Petroleo Brasileiro S.A. Petrobras ADS

Good morning, everyone. Welcome to Petrobras' full year 2024 earnings. This meeting is being recorded. We apologize with the technical issues we've had. We were able to overcome them and we will now begin. This event will be presented in Portuguese with simultaneous translation into English. The links for both languages are available on our Investor Relations website. We'd like to inform you that all participants are currently connected to the webcast in At&D mode. After our introductions, we will have our Q&A, and you'll be able to send your questions via email to PetroInvest at Petrobras.com.br. Joining us today are Petrobras' President Magda Chembriard, Executive Director of Corporate Affairs, Clarice Capetti. Executive Director of Logistics, Commercialization, and Markets, Claudia Schlosser. Executive Director of Finance and Investor Relations, Fernando Margarero. Executive Director of Governance and Compliance, Mario Spinelli. Executive Director of Energy and Transition and Standability, Mauricio Tomoskin. Executive Director of Engineering, Technology and Innovation, Renato Baruzzi. Executive Director of Exploration and Production, Silvio De Sanjos. And Executive Director of Industrial Processes and Other Technologies. To begin, I'll now hand over to our President, Magda Chambriart, for her initial remarks. Please, Magda, you may proceed. Ladies and gentlemen, good afternoon. It is a great pleasure to join you today to talk a little bit about our performance in 2024 and to also place ourselves at your service and to answer any questions you may have about said performance. As Eduardo well said, we have the entire executive board here with us, as well as a few directors and executives who are all open to this discussion about our results. I'd like to thank everyone for joining us, and especially our investors who are watching us right now. I'm happy to be here and it is very important to have all of you connected with us today. It is always a great joy to be able to join events like this where we can show you our vision and tell you face to face or looking into your eyes where the company is and where we stand about its performance. I start by telling you that 2024 was a very positive year for Petrobras. We also believe that 2025 will be even better. In 2024, we generated over 200 million Reais in cash and paid over 102 billion Reais in dividends. All of that took place in a more challenging environment, with Brent and diesel crack prices lower. But even so, our investments went up by 31% to $16 billion and also reduced our financial debt to the lowest level since 2008. This is no surprise to you, seeing as it's already been reported. But we saw a loss of $17 billion in Q4. That's something you've probably read in newspaper headlines today. But we'd like to tell you that it is very important to understand that this loss involves no flaw in the company's cash situation. This was the result of of an exclusively accounting event, which is the variation in exchange rate and its impact on Petrobras' debts as well as the debts of Petrobras' subsidiaries. This $59 billion in transactions in 2024 affect our accounting result, but in no way does it lead to outlays by the company. We've lowered our debt level and paid dividends throughout the year. We paid about $102 billion in debt. Petrobras is strong and extremely healthy in financial terms. In operational terms and with regard to cash generation, we continue to move forward. About 10 days ago, we began the operation of an FPSO, Almirante Tamandere, in the Buzios field. These operations brought capacity for 225 barrels of oil a day. We must say, that this is the largest deep water operations field in the world, and that this 225 barrels a day FBSO is the first of four large rigs that will come into operation and will help this field produce about 200 million barrels a day by 2030. This is a production and production potential that's unprecedented, that no other country shows or has shown. And while it may take some time for this field to reach its full potential, we've already managed to see 800,000 barrels a day in Buziosk thanks to the start of operations in this FPSO which started earlier and I mean Almirante FPSO as I mentioned earlier. This is Petrobras' most productive field. Before that, the most productive one would produce 150,000 barrels a day. So we're close to 2p now with 800,000. In Buzios, this will probably overcome 2p soon to 1,000, 1.5 billion, and even 2 billion barrels a day by 2030. It's a high-class asset, and again, The largest deep water oil field in the world. This is excellent news. Even better when we see wells with production potential of as high as 70,000 barrels of oil a day. A single well in this field, connected to this platform, whose production we opened earlier, has potential to produce more than many oil fields around the world. 