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Investor Relations • Year VII • nº 23 / June 2007

Petrobras is the7th oil company■ Petrobras now ranks 7th among the largest oil

companies in the world with stock exchange

listings according to Petroleum Intelligence

Weekly (PIW), one of the most respected energy

industry publications. This announcement is

made annually following a survey of the largest

and most important oil companies in the world.

The PIW ranking classifies the 50 leading oil com-

panies in the world, made up of the principal 25

state-owned and 25 private sector companies.

Petrobras was also placed 8th among the state-

owned companies. In the general ranking, in

which 125 of the largest companies in this seg-

ment in the world were evaluated, the Company

was classified in 14th position.

S&P awards an investmentgrade rating■ In January, Standard & Poor’s Ratings

Services (S&P) awarded the Company a BBB

investment grade rating for long term domestic

and foreign currency corporate credit, with a

stable outlook. According to S&P, the

independent ratings attributed to Petrobras

reflect its satisfactory business risk profile,

characterized by the quality of its Exploration

and Production activities and dominant position

in the Brazilian hydrocarbons industry. In

October 2005, the Company had already seen

its foreign currency risk rating increased to Baa2

(investment grade).

Change in ADR Ratio■ The Company’s Board of Directors approved

the change in the relation between its shares

and American Depositary Receipts – ADRs from

the current four shares for each ADR (4:1) to

two for each ADR (2:1). The change in the ratio

comes into effect from July 2 2007.

The alteration is designed to facilitate small

investors’ purchases of ADRs on the New York

Stock Exchange (NYSE), thus broadening the

shareholder base and increasing the liquidity of

the stock - a reflection of the Company’s confi-

dence in its future results.

Dividend Payout■ On May 17, Petrobras paid out dividends

to holders of common and preferred shares

as at the record date of April 2 2007, in

accordance with the resolution of the Ordinary

General Shareholders Meeting of April 2 2007.

The net payout was R$ 0.3786 per share

(about US$ 0.1928).

Petrobras in

Portugal

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The 8th mostrespected

company in theworld

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TestingB5

biodiesel

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Acquisition ofthe Ipiranga Group

Jointly with Ultrapar and Braskem, Petrobras has signed an agreementfor the acquisition of the total shares held by the ControllingShareholders of the Ipiranga group in Refinaria de Petróleo Ipiranga S.A(RPI), Distribuidora de Produtos de Petróleo Ipiranga S.A. (DPPI) and

Companhia Brasileira de Petróleo Ipiranga (CBPI). Additionally, a tenderoffer will be made for the acquisition of the common shares of RPI, DPPI,CBPI and Ipiranga Petroquímica S.A (IPQ) in the hands of minority share-holders (tag along) and for the delisting of Copesul – CompanhiaPetroquímica do Sul.

Petrobras is to assume control of the fuels and lubricants businesses inthe North, Northeast and Midwest regions of Brazil and, jointly withBraskem, the petrochemical assets represented by IPQ, Ipiranga QuímicaS.A. and IPQ’s stake in Copesul in the proportion of 60%, Braskem and40%, Petrobras.

The oil refining assets held by RPI will be shared equallyamong Petrobras, Ultrapar and Braskem. Ultrapar will acquire thefuel and lubricant distribution businesses in the South and theSoutheast regions.

In line with its Strategic Plan, Petrobras has been investingselectively in Brazil’s petrochemical sector and in theSouthern Cone, in projects which add value to its oil, naturalgas and refining businesses, acting on an integrated basis. Theacquisition of these assets will result in an increase in value of theCompany’s portfolio of stakes in the petrochemical industry, con-tributing to the consolidation of the Southern PetrochemicalComplex.

Petrobras intends to consolidate its position in the distribution sec-tor by strengthening presence in the North/Northeast and Midwestof the country. Currently, Petrobras has a global market sharein distribution of 33.8% with 6,200 active service stationsin Brazil and a further 1,000 in other countries.

For more details, please access the press release “Acquisition of theIpiranga Group” and subsequent press releases in the Investor Relationswebsite, section “Press Releases”.

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71.5%

263.8%

41.4%

162.3%

229.7%

10.9%

276.4%240.3%

13.1%

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

10 Years 5 Years 1 Year

■ Ibovespa

■ Petrobras PN

■ Petrobras ON

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Petrobras ADRs versus DOW JONES and Amex Oil Indexes Economic and Financial Figures

Real Increase in Stock Price*

Net operating revenues reportedan increase of 13.5% when com-pared to the first quarter of 2006

at US$ 18.4 billion due to the increase insales volume, partially a reflection of theconsolidation of the Pasadena refinery inTexas. However, operating profit did nottrack this same trajectory given theincrease in the cost of products sold(impacted by the realization of highercost inventory) and the increase in oper-ating expenses.

