Petrobras - Petroleo Brasileiro SA Q1 FY2025 Earnings Call

The links for both languages are available on our investor relations website. We would like to inform you that all participants are connected to the webcast in listen-only mode. After our introductions, we will have a question-and-answer session, and you'll be able to send your questions via email to [email protected]. Joining us today are Magda Chambriart, Petrobras' President, who will start our session but will not remain for the Q&A due to a prior commitment. Clarice Coppetti, Executive Director of Corporate Affairs; Claudio Schlosser, Executive Director of Logistics, Commercialization and Markets; Fernando Melgarejo, Executive Director of Finance and Investor Relations; and Calovalli, Director of Governance and Compliance. Mauricio Tolmasquim, Executive Director of Energy Transition and Sustainability; Renata Baruzzi, Executive Director of Engineering, Technology and Innovation; Sylvia dos Anjos, Executive Director of Exploration and Production; and William Franca, Executive Director of Industrial Processes and Other Products. So to begin, I will hand over to our President, Magda Chambriard for her initial remarks. Please go ahead, ma'am.

Ladies and gentlemen, good afternoon. It's a great pleasure to join you today to talk a bit about our performance in the first quarter of 2025. I believe that these were excellent results, but I will take this opportunity to also draw your attention to the challenging scenario that we currently face with oil prices. This scenario requires from us redoubled efforts, going from $84 per barrel in the first quarter of 2024 to face this first quarter of 2025 with an average of $75 per barrel. To post the results that we are sharing was not an easy task. This is an arduous task that was carried forward with a lot of dedication and wisdom by the Petrobras board and all of its technical staff. What we will have in the future will be even more challenging. This is the second quarter of 2025, and oil is at $65 per barrel, a difference of about $20 versus the first quarter of 2024. We are certain and committed to resolving this issue, delivering good results, and dedicating much effort to capital discipline for 2025. This challenging scenario of $65 per barrel requires and will require from us simplified projects, assurance of good trading margins for our products, a significant cost reduction, and a lot of cooperation among the different areas of the company so that we can have the best results possible for our business. This is what we are already addressing, and this is what all main oil companies are doing. And of course, we have to make this effort to achieve better results in such a challenging scenario. Again, it's $65 per barrel. So in this scenario, we're going to talk about a few words that you will hear constantly, such as austerity, simplification, optimization, reducing investment costs, reducing operational costs, and overhead. Our products, as we know very well, are priced by the international market and they vary according to their prices and the exchange rate, which is out of our control. What we know, and we are certain of this, is that we must react to these fluctuations. Petrobras is absolutely aware of its obligations to react to these fluctuations. When prices go up, we have more comfort to expand our initiatives. But when prices go down, it's time to tighten our belts. With that being said, this is my message to you. Please remain confident that we are addressing this cost reduction in the face of a challenging scenario to achieve the best results possible for our investors, whether they are in the government or private. I must also highlight the excellent results that we had in the first quarter of 2025. First of all, I'd like to say that there's no future for an oil company without exploration. And I like saying that this is what we have been doing. This is what we've been bringing as a result for our company. We are constantly expanding our reserves and building up our efforts to expand the Brazilian equatorial margins. We believe in this potential and will continue pursuing the opportunity to show Brazilian society and our investors that we have relevant gains that we can attain from exploring oil and gas in the Brazilian equatorial margin. So in that aspect, as I mentioned, we have been very successful. We have continually added more reserves, especially with the pre-salt layer. Last week, we disclosed a new discovery in the pre-salt layer and the Aram block. If everything works out, we believe that we will have advanced production for the Aram block. More pre-salt with good quality oil without contaminants but still with a challenging rock for our project. But this is within our potential. This is what we know how to do. Before the second discovery in Aram, we made a new discovery in the Campos Basin in the North Brava area. We also made discoveries in Colombia and had an excellent test in Colombia's offshore area. This is a block that, if all works out, will be responsible for supplying all of the gas consumption in Colombia. And let's hope that this will happen. But that's not all, ladies and gentlemen. We still have many opportunities ahead of us, whether it is in the Brazilian eastern margin or in the equatorial margin. We have to remember the Pelotas Basin, where we're also exploring, and soon we will consider drilling wells there. As we will hear later on, we have about 50 exploratory wells to drill in the next few years. And this reinforces what I mentioned before. We're very proud of this because an oil company will not have a future without exploration. We want a strong, long-lasting company that contributes to our investors, whether they are the government or private investors, and also contributes to Brazilian society in general. We're seeking new reserves while working to develop the fields that have already been discovered. In the first quarter of 2025, our production went up 5.4% compared to the previous quarter. This increase decisively contributed to our financial results. Oil is our main product, and with it, especially because of it, we are generating $8.5 billion in cash with our operations. We reached a net income of $6 billion. After my message, our Director Melgarejo will go into details about our financial performance and draw our attention to the impact of variations in brand oil prices and our exchange rate. You will be reminded that in the previous quarter, the foreign exchange for Brazilian oil had a negative impact on our results. This quarter, the opposite happened. We recovered a part of those losses. The appreciation of the Brazilian real had an impact on our results again, and without these