UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the

Securities Exchange Act of 1934

 

For the month of July, 2022

 

Commission File Number 1-15106

 

 

PETRÓLEO BRASILEIRO S.A. – PETROBRAS

(Exact name of registrant as specified in its charter)

 

Brazilian Petroleum Corporation – PETROBRAS

(Translation of Registrant's name into English)

 

Avenida Henrique Valadares, 28 – 19th floor 
20231-030 – Rio de Janeiro, RJ
Federative Republic of Brazil

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. 

Form 20-F ___X___ Form 40-F _______

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes _______ No___X____

 

 

 
 

 

 

 

Unaudited

Consolidated

Interim

Financial

Statements

 

As of June 30, 2022 and for the six-month periods ended June 30, 2022 and 2021 with report of independent registered public accounting firm

 

 

 

 

 
 

INDEX

PETROBRAS

 

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 3
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME 4
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 5
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS 6
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY 7
1. Basis of preparation 8
2. Summary of significant accounting policies 8
3. Cash and cash equivalents and Marketable securities 8
4. Sales revenues 9
5. Costs and expenses by nature 10
6. Other income and expenses 11
7. Net finance income (expense) 11
8. Net income by operating segment 12
9. Trade and other receivables 16
10. Inventories 17
11. Taxes 18
12. Employee benefits 20
13. Provisions for legal proceedings 25
14. Provision for decommissioning costs 29
15. Property, plant and equipment 30
16. Intangible assets 32
17. Impairment 34
18. Exploration and evaluation of oil and gas reserves 35
19. Collateral for crude oil exploration concession agreements 35
20. Investments 36
21. Assets by operating segment 36
22. Disposal of assets and other changes in organizational structure 37
23. Finance debt 41
24. Lease liabilities 43
25. Equity 44
26. Fair value of financial assets and liabilities 46
27. Risk management 46
28. Related-party transactions 51
29. Supplemental information on statement of cash flows 53
30. Subsequent events 53
Report of Independent Registered Public Accounting Firm 56

 

 

 

2  
 

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

PETROBRAS

As of June 30, 2022 and December 31, 2021 (Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Assets Note 06.30.2022 12.31.2021   Liabilities Note 06.30.2022 12.31.2021
Current assets         Current liabilities      
Cash and cash equivalents 3.1 16,287 10,467   Trade payables   5,528 5,483
Marketable securities 3.2 2,855 650   Finance debt 23.1 4,116 3,641
Trade and other receivables 9.1 5,048 6,368   Lease liability 24 5,224 5,432
Inventories 10 9,512 7,255   Income taxes payable 11.1 1,922 733
Recoverable income taxes 11.1 142 163   Other taxes payable 11.2 3,784 4,001
Other recoverable taxes 11.2 1,132 1,183   Dividends payable 25.2 4,633
Others   2,146 1,573   Employee benefits 12 2,007 2,144
    37,122 27,659   Others   3,641 1,875
              30,855 23,309
Assets classified as held for sale 22 5,792 2,490   Liabilities related to assets classified as held for sale 22 1,822 867
    42,914 30,149       32,677 24,176
                 
Non-current assets         Non-current liabilities      
Long-term receivables         Finance debt 23.1 26,935 32,059
Trade and other receivables 9.1 1,981 1,900   Lease liability 24 17,302 17,611
Marketable securities 3.2 49 44   Income taxes payable 11.1 310 300
Judicial deposits 13.2 9,716 8,038   Deferred income taxes 11.1 6,895 1,229
Deferred income taxes 11.1 548 604   Employee benefits 12 8,861 9,374
Other recoverable taxes 11.2 3,648 3,261   Provisions for legal proceedings 13.1 2,468 2,018
Others   574 487   Provision for decommissioning costs 14 15,474 15,619
    16,516 14,334   Others   2,081 2,150
              80,326 80,360
          Total liabilities   113,003 104,536
                 
          Equity      
Investments 20 1,717 1,510   Share capital (net of share issuance costs) 25.1 107,101 107,101
Property, plant and equipment 15 127,419 125,330   Capital reserve and capital transactions   1,144 1,143
Intangible assets 16 3,254 3,025   Profit reserves   76,055 72,811
    148,906 144,199   Accumulated other comprehensive (deficit)   (105,922) (111,648)
          Attributable to the shareholders of Petrobras   78,378 69,407
          Non-controlling interests   439 405
              78,817 69,812
Total assets   191,820 174,348   Total liabilities and equity   191,820 174,348
The notes form an integral part of these unaudited consolidated interim financial statements.

 

3  
 

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

PETROBRAS

Three and six-month periods ended June 30, 2022 and 2021 (Expressed in millions of US Dollars, unless otherwise indicated)

 

 

 

  Note Jan-Jun/2022 Jan-Jun/2021 Apr-Jun/2022 Apr-Jun/2021
           
Sales revenues 4 61,892 36,680 34,703 20,982
Cost of sales 5.1 (28,019) (17,849) (15,240) (10,158)
Gross profit   33,873 18,831 19,463 10,824
           
Income (expenses)          
Selling expenses 5.2 (2,425) (2,034) (1,247) (1,086)
General and administrative expenses 5.3 (622) (533) (323) (260)
Exploration costs 18 (123) (405) (44) (191)
Research and development expenses   (426) (264) (220) (147)
Other taxes   (152) (152) (93) (46)
Impairment of assets 17 (167) (180) (168) (90)
Other income and expenses 6 1,867 (393) 2,189 (109)
    (2,048) (3,961) 94 (1,929)
           
Income before net finance expense, results of equity-accounted investments and income taxes   31,825 14,870 19,557 8,895
           
Finance income   881 328 619 206
Finance expenses   (1,716) (3,079) (959) (1,871)
Foreign exchange gains (losses) and inflation indexation charges   (1,767) (869) (2,858) 3,684
Net finance income (expense) 7 (2,602) (3,620) (3,198) 2,019
           
Results of equity-accounted investments 20 341 1,209 (9) 1,026
           
Net income before income taxes   29,564 12,459 16,350 11,940
           
Income taxes 11.1 (9,875) (4,103) (5,309) (3,784)
           
Net income for the period   19,689 8,356 11,041 8,156
Net income attributable to shareholders of Petrobras   19,615 8,301 11,010 8,121
Net income attributable to non-controlling interests   74 55 31 35
Basic and diluted earnings per common and preferred share - in U.S. dollars 25.3 1.50 0.64 0.84 0.62
           
The notes form an integral part of these unaudited consolidated interim financial statements.

 

4  
 

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

PETROBRAS

Three and six-month periods ended June 30, 2022 and 2021 (Expressed in millions of US Dollars, unless otherwise indicated)

 

 

  Jan-Jun/2022 Jan-Jun/2021 Apr-Jun/2022 Apr-Jun/2021
Net income for the period 19,689 8,356 11,041 8,156
         
Items that will not be reclassified to the statement of income:        
         
Actuarial losses on post-employment defined benefit plans        
Recognized in equity 1,719 1,722
Deferred income tax (585) (585)
  1,134 1,137
         
Items that may be reclassified subsequently to the statement of income:        
         
Unrealized gains (losses) on cash flow hedge - highly probable future exports        
Recognized in equity 5,073 2,451 (6,523) 8,042
Reclassified to the statement of income 2,488 2,307 1,108 1,194
Deferred income tax (2,571) (1,617) 1,841 (3,140)
  4,990 3,141 (3,574) 6,096
         
Translation adjustments (*)        
Recognized in equity 614 869 (4,283) 1,682
Reclassified to the statement of income 34
  614 903 (4,283) 1,682
         
Share of other comprehensive income in equity-accounted investments        
Recognized in equity 145 141 (105) 253
         
Other comprehensive income (loss) 5,749 5,319 (7,962) 9,168
         
Total comprehensive income 25,438 13,675 3,079 17,324
Comprehensive income attributable to shareholders of Petrobras 25,341 13,651 3,102 17,299
Comprehensive income (loss) attributable to non-controlling interests 97 24 (23) 25
(*) It includes cumulative translation adjustments in associates and joint ventures.
The notes form an integral part of these unaudited consolidated interim financial statements.

 

 

 

5  
 

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

PETROBRAS

Six-month periods ended June 30, 2022 and 2021 (Expressed in millions of US Dollars, unless otherwise indicated)

 
  Note Jan-Jun/2022 Jan-Jun/2021
Cash flows from operating activities      
Net income for the period   19,689 8,356
Adjustments for:      
Pension and medical benefits (actuarial expense) 12 633 638
Results of equity-accounted investments 20.2 (341) (1,209)
Depreciation, depletion and amortization 8 6,630 5,678
Impairment of assets (reversal) 17 167 180
Inventory write-down (write-back) to net realizable value 10 3 (3)
Allowance (reversals) for credit loss on trade and other receivables   39 (4)
Exploratory expenditure write-offs 18 94 187
Disposal/write-offs of assets, remeasurement of investment retained with loss of control and reclassification of CTA   (846) (71)
Foreign exchange, indexation and finance charges     2,882 3,652
Deferred income taxes, net 11.1 1,989 3,883
Revision and unwinding of discount on the provision for decommissioning costs 14 295 389
PIS and COFINS recovery - exclusion of ICMS (VAT tax) from the basis of calculation   (4) (973)
Results from co-participation agreements in bid areas 16 (2,872)
Early termination and cash outflows revision of lease agreements   (401) (227)
Decrease (Increase) in assets      
Trade and other receivables   57 (735)
Inventories   (2,034) (1,579)
Judicial deposits   (816) (438)
Other assets   (652) (182)
Increase (Decrease) in liabilities      
Trade payables   (141) 340
Other taxes payable   6,905 2,463
Pension and medical benefits   (1,689) (1,663)
Provisions for legal proceedings   336 (35)
Short-term benefits   (366) (228)
Provision for decommissioning costs   (278) (325)
Other liabilities   627 92
Income taxes paid   (5,102) (119)
Net cash provided by operating activities   24,804 18,067
Cash flows from investing activities      
Acquisition of PP&E and intangible assets   (4,073) (3,135)
Investments in investees   (19) (11)
Proceeds from disposal of assets - Divestment   3,378 502
Financial compensation from co-participation agreements 16 5,213
Divestment (Investment) in marketable securities   (2,108) 91
Dividends received   242 200
Net cash provided by (used in) investing activities   2,633 (2,353)
Cash flows from financing activities      
Changes in non-controlling interest   (17) (14)
Proceeds from financing 23.3 330 1,668
Repayment of principal - finance debt 23.3 (5,477) (13,558)
Repayment of interest - finance debt 23.3 (916) (1,227)
Repayment of lease liability 24 (2,682) (2,899)
Dividends paid to Shareholders of Petrobras   (12,429) (1,848)
Dividends paid to non-controlling interests   (58) (39)
Net cash used in financing activities   (21,249) (17,917)
Effect of exchange rate changes on cash and cash equivalents   (374) 300
Net change in cash and cash equivalents   5,814 (1,903)
Cash and cash equivalents at the beginning of the period   10,480 11,725
       
Cash and cash equivalents at the end of the period   16,294 9,822
The notes form an integral part of these unaudited consolidated interim financial statements.
 

