Securities and Exchange Commission
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant To Rule 13a-16 or 15d-16
of The
Securities Exchange Act of 1934
For the month of July 2002 Commission File Number 1-15106
PETROLEO BRASILEIRO S.A. - PETROBRAS
(Exact name of registrant as specified in its charter)
Avenida Republica do Chile, 65
20035-900 - Rio de Janeiro - RJ
Brazil
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)
(Check One) 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 information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
(Check One) Yes No X
--- ---
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b). 82- .)
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PETROBRAS ANNOUNCES FIRST QUARTER 2002 RESULTS
(Rio de Janeiro - June 28, 2002) - PETROLEO BRASILEIRO S.A. - PETROBRAS today
announced its consolidated results stated in U.S. Dollars, prepared in
accordance with U.S. GAAP.
--------------------------------------------------------------------------------
.. Consolidated sales of products and services and net operating revenues for
the first quarter of 2002 (1Q2002) totaled U.S.$ 7,476 million and
U.S.$ 4,729 million, respectively, primarily reflecting the decline in oil
products prices in the international market. During the first quarter of
2001 (1Q2001) consolidated sales of products and services and net
operating revenues were U.S.$ 9,335 million and U.S.$ 6,554 million,
respectively.
.. Consolidated net income for 1Q2002 was U.S.$ 613 million, as compared to a
net income of U.S.$ 1,221 million for lQ2001. This figure was primarily
impacted by the lower prices of oil products in the international market
and a 3.4% decrease in sales volumes in the domestic market.
.. Adjusted EBITDA for 1Q2002 was U.S.$ 1.4 billion as compared to U.S.$ 2.5
billion for 1Q2001, mainly as a result of a decrease in consolidated net
income.
.. Earnings per share for 1Q2002 decreased to U.S.$ 0.56 per share, as
compared to U.S.$ 1.12 per share for 1Q2001.
.. In 1Q2002, oil, NGL and natural gas production reported a year-over-year
increase of approximately 10% when compared to lQ2001, reaching a quarterly
average of 1,807 thousand barrels/day. In March 2002, PETROBRAS posted a
new record in the monthly output of oil and NGL in Brazil with an average
of 1,501 thousand barrels/day, with 81% coming from the Campos Basin. Total
quarter-over-quarter production was up by 9%.
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COMMENTS FROM THE PRESIDENT, MR. FRANCISCO GROS
The first quarter of 2002 marked the beginning of PETROBRAS' operation in a
totally deregulated Brazilian fuel market.
At the same time, PETROBRAS' quarterly earnings, consistent with the
international oil industry, were strongly impacted by the reduction in
international crude oil and oil product prices.
Operational Highlights:
As of January 1, 2002, the Brazilian fuel market was deregulated in line with
Law 9,478 (the Petroleum Law) of August 06, 1997 and Law 9,990 dated July 21,
2001. Essentially, this means that other companies are now able to produce and
sell crude oil and oil products in the domestic market, as well as conduct their
own import and export operations. This has already been reflected in the 3.4%
decline in domestic sales volumes of oil products, (1Q2002 over 1Q2001)
primarily due to a decrease in naphtha imports in the petrochemical sector.
In lQ2002, the domestic output of oil and NGL grew approximately 11% when
compared to lQ2001, reaching an average of 1,489 thousand barrels/day during the
quarter.
In March 2002, PETROBRAS reported an all-time record production of oil and NGL
in Brazil with an average of 1,501 thousand barrels/day, 81% of which came from
the Campos Basin. Crude oil exports registered an average of 160 thousand
barrels/day in lQ2002, an increase of 65% when compared to lQ2001. Net crude oil
and oil product imports totaled 130 thousand barrels/day, a period-to-period
decline of 46%.
The proportion of national crude in refinery throughput reached 81% in 1Q2002,
an increase of 1% compared to 1Q2001, thus implying a better cost structure
profile.
There was a significant increase of 78% (over lQ2001) in service volume related
to natural gas carried by TBG - controlled by Gaspetro - which operates the
Bolivia-Brazil pipeline.
1Q2002 capital expenditures were U.S.$ 1,100 million, representing a growth of
15% over lQ2001.
Financial Highlights:
Despite the highly volatile nature of the capital markets, PETROBRAS' through
its subsidiary PIFCO, issued US$ 500 million in Senior Notes with a five-year
maturity. The price established for this operation resulted in a yield of
9.125% and the issuance was rated Baa1 -Investment Grade, by Moody's Investor
Services.
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FINANCIAL DATA
Financial Highlights
U.S. $ million
(except earning per share or
unless otherwise noted)
-----------------------
First quarter
4Q -2001 Income statement data 2002 2001
-------- --------------------- ---- ----
8,092 Sales of products and services 7,476 9,335
5,624 Net operating revenues 4,729 6,554
2,082 Income from operations/(1)/ 1,874 2,374
529 Financial income(expense),net 120 (306)
143 Net income 613 1,221
0.13 Basic and diluted earnings per common and preferred share 0.56 1.12
Other data
----------
43.0 Gross margin(%)/(2)/ 47.6 51.8
37.1 Operating margin (%)/(3)/ 39.6 36.2
2.5 Net margin (%)/(4)/ 13.0 18.6
22 Adjusted EBITDA (%)/(5)/ 1,379 2,486
33 Net debt/(net debt + stockholders' equity)(%) 37 31
64 Debt to equity ratio (%)/(6)/ 66 64
(1) Income from operations is calculated as net operating revenues (before
elimination of intersegment revenues) less: cost of sales, depreciation,
depletion and amortization, exploration, including dry holes, and
impairment for the Exploration and Production, Supply, Distribution, Gas
and Energy, and International Segments.
(2) Gross margin is calculated as net operating revenues less cost of sales
divided by net operating revenues.
(3) Operating margin is calculated as income from operations divided by net
operating revenues.
(4) Net margin is calculated as net income divided by net operating revenues.
(5) Adjusted EBITDA is calculated as income before income taxes and minority
interest less: financial income, equity in results of non-consolidated
companies, monetary and exchange variation on monetary assets and
liabilities, net, plus financial expense and depreciation, depletion and
amortization.
(6) Debt to equity ratio is calculated as current liabilities plus long-term
liabilities divided by the sum of total liabilities and total
stockholders' equity
U.S. $ million
(except earnings per share or unless otherwise noted)
Balance sheet data 31.03.2002 31.12.2001 *% 31.03.2001
------------------ ---------- ---------- -- ----------
Total assets 37,119 36,864 0.7 37,077
Total debt/(1)/ 14,124 14,010 0.8 12,158
Current 2,813 3,019 -6.8 4,218
Long-term 11,311 10,991 2.9 7,940
Net debt/(2)/ 7,529 6,500 15.8 6,085
Stockholders' equity/(3)/ 12,656 13,247 -4.5 13,271
Total capitalization/(3)//(4)/ 26,780 27,257 -1.8 25,429
* denotes symmetric difference
(1) Total debt Includes short-term debt, long-term debt, capital lease
obligations and project financings.
