Petrobras : Webcast Transcript 1Q 2024

Webcast - 1st Quarter Results 2024

May 13, 2024

Ana Paula: Good morning, and welcome to Petrobras' earnings call for analysts andinvestors. We are going to discuss our results for the 1Q24.

It's a pleasure to have you here. This event will be held in Portuguese, but it is being simultaneously translated into English. You may access the links to both languages webcast on our Investor Relations website. All participants will be on listen-only mode during the Company's presentation, after that we will have a questions-and-answer session. You may send us your questions via e-mail, [e-mail].

We have with us:

• Carlos Travassos, Executive Engineering, Technology and Innovation Director;
• Clarice Coppetti, Executive Director of Corporate Affairs;
• Claudio Schlosser, Executive Director for Logistics, Trade and Markets;
• Joelson Mendes, Executive Director for Production and Exploration;
• Mario Spinelli, Executive Director for Governance and Compliance;
• Mauricio Tolmasquim, Executive Director for Energy Transition and Sustainability; Sergio Caetano Leite, Executive Financial and Investor Relations Director; and
• William França, Executive Director for Processes and Products.

We will begin with a video bearing a message of our CEO, Jean Paul Prates.

Jean Paul Prates: Good morning, ladies and gentlemen. Today, we are going to go into the financial results for the 1Q24. The main message I would like to leave you with before presenting the figures is our commitment to executing and financing our investment plan with capital discipline and generating value for shareholders and society.

We maintained consistent cash generation this quarter, which gives us security in relation to future investments including those for production growth. This quarter, and also in comparison to the previous quarter, we had a drop in oil and gas production, which was already expected because we have scheduled maintenance down times on platforms. Therefore, it's a planned movement, which does not impact our production curve set out in the strategic plan.

I would like to point out that this is a short-term variation because when we compare it to the 1Q23, Petrobras' production grew by 3.7%. In other words, we have increased production in the last 12 months, and we are on a growing curve projected in our 2024 to 2028 strategic plan.

In the E&P segment, we had an excellent performance from the FPSOs, Almirante Barroso and Búzios and P-71 and Itapu, which reached peak production at the end of

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last year. And we are increasing production from the FPSO's Sepetiba in Mero and Anita Garibaldi in the Campos Basin.

In the 2H24, we are going to start operating the Marechal Duque de Caxias FPSO, which will be the third definitive production system for the Mero field with the capacity to produce up to 180,000, barrels per day and 12 million cubic meters of natural gas.

Talking about the downstream, you know the 1Q is always weaker in terms of sales volume due to seasonality. We took advantage of this period to make scheduled maintenance stoppages at the refineries. And even with important scheduled stoppages at Repar and Replan, the utilization factor of our refining park remains high, reaching 92% in this 1Q24, seven percentage points above the utilization factor of a year ago.

It's important to say that this increase in the level of refinery processing is taking place with value generation and total safety. Diesel, gasoline, and jet fuel in total production was 67% of the 1Q. We are also keeping an eye on low carbon markets. In this quarter, we expanded our offer of more sustainable products starting to sell R5 diesel. Diesel with renewable content at RPBC, which like Repar is already able to sell R5 diesel. We also established partnership with the second largest asphalt retailer in the country to sell CAP Pro W, a more sustainable type of asphalt.

This is a summary of our operating performance in the 1Q, which led us to a net profit of US$4.8 billion adjusted EBITDA of 12.1 billion and an operating cash flow of US$9.4 billion. An important highlight is our financial debt, which has been falling every quarter. We ended the 1Q with a financial debt of US$27.7 billion, the lowest affordable level since 2010. We should also point out that the return to our shareholders taken into account share appreciation and dividend payments continues to be the highest in the industry over the last 12 months.

