pbradf1q15usd_6k.htm - Generated by SEC Publisher for SEC Filing

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934

For the month of May, 2015

Commission File Number 1-15106



PETRÓLEO BRASILEIRO S.A. - PETROBRAS
(Exact name of registrant as specified in its charter)



Brazilian Petroleum Corporation - PETROBRAS
(Translation of Registrant's name into English)



Avenida República do Chile, 65
20031-912 - Rio de Janeiro, RJ
Federative Republic of Brazil
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. 

Form 20-F ___X___ Form 40-F _______

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes _______ No___X____

 


 
 

 

 

Petróleo Brasileiro S.A. – Petrobras

 

Consolidated financial statements as of

March 31, 2015, with report of independent

registered public accounting firm

 

 


 
 

Petróleo Brasileiro S.A. – Petrobras

Index

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

 

Report of Independent Registered Public Accounting Firm 
Consolidated Statement of Financial Position 
Consolidated Statement of Income 
Consolidated Statement of Comprehensive Income 
Consolidated Statement of Cash Flows 
Consolidated Statement of Changes in Shareholders’ Equity 
Notes to the financial statements 
1 The Company and its operations 
2 Basis of preparation 
3 The “Lava Jato” (Car Wash) Operation and its effects on the Company  10 
4 Basis of consolidation  10 
5 Summary of significant accounting policies  10 
6 Cash and cash equivalents and Marketable securities  11 
7 Trade and other receivables  12 
8 Inventories  14 
9 Disposal of assets and legal mergers  14 
10 Investments  15 
11 Property, plant and equipment  16 
12 Intangible assets  17 
13 Exploration for and evaluation of oil and gas reserves  17 
14 Trade payables  18 
15 Finance debt  18 
16 Leases  21 
17 Related party transactions  22 
18 Provision for decommissioning costs  23 
19 Taxes  24 
20 Employee benefits (Post-Employment)  26 
21 Shareholders’ equity  28 
22 Sales revenues  29 
23 Other expenses, net  29 
24 Costs and Expenses by nature  30 
25 Net finance income (expense)  30 
26 Supplemental information on statement of cash flows  31 
27 Segment Information  32 
28 Provisions for legal proceedings  36 
29 Collateral for crude oil exploration concession agreements  40 
30 Risk management  40 
31 Fair value of financial assets and liabilities  44 
32 Subsequent events  45 
33 Information Related to Guaranteed Securities Issued by Subsidiaries  45 

 

 

2


 
 

Petróleo Brasileiro S.A. – Petrobras

Report of Independent Registered Public Accounting Firm

 

 

 

Report of independent registered

public accounting firm

 

 

To the Board of Directors and Shareholders

Petróleo Brasileiro S.A. - Petrobras

 

 

We have reviewed the accompanying condensed consolidated statement of financial position of Petróleo Brasileiro S.A. - Petrobras and its subsidiaries as of March 31, 2015, and the related condensed consolidated statements of income, comprehensive income, cash flows and changes in shareholders’ equity for the three-month periods ended March 31, 2015 and March 31, 2014. This interim financial information is the responsibility of the Company's management.

 

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

 

Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial information for it to be in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

 

As discussed in Note 3 to the condensed consolidated financial statements, during the third quarter of 2014, the Company wrote off US$ 2,527 million of overpayments on the acquisition of property plant and equipment incorrectly capitalized, according to testimony obtained from Brazilian criminal investigations.

 

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated statement of financial position as of December 31, 2014, and the related consolidated statements of income, comprehensive income, cash flows (not presented herein) and changes in shareholders’ equity for the year then ended, and in our report dated April 22, 2015, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed accompanying consolidated statement of financial position as of December 31, 2014 is fairly stated in all material respects in relation to the accompanying consolidated statement of financial position from which it has been derived.

 

/s/

PricewaterhouseCoopers

Auditores Independentes

 

 

Rio de Janeiro, Brazil

May 15, 2015

3


 
 

Petróleo Brasileiro S.A. – Petrobras

Consolidated Statement of Financial Position

March 31, 2015 and December 31, 2014

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Assets

Note

03.31.2015

12.31.2014

Liabilities

Note

03.31.2015

12.31.2014

Current assets

 

 

 

Current liabilities

 

 

 

Cash and cash equivalents

6

10,739

16,655

Trade payables

14

7,814

9,760

Marketable securities

6

10,545

9,323

Finance debt

15

12,368

11,868

Trade and other receivables, net

7

6,464

7,969

Finance lease obligations

16

14

16

Inventories

8

9,985

11,466

Income taxes payable

19.1

320

247

Recoverable income taxes

19.1

819

1,063

Other taxes payable

19.1

3,238

4,064

Other recoverable taxes

19.1

2,196

2,748

Payroll, profit sharing and related charges

 

1,923

2,066

Advances to suppliers

 

357

423

Pension and medical benefits

20

700

796

Other current assets

 

1,773

1,180

Others

 

1,790

2,301

 

 

42,878

50,827

 

 

28,167

31,118

Assets classified as held for sale

 

3

5

Liabilities on assets classified as held for sale

 

 

 

42,881

50,832

 

 

28,167

31,118

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

Non-current liabilities

 

 

 

Long-term receivables

 

 

 

Finance debt

15

112,456

120,218

Trade and other receivables, net

7

4,991

4,832

Finance lease obligations

16

50

56

Marketable securities

6

92

109

Deferred income taxes

19.2

262

3,031

Judicial deposits

28.1

2,373

2,682

Pension and medical benefits

20

14,020

16,491

Deferred income taxes

19.2

916

1,006

Provisions for legal proceedings

28.1

1,496

1,540

Other tax assets

19.1

3,329

4,008

Provision for decommissioning costs

18

6,757

8,267

Advances to suppliers

 

2,199

2,409

Others

 

831

988

Others

 

3,217

3,817

 

 

135,872

150,591

 

 

17,117

18,863

 

 

 

 

 

 

 

 

Total liabilities

 

164,039

181,709

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

21.1

 

 

Investments

10

4,943

5,753

Share capital (net of share issuance costs)

 

107,101

107,101

Property, plant and equipment

11

190,579

218,730

Change in interest in subsidiaries

 

148

148

Intangible assets

12

3,815

4,509

Profit reserves

 

68,286

66,423

 

 

216,454

247,855

Accumulated other comprehensive (deficit)

 

(80,848)

(57,400)

 

 

 

 

Attributable to the shareholders of Petrobras

 

94,687

116,272

 

 

 

 

Non-controlling interests

 

609

706

 

 

 

 

Total equity

 

95,296

116,978

Total assets

 

259,335

298,687

Total liabilities and shareholder's equity

 

259,335

298,687

The Notes form an integral part of these Financial Statements.

 

4


 
 

Petróleo Brasileiro S.A. – Petrobras

Consolidated Statement of Income

March 31, 2015 and 2014

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

 

Note

Jan-Mar/2015

Jan-Mar/2014

 

 

 

 

Sales revenues

22

25,967

34,494

Cost of sales

 

(18,140)

(26,388)

Gross profit

 

7,827

8,106

 

 

 

 

Income (expenses)

 

 

 

Selling expenses

 

(602)

(1,154)

General and administrative expenses

 

(946)

(1,083)

Exploration costs

13

(343)

(646)

Research and development expenses

 

(197)

(250)

Other taxes

 

(263)

(138)

Other expenses, net

23

(818)

(1,632)

 

 

(3,169)

(4,903)

 

 

 

 

Net income before finance income (expense), share of earnings in equity-accounted investments, profit sharing and income taxes

 

4,658

3,203

 

 

 

 

Finance income

 

256

441

Finance expenses

 

(1,289)

(782)

Foreign exchange and inflation indexation charges

 

(930)

268

 

 

 

 

Net finance income (expense)

25

(1,963)

(73)

 

 

 

 

Share of earnings in equity-accounted investments

10.1

60

221

 

 

 

 

Profit sharing

20.1

(117)

(142)

 

 

 

 

Net income before income taxes

 

2,638

3,209

 

 

 

 

Income taxes

19.3

(1,056)

(763)

 

 

 

 

Net income

 

1,582

2,446

 

 

 

 

Net income (loss) attributable to:

 

 

 

Shareholders of Petrobras

 

1,862

2,280

Non-controlling interests

 

(280)

166

 

 

 

 

 

 

1,582

2,446

 

 

 

 

Basic and diluted earnings (loss) per weighted-average of common and preferred share - in U.S. dollars

21.3

0.14

0.17

 

 

 

 

 

 

 

 

 

 

 

 

The Notes form an integral part of these Financial Statements.

 

 

5


 
 

Petróleo Brasileiro S.A. – Petrobras

Consolidated Statement of Comprehensive Income

March 31, 2015 and 2014

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

 

Jan-Mar/2015

Jan-Mar/2014

 

 

 

Net income

1,582

2,446

 

 

 

Items that will not be reclassified to the statement of income:

 

 

Actuarial gains (losses) on defined benefit pension plans

Cumulative translation adjustments

(16,695)

4,480

 

(16,695)

4,480

Items that may be reclassified subsequently to the statement of income:

 

 

Unrealized gains / (losses) on cash flow hedge - highly probable future exports

 

 

Recognized in shareholders' equity

(9,884)

1,645

Reclassified to the statement of income

288

199

Deferred income tax

3,263

(627)

 

(6,333)

1,217

Unrealized gains / (losses) on cash flow hedge - others

 

 

Recognized in shareholders' equity

(1)

3

Reclassified to the statement of income

1

Deferred income tax

 

(1)

4

 

 

 

 

(6,334)

1,221

 

 

 

Share of other comprehensive income (losses) in equity-accounted investments

(358)

59

 

 

 

Total other comprehensive income (loss):

(23,387)

5,760

 

 

 

Total comprehensive income (loss)

(21,805)

8,206

Comprehensive income (loss) attributable to:

 

 

Shareholders of Petrobras

(21,585)

8,162

Non-controlling interests

(220)

44

Total comprehensive income (loss)

(21,805)

8,206

 

 

 

 

 

 

The Notes form an integral part of these Financial Statements.

 

 

 

6


 
 

Petróleo Brasileiro S.A. – Petrobras

Consolidated Statement of Cash Flows

March 31, 2015 and 2014

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

 

03.31.2015

03.31.2014

 

 

 

Cash flows from Operating activities

 

 

Net income attributable to the shareholders of Petrobras

1,862

2,280

Adjustments for:

 

 

Non-controlling interests

(280)

166

Share of earnings in equity-accounted investments

(60)

(221)

Depreciation, depletion and amortization

2,974

3,013

Impairment of property, plant and equipment, intangible and other assets

101

117

Exploration expenditures written off

201

447

Allowance for impairment of trade receivables

(301)

14

(Gains) losses on disposal of assets, write-offs of non-current assets, E&P areas returned and cancelled projects, net

(141)

(222)

Foreign exchange, indexation and finance charges

2,198

599

Deferred income taxes, net

714

290

Pension and medical benefits (actuarial expense)

588

440

Decrease (Increase) in assets

 

 

Trade and other receivables, net

25

(1,078)

Inventories

(358)

(1,045)

Other assets

(1,018)

(885)

Increase (Decrease) in liabilities

 

 

Trade payables

(795)

(205)

Taxes payable

113

(539)

Pension and medical benefits

(145)

(142)

Other liabilities

61

952

Net cash provided by operating activities

5,739

3,981

Cash flows from Investing activities

 

 

Capital expenditures

(6,115)

(8,750)

Investments in investees

(63)

(5)

Proceeds from disposal of assets

180

368

Divestment (investment) in marketable securities

(1,455)

(307)

Dividends received

3

154

Net cash (used in) investing activities

(7,450)

(8,540)

Cash flows from Financing activities

 

 

Acquisition of Non-controlling interest

138

(46)

Financing and loans, net:

 

 

Proceeds from long-term financing

1,304

22,803

Repayment of principal

(2,948)

(2,595)

Repayment of interest

(1,956)

(1,595)

Net cash provided by (used in) financing activities

(3,462)

18,567

 

 

 

Effect of exchange rate changes on cash and cash equivalents

(743)

379

 

 

 

Net increase (decrease) in cash and cash equivalents

(5,916)

14,387

 

 

 

Cash and cash equivalents at the beginning of the year

16,655

15,868

 

 

 

Cash and cash equivalents at the end of the period

10,739

30,255

 

 

 

 

 

 

The Notes form an integral part of these Financial Statements.

