PBR Petroleo Brasileiro ADR

Key Financial Information

Sales Revenues

 

Sales revenues were US$ 27,189 million for the period Jan-Mar/2022, a 73.2% increase (US$ 11,491 million) when compared to US$ 15,698 million for the period Jan-Mar/2021, mainly due to:

* It includes short-term leases and inventory turnover.

Cost of sales was US$ 12,779 million for the period Jan-Mar/2022, an 66.1% increase (US$ 5,088 million) when compared to US$ 7,691 million for the period Jan-Mar/2021, mainly due to:

Selling expenses were US$ 1,178 million for the period Jan-Mar/2022, a 24.3% increase (US$ 230 million) compared to US$ 948 million for the period Jan-Mar/2021, mainly due to higher volume sold and more expenses related to natural gas, whose contracts were readjusted.

General and administrative expenses were US$ 299 million for the period Jan-Mar/2022, a 9.5% increase (US$ 26 million) compared to US$ 273 million for the period Jan-Mar/2021, mainly due to inflation.

In Jan-Mar/2022, the Company recognized net impairment reversals amounting to US$ 1 million, due to the disposal of drilling rigs which were no longer in use and to the leasing of Termocamaçari thermoelectric plant to third parties. In Jan-Mar/2021, US$ 90 million impairment losses were recognized, mainly due (i) a US$ 122 million loss arising from the decision to discontinue the use of the P-33 platform in the Marlim field, and (ii) a US$ 27 million impairment reversal arising from the decision to use certain equipment that were previously part of platforms P-72 and P-73 in producing fields in the Santos basin.

 

Net finance income (expense)

Net finance income (expense) was an income of US$ 596 million for the period Jan-Mar/2022, an increase of US$ 6,235 million compared to an expense of US$ 5,639 million for the period Jan-Mar/2021, mainly due to:

Income tax expenses

Income tax was an expense of US$ 4,566 million in Jan-Mar/2022, compared to an expense of US$ 319 million in Jan-Mar/2021, mainly due to higher net income before income taxes (US$ 13,214 million of income in Jan-Mar/2022 compared to a US$ 519 million income in Jan-Mar/2021), resulting in nominal income taxes computed based on Brazilian statutory corporate tax rates (34%) of US$ 4,492 million in Jan-Mar/2022 compared to a US$ 176 million in Jan-Mar/2021.

Net Income (loss) attributable to shareholders of Petrobras

Net income (loss) attributable to shareholders of Petrobras was a net income of US$ 8,605 million for the period Jan-Mar/2022, a US$ 8,425 million increase compared to a net income of US$ 180 million for the period Jan-Mar/2021, mainly due to business performance improvement, led by higher oil prices and increased margins.

CAPITAL EXPENDITURES (CAPEX)

Capital expenditures, or CAPEX, is based on the cost assumptions and financial methodology adopted in our strategic plans, which includes acquisition of intangible assets and property, plant and equipment, investment in investees and other items that do not necessarily qualify as cash flows used in investing activities, comprising geological and geophysical expenses, research and development expenses, pre-operating charges, purchase of property, plant and equipment on credit and borrowing costs directly attributable to works in progress.

 

We invested a total of US$ 1,768 million in Jan-Mar/2022, of which 77.7% was in the E&P segment, a 7.6% decrease when compared to our Capital Expenditures of US$ 1,913 million in Jan-Mar/2021. In line with our Strategic Plan, our Capital Expenditures were primarily directed toward investment projects in which Management believes are most profitable, relating to oil and gas production.

In Jan-Mar/2022, investments in the E&P segment totaled US$ 1,374 million, mainly concentrated on: (i) the development of ultra-deep water production in the Santos Basin pre-salt complex (US$ 500 million); (ii) development of new projects in deep water (US$ 200 million); and (iii) exploratory investments (US$ 100 million).

 

* Free cash flow (FCF) is in accordance with the Shareholder Remuneration Policy, which is the result of the equation: FCF = net cash provided by operating activities less acquisitions of PP&E and intangible assets.

As of March 31, 2022, the balance of Cash and cash equivalents was US$ 17,232 million and Adjusted Cash and Cash Equivalents totaled US$ 18,491 million.