foreign exchange effects, our results would have been $4 billion, which is not bad, but it was even better at $6 billion. Our results are often impacted by the price of oil and the foreign exchange rate, as happens with all oil companies, and both of these variables are out of our control. That is why we are saying that right now is a moment for austerity. We will have to control our costs in general. We will have to do what we do well, which is exploring, producing oil and its byproducts, and trading these byproducts and our oil with the best profit margins we can achieve. But we need to do it with capital discipline and seeking major cost reductions, the highest we can attain. After that message, which I think will soothe your thoughts about how much the company is spending, we will highlight our physical results for the first quarter. They were very good, and they justify the capacity that the company has. On February 15, FPSO Almirante Tamandare went into production in the Buzios field. It was the first of a series of five oil rigs that will make Buzios field the biggest field in Brazil by far. That rig has a production capacity of 225,000 barrels of oil per day, in addition to gas. As I said, it was the first of a series of five giant rigs that will comprise the facilities around the Buzios field. On March 3rd, Alexandre de Gusmao went to the field, which will also operate in the pre-salt in the Santos basin and was finally anchored in 10 days. I need to draw your attention to these 10 days, which is a record-breaking period for Petrobras. It will begin its production towards the end of the second quarter of this year, the beginning of the third quarter. With that, it will be another 180,000 barrels a day operated by Petrobras in the pre-salt, along with refining. We also completed the revamping of Train 1 of our refinery, going from a processing capacity of 80 barrels per day of refined oil to 130,000 barrels per day. So with very little investment, with the introduction of the SOX unit, plus a small revamp involving maintenance, we basically doubled the capacity of RNEST Train 1. This may sound simple, but it’s no small feat. We're talking about 50,000 additional barrels per day in terms of processed load, 70% of which generates diesel, our main product. As I said, this means more diesel on the market, and once Train 2 is completed, which is undergoing a bidding process, it will be 260,000 barrels per day processed in the northeast of Brazil, a market that's hungry for diesel. I used to say that among all of the refineries, we're undertaking more efforts around diesel, especially S10 diesel, which emits much less and adds more value. Among all refiners, RNEST has the highest conversion of crude into diesel, around 70%, which shows how modern and economically feasible this refinery is. The second module of natural gas processing will go into operations in the second half at the BOAVENTURA complex in Itaborai, Rio de Janeiro. Added to the first module, the total processing capacity of that unit will achieve 21 million cubic meters per day, increasing the supply of natural gas and its byproducts, including liquid natural gas. We're also on the brink of inaugurating the new RDT at Replan. This new unit will have the capacity to produce 63,000 barrels per day of S10 diesel. Our efforts to increase capacity and production of diesel, especially S10, is real. These are our highest added value products. We are seeking the highest possible level of attractiveness for our investments. The S10 diesel has a high added value as it emits much less sulfur into the atmosphere, which is almost negligible. This high value also shows us that we're looking for more value while seeking products with the lowest possible emissions. We're still on the lookout for opportunities to decarbonize, which means that this is what it means. In February, we sold the first bunker of fossil fuel with 24% of renewable content in the Asian market. This is a huge achievement. We now have a presence in the Asian market with a high value product that is produced and traded by Petrobras. The product is a mixture of 76% mineral fuel oil and 24% biofuels produced from used cooking oil. Once again, the mixture of these two components allows us to create a product that’s valued internationally. We are developing new products also involving the low carbon market, an extremely attractive market for us, innovating to generate value and enable new energy solutions and decarbonization. In March, we signed a contract with the National Development Bank of Brazil to reforest the Amazon under the ProForest Plus program, one of the biggest programs for acquiring carbon credits in Brazil. We'll promote the reforestation of up to 50,000 hectares of now degraded areas in the Amazon. To give you an idea, this is equivalent to 50,000 football fields and will capture carbon tons equivalent to what is emitted annually by around 9 million gas-fueled cars. This is a structuring project around climate and reputation, sowing the seed of decarbonization. When Petrobras plans to profit from capturing CO2, we are confident in our 2050 strategic plan, not forgetting that low Brent prices bring about additional challenges and necessitate reviewing our plan, generating a 2026-2030 business plan, considering our need to overcome extremely high challenges imposed by price reductions. We'll do that by preserving our cash, reducing costs, and maintaining capital discipline. This is part of our values. The commitment to Brazil and our investors, both governmental and private, is part of our values. That's why we'll keep on investing and focusing on more financially feasible projects that generate profit for our investors, whether from the government or private market. We're committed to this path and planning with expenditures that align with current oil prices. You can rest assured that our common goal at Petrobras is to be a long-lived and strong company for the workforce at Petrobras, the board, investors, and Brazilian society. Having said that, I want to thank you for your trust. We promise to address the challenges ahead of us and seize possible opportunities along the way. Thank you for your presence, and now I will give the floor to my colleagues for the presentations. Unfortunately, I will not be able to stay for them, but I wish you a great presentation. Please analyze your purchase recommendations. We want all of you investing in Petrobras, and we'll make you proud of your investments. Thank you.

Thank you, Magda. Now we'll start the presentation about the performance of the first quarter of 2025. I'll give the floor to Fernando Melgarejo, our Financial Director. Fernando, you have the floor.

