Lucas Tavares de Mello - Executive Manager of Investor Relations Ivan de Souza Monteiro - CFO and Investor Relations Director Jorge Celestino Ramos - Downstream Director Solange da Silva Guedes - Exploration and Production Director.

Bruno Montanari - Morgan Stanley Andre Sobreira - Credit Suisse Diego Mendes - Itaú BBA Luiz Carvalho - HSBC Paul Cheng - Barclays Capital Alexander Burgansky - Deutsche Bank Christian Audi - Santander Caio Carvalhal - Brasil Plural Pedro Medeiros - Citigroup Investment Research & Analysis.

Good morning, ladies and gentlemen. Welcome to Petrobras Conference Call with Analysts and Investors for the Presentation of Second Quarter 2015 Results. We would like to inform you that participants will only be listening to the conference call during the company’s presentation as listeners only, with simultaneous translation into English.

Following the presentation, a Q&A session will begin in Portuguese and in English when further instructions will be provided. [Operator Instructions] Present with us today are Mr. Ivan de Souza Monteiro, Chief Financial Officer and Investor Relations Officer; Mr. Solange da Silva Guedes, Chief Exploration and Production Officer; Mr.

Jorge Celestino Ramos, Chief Downstream Officer; Mr. Hugo Repsold Junior, Chief Gas and Power Officer; Mr. Joao Adalberto Elek Junior, Chief Governance, Risk and Compliance Officer; as well as other company officers.

I would like to remind you that this meeting is being recorded and please be mindful of Slide #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 Mr.

Lucas Mello, Executive Manager of Investor Relations. Then there will be the presentation of the results for the second quarter of 2015 results. Afterwards, we will answer questions from participants. Mr. Lucas, you have the floor..

the increase in oil production by 7%, also recovery of funds from Lava Jato operation amounting to R$157 million, the reimbursement related to the insurance of the accident in Chinook field, USA, amounting to R$259 million and provision of IOF tax liability of R$3.1 billion.

We also had impairments on Gas and Power, Downstream and E&P amounting to R$1.3 billion, and that is in operating expenses line. Now I would like to Slide #8. We have the impairment of assets amounting to R$1.6 billion, particularly on the nitrogen fertilizer plant number five of almost $600 million, $585 million.

Now oil and gas fields in Brazil and the disposal of assets amounting to $245 million, Transfer and Expert Offshore Unit, $198 million, and others that when put altogether amount to $257 million, and R$1.3 billion is operating expenses and R$300 million allocated in investments. Now, I’ll go to Slide #9.

We will now refer to exploration and production of oil and gas. Between the half years we experienced a 9% growth in production. The total production was 2,784 million barrels of oil equivalent a day. And between the quarters, the second quarter of 2015 and the first quarter of 2015, there was a decrease of 1%.

It’s a stable production, but there was a slight decrease of 1%, so then we had 6,746 billion [ph] barrels of oil equivalent for the year. Still speaking about exploration and production, we have the connection of the new wells on Slide #10.

Until now, in the first quarter of 2015 we connected 39 wells, 28 wells were producing wells and 11 were injector wells. We hope to have 72 connections until the end of the year. So in the second-half of the year, we intend to connect 33 wells in this area of exploration and production.

When it comes to Downstream on Slide #11, the oil products output in Brazil between the half years, the first-half of 2014 and the first-half of 2015, there was a 6% reduction in the production of oil products.

Even when we look at the quarters, the first quarter of 2015 - the first and the second quarters of 2015, we see an increase of 7% in the production of oil products. Now, Slide #12 refers to sales of oil products in Brazil. Between the half years, we see a drop of 7% in the sales of oil products.

And also in the quarter there has been stability in sales with a growth of 1% in the sales volume of oil products in Brazil. Now going to Slide #13, we talk about the balance of oil and oil products.

On the left hand side of the slide we refer to exports, especially exports between the half years, exports were higher due to higher crude oil production. Imports drop and it dropped both in terms of oil products and crude oil.

And all-in-all, the net balance comparing the first-half of 2014 and first-half of 2015, goes from a negative 526 barrels a day to a negative of 125 barrels a day in the first half of 2015. On the right hand side, we see the quarterly evolution and comparing the first quarter of 2015 versus second quarter of 2015.

We also notice a reduction in that negative balance, which was in the first quarter of minus 225 and in the second quarter was minus 27 in the second quarter of 2015. Slide 14 shows the operating income evolution between the half-year periods per segment. In the first segment - in the first half of 2014, the operating income was R$16.4 billion.