 

 

6  
 

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

PETROBRAS

Six-month periods ended June 30, 2022 and 2021 (Expressed in millions of US Dollars, unless otherwise indicated)

 
  Share capital (net of share issuance costs)   Accumulated other comprehensive income (deficit) and deemed cost Profit Reserves        
  Share Capital Share issuance costs Capital reserve, Capital Transactions and Treasury shares Cumulative translation adjustments Cash flow hedge - highly probable future exports Actuarial gains (losses) on defined benefit pension plans  Other comprehensive income (loss) and deemed cost Legal Statutory Tax incentives Profit retention Additional dividends proposed Retained earnings (losses) Equity attributable to shareholders of Petrobras Non-controlling interests Total consolidated equity
Balance at December 31, 2020 107,380 (279) 1,064 (73,936) (24,590) (15,034) (1,174) 8,813 2,900 1,102 51,974 1,128 59,348 528 59,876
    107,101 1,064       (114,734)         65,917 59,348 528 59,876
Capital increase with reserves 2 2
Capital transactions (691) (691) 750 59
Net income 8,301 8,301 55 8,356
Other comprehensive income (loss) 934 3,141 1,134 141 5,350 (31) 5,319
Appropriations:                                
Dividends (1,128) (1,128) (37) (1,165)
Balance at June 30, 2021 107,380 (279) 373 (73,002) (21,449) (13,900) (1,033) 8,813 2,900 1,102 51,974 8,301 71,180 1,267 72,447
    107,101 373       (109,384)         64,789 8,301 71,180 1,267 72,447
                                 
Balance at December 31, 2021 107,380 (279) 1,143 (75,122) (24,169) (11,205) (1,152) 9,769 3,084 1,220 52,050 6,688 69,407 405 69,812
    107,101 1,143       (111,648)         72,811 69,407 405 69,812
Capital transactions 1 1 (18) (17)
Net income 19,615 19,615 74 19,689
Other comprehensive income 591 4,990 145 5,726 23 5,749
Appropriations:                                
Dividends (1,503) (6,688) (8,180) (16,371) (45) (16,416)
Balance at June 30, 2022 107,380 (279) 1,144 (74,531) (19,179) (11,205) (1,007) 9,769 3,084 1,220 50,547 11,435 78,378 439 78,817
    107,101 1,144       (105,922)         64,620 11,435 78,378 439 78,817
                                 

The notes form an integral part of these unaudited consolidated interim financial statements. 

 

7  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

1. Basis of preparation
1.1. Statement of compliance and authorization of unaudited consolidated interim financial statements

These unaudited consolidated interim financial statements of Petróleo Brasileiro S.A. (“Petrobras” or “Company”) have been prepared and presented in accordance with IAS 34 – “Interim Financial Reporting” as issued by the International Accounting Standards Board (IASB). They present the significant changes in the period, avoiding repetition of certain notes to the annual consolidated financial statements previously reported. Hence, they should be read together with the Company’s audited annual consolidated financial statements for the year ended December 31, 2021, which include the full set of notes (2021 Financial Statements).

These unaudited consolidated interim financial statements were approved and authorized for issue by the Company’s Board of Directors in a meeting held on July 28, 2022.

2. Summary of significant accounting policies

The accounting policies and methods of computation followed in these unaudited consolidated interim financial statements are the same as those followed in the preparation of the annual financial statements of the Company for the year ended December 31, 2021.

The IFRS standards that became effective on January 1, 2022 resulted in no material effects on these unaudited consolidated interim financial statements.

Regarding the Interest Rate Benchmark Reform (IBOR Reform), in order to prepare for the transition to alternative reference rates, the Company continues to monitor the pronouncements of regulatory authorities, aimed at adapting its financial instruments to the new benchmark. The Company has debts indexed to Libor (London Interbank Offered Rate), corresponding to 33.7% of total finance debt (see note 23.4).

3. Cash and cash equivalents and Marketable securities
3.1. Cash and cash equivalents

They include cash, available bank deposits and short-term financial investments with high liquidity, which meet the definition of cash and cash equivalents.

  06.30.2022 12.31.2021
Cash at bank and in hand 231 299
Short-term financial investments    
- In Brazil    
Brazilian interbank deposit rate investment funds and other short-term deposits 6,072 1,951
Other investment funds 205 163
  6,277 2,114
- Abroad    
Time deposits 6,195 4,310
Automatic investing accounts and interest checking accounts 3,555 3,732
Other financial investments 29 12
  9,779 8,054
Total short-term financial investments 16,056 10,168
Total cash and cash equivalents 16,287 10,467

 

 

Short-term financial investments in Brazil primarily consist of investments in funds holding Brazilian Federal Government Bonds that can be redeemed immediately, as well as reverse repurchase agreements that mature within three months as of the date of their acquisition. Short-term financial investments abroad comprise time deposits that mature in three months or less from the date of their acquisition, highly-liquid automatic investment accounts, interest checking accounts and other short-term fixed income instruments.

 

8  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 
3.2. Marketable securities
  06.30.2022 12.31.2021
Fair value through profit or loss 622 650
Amortized cost 2,282 44
Total 2,904 694
Current 2,855 650
Non-current 49 44

 

 

Marketable securities classified as fair value through profit or loss refer mainly to investments in Brazilian Federal Government Bonds. These financial investments have maturities of more than three months and are generally classified as current assets due to their maturity or the expectation of their realization in the short term. Securities classified as amortized cost refer to investments abroad in time deposits with maturities exceeding three months from the contracting date and investments in floating-rate Bank Deposit Certificates (CDB) with daily liquidity, with maturity of one year.

4. Sales revenues
  Jan-Jun/2022 Jan-Jun/2021 Apr-Jun/2022 Apr-Jun/2021
Diesel 18,164 10,647 10,681 6,069
Gasoline 8,034 4,765 4,309 2,743
Liquefied petroleum gas 2,623 2,036 1,437 1,120
Jet fuel 2,391 827 1,400 401
Naphtha 1,335 693 724 362
Fuel oil (including bunker fuel) 718 723 352 388
Other oil products 2,890 1,883 1,615 1,005
Subtotal oil products 36,155 21,574 20,518 12,088
Natural gas 3,684 2,370 1,961 1,333
Oil 4,443 53 2,682
 Renewables  and nitrogen products 161 22 95 9
Breakage 274 161 170 94
Electricity 402 1,134 109 591
Services, agency and others 545 331 307 170
Domestic market 45,664 25,645 25,842 14,285
Exports 14,924 10,496 8,189 6,359
Oil 10,404 7,512 5,593 4,711
Fuel oil (including bunker fuel) 4,161 2,455 2,276 1,254
Other oil products 358 529 320 394
Sales  abroad (*) 1,305 539 672 338
Foreign market 16,228 11,035 8,861 6,697
Sales revenues (**) 61,892 36,680 34,703 20,982
(*) Sales revenues from operations outside of Brazil, including trading and excluding exports.
(**) Sales revenues by business segment are set out in note 8.

 

 

In the six-month periods ended June 30, 2022 and 2021, sales to Vibra Energia (formerly BR Distribuidora) represented more than 10% of the Company’s sales revenues, mainly associated with the refining, transportation and marketing segment.

5. Costs and expenses by nature
5.1. Cost of sales
  Jan-Jun/2022 Jan-Jun/2021 Apr-Jun/2022 Apr-Jun/2021
Raw material, products for resale, materials and third-party services (*) (13,769) (7,610) (8,008) (4,950)
Depreciation, depletion and amortization (5,344) (4,404) (2,782) (2,165)
Production taxes (8,093) (4,984) (4,029) (2,630)
Employee compensation (813) (851) (421) (413)
Total (28,019) (17,849) (15,240) (10,158)
(*) It Includes short-term leases and inventory turnover.

