Prepared remarks
Good morning. Welcome to Petrobras' earnings webcast for analysts and investors for the earnings of 2025. It's a pleasure to be with you today to discuss our earnings. We'll be presenting this conference in Portuguese, which will be translated into English. The links for both languages are on our Investor Relations website. Today, we have Magda Chambriard, President of Petrobras; Angélica Laureano, Executive Director for Energy Transition and Sustainability; Clarice Coppetti, Executive Director of Corporate Affairs; Claudio Schlosser, Executive Director of Logistics, Commercialization and Markets; Fernando Melgarejo, Executive Director of Finance and Investor Relations; Ricardo Wagner, Director of Governance and Compliance; Renata Baruzzi, Executive Director for Engineering, Technology and Innovation; Sylvia dos Anjos, Executive Director for Exploration and Production; and William Franca, Executive Director for Industrial Processes and Other Products. I will now turn it over to our President, Magda Chambriard, for her initial remarks. You may proceed, Mrs. President.
Good morning, everyone. I would like to extend a warm welcome to all of you, including our executive team and those attending this conference online. It is a pleasure to have you here for our quarterly update. We are very proud of the earnings we have achieved. In the second quarter of 2025, the significant highlight was the increase in our oil production. Just to remind you, in the fourth quarter of 2024, we produced 2,090,000 barrels of oil per day. This figure is not measured in barrel equivalents, but in actual barrels of oil. We also experienced a critical issue with our CapEx, which raised numerous questions about our decision to decrease it midway through the year. However, we executed just a bit over what we had planned for that period. Previously, in the last quarter of the previous year, we had been active for six months. So, when we adjusted our CapEx in the middle of the year, we were responding to demand and following an investment plan carried out in the first quarter of 2024.
Having addressed these concerns, I want to unequivocally clarify our actions. We increased our CapEx in the fourth quarter, aligning it with our guidance, and the result was a significant boost in production levels. In the second quarter of 2025, we produced an average of 2.3 million barrels of oil per day, which equates to an additional 230,000 barrels per day compared to the fourth quarter of 2024. This represents a 5% increase over the first quarter of this year and an 8% increase compared to the same period last year. In July, we further boosted our production to an average of 2,470,000 barrels of oil per day, which includes an increase of 380,000 barrels per day compared to the previous fourth quarter production figures. This showcased a clear production ramp-up: 2,090,000 barrels per day in the fourth quarter, 2,300,000 in the second quarter, and 2,470,000 in July. Such an increase reflects both our commitment to our government and private sector stakeholders, showing the effective execution of our plans.
We are nearing the top end of our production guidance for the year, while also remaining within our investment guidelines, which translates to value creation for all our stakeholders. The achievement of this higher production level in just seven months required a tremendous collaborative effort across teams, as well as enhancements to our internal processes. The reality is that an increase of 380,000 barrels per day is significant, surpassing the output of some countries. This increased production was made possible by executing our CapEx while ensuring our actions were safe and environmentally responsible. As for our ongoing initiatives, we have ramped up production on several platforms, including the Duque de Caixas platform and the Alexandre de Gusmão platform, both operating at capacities of 180,000 barrels per day. Additionally, we expect the largest platform in Brazil to reach 225,000 barrels per day shortly.
Our strategic planning last year was based on an oil price of $83 per barrel, while current prices hover around $67. We recognize this challenge and are prepared to react by increasing production and reducing costs. In the first half of the year, we've connected over 50 wells, exceeding our entire production efforts for 2024, owing to strong collaboration amongst our executives. We are also preparing to launch operations of the P-78 platform, which will add another 180,000 barrels per day. By staffing these platforms efficiently, we are optimizing production capabilities for our investors. Furthermore, we have improved our natural gas supply to the market, increasing gas production by 15% thanks to our Route 3 project in Rio de Janeiro. We are excited to share these accomplishments with you. We are committed to continued improvement and are ready to address the current challenging geopolitical environment impacting crude oil and gas prices.