 

 

7


 
 

Petróleo Brasileiro S.A. – Petrobras

Consolidated Statement of Changes in Shareholders’ Equity

March 31, 2015 and 2014

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

 

Share capital (net of share issuance costs)

 

Accumulated other comprehensive income (deficit) and deemed cost

Profit Reserves

 

 

 

 

Share Capital

Share issuance costs

Change in interest in subsidiaries

Cumulative translation adjustment

Cash flow hedge - highly probable future exports

Actuarial gains (losses) on defined benefit pension plans

Other comprehensive income (loss) and deemed cost

Legal

Statutory

Tax incentives

Profit retention

Retained earnings

Shareholders' equity attributable to shareholders of Petrobras

Non-controlling interests

Total consolidated shareholders' equity

 

107,371

(279)

674

(26,440)

(3,911)

(2,505)

(178)

7,919

2,182

729

62,965

148,527

596

149,123

Balance at January 1, 2014

 

107,092

674

 

 

 

(33,034)

 

 

 

 

73,795

148,527

596

149,123

Realization of deemed cost

 

 

 

 

 

 

(1)

 

 

 

 

1

 

Change in interest in subsidiaries

 

 

(42)

 

 

 

 

 

 

 

 

 

(42)

(73)

(115)

Net income

 

 

 

 

 

 

 

 

 

 

 

2,280

2,280

166

2,446

Other comprehensive income

 

 

 

4,602

1,217

63

 

 

 

 

 

5,882

(122)

5,760

Appropriations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation of net income

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

107,371

(279)

632

(21,838)

(2,694)

(2,505)

(116)

7,919

2,182

729

62,965

2,281

156,647

567

157,214

Balance at March 31, 2014

 

107,092

632

 

 

 

(27,153)

 

 

 

 

76,076

156,647

567

157,214

 

107,380

(279)

148

(41,968)

(7,699)

(7,295)

(438)

7,919

2,182

720

55,602

116,272

706

116,978

Balance at January 1, 2015

 

107,101

148

 

 

 

(57,400)

 

 

 

 

66,423

116,272

706

116,978

Realization of deemed cost

 

 

 

 

 

 

(1)

 

 

 

 

1

 

Change in interest in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

123

123

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

1,862

1,862

(280)

1,582

Other comprehensive income (loss)

 

 

 

(16,755)

(6,333)

(359)

 

 

 

 

(23,447)

60

(23,387)

Appropriations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Transfer from reserves

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

107,380

(279)

148

(58,723)

(14,032)

(7,295)

(798)

7,919

2,182

720

55,602

1,863

94,687

609

95,296

Balance at March 31, 2015

 

107,101

148

 

 

 

(80,848)

 

 

 

 

68,286

94,687

609

95,296

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Notes form an integral part of these Financial Statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

1.            The Company and its operations

Petróleo Brasileiro S.A. - Petrobras is dedicated, directly or through its subsidiaries  (referred to jointly as “Petrobras” or “the Company”) to prospecting, drilling, refining, processing, trading and transporting crude oil from producing onshore and offshore oil fields and from shale or other rocks, as well as oil products, natural gas and other liquid hydrocarbons. In addition, Petrobras carries out energy related activities, such as research, development, production, transport, distribution and trading of all forms of energy, as well as other related or similar activities. The Company’s head office is located in Rio de Janeiro – RJ, Brazil.

2.            Basis of preparation

The consolidated interim financial information has been prepared and is being presented in accordance with IAS 34 – “Interim Financial Reporting” as issued by the International Accounting Standards Board (IASB). The information is presented in U.S. dollars.

This interim financial information presents the significant changes for the Company in the first quarter of 2015, and it does not repeat certain other recent significant changes that were previously reported in notes to the Company’s financial statements. As a result, this interim financial information should be read together with the Company’s annual financial statements for the year ended December 31, 2014, which include the full set of notes.

The Company has reclassified certain amounts from prior periods to provide a more appropriate presentation and consistent with the industry practice. Net income was not affected in any of the periods presented.

Petrobras has selected the U.S. Dollar as its presentation currency. The financial statements have been translated from the functional currency (Brazilian Real) into the presentation currency (U.S. Dollar) in accordance with IAS 21 – “The effects of changes in foreign exchange rates”. All assets and liabilities are translated into U.S. dollars at the closing exchange rate at the date of the financial statements; income and expenses, as well as cash flows are translated into U.S. dollars using the average exchange rates prevailing during the year. Equity items are translated using the exchange rates prevailing at the dates of the transactions. All exchange differences arising from the translation of the consolidated financial statements from the functional currency into the presentation currency are recognized as cumulative translation adjustments (CTA) within accumulated other comprehensive income (loss) in the consolidated statements of changes in shareholders’ equity.

Brazilian Real x U.S. Dollar

Mar 2015

Mar 2014

Jun 2014

Sep 2014

Dec 2014

Quarterly average exchange rate

2.86

2.36

2.23

2.28

2.55

Period-end exchange rate

3.21

2.26

2.2

2.45

2.66

 

 

 

The Company’s Board of Directors in a meeting held on May 15, 2015 authorized the consolidated interim financial information for issue.

2.1.            Accounting estimates

The preparation of interim financial information requires the use of estimates and assumptions for certain assets, liabilities and other transactions. These estimates include: write-off of overpayments improperly capitalized, oil and gas reserves, pension and medical benefits liabilities, depreciation, depletion and amortization, decommissioning costs, impairment of assets, hedge accounting, provisions for legal proceedings, fair value of financial instruments, present value adjustments of trade receivables and payables from relevant transactions, and income taxes (income tax – IRPJ and social contribution on net income – CSLL). Although our management uses assumptions and judgments that are periodically reviewed, the actual results could differ from these estimates.

9


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

3.            The “Lava Jato” (Car Wash) Operation and its effects on the Company

In the third quarter of 2014, the Company wrote off US$2,527 of capitalized costs representing amounts that Petrobras overpaid for the acquisition of property, plant and equipment in prior years. For further information see note 3 to the Company’s December 31, 2014 consolidated financial statements.

In preparing its financial statements for the first quarter of 2015, the Company carefully considered all available information and does not expect that new developments in the investigations related to the “Lava Jato” (Car Wash) Operation by the Brazilian authorities, by the independent law firms conducting an internal investigation, or by newly set up internal commissions (or a review of the results of previous internal investigations) could materially impact or change the methodology adopted to recognize the write-off described above. Notwithstanding this expectation, the Company will continuously monitor the investigations for additional information and, as of March 31, 2015, has not identified any necessary adjustment based on existing information.

On May 13, 2015, the Company received US$ 49 representing the first portion of amounts recovered from Pedro José Barusco Filho, a former executive manager of the Services area, who previously entered into a plea agreement with Brazilian authorities. This amount will be recognized as other income (amounts recovered – “overpayments incorrectly capitalized”) in the second quarter of 2015. To the extent that any of the proceedings resulting from the Lava Jato investigation involve leniency agreements with cartel members or plea agreements with individuals pursuant to which they agree to return funds, Petrobras may be entitled to receive a portion of such funds.

See note 28 for information about class actions and the Company’s other material legal proceedings.

4.            Basis of consolidation

The consolidated interim financial information includes the quarterly information of Petrobras, its subsidiaries, joint operations and consolidated structured entities.

There were no significant changes in the consolidated entities in the three-month period ended March 31, 2015.

The main disposal of assets and legal mergers are set out in note 9.

5.            Summary of significant accounting policies

The same accounting policies and methods of computation were followed in these consolidated interim financial statements as those followed in the preparation of the annual financial statements of the Company for the year ended December 31, 2014.

10


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

6.            Cash and cash equivalents and Marketable securities

Cash and cash equivalents

 

03.31.2015

12.31.2014

Cash at bank and in hand

694

709

Short-term financial investments

 

 

- In Brazil

 

 

Single-member funds (Interbank Deposit) and other short-term deposits

1,561

1,999

Other investment funds

39

41

 

1,600

2,040

- Abroad

 

 

Time deposits

4,052

8,700

Automatic investing accounts

2,265

3,097

Other financial investments abroad

2,128

2,109

 

8,445

13,906

Total short-term financial investments

10,045

15,946

Total cash and cash equivalents

10,739

16,655

 

 

 

Short-term financial investments in Brazil comprise investments in exclusive (single-member) funds, mainly holding Brazilian Federal Government Bonds. Short-term financial investments abroad are comprised of time deposits, highly-liquid automatic investing accounts and other short-term fixed income instruments from highly-rated financial institutions with maturities of three months or less.

Marketable securities

 

03.31.2015

12.31.2014

Trading securities

1,537

2,690

Available-for-sale securities

12

21

Held-to-maturity securities

9,088

6,721

 

10,637

9,432

Current

10,545

9,323

Non-current

92

109

 

 

 

Trading securities refer mainly to investments in Brazilian Government Bonds and held-to-maturity securities are mainly comprised of time deposits with highly-rated financial institutions abroad.

These financial investments have maturities of more than three months and are classified as current assets due to their maturity or the expectation of their realization in the short term.

11


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

7.            Trade and other receivables

7.1.       Trade and other receivables, net

 

03.31.2015

12.31.2014

Trade receivables

 

 

Third parties

8,772

10,022

Related parties (Note 17)

 

 

Investees

636

863

Receivables from the electricity sector

2,800

2,966

Petroleum and alcohol accounts -Federal Government

263

317

Other receivables

1,605

2,005

 

14,076

16,173

Provision for impairment of trade receivables

(2,621)

(3,372)

 

11,455

12,801

Current

6,464

7,969

Non-current

4,991

4,832

 

 

 

7.2.       Changes in the allowance for impairment of trade receivables

 

03.31.2015

12.31.2014

Opening balance

3,372

1,406

Additions

211

2,484

Write-offs (*)

(512)

(131)

Cumulative translation adjustment

(450)

(387)

Closing balance

2,621

3,372

 

 

 

Current

1,309

1,448

Non-current

1,312

1,924

 

 

 

(*) Includes US$ 452 related to companies from the isolated electricity sector in the quarter ended March 31, 2015, as set out in note 7.4.

 

 

 

7.3.       Trade receivables overdue - Third parties

 

03.31.2015

12.31.2014

Up to 3 months

741

823

From 3 to 6 months

363

178

From 6 to 12 months

238

181

More than 12 months

1,657

1,832

 

2,999

3,014

 

 

 

 

12


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

7.4.       Trade receivables – electricity sector (isolated electricity system in the northern region of Brazil)

 

03.31.2015

12.31.2014

 

Not yet due

Overdue

Total

Not yet due

Overdue

Total

Clients

 

 

 

 

 

 

Eletrobras Group (Note 17)

2,105

695

2,800

2,536

430

2,966

Companhia de Gás do Amazonas (CIGÁS)

1,011

309

1,320

1,266

167

1,433

Others

33

348

381

24

394

418

 

3,149

1,352

4,501

3,826

991

4,817

(-) Allowance for impairment of trade receivables

(511)

(541)

(1,052)

(1,090)

(621)

(1,711)

Total

2,638

811

3,449

2,736

370

3,106

Related parties

2,054

499

2,553

2,473

165

2,638

Third parties

584

312

896

263

205

468

 

 

 

As of March 31, 2015, US$ 3,850 of the Company’s receivables from the isolated electricity system in the northern region of Brazil, related to fuel oil, natural gas and other products sold to thermoelectric power plants (which are subsidiaries of Eletrobras), state-owned natural gas distribution companies and independent electricity producers (Produtores Independentes de Energia – PIE) located in the northern region of Brazil, were classified as non-current assets. The balance of those receivables was US$ 4,501 as of March 31, 2015 (US$ 4,817 as of December 31, 2014).

A portion of the costs related to the supply of fuel to thermoelectric power plants located in the northern region of Brazil is borne by funds from the Fuel Consumption Account (Conta de Consumo de Combustível – CCC), which is managed by Eletrobras.

Recently, funds transferred from the CCC to the electricity companies in the northern region of Brazil have not been sufficient for them to meet their financial obligations, and, as a result, some of these companies have experienced financial difficulties and have not been able to pay for the products supplied by Petrobras. The Company entered into a debt acknowledgement agreement with subsidiaries of Eletrobras on December 31, 2014 with respect to the balance of its receivables as of November 30, 2014. Eletrobras acknowledged being indebted in the amount of US$ 3,509. This amount is being updated based on the Selic interest rate (Brazilian short-term interest rate) every month. Under the agreement, the amounts started to be paid in 120 monthly installments beginning in February 2015 and US$ 2,483 were guaranteed by collaterals, as of December 31, 2014.

In 2015, the Brazilian government implemented a new pricing policy for the electricity sector and has already implemented price increases in the first quarter of 2015. The new policy will strengthen the financial situation of the companies in the electricity sector and reduce their insolvency on payables from fuel oil and other products supplied. The Company expects that the impact of the higher electricity prices resulting from the new policy will be more significant after the first quarter of 2015, notably because the funds received from the end customer will be transferred to the CCC and used to refund the electricity generation companies.

The Company recognized an allowance for impairment of trade receivables in 2014 of US$ 1,696 (US$ 1,948 charged to selling expenses, partially offset by a US$ 252 cumulative translation adjustment - CTA effect) to cover uncollateralized receivables as of October 31, 2014, including the balances of previous debt acknowledgement agreements and from companies that were not part of the most recent debt acknowledgment agreement with Eletrobras.