Net income was 31.7% lower thanthe first quarter 2006 largely due to thedisbursement of US$ 498 million follow-ing the conclusion of pension plan(Petros) renegotiations. Net income wasalso impacted by net financial expensesdue to increased exposure of currencydenominated assets and the apprecia-tion of the Real in the quarter resulting ina foreign exchange translation loss, thesefactors having a negative impact onresults of US$ 449.

Production of oil and LNG in Brazilreached an average of 1.8 million bar-rels/day, 83% of which from the CamposBasin. This represents an increase ofabout 50,000 barrels per day or 3%

more than the same period in 2006. Thisexpanded production capacity is thereflection of the operational startup ofvarious platforms such as P-50 (AlbacoraLeste field), FPSO-Capixaba (Golfinho),P-34 (Jubarte) and FPSO-Cidade do Riode Janeiro (Espadarte).

Total oil products output increased7% impacted by a 150% increase inrefinery throughput overseas followingthe consolidation of the PasadenaRefinery operations. Domestic refinerythroughput reported a decline of 2%due to scheduled maintenance down-time at Replan (Paulínea-SP), Brazil’slargest refinery, and Reman (Manaus-AM).

On the external front, exports grew17% in volume – the result of increasedproduction and the reduction in domes-tic oil output proportional to totalprocessed throughput. Internationalsales volume was up 53% due to theinclusion of operations at the PasadenaRefinery, and overseas commercial oper-ations. Domestic sales volume rose 1.5%in relation to the same period in 2006,fuel oil, LPG and jet fuels putting in par-ticularly strong performances.

Petrobras Group’s capital expendi-tures amounted to US$ 3,674 million,37.8% up on the first quarter 2006,the highlights being the supply of natu-ral gas to the domestic market and theconsolidation of Petrobras’ position over-seas with investments in seismic explo-ration (USA and Turkey) and in the con-struction of two drilling vessels.

The Company’s total debt fell by 4%with the amortization of debt which wasnot rolled over. However, cash and cashequivalents also reported a reduction,principally due to the payment of inter-est on equity capital to shareholders ofUS$ 3,693 million, the end result beingan increase in net debt. Petrobras’ finan-cial leverage increased during the quar-ter from 13% to 17% meeting the objec-tives for optimization of the corporatecapital structure.

In the light of weaker internationaloil prices, the Company’s shares fell inthe first quarter 2007, in line with lead-ing world oil companies as a whole.Despite the decline in the period,market capitalization reached themark of R$ 215.6 billion. (about US$105.2 billion).

Operating Performance

Dec-

02

Feb-

03

Apr-0

3

Jun-

03

Aug-

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Apr-0

7

Jun-

07

Aug-

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Oct-0

3

Dec-

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Feb-

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Apr-0

4

Jun-

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Aug-

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Oct-0

4

Dec-

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Feb-

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Apr-0

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Jun-

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Aug-

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Oct-0

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Feb-

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Apr-0

6

Jun-

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Aug-

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Oct-0

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Dec-

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Feb-

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50100150200250300350400450500550600650700750800850900950

1,000

First Quarter 2007 Results

First Quarter

In US$ million 2007 2006 Variation (%)

Sales of products and services 23,700 21,225 11.7

Net operating revenues 18,400 16,214 13.5

Gross profit 6,788 7,286 (6.8)

Net income 2,159 3,163 (31.7)

Earnings per share 0.49 0.72 (31.9)

Net cash provided by operating activities 3,463 4,924 (29.7)

Capital expenditures 3,674 2,666 37.8

Net debt 11,569 9,742 18.8

Debt to equity ratio 52% 55% -3 pp

In thousand barrels of oil equivalent 2007 2006 Variation (%)

Average daily crude oil and gas production 2,305 2,278 1.2

Oil product production 2,041 1,916 7

Net imports 187 73 156

Refining and marketing operationsBrasil – Utilization 90% 91% -1 bps

Refining and marketing operationsInternational – Utilization 85% 80% 5 bps

Domestic crude oil of total

feedstock processed 77% 81% -4 pp

First Quarter

* Monthly changes discounted for inflation in accordance with IGP-DI index

727,8% (PBR/ADR ON)

694,5% (PBRA/ADR PN)

205,6% (Amex Oil)

60,1% (Dow Jones)

