Good morning, ladies and gentlemen. Welcome to Petrobras Conference Call with Analysts and Investors for the Presentation and Concerning 2015 Results Ended Fourth Quarter of 2015.

We would like to inform you that participants will only be listening to the conference call during the company's presentation which will be conducted in Portuguese with simultaneous translation into English. Following the presentation, a Q&A session will begin in Portuguese and English.

And instructions will be provided at the time [Operator Instructions] Present with us today are Mr. Ivan de Souza Monteiro, Petrobras' Chief Financial and Investor Relation Officer; Ms. Solange da Silva Guedes, Chief Exploration and Production Officer; Mr. Jorge Celestino Ramos, Chief Downstream Officer; Mr.

Hugo Repsold Júnior, Chief Gas and Power Officer; Mr. Roberto Moro, Chief Engineering, Technology and Procurement Officer and other company executives. I would like to remind you that this meeting is being recorded and please be mindful of Slide number 2, which contains a notice to shareholders and investors.

The words believe, expect and similar ones related to projections and targets are mere forecasts based on the expectations of executives regarding the future of Petrobras. To begin, we will hear the Executive Manager of Investor Relations, Mr. Lucas Tavares de Mello.

Then, we'll then proceed with the presentation concerning the results for the fourth quarter of 2015 and the year 2015. Right after the presentation, we will proceed with the Q&A session..

Good morning, everyone. I would like here to be mindful of the Slide number 2, which has a notice to shareholders. Now, moving to the Slide number 3, we will talk about the exchange rate and we notice that at the end of 2015, the exchange rate was 3.9, there was depreciation of 47% of the real in relation to the year 2014.

Now, when we look at the fourth quarter of 2015 when compared to the third quarter of the same year, we've seen an appreciation of 2%. On slide number 4, now we talk about the price of Brent. We notice a drop on average Brent, which was almost a $100 in 2014 to $52.46 in 2015.

I would like to remind you again that once we compared the fourth quarter of 2015 vis-à-vis the third quarter, we also saw a 13% drop in the Brent price.

Slide number 5, here we have some highlights on our results, the free cash flow amounting to $15.6 billion, something that hasn't been posted since 2007, adjusted EBITDA was $73.9 billion, 25% higher when compared to 2014.

Total production of 2,787 million of barrels of oil equivalent a day, which is up by 4% over 2014, with a daily production record in the Pre-Salt of 1.173 million Boe at the end of 2015. Lower expenses related to oil and oil products and production taxes.

Impairment of assets was 47.7 billion and investments of 2.1 billion, still on the negative side, higher net financial expenses due to foreign exchange depreciation and higher interest expenses. Now referring to the fourth quarter of 2015, we have the impairment of assets 46.4 billion and investments of 1.9 billion.

On the positive side, the free cash flow was 7.3 billion and a reduction of 57% in our net financial expenses. Now moving on to the Slide 6, speaking about our results highlights. Our EBITDA was up by 25% in 2015 when compared to 2014, the EBITDA margin went from 18% in 2014 to 23% in 2015.

Investments were down by 12%, reaching 76.3 billion in 2015, vis-à-vis 87.1 in 2014. Free cash flow was 15.6 billion in 2015 when compared to a negative 19.6 billion in 2014. Slide number 7. Speaking about our highlights. Our net debt in dollar terms was down 5% when compared to 2014.

The average debt maturity was up, reaching 7.1 when compared to 6.1 in 2014. Net borrowings denominated in dollars went from 25.2 billion to 12 billion in 2015, so down by 52% and the cost of debt went from 5.6% a year to 6.3% a year, comparing 2014 to 2015. Now on Slide number 8.

Consolidated net results of negative result of R$34.8 billion, the net offerings in income was down when compared to 2014, mostly explained by lower demand for oil products in the domestic market, even though we had higher oil export volumes.

So cost of cost of sales was also down due to lower expenses with imports and production taxes and the lower share of imported volumes in the sales mix. Therefore, gross profit was up by 26%, reaching 98.6 billion vis-à-vis 80.4 billion in 2014.

Operating income was up by 9%, mostly due to a impairment of 47.7 billion, tax expenses was 9.2 billion, legal contingencies and losses 5.6 billion and 1.9 billion was the impairment of trade receivables from the electricity sector. Therefore, our operating income was 2.9 billion, higher than 2014 but negative by 12.4 million.

And in terms of our financial results line, there is a major difference when comparing 2014 to 2015, I mean 3.9 billion in 2014. Mostly due to foreign exchange losses due to the depreciation of the real and increase in our interest expenses in higher debt and interest on tax expenses, lower interest capitalization.

And thus, our overall result was negative 34.8 billion, vis-à-vis a negative 21.4 in 2014, the dollar denominated result in 2014, represents $8.5 billion when compared to the 7.5 billion negative in 2014.

The adjusted EBITDA, we already talked about it is 73.9 billion, meaning 25% higher than 2014 and investments was down by 12% when compared to 2014. Now, moving on to the Slide number 9. Here, we analyze the impairment provision from 2015 and 2014.

On the left side of the slide, we have the 2015 impairment figures reaching 49.7 billion, we also notice that it was mostly concentrated in the E&P activities, unlike what happened in 2014 which appears on the right side of the chart, the impairment in 2014 was 45.4 billion, but it was mostly concentrated in the downstream operation.