Good morning. Thank you, President Magda, for your message. I appreciate everyone being here for another webcast. We'll begin by reviewing the highlights from the first quarter of 2025. After the presentation, both I and the other directors will be available for the Q&A session. This slide displays the company's financial highlights, with adjusted EBITDA of $10 billion, up 8% from the previous quarter, and a net income of $4 billion. Our cash generation remains robust, with an operational cash flow of $8.5 million and a net cash flow of $4.5 billion. I also want to highlight our distributions. We approved BRL11.7 billion in dividends for this quarter and paid over BRL65 billion in taxes. This growth stems from our well-executed strategy, showcasing Petrobras' financial strength. Our commitment is clear: we aim to continue generating returns for our shareholders and Brazilian society responsibly and consistently. Slide 6 provides details on the EBITDA and operational cash flow. Here, I want to emphasize how our operational performance has influenced our results, especially with increased production and trading volumes. The EBITDA was $10.7 billion this quarter, reflecting an 8% growth compared to Q4 2024, primarily driven by higher oil sales in domestic and international markets and an increased diesel crack spread. Our operational cash flow grew by 4% from the previous quarter, amounting to $8.5 billion. The next slide indicates our net profit of $6 billion, before considering one-off events, with a result of $4 billion, up 31% from last quarter. The table below outlines the external environment, showing a 28% increase in the diesel crack spread, a 1% appreciation in the brand quarter-over-quarter, and a 7% increase of the real against the end-of-year dollar. Moving to slide eight, investments in the first quarter of 2025 reached $4.1 billion, a 29% decrease from Q4 2024. This investment level supports the message I shared in our last webcast about not expecting the same CapEx levels in Q1 2025 as in Q1 2024. As you may recall, last year's final quarter saw higher CapEx to alleviate the mismatch between the physical and financial advancements of our units concerning the Buzios fields. While CapEx in Q1 2025 is lower than in Q4 2024, it is up 34% compared to Q1 last year, mainly due to significant advancements and investments in the pre-salt in the Santos Basin and new production systems in the Buzios and Oiapoque fields. Slide 9 illustrates our investments. We are investing more while also delivering more, with these investments related to increased physical deliveries that support production curves and facilitate new system implementations. The acceleration of CapEx towards year-end 2024 helped us reduce the physical-financial gap by 14 percentage points, showcasing our commitment to timely packages and minimizing delay risks. The past year saw improvements in delivery rates; for example, the five rigs being constructed in Q1 2024 advanced from 51% to 76% completion. Additionally, we commenced construction of two more rigs this year, totaling seven units under construction. Our increased CapEx compared to last year reflects the rising number of platforms we are building, which benefits us by preventing affected platforms from impacting our debt. We also doubled the number of interconnections and wells within a year, interconnecting 16 wells in Q1 2025 compared to eight in the same period last year—our best result in eight years. We executed 27 drilling interventions for new wells, marking a 13% increase from Q1 2024. We are enhancing our drilling activities, interconnecting wells, and progressing towards completing new units that will bolster our production curve. These investment projects add value for our shareholders and are poised to drive profitable growth in the coming years. Slide 10 explains the reconciliation between CapEx competence and cash CapEx for Q1 2025. The cash investment for the quarter was affected by elevated CapEx in Q4 2024. It’s important to clarify that a normal time lag exists between measurements and payments. Each quarter, we typically see a time lag, which is completely standard. However, due to a concentration of measurements at the end of Q4 2024—especially in December linked to our efforts to close the physical and financial gap of new systems—many payments were only made in January. This impacted the cash investment in Q1 2025. To illustrate this unusual effect, we've detailed how the time lag between measurement and payment influences our cash flow. In Q1 2025, about $1 billion of our investment cash stemmed from measurements in Q4 2024, whereas $400 million measured in Q1 2025 will only reflect in cash in Q2 2025, reverting to standard practices. I want to highlight the section concerning IFRS 16. This amount counts in CapEx competence but is classified as a cash outflow from financing activities due to its relation to leases. Now, moving to Slide 11, we see the levels of the company’s debt. In Q1 2025, gross debt rose, largely due to the entry of the FPSO Almirante Tamandare, a chartered unit that affects our leasing expenses. It has a 250 barrels per day capacity and can scale up later this year. It's crucial to note that our debt remains within the limits set by the 2025-2029 business plan, capped at $75 billion, allowing for an efficient and flexible capital structure. Now, onto Slide 12. Our commitment to distributing generated results and ensuring the company's financial sustainability remains steadfast. With gross debt controlled within our planned levels and strong results, our board approved the distribution of BRL11.7 billion to shareholders for Q1 2025, translating to zero cents per share, which will be paid in two equal installments in August and September. Slide 13 illustrates the significant tax contributions from our activities. Overall, we paid BRL65.7 billion in taxes to various entities, including government participation. Additionally, we allocated approximately BRL66 million towards voluntary social and environmental investments and sponsorships, which include over 200 initiatives across social and environmental projects, cultural, sports, and science technology sponsorships. We emphasize bringing attention to these figures to show how Petrobras' performance results in positive impacts for Brazilian society. Now, looking at the last slides, we've reflected on our performance in Q1 2025, but our focus is also on the present and how the company is poised for the lower price environment. I want to remind you that Petrobras has a strategic plan and project renewal governance designed to create value in challenging price scenarios. We’ve included a snapshot from our business plan released last year, highlighting our resilience even during low oil price situations. Our E&P projects must exhibit a positive NPV at prices as low as $45 per barrel, and our average break-even for E&P portfolios is around $28 per barrel. Additionally, we are evaluating a portfolio of projects to ensure they do not endanger the company’s capital structure while also confirming their returns in favorable scenarios, just like all our other projects. Concerning shareholder remuneration, our policy is structured to ensure dividends align with varying oil prices without threatening the company’s financial well-being. Thus, we remain confident in our strategy and governance. I want to reaffirm that while we maintain a long-term strategy, we are fully aware and attentive to the global context of declining prices in our industry. Moving to the next slide, we are implementing cost-reduction measures and adapting our business plan to the new economic landscape. The final slide details our actions. We are focusing on three main areas: first, measures to reduce inflation impact by optimizing expenditures, primarily by cutting corporate overhead costs to return to previous levels. Second, initiatives to alleviate the effects of lower prices on our free cash flow, which include simplifying engineering projects and reassessing recently tendered projects that are not particularly attractive, as well as lowering hibernation expenses for systems awaiting decommissioning and re-evaluating the cost structure of mature onshore fields. Lastly, in our portfolio, we will prioritize projects that generate cash flow in shorter timeframes. This includes tightening controls over new project inclusions and reprioritizing ongoing projects that promise higher returns in the short and medium term. We will continue exploring measures to bolster our resilience and keep you updated on developments stemming from these actions. I’ll conclude my presentation here and appreciate your attention. I now turn the floor over to Eduardo to begin the question-and-answer session. Thank you, everyone.

