Earnings Call Transcript - PBR Q4 2023

Operator, Operator

Good morning, and welcome to Petrobras's Earnings Call for the Fourth Quarter of 2023. It's a pleasure to have you with us today. This event will be in Portuguese, and we have simultaneous translation into English. You can find the links to both on our Investor Relations page. All participants will be in listen-only mode during the company's presentation, and then we will have a Q&A session. And you may send us your questions to petroinvest@petrobras.com.br. We have Jean Paul Prates, President of Petrobras; Clarice Coppetti, Corporate Affairs; Sergio Caetano Leite, Financial and Investor Relations Director; Mario Spinelli, Governance and Compliance Director; Tolmasquim, Energy Transition and Sustainability Director; Joelson Mendes, Exploration and Production Director; William Franca, Industrial Processes and Products; Claudio Schlosser, Logistics, Trade and Markets; Carlos Travassos, Engineering, Technology and Innovation; and Maiza Goulart, CENPES. We'll start with a word from our CEO. Go ahead, sir.

Jean Paul Prates, President

Thank you. Good morning, everyone. Dear shareholders, investors, I'm very happy to talk to you today, not only because of the excellent economic and financial results we're going to present, but especially because I am convinced we're building a more robust Petrobras that is more resilient and better able to generate value in the long term for its shareholders and for society, facing the numerous challenges that we know and don't know created by this world in transition. From the beginning of our administration, we have emphasized this need to adapt the company to a new energy context in which the main driver is decarbonizing operations and energy sources. This is due to a legitimate request from society and requires new solutions to reduce the use of fossil fuels. We're aware of this challenge, and so we built a strategic plan based on realism and coherence. We aim to be responsible and transparent in our plan. We understand that we will have to go through a gradual transition. And so, we will continue investing in producing and exploring oil and gas, an industry that generates the biggest returns, and also in integrating our downstream logistics, supplies, and refinement. We're also going to generate value through a fair and responsible transition process. We wanted to be fair and responsible, diversifying our operations into profitable low-carbon businesses by prioritizing partnerships. And as I've emphasized, we want to do what we know how to do. In each industry, we have synergy between what we used to do and what we will start doing. All of this will be done by focusing on capital discipline and on solid governance, remaining rational across all decision processes. This rationality has guided the commercial strategy that we've implemented. We're aiming to increase the company's competitiveness to achieve new markets and create more stability for our decision-making process and for our consumers, as well as our payout policy because we want to consider higher investments, and we have a need to maintain our financial health. So I'd like to highlight the proposed dividends for 2023, BRL72.4 billion that will be paid to Brazilian society, which owns 37% of Petrobras shares. They've benefited from over BRL240 billion in taxes. We've also had market value records since our administration started. In 2023, the total returns from our preferential shares in the New York Stock Exchange in U.S. dollars reached 112%, which is far above the highest returns of the majors, 20%. This was all possible because we put people first. To give them value, we created a diversity, equity, and inclusion policy and a racial equality program. People are definitely our highest asset due to their efforts and love for what they do, and we're building a solid and promising future for our company. Actually, people were the driver behind our biggest results this year, especially now that we're celebrating 15 years of exploring the pre-salt layer. We're reaching record oil and gas production levels with fewer emissions. We've also inaugurated four new platforms. We've reached record refinement levels. We had the highest energy efficiency in our history. We expanded our bio-refinement capacity and we were able to process 100% of soybean oil in an industrial refinement unit with a Petrobras patent. We also improved our carbon efficiency, cutting 1.8 million tons of CO2 from our emissions. We won the main global offshore award, OTC Distinguished Achievement Award in 2024. We're being recognized for our efforts in renewing the Campos Basin, which has become a benchmark for the global industry. We were also record holders in patents. This is only a part of what we've achieved. We had so many victories that it could be an entire book. That's why I always say to our dear shareholders that Petrobras is back. It's back to prosperity, generating long-term value and building a better world. We're going to face the challenges we have and make use of the synergies in our business based on our expertise, which is well known by all. We've never neglected and we never will neglect generating economic value, which is a requirement for any company that wants to be competitive and perpetuate its value for future generations. It's very pleasing to lead Petrobras, and these results are a source of pride for all Brazilians and for all shareholders and investors as well. Believing in Petrobras and trusting our administration has paid off. These are the results that we're giving to the people who are sticking with us, who know that we're on the right track and who know that we're going to get it even more right in the future.

Sergio Caetano Leite, Financial Director

Thank you, Jean. We'll begin our presentation on fourth quarter earnings results, so I'll pass it over to our Corporate Affairs Director, Clarice.

