Earnings Call Transcript - PBR Q1 2023

Operator, Operator

Hi. Good afternoon, everyone. Welcome to Petrobras Webcast with Analysts and Investors about the First Quarter 2023 Results. It's great to have you join us today. We'd like to inform you that all participants will follow the transmission by Internet as listeners. After an introduction, a Q&A session will begin. You can send us questions by e-mail at petroinvest@petrobras.com.br. Today, we have with us Anna Paula Zettel, Upstream Executive Manager representing the Chief Exploration and Production Officer, Joelson Mendes; Carlos Travassos, Chief Engineering, Technology & Innovation Officer; Clarice Coppetti, Chief Corporate Affairs Officer; Claudio Schlosser, Chief Logistics, Commercialization & Markets Officer; Mario Spinelli, Chief Governance & Compliance Officer; Mauricio Tolmasquim, Chief Energy Transition & Sustainability Officer; Sergio Caetano Leite, Chief Financial Officer & Investor Relations Officer; and William França, Chief Industrial Processes & Product Officer. To begin, we will watch a message from our CEO, Jean Paul Prates.

Jean Paul Prates, CEO

Dear investors, as we open this event to discuss our results, I believe it is of the utmost importance to talk about the future of Petrobras and the perspectives opened up by yet another quarter of solid operational and financial performance, the first under this new management team. In these first 100 days, we focused our efforts on reorganizing the company structure, preparing Petrobras for the future, especially to lead the just energy transition. We continue to reach production records in the pre-salt, and to increase the efficiency of our refineries. Our operating cash generation remains consistent and our debt reached the lowest level since 2010. We have solid fundamentals, which underpin our plan to diversify our investments to strengthen Petrobras as an integrated, robust and long-living energy company. We will always pursue returns on investments and reductions in the cost of capital, maximizing the company's value and seeking to develop the Brazilian market with sustainability. Total attention to people is our non-negotiable priority, because only a skilled and diverse technical staff will allow us to meet the dynamic demands of the market, especially the energy transition. The investment in profitable exploration and production assets and in adjusting the refining facilities to the Brazilian market's demands are our natural movements to ensure the energy supply that society needs. We will continue our efforts to decarbonize our production processes and to develop greener products, which we understand to be the only way forward for the oil and gas industry, reducing its emissions and consolidating clean energy alternatives. In fact, we are convinced that Brazil and Petrobras have all the conditions to be global leaders in a fair energy transition without ceasing to be an oil power, establishing partnerships with other companies and taking advantage of the different vocations and potentialities of all Brazil's regions. We will build this route alongside our partners. This is our path going forward. We make decisions always reconciling our social function and respect for our governance, honoring the trust placed in our company by our shareholders. This is my greatest commitment, as well as that of the entire Executive Board, which I represent. Thank you very much to all of you.

Operator, Operator

Thank you. Now I'd like to pass the floor to Petrobras CFO, Sergio Caetano Leite. That will begin our webcast presentations of the first quarter 2023 results. Please Sergio, go ahead.