70,000 barrels of oil a day, as I said. Later this quarter, we should reach 1,000 barrels. We expect this well to exceed the production of many others in the world and for it to produce alone over 2 billion million barrels a day, becoming the most productive production field that Petrobras runs. Needless to say, Boozius is an invaluable asset for us, which is why I'd like to take this opportunity to speak a little bit more about our investments in 2024. Our investment, which came to $16.6 billion, slightly higher than what we established in our guidance was a recovery of our investments that we had planned for 2025 in our organizational strategy. and which we fully executed in 2024. Anticipating the operations in a platform such as this one, just to give you an idea of what this means. This means an increase in present net value for this platform by about $2.2 billion. in a three-year period. So this is already solved and we do not expect to see the same level of capex in the first quarter of 2025. And it is very important that this is clear to everyone. This investment was due to the anticipation of plant investments and also of a high potential oil operation. Also important, these investments that we pushed from 2025 to 2024 in Buzios were again to start operations in the most productive deep water oil rig in the world. meaning more oil in a field that's with high potential and with also high financial return, something that's absolutely unquestionable. We understand how the market may be frustrated with the near-term results, but we'd like to remind you that Making advance investments such as what we did in Buzio's is what any investor might ever want. Increased production in a highly productive field is money in your pockets quicker. So ultimately what we're offering you is oil more quickly. If possible, we would have advanced all the boozes-related capex to today, and all of you would be very happy because we would start producing its full potential by tomorrow, and most likely you would be able to rely on production levels of about 2 billion barrels a day in a single field. This adds value to Petrobras, but unfortunately, we cannot advance the investment that much. We did what was possible to us, and if in the future we can advance something that will bring as much profit or even more, rest assured this is what Petrobras will do. We will always try to advance investments in order to derive value for the company. And whenever that happens, what we are advancing is cash generation with new oil coming in. Meaning, we are making any investor's pipe dream come true. That's what we're focusing on. We are focusing on bringing productions, investments and value earlier. And this is something we did deliberately. Another example was FPSO Maria Kateria whose operations, which was expected to take place later in the compost basin. This is a platform that was expected to start operating in 2025. and we were able to make it so that operations started in October 2024. Again, it was advanced cash spending that was made deliberately. And it must be said that this was the result of great effort by our team, which was accomplished thanks to the very well fine-tuned directories or secretariats in the company. We also set new records in our pre-salt project, which now accounts for 80% of all of Petrobras' production. These are world-class assets, which are highly productive, and which currently, as I said, account for 80% of the company's full output. We started operating FPSO Marichal Duque de Caxias in the Melo field in addition to Maria Kateria in the Juba field. That expanded our production capacity. Our production peaked in FPSO Sepitiba also in the Melo field. Another very positive piece of news was the increase in our reserves in 2024. To give you an idea, over the course of 2024, we produced 900 million barrels of oil. And we also replenished 1.2 billion barrels to our reserves, meaning we produced 900 million and also replenished our inventory, showing that our reserves are a priority for us. We face the production challenge. We produce a type of energy that's non-renewable. which is to say production of this is expected to decline and we've been able to show greater production and a larger reserve. Replenishing our reserves is absolutely critical for Petrobras to remain important and relevant both in Brazil and the world over the next few decades. so we understand as paramount to responsibly explore the equatorial shore, which is an area we understand to be of high potential, as well as other borders in Brazil, such as the Pelotas Basin in the southern side of Brazil. We are currently conducting exploratory results in that basin and also interpreting the seismic signs and we expect this basin, which already shows similarities to the Namibia basin, might also provide us a fruitful future when it comes to oil production. Our actions took place not only in production and exploration and also not only in engineering. In refining, we also reported major breakthroughs. Our gasoline and S10 diesel also deserve highlight. Bear in mind that S10 diesel is our most profitable product. And we set record breaking production in S10 diesel production. Our refineries operated with the highest operating factor in the last 10 years. And 70% of deep water oil production. reached its highest percentage in total produced meat. And as you know, years ago, our most important production came from the compost basin, and this was heavy oil. So to reach 70% of deep water oil share in the processed load in 2024, meaning a lighter oil, All this goes to show is how much work our teams have accomplished to change the level of processing of this oil to deliver as much value as possible to you as a result of our most valuable asset, which is our deep water prospecting and exploration. We also started operations at PGN, the natural gas production in the state of Rio de Janeiro, as well as the sulfur unit in the Pernambuco unit, which we call Remest. Many accomplishments and breakthroughs have come throughout the year. And because we do not have a lot of time, we just wanted to offer you a summary of what we've accomplished. But once again, we are here at your service and available to answer any question you might have.

