Earnings Call Transcript - PBR Q3 2024

Operator, Operator

Good afternoon, and welcome to Petrobras' webcast with analysts and investors to discuss Q3 results. This will be in Portuguese with simultaneous translation into English. The links are available on our IR website. You can submit your questions through [email protected]. Joining us are Clarice Coppetti, Director for Corporate Affairs; Cláudio Schlosser, Logistics, Sales and Market Director; Fernando Melgarejo, IR Director; Mário Spinelli, Governance Director; Mauricio Tolmasquim, Director for Energy Transition and Sustainability; Renata Baruzzi, Engineering Technology and Innovation Director; Sylvia dos Anjos, Exploration and Production Director; and William Franca, Product Director, along with other company executives. Fernando Melgarejo, our CFO, will now take over.

Fernando Melgarejo, CFO

Good afternoon. Thank you for attending this webcast. These are the highlights for Q3 '24. We will be available to answer questions you may have at the end of this presentation. On to Slide 3. These are our operational highlights. Starting with exploration and production. We have come a long way. Back in October, we started operation of 2 FPSO, Maria Quitéria in Jubarte field and Marechal Duque de Caxias, in the Mero field in the Santos Basin. And we've also received Almirante Tamandaré. It's now in Brazilian waters and will be operating in the Búzios field. This is going to be the first high-capacity unit, with the capacity of up to 225,000 barrels and 12 million cubic feet a day. The plan is to start operations next year, but we may anticipate that these are very important deliveries for our strategic plan. In the case of Maria Quitéria, we've anticipated that operation that was scheduled for '25. This effort results in more revenue as these assets generate or reach their full capacity, which is over 500,000 barrels a day. You can also see other important highlights. Our record production in 2P reached 3 billion barrels. In Mero, the Sepetiba FPSO reached its peak production in less than 8 months, also contributing to the production of the quarter. In explorations, we have discovered a field in Colombia and in South Africa. We have a minor stake in the Orange Basin. On to the next slide. Operational highlights, a high level of use of our 95% for the quarter. In September, we reached 97%. We did this by maintaining high-value byproducts. We've had the best historical level of the greenhouse effect emissions in our refining park. We've increased sales for byproducts in the Midwest and also partnered with Vale to test low carbon products, including diesel R, with 5% renewable content. We have the natural gas production unit in Rio. We are ready to start commercial operations soon. It's very strategic for Petrobras because it will increase the offer of natural gas in Brazil. We're starting at 50% capacity, and by year's end, we'll have 2 modules in operation, reaching 21 million cubic meters of gas per day. And we're back to the top 10 ranking of companies we would like to work for. After 4 years of being outside of that list, these results are very important for those companies that want to attract and retain talent. This indicates that we're heading in the right direction. On to financial results on Slide 5. We haven't had any nonrecurring item impacts this quarter, unlike the previous quarter, as you all remember. Recurring EBITDA was $11.6 billion. Recurring net income was $5.9 billion. We've maintained our cash generation at $11.3 billion, a 24% increase quarter-on-quarter. Free cash flow was $6.9 billion. Gross debt is under control at $59.1 billion, within the range we established in our strategic plan. I'll be giving you more detail about these figures, and you'll see that financial debt is at its lowest level since 2008. We paid out BRL 64.4 billion in taxes, and we've approved dividends and our capital interest at BRL 17.1 billion. These numbers show that we've reached consistent results despite the drop in prices of Brent oil. This is the foreign scenario. Brent prices were down compared to the previous quarter, just like the crack spread in diesel, margins were reduced. However, we managed to offset this by selling more byproducts. On average, we see a devaluation of the real, but FX was BRL 5.45, with a positive impact on our financial numbers, a 2% appreciation of the real in Q3 when compared to an 11.2% depreciation in Q2 '24. Moving on to the next slide. This has impacted EBITDA in Q3, partially offset by more oil production in the byproducts mix and higher domestic sales volumes. Adjusted EBITDA was $11.6 billion, slightly smaller than the previous quarter when we wrote off the one-off events. Net profit is a result of the FX impact and the fact that there are no expenses that impacted the previous quarter. On this table, we can say that our cash generation remains robust enough to support investments, financial obligations, and the dividends payment. Let me point out that we are investing $4.5 billion, about 30% above the previous quarter, and that increase is due to scheduled payments of OLP projects, those related to the new platforms in Búzios and also investments with the start of construction work in P-84 and P-95. This increase won't change the investments provision for the rest of the year. Investments amount to $10.9 billion. On to Slide 9. Before I talk about the debt, let me point out the successful mission that we conducted in August and September. We issued a 10-year bond maturing in 2035, $1 billion, the lowest spread to the U.S. treasury bond since 2011. At the same time, we had a repurchase plan. The 2 operations are in line with the debt management strategy of the company, helping us reduce our leverage. Financial debt was $25.8 billion, the lowest level since 2008. On to the dividends screen. We are committed to distributing the results generated and the financial sustainability. Gross debt is under control, with accrued positive results. The Board of Directors approved a compensation of BRL 1.32 per share. It will be paid out in 2 equal installments in February and March, while a JCP or dividends will be defined by year's end. We will then have enough information so that we can have the best tax advantage possible. On to the last slide. This is the important contribution of our taxes to federal, state, and local governments. This is just a portion of what Petrobras returns to society. On top of that, you have dividends paid out to the government and our strategic plans which can generate high yields that contribute to create value for both shareholders and society overall. Petrobras had a 14% increase compared to the same period last year, with taxes amounting to BRL 64.4 billion. In conclusion, I would like to turn it over to Eduardo so that we can get started with our Q&A session. Thank you so very much.

