Petrobras : Audio Transcripts 4Q22

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Webcast - 4th Quarter Results 2022

March 2, 2023

Carla Albano:

Good afternoon, everyone. Welcome to Petrobras' webcast with analysts and investorsabout the 4Q22 Results. It's great to have you join us today.

We would like to inform you that all participants will follow the transmission via Internet as listeners. After an introduction, a Q&A session will begin. You can send us questionsby e-mailat [e-mail].

Today, we have with us Jean Paul Prates, Petrobras' CEO; Claudio Mastella, Chief Trading and Logistics Officer; Fernando Borges, Chief Exploration and Production Officer; Joao Henrique Rittershaussen, Chief Production Development Officer; PauloPalaia, Chief Digital Trading and Innovation Officer; Rafael Chaves, Chief Institutional Relations and Sustainability Officer; Rodrigo Araujo, Chief Financial and Investor Relations Officer; Rodrigo Costa, Chief Refining and Natural Gas Officer; and Salvador Dahan, Chief Governance and Compliance Officer.

To initiate, I will pass the floor to Petrobras' CEO, Jean Paul Prates. Please Jean, go ahead.

Jean Paul Prates:

Hello to all of you. It is an honor to speak to you as CEO of Petrobras at a time when we are disclosing such an expressive and symbolic results for the Company.

At the same time, we met all our production targets. We advanced in the prospecting of new reserves and in the decarbonization of our operations. We maintain our competitiveness, raising the utilization factor of our refineries, while launching new products with renewable content.

All these achievements are extremely important in the complex scenario we live today. As global consumption of fossil fuel hits record highs, we must prepare ourselves for the inevitable energy transition.

While no one can say precisely how long the traditional oil and gas industry will be dominant, it is indisputable that this moment is getting closer and closer. We will maintain our leading role in oil and gas production, while working to build a new future.

Our main goal in the new management that starts now is to make Petrobras an increasingly balanced company, strong and prepared to be the protagonist of the energy transition, drawing on its unique knowledge of Brazil's potential for this growing market.

Investment in the renewable energy sources such as hydrogen and offshore wind are already foreseen in the current strategic plan. Our operations in deep and ultra- deepwater put us in a privileged position for the generation of offshore wind energy, even integrated with oil and gas production.

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We are major producers of natural gas, the transition fuel for hydrogen. We will continue and in responsible and transparent manner, seeking more opportunities to diversify our operation attentive to the society demands for a fair energy transition, guaranteeingenergy that is available, accessible and sustainable for all.

I reiterate our ambition to neutralize our operational emissions within a timeframe compatible with that established by the Paris agreement.

To this end, we have invested in the decarbonization of our operations. We already operate the world's largest offshore carbon reinjection program, and we areimplementing a series of state-of-the-arttechnologies to reduce emissions.

We are a company in permanent transformation. We are working every day to make Petrobras a company that is increasingly stronger, more responsible and connected to the future, because we believe this is the best way to fulfill our responsibility to societyand to our investors.

Thank you very much. Welcome.

Carla Albano:

Thank you, Jean. Now I will pass the floor to Petrobras' CFO, Rodrigo Araujo. Please, Rodrigo, go ahead.

Rodrigo Araujo:

Thank you, Carla. Thank you, Jean. Thanks, everyone, for being with us today and joining our earnings call for the 4Q22. I am very glad to be here and to report the important and strong results that we have for the fiscal year 2022 and for the 4Q22.

First, I would like to just show my respect with my colleagues of the Executive Board and with the important work that has been done in terms of deleveraging the Company, keeping our capital structure optimized, delivering the relevant projects that we have on time and within cost.

As we all know, about 90% of the results and the returns from projects come from the FID and also from being able to deliver the projects on time. So I am very glad about the work that has been done in terms of well drilling, time reduction, delivering, contracting on time, delivering efficient platforms and projects on time.

We have also managed to have important operational results in 2022. We, of course, have reached the highest incorporation of reserves in the history of the Company. So that's very important in terms of looking for the Company's future.

We have also reached the highest utilization factor of our refineries in the last five years. In a year, in which we had relevant scheduled stoppages that were quite challenging to deal with, especially that we are still in an environment where we still facing the impact of covid-19, not only on the teams, but also on the supply chain.