In the second quarter, we faced a decline in oil prices, but we countered it effectively with a 5% increase in production, thereby mitigating its impact on our financials. We will work diligently to ensure our future projects remain competitive amid price fluctuations. Our commitment to maximizing value for our investors and Brazilian society will not waver, even in these uncertain conditions. We will focus on our strengths—exploring, producing, and efficiently selling oil and gas—while responsibly pursuing energy transition objectives. Thank you for joining us today. Now, I will hand over to our CFO, Fernando Melgarejo, to discuss the company's financial results.
Good morning, everyone. Thank you for joining us for the Petrobras earnings webcast. I will start by presenting the key figures for the second quarter of 2025. As Magda mentioned earlier, we experienced significant growth in our production this quarter. While Brent prices fell by 10% from 75.7% to 60.7%, our production increased by 5% due to new production systems and enhanced operational efficiency across our fields. As our CEO noted, we have already reached the halfway mark of our 2025 production target of 2.3 million barrels per day. Additionally, commercial gas production rose significantly, with a 15% increase in gas supply to the market, largely due to advancements in the Rota 3 pipeline and the Boaventura gas processing unit. Overall, we achieved a record total production of 4.2 million barrels of oil equivalent per day in the second quarter. This increased production volume was crucial for maintaining financial results consistent with the previous quarter, thanks to effective CapEx execution and strong workforce engagement.
We reported net income, excluding one-off events, of USD 4.1 billion and EBITDA of USD 10.2 billion, also excluding one-off events, which are comparable to the previous quarter when Brent prices were higher. Our strong operational results helped mitigate external factors, such as commodity prices. We also effectively managed our commercial strategy, implementing three diesel price reductions and one gasoline price reduction during the quarter, which helped maintain competitive margins and profitable operations. Operating cash flow was USD 7.5 billion, but this marked a decline compared to the previous quarter, mainly due to known events such as the impact of last year's PIS/COFINS tax credit and higher selling expenses associated with increased crude oil export volumes from our production. In terms of our debt history, both financial debt and chartering remain under control, with over 60% of total indebtedness linked to leases of platforms, vessels, and rigs.
This lease portion is related to assets that generate production and revenue for the company. The commissioning of the FPSOs Alexandre de Gusmão and Almirante Tamandaré added BRL 3.7 billion to our debt this year, but they also increased our production capacity by 207,000 barrels per day. In the first half of 2025, leases added roughly USD 5 billion to our debt, reinforcing our focus on capacity and revenue generation. This quarter, we celebrated a successful public offering of debentures totaling BRL 3 billion with high demand, enabling us to raise funds in the local market at competitive costs, something we had not done in eight years. We invested USD 4.4 billion in the second quarter, bringing our total investment for the year to USD 18.5 billion, in line with our guidance. We're committed to executing our plans and accelerating value-generating efforts. As mentioned, we began production from the FPSO Alexandre de Gusmão over two months ahead of schedule, and the Almirante Tamandaré has already reached 200,000 barrels with only four producing wells, with peak production expected soon.
In 2025, we've connected more wells than in prior years, further emphasizing our focus on production through our CapEx strategy. Our investments are benefiting the company, shareholders, and society, yielding increased production and operational cash flow. We are now a significant exporter of commodities, contributing positively to Brazil's trade balance. We are not only investing in new projects but also enhancing efficiency and managing maintenance schedules more effectively, which boosts our production curve. Our CEO noted production in July surpassed the previous quarter, with a 380,000 barrels per day increase in just seven months. With this trend, we aim to achieve average oil and gas production in 2025 at the higher end of our target range, which could generate an additional USD 2.5 billion in revenue at a price of USD 70. Regarding dividends, our shareholder remuneration policy ensures dividends align with varying oil prices while maintaining the company’s financial stability.
We will distribute 45% of our free cash flow from the second quarter, amounting to BRL 8.7 billion, or BRL 0.67 per share, with payments scheduled for November and December this year. Thank you for your attention, and I'm now available to answer your questions alongside the other directors. I will hand over to Eduardo, who will continue with the Q&A session.
Questions and answers
Thank you, Fernando. Thank you, Magda. Let's begin the Q&A session. Medani, can you hear us? You may proceed with your question.