Downstream area showed an improvement in the operating income due to better margins in the oil products volume and this result is due to drop in Brent prices. Now, exploration and production experienced a reduction in its overall result and this is due to a drop in Brent prices. The other segments did not suffer major alterations.

And Corporate includes tax contingencies with IOF. Therefore, we reach an operating income result of R$22.8 billion, 39% higher than what was posted in the first-half of 2014. Slide 15, we show the operating income evolution per half year. In the first half of 2014, it was R$10.4 billion net income.

Sales revenue was affected by the export prices, lower export prices and lower volumes of oil product sales. COGS showed an improvement stemming from reductions in production taxes and lower import volumes of oil products. Operating expenses experienced a decrease due to tax liabilities of IOF and impairment of assets.

Financial result is also affected by foreign exchange variation in the period, higher interest rates and also interests on tax contingencies of IOF.

Income tax or taxes was slightly higher, I mean, the tax rate was higher concerning topics abroad and therefore, the net income for that half-year was R$5.9 billion, 43% lower than what was posted in 2014 in the same period. Slide number 16 shows operating income evolution per quarter per segment.

Operating income was R$13.3 billion in the first quarter of 2015. Downstream experienced a decrease, a drop in the results due to worse margins in the quarter, due to higher Brent prices, and we see the contrary when it comes to exploration and production. And here, we have better Brent prices and this improves the operating results in the E&P area.

Gas & Power had a decrease in the results. I would like to remind you that this area in the first quarter of 2015 had the benefit of reversal of losses coming from the electric industry.

Corporate had IOF tax liability and therefore the operating income in the second quarter of 2015 was R$9.5 billion, 29% lower than the results that we had in the first quarter of 2015. And Slide 17, we have the operating income evolution in the quarters. We have net income in the first quarter of R$5.3 billion.

Sales revenue was higher, because we had higher sales volumes and higher volumes of exports at higher prices. COGS were worse because of higher production taxes. Operating expenses also had a decrease, due to tax liabilities of IOF, impairment and also higher exploration costs.

The financial results had higher interest payments, payments of IOF that were partially offset by the appreciation of the Brazilian real in the period. Our net income in the second quarter was R$500 million, which is 90% lower than what we had in the first quarter of 2015. Slide #18 refers to lifting cost and refining cost.

At the top of the slide, we have lifting cost. And we know that, that between the first and the second quarter of 2015 the lifting cost has been stable. And once we look at the same cost in the half-year period, we see an increase of 17%, mostly due to the real devaluation and higher expenses with workovers and subsea maintenance.

Refining cost has remained stable in the half - in the quarters and in the half-year it was high by 25%, due to lower throughput and due to maintenance stoppages and higher personnel costs. In Slide 19, we talk about the company’s indebtedness. And in the last line, we see that net debt denominated in U.S. dollars has remained stable.

However, the net debt denominated in Brazilian real was up by 282% higher due to the depreciation of the Brazilian real that occurred during the period. Slide #20 refers to the financial ratios and indebtedness. The top line refers to net debt over EBITDA ratio.

About net debt between the first quarter of 2015 and the second quarter, it has been stable. And then net debt over adjusted EBITDA went from 5 times to 4.6 times in terms of the debt ratio. We are using the EBITDA of the last 12 months instead of the annualized EBITDA. On Slide 21 we have the company’s cash flow.

In 2015, our cash position was $26 billion. We anticipate an operating cash flow of $26 billion. We had up to now $14 billion. Interest amortizations and others, we anticipate $22 billion; up to now, we had $11 billion. Now, investment we anticipate $28 billion. So far, we have invested $12 billion.

Divestments $3 billion; rollovers, we concluded funding $12 billion, therefore - I mean, by now, it’s slightly over $10 billion, therefore, by year-end our cash position should be $20 billion. With that, I conclude the presentation of the slides and we will now initiate our Q&A session..

Now we will initiate our Q&A session. I would like to ask participants to have only two questions, but please speak slowly and clearly. And wait for the answer from the executives, from the officers. [Operator Instructions] Your first question comes from Bruno Montanari, Morgan Stanley..

[Interpreted] My question is about results and another about the business plan. About results, I would like to better understand the trend of imports, oil product imports. For the second-half of the year numbers were very low, 27,000 barrels per day.

Is this temporary or is this the new level of net exports to expect from the company? And what about the business plan when we consider the target of divestment, non-current is almost $47 billion? I would like to understand if the targets for cash generation and production presented already factored in this increase in disposal of assets? Would it initially decrease the target for generation and cash? Thank you..

[Interpreted] Thank you, Bruno, Ivan Monteiro speaking. Answering the first part of the question, I will give the floor to Jorge Celestino..