Operator, Operator

Thank you, Fernando. On to the Q&A now. Please ask 2 questions at most. Matheus Enfeldt from UBS asks the first question.

Matheus Enfeldt, Analyst

Congratulations on the results. My questions are more on the operational side. Can you give us more color on the Q3 production levels? You had an expectation of better performance. Q2 had a negative impact from scheduled and unscheduled shutdowns. How much of this quarter, including pre-salt, was impacted by those shutdowns? And what's the outlook moving forward? Can we expect higher production from now all the way to 2025? What is the short-term prediction? The second question is about exploration. ANP data shows that we had the least or the lowest amount historically. What is the company doing regarding explorations in both the Santos and Campos basins to replenish reserves, given the domestic difficulties? Would it make sense to acquire companies abroad or consider acquiring companies that have a portfolio already in operation?

Operator, Operator

Thank you, Matheus. Sylvia will take those answers.

Sylvia Couto dos Anjos, Director of Exploration and Production

Matheus, I'll begin with your second question. You asked about the reduction in exploration and the potential in the Santos Basin. It's always important to remember that in 2006, we were able to achieve our self-sufficiency, which we had dreamed of for so long. The determining factor is that we are now increasing production and replacing our reserves. That's our track. We see that we have our strategic plan for '27 and '28 with over $7 billion in exploration. In this research project, we have significant oil potential that we are investing in through 3 ways. First, you asked about Santos. Yes, we are replenishing that. We're also investing in new opportunities in the fields that we already have, and we're seeking new fields as well. That's where the Equatorial Basin comes in, where we have the greatest volume of prospection that has ever been done, which was in 2013. It's also very similar to the Campos Basin. The Equatorial Basin is technically akin, with seismic characteristics also being similar. This occurs both in Venezuela and the more recent discoveries in Guyana and Suriname. So there is enormous potential there that we need to assess; we can only assess it by drilling, for which we need a license. So that is our primary line of investments, our roadmap. We are investing over $3 billion of our budget into that alone. Regarding investments outside of Brazil, as production increases, so does our need to replenish reserves. Therefore, we are looking in regions with the greatest potential, investing our efforts into places where we have more established potential, primarily in conjugate basins in Africa and offshore. Of course, always with a view towards economic viability and profitability for Petrobras. I also want to mention that this year we finished our acquisition in São Tomé and Príncipe. We also accomplished an investment in another basin in Equatorial Africa, and we are currently waiting for our license in that Equatorial margin. While there's a lot of potential there, we can only determine the extent after we drill, at which point we will confirm whether or not our model is correct. The year has been atypical regarding downtimes, as we have had both scheduled and unscheduled downtime. Scheduled ones were especially in Santos in large-scale basins. Just to give you an idea, during scheduled downtimes, we ceased producing approximately 150,000 barrels a day. But those scheduled downtimes are important for the longevity and safety of our units. These don't occur every year; they occur in different intervals. We've also faced unscheduled downtime, which can occur for various reasons, such as legal mandates or unforeseen discoveries. There could also be worker strikes, and the ANP agency in Brazil ordered us to halt production for a certain period, all happening within a safe margin of risk. Overall, we faced a total of 2.8 million barrels lost due to downtime, which is roughly 4%.