Clarice Coppetti, Corporate Affairs Director

Hello. Good morning. I have some highlights from our corporate affairs department at Petrobras. I understand you might prefer other topics, so I'll quickly cover a few key points. I want to start by expressing my gratitude to my fellow directors for allowing me to speak first, particularly because we have numerous activities related to International Women's Day. First, I want to mention that we've been reorganizing our workforce. In the past year, we brought on nearly 2,300 new employees who all completed a training program. No employee can join without completing these training courses, which can take four months to over a year, depending on the role. In line with current societal expectations, we established a diversity, equity, and inclusion department and set goals to improve equity and diversity in leadership. We also launched a policy on diversity, equity, and inclusion. Every cooperation agreement includes a diversity clause, and we've received awards for our teams' achievements last year. Additionally, I must highlight our supercomputers, designed for energy efficiency and reduced processing times for our simulations of oil and gas reservoirs. We're also investing in quantum computing studies, with expected results still this year. We conducted human rights training for all our security professionals and personnel working in corporate security across all units and headquarters. Last year, we began working nationwide, harnessing regional strengths, and we're placing teams in some dormant areas in northeastern Brazil, particularly in Bahia and Rio Grande do Norte. We also invested in artificial intelligence, which is a major topic of discussion in society, and we've been actively engaging with it. Today, in recognition of International Women's Day, I emphasize our investments at all levels aimed at supporting women in the workforce, including our outsourced employees. We have various initiatives and can provide further details to any interested analysts. Another significant point is our commitment to environmental, social, and governance efforts. Our program, Commitment with Life, covers our environment, operational safety, excellence, and health and well-being initiatives. We achieved impressive results last year, including over 700,000 hours of HSE training. We're also working towards positive water management, with programs aimed at ensuring water safety and returning clean water to society. Additionally, we have focused on training our leadership in mental health, a growing topic across companies. I also want to mention our social responsibility actions, including a technical cooperation agreement with the Ministry of Human Rights and Citizenship aimed at improving public policies and governance related to human rights. We launched our Racial Equity Program last year, and in 2023, we are set to invest 432 million in over 60 projects in the areas where Petrobras operates through our socio-environmental program. This initiative is crucial for directly impacting the communities around our operations. Furthermore, we updated our social responsibility policy and received recognition for our sustainability report as one of the top 10 reports of 2023. This concludes my presentation. I'm available, along with our Investor Relations team, to address any questions you may have. Now, I would like to turn it over to our Financial Director, Sergio Caetano.

Sergio Caetano Leite, Financial Director

Good morning, everyone, and a special acknowledgment to women on this Women's International Day. As President Jean Paul mentioned, our market valuation significantly surpasses our ADR at 112%, while others are at 20%. The first slide illustrates Petrobras's valuation in Brazil, highlighting the ONs and PNs with strong numbers and comparisons to other major players in total shareholder returns. We generated value for the company amounting to BRL150 billion and returned 20.4 billion to shareholders, which includes 19.7 billion in dividends and 0.7 billion in share buybacks. We contributed BRL240 billion to society through taxes and government shares. Of the total dividends paid by Petrobras, BRL36.6 billion went to the controlling group, which consists of the federal government. Additionally, we added another BRL54 billion in public asset valuations for the state. Beyond generating value, this also represents a significant contribution to society through the redistribution of resources as taxes and dividends. Our financial performance shows an EBITDA of 52.4 billion, marking the second-highest in history. The operational cash flow reached 43.2 billion, also the second largest ever, while our free cash flow stood at 31.1 billion, the third biggest recorded. We reported a net revenue and profit of 24.9 billion, the second highest historically. Despite facing a challenging external environment, we achieved these strong results. Notably, while considering customer devaluation, we continued to invest, which further enhances these results. Our gross debt is maintained between 55 billion and 65 billion, and we anticipate a reduction in debt over the next five years compared to last year's levels. Our financial debt is 28.8 billion, reflecting a decrease of 1.2 billion this year. The return on capital employed is at 11.2%, consistent with previous results. We also achieved the lowest yield spread compared to U.S. bonds in the market and earned the Quasi-Sovereign Bond Deal of the Year award following our issuance of 1.5 billion in 10-year bonds. We're proud of our transparency efforts aligned with the UN Global Compact, involving the commitment and engagement of the entire company as we share results with investors and shareholders. In the external landscape, we've seen an 18% brand valuation increase compared to last year, which notably impacts our financial outcomes. Diesel remains the most sold oil byproduct by Petrobras. We saw a margin devaluation of 23% between Brent oil and diesel sold. In 2022, oil prices rose due to the onset of the Russia-Ukraine conflict, but with the stabilization of the situation, margins returned to prior levels. We experienced impacts, such as an 18% drop in Brent prices and a 23% reduction in crack spreads, along with a 3% decline in foreign exchange rates, despite the real appreciating against the dollar. These elements significantly affected our net results and EBITDA, which showed a 21% decline. Our cash flow for 2023 includes investments totaling 12.1 billion. This year, we also experienced a debt impact of 8.7 billion related to new platform trades, with anticipated revenue from oil production further influencing our cash flow. We also made dividend payments and share repurchases totaling 20.4 billion. Comparatively, Petrobras's free cash flow of 31.1 billion placed us second to Shell, demonstrating strong performance within our peer group. Our oil production figures, which Director Joelson will detail, showed us in a tie for first with Chevron, reaffirming our status as leaders in organic reservoir generation, a collective achievement from our E&P team. Our EBITDA ranks among the best in our sector, finishing third behind significantly larger competitors Shell and Exxon. We are committed to growing our market share while enhancing operational results from our refineries. In terms of debt, we have maintained a decreasing trend since 2019, with a slight uptick in 2023 due to anticipated platform additions and inflationary costs in the supply chain. The cash on hand stood at approximately 18 billion, with 8 billion available for short-term needs, providing assurance that Petrobras can navigate current market fluctuations. We outlined our debt amortization profile and noted that, despite facing adverse conditions, we achieved the second-highest net profit historically without any divestments. Our contribution to society includes over 277 billion, of which nearly 37 billion relates to dividends for the controlling shareholder, the Brazilian state. We also accounted for 61.4 billion in government revenues and 178.8 billion in taxes paid. For shareholders, we distributed a total of 78.4 billion in 2023, with 72.4 billion attributed specifically to dividends, following our first full year of a consistent share repurchase program, which involved buying back 3.6 billion shares. Following the deduction of share purchases, the remaining profit was allocated to form a capital remuneration reserve for future dividend distributions. It’s important to clarify that these resources are strictly for dividends and cannot be repurposed for investments. These results reflect our accomplishments and efforts across the company, making us proud of our performance in this first year under new administration. I will now turn the floor over to Director Spinelli, our Director of Governance and Compliance.

