Petróleo Brasileiro's Management Discusses Q4 2011 Results - Earnings Call Transcript

Petróleo Brasileiro S.A. – Petrobras (

PBR

)

Q4 2011 Earnings Call

February 14, 2012 9:00 AM ET

Executives

Theodore Helms – Executive Manager, IR

Almir Guilherme Barbassa – CFO and IR

Analysts

Frank McGann – Bank of America

Marcel (ph)

Emerson Leite – Credit Suisse

Gustavo Gattass – BTG

Felipe dos Santos – JP Morgan

Christian Audi – Santander

Unidentified Company Representative

Denis Parisien – Deutsche Bank

Pedro Medeiros – Citigroup

Robert Kessler – Tudor Pickering Holt

Presentation

Operator

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Ladies and gentlemen, thank you for standing by, and welcome to the Petrobras conference call to discuss the fourth quarter 2011 results. At this time, all lines are in a listen-only mode. Later there will be a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded.

Today with us we have Mr. Almir Guilherme Barbassa, Petrobras CFO and Investor Relations Officer, and his staff. At this time, I would like to turn the conference over to Mr. Theodore Helms, Investor Relations Executive Manager of Petrobras, who has some additional comments. Please go ahead, Mr. Helms.

Theodore Helms

Good morning, ladies and gentlemen. Welcome to our conference call to discuss fourth quarter 2011 and year end results. We have a simultaneous webcast on the Internet that can be accessed at the site www.petrobras.com.br/ir.

Before proceeding, I’d like to draw your attention to the slide number two. We may make forward-looking statements which are identified by the use of the words will, expect and similar that are based on the beliefs and assumptions of Petrobras management and on information currently available to the company.

The conference call will be conducted by our CFO, Mr. Almir Barbassa. He will comment on the company’s operating and financial highlights and the main events during this quarter, and he will be available to answer any questions you may have.

Almir, please begin.

Almir Guilherme Barbassa

Good morning or good afternoon for everyone. Thank you for being with us in one more conference on our results of 2011 and the fourth quarter of 2011.

Starting with the highlights of the company, we can read in the spots, in the numbers and figures, we have here what is the performance of the company. We keep growing our reserves. We have a reserve replacement ratio of 148%, keeping our higher, long life of production year 18, 19 years, increasing the production of oil in Brazil. In total, the oil equivalent and mainly gas, we have increased by 18% mainly from Brazil because we finished the construction of some important pipeline that allowed for delivering this gas to the market.

Curaçao is contributing heavily to the increase of production. Our share of the production increase out today is 133,000 barrels per day, not including our partners here. With the partners we reach production near 200,000. And we have some new platforms and units that will come to production during 2012, including the new pilot on the Sapinhoá. Sapinhoá is the new name given to the field of Guará. Where we used to say Guará Area, now we have Sapinhoá. That was declared as commercially viable with proved reserves of 2.1 billion barrels of oil.

We keep selling more and more to the Brazilian market. That is growing and presented a 9% increase on 2011 over 2010. And in 2010 we had an increase of about 10% in average, so two exceptional years for the market. And our investment is kept in the range of R$70 billion, what allows for the growth of the company as projected. In dollars, this is near $45 billion, what means the R$224 billion as programmed for the five years plan.

Next, looking at the proven reserves, we can see that Petrobras is essentially a Brazilian company and with a large share of reserves in deep and ultradeep waters. We are growing the proven reserves in Brazil. In the last 20 years, we had reserve replacement higher than 100%, what means every year we were adding some new proved reserves to our total proved reserves, keeping our reserve production very few of 19 years.

Next, the exploratory activity has been very successful in Petrobras, with a success index higher than 50%, adding new fields offshore in the pre-salt and post-salt in Brazil. And this is contributing to add potential new reserves of cost lower than $2. In 2011, the average was $1.55, $1.56 per barrel of new oil found. We are expecting 2012 to present around $2.

And we are increasing our expenditures in exploration, with increasing from R$9 billion to R$10 billion dedicated to exploratory activities. We are increasing the number of wells we are going to do offshore, from 47 in 2011 to 66 in 2012, and this is a reflection of the availability of new rigs as we are going to discuss in more detail next slides. Next please.

The production in Brazil increased substantially in the last quarter, and you can see that the main contribution came from stoppages. The volume we lost in the third quarter on stoppages programmed and unprogrammed was 79,000 barrels per day, and in the fourth quarter it reduced to 24,000. This is important. And there is a new wells that were connected from the Varredura project discoveries that in the (inaudible) of areas that are producing and connecting wells to the existing platforms. We were able to add new production of more than 40,000 barrels per day during the year.

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