(2) Net debt is calculated as total debt less cash and cash equivalents. At
December 31, 2001 and at March 31, 2002, this item excludes Junior Notes
in the amount of U.S.$150 million.
(3) Stockholders' equity includes a loss in the amount of U.S.$ 1,864
milllon, U.S.$ 1,867 million and U.S.$ 1,371 million, for the first
quarter of 2002, the year ended December 31, 2001 and for the first
quarter of 2001, respectively, related to an "Amount not recognize as net
periodic pension cost".
(4) Total capitalization means shareholders' equity plus total debt.
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OPERATING PERFORMANCE
First Quarter
--------- -------------------
4Q-2001 2002 2001
--------- -------------------
Average daily crude oil and gas production - Total
1,397 Crude oil NGLs(Mbpd)/(1)/ 1,526 1,387
1,572 Natural gas (Mmcfpd) 1,686 1,524
Crude oil and NGL average sales price
(U.S. dollars per bbl)
14.58 Brazil 17.46 20.91
19.15 International 19.18 24.29
Natural gas average sales price (U.S. dollars, per Mcf)
1.34 Brazil 1.47 2.49
1.98 International 1.66 3.29
Lifting cost (U.S. dollars per boe)
Crude oil and natural gas - Brazil
5.77 Including government take/(2)/ 6.72 6.63
2.91 Excluding government take /2/ 3.43 3.33
2.78 Crude oil and natural gas - International 1.97 2.24
Refining cost (U.S. dollars per boe)
0.73 Brazil 0.97 1.21
1.07 International 1.17 1.10
Refining and marketing operations(Mbpd)
Brazil
1,931 Installed capacity 1,931 1,931
1,620 Primary throughput 1,662 1,596
83% Utilization 85% 84%
International
91 Installed capacity 91 60
61 Primary throughput 60 29
67% Utilization 66% 61%
Domestic crude oil as % of total feedstock
75 processed 81 80
Imports (Mbpd)
268 Crude oil imports 216 146
234 Oil product imports 215 378
103 Crude oil exports 160 97
180 Oil product exports 141 185
--- --- ---
219 Net imports 130 242
(1) Includes production from shale oil reserves.
(2) Government take includes royalties, special government participation and
rental of areas.
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ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Price Regulation and Other Government Policies
PETROBRAS' financial condition and results of operations have been, and most
likely will continue to be, substantially impacted by political and economic
conditions internationally and in Brazil.
- Pre-January 2, 2002
Until January 2, 2002, when price deregulation was fully implemented, PETROBRAS'
financial condition and results of operations reflected the effects of
governmental policies that the Federal Government maintained, changed or
implemented to address prevailing conditions in the Brazilian economy, including
the level of inflation and the level of gross domestic product.
Because the regulation of crude oil and oil products prices was one of the tools
available to the Federal Government for the control of inflation, the Federal
Government periodically changed the prices at which PETROBRAS could sell its
products based upon political and economic conditions in Brazil.
As a part of the deregulation of the Brazilian oil and gas sector, effective
July 29, 1998, the Federal Government changed its price regulation policies.
Under these policies, the Federal Government continued to establish PETROBRAS'
sales prices until January 2, 2002, at which time price controls ended, in
accordance with Law 9,990.
On July 29, 1998, the Federal Government introduced a program to calculate a
realization price (Preco de Realizacao, or PR), for oil products sold by
PETROBRAS, which was the basis on which the Company was required to calculate
its net operating revenues. Net operating revenues were the sum of the products
obtained by multiplying the realization price for each oil product by the volume
of each such oil product sold. The amount obtained from subtracting net
operating revenues from sales of products and services (net of value added and
other taxes on sales and services) was recorded as the Parcela de Precos
Especifica, or PPE, which was presented as an adjustment to sales of products
and services. The amount of PPE for any period increased or decreased the
balance of the Petroleum and Alcohol Account, and this process resulted in a
decrease or increase in the net cash available to the Company.
The Federal Government, through PETROBRAS, reimbursed certain fuel
transportation and other eligible costs, to PETROBRAS and distributors
(including BR). These subsidies were gradually and completely phased out by
December 31, 2001. The impact of PETROBRAS' role as administrator of these
remaining subsidies was solely reflected in the Petroleum and Alcohol Account on
PETROBRAS' balance sheet and in increases or decreases in that account on
PETROBRAS' statement of cash flows.
- Post-January 2, 2002 regulations
Pursuant to the Oil Law and subsequent legislation, the market for crude oil and
oil products in Brazil were deregulated, beginning January 2, 2002. As part of
this action:
.. the Federal Government deregulated sales prices for crude oil and oil
products, and as a consequence, the PPE was eliminated; and
.. the Brazilian government established the CIDE, a tax on the importation and
sale of fuels established by Law 10,336 dated December 19, 2001. The CIDE
is a per-transaction payment to the Federal Government at a set amount for
different oil products based on the unit of measurement typically used for
such products by producers, blenders and importers upon sale and purchase
of specified oil and fuel products.
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RESULTS OF OPERATIONS FOR THE FIRST QUARTER OF 2002 COMPARED TO THE FIRST
QUARTER OF 2001
The comparison between PETROBRAS' results of operations has been impacted by the
Real devaluation against the U.S. dollar, due to the fact that the average
exchange rate of the first quarter of 2002 was 18.0% higher than the average
exchange rate of the first quarter of 2001.
Revenues
Net operating revenues decreased 27.8% to U.S.$ 4,729 million for the first
quarter of 2002, as compared to net operating revenues of U.S.$ 6,554 million
for the first quarter of 2001. This decrease is primarily attributable to a
decrease in international oil products prices from December 31, 2001 through
March 31, 2002 and a 3.4% decrease in domestic sales volumes in the domestic
market. This decrease was partially offset by an increase in sales volumes
outside Brazil, which includes both international sales and exports.
Consolidated sales of products and services decreased 19.9% to U.S.$ 7,476
million for the first quarter of 2002, as compared to U.S.$ 9,335 million for
the first quarter of 2001.
Included in sales of products and services are the following amounts which
PETROBRAS collected on behalf of the federal or state governments:
.. Value added and other taxes on sales of products and services and social
security contributions. These taxes decreased to U.S.$ 1,230 million for
the first quarter of 2002, as compared to U.S.$ 2,529 million for the first
quarter of 2001, primarily due to the decrease in sales of products and
services and to the reduction in PASEP/COFINS charges during the first
quarter of 2002, since the amounts paid as CIDE are permitted to be
deducted from the amount over which the PASEP and COFINS are calculated;
.. CIDE, the newly instituted per-transaction tax due to the Federal
Government which amounted to U.S.$ 1,517 million for the first quarter of
2002; and
.. PPE, which amounted to an expense of U.S. $252 million for the first
quarter of 2001 and that was extinguished at the end of 2001.