 

 

 

9  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 
5.2. Selling expenses
  Jan-Jun/2022 Jan-Jun/2021 Apr-Jun/2022 Apr-Jun/2021
Materials, third-party services, freight, rent and other related costs (1,948) (1,709) (1,000) (925)
Depreciation, depletion and amortization (417) (289) (217) (140)
Allowance for expected credit losses (14) 6 (6) 1
Employee compensation (46) (42) (24) (22)
Total (2,425) (2,034) (1,247) (1,086)

 

 

5.3. General and administrative expenses
  Jan-Jun/2022 Jan-Jun/2021 Apr-Jun/2022 Apr-Jun/2021
Employee compensation (414) (376) (216) (191)
Materials, third-party services, rent and other related costs (161) (112) (83) (48)
Depreciation, depletion and amortization (47) (45) (24) (21)
Total (622) (533) (323) (260)

 

 

6. Other income and expenses
  Jan-Jun/2022 Jan-Jun/2021 Apr-Jun/2022 Apr-Jun/2021
Unscheduled stoppages and pre-operating expenses (889) (651) (513) (351)
Gains (losses) with legal, administrative and arbitration proceedings (557) (275) (298) (326)
Pension and medical benefits - retirees (491) (439) (253) (221)
Performance award program (247) (195) (129) (101)
Losses with commodities derivatives (222) (42) (169) (19)
Profit sharing (65) (58) (34) (30)
Losses on decommissioning of returned/abandoned areas (27) (7) (3) (1)
Equalization of expenses - Production Individualization Agreements (9) (52) (37) (9)
Amounts recovered from Lava Jato investigation (**) 12 196 - 55
Recovery of taxes (*) 41 506 24 485
Fines imposed on suppliers 116 77 48 48
Reimbursements from E&P partnership operations 154 291 127 191
Early termination and changes to cash flow estimates of leases 401 226 176 157
Results on disposal/write-offs of assets and on remeasurement of investment retained with loss of control 846 104 370 56
Results from co-participation agreements in bid areas (***) 2,872 - 2,872 -
Reclassification of comprehensive income (loss) due to the disposal of equity-accounted investments - (33) - -
Others (68) (41) 8 (43)
Total 1,867 (393) 2,189 (109)
(*) In the three and six-month periods ended June 30, 2021, it Includes the effects of the exclusion of ICMS (VAT tax) from the basis of calculation of sales taxes PIS and COFINS, except for the effects of inflation indexation.
(**) The total amount recovered from Lava Jato Investigation through December 31, 2021 was US$ 1,522, recognized through collaboration and leniency agreements entered into with individuals and legal entities.
(***) It refers to the gain related to the Co-participation Agreement of Atapu and Sépia (see note 16.2).

 

 

 

10  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 
7. Net finance income (expense)
  Jan-Jun/2022 Jan-Jun/2021 Apr-Jun/2022 Apr-Jun/2021
Finance income 881 328 619 206
Income from investments and marketable securities (Government Bonds) 532 74 369 45
Other income, net 349 254 250 161
Finance expenses (1,716) (3,079) (959) (1,871)
Interest on finance debt (1,223) (1,656) (693) (904)
Unwinding of discount on lease liabilities (624) (592) (334) (297)
Discount and premium on repurchase of debt securities (110) (849) (84) (666)
Capitalized borrowing costs 535 478 297 266
Unwinding of discount on the provision for decommissioning costs (267) (384) (137) (195)
Other finance expenses , net (27) (76) (8) (75)
Foreign exchange gains (losses) and indexation charges (1,767) (869) (2,858) 3,684
Foreign exchange gains (losses) (*) 781 1,001 (1,640) 4,443
Reclassification of hedge accounting to the Statement of Income (*) (2,488) (2,307) (1,108) (1,194)
Recoverable taxes inflation indexation income  (**) 45 474 24 461
Other foreign exchange gains (losses) and indexation charges, net (105) (37) (134) (26)
Total (2,602) (3,620) (3,198) 2,019
(*) For more information, see notes 27.3a and 27.3c.
(**) In 2021, includes PIS and Cofins inflation indexation income related to the exclusion of ICMS (VAT tax) from the basis of calculation.

 

 

8. Net income by operating segment
Consolidated Statement of Income by operating segment
Apr-Jun/2022
  Exploration and Production (E&P) Refining, Transportation & Marketing (RT&M) Gas
 &
Power (G&P)
Corporate and other business Eliminations Total
Sales revenues 21,940 31,956 3,734 150 (23,077) 34,703
    Intersegments 21,572 498 1,009 (2) (23,077)
    Third parties 368 31,458 2,725 152 - 34,703
Cost of sales (8,176) (26,787) (2,366) (147) 22,236 (15,240)
Gross profit (loss) 13,764 5,169 1,368 3 (841) 19,463
Income (expenses) 2,519 (843) (816) (763) (3) 94
  Selling (3) (461) (776) (4) (3) (1,247)
  General and administrative (12) (42) (18) (251) - (323)
  Exploration costs (44) - - - - (44)
  Research and development (192) (3) - (25) - (220)
  Other taxes (24) (18) (9) (42) - (93)
  Impairment of assets (124) (44) - - - (168)
  Other income and expenses 2,918 (275) (13) (441) - 2,189
Income (loss) before net finance income (expense), results of equity-accounted investments and income taxes 16,283 4,326 552 (760) (844) 19,557
  Net finance income (expense) - - - (3,198) - (3,198)
  Results in equity-accounted investments 57 (95) 30 (1) - (9)
Net income / (loss) before income taxes 16,340 4,231 582 (3,959) (844) 16,350
  Income taxes (5,538) (1,470) (188) 1,599 288 (5,309)
Net income (loss) for the period 10,802 2,761 394 (2,360) (556) 11,041
Attributable to:            
Shareholders of Petrobras 10,803 2,761 368 (2,366) (556) 11,010
Non-controlling interests (1) 26 6 31

 

 

 

11  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

 

Consolidated Statement of Income by operating segment
Jan-Jun/2022
  Exploration and Production (E&P) Refining, Transportation & Marketing (RT&M) Gas
 &
Power (G&P)
Corporate and other business Eliminations Total
Sales revenues 41,624 56,641 7,099 276 (43,748) 61,892
    Intersegments 40,946 931 1,870 1 (43,748)
    Third parties 678 55,710 5,229 275 - 61,892
Cost of sales (15,852) (48,334) (5,251) (272) 41,690 (28,019)
Gross profit (loss) 25,772 8,307 1,848 4 (2,058) 33,873
Income (expenses) 2,486 (1,380) (1,705) (1,442) (7) (2,048)
  Selling (5) (869) (1,537) (7) (7) (2,425)
  General and administrative (24) (79) (34) (485) - (622)
  Exploration costs (123) - - - - (123)
  Research and development (365) (6) (3) (52) - (426)
  Other taxes (39) (25) (19) (69) - (152)
  Impairment of assets (123) (44) 1 (1) - (167)
  Other income and expenses 3,165 (357) (113) (828) - 1,867
Income (loss) before net finance income (expense), results of equity-accounted investments and income taxes 28,258 6,927 143 (1,438) (2,065) 31,825
  Net finance income (expense) - - - (2,602) - (2,602)
  Results in equity-accounted investments 108 176 59 (2) - 341
Net income / (loss) before income taxes 28,366 7,103 202 (4,042) (2,065) 29,564
  Income taxes (9,610) (2,355) (49) 1,435 704 (9,875)
Net income (loss) for the period 18,756 4,748 153 (2,607) (1,361) 19,689
Attributable to:            
Shareholders of Petrobras 18,758 4,748 101 (2,631) (1,361) 19,615
Non-controlling interests (2) - 52 24 - 74

 

 

12  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

 

Consolidated Statement of Income by operating segment
Apr-Jun/2021
  Exploration and Production (E&P) Refining, Transportation & Marketing (RT&M) Gas
 &
Power (G&P)
Corporate and other business Eliminations Total
Sales revenues 13,509 19,007 2,654 116 (14,304) 20,982
    Intersegments 13,271 338 633 62 (14,304)
    Third parties 238 18,669 2,021 54 - 20,982
Cost of sales (5,606) (16,737) (1,660) (114) 13,959 (10,158)
Gross profit (loss) 7,903 2,270 994 2 (345) 10,824
Income (expenses) (457) (523) (665) (278) (6) (1,929)
  Selling (5) (403) (669) (3) (6) (1,086)
  General and administrative (28) (39) (16) (177) - (260)
  Exploration costs (191) - - - - (191)
  Research and development (106) (3) (12) (26) - (147)
  Other taxes (23) (24) (24) 25 - (46)
  Impairment of assets (7) - (79) (4) - (90)
  Other income and expenses (97) (54) 135 (93) - (109)
Income (loss) before net finance income (expense), results of equity-accounted investments and income taxes 7,446 1,747 329 (276) (351) 8,895
  Net finance income (expense) - - - 2,019 - 2,019
  Results in equity-accounted investments 33 520 33 440 - 1,026
Net income / (loss) before income taxes 7,479 2,267 362 2,183 (351) 11,940
  Income taxes (2,531) (595) (111) (666) 119 (3,784)
Net income (loss) for the period 4,948 1,672 251 1,517 (232) 8,156
Attributable to:            
Shareholders of Petrobras 4,949 1,672 226 1,506 (232) 8,121
Non-controlling interests (1) - 25 11 - 35

 

 

 

13  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

 

Jan-Jun/2021
  Exploration and Production (E&P) Refining, Transportation & Marketing (RT&M) Gas
 &
Power (G&P)
Corporate and other business Eliminations Total
Sales revenues 25,175 32,980 4,862 271 (26,608) 36,680
    Intersegments 24,724 573 1,185 126 (26,608)
    Third parties 451 32,407 3,677 145 - 36,680
Cost of sales (10,840) (28,574) (2,992) (264) 24,821 (17,849)
Gross profit (loss) 14,335 4,406 1,870 7 (1,787) 18,831
Income (expenses) (979) (921) (1,411) (638) (12) (3,961)
  Selling (5) (738) (1,272) (7) (12) (2,034)
  General and administrative (60) (71) (33) (369) - (533)
  Exploration costs (405) - - - - (405)
  Research and development (191) (6) (17) (50) - (264)
  Other taxes (41) (63) (47) (1) - (152)
  Impairment of assets (102) - (79) 1 - (180)
  Other income and expenses (175) (43) 37 (212) - (393)
Income (loss) before net finance income (expense), results of equity-accounted investments and income taxes 13,356 3,485 459 (631) (1,799) 14,870
  Net finance income (expense) - - - (3,620) - (3,620)
  Results in equity-accounted investments 56 628 73 452 - 1,209
Net income / (loss) before income taxes 13,412 4,113 532 (3,799) (1,799) 12,459
  Income taxes (4,541) (1,185) (156) 1,167 612 (4,103)
Net income (loss) for the period 8,871 2,928 376 (2,632) (1,187) 8,356
Attributable to:            
Shareholders of Petrobras 8,873 2,928 330 (2,643) (1,187) 8,301
Non-controlling interests (2) - 46 11 - 55