And considering only the 1Q24, our public return in taxes and other government participations reached R$68 billion. These are consistent figures that demonstrate Petrobras' financial health. This robustness underpins the ambition of a company that wants to keep growing, innovating, and transforming itself. Beyond our recent success, we also want to emphasize that our investment case is a long-term one. We are building the Petrobras of the future, a more efficient company committed to generating value with total attention to people and connected to a just energy transition.

Thank you all for your participation, and I wish you a great event.

Ana Paula: We will now start the presentation of the earnings of the 1Q24. To begin, I would like to give the floor to Clarice Coppetti, Director of Corporate Affairs.

Clarice Coppetti: Thank you, Ana Paula, and good morning to everybody. It is a huge pleasure to be here with you today to go over our financial results for the 1Q and also to give you information about our actions and our activities and Rio Grande do Sul state.

At this moment, when the state is going into its third week of a climate catastrophe. Since May 1st, we have been giving shelter to more than 600 people inside our center in Canoas. It's basically adjacent to the Alberto Pasqualini refinery giving every possible condition to everybody that lost their homes and providing them with food, shelter, hygiene, and protection throughout the day and also the possibility of spending the night and providing them with as much comfort as we can.

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This is an amazing work done not only with the involvement of our local team, but also it's being fully supported by the donations that we have been providing. You can see that we donated over R$7,6 million to the impacted communities.

Our operations are extremely strong in Canoas and Esteio, where our main asset is located in Rio Grande do Sul, a refinery in Alberto Pasqualini. Also, fuel over 500,000 liters have been donated and always catering to the demands of the civil defense and the state government and other public institutions. Also, fresh water, there's a freshwater supply crisis in the state.

This has been a constant effort, providing also chemical toilets and logistics, lending our helicopters to transport food and also vessels that, work for our Environmental Defense Center that have been made available to the civil defense of the state to rescue the victims. And very briefly, our Alberto Pasqualini refinery has been operating, catering to the fuel demands. It's extremely important to the state. We have been demanded by the National Operator of the Electric System, ONS, that we should start dispatching electricity from, the thermal power plant of Canoas.

So, the Company has been making every effort not only being a solidary but also making every effort to keep its assets intact and working. We know that they are required right now for the population and also for the recovery of the state. Here we see information, some corporate highlights, an important part of our businesses to give support to all of our departments.

So, this shows not only the recruitment and selection process that we have been working on this year, but we have also been hiring new employees. And along with that, we are also launching our biggest call for the Young Apprentice Program with over a 1,000 positions open.

We are also working with many of these apprentices that have been formally hired with all of the formal benefits. Few others are also being formally trained and we are also setting aside some positions for people with disabilities. And that is important all not only, for us to have a close relationship with the universities and the technology institutes, but also to develop the Petrobras brand as a major employing brand in Brazil.

And obviously, throughout this process, Petrobras, every worker that is a higher goes through a very solid onboarding process in the 1Q, over 700 new employees were hired and on-boarded at the Company and they are now going through their formal training processes.

I cannot fail to mention that the Petrobras' Board has been investing in initiatives to encourage the increase of diversity among the Company's leaders. Our leaders are comprised 17% of women and most of them are working on shifts and go on hitches with we have also been investing on male workers for those positions, but we have been investing on females for the leadership positions.

I also want to talk about a recently launched project that has a huge impact on Brazil in our areas of operation, which is our Autonomy and Income Program that's offering 20,000 positions for professional training courses for people in a situation of social vulnerability without a formal employment relationship.

And of course, this program is integrated with our 2024 to 2028 strategic planning projects, and it intends to train the workforce since our 2024-2028 period will require lots of downtimes and that requires a qualified workforce.

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Also, I should mention that our investors and market analysts are aware of this global mental health problem inside companies. We were just awarded the UN award, Mind and Focus in one year, we have engaged with almost 6,000 leaders of the Company and we have given them formal training across all areas to try not only to identify mental health issues but also to deal with them inside the Company.