Cost of sales
Cost of sales for the first quarter of 2002 decreased 21.6% to U.S. $ 2,476
million, as compared to U.S. $ 3,158 million for the first quarter of 2001. This
decrease was mainly due to:
. a decrease in imports amounting to U.S.$ 523 million, primarily as a result
of the elimination of our legal obligation to import naphtha;
. a decrease in the amount U.S.$122 million in government take (which
includes royalties, special government participation and rental of areas)
primarily attributable to a decrease in international oil products prices;
. the effect of the devaluation of the Real against the U.S. dollar on our
cost of sales as expressed in U.S. dollars, since a significant portion of
our cost of sales is denominated in Reais; and
. a decrease in the amount of approximately U.S.$ 84 million related to the
3.4% reduction of domestic sales volumes.
These decreases were partially offset by a net increase in cost from sales
outside Brazil of approximately U.S.$ 28 million, attributable to an increase in
PETROBRAS' sales volume in the international market, offset by a decrease in
international oil products prices.
Depreciation, depletion and amortization
Depreciation, depletion and amortization expenses decreased 38.0% to U.S.$ 402
million for the first quarter of 2002, as compared to U.S.$ 648 million for the
first quarter of 2001. This decline was primarily attributable to the effect of
the devaluation of the Real against the U.S. dollar and the reduction of
approximately U.S.$ 159 million in abandonment costs, as a consequence of a
revaluation of mineral reserves (crude oil and natural gas).
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Exploration, including exploratory dry holes
Exploration costs, including exploratory dry holes increased 52.3% to U.S. $ 99
million for the first quarter of 2002, as compared to U.S. $ 65 million for the
first quarter of 2001. This increase was mainly caused by an increase of
approximately U.S.$ 39 million in dry holes expenses, which were partially
offset by the effect of the devaluation of the Real against the U.S. dollar.
Selling, general and administrative expenses
Selling, general and administrative expenses increased 4.6% to U.S. $ 453
million for the first quarter of 2002, as compared to U.S. $ 433 million for the
first quarter of 2001.
Selling expenses increased 6.2% to U.S.$ 241 million to the first quarter of
2002, as compared to U.S.$ 227 million for the first quarter of 2001. Although
partially offset by the effect of the devaluation of the Real on these expenses
when expressed in U.S. dollars, this increase was primarily attributable to the
following:
.. a U.S.$ 11 million charge for doubtful accounts and gas station
improvements; and
.. an increase in the amount of U.S.$ 12 million in expenses related to
technical consulting services in connection with PETROBRAS' increased
outsourcing of selected non-core activities.
General and administrative expenses increased 2.9% to U.S.$ 212 million for the
first quarter of 2002, as compared to U.S. $ 206 million for the first quarter
of 2001. Although partially offset by the effect of the devaluation of the Real
on these expenses when expressed in U.S. dollars, this increase was primarily
attributable to an increase in the amount of U.S. $ 26 million in expenses
related to technical consulting services in connection with PETROBRAS'
increased outsourcing of selected non-core activities related to general and
administrative activities.
Research and development expenses
Research and development expenses increased 22.6% to U.S.$ 38 million for the
first quarter of 2002, as compared to U.S.$ 31 million for the first quarter of
2001. This increase is related to the increase in investments in programs for
environmental safety and deepwater and refining technologies of approximately
U.S.$ 11 million, which were partially offset by the effect of the devaluation
of the Real against the U.S. dollar.
Equity in results of non-consolidated companies
Equity in results of non-consolidated companies amounted to a loss U.S.$76
million for the first quarter of 2002, as compared to a gain of U.S.$l million
for the first quarter of 2001. This decrease is mainly attributable to a loss of
U.S.$72 million related to the effect of the devaluation of the Argentine Peso
against the U.S. dollar, which impacted the result of PETROBRAS' equity
investments in Argentina.
Financial income
Financial income decreased 30.2% to U.S.$ 287 million for the first quarter of
2002 as compared to U.S.$ 411 million for the first quarter of 2001. The
decrease is primarily attributable to a reduction in financial interest income
from short-term dollar based investments, which declined 42.1% to U.S.$ 165
million for the first quarter of 2002, as compared to U.S.$ 285 million for the
first quarter of 2001, primarily due to the fact that the average exchange rate
of the first quarter of 2002 was 18% higher than the average exchange rate of
the first quarter of 2001.
Financial expense
Financial expense increased 11.0% to U.S.$ 212 million for the first quarter of
2002, as compared to U.S.$ 191 million for the first quarter of 2001. This
increase was primarily attributable to the increase in the average balance of
total debt to U.S.$ 14,067 million during the first quarter of 2002 as compared
to U.S.$ 12,649 million during the first quarter of 2001. This increase was
partially offset by the decrease in the international interest rates during the
first quarter of 2002 as compared to the first quarter of 2001.
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Monetary and exchange variation on monetary assets and liabilities, net
Monetary and exchange variation on monetary assets and liabilities increased to
an income of U.S. $ 45 million for the first quarter of 2002, as compared to an
expense of U.S. $ 526 million for the same period of 2001. Approximately 88% of
PETROBRAS' indebtedness was denominated in foreign currencies during the years
of 2002 and 2001. Consequently, the differential is primarily attributable to
the effect of a 9.5% devaluation of the Real against the U.S. dollar during the
first quarter of 2001, as compared to a 0.1% devaluation of the Real against the
U.S. dollar during the first quarter of 2002.
Employee benefit expense
Employee benefits expenses increased 62.4% to U.S. $ 151 million for the first
quarter of 2002, as compared to U.S. $ 93 million for the first quarter of 2001.
The increase is primarily attributable to an increase in the provision of U.S. $
39 million due to the annual actuarial calculation of the pension plan liability
and an expense of U.S. $ 33 million related to the migration process to the new
pension plan. These increases were partially offset by the effect of the
devaluation of the Real against the U.S. dollar.
Other expenses, net
Other expenses for the first quarter of 2002 decreased 72.0% to U.S. $ 60
million, as compared to an expense of U.S. $ 214 million for the same period of
2001. The most significant nonrecurring charges for first quarter of 2002 were:
.. a U.S. $ 48 million expense for contractual contingencies relating to
thermoelectric plants; and
.. U.S. $ 20 million general advertising and marketing expenses unrelated to
direct revenues.
The most significant nonrecurring charges for the first quarter of 2001 were:
.. a U.S. $ 95 million loss recorded in respect of the sinking of Platform
P-36;
.. a U.S. $ 75 million allowance for doubtful accounts recorded with respect
to advances to suppliers; and
.. U.S. $ 24 million general advertising and marketing expenses unrelated to
direct revenues.
Income tax (expense) benefit
PETROBRAS recorded an income tax expense of U.S. $ 357 million for the first
quarter of 2002, as compared to an expense of U.S. $ 376 million for the first
quarter of 2001. This difference is primarily attributable to a decrease in
income before income taxes and minority interest from U.S. $ 1,533 million for
the first quarter of 2001, to U.S. $ 1,021 million for the first quarter of
2002, because income before income taxes and minority interest for the first
quarter of 2001, included the U.S. $ 497 million in respect of insurance
proceeds received as a result of the platform P-36 accident, which was not
subject to income tax.
