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November 16th, 2010
Results Announcement
3nd Quarter 2010 (IFRS)
Conference Call / Webcast
Almir Guilherme BarbassaCFO and Investor Relations Officer
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DISCLAIMER
FORWARD-LOOKING STATEMENTS:
DISCLAIMER
The presentation may contain forward-looking statementsabout future events within the meaning of Section 27A ofthe Securities Act of 1933, as amended, and Section 21Eof the Securities Exchange Act of 1934, as amended, thatare not based on historical facts and are not assurances offuture results. Such forward-looking statements merelyreflect the Company’s current views and estimates offuture economic circumstances, industry conditions,company performance and financial results. Such termsas "anticipate", "believe", "expect", "forecast", "intend","plan", "project", "seek", "should", along with similar oranalogous expressions, are used to identify such forward-looking statements. Readers are cautioned that thesestatements are only projections and may differ materiallyfrom actual future results or events. Readers are referredto the documents filed by the Company with the SEC,specifically the Company’s most recent Annual Report onForm 20-F, which identify important risk factors that couldcause actual results to differ from those contained in theforward-looking statements, including, among otherthings, risks relating to general economic and businessconditions, including crude oil and other commodityprices, refining margins and prevailing exchange rates,uncertainties inherent in making estimates of our oil andgas reserves including recently discovered oil and gasreserves, international and Brazilian political, economicand social developments, receipt of governmentalapprovals and licenses and our ability to obtain financing.
We undertake no obligation to publicly update orrevise any forward-looking statements, whether asa result of new information or future events or forany other reason. Figures for 2010 on areestimates or targets.
All forward-looking statements are expresslyqualified in their entirety by this cautionarystatement, and you should not place reliance onany forward-looking statement contained in thispresentation.
NON-SEC COMPLIANT OIL AND GAS RESERVES:
CAUTIONARY STATEMENT FOR US INVESTORS
We present certain data in this presentation, suchas oil and gas resources, that we are not permittedto present in documents filed with the UnitedStates Securities and Exchange Commission (SEC)under new Subpart 1200 to Regulation S-K becausesuch terms do not qualify as proved, probable orpossible reserves under Rule 4-10(a) of RegulationS-X.
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o Net income (R$ 24,588 million) increased 10% in 9M10 vs. 9M09. In the 3Q10, net
income reached R$ 8,566 million;
o Total investments of R$ 56,500 million YTD 2010, 11% higher than 9M09;
o Public offering resulted in a capital increase of R$ 120 billion;
o Acquired rights to produce 5 billion boe in new pre-salt areas not yet licensed;
o Reduced leverage ratios:
o Net Leverage decreased from 34% to 16%
o Net Debt/EBITDA from 1.52X to 0.94X
HIGHLIGHTS
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FPSO Cidade de Angra dos Reis
o Start-up of the first commercial FPSO in
Tupi:
o Estimated 2011 average production:
50 thous. bpd
o Peak production forecasted for 2012
OPERATING HIGHLIGHTS
o New exploratory frontier in ultra deepwater at Sergipe-Alagoas basin with light oil;
o Inauguration of the diesel hydrotreatment and coke units as part of the
modernization of Revap , which is responsible for 15% of the feedstock processed in
Brazil.
o Record thermoelectric generation in September (6,252 MW average) and of natural
gas sales in 3Q10 (360 thous. boed).
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OIL AND NATURAL GAS PRODUCTION 9M10 VS 9M09:
Increase in domestic and international markets
1,963
316
1,995
327 Natural Gas
Oil and LNG
2,279 2,322
2,279
234
2,322
246 International
National
2,513 2,568
o Production growth of 2% in the year due to:
- Increase in the production of FPSO´s Cidade de Vitória, Cidade de Santos, EspíritoSanto and Frade and contribution of extended well tests (Tiro and Tupi);
- Higher demand for natural gas in the domestic market. Production achieved recordin September;
o Comparing 3Q10 vs 2Q10, reduction of 1% due to maintenance stoppages during Augustof P-33 and P-35.