We also launched the human rights and corporate citizenship supplement, and it highlights all of the progress that we have made so far in this regard. It poses a huge challenge in that we have to be well-positioned in terms of human rights by 2030, and that's a challenge not only to the corporate social responsibility areas but also each and every department.

And with that, I am sure you are eager to listen to him. I will give the floor to, Sergio Leite, Chief Financial and Investor Relations Officer. He will speak about the financial highlights. Thank you for your attention.

Sergio Caetano Leite: Thank you, Clarice. Good morning, everybody. We are solidarity with our brothers and sisters from the south of Brazil in such difficult times in terms of our results for the 1Q. I want to highlight a few operational aspects.

In Búzios, we reached a production of 1 billion barrels of oil, 2-P, 15 years of operation of our largest fields with the production of 2.6 billion boes. Additionally, several of our units are now undergoing a ramp-up process of which it should mention the FPSO's, FPSOs Almirante Barroso, P-71, Anna Nery, Anita Garibaldi and Sepetiba. And for the 2H of 2024, Marechal Duque de Caxias will start production. It's a very important unit that will add a 180,000 barrels of oil per day and 12 million cubic meters of gas. It's an important asset that's located in the Mero field.

Also, speaking about the impacts on our quarterly results, the E&P team adopted the strategy to induce important downtimes in the 1Q. And never before in the history of the Company have we had a 1Q that's been better than the fourth of the previous year. So, that is just natural that this is a slower quarter. And in that regard, the team decided to introduce important downtimes in production and the impact of that vis-a-vis the 1Q23 is twice as high.

These downtimes have they have produced a relevant impact on production. In spite of that, if we compare the 1Q24 with that of 2023, our production grew by 3%. The refinery farms have been delivering high utilization rates at 92%. We have delivered utilization factors that were significant in 2023 in refineries for Replan and Repar. And even with the downtimes, we have delivered high productions of aviation fuel and lubricants and 92 kbpd for jet fuel and 11 for lubricants, even higher than 2020 and 2019.

The production of oil products is concentrated in high-value products. The participation, the share of diesel, gasoline, and jet fuel in total production is 67%, which is very important for the entire company. The refinery farms, we should also highlight, the efficiency and energy transition, our numbers have improved in these areas as well.

We saw oil processing has reached a new record of two percentage points above those of the 4Q. That's very important for logistics and that it gives us flexibility and allows for gains of scale. R5 diesel, it's a co-processed Petrobras products that started being produced and it started being distributed over highways and roads and the first refinery started distributing it into this system.

Another highlight is our energy transition area. Petrobras has posted a reduction in emissions 55%. So, it was an expressive amount, another important piece of data.

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From 2015 until now we reduced our greenhouse gas emissions by 40%. So, this is a transition, that is affecting the entire Company. In order to have a reduction of this level, we had to go through changes in the RP area and downstream. We also saw a reduction in the amount of CO2 produced per barrel. So, this transition area will definitely have some more news in the future but it is going very well. It's a great area at Petrobras that is doing very well. It's close to innovation and that's one of our main qualities.

We have talked about HISEP, a system that is on the ocean floor injecting gas. And this was only possible with Petrobras technology due to the constant investments we have made into technology. We have US$3.6 billion in RP, nearly US$1 billion a year on average. And most of this investment, at least in the last few years, have been focusing on energy transition.

It was this kind of investment. It was this drive for innovation that allowed us to have these results in pre-salt. It's a very important area at Petrobras and we are always seeking innovation and technology.

Looking at our financial highlights, we have seen many of them, during our CEO's video, but these are some important highlights. Our adjusted EBITDA was US$12.1 billion, the eighth highest in the Company's history, nearly R$60 billion, US$9.4 operational cash flow, which is about R$46.5 billion. Net income at US$4.8 billion close to R$23.7 billion.