The reconciliation between the tax calculated based upon statutory tax rates to
income tax expense and effective rates is shown in Note 6 to the PETROBRAS
Audited Consolidated Financial Statements as of March 31 2002.
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THE PETROLEUM AND ALCOHOL ACCOUNT
The Petroleum and Alcohol Account - Receivable from Federal Government has been
used to accumulate the impact of the Federal Government's regulation policies
for the Brazilian oil and gas industry on PETROBRAS.
According to specific legislation applicable to the Petroleum and Alcohol
Account up to December 31, 2001, PETROBRAS had the right to offset amounts owed
to the Federal Government relating to the regulation policies of the Brazilian
oil and gas industry against the receivable that increased and decreased the
Petroleum and Alcohol Account.
Until December 31, 2001, the Petroleum and Alcohol Account was realized through
collection of the Specific Parcel Price (PPE) generated by the sale of the
majority of basic oil products.
On June 30, 1998, the Federal Government issued National Treasury Bonds - Series
H in the name of PETROBRAS, which were placed with a federal depositary to
support the balance of this account. The value of the outstanding Series H bonds
as of March 31, 2002 was U.S.$66 million, at which time the balance of the
Petroleum and Alcohol Account was U.S.$70 million.
The Federal Government certified the balance of the Petroleum and Alcohol
Account as of June 30, 1998. The movements in the Petroleum and Alcohol Account
in the period July 1, 1998 to December 31, 2001, will be subject to audit by the
National Petroleum Agency - ANP, and the results of the audit will be the basis
for the settlement of the account with the Federal Government, which should be
concluded during 2002, unless extended, in accordance with Provisional Measure
No. 18 of December 28, 2001. PETROBRAS does not expect significant adjustments
from the ANP audit of this period.
Considering the deregulation of the market and current legislation, as from
January 2, 2002, PPE was extinguished and the Petroleum and Alcohol Account will
no longer be used to reimburse expenses related with the supply of oil products
and alcohol to PETROBRAS and third parties.
Law number 10,453, of May 13, 2002, article 7, authorized the ANP to order the
settlement of amounts due to and from PETROBRAS arising from entries in the
Petroleum and Alcohol Account covered in the relevant legislation and arising
from events prior to December 31, 2001 as well as the settlement of debits
relating to the program for equalizing the costs of sugarcane production in the
North-East Region.
The following summarizes the changes in the Petroleum and Alcohol Account for
the three-month period ended March 31, 2002:
U.S. $ million
March 31, 2002
Beginning balance 81
Advances (Collections) of PPE (6)
Reimbursements to third parties (4)
Reimbursements to PETROBRAS (1)
----------------
Ending balance 70
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BUSINESS SEGMENTS
The segment information included herein was prepared based on the same
accounting policies reflected in the PETROBRAS Audited Consolidated Financial
Statements and the Interim Consolidated PETROBRAS Financial Statements.
Intersegment net revenues includes sales to external clients and intersegment
sales based upon an internal transfer price established for transactions among
the segments.
The following table sets forth by segment the consolidated operating revenues
and income from operations (net operating revenues before elimination of
intersegment revenues less: cost of sales; depreciation, deletion and
amortization; and exploration, including dry holes), reflecting PETROBRAS'
domestic and international activities for the three months ended March 31, 2002
and March 31, 2001.
------------------------------------------
U.S. $ million
------------------------------------------
For the Three Months Ended March 31,
------------------------------------------
2002 2001
------------------------- ------------
Exploration and Production
Net revenues to third parties 132 11
Intersegment net revenues 2,290 2,867
------------------------- ------------
Total net operating revenues 2,422 2,878
========================= ============
Income from operations 1,114 1,161
========================= ============
Net income 617 575
========================= ============
Supply
Net revenues to third parties 2,639 4,400
Intersegment net revenues 1,268 1,383
------------------------- ------------
Total net operating revenues 3,907 5,783
========================= ============
Income from operations 545 960
========================= ============
Net income 222 438
========================= ============
Distribution
Net revenues to third parties 1,549 1,776
Intersegment net revenues 30 18
------------------------- ------------
Total net operating revenues 1,579 1,794
========================= ============
Income from operations 133 143
========================= ============
Net income 15 16
========================= ============
Gas and Energy
Net revenues to third parties 172 154
Intersegment net revenues 45 38
------------------------- ------------
Total net operating revenues 217 192
========================= ============
Income from operations 52 49
========================= ============
Net income (34) (60)
========================= ============
International
Net revenues to third parties 237 213
Intersegment net revenues 20
------------------------- ------------
Total net operating revenues 257 213
========================= ============
Income from operations 30 61
========================= ============
Net income (47) 18
========================= ============
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PETROBRAS' income from operations (net operating revenues before elimination
of intersegment revenues less: cost of sales; depreciation, depletion and
amortization; and exploration, including exploratory dry holes) decreased to
U.S. $ 1,874 million in the first quarter of 2002, as compared to U.S. $ 2,374
million for the first quarter of 2001,
This decrease was largely due to a decrease in sales prices of oil products as
discussed above.
PETROBRAS' exploration and production, and supply activities in the first
quarter of 2002 contributed to income from operations in the amount of U.S. $
1,114 million and U.S. $ 545 million, respectively. During the same period,
PETROBRAS' distribution, gas and energy and international segments contributed
income from operations of U.S. $ 133 million, U.S. $ 52 million and U.S. $ 30
million, respectively.
Exploration and production, and supply activities in the first quarter of 2001
contributed to income from operations in the amount of U.S. $ 1,161 million
and U.S. $ 960 million, respectively. During the same period, PETROBRAS'
distribution, gas and energy and international segments contributed income
from operations of U.S. $143 million, U.S. $ 49 million and U.S. $ 61 million,
respectively.
Segment assets
U.S. $ million
--------------------------------------
Segment March 31, 2002 December 31,200l
------- -------------------- -----------------
Exploration and production 14,747 13,992
SupplY 9,239 8,682
Distribution 1,512 1,525
Gas and Energy 2,820 2,666
International 1,660 1,715
Corporate 8,528 9,885
Eliminations (1,387) (1,601)
-------------------- -----------------
Total assets 37,119 36,864
==================== =================
11
PETROBRAS S.A. [LOGO] PETROLEO BRASILEIRO S.A.
PETROBRAS
--------------------------------------------------------------------------------
CAPITAL EXPENDITURES
In accordance with the objectives established in the strategic plan for 2001 -
2005, PETROBRAS continues to prioritize capital expenditures in the development
of crude oil and natural gas production for its own account and through joint
ventures. In line with its objective to increasing production, PETROBRAS signed
59 joint venture agreements to develop areas where PETROBRAS has already made
commercial findings and to promote further exploration activity. Currently, 45
of these 59 joint ventures are operating. In 1Q2002, total capital expenditures
were U.S.$ 1,100 million, representing an increase of 15% over capital
expenditures made in 1Q2001.
