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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 6-K
 
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
 
For the month of May, 2003

Commission File Number 1-15106
 

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

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

Avenida República do Chile, 65
20035-900 - Rio de Janeiro, RJ
Federative Republic of Brazil
(Address of principal executive office)
 

 

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

Form 20-F ___X___ Form 40-F _______

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

Yes _______ No___X____

"The information contained in this Form 6-K is incorporated by reference into each of the Offering Memoranda, dated May 13, 2003 and May 14, 2003, relating to the offer of US$550,000,000 6.436% Senior Trust Certificates, Series 2003-A due 2015, and US$200,000,000 3.748% Senior Trust Certificates,Series 2003-B due 2013, respectively."


 

PETROBRAS ANNOUNCES FIRST QUARTER 2003 RESULTS

(Rio de Janeiro – May 15, 2003) – PETRÓLEO BRASILEIRO S.A. – PETROBRAS today announced its consolidated results stated in millions of Reais, in accordance with generally accepted Brazilian accounting principles.

PETROBRAS reported consolidated net income of R$ 5,545 million for the first quarter 2003 (1Q-2003). Consolidated net operating revenue in 1Q-2003 was R$ 24,500 million. As of March 31, 2003, the Company’s market value was R$ 53,451 million. 1Q03 EBITDA was R$ 9,409 million, up 107.8% on 4Q02.

This document is divided into 5 sections:

PETROBRAS SYSTEM Contents PETROBRAS Contents
Financial Highlights Financial Statements 28
Operating Highlights    
Financial Statements 13     
Appendices 23     

PETROBRAS SYSTEM

Comments of the CEO, Jose Eduardo de Barros Dutra

During this first quarter at the helm of PETROBRAS, the new Board and I have sought to immerse ourselves in all the Company’s activities in close collaboration with our employees, suppliers, clients shareholders, investors, professionals, and the Federal Government.

Our first task was to listen, talk, suggest and discuss all that is of material interest to PETROBRAS with those that contribute to the development of the Company’s activities.We sought to adapt practices, procedures, and objectives to the new strategies, reconciled to the new economic and social climate of Brazil, without losing focus and sight of our business, aiming for profitability with respect for the environment, and contributing to the development of the communities where we operate.

It is therefore with satisfaction that I inform our shareholders and investors of our first quarter net profit of R$ 5,545 million. This result not only reflects PETROBRAS’s appropriate pricing policy, but is also indicative of an improving outlook for the Brazilian economy, with the foreign exchange rate registering significant appreciation, positively impacting not only our debt but also boosting our already growing export business.

Before commenting in more detail on the operational and financial highlights of the quarter, I would like to highlight specifically our revised strategic plan for the 2003/2007 period. The plan foresees capital expenditures of approximately US$ 34.3 billion, while maintaining PETROBRAS’s continued leadership of the domestic market by offering products of an international standard in an efficient and modern manner. The revised plan includes stronger policies for human resources, social responsibility and occupational health, safety and the environment, with a continued focus on the commitment to the policies of capital discipline and corporate governance.

Operating highlights

Total oil, NGL and natural gas production was 1,896 thousand bpd, or 5% higher than the same period last year. The boost to production came largely from the start-up of new wells in the Marlim field (P-35 and P-37), in Espadarte (ESPF) as well as the new wells comprising the P-38/P-40 system in the Marlim Sul field.

This increase in domestic production in first quarter 2003 permitted net oil and oil product imports of only around 120,000 bpd, a 39% decline compared with the same period last year, confirming that the Company is on the right track to achieve a trade surplus in the medium term.

I would like to particularly mention four major operational highlightsof this first quarter:

Financial and corporate highlights

Net operating revenue was R$ 24,500 million due to rising international oil product prices and growth in production. As a result, PETROBRAS reported strong cash flow with an EBITDA of R$ 9,409 million in the first quarter.

Consequently PETROBRAS generated tax obligations of R$ 9,068 miilion. Royalties and government participations almost tripled, reaching R$ 2,656 million. Accordingly, the Company’s economic contribution totaled R$11,724 million, an increase of 42% when compared to the same period last year and higher than its own cash generation.

This excellent performance permitted the immediate provision of R$ 708 million that, combined with the R$ 724 million already provisioned in 2002,correspond to 94% of the maximum expected losses in 2003, related to thermoelectric plants. The installed capacity, while not currently being dispatched, provides a margin of security to the Brazilian electric system. a security.

Petrobras’ net debt on March 31, 2003 was R$ 34,926 million, down 9% compared with December 31, 2002, primarily due to the effect of the appreciation of the Real against the US dollar on consolidated debt, as well as the increase in our cash position during the first quarter.

The Company continued its policy of extending the maturity profile of its debt by raising long term funds and, at the same time, paying down short-term debt. The debt to equity ratio was 61% on March 31, 2003, a decrease of 6 percentage points compared with December 31, 2002.

PETROBRAS continues to concentrate its investments on increased oil and natural gas production through investing in its own production resources, as well as through the structuring of venture partnerships. In the first quarter 2003, total capital expenditures were R$ 3,590 million (excluding values invested through SPCs, on an off-balance sheet basis and totaling about US$ 261 million in 1Q-2003), representing a growth of 44% over investments in the same period in 2002.

In this context, through a new issue targeted to raise US$ 200 million, PETROBRAS successfully raised US$ 400 million with maturity in 2008 through its Petrobras International Finance Company – Pifco subsidiary. This is one more example of investor confidence in the way we are managing the Company’s business.

I would also like to mention the successful tender offer for the acquisition of shares in exchange for the delisting of BR Distribuidora. The significant level of approval among BR’s minority shareholders indicates PETROBRAS’s commitment to stronger Brazilian Capital Markets with better corporate governance practices.

Events subsequent to the end of the quarter:

In accordance with the decision of the Annual General Shareholders’ Meeting on March 27, 2003, PETROBRAS began on May 5, 2003 dividend and interest on capital payments based on the adjusted result for the fiscal year ending December 31, 2002 for a total of R$ 1.6571 per common and preferred shares, restated at the Selic rate.

We also announced the largest natural gas discovery ever on the Brazilian continental shelf with reserves of around 70 billion cubic meters or approximately 440 million boe, increasing Brazilian proven natural gas reserves by about 30%.

As already commented, we announced our revised strategic plan. This plan sets feasible objectives and targets adapted to the new international reality and focused on increased production but aligned to the recovery of Brazilian economic growth. The execution of the projects contained in the strategic plan will translate into more jobs through PETROBRAS’s direct activities as well as through its investments in Brazilian industries that are being expanded during the 2003/2007 period. And what is even more significant, is that we are able to do this without incurring additional costs and withsupport that is available to the brazilian oil industry as a whole.

Finally, we register that, on May 13, 2003, the Argentine Antitrust Committee (Comisión Nacional de Defensa de la Competencia), an agency reporting to the Argentine Secretariat of Competition, Deregulation and Consumer Protection (Secretaría de la Competencia, la Desregulación y la Defensa Del Consumidor), approved the purchase of 58.62% of Perez Companc S.A.´s and 39.67% of Petrolera Perez Companc capital stock. Upon approval of the transaction Pecom Energía S.A. agreed to divest itself of its aggregate equity interest in Transener S.A. in accordance with the Law Nº. 24,065 of the Electricity Regulatory framework. It is worth mentioning that this divestment is in line with Perez Companc S.A.‘s strategic plan objectives and does not represent any relevance to the strategic plan of Petrobras.

PETROBRAS SYSTEM Financial Highlights

Consolidated Net Income

PETROBRAS, its subsidiaries and controlled companies, reported consolidated net income of R$ 5,545 million in 1Q-2003, with an operating profit (1) that represents an increase of 160% compared with 4Q-2002.