Thank you, Fernando. We will now continue with the question-and-answer session. The first question was asked by Bruno Amorim from Goldman Sachs. Bruno, over to you.

Hi, thank you. Thank you for taking my question. My first question is about capital allocation. If you can tell us a bit more about the potential processes and how that you are buying back that refinery in Bahia, also ethanol, if you have progressed there. And as you've shown, most of the company's projects are resilient to oil prices being low. So I'd just like to confirm if thus far you don't believe there are any changes necessary to the investment plan. And as a follow-up, let's imagine a scenario in which oil prices go down even more. Are there specific areas in which you can make adjustments, whether it is by making onshore investments or investments in other areas where returns are lower than in deep waters? So that's a broader question about your capital allocation. Thank you.

Hi, Bruno. So about RLAM, we didn't have any changes. We still follow the same logic. So we can look at any investments and any M&As, but we need to have compatible returns on our investments. But for RLAM, we don't see any news. There have not been advances considering capital. It's important to mention that Petrobras will celebrate its 72nd anniversary this year. We're working on a commodity that has intrinsic volatility. Our 70-year experience has built a structure thought out for volatile moments, which was not different when we built the strategic plan for 2025 to 2029. That was taken into consideration. Some important things about resilience: our break-even is $28 per barrel, and we always work with testing and modeling at $45 per barrel. If it doesn't pass, then the projects are not continued. So this year, thus far, we haven't seen any changes to our planned CapEx. We've maintained what we want to do without any further changes.

Thank you, Fernando. Now we will receive questions from Caio Ribeiro from Bank of America. Caio?

Good afternoon. Thank you. First of all, recently Shell mentioned that it's going to some blocks in the Caribbean where they have some participation with Ecopetrol. Since Petrobras has some presence in Caribbean offshore assets, would you be interested in assessing or even taking over this participation from Shell if Ecopetrol is seeking a new partner for these fields? Secondly, despite the adjustments to diesel prices made recently, we still see a premium on PPE for diesel of about 6%, especially gasoline, which is close to 10% according to our calculations. So can you give us some color about this decision, this recent decision on changing diesel prices but not gasoline? And do you see a reason for new adjustments? Thank you.

Hi, good afternoon, Caio. Yes, Shell is letting go of this asset. And just like this one, we're assessing others in our portfolio. It’s a constant process where we assess opportunities to see what provides the best returns and the most significant results. Exploration, as our head always says, cannot continue indefinitely. Of course, we have to look at our full portfolio and we are assessing everything. But in Colombia, not only do we have this discovery, but we're drilling two wells. One is indiscernible, which will hopefully give us good luck, as its name implies. But yes, we are assessing these possibilities.

Hi, Caio. Good afternoon. Thank you for that question. Before I talk about your specific points, it's important to highlight that obviously we are trying to see movements from the international market. The company's strategy doesn't only consider international prices. Now, on May 19, we will celebrate our second year after implementing the new commercial strategy, which considers all of these aspects. To answer your question, Caio, I think there are two points that we need to clarify here when addressing the diesel and gasoline issue. We believe each product deserves a specific look. Contrary to diesel, which is going down in the international market, gasoline is going up. Inventories will probably be recomposed in the U.S., especially where gasoline consumption will increase, and that pressures international prices. While we're looking at this, we're also seeing our own internal potential in Brazil, especially in our refining capacity for the oil we produce and our logistics. In diesel and gasoline, we have a broader perspective. External volatility is also a factor; there are extremely strong geopolitical factors putting pressure on prices—prices of oil and spreads for products are under very high volatility. For example, in early April, because of fake news, oil went up $4 in a few minutes, and after that got debunked it went down again. The market is volatile, and we're not transferring this volatility to the client as we did in the past. In the past, with previous commercial strategies, you had in some years more than 90 adjustments or readjustments of fuel prices, which ensured some stability. In 2023, for diesel, we maintained stable prices for nearly 400 days, and that carries significant value for society and our economy in general. This is within our strategy. We have gasoline adjustments, and as you mentioned, the last one was in June 2024. We've had stable prices for over 300 days while the market is highly volatile. We are assessing prices daily and evaluating our logistics capacity and infrastructure to keep it balanced. Just to underscore that for diesel, with the market parameters and our commercial strategy, we recently had three price reductions. The first quarter was very interesting; we advanced in the Midwest, which grew 9.7%. We captured a significant part of this increase which represented an expansion of about 72% to 74% of the diesel market. We've been making use of that, yet we saw effects from tariff wars and another announcement from OPEC to continue their production. That led to rate reductions. Overall, expenses completed $0.45, and our expectation is that this would reflect a cost reduction of $0.39 for our consumers, but that hasn't happened. In conclusion, we're considering all of these elements to determine how we're going to apply readjustments and execute our commercial strategy in the best way possible.