Activities
--------------------------------------------------------------------
U.S.$ million
March 31,
2002 2001
Domestic market
. Exploration and Production 587 628
. Supply 165 92
. Distribution 29 17
. Gas and Energy 81 27
. Corporate 48 37
--------- --------
910 801
--------- --------
Project Financings
. Albacora 32 16
. Espadarte / Voador / Marimba - EVM 40 34
. Cabiunas 8 10
. Companhia Petrolifera Marlim 34 57
. Others 10 3
--------- --------
124 120
--------- --------
--------- --------
Total domestic market 1,034 921
--------- --------
International Market
. Exploration and Production 63 36
. Supply 2 1
. Gas and Energy 1 --
--------- --------
Total international market 66 37
--------- --------
========= ========
Total capital expenditures 1,100 958
========= ========
.. Of the capital expenditures incurred during lQ2002, U.S. $ 711 million
(65%) were directed to domestic exploration and production activities,
which includes our exploration and production segment and our project
financings.
12
PETROBRAS S.A. [LOGO] PETROLEO BRASILEIRO S.A.
PETROBRAS
--------------------------------------------------------------------------------
Selected Balance Sheet Data
(in million of U.S. dollars, except for share data)
As of March As of
----------- -----
31, December 31,
--- ------------
2002 2001
-------- ------
(Unaudited)
Assets
------
Current assets
Cash and cash equivalents 6,445 7,360
Accounts receivable, net 2,966 2,759
Inventories 2,622 2,399
Other current assets 1,729 1,808
------------ ------------
Total current assets 13,762 14,326
Property, plant and equipment, net 19,924 19,179
Investments in non-consolidated companies and
other investments 497 499
Other assets
Petroleum and Alcohol Account - Receivable from
Federal Government 70 81
Government securities 697 665
Unrecognized pension obligation 164 187
Others 2,005 1,927
------------ ------------
Total other assets 2,936 2,860
Total assets 37,119 36,864
============ =============
Liabilities and stockholders' equity
------------------------------------
Current liabilities
Trade accounts payable 1,784 1,783
Short-term debt 741 1,101
Current portion of long-term debt 761 940
Project financings 1,020 680
Capital lease obligations 291 298
Dividends payable 1,004 93
Other current liabilities 2,901 3,149
------------ ------------
Total current liabilities 8,502 8,044
Long-term liabilites
Employees post retirement benefits 3,468 3,380
Project financings 3,110 3,153
Long-term debt 6,336 5,908
Capital lease obligations 1,865 1,930
Other liabilities 1,066 1,123
------------ ------------
Total long-term liabilities 15,845 15,494
Minority interest 116 79
Stockholders' equity
Shares authorized and issued:
Preferred stock - 451,935,669 2,459 1,882
Common stock - 634,168,418 3,761 2,952
Reserves and other 6,436 8,413
------------ ------------
Total stockholders' equity 12,656 13,247
Total liabilities and stockholders' equity 37,119 36,864
============ ============
13
PETROBRAS S.A. [LOGO] PETROLEO BRASILEIRO S.A.
PETROBRAS
--------------------------------------------------------------------------------
Income Statement
(Unaudited)
(in millions of U.S. dollars, except for share and per share data)
Three-month period ended
March 31,
--------------------------
4Q-2001 2002 2001
----------- ----------- -----------
8,092 Sales of products and services 7,476 9,335
Less:
Value-added and other taxes on sales and
(2,017) services (1,230) (2,529)
(451) Specific parcel price - PPE
CIDE (1,517) (252)
----------- ----------- -----------
5,624 Net operating revenues 4,729 6,554
(3,207) Cost of sales (2,476) (3,158)
(279) Depreciation, depletion and amortization (402) (648)
(122) Exploration, including exploratory dry holes (99) (65)
(145) Impairment
(424) Selling, general and administrative expenses (453) (433)
(39) Research and development expenses (38) (31)
----------- ----------- -----------
(4,216) Total costs and expenses (3,468) (4,335)
(31) Equity in results of non-consolidated companies (76) 1
109 Financial income 287 411
(224) Financial expense (212) (191)
Monetary and exchange variation on monetary
644 assets and liabilities, net 45 (526)
(351) Employee benefit expense (151) (93)
(69) Other taxes (73) (74)
(1,099) Loss on government securities
(146) Other expenses, net (60) (214)
----------- ----------- -----------
(1,167) (240) (686)
Income before income taxes and minority
241 interests 1,021 1,533
----------- ----------- -----------
Income tax expense:
(244) Current (334) (338)
268 Deferred (23) (38)
----------- ----------- -----------
24 Total income tax expense (357) (376)
Minority interest in (income) loss of consolidated
(122) subsidiaries (51) 64
----------- ----------- -----------
143 Net income 613 1,221
=========== =========== ===========
Weighted average number of shares outstanding
634,168,418 Common/ADS 634,168,418 634,168,418
451,935,669 Preferred/ADS 451,935,669 451,935,669
Basic and diluted earnings per share
0.13 Common/ADS and Preferred/ADS 0.56 1.12
=========== =========== ===========
14
PETROBRAS S.A. [LOGO] PETROLEO BRASILEIRO S.A.
PETROBRAS
--------------------------------------------------------------------------------
Statement of Cash Flows Data
(Unaudited)
(in millions of U.S. dollars)
Three-month period ended March 31,
----------------------------------
4Q-2001 2002 2001
-------- ------------ ------------
Cash flows from operating activities
143 Net income for the period 613 1,221
Adjustments to reconcile net income to net cash provided by
operating activities
375 Depreciation, depletion and amortization 444 610
157 Loss on property, plant and equipment 65 635
1,099 Loss on government securities
(618) Foreign exchange and monetary loss 98 345
(49) Others 147 (27)
Decrease (increase) in assets
(122) Accounts receivable, net (240) 363
Petroleum and Alcohol Account-Receivable from
608 Federal Government 10 230
699 Inventories (229) (24)
136 Advances to suppliers (79) (124)
Insurance receivable (497)
(52) Interest receivable on government securities (59)
(226) Others 88 (234)
Increase (decrease) in liabilities
(304) Trade accounts payable 25 (323)
(114) Taxes payable, other than income taxes (283) (129)
(367) Other liabilities 69 491
-------- ------------ ------------
1,365 Net cash provided by operating activities 728 2,478
-------- ------------ ------------
Cash flows from investing activities
(1,382) Additions to property, plant and equipment (1,100) (958)
(81) Others (65) (53)
-------- ------------ ------------
(1,463) Net cash used in investing activities (1,165) (1,011)
-------- ------------ ------------
-------- ------------ ------------
1,639 Cash flows from financing activities (392) (622)
-------- ------------ ------------
1,541 Increase (decrease) in cash and cash equivalents (829) 845
-------- ------------ ------------
742 Effect of exchange rate changes on cash and cash equivalents (86) (598)
5,077 Cash and cash equivalents at beginning of period 7,360 5,826
-------- ------------ ------------
7,360 Cash and cash equivalents at the end of period 6,445 6,073
======== ============ ============
15
PETROBRAS S.A. [LOGO] PETROLEO BRASILEIRO S.A.
