Good morning, everyone. Welcome to Petrobras Webcast with Analysts and Investors about the Third Quarter 2021 Results. It's great to have you here with us today. We'd like to inform you that all participants will follow the transmission by listeners. After introduction, a Q&A session will begin.

You can send us questions by email at petroinvest@petrobras.com.br. We also inform you that all executives are participating in the event remotely in their individual rooms, respecting all security protocols.

Today, we have with us Claudio Mastella, Chief Trading and Logistics Officer; Nicolas Simone, Chief Digital Transformation and Innovation Officer; Roberto Ardenghy, Chief Institutional Relations and Sustainability Officer; Rodrigo Araujo, Chief Financial and Investor Relations Officer; Rodrigo Costa, Chief Refining and Natural Gas Officer; Salvador Dahan, Chief Governance and Compliance Officer; and [Indiscernible] , Executive Manager for Subsea Systems; and Joao Jeunon, Executive Manager for E&P Integrated Asset Management.

To initiate, I will pass to our CFO, Rodrigo Araujo. Rodrigo, please go ahead..

Thank you, Carla. Hello, everyone. Good morning. It's a pleasure to be here with you today, and I hope you're all well and safe. We can start with the next slide, please. Thank you.

As we see, our rate of total recordable injuries per million man-hours has been continually decreasing, and when we look at the first 9 months of 2021, we're at a 0.56 level that is below our level of alert of 0.7.

Of course, the Company has been doing significant work in terms of continually improving its safety and safety is a main value and priority for us. But of course, we're not only comfortable with such rate, we're focused on having zero fatalities, and unfortunately, we had two fatalities in the third quarter of 2021.

So, we're highly focused on improving safety in our operations and meeting our ambition of zero fatalities. Next slide, please.

In terms of our emissions and our commitment to the energy transition, we've announced in September this year our ambition to achieve emissions neutrality in a timeframe compatible with the Paris Agreement, and of course, is focused on the neutrality of activities under our control, Scopes 1 and 2, and we're also committed to influence our partners in our upstream joint ventures to achieve the same ambition in non-operated assets.

This ambition is aligned for 50 OGCI, the Oil & Gas Climate Initiative, of which we've been a member since 2018, and reinforces our commitment in reducing emissions in our operations. Next please.

In terms of the results with respect to emissions in the year 2021, our results are coming as expected and our outlooks for 2021 are very healthy, and we expect to achieve the goals that we set for 2021 in terms of kilos per CO2 per barrel of emissions in the upstream segment.

Our carbon intensity is 15.7 compared to our target of 17, our acceptable maximum limit of 17. So, we're comfortably below the target that we set for 2021, and in terms of the emissions in our refining operations, we're also below.

We have 39.9 kilos of CO2 equivalent per ton of complexity weighted in our refining operations and our acceptable maximum limit is 40, so we're below the target set for 2021, and in terms of absolute GHG emissions for 2021, we've emitted 46 million tons of CO2 in this year, and is also compatible with the targets that we set for 2021 as well.

Next, please.

In terms of CO2 emissions, in terms of CO2 reinjection, sorry, we've been focused on reinjecting a relevant portion of our CO2 emissions, and when we look at what we've done since 2008, we've already reinjected 28.1 million tons of CO2, and only in 2021, we've already reinjected 6.7 million tons, which is very close to the level of reinjections of 2020, and we're focused on achieving our commitment of reinjecting 40 million tons of CO2 by the year 2025, and we're focused on achieving that target and continually improving the level of CO2 range action.

Next, please. Another important aspect of our ESG strategy is, of course, the recognition of improvements in our governance. October this year, we have completed the obligations that we had under the agreement with the U.S. Department of Justice.

This agreement was signed in 2018 and is now closed, and there are important recognition's that were made in the conclusion of this process, of course, related both to the improvement of our internal controls and to the evolution of our integrity program.

The Company's compliance system has evolved substantially since 2015, and, of course, we're highly committed to continue the improvements in our governance and compliance systems, but it's an important achievement and recognition, the conclusion of their agreement with the U.S. DOJ.

Of course, the agreement also acknowledges that Petrobas was a victim of the corruption schemes that occurred in the past, and as I mentioned before, we're focused on continually improving our governance and our compliance systems. Next please.

In terms of our financial and operational highlights, of course, we have to highlight the fact that we've achieved our target of $60 billion gross debt more than a year before the expected deadline.

We expect it to achieve that in 2022, and we closed third quarter 2021 with a gross debt of $59.6 billion, which is a very important achievement and brings us to a capital structure that is much more compatible with our peers and allows us to compete much more efficiently in the oil and gas market with majors and other peers.

We had a recurring EBITDA of $12.2 billion and a recurring net income of $3.3 billion in the third quarter of 2021. A very solid operational performance with higher sales of oil products in domestic market, especially diesel, gasoline, and just fuel. Our oil and gas production also increased in the third quarter.