Our operation, ladies and gentlemen, rest assured, is absolutely profitable. Petrobras has had a cash, a operating cash generation, which is unprecedented for 2024. We're talking about no more, no less than 204 billion BRL in operating cash generation. And as I have mentioned in the beginning of my speech, we had a reduction in our financial debt, which is now 23 billion. So, in other words, we generated our operating cash flow to the tune of $204 billion BRL. We paid off $270 billion in taxes, and we concluded the year with a lower financial debt, the lowest level that we've seen in the last 10 years. So we have reached our lowest point in the debt since 2008. And that means, ladies and gentlemen, that we have generated enough resources to invest, compensate our shareholders, meet our obligations, and we did all of that with a debt level that is well under control, which makes for an excellent financial health for the company. I underscore that the accounting loss of the fourth quarter does not reflect operating soundness or the financial health of Petrobras, but rather it is the effect of the exchange rate variation and debt of Petrobras with its own subsidiary companies abroad. Just to give you an idea of what that means and how that translates into an accounting amount, it was an impact of 59 billion BRL. Which results, once again, this does not have any impact on our cash flow, but rather this is an effect of Petrobras' debt with its subsidiaries abroad. And again, this is not to say it's very important to underscore and understand this fact. This negative value of the variation did not come from the company's cash. And furthermore, that is to say that as the dollar scales back, part of this amount will be a profit in the first quarter of 2025. In some years, this variation is positive, and other years, this variation is negative. This year, and throughout 2024, this variation was negative to the tune of 59 billion BRL. For example, if we were to do a simulation for the first quarter of 2025, closing at the current exchange rate of 570 BRL, all the way to 585 BRL per USD, that exchange variation would give us instantly a positive result in the order of $2 billion in the first quarter of 2025. In BRL, north of 11 billion BRL, and that's only coming from the exchange rate variation and the accounting profit, and again, without any impact on our cash flow. At the end of the day, we have some opposite effects that come to a balance economically, and that is because the exchange variation between the net results of the Brazilian holding has an impact on the profits, a negative impact in this case for 2025. However, at the same time, this comes in positively into our net worth. One theoretical example, if we were to exclude this exchange variation from different exclusive events, as well as the tax transaction from the second semester, and by the way, I do a parenthesis here, That decision, by the way, was recognized as a very positive one. In this case, Petrobras' profit in 2024 would have been $19.4 billion. So, from that perspective, it's worthwhile to have this calculation in mind. Now, I will discuss a little bit about the company's future. I already mentioned the Boozios field, so let's get into Petrobras' future. When we come back to this call to talk about the results of 2025, we will be looking at a company that is producing more. We are planning an increase of 100,000 barrels per day for 2025. And by the way, we remind you that we are working with non-renewable power sources, and the trend is a downward trend. And what we are presenting to you, ladies and gentlemen, is that Even though we are facing some declining trends, we intend to announce to all of you by the end of 2025 that we'll have an increase in production in the order of 100,000 barrels of oil per day. We will have three new producing units that are going fully operational throughout the year. And once again, ladies and gentlemen, this is a time that is very challenging, but Petrobras is adamant and ready to face up to the challenges and turn it into positive results. The revamp of the Train 1 from the refinery of Pernambuco and the new HDT, those will be fully operational by the end of this year. which also means more diesel out in the market. And it means something extra, as a matter of fact. It means more S10 diesel in the market, which is our most prized possession, our most high value-added product. We are also returning to the fertilizer business with the operation of ENSA, which is estimated for 2025, and we will also resume the works of UFN3, which is the fertilizer unit of the Midwest of Brazil. We are expanding our fleet by acquiring four range vessels and eight additional vessels for coasting. For those that are not familiar with range vessels, these are vessels that pick up fuel in the south of Rio and take it all the way north to the Iguaçu port to replenish our vessel fleet, our supporting vessels. And we are also expanding that with an additional eight vessels for coastal navigation. And I'll tell you why, because on Route 3, we will produce more GLP. And this GLP will actually be distributed throughout the Brazilian coast with