The three-month period ended March 31, 2022 had net cash provided by operating activities of US$ 10,308 million and positive free cash flow of US$ 7,932 million. This level of cash generation, together with proceeds from disposal of assets (divestments) of US$ 1,753 million, financial compensation for the Búzios co-participation agreement of US$ 61 million and proceeds from finance debt of US$ 150 million, were allocated to: (a) debt prepayments and to amortizations of principal and interest due in the period of US$ 2,058 million; (b) repayment of lease liability of US$ 1,321 million; and (c) acquisition of PP&E and intangibles assets of US$ 2,376 million.

The Company repaid several finance debts, in the amount of US$ 2,058 million, notably US$ 679 to repurchase and withdraw global bonds previously issued by the Company in the capital market.

 

In the first quarter of 2022, the Company’s maintained its liability management strategy to improve the debt profile and to adapt to the maturity terms of the Company’s long-term investments.

The cash flow generation and continuous liability management allowed a reduction in our indebtedness. Gross Debt decreased 0.3% (US$ 189 million) to US$ 58,554 million on March 31, 2022 from US$ 58,743 million on December 31, 2021. Gross Debt was lower than the US$ 60,000 million target established for 2022, mainly due to debt prepayments and amortizations.

Net Debt was reduced by 15.9% (US$ 7,554 million), reaching US$ 40,072 million on March 31, 2022, compared to US$ 47,626 million on December 31, 2021.

 

RECONCILIATION OF LTM ADJUSTED EBITDA, GROSS DEBT/ LTM ADJUSTED EBITDA AND NET DEBT/LTM ADJUSTED EBITDA METRICS

LTM Adjusted EBITDA reflects the sum of the last twelve months of Adjusted EBITDA, which is computed by using the EBITDA (net income before net finance income (expense), income taxes, depreciation, depletion and amortization) adjusted by items not considered part of the Company’s primary business, which include results in equity-accounted investments, reclassification of comprehensive income (loss) due to the disposal of equity-accounted investments, results from disposal and write-offs of assets and on remeasurement of investment retained with loss of control, impairment and results from co-participation agreements in bid areas.

LTM Adjusted EBITDA represents an alternative to the company's operating cash generation. This measure is used to calculate the metrics Gross Debt/LTM Adjusted EBITDA and Net Debt/LTM Adjusted EBITDA, to support management’s assessment of liquidity and leverage.

 

 

Gross Debt/LTM Adjusted EBITDA and Net Debt/LTM Adjusted EBITDA Metrics

The Gross Debt/LTM Adjusted EBITDA ratio and Net debt/LTM Adjusted EBITDA ratio are important metrics that support our management in assessing the liquidity and leverage of Petrobras Group. These ratios are important measures for management to assess the Company’s ability to pay off its debt, mainly because Gross Debt is a Top Metric of our Strategic Plan 2022-2026.

The following table presents the reconciliation for those metrics to the most directly comparable measure derived from IFRS captions, which is in this case the Gross Debt Net of Cash and Cash Equivalents/Net Cash provided by operating activities ratio:

 

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In the period Jan-Mar/2022, the gross profit of E&P segment was US$ 12,008 million, an increase of 86.7% in relation to the period Jan-Mar/2021, due to higher sales revenues, which reflect mainly higher Brent prices.

The operating income of US$ 11,975 million in the period Jan-Mar/2022 was mainly due to the increase in Brent prices and the lower net other expenses, reflecting mainly the gain with sale of Alagoas Cluster and lower exploration costs.

In the period Jan-Mar/2022, the increase in production taxes was caused primarily by the rise in Brent prices, in relation to the Jan-Mar/2021 period.

Operational information

Production of crude oil, NGL and natural gas was 2,796 mboed in the period Jan-Mar/2022, representing a 1.1% increase compared to Jan-Mar/2021, due to the continuity of the ramp up of FPSO Carioca (Sépia field), P-67 (Tupi field), P-68 (Berbigão and Sururu field) and P-70 (Atapu field), partially compensated by natural decline in production, divestments of fields concluded over 2021 and early 2022 and loss caused by maintenance stoppages.