On March 31, 2015 the Company recognized a reversal of an allowance for impairment of trade receivables of US$ 404 (a US$ 452 reduction in selling expenses, partially offset by a US$ 48 negative cumulative translation adjustment – CTA effect) due to the pledge of additional receivables the CCC has from the Brazilian Energy Development Account (Conta de Desenvolvimento Energético – CDE) as security on May 7, 2015, for an additional portion of the debt acknowledgement agreement entered into with Eletrobras in 2014.

13


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

8.            Inventories

 

03.31.2015

12.31.2014

Crude oil

3,621

3,977

Oil products

3,646

4,333

Intermediate products

701

854

Natural gas and LNG (*)

339

358

Biofuels

180

150

Fertilizers

39

34

 

8,526

9,706

Materials, supplies and others

1,506

1,806

 

10,032

11,512

Current

9,985

11,466

Non-current

47

46

 

 

 

(*) Liquid natural gas

 

 

 

Inventories are presented net of a US$ 103 allowance reducing inventories to net realizable value (US$ 150 as of December 31, 2014), mainly due to the decrease in international prices of crude oil and oil products. In the quarter ended March 31, 2015 the Company recognized a US$ 100 allowance reducing inventories to net realizable value recognized as cost of sales (US$ 123 in the quarter ended March 31, 2014).

A portion of the crude oil and/or oil products inventories have been pledged as security for the Terms of Financial Commitment (TFC) signed by Petrobras and Petros in the amount of US$ 1,806 (US$ 2,316 as of December 31, 2014), as set out in note 20.

9.            Disposal of assets and legal mergers

9.1.       Disposal of assets

Disposal of assets in Argentina

On March 30, 2015, Petrobras Argentina S.A., PESA, disposed of its interest in assets located in the Austral Basin in Santa Cruz to Compañía General de Combustibles S.A. (CGC) for a lump-sum payment of US$ 101 made on the same date. The Company recognized a US$ 77 gain in other income.

Innova S.A.

On August 16, 2013, the Board of Directors of Petrobras approved the disposal of 100% of the share capital of Innova S.A. to Videolar S.A. and its controlling shareholder for US$ 369, subject to certain condition precedent, such as approval by the Brazilian Antitrust Regulator (Conselho Administrativo de Defesa Econômica – CADE).

On October 30, 2014 the transaction was concluded as set out in the sales and purchase agreement and a US$ 57 gain was recognized in other income.

On March 31, 2015, a final price adjustment was agreed between the parties and was paid. The Company recognized the additional payment received of US$ 78 in other income.

14


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

9.2.       Legal mergers

On January 30, 2015, the Shareholders’ Extraordinary General Meeting of Petrobras approved the mergers of Arembepe Energia S.A. and Energética Camaçari Muricy S.A. into Petrobras.

The objective of these mergers is to simplify the corporate structure of the Company, reduce costs and capture synergies. These mergers did not affect share capital or the Company’s consolidated financial statements.

10.        Investments

10.1.   Investments in associates and joint ventures

 

Carrying amount of the investments

Share of earnings in the investments

Investments accounted for using the equity method

03.31.2015

12.31.2014

Jan-Mar/2015

Jan-Mar/2014

Braskem S.A.

1,153

1,711

25

54

Petrobras Oil & Gas B.V. - PO&G

1,718

1,714

4

100

Guarani S.A.

391

518

(3)

(6)

State-controlled Natural Gas Distributors

295

340

15

29

Nova Fronteira Bioenergia S.A.

133

163

(2)

2

Petrowayu S.A.

136

136

Petroritupano S.A.

112

112

(1)

Other petrochemical investees

55

66

1

11

UEG Araucária Ltda

66

73

11

11

Petrokariña S.A.

45

45

Transierra S.A.

3

Other associates

825

858

9

18

 

4,929

5,736

60

221

Other investees

14

17

 

4,943

5,753

60

221

 

 

 

10.2.   Investments in listed companies

 

Thousand-share lot

 

Quoted stock exchange prices (US$  per share)

Market value

Company

03.31.2015

12.31.2014

Type

03.31.2015

12.31.2014

03.31.2015

12.31.2014

 

 

 

 

 

 

 

 

Indirect subsidiary

 

 

 

 

 

 

 

Petrobras Argentina S.A.

1,356,792

1,356,792

Common

0.92

0.65

1,248

879

 

 

 

 

 

 

1,248

879

 

 

 

 

 

 

 

 

Associate

 

 

 

 

 

 

 

Braskem S.A.

212,427

212,427

Common

2.52

4.07

536

864

Braskem S.A.

75,793

75,793

Preferred A

3.43

6.59

260

499

 

 

 

 

 

 

796

1,363

 

 

 

The market value of these shares does not necessarily reflect the realizable value upon sale of a large block of shares.

Braskem S.A. - Investment in publicly traded associate:

Braskem’s shares are publicly traded on stock exchanges in Brazil and abroad. The quoted market value of the investment as of March 31, 2015, was US$ 796, based on the quoted values of both Petrobras’ interest in Braskem’s common stock (47% of the outstanding shares), and preferred stock (22% of the outstanding shares). However, there is extremely limited trading of the common shares, since non-signatories of the shareholders’ agreement hold only approximately 3% of the common shares.

15


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

In addition, given the operational relationship between Petrobras and Braskem, the recoverable amount of the investment, for impairment testing purposes, was determined based on value in use, considering future cash flow projections and the manner in which the Company can derive value from this investment via dividends and other distributions to arrive at its value in use. As the recoverable amount was higher than the carrying amount, no impairment losses were recognized for this investment.

The main assumptions on which cash flow projections were based to determine Braskem’s value in use are set out in note 14 to the Company’s consolidated financial statements for the year ended December 31, 2014.

11.        Property, plant and equipment

 

Land, buildings and improvement

Equipment and other assets

Assets under construction (*)

Exploration and development costs (Oil and gas producing properties)

Total

Balance at January 1, 2014

7,868

90,405

79,758

49,870

227,901

Additions

30

2,031

30,362

580

33,003

Additions to / review of estimates of decommissioning costs

1,999

1,999

Capitalized borrowing costs

3,592

3,592

Write-offs              

(9)

(57)

(4,024)

(196)

(4,286)

Write-off - overpayments incorrectly capitalized

(35)

(1,160)

(1,078)

(91)

(2,364)

Transfers (***)

2,685

25,371

(36,178)

23,078

14,956

Depreciation, amortization and depletion

(534)

(7,381)

(4,888)

(12,803)

Impairment recognition (****)

(899)

(1,398)

(11,670)

(2,839)

(16,806)

Impairment reversal (****)

17

3

20

Cumulative translation adjustment

(1,071)

(9,832)

(7,819)

(7,760)

(26,482)

Balance at December 31, 2014

8,035

97,996

52,943

59,756

218,730

Cost

10,979

142,030

52,943

88,023

293,975

Accumulated depreciation, amortization and depletion

(2,944)

(44,034)

(28,267)

(75,245)

Balance at December 31, 2014

8,035

97,996

52,943

59,756

218,730

Additions

6

326

5,419

84

5,835

Additions to / review of estimates of decommissioning costs

24

24

Capitalized borrowing costs

505

505

Write-offs              

(3)

(16)

(255)

(54)

(328)

Transfers

248

3,281

(5,801)

2,514

242

Depreciation, amortization and depletion

(138)

(1,594)

(1,203)

(2,935)

Cumulative translation adjustment

(1,338)

(12,733)

(7,485)

(9,938)

(31,494)

Balance at March 31, 2015

6,810

87,260

45,326

51,183

190,579

Cost

9,459

127,061

45,326

75,927

257,773

Accumulated depreciation, amortization and depletion

(2,649)

(39,801)

(24,744)

(67,194)

Balance at March 31, 2015

6,810

87,260

45,326

51,183

190,579

 

 

 

 

 

 

Weighted average of useful life in years

40 (25 to 50 ) (except land)

20 (3 to 31) (**)

 

Units of production method

 

 

 

 

 

 

 

(*) See note 27 for assets under construction by business area

(**) Includes exploration and production assets depreciated based on the units of production method.

(***) Includes US$ 10,446 reclassified from Intangible Assets to Property, Plant and Equipment in 2014, as a result of the declaration of commerciality of areas of the Assignment Agreement (See note 12.3 to the Company's consolidated financial statements for the year ended December 31, 2014).

(****) For more detailed information, see Note 14 to the Company's consolidated financial statements for the year ended December 31, 2014.

 

 

 

As of March 31, 2015, property, plant and equipment include assets under finance leases of US$ 60 (US$ 72 as of December 31, 2014).

The Company’s property, plant and equipment include US$ 23,319 related to the acquisition costs of areas in the Assignment Agreement.

16


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

12.        Intangible assets

12.1.   By class of assets

 

 

Software

 

 

 

Rights and Concessions

acquired

developed in-house

Goodwill

Total

Balance at January 1, 2014

14,381

142

496

400

15,419

Addition

92

41

118

251

Capitalized borrowing costs

8

8

Write-offs

(93)

(5)

(10)

(108)

Transfers (**)

(10,346)

7

9

(1)

(10,331)

Amortization

(35)

(54)

(131)

(220)

Impairment recognition

(8)

(8)

Impairment reversal

6

6

Cumulative translation adjustment

(405)

(12)

(58)

(33)

(508)

Balance at December 31, 2014

3,592

119

432

366

4,509

Cost

4,003

578

1,281

366

6,228

Accumulated amortization

(411)

(459)

(849)

(1,719)

Balance at December 31, 2014

3,592

119

432

366

4,509

Addition

3

5

21

29

Capitalized borrowing costs

1

1

Write-offs

(3)

(3)

Transfers (**)

2

3

(1)

4

Amortization

(6)

(9)

(24)

(39)

Cumulative translation adjustment

(553)

(17)

(73)

(43)

(686)

Balance at March 31, 2015

3,035

98

360

322

3,815

Cost

3,310

502

1,089

322

5,223

Accumulated amortization

(275)

(404)

(729)

(1,408)

Balance at March 31, 2015

3,035

98

360

322

3,815

Estimated useful life - years

(*)

5

5

Indefinite

 

 

(*) Mainly comprised of assets with indefinite useful lives, which are reviewed annually to determine whether events and circumstances continue to support an indefinite useful life assessment.

(**) Includes US$ 10,446 reclassified from Intangible Assets to Property Plant and Equipment in 2014, as a result of the declaration of commerciality of areas of the Assignment Agreement. See Note 12.3 to the Company's consolidated financial statements for the year ended December 31, 2014.

 

 

 

 

 

 

 

 

13.        Exploration for and evaluation of oil and gas reserves

Exploration and evaluation activities include the search for oil and gas from obtaining the legal rights to explore a specific area to the declaration of the technical and commercial viability of the reserves.

Changes in the balances of capitalized costs directly associated with exploratory wells pending determination of proved reserves and the balance of amounts paid for obtaining rights and concessions for exploration of oil and natural gas (capitalized acquisition costs) are set out in the following table.

17


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Capitalized Exploratory Well Costs / Capitalized Acquisition Costs (*)

03.31.2015

12.31.2014

Property plant and equipment

 

 

Opening Balance

7,000

8,802

Additions to capitalized costs pending determination of proved reserves

833

4,272

Capitalized exploratory costs charged to expense

(180)

(1,366)

Transfers upon recognition of proved reserves

(35)

(3,835)

Cumulative translation adjustment

(1,198)

(873)

Closing Balance

6,420

7,000

Intangible Assets

2,574

3,044

Capitalized Exploratory Well Costs / Capitalized Acquisition Costs

8,994

10,044

 

 

 

(*) Amounts capitalized and subsequently expensed in the same period have been excluded from the table above.

 

 

 

Exploration costs recognized in profit or loss and cash used in oil and gas exploration and evaluation activities are set out in the table below:

Exploration costs recognized in the statement of income

Jan-Mar/2015

Jan-Mar/2014

Geological and geophysical expenses

140

179

Exploration expenditures written off (incl.dry wells and signature bonuses)

201

447

Other exploration expenses

2

20

Total expenses

343

646

 

 

 

Cash used in :

Jan-Mar/2015

Jan-Mar/2014

Operating activities

120

198

Investment activities

875

1,229

Total cash used

995

1,427

 

 

 

14.        Trade payables

 

03.31.2015

12.31.2014

Third parties in Brazil

3,851

4,949

Third parties abroad

3,362

4,240

Related parties

601

571

Balance on current liabilities

7,814

9,760

 

 

 

15.        Finance debt

The Company obtains funding through debt financing for capital expenditures to develop crude oil and natural gas producing properties, construct vessels and pipelines, construct and expand industrial plants, among other uses.

The Company has covenants in its loan agreements and notes issued in the capital markets requiring, among other obligations, the presentation of interim financial statements within 90 days of the end of each quarter (not reviewed by independent auditors) and audited financial statements within 120 days of the end of each fiscal year. These obligations do not represent immediate events of default and the grace period in which the Company has to deliver these financial statements ranges from 30 to 60 days in the different agreements. Delivering financial statements is an obligation included in most financing agreements and non-compliance with that obligation can trigger an event of default and a right to accelerate the debt.