PETROBRAS
--------------------------------------------------------------------------------
Income Statement by Segment
Three-month period ended March 31, 2002
U.S.$ million
GAS
E&P SUPPLY & INTERN. DISTRIB. CORPOR. ELIMIN. TOTAL
ENERGY
STATEMENT OF INCOME
Net operating revenues to
third parties 132 2,639 172 237 1,549 4,729
Intersegment net operating
revenues 2,290 1,268 45 20 30 (3,653)
------ ------ ----- ------- -------- ------- ------ ------
Net operating revenues 2,422 3,907 217 257 1,579 (3,653) 4,729
Cost of sales (942) (3,283) (150) (196) (1,438) 3,533 (2,476)
Depreciation, depletion and
amortization (269) (79) (15) (29) (8) (2) (402)
Exploration, including dry holes (97) (2) (99)
Selling, general and
administrative expenses (21) (193) (13) (23) (100) (103) (453)
Research and development
expenses (17) (11) (1) (9) (38)
------ ------ ----- ------- -------- ------- ------ ------
Cost and expenses (1,346) (3,566) (179) (250) (1,546) (114) 3,533 (3,468)
Results of affiliated companies (4) (72) (76)
Debt expenses, net (93) 24 (19) 11 3 194 120
Employee benefit expense (151) (151)
Other expenses, net (43) (13) (65) 22 (5) (43) 14 (133)
------ ------ ----- ------- -------- ------- ------ ------
Income before income taxes
and minority interest 940 348 (46) (32) 31 (114) (106) 1,021
Income tax benefits (expense) (323) (123) 19 (16) (10) 52 44 (357)
Minority interest (3) (7) 1 (6) (36) (51)
------ ------ ----- ------- -------- ------- ------ ------
Net Income 617 222 (34) (47) 15 (98) (62) 613
====== ====== ===== ======= ======== ======= ====== ======
16
PETROBRAS S.A. [LOGO] PETROLEO BRASILEIRO S.A.
PETROBRAS
--------------------------------------------------------------------------------
Selected Balance Sheet Data by Segment
---------------------------------------------------------------------
Three-month period ended March 31, 2002
U.S.$ million
---------------------------------------------------------------------
------- ------- ------- ------- ------- -------- ------- ---------
GAS INTERN.
E&P SUPPLY & DISTRIB. CORPOR. ELIMIN. TOTAL
ENERGY
------- ------- ------- ------- ------- -------- ------- ---------
CURRENT ASSETS 1,702 4,524 645 562 983 6,256 (910) 13,762
------- ------- ------- ------- ------- -------- ------- ---------
Cash and cash equivalents 577 102 135 23 5,608 6,445
Other current assets 1,702 3,947 543 427 960 648 (910) 7,317
INVESTMENTS IN AFFILIATED
COMPANIES AND OTHER
INVESTMENTS 2 295 58 17 20 102 3 497
PROPERTY,PLANT AND
EQUIPMENT, NET 12,704 4,164 1,471 996 331 260 (2) 19,924
NON CURRENT ASSETS 339 256 646 85 178 1,910 (478) 2,936
------- ------- ------- ------- ------- -------- ------- ---------
Petroleum and Alcohol Account 70 70
Government securities held-to-maturity 2 210 212
Other assets 339 254 646 85 178 1,630 (478) 2,654
TOTAL ASSETS 14,747 9,239 2,820 1,660 1,512 8,528 (1,387) 37,119
------- ------- ------- ------- ------- -------- ------- ---------
Selected Data for International Segment
---------------------------------------------------------------------
Three-month period ended March 31, 2002
U.S.$ million
INTERNATIONAL
---------------------------------------------------------------------
------- ------- ------- ------- -------- ------- ---------
GAS
E&P SUPPLY & DISTRIB. CORPOR. ELIMIN. TOTAL
ENERGY
------- ------- ------- ------- -------- ------- ---------
INTERNATIONAL
ASSETS 1,022 296 54 149 207 (68) 1,660
------- ------- ------- ------- -------- ------- ---------
STATEMENT OF INCOME
Net Operating Revenues 65 227 1 94 (130) 257
------- ------- ------- ------- -------- ------- ---------
Net Operating Revenues to third
parties 23 119 1 94 237
Intersegment net operating
revenues 42 108 (130) 20
------- ------- ------- ------- -------- ------- ---------
Net income 18 4 (8) (61) (47)
======= ======= ======= ======= ======== ======= =========
17
PETROBRAS S.A. [LOGO] PETROLEO BRASILEIRO S.A.
PETROBRAS
--------------------------------------------------------------------------------
http://www.petrobras.com.br/ri/ingles
--------------------------------------------------------------------------------
Contacts:
Petroleo Brasileiro S.A - PETROBRAS THOMSON FINANCIAL/CARSON
Investor Relations Department Isabel Vieira (New York)
Luciana Bastos de Freitas Rachid - Executive (212) 701-1823
Manager isabel.vieira@thomsonir.com
E-mail: lrachid@petrobras.com.br Richard Marte (New York)
Carlos Henrique Dumortout Castro - Manager (212) 701-1812
E-mail: carloshdc@petrobras.com.br richard.marte@tfn.com
Av. Republica do Chile, 65 - 4/th/ floor Valter Faria (Brazil)
20031-912 - Rio de Janeiro, RJ (11) 3848-0887 ext. 202
(55-21) 2534-1510 valter.faria@thomsonir.com.br
================================================================================
[LOGO OF LISTED [LOGO OF PBR [LOGO OF PBRA
BOVESPA COMPANY] LISTED NYSE] LISTED NYSE]
________________________________________________________________________________
This document may contain forecasts about future events. Such forecasts merely
reflect the expectations of the Company's management. Such terms as
"anticipate", "believe", "expect", "forecast", "intend", "plan", "project",
"seek", "should", along with similar or analogous expressions, are used to
identify such forecasts. These predictions evidently involve risks and
uncertainties, whether foreseen or not by the Company. Therefore, the future
results of operations may differ from current expectations, and readers must not
base their expectations exclusively on the information presented herein. The
Company is not obliged to update such forecasts in light of new information or
future developments.
18
Petroleo Brasileiro S.A. -
PETROBRAS and Subsidiaries
Consolidated Financial Information
As of March 31, 2002 and 2001 and
Report of Independent Accountants
Independent Accountants' Review Report
To the Board of Directors
and Stockholders of
Petroleo Brasileiro S.A. - PETROBRAS
We have reviewed the accompanying unaudited consolidated balance sheets of
Petroleo Brasileiro S.A. - PETROBRAS and its subsidiaries at March 31, 2002 and
the unaudited consolidated statements of income, of cash flows and of changes in
stockholders' equity for the three-month periods ended March 31, 2002 and 2001.