Millions of Reais (R$)
    Jan-Mar
4Q-2002   2003  2002  D
29,429  Gross Operating Revenue 33,365  17,778  88 
20,843  Net Operating Revenue 24,500  11,239  118 
3,264  Operating Profit (1) 8,491  1,472  477 
1,383  Financial Result 703  247  185 
2,829  Net Income for the period 5,545  866  540 
2.61  Net income per share 5.06  0.80  533 
54,308  Market Value (Parent Company) 53,451  65,252  (18)
(1) Before financial income and expenses and the gain from investments in subsidiaries.

The principal factors affecting the Company’s net consolidated income in the first quarter of 2003 were:

Subsidiaries’ Results

Millions of Reais (R$)
Jan-Mar
4Q-2002   2003  2002 
2,458  PETROBRAS (1) 5,529  1,064 
90  BR Distribuidora 100  381 
425  Gaspetro - consolidated (4) 158  18 
(9) PIFCo - consolidated 26  (70)
PNBV (3) 14 
209  Transpetro - consolidated 143  96 
263  Downstream - consolidated 122  20 
70  Petroquisa - consolidated (4) 111  59 
Petrobras Energia 14 
505    Braspetro - consolidated (2) (55)
232    BRASOIL - consolidated 65 
(74)   BOC - consolidated (4) 56 
(30)   PIB - BV - consolidated 50 
(35)   Petrobras Colômbia
84    Eliminations

 

682  Sub total 171  (55)
Thermal - consolidated (4)
  Less:      
(885) Eliminations and adjustments (643) (541)
(480) Minority Interests (206) (106)

 

2,829  Consolidated net income (loss) 5,545  866 

 

(1)      PETROBRAS (Controlling Company) – PETROBRAS posted a 1Q-2003 net income of R$ 5,529 million, an increase of R$ 4,465 million compared to the same period last year, driven mainly by the price increases for oil product sales, representing the partial pass through of international prices in addition to the effects of the reduction in gasoline and diesel sale prices in January of 1Q-2002. Other factors which affected 1Q-2003 results compared with the same period in the preceding year were: larger volumes of oil exports from the Marlim Field (41%), larger outlays incurred with government participations and consortia (SPCs), the write-off of R$ 68 million in wells identified as dry or sub-commercial, the increase in provisions for losses arising from the financial exposure to contracts with thermoelectric power plants of R$ 708 million and the appreciation of the Real against the US dollar in the quarter (5.1% in 1Q-2003 against a devaluation of 0.1% in 1Q-2002), producing a net financial gain of R$ 551 million.

(2)     BRASPETRO – The Extraordinary General Meeting of PETROBRAS’ shareholders held on September 30, 2002, approved the incorporation of BRASPETRO by PETROBRAS, thus concluding the restructuring process that began in 2000. As part of this restructuring, on September 5, 2002, PETROBRAS constituted Petrobras Internacional Braspetro B.V. – PIB BV, domiciled in the Netherlands and on September 25, 2002, Petrobras Participaç&otidle;es S.L., domiciled in Spain. Both will operate as holding and sub-holding companies respectively, for the components of the PETROBRAS System related to the activities of the International Business Area. With the conclusion of the restructuring of the International Area and with the incorporation of BRASPETRO into PETROBRAS, the companies Brasoil, BOC and PIB BV, previously controlled by BRASPETRO, will be directly controlled by PETROBRAS.

(3)     On February 19, 2003, Petrobras Netherlands BV — PNBV, domiciled in the Netherlands, previously controlled by Petrobras International Finance Company — PIFco, was placed under the direct control of PETROBRAS.

(4)     In 1Q-2003, consolidated revenue, were impacted by transactions involving Fábrica Carioca de Catalisadores (jointly controlled with PETROQUISA), by Petrolera Santa Fe (controlled by BOC), by CEG – Rio (affiliated of GASPETRO), by Bahiagás (jointly controlled with GASPETRO) and by Ibiritermo, thermoelectric plant included in the consolidation process using the shared control accounting principle.

Consolidated Economic Indicators

The businesses managed by PETROBRAS, its subsidiaries and controlled companies reported R$ 9,409 million in earnings before interest, equity income, taxes, depreciation and amortization (EBITDA) in 1Q-2003, 295% higher when compared with the same quarter of 2002.

Jan-Mar
4Q-2002   2003  2002  
36  Gross margin (%) 49  33 
16  Operating margin (%) 34  13 
14  Net margin (%) 23 
4,527  EBITDA - R$ million 9,409  2,383 

In 1Q-2003, the gross margin increased 16 percentage points compared to 1Q-2002, primarily due to the partial pass through of international prices, starting from October 2002, onto some by-products and the currency devaluation, as well as the increase in exports, in large part from the Marlim field. Other reasons were the reduction in expenses in relation to the future abandoning of depleted wells due to new accounting procedures adopted in 2003, partially offset by an increase in the cost of oil and oil product imports and reflecting higher imported volumes, of international prices and the devaluation of the Real in relation to the US dollar (44% compared to 1Q-2002). Also affecting the gross margin were domestic oil production costs impacted by an increase in expenditures in the preceding quarter with payments for government participations in Brazil and with the participation of third party members of consortia, payments which are benchmarked to international prices and the foreign exchange rate.

In 1Q-2003, the operating margin increased 34% in relation to 1Q-2002, basically due to the gross margin, offset by the increase in the provision for losses on financial exposure to contracts with thermoelectric power plants amounting to R$ 708 million.

Net margin for 1Q-2003, compared with 1Q-2002, increased, reflecting gross margin in addition to the reduction in net financial expenses from the appreciation of the Real in relation to the US dollar in 1Q-2003 (5.1% versus 0.1% devaluation in 1Q02), despite the increased provisioning during the quarter for losses on financial exposure in relation to contracts with thermoelectric power plants amounting to R$ 708 million.

Consolidated Debt

  Millions of Reais (R$)
 
  Mar 31, 2003 Dec 31, 2003 D
Short-term Debt (1) 9,664  9,611 
Long-term Debt (1) 40,473  40,774  (1)
 

 
Total Debt 50,137  50,385    
Net Debt (1) 34,926  38,510  (9)
Net Debt/(Net Debt+Equity Ratio) (1) 45% 53% (8)
Total Net Liabilities (1) (2) 110,654  103,174 
Capital Structure         
Debt to Equity Ratio 61% 67% (6)
(1) Includes debt contracted by special purpose companies used by PETROBRAS to structure project finance transactions (R$ 10,977 million on March 31, 2003 and R$ 10,761 million on December 31, 2002), as well as advances for of the project in consortium with Nova Marlim S.A. (R$ 1,706 million on March 31, 2003 and R$ 1,794 million on December 31, 2002) and debt contracted through leasing contracts (R$ 6,422 million on March 31, 2003 and R$ 7,028 million on December 31, 2002).
(2) Total liabilities net of cash/cash equivalents.

As of March 31, 2003, the PETROBRAS System reported a 9% reduction in net debt in relation to December 31, 2002, principally due to the appreciation effect of the Real against the US dollar in the quarter (5.1%) as well as the increase in its cash position in 1Q-2003.

The Company has been taking steps to improve its debt maturity profile by borrowing at longer terms and at the same time paying down shorter-term liabilities. The debt to equity ratio stood at 61% on March 31, 2003, a decrease of 6 percentage points compared with December 31, 2002.