[Interpreted] Good morning, Bruno. Our projections or outlook are showing now that we have the start-up of RNEST, and the better production in refineries, and the trend of the ethanol market to remain competitive. This is all generating this trend.

And this is the best forecast we can give you right now, and these are the figures we are working on for the second-half of the year. Bruno, answering the second part of your question, all the data disclosed by the company are based on the new business plan, including the best expectation of the company vis-à-vis the divestment plan..

[Interpreted] Thank you..

The next question is from Andre Sobreira from Credit Suisse..

[Interpreted] Good morning. Thank you. I have two questions, if I may, about divestments, Ivan, and the target on a longer-term basis. It is quite an ambition target R$48 billion.

Could you explain the process? Do you think this number is conservative, aggressive? What kind of assets, in your opinion, can be addressed, at first, considering the best demand, could you clarify this? I think this is critical for deleverage of the company or net debt over EBITDA. Now, CEO Bendine mentioned something about this yesterday.

Apparently the company is more focused on lowering tax liability. There is a huge amount, $90 billion, in tax disputes going on. I wonder if you could give us some guidance to what extent this can be solved and what about the timeframe? Thank you..

[Interpreted] Andre, thank you. About the divestments, the information disclosed, first of all, they relate to the challenge of $15.1 billion in 2015 and 2016. Our goal for this year is $8 billion. There are several processes underway, and as they become more mature the company will disclose them.

We’ve a government process for approval purposes, and also how to carry on our divestment program, and then a formal process of approval at the company level. So only once these processes are both concluded we will be able to provide more visibility to the market.

As to the tax question, just as what CEO Bendine mentioned yesterday, we just had an ordinance issued by the National Ministry of Finance and whenever this company faces cases in the administrative arena and in order to continue discussion in the judicial area, it is requested to focus on collaterals and also cash burn.

We also discuss with the legal department about how successful these processes can be. And this is why the company decided to keep on discussing in the judicial area or, more specifically, simply comply to the new ordinance issued on August 3..

[Interpreted] Thank you..

[Interpreted] Thank you, Andre..

The next question is from Sercho Onchie [ph] from Goldman Sachs..

[Interpreted] Good morning. My question is about price dynamics or Brent realization and sales prices of Petrobras oil from E&P to Downstream. On your slide, you showed Brent compared to the sales price.

When I look the international average for Brent in 2014 and 2013, percentage-wise it is 90% [ph] Brent, per barrel in dollars it is around $10.3, that’s the spread; in other words, Brent above the realization price. In the second quarter, it was lower, $9.78 per barrel, if you check the spread. And percentage-wise it was 84.2%.

I’d like to better understand the numbers. There are some significant implications. The government stake or E&P and Downstream, so what about the dynamics, how do you come to the transfer price? Should I consider percentages or dollars per barrel? In the second quarter, prices went down compared to what we had in 2014 or 2015.

Could you give us more color on this? Thank you..

[Interpreted] Thank you, Sercho [ph]. Jorge Celestino will answer your question..

[Interpreted] Good morning, Sercho. In reality the methodology of our domestic prices and transfer prices goes through the approval of crude oil quality. We have a planning model, and this planning model also gives prices of oil.

Due to international prices and also the quality of crude oil, what I mean by quality is the yield of middle products and light products, so considering what you process domestically this is evaluated based on these models.

In reality, to come to this amount and value, we would have to compare whether that was processed in 2014 or in 2015 that might have shown variations. Certainly, there was a variation due to the market and also owing to what we import or the oil imported to be more adapted to our refinery production profile.

So giving a straightforward answer, we have to consider what we chose in 2014 and also in 2015, so we can assess and give you a more straightforward answer..

[Interpreted] Just the follow-up question, Sercho, Ivan Monteiro speaking, just one suggestion. That’s a very specific question you have. So the IR department and the Downstream department can give you more detail, but please follow on with your next question..

[Interpreted] If we analyze the company’s numbers, my feeling is one of the explanations might precisely be the one you just given, the heavy versus light oil mix.

So the question is, considering we have RNEST start-up early this year, and obviously it processes heavier oil, so I wonder if there’s new reality or new scenario in the second quarter might prevail. In other words, the profile of Petrobras refining capacity is changing and that might explain this event.

Am I right to assume this?.

[Interpreted] In reality, we don’t have heavy oil in RNEST yet. They are still running with slightly lighter oil. We haven’t come to our real target at RNEST. In reality, we pre-operated several clanks, [ph] several units in the first-half of the year.

The whole package of sulfur, [ph] for instance, is just starting up now and possibly in the second-half of the year RNEST will still be with the same line of projects..

