Isabela Mesquita Carneiro da Rocha - Executive Manager of Investor Relations Ivan de Souza Monteiro - Chief Financial and Investor Relation Officer Solange da Silva Guedes - Chief Exploration and Production Officer Jorge Celestino Ramos - Chief Refining and Natural Gas Officer Hugo Repsold Júnior - Chief Human Resources Officer Roberto Moro - Chief Engineering, Technology and Production Development Officer Joao Adalberto Elek - Chief Governance and Risk and Compliance..

Caio Carvalhal - Brasil Plural Felipe Santos - JPMorgan Gustavo Allevato - Santander Diego Mendes - Itau BBA Pedro Medeiros - Citigroup Harry Kevin - Barclays Capital Frank McGann - Bank of America Merrill Anish Kapadia - TPH.

Good morning, ladies and gentlemen. Welcome to Petrobras Conference Call with Analysts and Investors for the Presentation Concerning the First Quarter 2016 Results.

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, at which time instructions on how to participate will be provided [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 Refining and Natural Gas Officer; Mr. Hugo Repsold Júnior, Chief Human Resources, [HSC] (Ph) and Services Officer; Roberto Moro, Chief Engineering, Technology and Production Development Officer; and Mr.

Joao Adalberto Elek, Chief Governance and Risk and Compliance. 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 the projections and targets are mere forecasts based on the expectations of executives regarding the future of Petrobras. To begin, we will hear Ms Isabela Mesquita Carneiro da Rocha, Executive Manager of Investor Relations who will presenting the results for the first quarter of 2016.

After that, we will answer the questions coming from participants. Please Isabela you may proceed..

Good morning and good afternoon everyone. I would like to start the presentation by mentioning slide number two, which has a disclaimer to analysts and investors. Now going on to Slide 3, we talked about the exchange rate the average exchange rate, in 2016 was 390 which is 30% higher than the average exchange rate in the first quarter of 2015.

But when comparing to the fourth quarter, there was a drop in the Rio de Janeiro in the end of the period. Now moving to Slide 4, will show Brent performance.

We see a very low amount of $34 in the first quarter of 2016 which I would down by 37% when compared to the first quarter of 2015 and also a decrease when compared to the same period of last year. This Brent price is very low and it hasn’t been like this until the first of last year.

Now looking at the results highlights, I would like to start by referring to gross income. We had R$21 billion, which is down by 6% when compared to the first period of the year before.

The main references is a drop in the sales of oil products and lower sales of gas and power due to demands coming from the electric sector and prices of electric energy. There was also a drop in the oil and gas production of 7%.

The drop in Brent prices also led to lower amounts of export prices of oil products, and we had an increase in cost due to depreciation, depreciation because of resource drops and also impacts from the drop in oil prices. This is due to our depreciation method which includes production products.

This was due to lower margins of gasoline and diesel, lower export volume of oil products. We had 14 % increase in imports and lower costs from production taxes and imports. Now looking at the operating income, we had R$8.1 billion in terms of results, which was down by 37% when compared to the same period of the year before.

Here we see higher expenses with the idleness of equipment particularly drilling rigs and more expenses with healthcare plans due to increases in interest rate according to a higher actuarial liability.

By end of first quarter of 2015 we experienced a reversal in terms of impairment on in the electric sector going to a net financial results which was minus R$L8.7 million here we see an additional expense of R$3.1 billion due mainly to decreases in interest expenses due to exchange rates and lower indebtedness.

If we compare to the first period of the year before, a higher FX coming from exchange rate variation and also a different reclassification of head accounting in terms of shareholders' equity vis-à-vis the result. This minus 8.7 overlaps the operating results which lead us to a loss of R$1.2 billion.

Now going to the next page, page number six, here we have a cash position on the company and here we have important adjusted EBITDA figures of R$21.1 billion, this amount represents a slight drop vis-à-vis the year before. If we exclude non-returning items EBITDA would be R$22 billion.

Now looking and the EBITDA margin is 30% which is a very high margin considering the very low oil price environment.

Looking at the operating cash flow, which was R$17.3 billion up by 5% vis-à-vis the year before and this was due to higher margins particularly in gasoline and reduction of expenses with production taxes and imports which were in part offset by a lower crude oil exports and a drop in the sales volumes.

Now looking at investments, we had an important reduction in the first quarter, we had R$14.9 million in investments 16% lower than the year before and I would like to highlight that 88% of these investments are concentrated in E&P.

Now looking at the free cash flow slide, which is operating cash flow minus investments so we see a free cash flow of R$2.4 billion in the first quarter of 2016. It is positive for the fourth quarter in a row.