Sergio Caetano Leite, CFO

Hello, everyone. Good morning. I'm very happy to be here reviewing my first quarter results webcast, and even happier to talk about the important and solid performance that Petrobras delivered in the first quarter of 2023. We had a very strong quarter from an operational and financial perspective and I will take a moment to highlight several important deliveries. First, from an operational angle, pre-salt production set a new monthly record in February 2023, and a quarterly record, reaching 77% of our total production. In February, we also had a monthly production record at the FPSO Guanabara in the Mero field, whose average oil production reached 179,000 barrels per day. We made the first injection of gas at the P-71, continuing its ramp-up in the Itapu field in Santos Basin pre-salt. The production of diesel, gasoline, and jet fuel in the first quarter of 2023 reached 67% of total production, 1 percentage point higher than the first quarter of 2022. We also set production records for 10 PPM diesel at REPAR and REGAP refineries in January and the REPLAN refinery in March. We advanced in the development of more sustainable and efficient products with the certification of Diesel R at the REPAR. The launch of new premier gasoline, the exclusive commercialization of fuel oil with a maximum of 1% sulfur content in the domestic market and the beginning of trade of Ultra Low Sulfur Marine Gas Oil. Here, it's important to point out that we have recently undergone an organizational adjustment to prepare the company for the future by creating the energy transition and sustainability executive option. We carried out the remaining procurement to resume the works of the natural gas processing needs of the integrated project Route 3 in the GASLUB cluster in Itaboraí, which is strategic for the new natural gas flow from the Santos Basin. Moreover, on the financial side, I would like to highlight our EBITDA which reached around $14 billion, a very robust amount for the fourth highest in Petrobras history. We had consistent operating cash generation with cash flow from our operations reaching the solid mark of $10.3 billion. The net debt EBITDA ratio reached its best mark since 2010. It's also important to highlight that we had the lowest level of gross debt since 2010, reaching $53.3 billion. Return on capital employed reached 15.7%, the same level as in the first quarter of 2022. Our net income reached $7.3 billion, and the free cash flow was around $8 billion, which are very significant levels. We continue our commitment to generate value and financial sustainability by distributing results to society. As can be seen in our fiscal report, in the first quarter of 2023, we paid R$63 billion in tax and government take, we also paid $4.2 billion in dividends, bringing our cash levels to $15.8 billion. In terms of the external environment, in the quarter, we had an 8% drop in Brent prices and the average exchange rate went down 1% when compared to the fourth quarter of 2022. Next slide. As already mentioned, we had very robust EBITDA. Recurring EBITDA in the first quarter of 2023 reached $14.3 billion, in line with the first quarter of 2022. Despite the 8% devaluation of Brent mainly explained by lower exploration expenses and legal contingencies. Next slide. Delve into the results by business segment. In Exploration and Production, the impact of the Brent devaluation was partially offset by low expenses and higher production, causing the segment's EBITDA to decline 1% when compared to the first quarter of 2022. In the downstream segment, EBITDA was 15% lower than the previous quarter due mainly to the effect of inventory turnover with reduction of Brent between the quarters. When looking at the replacement cost, the results for the quarter grew 3% reflecting higher margins on oil products, main gasoline, due to the appreciation of the international margins. In Gas and Power EBITDA rose 16% due to the favorable scenario and the actions taken to build a commercial portfolio resilient to business risks. Next slide. As mentioned earlier, the results generated by operating activities and free cash flow reached very significant levels. The level of cash flow generation, together with the inflow of resources from divestments were used to remunerate shareholders, make investments, prepaid debt and amortize principal and interest during the period and amortize leasing liabilities. Next slide. When we look at our debt position, we have a very comfortable debt profile in terms of liquidity and financial strength. At the end of the first quarter of 2023, gross debt reached $53.3 billion as already stated, that's the lowest level since 2010. Net debt was $37.6 billion, a drop of 9.5% compared to year-end 2022. Our cash position remains quite robust, reaching $15.8 billion at the end of the first quarter. Additionally, it's worth noting that we have variable revolving credit lines of $9 billion. We closed the quarter with an average funding rate of 6.5% per year in an average maturity of 12 years. Next slide. In relation to portfolio management, we are reassessing the process in which no contracts were signed. It's important to emphasize that the projects that have already been designed and are in the current closing stage will be honored by the company. Up to April 2023, cash inflows related to these divestments totaled $2.1 billion. In the first quarter of 2023, net income was $7.3 billion, compared to $8.2 billion in the fourth quarter of 2022. This result is mainly explained by the Brent devaluation and lower financial results, partially offset by the lower operation expenses. Additionally, there was a higher income tax expense, which was mainly due to the absence of tax credit in the fourth quarter of 2022 because of the dividend distribution for fiscal year 2022 as interest on equity. In this first quarter of 2023, tax and government take to federal, state and municipal governments amounted to R$63 billion, representing the return to society of 54% of the company operating cash generation. I finish here my presentation. Please, we can move forward.

Operator, Operator

Thank you, Sergio. Now, I'll pass the floor to Chief Energy Transition and Sustainability Officer, Mauricio Tolmasquim. Mauricio Tolmasquim, go ahead.