National ProductionTotal Production (Thous. bpd)
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Main units
Projects Capacity 2Q10 3Q10
FPSO Cidade de Vitória
(Golfinho)100 th. bpd 60.9 th. bpd 51 th. bpd
FPSO Capixaba
Cachalote e Baleia Franca100 th. bpd 9.7 th. bpd
58 th. bpd
FPSO Espírito Santo
Parque das Conchas (1)35 th. bpd 28.2 th. bpd 26 th. bpd
SS-11 (TLD de Tiro) 30 th. bpd 15 th. bpd 17 th. bpd
FPSO Frade (2) 30 th. bpd 17 th. bpd 18 th. bpd
FPSO Cidade de Santos (Uruguá-Tambaú) and
Mexilhão
35 th. bpd and
25 million m3/d-
UTB: 15 th.bpd
MXL.: 1Q11
New Units
Projetcs Capacity Start-up
FPSO Cidade de Angra dos Reis (Tupi) 100 th. bpd Oct/2010
Guará EWT 30 th. bpd Dec/2010
P-56 (Marlim Sul) 100 th. bpd Jul/2011
P-57 (Jubarte) 180 th. bpd Dec/2010
Total: 185 th. bpd
NEW PRODUCTION UNITS:
Continued increase in capacity
(1) Projects in partnership, capacity and production refers to Petrobras share (35%)(2) Projects in partnership, capacity and production refers to Petrobras share (30%);
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Macunaíma
Libra
Petrobras
ANPo Acquisition of the rights to produce5 billion boe in specific areas of thepre-salt that are not underconcession;
o Start up of FPSO Cidade de Angra
dos Reis in Tupi;
o 5 new wells to be concluded in2010, totaling 16 wells this year;
o Two additional rigs still to arrive in2010, increasing pre-salt operatingfleet to ten;
o Guará EWT scheduled to start upby the end of November (FPSOalready in Brazil);
o Tupi NE EWT scheduled to start upin 1Q11 (FPSO Cidade de SãoVicente).
Tupi NE
Tupi
Sudoeste
Tupi OesteCarioca
NE
Tupi Sul
Piloto de
Tupi IG1
Under Concession
Transfer of Rights
Santos Basin
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PRE-SALT UPDATE
Wells**:
** Drilling or completion or test.
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• New buildings in Comperj and Abreu e Lima in progress
• Pre-operation of Polyester Yarn Unit (Suape Petrochemic)
• Contracting of basic engineering - Premium I (Maranhão) and II (Ceará)
DOWNSTREAM UPDATES
• Investments of US$ 2.5 billion:
• Coke Unit (55%): higher added value products
• Capacity: 5,000 m³/day (3,000 m³/d additional domestic crude oil processing)
• Yield: Diesel (55%), LPG (5%), Naphtha (10%), Coke (20%) and Feed Cracker Unit (10%).
• Hydrotreatment of diesel (45%): Diesel S-50
• Increase in production capacity:
- LPG - 21 thous. bpd
- Nafta - 42 thous. bpd
- Diesel - 23 thous. bpd
Revap – Reduction of future needs for Imports
New Refineries - Updates
Abreu e Lima
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1.90.2
0.9
29%
25%
46%
HSE IT R&D
Petrobras Investments in HSE, IT and R&D (2010-14)
US$ 11.4 Billion
INVESTING IN TECHNOLOGY LEADERSHIP
Petrobras´s partnerships with 120 universities and
research centers has created one of the greatest
concentrations of energy research in the world
Expansion of CENPES makes it one of the largest research center in the world
In the Technological Park of the Rio de Janeiro FederalUniversity, four R&D centers for major equipment andservices suppliers is currently under construction :
Others companies are schedule to come to Brazil todevelop technological centers:
•TenarisConfab
• Vallourec & Mannesman
• Weatherford
• Wellstream
• FMC Technologies
• Usiminas
• Schlumberger
• Baker Hughes
• Cameron
• General Electric
• Halliburton
• IBM
• Technip
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3Q084Q081Q092Q093Q09 4Q09 1Q10 2Q10 3Q10
115
5544
59 6875 76 78 77
101
48
32
49 64 70 73 7472
20
40
60
80
100
120
Petrobras Oil Price Brent
AVERAGE REALIZATION PRICE:
Stable price in the domestic market
o Average Realization Price remains stable.
o In the comparison 3Q10/2Q10, the gap between ARP USA and ARP Petrobras increased, due tolower oil prices, Real strengthening and price stability in Brazil.