these vessels. So once again, all of that operation will be carried out to distribute this production, which finds itself in a growing trend. We're growing this production more and more. And again, these are major opportunities for the national industry. These are vessels that are going to be financed by the merchant navy, and they are going to be operational. So it's noteworthy to mention that this enlargement of our fleet is is in line with all of our governance procedures, all of our economic analysis. So all of that is a positive prospect in all three scenarios and analysis that we've ran. And this is a very promising and optimistic scenario. Now, once again, when it comes to the local content in this fleet, which will be our own fleet, we are talking about a major contribution from the federal government. When it comes to the local content, which may reach as high as 65% of supply from the national industry, it's worthy to say that this cost will not be paid for by Brazil. This will be paid rather by the federal government via some financing structures at a reduced cost from the merchant navy fund and also a new legislation in Brazil which is also has been drafted by the federal government. It's a procedure related to the accelerated depreciation which is enabled as of 2024 thanks to the efforts of the federal government. And once again, with the support of the federal government, these developments may reach as high as 65% local content, generating jobs and expanding the participation of the Brazilian industry in the naval and offshore industries. And to us, this is rather positive because besides having assets that compete on the international level, for the costs of replenishment, we also have some suppliers that are close to us and those are meeting all of our demands in a timely fashion. Therefore, when you consider all of our projects to expand our fleet and to increase the number of vessels we own, we expect to generate 44,000 new jobs These are going to be very positive hiring processes that are going to increase our ability to respond swiftly to our needs and to distribute fuel throughout the country. And with that, we are going to be less financially exposed from a Petrobras perspective to charters and freights. We have our financial director, our CFO here. To our side, he's going to tell you that in a second, but what our finance department has said is that reducing freight is in line with a better possibility to manage our company debt. Freights are debts, and managing our debt is one of the priorities, as our CFO will be happy to inform you later on. Again, we are elated as well. With Tetrabras going back to the Dow Jones Index of Sustainability, which is one of the most important indexes in the world, we are recognized as a company thanks to our efforts in the environmental, social, and governance areas. We have stacked prizes and awards in the area of governance. We have garnered awards in the environmental and social sides as well. Petrobras is one of the nine global energy businesses that are qualified between the over 50 companies. that work in this sector and that have been assessed for the certification. We recognize the multiplying effect of Petrobras' activity in Brazilian society. In 2024, our investment sustained 250,000 jobs and they accounted for 5% of the investment in Brazil. Our activities have generated 31% of all the primary energy consumed in Brazil. We paid for 270 billion BRL in taxes and other government expenses, as I had mentioned before. And we paid 102.6 billion BRL in dividends. As I mentioned before, we had 37.9 billion BRL that were paid to the union and to the national bank for development. We also dedicated over 1 billion reals in social environmental investment. This is a voluntary and mandatory effort. We also did sponsorships and donations with this amount. And we have numerous impactful programs, such as our income program, which will offer 11,000 positions in professional training for the energy sector. developing skills that are essential to our industry. Ladies and gentlemen, I would like to make another parenthesis at this point because we are already observing the results of Petrobras activities. We do have a shortage of labor in Brazil. Boiler operators, welders and other professionals, this is an issue. And Petrobras has gotten involved in numerous programs along with the industry agency in Brazil to train numerous professionals. And these trainings, they comprehend a great deal of our income and autonomy program. You have people that are registered. These are folks that are eligible for the income assistance. So in this sense, that is to say that what the company is doing is we are adding labor to the market. We are qualifying our labor in the country, and at the same time, we are alleviating Brazilian society from a heavy burden. So it's a win-win situation. It's good for Petrobras because we have qualified labor to work in our operations, and we mitigate risks, therefore. And we are also meeting the demands of society at large in a timely fashion. We are working on our strategic plan, which is our guidance for 2025 and for the year 2025 all the way to 2029.