Thank you. We will now hear from Rodolfo Angele from JPMorgan. Go ahead, sir.

Thank you. Good afternoon, everyone. My first question is about costs. The message from the CEO was very interesting in adjusting the company for lower oil prices. We've discussed with investors regarding the fact that lifting costs have gone up. So I would like to see this focus on cutting costs. My question is, can you give us more color about what initiatives you are taking? What is the highest potential for cost-cutting? Also, what is your ambition? What value do you expect to capture? That’s my first question. The second one is, with lower price scenarios, we will see companies becoming more conservative about their cash use. We would like to know if, considering capital allocation, there is any space for reviewing expenses, potentially seeing lower CapEx levels, and perhaps some extraordinary dividends throughout the year. Thank you.

Hi, how are you, Rodolfo? Let's start with your second question about CapEx. First, I want to reiterate that our commitment is with the sustainability of the company to be important to society and to adequately compensate all our investors. When you encounter lower brand prices, you must take certain measures. As we mentioned, we are optimizing cross-sectional expenditures to compensate for inflation and return to historical levels. This is one objective, simplifying projects. We had a project postponed for an engineering review to enhance efficiency while prioritizing projects that are generating positive cash flows. So in our investment portfolio, we're attempting to prioritize the most critical projects from a financial and strategic perspective. But before we can reduce CapEx, we must analyze our possibilities around reducing costs, so we can maintain CapEx at current levels and execute projects. Today's projects are the future of Petrobras, as we all know, and they'll be prioritized. Would you like to add anything, Sylvia?

Well, one way for us to assess the optimization of costs is through discussions with the performance area, where we may boost our operational efficiency, thereby decreasing the costs in our offshore areas. In the onshore areas, we are discussing substantial reductions for profitability of all our assets to ensure a positive ROI, while continuing to improve it with optimizations and the search for lower costs to produce results and lower costs.

Thank you, Fernando and Sylvia. Now on to the next question from Vicente Falanga from Bradesco BBI. Vicente, have the floor.

Thank you. I also have two questions. First, we haven't seen some FPSOs delivering growth for quite some time. In the area of Maria Quiteria, there are projects that have been more or less flat for some time. Are there difficulties being faced by these projects? Are the revamps profitable, or is it time that we rethink these assets and perhaps consider their resale? My second question is about gas and energy, which dropped expressively this quarter, as was explained in the release. Is it possible to say the company will recover its EBITDA with the route-free ramp-up? If so, at what levels will EBITDA stabilize after this ramp-up? Thank you.

Vicente, when we deal with revamping projects for mature fields, they need more water injection and more producing wells to resume their production levels. Differently from the pre-salt fields that can achieve peak quickly, they take more time. In the case of these fields, the forecast for Maria Quiteria is that it will only reach peak levels towards the end of the year. Developing these wells requires more time. This is factored in when developing these wells.

You're right. The productivity of pre-salt wells reaches 50,000 or 60,000 barrels per day from a single well. With full wells, this can top up a platform, which is different from what Sylvia mentioned about the revamping projects. However, I'd like to emphasize that all of these revamp projects are subject to robust factors. One of our best projects is Albacora, featuring an excellent tier VPL. We'll keep on implementing these projects. As we stated before, we are looking for simplification. Again, we have our topside, which is one of the possibilities to gauge the feasibility of a project. It's 35,000 tons, and with other projects, we’re looking at 60,000 or 70,000 tons. We’re able to simplify Albacora after many conversations with the market and suggestions to simplify the project. Thus, the Albacora project is one of the best projects in our current portfolio.

Thank you, Vicente. As for gas, a series of initiatives indicate that we'll likely see improvement in performance and results. The first one is a quite aggressive policy around capturing new clients in the free market, and we observed significant progress this quarter, which will continue. There's also a new incentive policy, implementing a premium for increased demand in the market that applies to distributors and the free market alike. This generates more revenue and clients. Additionally, we're banking on the full operations of the OPGN in the BOAVENTURA complex on Route 3, enhancing our product portfolio and increasing our competitiveness. Moreover, we have an auction scheduled with nine existing registered plants and two new plants with good expectations. Lastly, we're discussing the regulatory framework for transportation assets with a solid initiative among several stakeholders. Our expectations for the next quarters point to improvement. Thank you, Bruno Montanari from Morgan Stanley. You have the floor.

Good afternoon and thanks for answering my questions. First, about the CapEx. In terms of what we can expect for the CapEx for the next quarters of 2025, it probably makes sense to think that it was a bit higher than what we normally see in the beginning of the year. That being the case, the second and third quarters will likely go to lower levels before increasing again to regular levels towards the end of the year if that's to be expected. Secondly, as the President stated, the beginning of the year was very good for oil production in Brazil, potentially even above expectations. So I would like to hear from you about the scheduled maintenance pipeline for these months and which units have maintenance scheduled for the upcoming months to help us understand how much of the results stemmed from maintenance and how much arose from ramp-up.