Operator, Operator

Thank you, Sylvia. Our next question comes from Monique from Itaú.

Monique Greco, Analyst

Congratulations on your results. I'm going to follow up on Matheus' question for Sylvia again. With regard to the unscheduled and extraordinary downtime, how would Petrobras classify the reasons behind this downtime? What were the main causes? And what has the company been doing in terms of process to improve and reduce these unscheduled or unexpected downtimes? My next question is about CapEx. We've been talking with Petrobras over the past few months about a mismatch between the physical and financial advances regarding the road map. You always mention that there is an improvement process underway to better align the CapEx curve such that the mismatch or deviation will be reduced, rendering the plan more realistic. So my second question is, could you please comment on how the CapEx projection refinement process is proceeding, especially regarding future plans?

Operator, Operator

All right. Our first question will be for Sylvia, and the second will be for Renata.

Sylvia Couto dos Anjos, Director of Exploration and Production

The unscheduled stops occurred due to maintenance reasons that we sometimes detect or new technologies we want to implement. We had several shut downs this year due to requirements of the ANP. Remember that during the pandemic, many of our basins and units were not shut down at all, so we extended operations throughout that period. We're working to clear out any and all requirements made by the ANP so that we can guarantee the longevity of all our units. This is crucial to clear out any pending demands and ensure our investments' integrity. Our ultimate goal is to tackle and resolve every requirement made by the ANP, and we're focused on clearing all of them.

Renata Baruzzi, Director of Engineering Technology and Innovation

Monique, I mentioned in an event 3 months ago about the mismatch you referred to between physical and financial aspects. We have indeed implemented improvements, and you can see in this quarter how much we have accomplished. One of the reasons for that is that we were able to align the physical and financial advancements. From here on out, we did have a liability that we cleared out. We are confident that we will be able to accomplish everything we plan.

Operator, Operator

Thank you, Sylvia, Renata, and Monique for your questions. Our next question comes from Bruno from Goldman Sachs.

Bruno Amorim, Analyst

Congrats on the results. My first question is regarding the company's cash position. You've been operating with a cash position far above the $8 billion benchmark for what Petrobras would need for its stated operations. Do you have an intention to reduce that surplus cash? Is that a margin you intend to keep in your balance? My next question is about exploring reserves. There's been a lot of talk about the equatorial margin. But what about the Pelotas location? Could you give us an update on that project's current status?

Operator, Operator

Thank you, Bruno. The first question is for Fernando, and about Pelotas that will go to Sylvia.

Fernando Melgarejo, CFO

Bruno, thanks for your question. Regarding the cash available to the company, it's an interesting topic because when we think about projects and the need for cash flow, we look at projects from exploration to first oil with timelines of 5 to 7 years. Therefore, we cannot just look at a 3-month window, as is the case for other companies with different turnaround requirements. We consider short-, medium-, and long-term views in our strategic planning, which includes investment indicators and cash flow indicators. We also consider how much will be net and how much we will use for our investments. We begin with strong cash generation; it’s natural for us to have different cycles. We accumulate cash in our treasury, and when we need to make investments, we distribute that cash because we do not wish to hold surplus cash. Surplus cash carries a cost, and the more surplus we have, the greater that cost becomes. Currently, we have $8 billion as you mentioned, and we are investigating various scenarios and alternatives to understand our flexibility with cash.