[Interpreted] Perfect. So, maybe later on we can have a follow-up, so you can give me more detail. Thank you..

[Interpreted] Thank you, Sercho..

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

[Interpreted] Good morning, everyone. I also have two questions. My first question refers to the Lava Jato impact when it comes to services and CapEx.

Whether in the company’s daily operation, you’ve been experiencing any delays in the service rendering or delays in costs?.

[Interpreted] Diego, can you please repeat your question, but speak up a little, please.

We had a hard time understanding the initial part of your question?.

[Interpreted] In fact, the idea here is to ask you about Lava Jato’s impact and the cost of the company and CapEx of the company, whether you’re experiencing delays or delayed services or whether you have experienced a more significant impact on your CapEx.

The CapEx in the second quarter was lower and probably what I want to see is - if you can give me the current status of that situation. My second question refers to cost reductions. In your plan you said that you are promoting a cost reduction.

And so my question is, whether you can give us some guidance about that reduction and what are the areas that will be more affected?.

[Interpreted] Diego, the Lava Jato operation, when we discussed our business plan, Lava Jato operation had already impacted our supplier chain and this has been taken into account. When we drafted the plan we also included problems that could probably impact our CapEx. To give you more details about E&P, I’ll give the floor to Solange..

[Interpreted] Good morning, Diego. I mean, to elaborate more on that subject, as Ivan said, considering delays, we had to disclose P&G. We did that because we wanted to capture - or our business plan said that we wanted to capture contingencies concerning all of the events that needed to be further assessed by all of us.

With that we would be able to translate through investment targets and other targets applying to E&P, related to restrictions of vendors that had to be included in our business plan. All of these contingency measures are still underway.

Once we publish the plan with a more clear landscape which already depicts this new reality, these deviations that you noticed are not significant, but they are in keeping with our project plan in that part of the year.

There is a slight delay in some investments associated to some vendors, but they are not very significant, and again, very well managed. We expect to be very close to our investment budget for the year, because all of the mitigation actions that were listed early on this year are now bearing some fruits..

[Interpreted] Thank you, Solange..

[Interpreted] Diego, now about your second question, cost reduction. Cost reduction is a constant concern of the company. When we drafted our business plan, we already contemplated that. And I think I can give the floor back to Dr.

Solange who can elaborate more on the criteria for project selections and how things are being carried out with this new Brent price when it comes to renegotiating existing contracts with vendors..

[Interpreted] Very good then. So now I have a very specific question about the numbers that you showed on Slide 21.

So you are using the same foreign exchange assumption in the first quarter, 3.,1 or there has been any changes in the foreign exchange assumption for the year?.

[Interpreted] Well, we adjusted that to the new exchange rate, the exchange rate has been already adjusted..

[Interpreted] Our next question comes from Luiz Carvalho from HSBC..

[Interpreted] Good morning. I have two questions. Ivan, yesterday Mr. Bendine talked about the price policy during the press conference. In our understanding, there is a difference in the market, there is a mismatch between what the company does and what the market sees that price difference is much more related to the leverage levels of the company.

And you are looking more at the consolidated results to justify your need or not need to raise prices.

I just want to understand from you whether this needs to increase prices, given your internal policy, is that strictly related to the results from refining, or this is related to the net debt over EBITDA ratio of the company? Well, there have also been some impairments of assets that hurt your profit a bit.

But looking at the projections for your net income this year, I mean, you disposed of some assets and maybe the distributing company will be disposed in the next half of the year.

But what will be the impact for the company? What I want to understand is in terms of your dividend policy, how would you address the payment of ordinary shares or whether there would be a deferment, or whether you will be giving more visibility to investors about your policy until the end of this year?.

[Interpreted] Luiz, referring to prices, pricing is not linked to a certain business area of the company, the company sells products and we face competition and we have to cater to the needs of the market and there is certainly very intense competition in the market. But I’ll give the floor to Jorge Celestino to elaborate more on the subject..

[Interpreted] Good morning. In fact, referring to our commercialization policy, the competitiveness of our products vis-à-vis the domestic market refers - relates to the international market.

Therefore our commercial policy is always based on the best use of our assets and also the best profit margins to our company coming from oil products, or also looking for oil products abroad or also in the exploration of oil, if we look - looking at the last 12 months and four months.

Therefore our commercial policy aims at achieving the best global results for the company always with an eye at the competitiveness of our products, both domestically and abroad..

[Interpreted] Luiz, answering the second part of your question, since we drafted the business plan, the company made a clear message to prioritize value generation for shareholders, prioritize profitability to the detriment of volume.