This financial information is the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial information taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying financial information as of March 31, 2002 and for
the three-month periods ended March 31, 2002 and 2001, for it to be in
conformity with accounting principles generally accepted in the United States of
America.
We have previously audited in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Petroleo Brasileiro S.A. - PETROBRAS and its subsidiaries as of December 31,
2001, and the related consolidated statements of income, of cash flows and of
changes in stockholders' equity for the year then ended (not presented herein),
and in our report dated March 31, 2002, we expressed an unqualified opinion on
those audited financial statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet information as of December 31, 2001
is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
As described in Note 8, PETROBRAS has been subject to significant Brazilian
Federal Government regulations.
PricewaterhouseCoopers
Auditores Independentes
Rio de Janeiro, Brazil
May 6, 2002
F-2
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Consolidated Balance Sheets
Expressed in millions of United States Dollars
March 31, December 31,
Assets 2002 2001
----------- -------------
(Unaudited)
Current assets
Cash and cash equivalents 6,445 7,360
Accounts receivable, net 2,966 2,759
Inventories 2,622 2,399
Deferred income tax 107 149
Recoverable taxes 472 664
Advances to suppliers 546 483
Other current assets 604 512
---------- ------------
13,762 14,326
---------- -----------
Property, plant and equipment, net 19,924 19,179
---------- -----------
Investments in non-consolidated companies and
other investments 497 499
---------- -----------
Other assets
Accounts receivable, net 205 212
Advances to suppliers 420 403
Petroleum and Alcohol Account - Receivable from
Federal Government 70 81
Government securities 697 665
Unrecognized pension obligation 164 187
Restricted deposits for legal proceedings
and guarantees 353 337
Receivable from non-consolidated companies 306 264
Recoverable taxes 135 164
Marketable securities 212 212
Other assets 374 335
---------- -----------
2,936 2,860
---------- -----------
Total assets 37,119 36,864
========== ===========
F-3
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Consolidated Balance Sheets
Expressed in Millions of United States Dollars
(except number of shares) (continued)
March 31, December 31,
Liabilities and stockholders' equity 2002 2001
--------------- ---------------
(Unaudited)
Current liabilities
Trade accounts payable 1,784 1,783
Income taxes 174 1,044
Taxes payable, other than income tax 1,670 1,101
Short-term debt 741 1,101
Current portion of long-term debt 761 940
Current portion of project financings 1,020 680
Capital lease obligations 291 298
Employee postretirement benefits 108 117
Payroll and related charges 347 333
Dividends payable 1,004 93
Accrued interest 103 104
Other payables and accruals 499 450
--------------- ---------------
8,502 8,044
--------------- ---------------
Long-term liabilities
Employees postretirement benefits 3,468 3,380
Project financings 3,110 3,153
Long-term debt 6,336 5,908
Capital lease obligations 1,865 1,930
Deferred income taxes 742 717
Other liabilities 324 406
--------------- ---------------
15,845 15,494
--------------- ---------------
Minority interest 116 79
--------------- ---------------
Commitments and contingencies (Note 16)
Stockholders' equity
Shares authorized and issued (Note 13)
Preferred stock - 2002 and 2001 - 451,935,669 shares 2,459 1,882
Common stock - 2002 and 2001 - 634,168,418 shares 3,761 2,952
Capital reserve - fiscal incentive 131 128
Accumulated other comprehensive income
Cumulative translation adjustments (12,085) (11,854)
Amounts not recognized as net periodic pension cost (1,864) (1,867)
Unrealized gain on available-for-sale securities 27 13
Retained earnings
Appropriated 5,457 6,869
Unappropriated 14,770 15,124
--------------- ---------------
12,656 13,247
--------------- ---------------
Total liabilities and stockholders' equity 37,119 36,864
=============== ===============
The accompanying notes are an integral part of this interim consolidated
financial information.
F-4
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Consolidated Satements of Income
Expressed in Millions of United States Dollars
(except number of shares and earnings per share)
(Unaudited)
Three-month period
ended March 31,
----------------------------------
2002 2001
--------------- ----------------
Sales of products and services 7,476 9,335
Less:
Value-added and other taxes on sales and services (1,230) (2,529)
Specific parcel price - PPE (Note 8) (252)
CIDE (Note 8) (1,517)
--------------- ----------------
Net operating revenues 4,729 6,554
--------------- ----------------
Cost of sales (net of impact of government regulation of US$ (2),
during 2001 (Note 8)) 2,476 3,158
Depreciation, depletion and amortization 402 648
Exploration, including exploratory dry holes 99 65
Selling, general and administrative expenses (net of impact of
Government regulation of US$ (1) and US$ (17), in 2002
and 2001, respectively (Note 8)) 453 433
Research and development expenses 38 31
--------------- ----------------
Total costs and expenses 3,468 4,335
--------------- ----------------
Equity in results of non-consolidated companies (76) 1
Financial income (including financial income on the Petroleum and
Alcohol Account of US$ 3, during 2001 (Note 8)) 287 411
Financial expense (212) (191)
Monetary and exchange variation on monetary assets and
liabilities, net 45 (526)
Employee benefit expense (151) (93)
Other taxes (73) (74)
Other expenses, net (60) (214)
--------------- ----------------
(240) (686)
--------------- ----------------
Income before income taxes and minority interest 1,021 1,533
--------------- ----------------
F-5
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Consolidated Statements of Income
Expressed in Millions of United States Dollars
(except number of shares and earnings per share)
(Unaudited) (continued)
Three-month period
Ended March 31,
----------------------------
2002 2001
------------ ------------
Income tax expense
Current (334) (338)
Deferred (23) (38)
------------ ------------
(357) (376)
------------ ------------
Minority interest in results of consolidated subsidiaries (51) 64
------------ ------------
Net income for the period 613 1,221
============ ============
Net income applicable to each class of shares
Common/ ADS 358 710
Preferred/ADS 255 511
------------ ------------
Net income for the period 613 1,221
============ ============
Basic and diluted earnings per share (Note 14)
Common/ADS and Preferred/ADS 0.56 1.12
============ ============
Weighted average number of shares outstanding
Common/ADS 634,168,418 634,168,418
Preferred/ADS 451,935,669 451,935,669
============ ============
The accompanying notes are an integral part of this interim consolidated
financial information.