 

 

 

14  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

The amount of depreciation, depletion and amortization by segment is set forth as follows:

  Exploration and Production (E&P) Refining, Transportation & Marketing (RT&M) Gas
 &
Power (G&P)
Corporate and other business Total
Jan-Jun/2022 5,258 1,114 207 51 6,630
Jan-Jun/2021 4,307 1,072 213 86 5,678
           
  Exploration and Production (E&P) Refining, Transportation & Marketing (RT&M) Gas
 &
Power (G&P)
Corporate and other business Total
Apr-Jun/2022 2,788 542 99 31 3,460
Apr-Jun/2021 2,137 532 107 46 2,822
           

 

 

9. Trade and other receivables
9.1. Trade and other receivables
  06.30.2022 12.31.2021
Receivables from contracts with customers    
Third parties 5,425 4,839
Related parties    
Investees (note 28.1) 303 385
Subtotal 5,728 5,224
Other trade  receivables    
Third parties    
Receivables from divestments (*) 1,075 2,679
Lease receivables 417 435
Other receivables 739 872
Related parties    
Petroleum and alcohol accounts - receivables from Brazilian Federal Government 582 506
Subtotal 2,813 4,492
Total trade and other receivables, before ECL 8,541 9,716
Expected credit losses (ECL) - Third parties (1,503) (1,428)
Expected credit losses (ECL) - Related parties (9) (20)
Total trade and other receivables 7,029 8,268
Current 5,048 6,368
Non-current 1,981 1,900
(*) At June 30, 2022, it mainly refers to the receivables from the divestments of Rio Ventura, Roncador, Baúna, Miranga, Maromba, Pampo and Enchova, Sépia and Atapu fields.

 

 

Trade and other receivables are generally classified as measured at amortized cost, except for receivables with final prices linked to changes in commodity price after their transfer of control, which are classified as measured at fair value through profit or loss, amounting to US$ 775 as of June 30, 2022 (US$ 1,155 as of December 31, 2021).

The change in Receivable from divestments was mainly due to the receipt of US$ 950 related to the final installment for the sale of block BM-S-8, and to the receipt of US$ 1,000, related to the final installment for the sale of the Company’s 90% interest in Nova Transportadora do Sudeste (NTS), partially offset by other receivables from divestments recorded in the period, such as from the Atapu and Sépia Co-participation Agreement (US$ 129) and from Pampo and Enchova fields (US$ 124).

 

15  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 
9.2. Aging of trade and other receivables – third parties
  06.30.2022 12.31.2021
  Trade and other receivables Expected credit losses Trade and other receivables Expected credit losses
Current 5,895 (78) 7,059 (77)
Overdue:        
1-90 days 186 (34) 218 (26)
91-180 days 24 (23) 40 (6)
181-365 days 22 (18) 51 (29)
More than 365 days 1,529 (1,350) 1,457 (1,290)
Total 7,656 (1,503) 8,825 (1,428)

 

 

9.3. Changes in provision for expected credit losses
 

2022

Jan-Jun

2021

Jan-Jun

Opening balance 1,448 1,596
Additions 72 42
Write-offs (21) -
Reversals (38) (75)
Cumulative translation adjustment 51 30
Closing balance 1,512 1,593
Current 190 199
Non-current 1,322 1,394

 

 

10. Inventories
  06.30.2022 12.31.2021
Crude oil 3,985 3,048
Oil products 3,252 2,495
Intermediate products 634 532
Natural gas and Liquefied Natural Gas (LNG) 617 349
Biofuels 23 19
Fertilizers 2 8
Total products 8,513 6,451
Materials, supplies and others (*) 999 804
Total 9,512 7,255
(*) It mainly comprises production supplies and operating materials used in the operations of the Company, stated at the average purchase cost, not exceeding replacement cost.

 

 

In the six-month period ended June 30, 2022, the Company recognized a US$ 3 loss within cost of sales, adjusting inventories to net realizable value (a US$ 3 reversal of cost of sales in the six-month period ended June 30, 2021) primarily due to changes in international prices of crude oil and oil products.

At June 30, 2022, the Company had pledged crude oil and oil products volumes as collateral for the Term of Financial Commitment (TFC) signed by Petrobras and Petros in 2008, amounting to US$ 3,213. This pledged amount is under assessment, due to the partial early settlement of the TFC relating to the Pension Difference and TFC Pre-70, made in February 2022. The Company expects the balance of the collateral to reach the balance of the financial commitment, which at June 30, 2022 is US$ 1,103, in compliance with what is provided for in the agreement for the TFC.

 

16  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 
11. Taxes
11.1. Income taxes
  Current assets Current liabilities Non-current liabilities
  06.30.2022 12.31.2021 06.30.2022 12.31.2021 06.30.2022 12.31.2021
Taxes in Brazil            
Income taxes 140 133 1,583 682 - -
Income taxes - Tax settlement programs - - 47 43 310 300
  140 133 1,630 725 310 300
Taxes abroad 2 30 292 8 - -
Total 142 163 1,922 733 310 300
             

 

 

Reconciliation between statutory income tax rate and effective income tax rate

The following table provides the reconciliation of Brazilian statutory tax rate to the Company’s effective rate on income before income taxes:

  Jan-Jun/2022 Jan-Jun/2021 Apr-Jun/2022 Apr-Jun/2021
Net income before income taxes 29,564 12,459 16,350 11,940
Nominal income taxes computed based on Brazilian statutory corporate tax rates (34%) (10,051) (4,236) (5,559) (4,060)
Adjustments to arrive at the effective tax rate:        
Tax benefits from the deduction of interest on capital distribution 383 - 383 -
Different jurisdictional tax rates for companies abroad 394 (70) 203 (93)
Brazilian income taxes on income of companies incorporated outside Brazil (*) (628) (199) (329) 6
Tax loss carryforwards (unrecognized tax losses) (1) (21) (10) 9
Non-taxable income (non-deductible expenses), net (**) 68 234 44 195
Post-employment benefits (186) (90) (44) (46)
Results of equity-accounted investments in Brazil and abroad 120 279 (3) 205
Others 26 - 6 -
Income taxes (9,875) (4,103) (5,309) (3,784)
Deferred income taxes (1,989) (3,883) (28) (3,683)
Current income taxes (7,886) (220) (5,281) (101)
Effective tax rate of income taxes 33.4% 32.9% 32.5% 31.7%
(*) It relates to Brazilian income taxes on earnings of offshore investees, as established by Law No. 12,973/2014.
(**) It includes provisions for legal proceedings.

 

 

Deferred income taxes - non-current

The composition of deferred tax assets and liabilities is set out in the following table:

 

17  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Nature Realization basis 06.30.2022 12.31.2021
PP&E - Exploration and decommissioning costs Depreciation, amortization and write-offs of assets (781) (1,362)
PP&E - Impairment Amortization, impairment reversals and write-offs of assets 4,643 4,382
PP&E - depreciation methods and capitalized borrowing costs Depreciation, amortization and write-offs of assets (15,461) (12,924)
Loans, trade and other receivables / payables and financing Payments, receipts and considerations 1,418 3,490
Lease liabilities Appropriation of the considerations 589 1,244
Provision for legal proceedings Payments and use of provisions 757 605
Tax loss carryforwards 30% of taxable income compensation 643 1,827
Inventories Sales, write-downs and losses 340 228
Employee Benefits Payments and use of provisions 1,216 1,250
Others   289 635
Total   (6,347) (625)
Deferred tax assets   548 604
Deferred tax liabilities (*)   (6,895) (1,229)
(*) Changes in deferred tax liabilities are mainly due to the offsetting of the tax losses carryforwards and negative basis of CSLL, and to the use of the benefit of accelerated tax depreciation.

 

 

The changes in the deferred income taxes are presented as follows:

  Jan-Jun/2022 Jan-Jun/2021
Opening Balance (625) 6,256
Recognized in the statement of income for the period (1,989) (3,883)
Recognized in shareholders’ equity (2,571) (2,202)
Cumulative translation adjustment (29) (58)
Use of tax loss carryforwards (1,137) -
Others 4 2
Closing balance (6,347) 115
 

 

 

11.2. Other taxes
  Current assets Non-current assets Current liabilities Non-current liabilities (*)
  06.30.2022 12.31.2021 06.30.2022 12.31.2021 06.30.2022 12.31.2021 06.30.2022 12.31.2021
Taxes in Brazil                
Current / Non-current ICMS (VAT) 714 665 388 379 752 995 - -
Current / Non-current PIS and COFINS (**) 322 418 2,339 2,030 295 499 66 45
Claim to recover PIS and COFINS - - 643 594 - - - -
CIDE 1 6 - - 26 42 - -
Production taxes - - - - 2,462 2,147 22 21
Withholding income taxes - - - - 56 86 - -
Tax Settlement Program - - - - 50 67 7 6
Others 41 48 269 249 111 142 80 70
Total in Brazil 1,078 1,137 3,639 3,252 3,752 3,978 175 142
Taxes abroad 54 46 9 9 32 23 - -
Total 1,132 1,183 3,648 3,261 3,784 4,001 175 142
(*) Other non-current taxes are classified as other non-current liabilities.
(**) It includes US$ 75 (US$ 104 as of December 31, 2021) related to exclusion of ICMS (VAT tax) in the basis of calculation of sales taxes PIS and COFINS (contributions for the social security).

 

 

Claim to recover PIS and COFINS

The Company filed four civil lawsuits, in the Regional Federal Court of the Second Region, against the Brazilian Federal Government, claiming to recover PIS and COFINS paid over finance income and foreign exchange variation gains, from February 1999 to January 2004.

The court granted to the Company, in all the lawsuits, the definitive right to recover those taxes. Two lawsuits have resulted in judicialized debts (precatórios) in the amounts claimed by the Company.

 

18  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

Regarding the two remaining cases, both had rulings by the court favorable to the Company and, in one of them, the Brazilian Federal Government has already expressed its agreement.