It's also important to say this is a concrete plan. We move on looking for ethanol projects, bioethanol and low carbon hydrogen in addition to other decarbonization initiatives. It's also important to say that all of these projects are based on the same governance criteria and the same profitability analysis criteria as any other project for the company. They must be profitable in every scenario, from the brightest to the gloomiest, just as any other project this company embraces. And in closing, I'd like to say we are absolutely determined to continue to derive value for society and our shareholders, whether they are on the private sector or the public sector. We'll continue to invest in profitable projects with capital, discipline, and innovation. Together, we'll continue to write a successful story for our company. And we would very much like to have all of you beside us. I'd like to once again thank everyone for joining us and turn it over to our CFO, Fernando Melgarejo, who will dive a little bit deeper into our financials. Good afternoon, everyone. Thank you all for joining another Petrobras earnings webcast. We'll start by giving you the main highlights for the company's 2024 performance. After this presentation, myself and all our other directors will be available to answer any questions you might have during our Q&A. So let's begin with slide five, talking about the main items in our financial result. The first point I'd like to highlight is our strong cash generation with an operational cash flow of $38 billion for the year. This is as large as the GDP of many large states in the country. Many of our states do not have a GDP as large as our operational cash flow. Our financial debt decreased to $23.2 billion, the lowest level since 2008. These indicators demonstrate Petrobras' financial health. I'd also like to highlight our investments, which came to $16.6 billion in 2024. All of this has been mentioned already by our president. And this accounted for a 31% increase over 2023, which we will discuss in further detail later on. Our adjusted EBITDA was $40.4 billion and net income was $7.5 billion for the year. Now moving on to slide six. Despite our strong cash generation, our net income in 2024 was lower than in the previous year. Now, why was that? First of all, it's important to understand that Petrobras' results were impacted by an accounting-only item, that being the foreign exchange variation impact in debts between Petrobras and its subsidiaries abroad. This $10.9 billion impact, which you see on the chart, does not involve any cash outflow, as our president has mentioned, and actually involves no actual disbursement. It's purely an accounting impact. The second most significant impact came from external factors, the depreciation of Brent crude and the diesel crack spread. These are external market conditions that affect all companies in the industry, both domestically and overseas. Lastly, the tech settlement agreement, which we recognized in Q2, was actually a highly positive measure for Petrobras. It was thanks to this agreement that Petrobras resolved billion-dollar disputes that posed significant uncertainty for the company's cash flow. We also included the impact of oil production in the chart, so you can see that the lower production volume had minimal effect. The other items I mentioned were the key factors affecting Petrobras' accounting results. and mostly because of the foreign exchange situation. Now, what we conclude from the chart is that excluding these specific impacts, Petrobras' net income would have been $19.4 billion. Now, if we were to look at it from a quarter-over-quarter perspective, excluding the exchange effect, we would have had $5.5 billion, and the minus $18.2 billion would have been $13. billion, a positive $13 billion. Now on slide 7, we will explain in more detail the items that had the greatest impact on our results, starting with the foreign exchange variation. At the end of Q4, exchange rate was 6.19 BRL per USD, 28% depreciation of the Brazilian real. This conversion is applied to debts between Petrobras and its foreign subsidiaries. These are intercompany transactions, which are very common among global corporations like Petrobras. In other words, these are funds circulating internally within the company. This exchange rate effect enters Petrobras' holdings net income and negatively impacted our profits in 2024. At the same time, it positively impacted our equity. These opposing effects ultimately balance each other out economically. According to current accounting standards, one of these variations is recorded in earnings and can be either positive or negative. In 2023, as you all remember, it was positive. Now, it's been negative. In Q2, we also discussed this at