And later on, we are going to go over, some of these values. We did see an impact from foreign exchange affecting us by about US$2 billion or R$11 billion in our net income, but still it was significant. Free cash flow was US$6.5 billion or R$32.4 billion, and taxes paid were R$68.2 billion.

So, our Company has been growing, but besides these, expressive figures Petrobras is starting to see its operations through indexes, which often translate the Company's efficiency in the space that we have to grow in generating value for our shareholders. We consider that the Company's, share values it's still short of what it should be. If we look at the Company's value over the approved reserve and that's very important to measuring the value of oil and gas companies around the world.

If we look at the enterprise value, the Company value, and the approved reserve, majors grew 3.2% from 22.2% to 22.9%. And this was all in the 1Q24. If we look at Petrobras comparing quarter-to-quarter, we are growing 10x that amount. So, in this index enterprise value to proved reserves, we grew 33.3% which is 10x what we see in the majors average. So, not only did we grow a lot, but we still have a lot to add.

We also had a case considering enterprise value to EBITDA. So, majors grew 48.5% and Petrobras 75%. We were expressive in providing shareholder value. Considering PN ADRs in 12 months March to March, we had a TSR of 107.3% in U.S. dollars. In ordinary shares it was close to 84% or 83.9%.

So, not only are we providing added value, but we are providing it on the middle and long-term. If we consider 10 years, our average majors had a 5%, but Petrobras grew 22% despite all of the variations we saw. So, that's very important for institutional investors, pension funds, long-term funds and investors who want their resources safe on the long run. And we are dealing with an adverse external environment, during the 1Q.

You can see some of the highlights here on the screen, but I would like to draw your attention to something that is very important. The crack spread for diesel. So, the margin

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between, value of the barrel and how much it is sold. If we look at it on a quarterly basis, it went down 26%. So again, this is a refined product that is the most significant for our revenue, diesel. And it had a margin reduction of 26%. From the 4Q23 to the 1Q24, it reduced by 14% which in fact not only Petrobras but all majors. It's important to keep this variation in mind.

As we said, we have been affected by seasonality from the 4Q to the 1Q. It's easy to understand because in the 4Q, you have a harvest, cargo, movements due to the holiday season. It's a growing curve from the 1Q to the 4Q, but we did not see a significant reduction in the 1Q. Again, in our history we never had a 1Q that sold more in fuel than the previous 4Q. So, this is normal behavior.

However, we did see some factors impacting sales besides the seasonal factors. So. a higher production of ethanol in the case of gasoline. So, this pressured our sales and made some drivers choose ethanol. In the case of diesel, we also were pressured by an increased mandate in diesel usage and although, some refineries were stopped, we still were able to post a cash generation of US$9.4 billion.

And this is also important, our free cash flow was US$6.5 billion. All the resources generated in our cash during the 1Q allowed us to satisfy our needs and have, some leftover at the end. So, the Company is still healthy, robust, and is still posting significant profits. Now let's look at our financial debt. Our gross debt is going down and our financial debt is going down as well. We have the lowest financing debt at Petrobras, since 2010. That's the lowest financing debt we have had in the Company. And the total gross debt is also going down.

Next slide please. Here, we see our net profit. As I said, it was impacted by a currency devaluation. Our net profit was US$4.8 billion in the 1Q. If we compare the 4Q23 to the 1Q24 it was a 16% reduction. But, if we compare it to the 1Q23 the reduction was slightly lower. But, the reduction reflects, currency devaluation, meaning that dollar prices were lower during the end of the quarter.

Petrobras has increased its contribution to society. 66% of its cash generation is returned to society as dividends to controlling shareholders, as government participations and taxes at all levels. So, this is a significant highlight for the Company as well. We approved a payout of R$13.45 billion. The Company is generating R$14.6 billion in dividends, when we apply the formula to ordinary dividends. R$1.15 billion is deducted from our buyback program, which is a very successful program.