Hi, Bruno. Thank you for your question. Regarding CapEx, it's important to state there was a carryover from measurements made in December, with the first payments occurring in the first quarter of 2025. This carryover effect and some measurements not completed in December but in the first quarter impacted cash investment. For instance, in the first quarter of 2025, approximately $1 billion expended from our cash for investments related to the measurements of the fourth quarter of 2024, while $400 million were measured in the first quarter of 2025 and will only leave cash in the second quarter of 2025, returning to normal. I want to assure you that we're still guiding for $18.5 billion, naturally adjusted according to FX rates.

Thank you, Fernando. As for downtimes, scheduled downtimes are essential for maintenance and safety. Our maintenance schedule ensures we are maintaining good practices. For the first quarter, we observed a planned downtime, resulting in 245,000 barrels due to P-68, 70 FPSO, Maria Quiteria, Santos Basin. We managed our planned downtimes for the first quarter successfully. Overall, it was a strong quarter from both a production perspective and new discoveries, with three made, including two in Aram and one in North Brava. If we combine the results, we observe a significant situation for the Campos Basin and the Santos Basin. Thank you. Renato, would you like to add anything?

Yes, please, about CapEx. Last year, we reviewed our planning process regarding CapEx and how it would behave throughout the year. We're confident that we will stay within the guidance of 18.5%, more or less 10%. One reassuring factor is that most big projects are already set; thus, we anticipate minimal bumps along the way over the year. Our forecast remains accurate.

Thank you, Renata and Sylvia, and Fernando. Next question from Matheus from UBS. Matheus, you have the floor.

Thank you. Good afternoon. My first question is about dividends. Given that our policy is structured in our accounts with oil prices close to or below $60 per barrel, Petrobras may need to issue debts to pay dividends of 45% of free cash flow. Would it make sense to change that policy? That's my first question. My second question is that in terms of LNG, we understand that there are restrictions regarding supply and the company's reliance on the LNG market. How do you view competition in this industry, given the higher costs associated with import infrastructure? How do you think about increasing the availability of LNG? Will the number of refineries increase as indicated in the revamp plan for the next five years?

Good afternoon, Matheus. First, I'd like to reiterate our commitment to ordinary dividends according to the methodology of 45% of free cash flow, which is self-adjustable. After all, as earnings increase, dividends will rise proportionately. Regarding the debt, when we defined the strategic plan last year, we decided to adjust the debt target to $75 billion, up from $65 billion, due to three main motivations. The first one relates to potential investments we couldn't see then or now, expected to contribute to debt increase. Second, the initial oil outputs in Maria Quiteria and Tamandare caused some worsening in debt levels, which remain associated with revenues. Lastly, it's about cash management; if there are fluctuations like the Brent price, we will require flexibility in managing cash flows to adapt to any turbulence. Therefore, nothing changes in the debt target; it remains at $75 billion.

Well, Matheus, concerning LNG and infrastructure issues, we have a plan prepared for the future aiming to increase LNG production. Refining investment and expansion capacity are focused primarily on diesel, but also LNG. The BOAVENTURA natural gas production is presently being planned, and we have two trains processing gas, making significant strides. So for our logistics related to LNG distribution, we are devising plans in conjunction with third parties, especially distributors, to facilitate operations, although these have yet to materialize. Nevertheless, the company has been increasing LNG production and processing.

If I may add to that. Before we begin, the CEO has communicated important austerity measures. We are working on three major fronts that I discussed before, and we continue with this austerity plan. We have certain short-term measures aimed at achieving some immediate reductions related to cost-cutting, plus some medium and long-term initiatives. But this is all laid out in our strategic plan, with no corresponding increase in debt anticipated. Thank you, Fernando and Schlosser. Now we will receive questions from Rodrigo Almeida from Santander Bank. Go ahead.

Good afternoon, everyone. Thank you for taking my question. I have a point about the equatorial margin. I think there have been some advances at this, or at least it seems to have progressed from outside. I'd like an update on what we can expect and monitor for the next months with the licensing process and exploration process in the region, whether you have a license approved. Remaining with the same topic, I'd like to ask your long-term view on the equatorial margin. I know we don't have all the details, but I think we will have a relevant part of the exploratory session in the plan. We've discussed this for a long time. But if we start developing assets in the region, how do you believe the business plan will support these additional investments in CapEx and the development of the region? Would you be willing to share assets with partners to help fund these projects or have a portfolio recycling plan for other assets to finance the development of the equatorial margin? Thank you.

Hi, Rodrigo. Yes, we have some expectations for the equatorial margins. We've already fulfilled all the requirements laid out by Ibama. They have been handed to Director Clarice. We have two centers in Belem, in Oiapoque, awaiting Ibama to verify everything is fine. We already have a probe positioned in Bahia. All we need now is to receive approval for the probe and start drilling. In our strategic plan, we foresee $3 billion for the margin, with the first well of this year included in that. For the margin overall, 15 wells are planned over the next five years. Once discoveries begin, we delimit the field. We have some leeway in our budget to accommodate this. However, it might take four or five additional years before production begins once the field has been defined. We can reschedule investments according to future plans without depending solely on this area as we have other wells to drill here in the southeast margin. We even have some wells planned abroad in Colombia, as well as San Tome and Príncipe, with some drilling planned too. We're working to optimize the Campos and Santos fields, improving efficiency by adding complementary wells and pursuing strong investments to acquire a license in the equatorial margin. In the meantime, we’re also working on other areas like the Colombia well and at the end of the year in South Africa.