Consolidated Statement of Results by Business Area

Result by Bussiness Segment millions of Reais (R$) (1)
    Jan-Mar
4Q-2002   2003  2002 
        (3)
2,932  EXPLORATION &PRODUCTION 5,617  1,230 
405  SUPPLY 1,465  339 
(453) GAS &ENERGY (335) (98)
74  DISTRIBUTION 97  35 
165  INTERNATIONAL (2) 185  (63)
(170) CORPORATE (377) (373)
(124) ELIMINATIONS AND ADJUSTS (1,107) (204)

 

2,829  CONSOLIDATED NET INCOME 5,545  866 

 

(1)     The accounting statements by business area and the respective comments are shown on page 17.

(2)     In the international business area, the comparison between periods is influenced by foreign exchange rate variations in the period, given that all operations are transacted overseas either in dollars or in the currency of the countries in which each company is domiciled. There may be cases in which fluctuations in the Real are significant and due almost exclusively to foreign exchange variations, principally during periods of high volatility. From 4Q–2002, the International area’s businesses also includes the Argentine operations of Petrolera Santa Fé, acquired in October 2002, but exclude those of Perez Companc S.A. and Petrolera Perez Companc S.A., since the transfer of shareholding control, on March 31, 2003, was subject to approval by the appropriate Argentine regulatory authorities.

(3)     With the aim to allow for comparison between both fiscal periods, the results of the businesses of Gas & Energy and the corporate segment relative to 4Q02 underwent a few changes, taking into account the revision in the criteria adopted for the allocation of the financial result.

Consolidated Capital Expenditures

In accordance with the objectives established in the strategic plan, PETROBRAS continues to prioritize capital expenditures in developing its oil and natural gas for its own account and through joint ventures. In the first quarter of 2003, total investments were R$ 3,590 million (excluding investments through SPC’s on an off-balance sheet basis and worth approximately US$ 261 million in 1Q — 2003), a year-over-year increase of 44%. 

Millions of Reais (R$)
Jan-Mar
  2003  2002  D
• Own Investments 3,331  93  2,090  84  59 
 



 
Exploration &Production 2,075  58  1,252  50  66 
Supply 626  17  361  14  73 
Gas and Energy 110  166  (34)
Internacional 369  10  162  128 
Distribution 78  70  11 
Corporate 73  79  (8)
• Ventures under Negotiation 128  111  15 
 



 
• Structured Projects 131  291  12  (55)
 



 
Exploration &Production 131  291  12 
Albacora 75 
Espadarte/Marimbá/Voador 94  (93)
Cabiúnas 14  18  (22)
Marlim 80 
Novamarlim Petróleo 94 
Others 16  24  (33)
 



 
Total Investments 3,590 * 100  2,492  100  44 
 



 
*  Beside this amount,approximately US$ 261 million were invested through SPC companies as mentioned above.
Millions of Reais (R$)
Jan-Mar
  2003  2002  D
International 369  100  162  100  128 
 



 
Exploration &Production 350  95  115  72  204 
Supply
Gas and Energy 38  23 
Distribution 800 
Others 100 
 



 
Total Investments 369  100  162  100  128 
 



 

PETROBRAS SYSTEM Operational Highlights

Exploration & Production

1Q-2003, domestic oil and NGL production was 8% higher than in 4Q-2002 largely due to the start-up of production of the new wells making up the FPSO System – Brasil in the Roncador filed and the DP-Seillean in the Jubarte field, which production began in the last quarter of 2002, and also to scheduled interruptions of platforms in the Campos Basin in the 4Q-2002 and the stoppage at platform P-34 due its semi-capsizing on October 13, 2002. A new monthly production record in oil and NGL was set in February 2003 with an average of 1,597,000 bpd reflecting PETROBRAS’s efforts to ramp up production, placing Brazil within reach of domestic self-sufficiency.

Barrels/Days (thousands)
Jan-Mar
4Q-2002   2003  2002  D
1,491  Oil and LNG production 1,613  1,526 
1,455    Domestic market 1,573  1,489 
36    Foreign market 40  37 
263  Natural gas production * 283  281 
236    Domestic market 249  262  (5)
27    Foreign market 34  19  79 

 

 
1,754  Total production 1,896  1,807 

 

 

* Excluding liquified gas and including reinjected gas

The year-over-year increase of 6% in domestic oil and NGL in 1Q-2003 reflects the start-up of new wells in the Marlim field (P-35 and P-37), in the Espadarte field (ESPF), and above all, the new wells of the P-38/P-40 system in the Marlim Sul field.

Refining, Transport and Marketing

Mainly as a result of the increase in domestic oil production, in 1Q-2003, net oil and oil product imports averaged 120,000 bpd, representing a decline of 39% compared with the same period in 2002, confirming the tendency towards a Company trade surplus in the medium term.

Barrels/Day (thousands) (average for the period)
Jan-Mar
4Q-2002   2003  2002  D %  
298  Crude oil imports 388  281  38 
213  Oil product imports 183  215  (15)
212  Crude oil exports 225  160  41 
178  Oil product exports 226  141  60 
121  Net imports 120  195  (39)
1,707  Output of oil products 1,693  1,722  (2)
1,647  • Brazil 1,623  1,662  (2)
60  • International 70  60  17 
2,022  Primary Processed Installed Capacity 2,047  2,022 
1,931  • Brazil 1,956  1,931 
91  • International 91  91 
  Use of Installed Capacity      
82  • Brazil 83  85  (2)
65  • International 70  66 
77  Domestic crude as % of total feedstock processed 80  81  (1)

Costs

US$/barril
Jan-Mar
4Q-2002   2003  2002  D
   Lifting Costs:        
     • Brazil        
2.93      • • without government participation 2.85 3.46 (18)
7.38      • • with government participation 8.45 6.75 25 
2.48    • International 1.99 1.97
   Refining cost        
0.92    • Brazil 0.90 1.04 (13)
0.92    • International 1.07 1.17 (9)
130  Corporate Overhead (US$ million) (1) 138  168  (18)

(1)     To adequate the Corporate Overhead ratio to the management model, the Company reviewed this concept ratio promoting the restatement of the previous period.

Excluding government participations, 1Q-2003 domestic lifting costs fell 18% in relation to 1Q-2002, principally reflecting the translation effect into dollars of costs originating in local currency due to the Real’s devaluation against the US dollar (44% in relation 1Q-2002) and the reduction in overhead relating to exploratory drilling rigs, and the transportation and processing of oil. The quarter-over-quarter decrease of 3% in lifting costs is due principally to the 4Q-2002 interruption of production at the Barracuda and Caratinga fields from October 14, 2002 with the partial capsizing of platform P-34. Also contributing to the quarter’s improved lifting costs were scheduled down time for maintenance on production systems in the Campos Basin thereby reducing production volumes and increasing 4Q-2002 unit costs.

In 1Q-2003, domestic lifting costs including the government’s participations, increased 25% compared to 1Q-2002 and 14% relative to 4Q-2002, due to 1Q-2003 increases in domestic oil reference prices, in turn, linked to the international market, combined with the increase in the special government participation rate for the Marlim Sul field due to increased production, and consequently higher quarterly expenditures.

In 1Q-2003, domestic unit refining costs decreased by 13% compared with the same period in 2002, mainly due to weaker demand for chemical products and catalyzers as well as the impact of the conversion into dollars of costs originating in local currency and reflecting the devaluation in the local currency against the US dollar. Quarter-over-quarter refining costs remained stable, due to higher expenditures in the final quarter of 2002 with planned stoppages at both the REVAP and REPAR refineries but offset by the conversion in dollars of costs originating in local currency due to the stronger appreciation in the Real against the US dollar in 4Q-2002 (9.2%) when compared with 1Q-2003 (5.1%).