On average, they deliver 70% of what was programmed and we are at 86% of what is scheduled. This buyback program as you know, is included in the shareholder remuneration policy and should end at the end of August. It started with a buyback proposal of a R$157 million preferred shares. So, this is a way of remunerating our shareholders and out of the total that was approved in dividends and interest on own capital, we are going to pay R$13.45 billion deducted from that 11.15 used for distribution. So our long-term investment theory is still being upheld.

The 1Q was impacted by some strategic decisions, with maintenance downtime in some of the refinery parks. We had fewer of them during the last-term, but now we are doing them again. We had higher utilization rates last year, so it required more maintenance downtime. So, we had twice as much of an impact in January from this. The production curve that we presented in our strategic plan will be maintained though, meaning that we are going to recover production levels. Next quarter, we are still going to have some downtime, but we will gradually return to our previous production level. We hope to achieve that curve as we presented in our strategic plan.

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Now, I will give the floor to Carlos Travassos, and he will talk about our investments.

Carlos Travassos: Thank you, Sergio. Good morning, everybody. I will give you a short update of a few investments that are scheduled to start operating in 2024, 2025.

Starting with the upstream segment at the first unit is scheduled to start operations in 2024, Duque de Caxias in the Mero field adding a 180,000 barrels of oil per day as was said before and this project once it's been implemented will increase the Mero capacity of production to 500,000 barrels of oil per day. This unit will receive the HISEP that's scheduled to start operating in the 2H of 2028. We are now going through the technical details phase according to the contract that we entered into in December last year.

Talking about the units that will start operating next year in chronological order, the first one is Maria Quiteria that left the shipyard on the sixth, and it's on its way to Brazil with a production capacity of a 100,000 barrels of oil per day with a gas compression capacity of 5 million cubic meters per day.

This unit will incorporate the combined cycle technology being the first offshore production unit of Petrobras to combine the two cycles which will increase the efficiency and consequently will reduce the emissions of the unit.

Speaking of the next units, Búzios 7, the Almirante Tamandaré FPSO that completed the installation of the modules on the deck of the unit and is now in the integration phase, it is scheduled to depart from the shipyard on the 2H of 2024 and will start operating in 2025.

Alexandre de Gusmão, the FPSO is now at the final stage, where it's lifting the modules and it's the fourth unit to enter the Mero field. And the last one, P-78, that's already in Singapore for the lifting stage. I just heard that they received the last modules yesterday, modules built in Brazil. They are at the shipyard and are ready to be lifted. And once the lifting phase has started, we will then initiate the integration of the unit that's scheduled to start operating in the last quarter of next year.

Talking about our investments in downstream, I will start with RNEST. The first one is SNOX, our emission reduction units that will increase the capacity of the refinery at of 27,000 barrels of oil per day, and it will start operating in the 2Q24. And the refinery capacity will be increased by 15,000. We are calling it the re-vamp of Train 1. We are now manufacturing equipment and doing inspections and all that. And also, we are now with the auction of Train 2 extension. We received to the proposals in March, and we are now assessing the proposals and negotiating with the stakeholders.

Talking about Route 3, now it's moving towards its final stage, and it's scheduled to start operating in the 2H of 2024. We will start the reverse pressurization operation as we call it. We will pressurize from the inland segment to the offshore segment, the onshore to offshore segments and we are also building a unit to start manufacturing lubricating oil with a production capacity of 12,000 barrels of lube oil per day. In the same process, we have the HCC and HDT units for the production of S-10 diesel and jet fuel.

About RPBC, we are now closing the blow down system providing relief to the lube valves and also for the coke production units that's scheduled for 2024. And that's an environmental condition that we are meeting. We are also increasing our tankage capacity for a diesel S-10 in Goiás, in the Senador Canedo Terminal, in Goiânia. And lastly, our hydro treatment project at Replan adding a production capacity of 63,000 barrels per day.

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This is a summary of our infrastructure investments. And with that, I will give the floor back to, Sergio.