This is a very significant number because it reflects our efforts to deleverage the company and also our efforts to tours and discipline to reduce investments and capital. So the brand price environment is down and so this free cash flow result is very important.

Now moving on to slide number seven, here we had indebtedness evolution and the position of the debt of the company there was a reduction in total indebtedness, which has been coming down since the third quarter of 2015, but in this last quarter we experienced a drop from $492.8 billion to $450 billion.

And this also impacts the net debt there was a 6% drop in terms of dollar exposure, we have a $126.4 billion of gross debt and a $103.8 of net debt and this is an increase of 3% vis-à-vis the last quarter.

In this quarter, we amortized R$24.7 billion in interest and principal and in terms of borrowings there was just a leaseback with CBC amounting to $1 billion. Therefore, here we see the behavior of the cost of debt and the average tenure showing the possibility of extending the debt.

In terms of debt KPIs, we see a drop in a debt over EBITDA margin from 5.31 to 5.03, which is down by 5% in leverage as well or is down by 3%.

Going to slide number eight this is just a summary of all the variables that have been mentioned, I would like to draw your attention to the investment line that talks about the components which is a bit different from the numbers presented on slide number six, which brought us the cash view.

Now moving on again and talking about operating results on slide number nine.

We refer to E&P in Brazil and abroad, we have 2.6 in the first quarter, we had 2.6 million barrels a day of oil equivalent which is a 7% drop vis-à-vis the year before which is explained by the concentration of maintenance stoppages or scheduled stoppages that we last quarter. There was an increase of 5% in production.

This schedule of stoppages happened in the Compos Basin and Parque das Baleias, Espírito Santo and [indiscernible] all of these units that stopped already resumed operations and as a fact was mitigated by the ramp up of new platforms that are now in the Pre-salt and also the ramp up of Itaguaí and Mangaratiba.

I would like to highlight that the production in April already showed signs of recovery. We had 2.69 million of Boe in April and we hope that before the end of the year, we will have a lower scheduled maintenance occasions going to 2.655 million barrels of oil in Brazil. Here in the quarter we see that that was 1.980.

Now moving to the next slide, I would like to highlight Pre-salt which is shown on Slide number 10. We now highlight an increase of 29% in Pre-salt production since the first quarter of last year until the first quarter of this year.

Therefore, in terms of operated position, we are at 159 a day we have Petrobras shares and the Partners’ stake and in terms of oil post gas we already surpassed one million barrels a day since July of last year. I would also like to highlight the platforms that started up in the first quarter and they should be in operation by the end of the year.

We have Maricá and Lula field and Pre-salt due to the high productivity of those stations. The lifting cost is lower by $8 per barrel and we expect to see another unit in Lula in Saquarema and another FPSO in Caraguatatuba.

I would like to highlight the Pre-salt operation and in addition our production in the Campos Basin experienced a 12% increase from March to April due to the operation of the platforms there were not operating.

The next Slide, the Slide 11, we have lifting cost, our lifting cost in Brazil experienced an important reduction, now we have 10.49% per barrel which is down by 21% when compared to the first quarter of 2015 and this also is due to higher expenses in the Campos Basin and the impact of Pre-salt in Petrobras total output.

The Pre-salt lifting cost is lower which reduced the production margin of Petrobras and they are not in reais the lifting cost was stable.

In terms of lifting cost abroad, there was a drop which is explained by the sales of Campos Austral Basin, they had higher operating costs and also the start up of new fields in the Gulf of Mexico that had lower costs. We also have to consider the depreciation of the Argentine currency.

So the cost of Petrobras including Brazil and abroad is 10.13 Boe - $0.13 which is very significant for the oil industry. Now moving on to the Slide 12, we see the production of oil products, the oil products output in Brazil and despite the fact that the market is on a downturn, the output is stable because we reduced the share of imported goods.

And then we had from 85% to 86%, but in terms of yield in our refining area went back so we had increase to 70% for diesel and gasoline. This also includes an increase in diesel output. It was 42% of the total production was diesel when compared to 40% the year before.

And this can be translated into an improvement of our efficiency in refinery and honestly 80% of the total output is diesel. And we think the diesel production there is the share of diesel S10 which has 10 PPM of sulfur so it's a high quality diesel. So the stake of the S10 diesel in the total amount of diesel produced increased this year.

So we have a better adjustment to the production profiles adjusting it to the Brazilian demand and also the quality of the products delivery. On Slide number 13, we show sales volumes in Brazil. There was a drop due to drops in demand because of the current economic situation.

So from 2.56 million barrels a day in the first quarter 750 diesel barrels and 564 gasoline, so that was a 5% decrease. And this drop was due to Naphtha there was a 10% decrease in Naphtha, because of lower demand mainly from Braskem.