We have the presort representing more than 71% of our total production now. So, we had a very solid operational quarter. That resulted, of course, in an important generation of cash from our operations of $10.5 billion and a free cash flow of $9 billion. During the third quarter, we also had important inflows from our portfolio management strategy.

Of course, the remaining shares that we had in Petrobas Distribuidora resulted in a cash inflow of $2.2 billion, and we also had the payments of the Corparticipation Agreement for the Buzios field of $2.9 billion.

That was also relevant cash inflow and represented our data entry software partners in the Buzios field, and yesterday, our Board of Directors approved a new anticipation of dividends of $6 billion that alongside with the $6 billion and we had announced in August totals $12 billion of anticipated shareholder remuneration for the year, and this is of course, an important contribution and represents the Company's commitment with generating value and distributing its earnings and an important contribution both to its shareholders and to the Brazilian society, not only in the form of dividends, of course, but in the form of tax payed and social responsibility as well.

So, the Company is getting stronger and healthier, and being able to substantially contribute to the Brazilian society as well with relevant investments and commitment with operational efficiency. Next slide, please.

When we look at the external environment, Brent prices were 7% above Q2 2021, and there was a little appreciation of the real compared to the U.S. dollar during the quarter.

But the main relevant figure here is the change in the end-of-period exchange rate, which impacts our end of period debt, when we translated into Brazilian real, our functional currency, and it impacts our earnings.

So, we had an important impact in the earnings of the third quarter of 2021, that is, of course, a non-cash impact, but it impacts relevantly our third quarter 2021 earnings. Next, please. When we look at the gross debt, as I mentioned before, we reached a target of $60 billion in anticipation.

We originally forecasted to meet in 2022, and when we look at the track record of the Company since 2015, where we had in the past a $166 billion in gross debt when we consider the finance leases and the multiple of our cash flow from operations was in the past above 7.

So, it's an impressive corporate turnaround journey that has been made by the Company, and of course, allow us to be even more focused now on operational efficiency and on returning the cash that we generate.

In the third quarter of 2021, we prepaid $6.1 billion in gross debt, and there was of course the startup of the FPSO Carioca, which added another $3 billion in finance leases. It's an important achievement with respect to FPSO Carioca, as well.

We're very close to start producing a second producing field from FPSO Carioca and continuing with the ramp up of the platform, which adds relevant production to our portfolio and adds value to our portfolio overall.

When we look at our leverage in terms of net debt EBITDA close Q3, 2021 at 1.17, which is very in line with the four peers with majors, and of course, when we think about the $60 billion debt target that we set, is a level that allows us to be committed with the Company's financial sustainability and to navigate scenarios much more challenging than the one that we're seeing now.

$60 billion debt allows us to go through scenarios like the one we saw last year when we had Brent prices around $40 per barrel without substantially increasing our leverage. So, it brings us a very optimized capital structure and allows us to look very enthusiastically to the future. Next, please.

In terms of our EBITDA, we had a very solid quarter as well, we improved our recurring EBITDA with 7%. Total EBITDA of $12.2 billion of recurring EBITDA in the third quarter of 2021. As I mentioned before, this is, of course, a result of a very solid operational performance, both in the upstream and downstream segment. Next, please.

Looking at the performance by segment, we have an important impact of Brent prices for the upstream segment. Our production, of course, increased around 1% this quarter as well and we saw this is improve in its share in terms of our total portfolio, which also adds value to our portfolio and our results.

In terms of our RTC segment, we had also important results in the second quarter, and despite the improving in the operational performance, we had higher expenses with legal proceedings that offset the improve in the operational performance, and with respect to our gas and power segment, of course, we had no lower natural gas margins substantially this should increase in LNG costs.

I believe LNG costs internationally are substantially higher and we have longer-term contracts. So, we had an impact of LNG costs in our long-term contracts in this quarter, but the annual result is also very solid and in line with our planning for this year as well. Next, please.

In terms of cash generation and the distribution of our cash alongside with our EBITDA, we had the impact of income taxes and working capital that was relevant in the third quarter. We're seeing higher prices, so we see some increase in terms of working capital as well.

As I mentioned before, we had $9 billion of free cash flow in third quarter of 2021, and when we include inflows from the portfolio management strategy and from the Buzios Coparticipation Agreement, we have a free cash flow after divestments of $14.3 billion. Of course, that was mainly used to reduce our gross debt.

We prepaid $6.1 billion of gross debt and we also had an additional scheduled payment, so the total payments in terms of debt was $6.8 billion this quarter, and we also had the first payment of the dividends that we announced in August, $4 billion.

So, in terms of cash, in the end, we have a positive cash change of $1 billion in the third quarter of 2021. Next, please. In terms of our liability management strategy, of course, in terms of debt level, we're quite comfortable with the current capital structure. Of course, this is something that the Company continually monitors.