Sylvia Couto dos Anjos, Director of Exploration and Production

Thank you, Fernando. About the Pelotas Basin, in addition to the Equatorial margin, we have invested in exploration and acquired 29 blocks—26 in partnership with Shell and 3 more in partnership with CNOOC. We are currently acquiring seismic data, which is necessary for exploration. It's a gigantic area, one of the largest we've ever worked in. We have begun working on this project and are likely to finish data acquisition next year. After obtaining seismic data, we need to interpret it, select regions, and study the blocks to determine which are more favorable for drilling. We're working on the first stages of seismic data acquisition, and we won't wait until the end of the year to start interpreting the data. We'll analyze it as it arrives.

Operator, Operator

All right. Thank you, Sylvia, thank you, Fernando, and Bruno for your question. Our next question is from Bruno from Morgan Stanley.

Bruno Montanari, Analyst

I have a follow-up regarding cash and shareholders and another about 2P. With regard to shareholders, if there is enough leeway for a complementary distribution, what would be the timing for that? Would that be within this fiscal year, perhaps right after the presentation or after the strategic plan? How would approval specifically work? Will a Board meeting be called? How quickly can we expect that to occur? Regarding 2P, you mentioned a decline phase; I'd like to understand whether that is happening in line with the 10% that the company mentioned or whether pre-salt has proven to be more resilient compared to other fields such as Bacia de Campos? What about resource allocation platforms and where might that production move in the upcoming years?

Operator, Operator

The first question about the compensation for shareholders will go to Fernando, and then Sylvia will be talking about 2P.

Fernando Melgarejo, CFO

Bruno, how are you doing? Well, this is what we've observed so far this year. It's only natural to make a decision about extraordinary dividends once the strategic plan is ready, taking into account short-, mid-, and long-term volumes. Of course, we'll consider that distribution alongside the strategic plan, if we can meet the deadline, which is to be approved by November 21st. Technically, it's possible to distribute that within the same year by the end of December.

Sylvia Couto dos Anjos, Director of Exploration and Production

2P is our beloved giant; production results are better than the average. The decline in production is below 10% and significantly less than those in the Campos Basin. We're embarking on the challenge of 2P Plus, which is almost 1,000 barrels a day, with the goal being to reach 1 million. 2P aims to compete with Búzios, which aims to reach 1 million next year. We're refurbishing 2P. 2P Plus will incorporate more wells, and we’ll review infrastructure for injecting water and gas to revitalize pipelines, possibly using another platform. We want to minimize the decline as much as possible and avoid what we've seen in the Campos Basin, which has undergone major declines. We've prioritized strong reinjection in our wells to maintain production at optimal levels.

Operator, Operator

Thank you, Sylvia and Bruno. Gabriel from Citi is up next. Over to you, Gabriel.

Gabriel Coelho Barra, Analyst

I have 2 questions. First, regarding the capital structure, we've focused on minimum cash and gross debt but disregarded leverage, which presents a more pessimistic outlook for next year. Can you explain what you're considering for the capital structure, especially the size of influence? The second question is about investments. You've had some challenges with the ANP regarding licenses and tight market capacity for hiring FPSOs. How do you plan to navigate this issue? Can you have more flexibility to hire vessels in 2025? And what impact will that have on the budget? Would it be around $9 billion, as this is a new level of investments? These are significant units, but these figures are higher than we've seen in the past. What would the inflation impact be?

Operator, Operator

Thank you, Gabriel for the question. Fernando will address the first one, and then Renata.

Fernando Melgarejo, CFO

Thank you. Cash and the ceiling for the debt are under discussion within the strategic planning cycle. We have explored the company's capital structure, what would be the ideal balance between own capital and third-party capital. These discussions are happening in our strategic planning exercise. The leverage level should align with the company's situation and our business plan, which will be publically announced during the strategic planning. Many things are discussed there, as this is a critical report at year's end, providing various answers. We want to optimize the company’s capital structure to strike an ideal balance between own and third-party capital. IFRS 16 will acknowledge that as a debt proxy; it changes the investment flow depending on whether it's own capital or third-party, and we've adopted leasing as an ideal strategy.