There was also a very important demand of oil fuel of 33%, which is explained by lower thermoelectric demand and in diesel we experienced a 12% drop explained by lower demand. There was also increase in sales by third parties and a loss of market share in refining and the lower generation by diesel thermal power plant.

So as I said there was a reduction in the demand but our output profile is now more adjusted to the Brazilian demand profile.

Now moving to Slide 14 we have the trade balance imports and exports showing a reduction and this was due to reductions in demand that's why now we have lower imports and higher exports so there was an increase in exports of oil and oil products. We exported gasoline, naphtha, and LPG.

So we see an improvement in the total balance vis-à-vis the same period of the year before when it comes to net balance of liquids. Going to Slide 15, we have refining costs in Brazil.

Our refining cost in Brazil was US$2.27 per barrel which is down by 20% vis-à-vis the same period of the year before, in terms of denominated in reais there was an adjustment due to the collective bargaining agreement and also due to the reduction of process feedstock and this cost is really, this chart is really important because of the refining costs in Brazil.

Abroad the refining cost is higher above $4 per barrel and there was an increase vis-à-vis the year before mainly due to higher expenses for E&P in the Pasadena refinery they were offset by the depreciation of the Argentine currency, because here we also include the Bahia Blanca refinery located in Argentina.

Now moving on to Slide 16, we have an overview of the general and administrative expenses, they were down by 2% when compared to the first quarter of 2015 and despite that inflation of approximately 10% this reduction stems from several initiatives to reduce costs.

Even though several initiatives also had an impact on the costs goods sold they also impact G&A expenses. Here we have lower expenses with third-party services offset by higher expenses with personnel costs due to the collective bargaining agreement. And this also impacted reduction in costs which is quite important for Petrobras.

Now going to Slide 17, we have the operating income, I would like to highlight that Petrobras is an integrated company and very balanced in terms of oil production, oil products output and sales so there is a natural hedging, which is quite interesting if we look at an environment with very low oil prices.

So the operating income considers internal transfer operations and also because the company is fully integrated and that brings about a better balance. Therefore, you know we had R$11.5 million for downstream and then we had a lower amount of E&P and up by 1.1% gas and power distribution was down by 0.05 and operating income was 8.1 as a whole.

In terms of E&P, we had 0.8 billion of losses minus 0.8 in furnace, there was a drop in the oil prices, lower crude oil production and that was also due to a depreciation effect and the idleness of the equipment, which were offset by lower production taxes.

If we include idleness the result alone will be enough to bring about a positive result of about R$1 million, in terms of gas and power there was a positive result of 1.1 billion given to higher commercialization rates and acquisition costs both for LPG and Bolivian product as well. There was a drop in [LPG] (Ph) and a reduction in sales of gas.

Now moving on to distribution and here we are referring to distribution both in Brazil and abroad that a result was negative by 50 million explained by lower sales volumes due to the economic downturn there was a reduction of 59% in the sales of diesel and diesel oil to General Electric Biofuels.

There was a drop from 33% to 32%, part of this decline is also explained by the repositioning of BR, which is privileging not volumes, but quality and this is also related to losses in receivables from the thermoelectric plan and government.

If we’re not for the non-recurring numbers to BR, we would have a result close to R$800 million in the distributing company.

In terms of your biofuels there was a reduction of a 100 million and in the corporate segment we still have the same levels of - the same period of 2015 which was minus 4.0, the final result the operating income was 8.1 billion as we mentioned before. Slide number 18 brings our current cash flow view for 2016.

It also incorporates some expectations for the end of the year. Our initial cash flow was $26 billion. It's all denominated in U.S. dollars. Operating cash flow is better so we expect to have R$24 billion and also we have judicial guarantees.

These are necessary guarantees referring to cases that leaves our administrative scope and go to the judicial [indiscernible] and so these are cash guarantees and we associated to them $6 billion as the amount of judicial guarantees. In the same period the year before this was only $100 million.

Now speaking about dividend interest and amortization, we expect $20 billion divided into financial expenses and amortizations therefore the answer is zero.

Investments was $90 million and in terms of divestments, we continue to pursue our target of $14 billion, which was announced to be part of our plan of $15.8 billion, and we just announced the signing up of the sale of the Argentina plant. And so divestments are taking place, and we are just reinstating our target.

In terms of rollovers and borrowings, this has already occurred. So without the lease back, with SCPC and some rollovers, the final cash flow is $21 billion. I would like to thank you for your attention. And now, we can go to the Q&A session..

We will now initiate the Q&A session. We would like to ask each participant to ask at least two questions slowly and clearly. And please ask them one after the other. We also would like to ask you that you do not use the speaker phone.