Now, when we looking at investments in 2015, impairment was 2.1 billion and 0.8 billion in 2014. Going on to the Slide number 10, speaking about impairment was 47.7 billion that as mentioned, the main reason for this impairment were in the production of E&P fields we had the reductions in oil prices and the geological review of Papa-Terra reservoir.

At Comprej, we have the postponement of the startup of the project and also E&P equipment, we have an expectation of future idleness of drilling rigs, and the discount rate affects all of our projects due to a higher risk premium reflecting Brazil's loss of investment grade. Slide number 11.

Here, we have a breakdown of the main E&P projects which have been affected by the impairment Papa-Terra 8.7 billion, so it's the most relevant one and as seen before this was due to a geological review of the Papa-Terra reservoir.

All of the other projects are mainly linked to the lower oil prices in conjunction with a higher discount rate utilized in the parity test. Slide number 12. We will now look at EBITDA, adjusted EBITDA without special items.

In 2014, EBITDA was 59.1 billion and in 2015 was 73.9 billion and without all of these special items, it would have been 85.5 million in 2015 when compared to 63.3 million in 2014, which means an increase of 35%.

Now looking at the EBITDA margin without the special items, again, it would have been 19% in 2014 and 27% in 2015 when compared to 23% when we consider special items. Slide no 13. Here, we have a simulation of 2015 consolidated net income without the special items.

Here, when we look at the chart, we see that the result reached 34.8 million negative in 2015, but if we go with the impairment of 49.7 and then receive legal contingencies receivables from the electricity sector and other is 14.3.

Also if we discount income tax of minus 15.5, our net income estimated would have been 13.6 million, which is without the special items, this is the simulated number. Now going to slide 14, we talk about the consolidated net results for the fourth quarter that was 36.9 billion negative.

Operating revenue in the fourth quarter was higher when compared to the third quarter, because of higher prices of oil products and gasoline adjustment in September of 2015 and oil product sales in the domestic market. Cost was stable, there were lower expenses with imports and production taxes and lower share of imported volumes in the sales mix.

The vast gross profit was up by 13% reaching 26.8 billion. Operating expenses that was mostly impacted by the impairment of assets that took place in the fourth quarter of 2015 and the financial results is better, it’s better than in the third quarter of 2015, because in the fourth quarter of 2015 there was an appreciation of the real.

When we look at the result was 36.9, that is the net income and loss with a negative figure of 3.8 million in the third quarter. The net income was 9.4 billion negative in the fourth quarter and 1.1 billion negative in the third quarter. The adjusted EBITDA in the fourth quarter was 17.1 billion, when compared to 15.5 billion in the third quarter.

Investments were 20.8 billion, these are the 19.3 billion in the third quarter and that was due to seasonal increases. Slide number 15. Now we will talk about exploration and production. We see that we are still growing our production. Production grew 5% between 2013 and 2014 and 4% between 2014 and 2015.

And in 2015, we reached the goal in terms of oil production in Brazil. Moving to the slide 16. Now we refer to Pre-Salt. In December, we had a production record in this region of 874,000 barrels per day. And also a daily production record, which was reached in December 14 of 2015, of 1,173 BOED and 942 KBPD. On slide number 17.

Well the objective was to connect 73 offshore production wells and we reach the target when we connected 73 wells during 2015 where the target was 72. Slide number 18. Now we refer to downstream. The oil products output in Brazil was down in 2015, when compared to numbers from 2014.

Even though the yield of peso, as we see in the chart, I mean the production of diesel since 2013 has been kept stable around 850 barrels a day. Therefore, the number is still high. Slide 19. Now we talk about the sales of prior product. Production was down by 9% in 2015 vis-à-vis 2014.

Mostly due to lower demand of some oil products, in particularly, Naphtha from Braskem and also gasoline, there was an increase of ethanol content in gasoline-C from 27% to 25%, at lower market share.

Diesel, we had a lower consumption, there was lower consumption in infrastructure projects, lower market share and higher content of biodiesel in the diesel/biodiesel mix. Slide number 20, here we see the operating income evolution, comparing 2014 to 2015.

In 2014, we had an negative operating result of 21.3 billion, to downstream unit posted an improvement because of better trade margins of oil products, exploration and production has the opposite performance lower margins because the Brent prices were lower and also this year we had impairment in the E&P factor.

In terms of gas and power, there was an improvement in the results because of better trade margins of natural gas and in terms of distribution, we see a worsening in the results due to lower market share and lower sales volume, these are the main lines that accounted for the worsening of our results.

So at the end of 2015, our operating income was minus 12.4 billion. Slide number 21, here we have general and administrative expenses, there was a 2% decrease in SG&A, comparing 2015 to 2014.

In the lower part of the Slide, we have the holding personnel, there was a 3% increase, therefore, despite the salary restructuring, there was a decrease in headcount. And in the upper part of the chart, we see a decrease in otherwise of 5% in extends from expenses in consulting services, data processing and other services.

And in terms of gross profit and the percentage of the SG&A vis-à-vis gross profit, gross profit was 8%. I mean, SG&A was 8% of gross profit and this is a downtrend when compared to years before to the previous years.

Slide number 22, we have the indebtedness of the company, the indebtedness denominated in real, it was affected by the foreign exchange appreciation when we look at the figures denominated in U.S. dollars, there was a decline between the fourth quarter of 2015 and the fourth quarter of 2014, going to a $100 billion rather than $101 billion.

