This summary is based on the third quarter fiscal 2007 earnings call conducted by Petrobras. (PBR) on November 13, 2007.
Management:
Director of IR: Theodore M. Helms
CFO and IR Officer: Almir Guilherme Barbassa
Director of Gas & Energy: Ildo Luis Sauer
Key Investors Issues
- Net revenue increased to R$45 billion sequentially as a result of increased demand for deliverables in Brazil.
- The projected target for annual oil production in 2008 is two million barrels per day, which is below previously announced guidance.
- Domestic oil and NGL production was up 0.45% to 1,797 bpd,
Year-to-date Highlights:
Production increased by 2% from the prior year as delays in bringing new production system on stream and unexpected platform stoppage had caused average production to fall below previously announced target.
- P-50 added on average 148,000 bpd to production as compared with 2006, and FPSO, Capixaba has added 38,000 bpd to the average.
- The reserve oil performance of this area has been below expectation and consequently the platforms production capacity of 100,000 bpd has not been reached nor moved.
- The firm is now analyzing the possibility of timing order wells from neighboring fields to clearly utilize the platform''s production capacity.
P-34, after a series of capacity delays related to the pumping system is now producing 57,000 bpd versus capacity of 60,000 bpd.
- FPSO-Cidade do Rio de Janeiro in the Espadarte field experienced delays in completing their five first wells as well as some gas leak issues, however, these issues are now resolved and production from the platform is expected to increase from the total range of about 6000 bpd to 100,000 bpd by the first semester of 2008.
- The addition of capacity of these platforms which added 203,000 bpd of new production compared to its nine months period a year ago was largely offset by the natural decline rate from existing systems of 170,000 bpd.
- Golfinho Module 2 is currently moved and the firm expects first oil soon.
- P-54 has been towed to its production site and is currently being moored with first oil expected in December with one well. Peak production from this unit will be reached by the second half of 2008 representing a very positive growth in production profile next year.
The projected target for annual oil production in 2008 is two million barrels per day, and this is below the previously announced guidance of 1,840,000 bpd in 2007 and 2,060,000 in 2008.
- The firm prudently expects first volume from P-51 in June of 2008 and P-52 and FPSO-Cidade do Rio de Janeiro by December 2008.
- Most of the production for strong units will be felt in 2009 and this all provides strong follow-in support for the production growth expected from P-52 and P-54 for next year.
- Phase two of Peroá Fase 2 will add 5 million cubic meters during 2008 with first gas from this development to accrue in November 2007 this month.
- Additionally the first gas from Camarupim is expected in December of 2008 and will have a nominal capacity of 50 million cubic meters of that to date or equivalent to 98,000 bpd of oil equivalent.
Given the growing demand in Brazil for gas and the lead time to blend new source of supply to the market, the company has engaged in a policy of increased gas price.
- The firm recently announced that it expects to raise price for natural gas an additional 15% to 25% on average during next year to bring the gas price into levels that more closely represent the cost of alternative source of energy.
- The REDUC extension facilities continue to move forward and the firm expects to have the regasification capacity of 20 million cubic meters per day available by the end of next year.
Domestic refining sectors:
- Demand for product volumes increased by 3.3% while output from refined product increased by 0.6%.
- The improvement in throughput since last year is a result of the completion of the upgrade of REVAP refinery which has increased reliability and the capacity.
- The firm continues to invest in improving refining margins in Brazil primarily by building delayed cokers that will process more of the domestic head crude oil and permanently increasing diesel production and reducing fuel oil output.
Net revenue increased to R$45 billion as a result of increased demand for deliverables in Brazil.
- The additional demand to offset price by an increase in imports increased the cost of goods sold.
- Higher sales costs related to higher sales volume and higher general and administrative costs of 50 million reais reduced EBITDA to 13.1 billion reais leading to an inflow decline in operating income.
- Net income decreased to R$5.5 billion due to higher sales costs.
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In the E&P segment the higher value of fuel in general and a smaller light/heavy differential led to higher price for revenue.
- These additional revenues were more than offset by the higher cost of product sold primarily high light crude oil and product need to meet the increased domestic demand.
- Declining refining costs to $2.55 were due to fewer programs and refineries shutdown and partially offset the previous increase.
- The new production system coming online in the fourth quarter of this year and in 2008 from that refinery investment and international expansion has all contributed to an increase of 35% in the investment as compared to 2006.
– The firm purchased 2.9 billion reais of long-term Brazilian Government loans to hedge the existing liability of the Petros fund.
Update on the Tupi Area:
- The firm recently announced that Tupi area in the block BMS-11 is escalated to contain 5 to 8 billion barrels of oil recoverable and also disclosed that it has now drilled a total of 15 wells in the pre-salt areas and passed 8 of these wells.
- Based on the performance of these past wells, all the oil produced from them, the firm is confident in its hypothesis that the pre-salt extend 800 kilometers from north to south, and it is some 200 kilometers wide and located in waters'' depth of between 1500 and 1300 meters.
- The technological challenges the firm anticipates on this site will be focused on how to reduce the cost of development and operation.
- Early indications from the test wells indicate that the oil to gas production split from the field will be approximately 18 to 20.
- With respect to future production on these areas, the firm expects to have 100,000 barrels per day pilot program by 2011.