Questions in English will be translated into Portuguese for the Executives of Petrobras who will answer them back in Portuguese and the answers will be translated into English. Our first question comes from Caio Carvalhal from Brasil Plural..

Good afternoon everyone. I have two questions. The results like as said before we had very interesting operating factors and also no recurring factors. I would like to focus going forward about upstream actually two questions. Firstly, I understand the first quarter to do with maintenance. And I think there was a dramatic drop particular in Campos Basin.

Do you have any outlook, could you give us some guidance about the depletion this year vis-à-vis the previous year, specifically for Campos Basin, not only an order of magnitude or something closer to 10%, but about Campos? And second question is about cost going forward, I understand the lifting cost of Pre-salt you mentioned it's lower than $8, naturally considering all fields, particular those in production, what about the lifting cost of a Pre-salt field today which is still in the development phase or just about to be developed? Very specific upstream questions, so if you could give us more detail it would be great..

Caio thank you for your question, it's Ivan Monteiro. Solange Guedes is going to answer your question..

Solange speaking, good morning Caio, I perfectly understood your questions. The numbers well actually you give me a great opportunity to clarify a couple of points related to this very dramatic reduction and production in Campos Basin in the first quarter 2016. You are right.

It did happen and I try to clarify yesterday with additional data and our interaction with journalists. In reality we had a stoppage strategy over the first quarter and it was very aggressive. We started very important units of Campos Basin for maintenance purposes.

So the impact in the first quarter and I think you followed up our numbers, we had stoppage in production in Caratinga lastly more than one Marlim unit. We stopped another two units. So all these units are above 100,000 barrels per day of capacity, not necessarily production and this was the impact.

So our strategy was to stop and this is not related to the numbers that you are asking. I understand you have a clear distinction in your question about depletion, which is precisely the production capacity of the reservoirs, which are not usually related to scheduled maintenance.

We had something around 10% of decline or drop in production in our reservoirs in Campos basin. However, it was very much affected by positive event or return some wells back in production, use systems like Papa-Terra.

So, my perspective assessment based on the terms you mentioned I would say that over the coming years we will have a depletion not related to factors like scheduled maintenance, but amounting to 12% or 15%, which is our reference from the industry for such maturity.

And also for this environment which is offshore deep waters that mostly apply to Campos basin, while Caio it is in this context that we are revamping and scheduling revamping up Marlim field, so we can have better operating conditions to better manage that asset.

So with the extension of Marlim contract, it gives us a chance to work on the production program again and then we will start planning better recovery. So, this is the answer to your first question.

Now, second question, you want to know about lifting costs that we announced, the excessive reduction in lifting costs about Pre-salt; naturally this is related to the startup of increasingly more high production wells.

In the first quarter, we had a ramp up of units that started up the second half of last year and so that you might recall it started in 2016. Now something very important to mention which has to do with the outlook for the future that you asked about Pre-salt, our view about this is very bullish in terms of a more aggressive reduction.

Because as of 2017 we will be starting up our own unit and this has a direct impact on our operating expenses and also our lifting costs. So how will that happen? Our charted units, freighted units have a direct impact on our lifting costs.

And this is due to the freight or chartering costs we pay for these units and the opposite happens whenever we have our own unit. So we expect to have positive effect in the coming years. I believe our yield has reached the limit and we will keep on working hard and we expect to see cost reduction optimization of projects but also positive impact.

Because we will be working more with our own units rather than these over charter units in Pre-salt. I hope I've answered your question Caio..

Perfect. Ivan and Solange thank you very much for your answers..

Thank you Caio..

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

Good afternoon everyone, thank you for taking our questions. Ivan firstly, I would look to better understand something the company has been very vocal in terms of stating that for the first time in many years it is generating operating cash above its investment commitments again.

For many years the company was investing 1.5 times its operating cash generation ability and now we have managed to move to a different level with more cash after investments. But based on the numbers and figures there is not cash enough left to honor the debt.

The company still has cash used last year and based on the numbers mentioned today the same will happen this year.

So could you clarify considering the assumptions that you plan, in which year we will expect to see the company becoming positive net cash generation again including the debt service and not only coping investments? My second question is for Solange, I would like to have a better understanding of the rig fleet you have today.

Solange could you give us more visibility about the number of rigs you currently have, deepwater, ultra deepwater and how many would be necessary and how would you compare to what you need for the current plan.

What about the idleness level that we see this quarter, will this be recurring for the coming quarters and do the contracts expire or is it something non-recurring, because you will have most of your cash position and you decided to use the rigs less often and save cash as a result and that would not be recurring going forward.

And if may, if I, can I ask another question. Jorge I have a question for you, we can see that last year your downstream result is very significant, well last year by the way it was historically high, if I'm not mistaken it was a record level at Petrobras downstream.