A roll-forward of non-current debt is set out below:

18


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

 

Export

Credit

Agencies

Banking Market

Capital Market

Others

Total

Non-current

 

 

 

 

 

In Brazil

 

 

 

 

 

Opening balance at January 1 , 2014

29,000

1,211

49

30,260

Additions (new funding obtained)

4,319

359

4,678

Interest incurred during the year

202

2

204

Foreign exchange/inflation indexation charges

1,033

79

1

1,113

Transfer from long term to short term

(1,440)

(156)

(18)

(1,614)

Cumulative translation adjustment (CTA)

(3,826)

(194)

(4)

(4,024)

Balance at December 31, 2014

29,288

1,301

28

30,617

Abroad

 

 

 

 

 

Opening balance at January 1 , 2014

5,805

26,908

42,572

690

75,975

Additions (new funding obtained)

281

6,710

13,766

20,757

Interest incurred during the year

4

22

46

8

80

Foreign exchange/inflation indexation charges

103

412

(1,433)

20

(898)

Transfer from long term to short term

(742)

(3,411)

(1,260)

(42)

(5,455)

Cumulative translation adjustment (CTA)

(207)

(743)

119

(27)

(858)

Balance at December 31, 2014

5,244

29,898

53,810

649

89,601

Total Balance at December 31, 2014

5,244

59,186

55,111

677

120,218

Non-current

 

 

 

 

 

In Brazil

 

 

 

 

 

Opening balance at January 1 , 2015

29,288

1,301

28

30,617

Additions (new funding obtained)

277

277

Interest incurred during the year

62

62

Foreign exchange/inflation indexation charges

1,585

30

1,615

Transfer from long term to short term

(315)

(64)

(1)

(380)

Cumulative translation adjustment (CTA)

(5,145)

(220)

(5)

(5,370)

Balance as of March 31, 2015

25,752

1,047

22

26,821

Abroad

 

 

 

 

 

Opening balance at January 1 , 2015

5,244

29,898

53,810

649

89,601

Additions (new funding obtained)

Interest incurred during the year

1

10

12

2

25

Foreign exchange/inflation indexation charges

217

1,084

(1,210)

29

120

Transfer from long term to short term

(242)

(9)

(2,300)

(12)

(2,563)

Cumulative translation adjustment (CTA)

(218)

(1,086)

(214)

(30)

(1,548)

Balance as of March 31, 2015

5,002

29,897

50,098

638

85,635

Total Balance as of March 31, 2015

5,002

55,649

51,145

660

112,456

 

 

 

 

03.31.2015

12.31.2014

Short-term debt

3,412

3,484

Current portion of long-term debt

7,887

6,845

Accrued interest

1,069

1,539

 

12,368

11,868

 

19


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

15.1.   Summarized information on current and non-current finance debt

Maturity in

2015

2016

2017

2018

2019

2020 onwards

Total (*)

Fair value

Financing in Brazilian Reais (BRL):

1,255

2,296

1,989

2,153

3,492

8,522

19,707

16,456

Floating rate debt

839

1,963

1,429

1,612

2,962

6,540

15,345

 

Fixed rate debt

416

333

560

541

530

1,982

4,362

 

Average interest rate

10.0%

12.1%

11.9%

11.5%

10.7%

8.5%

10.1%

 

Financing in U.S.Dollars (USD):

7,501

8,997

8,757

11,098

17,894

30,250

84,497

76,308

Floating rate debt

7,080

4,346

5,096

8,669

13,026

8,465

46,682

 

Fixed rate debt

421

4,651

3,661

2,429

4,868

21,785

37,815

 

Average interest rate

2.1%

4.1%

4.4%

4.1%

4.0%

5.4%

4.4%

 

Financing in BRL indexed to USD:

109

395

705

704

701

6,123

8,737

8,590

Floating rate debt

17

23

23

22

19

55

159

 

Fixed rate debt

92

372

682

682

682

6,068

8,578

 

Average interest rate

3.7%

7.2%

7.0%

7.1%

7.0%

7.0%

7.0%

 

Financing in Pound Sterling (£):

49

2,546

2,595

2,231

Fixed rate debt

49

2,546

2,595

 

Average interest rate

3.5%

6.0%

5.9%

 

Financing in Japanese Yen (¥):

338

391

94

85

908

906

Floating rate debt

87

85

85

85

342

 

Fixed rate debt

251

306

9

566

 

Average interest rate

1.0%

1.8%

0.8%

0.7%

1.5%

 

Financing in Euro (€):

81

12

12

2,951

1,400

3,915

8,371

7,638

Floating rate debt

12

11

11

11

11

168

224

 

Fixed rate debt

69

1

1

2,940

1,389

3,747

8,147

 

Average interest rate

1.3%

2.1%

2.1%

3.7%

3.8%

4.3%

4.0%

 

Financing in other currencies:

7

2

9

9

Fixed rate debt

7

2

9

 

Average interest rate

14.1%

15.3%

14.4%

 

Total as of March 31, 2015

9,340

12,093

11,557

16,991

23,487

51,356

124,824

112,138

 

3.1%

5.7%

5.8%

5.1%

5.1%

6.1%

5.5%

 

 

 

 

 

 

 

 

 

 

Total as of December 31, 2014

11,868

12,572

11,948

17,789

24,189

53,720

132,086

115,238

 

 

 

 

 

 

 

 

 

* The average maturity of outstanding debt as of March 31, 2015 is 5.66 years (6.1 years as of December 31, 2014).

 

 

The fair value of the Company's finance debt is determined primarily by quoted prices in active markets for identical liabilities (level 1), when applicable. When a quoted price for an identical liability is not available, the fair value is determined based on the yield curve of the Company's most liquid bonds (level 2).

The sensitivity analysis for financial instruments subject to foreign exchange variation is set out in note 30.2.

15.2.    Capitalization rate used to determine the amount of borrowing costs eligible for capitalization

The capitalization rate used to determine the amount of borrowing costs eligible for capitalization was the weighted average of the borrowing costs applicable to the borrowings that were outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. In the first quarter of 2015, the capitalization rate was 4.89% p.a. (4.64% p.a. in the first quarter of 2014). This rate was applied to the balance of assets under construction as the basis for capitalizing borrowing costs, when eligible.

20


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

15.3.   Lines of credit – Outstanding balance

Company

Available (Lines of Credit)

Used

Balance

Abroad

 

 

 

PGT

1,500

700

800

Petrobras

2,500

689

1,811

In Brazil

 

 

 

Transpetro

3,135

946

2,189

Petrobras

4,521

4,004

517

PNBV

3,079

357

2,722

Liquigás

44

42

2

 

 

 

 

 

 

 

15.4.   Collateral

The financial institutions that have provided financing have not required Petrobras to provide collateral related to loans, except for certain specific funding instruments to promote economic development, which are collateralized by tangible assets.

The loans obtained by structured entities are collateralized based on the projects’ assets, as well as liens on receivables and shares of the structured entities. Certain subsidiaries issue securities fully and unconditionally guaranteed by Petrobras (note 33).

The Company’s capital market financing relates primarily to unsecured global notes.

16.        Leases

16.1.   Future minimum lease payments / receipts – finance leases

 

Receipts

Payments

Estimated lease payments / receivable

Future Value

Annual Interest

Present Value

Future Value

Annual Interest

Present Value

2015

154

(97)

57

15

(11)

4

2016 – 2019

762

(466)

296

72

(34)

38

2020 and thereafter

1,720

(533)

1,187

197

(175)

22

As of March 31, 2015

2,636

(1,096)

1,540

284

(220)

64

Current

 

 

72

 

 

14

Non-current

 

 

1,468

 

 

50

As of March 31, 2015

 

 

1,540

 

 

64

Current

 

 

59

 

 

16

Non-current

 

 

1,455

 

 

56

As of December 31, 2014

 

 

1,514

 

 

72

 

 

16.2.   Future minimum lease payments – non-cancelable operating leases

Operating leases mainly include oil and gas production units, drilling rigs and other exploration and production equipment, vessels and support vessels, helicopters, land and building leases.

21


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

2015

13,690

2016 - 2019

41,028

2020 and thereafter

58,787

At March 31, 2015

113,505

As of December 31, 2014

118,404

 

 

 

 

 

As of March 31, 2015, the balance of estimated future minimum lease payments under operating leases includes US$ 65,886 (US$ 69,565 as of December 31, 2014) with respect to assets under construction, for which the lease term has not commenced.

In the three-month period ended March 31, 2015, the Company recognized expenditures of US$ 3,581 (US$ 2,701 in the three-month period ended March 31, 2014) for operating lease installments.

17.        Related party transactions

The Company has a related-party transactions policy, approved by its Board of Directors, which establishes rules to ensure that all decisions involving related parties and potential conflicts of interest take into account applicable laws in the countries in which the Company operates, the parties involved in negotiations and market conditions.

17.1.   Transactions with joint ventures, associates, government entities and pension funds

The balances of significant transactions are set out in the table below:

 

 

Jan-Mar/

2015

 

03.31.2015

Jan-Mar/

2014

 

12.31.2014

 

Income (expense)

Assets

Liabilities

Income (expense)

Assets

Liabilities

Joint ventures and associates

 

 

 

 

 

 

State-controlled gas distributors

957

362

91

1,056

506

195

Petrochemical companies

973

45

146

1,987

205

82

Other associates and joint ventures

206

229

276

393

152

263

 

2,136

636

513

3,436

863

540

Government entities

 

 

 

 

 

 

Government bonds

127

2,932

171

4,339

Banks controlled by the Federal Government

(1,318)

3,483

26,859

(692)

3,814

28,304

Receivables from the Electricity sector (Note 7.4)

181

2,800

196

2,966

Petroleum and alcohol account - receivables from Federal government (Note 17.2)

1

263

317

Federal Government - dividends and interest on capital

(20)

Others

12

153

89

14

241

224

 

(997)

9,631

26,948

(331)

11,677

28,528

Pension plans

34

135

 

1,139

10,267

27,495

3,105

12,540

29,203

Revenues (mainly sales revenues)

2,317

 

 

3,654

 

 

Foreign exchange and inflation indexation charges, net

(778)

 

 

(272)

 

 

Finance income (expenses), net

(400)

 

 

(277)

 

 

 

 

 

 

 

 

 

Current assets

 

4,902

 

 

6,715

 

Non-current assets

 

5,365

 

 

5,825

 

Current liabilities

 

 

3,549

 

 

1,855

Non-current liabilities

 

 

23,946

 

 

27,348

 

1,139

10,267

27,495

3,105

12,540

29,203

 

 

 

22


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

17.2.   Petroleum and Alcohol accounts - Receivables from Federal Government

As of March 31, 2015, the balance of receivables related to the Petroleum and Alcohol accounts was US$ 263 (US$ 317 as of December 31, 2014). Pursuant to Provisional Measure 2,181 of August 24, 2001, the Federal Government may settle this balance by using National Treasury Notes in an amount equal to the outstanding balance, or allow the Company to offset the outstanding balance against amounts payable to the Federal Government, including taxes payable, or both options.

The Company has provided all the information required by the National Treasury Secretariat (Secretaria do Tesouro Nacional - STN) in order to resolve disputes between the parties and conclude the settlement with the Federal Government.

Following several negotiation attempts at the administrative level, the Company filed a lawsuit in July 2011 to collect the receivables. Court-ordered expert proceedings are ongoing.

17.3.   Compensation of employees and officers

Petrobras’ key management compensation is set out below:

 

Jan-Mar/ 2015

Jan-Mar/ 2014

 

Officers

Board

Total

Officers

Board

Total

Wages and short-term benefits

1.4

0.1

1.5

1.2

0.1

1.3

Social security and other employee-related taxes (*)

0.4

0.4

0.3

0.3

Post-employment benefits (pension plan)

0.1

0.1

0.1

0.1

Total compensation recognized in the statement of income

1.9

0.1

2.0

1.6

0.1

1.7

Total compensation paid

1.9

0.1

2.0

1.8

0.1

1.9

 

 

 

 

 

 

 

Number of members

8

10

18

7

10

17

(*) The compensation of executive officers and directors is based on legal requirements and guidelines established by the Brazilian Department of Oversight and Governance of State-controlled Companies (Departamento de Coordenação e Governança das Empresas Estatais - DEST). DEST determined that social security and other employee-related taxes were included in the key management compensation proposed at the Annual General Meeting of 2014. Those taxes had been included since the first quarter of 2014, but were not disclosed in the notes to the financial statements.

 

 

 

In the three-month period ended March, 31 2015 the compensation of board members and officers for the consolidated Petrobras group amounted to US$ 5.5 (US$ 6.5 in the three-month period ended March 31, 2014).