In 1Q-2003, the 18% year-over-year decrease in the Corporate Overhead reflects the decrease in payroll expenditure due to extraordinary costs in 1Q02 associated with the incentives provided to employees and retirees to migrate to the Company’s new pension plan. The reduction also relates to the conversion effect of local currency costs into US dollars in the light of the Real’s devaluation against the dollar. In comparison with 4Q-2002, the 1Q-2003 Corporate Overhead increased by 6%, principally due to the increase in outlays with the Company healthcare plan for employees, retirees and pensioners.

Net Operating Revenue

1Q-2003 consolidated net revenue increased 118% compared with the same period in 2002, reflecting the partial pass through of increases in oil products pricing on the international market to domestic selling prices as well as the increase in oil exports from Marlim field.

Net operating revenue increased 18% compared with 4Q-2002, largely due to increases in the selling prices of oil products, reflecting the partial pass through of higher international prices onto some by-products but also impacted by the reduction in dollar rates.

Millions of Reais (R$)
Jan-Mar
4Q-2002    2003  2002  D %
18,214  PETROBRAS 20,934  9,375  123
6,098  BR - Distribuidora 6,326  3,759  68
276  GASPETRO - Consolidated 289  137  111
4,162  PIFco - Consolidated 6,524  2,653  146
PNBV 143   
539  TRANSPETRO - Consolidated 484  436  11
1,306  DOWNSTREAM - Consolidated 1,418  720  97
67  PETROQUISA - Consolidated 27   
PETROBRAS ENERGIA 48   
  BRASPETRO - Consolidated (*) 1,921   
1,891    BRASOIL - Consolidated 2,407   
164    BOC - Consolidated 79   
2,530    PIB - BV - Consolidated 4,713   
110    PETROBRAS COLÔMBIA  
(296) Eliminations  

 

 
4,399  Sub total 7,199  1,921  275
44  Thermal - Consolidated 14   
   Less:        
(14,262) Eliminations and adjustments (18,906) (7,762) 144

 

 
20,843    24,500  11,239  118

 

 

(*)     See comments on page 5.

In 1Q-2003, consolidated revenue, were impacted by transactions involving PETRORIO (fully controlled), Fábrica Carioca de Catalisadores (jointly controlled with PETROQUISA), by Petrolera Santa Fe (controlled by BOC), GNL do Nordeste LTDA. (jointly controlled with PETROBRAS), Bahiagás (jointly controlled with GASPETRO) and the thermoelectric plants Tersmosergipe, Termoaçu, Termorio, Ibitermo and Termobahia, all of them included in the consolidation process using the shared control accounting principle

On February 19, 2003, Petrobras Netherlands BV — PNBV, domiciled in the Netherlands, previously controlled by Petrobras International Finance Company — PIFco., was placed under the direct control of PETROBRAS.

Sales volume

Domestic 1Q-2003 sales volume decreased 6% compared with 1Q- 2002, mainly due to lower fuel oil sales as a result of competition from natural gas and substitutes such as imported coke, bagasse, coal, biomass and firewood, as well as weaker gasoline sales. Marlim oil exports accounted for the 45% growth in sales to markets overseas.

Jan-Mar
4Q-2002 Barrels/Day (thousand) 2003  2002  D
1,643  Total Oil Products 1,480  1,594  (7)
34  Alcohol, Nitrogen and others 29  26  12 
178  Natural Gas 148  141 

 

 
1,855  Total domestic market 1,657  1,761  (6)

 

 
398  Total international market 458  316  45 
2,253  Total 2,115  2,077 

Consolidated Sales Costs

On a year-over-year basis, sales costs in 1Q-2003 increased 36% primarily due to higher sales prices of oil products in the domestic market.

Millions of Reais (R$)
Jan-Mar
4Q-2002   2003  2002  D
4,043  ICMS 4,197  2,608  61 
723  PASEP/COFINS 477  173  176 
3,712  CIDE 4,010  3,613  11 
108  Others 181  145  25 

 

 
8,586  Total 8,865  6,539  36 

 

 

PETROBRAS SYSTEM Financial Statements

Income Statement – Consolidated

Millions of Reais (R$)
Jan-Mar
4Q-2002    2003  2002 
29,429  Gross Operating Revenues 33,365  17,778 
(8,586) Sales Deductions (8,865) (6,539)

 

20,843  Net Operating Revenues 24,500  11,239 
(13,400)   Cost of Goods Sold (12,480) (7,537)

 

7,443  Gross Profit 12,020  3,702 
   Operating Expenses      
(1,502)   Sales, General &Administrative (1,561) (1,067)
(522)   Cost of Prospecting, Drilling &Lifting (227) (232)
(153)   Research &Development (140) (88)
(152)   Taxes (235) (173)
(1,850) Others (1,366) (670)
     Net Financial Expense      
857        Income 774  702 
(668)       Expense (640) (442)
(248)       Monetary &Foreign Exchange Correction - Assets (137) 585 
1,442        Monetary &Foreign Exchange Correction - Liabilities 706  (598)

 

1,383    703  247 

 

(2,796)   (2,826) (1,983)
(403) Gains from Investment in Subsidiaries (89) (40)

 

4,244  Operating Profit 9,105  1,679 
606    Balance Sheet Monetary Correction 16    
(61) Non-operating Income (Expense) (56)
(1,036) Income Tax &Social Contribution (3,314) (715)
(480) Minority interest (206) (106)
(444) Employee Profit Sharing Plan      

 

2,829  Net Income (Loss) 5,545  866 

 

Balance Sheet — Consolidated

Assets Millions of Reais (R$)
 
  Mar 31, 2003 Dec 31, 2002
 

Current Assets 43,492  38,431 
 

Cash and Cash Equivalents 15,211  11,875 
Accounts Receivable 8,537  7,993 
Inventories 13,984  12,209 
Others 5,760  6,354 
Non-current assets 16,889  16,561 
 

Petroleum &Alcohol Account 668  644 
Ventures under Negotiation 1,159  1,024 
Advances to Suppliers 1,287  1,334 
Marketable Securities 1,495  1,617 
Investments in Companies to be Privatized 291  246 
Deferred Taxes and Social Contribution 1,539  1,477 
Advance for Pension Plan Migration 1,100  1,023 
Others 9,350  9,196 
Fixed assets 48,085  42,268 
 

Investments 814  637 
Property, Plant &Equipment 46,444  40,786 
Deferred 827  845 
 

Total Assets 108,466  97,260 
 


Liabilities Millions of Reais (R$)
 
  Mar 31, 2003 Dec 31, 2002
 

Current Liabilities 31,591  29,227 
 

Short-term Debt 6,222  6,016 
Suppliers 6,036  6,491 
Taxes &Social Contribution Payable 9,658  7,036 
Project Finance and Joint Ventures 1,706  1,794 
Pension fund obligations 312  264 
Dividends 1,727  2,812 
Others 5,930  4,814 
Long-term Liabilities 34,486  33,909 
Long-term Debt 24,810  24,786 
 

Pension fund obligations 474  515 
Health Care Benefits 3,951  3,745 
Deferred Taxes &Social Contribution 3,866  3,639 
Others 1,385  1,224 
Provision for Future Earnings 403  404 
Minority Interest (907) (605)
 

Shareholders' Equity 42,894  34,325 
Capital Stock 20,176  16,631 
Reserves 17,174  9,596 
Net Income 5,545  8,098 
 