Renata Baruzzi, Director of Engineering Technology and Innovation

Yes, Gabriel, you're right. We have found it difficult to lease the FPSOs, which has delayed some projects. Here's what we did: Fernando and his team approached the market to understand the situation. We discovered these companies struggled to obtain credit lines, which hindered their ability to offer chartering proposals. Another issue was the payment flow; we remodeled the cash flow to be neutral, with no financing flowing in either direction. For upcoming platforms, we're not going to rely on that alternative. One approach is BOT; the CapEx comes from Petrobras, the operation is run directly by our company, and then the asset is transferred over to Petrobras—this will encourage companies to bid as part of the process. We've seen significant growth in rigid EPCIs, which is what we refer to rigid oil pipelines. While there has been a downward trend recently, we are bringing more players to that bid. We now have 5 players participating in the EPCI process. We will hire and charter the vessel and equipment separately to create the contract, giving us the option to do the work in-house instead of relying exclusively on market solutions. Regarding prices, nickel is a top commodity impacting equipment prices; back in 2022, it was priced at $48,000 a ton but is currently at $16,000. Our expectation is that prices will continue to decline due to commodity market trends.

Operator, Operator

Thank you, Fernando. Thank you, Gabriel. Pedro from BTG is up next.

Pedro Soares, Analyst

I have 2 questions. What are the possible tax deductions in the coming quarters? This has begun to impact Q3 results. Can you provide more details on how soon that benefit will be utilized? My second question is about the investment curve. While results will be announced at the strategic planning announcement, can you share what the implementation CapEx profile looks like? Are you planning to change the share of different CapEx compared to last year's plan?

Operator, Operator

Thank you, Pedro. Can you address both questions, Fernando?

Fernando Melgarejo, CFO

Yes. Let me talk about tax authorities. For Q3, cash flow includes these positive impacts—better income tax and social contribution, with $800 million in savings from about BRL 4.2 billion by paying those taxes due to that offset in our fiscal base. The remainder will be used by Q1, about BRL 3 billion or $500 million, approximately. As for our investments, we don’t envision any major changes in their maturity; those currently underway remain significant, even into 2025. The implementation cycle is ongoing, and we can see that it is coming down as we finalize ongoing projects. When we presented a strategic plan for last year, we found it crucial for understanding maturity levels and if we were effectively using our resources. However, I don’t anticipate major changes from one year to the next since our vision is always long-term—4 or 5 years ahead until we reach the first oil and even for renewable energy projects.

Operator, Operator

Next questions come from Rodrigo from Santander.

Rodrigo Reis de Almeida, Analyst

I’d like to return to post-salt and understand what the revitalization processes will be for '27 and '28. How do you envision the company's production curve looking in those regions? My next question is about capital allocation. Regarding CapEx and M&As, specifically revitalization projects and M&As such as investments in Namibia, how do you balance your decision-making process between these organic projects and acquisitions?

Operator, Operator

Thank you, Rodrigo. Sylvia will take the first question and then Fernando.

Fernando Melgarejo, CFO

Rodrigo, we will begin with your second question regarding CapEx and M&As. Our strategy is to not comment on specific projects, but we will respond in broader terms. Regarding organic versus inorganic investments, all of them follow the same governance process and requirements for returns, across all scenarios, including resiliency. Investments need to generate positive NPV for us to proceed. This concept guides our governance, which has been functioning effectively, though improvements are always welcome. We don’t expect any shifts in this approach. In terms of returns, riskier investments typically necessitate higher returns. However, strategic alignment also matters; some investments provide synergies, so they must be assessed as part of our entire portfolio, not in isolation. We can accept lower returns for investments that yield synergy and align with our medium or long-term strategy, provided they do not adversely affect the company.