Mario Spinelli, Governance and Compliance Director

Good morning, everybody. Good morning to those watching us. Special greetings to women. Some highlights in governance and compliance. 2023 was a very important year. In 2024, our Board will celebrate its 10th anniversary. In 2023, we had the first major restructuring in the department, creating new managements and broadening our possibilities in terms of disciplinary responsibility. I'd like to highlight that Petrobras is the entity that applies the anti-corruption law most heavily in Brazil. Around 20% of the sanctions are applied to companies under Petrobras' responsibility. We also created an area to work with data science, making Petrobras increasingly more capable to detect irregularities and also a specific section to deal with violence at the workplace. Last year, we once again did our survey, a compliance survey with 80% overall. This is a weighted average between all of the replies, and this is a clear demonstration of how the compliance culture is disseminated across the company. We were awarded several prizes, of which I'd like to highlight two. The Public Ethics Committee awarded us a prize. We were the only awarded company in the five categories in the UN Global Pact 100% transparency, which is also a clear demonstration of how our integrity and governance actions are robust. Our professionals also won awards in several different categories. Now, to tell you a bit about something that I think is relevant for everyone in our decision-making process. We have a governance strategy at Petrobras that gives privilege to technical aspects, so every decision is either shared or done through a collegiate process. In some cases, we need to have statutory committees or technical committees present so that the decision-making process is entirely based on technical aspects. We also have a governance structure that deals with compliance that is very robust. We have a director's office for compliance, which is one of the eight executive directors' offices in Petrobras, along with our CEO. Besides that, we also have internal audits, which are also independent. We have a reporting channel that works in three languages 24/7 across all the countries where Petrobras is. We're supervised by a number of regulatory bodies. It all aims to ensure that we have technical decisions. We want to prevent undue political interference and ensure that our projects are executed with a financial return for the company. It's also important to highlight a few issues in this process that ensures that we have technical decisions. The compliance officer has the power of veto in the executive board, and it can be used if any decisions do not comply with the applicable legislation or our internal regulations. As I said, the chief governance and compliance officer is independent. They're selected from the market and have a two-year term, which can only be interrupted if there's a majority of Board members elected by minority shareholders, ensuring that they are independent enough to do their activities. I have 25 years of experience in anti-corruption and governance. I played many roles in the federal government and also state and city governments, and also in the private sector. I've talked about strengthening governance last year. As I said, our main highlight was the biggest restructuring for the governance and compliance office in the company since 2014. We created new management positions responsible for the entire disciplinary process in the company. Now we have a robust structure as we've never had before. It's important to highlight that because it demonstrates how this area was strengthened in the previous year. That's what I had to say, and I'll now pass it over to our Executive Officer for Energy Transition and Sustainability, Mauricio Tolmasquim, and I'll be here for any questions you may have at the end of the presentations.

Mauricio Tolmasquim, Executive Officer for Energy Transition and Sustainability

Good morning. I'd like to greet everyone, especially women who may be watching us. I'll start talking a bit about the gas industry. This was a very good year for it, but we launched new products with more flexibility in terms, indexing, and we made a number of changes that were accepted very well by the market. That led to a record number of new contracts signed in 2023. We had 34 new contracts with 15 distributors, a total of BRL167 billion in estimated revenues. We also traded 22 million cubic meters per day starting in 2024. This is about 55% of the total consumption in the thermal market in Brazil. We also made significant strides in resolving a number of disputes, especially with a few of our distributors. I'd like to briefly discuss the importance of thermal generation for our energy transition. Some people might think, how are thermal plants related to renewable energy? We know that renewable generation is intermittent. You can only generate wind power when you have wind or solar power when you have sunlight. The graph on the left shows how it changes across two normal days. In yellow, we see sunlight, but as we reach the end of the day, it reduces because you have less sunlight and you need to have sources to replace it during the nighttime. Here, we have two main sources, wind or hydroelectric power when it is available, but usually it is not enough. To illustrate this challenge, on the right-hand side graph, we see the variation in thermal generation. You can see that significant increase around 12. That represents thermal generation. In less than four hours, we need to add 2 gigawatts to our power generation. That's about the same as what is generated in the Angra 2 and Angra 1 plants. Next slide, please. We also had a very good year in decarbonizing our processes. At E&P, we had a 10% reduction in our carbon intensity, which is very important for Petrobras to continue to use its oil in the future. In the future, we will only be able to take oil to the market if we can reduce its emissions. From 2022 to 2023, the refining industry reduced carbon intensity as well, and the same happened to the thermoelectric industry. There was also a significant reduction in methane emissions, 51%. Why is it so significant? Because methane's impact on global warming is much higher than CO2. In 100 years, a methane molecule has a 25-fold higher impact than CO2. Finally, this is the newest section, renewables. In the first year and actually our term isn't even one year long; it will be in May. During this last year, we created a governance program to approve projects for renewables. This is done in a very safe and responsible manner. We signed MoUs with about 45 companies. We have 45 business opportunities that are being analyzed. This doesn't mean that we are going to take all of them. Actually, it will be a much smaller percentage than this total number. It's important to have this number of possibilities because this allows us to select things better. In carbon capture, we're looking at a new business which is providing carbon capture services for other industries, like refinement. We're going to run a pilot in Rio de Janeiro, and we also want to highlight the low carbon product area. We have, for example, a partnership with the logistics area launching Podium gasoline, a carbon-neutral gasoline that has a certain market niche. The refinement office is also working on Diesel R, which is also very important to ensure that our refineries, even after the age of oil, still have use and can add value. We can also produce, for example, low-emission asphalt. I'd just like to conclude by showing this graph, which was created by BCG. It's a very interesting slide. The first graph shows that really if you look at that green curve, it shows low-carbon companies and in blue, a selection of oil and gas companies. We can see that on the short term, the returns of oil and gas companies cannot be denied. In general, they are much higher on average than the returns paid by the selection of companies that have low carbon emissions. But what properties do we see here? Oil and gas companies have a variable ROCE. They can go to quite low values, while the average ROCE for low-carbon companies is stable. We can see that investments into these activities and businesses, the low carbon ones, mitigate risks and generate value while you're still protecting and gaining market share. A good example is Diesel R. If you don't have Diesel R, your biodiesel mandates would little by little lose market. So Diesel R is a way of fighting for this space with our products as well. Podium gasoline is an example of how you can gain market share in a special niche, and this can be done at the same time. The strategy allows you to mitigate risks of having, for example, rising CO2 costs. Over the long term, and this is shown by the last graph, investors who invested $1 in a pool of companies in the oil and gas industry versus an investor who invested $1 in a low carbon company. In 2022, they would have about the same returns in total for that investment. This shows the importance of this strategy in the long term. If you have any questions, please let me know. With that, I'd like to give the floor to our colleague, Joelson Mendes, Director of Exploration and Production.