As of June 30, 2022, the Company had non-current receivables of US$ 643 (US$ 594 as of December 31, 2021) related to PIS and COFINS, which are indexed to inflation.

12. Employee benefits

Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees or for the termination of employment. It also includes expenses with directors and management. Such benefits include salaries, post-employment benefits, termination benefits and other benefits.

  06.30.2022 12.31.2021
Liabilities    
Short-term employee benefits 1,180 1,289
Termination benefits 224 349
Post-employment benefits 9,464 9,880
Total 10,868 11,518
Current 2,007 2,144
Non-current 8,861 9,374

 

 

12.1. Short-term employee benefits

Short-term benefits are expected to be settled wholly before twelve months after the end of the period in which the employees render the related service.

  06.30.2022 12.31.2021
Variable compensation program - PPP 272 461
Accrued vacation and 13th salary 600 440
Salaries and related charges and other provisions 244 270
Profit sharing 64 118
Total 1,180 1,289
Current 1,177 1,286
Non-current (*) 3 3
(*)Remaining balance relating to the four-year deferral of 40% of the PPP portion of executive managers.
     

 

In the three and six-month periods ended June 30, 2022 and 2021, the Company recognized the following amounts in the statement of income:

  Jan-Jun/2022 Jan-Jun/2021 Apr-Jun/2022 Apr-Jun/2021
Salaries, accrued vacations and related charges (1,458) (1,310) (780) (657)
Variable compensation program - PPP (247) (195) (129) (101)
Profit sharing (65) (58) (34) (30)
Management fees and charges (5) (6) (2) (3)
Total (1,775) (1,569) (945) (791)

 

 

12.1.1. Variable compensation programs

Performance award program (PPP)

On September 17, 2021, the Company’s Board of Directors approved the pay-out criteria for granting PPP 2021 to employees.

The PPP 2021 model establishes that, in order to trigger this payment, it is necessary to have net income for the year and a declaration and payment of distribution to shareholders.

 

19  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

On December 15, 2021, the Company’s Board of Directors approved the pay-out criteria for the program for 2022, maintaining the criteria of the PPP 2021.

In the six-month period ended June 30, 2022, the main changes related to the PPP were:

· payment of US$ 504 relating to the PPP provisioned in 2021;
· provision of US$ 247 for the PPP related to 2022, accounted for within other income and expenses.

Profit Sharing (PLR)

At December 29, 2020, the 17 unions representing onshore employees of Petrobras had signed the agreement for the PLR for 2021 and 2022, before the deadline determined by the Collective Labor Agreement (ACT). Among the offshore employees, only one union had signed the agreement within the period defined by the ACT.

The current agreement for the PLR provides that only employees without managerial functions will be entitled to receive profit sharing with individual limits according to their remuneration. In order for the PLR to be paid for 2021 and 2022, the following requirements must be met: (i) dividend distribution to shareholders approved at the Annual General Shareholders Meeting, (ii) net income for the year, and iii) achievement of the weighted average percentage of at least 80% of a set of indicators.

The maximum amount of PLR to be distributed is limited to 5% of Adjusted EBITDA (a non-GAAP measure defined as net income plus net finance income (expense), income taxes, depreciation, depletion and amortization, results in equity-accounted investments, impairment, cumulative foreign exchange adjustments reclassified to the income statement, results from disposal and write-offs of assets, foreign exchange gains and losses resulting from provisions for legal proceedings denominated in foreign currencies and results from the compensation of investments in bid areas), to 6.25% of net income and to 25% of dividends distributed to shareholders, in each year, whichever is lower.

In the six-month period ended June 30, 2022, the main changes related to the PLR were:

· payment of US$ 129 relating to the PLR provisioned in 2021;
· provision of US$ 65 for the PLR related to 2022, accounted for within other income and expenses.
12.2. Termination benefits

Termination benefits are employee benefits provided in exchange for the termination of labor contract as a result of either: i) the Company’s decision to terminate the labor contract before the employee’s normal retirement date; or ii) an employee’s decision to accept an offer of benefits in exchange for the termination of their employment.

The Company has voluntary severance programs (PDV), specific for employees of the corporate segment and of divestment assets, which provide for the same legal and indemnity advantages.

During the second quarter of 2022, the wholly-owned subsidiary Transpetro launched a new voluntary severance program for its offshore employees, whose enrollment occurred between May 4, 2022 and July 14, 2022, and the deadline for the termination of employees will be December 3, 2022.

Thus, for the current programs, there are 11,539 adhesions accumulated through June 30, 2022 (11,418 through December 31, 2021).

Changes in the provision for expenses relating to voluntary severance programs are set out as follows:

 

20  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

  Jan-Jun/2022 Jan-Jun/2021
Opening Balance 349 900
Effects in the statement of income 4 (8)
Enrollments 4 26
Revision of provisions (34)
Effects in cash and cash equivalents (155) (123)
Terminations in the period (155) (123)
Cumulative translation adjustment 26 25
Closing Balance 224 794
Current 123 685
Non-current 101 109

 

 

Recognition of the provision for expenses occur as employees enroll to the programs.

The Company disburse the severance payments in two installments, one at the time of termination and the remainder one year after the termination.

As of June 30, 2022, from the balance of US$ 224, US$ 48 refers to the second installment of 852 retired employees and US$ 176 refers to 1,807 employees enrolled in voluntary severance programs with expected termination by December 2023.

12.3. Post-employment benefits

The Company maintains a health care plan for its employees in Brazil (active and retiree) and their dependents (Saúde Petrobras), and five other major types of post-employment pension benefits (collectively referred to as “pension plans”).

The following table presents the balance of post-employment benefits:

  06.30.2022 12.31.2021
Liabilities    
Health Care Plan 4,919 4,485
Petros Pension Plan - Renegotiated (PPSP-R) 3,101 3,233
Petros Pension Plan - Non-renegotiated (PPSP-NR) 702 658
Petros Pension Plan - Renegotiated - Pre-70 (PPSP-R Pré 70) 300 817
Petros Pension Plan - Non-renegotiated - Pre-70 (PPSP-NR Pré 70) 249 511
Petros 2 Pension Plan (PP-2) 192 165
Other plans 1 11
Total 9,464 9,880
Current 706 651
Non-current 8,758 9,229

 

 

Health Care Plan

The health care plan is managed by Petrobras Health Association (Associação Petrobras de Saúde – APS), a nonprofit civil association, and includes prevention and health care programs. The plan covers all employees and retirees, and is open to future employees.

Benefits are paid by the Company based on the costs incurred by the participants. The financial participation of the Company and the beneficiaries on the expenses are provided for in the Collective Bargaining Agreement (ACT), being 60% by the Company and 40% by the participants.

Pension plans

The management of the Company's supplementary pension plans is under the responsibility of Fundação Petrobras de Seguridade Social – Petros, which was established by Petrobras as a non-profit, private legal entity with administrative and financial autonomy.

The net obligation with pension plans recorded by the Company is measured in accordance with the requirements of IFRS which has a different measurement methodology to that applicable to pension funds, regulated by the Post-Retirement Benefit Federal Council (Conselho Nacional de Previdência Complementar – CNPC).

The table below presents the reconciliation of the surplus of Petros Plan registered by Petros Foundation as of December 31, 2021 with the net actuarial liability registered by the Company:

 

21  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

  PPSP-R (*) PPSP-NR (*)
Surplus registered by Petros 1,388 139
Financial assumptions (1,120) (364)
Ordinary and extraordinary sponsor contributions 2,190 652
Changes in fair value of plan assets (**) 1,447 543
Others (including Actuarial valuation method) 145 200
Net actuarial liability recorded by the Company 4,050 1,169
(*) It includes the balance of PPSP-R pre-70 and PPSP-NR pre-70.
(**) It includes balance of accounts receivable arising from the Term of Financial Commitment - TFC signed with Petrobras, which Petros recognizes as equity.

 

 

On March 28, 2022, the Deliberative Council of Petros approved the financial statements of the pension plans for the year ended December 31, 2021, sponsored by the Company.

12.3.1. Amounts related to net actuarial liabilities (defined benefit plans)

Net actuarial liabilities represent the obligations of the Company related to defined benefit plans, net of the fair value of plan assets (when applicable), at present value, based on actuarial calculations which are revised annually by an independent qualified actuary.

Changes in the actuarial liabilities is presented as follows:

 

22  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

   
  Pension Plans Health Care Plan Other plans Total
  PPSP-R (*) PPSP-NR (*) Petros 2      
Balance at December 31, 2021 4,050 1,169 165 4,485 11 9,880
Recognized in the Statement of Income 233 74 17 309 633
Current service cost 5 1 7 53 66
Net interest 228 73 10 256 567
Cash effects (1,156) (371) (162) (1,689)
Contributions paid (141) (47) (162) (350)
Payments related to Term of financial commitment (TFC) (1,015) (324) (1,339)
Other changes 274 79 10 287 (10) 640
Others 1 1 (11) (9)
Cumulative Translation Adjustment 274 79 9 286 1 649
Balance at June 30, 2022 3,401 951 192 4,919 1 9,464
(*) It includes the balance of PPSP-R pre-70 and PPSP-NR pre-70.

 

 

             
  Pension Plans Health Care Plan

Other

plans

Total
  PPSP-R (*) PPSP-NR (*) Petros 2      
Balance at December 31, 2020 7,524 2,696 477 5,356 16 16,069
Recognized in the Statement of Income 248 87 37 265 1 638
Past service cost (1) (1)
Present value of obligation (730) (33) (763)
Plan assets transferred to PP-3 496 22 518
Sponsor contribution for PP-3 233 11 244
Current service cost 5 20 83 108
Net interest 226 82 17 182 1 508
Interest on the obligations with contribution for the revision of the lump sum death benefit 18 5 23
Recognized in Equity - other comprehensive income (1,369) (352) 2 (1,719)
Remeasurement effects recognized in other comprehensive income (1,369) (352) 2 (1,719)
Cash effects (965) (539) (159) (1,663)
Contributions paid (134) (41) (159) (334)
Payments of obligations with contribution for the revision of the lump sum death benefit (**) (341) (102) (443)
Payments related to Term of financial commitment (TFC) (490) (396) (886)
Other changes 255 82 21 220 (4) 574
Others (1) (1)
Cumulative Translation Adjustment 255 82 21 220 (3) 575
Balance at June 30, 2021 5,693 1,974 535 5,682 15 13,899
(*) It includes the balance of PPSP-R pre-70 and PPSP-NR pre-70.
(**) On June 30, 2021, the Company prepaid the remaining balance of US$ 447.