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Aligned targets

New strategyfor new platforms

P etrobras has undertaken a review ofits strategy for contracting con-struction services for platforms P-55

and P-57, both destined for the CamposBasin. The tender bids for the energygeneration and gas compression mod-ules for the two platforms have been can-celled due to excessively high prices. As aresult, the Company is in the process offine-tuning the projects to obtain bettercommercial conditions, reworking thetechnical specifications with a view toholding a new tender bid. Similarly,Petrobras is seeking to maximize the con-ditions for procurement in the domesticmarket as well as adhering to such crite-ria as competitive terms for delivery, costand quality

P-55 will be a unit of the semi-sub-mersible type with a production capaci-ty of 180,000 bpd, 4.5 million m3/dayof natural gas, located in a water depthof 1,795 m in the Roncador Field in theCampos Basin. P-57 will be a produc-tion unit of the FPSO (Floating,Production, Storage and Offloading)type, its production capacity being up to180,000 bpd and 2 million m3/day ofnatural gas, to be installed in theJubarte Field in Espírito Santo, andlocated in a water depth of 1,246 m.

Petrobras has decided to anticipatethe construction of platform P-56, to beoperated in the Marlim Sul Field in theCampos Basin in order to offset possibledelays in the oil production program.

Petrobras has been negotiating withthe construction consortium for optimiz-ing delivery dates and anticipating com-missioning. This platform will have aproduction capacity of 100,000 bpdand 6 million m3/day of natural gas. Itwill be installed in a water depth of1,700 m.

Petrobras’ involvement in theBrazilian Growth AccelerationPlan (GAP) includes 183 proj-

ects representing investments ofR$ 171.7 billion (about US$ 83.7 bil-lion) through 2010, also encompass-ing the Company’s partners in oil andgas and renewable fuel programs.The total incorporates the invest-ments announced in the BusinessPlan 2007-2011 and projects whichwere initiated ahead of schedule.

Based on the principles of socio-environmental responsibility andprofitability, the Strategic Plan is in linewith GAP’s goals, such as ensuringBrazilian sustained self-sufficiency in oilwith a minimum production 20%above domestic consumption, a 15-year minimum reserve/productionratio and increased output of light oils.The plan also provides for the expan-sion and modernization of theCompany’s refinery complex, increas-ing the share of domestic oil in refinerythroughput and improving the qualityof oil products.

Also part of the broad-based port-folio of projects in the Business Plan is

the objective for increasing reserves ofoil and gas, expanding transportationand distribution infrastructure andintensifying research as well as thedevelopment of fuels and alternativeand renewable sources of energy.

Among the principal projects arePlangás (the increased production ofnatural gas), the construction of gaspipelines and the implementation ofnatural gas projects. In the petro-chemical sector, the highlight is the Rio de Janeiro Petrochemical Complex(Comperj) and in the Downstreamarea, the construction of the AbreuLima refinery in Pernambuco, and the expansion and modernization ofthe refinery complex as a whole. Theexploration and production area has aportfolio of projects worth R$ 81 mil-lion (about US$ 39.5 million)through 2010, while the tanker fleet isto be renewed with the contracting of42 units to be built in Brazilian ship-yards. In addition, Petrobras is devel-oping a biofuels program whichincludes projects and technology forthe production of biodiesel andethanol.

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P etrobras has signed an agreement with the Portuguese companiesGalp Energia and Partex for the exploration and production of oil infour blocks in the Lusitaniana Basin, situated to the north of Lisbon.

This will be the first exploration and production activity ever to beundertaken off the coast of Portugal.

Petrobras’ stake in this agreement is very significant since itrepresents the Company’s debut in a new exploratory frontier.

With a 50% stake, Petrobras will be the operator, Galp Energiaand Partex holding 30% and 20% interests, respectively. The blocks are denominated Camarão, Amêijoa, Mexilhão and Ostra and are located at water depths of between 200 and 3,000 meters, covering a total exploration area of12,000 square kilometers.

The agreement provides for an 8-year exploration period,the first stage of which involving investments of the order

of US$ 20 and 30 million. However,these amounts may eventually be

higher, depending on the technicalevaluations in the studiesundertaken. This agreement is partand parcel of Petrobras’ strategy ofexpanding its exploratory activitiesin international deepwater areas

where it has recognizedtechnological capability.