The main goal behind the management announcing the new business plan is predictability in oil production, the company’s expectation in terms of oil production, particularly over 2015 and 2016. This is the big business of the company, and also more diligence when it comes to investment.

The whole CapEx of the company was well prioritized and the main priority is on E&P, and that’s what you followed. You follow CapEx realization in the first-half of the year and it will remain as such in the future. That’s finer result of the company and as a result, the distribution will be subordinated to the business plan.

We’ve been trying to be very diligent, vis-à-vis the business plan, despite macroeconomic challenges and all the variables that are not under the company’s control like Brent prices and foreign exchange effect.

But we’re very disciplined and focused on what we disclose to the market; stability and predictability vis-à-vis our core business, which is to produce, explore oil and more discipline as to the use of our resources stemming from our generation, focusing on the core business of the company and a clear message to shareholders, prioritizing, value generation to shareholders, and searching for profitability regardless of our volumes.

Officer Solange has something to say..

[Interpreted] I would just like to talk about the management position that Ivan has just mentioned. I mentioned before the method we use to create some challenges with our suppliers. However, at the same time, we are also trying to translate to the company, also due to facts of the reduction of the oil and gas activity in our costs.

So the renegotiation aspect of contracts, for instance, in E&P, this is where we have the focus of the company.

And our action is very much specific to renegotiate this contract, so that we can really pro forma our business plan in a very diligent manner, so we can bring to the company the benefits of the reduction in activities and also lowering costs, particularly capital costs.

If you look at these results, you will see that due to the reduction in Brent, there is a very positive side effect in terms of stakes. There was a dramatic reduction in our lifting costs comparing the second quarter of 2014 and 2015, basically a reduction of 3% when you consider dollars per barrel.

In our operations, if you consider our scale, for instance, we also highlight, and here again coming back to the business plan that Ivan mentioned, when our business plan focuses on our pre-salt activities, this is where we effectively reap more benefits.

For instance, we have already lowered from $9 to $8 per barrel in our lifting cost in pre-salt in the second quarter. So I’m just giving you some examples of the highlights mentioned by Ivan..

[Interpreted] If I may another question. Considering the divestment plan of about $50-something-billion [ph], there is a very strong reaction from the unions. Recently, they even mentioned they would be on strike.

Any negotiations between the company’s management and/or your companies and unions, apparently they are fully against disposal of assets or any more aggressive plan in terms of reducing the scope of some of the business of the company. So what about conversations with these parties? Thank you..

[Interpreted] The company’s executive management published a business plan committing itself with shareholders and the market in general to generate value to shareholders and to have more capital discipline and also certain priorities, prioritizing productivity rather than volume, that’s the commitment by the company.

And as I mentioned, well, it goes through a divestment program. The divestment program, it is up to the company to clarify to all the parties involved, including employees, staff, and all the institutions that represent the company and the company is careful enough to clarify information.

That doesn’t mean, however, that the company will change what it committed to do with the market. This program is a long-term program and it follows some conditions, conditions set by the market and they vary quite widely in recent months. However, it is a commitment made by the executive committee that will remain unchanged..

[Interpreted] Luiz. Thank you. We’ll have a question in English Paul Cheng from Barclays has a question..

Thank you. Good morning, everyone. Two question please. First, in 2016, your current budget is $25 billion.

What’s your flexibility in further lower the CapEx if oil prices stay at the recent level? What are your CapEx requirements to make a flat production and then on top of that add the existing commitment for the longer lead time construction project that is already under construction? That’s the first question..

[Interpreted] Thank you for the question. Our CapEx expectation for 2016 is $25 billion, it has remained the same.

But could you repeat the second part of the question, please?.

The question is that if the oil price stays here, what is your flexibility to further reduce it, in other words that if I look at what is your minimum you have to spend to maintain a flat production, combined with whatever is the commitment you have on the longer lead time construction projects?.

[Interpreted] Well, Solange is going to answer your question..

[Interpreted] You made comments on the possible impact of Brent and oil outlook for 2016. I guess, this answer is very much in line with all we have - explanations we gave before. Our production and our investment will continue to happen. And it has an impact on prices or a drop in prices, we might go for other options.

But they will not affect projects underway. These projects will continue strengthening our cost optimization, and this also goes through a direct relationship between cost and a drop in Brent prices. If that happens, they will also have an impact on production taxes and also in the cost of projects underway.

But I want to highlight that considering planning scenario alone, I think if I fully understood your question, but we are planning to increase production by next year. Our plan is to grow 2.8% in 2016 compared to 2015..

[Interpreted] Our next question is from Alexander Burgansky from Deutsche Bank..