Mauricio Tolmasquim, Chief Energy Transition and Sustainability Officer

Hi, good afternoon. I'm pleased to be here today as Petrobras' first Chief Energy Transition and Sustainability Officer to share the impressive results from the first quarter of 2023. Please move to the next slide. As shown in the graphs, we are maintaining our commitment to sustainability, with carbon intensity levels lower than in 2022. In our Exploration and Production operations, carbon intensity reached 14.7 kilograms of CO2 per barrel in the first quarter of 2023, which is an improvement over last year due to our ongoing efforts to reduce emissions. We have enhanced the competitiveness of pre-salt oilfields, which now constitute a larger share of the company's overall production. This is significant because the initial emissions from pre-salt fields are lower than those from other fields. For instance, Tupi and Búzios fields had emissions of 10.6 and 9.3 CO2 per barrel, respectively, both of which are well below national and international emission levels. In the following graph, we can see a consistent reduction in carbon intensity in our refining operations as well. This has been aided by increased energy efficiency, including a reduction in gases directed to the torch and the virtualization of processes. Additionally, the third graph shows a decrease in carbon intensity from thermal power generation, which can be attributed to improvements in the thermal power plants themselves and a reduction in dispatch from less efficient plants. Please proceed to the next slide. Now, let's examine our absolute emissions. We have made good progress in reducing total operational emissions from 2022 through the first part of 2023, and the same pattern is evident for emissions from oil and gas. There are two main reasons for these reductions: improvements in our processes and the decreased dispatch from thermal power plants. Please bring up the first slide. On this slide, I want to emphasize three aspects related to climate and decarbonization. First, we released new editions of our climate supplement, highlighting our progress in the carbonization pathway, the carbon-neutral program, and other decarbonization efforts. The document details emissions performance in 2022 and the projects we are implementing. It outlines our strategy, risks, and governance concerning climate change, as well as our actions to reduce methane emissions, our stance on just transition, and our carbon credit strategy. I encourage everyone to read this document. The second point I want to emphasize is the partnerships we've established to enhance new business and decarbonization opportunities. Lastly, we focus on our supply chain, reinforcing our commitment to fostering good environmental practices and climate change mitigation measures. Finally, let's look at the last slide. In the Gas and Energy segment, performance during this period was strong, thanks to efforts to create a commercially resilient portfolio amidst business risks. Petrobras has maintained 100% reliability in delivering its gas commitments this quarter. In the first quarter of 2023, the natural gas market remained stable compared to the first part of 2022, though we saw a decrease of 16 million cubic meters per day. This was driven by two factors: the opening of the natural gas market in the country, leading to increased participation from producers selling directly to the market, and lower thermal consumption due to better reservoir levels. By April, reservoir levels were at 88%, which is quite high for the Brazilian power sector. The reduced dispatch of thermal plants contributed positively to our results in this quarter since it meant less expensive LNG was imported during a time when global prices for this fuel were high. Furthermore, in the long-term gas distribution market, we signed a new contract to resolve past disputes, extending our sales portfolio. That concludes my remarks. Thank you very much.

Operator, Operator

Thank you, Tolmasquim. Now, we'll continue with Carlos Travassos, Chief Engineering, Technology & Innovation Officer to present the E&P results.