Joelson Mendes, Director of Exploration and Production

Good morning to all of you who are watching us. I want to start showing the numbers of our operated production. Last year, there was a significant increase versus the previous year. That was due to the fact that many projects started the production phase. Our operated production grows less because many of these projects that started to operate, we are operating. So part of the production goes to the partners. We also had very significant numbers and the pre-salt production in our mix has been growing from '22 to '23, growing from 73% to 78%. We had important records last year. The operated production surpassed 4.05 million barrels of oil per day, which is compared to the majors and is a very robust operation. Our pre-salt production also broke records last year, and also very important is the IUGA index. In the fourth quarter, it reached 98%. Our production last year surpassed our initial forecast while staying within what we call the risk tunnel; we've been working very hard to analyze all of the factors that can influence the production up or down over the course of the year. The accuracy of our projection has been around 96% over the last few years, which is very reassuring in terms of what we forecast for the current year. The highlights in production, and I'll repeat myself, we started to operate major production projects starting with the renovation of the Marlim field, which is something that we worked very hard on. The environmental licensing of these projects was very complex, but we won, and we were able to recover almost to get involved in projects that will recover almost 1 billion barrels of oil equivalent. Our fifth unit in Buzios field is now operating at maximum production. The FPSO Sepetiba also started production in the Marrow fields with a large capacity of 180 Kbpd, and Petrobras accounts for 40% of that production. In 2023, two projects that had started in the previous year, Guanabara and 71, reached peak production in a very short timeframe. This is our lifting cost and total cost of produced oil. The lifting cost went down from 5.8 to 5.6 barrels of oil equivalents produced; very significant amounts. The presence of the pre-salts from 73 to 78, as I said before, largely accounts for this decrease in total production cost in deep waters and shallow waters, with a little more than 20% of our production, with very attractive numbers. Even though we're talking about mature fields, there are still very important numbers. Our total cost of produced oil has gone down, largely due to the decrease in the price of the oil barrel abroad, which allows us to pay our governmental participations based on the oil price. With this decrease, we see this important impact on Brent, and $35 per barrel is a very robust price. This is one of the most relevant news to us. Director Sergio had already talked about this. We closed the reserves of 2023 with an organic recomposition of more than 150%, which is extremely significant if you consider the universe of majors in the world. Over the last few years, we've been achieving 200% in reserve replacement, which shows the consistency of our production curve for the future. This is the reserve that we've been achieving. We've been managing to increase year after year, and we were able to replace these reserves after a lot of hard work in Buzios, Tupi, Atapu, Raia Manta, Raia Pintada fields, and the approval of new complementary projects, especially in the Campos Basin. This work around reserves involves costs, projects, lots of simulations, and a very hard technical work by the team that coordinates this segment. Lastly, these are some highlights in the production area with our operations in Africa and also in the Pelotas Basin. We're also exploring Latin America as a whole and West Africa. These are areas that we know very well and we're always looking for opportunities. I also have to mention that we will continue to explore the equatorial margin, and now we're drilling a well in the Potiguar Basin, and in the future, hopefully, we're going to be able to drill new wells. We're also exploring new wells in the Campos and Santos Basins as a routine. That's what I had. If you have any questions, please let me know. Director William, you have the floor.

William Franca, Director of Industrial Processes and Products

Thank you, Director Joelson. Good morning. I will talk about the RTC segment with possibly the best results in history, both from an operational and financial standpoint, as well as from a sustainability perspective, with HSC results and also with very good progress in energy efficiency. The utilization factor has to be highlighted. We reached 92% on average, and in some months we reached more than 97% in utilization factor due to integration across the entire RTC division. The RP division achieved very good results for the company, contributing to our reaching the financial earning results with the pre-salt load of 65% in processing the pre-salt oil across all refineries. This utilization factor comes along with an increase in value, reaching 68%. We're talking about diesel and aviation kerosene. We're using our refineries with better yields. Our current CapEx is BRL3.1 billion in 2023 with very important stops for our refinery system, with the longest downtime in Kubaton, with very important projects to optimize the refinery REFAP with important downtimes and REGAP and our Duque de Caxias refinery, including the downtime of one of the lube trains. For 2024, we predict BRL3.8 billion in current CapEx. We'll move forward with the maintenance of our units leading to high availability of our units to refine oil, especially pre-salt oil. We ended the year at 60% of participation from diesel S10, and you can see on the left-hand side a few important production numbers in several of our production units, with our refineries having contributed to these fantastic operational results in 2023. The best historical results in energy efficiency with our RefTOP program with a reduction in carbon intensity and also with an increased energy intensity in the refineries, leading to a lower consumption of fuel natural gas with very significant results, putting us on the path to even faster energy transition. We also reached our lowest historical level of gas flaring rate and a record in pre-salt gas processed in our PGNs. In 2023, we saw the return of investments in fertilizers and petrochemical sectors and fertilizers. We're working towards achieving a definitive solution for Bahia and Sergipe plants. We also closed studies for the Araucaria plants, Parana, and UFN-III Tres Lagoas. Soon, we will return to being a strong player in the fertilizer sector and not only a plant. For that, we've been engaging in discussions with several partners and also with the strategic partnerships involving biomethane, green ammonia, and other interesting byproducts that will lead to a carbon footprint reduction. We're focusing on high-value, low-carbon products. With that, we're working in Kubaton and gas lube plants in Kubaton where we're entering Phase 3 this year as well as in GASLUB and Travassos will talk about RNEST Train 2 and EGM with the Routes 3 being completed by the beginning of the second half of this year. We have very good results that give us strength to face the challenges involved in expanding our downstream in line with our strategic planning. It's a year of achievement and we'll continue to work strongly in that direction to achieve these goals. With that, I'd like to give the floor to our Director of Logistics, Trade and Markets, Claudio Schlosser.