Yes. Good morning, and thank you very much for taking the call. I have two questions, if I may. Firstly, on Slide 10, you mentioned number of wells connections to be completed in the second-half of this year, and the number shows a decline on the first-half.

So I wanted to ask you how that compares to your expectations of production growth in the second-half of this year, and also do you have a projection that you can share with us on the well connections in 2016? And the second question, if I may, on the business plan.

I did not quite get the answer on the details behind the disposal program and, in particular, whether the 2020 production targets for domestic oil production of 2.8 million barrels per day is already incorporates the disposals that you’re planning to make between now and 2018? Thank you very much..

[Interpreted] I’ll give the question to Solange who will be able to speak about the connection of the new wells..

[Interpreted] I think this chart illustrates the point quite well. In our plan for 2015, we are quite advanced in terms of our targets to connect all of the new wells.

And as a recent fact I can mention a new production unit in the [indiscernible] that is foreseen to happen in early September, this is part of our plan, but it happened on July 31 of 2015, which is earlier than expected, because we were able to complete and connect the production well of that unit.

This year, if we look at the chart, we have a reduced number of wells when compared to the year before. 2014 was a very challenging year. This is when we were asked to optimize our activities and to work on the connection of subsea stations, and that’s why this year we are very much in line with our target.

There is no other different projection compared to that of non-realized in the wells. On the contrary, we may be able to anticipate from 2016 to the end of 2015 that interconnection of wells. I think that answers your question.

Now, concerning the second part of your question, the targets that have been disclosed to the market, vis-à-vis the investment projects are still the same.

However, these charges and we often say that with all the trends on market condition at the time that the company, as part of its approval process and according to the company’s governance and possible approval of sale or the search for a partner to continue its processes will be then considered at the time, but all of the targets are contemplated in the business plan of the company..

Our next question comes from the Mr. Christian Audi from Santander..

[Interpreted] Thank you. Good morning, Ivan. My first question relates to those one-off factors that impacted your result in the quarter.

I was trying to reconciliate the fact on the one hand there were one-off, but on the other hand based on the comments that were made, it seems to me that there is a potential of other impairment of other accounting write-offs related to those tax liabilities.

But I’m just trying to understand these - if it is, maybe there is a risk of this happening again, but now visibility is low concerning whether this will occur or not.

And then the second question relates to the impact of your disposal of assets, and whether you will reach your target for 2015 and 2016, and maybe or I want to know whether you were surprised on the upside with the level of interest and also related to the target for 2017 and 2018, is it possible to maintain your target of 43 billion? Could you give me an idea of what would be the percentage you would get from the disposal of assets or restructuring of assets, please?.

[Interpreted] Christian, thank you very much for your question. Well, in relation to your initial remarks on contingencies and impairment, we had still important events. First was the release of the results of the company in the year of 2014.

Then we had a major impairment event or projects that up to then had no visibility in terms of its future cash flows. Some of our projects were totally abandoned, like Premium 1 and Premium 2 refineries and the others just follow the right of our impairment flow, which is usually carried out by the company. That was an important one.

But now what we see is the reflection of our new business plan. This new business plan also contemplates a reprioritization of projects and those projects that were not aligned with our priorities, like our nitrogen fertilizer land. We look at as impairment and we noticed that this is no longer part of our priority portfolio.

In terms of contingencies, we are constantly assessing contingencies and liabilities. There is a whole set of tax liability, a whole set is very high. We also communicated to the market the result of our internal assessment and they involved very specific situations involving the same process, which involved the litigation of IOF.

And then a minister speaking [ph], we reported on that and then how we transfer that were carried out here and judicially. Through the inspection notice, there was a recognition of a good economic advantage.

Now with a new ordinance of the company, once again ran an evaluation of this same process when compared to previous years and then we made a decision of recognizing that expense and also recognizing the results of the second quarter.

So according to what has been explained in the explanatory notes, we are constantly conducting this evaluation, and once we recognize that there is an opportunity on the point of view of having economic advantages from the process, this will be then carried out through an Internal evaluation and communicated to the market.

About the divestment process, this is nothing new, this is something that had already been taken place in the company. But the level of leverage of the company in terms of that we expedited values in 2015 and 2016, all the projects are still underway. And then your question was about the level of interest.

The level of interest is quite high in terms of the assets of the company. Now, looking at 2017 and 2018, given the fact that we have more time. As you said it yourself, it’s not only a matter of divestment, but also a matter of reorganizing a set of businesses within the company.

This is being carefully crafted, but always looking at what the company has been committed to do in our business plan, generating more value to the shareholders, greater discipline, and greater prioritization of projects. The company masters the technology and we are executing with good profits..