18.        Provision for decommissioning costs

Non-current liabilities

03.31.2015

12.31.2014

Opening balance

8,267

7,133

Adjustment to provision

19

2,430

Payments made

(283)

(679)

Interest accrued

70

201

Others

96

75

Cumulative translation adjustment

(1,412)

(893)

Closing balance

6,757

8,267

 

 

 

23


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

19.        Taxes

19.1.   Income taxes and other taxes

Income taxes

Current assets

Current liabilities

 

03.31.2015

12.31.2014

03.31.2015

12.31.2014

Taxes in Brazil

775

1,018

219

139

Taxes abroad

44

45

101

108

 

819

1,063

320

247

 

 

 

 

Other taxes

Current assets

Non-current assets

Current liabilities

 

03.31.2015

12.31.2014

03.31.2015

12.31.2014

03.31.2015

12.31.2014

 

 

 

 

 

 

 

Current / Deferred ICMS (VAT)

1,401

1,772

637

787

1,060

1,275

Current / Deferred PIS and COFINS (taxes on revenues)

672

829

2,494

2,983

452

295

CIDE

11

13

6

8

Production taxes

922

1,517

Withholding income taxes

384

486

Others

61

73

189

230

231

281

 

2,145

2,687

3,320

4,000

3,055

3,862

Taxes abroad

51

61

9

8

183

202

 

2,196

2,748

3,329

4,008

3,238

4,064

 

 

 

24


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

19.2.   Deferred income taxes - non-current

Income taxes in Brazil comprise corporate income tax (IRPJ) and social contribution on net income (CSLL). Brazilian statutory corporate tax rates are 25% and 9%, respectively. The changes in the deferred income taxes are presented as follows:

a)             Changes in deferred income taxes

 

Property, Plant & Equipment

 

 

 

 

 

 

 

 

Oil and gas exploration costs

Others

Loans, trade and other receivables / payables and financing

Finance leases

Provision for legal proceedings

Tax losses

Inventories

Interest on capital

Others

Total

Balance at January 1, 2014

(13,406)

(4,006)

1,984

(518)

409

4,811

575

1,343

32

(8,776)

Recognized in the statement of income for the year

(2,055)

3,917

401

(42)

182

2,965

(7)

(1,418)

(898)

3,045

Recognized in shareholders’ equity

1,949

(41)

(192)

1,351

3,067

Cumulative translation adjustment

1,814

302

(441)

86

(75)

(842)

(66)

68

(133)

713

Others

(3)

(70)

(77)

10

(51)

1

116

(74)

Balance at December 31, 2014

(13,647)

210

3,823

(592)

526

6,691

503

(7)

468

(2,025)

Recognized in the statement of income for the year

(485)

(362)

239

(67)

76

1,270

144

8

(1,537)

(714)

Recognized in shareholders’ equity

2,963

(80)

409

3,292

Cumulative translation adjustment

2,399

91

(1,013)

109

(97)

(1,039)

(101)

(1)

(234)

114

Others

(99)

96

(1)

(4)

(5)

(13)

Balance at March 31, 2015

(11,733)

(160)

6,108

(550)

504

6,838

546

(899)

654

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax assets

 

 

 

 

 

 

 

 

 

1,006

Deferred tax liabilities

 

 

 

 

 

 

 

 

 

(3,031)

Balance at December 31, 2014

 

 

 

 

 

 

 

 

 

(2,025)

 

 

 

 

 

 

 

 

 

 

 

Deferred tax assets

 

 

 

 

 

 

 

 

 

916

Deferred tax liabilities

 

 

 

 

 

 

 

 

 

(262)

Balance at March 31, 2015

 

 

 

 

 

 

 

 

 

654

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The deferred tax assets will be realized in proportion to the realization of the provisions and the final resolution of future events, both of which are based on estimates.

 

25


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

19.3.   Reconciliation between statutory tax rate and tax expense

A reconciliation between tax expense and the product of “income before income taxes” multiplied by the Brazilian statutory corporate tax rates is set out in the table below:

 

Jan-Mar/2015

Jan-Mar/2014

Income before income taxes

2,638

3,209

Nominal income taxes computed based on Brazilian statutory corporate tax rates (34%)

(897)

(1,091)

Adjustments to arrive at the effective tax rate:

 

 

·    Different jurisdictional tax rates for companies abroad

230

263

·    Tax incentives

5

8

·    Tax loss carryforwards (unrecognized tax losses)

(267)

69

·    Non taxable income (deductible expenses), net (*)

(156)

(70)

·    Tax credits of companies abroad in the exploration stage

(1)

(1)

·    Others

30

59

Income taxes benefit (expense)

(1,056)

(763)

Deferred income taxes

(714)

(290)

Current income taxes

(342)

(473)

 

(1,056)

(763)

 

 

 

Effective tax rate

40.0%

23.8%

 

 

 

(*) Includes share of earnings in equity-accounted investees.

 

 

20.        Employee benefits (Post-Employment)

20.1.   Pension and medical benefits

The Company sponsors defined benefit and variable contribution pension plans in Brazil and for certain of its international subsidiaries, as well as defined-benefit medical plans for employees in Brazil (active and retirees) and their dependents.

Changes in the pension and medical benefits to employees are set out below:

 

Petros Plan

Medical Plan

 

 

 

Petros

Petros 2

AMS

Other plans

Total

Balance at December 31, 2013

5,342

121

6,999

111

12,573

(+) Remeasurement effects recognized in OCI

3,264

143

2,538

2

5,947

(+) Costs incurred in the year

794

49

1,155

24

2,022

(-) Contributions paid

(245)

(396)

(7)

(648)

(-) Payments related to the Term of Financial Commitment (TFC)

(203)

(203)

Others

1

(13)

(12)

Cumulative translation adjustment

(1,079)

(26)

(1,277)

(10)

(2,392)

Balance at December 31, 2014

7,874

287

9,019

107

17,287

Current

440

354

2

796

Non-Current

7,434

287

8,665

105

16,491

 

7,874

287

9,019

107

17,287

(+)Costs incurred in the period

253

22

306

7

588

(-) Contributions paid

(49)

(95)

(3)

(147)

Others

14

14

Cumulative translation adjustment

(1,374)

(52)

(1,573)

(23)

(3,022)

Balance at March 31, 2015

6,704

257

7,657

102

14,720

Current

405

294

1

700

Non-Current

6,299

257

7,363

101

14,020

 

6,704

257

7,657

102

14,720

 

 

26


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

Pension and medical benefit expenses recognized in profit or loss are set out below:

 

Jan-Mar/2015

 

Pension Plan

 

Medical Plan

Other Plans

Total

 

Petros

Petros 2

AMS

 

 

Current service cost

24

13

38

3

78

Interest cost over net liabilities / (assets)

229

9

268

4

510

Net costs for the period Jan-Mar/2015

253

22

306

7

588

Related to active employees:

 

 

 

 

 

Included in the cost of sales

75

12

73

160

Operating expenses in profit or loss

37

9

44

7

97

Related to retired employees

141

1

189

331

Net costs for the period Jan-Mar/2015

253

22

306

7

588

Net costs for the period Jan-Mar/2014

173

12

250

5

440

 

 

 

As of March 31, 2015, the Company had the balance of crude oil and oil products of US$ 1,806 pledged as security for the Terms of Financial Commitment (TFC), signed by Petrobras and Petros in 2008.

In the three month period ended March 31, 2015 the Company's contribution to the defined contribution portion of the Petros Plan 2 was US$ 78 ( US$ 83 in the three month period ended March 31, 2014).

20.2.   Profit sharing

Profit sharing benefits comply with Brazilian legal requirements and those of the Brazilian Department of Coordination and Governance of StateOwned Enterprises (DEST), of the Ministry of Planning, Budget and Management, and of the Ministry of Mines and Energy, and are computed based on the consolidated net income attributable to the shareholders of Petrobras.

In March 2014, the Company and the labor unions reached an agreement regarding a new profit sharing regulation, following negotiations started in the context of the 2013/2015 Collective Bargaining Agreement.

Pursuant to the amended rules, profit sharing benefits will be computed based on the results of six corporate indicators, for which annual goals are defined by management (maximum permissible levels of crude oil and oil products spill, lifting cost excluding production taxes in Brazil, crude oil and NGL production in Brazil, feedstock processed - excluding NGL - in Brazil, vessel operating efficiency and percentage of compliance with natural gas delivery schedule).

The results of the six individual goals are factored into a consolidated result that will determine the percentage of the profit to be distributed as a profit sharing benefit to employees.

Pursuant to the amended rules, in the event the Company records a net loss for the period, profit sharing benefit will be one half of the benefit paid in the prior year in addition to half a month’s salary for each employee.

Profit sharing benefits for the quarter ended March 31, 2015

Based on the consolidated result of the corporate indicators for the quarter ended March 31, 2015, a 6.25% distribution was applied to the net income expressed in reais and the Company recognized a profit sharing expense of US$ 117.

20.3.   Voluntary Separation Incentive Plan

In January 2014, the Company launched a Voluntary Separation Incentive Plan (PIDV), which was developed within the context of its Productivity Optimization Plan (POP) to contribute to the achievement of the goals set out in the Business and Management Plan.

27


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

On March 31, 2014 the Company recognized in other expenses in the statement of income a provision for the estimated charges. The amounts are subject to changes resulting from employees who cancel their requests for voluntary separation, impacts of Collective Bargaining Agreements, which might increase salaries before separation, inflation-indexation of the floor and the cap based on the Brazilian Consumer Price Index (IPCA), as well as variable additional incentives earned by employees.

As of March 31, 2015, 5,118 separations and 500 cancellations of requests were made for voluntary separation of employees who enrolled in the PIDV. Changes in the provision are set out below:

Balance as of December 31, 2014

390

Revision of provision

9

Separations in the period

(25)

Cumulative translation adjustment

(66)

Balance as of March 31, 2015

308

Current

159

Non-current

149

 

 

 

21.        Shareholders’ equity

21.1.   Share capital (net of share issuance costs)

As of March 31, 2015 subscribed and fully paid share capital was US$ 107,380 and share issuance costs were US$ 279 (US$ 107,380 and US$ 279 as of December 31, 2014), represented by 7,442,454,142 outstanding common shares and 5,602,042,788 outstanding preferred shares, all of which are registered, book-entry shares with no par value.

Preferred shares have priority on returns of capital, do not grant any voting rights and are non-convertible into common shares.

21.2.   Dividends

The Company’s Board of Directors did not propose a dividend distribution in 2015 for the year ended December 31, 2014, because the Company reported a loss for that fiscal year.

21.3.   Earnings per Share

 

 

Jan-Mar/2015

Jan-Mar/2014

Net income (loss) attributable to shareholders of Petrobras

 

1,862

2,280

Weighted average number of common and preferred shares outstanding

 

13,044,496,930

13,044,496,930

Basic and diluted earnings per common and preferred share (US$ per share)

 

0.14

0.17

 

 

 

28


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

22.        Sales revenues

 

Jan-Mar/2015

Jan-Mar/2014

Gross sales

32,502

41,627

Sales taxes

(6,535)

(7,133)

Sales revenues (*)

25,967

34,494

Diesel

8,366

9,793

Automotive gasoline

4,667

5,620

Fuel oil (including bunker fuel)

770

1,001

Naphtha

574

1,568

Liquefied petroleum gas

760

859

Jet fuel

901

1,429

Other oil products

938

1,437

Subtotal oil products

16,976

21,707

Natural gas

1,702

1,873

Ethanol, nitrogen products, renewables and other non-oil

products

993

925

Electricity, services and others

1,489

1,889

Total domestic market

21,160

26,394

Exports

1,985

3,480

International sales (**)

2,822

4,620

Sales revenues (*)

25,967

34,494

 

 

 

(*) Analysis of sales revenues by business segment is set out in note 27.

(**) Sales revenues from operations outside of Brazil, other than exports.

 

23.        Other expenses, net

 

Jan-Mar/ 2015

Jan-Mar/ 2014

Pension and medical benefits - retirees

(331)

(234)

Unscheduled stoppages and pre-operating expenses

(329)

(225)

Legal, administrative and arbitration proceedings

(291)

(161)

Institutional relations and cultural projects

(133)

(194)

Health, safety and environment

(25)

(35)

Voluntary Separation Incentive Plan - PIDV

(9)

(1,014)

Gains / (losses) on decommissioning of returned/abandoned areas

(2)

Reversal / Recognition of impairment

(1)

6

E&P areas returned and cancelled projects

(25)

Government grants

2

30

Reimbursements from E&P partnership operations

49

72

Gains / (losses) on disposal/write-offs of assets

141

247

Others (*)

111

(99)

 

(818)

(1,632)

(*) Includes US$ 164 in 2014 with respect to additional profit sharing benefits for 2013, as set out on note 22.7 of the Company's consolidated financial statements for the year ended December 31, 2014.

