Webcast 4Q14

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  • RESULTS ANNOUNCEMENT

    4th Quarter and

    2014 Year End Results

    __

    Conference Call / Webcast

    April, 23rd 2015

  • DISCLAIMER

    FORWARD-LOOKING STATEMENTS:

    DISCLAIMER

    The presentation may contain forward-looking statements about future

    events within the meaning of Section 27A of the Securities Act of 1933, as

    amended, and Section 21E of the Securities Exchange Act of 1934, as

    amended, that are not based on historical facts and are not assurances of

    future results. Such forward-looking statements merely reflect the

    Companys current views and estimates of future economic circumstances, industry conditions, company performance and financial results. Such

    terms as "anticipate", "believe", "expect", "forecast", "intend", "plan",

    "project", "seek", "should", along with similar or analogous expressions, are

    used to identify such forward-looking statements. Readers are cautioned

    that these statements are only projections and may differ materially from

    actual future results or events. Readers are referred to the documents filed

    by the Company with the SEC, specifically the Companys most recent Annual Report on Form 20-F, which identify important risk factors that

    could cause actual results to differ from those contained in the forward-

    looking statements, including, among other things, risks relating to general

    economic and business conditions, including crude oil and other

    commodity prices, refining margins and prevailing exchange rates,

    uncertainties inherent in making estimates of our oil and gas reserves

    including recently discovered oil and gas reserves, international and

    Brazilian political, economic and social developments, receipt of

    governmental approvals and licenses and our ability to obtain financing.

    We undertake no obligation to publicly update or revise any forward-

    looking statements, whether as a result of new information or future

    events or for any other reason. Figures for 2015 on are estimates or

    targets.

    All forward-looking statements are expressly qualified in their entirety

    by this cautionary statement, and you should not place reliance on any

    forward-looking statement contained in this presentation.

    NON-SEC COMPLIANT OIL AND GAS RESERVES:

    CAUTIONARY STATEMENT FOR US INVESTORS

    We present certain data in this presentation, such as oil and gas

    resources, that we are not permitted to present in documents filed with

    the United States Securities and Exchange Commission (SEC) under

    new Subpart 1200 to Regulation S-K because such terms do not

    qualify as proved, probable or possible reserves under Rule 4-10(a) of

    Regulation S-X.

  • R$ Billion 2014 2013 %

    Sales Revenues 337.3 304.9 11

    Cost of Sales (256.8) (235.0) 9

    Gross Profit 80.4 69.9 15

    Operational Expenses (101.8) (35.5) 186

    Net income before financial results and others (21.3) 34.4 -162

    Financial Results (3.9) (6.2) -37

    Share of earnings in equity-accounted investments 0.5 1.1 -59

    Profit-sharing (1.0) (1.1) -5

    Net income before income taxes (25.8) 28.2 -192

    Income Taxes 3.9 (5.1) -176

    Non-controlling interests 0.3 0.6 -40

    Net Income (21.6) 23.6 -192

    Adjusted EBITDA 59.1 63.0 -6

    FX devaluation over imports and government take

    Increase in demand

    Impairment Write-off of overpayment incorrectly

    capitalized

    Cancellation of projects Provision for losses in the electric sector

    Higher oil products prices Higher volumes

    2014 Net Result: (-)R$ 21.6 billion

    3

  • R$ Billion 3Q14

    Reviewed

    3Q14

    Not Reviewed %

    Sales Revenues 88.4 88.4 0

    Cost of Sales (67.9) (67.3) 1

    Gross Profit 20.4 21.1 -3

    Operational Expenses (25.4) (16.5) 54

    Net income before financial results and others (4.9) 4.6 -207

    Financial Results (1.0) (1.0) 0

    Share of earnings in equity-accounted investments 0.2 0.2 0

    Profit-sharing (0.1) (0.2) -50

    Net income before income taxes (5.8) 3.6 -261

    Income Taxes (0.1) (1.1) -91

    Non-controlling interests (0.6) (0.6) 0

    Net Income (5.3) 3.1 -271

    Adjusted EBITDA 8.5 11.7 -27

    Change in provision, mainly due to losses in the electric sector

    Write-off of overpayment incorrectly capitalized

    Additions to provision for losses in the electric sector

    Comparison between Reviewed and Not Reviewed 3Q14

    4

  • Financial

    2014 Highlights

    Sales revenues: R$ 337.3 billion

    Net results of (-) R$ 21.6 billion

    Adjusted EBITDA of R$ 59.1 billion

    Investments of R$ 87.1 billion

    5% growth in total oil and natural gas production, reaching 2,669 thousand boe/day in

    2014

    Proven reserves of 16.6 billion boe (ANP/SPE criteria)