I will align CapEx results with what you mentioned yesterday regarding natural gas distribution. As the CEO indicated, Petrobras has been focusing CapEx, particularly on upstream, to deliver operational results. We would like to understand what advancements we can expect in the next few years and how these will be generated. Is this integrated into the business plan, including the strategy from the Board and the timing for this operation?
Thank you for the question. Petrobras has been an integrated company for 71 years, which has allowed us to explore the potential for synergy. As we consider an increase in gas production, we're evaluating its implications, particularly regarding more LNG for the market. We currently import LNG and aim to increase our deliveries. It's important for us to capture the margins related to our products. Yesterday, we discussed the potential for increased production and whether it aligns with our business interests. At this moment, we don’t have any projects to acquire LNG in our portfolio. However, we want to ensure that we remain open to opportunities if they align well with our profitability and project requirements.
Petrobras has been striving to be the top choice for our customers, which involves offering competitive prices and ensuring the availability of products where demand exists. We are actively engaging in direct sales to large customers and making efforts to access terminals and distribution channels. Our CEO has highlighted that we will see a significant increase in diesel production and LNG output, both of which require a strong market to be profitable for our company. We are advancing in direct LNG sales where we have the necessary infrastructure, engaging with major clients to supply them directly and capture margins. This strategy is very much part of our ongoing discussion and will be evaluated for approval by our Board based on sound economic rationale. Additionally, we are committed to a governance process that considers the availability of funds for necessary investments. We are confident that any project undertaken will be value-enhancing for our shareholders, adhering to our disciplined approach to capital expenditure and managing our debt effectively, with a focus on achieving the targets outlined in our strategic plan for 2025 to 2029.
Thank you, Fernando, Magda. Next question by Bruno Montanari, Morgan Stanley.
I want to commend the company for the substantial increase in production over such a brief period. The ramp-up of the new platform in the pre-salt layer is quite evident. I would like to know more about the risk factors that are contributing to a more conservative curve and how this can be linked to improved execution. Additionally, I am interested in discussing a potential revitalization of Itaborai to achieve even greater production in the medium term.
We are experiencing a unique quarter. We've managed to lower our spending while increasing our production, and we've significantly cut our costs. When discussing growth in this sector, it's important to highlight our reservoir. The effectiveness of our reservoir in the pre-salt layer is dependent on the field being connected. We've encountered some pleasant surprises, as our expectations for increased production and high-productivity wells have been met. Currently, we have four wells each producing over 200,000. By the end of the year, we plan to boost our production further, but we need to note that there will be some platform-related challenges. We have initiated work on several large platforms, and there will be scheduled shutdowns. As a result, this increase in production may stabilize. Nevertheless, we anticipate reaching our production targets by the end of the year. Furthermore, in the higher range of our target, we are focusing on Itaborai and Tupi, where we aim to enhance optimization with new units to further increase production.
Now adding to the question, you mentioned Tupi in particular, right?
So as Sylvia mentioned, Tupi has at least two more projects aimed at revitalizing it and enhancing what we refer to as complementary Tupi. Our goal is to elevate Tupi's production to reach 1 million barrels of oil per day.
Thank you, Sylvia. Thank you, Magda. Now Vicente of Bradesco.
I'd like to discuss the GLP release or LPG release that you published last night. Any movements in this sector need to be approved in the November plant first, and only then would you make any transactions. You also mentioned in the release that you would have distribution partnerships according to contract provisions. What kind of partnership is this? What are these contract provisions?
As Executive Director Claudio Schlosser stated, our main challenge as production ramps up is to effectively market these products and expand our customer base. Increased production means we need to enhance our refinery capacity. Our goal is to boost diesel S10 production, which is very lucrative, by at least an additional 200,000 barrels per day. Consequently, we face increased pressure to grow our market presence. To address this, we are reaching out to our top consumers, including those in Brazil's agribusiness sector. We're now offering LPG not just for industrial use but also for domestic consumption, which allows us to broaden our natural gas market. Our efforts to integrate natural gas into Brazil's free market have attracted many companies to join this initiative with Petrobras, contributing to a 15% expansion of this gas market. It’s crucial that we do not encounter obstacles that hinder our progress in this area. We aim to keep options open for B2B sales, sales to large consumers, and needs for gas stations or gas sales. Our focus is on selecting the most valuable and efficient partners to help us place our products in the market effectively. Over time, Petrobras has decided to withdraw from certain markets, and we believe we must leave the door open for the best possible utilization of those opportunities. This is the approach we took recently.