Claudio Schlosser, Director of Logistics, Trade and Markets

Thanks to William. Good afternoon, everybody. It's a pleasure to be with you today to talk about our 2023 results. I'd like to take the opportunity to greet all women both in person and online. The first slide covers the selling of byproducts both in Brazil and abroad. The sales of gas grew and were powered by a greater competitiveness of gas versus ethanol. If you look at diesel, you see a reduction of 1% as compared to 2022, basically because of two factors. REMAN had been considered up until the end of 2023 and also because of the mandatory mix with biodiesel that went from 10% to 12% in April. Concerning the exports of byproducts, there was an increase of 5%, and I'd like to highlight the increase in the exports of gas because of the change in quality, which is quite positive for the operation. Concerning the oil sales, we had an increase resulting from an increased production in exploration and production, as Director Joelson mentioned. What I'd like to highlight in 2023 is that we added three new refineries as clients, in addition to expanding the purchasing of our oil by other refineries, which resulted in a significant increase in the refining of oil. Now we have 26 new pairs in our customer portfolio, which allows us to capture and diversify in new destinations for our oil. We're constantly trying to expand our customer database to maximize the value of our oil, which is extremely valuable in terms of quality and also carbon footprint. Talking about market share, our share of the market is stable compared to 2022. By adding up the blue parts of the graph, the share of gasoline imported and produced is a consequence of optimizing production and the change in quality with the foreign market. So we're capturing more value for Petrobras. The diesel market grew overall. We were able to maintain our share. The diesel produced by the company increased due to higher levels of refinement. This higher availability of refineries and our logistics park utilization in 2023 was mentioned by William and contributed to reducing diesel imports and capturing margins from the Brazilian market, which is a better destination to monetize our reserves. Here, Director Tolmasquim has also made a point of mentioning each topic here. We talked about our commitment to low-carbon products. So the Petrobras Podium Gasoline, Diesel R, Cap Pro, our asphalt line. I'd add as a highlight that we started selling our R Diesel in Sao Paulo. That's a significant market for us and it was a milestone. We were able to advance in that area. Also related to Diesel R, this is voluntary consumption. We don't have any mandates for it. We're working through partnerships with national and regional distributors, especially CIM and Ipiranga. Simply, if you don't know, it is a regional distributor in the State of Rio Grande do Sul and it has values related to reducing carbon footprint and is the only company that has a specific contract to buy Diesel R. Some other highlights that we have for you are on the next slide. Related to how we execute our commercial strategy, this was mentioned by the President. We were very successful throughout the year, considering the best logistics and refinement conditions we have. We're offering to our clients a very competitive price, maximizing how we optimize our assets and we're capturing good margins from the Brazilian market as we said before. Considering sales hubs, we created two of them in line with our strategy to improve access in different markets of the country. It's a way of improving our logistics chain and also to be in communication with our clients. In 2023, we expanded our operations in Rondonopolis in the State of Mato Grosso and recently we started selling diesel and gasoline in Rio Verde. One final highlight is platform recycling; we are decommissioning some of our vessels and this is making Petrobras a reference company through the shipbreaking platform NGO in responsible vessel disposal. This is a very important milestone for us. So those were our main highlights in this area. I'll pass it over to Travassos.