Net debt over EBITDA on the fourth quarter of 2014 was 34.8 and that was five times net debt over EBITDA ratio and it reached fixed 60%.

On the right side of the chart, we have the debt profile, 50% of the debt is fixed and the remaining is floating, the cost of debt in 2015 was 5.3% a year, the average tenure was 7.14 years and net borrowings between 2014 and 2015, in 2014 it was 25.2 billion and in 2015, net borrowings were 12 billion. On Slide 23, we have a cash flow for 2016.

Early this year, we started with our initial cash position of 26 billion, we had 22 billion of operating cash flow, judicial guarantees were at 5 billion, dividends, interest and amortization was 19 billion and dividend line is zero, investments 19 billion, divestments 14 billion, rollovers and borrowings 1 billion and 1 billion.

So by the end of 2016, we'll have 21 billion in our final cash position. With that, I conclude the presentation and we now move to our Q&A session..

We'll now proceed with our Q&A session. I would like to ask each participant to post at least two questions, but very slowly and please do the main sequence so that the executives can answer in the same sequence.

And we would like to inform you that questions in English will be translated to the Company's officers that will then answer them in Portuguese and then the answers in Portuguese will be then translated into English. Our first question is from Luiz Carvalho from HSBC..

Good morning, everyone. Thank you for taking my question, a couple of questions. Let me start on Slide number 23, the last one that Lucas commented about. I can see numbers that draw my attention, particularly investments around 11 billion and naturally the final balance 21.

I would like to better understand the zero dividend could be used as guidance for next year or your absolutely not considering in this cash flow just because you don’t want to give any guidance? Just to have a better understanding of how you see the dividend policy for this year and the Company's understanding, if there is any loss, we will keep on not paying what is the impact in terms of control, corporate tax versus oil? And the second question maybe Solange could help me out.

Yesterday during the press conference Solange mentioned that the breakeven point for Pre-Salt is $30 or $35 per barrel and I think she also mentioned the first wave so to speak up cost reduction with a decrease of approximately 13%, the second wave might bring additional cost reduction.

So we're speaking of a reduction of 25% of the breakeven for Pre-Salt vis-à-vis the last guidance.

So could you give us a break down of all the items and the current breakeven point? And just a last follow-up question, what about Petros stake, is there any kind of discussion ongoing, in the sense of the Company having to use a phase funding structure and how can employees contribute to make it happen may be with an increase of contribution.

Thank you..

Thank you, Luiz. Ivan speaking, first asking about dividend, the Company had a negative result in losses, so we don’t have any expected dividend payout this year. Solange is going to answer your question about the breakeven point..

Good morning, Luiz. Answering your question about the Brent and the breakeven point, what I wanted to tell the press yesterday is that that’s something we are working on. I made reference to the first wave, because our most recent planning already include those benefits that were checked for negotiations in the agreement.

However, there are other benefit which were also included and I did not mention them yesterday and possibly in the breakfast we had at a different occasion, I have made reference to it and referring to yield productivity in terms of construction of ports, which were not included at that time with the significant reduction in the time to build wells.

Particularly in Pre-Salt project, I think I told you before this is the most significant share for the well during the cost, this is the most significant share, so any benefit this regard is extremely welcome. A second point that I also mentioned yesterday and by the way I discussed with you in the past in a [photo] (Ph) manner.

It is the fact that in this most recent analysis and planning there is a continuation of well production going down that's a better behavior than we expected. And by having this included in our planning, we've managed to postpone many of the well completion from the moment they won't be necessary as we planned before, but maybe only later on.

And by the way, you analysts came to us asking us why in our planning we had a reduction, a significant reduction in extensive without an equivalent in the production goals even though there were reduced but not in the same dimension. So it is the same as we mentioned before.

In terms of inclusion of some benefits that we're considered from the operational and also contract standpoints, but all I want to do is to draw you attention to the fact that this is an ongoing process for the portfolio optimization.

And this amount will reflect many conditions to future analyze our projects and everything that we've be working very strongly be it through events like the one that I mentioned or also through the internal individual optimization on a project base.

Luiz Answering your question about Petros, when you have the third consecutive year showing a deficit, you should work at adjustment program and this program requires contribution from the stakeholders and the sponsor. This is already reflected in Petrobras statement..

Ivan, maybe if you could go back to the dividend question, I know you have mentioned the company had a negative results in 2015 and consequently during did not pay it, what about going forward, for any reason the company has another negative result in 2016? Will this remain the understanding that there won't dividend payout or is there any kind of divergence in terms of the corporate tax showing that these companies or ordinary shares and our common stock and preferred stock..

If the company has dividends they will be paid out, if there are no dividends they won’t be paid out..

Got it. Thank you..

The next question is from [indiscernible] from Credit Suisse..

Good morning, everyone. Thank you for taking my question. I have two questions. The first question is about what you expect in the business plan CapEx. Solange already answered the previous question about CapEx optimization, but what about impairment that we can see this year for E&P this quarter.

Should we expect a postponement of E&P project in the future? And my second question is, I would like to know more about Rnest impairment.

In Comprej, we can see a significant reduction, but what about the Rnest, we already had a reduction a write-off maybe already affected by the discount rate and possibly a benefit due to foreign exchange in order to reverse the picture.