Thank you, Magda. Now Gabriel Barra of Citi.
My point here is just one. One of the major topics that has been discussed with investors are, of course, your investment plan for next year. We have a perspective and taking the cue of the last commitment when you discussed efficiency gains and the difficulty we have today hiring new personnel in a tighter industry environment, we have a softer price movement for probes. But I think what I need to understand better is about what's going to happen, what can we expect next year when you look at our plans for the future and also considering your previous CapEx data. So how flexible are you for next year? And what solutions could you provide or improve for 2026? And what are NMAs and also LPG or other fuels? So how does that mean more CapEx efficiency for a market that is a little more uncertain in terms of oil price in the next few months or even the next few years?
Okay, I will begin by answering and then turn it over to Fernando, along with Sylvia and Renata, if they would like to add anything. We have significant business opportunities in oil exploration and production, which is the company’s major focus. These projects are highly profitable, and you can see their profitability levels. In the second quarter, we experienced lower prices, but this was offset by increased production. When evaluating these projects, our first priority is to ensure they are profitable, and second, that their profitability meets our expectations. If both criteria are met, we will proceed with them; we will not pursue projects that destroy value. For the first time in the history of Petrobras, a project has transitioned to a different phase. Projects in our portfolio have been advancing through phases numbered 0 to 4, with 4 indicating full maturity. Some projects that were anticipated to move from Phase 3 to Phase 4 will now revert to Phase 2. The intention here is to optimize these projects. We are committed to not abandoning them as they remain profitable. However, due to changes in oil prices, we felt it necessary to revisit several phases for better optimization. Now, I will hand it over to Fernando and then Renata for further details.
Thank you, Gabriel, for your question. First, I should stress that the current scenario is more challenging and that reflects in our business plan. And as we have this commitment with capital discipline, all our business plan structure needs to be adequate to reflect the needs for this new scenario. In other words, we'll be able to restructure all our CapEx that will then meet the needs of our investing capacity, considering our new production curve that we will deliver until potentially even above the margin, but within the margin or even in the upper range, the Brent is lower. So we need to offset that. And then the cash flow generation that is possible. So I believe the greatest goal, our greatest commitment is really to reduce cost for the company and also optimize projects that our President mentioned. It's the first time we went back to Phase 1 to consider engineering aspects and then also productivity. So all these factors together are integrated into our business plan. The idea is for us to devise a business plan that shows all this capital discipline with adjusted debt adjusted to our size. We do not want to increase our debt for no reason, of course. Our target is still $65 billion. This will remain. So we want to create a portfolio and a business plan that is safe and secure and adapted to the current situation and scenario.
Gabriel, I think they said everything that had to be said, but I'd just like to add one more point. Whatever the value of our business plan in 2026, rest assured that we will realize, make it happen this year. In the first quarter of last year, it was at 30%. And this quarter, it is aligned to what we had planned. It was 30% below the expected level. So whatever the value, we will execute as planned.
Magda, Fernando, Renata, thank you. Now Lilyanna Yang of HSBC.
Can you please tell us about how different the results are today as compared to what you promised in your strategic plan? Of course, it's better than expected. You probably at the top of the guidance. But again, can you please make comments about your CapEx, your $18.5 billion investment plan? So in summary, is it safe to say that today, there's a higher likelihood of this CapEx be higher this year? Are you feeling pressure from providers, suppliers? Can you expect Petrobras to put more money into Braskem and that might be a good consumer of your gas?
Lilyanna, thank you for your question. All contracts for our 2025 plan and part of 2026 have already been signed. Therefore, there is no possibility of exceeding our guidance. We will meet whatever was set on our guidance, and our commitment is assured. There are no surprises ahead for the Petrobras team.