US$/bbl
4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
20
70
120
170
220
ARP USA
ARP Petrobras
R$/bbl
Avg.
3Q10
Avg.
3Q09
144.47132.87
152.34158.17
Avg.
2Q10
152.64
158.60
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137.2140.2
134.5129.7
127.7
Brent (in R$)
16.84
24.78
16.51
26.53
16.95
26.87
17.54
26.37
18.46
24.26
3Q09 4Q09 1Q10 2Q10 3TQ10
Lifting Cost Gov.Part.
76.2 78.3 76.974.6
68.3
Brent (in US$)
9.02
13.84
9.51
15.23
9.40
14.33
9.79
14.71
10.60
14.07
3Q09 4Q09 1Q10 2Q10 3Q10
Lifting Cost Gov.Part.
DOMESTIC LIFTING COST:Increase explained by collective bargain and stoppages for maintenance
R$/barrel
41.62 43.04 43.82
US$/barrel
43.9122,86
24,74 23,73 24,5042.72
24,67
Comparing 3Q10/2Q10:
o Collective Bargain Agreement (CBA), expenses with materials (equipments for platformmaintenance) and 1% decrease in production increased lifting costs;
o Lower government take due to decrease in international oil price (4%);
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DOMESTIC OIL PRODUCTS :
Significant sales growth in the domestic market
Domestic SalesThous. bpd
769
327
222
507
802
374
221
501
859
379
230
565
Others
LPG
Gasoline
Diesel
2,0331,898
+11%
1,825
3Q09
3Q102Q10
o Oil product sales in the domestic market grew 11% versus year earlier.
- Diesel (increase of 12%): growing economic activity and improved grain harvest;
- Gasoline (increase of 16%): substitution with ethanol due to higher ethanol prices;
- Other: (increase of 9%): largely from jet fuel, asphalt sales, and LPG
o Refinery output increased quarter over quarter as a result of restart of Replan
755
338
134
640
702
334
134
637
740
342
128
634
Refinery Output
-1%
3Q09
3Q102Q10
1,8441,8071,867
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NG Pipelines
Fertilizer
Thermo Power Plant
LNG Terminals
GAS & ENERGY
Investments consolidation
Infrastructure Flexibility Power Generation
Ave
rag
e M
W
Gas to Petrobras
Gas to others
Power Generation in Brazil
+224% (3Q10 vs. 2Q10)
G&E Investments fully responded to higher demand
292
360
244
3Q09 3Q102Q10
Natural Gas sales (Th. boed)
+23% (3Q10 vs. 2Q10)
0
1000
2000
3000
4000
5000
6000
7000
Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10
Brazil: 6,252 MW
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12,303
1,108(580) (270)
(1,888)
10,673
o Higher Operating Revenue due to higher product sales volume in Brazilian market, metlargely by imports;
o Average inventory accounting increased COGS by R$ 580 million versus prior quarter;
o Increased operating expenses due primarily to non-recurrent items in 3rd Quarter: CollectiveBargaining Agreement (CBA) 2010/2011, terminating Barracuda financial structure, andIncentives Progam for employees to purchase shares in the Public Offering.
(R$ Million)
OPERATING INCOME 3Q10 vs 2Q10
2Q10Operating Income
Operat. Net
Revenue
Other COGS
Operating Expenses
3Q10Operating Income
- CBA 2010/2011: R$ 634 million
- Barracuda: R$ 486 million
- Employees incentives: R$ 92 million
Inventory Effect
(COGS)
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8,295 (1,630)
2,598460 (634)
(523)8,566
NET INCOME 3Q10 vs 2Q10
*(1) Operating profit before financial income and participation in investments
(R$ Million)
o Higher financial results (R$2,598 million), due to q/q 6% valuation of Real on net debt;
o Equity income and Minority Interest also a consequence of Real strengthening;
o Increase in tax expenses as a consequence of higher operating income;
o Lower operating income offset by financial results, leading to 3% increase in net income.
2Q10Net Income
Financial Result
TaxesEquity Income
Operating Income
3Q10Net Income
Minority Interest and
Employees Part.