So what about the influence of these factors and why is it that we don’t have an impairment or another reversal of impairment at Rnest..

[indiscernible] thank you. The first part of your question will be answered by Solange and then by Jorge Celestino..

Good morning [indiscernible]. If I understood your question, you mentioned, you wanted to know, if you are going to have any project per installment in our next project.

We talk to you recently about adjustments may to our business plan and right now or in June 2015, when we worked on the first big adjustment of the plan considering the new market scenario. We mentioned a couple of risks of potential postponement. And today, we understand that we are increasingly having these risks under control compared to the past.

Now I'll turn it over to officer Moro, he has some analysis about such risks and very important facts to be shared with you all..

Good morning [indiscernible]. Moro speaking, Engineering Officer. Like Solange said, last year we said there were some risks involving project delivering. So now I’ll try to give a snapshot of our status last year. Last year, we had 16 big projects for Pre-Salt 16 FPSOs and platforms connected to project. And six chartered and 10 own units.

The 10 that were chartered or leased, we intended to deliver two last year and we did. And one of the them, we anticipated terms of approximately monsoon advance. And our problem in the previous year had to do with contracts for our 10 own units, six for Pre-Salt blocks for the concession block and four the transfer of rights.

These 10 own platforms that we had to deliver are realized through 11 major contracts. So last year of the 11 contracts, we had seven contracts with structural problems and they were nearly terminated and one of them was effectively terminated early last year. So four contracts, we had no problem and seven with problems.

And the one that was terminated affected six units, six of our own units. So we have to make a decision last year whether to continue with these contracts or to start from scratch. And based on the impact of non-continuity, we decided to continue and try to renegotiate and come to another balance of these contracts and that’s what we did.

We bet on that at that time, but that accounted so quite a big risk, because we were not assertive of the result of negotiations. And now the status in 2016 early 2016 all contracts have been renegotiated of the seven, one was terminated was contracted again with the strategy to recover construction in nine-months, it was taken abroad.

And for these contracts, we will be delivering the compression modes of two platforms that will be delivered and shipping in March one in Thailand, the other in China, allowing us to complete and giving you a real view of completion of P66 for instance, which is their item in the shipyard just waited for the margins to come.

So now we have a real possibility one of our assertiveness by year-end. So we can fully meet our business plan. As for the additional six contracts, they were all aligned again related to changes to the execution plan or rebalance to the local contract or because we are in-charge of our account with a lot of assertiveness.

All of them up in running, renegotiated and now creating a better outlook that are inherent risk naturally, inherent to the process to the build in process, but with a far more comfortable condition in terms of delivery terms and deadline. So that was just adding to the previous comment.

So now we are increasing the reliability behind our deliveries, and in terms of postponement to the contract, Jorge Celestino is going to talk about Rnest now..

Good morning [indiscernible]. As to impairment test for Comperj and Rnest, Comprej just as a remainder, well the hibernation activities would not consider in the business plan after 2019, 2015 to 2019 it was not in the horizon. And what we're pursuing and keep on pursuing right now is the completion through a partner stake.

When we rolled Comperj impairment for year 2015, there were three factors that led to impairment, number one postponement of Comprej to 2022 in the horizon of the business plan that discount rate. And additionally the diesel market which is lower now and also diesel margins, if you look at the horizon, these margins are also lower.

At the end of the day, we generated cash flow that has an impact on PP&E. So this happens in Comperj but not in Rnest. In Rnest, the 2nd Train is expected for 2015 to 2019 but we will continue with work in progress and impairment test run with a same diesel market, same discount rate, they did not lead to an impairment of Rnest Train number two..

Can I just ask a follow up question please? So there was an impairment factor, which is foreign exchange rate, I think it does help somehow to offset the higher discount rate impact, so if possible.

Could you make some comments on it and then coming back to what you said about diesel margin, I would like to understand, if there are any different margin projections in Comperj and Rnest?.

In terms of diesel margin, that are no different margins in Rnest or Comperj, diesel margin are the company's margin and the strategy area runs under different scenarios. So we don't have different margins.

As to CapEx, naturally the CapEx that you have for Comperj terminal, it was slightly higher compared to CapEx for Rnest terminal and effectively it does have an impact.

Thank you, Jorge..

The next question is from Gustavo Allevato from Santander..

Good morning, everyone. I have two questions.

First question is about the electrical system provision, we can see the recurring in Petrobras earnings, what about the status and negotiation to try to lower problems and I want to know, is the agreement made with creditors are in line or as expected? My second question is to Solange, what happened to Papa-Terra, what about the target of protection for 2016, does it already taking to account of lower production in Papa-Terra and what about the target for 2020 in the revision in Papa-Terra? Thank you..

Thank you, Gustavo. With regards to the electrical system, this is routine work, whenever the company finds lack of guarantee, actual guarantee, it has to work on provision. You may be making reference to this first big that we worked on and this is fully in line, but with the whole company exposure that does not have an actual guarantee.

The exposure is taken to provision as we did late in the year. this is routine and it always happened, not only for the electrics, but for any other exposure of the company now Solange is going to tell you more about Papa-Terra.

Good morning, Gustavo. All our identifications and findings over 2015 vis-à-vis changes to the project compared to our original plan were fully included in our projections. So we don't expect to see any change vis-à-vis our projections due to the facts that you mentioned.