Carlos Travassos, Chief Engineering, Technology & Innovation Officer

Thank you very much, everyone. I'm Carlos Travassos, the Chief Officer of Engineering, Technology, and Innovation. Today, I will share the results for Exploration and Production, as well as Engineering, Technology, and Innovation. Joelson Mendes had a minor surgery and cannot be with us today, but he is doing well and will return next week. Let's move on to the next slide. We achieved a 2% increase in operative production compared to the first quarter of 2022, reaching 3.74 million barrels per day. This marks a growth of 2.3% from the same period last year. In terms of oil and gas production, we also saw growth from the previous quarter, primarily due to the ramp-up of P-71 and the addition of eight new wells in the Campos Basin, alongside our enhanced efficiency. Looking at the pre-salt segment, we are experiencing an increased share of pre-salt production, achieving 77% of total production this quarter. Now, let's go to the next slide. We have some significant accomplishments to discuss. In February, we set a monthly production record of 2.13 million barrels per day, as well as a quarterly record of 2.05 million barrels. Individual production results have been impressive, particularly from the Guanabara FPSO, which produced 179,000 barrels per day at 100% efficiency in February. Our previous record was set in November with the Carioca unit, indicating that we have surpassed our own achievements. Now, let's move to the next slide. Regarding costs, I want to highlight our lifting costs in Brazil. We are analyzing this in three categories. The yellow section represents onshore and shallow waters, where we reduced costs from 18.8 in the last quarter of the previous year to 14.7, thanks to some strategic portfolio changes. We also saw a decrease in lifting costs in deep water, particularly in the Campos Basin, where the costs fell from 6.1 to 5.5 due to the new wells brought into production, particularly in the pre-salt area. Now, looking at the overall cost of oil production: last quarter, total costs were at 38, and we achieved an 11% reduction in these costs. It is essential to note that these figures do not include investments or other total costs. Let's move to the next slide. Now, concerning our exploration efforts, in 2021 we made a discovery, and we have begun the extension well at the Aram block in Curaçao, which is our first action in this regard, with six more to follow. I believe this concludes the exploration production section. Let's move on to engineering, technology, and innovation. If we can look at the next slide, we see the Anna Nery unit, which has just started production with the connection of the second well. This unit is part of the Marlim revitalization program. Looking at the next slide, within this program, we plan to remove nine units and replace them with two: Anna Nery and Anita Garibaldi. Anna Nery is already producing, while Anita Garibaldi is currently in the mooring process. Regarding our strategic plan for 2023-2027, of the 18 units planned, four are already in the final location for P-71, which is in production. Anna Nery is operational, and Anita Garibaldi is being moored. We also have Almirante Barroso, which is ready to start production, pending authorization. Regarding the revitalization, it is an outstanding program, aiming for a 20% increase in production while reducing greenhouse gas emissions by 6%. This plan supports the production systems and focuses on these units. However, we must acknowledge the challenges of subsea operations, especially with the revitalization efforts, which will involve building 14 new wells and relocating six wells. This requires careful synchronization and planning to execute effectively. Now, let's move to the next slide. Discussing the start-up schedule for 2023-2027, you are all likely familiar with this outline, which showcases the 18 units we plan to start. We made some minor adjustments concerning Búzios 7 IPB, but I want to emphasize that these timing shifts are minor and do not affect our production growth. In this slide, you can also see the progress of Búzios unit P-78, which is under construction. Now, let's go to the next slide. In the downstream area, we've achieved a significant milestone this quarter, having signed contracts to restart our process gas units at Itaboraí, GASLUB. This process was interrupted last year, but we have managed to resume it within an impressive timeframe of six months. We now have the contract signed and the teams mobilized on-site, keeping on track for operations to begin in 2024. Another significant achievement is the extension of the contract for Train 1 of RNEST, increasing its capacity from 115,000 barrels per day to 130,000 barrels per day, with expected completion in 2024. Additionally, construction of the air emission removal unit at RNEST is ongoing. That's all I have for today. Thank you for your attention.

Operator, Operator

Thank you, Travassos. Now I will pass the floor to William França, Chief Industrial Process & Product Officer. William, go ahead.

William França, Chief Industrial Processes & Product Officer

Good afternoon, everyone. It’s a pleasure to be here and present the highlights of the refining segment in the first quarter of '23. In the first quarter of '23, we are going to prioritize two areas in this presentation: the utilization factor of refineries and operational availability. In the first quarter, the utilization factor in our refineries was 85%. I think that is an important and excellent result considering that we had three significant turnarounds during this period in REFAP, REVAP, and RPBC. We spent almost R$1.2 billion by maintaining more than 800 larger pieces of equipment, like pipelines, pumps, towers, and reactors. More than 10,000 collaborators contributed and performed in this big challenge. In April, we had our utilization factor of 29%. At the beginning of May, we performed above 90%. Regarding operational availability, in the first quarter of '23, we obtained a result above 96%, with most of our refineries achieving levels comparable to the best refineries, including those in the United States. Thank you for your attention. Have a nice day.