Sylvia Couto dos Anjos, Director of Exploration and Production

Thank you, Fernando. Regarding post-salt and the Campos Basin, we want to focus on recovery. We currently have 4 new units aimed at replenishing and renewing the post-salt basin in Campos. We are implementing new production wells with a forecasted increase of 200,000 barrels in that basin. Overall, recovery levels in that basin are around 7%, but we aim to keep the post-salt cover stable while working on upcoming wells. The Campos Basin serves as our production model—a benchmark we will apply for Africa and the equatorial margin. It has taught us valuable lessons, which will help us increase production and prolong its life. Our goal is to maintain production levels for many more years. This may not happen in the short term, but we aspire to treat this young elder, celebrating its 50th anniversary now, the Campos Basin, which significantly changed the history of Petrobras and Brazil and equipped us with the knowledge to advance as a global oil production benchmark.

Operator, Operator

Thank you, Sylvia. Thank you, Fernando. Our next questions come from Jorge from Scotiabank.

Jorge Gabrich, Analyst

Congratulations on your results. It's been a few months since the recent gas decree; how did that decree change discussions with ANP regarding future projects? Additionally, how has Petrobras adjusted its outlook towards those projects? Secondly, considering the Brazilian deficit in diesel and current imports, how did Petrobras decide on its supply chains geographically, and does it tend to concentrate its relationships or opt for a more diversified approach?

Operator, Operator

Thank you, Jorge. The first question will go to Mauricio, and I think Cláudio will take the second one.

Mauricio Tolmasquim, Director of Energy Transition and Sustainability

Thank you, Jorge. Initially, we were a bit cautious about the situation. However, our current understanding is that it will pertain to new projects rather than those already approved. We are waiting for the ANP regulatory paper for 2025 and 2026 to start discussions. Right now, in the gas sector, we are concentrating on the Senate amendment to the Patent law, which includes measures that could affect Petrobras’ market, but our discussions have been encouraging. We have established agreements to safeguard Petrobras' production and to address GNL import issues as well as contracts for importing from Bolivia and Argentina.

Cláudio Romeo Schlosser, Logistics, Sales and Market Director

Yes, I want to clarify something. We do not rely heavily on imported products to meet Brazilian market needs. On the contrary, since the initiation of our new strategic plan, we’ve prioritized Petrobras' assets, including refineries and logistics, to capture domestic margins. In '24 to date, 23% of internal demand for diesel A was met through various players, including Petrobras. We also work in the import market complementarily to domestic production while striving for operational resiliency. This decision is based on operational planning processes and the use of computing tools. The geographic strategy considers various factors, and we have strategic plans for supply markets.

Operator, Operator

Thank you, Mauricio. Mr. Schlosser?

Clarice Coppetti, Director for Corporate Affairs

Lilyanna, thank you for your question. To obtain a license, Petrobras has been making every effort. The latest response from Ibama was not negative; they asked our technical team a series of questions regarding the proposal we presented in early August. This proposal addressed the construction of an additional base to protect fauna located in the Oiapoque region and was part of our license request for drilling in the Amapá deep-water regions. This includes a range of services, such as a fauna protection base integrated with vessels and specialized technicians. Petrobras is sparing no effort in instilling greater confidence in Ibama regarding our capacity to obtain this license. After it’s received, we'll proceed with our pre-operational assessment, by hiring companies specialized in this sector.

Operator, Operator

Thank you, Clarice. Thank you, Sylvia. William?

William da Silva, Product Director

Yes, we established a non-binding memorandum of understanding with Yara, and we're currently discussing prospects with our RTC in renewables. There are interesting assets related to Yara fertilizers. We're considering producing fertilizers from biomethane. Just like Fernando said, it must have positive NPV for all 3 scenarios. We aim to resume operations in the ANSA case, situated in Paraná, by May 2025. Petrobras will solely run this without partnerships; however, we are also engaged in discussions for potential future partnerships with Yara.

Operator, Operator

Thank you, William. Thank you, Lily, for your questions. Over to Caio from Bank of America.