But we believe that $60 billion debt level will allow us to be able to manage the Company efficiently in challenging scenarios. But when we look at the profile of the remaining debt, of course, we see opportunities to increase its maturity and to reduce costs.

Our current costs are 6% and we improved the maturity in the third quarter of 2021, from around 12.5 to 13.5.

When we look at the amortization schedule for the next year, next year's is quite compatible with the Company's cash flow generation, and we see that we have a very smooth amortization profile data analysis to make the relevant investments that we need to make and to distribute our dividends without committing the Company's financial sustainability.

We also have revolving credit facility lines of $8.7 billion and a cash level of $11.5 billion. When we think about the cash level, we see that we have a cash level that is higher than our optimal cash level, that we believe that is around $8 to $10 billion. But of course, we still have potential challenges coming from the pandemic scenario.

That is, of course, it's improving, but we still see potential challenges in the upcoming future. We have a higher cash level, then we think it's optimal at least for the short term. But we do expect to bring our cash levels to a lower level closer to a range from $8 to $10 billion.

In third quarter, we also had the early redemption of $1.3 billion in our bonds make whole of some of our bond’s series. We also had $3.5 billion in prepayments of bank loans, and we had very positive news in terms of credit profile, Moody's upgraded our credit risk from Ba2 to Ba1 in the third quarter of 2021. Next please.

In terms of Portfolio Management, as you can see, the highlighted transactions, we had six signings and four closures in third quarter of 2021. Of course, relevant transactions that support our deleveraging and help us achieve the optimal portfolio focused on world-class upstream assets and world-class refining assets in Brazil.

Of course, especially in the ultra-deepwater, pre-salt, and workup class, refining assets in the southeast of Brazil, that is the focus of our portfolio. Next please, and in terms of highlights of this third quarter, we had the follow-on of our remaining shares in Petrobas Distribuidora that I mentioned before.

We also had relevant signings, both in terms of our agreement with Kagis with respect to the refining assets, and to the natural gas assets, so we signed the SBA for [Indiscernible] and all the relevant assets in the natural gas agreement with the Brazilian and the Teristo authorities, and also, we had the closing of the Habbo Branco field in October 2021.

So, our total cash inflows in 2021 is $2.9 billion and the total value of the already signed transactions in 2021, $5.6 billion, and that of course supports our deleveraging strategy and distribution of earnings. So, it's a very positive inflow in terms of cash. Next, please.

In terms of earnings for the quarter, we had $3.3 billion of recurring earnings in the third quarter of 2021. We had a 5% increase in gross profit, and as I mentioned before, we also had a negative impact with respect to the depreciation of the real, as I mentioned, it's non-cash, but it impacted substantially our earnings.

We also had reversal of impairments from upstream assets, given the more positive price scenario and capital gains from the Buzios' Coparticipation Agreement. Those were partially offset by actuarial losses related to our corporate health plan, where we had a relevant change in terms of legislation here in Brazil.

Because it was some unions was part of our labor agreement with the unions and it impacted negatively the third quarter of 2021. Next, please.

Finally, as I mentioned before, our Board of Directors approved in 2021, an anticipation in 6% billion, $6 billion were approved in the second quarter of 2021, and an additional 6 billion has been approved now in the third quarter.

This anticipation of shareholder remuneration, of course, is compatible with our financial sustainability and reinforces our focus on capital discipline, on optimizing our capital allocation, and, of course, on distributing all the earnings that we generate.

That, of course, is very positive, both to our shareholders and to the Brazilian society that, in the end, receives a relevant portion of the dividends that we pay. So, this is very important in terms of Petrobras contribution to the Brazilian society as well.

We believe that having a stronger and more solid Petrobras is very positive for the Brazilian society, and as I mentioned before, we continue to be highly committed with the execution of our strategy, and we believe that the results that we have in the third quarter represent important achievements in terms of delivering our strategic plan.

Thank you. I'll pass the floor back to Carla. Thank you..

Thank you, Rodrigo. We can now move to our Q&A session, and the first question that we've received comes from Frank McGann with Bank of America Merrill Lynch, and it's for Andre.

Andre, what cost pressures are you seeing both relative to operations and also to investments? Could this affect future CapEx decisions?.

Thank you, Frank, for your question. We do not expect cost impacts this year since the contracts of goods and services have been set before, and also because even inflation corrections do not apply at the same time for all our contracts.

In respect to the future investments, we continuously access all the applicable variables, not only for us, but exchange rates, brand scenarios, in short and long terms. Also, a possible project, optimizations, analyze them, the other aspects, are considered on the future CapEx decisions.

We are concluding and close to announce by the end of November and beginning December, our '22 to '26 strategic plan, which will detail our investments choices. Thank you for your question..

Thank you, Andre. The second question from Frank is for Rodrigo Araujo.

Rodrigo, given the significant improvement in the Company's balance sheet, an expected tight global supply demand that is expected over the next few years, could the Company move to increase investments in upstream projects over the next several years?.