Operator, Operator

Thank you, William. Now I'll call Claudio Schlosser, Chief Logistics, Commercialization and Markets Officer. Schlosser, go ahead.

Claudio Schlosser, Chief Logistics, Commercialization and Markets Officer

Yes, thank you. Hello, everybody. It's a pleasure to be here with you today to talk about our first quarter '23 results. Next slide please. On this slide, we'll talk about the oil product sales. As you can see, there was a reduction in domestic oil product sales, dropping by 5% compared with the previous similar quarter. This was already expected, as diesel and gasoline seasonally have weaker consumption in the first quarter of the year. It's important to note that in this quarterly composition, there is still the impact of the divestment of REMAN. We had to cool that down at the end of last year. Even so, it is important to highlight that gasoline sales were the highest compared to the first quarter in the last six years, driven by the greater competitiveness of gasoline in relation to ethanol. Regarding foreign markets, the drop in fuel oil exports was caused by lower production due to the scattered shutdowns of some of our biggest refineries, as mentioned by Director William. In discussing oil product sales, I would also like to take the opportunity to highlight our focus on the market. The retail market has even become part of the name of this world. That's why I want to highlight the startup of the new diesel and gasoline sales center in November in Almirante Barroso, Búzios. This action strengthens our presence in the Midwest and enables the practice of specific commercial actions in the region. This is a significant milestone that guarantees Petrobras' presence in the region that should grow the most in the coming years. Next slide, we will talk about oil export flow. As you can see, our main destination remains China. However, it is important to enhance that we continue to work constantly to seek global opportunities and to develop new clients, which generate more value for Petrobras in addition to diversifying the client portfolio. Another key action is the market development for oil streams such as Sururu, Mero, and Atapu. The Búzios and Tupi streams are already well known in the international market with guaranteed better liquidity in pricing. Finally, I present the highlights of the quarter that reinforce Petrobras' commitment to supplying more responsible fuels. We have our first bunker filling fleet vessel with renewable content with Darcy Ribeiro, which is part of the Petro strategy. This fuel was formulated with 10% soy biodiesel, reducing about 7% of greenhouse gas emissions considering the complete lifecycle of the fuel; a big step towards the goal of reducing carbon emissions. During the 40 days of testing, no anomalies were reported by the fuel or operational differences in relation to conventional marine fuel. Samples of collected fuel and ship monitoring data are in the final stages of analysis. Another action in the same line was that we began offering the domestic market exclusively fuel oil with a maximum sulfur content of 1%, discontinuing the sale of fuel oil with a maximum sulfur content of about 2%. By ensuring that all fuel oil sold by the company in the domestic market has a low sulfur content, we help consumers in the industry segment reduce their emissions. I also highlight the sales of the new product, the Ultra Low Sulfur Marine Gas Oil, which is produced at the Presidente Bernardes refinery, RPBC in Cubatão, São Paulo. Previously, products sold at the Port of Santos to long-haul and regional maritime vessels contained a maximum sulfur content of 0.5%. With the introduction of this Ultra Low Sulfur MGO, we started helping ship haulers to reduce emissions of sulfur oxide, in addition to avoiding fueling stops for vessels passing through sulfur emission control areas, reducing both cost and time. These actions show that we are on the right track in developing cleaner fuels, ensuring lower emissions, and generating great value for the company, society, and the environment. That's the final slide. And going back to Carla.

Operator, Operator

Thank you, Schlosser. Thank you all, we can move on to our Q&A session. And the first question that we received comes from Bruno Amorim with Goldman Sachs and it's for Sergio. Sergio, Petrobras CapEx is poised to grow in the next few years under the current and possibly the new strategic plan to be announced, what is the comfortable level of cash position the company should target, more, less or in line with the prior management target of $8 billion?