Caio Ribeiro, Analyst

First off, Petrobras has been mentioning the possibility of internationalizing assets in Colombia and Namibia. How do you prioritize these assets, especially considering the potential of the equatorial margin, Pelotas Basin, and domestic assets? Can you explore all these fronts at the same time, or do you prioritize any of these projects? Once approved, would you decline the others? My more specific question is regarding gross debt of $35 billion. Do you believe this is enough for future projects? Would the company consider increasing that ceiling to accommodate more investments, or perhaps by distributing more cash to investors, or both?

Operator, Operator

Sylvia and then Fernando.

Sylvia Couto dos Anjos, Director of Exploration and Production

All right, Caio. These are not competing projects. We can invest in all of them—the equatorial margin, Pelotas Basin, and international projects. We have set aside USD 7.5 billion for exploration, with $3.1 million for the equatorial margin and $1.3 million for international projects. Our investments include wells for these areas, São Tomé and Príncipe, along with Colombia, Bolivia, and Argentina. These are part of our strategic plan. None of these projects are mutually exclusive, so yes, we can operate across all fronts, including in the equatorial margin.

Fernando Melgarejo, CFO

Thank you for your question. We are discussing this matter in our strategic planning sessions. This is quite helpful for envisioning how our company sees the future. One facet involves reviewing the capital structure of both own and third-party capital and their combinations. This will also be addressed during the strategic planning announcement. Once presented, this will cover whether we intend to maintain the current debt ceiling or not.

Operator, Operator

Thank you, Fernando, Sylvia, and Caio for your questions. Regis from XP asks the next question.

Regis Cardoso, Analyst

Congratulations on the results. I would like to discuss 3 topics: One follow-up on extraordinary dividends. I want to better understand the discussions—will you look at the cash position in late Q3 and then decide based on the cash position or projected future cash flow? Alternatively, would multiple extraordinary payments per year make sense if you believe that once you report full-year 2024 results you'll have additional cash? My second question is simpler. What is the current status of Búzios and Mero for 2026? Can you anticipate any risks for delays regarding licenses, labor, and equipment? Finally, what are the key projects for the Campos Basin for '25 and '26?

Operator, Operator

Sylvia?

Sylvia Couto dos Anjos, Director of Exploration and Production

Regarding the Campos Basin, revitalization remains a priority. Investments during the '24 to '28 period are BRL 22 billion. This includes new platforms such as Albacora, Barracuda-Caratinga, Jubarte, and Maria Quitéria, as well as our partnership with MC33 with Equinor. We're looking at a scheduled 200 wells from '24 to '28. We're set to increase production by over 200,000 barrels in the short-term '25 to '26 time frame.

Operator, Operator

Thank you, Sylvia. Fernando?

Fernando Melgarejo, CFO

With regard to extraordinary payments, it's important to note this is a dynamic decision. We consider the cash flow at the start and our capacity to generate more cash that can support our operations, costs, investments, and debt. The cash position at T-zero is not the only element to consider. We need to take all terms into account on short-, mid-, and long-term bases. However, with my background in treasury, I ideally recommend maintaining a streamlined cash position whilst retaining a buffer for stress scenarios should we need alternatives to replenish cash.

Operator, Operator

Thank you, Fernando. Thank you, Regis. Conrado from Safra is next.

Conrado Vegner, Analyst

I want to discuss investments in renewables—wind and solar. They don’t seem to be moving as quickly as expected. Do you agree? Is it a timeframe issue due to the nature of those projects? Would that alter your strategy, perhaps moving towards greenfield projects solely run by Petrobras? My other question is about fertilizers, specifically regarding the fafens in Bahia and Sergipe. Are you still negotiating these? Will you adopt a tolling model after reviewing those conditions? Are other alternatives being considered?

Operator, Operator

Thank you, Conrado. Tolmasquim will address the renewables question, and William will tackle the fertilizers.