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11,572 (930)
125
1,095 (506)(1,081)
10,275
EXPLORATION & PRODUCTION 3Q10 vs 2Q10Operating Income
(R$ Million)
Cost Effecton COGS
Volume Effect on COGS
Operating Expenses
3Q10Operating Income
2Q10Operating Income
Volume Effect on Revenue
Price Effect on Revenues
Reduction in operating income due to:
o Lower sales prices in the domestic market for oil and natural gas (oil: -2%; NG: -25%,in US$/bbl);
o Higher volumes reflect sales from inventory during 3Q.
o Higher operating expenses reflect CBA (R$ 225 Million), Barracuda project structure(R$ 486 Million)
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244 (925)
2,497
474 (365)
(211)1,714
DOWNSTREAM 3Q10 vs 2Q10Operating Income
(R$ Million)
Cost Effecton COGS
Volume Effect on COGS
Operating Expenses
3Q10Operating Income
2Q10Operating Income
Volume Effect on Revenue
Price Effect on Revenues
o Higher sales volumes from increasing domestic demand;
o Lower cost of goods sold due to lower oil acquisition/transfer prices in the 3Q10 andhigher oil product import costs in the 2Q10, explain positive effect on cost;
o Positive effect on COGS due to lower acquisition/transfer prices and oil productimport costs;
o Operating expenses higher because of CBA 2010/11 (R$ 136 Million).
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In
tern
ati
on
al
Dis
trib
uti
on
3Q10
R$ 437 million
2Q10
R$ 600 millionVS.
FPSO Campo de Akpo
35 %
27 %
META DE ENDIVIDAMENTO:
Oferta Pública de Ações melhora indicadores da Cia.
Gas &
Po
wer
3Q10
R$ 264 million
2Q10
R$ 522 million
VS.49 %
o Higher exploratory costs;
o Higher write-off of dry or economically unviable wells in Angola,Nigeria, the USA and Argentina.
o Increase of 10% on sales volume;
o Benefited from non-occurrence of expenses from the settlement ofICMS tax debits, as occurred in the previous quarter.
o Natural Gas: Lower margins due to sales to volumes;
o Energy: Lower result in energy commercialization due to increase inspot price (PLD) offset by higher thermoeletric generation;
o Non-recurring write-offs reduced operating income: ICMS Tax (-R$90million); GTL Pilot Plant (-R$ 50 million), CBA 2010/2011 (-R$ 30million), lower thermoeletric idleness (+R$45 million).
GAS & POWER, INTERNATIONAL and DISTRIBUITION
(3Q10 vs 2Q10)
Operating Results :
Operating Results:3Q10
R$ 526 million
2QT10
R$ 390 millionVS.
Operating Results:
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Investiments 9M10 R$ 56.5 billion
5,6
6,1
24,710,1
0,05
1,3
1,1
3,8
Investiments 9M09R$ 50.7 billion
6.5
0.4
5.5
4.5
10.6
23.2
3.7
0.54.4
24.1
20.6
3.4 E&P
Downstream
Gas & Power
International
RTC
Others
Investments in Downstream for 9M10: R$ 20,582 million
INVESTMENTS 9M10 vs 9M09:
19%
13%
27%
2%
12%
27%
Quality/Sulfer Content
Conversion
New Units
Fleet Expansion
Investments in Braskem
Plangas, Maintenance,infrastructure,HSE
and others
•Quality improvements (sulfur removal);
•Maintenance, HSE, operating efficiencies logistics;
•Expansion of refining capacity.
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R$ 120.2 Billion: Public Offering
R$ 115.1 billion: 3Q10
R$ 5.2 Billion: 4Q10 Cash
R$ 67.8 Billion: LFTs
R$ 47.2 Billion:Cash
R$ 74.8 Billion
to acquire rights
to 5 billion barrels
R$ 67.8 B: LFTs
R$ 7.0 Billion: Cash
R$ 10.7 Billion: LFTs*
R$ 29.5 Billion: Cash
*Government securities with a maturity greater than 90 days.
R$ Billion 06/30/2010
Cash and Cash Equivalents(Adjusted by LFT) 24.2
Net Debt 94.2
Net Debt / Net Capitalization 34%
Net Debt/Ebitda 1.52X
09/30/2010
58.0
57.1
16%
0.94X
Before Public Offering After Public Offering
PUBLIC OFFERING RECONCILIATION
R$ 45.5 Billion
Retained as cash
and equivalents
Gre
en
Sh
oe