 

The net expense with pension and health plans is presented below:

 

23  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

    Pension Plans Health Care Plan Other Plans Total
  PPSP-R (*) PPSP-NR (*) Petros 2
Related to active employees (cost of sales and expenses) 17 3 10 112 142
Related to retirees (other income and expenses) 216 71 7 197 491
Net costs for Jan-Jun/2022 233 74 17 309 633
Related to active employees (cost of sales and expenses) 27 4 30 138 199
Related to retirees (other income and expenses) 203 78 7 127 1 416
Obligations with contribution for the revision of the lump sum death benefit 18 5 23
Net costs for Jan-Jun/2021 248 87 37 265 1 638
(*) It includes the balance of PPSP-R pre-70 and PPSP-NR pre-70.
             
    Pension Plans Health Care Plan Other Plans Total
  PPSP-R (*) PPSP-NR (*) Petros 2
Related to active employees (cost of sales and expenses) 9 2 5 57 73
Related to retirees (other income and expenses) 111 36 4 102 253
Net costs for Apr-Jun/2022 120 38 9 159 326
Related to active employees (cost of sales and expenses) 14 2 15 71 102
Related to retirees (other income and expenses) 102 39 4 64 1 210
Obligations with contribution for the revision of the lump sum death benefit 8 3 11
Net costs for Apr-Jun/2021 124 44 19 135 1 323
(*) It includes the balance of PPSP-R pre-70 and PPSP-NR pre-70.

 

 

12.3.2. Contributions

In the six-month period ended June 30, 2022, the Company contributed with US$ 1,689 to the defined benefit plans (reducing the balance of obligations of these plans, as presented in note 12.13.1), which includes the partial prepayment of the Term of Financial Commitment, in the amount of US$ 1,339 which occurred on February 25, 2022.

In addition, the Company contributed with US$ 90 and US$ 1, respectively, to the defined contribution portions of PP-2 and PP-3 plans (US$ 77 for PP-2 in 2021), whose amounts were expensed in the six-month period ended June 30, 2022.

The collection of contributions for PP-3 started August 31, 2021.

13. Provisions for legal proceedings
13.1. Provisions for legal proceedings, judicial deposits and contingent liabilities

The Company recognizes provisions for legal, administrative and arbitral proceedings based on the best estimate of the costs for which it is probable that an outflow of resources embodying economic benefits will be required and that can be reliably estimated. These proceedings mainly include:

· Labor claims, in particular: (i) opt-out claims related to a review of the methodology by which the minimum compensation based on an employee's position and work schedule (Remuneração Mínima por Nível e Regime - RMNR) is calculated; and (ii) actions of outsourced employees;
· Tax claims including: (i) claims relating to benefits previously taken for Brazilian federal tax credits applied that were subsequently alleged to be disallowable; (ii) tax notices for alleged non-compliance with ancillary obligations; and (iii) claims for alleged non-payment of CIDE on imports of propane and butane.
· Civil claims, in particular: (i) lawsuits related to contracts; (ii) royalties and special participation charges, including royalties over shale extraction; and (iii) penalties applied by ANP relating to measurement systems.
· Environmental claims, specially: (i) fines relating to an environmental accident in the State of Paraná in 2000; (ii) fines relating to the Company’s offshore operation; and (iii) public civil action for oil spill in 2004 in Serra do Mar-São Paulo State Park.

Provisions for legal proceedings are set out as follows:

 

24  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Non-current liabilities 06.30.2022 12.31.2021
Labor claims 771 716
Tax claims 385 306
Civil claims 1,084 820
Environmental claims 228 176
Total 2,468 2,018

 

 

  Jan-Jun/2022 Jan-Jun/2021
Opening Balance 2,018 2,199
  Additions, net of reversals 396 190
  Use of provision (225) (261)
  Revaluation of existing proceedings and interest charges 161 19
  Others (5) 6
  Cumulative translation adjustment 123 75
Closing Balance 2,468 2,228

 

 

In preparing its unaudited consolidated interim financial statements for the six-month period ended June 30, 2022, the Company considered all available information concerning legal proceedings in which the Company is a defendant, in order to estimate the amounts of obligations and probability that outflows of resources will be required.

In the six-month period ended June 30, 2022, the increase in liabilities arises mainly from changes in the following cases: (i) US$ 203 in the provision for civil claims involving contractual matters; and (ii) US$ 39 in the provision for tax claims for alleged non-compliance with ancillary obligations.

13.2. Judicial deposits
Non-current assets 06.30.2022 12.31.2021
Tax 6,960 5,790
Labor 869 796
Civil 1,705 1,275
Environmental 110 101
Others 72 76
Total 9,716 8,038

 

 

  Jan-Jun/2022 Jan-Jun/2021
Opening Balance 8,038 7,281
Additions 861 488
Use (45) (43)
Accruals and charges 386 76
Others (9) (15)
Cumulative translation adjustment 485 320
Closing Balance 9,716 8,107

 

 

In the six-month period ended June 30, 2022, the Company made judicial deposits in the amount of US$ 860, including: (i) US$ 283 relating to the unification of Fields (Cernambi, Tupi, Tartaruga Verde and Tartaruga Mestiça); (ii) US$ 133 referring to IRPJ and CSLL for not adding profits of subsidiaries and affiliates domiciled abroad to the IRPJ and CSLL calculation basis; (iii) US$ 137 related to CIDE and PIS/COFINS on the chartering of platforms; and (iv) US$ 68 referring to IRPJ and CSLL in the deduction of expenses with Petros.

13.3. Contingent liabilities

The estimates of contingent liabilities for legal proceedings are indexed to inflation and updated by applicable interest rates. Estimated contingent liabilities for which the possibility of loss is classified as possible are set out in the following table:

Nature 06.30.2022 12.31.2021
Tax 28,376 24,785
Labor 8,066 7,172
Civil - General 6,710 5,720
Civil - Environmental 1,353 1,192
Total 44,505 38,869

 

 

The main contingent liabilities are:

 

25  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 
· Tax matters comprising: i) withholding income tax (IRRF), Contribution of Intervention in the Economic Domain (CIDE), Social Integration Program (PIS) and Contribution to Social Security Financing (COFINS) on remittances for payments of vessel charters; (ii) income from foreign subsidiaries and associates located outside Brazil not included in the computation of taxable income (IRPJ and CSLL); (iii) requests to compensate federal taxes disallowed by the Brazilian Federal Tax Authority; (iv) collection and crediting of ICMS by several states; (v) collection of social security contributions over payments of bonuses; and (vi) collection of customs taxes and fines related to imports under the Repetro regime in the Frade consortium.
· Labor matters comprising mainly actions requiring a review of the methodology by which the minimum compensation based on an employee's position and work schedule (Remuneração Mínima por Nível e Regime - RMNR) is calculated;
· Civil matters comprising mainly: (i) administrative and legal proceedings challenging an ANP order requiring Petrobras to pay additional special participation fees and royalties (production taxes) with respect to several fields; (ii) regulation agencies fines; and (iii) lawsuits related to contracts.
· Environmental matters comprising indemnities for damages and fines related to the Company operation.

In the six-month period ended June 30, 2022, the increase in the balance of contingent liabilities is mainly due to: (i) US$ 2,224 relating to the notice of infraction for the collection, by joint liability, of customs taxes and fines arising from imports under the Repetro regime, for use in the Frade consortium; (ii) US$ 534 in lawsuits in administrative and judicial stages discussing the difference in special interest and royalties in different fields, including unitization; (iii) US$ 403 lawsuits requesting a review of the methodology by which the minimum compensation based on an employee's position and work schedule (Remuneração Mínima por Nível e Regime - RMNR) is calculated; (iv) US$ 261 referring to CIDE and PIS/COFINS on the chartering of platforms; and (v) US$ 205 referring to lawsuits involving ICMS collection on imports in operations with liquified petroleum gas derived from natural gas. These effects were partially offset by: (i) US$ 1,206 transferred to remote loss relating to tax on services provided offshore; (ii) US$ 295 for the write-off due to the conclusion of an agreement and review of amounts in lawsuits in which the state monopoly of piped gas services was discussed; and (iii) US$ 201 for the review of values and write-off, due to favorable decisions, in proceedings related to tax deductions taken that were subsequently challenged.

13.4. Minimum Compensation Based on Employee's Position and Work Schedule (Remuneração Mínima por Nível e Regime - RMNR)

As of June 30, 2022, there are lawsuits related to the Minimum Compensation Based on Employee's Position and Work Schedule (RMNR), with the objective of reviewing its calculation criteria.

The RMNR consists of a minimum remuneration guaranteed to employees, based on salary level, work schedule and geographic location. This policy was created and implemented by Petrobras in 2007 through collective bargaining with union representatives, and was approved at employee meetings, and started being the subject of lawsuits three years after its implementation.

In 2018, the Brazilian Superior Labor Court (TST) ruled against the Company, which filed extraordinary appeals against its decision. Therefore, the Brazilian Supreme Federal Court (STF) suspended the effects of the decision issued by the TST and determined the national suspension of the ongoing proceedings related to the RMNR.

On July 29, 2021, a monocratic decision was published in which the STF’s Judge-Rapporteur granted an extraordinary appeal filed, accepting the Company's thesis and recognizing the validity of the collective bargaining agreement freely signed between Petrobras and the unions, reversing the decision of the TST.

