PBR

Petrobras 2Q24 Performance Summary

Business Context and Reporting Period

This Form 6-K filing covers Petrobras' financial performance for the second quarter ended June 30, 2024. The company reported a net loss for the quarter, primarily driven by significant non-recurring accounting charges related to a tax transaction settlement and foreign exchange losses due to the depreciation of the Brazilian Real (BRL) against the US Dollar. Management emphasizes that underlying cash generation remained robust, with recurring net income estimated at US$ 5.4 billion excluding these specific non-cash and non-recurring items.

Key Financial Metrics

Capital Expenditure (Capex): Total Capex for 2Q24 was US$ 3.4 billion, bringing the first-half total to US$ 6.4 billion (up 12.5% vs. 1H23). The 2024 full-year guidance has been revised to a range of US$ 13.5 billion to US$ 14.5 billion.

Material Changes vs. Prior Period

• Net Income Decline: Reported net income swung to a loss of US$ 344 million from a profit of US$ 4.8 billion in 1Q24. This was driven by a US$ 4.4 billion foreign exchange loss and US$ 2.1 billion in finance expenses related to the tax transaction.
• Adjusted EBITDA Drop: Adjusted EBITDA fell 20.6% quarter-over-quarter to US$ 9.6 billion, attributed to lower margins on diesel and gasoline, increased imports, and non-recurring items. However, Recurring Adjusted EBITDA remained relatively stable at US$ 12.0 billion.
• Revenue Stability: Net revenues remained flat at US$ 23.5 billion compared to 1Q24. Export revenues increased 5.4% due to higher oil export volumes and a 2% rise in Brent crude prices, offsetting a 3.9% decline in domestic sales revenues caused by lower product prices.
• Debt Profile: Financial debt reached US$ 26.3 billion, the lowest level since 3Q08. Net debt increased 5.8% quarter-over-quarter to US$ 46.2 billion, primarily due to the exchange rate impact on cash balances.

Guidance, Outlook, and Risks

• Shareholder Remuneration: The company approved dividends and interest on equity totaling R$ 13.6 billion (approx. US$ 2.6 billion), to be paid in November and December 2024. This utilizes R$ 6.4 billion from the capital remuneration reserve.
• Tax Transaction: Adherence to the tax transaction settled significant legal disputes worth R$ 45 billion. While this resulted in a large non-cash accounting charge in 2Q24, management views it as positive for removing cash flow uncertainty.
• Operational Outlook: Capex is focused on pre-salt projects in the Santos and Campos basins. The company expects to maintain robust cash generation to fund investments and debt management.
• Risks: Key risks include continued volatility in the BRL/USD exchange rate, fluctuations in global oil prices, and regulatory changes in Brazil. The filing notes that forward-looking statements involve uncertainties and actual results may differ.

Investor Verification Checklist

• Recurring vs. Reported Earnings: Verify the distinction between the reported net loss (US$ 344M) and the recurring net income (US$ 3.1B) to understand the true operational performance.
• Foreign Exchange Impact: Assess the magnitude of the US$ 3.5 billion foreign exchange loss and its impact on the financial result versus cash flow.
• Tax Settlement Details: Review the specific accounting treatment of the US$ 2.1 billion finance expense and US$ 790 million tax expense related to the tax transaction settlement.
• Dividend Policy Execution: Confirm the timing and funding source of the upcoming R$ 13.6 billion dividend payment scheduled for late 2024.
• Capex Allocation: Monitor the execution of the revised US$ 13.5B–14.5B Capex guidance, specifically the allocation to pre-salt developments versus other segments.