You have $12 billion, but if you check the price ratio considering domestic and foreign prices, on an average for the year they were in line with international prices and when we think about Petrobras in line with [PP&E] (Ph), we expect that downstream to have $5 billion of EBITDA rather than $12 billion.

And maybe one reason is that effect of gasoline abroad were much higher than historical figures it was $12 and the same goes for this year in this quarter. So despite dry season on average it is very high. So our question is what about sustainability.

Is it something out of this current scenario or do you think it will be sustained? If we think about PP&E in the future, do you think we will have $12 billion or $5 billion as EBITDA? I think it varies..

[Andre] (Ph) thank you very much. I will answer your first question, Ivan is speaking now. It is very hard to predict anything.

Now what is particularly striking in the management’s decision is that rather than focusing on production we focus on profitability and rather than starting out budget based on the production goal we start our budget preserving our Company’s liquidity and predictability levels. So the mental model is different.

Not only one initiative Andre but a whole set of harmonious initiatives starting with more stringent capital use, cost reduction, be then administrative or business oriented and an important component and this may accelerate the deleverage process and contribute for cash generation to cover all investments including the debt services.

Undoubtedly it is divestment. As you followed up, we have three announcements; one in Argentina, another in Chile and another of exclusivity with Brookfield with gas pipeline, and we are making our efforts $1.5 billion for 2015, 2016 and our goal for this year is $14 billion.

So the whole set of initiatives in my opinion and according to the management’s opinion we expect to speed up ripping the results over 2016, so we can reach the horizon that we so much desire. Now Solange is going to answer your second question..

Good morning Andre, I realized based on your comments you did your homework about our idle equipment. You want to know about recurring levels and other quarters. This adjustment is still been performed over the first quarter of 2016. So more objectively you are right.

We are going to have very similar results in this item due to the same reasons driven idle rigs. There are several issues of different natures been address at Petrobras and they may lead to a reduction in recurring items over the second half of the year. And as I said, yesterday during the press conference, we expect to work within 30 and 35 rigs.

That’s what I said yesterday. We don’t have a fixed number. We don’t a set number close it will vary but precisely due to our vision considering our future investments.

Andre I don’t have here with me a distribution of water depth of deepwater or ultra-deepwater I don’t have the numbers you want, but it's excess resource will be balanced by the end of 2016.

And our plan is to be slightly above 30 by the end of 2016 maybe later on the investor relations department can give you more detail of the breakdown between deepwater and ultra deepwater. But our fleet is nearly all oriented to ultra-deepwater.

Shallow water rigs where we have been successfully going down considering our investment demand and operation demand in our portfolio. And pretty much focus on exploration for Pre-salt, Libra and also Pre-salt development, which is the focus of our business plan. Jorge Celestino is going to answer your last question Andre..

Hi Andre. Celestino speaking. Good morning. I’ll be breaking down your question and our answer in three topics. Firstly, our performance and cash generation, downstream more specifically. We work with three different perspectives.

First perspective, how do you see the progression of crack spread? 2014, 2015 there is a decoupling of crack and gasoline vis-à-vis diesel particularly in dry season. We only started in the $15 or $20 per barrel above Brent prices when you compare with diesel around $14 per barrel and in the winter season the crack is decoupling.

So in our horizon up to 2017 this behavior is expected to remain and to be similar at annual average there is something around $10 to $12 a barrel cracked diesel and that's what we expected to see in the market by 2017. We are not including here a higher number of stoppages in the US for instance but we are considering an average and a trend.

So this is the best number we have today and that's what we are confident to consider in terms of price forecasts. Now the second point, we have been working very strongly in order to improve our product portfolio.

We are working to improve our mid and light products gasoline, diesel are very consistent and consistently increasing their corresponding yields.

So well, we have 3% which is a significant value and [indiscernible] is performing better and better, the diesel position is quite sustainable and [indiscernible] also improving our performance, so we are really making efforts in order to include net and gross margin.

We want to improve margins efficiency and better planning our supply chain, which is extremely valuable to our integration operation in Brazil. And lastly, today we work with competitors prices. We understand price to be a very significant commercial approach to Petrobras.

So first we have to understand what we mean by commodities and the risk of the operation and Petrobras' competitive edge in Brazil. As a result, we have been managing to have significant margins in our business operations. As a result, we can envisage that in our results, our results are quite sustainable when we design our business plan..

Great answer, thank you very much..

Thank you..

Our next question is from Felipe Santos from JPMorgan..

Good morning everyone. Actually I have two questions, firstly about operation and production.