[Interpreted] Thank you. Now let me see if I understood it right. So there is a good potential, but it’s very difficult to quantify it at the moment in terms of provisions related to tax liabilities. And if there are other impairments, I mean, in other words, this potential is present, but it’s difficult to estimate anything or to give us any guidance.

But the fact that this may occur, again, is something unknown, but it may be present.

Did I get it right?.

[Interpreted] No, you are not right. What is correct is what the company releases and discloses, or discloses through material fact or through the financial results. It is very clear if you look at the papers that the company has identified the processes and let the process to a final result.

So if it was not there, it’s because the company had no expectation at that moment in relation to any other process, because if that were to be the case, in case of impairment or any tax liability or litigation, what is in the explanatory note is that the company is still assessing that tax liability in compliance with the ordinance.

The ordinance is a very recent one, dating back from August 3. The company is still assessing what it could be the, but this is very sensitive evaluation and that is then together by the tax area, financial, and legal areas of the company.

And it’s only after the analysis are concluded that we will make a decision in line with Petrobras governance and that’s when Petrobras will release its decision.

Now about impairment, I would just like to emphasize that a large set of imparities from last year and also as a consequence of Lava Jato, and as a consequence of this new business environment, and now more particularly linked to the lead business plan of the company..

[Interpreted] Thank you very much..

[Interpreted] Thank you, Christian. The next question is from Caio Carvalhal from Brasil Plural..

[Interpreted] Thank you for taking my question. My first question is very specific. We can see there is an increase in oil exports, even though there was a slight drop in output. And it was also the use of inventory build over the first quarter, which makes all the sense in the world. In the first quarter, oil prices were slightly less expensive.

So considering the reality of the third quarter with significant drop in oil prices, should we expect to see buildup of inventory again and the volume of exports will be slightly lower in the third quarter considering you will be working on opportunistic building inventory related to oil prices? So does it make sense when you consider building on using inventory? My second question is slightly broader.

If you consider the gross margin, there is a gross margin of 32% better than the 30% of the previous quarter. For the last three years, the gross margin is always between 34%, 35%, so there has been a significant increase, not only in this quarter, but the first-half of the year.

So I have the feeling this is non-recurring, possibly we expect to see a lower margin on a long term basis. I think this is more related to a reduction in oil prices and also reduction of domestic use, allowing you to improve your refining operation. That may also have a recurrent effect, considering the [indiscernible] in the Northeast.

I wouldn’t expect to see that, because the refinery is not so large considering the whole refining capacity, but precisely how do you see that a leader of the gross margin or COGS vis-à-vis the revenue for the second-half of the year, and how do you see it a broader view? These are my questions..

[Interpreted] Caio, thank you for your question. Regarding that strategy of inventory of oil and the company’s behavior for the second-half of the year, Jorge Celestino is going to answer your question..

[Interpreted] Caio, good morning. Regarding the better performance of the oil position, you are right, oil prices were very low in the first quarter. The market kept an eye on prices and we managed.

They have a good strategy to slightly increase our inventory levels at the end of the third month of the year, in March, and capture all the margin gains in the second quarter.

By the way, the market in the first quarter was much lower and then we managed to optimize our operations in the refinery very well, searching for better yield of our refining capacity and better management of our oil inventories in the first-half of the year.

And to this - to the next quarter, the market usually will be a little - a little bit busier. Oil output will remain good and we are paying attention to the market behavior, possibly, we won’t reap all the gains that we had in the first-half of the year, but we also expect to see some gains by drilling and selling crude oil.

Caio, answering the second part of your question, there is a clear answer. There was a substantial increase in downstream, so there is a significant contribution. And we also see ongoing increase in oil output, now far more predictable than before. So the combination of these two variables.

Number one, substantial improvement in downstream results added to better prices and also continuous increase in the company’s oil production. This brings to better results and better margins to the company..

[Interpreted] Perfect. Thank you very much. Can I just have a last follow-up question? The media show that the company would be revisiting the long-term strategic plan for 2030.

Considering the new reality and oil curves, do you have any timing for this, when do we expect to have this discussion underway?.

[Interpreted] This discussion is still very preliminary, it is not much sure yet to be disclosed to you or to the market. It’s still very embryonic..

[Interpreted] Perfect. Thank you very much..

[Interpreted] Thank you, Caio. The next question is from Pedro Medeiros from Citigroup..

[Interpreted] Good morning. Thank you for taking my question. Actually I have three questions, but most of the questions are very straightforward.