Hi, Rodrigo, that's an excellent question because it gives us the opportunity to tell you about something. We recently conducted a simulation in Petrobras with Oiapoque, involving over 200 people. We executed all exercises, including emergency responses and treating fauna. During these exercises, results adhered to Ibama manuals, showcasing our readiness. Sylvia has mentioned we've been cleaning the probe and have licensed fauna. We have an operating license from SEMA. In Oiapoque, we are also arranging a contingency of equipment and trained professionals to respond to emergencies. Weekly, we communicate with Ibama regarding steps taken by the company, demonstrating readiness for pre-operational assessment, which occurs before the license to operate.

Thank you, Clarice. Thank you, Sylvia. We'll now hear questions from Gabriel Barra. Gabriel, can you hear us?

Hi, everyone. Can you hear me?

Yes, go ahead.

Thank you for taking my questions. I have two. The first is regarding OTC. I got a presentation from Renata about this, and this has been an important topic for the company, especially in contracting not only services but also projects. In this presentation, Renata discussed vessels here in Brazil. We also saw some news from Magda regarding meetings with people in other countries trying to attract investments to the country with shipyards. I would like to hear from Renata how we can solve this equation. With low oil prices impacting conservative investments, could you provide feedback on OTC and how to understand this issue from your perspective? That would be an important point. My second point is about the gas market. Brazil has been discussing opening the gas market and lowering gas prices for some time. What would be the company’s strategy concerning BOAVENTURA and higher gas capacity in a market with insufficient demand and high prices? I’d like to hear your thoughts about the gas market strategy and how it will impact the company’s results moving forward.

Hi, Gabriel. We have been simplifying our projects. I mentioned before, talking again about the topside of the projects. This is one of the complexity measures we have. In the beginning, first FPSOs installed in the pre-salt layer had topside weights not over 30,000 tons; the ones in Buzios are now over 60,000 tons. We need to go back to basics, and we are implementing that. We took a project from Replicon Chizem and need to make minimal changes for a very lean project. We concluded this study and are implementing it across several projects. I mentioned Albacora, which is simple; we’ve implemented many simplifications with CIAP-1 and 2. The tender organizers required more days to organize this, but we also have to look at the Subic. Last year, this market grew due to a lack of competition. We had essentially two suppliers, which led to an increase in costs, but we made a strong endeavor with the market. The last tender surprised us with four proposals significantly below previous bids. That's what we are trying to do—find more suppliers. We went to China seeking partners for Brazilian shipyards. As a company and other companies prefer nearby suppliers; geopolitical concerns affect our approaches.

Yes, Gabriel, you're correct. We're in a much more competitive environment than in the past. In about three years since the market opened, 19 suppliers have emerged, creating challenges for us in finding new clients. To address this, we established an aggressive pricing strategy, which has yielded results. In recent quarters, we communicated with three buyers who signed contracts with Petrobras. While we cannot divulge details, we are negotiating with numerous others, and contracts will be announced as they are signed. We have a clause in our contracts with distributors that allows us to reduce the contract if a free consumer opts for the freight market. This clause has also affected distributors' operations. Thus, we're prepared to continue launching new products to capture a better share of the market.

Thank you, Tolmasquim. Let's continue with the next question from Luiz Carvalho, BTG. Go ahead, sir.

Hello, good afternoon. Thank you for taking my question. I also have two. The first is for Director Renata. Referring back to a question asked about President Magda's initial comments on cost reduction and simplifying projects, I am trying to quantify the potential impact of simplification and reduction of topside weight. We've seen FPSOs with total costs of $2.5 billion rising to $4 billion. Do you have any estimates or expectations about the costs of these units? Will they range between $2.5 billion and $3 billion or between $3 billion and $4 billion? And how do these costs mesh with the impact on the total projected CapEx? My second question is for Director Fernando regarding leverage. This quarter, we observed net leverage nearing 1.5 times, up from 0.8 times a year ago. Gross debt hit $65 billion, coming very close to the $75 limit, while your cash appears near minimal or ideal levels. In your presentation, you emphasized CapEx resilience at varying oil levels. What’s the ideal maximum level of leverage for you, particularly given the current context of lower oil prices?

Hi, Luis. Our expectation is that costs for rigs will be below $3.5 billion. Of course, this will depend on the complexity of each rig. Our estimate is that they will not exceed $3.5 billion.

Hi, Luis. First, leasing constitutes 70% of our leverage, and leasing is primarily linked to generating revenue. Therefore, in a company with leasing, this point must be taken into consideration. While financial leverage is much lower, we've noted that leverage relates to our debt cap. No one interprets this as exceeding the $75 billion ceiling. As a financial manager, ensuring sustainability, cash generation, and payment capacity is essential. This is how we view our leverage.

Thank you, Fernando. Let's continue with the next question. Lilyanna Yang from HSBC will ask the next one. Go ahead.

Hi, thank you for taking my question. You've discussed the investment plan execution for 2025. I’d like to know what cost pressures you're facing today and if there's any possibility of executing CapEx above $18.5 billion in the budget. Director Fernando mentioned foreign exchange as a caveat. I have similar inquiries for 2026. That's my first question. If you allow me a second one, can you discuss the status of the investment plans in fertilizers? Are there ongoing studies for Petrobras’ growth strategy in petrochemicals, and have they advanced?