I have a question about the amount on the slide, as to operations the major stoppage happened in the first quarter of the year, due you expect to have platform stoppages with the same level that we had in the first quarter, also in the second quarter or from now onwards, something that might have an impact on production.

Second question so the platform that will be started up in Lapa fields, will start to happen in the third quarter or by the end of the fourth quarter. And what about the new platforms that are just being started up, were the wells drilled beforehand. This is my first question.

Now the second question, I understand you have cash projections by the end of 2016. Now we are almost in the middle of the year so possibly you are already considering 2017. Do you think that 2017 cash would be similar to the levels we have seen 2016. Social guarantee and investment plans had some slight changes.

Was it due to anything more specific or just due to exchange or dollar impact..

Felipe, good afternoon. Solange is going to answer your questions and then I'll come back and talk about cash position..

Good morning Felipe, Solange speaking. One of the metrics that I usually talk about concerning production stoppage, I tend to talk about 2.5 and 3% of our stoppage as reasonable numbers. So we can adequately meet all requirements and adjust demand in our equipment so that can be in compliance and operational.

In the sense, we announced that our stoppage volume that had an impact on the first quarter of 2016 was 5%. This volume of 5% was planned beforehand and the top management have mentioned Red flags about our predictability in order to strengthen the importance to have predictable processes.

The result of 5% of production stoppage in Q1 2016 was planned before hand like I said before. So we are in line with our projections. And likewise, we have been planning and will be performing stoppages lower than 2% for the rest of the year.

The best scenario today is that the impact will be less than 3% over 2016 and our production will be 2,145,000 barrels of oil in Brazil, so this is the answer to your first question. Lapa, you asked about Lapa. Caraguatatuba will be installed in Lapa field and also Saquarema.

They are both expected to complete third quarter of 2016 and not fourth quarter of 2016. And lastly, if I understood your question correctly about the wells, so what do we do. Before the unit reaches the location, we have some wells prepared. So they can be sequentially interconnected, bringing the rest ramp up possible.

It is not immediate due to technical reasons and the sequence and interconnection of the wells in the FPSO, but we have allocation of resource that is enough to provide wells ready for sequential ramp up. Correcting myself Itaguaí and Cidade de Maricá, both are just about to be in the ramp up Phase and they follow the same rational.

So we prepare these wells but physical interconnection works of the production lines take place following a sequence and this is what we mean by ramp up. Sometimes they happen in both units and in the third quarter this will also apply to Saquarema and Caraguatatuba..

Perfect. Thank you..

Felipe, actual cash projections clearly the company is already trying to bring solutions for funding solutions up to 2018. When we drafted our budget the average Brent was $45 per barrel for 2016 and exchange range way above what we have in the market today.

So the combination of both factors Brent and exchange rate brings better operational performance, which is clearly shown in our Slide.

Our expectation maybe the numbers maybe slightly higher by year-end and to cash at the end of the period the minimum cash is $15 million but we also have or expect to close around $20 billion or $21 billion by the end of 2017. Please bear in mind there are several things that are being identified by the company and followed up by the company.

And they may bring higher benefits for this number of $20 billion or $21 billion by year-end. We have been extremely conservative in the numbers of fundings and we have a challenging number for divestment but even if we consider the combination of both numbers $21 billion and $20 billion by the end of 2017 seems to be pretty reasonable..

Okay, let me allow, allow me to just make a follow-up.

With operating improvement and a better cash position, higher cash position, with the divestment, would it be reviewed or you will still pursue the same target?.

The target will be the same..

Thank you very much..

Our next question comes from Gustavo Allevato from Santander..

I have two questions, the first relates to Papa-Terra, and whether you could give us an update about all of the activities you are working on to recovery production? And my second question is about CapEx. The annual CapEx is about $16 million.

Is that below what you had anticipated earlier in the year? Should we expect that the CapEx would be below the target, or still too soon to tell?.

Gustavo I’ll give the floor to Solange and then I will refer to CapEx..

Gustavo, good morning. The consortium that operates Papa-Terra consist of Petrobras and they are working hard to redefine the project. And the target is for the last quarter this year we will have then a new project for this year, there will be a different well geometry and a different drainage grid. The project was stopped this year 2016.

So as to allow an integration of both companies and they will now be focusing on the reoptimization and review of other tasks to be conducted. So by year end, we will have a new continuity planning to continue and develop Papa-Terra..

Gustavo about the CapEx. What you see on the slide, in the first quarter there was low performance from the supplier chain. You know that the government internal process for payments and as this the deliveries were not done according to schedule.

That's why we have this decline, you know in terms of what we envision for the first quarter, but this does not change our forecast of output for this year, this is something that we talked about earlier, even with the stoppages mentioned by Simone and lower CapEx we have - I mean the CapEx remained unchanged for 2016..