Thank you for your question, Frank. Of course, the more positive oil price scenario, it's supportive of increasing CapEx in upstream assets. But when we look at the portfolio in terms of future perspectives, we're of course concerned with long-term prices and we're committed to invest in assets that are both environmentally and low price resilient.

So, we have a very solid threshold in terms of project decision of 35 Brent price in terms of resilience for long-term projects, and we can expect some increase in terms of CapEx for the '22 to '26 business plan that we expect to announce by the end of November, beginning of December.

But again, all the CapEx increases that we eventually make will be related to resilient assets, and that are able to be profitable and have adequate returns, even in quite challenging scenarios. But thank you for your question..

Thank you, Rodrigo. The second question comes from Luiz Carvalho with UBS, and it's for you as well. So, the Company has been very vocal in the sense of highlighting its potential contribution to the society in the form of dividends.

How can we see this developing in the next 12 to 18 months? As the country undergoes a challenging macro situation, could Petrobras increase its dividends to benefit the country? How could we understand the potential limits for distribution? Could there be the case for a potential higher percentage than the 60% of the difference of operating cash flow in CapEx?.

Thank you for your question, Luiz. Well, of course, 2021 is a transition year in which we achieved our $60 billion gross debt target, and we have, of course, managed to balance reducing our leverage this year, with distributing our earnings as well. So, this has been an important part of our strategy for 2021.

Of course, that depending on the results of the fourth quarter of 2021, we may see additional dividend distribution, depending on the scenario, the results, and the Company's financial sustainability as well. But in terms of the future, for 2022, we expect to comply with our dividend policy and distribute 60% of our free cash flow starting from 2022.

Then, of course, depending on the scenario and the results that we have, we may think about additional distribution. But again, it will be depending on the scenario and the upsides that we have in terms of what happens next year.

Of course, we're now looking at the '22 to '26 business plan and considering aspects like the timing of dividend distribution, we want you to have a more consistent distribution in terms of timing as well.

Considering potentially quarterly or half year distribution, we don't have a straightforward answer now, but there's something that we're looking at, and we may have these descriptions concluded by the announcement of our '22-'26 business plan. Thank you for your question..

Thank you, Rodrigo. We received another big question from Louise, so I'll break it down in three. The first part would be for Rodrigo Costa, what changes for Petrobras upon the divestments of the refiners? This Petrobras foresee additional investments by other players in the market, potentially in your refineries. The second part is for Marcelo.

How do you see the Brazilian refining markets advancing after the refineries are sold? Also, how the Company sees the guarantee of domestic fuel supply once there are other players in the market? What will be the Petrobras hold in this scenario? The third part is for Rodrigo Araujo.

Following the halting of the sale process for [Indiscernible], how are the plans for the final optimal portfolio for the Company? Is Petrobras considering changes in its configurations or can we expect that the Company to continue to focus only on refineries in Sao Paulo, even if in the long-term?.

Louise, we are preparing our Company to this new environment, implementing three action plans. The first one is regarding improving our efficiency through a program that we are calling here as [Indiscernible].

This program aims to put our refineries in the first quartile of benchmark Solomon that we use the reference of United States refinery performance. We are trying through this project to optimize our energy efficiency. Looking forward to reduce cost, zinc chain, natural gas, and power.

Actually, we are in 5 projects that it's around $300 million in CapEx on the horizon until 2025. The second line that we are working here is prepare our hardware to follow market conditions.

We are increasing our hydrotreating capacity around 10,000 cubic meters per day, and we are looking for increasing our conversion capacity around 9,700 cubic meters per day. To implement those projects, our current business plan is point to a CapEx around $3.7 billion.

The third line of action is capturing the opportunities that we have in energy transition horizon regarding bio-refining. Here, we are trying to analyze the opportunities to produce bio jet fuels, and renewable [Indiscernible]. So, I pass through to Marcelo, to answer your second question..

Thank you. Thanks for the question, Louise. We are talking about our new refiners in Brazil. Competition among [Indiscernible] refiners will occur naturally and tend to be positive to the market supply and risk sharing.

Besides, I think, it will create a healthy pressure on efficiency by [Indiscernible], and it's important to highlight that the Brazil already has and has had for some years, the competitive environment involves diesel and gasoline domestic market, and the participation of different players already occur, mainly importing these products.

Talking about the competition, well, Petrobras have already demonstrated that it's prepared for the arrival of more players. Thank you..

Well, Louise, thank you for your question. In terms of the third part, where you asked us [Indiscernible], and whether we have any changes in any changes in terms of strategy and portfolio? No, we don't have any changes.

Of course, we continue to be committed with complying with the agreement that we have with the Brazilian anti-trust authorities to divest of a relevant portion of our refineries.

Given a more general perspective, we already have the signings of HILA and HEMMA, that were both in first and in the second quarter of 2022, and we're moving faster towards concluding six. We also have [Indiscernible] they got more advanced.