If you allow me to go off protocol and highlight some points you've mentioned, you stated that the production number for July was 2,470,000 and that new platforms are being introduced this year. I would like to confirm that the production curve is still growing. Additionally, can you provide more details about the impact of scheduled shutdowns? I think this relates to earlier comments, and I wanted to reiterate these points for clarification. Furthermore, I have a question regarding the last auction with the Amazonas blocks. Specifically, what is the nature of your partnership with Exxon, and do you see any synergy with Guyana and Suriname?
Regarding the ramp-up, we have indeed seen an increase in production in our reports. Efficiency has improved in linking the wells at the well level, and the reservoir responded positively, leading to a rapid increase in production. However, this growth will be balanced by the larger platforms that are set to begin production. I can assure you that we are focused on safety; we aim for our platform to have a long lifespan, and scheduled shutdowns are crucial for future operations. We are on track with our planned goals and actually at the upper end, around four, which should yield a very positive outcome. It is worth noting that the pre-salt layer has exceeded expectations in productivity, providing very good results and earnings. We have an oil column comparable in height to Pão de Açúcar Mountain and the size of our discovery is twice that of Guanabara Bay, which will be confirmed once we commence production.
Regarding the auction, we did hold it and secured ten blocks, giving us a total of 16 blocks in Amapá. We are currently awaiting environmental licensing to evaluate our productivity. The blocks we obtained are quite similar to those in Venezuela and Guyana, and to what we have in the Campos basin, so we have a strong familiarity with them. Our partnership with Exxon and Shell, among our over 30 partners, has yielded significant results in Guyana, similar to the outcomes in the Equatorial margin. Collaborating with Exxon, a renowned operator, allows us to effectively share risks and leverage knowledge.
Thank you, Sylvia. Monique Greco of Itau.
Congratulations on your operating performance; it's truly impressive. Well done to the entire team. I have just one question. The message regarding your capital expenditures and gas was very clear. We understand that there are some potential developments on the horizon in the coming months, as President Magda Chambriard mentioned, such as movements in ethanol. The government will hold auctions for pre-salt areas that were not awarded this year. Could you clarify what we can expect in terms of capital expenditure execution beyond the initial $18.5 billion, especially considering these upcoming developments in the non-awarded areas?
Monique, thank you for your question. Okay. Petrobras will always be present when we discuss any opportunity of auctions. The Brazilian territory is our home. In other words, when pre-salt areas are being offered, we will always be present at such auctions. This is really in our interest. However, irrespective of any other factor, this will only happen if it makes economic sense to us. No one is considering embarking on a wild adventure, of course. If the project is worth it and if it is on our business plan, this is the direction we'll be taking. The same thing applies to ethanol. Our project portfolio includes investment in renewable fuels. In energy transition and also in biofuels, it also expects considerable effort, for instance, in electricity, including thermal power plants. So again, we will do it provided the project is profitable and attractive, provided the project meets the attractiveness and expectations of our company in terms of economic returns.
Thank you, Magda. Next question by Luiz Carvalho from BTG.
I want to congratulate you on the production ramp-up; it's great to see. I have a question to clarify regarding the initial estimates for this year. The planned oil price was $83 per barrel, but as Fernando mentioned, it’s currently around $67 or $68. This creates a gap in cash generation that is lower than initially expected. Although we know that the graph represents a 5-year plan, cash generation for this year is projected to be less than planned. You're also maintaining the CapEx guidance for this year and next year. My question is about the flexibility of this investment plan in relation to changes in oil prices and the company's debt limits, especially when considering dividend payments. With lower oil prices in mind, although you talk about project profitability being crucial for approval, what level of oil prices might lead to postponing projects toward the end of the plan rather than canceling them due to lower short-term cash generation?
Thank you, Luiz. Well, let's talk a bit about this topic. I think that the first thing is that last year, we adjusted our debt level so that we could have a little bit more flexibility, so that we could consider the scenario that occurred reduction in Brent prices and thus reduction in revenue. So still at the limit of our debt, we can still take some investments in the short term, meaning for this year, we have this CapEx of $18.5 million. We have many contracts that have already been signed. So we have scheduled that, and this should happen. The flexibility will take place when we build the strategic plan for '26, 2030. There we have to reevaluate some projects. Actually, we will look again at all assumptions and include these assumptions on the projects and see which was feasible. Those who are not, they will be along the way or maybe they will be postponed or we will look for engineering alternatives that will lead to lower CapEx so that it's financially feasible.