Sergio Caetano Leite, CFO

Thank you, Bruno, for your question. I believe that the levels set up in the current business are very prudent. I think we must keep solid parameters in terms of liquidity and leverage. We want to always maintain robust financial health to face inevitable down cycles in oil prices. Additionally, we need to ensure that our investments will be self-funded with our operational cash flow; nonetheless, I would like to emphasize that the execution of the new business plan may result in a revision of the current targets. Thank you, Bruno.

Operator, Operator

Thank you, Sergio. The next question comes from Vicente Falanga with Bradesco BBI. And it's for Travassos. Travassos, the company recently announced the delay in the startup of some platforms. What was the major cause of that?

Carlos Travassos, Chief Engineering, Technology & Innovation Officer

Thank you very much for your question. That's a very good question. We have had a minor adjustment to the schedule. While we perceive a shift from one year to another, we're talking about minor changes, possibly due to our risk analysis concerning the supply chain markets for both topsides and subsea. If you look at the IPB, we're discussing a 13-day shift, which is not significant. A shift from one year to another might seem like a big change, but it's not substantial. Whenever we have a change in our business plans, we remain very transparent, as it's important to showcase and analyze the market. This change does not impact our production curve. Thank you very much for your question.

Operator, Operator

Thank you, Travassos. The next question comes from Luiz Carvalho with UBS. And it's for Tolmasquim. Tolmasquim, we are seeing a series of comments regarding the company's focus in the future, particularly with diversification of investments focused on energy transition. Could you list some potential investment options, how fast the investment portfolio could be built? This portfolio could be made through organic investments or potential acquisitions? Will the company pursue assets in petrochemicals, renewable power generation, offshore wind, fertilizers, biofuels, fuel distribution, new refiners, or some other sector? In your view, is there any target on how much this could represent from future investment plans?

Mauricio Tolmasquim, Chief Energy Transition and Sustainability Officer

Thank you very much, Luiz. Well, in fact, we are planning to diversify our investments regarding renewables. We are talking about investing in offshore wind, green hydrogen, CCUS, and other possibilities. We're still drafting our strategic plan for the next cycle. So this strategic planning will allow us to understand which technology we will invest in. The investment can be through organic growth, but we are also open to potential acquisitions. However, our preference leans towards organic investments. We want to accomplish this mainly through partnerships with other companies, which I think is the best way to approach new investments, especially with larger firms. In terms of future investment targets, we don't have specific targets yet because, as I mentioned, the strategic plan is still in the works, but I can say that diversification will be pursued with derisked financial responsibility. The idea is to allow for diversification while maintaining our financial indicators.

Operator, Operator

The next question also from Luiz Carvalho with UBS is for Schlosser. Schlosser, the company's current fuel price policy considers international prices and import costs. What parameters could be used in a possible new policy? Is export parity for domestically produced products an option? Does the company consider holding lower margins on domestically produced products to reduce price pressure for the final consumer?

Claudio Schlosser, Chief Logistics, Commercialization and Markets Officer

Thanks for your question, Luiz. First, I would like to take the opportunity to mention that although the current price policy relies heavily on certain factors, it is up to Petrobras to develop its commercial strategy. That said, the import parity is a reference to the cost of our importing competitors. However, it doesn't have to be the only reference for Petrobras. We have other opportunities that we can explore through our installed refinery capacity, logistics integration, and operational efficiency that allow us to compete efficiently, preserving the company's valued innovation. That's my answer. Back to you, Carla.

Operator, Operator

Thank you, Schlosser. The next question comes from Monique Greco with Itaú BBA. She sent us a message. Thank you for the opportunity to address our questions. On behalf of Itaú, I'd like to wish the new Executive Board good luck in this new phase. The first question from Monique is to Spinelli. Could you comment on the challenges you expect to encounter in your new position? And if possible, share some outlook plans and ideas to be implemented during your term.

Mario Spinelli, Chief Governance & Compliance Officer

Hi, Monique. Thanks for your question. First of all, it's important to point out that we already had a very robust integrity and governance system…

Operator, Operator

Spinelli, you have to turn on the camera. Sorry.