In terms of the ones that were unsuccessful in that meaning GAAP and sorry, HIPAA, we expect to continue our conversations with the Brazilian anti-trust authorities so that we can relaunch the processes in a way that we can be more effective and successful, and actually be able to conclude the transactions in the second opportunity.

So, we've been having discussions in terms of timing and strategy of how to launch the processes in terms of timing as well, so that we can improve the competition in the M&A process and be able to successfully sign and close them. So, this is where we are now, but thank you for your question..

Thank you all. The next question comes from Rodolfo de Angele with JPMorgan, and it's for you, Rodrigo.

Can you give us an update on the process of sale of the Refining Park? What can be done to make these assets more interest for buyers, and what would be a reasonable time frame?.

Thank you. Thank you for your question, Rodolfo. Well, as I mentioned before, we're considering timing and the strategy of how to relaunch the processes that were not successful. They were unsuccessful for different reasons.

HIPAA, for example, the bids that we've received were substantially below our minimum valuation, and in HIPAA, we could not agree on the terms of the transaction, unfortunately. But actually, we didn't receive binding offers, so we expect to relaunch those transactions after we conclude discussions with the Brazilian anti-trust authorities.

But we're concerned about improving the level of competition in the transactions and how can we ensure that we were able to relaunch and sign and close them successfully. So, we're working on this now, and this is where we are and in terms of the other process I have already mentioned where we are in terms of timing, but thank you for your question..

Thank you, Rodrigo. Rodolfo also made a question for Joao.

So, Joao, can you give us an update on the auction of Atapu and Sepia? Have you seen interest from companies to partner up with Petrobras?.

Thank you, Rodrigo, for your question. As the Company has publicly announced on April, Petrobras has separated its rights to work as Operator on both areas of Sepia and Atapu with a minimum of 30% of working interest.

Unfortunately, as you know, the bid process is ongoing, and we are not be able to share any perceptions of other companies at this moment. Finally, we reinforced that Petrobras maintains our intention to work in partnership in all EMP areas in order to reduce the risks and costs. Thanks again for the question..

Thank you, Joao. The next question comes from Bruno Amorim with Goldman Sachs and it's for Mastella.

So Mastella, do you attribute the recent rise in demand for Petrobras shears for November, too much stronger demand in the domestic market overall, are harder to achieve toward more internal sourcing in that meant of less imports by the fuel distributors?.

Bruno, thank you for your question. Well, we haven't really noticed anything that could support the growth of demand in less demanding November, which is seasonally a weaker month than October.

Regarding the typical demand for Petrobras products for November, we must have in mind that we have almost 100 clients each with different perspectives of the market. So, I can't speak by each of them but it's only some of their perspectives which we do not share. Thank you..

Thank you, Mastella. The second question from Bruno is to Rodrigo Araujo. So, Rodrigo, can you please clarify the rational for determining the size and timing of dividends going forward? The delivery storage story is now behind us.

So, is it reasonable to expect for the Company to pay out 60% of operating cash flow minus CapEx on a quarterly basis?.

Thank you. Thank you for your question, Bruno. Well, as I mentioned before, the anticipated dividends that we've already announced, of course, we took into account balancing, achieving our $60 billion gross debt target. We've been able to distribute our earnings and being able to start improving the level of dividend distribution.

2021 is, of course, it's a transitional year, and we expect to start from 2020 through forward paying the 60% of our free cash flow consistently and comply with our dividend policy. We're currently discussing whether to have a more consistent dividend payment. In terms of timing as well.

We're thinking about whether we do it quarterly or half-annually, but we expect to keep a closer time frame in terms of dividend payments as well.

With respect to 2021, as I mentioned before, depending on the Q4 results, and the scenario and Company's financial sustainability and performance for the fourth quarter, we may see the announcement of additional dividends depending on the scenario. Thank you for your question..

Thank you, Rodrigo, we now have questions from Bruno Montanari with Morgan Stanley, and the question's for Mastella. Mastella, fuel prices in Brazil have been making the headlines since the beginning of the year.

How can Petrobras contribute to make the price adjustments less volatile to final consumers without taking on addition margin risks? How can the Company contribute to the discussions regarding potential tax changes, or the implementation of fuel price stabilization funds in the country, in order to reduce the negative impact of high price to final consumers?.

Thank you, Bruno. Regarding our contribution to the reduction of volatility we do avoid passing you on to customers all the volatility before entering markets and the exit rates. This translates into a lower frequency adjustment, but doesn't prevent us from following structural changes in international price levels.

Finally, with regard to public policies, Petrobras wants to clarify that when requested. We have contributed with our technical knowledge to the various government agencies in the most diverse issues, related to fuel market in Brazil. That's what they do. Thank you..

Thank you, Mastella. The second questions from Bruno. It's for Rodrigo.

Rodrigo, compared to peers, Petrobras has adopted a more pragmatic approach towards energy transition, focusing more on short-term goals and if capital investment, does management expect to implement any changes to this approach in the new business plan? Considering the high level of free cash flow generation and its higher oil prices, could it make sense for the Company to increase investments in research on new energy in order to be better positioned in contexts of energy transition?.

