissioning of returned/abandoned areas

(1)

(1)

Variable compensation program

(122)

(56)

(11)

(99)

(288)

Institutional relations and cultural projects

(1)

(30)

(31)

Gains/(losses) with Commodities Derivatives

64

64

Voluntary Separation Incentive Plan - PDV

(25)

(24)

(1)

(18)

(68)

Government grants

1

1

1

248

251

Operating expenses with thermoelectric power plants

(24)

(24)

Equalization of expenses - Production Individualization Agreements

33

33

Profit sharing

(11)

1

(1)

(11)

Employee Career and Compensation Plan - PCR

(1)

(1)

Agreement with US Authorities

Amounts recovered from Lava Jato investigation

112

112

Expenses/Reimbursements from E&P partnership operations

134

134

Results on disposal/write-offs of assets and on remeasurement of investment retained with loss of control

(117)

(18)

(34)

6

(163)

Others

43

6

153

(3)

199

 

(412)

(307)

135

(759)

(3)

(1,346)

 

 

 

39

 

 

 


Table 33 - Consolidated Assets by Segment – 12.31.2019

US$ million

E&P

RTM

GAS & POWER

CORP. AND OTHERS

ELIMIN.

TOTAL

Total assets

154,280

43,521

12,713

24,090

(4,864)

229,740

 

 

 

 

 

 

 

Current assets

5,734

12,273

1,932

12,700

(4,827)

27,812

Non-current assets

148,546

31,248

10,781

11,390

(37)

201,928

Long-term receivables

6,456

3,299

1,369

6,567

17,691

Investments

592

1,109

1,067

2,731

5,499

Property, plant and equipment

122,496

26,710

8,181

1,915

(37)

159,265

Operating assets

106,331

23,630

5,605

1,784

(37)

137,313

Assets under construction

16,165

3,080

2,576

131

21,952

Intangible assets

19,002

130

164

177

19,473

Table 34 - Consolidated Assets by Segment – 12.31.2018

US$ million

E&P

RTM

GAS & POWER

CORP. AND OTHERS

ELIMIN.

TOTAL

Total assets

132,313

44,083

15,609

33,524

(3,461)

222,068

 

 

 

 

 

 

 

Current assets

5,324

11,964

2,027

21,404

(3,657)

37,062

Non-current assets

126,989

32,119

13,582

12,120

196

185,006

Long-term receivables

8,115

3,286

1,525

8,898

235

22,059

Investments

650

1,303

757

49

2,759

Property, plant and equipment

116,153

27,356

11,057

2,856

(39)

157,383

Operating assets

93,172

24,347

8,517

2,460

(39)

128,457

Assets under construction

22,981

3,009

2,540

396

28,926

Intangible assets

2,071

174

243

317

2,805

Table 35 - Reconciliation of Adjusted EBITDA by Segment – 12M19

US$ million

E&P

RTM

GAS & POWER

CORP. AND OTHERS

ELIMIN.

TOTAL

Net income (loss)  from continuing operations

12,613

922

4,301

(8,632)

(1,401)

7,803

Net finance income (expense)

8,764

8,764

Income taxes

6,451

552

2,162

(4,244)

(721)

4,200

Depreciation, depletion and amortization

11,486

2,458

654

238

14,836

EBITDA

30,550

3,932

7,117

(3,874)

(2,122)

35,603

Results in equity-accounted investments

(86)

151

(103)

(115)

(153)

Impairment

1,956

697

195

2,848

Reclassification of cumulative translation adjustment - CTA

34

34

Results on disposal/write-offs of assets and on remeasurement of investment retained with loss of control

(700)

204

(5,361)

(189)

(6,046)

Foreign exchange gains or losses on provisions for legal proceedings

120

120

Adjusted EBITDA from continuing operations

31,720

4,984

1,848

(4,024)

(2,122)

32,406

Adjusted EBITDA from descontinued operations

14

287

301

Adjusted EBITDA*

31,720

4,984

1,862

(3,737)

(2,122)

32,707

 


40

 

 

 


Table 36 - Reconciliation of Adjusted EBITDA by Segment – 12M18

US$ million

E&P

RTM

GAS & POWER

CORP. AND OTHERS

ELIMIN.