Carlos Travassos, Director of Engineering, Technology and Innovation

Thank you, Schlosser. Good morning, and I'd also like to greet everyone, especially any women watching us. I'm going to continue talking about technology with the OTC award, the highest award in the oil and gas industry. In 2023, we received seven awards by OTC, two from OTC Brazil and five from OTC International. In Brazil, this was about our technology that allows us to use dynamic wells and stable waters, and this gives us a higher decommissioning capacity. The OTC award we received may refer to the innovations and technologies that were used in our revitalization process in Marlim and other areas of the Campos Basin. We're celebrating the 50th Anniversary of its discovery. We're now receiving another award for its revitalization. It's a very current approach for the oil and gas industry because this is a very resilient process from an environmental standpoint. We reduced greenhouse gas emissions by 55% and also made it more economically viable because we're increasing production capacity by replacing nine units with two new ones. This is a peculiar project because not only are we installing new lines, but we're also removing active lines, decommissioning old wells, and building new wells. We have about 60 wells that will be connected, and I highlighted three of the nine pioneering technologies we have been developing. TOT-3P well design that accelerates the construction of post-salt wells reducing from 110 days to 56 days on average. This is in the Campos Basin. We also have flexible pipe envelopes that reduce engineering processes and allow us to reuse lines, and that even reduces our inventory. The last technology I'd like to highlight is a new methodology and extension tools that allowed us to extend the life of Wet Christmas Trees and pipelines. So this will all add to how economic our projects are. The next slide refers to another milestone we had in the last 12 months. We were the only company that installed five production systems in 12 months, from December 2022, when the P-71 unit started, to December 2023, when FPSO Sepetiba was started. We're highlighting FPSOs, but we actually started five production systems with 1,300 kilometers of lines and 106 wells. That gives the company an installed capacity to produce 630,000 barrels in 12 months. We also want to highlight FPSO Almirante Barroso, the fifth unit in Buzios that started its production in less than five months, another record for the company. This used to be P-76 that reached this production level in eight months. This is due to a joint effort with the company, but we're also delivering units at a very high reliability and safety level, a benchmark for the entire world. The next slide also highlights how we're decommissioning some platforms. This effort started with our exploration and production companies as we were prepared for decommissioning the unit, and it's a significant highlight for the submarine teams that disconnect and unmoor the unit and also the wells team. This is a very important portfolio for Petrobras. In our strategic plan, we will decommission 23 units, and after 2028, we will have an additional four units to decommission. So it's a circular economy market. We're building opportunities for Brazilian companies. Schlosser mentioned we were recognized by a Belgian NGO called Shipbreaking Platform for establishing a new green disposal policy. This organization represents several environmental agencies that monitor how maritime units are being decommissioned, and we were recognized by them. This is very relevant for our practices and how aligned they are to sustainability and governance. Let's continue with the next slide. Here we have some of our highlights downstream, some of the advances we've had in the Duque de Caxias refinery, adapting our hydro treatments, Diesel S-10. We also have a hydro treatment area for Diesel S10 being built by REPLAN and also REFAP. We're also increasing our diesel capacity. We heard about RNEST, this is not on the screen, but we are also conducting some works there. In the next weeks, possibly next week, we will receive proposals for the second adaptation and that would allow it to process 260,000 barrels of oil a day. We signed a contract to acquire HEFA Technology, which will be adopted in RPBC's dedicated plant, and another significant milestone was that we are completing our natural gas unit in Itaborai. That will be UPGN gas lube, which will increase our capacity. This is forecast to be concluded in the second half of 2024. The next slide will be my last. Another thing I'd like to highlight about our technology is that we started lab tests and a pilot plant. In November last year, we concluded industrial-scale tests to produce bio-aromatics. So products that can be used for the petrochemical industry based on vegetable inputs, in this case, soybean oil. This was also developed by our research center, and we just wanted to highlight how we are adapting our products to find new markets. So we're not concluding with me this time. We're still going to talk a little bit about CENPES, but I'd like to invite a young executive, Maiza Goulart, to do that. She's been in the company for 20 years. She's worked offshore. She's released platforms. She's led FPSOs. Our production development area has been led by her, and now she is a leader for the biggest research center in Latin America, CENPES. So I'll pass it over to her.

Maiza Goulart, CENPES Director

Thank you for that introduction. It's a pleasure to be here on International Women's Day and discuss some achievements of female researchers at CENPES. Before I share those, I want to highlight that we are the largest applied research center in Latin America, with over 1,000 employees and nearly 1,000 researchers. Last year, we invested BRL3.6 billion in research, development, and innovation. We take pride in the successful implementation of our technologies at Petrobras and the various awards we've won. While Travassos and our CEO mentioned our OTC award, I also want to point out that we were finalists in five categories at the NP awards and won in four. According to the MIT Technology Review, we ranked among the Top 20 Most Innovative Companies in Brazil and placed second in Valor’s awards for companies across multiple industries, which was the highest in the oil and gas sector. Last year, we celebrated a national record of partnerships through our Connections for Innovation program and achieved a national record of registered patents for the third consecutive year. Now, I want to focus on the contributions of women in our center. The image behind me was taken this week at CENPES. While it doesn’t capture all the women in our research center, I’m delighted to see the smiles and stories it reflects. We have remarkable women here, with women comprising 25% of our employees, 32% of our leaders, and 21% of our researchers. Although I could mention the achievements of each of the 270 women, I will spotlight a few. Aline Machado received the Brazilian Women in Chemistry Award last year. Marcia Khalil serves as a consultant leader for one of our research lines and has worked on a project this year regarding digital monitoring to prevent flow-related losses due to hydrate formation. Andrea Pinho was instrumental in testing at the Riograndense refinery. Thamires is one of our youngest researchers exploring geological hydrogen through remote sensing, employing AI and satellite data to identify areas indicating hydrogen formation. Katia Moniz developed carbon-neutral gasoline starting from our CENPES labs. Teresa Villano created an anticorrosion adhesive from 100% recycled PET, currently in the development phase for the market. Ana Musse leads research on CO2 capture, while Helga and Priscilla contributed to the implementation of devices and systems to reduce falling incidents. While I could speak about each of these 270 women, through these few highlights, I want to honor all women at CENPES. My message to every woman watching is that our greatest achievement lies in being true to ourselves, and we are respected for that.

Operator, Operator

Thank you, Maiza. Now we will start the Q&A session. I'd like to ask each participant to please ask up to two questions. The first question comes from Mr. Rodolfo Angele. Go ahead, Rodolfo.

Rodolfo Angele, Analyst

Good afternoon, everybody. Thanks for the opportunity to talk to the Board. I have just one question about the dividends. Till the beginning of last year, Petrobras would pay minimum and extraordinary dividends each quarter. One of the changes for this tier is that the extraordinaries are no longer paid on a quarterly basis and with that, the investors created the expectation of seeing that after the publication of the fourth Q results. But the Board decided to pay only the minimum dividends and did not approve any extraordinary dividends, which is kind of opposed to what the market expected. So, as discussed on the call, Petrobras had very significant results last year with very low leveraging, and it seems that there's leeway, but still the Board decided not to pay the extraordinary dividends. My question is, we'd really like you to help investors to understand how to see the extraordinary dividends moving forward. Taken into account, four aspects. First, maybe the most important one, what's the rationale behind not paying more, if apparently there was some leeway to do so? Secondly, the periodicity; for the extraordinary dividends, should we expect them to be paid only at the end of 2024, or do we have a different possibility? The third one is about the reserves, how they work. I understand they cannot be used for investments, but can they be reverted and capitalized? If so, when will it start being used to pay dividends? Lastly, if that affects the repurchase program in any way. Thank you.