We are strongly engaged, there is real expectation by the way expectation that we can have a more a bullish scenario to what we originally planned, we did another planning for our projections for these assets in a very realistic scenario and we are working with targets oriented to this bullish scenario..

Perfect Solange, just another follow-up question. So the first question, Ivan, is there any clarity at Petrobas in terms of diesel supply to Thermopower plan with advanced payment in order to not to have additional provision risk and just an update about the last slide, what about the five ruling of judicial guarantee? Thank you..

Thank you. The company adopts several procedures both commercial procedures and collection procedure.

This is part of our normal operation in the several business areas of the company in case of non-payment of the company through the contracts that we have with those companies put in place all of the routine collection procedure to enforce the contract.

Now in terms of judicial guarantee, there are still some pending legal disputes and every time you migrate from an administrative process to a debate in the judiciary, you have to make guarantee deposits while you continue to litigate.

And so the amount that Petrobras will be obliged or not to deposit and as co-account to I mean if that is the case to continue this cost seeing all of the these issues at a legal level..

Thank you very much..

Thank you. Gustavo.

Our next question is from Felipe Santos from JPMorgan..

I have three questions, the first is about the detail policy. In general diesel production was already above domestic consumption and your competitors began to import diesel and placing this imported fuel in the domestic market taking advantage of international prices.

In case this scenario remains the same, do you want to export your surplus or sell it domestically? This is my first question.

The second question relates to borrowings from the Chinese bank, in the last slide you showed that 10 billion amount doesn't appear and that was the amount of borrowings with the Chinese bank, that doesn’t appear in your cash flow? And my last question refers to cost proceedings, I think there is one amounting to 7 billion or something else and whether these provisions are not being considered by you?.

Thank you, Felipe. I would like to give the floor to Celestino to answer the detail question..

Good morning, Felipe. In fact our planning model it's a linear planning model and we run this template offering imports and exports of oil and oil products and this model so it generates about economic outcome for the company. We have offered some diesel experts.

We had the first one for Diesel 10 and that took place in February was our first export activity and this is how we intent to work. We consequently seek for the best economic result for the company, importing companies so are deemed necessary to supply the market and we will also operate refineries to reach its utmost the best economic level..

Thank you..

In terms of borrowings, which you just mentioned we just have this agreement with the Chinese bank, I mean, just after the outlay that we will post something there is this $1 billion that was just the first part obviously that we did [indiscernible] and there has been an outlay. This is a very conservative position we don't want to be surprised.

So once the corporation agreement is signed and then we go to the contracts and as the outlay hasn't already been posted, it hasn't reflected in our figures, because we evaluated the entire litigation proceedings at all different legal levels and the amount that we posted is what we think is necessary to face all of the cases both distribution level and in other levels.

This amount of 7.5 billion involves a contribution to Petro in 2010 and the litigation came to a very close tie and then in the judicial level, they were right in terms of the deducting all of the taxes that were paid by Petros..

Could you give me more details, I know that you cannot talk about the term sheet, you have with the Chinese Bank, but can you give me just a few details concerning the basic assumptions?.

The contract is exactly the same as the contract we signed last year amounting to $5 million. So same format in the contract.

There is a 10-year term and this is aligned with what Petrobras is now, but we do not give out any more details, but it follows the same terms in 2009, we had our first agreement and the second one were signed last year in the third agreement will take place this year..

Thank you..

Thank you, Felipe..

Next question from Bruno Montanari from Morgan Stanley..

Good morning and thank you for taking my question. First, I would like to revisit Papa-Terra. I know that you said that you are working according to plan. But can you give me an idea of what could be expected in terms of production level, capacity utilization of the platforms.

And the second thing refers to China Development Bank I think you have 5 billion to 10 billion. Is this with the trigger or once you decide to withdraw, you have to withdraw, the entire amount of 10 billion at ones? And my third question is about the U.S. Class Action.

What will be the next step and whether you have any timing idea for the parties to begin getting into an agreement or settling this issue? Thank you..

Bruno, thank you. Well start by answering your two last question and then Solange will refer to Papa-Terra. Well you are not at large to withdraw the 10 million all at ones and this is not what we want, but this is not like a revolver or trigger. There is a contractual payment term that we have to follow.

In terms of the Class Action, there is nothing has been decided about that yet. We are still in the discovery phase, people are giving their depositions and we are still discussing this and getting ready for the trial and I think the judge has said which is in early September of this year.

Now I’ll give the floor to Solange, who will answer your question about Papa-Terra..

Good morning, Bruno. The consortium is leaning over a total redefinition of the project and this includes the way we operate that special unit that drills well and the performance of this drilling is poor and we are also focusing on the entire draining grid.

And I’m referring to the wells so the location has to be redefine and the trajectory has to be revisited. All of these review work on the operating side and project definition will take place at the end of 2016, therefore is to too early for me to tell you now about any ramp up decision.

In the absence of this new project, we have now our view what the status of the project, what is the performance of the wells, the performance of the rigs.

Therefore, using all of the existing knowledge in our existing models, we ran into optimistic simulations worst case scenario, current scenarios and we are getting ready to adapt to more realistic position, but the entire project will be redesigned.

And I will be able to give you a better answer to answer your question by late October when the entire project will be redesigned by the consortium members..

Thank you very much..

Next question from Diego Mendes from Itau BBA..