In February 2022, the judgment of the appeals filed by the plaintiff and several amicus curiae was started. The judgment is currently underway in the First Panel of the Supreme Federal Court, with 3 votes in favor of the Company, confirming that there is an understanding of recognizing the merit of the collective bargaining agreement signed between Petrobras and the unions. Considering that the last minister to vote requested additional time for analysis, the trial was suspended, and is pending the presentation of the vote by this last minister.

As of June 30, 2022, the balance of provisioned proceedings regarding RMNR amounts to US$ 150, while the contingent liabilities amount to US$ 6,686.

13.5. Class action and related proceedings

On May 26, 2021, the District Court of Rotterdam decided that the class action against Petróleo Brasileiro S.A. – Petrobras, Petrobras International Braspetro B.V. (PIB BV), Petrobras Global Finance B.V. (PGF), Petrobras Oil & Gas B.V. (PO&G) and some former Petrobras managers must proceed and that the arbitration clause of Petrobras' bylaws does not prevent the Company's shareholders from having access to the Dutch Judiciary and being represented by the Stichting Petrobras Compensation Foundation (“Foundation”). However, investors who have already started arbitration against Petrobras or who are parties to legal proceedings in which the applicability of the arbitration clause has been definitively recognized are excluded from the action. The class action is in the merit discussion stage.

 

26  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

In relation to the arbitration in Argentina, the Argentine Supreme Court has not yet judged the appeal filed by the Consumidores Financieros Asociación Civil para su Defensa ("Association"). This arbitration discusses Petrobras' liability for an alleged loss of market value of Petrobras' shares in Argentina, as a result of the Lava Jato Operation.

Regarding criminal proceeding in Argentina related to an alleged fraudulent offer of securities, aggravated by the fact that Petrobras allegedly declared false data in its financial statements prior to 2015, the Court of Appeals revoked on October 21, 2021, the lower court decision that had recognized Petrobras' immunity from jurisdiction and recommended that the lower court judge take steps to certify whether the Company could be considered criminally immune in Argentina for further reassessment of the issue. Petrobras appealed against this decision, but on April 30, 2022 the appeal was not admitted by the Court of Cassation. The Court of Appeals recognized that the Association could not act as a representative of financial consumers, due to the loss of its registration with the competent Argentine bodies, which was also appealed, still pending judgment. Petrobras presented other procedural defenses, still subject to appeals before the Argentine Court of Appeals. This criminal action is being processed before the Economic Criminal Court No. 2 of the City of Buenos Aires.

As for the other criminal action for alleged non-compliance with the obligation to publish “press release” in the Argentine market about the existence of a class action filed by Consumidores Financieros Asociación Civil para su Defensa before the Commercial Court, there are no developments during the six-month period ended June 30, 2022.

13.6. Arbitrations in Brazil

In the six-month period ended June 30, 2022, there were no events that changed the assessment and information on arbitrations in Brazil.

13.7. Legal proceedings - Compulsory Loan – Eletrobrás

In the six-month period ended June 30, 2022, there were no events that changed the assessment on this proceeding.

13.8. Lawsuits brought by natural gas distributors and others

In the six-month period ended June 30, 2022, the Company obtained a favorable decision from the Superior Court of Justice (Superior Tribunal de Justiça - STJ) suspending the interim decision in favor of CEGÁS, which granted the extension of its gas supply contract for 6 months. The injunction that had been obtained by SC GÁS and that had extended, until April 2022, the price of the gas supply contract that was terminated on December 31, 2021, was revoked in a lower court judgement handed down on June 29, 2022.

14. Provision for decommissioning costs

The following table details the amount of the decommissioning provision by producing area:

  06.30.2022 12.31.2021
Onshore 500 873
Shallow waters 3,834 3,732
Deep and ultra-deep post-salt 8,410 8,420
Pre-salt 2,730 2,594
  15,474 15,619

 

 

 

27  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Non-current liabilities

2022

Jan-Jun

2021

Jan-Jun

Opening balance 15,619 18,780
Adjustment to provision 37 5
Transfers related to liabilities held for sale (*) (1,075) (358)
Payments and use of provisions (404) (324)
Interest accrued 246 366
Others (4) (3)
Cumulative translation adjustment 1,055 706
Closing balance 15,474 19,172
(*) In the first half of 2022, it refers to the Golfinho and Camarupim Group (US$ 103), in Espírito Santo,  the Albacora Leste Field (US$ 374), in Rio de Janeiro, the Norte Capixaba Group (US$ 32), in Espírito Santo state, and the Potiguar Group (US$ 566), in Rio Grande do Norte state, as set out in note 22.  In the first half of 2021, it includes transfers to held for sale mainly related to US$ 109 in the concessions of Peroá Group in Espírito Santo state, US$ 97 in Miranga Group in Bahia state and US$ 153 in Alagoas Group in Alagoas state.

 

 

15. Property, plant and equipment
15.1. By class of assets
 

Land, buildings

and

improvement

Equipment and other assets (*)

Assets under

construction (**)

Exploration and development costs (***) Right-of-use assets Total
Balance at December 31, 2021 2,383 53,126 16,922 35,847 17,052 125,330
Cost 4,080 98,085 25,954 61,906 26,382 216,407
Accumulated depreciation and impairment (****) (1,697) (44,959) (9,032) (26,059) (9,330) (91,077)
Additions - 442 3,209 9 3,255 6,915
Decommissioning costs - Additions to / review of estimates - - - 11 - 11
Capitalized borrowing costs - - 530 - - 530
Signature Bonuses Transfers (note 16.1) - - - 840 - 840
Write-offs - (723) (963) (614) (1,389) (3,689)
Transfers 65 1,706 (4,095) 2,411 - 87
Transfers to assets held for sale (13) (1,857) (343) (1,248) (8) (3,469)
Depreciation, amortization and depletion (44) (2,369) - (2,680) (2,268) (7,361)
Impairment recognition (note 17) - (48) (18) (42) - (108)
Impairment reversal (note 17) - 12 2 11 - 25
Cumulative  translation adjustment 152 3,661 1,062 2,369 1,064 8,308
Balance at June 30, 2022 2,543 53,950 16,306 36,914 17,706 127,419
Cost 4,308 102,174 25,582 64,420 27,971 224,455
Accumulated depreciation and impairment (****) (1,765) (48,224) (9,276) (27,506) (10,265) (97,036)
Weighted average useful life in years

40

(25 to 50)

(except land)

20

(3 to 31)

 

  Units of production method

8

(2 to 47)

 

 

 

 

Land, buildings

and

improvement

Equipment and other assets (*)

Assets under

construction (**)

Exploration and development costs  (***) Right-of-use assets Total
Balance at December 31, 2020 3,043 58,680 15,443 31,166 15,869 124,201
Additions - 728 2,842 1 1,089 4,660
Decommissioning costs - Additions to / review of estimates - - - (1) - (1)
Capitalized borrowing costs - - 478 - - 478
Write-offs - (47) (167) (14) (71) (299)
Transfers (23) 779 (2,705) 2,026 (1) 76
Transfers to assets held for sale - (1,037) (159) (257) 3 (1,450)
Depreciation, amortization and depletion (56) (2,009) - (2,002) (2,067) (6,134)
Impairment recognition - (186) - (8) - (194)
Impairment reversal - 42 27 19 - 88
Cumulative  translation adjustment 145 2,007 587 1,212 538 4,489
Balance at June 30, 2021 3,109 58,957 16,346 32,142 15,360 125,914
Cost 4,744 110,783 28,422 63,540 25,020 232,509
Accumulated depreciation and impairment (****) (1,635) (51,826) (12,076) (31,398) (9,660) (106,595)
(*) It is composed of production platforms, refineries, thermoelectric power plants, natural gas processing plants, pipelines, and other operating, storage and production plants, including subsea equipment for the production and flow of oil and gas, depreciated based on the units of production method.
(**) See note 21 for assets under construction by operating segment.
(***) It is composed of exploration and production assets related to wells, abandonment and dismantling of areas, signature bonuses associated with proved reserves and other costs directly associated with the exploration and production of oil and gas (oil and gas production properties).
(****) In the case of land and assets under construction, it refers only to impairment losses.

 

 

 

28  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

 

The right-of-use assets comprise the following underlying assets:

  Platforms Vessels Properties Total
Balance at June 30, 2022 9,850 6,581 1,275 17,706
Cost 13,754 12,434 1,783 27,971
Accumulated depreciation and impairment (3,904) (5,853) (508) (10,265)
Balance at December 31, 2021 9,840 5,997 1,215 17,052
Cost 13,362 11,267 1,753 26,382
Accumulated depreciation and impairment (3,522) (5,270) (538) (9,330)

 

 

15.2. Unitization agreements

Petrobras has Production Individualization Agreements (AIP) signed in Brazil with partner companies in E&P consortia. These agreements result in reimbursements payable to (or receivable from) partners regarding expenses and production volumes related to Atapu, Berbigão, Sururu, Albacora Leste, Tartaruga Verde and other fields.

The table below presents changes on the reimbursements payable by Petrobras relating to AIPs submitted for approval by the ANP, presented within trade payables. This estimate reflects the best available estimate of the assumptions used in calculating the calculation base and the sharing of relevant assets in areas to be equalized.

          Jan-Jun/2022 Jan-Jun/2021
Opening balance         364 370
Additions/(Write-offs) on PP&E         (37) (67)
Other income and expenses         12 54
Cumulative translation adjustments         22 15
Closing balance         361 372

 

 

15.3. Capitalization rate used to determine the amount of borrowing costs eligible for capitalization

The capitalization rate used to determine the amount of borrowing costs eligible for capitalization was the weighted average of the borrowing costs applicable to the borrowings that were outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. For the six-month period ended June 30, 2022, the capitalization rate was 6.56% p.a. (6.08% p.a. for the six-month period ended June 30, 2021).