Sergio Caetano Leite: Thank you, Travassos. So, that was the end of our presentation. We will now start the Q&A session. And before that, I would like to highlight a few important aspects of our performance for the 1Q.

Firstly, we have delivered consistent results that were impacted by external aspects. The Brent price and the FX variation, these are the biggest external factors in refined products produced from oil. We have already gone over the external factors that impacted it, but the results were consistent with our plans reflecting the well thought-out management decisions to deliver our results.

So, the results are consistent. The trajectory is in-line with our plans. The numbers and results are very significant for the 1Q. And certainly Petrobras is among the two biggest producers of results for its investors in the world. And we are on a growth trajectory with positive results to be added in the near future.

As the figures show, our investment proposition at Petrobras is for the medium-term and long-term, and that's worth mentioning. So, we are above average as investors in the oil and gas industry. That's an indication of our belief in the future and resilience. And this has been producing expressive results for investors. The ADRs of 84%, a 107% for TSRs in dollar, the EBITDA grew by 75% with financial discipline and debt control, and above all placing all our bets on EPO.

Now let's start the Q&A session.

Bruno Montanari, Morgan Stanley: Good afternoon, and thank you for the presentation. My first question goes to Sergio, concerning payments to shareholders. If we think about potential additional distributions of the profits that were retained in 2023, can we think about a timeline for the distribution of these assets, assuming that the cash generation keeps strong and the levels are maintained at the current levels? Does it make sense to think that additional distributions could occur along with the results of the 2Q or 3Q24? Or would that only happen at the end of the year?

And the second question is about the fuel prices. If I am not mistaken, it's been almost seven months since there was an adjustment to fuel prices, both gasoline and diesel. The market is quite volatile, but it's been maintaining the price in the range of US$80 per barrel. How do you see this market behavior considering its methodology, CAC and VM? Thank you.

Sergio Caetano Leite: Thanks for the question, Bruno. I hope you are doing fine. Long time no see. I will try to be brief. Concerning the extraordinary dividends from fiscal year 2023, what the general assembly decided is that 50% should be paid, and that by the end of fiscal year 2024 we would then reassess the outstanding balance in the account.

We did not set a date, as you know, but Petrobras delivers monthly outlooks to the Board. And in every meeting we go over these outlooks and the profit distribution. So, I would say that this could happen sometime along this year or next year. There's no pre-set date. Either the 1Q, the 2Q, the 4Q, or before the end of the year. The only date that we have set so far is that it will be reassessed within this fiscal year. And as you know, the resources in the account will be allocated to the payment of dividends.

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And the Board keeps on reviewing the situation constantly. We are now amidst an international crisis, making for a very volatile situation, with surprises along the way. And the surprises are not impacting only the barrel price.

As we know, the latest occurrence led to changes to shipping prices and shipping routes. So, this is an obscure scenario that the council keeps on reviewing on an ongoing basis. But as I said, there is no set date for the distribution.

Picking up on that and speaking about prices since they are related, our commercial strategy is now completing its first anniversary, and Director Schlosser is the parent of this strategy, so to speak. This business strategy, and it's important to highlight that it is a business strategy and not a price policy, even though it also talks about prices. But, it also talks about other aspects such as supply and risks of shortage of supply auctions, reviewing the quantities purchased by our main customers.

So, it is a strategy that covers several different aspects differently from what used to occur in the past where Petrobras used to have a pricing strategy. But, this new strategy has created, as you probably all know, a minimum or marginal price at which we should sell our fuels and the customer's alternative price.

To simplify things, the marginal price is the price at which Petrobras will stop negotiating. Below these amounts, the Company is not interested in negotiating. And of course, these amounts include margins for dividends, for investments, but the marginal prices are the prices below which Petrobras will no longer be interested in negotiating.