Good morning everyone. I also have two questions. One about impairment. When we look at the figures, you use your Brent of $72 long run and what was the basis for that and whether we can see any reduction in this amount and this would probably lead you to further impairment.

And also your cost of capital increased about 100 basis points versus 2014 whereas at the end of the landscape was much worse and this both the equity use and the cost of debt changed. How did you calculated those figures and what should be expected in the long run? And the second question relates to your hedge accounts policy.

If we compare the end of 2015 to the end of 2014, you significantly increased your exports coming from $50 billion to $61 billion in a time when the price of oil is down in the U.S., even extended the 10-year. How should we consider all of these positions in the future and whether you still have room to increase that $61 million further.

Diego Thank you. First about Brent prices and cost of capital, this is extensively debated by all business areas of the company and this is the best view that we had and this is what we use to carried out the imperative test.

This is the company's view, this is a significantly lower number in the case of Brent and a higher figure when it comes to cost of capital, this is our logic. In terms of the hedge account, we increased denomination, but this is compatible.

If you compared two variables, the drop in the domestic demand for your oil products and higher production of the company, which lead us to more availability to export. The company is trying and will continue to be more predictable in terms of our results.

All the rules are well described in the guidelines of the company and it does reflects our best judgment, because it also considers our own debate and also consultations from the outside market..

So in terms of Brent, so $72 should also be included in your business plan?.

Yes, this is correct..

Thank you..

We also have questions in English. Mr. Frank McGann from Bank of America has the next question..

Good morning. Thank you.

Two questions, if I may, one in terms of the write-off impairments, I was wondering, what percentage of the write-off is attributable to the change in discount rates and what amount was related to that and what amount was related to other factors and then just perhaps an update on the current status of your [not to sell] (Ph) assets?.

Frank, good morning and thank you for your question. We do not have this amount in terms of Brent and discount rate, but the IR area, we'll send that to you, we don't have it right now, but we do have it available and we will send it to you and regarding Pre-Salt, I'll give the call to Solange to answer that part of the question..

Good morning, Frank. Our Pre-Salt projects are very much aligned to the outlook described by Moro. We just started up a unit in the first quarter of 2016, there are two other units leased that are up to speed and in the case of one of them we may see an anticipation.

So we may start up a unit earlier than what has been anticipated and this has been the case with some two other units when there was an anticipation. Even four months prior to plan and in the following years after 2017 onwards, we will then follow the rule described before where some of the delay risks have already been sold.

Now in terms of construction of wells and connection of wells, our plan is up-to-date for years we have been working in our well connection plan and we have been sharing the status of that with you and we are incompliance with our plan.

Also in terms of the Pre-Salt in 2015, we added four additional wells in addition to what has been planned and then productivity of the wells and the exploration of [Libra] (Ph) as I had yesterday to the press, it is also up-to-date.

Yesterday, I also talked about the results, the Libra exploratory area had a magnificent performance and again yesterday, I talked about over 300 meters in depth, this was very relevant because very soon, in early 2017, we will install a pilot unit in Libra, it's a pilot unit.

It will be our largest pilot ever in Brazil of 50,000 barrels and once the connection is made, that could have that capacity, we will test it and as time goes by Pre-Salt predictability remains untouched, we did not encounter any other factors that will lead us to believe that we will have delays to that target that we mentioned before..

Next question is from John Herrlin from Societe Generale..

Regarding the impairment discount rate, I may have missed it, can you specify what the discount rate was?.

John thank you for the question. The discount rate is linked to risk and also linked to the activity as well. For each business unit, so each company we have a different discount rate, we do not have a single discount rate for all the businesses, because we have to reflect a specific risk of each business unit.

All discount rates are that are applied for 2015 and 2014, in 2015 there was an increase even because now Brazil had a downgrading in its investment grade.

And what you will find that is common, it's an increase in the discount rate, but there is no such thing as a single discount rate, because each discount rate reflects a different business unit risks..

[Operator Instructions] Next question is from [Anish Kapashera] (Ph) from TBH..

Good morning a few questions please.

Firstly, we've seen recent rise in international oil prices, I just wanted to say what is a huge in terms of increases gas flame and diesel prices at a bump in 2016 in your cash flow forecasts? Second question as well as on Papa Terra you have also had seemed disappointing some of your units Campos Basin on Roncador and Parque das Baleias, can you update on your production expectation from these fields and when you would expect them to reach plateau? And what are you seeing in terms of the underlying decline rate in the Campos Basin, is that accelerating? And the just final one, I was wondering if you can give an update on the progress on the Buzios and of your phase of Buzios and the expected ramp up you would expect for them? Thank you..

Thank you. I'll give the floor to Solange who will talk about Buzios and Campos..

We don’t have problems in Roncador structural problems neither in Roncador or Parque das Baleias. Now let me draw your attention more specifically to Parque das Baleias, we had a unit with operational problems in the first month, but these problems were solved and it is at full speed with very good results as to the decline rate.

Prior to that I would like to talk about Campos basin. Yesterday, I talked to the press what we were mentioning the importance of the basin that we have two kinds of important works there in terms of more economical aspects, we've have been strongly invested to revamp platforms over 2015.

We invested R$2.7 billion in the platforms and now we're designing projects complex projects of full field.

And yesterday we also announced and by the way this also related to the question about the decline, but it was our first field of deepwater Madeleine is [indiscernible] running the 80s and for the third consecutive year we have growing production in Madeleine field.