 

29  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 
16. Intangible assets
16.1. By class of assets
  Rights and Concessions (*) Software Goodwill Total
Balance at December 31, 2021 2,695 308 22 3,025
Cost 2,744 1,321 22 4,087
Accumulated amortization and impairment (49) (1,013) - (1,062)
Addition 895 87 - 982
Capitalized borrowing costs - 5 - 5
Write-offs (11) (1) - (12)
Transfers (10) (1) - (11)
Signature Bonuses Transfers (**) (840) - - (840)
Amortization (2) (35) - (37)
Impairment recognition - (1) - (1)
Cumulative  translation adjustment 124 18 1 143
Balance at June 30, 2022 2,851 380 23 3,254
Cost 2,905 1,487 23 4,415
Accumulated amortization and impairment (54) (1,107) - (1,161)
Estimated useful life in years (***) 5 Indefinite  
         
  Rights and Concessions (*) Software Goodwill Total
Balance at December 31, 2020 14,714 210 24 14,948
Addition 12 59 - 71
Capitalized borrowing costs - 2 - 2
Write-offs (7) - - (7)
Transfers (43) 2 - (41)
Amortization (4) (28) - (32)
Cumulative  translation adjustment 571 8 1 580
Balance at June 30, 2021 15,243 253 25 15,521
Cost 15,336 1,351 25 16,712
Accumulated amortization and impairment (93) (1,098) - (1,191)
(*) It comprises mainly signature bonuses (amounts paid in concession contracts for oil or natural gas exploration and production sharing), in addition to public service concessions, trademarks and patents and others.
(**) Transfer to PP&E relating to Sépia and Atapu.
(***) Mainly composed of assets with indefinite useful lives, which are reviewed annually to determine whether events and circumstances continue to support an indefinite useful life assessment.

 

 

16.2. Surplus volumes of Transfer of Rights Agreement

Búzios

Expenses incurred by Petrobras in the ordinary operations of the bidding area for the benefit of the consortium, in the amount of US$ 61, made prior to the start of the Co-Participation Agreement and not included in the total compensation amount, were reimbursed to Petrobras by the partners CNODC Brasil Petróleo e Gás Ltda. (CNODC) and CNOOC Petroleum Brasil Ltda. (CPBL) in February 2022.

In addition, on March 4, 2022, Petrobras signed an agreement with its partner CPBL for the transfer of 5% of its interest in the Production Sharing Contract for the Surplus Volume of the Transfer of Rights Agreement of the Búzios field, in the pre-salt layer of the Santos basin, to this company. The agreement results from the call option exercised by CNOOC on September 29, 2021.

The amount to be received by Petrobras at the closing of the operation is US$ 2,120, referring to the compensation and reimbursement of the signature bonus of CNOOC's additional interest, subject to price adjustments and to the fulfillment of conditions precedent, such as CADE, ANP and Ministry of Mines and Energy (MME) approval.

After the transaction becomes effective, Petrobras will hold an 85% interest in the Production Sharing Contract of the Surplus Volume of the Transfer of Rights Agreement of the Búzios field, CNOOC will hold a 10% interest and CNODC a 5% interest. The total participation in this Búzios Co-participation Agreement, including the portions of the Transfer of Rights Agreement and of the BS-500 Concession Agreement (100% of Petrobras) will be 88.99% of Petrobras, 7.34% of CNOOC and 3.67% of CNODC.

 

30  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

At June 30, 2022, the assets and liabilities related to the transfer of 5% of its interest in the Production Sharing Contract to the Transfer of Rights Agreement are classified as held for sale.

Atapu and Sépia

On April 27, 2022, Petrobras signed the Production Sharing Contract for the surplus volume of the Transfer of Rights Agreement related to the Atapu field, in partnership with Shell Brasil Petróleo Ltda (Shell, 25%) and TotalEnergies EP Brasil Ltda. (TotalEnergies, 22.5%), and related to the Sépia field in consortium with TotalEnergies (28%), Petronas Petróleo Brasil Ltda. (Petronas, 21%) and QP Brasil Ltda. (QP, 21%), according to the results of the Second Bidding Round for the Surplus Volume of the Transfer of Rights Agreement in the Production Sharing regime, which was held on December 17, 2021.

On the same date, the Company also signed the Co-participation Agreements and the Amendments to the Agreement for the Individualization of Atapu and Sépia Production (AIPs), which are necessary to manage the coexisting deposits of the Transfer of Rights Agreement and the Production Sharing Contract (related to the surplus volume) of these areas.

The compensation to Petrobras for Atapu and Sépia, including an estimate of the gross-up of the taxes levied, pursuant to Ordinance No. 8 of April 19, 2021 of the MME, were paid by the partners in April 2022, totaling US$ 2,093 for Atapu and US$ 3,059 for Sépia.

The agreements became effective on May 2, 2022, when Pré-Sal Petróleo S.A. (PPSA) confirmed there was no settlement pending for this transaction, in accordance with the provisions of Ordinance No. 519 of May 21, 2021.

On the same date, a partial write-off of the assets associated with these fields was carried out, in exchange for the financial compensation, resulting in a transaction similar to a sale.

Furthermore, the Company accounted for an additional US$ 129 gain corresponding to the difference between the estimate and the final calculation of the gross-up of taxes levied on the gain on the transfer of assets to the Production Sharing regime, as provided for in the mentioned ordinance (US$ 60 for Atapu and US$ 69 for Sépia). These amounts were paid to Petrobras in July 2022.

The total gain in this operation was US$ 2,872 (US$ 1,028 for Atapu and US$ 1,844 for Sépia), accounted for within other income and expenses.

The signature bonus corresponding to the Company's participation in the Production Sharing Contract was US$ 416 for Atapu and US$ 424 for Sépia.

Since these agreements relate to the surplus volume of fields with technical and commercial feasibility already identified, the signature bonuses paid by the Company in the first quarter of 2022, totaling US$ 840, were transferred from intangible assets to property, plant and equipment after the Co-participation Agreements came into effect.

17. Impairment
(Losses) / reversals Jan-Jun/2022 Jan-Jun/2021 Apr-Jun/2022 Apr-Jun/2021
Property, plant and equipment (83) (106) (84) (11)
Intangible assets (1)
Assets classified as held for sale (83) (74) (84) (79)
Impairment losses (167) (180) (168) (90)
Investments (10) 399 (2) 425
Net effect within the statement of income (177) 219 (170) 335
Losses (218) (312) (208) (156)
Reversals 41 531 38 491

 

 

The Company annually tests its assets for impairment or when there is an indication that their carrying amount may not be recoverable, or that there may be a reversal of impairment losses recognized in previous years.

In the six-month period ended June 30, 2022, the Company recognized net impairment losses amounting to US$ 167, mainly due to:

 

31  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 
· definitive cessation of the operations of platform P-35, in the Marlim field, which led to the exclusion of this asset from the CGU North group and classification as a separate asset, resulting in the recognition of a US$ 52 impairment loss;
· approval for the disposal of Golfinho group of fields, which comprises Golfinho field (which produces oil), Canapu field, which produces non-associated gas, and the exploratory block BM-ES-23. As a result, the Company assessed the recoverability of the carrying amount of these assets, considering the fair value net of disposal expenses, resulting in the recognition of a US$ 51 impairment loss;
· approval for the disposal of LUBNOR Refinery, in the state of Ceará, separating it from the Downstream CGU. As a result, the Company assessed the recoverability of the carrying amount of the refinery, considering the fair value net of disposal expenses, resulting in the recognition of a US$ 44 impairment loss.

In the six-month period ended June 30, 2021, impairment losses were recognized, in the amount of US$ 180, mainly due to:

· discontinuation of use of platforms P-33 and P-26, in the Marlim field, resulting in their exclusion of CGU North group and testing for impairment as separate assets, with the recognition of a US$ 190 impairment loss;
· approval for the sale of thermoelectric power plants Arembepe, Muryci and Bahia 1, located in Camaçari, in the state of Bahia. As a result, considering fair value net of selling expenses, a US$ 79 impairment loss was accounted for in the second quarter of 2021;
· assessment for impairment of producing properties considering fair value net of selling expenses, resulting in a US$ 61 impairment reversal in the second quarter of 2021, mainly due to the approval for sale of the Papa-Terra field, located in the Campos Basin, state of Rio de Janeiro (a US$ 41 impairment reversal); and
· the decision to use in producing fields in the Santos basin, certain equipment that were previously part of platforms P-72 and P-73. Thus, considering estimated future cash flows for these assets, the Company recognized a US$ 27 impairment reversal.
17.1. Investment in publicly traded associate (Petrobras Distribuidora S.A. – BR Distribuidora)

On August 26, 2020 the Company’s Board of Directors approved the disposal of the remaining interest in BR Distribuidora and, on June 30, 2021, approved the price per common share of BR Distribuidora in the amount of US$ 5.20 (R$ 26.00) for the secondary public offering (follow on) of these shares, totaling US$ 2,252 (R$ 11,264 million), net of transaction costs.

Accordingly, considering the sale of the shares and the cash flows arising from this sale, a US$ 404 impairment reversal was accounted for in the six-month period ended June 30, 2021.

18. Exploration and evaluation of oil and gas reserves

Changes in the balances of capitalized costs directly associated with exploratory wells pending determination of proved reserves and the balance of amounts paid for obtaining rights and concessions for exploration of oil and natural gas (capitalized acquisition costs) are set out in the following table:

     
Capitalized Exploratory Well Costs / Capitalized Acquisition Costs (*) Jan-Jun/2022 Jan-Jun/2021
Property plant and equipment    
Opening Balance 2,376 3,024
Additions 95 222
Write-offs (14) (178)
Transfers (42) (145)
Cumulative translation adjustment (259) 104
Closing Balance 2,156 3,027
Intangible Assets 2,734 15,057
Capitalized Exploratory Well Costs / Capitalized Acquisition Costs 4,890 18,084
(*) Amounts capitalized and subsequently expensed in the same period have been excluded from this table.    
 

 

Exploration costs recognized in the statement of income and cash used in oil and gas exploration and evaluation activities are set out in the following table:

 

32  

NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PETROBRAS

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

  Jan-Jun/2022 Jan-Jun/2021