TOTAL

Net income (loss)  from continuing operations

12,182

2,342

594

(8,037)

(510)

6,571

Net finance income (expense)

6,484

6,484

Income taxes

6,236

1,020

257

(2,995)

(262)

4,256

Depreciation, depletion and amortization

8,998

2,142

626

146

11,912

EBITDA

27,416

5,504

1,477

(4,402)

(772)

29,223

Results in equity-accounted investments

(75)

(362)

(95)

9

(523)

Impairment

1,391

442

190

(18)

2,005

Reclassification of cumulative translation adjustment - CTA

Results on disposal/write-offs of assets and on remeasurement of investment retained with loss of control

(461)

90

19

(64)

(416)

Foreign exchange gains or losses on provisions for legal proceedings

456

456

Adjusted EBITDA from continuing operations

28,271

5,674

1,591

(4,019)

(772)

30,745

Adjusted EBITDA from descontinued operations

22

735

757

Adjusted EBITDA

28,271

5,674

1,613

(3,284)

(772)

31,502

Table 37 - Reconciliation of Adjusted EBITDA by Segment – 4Q19

US$ million

E&P

RTM

GAS & POWER

CORP. AND OTHERS

ELIMIN.

TOTAL

Net income (loss)  from continuing operations

3,432

30

(132)

(642)

(613)

2,075

Net finance income (expense)

1,602

1,602

Income taxes

1,771

130

(76)

(1,750)

(316)

(241)

Depreciation, depletion and amortization

2,829

591

152

59

3,631

EBITDA

8,032

751

(56)

(729)

(929)

7,067

Results in equity-accounted investments

8

223

(17)

(4)

210

Impairment

1,649

381

191

2,221

Reclassification of cumulative translation adjustment - CTA

Results on disposal/write-offs of assets and on remeasurement of investment retained with loss of control

(865)

217

69

(41)

(620)

Foreign exchange gains or losses on provisions for legal proceedings

Adjusted EBITDA from continuing operations

8,824

1,572

187

(774)

(929)

8,878

Adjusted EBITDA from descontinued operations

Adjusted EBITDA

8,824

1,572

187

(774)

(929)

8,878

Table 38 - Reconciliation of Adjusted EBITDA by Segment – 3Q19

*US$ million

E&P

RTM

GAS & POWER

CORP. AND OTHERS

ELIMIN.

TOTAL

Net income (loss)  from continuing operations

2,979

106

237

(3,205)

(245)

(128)

Net finance income (expense)

2,740

2,740

Income taxes

1,522

89

100

(594)

(125)

992

Depreciation, depletion and amortization

2,913

644

160

59

3,776

EBITDA

7,414

839

497

(1,000)

(370)

7,380

Results in equity-accounted investments

(21)

68

(42)

(117)

(112)

Impairment

590

13

4

607

Reclassification of cumulative translation adjustment - CTA

Results on disposal/write-offs of assets and on remeasurement of investment retained with loss of control

117

18

34

(7)

162

Foreign exchange gains or losses on provisions for legal proceedings

141

141

Adjusted EBITDA from continuing operations

8,100

938

493

(983)

(370)

8,178

Adjusted EBITDA from descontinued operations

7

24

31

Adjusted EBITDA

8,100

938

500

(959)

(370)

8,209

 

 

 

41

 

 

 


GLOSSARY

ACL – Ambiente de Contratação Livre (Free contracting market) in the electricity system.

ACR – Ambiente de Contratação Regulada (Regulated contracting market) in the electricity system.

supports leverage management.

Adjusted cash and cash equivalents – Sum of cash and cash equivalents, government bonds and time deposits from highly rated financial institutions abroad with maturities of more than 3 months from the date of acquisition, considering the expected realization of those financial investments in the short-term. This measure is not defined under the International Financial Reporting Standards – IFRS and should not be considered in isolation or as a substitute for cash and cash equivalents computed in accordance with IFRS. It may not be comparable to adjusted cash and cash equivalents of other companies, however management believes that it is an appropriate supplemental measure to assess our liquidity and supports leverage management.

Adjusted EBITDA – Net income plus net finance income (expense); income taxes; depreciation, depletion and amortization; results in equity-accounted investments; impairment, cumulative translation adjustment and gains/losses on disposal/write-offs of assets. Adjusted EBITDA is not a measure defined by IFRS and it is possible that it may not be comparable to similar measures reported by other companies, however management believes that it is an appropriate supplemental measure to assess our profitability. Adjusted EBITDA shall be considered in conjunction with other metrics for a better understanding on our performance.