Petrobras’ offshoreexploration in Portugal

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Petrobras launchesits AnnualReport 2006

In June, Petrobraslaunched itsAnnual Report andSocial Reportfor 2006.Recognized forits excellence,Petrobras’ AnnualReport has alreadywon several nationaland international awards, among whichare the Abrasca Prize for the bestAnnual Report, the world OAR1 prizefor best on-line annual report and theaward presented by the US-publishedInvestor Relations Magazine. Available inprinted and on-line versions and inthree languages (Portuguese, Englishand Spanish), the Annual Report is animportant vehicle for disseminating theCompany’s activities and is designed forall stakeholders (shareholders, investors,customers, suppliers, students andsociety in general).

See Petrobras’ Annual Report 2006 in our website, or if required, request a printed version by e-mail toacionistas@petrobras.com.br or bycalling 0800 282 1540.

Investor Relations Work receives award

The American publication,Investor Relations Magazineawarded Petrobras the BestInvestor Relations Program forIndividual Investors prize. Thisaward reflects market recognitionof the work and transparency ofthe Company with its investorsand other stakeholders. It alsoreflects Petrobras’ level of corpo-rate governance in relation to itsactivities in general and the con-tinual concern with social andenvironmental responsibility. Thisaward is based on a survey con-ducted by the Brazilian EconomicsInstitute of the Getúlio VargasFoundation – FGV among 200research analysts and investors.

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B5 Biodieseltests in Bahia

Petrobras is making steady progressin the project for developing bio-

fuels and has already begun tests withB5 Biodiesel – conventional diesel oilblended with 5% of biodiesel.

Petrobras intends to launch B5Biodiesel on the market in 2008, pre-empting the legal obligation for usingthis blend as from 2013. Through4,000 services stations of in its net-work, Petrobras is already selling B2biodiesel, diesel oil with 2% biodiesel,the use of which will become obliga-tory from 2008.

Two vehicles will use soybean-based biodiesel, a further two, castoroil based bio-diesel and two will runon conventional diesel fuel enablingperformance to be evaluated, togeth-er with emission of pollutants andengine wear and tear in comparisonwith engines running on convention-al diesel fuels.

Petrobras envisages in its BusinessPlan 2007-2011 capital expendituresof US$ 700 million in renewable ener-gy sources, an initiative which willcontribute to the reduction independence on imported diesel andact as a catalyst in the creation of newtechnologies as well as encouragingthe generation of employment andincome in the agribusiness sector. Thefirst three industrial production proj-ects are being developed in Candeias(BA), Montes Claros (MG) andQuixadá (CE) using various vegetableoils and animal fat as raw material.Total investment in the three units willbe R$ 227 million (about US$ 110.7million) and each one will have anannual capacity of 57 million liters.

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VeranaDeveloped specifically for theleisure boating market, in April

Petrobras launched Verana diesel oil,the characteristics of which provide

better engine performance andgreater durability.

This is one of the purest fuels withreduced particle and smoke

emissions and with a sulfur contentwhich is 98% lower than marine

diesel oil. The new products will beinitially on sale at marina complexesin Angra dos Reis, Paraty, Ubatuba,

Guarujá and Ilhabela, as well asPetrobras’ nautical service stations.

8a

Petrobras is the eighthmost respected

company in the world

Petrobras has made a quantum leap

from 83rd to 8th place in the list of the

world’s most respected companies

according to a survey published by

the Reputation Institute (RI).

The ranking lists the 600 largest

companies in the world.

The survey is indicative of the extent

to which Petrobras has grown in reputation,

particularly significant when compared

with the top eight companies.

Petrobras has jumped 75 places and

has achieved the best position among

companies in the energy industry. In terms

of domestic corporations, Petrobras

was also the best placed. In front of

Petrobras in the international ranking are:

Lego (Denmark), IKEA (Sweden),

Barilla (Italy), Mercadona (Spain),

AP Moller-Maersk (Denmark),

Toyota (Japan) and Ferrero (Italy).

Newssh eet edited by Petrobras' Investor Relations Department • Executive Manager: Raul Campos • Coordinator: Marcos Vinícius Guimarães • Editor:

Cláudio Paula (RJ-21059-JP) • Colaboration: Tereza Lobo • Contact: Petrobras' Shareholders Department • Tel.: (55-21) 3224-1540/4914 Fax: (55-21) 2262-3678 •

0800 282-1540 • Av. República do Chile, 65 / 2202-B • Centro – Rio de Janeiro – RJ – 20031-912 • E-mail: acionistas@petrobras.com.br • Design: Estúdio MatizDepositary Bank: JPMorgan Chase Bank • JPMorgan Depositary Receipts • 4 New York Plaza, 13th Fl. • New York, NY 10004 • +1 (866) JPM-ADRS (576-2377)

Visit our website at www.petrobras.com.br/ri/english

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