Total liabilities 108,466  97,260 
 

Cash Flow Statement — Consolidated

Millions of Reais (R$)
Jan-Mar
4Q-2002    2003  2002 
2,829  Net Income (Loss) 5,545  866 
(2,044) (+) Adjustments 1,675  729 
1,262      Depreciation &Amortization 918  911 
145      Petroleum &Alcohol Account (25) 24 
(442)     Charges on Financing and Connected Companies (13) 328 
(606)     Balance Sheet Monetary Correction (16)
(2,403)     Other Adjustments 811  (534)
785  (=) Net Cash Generated by Operating Activities 7,220  1,595 
5,114  (-) Cash used for Cap.Expend. 3,672  2,709 
1,156      Investment in E&P 2,582  1,311 
1,360      Investment in Refining &Transport 638  383 
(20)     Investment in Gas and Energy 97  184 
542      Project Finance 130  405 
(7)     Dividends (17) (16)
2,083      Other investments 242  442 
(4,329) (=) Free cash flow 3,548  (1,114)
(2,053) (-) Cash used in Financing Activities 212  960 
(2,276) (=) Net cash generated in the period 3,336  (2,074)
14,151  Cash at the Beginning of Period 11,875  17,108 
11,875  Cash at the End of Period 15,211  15,034 

Value Added Statement – Consolidated

  Jan-Mar
  2003  2002 
Description
Gross Operating Revenue from Sales &/ Services 33,357  17,910 
Raw Materials Used (3,095) (1,428)
Products for Resale (4,426) (2,292)
Materials, Energy, Services &Others (2,781) (2,529)
 

Value Added Generated 23,055  11,661 
     
Depreciation &Amortization (918) (911)
Participation in Associated Companies (89) (40)
Financial Income 638  1,287 
Balance Sheet Monetary Correction 16    
 

Total Distributable Value Added 22,702  11,997 
     
Distribution of Value Added
Personnel
Salaries, Benefits and Charges 1,149  862 
Profit Sharing (Participation)   
 

  1,149  862 
 

Government Entities
Taxes, Fees and Contributions 11,630  7,099 
Government Participation 2,878  1,113 
Deferred Income Tax &Social Contribution 95  (93)
 

  14,603  8,119 
 

Financial Institutions and Suppliers
Financial Expenses,Interest, Rent &Freight 1,199  2,044 
 

Shareholders
    Dividends   
    Minority Interest 206  106 
    Net Income 5,545  866 
 

Value added distributed 5,751  972 
 

Consolidated Statement of Business Segmentation – 03.31.2003

Millions of Reais (R$)
  E&P  SUPPLY GAS
&
ENERGY
DISTRIB. INTERN. CORPOR. ELIMIN. TOTAL
INCOME STATEMENTS                        
Net Operating Revenues 17,202  18,127  1,016  6,326  1,363  (19,534) 24,500 
 







    Intersegments 14,917  4,139  131  93  254  (19,534)
    Third Parties 2,285  13,988  885  6,233  1,109  24,500 
Cost of Goods Sold (7,719) (15,235) (567) (5,762) (1,054) 17,857  (12,480)
 







Gross Profit 9,483  2,892  449  564  309  (1,677) 12,020 
 
Operating Expenses (611) (786) (832) (365) (110) (825) (3,529)
 
Sales, General &Administrative (67) (620) (120) (319) (98) (337) (1,561)
Taxes (20) (3) (37) (14) (161) (235)
Prospection, Drilling and Lifting Costs (208) (19) (227)
  Research &Development (78) (25) (5) (32) (140)
Others (258) (121) (704) (9) 21  (295) (1,366)
Operating Profit 8,872  2,106  (383) 199  199  (825) (1,677) 8,491 
 







  Interest Income (Expenses) (21) 60  25  (36) 54  621  703 
Gains from Investment in Subsidiaries 88  19  (196) (89)
Balance Sheet Monetary Correction 16  16 
  Non-operating Income (Expense) (7) (43) (2) (8) (56)
 







Income before Taxes                        
and Minority interests 8,844  2,211  (358) 161  280  (396) (1,677) 9,065 
 
  Income Tax &Social Contribution (3,227) (714) 198  (62) (98) 19  570  (3,314)
Minority interests (32) (175) (2) (206)
  Employee interest
 







Net Income (Loss) 5,617  1,465  (335) 97  185  (377) (1,107) 5,545 
 







Consolidated Statement of Business Segmentation 03.31.2003

Millions of Reais (R$)
  E&P SUPPLY GAS
&
ENERGY
DISTRIB. INTERN. CORPOR. ELIMIN. TOTAL
INCOME STATEMENTS                        
 
Net Operating Revenues 5,764  9,284  517  3,759  612  (8,697) 11,239 
 







    Intersegments 5,450  3,031  106  72  38  (8,697)
    Third Parties 314  6,253  411  3,687  574  11,239 
 
Cost of Goods Sold (3,356) (8,209) (430) (3,424) (537) 8,419  (7,537)
 







Gross Profit 2,408  1,075  87  335  75  (278) 3,702 
 
Operating Expenses (432) (584) (193) (264) (19) (673) (65) (2,230)
 
Sales, General &Administrative (52) (454) (29) (244) (59) (229) (1,067)
Taxes (18) (2) (23) (6) (124) (173)
Prospection, Drilling and Lifting Costs (228) (4) (232)
  Research &Development (39) (26) (3) (20) (88)
Others (113) (86) (159) 50  (300) (65) (670)
 







Operating Profit 1,976  491  (106) 71  56  (673) (343) 1,472 
 
  Interest Income (Expenses) (98) 31  (47) (66) 423  247 
Gains from Investment in Subsidiaries 15  (59) (40)
  Non-operating Income (Expense) (4) 10 
 







Income before Taxes                        
and Minority interests 1,878  533  (153) 75  (59) (244) (343) 1,687 
 
  Income Tax &Social Contribution (648) (187) 55  (27) (6) (41) 139  (715)
Minority interests (7) (13) (88) (106)
  Employee interest
 







Net Income (Loss) 1,230  339  (98) 35  (63) (373) (204) 866 
 







Other Operating Expenses (Revenues) - Consolidated - Jan-Mar - 2003

  Millions of Reais (R$)
 
  E&P SUPPLY GAS
&
ENERGY
DISTRIB. INTERN. CORPOR. ELIMIN. TOTAL
Provisions Losses on Financial Exposure-Thermoplants (708) - (708)
Pension Fund obligations and Health Care benefits (1) (7) (199) - (207)
Institutional Relations and Cultural Projects (1) (69) - (70)
Unscheduled stoppages - plant and equipament (136) (29) - (165)
The Listing of P-34 (39) - (39)
Losses as a result of Legal Proceedings (6) (5) (2) - (13)
Others (77) (85) (2) 21  (25) - (164)
 







  (258) (121) (704) (9) 21  (295) - (1,366)

Other Operating Expenses (Revenues) - Consolidated - Jan-Mar - 2002

  Millions of Reais (R$)
 
  E&P SUPPLY GAS
&
ENERGY
DISTRIB. INTERN. CORPOR. ELIMIN. TOTAL
Contractual Contingencies with Thermoplants (112) (112)
Pension Fund obligations and Health Care benefits (7) (176) (183)
Institutional Relations and Cultural Projects (48) (48)
Unscheduled stoppages - plant and equipament (100) (18) (118)
Losses as a result of Legal Proceedings (6) (5) (1) (12)
Petroleum &Alcohool Account Regularization (16) (16)
Others (7) (63) (47) 10  50  (59) (65) (181)
 







  (113) (86) (159) 50  (300) (65) (670)

Consolidated Statement of Business Segmentation - 03.31.2003

  Millions of Reais (R$)
 
  E&P SUPPLY GAS
&
ENERGY
DISTRIB. INTERN. CORPOR. ELIMIN. TOTAL
ASSETS 32,208  29,182  12,784  5,966  12,112  24,193  (7,979) 108,466 
 







