Petróleo Brasileiro S.A. - Petrobras Q1 FY2025 earnings call

Key Points:

• Magda highlighted excellent Q1 2025 results despite challenging oil price scenario, with average oil price at $75 per barrel in Q1 2025 compared to $84 in Q1 2024. Current Q2 2025 oil price is $65 per barrel.
• Exploration successes: Constantly expanding reserves, new discoveries in pre-salt layer (Aram block, Campos Basin), and good test in Colombia's offshore block potentially supplying gas to Colombia.
• Production growth: FPSO Almirante Tamandare went into production in Buzios field, Alexandre de Gusmao anchored in 10 days (record for Petrobras), revamp of RNEST Train 1 doubled processing capacity, second module of natural gas processing in BOAVENTURA complex to go into operation in H2 2025.
• Decarbonization initiatives: Sold first bunker of fossil fuel with 24% renewable content in Asian market, signed contract with BNDES to reforest Amazon for carbon credits, aiming for 2050 strategic plan.

In the first quarter of 2025, Petrobras reported adjusted EBITDA excluding one-off events of $10 billion, which was 8% above the last quarter. Net income was $6 billion. Operational cash flow was $8.5 billion, with a net cash flow of $4.5 billion. Production increased 5.4% versus the previous quarter. Oil is the main product, generating $8.5 billion in cash from operations. Revenue contribution is mainly from oil sales, both internal and external, and diesel crack spread.

Forward-Looking Statements:

• CapEx for Q1 2025 was $4.1 billion, a 29% reduction from Q4 2024, but 34% higher than Q1 2024 due to pre-salt investments. Will continue with capital discipline, simplifying projects, reassessing project scopes, and prioritizing cash flow-generating projects.
• Committed to maintaining dividend distribution, with BRL11.7 billion approved for Q1 2025 dividends, paid in two installments in August and September. Will evaluate extraordinary dividends based on cash flow.

Risks Discussed:

• Volatile oil prices: Impact on cash flow and financial results. Lower oil prices pose challenges in maintaining financial performance and require cost-cutting measures.
• Geopolitical and market uncertainties: Affecting product prices and exchange rates, which are out of Petrobras' control, requiring constant adaptation and austerity measures.

Q: About capital allocation and investment plan in case of lower oil prices, any adjustments needed?

A: Fernando stated Petrobras' projects are resilient to oil prices at $45 per barrel, with break-even brand for E&P portfolio at $28 per barrel. No immediate changes to investment plan, but focusing on simplifying projects, reassessing scopes, and prioritizing cash flow projects.

Q: Regarding Shell's asset in Caribbean, any interest in assessing?

A: Sylvia mentioned Petrobras is assessing opportunities in its portfolio, including Shell's asset, to evaluate returns and strategic fit.

Q: About cost-cutting initiatives, potential for cost reduction?

A: Fernando said optimizing cross-sectional expenditures, simplifying projects, and prioritizing cash flow-generating projects are key cost-cutting measures. Sylvia added focusing on operational efficiency in offshore and onshore areas to reduce costs.

Q: On LNG infrastructure and production, future plans?

A: Claudio Schlosser mentioned investments in refining and LNG production, with BOAVENTURA complex having significant LNG production, and planning for LNG distribution infrastructure with third-party investments.