Thank you. Thank you, Bruno for your question. I think that we have several perspectives to look into this question. I think the first of them is, of course, the quality of our portfolio, both in terms of environmental and low-price resilience.

As we saw in 2020, the Company's portfolio was quite resilient to much lower oil price scenario and around $40 of average of Brent prices in 2020. We, of course, have a very resilient and strong portfolio in our hands. This allows us to think about this discretion much more carefully and look at it in a more pragmatic way, as you mentioned.

Of course, we're focused on reducing the level of our emissions and we have already set targets, and as I explained earlier, we also announced the ambition aligned with OGCI as well.

Of course, alongside with reducing the level of emission in all operations, which is something that we're continually investing on and looking for projects that allow us to reduce emissions in our operations. Both in the upstream and the downstream segment in a more efficient way.

I'd like to have the [Indiscernible] project that we announced this year that is focused on improving energy efficiency in the refining operations. We also think about developing framework and governance process to look into these future potential projects, energies, and future potential scenario as well.

But of course, it's not something that we expect to substantially improve or increase CapEx, related to those alternative businesses for the '22 - '26 business plan. We expect to continue to be focused on the current portfolio that we have and on improving the level of emissions in our own operations. Thank you for your question..

Thank you, Rodrigo. The next question comes from Regis Cardoso with Credit Suisse, and it's also for you. It's about addition distributions on 2021. Cash flow generation was strong in the third quarter of 2021. In our view, it should be possible for Petrobras to distribute even more with the cash generated until the end of 2021.

Should we expect Petrobras to announce more dividends or will it depend on the balance sheet full year results?.

Sorry. Thank you. Thank you, Regis, for your question. As I mentioned before, depending on the scenario for the fourth quarter of 2021 and what we have in terms of earnings and cash flow generation, we may see additional dividend distributions for the fourth quarter.

But again, it will all depend on the Company's financial sustainability and on the future scenario on the fourth quarter of 2021, and of course, as I mentioned during the presentation, our cash level now is above the one that we think it's optimal. But we still see challenges in terms of the overall scenario.

So, we expect to be able in the short to medium term to being -- to bring our cash level to somewhere closer to $8 billion to $10 billion, that where we expect our optimal cash level should be.

But again, this will all depend on the scenario in the upcoming month, and as I mentioned before, of course, we're committed to start applying our dividend policy and start paying 60% of our free cash flow for the year 2022 as well, so this will all be taken into account and to analyze our financial sustainability, in order that we can announce additional dividends.

Thank you for your question..

Thank you, Rodrigo. The second question from Regis is to Mastella. Mastella, this is about gasoline and diesel supply. Recently, there were some news saying that Petrobras is not fulfilling additional fuel demand from distributor above contracted volumes, which was confirmed by the Company.

Could you comment on that? How do you see the capacity of third-parties to supply local demand for oil products where it exceeds Petrobras capacity? Do you believe the current levels of your price provide enough incentives to import? Does it make sense for Petrobras to not supply specific markets where imports could make more sense, for example, on the coast of the North and North east regions?.

Well, thank you, Bruno. Thank you for the question. First of all, Petrobras is fully compliant with its contractual obligations. It's very important to make, right? Specifically for November, as I've said before, we received an atypical additional demand, much confirmed higher than expected for that month.

So even with our refiners operating at the limit capacity, it was not possible to meet the extra demand of around 20% of diesel and 10% gasoline. Brazil market will not be short supplies.

Currently there are several other places besides Petrobras, distributors, trading companies, refiners, which produce and import gasoline and diesel, and are fully capable of meeting the demand. Talking about our commercial strategy, we don't avoid markets.

Petrobras will continue to operate in every location where we find profitability and competitiveness, including coastal markets in the North and the North-East. Thank you..

Thank you, Mastella. The next question comes from Vicente Falanga with Bradesco, and it's for Rodrigo Araujo. So, Rodrigo, it seems like Petrobras has the balance sheet to pay more than 60% of operating cash flow minus the CapEx.

Does the Company discuss this possibility for this year?.

Thank you for your question, Vicente. Well, as I mentioned before, '21 is a transition year. So of course, we're highly focused on reaching the $60 billion gross debt target that we reached now in the third quarter, and of course, that depending on the results for the fourth quarter and in the Company's sustainability and the scenario.

For the short-term, we may announce additional dividends, and as I mentioned for 2022, our expectation is to start complying with our dividend policy, and to start distributing 60% of our free cash flow, and of course, whenever we have scenarios that allows us to have stronger cash flow generation, we will be taking into account and considering potential additional dividends.

Thank you for your question..

Thank you, Rodrigo. The next question also from Vicente for Joao.

So, Joao, has Petrobras been talking with potential partners for the TOR auctions this December? How is the interest from foreign companies?.