We have also a very important result in terms of our commercial and trading operations in 2022. We were able to diversify our export base not only for the US market, but also for Europe and other Asian markets. We have been able to deliver the pre-salt oil that is quite competitive in terms of cost and in terms of emissions in new markets in this environment, in which the Russia Ukraine war has significantly impacted the industry.

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We also have relevant highlights that we are going to share in terms of reducing emissions of our operations and also in terms of digital transformation and governance.So, I am going to start with the earnings presentation.

So, our usual disclaimer with respect to forward-looking statements and forecasts.

As we always do we start discussing safety, which is our number one value. We are very concerned about safety, about being able to deliver and create strong value, but alwaysmaintaining the highest degree of safety standards in the industry.

As you well know, we are well-positioned in terms of comparison with our peers. But as the result of 2022 show safety is always a substantial challenge. We have to be continuously looking for safety metrics and ways of improving and reducing the impactof incidents and occurrences that happen within the Company.

We have the ambition of zero fatalities. Unfortunately, in 2022, we had five fatalities on course of operations. So, of course, we are very sorry about that and focused on improving our safety conditions so that we are always performing better and morefocused on delivering our results with more safety.

So, starting with our ESG results and agenda, I would like to highlight what we had interms of carbon intensity, not only in the Upstream segment in which we delivered results that were substantially below the acceptable limit that we set for 2022, but also in the downstream segment where we already see the results of our energy efficiency program called RefTOP on our refineries, reducing the energy intensity of our refineries, and of course, the overall carbon intensity of our operations.

It's always important to remember that the pre-salt oil and we highlight, of course, the Tupi and Búzios fields in which we have between 9 and 9.5 kilos of CO2 per barrel equivalent of emissions. It's quite competitive. It's one of the top-notch frontiers in the world. So, we are very glad with the results that we have been finding and focused, of course, on continually reducing our carbon footprint and also on delivering substantial technology to help that happen.

We reinforce our commitment with the targets that we set for carbon intensity for 2025 and 2030 and we have been able to comply with all the targets that we have been setting and to continue to challenge ourselves in terms of the future results.

Looking at our absolute emissions for 2022, it's important to highlight that we had a substantial decrease in total operational emissions when we compare to 2021. We should remember that in the end of 2021, we had the hydro crisis in Brazil that made us have a substantial increase in terms of thermal power plant generation, increasing the consumption of natural gas and of course, increasing the operational emissions. So, that impacted substantially in 2021.

As you can see, it was mostly an outlier and we have managed to continue the downward trend that we have for total operational emissions. And also, when we look at oil and gas operational emissions, we have been continually reducing our oil and gas operational emissions basically since 2008. And we can see that, that downward trend continues to happen, and we continue to be focused on improving our results in terms of lower emissions.

Looking at the carbon capture results, as you know, we have the largest offshore carbon capture program in the world. Since 2008, we have been able to range about 41 million

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tons of CO2. For 2022, we had about 11 million tons reinjected. It was the best result that we have, and it reinforces our commitment and our capability to deal with carbon intense reservoirs reinjecting and having a lot of technology to support that process andto reduce the carbon footprint of the pre-saltoil.

Also, in terms of highlights, we also reduced methane emissions in 2022, a 60% reduction when we compare to 2015. Just to remind you that we always look at 2015 as the initial baseline for the targets that we set for methane reduction. We have also joined the UN initiative focusing on methane mission reduction, and we are very glad to be partof an important group that is focused on delivering even better results that we have up to now.

We have also been, again, nominated as one of the members of the Dow Jones Sustainability Index. It's always a very important achievement. We do have targets for the executive teams to maintain our presence in the Index. It's an important external acknowledgment, and it's relevant to highlight that we got top marks for environmental reporting, social reporting, water-related risks. We also stood out in terms of operational ecoefficiency, labor practices and human rights as well. It was a second consecutive year that were part of the Index, and we are very glad to have achieved that result onceagain.

In terms of governance, it's important to highlight that, we continue to join our efforts in terms of digital transformation and governance risk and control. So we have a strong internal controls automation process that is ongoing. We already have more than 30% of internal controls automated, and we continue to be focused on increasing that level. We are one of the best performers in the industry.