Mario Spinelli, Chief Governance & Compliance Officer

Turn on. Is it working, Carla? Can you see?

Operator, Operator

Now I can see. Thanks.

Mario Spinelli, Chief Governance & Compliance Officer

Okay. So first of all, I think it's important to consider that we have a very robust integrity and governance system. However, that doesn't mean there isn't anything to do. Quite the contrary. What we need to do now is to enhance this system so that it becomes more sustainable and entirely aligned with our business model. There are important aspects related to improving our performance that need to be considered, such as our strategy to prevent and combat harassment, for instance. This is a significant point for us, and we will include it. Moreover, some technological tools can be integrated into our compliance actions, making them more efficient and agile. We will enhance our compliance risk management, also focusing on issues that may present risks to the company's strategic objectives. With this, we will identify the most exposed areas and work proactively. However, the most important point is that we need to ensure that our integrity program is strong and responsive enough to protect our assets, the company, and at the same time, ensure efficiency while respecting all the rules and focusing on people. I think that's all. Thank you, Monique.

Operator, Operator

Thank you, Spinelli. The next question from Monique is for William. William, despite the refinery maintenance carried out in recent quarters, the company has managed to maintain high levels of refinery utilization rates. In this regard, is there still room to increase the current utilization levels? What would be the desired level of refinery utilization for the refining park as a whole?

William França, Chief Industrial Processes & Product Officer

Hi, Monique. Thank you for your good question. The answer is yes. We have the conditions to increase our refinery utilization because of two reasons. First, we're performing and operating our refiners with excellent reliability. Therefore, it's important to maintain this standard. The second point is that we won't have significant turnarounds for the next few months and through the end of the year. I believe that we have good conditions to increase our utilization over the next months above 90% in order to seize market opportunities. The goal is to maximize our production and the quality of our operations while respecting all aspects of safety, environment, health, and integrity. Thank you for your question, Monique.

Operator, Operator

Thank you, William. And the next question is about E&P and I'll call Anna Paula Zettel. Anna Paula, regarding the equatorial margin, could you comment on the company's expectation regarding the approvals at IBAMA? If the regulatory agency president follows the negative opinion presented by the technical area earlier this month, could you discuss the medium and long-term alternatives for the company to continue increasing its production figures?

Anna Paula Zettel, Upstream Executive Manager

Thank you, Carla. Thank you, Monique, for your question. Well, Petrobras is awaiting IBAMA's positions on the pre-operational assessment. This is an exercise to evaluate the company's response capacity in the unlikely event of an accident. So it's part of the process and we are pursuing that authorization to the next steps of the permitting process. We are following strictly the requirements of IBAMA. There are no pending issues from Petrobras. All the resources are in the locations waiting for IBAMA's authorization. Thus, we understand that the activity in the region is very safe. That's the reason we have planned $3 billion to drill 16 wells in the equatorial margin. Additionally, we also have investments planned in exploratory phases, and we are monitoring closely all opportunities abroad. That's part of our strategy to build up our reserves and manage our portfolio. Thank you very much, Monique, again.

Operator, Operator

Thank you, Anna Paula. The next question comes from Gabriel Barra with Citi and it's for Mauricio Tolmasquim. Tolmasquim, could the managers give us more information on return levels, time for construction on offshore wind farms, and projects being studied together with ethanol?

Mauricio Tolmasquim, Chief Energy Transition and Sustainability Officer

Well, thank you for the question. At this moment, we only have a Memorandum of Understanding and some projects, along with areas that we've applied for environmental licenses at IBAMA. However, we are waiting for the establishment of the regulatory framework to start studying specific projects. So at this moment, we don't have any figures regarding investments, timelines, etc. I believe that it’s not certain when we will obtain this kind of information. Thank you.

Operator, Operator

Thank you, Tolmasquim. Thank you all. At this time, the Q&A session is over. If you have any further questions, you can send them to our Investor Relations team. I'd like to thank you all for your attention. It's been a very important quarter with solid results both operationally and financially. Thank you all and have a great day.