Sergio Caetano Leite, Financial Director

Thanks for your question, Rodolfo. This gives us the possibility to go over this subject that will certainly be questioned about. As you said, we had significant results and low indebtedness. This leads to your question about this leeway to pay extraordinary dividends. In fact, that was true, but the Board decided to allocate that to the reserves accounts based on what was published in the strategic plan; the search for a robust balance and a commitment to be careful in using capital in years especially '25 and '24 that require huge investment efforts from Petrobras. The rationale behind it is basically that the years '24 and '25 will require significant investments in a portfolio that's already been considered. That, in turn, leads us to manage the cash flow differently, and that may lead to misunderstandings. This resource that's allocated to the reserve can it be used for investments? The answer is no. The resources allocated to that reserve are to be used to pay dividends. So from the BRL43 billion or $9 billion of surplus, which are the net profit minus what was paid in 2023, they were allocated to the payment of dividends and not investments. This is important. I know that's not part of your question, but I'm using your question to answer other questions we received in the chat concerning dividends. Concerning periodicity, you compared it to the change that was made to the remuneration of shareholders. We'll keep waiting for the results of extraordinary results at the end of each period, not every quarter, that's according to policy. As for the time frame, we have no indication of a time frame right now. What we do have is a study of the variables that led to the decision to allocate this to the capital remuneration reserve.

Jean Paul Prates, President

Thank you, Rodolfo, for your questions. Although I would like to, I am unable to comment on the meetings that occur with the Board due to governance rules. However, the minutes are public, and you can download and read them. I cannot address that question. Briefly, Rodolfo, since the minutes are public, you will find that the government counselors voted for 100% of the reserve, while the private counselors voted for 100% of exclusion. As President, I abstained from voting since it wouldn't have made a difference, and I was with my Board of Directors, who proposed a 50-50 split. The discussions were normal, and these were the outcomes. We will work on these results and respect the council's sovereign decision. It's important to note that this could change, and we could decide to resume dividend distribution at any time. The situation continues to evolve. Regarding the allocation, I will pass the mic back to Sergio.

Sergio Caetano Leite, Financial Director

About the integralization of capital, that's allowed by law, and it's also provided for by law that the company uses any reserves to pay for its losses. We do not forecast these situations for the next few months. It was allocated for dividends and must be used as such. Speaking about transparency, thank you for your comments. We've been making every effort to give transparency to the market. I'll talk about Unigel, a very short answer, and then I'll give the floor to Joelson, the Director of Exploration and Production, to talk about Production. So Unigel, since we had those two meetings with Brazilians and foreigners, we talked about the company's governance and their role in the decision. You asked about the process, right? If I'm not mistaken, we had over 70 people looking at this contract throughout months. The situation is, last year, the Board allowed Petrobras to continue to invest in petrochemicals and fertilizers. We've been looking at processes, and Unigel was started, so 70 people started working on that. The process carried on normally. We signed, certified it and recognized it according to the different powers in Petrobras. You're right, the director and the managers involved chose the best solution in the existing scenario. It was a normal process with the entire company's governance. I'll pass it to Joelson.

Joelson Mendes, Director of Exploration and Production

I would like to clarify that this situation does not impact our management whatsoever. This is not a separate initiative or a new project, and we are not acquiring any assets. In terms of governance, this matter does not even need to be presented to the Board. It pertains to a service contract for the maintenance of two of our facilities at Petrobras. To illustrate, this involves our own assets in an operation that does not entail selling gas. We are supplying raw materials and receiving processed products in return. The contract spans 18 months, which is the timeframe we require to devise and implement a solution for these plants, which have not been sold or leased, in order to rectify the ongoing processes.

Sergio Caetano Leite, Financial Director

As Sergio said, this appeared at the end of the strategic decision-making process. We couldn't work on fertilizers before it was approved. The 18 months started then, and we're going to submit this activation to the different levels of decision makers. This was perfect. We feel free to deliberate on this process, if this is what the directors vote. Hi everyone. Good afternoon. Yes, the decision-making process for this industrialization process was passed, as Sergio said. Our leaders worked with many areas of the company, generating a report. With that, we made the decisions we had to, according to governance, to sign our contract. We voluntarily, as soon as we signed the contract, contacted TCU and we voluntarily had a meeting with them in the first quarter in January. We decided to go to the court of accounts and inform them under their request about the different things related to the contract itself. As a highlight, this contract has several possibilities. We understood that this was the best one for the group because these are our plants, although they are rented, so they have to be cared for. They're Petrobras plants, and we're continuing the approved process to do it in the most strategic way possible. This contract will provide leeway to analyze what's happening. This group is working in the company to find a definitive solution according to our interests and the country's interests, and our strategy to reduce dependence on imported fertilizers. Thank you.

Jean Paul Prates, President

Good afternoon, Bruno. Thank you for that question. About the downtimes you mentioned, they're all in line with what had been foreseen, nothing new. The production from the first quarter is in line with what we've forecasted. Last year, we had four new production systems and two that were ramping up. We were a bit above the production levels that we had foreseen last year, but still within that range. We have forecasts that fortunately did not materialize in terms of possible delays. This year, we have fewer foreseen problems. We have one FPSO that's ramping up and some areas in decline. I would say that our best bet is 12.8 million equivalent barrels per day, and we're going to announce a certain range, but I would bet that we would be about, on average, in the middle of that average.