The bylaws follows the SOEs in Brazil, once again, with their top-tier governance certification. We have also updated our code of ethical conduct that is one of the most important guidelines that we have. We have that in our website, and you can check as well.

Also, we have been awarded in terms of transparency of our financial statements once again, and we have recently approved now in January 2023, our tax policy that reinforces our commitment to fair taxation, transparency and also accountability. We have alongside with the financial results for the year, we have also released our tax report yesterday as well. I welcome everyone to look at it. We have important reports in terms of the Company contribution to Brazil and to the Brazilian society as an important taxpayer and how the contribution of the Company to several different Brazilian states is also quite relevant.

So in terms of tax payments for 2022, we have paid R$ 279 billion in taxes for 2022, record level taxation. We have also paid R$ 72 billion in dividends to the controlling group to the federal government and the federal government related, and it is also important to remember that more than 60% of our cash flow generation returns to the Brazilian society, including taxes and also dividends that we paid to the Brazilian state as the Company's controlling shareholder.

As I mentioned at the beginning, our focus on project management and our solid project implementation governance has been delivering substantial results over the course of the last years. In 2022, we had the start-up of FPSO Guanabara in Mero field. We have also anticipated P-71, which was expected to start production in 2023 and we started production in the end of 2022 in the Atapu field.

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Also, we have reached the full production capacity of P-68 in Berbigão and Sururu fields, and we have been achieving important results in terms of efficiency in the new productionunits that we have started over the last couple of years.

We also have FPSO in Anna Nery that has arrived at the Marlim field. And we also haveAlmirante Barroso and Anita Garibaldi arriving at the shipyard in Brazil.

So when we look at units that are expected to come online in 2023, we maintain our forecast that we expect to have all the four units that were expected for 2023 comingonline.

We have also done the contracting of three-owned platforms for the Búzios field, a very important result in terms of continuing with the development of the Búzios field and have also initiated contracting for other relevant FPSOs, like Atapu and Sépia too. As you remember, we have 17 units coming online in the course of the business plan, and wewill continue to be highly focused on achieving that substantial challenge.

So looking at our key financial highlights for 2022, several of the metrics were Petrobras' best historical results. We had very solid EBITDA in 2022, US$ 66 billion, US$ 50 billionof cash flow from our operations. Our highest net income ever, US$ 36.6 billion. During the course of the year, we have paid about US$ 3 per share in terms of dividends. During the course of 2022 on a cash basis, we have also been able, alongside with creating anddistributing value, we have also managed to keep our capital structure close to what we think is optimal. We reduced our net debt by US$ 6.1 billion when we compare to 2021. We have also reduced gross debt.

As I mentioned before, R$ 279 billion paid in taxes over the course of the year. And also another important milestone, we have reached double-digits return on capital employed for the first time for a very, very long time, and it's an important result of the focus on value creation and profitability of the relevant projects that we have been implementing over time. And as I mentioned in the beginning, the highest incorporation of reserves in the history of the Company, 2 billion barrels of oil equivalent incorporating the year 2022.

When we look at production KPIs, we have more than delivered the production target for the year. We were about 3% above the midpoint of the year's target for the oil production, for the commercial production and also for the total production. We have increased production without jeopardizing our cost conscience, the lifting cost for the year was lower than US$ 6 per barrel. So, very competitive lifting cost.

Of course, as you know, the lifting cost is a very small part of the equation. We have a substantial taxation. We have other costs associated and the return on capital employed that is necessary for an industry that has such a substantial risk as the oil industry. So we are focused on being more efficient over time as well.

We have also a record level of 10 ppm diesel sales. We have been phasing out of the 500 ppm diesel to the 10 ppm diesel. And over the course of 2022, it's also important to highlight that alongside with delivering record levels of 10 ppm diesel, we were also able to maintain competitive prices aligned with the international market over the course of the year.

It was a very challenging year. The Russia-Ukraine war substantially impacted the crack spreads. They were quite volatile over the course of the year. So we were also able to maintain the healthy competitive environment in Brazil, without passing through all the volatility that was seen in the international market.

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