The first question, Ivan, I would like to better understand, because I saw this quarter a significant change in the foreign exchange exposure of your cash generation, despite exchange depreciation this quarter.

Could you talk about the company’s policy about the balance and exposure to foreign currencies, any forecast for the second-half of the year that might lead to significant changes in exposure? My second question….

[Interpreted] Pedro, just answering the first question, we’ve been trying to keep most of the company’s cash generation exposed, while we bring the natural hedge to the company’s liabilities. So the cash position is the lowest in our Brazilian currency..

[Interpreted] Okay.

But don’t you add any other derivative strategy to that or anything beyond or in addition to exposure to natural gas?.

[Interpreted] Yes, Pedro, we had more earmarking in that account in March, so the company’s expectations vis-à-vis foreign exchange. By the way, there are some components, particularly interest payment and pre-payment operations, for instance, and they are more stable.

They are paid on a longer timeframe and therefore they would be a point of concern when it comes to the exchange exposure. So the company decided to earmark more.

Like Jorge Celestino said before, we had an effective increase in the company’s exports stemming from the lower demand in the domestic market and also the highest oil production by the company.

And we’ve been making use of that account in order to be hedged and [indiscernible] vis-à-vis the company’s exposure in strong currency, hot currency exposure..

[Interpreted] Thank you. My second question, well, I just want to confirm your investment plan.

Considering the progress achieved up to now in July and the forecast from August, and considering the floating exchange rate, can you talk about CapEx in dollars, lower compared to the guidance of $28 billion for the year? Just a follow-on question about Solange’s comment.

As to the revision process, our contracts with suppliers, a reevaluation of unit cost vis-à-vis the drop of prices in E&P products and services, to what extent has this already been taken into account in the five-year investment plan? Could you still or, at least, qualify improvement in cost of equipment and services, or should we consider this as a potential upside vis-à-vis the numbers you gave in the guidance? And my third question actually is very straightforward, just a follow-up question to Solange.

You have the number of well connections. Could you give us an objective number or the size of the development wells that were already drilled in pre-salt, but that have not been contacted yet? I believe this number is growing, vis-à-vis the portfolio of rigs available and the change in the timeline of the projects. Thank you..

[Interpreted] Pedro, Solange is going to answer your question. But above the guidance, there has been no change in the guidance vis-à-vis CapEx. In the first-half of the year, we were slightly lower, but the comparative guidance compared to the previous business plan, it is way below and fully prioritizing E&P.

This is the major fact, considering the new reality of the company’s net debt over EBITDA ratio. And now, Solange, is going to answer your second question..

[Interpreted] Good morning. Answering your first question, you want to know to what extent the exercise that we’re doing in terms of lowering cost of suppliers were included to the plan. But it was partially included to the plan, because at first, we did not have these negotiations underway.

But now we are very well above our expectations and we effectively delivered our promise of the part committed to the plan, but we also exceed our early expectations vis-à-vis this set of dozens of suppliers that we are negotiating with and we expect to conclude negotiations over the next two months.

In the second question, you had mentioned development well inventory, I would like to clarify how we consider this and how we address the implementation of these projects. Once we get or once we envisage an E&P project, that might lead to a delay in your platforms, what we immediately do is to adjust the well construction plan.

So we don’t run the risk of having any anticipated investment in well building and avoid a backlog of wells that are not connected, we don’t do that. We’ll have a scale that allows us to have an immediate adjustment to projects in order to make them in line as much as possible to the closest connection.

So they will be closer and more effective in terms of our interconnection to the platforms. So from the moment you adjust these projects, they are not partial, they are full adjustments and they apply to all resources and funds.

They are all delayed and reallocated and because we work with standardization and that’s a characteristic of pre-salt projects.

We work with all pieces of equipment, all standardized, and all standardized projects, so mobility at the end of the day becomes much easier and it has a huge potential to add value to the daily management of our implementation projects.

So we don’t have a backlog of idle wells, simply because we already adjusted in our curve, the building process according to our plan and as we expect to have the unit in our production..

[Interpreted] Okay. I understood it. Thank you for the answer Solange..

[Interpreted] Thank you, everyone. Now, we conclude the Q&A session of this webcast and conference call. And with that, I would like to give the floor to Mr. Ivan de Souza Monteiro for his final remarks..

[Interpreted] Thank you very much. I would like to thank you very much for participating, and we and our IR department are available to take any further questions..

[Interpreted] Thank you very much. Ladies and gentlemen, the audio of this conference call for replay and slide presentation will be available on the IR website of the company at www.petrobras.com.br./ir. And with that this webcast has concluded. Thank you very much for your participation. Please disconnect your lines and have a good day..