    Refining throughput (Brazil and abroad) of 2,269 thousand bbl/day, the 6th largest oil

    refiner worldwide

    5

    Operational

  • 2014 Highlights

    6

    Principal Adjustments in PP&E R$ 50.8 billion

    R$ 6.2

    Billion

    Write-off related to overpayment incorrectly

    capitalized, as a consequence of the Car Wash Operation

    Provision due to impairment tests R$ 44.6

    Billion

    PP&E in 12/31/14: R$ 581 billion

  • 7

    Principal Adjustments in PP&E

    R$ 6.2

    Billion

    Write-off related to overpayment incorrectly

    capitalized, as a consequence of the Car Wash Operation

    Amount of 3% over contracts with 27 companies members of the cartel between 2004 and 2012

    For companies outside the cartel, specific values mentioned in the depositions

    Principal Adjustments in PP&E

  • Methodology based on the contents of the Prosecutors Office investigations

    Depositions consistent with relation to: the existence of the cartel; time period; percentages and values

    Values by Business Segment

    0.1

    0.7 G&P

    2.0

    Others

    E&P

    Downstream 3.4

    8

    R$ 6.2 Billion

    Write-off related to overpayment incorrectly capitalized, as a consequence

    of the Car Wash Operation

  • 9

    Principal Adjustments in PP&E

    R$ 44.6

    Billion Provision due to impairment tests

    Refining: postponement of projects/assets

    E&P: Decline in oil prices

    Petrochemical: Reduction in demand and margins

    Principal Adjustments in PP&E

  • Postponement of Refining Projects/Assets: cash preservation.

    Exploration and Production: reduction in oil prices.

    Petrochemical:

    reduction in demand and margins.

    Others 0.8

    Petrochemical 3.0

    Cascade

    & Chinook 4.2

    E&P Brazil 5.6

    RNEST 2nd Train 9.1

    COMPERJ 21.8

    10

    Values by Business Segment

    R$ 44.6 Billion

    Provision due to impairment tests

  • 11

    2013 x 2014 Net Result

    R$ Billion

    -21.6

    Others

    -0.8

    Income Tax

    +9.0

    Financial

    Results

    +2.3

    2014 Net

    Result

    Other

    Expenses

    -8.8

    Losses

    with

    Receivables

    -5.0

    Premium I

    and II

    Write-offs

    -2.8

    Additional

    Expenses

    (Car Wash)

    -6.2

    Impairment

    -43.4

    COGS

    -21.8

    Revenues

    32.4

    2013

    Net

    Result

    23.6

    2013 304.9 -235.0 -1.2 - - -0.1 -34.2 -6.2 -5.1 0.6

    2014 337.3 -256.8 -44.6 -6.2 -2.8 -5.1 -43.0 -3.9 3.3 -0.3

    +32.4 -21.8 -43.4 -6.2 -2.8 -5.0 -8.8 +2.3 +9.0 -0.8

    R$ Billion 2013 2014

    Gross Profit 69.9 80.4

    EBITDA 63.0 59.1

  • Proven Reserves Brazil and Abroad (Billion boe)

    Exploration and Production

    +0.8% +0.3%

    2014

    16.61

    13.69

    2.50

    2013

    16.57

    13.51

    2.46

    2012

    16.44

    13.28

    2.45

    Natural Gas Abroad

    Natural Gas Brazil

    Oil and NGL Brazil

    Oil and NGL Abroad

    12

    RRR 103% 114% 105%

    R/P 18.6 years 19.2 years 18.5 years

  • Exploration and Production

    375 389426

    146 128

    1169793

    2,034

    2014

    +5.1%

    2013

    1,931

    -2.3%

    2,669 2,539

    91

    2012

    2,598

    1,980

    Oil and NGL Brazil

    Natural Gas Brazil

    Oil and NGL Abroad

    Natural Gas Abroad

    5.3%

    Oil and Gas Production - Brazil and Abroad (thousand boe/day)

    13

    FPSO

    Cid. de Anchieta (Sep)

    FPSO Cid. de So Paulo (Jan)

    FPSO Cid. de Itaja (Feb)

    FPSO Cid. de Paraty (June)

    P-63 (Nov)

    P-55 (Dec)

    P-58 (Mar)

    P-62 (May)

    FPSO Cid. de Mangaratiba (Oct)

    FPSO Cid. de Ilha Bela (Nov)

  • Million bpd

    Source: Evaluate Energy

    Change in

    production

    (thousand bpd)

    2006 - 2014

    Oil Production

    2006 to 2014

    Oil

    Pro

    duct

    ion

    +230

    -570

    -548

    -50

    -546 1,40

    1,60