Lilyanna, we don't foresee any possibility of exceeding our CapEx guidelines this year. Fernando is looking at me sideways; he demands we adhere to the forecast, especially since we've defined prices. There's no expectation for prices to surpass those we anticipate. As for 2026, we are planning our next five years currently but don't have those numbers available yet; we will abide by those defined.

Hi, Lilyanna. Thank you for your question. Both petrochemicals and fertilizers are included in our strategic planning approved by our board since the company is an integrated energy company. Thus, they're part of our investment portfolio, generating value for Petrobras. For fertilizers, in May, we will complete the scheduled downtime of the Paraná plant, and toward the end of the month, operations will resume. As for the settlement, it was approved by our board, along with the resolution of outstanding amounts, and we will initiate a tender for Fosfam in Bahia and Sergipe to return them to our portfolio. Also, I don't know if Renata wants to mention that we’re in the midst of the tender process for UF&Ts, and we will soon initiate storage and trading activities, likely in '26, with completion of loading operations in 2028 or 2029.

Thank you, Mario and Renata. Now there's a question from Regis Cardoso from XP. Regis, over to you.

Thank you, Eduardo and the board of Petrobras. I have a specific question about production. There was an important schedule regarding some platforms going into production and some of them undergoing ramp-up. I'd like to hear your comments about that. I know that we have a guidance for an average of '25; is there still any scheduled downtime, or perhaps you could discuss production by December and at the end of 2035, considering these rigs' ramp-up. Additionally, I'd like to hear examples regarding flexibility in investment plans to adjust based on the lower oil prices mentioned in the beginning of the call. I had the impression that there could be an opportunity to change the scope of the topside for the rigs, perhaps some that have not been hired yet in the five-year plan.

Well, Regis, regarding the production schedule, our total production is submitted to a risk analysis that's consistently reassuring. Last year, we remained within a range of 2.7 million and for 2025, we expect to remain within 2.8 million. These important platforms, the ones originating from Maria and Buzios, will enter production during their second quarter and will transition to Monterrey by the end of 2025, with Amaro 4 next year. That adheres strictly to our production levels. Along with revitalization ramp-ups, all these scheduled downtimes have been planned, and we can state that 260-270 barrels per day annually remain unproduced due to these downtimes. But this is already considered by our risk analysis and also includes occasional downtimes. We've attempted to include Ibama in our analysis for greater accuracy in assessing results. We do not alter any projects already underway because they generate claims. We do not tamper with ongoing projects, except for security or safety precautions. We only modify projects that are yet to be contracted. We’re actively addressing projects we still need to hire or initiate hiring. No adjustments are anticipated; as mentioned, our projects are resilient at a price point of $45. There are no changes expected. However, we do simplify projects and attract more suppliers, enhancing competitiveness during tender processes. Thanks to everyone for your questions. Now we have questions from Jorge Gabrich from Scotiabank. Jorge, over to you.

Thank you. We looked at the utilization factor of refineries. It decreased in the first quarter. How can we think about normalizing the load for the next quarters? My second question is about the successful task in anticipating production systems. What learning points—both in terms of processes and contracts—were generated? Is there any other opportunity to accelerate or advance another production system?

Hello, Jorge. Thank you for your question. Actually, our utilization factor was impressive. It didn’t decrease; it may sound paradoxical, but it's not. We maintained our utilization factor for the refineries above 90% through strong efforts from our refinement, logistics, and trading departments. Even with a 60-day downtime for RNEST for revamping, which halted distillation, coking, diesel, and naphtha, we executed that successfully. Even with this downtime, our logistics management and high availability of the other units helped us maintain a utilization factor of above 90%. For this year, we will have a downtime at Cubatão, with two units, one of which produces diesel and S10. Toward year-end, we’ll have a downtime for Replan, which will undergo revamps. We expect a utilization factor of about 95-96% in some months along with an average of around 92% or 93%, as our strategic plan indicates. The reliability level of the company remains excellent in terms of international availability; six out of the ten refineries have achieved good indicators.

What have we learned? We are closely monitoring everything done at shipyards. For instance, we now discuss daily welding operations to be performed. Additionally, once the rig gets here, we need to anchor and interconnect the wells through lines. Before the rig's delivery, we launched the torpedo piles for anchoring. Thus, once the platform arrives, they're already ready, and we simply need to attach the line to the platform. We aim to complete numerous tasks before the rig arrives. This practice has enabled us to expedite timelines.

Thank you to everyone for the questions. We will now conclude the call. Thank you for your presence, and we hope to see you again in the future.

I want to thank everyone for participating; your presence means a lot to Petrobras, and our final message is that the entire company is fully aware of the volatile situation we are experiencing and the Brent price levels. We are committed to analyzing multiple scenarios to understand possible effects on the balance sheet of the company, production, CapEx, cash flow, and debts. All of this is carefully considered to facilitate making the best possible decisions, based on a technical foundation to allow us to progress effectively within the company. Implementing austerity measures, which we believe will produce positive results, should enhance the company’s reliability. Never forget that we always speak about long-term results; any short-term decisions must take into account the long-term efforts. We're looking at a 70-year timeline, and I assure you, any decisions need to consider this. This commitment remains intact, and we continue to feel optimistic about increasing production. We are confident in our resilience, as demonstrated by our strategic plan. So, I wish you a great day ahead, a wonderful week, and see you next time.