Monique Greco, Analyst

Hi. Can you hear me? Good afternoon, everyone. I apologize for the technical issue earlier. I appreciate the opportunity to ask questions, which is very important for us. I have two questions for you. First, I would like to follow up on two points mentioned by Jean and Sergio. Jean indicated that as the reserve was established, there would still be a possibility for us to pay extraordinary dividends, while Sergio noted this would only be evaluated at the end of the year. My first question is whether we can expect any decisions throughout the year or if it will be solely at the end. My second question concerns your plans for integrating downstream. This was mentioned in the release and your strategic discussions. Jean spoke about expectations for investment in logistics and refinement. How do you foresee this integration? Aside from the partnership with Roland that you mentioned, what other investments are part of this strategy? Would returning to distribution fall within that scope? Thank you.

Sergio Caetano Leite, Financial Director

Good morning, Monique. Congratulations on International Women's Day. You asked about two different things, I think. Since there was a comment about extraordinary dividends being inspected quarterly and since there was a change at the end of the year, I was referring to that question. It will still be at the end of the year with every fiscal year. The other question is about what is being analyzed. The resources are being analyzed that can be redistributed at any point. Before I pass it over to William, who's going to answer your question about the downstream integration, I'll ask if Jean wants to say anything.

Jean Paul Prates, President

In terms of downstream integration, there are multiple aspects to consider, but we must focus on at least two key areas. The first concerns logistics assets that could be compromised, and we also need to innovate, modernize, and enhance some of our logistics processes. This means adapting to biofuels and new types of fuel that will become part of our operations, beyond what is currently included. Therefore, these two areas require thorough analysis. It's not simply about acquiring refineries and APRs; we are not repeating past practices but are instead looking towards the future. We've spent almost a decade assessing and divesting assets. We will need to undertake this process again, but it will be approached responsibly based on our experience and expertise.

William Franca, Director of Industrial Processes and Products

Thank you for your question. It's important to mention that integration for the company, especially downstream, is permanent in its execution. Last year, we had a great example where we saw our refinery park working. We processed more national oil in Brazil. We processed more pre-salt oil. This is happening in a scenario of high inflation, strong pressure on shipping. When we integrate or process our oil, we can capture the freight costs from Europe and China, and we're capturing a margin and still gaining the shipping costs. That's essential. The future of oil will be based on the market. Our integration is based on that because it will allow us to compete in different markets. When we talk about hydrogen, Petrobras' park is the biggest user of hydrogen in the country, or the biggest producer of hydrogen. That's very important when we talk about energy transition and transformation of our refineries. At the end of the day in the future, when we move away from the oil age and switch to renewables, we will need to use all of this transition.

Luiz Carvalho, Analyst

Hello. Good afternoon. Can you hear me? Well, I have two questions. I just like to understand if what was said in the board yesterday, if you added any metrics to what would be the drivers for you to pay the extraordinary, right, maybe gross increase or something like that? And I'd also like to know if this reserve has been used by Webex for the buyback program? So no metrics, just looking deeper into some analysis, and we'll just find that later on.

Sergio Caetano Leite, Financial Director

Thank you, Vicente. I haven't seen you for some time. Good to hear from you. Buyback is considered, and then some pilot; we have some goals. We're delivering monthly reports to CVM on how it's doing. It's at 80% or close to 80% execution, BRL157 million in preferential shares; we use a bank rotation system, so we don't get any criticism that we're being discretionary. We're always looking at daily operations; whenever we have an important event, like in this process, we suspend purchases, and it's been working very well. The difference that one of the biggest drivers of EBITDA has reduced even if we count the cost of doing business in Brazil and exchange variations. This is another parameter that Petrobras may overcome in the future. The buyback processes around the world have an average of 70% to 80%. We can still complement it later on. It is the intention of the company to continue with this program. You can call Nardi, ask him. We are preparing a new program to be proposed to analyze it. This is an attribution of the Board to approve a proposal from our management. It makes sense.

Rodrigo Almeida, Analyst

Good afternoon. Can you hear me? Thank you. I actually have a question and a follow-up. We see net debt close to 73 billion. Considering the amount of rent values that will still come in, is there any liability that might require your cash to be above the reference value? Looking at the plan, maybe the most CapEx heavy moment will be between 2024 and '25 because of the number of platforms. I'd just like to understand that it would be important to have that for the next quarters. With the different spreads, it might help us to imagine that the valuation would be higher than before. How is Petrobras working with the trial of accounts to justify it? Those are my questions. Thank you.

Jean Paul Prates, President

Thank you, Rodrigo, for your question. Starting with liability management, the peak in the debt was especially due to anticipating a receivable from 1R FPSOs. Usually, it would not reach 62. We would have amortization for it, and then that would create the curve. We presented a slide for the debt amortization process; even what we call the productive debt is good debt from the rental. So it's under control because it allows you to create a forecast for the oil curve. That shows a reduction versus the beginning of that period. What I'm seeing here is that it's under control. Close to 65, yes, but considering the receivables from FPSOs and the amortization calendar, it's going down and regressing according to our projections. This was discussed. This was something that we analyzed. We looked at the different risk scenarios in finance's impact to cash. Dozens if not hundreds of analyses that we run before we decide on that. But the curve is under control. It’s important to say that we got the lowest rate compressions in this operation and the highest rates for the period. So we looked at our cash. We saw if we needed to do it, and Petrobras was outside of the issuance market for a number of years, and we decided to test it. It was a very successful operation. We even received awards as the best in Latin America and one of the best in the world. This was an operation that we studied. The 1.25 billion was used for liability management. Whenever the market presents a favorable spread for VPL for Petrobras, it may go to the market for LP. There's no need because our financial debt is very low. If you look at a company like ours, our debt is nearly negligible. The 0.8 that we present is less than one and that's much more related to our productive debt than a financial debt. The answer is yes, we are looking at liability management, so that we can manage this. Whenever the spread presents itself, we extend our debt. This is an ongoing process at Petrobras.

Rodrigo Almeida, Analyst

Thank you.

Jean Paul Prates, President

Thank you, everyone. This concludes our call today. I look forward to seeing you at our next earnings call. Thank you.