 

 

 

29


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

24.        Costs and Expenses by nature

 

Jan-Mar/2015

Jan-Mar/2014

Raw material / products for resale

(8,724)

(15,492)

Materials, freight, rent, third-party services and other related costs

(5,187)

(5,320)

Depreciation, depletion and amortization

(2,974)

(3,013)

Employee compensation

(2,708)

(3,862)

Production taxes

(1,590)

(3,588)

Unscheduled stoppages and pre-operating expenses

(329)

(225)

Legal, administrative and arbitration proceedings

(291)

(161)

Other taxes

(263)

(138)

Exploration expenditures written off (incl. dry wells and signature bonuses)

(201)

(447)

Institutional relations and cultural projects

(133)

(194)

Health, safety and environment

(25)

(35)

Gains / (losses) on decommissioning of returned/abandoned areas

(2)

Impairment

(1)

6

E&P areas returned and cancelled projects

(25)

Gains / (losses) on disposal/write-offs of assets

141

247

Allowance for impairment of trade receivables

301

(14)

Changes in inventories

560

828

 

(21,426)

(31,433)

In the Statement of income

 

 

Cost of sales

(18,140)

(26,388)

Selling expenses

(602)

(1,154)

General and administrative expenses

(946)

(1,083)

Exploration costs

(343)

(646)

Research and development expenses

(197)

(250)

Other taxes

(263)

(138)

Other expenses, net

(818)

(1,632)

Profit sharing

(117)

(142)

 

(21,426)

(31,433)

 

 

25.        Net finance income (expense)

 

Jan-Mar/2015

Jan-Mar/2014

Foreign exchange gains/(losses) and inflation indexation charges on debt (*)

(883)

107

Debt interest and charges

(1,616)

(1,540)

Income from investments and marketable securities

176

264

Financial result on net debt

(2,323)

(1,169)

Capitalized borrowing costs

506

946

Gains (losses) on derivatives, net

(5)

7

Interest income from marketable securities

2

14

Other finance expense and income, net

(83)

(41)

Other foreign exchange gains/(losses) and indexation charges, net

(60)

170

Finance income (expenses), net

(1,963)

(73)

Income

256

441

Expenses

(1,289)

(782)

Foreign exchange gains/ (losses) and inflation indexation charges, net

(930)

268

 

(1,963)

(73)

 

 

 

(*) Includes debt raised in Brazil (in Brazilian reais) indexed to the U.S. dollar.

 

 

30


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

26.        Supplemental information on statement of cash flows

 

Jan-Mar/2015

Jan-Mar/2014

 

 

 

Additional information on cash flows:

 

 

Amounts paid/received during the year:

 

 

Income taxes paid

217

193

Withholding income tax paid on behalf of third-parties

381

432

 

 

 

Capital expenditures and financing activities not involving cash

 

 

Purchase of property, plant and equipment on credit

3

3

Recognition (reversal) of provision for decommissioning costs

24

5

 

 

 

31


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

27.        Segment Information

Consolidated assets by Business Area - 03.31.2015

 

Exploration

and

Production

Refining,

Transportation

& Marketing

Gas

&

Power

Biofuels

Distribution

International

Corporate

Eliminations

Total

 

 

 

 

 

 

 

 

 

 

Current assets

5,995

12,414

3,414

57

2,744

2,024

19,701

(3,468)

42,881

Non-current assets

129,134

45,681

20,963

823

3,489

10,454

6,886

(976)

216,454

Long-term receivables

6,150

2,950

1,765

3

1,381

1,604

4,187

(923)

17,117

Investments

205

1,241

452

651

17

2,234

143

4,943

Property, plant and equipment

120,362

41,294

18,477

169

1,900

6,090

2,340

(53)

190,579

Operating assets

87,518

34,635

15,070

156

1,471

4,519

1,937

(53)

145,253

Under construction

32,844

6,659

3,407

13

429

1,571

403

45,326

Intangible assets

2,417

196

269

191

526

216

3,815

Total Assets

135,129

58,095

24,377

880

6,233

12,478

26,587

(4,444)

259,335

 

 

 

 

 

 

 

 

 

 

Consolidated assets by Business Area - 03.31.2014

 

 

 

 

 

 

 

 

 

 

Current assets

6,008

14,724

3,979

65

3,481

2,345

24,160

(3,930)

50,832

Non-current assets

145,516

55,314

24,388

1,044

3,740

10,664

8,225

(1,036)

247,855

Long-term receivables

6,729

3,605

1,411

3

1,211

1,848

5,029

(973)

18,863

Investments

200

1,807

524

836

15

2,226

145

5,753

Property, plant and equipment

135,671

49,662

22,126

205

2,284

6,058

2,787

(63)

218,730

Operating assets

99,313

40,940

17,868

189

1,730

3,716

2,094

(63)

165,787

Under construction

36,358

8,722

4,258

16

554

2,342

693

52,943

Intangible assets

2,916

240

327

230

532

264

4,509

Total Assets

151,524

70,038

28,367

1,109

7,221

13,009

32,385

(4,966)

298,687

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Consolidated Statement of Income by Business Area

 

Jan-Mar/2015

 

Exploration

and

Production

Refining,

Transportation

& Marketing

Gas

&

Power

Biofuels

Distribution

International

Corporate

Eliminations

Total

 

 

 

 

 

 

 

 

 

 

Sales revenues

8,981

18,952

3,715

55

8,401

2,302

(16,439)

25,967

Intersegments

8,834

6,757

581

53

175

39

(16,439)

Third parties

147

12,195

3,134

2

8,226

2,263

25,967

Cost of sales

(6,671)

(15,006)

(3,126)

(57)

(7,684)

(1,976)

16,380

(18,140)

Gross profit (loss)

2,310

3,946

589

(2)

717

326

(59)

7,827

Income (expenses)

(604)

(681)

145

(12)

(419)

(186)

(1,471)

59

(3,169)

Selling, general and administrative

(116)

(574)

223

(9)

(434)

(199)

(499)

60

(1,548)

Exploration costs

(306)

(37)

(343)

Research and development

(77)

(33)

(15)

(2)

(1)

(69)

(197)

Other taxes

(11)

(58)

(68)

(5)

(30)

(91)

(263)

Other expenses, net

(94)

(16)

5

(1)

20

81

(812)

(1)

(818)

Income / (loss) before financial results, profit sharing and income taxes

1,706

3,265

734

(14)

298

140

(1,471)

4,658

Net finance income (expense)

(1,963)

(1,963)

Share of earnings in equity-accounted investments

24

27

(7)

1

15

60

Profit sharing

(44)

(30)

(5)

(5)

(2)

(31)

(117)

Income / (loss) before income taxes

1,662

3,259

756

(21)

294

153

(3,465)

2,638

Income taxes

(566)

(1,099)

(248)

6

(100)

(83)

1,034

(1,056)

Net income (loss)

1,096

2,160

508

(15)

194

70

(2,431)

1,582

Net income attributable to:

 

 

 

 

 

 

 

 

 

Shareholders of Petrobras

1,097

2,159

481

(15)

194

35

(2,089)

1,862

Non-controlling interests

(1)

1

27

35

(342)

(280)

 

1,096

2,160

508

(15)

194

70

(2,431)

1,582

 

 

 

 

33


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

Consolidated Statement of Income by Business Area

 

Jan-Mar/2014

 

Exploration

and

Production

Refining,

Transportation

& Marketing

Gas

&

Power

Biofuels

Distribution

International

Corporate

Eliminations

Total

Sales revenues

16,739

27,134

4,041

49

9,940

3,520

(26,929)

34,494

Intersegments

16,659

9,376

354

47

283

210

(26,929)

Third parties

80

17,758

3,687

2

9,657

3,310

34,494

Cost of sales

(8,325)

(29,234)

(3,612)

(58)

(9,088)

(3,098)

27,027

(26,388)

Gross profit (loss)

8,414

(2,100)

429

(9)

852

422

98

8,106

Income (expenses)

(1,543)

(1,040)

(161)

(19)

(532)

(230)

(1,430)

52

(4,903)

Selling, general and administrative

(89)

(734)

(291)

(13)

(462)

(180)

(518)

50

(2,237)

Exploration costs

(625)

(21)

(646)

Research and development

(133)

(41)

(17)

(3)

(56)

(250)

Other taxes

(13)

(16)

(29)

(5)

(23)

(52)

(138)

Other expenses, net

(683)

(249)

176

(3)

(65)

(6)

(804)

2

(1,632)

Income / (loss) before financial results, profit sharing and income taxes

6,871

(3,140)

268

(28)

320

192

(1,430)

150

3,203

Net finance income (expense)

(73)

(73)

Share of earnings in equity-accounted investments

2

62

54

(13)

114

2

221

Profit sharing

(49)

(39)

(5)

(10)

(3)

(36)

(142)

Income / (loss) before income taxes

6,824

(3,117)

317

(41)

310

303

(1,537)

150

3,209

Income taxes

(2,320)

1,081

(89)

10

(106)

44

669

(52)

(763)

Net income (loss)

4,504

(2,036)

228

(31)

204

347

(868)

98

2,446

Net income attributable to:

 

 

 

 

 

 

 

 

 

Shareholders of Petrobras

4,505

(2,035)

220

(31)

204

319

(1,000)

98

2,280

Non-controlling interests

(1)

(1)

8

28

132

166

 

4,504

(2,036)

228

(31)

204

347

(868)

98

2,446

 

 

 

 

 

 

34


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Statement of Income - breakdown of International Business Area

 

 

 

 

 

 

 

 

Jan-Mar/2015

 

Exploration

&

Production

Refining,

Transportation

& Marketing

Gas

&

Power

Distribution

Corporate

Eliminations

Total

 

 

 

 

 

 

 

 

Statement of income

 

 

 

 

 

 

 

Sales revenues

461

1,150

124

1,084

2

(519)

2,302

Intersegments

256

291

8

1

2

(519)

39

Third parties

205

859

116

1,083

2,263

Income before financial results, profit sharing and income taxes

136

6

14

26

(51)

9

140

Net income (loss) attributable to shareholders of Petrobras

122

1

24

22

(144)

10

35

 

Jan-Mar/2014

 

Exploration

&

Production

Refining,

Transportation

& Marketing

Gas

&

Power

Distribution

Corporate

Eliminations

Total

Statement of income

 

 

 

 

 

 

 

Sales revenues

790

1,899

121

1,217

7

(514)

3,520

Intersegments

361

350

8

5

(514)

210

Third parties

429

1,549

113

1,217

2

3,310

Income before financial results, profit sharing and income taxes

181

22

26

41

(67)

(11)

192

Net income (loss) attributable to shareholders of Petrobras

264

27

32

38

(31)

(11)

319

 

Exploration

&

Production

Refining,

Transportation

& Marketing

Gas

&

Power

Distribution

Corporate

Eliminations

Total

Total assets - breakdown of International Business Area

 

 

 

 

 

 

 

At 03.31.2015

9,639

1,598

465

890

990

(1,104)

12,478

At 03.31.2014

9,623

1,861

472

940

1,230

(1,117)

13,009

 

 

As an outcome of the creation of the position of Chief Governance, Risk and Compliance Officer, which replaced the position of Chief International Officer, the Company has recently approved the organizational structure adjustments in other business areas to allocate the international activities to other business segments. Considering the necessary steps to integrate the management of those activities, the Company is still presenting the results of international activities separately.

 

35


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

28.        Provisions for legal proceedings

28.1.   Provisions for legal proceedings, judicial deposits and contingent liabilities

The Company has recognized provisions for the best estimate of the costs of proceedings for which it is probable that an outflow of resources embodying economic benefits will be required and that can be reasonably estimated. These proceedings are mainly comprised of labor claims, losses and damages proceedings resulting from the cancellation of an assignment of excise tax (IPI) credits to a third party, deferred VAT (ICMS) on natural gas purchases and fishermen seeking indemnification from the Company for a January 2000 oil spill in the State of Rio de Janeiro.

Provisions for legal proceedings, are set out below:

Non-current liabilities

03.31.2015

12.31.2014

Labor claims

641

717

Tax claims

221

104

Civil claims

591

666

Environmental claims

35

40

Other claims

8

13

 

1,496

1,540

 

 

 

 

03.31.2015

03.31.2014

Opening Balance

1,540

1,246

New provisions, net

284

766

Payments made

(7)

(314)

Accruals and charges

15

66

Others

(46)

(8)

Cumulative translation adjustment

(290)

(216)

Closing Balance

1,496

1,540

 

 

 

 

Judicial deposits made in connection with legal proceedings are set out in the table below according to the nature of the corresponding lawsuits:

Non-current assets

03.31.2015

12.31.2014

Labor

791

928

Tax

878

1,006

Civil

632

663

Environmental

69

80

Others

3

5

 

2,373

2,682

 

 

 

Contingent liabilities for which the likelihood of loss is considered to be possible are not recognized as liabilities in the financial statements but are disclosed, unless the expected outflow of resources embodying economic benefits is considered remote.

The estimated contingent liabilities for legal proceedings as of March 31, 2015 for which the likelihood of loss is considered to be possible are set out in the table below.

36


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Nature

Estimate

Tax

29,944

Civil - General

3,025

Labor

4,046

Civil - Environmental

1,307

Others

1

 

38,323

 

 

 

A brief description of the nature of the main contingent liabilities (tax, civil, environmental and labor) for which the likelihood of loss is considered to be possible are set out in the table below.