Vicente, thanks for your question. As I mentioned, for the transfer of rights, beats process, is actually on-going, and in that case, unfortunately, I can't disclose this information about competitiveness at this time. Okay. Thanks a lot for your question..

Thank you, John. The next question comes from Lilyanna Yang with HSBC, and it's for Rodrigo Araujo. Rodrigo, can you please update us with the monetization status of [Indiscernible].

why has this taken so long to materialize?.

Thank you, Lilyana. Thank you for your question. Currently, we have ongoing discussions with Novonor that, of course, is another relevant shareholder in terms of next steps and trying to reach some common point in terms of the conditions of a potential sale transaction. So, this is where we are now.

Of course, we continue to be committed to divesting our interest in [Indiscernible], but we want to maximize value. So, we're currently having discussions with Novonor with respect to the conditions of our potential sale. Thank you for the question..

Rodrigo, Lilyanna also has another question for you and it's about CapEx plans. So, Petrobras is making more money than what was expected in the budget. This is leveraging faster too and has announced its higher dividends.

Isn't it the time to increase CapEx above cost inflation? If so, where would this make more sense to allocate cash? Or this management prefer to recommends the board of directors to distribute more dividends?.

Thank you, Lilyanna.

As I mentioned during the presentation, when we think about, of course, the more favorable oil price scenario is supportive of increasing CapEx in upstream project, and we expect to see certain level of CapEx increase for the 22-26 business plan, especially related to projects that were postponed, given the more challenging price scenario last year, and that could be anticipated, especially projects that are closer to the end portion of the business plan.

But again, we'll continue to be focused on assets that are resilient, both in terms of emissions and resilience to low price scenario. So, this is how we look at this and the kind of projects that we'll be focused on. Of course, depending on the scenario.

Even considering the potential CapEx improve, we could see additional dividends, but this is something that would depend on the upcoming scenario. But thank you for your question..

Thank you, Rodrigo. Now we have questions from Christian Audi with Santander. The first questions for you and it's about uses of cash.

So how would you prioritize your uses of cash going forward?.

Well, thank you, Christian, for your question.

Of course, as I mentioned before, we believe that the $60 billion gross debt level is an adequate level in terms of capital structure, of course, we do need some flexibility around that level, especially after reaching we believe we need some flexibility around 60 billion so that we can manage the Company's future financial sustainability more efficiently.

But then, as I mentioned, the higher oil price scenario is supportive for increases in resilient projects in terms of upstream CapEx, and of course, additional dividend distribution depending on the upcoming scenario.

So, our future capital allocation will be focused on, of course, having the CapEx studies already committed in our '21-'25 business plan. Focusing on some certain level of CapEx increase that we expect for '22-'26.

But of course, complying with the 60% free cash flow for our dividend policy and eventually paying more than the 60% whenever we have supportive scenarios like the one, we've been seeing now. But thank you for your question..

Thank you, Rodrigo. Now we have questions from Gabriel [Indiscernible] with Citi. The first question is for you.

So, looking at the Company's strong cash generation divestments and current leverage situation, how can we read the current dividend policy? Would there be room for payments beyond what was already been disclosed by the Company?.

Thank you for the question, Gabriel.

As I mentioned before, of course '21 is a transition year, but again, we've been able to reach our $60 billion gross debt target before we expected and depending on our earnings and cash flow generations for the fourth quarter of 2021, we may see additional dividends announced, but again, it will depend on how things play out in the fourth quarter of 2021, but thank you for your question..

Thank you, Rodrigo. The next question from Gabriel is to Mastella. So Mastella, currently, one of the major discussions involving Petrobras is its pricing policy. Looking at the current scenario for FX [Indiscernible] we believe that pressure of fuel will continue, at least in the short-term.

However, when we look at the import parity, we still see the Company charging prices below the [Indiscernible].

Therefore, I would like to understand a little better how Petrobras has been thinking about its pricing policy for the current moment and for the future as well? Is there any possibility of changing this strategy?.

Thank you for the question, Gabriel. We understand that the alignment of general prices with the global markets is essential for the maturity of the competitive market in Brazil. With the participation of several agents that will be encouraged to make investments in refining, logistics, and also share risks.

With that, we can deal with stronger market, less risk of any supply. Supply [Indiscernible] So we continue to seek this balance with the market [Indiscernible] as we've being doing [Indiscernible] Thank you..

Thank you, Mastella. Now, we have questions from Anne Milne with Bank of America Merrill Lynch. So, we have 1 question for Rodrigo.

Rodrigo, as the $60 billion debt target has been met, what will be the next goals or targets under that management leverage front?.

Thank you. Thank you, Annie, for your question. We think that $60 billion is an adequate level that allow us to navigate through challenging scenarios like the one we saw last year without jeopardizing the Company financial sustainability, even in lower price scenarios like the one we saw in 2020.