Adjusted EBITDA margin – Adjusted EBITDA divided by sales revenues.

ANP Brazilian National Petroleum, Natural Gas and Biofuels Agency.

Basic and diluted earnings (losses) per share – Calculated based on the weighted average number of shares.

Consolidated Structured Entities – Entities that have been designated so that voting rights or the like are not the determining factor in deciding who controls the entity. Petrobras has no equity interest in certain structured entities that are consolidated in the Company's financial statements, but control is determined by the power it has over its relevant operating activities. As there is no equity interest, the income from certain consolidated structured entities is attributable to non-controlling shareholders in the income statement, and disregarding the profit or loss attributable to Petrobras shareholders.

CTA – Cumulative translation adjustment – The cumulative amount of exchange variation arising on translation of foreign operations that is recognized in Shareholders’ Equity and will be transferred to profit or loss on the disposal of the investment.

Effect of average cost in the Cost of Sales – In view of the average inventory term of 60 days, the crude oil and oil products international prices movement, as well as foreign exchange effect over imports,  production taxes and other factors that impact costs, do not entirely influence the cost of sales in the current period, having their total effects only in the following period.

Free cash flow – Net cash provided by operating activities less acquisition of PP&E and intangibles assets, investments in investees and dividends received.. Free cash flow is not defined under the IFRS and should not be considered in isolation or as a substitute for cash and cash equivalents calculated in accordance with IFRS. It may not be comparable to free cash flow of other companies, however management believes that it is an appropriate supplemental measure to assess our liquidity and supports leverage management.

 

 

Investments – Capital expenditures based on the cost assumptions and financial methodology adopted in our Business and Management Plan, which include acquisition of PP&E, including expenses with leasing, intangibles assets, investment in investees and other items that do not necessarily qualify as cash flows used in investing activities, primarily geological and geophysical expenses, research and development expenses, pre-operating charges, purchase of property, plant and equipment on credit and borrowing costs directly attributable to works in progress.

Leverage – Ratio between the Net Debt and the sum of Net Debt and Shareholders’ Equity. Leverage is not a measure defined in the IFRS and it is possible that it may not be comparable to similar measures reported by other companies, however management believes that it is an appropriate supplemental measure to assess our liquidity.

Lifting Cost – Crude oil and natural gas lifting cost indicator, which considers expenditures occurred in the period.

OCF – Net Cash provided by (used in) operating activities (operating cash flow)

Net Debt – Gross debt less adjusted cash and cash equivalents. Net debt is not a measure defined in the IFRS and should not be considered in isolation or as a substitute for total long-term debt calculated in accordance with IFRS.  Our calculation of net debt may not be comparable to the calculation of net debt by other companies. Management believes that net debt is an appropriate supplemental measure that helps investors assess our liquidity and supports leverage management.

Net Income by Business Segment – The information by the company's business segment is prepared based on available financial information that is directly attributable to the segment or that can be allocated on a reasonable basis, being presented by business activities used by the Executive Board to make resource allocation decisions. and performance evaluation.

When calculating segmented results, transactions with third parties, including jointly controlled and associated companies, and transfers between business segments are considered. Transactions between business segments are valued at internal transfer prices calculated based on methodologies that take into account market parameters, and these transactions are eliminated, outside the business segments, for the purpose of reconciling the segmented information with the consolidated financial statements of the company. company.

As a result of the divestments in 2019, the strategy of repositioning its portfolio foreseen in the Strategic Plan 2020-2024, approved on November 27, 2019, as well as the materiality of the remaining businesses, the company reassessed the presentation of the Distribution and Distribution businesses. Biofuels, which are now included in the Corporate and other businesses.

PLD (differences settlement price) Electricity price in the spot market.  Weekly weighed prices per output level (light, medium and heavy), number of hours and related market capacity.

Refining – includes crude oil refining, logistics, transportation, acquisition and export activities, as well as the purchase and sale of petroleum and ethanol products in Brazil and abroad. Additionally, this segment includes the petrochemical area, which includes investments in companies in the petrochemical sector, shale exploration and processing.

 

Total net liabilities – Total liability less adjusted cash and cash equivalents.

 

 

 

42

 

 

 


 

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: February 19, 2020.

PETRÓLEO BRASILEIRO S.A—PETROBRAS

By: /s/ Andrea Marques de Almeida

______________________________

Andrea Marques de Almeida

Chief Financial Officer and Investor Relations Officer