CURRENT ASSETS 4,104  18,025  3,658  3,968  2,517  16,068  (4,848) 43,492 
 







CASH AND CASH EQUIVALENTS 1,396  177  173  486  12,976  15,211 
OTHERS 4,101  16,629  3,481  3,795  2,031  3,092  (4,848) 28,281 
NON CURRENT ASSETS 2,886  1,098  4,374  766  3,839  7,057  (3,131) 16,889 
 







PETROLEUM AND ALCOHOL ACCOUNT 668  668 
MARKETABLE SECURITIES 562  927  1,495 
OTHERS 2,324  1,093  4,374  765  3,839  5,462  (3,131) 14,726 
FIXED ASSETS 25,218  10,059  4,752  1,232  5,756  1,068  48,085 
 







Consolidated Statement of Business Segmentation - 12.31.2002

  Millions of Reais (R$)
 
  E&P SUPPLY GAS
&
ENERGY
DISTRIB. INTERN. CORPOR. ELIMIN. TOTAL
ASSETS 28,401  26,099  12,377  5,286  12,509  20,643  (8,055) 97,260 
 







CURRENT ASSETS 5,129  15,425  3,196  3,449  2,788  11,833  (3,389) 38,431 
 







CASH AND CASH EQUIVALENTS 1,804  175  211  833  8,849  11,875 
OTHERS 5,126  13,621  3,021  3,238  1,955  2,984  (3,389) 26,556 
NON CURRENT ASSETS 2,986  1,001  4,572  713  4,064  7,794  (4,569) 16,561 
 







PETROLEUM AND ALCOHOL ACCOUNT 644  644 
MARKETABLE SECURITIES 593  1,019  1,617 
OTHERS 2,393  996  4,572  713  4,064  6,131  (4,569) 14,300 
FIXED ASSETS 20,286  9,673  4,609  1,124  5,657  1,016  (97) 42,268 
 







Consolidated Statement of Business Segmentation - 03.31.2003

  R$ Millions
INTERNATIONAL
 
  E&P SUPPLY DISTRIB. G&E CORPOR. ELIMIN. TOTAL
INTERNATIONAL AREA
 
ASSETS 6,102  1,326  616  2,045  4,826  (2,803) 12,112 
 






Income Statement
Net Operating Revenues 414  1,004  453  161  (675) 1,363 
 






    Intersegments 250  613  66  (675) 254 
    Third Parties 164  391  453  95  1,109 
 
Operating Revenues 175  32  (42) 64  (30) 199 
Net Income (Loss) 147  36  (43) 62  (17) 185 

Consolidated Statement of Business Segmentation - 12.31.2002

  R$ Millions
INTERNATIONAL
 
  E&P SUPPLY DISTRIB. G&E CORPOR. ELIMIN. TOTAL
INTERNATIONAL AREA
 
ASSETS 5,945  1,377  674  1,923  5,423  (2,833) 12,509 
 






Income Statement
Net Operating Revenues 996  3,380  1,433  398  13  (1,994) 4,226 
 





 
    Intersegments 666  1,665  191  (1,994) 528 
    Third Parties 330  1,715  1,433  207  13  3,698 
 
Operating Revenues 139  165  (186) 100  (107) 111 
 
Net Income (Loss) (173) 357  (32) (127) 83  108 

Results by Business Area

PETROBRAS operates on an integrated basis with the larger part of oil and gas production being transferred from the Exploration and Production areas to other areas of the Company.

In the statements by business area, the Company’s operations are shown in accordance with the organization and management model approved on October 23, 2000 by PETROBRAS’ Board of Directors and comprising the following areas:

(a)     Exploration and production: through PETROBRAS, BRASOIL, PNBV and PIB BV, covers exploration, production development and the production of oil, NGL and natural gas in Brazil for the primary purpose of supplying the country’s refineries as well as selling oil to the domestic and overseas markets and/or maximizing any other commercial opportunities which may be identified;

(b)     Supply: through PETROBRAS, Downstream, Transpetro, Petroquisa, BRASOIL, PIFCO, BOC, and PIB BV, covers the activities of refining, logistics, transportation and sales of oil products and alcohol as well as stakes in petrochemical companies in Brazil and two fertilizer plants;

(c)     Distribution: responsible for the distribution of oil products and alcohol in Brazil in large part represented by the operations of BR Distribuidora,

(d)     Gas and Energy: through PETROBRAS, Gaspetro and Petro Energia, encompasses transportation and sales of natural gas produced in Brazil or imported, sales of energy, and stakes in natural gas transportation companies and distributors and in thermoelectric power plants.

(e)     International: through PIB BV, BRASOIL, Downstream, BOC and PETROBRAS, covers the activities of oil and gas exploration and production, of supply and of gas and power and distribution in thirteen countries around the world.

Activities that cannot be attributed to other areas are included in the corporate organization group, notably those linked to corporate financial management and overhead related to the Company’s administrative headquarter and other expenses including actuarial expenses with respect to healthcare and pension plans with retirees and respective dependents.

The accounting information per business area was prepared based on accounting principles, which analyzes only those items over which it exercises effective control.

Highlighted below are the principal criteria used in analyzing the results of each business area:

a)     Net operating revenue: considers all revenue from sales to external clients, plus sales between business areas benchmarked to internal transfer prices to be agreed between the areas concerned.

b)     Operating income is determined from net operating revenue, the cost of goods and services sold which is calculated by each business area based on the internal transfer price, and other operating costs for each segment as well as operating expenses which are defined as the expenses effectively incurred in each area.

c)     Assets: include the assets identified as pertaining to each area.

E&P — In 1Q-2003, the exploration and production area reported a net income of R$ 5,617 million, 357% higher than the net income recorded in the same period of the previous year (R$ 1,230 million), mainly due to the increase in the gross profit arising from the sale/transfer of oil and reflecting price increases on the international market and foreign exchange rate changes, as well as the 6% growth in oil and NGL production volumes due to the start-up of new wells in the Marlim (P-35 and P-37), and the Espadarte (ESPF) fields and principally from the new wells incorporating the P-38/P-40 in the Marlim Sul field.

SUPPLY – 1Q-2003 net income from the Marketing area was R$ 1,465 million, 332% higher than the net income reported for the same period in 2002 (R$ 339 million), primarily reflecting the increase in gross profits due to the partial pass through to oil by-product realization prices of the increase in international oil prices, coupled with the realization of inventories that had been built up at lower costs in previous periods.

This effect was partially offset by a 6% reduction in domestic oil product sales volume, principally of fuel oil and gasoline. The share of domestic oil in refinery throughput in 1Q-2003 was practically unchanged from 1Q-2002 (80% and 81%, respectively).

GAS AND ENERGY – In 1Q-2003, the loss reported by the gas and energy segment was R$ 335 million, 242% higher than the loss of R$98 million recorded in the same period in 2002, principally due to the increased provisioning for losses expected to be incurred over the remainder of 2003 from the electric energy business and amounting to R$ 708 million. 1Q-2002 losses from this area were R$113 million.

This effect was partially offset by the higher gross profit due to increases of 99% in the natural gas average realization value and 5% in sales volume as well as net financial income of R$ 25 million, reflecting the impact of the Real appreciation against the US dollar on the segment’s net debt.

In 4Q-2002, losses from the energy business were R$ 1,120 million, with R$ 396 million recorded for 1Q-2003 and R$ 724 million in provisions constituted in December 2002 and representing the estimate at the time for expected losses in 2003. R$ 372 million of this provision was realized during 1Q-2003.