So our mature reservoir policy and also improved operating efficiency in these various stage units Madeleine for instance and also in those related to Roncador and also those related to Parque das Baleias, these are programs or problems that were solved and now they are bringing quite positive results.

So this was one of the main contributions that allow us to meet our goal of production over 2015.

Just as we're working with the lot of diligence to implement the Pre-Salt project, we're also extremely careful with Campos Basin which accounts for 70% of our output and our cash flow basically lies on the efficiency of Campos Basin of the top 10 are in Campos Basin.

And we have good news to share about the extension of concessions these big field huge deepwater fields whose reserve is not depleted in 2025, so we're already searching for projects and try to have investment for big concession in the area.

Once right now we have already defined the model of the extension, the concession model and for another 27 years we will have a big rewind process, revitalization. So you don’t have a drop in production and therefore decline is under control. As to Buzios, I’m sorry still have to talk about discussion about Buzios.

In Buzios, we also have a campaign for the limits of the field, it is the main area of the transfer of right area. We have extended well tests being carried out in this area with mid-size vessels. And they allow us to mitigate risks once we have the big projects taken place. We have already defined full big projects in the portfolio for this area.

These projects are also being detailed by Officer Roberto Moro, when he talked about our unit. And we talked a lot about EBITDA, but Buzios also has amazing results in terms of reservoir and productivity, we are very happy with the exploration result achieved in Buzios.

Now I give the floor to Jorge Celestino to answer the first part of your question about forecast of diesel prices..

With regards to diesel prices expected and according to our planning. We have the Brent price curve that the management bets on. In addition, we also add to diesel, the spread or the diesel margins and also our competitive hedge.

So in our margin, we have a competitive positioning at the Petrobras system, which is also added to the picture and that’s how we work on prices and price forecast. If I may, I will just like to make or give more accurate information, when I talked about Comperj for 2022. Actually, it is January 2023, this is what we see in our plan.

This is more accurate information..

The next question is from [indiscernible]..

Good morning, everyone. Most of my questions have already been answered. If I may I would just like to have a better understand two things about impairment. First thing is, is there any strategies here, because we’ve seen before some variations, maybe not big variations of oil prices and maybe not so strong about Brazil costs.

But we had never seen such a strong impairment. My idea is will that happen annually, if the performance of oil prices really speeds up and with change over $70 on the longer term. Should we expect to see some gain? I want to know if there are going to be an annual strategy about these fields.

Another question is what about the assets of the transfer of rights, in the light of the new assumptions for impairment. The company also intends to apply this for transfer of rights, because the book value is at 74.8 billion reals by the end of 2014, 2015. I assume you are speaking up simply slightly different in the negotiation contract.

But should we expect to see something downwards in the valuation of transfer of rights assets, which might be positive for the company. And last but not least, also about the revision.

Wasn’t there any value gain, was the value small or not considered yet? And lastly, along the same lines, the impairment test revisited the value downwards maybe due to Papa-Terra or the discount rate and oil value and not related to production profile.

And in the revision of the reserves, there was a big drop 0.7 or 0.8 barrels or the drop of reserves from 2014 to 2015. There was a revision or a drop of 3 billion barrels, if I’m not mistaken 1.7, 1.8 due to technical and economic reasons as posted in the report.

Is there really no impact on production, are these reserves that have not been develop yet or that will be developed in the future or should we expect to see another impact due to these reserves? I think, I have more than two questions but around the same topic. Thank you..

[indiscernible] thank you, Ivan speaking. This is an annual review, it was the regular periodicity and it included all the assets including the transfer of rights you mentioned and you also mentioning in your third topic about extension.

Extension was afterwards, it is not include the balance sheet in 2015, if I’m not mistaken, it was discussed 10 days ago. So there was no impact on the balance sheet on March 3rd more specifically and as to the impact on reserves Solange is going to answer your question..

Good morning, [indiscernible]. More effectively and maybe redundant because Ivan already mentioned this. The provision in test or recovery of impairment test, this recovery test happens every year and this has been a typical year, due to the magnitude of the impact of prices.

So basically that's what happened, the price impact, the price in which all the companies assets have been tested last year, they were tested again.

So not only the forecast and the drop of price in the year, but also the long-term forecast that's the basic thing, tests will run based on a long-term forecast 30-years to 40-years for E&P, much longer and this year we reduced our projections, future projections based all the analysis in the market.

So the assets were put to the test with very different amount, no exception, transfer of right although it’s a separate contract, it is subject to rules. Subject to rules of appropriation of reserved imparity test, like all the assets in this topic.

And you also mentioned at the end to the announcement we made, 20% reduction in our proven reserves that's what we published. Once again, under the same impact something unique in our trajectory and also I'm unprecedented statistics sudden drop as we had with Brent oil prices.

Now this revision does not have an impact or significant impact, because that's the long-term revision, it's long-term and Petrobras is also very strong in this regard, trying to increase the recovery factor.

So we are working hard to increase the recovery factor, even though sometimes we have a lower impact of those amounts and you also make reference to some technical facts.

One of the technical facts that’s mentioned at that time, is specifically Papa-Terra, Papa-Terra is a midsize asset and it is Post-Salt from Campos Basin and it also suffered a significant impact due to cost reasons and also associated to a different impact.