But again, of course, we do need some level of flexibility around the $60 billion level so that we can efficiently manage the Company's cash and, of course, distribute our earnings and pay future dividends.

So, we expect to work on some level of flexibility around $60 billion in the upcoming future, but we don't expect to bring this debt level substantially lower to the one that we have now.

We think that looking at this from different perspectives, the $60 billion gross debt level allows us to be quite resilient and have a strong financial sustainability for the future. Thank you for your question..

Thank you, Rodrigo. Now, we have questions from Pedro Soares with BTG Pactual. The first questions for you.

So, with the gross debt target now achieved, what should we expect in terms of capital allocations in the coming quarters? Could you provide an update on the minimum levels of cash in by the Company? Can we expect payments beyond the 60% of operating cash flow minus CapEx?.

Thank you, Pedro, for your question. As I mentioned before, our optimal cash level was just somewhere around $8 to $10 billion. This is where we expect to be working in the future. But again, we still have certain challenges in the pandemic scenario that we are expecting to see in the upcoming future.

We think about a short-term trajectory to bring our cash level closer to these 8 to 10 levels that I mentioned. In terms of gross debt, I've mentioned before, we don't expect to substantially reduce the Company's debt. We don't want to under-leverage the Company as well.

So, we think that $60 billion is an adequate level for now, and of course, this is something that we continually monitor. But for the current scenario, we think that $60 billion is a sustainable level and is optimal in terms of cash allocation and supporting our dividend distribution in future CapEx strategy.

In terms of additional dividend payments, of course, depending on the upcoming scenario, whenever we have a constructive scenario like the one, we have now, we can propose additional dividend payments and have additional payments. But we're now focused on complying with the existing dividend policy and paying the 60% of our free cash flow.

Thank you for the question..

Thank you, Rodrigo. The next question also from Pedro Soares is to Rodrigo Costa. Refinery utilization rates are currently at high levels.

Can we expect some utilization reduction in the coming months as distributors are expected to increase fuel imports?.

Pedro, our virtualization rate is related with value generation output. This is on one condition, and the second one is the market demand, the third one is, regarding our hardware, regarding availability of our refineries. So, at the first quarter we achieved 85% of utilization rate, and now at October, our forecast point to 90% of utilization rate..

Thank you, Rodrigo. Now we have our last question. Last question is from Barbara Halberstadt with JPMorgan. She has two questions.

So, the first one would be to Rodrigo Araujo, in terms of capital structure, assuming the divestment program is completed, what's the level of debt that the Company would be comfortable with?.

Thank you, Barbara, for your question. We think that $60 billion that is an adequate level in terms of capital structure. We do need some flexibility around that number, but we don't expect to bring it much lower than 55 or much higher than 65.

Some flexibility around 60 would be more than enough so that we can manage the Company's capital structure efficiently and add value to our shareholders.

So that is where we expect to have our gross debt level set, and, of course, this is something that we will continue to monitor in the future, but we think that $60 billion allows us to go through challenging scenarios of lower prices, like the one we saw this year. Thank you..

Thank you, Rodrigo. So, Barbara has one more question and it's for Rodrigo Costa. Rodrigo, can you provide more color on the natural gas business and LNG? How was the business doing into the fourth quarter of 2021? We heard many companies complaining about freight costs.

Has Petrobras encountered the same issues for LNG imports? How are the pass-through mechanisms in this case?.

Hi, Barbara. Petrobras is a relevant player in Brazilian natural gas market, works with a portfolio both in the supply and in the demand side. We also have multiple contracts that aligns with different commercial conditions in short periods contracts. We have passed through mechanisms that reflect the conditions of the moment of the market.

If we see the fourth quarter, we expect high demand in our markets because we see high demands in thermoelectric and industrial markets. For the supplier, we have our production pipeline imports from Bolivia and LNG, and we increase our gas capacity in Rio de Janeiro terminal, around 50% in capacity.

For the LNG supply, we already bought around 112 cargoes and we are assessing the need of additional purchase is dependent on the supply and the demand conditions, especially in the power generation. According to our profile, we didn't face problems with the freight costs, consider that Brazil is in the Atlantic basin market.

So, we also have our own ship that allow us to manage punctual market and operation issues. Thank you for your question..

Thank you, Rodrigo. At this time, the Q&A session is over. If you have any further questions, you can send this to our Investor Relations team. Rodrigo Araujo will now make his final remarks. Please, Rodrigo, go ahead..

Well, thank you. Thank you, Carla, thanks, everyone, for your time this morning as we presented. We're very happy with the solid quarter that we had, both in terms of operational and financial performance.

We've been able to reach our gross dollar debt level target that we set up $60 billion gross debt, and, of course, we're quite happy with the results we've had.

In the year 2021, we've announced relevant dividend payments, we were able to make relevant investments, and to relevantly contribute to the Brazilian society as well, so thank you for your time today. Thank you for your questions. If you have any further questions, please feel free to contact our Investor Relation teams. Thank you..