As our CEO said, we had one project and the first time it went back so that we could rethink how our engineering would work and whether there would be more profitable alternatives because we understand that at the current price levels with this very volatile world scenario, we should have some flexibility for that. Well, dividends will continue at the same levels. There are no discussions going on in terms of changes regarding the ordinary. Now for the extraordinary with lower revenue, we would have a harder time paying extraordinary dividends, even though we would really like very much to have surplus cash in order to pay extraordinary dividends. But I think the probability for this year is pretty low.
I would like to add and then give the floor to Director Renata to further elaborate on that. But often, we are dealing not only with the engineering of the project, but how we contract projects. So when we look, for example, this issue of contracting RNEST. So the mere change in the way we contract and publicizing the price and the dilution of the lots in a larger number of lots, this meant a saving of BRL 1 billion for our company. So we had a work for bidding, we changed how these packages would be contracted, and we diluted in a larger number of packages to have more competition. And with that, we could save BRL 1 billion. And we are multiplying this effort in other works. And I'll give the floor to Renata to further elaborate on that because after all, this is a major effort being carried out for her team.
We have been thinking innovatively since the CEO encouraged us to approach this differently. One of the key initiatives we are implementing is BOT, which allows us to modify specifications during the bidding process due to its conceptual nature. This flexibility enables adjustments in requirements during the design phase. Through this approach and extensive market discussions, we have overcome previous restrictions, resulting in a 15% to 20% reduction in the weight of CR platforms. This reduction translates into significant cost savings. We plan to open these packages on September 30 and anticipate a considerable decrease in prices as a result. As our CEO mentioned, pricing strategies will vary based on market conditions, demand, and geopolitical factors, ensuring we maximize the benefits of each contract.
Thank you, Magda. Thank you, Fernando and Renata. So we are coming to the end of our webcast. We will close the Q&A session. If you have any additional questions, you can send it to our Investor Relations team, and we will answer them later. So I'd like to thank you all for having joined our webcast. And I'll give the floor to Fernando and to Magda for their final remarks. Fernando, Magda, the floor is yours.
Thank you all for joining us. Our team is here for any further questions you may have. We are always at your service. To conclude, I want to express our satisfaction in demonstrating the benefits of a well-planned CapEx, which has led to increased production. We believe this growth will be sustainable and have positive prospects moving forward, especially with new production equipment coming online. We expect our increase in production will outweigh any declines. Over the next five years, we are confident this will materialize. Our production results were strong enough to mitigate the impacts of lower Brent prices, which was crucial for our earnings, allowing us to execute our strategic plan as intended. We will adhere to all our distribution contracts, and compliance is a commitment we uphold. Thank you very much, and we are available to discuss any issues this week that you find necessary.
Well, to close, I would like to thank you all for joining us in this webcast. And thank you all for the attention you give to Petrobras and Petrobras businesses. I agree with Fernando. And I would like to again say that we are really willing to meet everything that has been planned, offering our investors, be it government or private investors, making sure that Petrobras really want to have profitable projects, optimizing its projects portfolio and really making investments and projects that are as efficient as possible. We have wonderful actions from exploration and production, very attractive projects, including refining and sales. We are making money. We have 24% renewable energy in Asia, expanding our market. We are making money. We are expanding production of diesel with profitability, very high levels of profitability. So you can all be reassured that Petrobras is making an effort and that this Board is really making an effort so that we can achieve the best results possible. Thank you all very much. Our doors are open. And our Investor Relationship and Eduardo is available so that we can answer all the questions you may have. And so whatever questions you have, you just ask. Thank you all very much, and have a nice day.
Thank you, Magda. Thank you, Fernando. So the presentation will be made available at the Investor Relationship website. And soon, we will also make the audio available. Thank you all very much for having joined us and hope to see you in the next webcast.