 

For the period Jan-Mar/2022, Refining, Transportation and Marketing gross profit was US$ 1,002 million higher than in the period Jan-Mar/2021. In Jan-Mar/2022 Brent prices appreciated which resulted in a higher gross profit margin as inventory was purchased earlier, at lower prices, and also due to higher margins of diesel, gasoline, and jet fuel, according to the elevation on international margins.

The operating income for the period Jan-Mar/2022 reflects higher gross profit partially offset by higher expenses mainly due to the higher sales expenses related of fuel oil, and the positive effect of the reversal of taxes expenses provisions through adhering to amnesty programs that occurred in Jan-Mar/21 with no equivalent event in Jan-Mar/22.

The refining cost in the period Jan-Mar/2022 was US$ 1.77/bbl, 9.9% higher than in the period Jan-Mar/2021, due to the effects of a stronger real in comparison to the US dollar and to an increase in maintenance of our refining park in the last period focused on improving the reliability of our industrial operations.

Operational information

Domestic sales in the period Jan-Mar/2022 were 1,700 mbbl/d, an increase of 2.0% compared to Jan-Mar/2021, mainly due to the growth in Gasoline and Jet Fuel sales between periods, partially offset by lower sales of Diesel, Liquefied Petroleum Gas and Fuel Oil.

Gasoline sales grew 17.3% due to the increase in the share of gasoline over hydrated ethanol in flex-fuel vehicles since the price relationship led consumer’s preference for the former, and to the negative effect of COVID-19 on sales in the period Jan-Mar/2021, resulting from the restrictive measures associated with the pandemic.

Jet Fuel sales increased 33.4% mainly due to the negative effect of COVID-19 on the aviation market in the period Jan-Mar/2021, resulting from the restrictive measures associated with the pandemic.

Diesel and Liquefied Petroleum Gas had 2.1% and 11.9% reduction in sales volume in Jan-Mar/2022, respectively, compared to Jan-Mar/2021, mainly due the impact of the divestment of the RLAM refinery on November 30, 2021. Fuel Oil sales decreased 33.7% due to lower demand for thermoelectric generation and due the impact of the divestment of RLAM refinery.

Total production of oil products for the period Jan-Mar/2022 was 1,726 mbbl/d, 5.2% below Jan-Mar/2021. Even though we have had a reduction in the volume produced due to the divestment of RLAM, it was partially compensated by increased output of our main refineries.

Processed feedstock for the period Jan-Mar/2022 was 1,653 mbbl/d, with a utilization factor of 87%, 6.1% above Jan-Mar/2021.

 

In Jan-Mar/2022, the gross profit of the Gas and Power segment was US$480 million, a decrease of 45.2% when compared to Jan-Mar/2021, mainly due to the increase in the gas acquisition costs, partially offset by higher average price of the natural gas sales portfolio, due to the increase in the Brent oil price and higher prices of new sales contracts in the non-thermoelectric segment.

In Jan-Mar/2022, despite the efforts to rebalance the natural gas portfolio, the operating loss was US$ 409 million, compared to an operating profit in Jan-Mar/2021, mainly due to lower gross profit and higher sales expenses, resulting from the annual adjustment of natural gas transportation tariffs. 

Operational information

In Jan-Mar/2022, electricity generation was 1,765 MW on average, a reduction of 38.4% compared to In Jan-Mar/2021, mainly due to the increase in the levels of hydroelectric plants reservoirs, which reduces demand for the electricity generated by the Gas and Power segment. Also, in the same period of comparison, there was a 16.6% reduction in the sales volume of thermal availability at auction, mainly due to the divestment of fuel oil plants in the Northeast in Jan-Mar/2022.

On the supply side, the delivery of domestic gas was reduced to 37 MM m³/day, mainly because of the expiration of the terms of Petrobras' purchase contracts with partners and third parties, which began to sell their gas directly to their customers, and also due to divestments in E&P in the Northeast. Additionally, there was a reduction of 9 MMm³/day in LNG regasification volumes, primarily due to lower gas demand for thermoelectric plants.

 

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