Description of tax matters

Estimate

Plaintiff: Secretariat of the Federal Revenue of Brazil

 

1) Failure to withhold and pay income tax (IRRF) and Contribution of Intervention in the Economic Domain (CIDE) on remittances for payment of platform charters.

 

Current status: This claim involves lawsuits in different administrative and judicial stages, in which the Company is taking legal actions to ensure its rights.

6,671

2) Failure to pay tax on financial operations (IOF) over intercompany loans entered into with, PifCo, Brasoil and BOC in 2007, 2008, 2009 and 2010.

 

Current status: Awaiting the hearing of an appeal at the administrative level.

2,270

3) Deduction from taxable income of profits of subsidiaries and associates domiciled abroad in 2005, 2006, 2007, 2008, 2009 and 2010.

 

Current status: Awaiting the hearing of an appeal at the administrative level.

2,145

4) Failure to withhold and pay income tax (IRRF) on remittances for payment of crude oil imports.

 

Current status: This claim involves lawsuits in different administrative and judicial stages, in which the Company is taking legal actions to ensure its rights.

1,767

5) Deduction from taxable income of expenses from Petros Plan renegotiation and penalties.

 

Current status: Awaiting the hearing of an appeal at the administrative level.

1,566

6) Deduction from taxable income (income tax - IRPJ and social contribution - CSLL) of development costs.

 

Current status: This claim involves a lawsuit in administrative stage, in which the Company is taking legal actions to ensure its rights.

1,486

7) Tax credits applied were disallowed due to failure to comply with an ancillary tax obligation.

 

Current status: Awaiting the hearing of an appeal at the administrative level.

1,424

8) Failure to pay social security contributions over contingent bonuses paid to employees.

 

Current status: This claim involves lawsuits in administrative stages, in which the Company is taking legal actions to ensure its rights.

693

9) Deduction from taxable income (income tax - IRPJ and social contribution - CSLL) of various employee benefits and pension benefits (PETROS) expenses in 2007 and 2008.

 

Current status: This claim is being disputed at the administrative level, involving three administrative proceedings.

627

10) Failure to pay Contribution of Intervention in the Economic Domain (CIDE) from March 2002 to October 2003 on transactions with fuel retailers and service stations protected by judicial injunctions determining that fuel sales were made without gross-up of such tax.

 

Current status: This claim involves lawsuits in different administrative and judicial levels, in which the Company is taking legal actions to ensure its rights.

533

Plaintiff: State of São Paulo Finance Department

 

11) Dispute over VAT (ICMS) levied on a drilling rig import – temporary admission in the state of São Paulo and clearance in the state of Rio de Janeiro and related fines for breach of ancillary tax obligations.

 

Current status: This claim involves lawsuits in administrative stages, in which the Company is taking legal actions to ensure its rights.

1,512

Plaintiff: States of AM, BA, DF, ES, PA, PE and RJ Finance Departments

 

12) Dispute over VAT (ICMS) levied on crude oil and natural gas sales attributable to alleged differences in initial inventory and final inventory.

 

Current status: This claim involves lawsuits in different administrative and judicial levels, in which the Company is taking legal actions to ensure its rights.

823

Plaintiff: State of Rio de Janeiro Finance Department

 

13) VAT (ICMS) levied on dispatch of liquid natural gas (LNG) without issuance of tax document by the main establishment.

 

Current status: This claim involves lawsuits in different administrative stages, in which the Company is taking legal actions to ensure its rights.

1,116

14) Dispute over VAT (ICMS) levied on jet fuel sales, as Decree 36,454/2004 was declared unconstitutional.

 

Current status: This claim involves lawsuits in administrative stages, in which the Company is taking legal actions to ensure its rights.

603

Plaintiff: Municipal governments of the cities of Anchieta, Aracruz, Guarapari, Itapemirim, Marataízes, Linhares, Vila Velha, Vitória and Maragogipe.

 

15) Alleged failure to withhold and pay tax on services provided offshore (ISSQN) in some municipalities located in the State of Espírito Santo. Petrobras withheld and paid these taxes to the municipalities where the respective service providers were established, in accordance with Complementary Law 116/03.

 

Current status: This claim involves lawsuits in different judicial stages, in which the Company is taking legal actions to ensure its rights.

748

Plaintiff: States of SP, RS and SC Finance Departments

 

16) Three States challenged VAT (ICMS) paid to the State of MS on imports of natural gas.

 

Current status: This claim involves lawsuits in different administrative and judicial stages, as well as three civil lawsuits in the Supreme Court.

627

Plaintiff: States of Rio de Janeiro and Sergipe Finance Departments

 

17) VAT (ICMS) credits were allegedly applied improperly on the purchase of drilling rig bits and chemical products used in formulating drilling fluid.

 

Current status: This claim involves lawsuits in different judicial stages, in which the Company is taking legal actions to ensure its rights.

319

Plaintiff: States of São Paulo, Ceará, Paraíba, Rio de Janeiro, Bahia and Pará Finance Departments

 

18) Alleged failure to pay VAT (ICMS) and allegedly improper use of ICMS credits on exports, internal consumption and similar transactions involving bunker fuel.

 

Current status: This claim involves lawsuits in different administrative and judicial stages, in which the Company is taking legal actions to ensure its rights.

359

19) Other tax matters

4,655

Total tax matters

29,944

37


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Description of civil matters

Estimate

Plaintiff: Agência Nacional de Petróleo, Gás Natural e Biocombustíveis - ANP

 

1) Legal and administrative disputes on differences in special participation charges and royalties paid in several oil fields. In addition, the Brazilian Oil, Natural Gas and Biofuels Agency (ANP) is claiming fines for alleged non-compliance with minimum exploratory programs and alleged irregularities in platform measurement systems.

 

Current status: This claim involves proceedings in different administrative and judicial stages, in which the Company is taking legal actions to ensure its rights.

982

Plaintiff: Refinaria de Petróleo de Manguinhos S.A.

 

2) Lawsuit seeking to recover damages for alleged anti-competitive practices with respect to gasoline and other oil products (Diesel and LPG) sales in the domestic market.

 

Current status: This claim is in judicial stage and was ruled for the plaintiff in the first stage. The Company is taking legal actions to ensure its rights. The Brazilian Antitrust regulator (CADE) has analyzed this claim and did not consider the Company's practices anti-competitive.

435

3) Other civil matters

1,608

Total for civil matters

3,025

 

 

Description of environmental matters

Estimate

Plaintiff: Ministério Público Federal, Ministério Público Estadual do Paraná

 

AMAR - Associação de Defesa do Meio Ambiente de Araucária and IAP - Instituto Ambiental do Paraná

 

1) Legal proceeding related to specific performance obligations, indemnification and compensation for damages related to an environmental accident that occurred in the State of Paraná on July 16, 2000.

 

Current status: The court partially ruled in favor of the plaintiff, however both parties (the plaintiff and the Company) filed an appeal.

688

2) Other environmental matters

619

Total for environmental matters

1,307

 

38


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Description of labor matters

Estimate

Plaintiff : Sindipetro of Espírito Santo, Rio de Janeiro, Bahia, Minas Gerais and São Paulo.

 

1) Class actions requiring a review of how the minimum compensation based on the employee's position and work schedule (Remuneração Mínima por Nível e Regime - RMNR) is computed.

 

Current status: The Company filed with the Superior Labor Court its collective bargaining agreement seeking an interpretation of the clause that is being questioned before the Labor Courts.

1,007

Plaintiff : Sindipetro of Norte Fluminense and Sindipetro of the state of Bahia

 

2) Class Actions regarding wage underpayments to certain employees due to alleged changes in the methodology used to factor overtime into the calculation of paid weekly rest, allegedly computed based on ratios that are higher than those established by Law No. 605/49.

 

Current status: The Company has appealed a decision with respect to the claim filed by Sindipetro/BA and awaits judgment by the Superior Labor Court. The Company has filed an appeal in the Superior Labor Court to overturn a decision with respect to the claim filed by Sindipetro Norte Fluminense (NF) and awaits judgment.

369

Plaintiff : Sindipetro of Norte Fluminense – SINDIPETRO/NF

 

3)The plaintiff claims Petrobras to pay overtime for standby work time exceeding 12-hours per day. It also claims that Petrobras must respect a 12-hour limit per workday, subject to a daily fine.

 

Current status: Awaiting the Superior Labor Court to judge appeals filed by both parties.

322

4) Other labor matters

2,348

Total for labor matters

4,046

 

 

 

28.2.   Class actions and other related proceedings

Between December 8, 2014 and January 7, 2015, five putative securities class action complaints were filed against the Company in the United States District Court for the Southern District of New York (SDNY). These actions were consolidated on February 17, 2015 (the “Consolidated Securities Litigation”). The Court appointed a lead plaintiff, Universities Superannuation Scheme Limited (“USS”), on March 4, 2015. USS filed a consolidated amended complaint on March 27, 2015 that purports to be on behalf of investors who: (i) purchased or otherwise acquired Petrobras securities traded on the NYSE or pursuant to other transactions in the U.S. during the period January 22, 2010 and March 19, 2015, inclusive (the “Class Period”), and were damaged thereby; (ii) purchased or otherwise acquired the 2012 Notes pursuant to the 2009 Registration Statement, or the 2013 Notes or 2014 Notes pursuant to the 2012 Registration Statement and were damaged thereby; and (iii) purchased or otherwise acquired Petrobras securities on the Brazilian stock exchange during the period January 22, 2010 and March 19,2015, who also purchased or otherwise acquired Petrobras securities traded on the NYSE or pursuant to other transactions in the U.S. during the same period.

The consolidated amended complaint alleges, among other things, that in the Company’s press releases, filings with the SEC and other communications, the Company made materially false and misleading statements and omissions regarding the value of its assets, the amounts of the Company’s expenses and net income, the effectiveness of the Company’s internal controls over financial reporting, and the Company’s anti-corruption policies, due to alleged corruption purportedly in connection with certain contracts, which allegedly artificially inflated the market value of the Company’s securities.

On April 17, 2015, Petrobras, PGF and underwriters of notes issued by the Company filed a motion to dismiss. The motion to dismiss is scheduled to be fully debriefed by May 22, 2015.

In addition, to date, three complaints have been filed by individual investors in the Southern District of New York consisting of allegations similar to those in the consolidated amended complaint. Those individual actions have been consolidated with the Consolidated Securities Litigation for pre-trial purposes.

39


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

The plaintiffs have not specified an amount of alleged damages in the actions. Because these actions are in their early stages, the possible loss or range of losses, if any, arising from the litigation cannot be estimated. The Company has engaged a U.S. firm as legal counsel and intends to defend vigorously against the allegations made in the context of these actions.

29.        Collateral for crude oil exploration concession agreements

The Company has granted collateral to the Brazilian Agency of Petroleum, Natural Gas and Biofuels (Agência Nacional de Petróleo, Gás Natural e Biocombustíveis -ANP) in connection with the performance of the Minimum Exploration Programs established in the concession agreements for petroleum exploration areas in the total amount of US$ 2,071 of which US$ 1,603 were still in force at March 31, 2015, net of commitments that have been undertaken. The collateral comprises crude oil from previously identified producing fields, pledged as security, amounting to US$ 1,269 and bank guarantees of US$ 334.

30.        Risk management

The Company is exposed to a variety of risks arising from its operations, including price risk (related to crude oil and oil products prices), foreign exchange rates risk, interest rates risk, credit risk and liquidity risk. It manages risks through a corporate policy established by its officers.

The objective of the overall risk management policy is to support the achievement of the Company’s strategic goals through an adequate resource allocation and an appropriate balance between growth, return on investments and risk exposure level, which can arise from its normal activities or from the context within which the Company operates.

A summary of the positions held by the Company and recognized in other current assets and liabilities as of March 31, 2015, as well as the amounts recognized in the statement of income and other comprehensive income and the guarantees given is set out following:

 

Statement of Financial Position

 

Notional value

Fair value

Asset Position (Liability)

Maturity

 

03.31.2015

12.31.2014

03.31.2015

12.31.2014

 

Derivatives not designated for hedge accounting

 

 

 

 

 

Future contracts - total (*)

(19,572)

(4,314)

50

70

 

Long position/Crude oil and oil products

90,088

84,544

2015

Short position/Crude oil and oil products

(109,660)

(88,858)

2015

Options - total (*)

845

(594)

0.7

 

Call/Crude oil and oil products

(50)

(364)

(0.3)

(0.4)

2015

Put/Crude oil and oil products

895

(230)

0.3

1.1

2015

Forward contracts - total

 

 

(1)

2

 

Long position/Foreign currency forwards (ARS/USD)

USD 10

USD 10

(1)

(1)

2015

Short position/Foreign currency forwards (BRL/USD)

USD 1

USD 249

3

2015

Swap

 

 

 

 

 

Interest – Euribor / Fixed rate

EUR 4

EUR 5

2015

 

 

 

 

 

 

Derivatives designated for hedge accounting

 

 

 

 

 

Swap - total

 

 

(27)

(42)

 

Foreign currency / Cross-currency Swap

USD 298

USD 298

(6)

(22)

2016

Interest – Libor / Fixed rate

USD 408

USD 419

(21)

(20)

2020

 

 

 

 

 

 

Total recognized in the Statement of Financial Position

 

 

22

30.7

 

(*) Notional value in thousands of bbl

 

 

40


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

 

Gains (losses) recognized in the statement of income (*)

Gains (losses) recognized in the Shareholders’ Equity (**)

Guarantees given as collateral

 

Jan-Mar/2015

Jan-Mar/2014

Jan-Mar/2015

Jan-Mar/2014

03.31.2015

12.31.2014

Commodity derivatives

(15)

16

90

6

Foreign currency derivatives

12

(9)

1

3

Interest rate derivatives

(2)

(2)

1

Embedded derivative - ethanol

 

(5)

7

(1)

4

90

6

Cash flow hedge on exports (***)

(288)

(199)

(9,596)

1,844

 

(293)

(192)

(9,597)

1,848

90

6

 

 

 

 

 

 

 

(*) Amounts recognized in finance income in the period.