length. And again, had the U.S. dollar had been around 5.75 right now, ending the quarter at that level, to our Q1 2025 results, we would add about $2 billion more. incrementally to the expected results to the tune of 11 billion reais. This is just for everyone to understand that this is an absolutely accounting effect which has no impact on the company's cash situation. Now on to slide 8, let's discuss the external factors that affected us in 2024. Brent crude declined by 2% as you can see in the chart and diesel crack spread dropped by nearly 40%. The decline in diesel prices was influenced by global economic uncertainties and lower demand in the northern hemisphere. It is important to emphasize that this scenario affected all companies in the sector, as I said earlier, and not only Petrobras. This is an issue that's specific to the oil and gas industry. On slide 9, reinforcing what we mentioned before, The tax settlement agreement was a one-time event in Q2, which impacted the company's earnings positively and eliminated legal disputes to between the $45 billion. And if you remember at the time when we reported this agreement, the company reported a 3% increase in its stock. Now onto slide 10, let's discuss our debt management, which to us has been highly successful and also well regarded by the market. At the end of 2024, our financial debt was the lowest since 2008. As you can see on the chart, our financial debt was $23.2 billion, most of it coming from our allocation, which is precisely connected to cash generating assets. We still have a very positive allocation and we continue to lengthen our debt maturity and shortening our spread. And as we talked about the market, I'd like to also mention our Latin Finance Award which also came with the issue of bonds, all of which impacted 2024. Now on slide 11, let's talk a little bit about CapEx, which is probably a point we must discuss at length. Some items already having been advanced by our president. It's important to say that this was $16.6 billion higher than our guidance and it represented no additional cost for the company. This was a recovery in our physical investment gap which were expected by 2025 and which were advanced to 2024. Now the gap was absolutely bridged for the year. which is to say we do not expect the Q4 2024 investment to be the same as what we expect in 2025. Another important point here is these investments that we moved from 2025 to 2024 were in buzios, as our president has already said. And because of that, The best EP asset in the world, as the President also said. This is extremely positive because it also means more oil sooner and more oil means higher revenue. If possible, we would actually make all our investments in Buzios earlier and start producing in all our FPSOs tomorrow. Now, the company gains in lower risks and potential increase in these advances. This line of incentives is decisive for our new production systems to go into operation, and that's what we're focusing on. executing our investment plan and a single portfolio, which will allow us to be profitable in our production. Another thing that may come up is whether the CapEx timeline will be altered, and the answer is an adamant no. It remains what we have in our strategic plan. That's what will be followed. Our forecasts for our CAPEX in 2025 through 2029 remains because we have major projects which involve uncertainties which are mitigated by the process we adopted. And within our capex, we also included a 10% more or less, a 10% variation, either up or down. On slide 10, we are still... committed to our disbursements and compensation for our stakeholders as you remember our result was mostly affected by results that have no impact on our cash flow so we paid using our reserves and capital compensation as well as profit reduction our reserves are an accounting feature to pay dividends but the payment of dividends is still based on the same decision-making process cash flow investment level the company's capital structure and most importantly its financial uh situation now on behalf of time for questions i will not be presenting on the following slides our president has already addressed every issue but i'd like to wrap up by saying something 2024 was a year where we had a $90 billion CapEx dividend to the tune of 102 billion Reais, an extremely healthy level. We paid 270 billion Reais in taxes and lowered our debt by about 11 billion Reais. What this means is the company's fundamentals are absolutely sound. and they make us confident in our results in 2025, which we expect to be significant and sustainable, preserving the company's status as one that derives value to society and its shareholders. I will now turn over to Eduardo, who will mediate our question and answer session.