Mauricio Tolmasquim, Director of Energy Transition and Sustainability

Regarding renewables—wind and solar—there’s been an oversupply of energy. There have been many more projects than demand. Consequently, prices decreased, leading the government to reduce project counts. Prices are trending upwards now as the economy recovers. To approve a project, we require positive NPV. We can have potential partners involved. We have 4 companies still negotiating. The projects are actively out there, but we have to establish the ideal conditions before we approve them. We're considering greenfield projects as a lower priority for now.

William da Silva, Product Director

Regarding the fertilizers, we’re in discussions with the Unigel Agro Group. We are considering options that are mutually beneficial. We possess a capacity for urea amounting to 1.5 million to 2 million tons in the Bahia and Sergipe units but are currently producing nothing. Our discussions focus on achieving economic feasibility that aligns with Petrobras’ fertilizer strategy as well.

Operator, Operator

Thank you, Conrado, for your questions. Rodolfo from JPMorgan is next.

Rodolfo De Angele, Analyst

Most of my questions have been answered already. I have just one left. We've been speaking with investors at length, and concerns about oil prices are increasing. Given Petrobras’ strong low cost, what plans does Petrobras have to react to a potentially more aggressive oil scenario?

Fernando Melgarejo, CFO

Rodolfo, thank you for your question. Some important points can be highlighted here to showcase the resiliency of our portfolio. In a negative scenario, we assess potential conditions at $45 a barrel. Even then, NPV must be at least greater than 0. We have a significant margin currently. In our planning, we run hundreds of scenarios to evaluate if our plans align effectively. Many scenarios, including varying dollar prices, are complex to analyze individually. However, conjugate pairs of scenarios remain strong. We anticipate a $4 billion to $5 billion yearly contraction in operational revenue under certain conditions.

Operator, Operator

Thank you, Fernando. Thank you, Rodolfo. We have just 2 more questions from Vicente from Bradesco.

Vicente Falanga Neto, Analyst

I have 2 questions. I’d like to revisit inflation concerns. For the last 12 months, topside numbers saw prices rise by 150%. This is concerning because we’re now competing with markets in Guyana, Namibia, and Asia. Petrobras has scale advantages with loyalty with shipyards. How does this situation affect CapEx and inflation at the $2 billion level? My second question pertains to CARF. You previously indicated that $3 billion may be accessible in next quarter. Would this include reimbursements to partners or shareholders, as addressed in Q3?

Operator, Operator

Sure. Let’s begin with Fernando and then move to Renata.

Fernando Melgarejo, CFO

There are 2 effects regarding CARF. The first is reimbursing partners. Initially, we planned BRL 2.6 billion, of which BRL 200 million remains unrecognized, leaving BRL 2.4 billion that have been recognized from June to September. Of those, BRL 1.9 billion have already been received by Petrobras in the current year. There was a reduction in income tax and social contributions amounting to BRL 4.2 billion due to our fiscal basis, which was reduced by that expense. We estimate that in the next quarter, it will drop by approximately $500 million, or BRL 3 billion in Q1 '25.

Renata Baruzzi, Director of Engineering Technology and Innovation

Vicente, there’s not a single reason for the increase in costs. It relates to more complex projects, the cost of feedstock and inputs, with nickel prices soaring due to the Ukraine conflict. I've inspected our projects in Asia, speaking to many vendors. They expressed keen interest in working with us as long as we include partners in Brazil. We've developed MOUs in this regard, and discussions with the market continue to expand our partner database.

Operator, Operator

Thank you, Renata, Fernando, and Vicente for your questions. We’ve ended our Q&A session. We’d like to thank you all for your engagement and participation. Today, we had over 1,000 connected to this webcast, benefiting from your inquiries. Our IR team is available for any additional questions. For final remarks, we have Fernando.

Fernando Melgarejo, CFO

On behalf of Petrobras, I'd like to thank everyone for your commitment to joining us, along with your technical questions. Our Investor Relations team remains at your disposal for any inquiries. Thank you for joining us for another webcast.

Operator, Operator

This event is available on the Petrobras Investor Relations site, with audio and live replay to be provided shortly. Thank you, investors. Have a great afternoon and a wonderful weekend. See you next time.