Thank you very much..

Our next question comes from Diego Mendes from Itau BBA..

Good morning everyone, I also have two questions. The first one is I would like to understand what you think in terms of your strategic plan for this year, earlier on in the year the crude oil prices were very low.

We now see a price over 47 and then we saw some changes in the plan, could you please tell us how you are working with the main variables in this area. And my second question refers to the electric sector. Once again, there was an acknowledgement of PDG because of some injunctions when you did not pay beforehand.

I just want to understand some injunction whether they are finished or not and what could be expected in terms of trade receivables of the electric sector..

Thank you Diego very much. First the executive board of Petrobras is very stringent and disciplined in terms of a strategic planning. All of the measures are totally in line and they're pursued as internal targets for the entire organization.

The fact that these two variables, Brent prices and exchange rate behavior was better than what we had in our plan and this was translated into our budget for 2016 all of those things are very good news but this does not affect the strategy of the company.

One example is, 88% of CapEx will be geared toward E&P and mostly focused on pre-salt and production. That shows that we have been giving out information and we are trying to deliver exactly what has been internally discussed by the company and what had been agreed by the Board of Directors, that's why we are very disciplined in this regard.

In terms of the electric sector, you said, we had to comply with some injunctions from the supply side, but we have also disputing in court all of our rights in terms of the processes. And we are working diligently to arrive at an agreement and then end with a situation where you are forced to supply just because of an injunction..

So is there any other injunction you know in the horizon?.

No, we still have some to work on with..

Our next question is from Pedro Medeiros from Citigroup..

Good morning everyone, Solange, Isabela, once again thank you for all the answers so far, I have a question and a few follow-up question. Could you please comment on the performance to-date of your management and governance program in terms of personnel cost in non-operating areas.

You reduced 30% of some jobs in non-operating areas and this could generate savings of almost 8 billion a year and you also announced some new things in terms of voluntary dismissal. Can you tell me about the performance of these programs and when could we expect to see more robust results in the company's quarterly results..

I would just like to give you some additional information. We had anticipated 30 but we reached about 44%, we had anticipated 1.8 billion reduction and we already have 0.9 million. I think most important benefit was a higher participation of the decision that comes from the technical area all the way up to the Board.

We created a Statutory Committee and they makes a decision more robust and they are more detached from what we had before, something that was abolished.

One of the first acts from the Executive Board, was to do away with the individual decision making not only in terms of what was the - you know the group that decided, but also the quality of the decision. Now we have a Statutory Committee that has executives from different areas of the company and therefore the quality would be much better.

Because all of divisions of the company are discussed in a collegiate fashion and then it goes through the executive directors and then finally to the board.

So in terms of cost reductions I would like to emphasize the quality of governance, the quality of governance, the quality of our decisions, which improved substantially after we introduce the Statutory Committee. Now what about your follow-up questions, you may proceed..

Thank you, Ivan. Thank you and congratulations for your success so far. The first follow-up refers to Andre’s question, just maybe I didn’t hear it well. That line of non-scheduled maintenance and operating cost in view of the idleness of the rigs.

Whether it should continue to be high this year, or we should anticipate any drops or decline in the following quarters. I do apologize for my questions, but it was not clear to me. The second follow-up question is to Solange, in view of the impairment in Lapa at the end of the year.

Could you please elaborate more on the ramp up of the system? It’s not very clear to me whether the impairment was geared towards a different productivity for levels and maybe the impairment will be more similar to recent systems according to the performance of the wells. So these are my two main follow ups.

And there is still a third one, which address to Ivan.

In terms of provisions of trade receivables of Eletrobras and honestly and we still have a vast discussion about all of the judicial cases, everything that has been provisioned in this quarter refers to sales realized in the quarter, nothing refers to stocks from the past, right?.

Let me try to organize my thought, and I’ll start by answering your last question and then I’ll give the floor to Hugo Repsold. Well, we just announced the results of the Company and then I’ll talk about upstream. The amounts are exactly the amounts for the quarter, nothing is related to stocks or inventories and we are really pursuing differences.

Last year we consolidated the debt that was our first step and this consolidation has a certain number of collaterals or what is not covered by the guarantees of collaterals is already provisioned. And the first agreement is up-to-date.

What happened it was second delinquency and this is still being debated and the Company in view of this discussion is still doing it but as we are not collecting, we have to make a provision but the provision was then in the flow line rather than inventory. So now, I’ll ask Repsold to talk about the voluntary separation incentive plan..

We have two processes of voluntary separation incentive plan. There is a group of about 800 people that should leave the Company until the end of this year and next year only on the operational side there is lower number of staff that is about to leave. And we have a voluntary separation incentive plan, which is still beginning.