DISTRIBUTION – The distribution area reported 1Q-2003 net income of R$ 97 million, 177% greater than the net income for the same period in 2002 (R$ 35 million), principally a result of the increase in gross profit, reflecting the pass through of the increase in by-product prices in the refineries, which allowed for the maintenance of gross margin at 8.9%.

INTERNATIONAL – In line with the strategic plan, operations in this area are focused on the integration of businesses in Latin America, especially the Southern Cone countries (Argentina), where the Company has acquired controlling stakes in Perez Companc, Petrolera Perez Companc and Petrolera Santa Fé.

In 1Q-2003, the International Business reported a net income of R$ 185 million (equivalent to US$ 55 million), compared with a loss of R$ 63 million (equivalent to US$ 28 million) for the same period in 2002. The result came largely from an improved gross profit, reflecting higher international oil prices and the depreciation of the Real as well as the impact of the stronger Argentine peso against the US dollar in 1Q-2003, in contrast to its devaluation in the same period of the previous year.

CORPORATE – The units which comprise the Corporate area of the PETROBRAS System reported losses of R$ 377 million in 1Q-2003, practically flat when compared with the loss posted in the same period of the previous year (R$ 373 million).

The increase in general and administrative expenses, principally in relation to payroll expenditures, as well as the loss of R$ 196 million in the translation effect of the foreign exchange rate on overseas corporate investments, were almost fully offset by the change in “other accounts”, in particular the R$ 198 million increase in net financial income for the quarter, due to the 5% appreciation of the Real against the US dollar and its effect on the Company’s debt (in 1Q-2002 exchange rates were stable).

PETROBRAS SYSTEM Appendixes

1.     Changes in accounting practices

During 2001, FASB (Financial Accounting Standards Board) issued “SFAS 143 – Accounting for Asset Retirement Obligations” which establishes the new treatment for recognizing costs incurred with the abandonment of wells and dismantlement of depleted production areas. PETROBRAS must comply with the SFAS 143 requirements as of January 1, 2003 in its US GAAP financial statements.

For this reason, the Company has decided to improve the presentation of its corporate financial statements in keeping with the policy of preparing them in accordance with prevailing international accounting practices, principally in relation to oil and gas exploration and production activities. As of January 1, 2003, management decided to prepare the Company’s financial statements both according to Brazilian and US accounting principles – BR GAAP and US-GAAP, respectively — using SFAS 143 concepts for recognizing costs incurred with abandonment of wells and the dismantlement of worked-out areas together with the respective liability.

According to the former accounting practices, costs for future abandonment and the dismantling of production areas were estimated and provisioned during the course of the field productive life, so as to become entirely booked by the end of the reserve production. Such a provision used to be included in the depreciation, being presented as a deductible account in the capitalized assets.

Following the introduction of the new rules, the estimated abandonment costs and dismantling of production areas will be booked based on the present value of these liabilities, discounted at a risk-free rate, are now to be recorded integrally at the production start-up, as part of the cost of these assets set against a compensating provision to support such expenditures.

In the light of these changes, on January 1, 2003, the introduction of this new accounting practice for provisioning the retirement costs of well abandonment will be recorded directly to shareholders’ equity as an Adjustment for Previous Fiscal Years and totaling R$ 2,396 million.

The expenses related with the interests incurred from provisioning the liability in 1Q03, in the amount of R$ 23 million, was booked as operating expenses – expenditures with prospecting and drilling for oil extraction.

2. Changes in the Petroleum and Alcohol Accounts

Millions of Reais (R$)
Jan-Mar
4Q-2002   2003  2002 
789  Initial Balance 644  187 
Adjustments of PPA (14)
37  Reimbursement to 3rd Parties 16  (10)
(81) Reimbursement to PETROBRAS (1)
Intercompany Lending Charges
(105) Regularization - GTI*

 

644  Final Balance 668  164 

* INTER-MINISTERIAL WORKING PARTY


As disclosed by the Company in the explanatory notes to the annual and quarterly account statements, the Federal Government Audit, currently in progress, is to certify as to the accuracy of the debit balances in the oil and alcohol accounts for the period from July 1, 1998 to December 31, 2001, thus concluding the reconciliation of accounts with the Federal Government.

Once the audit is complete, the value of securities held as collateral for the debit balance on June 30, 2003 or of the securitized credits, will be adjusted to the new value to be recorded at that date pursuant to Provisional Measure 2.181-45 of August 24, 2001.

3. Consolidated Taxes and Charges

PETROBRAS’ economic contribution to the country’s wealth as measured by payments of taxes, fees and social charges, totaled R$ 9,068 million, a 24% increase when compared to 1Q-2002.

Millions of Reais (R$)
Jan-Mar
4Q-2002   2003  2002  D
  Economic Contribution - Country      
3,133  Value Added Tax (ICMS) 3,581  2,179  64 
3,675  PASEP/COFINS (1) 3,897  2,500  56 
727  Income tax &social contribution on profit 710  870  (18)
511  CIDE (2) 553  1,589  (65)
302  Others 327  157  108 
336  Economic Contribution - Foreign 375  302  24 

 

 
8,684  Total 9,443  7,597  24 

 

 

(1)     See comments on sales deductions on page 12.
(2)     CIDE – INTERVENTION CONTRIBUTION OF THE ECONOMIC DOMAIN (CONTRIBUIÇÃO DE INTERVENÇÃO DO DOMÍNIO ECONÔMICO)

4.     Government Participations

Millions of Reais (R$)
Jan-Mar
4Q-2002   2003  2002  D
  País      
1,125  Royalties 1,279  539  137 
932  Special Participation 1,282  350  266 
Surface Rental Fees 95  73  30 
31  Foreign 76  55  38 

 

 
2,090  Total 2,732  1,017  169 

 

 

The 137% year-over-year growth in 1Q-2003 royalty payments compared with the same period in 2002, reflects the growth in domestic production and the impact of foreign exchange devaluation on the reference prices for domestic oil, the parameter used for calculating royalties.

Highly productive fields, principally those of Marlim, Albacora and Marlim Sul, are subject to special government participation payments, the value of which is a function of the variation of the reference prices for oil lifted from these fields using a methodology fixed by the ANP (National Petroleum Agency) and based on the previous quarter’s quoted prices. When compared to 1Q-2002, the 1Q-2003 special participation payment increased by 266%, due to higher oil reference prices and greater production volumes in 4Q-2002 (the basis for calculating the 1Q-2003 special participation payment and in contrast to the quotations used for the payment calculation in 1Q-2002).

5.   Reconciliation of Consolidated Results and Shareholders’ Equity

Millions of Reais (R$)
  Shareholder’s Resultity Result
. According Petrobras' information as of Mar. 31, 2003 45,143  5,529 
. Profit in the sales of products in affiliated inventories (276) (276)
. Profit reversion in inventories in fiscal years    164 
. Capitalized Interest (163) (10)
. Absortion of negative Net Worth in affiliated companies (1,649) 203 
. Other eliminations (161) (65)
 

. According Consolidated Information as of Mar. 31, 2003 42,894  5,545 
 

* Pursuant to CVM Instruction 247/96 and OFICIO CIRCULAR/CVM/SNC/SEP/04/96, the losses on investments valued by the equity income method were considered to be of a non-reccuring nature, where the invested entities indicated no evidence of ceasing operations or need for financial support, and should therefore be limited to the maximum value of the parent company’s investment. Therefore, the losses from uncovered liabilities (negative equity) of controlled companies have not impacted PETROBRAS’ results and shareholders’ equity for 1Q-2003. The items above are for accounting purposes only representing reconciled items between PETROBRAS’ accounting statements and the Consolidated Accounting Statements.