(**) Amounts recognized as other comprehensive income in the period.

(***) Using non-derivative financial instruments as designated hedging instruments, as set out note 30.2.

 

 

 

A sensitivity analysis for the different types of market risks, to which the Company is exposed, based on the derivative financial instruments held as of March 31, 2015 is set out following:

Financial Instruments

Risk

Probable Scenario*

Stressed

Scenario

(∆ of 25%)

Stressed

Scenario

(∆ of 50%)

Derivatives not designated for hedge accounting

 

 

 

 

 

 

 

Future contracts

Crude oil and oil products - price changes

50

(189)

(428)

Forward contracts

Foreign currency - depreciation R$ x USD

Forward contracts

Foreign currency - appreciation argentine peso x USD

1

(2)

(5)

Swap

Interest - Euribor decrease

Options

Crude oil and oil products - price changes

(1)

 

 

 

 

 

51

(191)

(434)

Derivatives designated for hedge accounting

 

 

 

 

 

 

 

Swap

 

(5)

(60)

(100)

Debt

Foreign currency - appreciation JPY x USD

5

60

100

Net effect

 

 

 

 

 

 

 

 

 

 

 

 

Swap

 

4

(1)

(2)

Debt

Interest - LIBOR increase

(4)

1

2

Net effect

 

 

 

 

(*) On March 31, 2015, the probable scenario was computed based on the following risks: R$ x U.S. Dollar - a 0.37% depreciation of the Real; Japanese Yen x U.S. Dollar - a 1.7% depreciation of the Japanese Yen; Peso x U.S. Dollar - a 4.83% depreciation of the Peso; LIBOR Forward Curve - a 0.28% increase throughout the curve; EURIBOR Forward Curve - a 0.1% increase throughout the curve.

 

 

 

 

30.1.   Risk management of price risk (related to crude oil and oil products prices)

Petrobras preferably does not use derivative instruments to hedge exposures to commodity price cycles related to products purchased and sold to fulfill operational needs. Derivatives are used as hedging instruments to manage the price risk of certain short-term commercial transactions.

30.2.   Foreign exchange risk management

Petrobras seeks to identify and manage foreign exchange rate risks based on an integrated analysis of natural hedges, to benefit from the correlation between income and expenses. The Company’s short-term risk management involves choosing the currency in which to hold cash, such as the Brazilian Real, U.S. dollar or other currency. The risk management strategy involves the use of derivative instruments to hedge certain liabilities, minimizing foreign exchange rate risk exposure.

41


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

a)             Cash Flow Hedge involving the Company’s highly probable future exports

The Company designates hedging relationships to account for the effects of the existing natural hedge between a portion of its long-term debt obligations (denominated in U.S. dollars) and its U.S. dollar denominated exports and to properly recognize that hedge in its financial statements.

Individual hedging relationships were designated in a one-to-one proportion, meaning that a portion of the total monthly exports will be the hedged transaction of an individual hedging relationship, hedged by a portion of the company’s long-term debt (which has an average maturity of approximately 5.66 years).

The principal amounts, fair value as of March 31, 2015, and a schedule of the timing of the losses recognized in other comprehensive income (shareholders’ equity) to be recycled to the statement of income based on a R$/USD 3.2080 exchange rate, are set out below:

Hedging Instrument

Hedged Transactions

Nature

of the

Risk

Maturity

Date

Principal Amount (US$ million)

Carrying amount as of March 31, 2015 (R$ million)

Non-Derivative Financial Instruments

Portion of Highly Probable

Future Monthly Export Revenues

Foreign Currency

– Real vs U.S. Dollar

Spot Rate

April 2015 to

November 2023

52,072

167,047

 

 

 

Changes in the principal amount (in US$ million)

 

Amounts designated as of December 31, 2014

50,858

New hedging instruments designated

2,634

Exports affecting profit or loss

(1,395)

Principal repayments / amortization

(25)

Amounts designated as of March 31, 2015

52,072

 

 

 

A schedule of the timing of the losses recognized in other comprehensive income (shareholders’ equity) to be recycled to the statement of income as of March 31, 2015 is set out below:

 

Consolidated

 

03.31.2015

 

2015

2016

2017

2018

2019

2020

2021

2022

2023

Total

Expected reclassification

(1,558)

(2,187)

(2,507)

(2,501)

(2,205)

(1,778)

(1,626)

(1,712)

(803)

(16,877)

 

 

b)            Cash flow hedges involving swap contracts – Yen x Dollar

The Company has a cross currency swap to fix in U.S. dollars the payments related to bonds denominated in Japanese yen and does not intend to settle these contracts before the maturity. The relationship between the derivative and the bonds was designated for cash flow hedge accounting.

c)             Sensitivity analysis for foreign exchange risk on financial instruments

A sensitivity analysis is set out below, showing the probable scenario for foreign exchange risk on financial instruments, computed based on external data along with stressed scenarios (a 25% and a 50% change in the foreign exchange rates), except for assets and liabilities of foreign subsidiaries, when transacted in a currency equivalent to their respective functional currencies.

42


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Financial Instruments

Exposure at 03.31.2015

Risk

Probable Scenario (*)

Stressed

Scenario

(∆ of 25%)

Stressed

Scenario

(∆ of 50%)

Assets

3,525

 

13

881

1,762

Liabilities

(62,133)

Dollar/Real

(233)

(15,533)

(31,067)

Cash flow hedge on exports

52,072

 

195

13,018

26,036

 

(6,536)

 

(25)

(1,634)

(3,269)

Liabilities (**)

(648)

Yen/Dollar

11

(162)

(324)

Assets

13

Euro/Real

3

7

Liabilities

(2,214)

 

21

(554)

(1,107)

 

(2,201)

 

21

(551)

(1,100)

Assets

5,902

Euro/Dollar

(89)

1,476

2,951

Liabilities

(11,913)

 

180

(2,978)

(5,957)

 

(6,011)

 

91

(1,502)

(3,006)

Assets

6

Pound

2

3

Liabilities

(704)

Sterling/Real

(176)

(352)

 

(698)

 

(174)

(349)

Assets

1,632

Pound

(12)

408

816

Liabilities

(3,511)

Sterling/Dollar

26

(877)

(1,755)

 

(1,879)

 

14

(469)

(939)

Assets

225

Peso/Dollar

11

56

112

Liabilities

(618)

 

(30)

(154)

(309)

 

(393)

 

(19)

(98)

(197)

 

(18,366)

 

93

(4,590)

(9,184)

 

 

 

 

 

 

(*) On March 31, 2015, the probable scenario was computed based on the following risks: Real x Dollar – a 0.37% depreciation of the Real / Yen x Dollar – a 1.7% depreciation of the Yen / Peso x Dollar: a 4.83% depreciation of the Peso/ Euro x Dollar: a 1.31% depreciation of the Euro / Pound Sterling x Dollar: a 0.34% depreciation of the Pound Sterling. The probable scenario was determined based on the spot foreign exchange rates (PTAX selling rates) reported by Focus and Bloomberg.

(**) A portion of the foreign currency exposure is hedged by a cross-currency swap.

 

 

 

30.3.   Interest rate risk management

The Company considers that interest rate risk does not create a significant exposure and therefore, preferably does not use derivative financial instruments to manage interest rate risk, except for specific situations encountered by certain subsidiaries of Petrobras.

30.4.   Credit risk

Credit risk management in Petrobras aims at minimizing risk of not collecting receivables, financial deposits or collateral from customers or financial institutions through efficient credit analysis, granting and management based on quantitative and qualitative parameters that are appropriate for each market segment in which the Company operates.

The commercial credit portfolio is very diversified and comprises clients from the domestic market and from foreign markets. Credit granted to financial institutions is spread among “investment grade” international banks rated by international rating agencies and highly-rated Brazilian banks.

43


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

30.5.   Liquidity risk

Liquidity risk is represented by the possibility of a shortage of cash or other financial assets in order to settle the Company’s obligations on the agreed dates and is managed by the Company based on policies such as: centralized cash management, in order to optimize the level of cash and cash equivalents held and to reduce working capital; a minimum cash level to ensure that the need of cash for investments and short-term obligations is met even in adverse market conditions; increasing the number of investors in the domestic and international markets through funding opportunities, developing a strong presence in the international capital markets and searching for new funding sources, including new markets and financial products.

This strategy is currently being achieved, for example, by seeking funding in the Asian banking market. The Company intends to use different funding sources (banking market, export credit agencies - ECAs and capital markets) in 2015 to obtain the necessary funding to repay debt and fund its capital expenditures. In addition, the Company’s divestment program (of US$ 13.7 billion) will contribute to its funding needs.

A maturity schedule of the Company’s finance debt (undiscounted), including face value and interest payments is set out following:

Maturity

2015

2016

2017

2018

2019

2020 and thereafter

Balance at March 31, 2015

Balance at December 31, 2014

 

12,734

17,803

16,673

21,729

27,248

72,723

168,910

179,704

 

 

31.        Fair value of financial assets and liabilities

Fair values are determined based on market prices, when available, or, in the absence thereof, on the present value of expected future cash flows. The fair values of cash and cash equivalents, short term debt and other non-current assets and liabilities are the same as or do not differ significantly from their carrying amounts.

The hierarchy of the fair values of the financial assets and liabilities, recorded on a recurring basis, is set out below:

-       Level 1 inputs: are the most reliable evidence of fair value, quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.

-       Level 2 inputs: are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

-       Level 3 inputs: are unobservable inputs for the asset or liability.

44


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

 

Fair value measured based on

 

 

Level I

Level II

Level III

Total fair

value

recorded

Assets

 

 

 

 

Marketable securities

1,549

1,549

Commodity derivatives

50

50

Foreign currency derivatives

Balance at March 31, 2015

1,599

1,599

Balance at December 31, 2014

2,781.7

2

2,783.7

 

 

 

 

 

Liabilities

 

 

 

 

Foreign currency derivatives

(7)

(7)

Interest derivatives

(21)

(21)

Balance at March 31, 2015

(28)

(28)

Balance at December 31, 2014

(42)

(42)

 

 

 

There are no material transfers between levels.

The estimated fair value for the Company’s long term debt as of March 31, 2015, computed based on the prevailing market rates is set out in note 15.1.

32.        Subsequent events

Financing agreements in the banking market

On April 1, 2015, Petrobras Global Trading BV – PGT, an indirect subsidiary of Petrobras entered into a US$ 3.5 billion line of credit for 10 years with China Development Bank Corporation – CDB.

On April 9, 2015, Petrobras Distribuidora S.A. (a wholly-owned subsidiary of Petrobras) entered into a R$ 4.5 billion (US$ 1.5 billion) working capital loan agreement with Banco do Brasil, due March 2021.

On April 17, 2015, the Company announced the approval of the following financing agreements:

-       5-year standby credit line with Caixa Econômica Federal amounting to R$ 2 billion (US$ 0.8 billion);

-       5-year standby credit line with Bradesco amounting to R$ 3 billion (US$ 1.2 billion);

-       Cooperation agreement with Standard Chartered for an oil production platform sale and leaseback transaction amounting to US$ 3 billion, with a 10 year maturity.

33.        Information Related to Guaranteed Securities Issued by Subsidiaries

33.1.   Petrobras Global Finance B.V. (PGF)

Petróleo Brasileiro S.A. - Petrobras fully and unconditionally guarantees the debt securities issued by Petrobras Global Finance B.V. (PGF), a 100-percent-owned finance subsidiary of Petrobras. There are no significant restrictions on the ability of Petrobras to obtain funds from PGF.

45

 

 

SIGNATURE
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May18, 2015
PETRÓLEO BRASILEIRO S.A--PETROBRAS
By:
/S/  Ivan de Souza Monteiro

 
Ivan de Souza Monteiro
Chief Financial Officer and Investor Relations Officer
 
 

 

 
FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act) that are not based on historical facts and are not assurances of future results.  These forward-looking statements are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results o f operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations. 
All forward-looking statements are expressly qualified in their entirety by this cautionary statement, and you should not place reliance on any forward-looking statement contained in this press release. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events or for any other reason.