Thus far, we have about 2,500 valid subscribers and we still have a certain time period to conclude. We hope that we will reach something like 10,000 or 15,000, this is just our first initial assumption. Now I would like to give the floor to Solange..

Good morning Pedro. Before jumping into your question, try to clarify Andre’s point. I would just like to clarify something that certainly I wasn’t clear enough about and this become something not precise in view of what I would have said.

When I referred to pre-salt productivity, I’m referring more objectively to the fact that we see well that are producing more than 40,000 barrels a day in the pre-salt area. We plan to arrive at other areas of the sodium Pre-salt, trying to engineer solutions that will reach even higher volumes or production. Maybe I wasn’t clear enough.

Therefore, I must say that the impact is different. But now speaking about idleness, we’ve got two questions on idleness.

The answer is that the better forecast we have is that we will maintain still a very high level of idleness in the second quarter of 2016 and then in the second half of the year, we will have more things on the way, but there still remaining at this level. Our planning today goes in that direction.

And finally Pedro, referring to Lapa where you associate productivity and impairment, this relationship does not exist, well we use the impairment in Lapa in 2015.

But it was related to a reassessment, a geological reassessment of the field and that shows that throughout the project that should last between 20 to 30-years, we will have less recoverable volumes or less impairment than what we anticipated in wells when you associated with other things.

As soon as Caraguatatuba gets into the third quarter of 2016, we assume that the productivity of the well meaning production will be in keeping with the plan. What the impairment says is that eventually the volumes to be recovered by this well throughout the lifespan of the well, which is 20 to 30-years.

At the end of this period will be lower than planned. The ramp up forecast will not affect 2016 production and as a consequence, it will not affect 2017 production in relation to what we are planning today and what is part of our plan in terms of Lapa interconnection..

Okay, so looking at this, maybe the ramp up will be similar than what we saw in other systems like Marita..

We will, the ramp up of Caraguatatuba will happen according to plan..

Great, thank you very much. Thank you for all the clarifications..

Thank you..

We have questions in English, Mr. Harry Kevin from Barclays would like to ask a question. Sir, you may proceed. Our next question comes from Frank McGann from Bank of America Merrill Lynch..

Okay, good morning thank you, or afternoon. I was just wondering if you could just give us an update on the status of the class action suit process, where you are right now and what you think the timeline will look over the next six-months or so.

And also, if you could do the same for the other investigations that are ongoing both in Brazil as well as the SEC and Department of Justice investigations. Thank you..

Well thank you Frank. About the collective bargaining agreement, I will give the floor to Hugo Repsold..

The collective bargaining agreement is supposed to happen in September, we are currently taking care of the restructuring of other aspects and there are still some items remaining from last year's collective bargaining agreement. So I think it's too soon to discuss the main point.

Next month we will be begin to receive reports from the union, so that should help us define the profile of this negotiation. Now in terms of DOJ it’s important to remember Frank that Petrobras is collaborating with the authorities both in Brazil and abroad.

The company is seen as a victim of a schema graft, scheme that has been largely reported by the media, so our position is to voluntarily give all the information necessary to clarify the fact. There are some Brazilian authorities that are closely looking at what is happening in our country and they see us as a victim of a graft scheme..

Our next question comes from Mr. Anish Kapadia of TPH..

Hi, couple of questions please. I saw from your annual report that the [indiscernible] have been to 2018 from 2017 and this is previously expected in last year's business plan.

I was wondering if you could give a bit more detail on the delays when in 2018 you expecting to start up and if you are in that confident [indiscernible] in fact start up in 2018.

And second question relates to the gas pipeline businesses, I was wondering if you could provide the cash flow EBITDA related to the NTS gas pipeline system and then also in terms of the remaining NTN pipeline system, if you have got some details as well about the cash flow that you are making throughout the pipeline system. Thank you..

I wasn’t able to identify what kind of ramp up you are referring, what unit. Therefore, it's difficult for us to answer the question. But in terms of what has been announced and I imagine that it refers to the divestment process of the pipelines.

Petrobras announced was published and a material fact we have an exclusivity agreement with the grid company and we can extend this deal until 2030, and so this is all we have to give you at the moment..

Thank you very much. We now conclude the Q&A session of this webcast. And now, I will give the floor to Ivan de Souza Monteiro for his final comments..

I would like to thank you very much for participating in any additional information that by any chance wasn’t covered in this call. You can please refer to our IR department. Thank you very much..

Ladies and gentlemen, the audio of this call for replay and slide presentation will be available on the Investor Relations website of the Company at www.petrobras.br/ir. And then this concludes this webcast and thank you very much for participating. And please disconnect your lines and have a good day..