On the other hand, you have the customer alternative price, which is the price above which customers are no longer interested in negotiating or buying for that matter. But some people, used to say well the customer alternative price is not what we call the PPE. No, it's not. The customer alternative price gives a certainty that the supply will be enough.

Petrobras has a huge capacity to deliver fuels anywhere in Brazil. And oftentimes customers will prefer to pay prices above the PPE, and to make sure that they will maintain their fuel supply. So, the customer alternative price encompasses the marginal price of the last drop at the end of the chain. The price above which customers will stop negotiating.

What I would like to remind you is that a significant part of the diesel cost is impacting the market. In some centers like Paranaguá, Paraná, and Santos, then definitely the alternative cost will be affected by these prices.

So, we still have not seen a structural change a variation between VM and CAC. We see that oil is at 83 at 87. It's been close to 88, for an entire week and then it was at 83 to 84 for two weeks. So, imagine if we had done this we would have transferred a lot of volatility to our clients and that's terrible for our inventory management and logistics management.

At the current price Petrobras is still able to make a profit in good market conditions and we are keeping our eye on the market. We need to see if there are going to be any structural changes that, require a change to the price. I hope I answered that question well because, Director Schlosser, is the person who knows about these things.

Claudio Schlosser: Let me just add something here. First, I would like to, just give my condolences to my fellow citizens of Rio Grande do Sul. As was said, the most important thing is to make sure that they have a supply of byproducts, because I know that they are essential for the calamity there. And we are also getting prepared to rebuild the state.

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We know that there will be high demands for asphalt in the future. So, we are all working on that.

So, just to comment on what Sergio said, thank you for your question, Bruno. As you said, it's been seven months since we re-adjusted prices. And the last ones were readjustments to gasoline prices in October, a reduction, and diesel prices also went down in December.

Due to global factors and geopolitical tensions, due to the war in Ukraine and in the Middle East, we have been seeing an effect in our production and logistical costs to sell oil and oil byproducts.

To give you an idea, and Sergio has mentioned this, it's great to have a Financial Director that understands the commercial strategy so well. So, I was happy with what Sergio said, but just to give you an example, if we look at Brent in April, it reached US$93. And now, it's at US$83, US$84 and even below that.

So, as you said very well, Bruno, yes. Apparently, there is some support for these US$80. And this may have happened in a couple of ways, either being generated by increased tension from one of the parties or due to cuts in production. So, this also seems to be a support price. You mentioned the commercial strategy, and Sergio, mentioned that as well in alternative costs for the client, which is not only importation data, but it might, there are substitutes in the market.

If you look at gasoline, we have substitutes like ethanol, Sergio mentioned, Russian diesel that has also gone into the market and another relevant factor in commercial strategy is to not pass on market volatility from the international market to our domestic clients.

Our commercial strategy has been very successful at doing that. And this has allowed us to continue with a successful strategy by introducing the martial value that you mentioned, Bruno, which shows the alternatives that Petrobras has.

It allows us to compete much more. It gives us the flexibility to be profitable while we are competing. And our vision is to be the best alternative for the client not only on the short- term, but also on the long-term.

So, in some moments where you have some lower alternative prices for clients, we have the possibility of competing because we have the infrastructure, we have good installations, and that's a great factor to execute our commercial strategy.

Thank you for your question. And another thing that I can add is that Repar and Replan downtimes were very successful. And now, as we are going back to our operations, this also makes us much more competitive because of this reduction in the marginal value.

Luiz Carvalho, UBS: Good afternoon. Thank you for taking my question. Sergio, my question is for you. Your 2024 to 2028 strategic plan brought some changes in some of the areas of the Company, strategies especially looking at the investment levels. I know that it might be early, but if we look on a four to five year horizon, Petrobras is focusing more on energy transition. So, are we expecting any structural changes besides this energy transition in the current plan?

And if we can look at this current plan, if you could, after six months, give us an assessment of how discussions have been going for implementation. How have conversations around acquisitions and renewable assets been going? So, that's my first

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