So this was due to Brent price in the long-term, but also additionally, it was also affected by the performance of some wells and reservoirs for the completion well rig and we also had a higher impact on Papa-Terra compared to other assets, but there is no impact on production.

By the way I answered that before in the first question, when we had at our breakfast meeting, we also discussed the business plan. So that business plan already included our most realistic scenario for projections and deliveries of these assets. What we are analyzing right now on the accounting aspects related to parity test..

Thanks [Technical Difficulty] review the amount in view of situation involving discount rate, exchange rate and price of oil.

Right?.

Yes, you are right. You got it right..

Thank you very much..

The next question is from Lilyanna Yang from UBS..

Thank you for this opportunity. I have a question about your divestment plan, that you believe that you will still saw a $14 billion until the end of the year as your target anticipate. And what kind of assets you will be putting for sale if you have your onshore fields that should be put for sale.

There is R$1.2 billion was due to what and from previous answers, I noticed that in addition to that, there was nothing related to Pre-Salt.

My third question relates to local content, what is the level of fines due to the non-compliant that were issued to you and how many waiver requests has been already accepted in your particular case of course?.

Well, you have lots of questions. So I'll give the floor to Solange, but speaking in a more general terms about the investment plan, yes that target is R$14.4 billion for this year, the company is working in different areas, some of them have already been disclosed.

But I would like to ask Solange to answer your questions and something related to selling our internal assets.

Good morning, Lilyanna. It’s a pleasure to speak to you. Well again, I will just change the order of answer starting with the fact that I mean you asked me speak about the type of assets that are part of our divestment portfolio.

And again I think I recall our last conversation when we said that there is no limit in terms of the maximum amount of returns for the company and what assets will be part of that in terms of upstream and downstream.

Assets that are put for sale involved 98 concessions, production concessions and six other prep assets that are very much integrated, 10 production sites scattered in different areas from [Indiscernible].

We did some very detailed work listing all the benefits to Petrobras, which involved divestments and also in terms of being more attractive to other players small and midsize players that may be interested and in terms of risks and opportunities these are things that are all part of package that can be very attractive to takers.

Now in terms of Lapa, its more related to seismic repositioning as more technical things and that's what led us to that result, but that was not necessarily linked to pricing. Now answering your question on local content. I think you can notice an attempt on part of the regulating agency about how we comply with local content requirement.

The regulating agency has clearly demonstrated its intent to promote further development not only from foreign companies, but also Brazilian companies with an eye on developing the industry as they know the difficulties encountered by some vendors and suppliers in Brazil this new measure has been very positive.

We are keeping a very good dialogue with the regulating body and therefore we do believe that soon enough we will see some positive results. Now you also had a question about the waiver and that local content debate, but I will ask the IR people to get in touch with you later. Thank you.

Now just talking about Lapa, the impairment was more related to the production platform, maybe I didn't make myself clear. The reservoir of the area was submitted to a seismic analysis, so it is not related to the platform neither pricing..

Thank you..

Next question is from Pedro Medeiros from Citigroup..

Thank you good morning. I also have a few questions.

First, Ivan could you please tell me a bit more about the performance or programs related to manageable costs, can we just list all of the gains that you were able to achieve related to renewal of contracts or overhead or new positions and how can this compare to your initial expectation? The second question is a follow-up on the transfer of rights issue, I understand that the impairment test is not a fact the asset base related to the transfer of rights.

But could you please give me an update on the contract renegotiation the renegotiation of the amount of the contract and what is your expectation concerning gains or losses? And my third question is merely a follow-up question, I look at your financial results and you have a provision for abandonment of R$14.1 billion in 2015 and this should have been recognized in the fourth quarter, was this included in the results this is something that is not very clear to me now?.

Pedro, first of all thank you for the questions. The reduction of these manageable expenses, I mean, are you happy with what you have so far? The answer is yes.

There are a lot of initiatives in many different parts of the companies just mentioned a few, I didn’t want to give you any precise information right now, but we can contact you further and give you all of the breakdown information you need. But it doesn't mean that the company will not pursue further improvements.

Solange already talked about the second wave, she talked about that yesterday. We will work hard on the second wave and our intent is to achieve further reductions. We do believe that the future price of Brent is now in a different level a lower level in the long run and this certainly had a significant impact.

And to that end the company will have to reinvent itself, it will have to adapt it costs to the new reality. This will therefore be a continues process and we will identify any possible opportunity to promote further reductions in terms of the transfer of rights, I will again given the floor to Solange..

Good afternoon or good morning Pedro. We also shared with you that there are two certifying companies that were hired one on the part of the government and one on the part of Petrobras. They are both working diligently to come up with the first results in the second quarter 2016.

We’ve been meeting to discuss assumptions, but I don’t have a schedule clearly defined, because everything will be paying on when the certificates will be delivered. Therefore, right now I cannot tell you anything about gains or receivables coming from the transfer of rights..

Thank you very much. We now conclude the Q&A session of this webcast and audio conference. I would now turn the floor to the company’s Director, Ivan de Souza Monteiro..

We would like to thank you very much and if you need any additional information please talk to our IR people. Thank you all very much. The audio for this conference call for replay and slide presentation will be available at Petrobras IR website at www.petrobras.com.br/ir..

This concludes today’s conference call. Thank you very much for participating and please disconnect your lines. Have a good day. Thank you..