6.     Environmental and Social Projects

The main projects in the Environmental and Social Project area can be found on the Companys’ web site at www.petrobras.com.br — Investor Relations.

7.     PETROBRAS’ shares and ADR Performance

Nominal Valuation
Jan-Mar
4Q-2002   2003  2002 
31.34%   Petrobras ON -3.81% 16.78%
25.75%   Petrobras PN 0.00% 12.90%
39.24%   ADR- Level III - ON 1.41% 13.61%
40.31%   ADR - Level III - PN 2.69% 12.15%
30.69%   IBOVESPA 0.05% -2.38%
9.87%   DOW JONES -4.19% 3.82%
13.95%   NASDAQ 0.42% -5.39%

The book value of one share of PETROBRAS on March 31, 2003 was R$ 42.95.

8.     Perez Companc S.A. Acquisition

Subsequent Event

On May 13th 2003, the Argentine Antitrust Committee (Comisión Nacional de Defensa de la Competencia), an agency reporting to the Argentine Secretary of Competition, Deregulation and Consumer Protection (Secretaría de la Competencia, la Desregulación y la Defensa del Consumidor), approved the purchase of 58.62% of Perez Companc S.A.´s and 39.67% of Petrolera Perez Companc capital stock by Petrobras Participaç&otidle;es S.L., a company controlled by Petróleo Brasileiro S.A. -Petrobras.

Upon approval of the transaction Pecom Energía S.A. agreed to divest itself of its aggregate equity interest in Transener S.A. in accordance with the Law Nº. 24,065 of the Electricity Regulatory framework which will be supervised by the Argentine Regulatory Entity for Electricity (Ente Nacional Regulador de la Electricidad — ENRE) and approved by the Argentine Secretary of Energy (Secretaría de Energía de la Nación).

PETROBRAS S.A Financial Statements

Income Statement – Controlling Company

Millions of Reais (R$)
Jan-Mar
4Q-2002   2003  2002 
25,724  Gross Operating Revenues 28,616  15,027 
(7,510) Sales Deductions (7,682) (5,652)

 

18,214  Net Operating Revenues 20,934  9,375 
(11,909) Cost of Goods Sold (10,222) (6,158)

 

6,305  Gross Profit 10,712  3,217 
   Operating Expenses      
(1,155) Sales, General &Administrative (1,100) (711)
(463) Cost of Prospecting, Drilling &Lifting (208) (228)
(152) Research &Development (140) (88)
(83) Taxes (160) (122)
(1,993)   Others (1,606) (677)
   Net Financial Expense      
790    Income 848  614 
(669)   Expense (463) (290)
(2,455)   Monetary &Foreign Exchange Correction - Assets (1,348) 141 
2,914    Monetary &Foreign Exchange Correction - Liabilities 1,514  (185)

 

580    551  280 
329    Gains from Investment in Subsidiaries 495  (6)

 

3,368  Operating Profit 8,544  1,665 
128  Non-operating Income (Expense) (28) 117 
(658) Income Tax & Social Contribution (2,987) (718)
(380) Employee Profit Sharing Plan      

 

2,458  Net Income (Loss) 5,529  1,064 

 

Balance Sheet – Controlling Company

Assets Millions of Reais (R$)
  Mar.31, 2003 Dec.31, 2002
 

Current Assets 34,708  31,976 
 

Cash and Cash Equivalents 11,774  7,921 
Accounts Receivable 6,895  8,429 
Inventories 12,003  10,385 
Others 4,036  5,241 
Non-current assets 35,395  34,520 
 

Petroleum &Alcohol Account 668  644 
Subsidiaries, Controlled and Associate companies 27,515  27,010 
Ventures under Negotiation 1,098  970 
Advances to Suppliers 1,287  1,334 
Advances to Migration - Petros Plan 1,100  1,023 
Deferred Taxes and Social Contribution 574  528 
Others 3,153  3,011 
Fixed assets 39,724  33,445 
 

Investments 11,480  10,545 
Property, Plant &Equipment 27,776  22,449 
Deferred 468  451 
 

Total Assets 109,827  99,941 
 


Liabilities Millions of Reais (R$)
  Mar.31, 2003 Dec.31, 2002
 

Current Liabilities 44,169  42,569 
 

Short-term Debt 2,331  2,268 
Suppliers 24,112  25,045 
Taxes &Social Contribution Payable 8,837  6,411 
Dividends 1,674  2,761 
Project Finance and Joint Ventures 1,706  1,794 
Pension Plan 277  229 
Others 5,232  4,061 
Long-term Liabilities 20,515  20,601 
 

Long-term Debt 9,398  9,728 
Subsidiaries and Controlled 2,648  2,783 
Pension fund obligations 443  483 
Health Care Benefits 3,659  3,473 
Deferred Taxes &Social Contribution 3,760  3,442 
Others 607  692 
Shareholders' Equity 45,143  36,771 
 

Capital Stock 20,176  16,631 
Reserves 19,438  10,336 
Net Income 5,529  9,804 
 

Total liabilities 109,827  99,941 
 

Cash Flow Statement – Controlling Company

Millions of Reais (R$)
Jan - Mar
4T-2002    2003  2002 
2,458  Net Income (Loss) 5,529  1,064 
4,838  (+) Adjustments 1,345  (1,952)
1,009        Depreciation &Amortization 586  657 
145      Petroleum &Alcohol Account (25) 24 
1,809    Charges on Financing and Connected Companies 236  (2,566)
2,331  Charges related to financing and associated companies 494  79 
(456) Others Adjustments 54  (146)
7,296  (=) Net Cash Generated by Operating Activities 6,874  (888)
3,688  (-) Cash used for Cap.Expend. 2,263  1,926 
2,073    Investment in E&P 1,696  1,071 
734    Investment in Refining &Transport 602  296 
51    Investment in Gas and Energy 76  54 
488  Structured Projects net of advance 124  405 
(40) Dividends (297)
382  Others Investments 62  100 
3,608  (=) Free cash flow 4,611  (2,814)
5,427  (-) Cash used in Financing Activities 758  2,748 
(1,819) (=) Net cash generated in the period 3,853  (5,562)
9,740  Cash at the Beginning of Period 7,921  15,106 
7,921  Cash at the End of Period 11,774  9,544 

Value Added Statement – Controlling Company

Millions of Reais (R$)
Jan - Mar
Description 2003  2002 
Gross Operating Revenue from Sales &/ Services 28,633  15,129 
Raw Materials Used (3,231) (1,091)
Products for Resale (1,349) (959)
Materials, Energy, Services &Others (2,522) (2,086)
Value Added Generated 21,531  10,993 
 

Depreciation &Amortization (586) (657)
Subsidiaries 495  (6)
Financial Income 659  660 
 

Total Distributable Value Added 22,099  10,990 
 

Distribution of Value Added      
Personnel      
Salaries, Benefits and Charges 900  670 
 
Government Entities      
Taxes, Fees and Contributions 10,983  6,388 
Government Participation 2,878  1,114 
Deferred Income Tax &Social Contribution 104  246 
 

  13,965  7,748 
Financial Institutions and Suppliers      
Financial Expenses,Interest, Rent &Freight 1,705  1,508 
 
Shareholders      
Dividends   
  Net Income 5,529  1,064 
  5,529  1,064 
 


 

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

Date: May 20, 2003

 
PETRÓLEO BRASILEIRO S.A--PETROBRAS
By:
/S/  José Sergio Gabrielli de Azevedo

 
José Sergio Gabrielli de Azevedo
Chief Financial Officer and Investor Relations Director
 

 

 
FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates offuture economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.