F-6
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Consolidated Statements of Cash Flows
Expressed in Millions of United States Dollars
(Unaudited)
Three-month period
ended March 31,
--------------------
2002 2001
-------- ---------
Cash flows from operating activities
Net income for the period 613 1,221
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation, depletion and amortization 444 610
Loss on property, plant and equipment 65 635
Foreign exchange and monetary loss (gain) 98 345
Others 147 (27)
Decrease (increase) in assets
Accounts receivable, net (240) 363
Petroleum and Alcohol Account 10 230
Interest receivable on government securities (59)
Inventories (229) (24)
Advances to suppliers (79) (124)
Insurance receivable (497)
Others 88 (234)
Increase (decrease) in liabilities
Trade accounts payable 25 (323)
Payroll and related charges 14 73
Taxes payable, other than income taxes (283) (129)
Employee postretirement benefits, net of unrecognized
pension obligation 74 19
Other liabilities (19) 399
-------- ---------
Net cash provided by operating activities 728 2,478
-------- ---------
F-7
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Consolidated Statements of Cash Flows
Expressed in Millions of United States Dollars
(Unaudited) (continued)
Three-month period
ended March 31,
----------------------
2002 2001
--------- ----------
Cash flows from investing activities
Additions to property, plant and equipment (1,100) (958)
Others (65) (53)
--------- ----------
Net cash used in investing activities (1,165) (1,011)
--------- ----------
Cash flows from financing activities
Short-term debt, net issuances and repayments (359) (871)
Proceeds from issuance of long term debt 532 294
Principal payments on long- term debt (295) (154)
Project financings (56) 124
Payment of lease obligations (73) (15)
Dividends paid (141)
--------- ----------
Net cash used in financing activities (392) (622)
--------- ----------
Increase (decrease) in cash and cash equivalents (829) 845
Effect of exchange rate changes on cash and cash equivalents (86) (598)
Cash and cash equivalents at beginning of period 7,360 5,826
--------- ----------
Cash and cash equivalents at end of period 6,445 6,073
========= ==========
The accompanying notes are an integral part of this interim consolidated
financial information.
F-8
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
Expressed in Millions of United States Dollars
(except number of shares and per-share amounts)
(Unaudited)
Three-month period
ended March 31,
------------------------
2002 2001
----------- ----------
Preferred stock (Note 13) 2,459 1,882
----------- ----------
Common stock (Note 13) 3,761 2,952
----------- ----------
Capital reserve - fiscal incentive
Balance January 1 128 37
Transfer from (to) unappropriated
retained earnings 3 (1)
----------- ----------
Balance March 31 131 36
----------- ----------
Accumulated other comprehensive income
Cumulative translation adjustments
Balance January 1 (11,854) (9,159)
Change in the period (231) (1,540)
----------- ----------
Balance March 31 (12,085) (10,699)
----------- ----------
Amounts not recognized as net periodic pension cost
Balance January 1 (1,867) (1,516)
Decrease in additional minimum liability 4 216
Tax effect on above (1) (71)
----------- ----------
Balance March 31 (1,864) 1,371)
----------- ----------
F-9
Petroleo Brasileiro S.A. - PETROBAS
and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
Expressed in Millions of United States Dollars
(except number of shares and per-share amounts)
(Unaudited) (continued)
Three-month period
ended March 31,
-------------------------------
2002 2001
-------------- ------------
Unrecognized gains (losses) on available-for-sale securities
Balance January 1 13 65
Unrealized gains (losses) 20 (43)
Tax effect on above (6) 14
-------------- ------------
Balance March 31 27 36
-------------- ------------
Appropriated retained earnings
Legal reserve
Balance at January 1 768 648
Transfer to unappropriated retained earnings (1) (62)
-------------- ------------
Balance at March 31 767 586
-------------- ------------
Unrealized income reserve
Balance at January 1 1,471
Transfer to unappropriated retained earnings (139)
-------------- ------------
Balance at March 31 1,332
-------------- ------------
Undistributed earnings reserve
Balance at January 1 5,886 3,648
Capital increase (1,386)
Transfer to unappropriated retained earnings (24) (348)
-------------- ------------
Balance at March 31 4,476 3,300
-------------- ------------
F-10
Petroleo Brasileiro S.A. - PETROBAS
and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
Expressed in Millions of United States Dollars
(except number of shares and per-share amounts)
(Unaudited) (continued)
Three-month period
ended March 31,
-------------------------------
2002 2001
-------------- ------------
Statutory reserve
Balance at January 1 215 221
Transfer to unappropriated
retained earnings (1) (21)
-------------- -----------
Balance at March 31 214 200
-------------- ------------
Total appropriated retained earnings 5,457 5,418
============== ============
Unappropriated retained earnings
Balance at January 1 15,124 14,456
Net income for the period 613 1,221
Dividends (per share: 2001 - US$ 1.13 to common and preferred
shares; 2000 - US$ 0.47 to common and preferred shares) (989) (1,231)
Appropriation from reserves 22 571
-------------- ------------
Balance at March 31 14,770 15,017
-------------- ------------
Total stockholders' equity 12,656 13,271
============== ============
Comprehensive income is comprised as follows:
Net income for the period 613 1,221
Cumulative translation adjustments (231) (1,540)
Amounts not recognized as net periodic pension cost 3 145
Unrealized gain (loss) on available-for-sale securities 14 (29)
-------------- ------------
Total comprehensive income (loss) 399 (203)
============== ============
The accompanying notes are an integral part of this interim consolidated
financial information.
F-11
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
1 Basis of Financial Statement Preparation
The accompanying unaudited consolidated financial information of Petroleo
Brasileiro S.A. - PETROBRAS (the Company) has been prepared pursuant to the
US generally accepted accounting standards (U.S. GAAP) and the rules and
regulations of the Securities and Exchange Commission (SEC). Although
certain information normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United
States of America has been condensed or omitted, management believes that
the disclosures are adequate to make the information presented not
misleading. The unaudited consolidated financial information should be read
in conjunction with the consolidated financial statements for the year
ended December 31, 2001 and the notes thereto.
The consolidated financial information as of March 31, 2002 and for the
three-month periods ended March 31, 2002 and 2001, included in this report
is unaudited. However, in management's opinion, such consolidated financial
information reflects all normal recurring adjustments that are necessary
for a fair presentation. The results for interim periods are not
necessarily indicative of trends or of results to be expected for a full
year.
2 Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") has recently issued the
following Statements of Financial Accounting Standards ("SFAS"). The SFAS's
issued in July 2001 were: SFAS No. 141, Business Combinations ("SFAS No.
141") and SFAS No. 142, Goodwill and Other Intangible Asset ("SFAS 142").
In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations ("SFAS 143"). In October 2001, SFAS No. 144,
Accounting for the Impairment or Disposal of Long Lived Assets ("SFAS 144")
was also issued. SFAS No. 141, requires the purchase method of accounting
for all business combinations, applies to all business combinations
initiated after June 30, 2001 and to all business combinations accounted
for by the purchase method that are completed after June 30, 2001. SFAS
No.142 requires that goodwill as well as other intangible assets with
indefinite lives not be amortized but be tested annually for impairment and
is effective for fiscal years beginning after December 15, 2001. Adoption
of SFAS 141 and 142 will not have a material impact on the financial
position and results of operations of the Company.
F-12
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
SFAS No. 143 requires entities to record the fair value of a liability for
an asset retirement obligation in the period in which it is incurred and a
corresponding increase in the carrying amount of the related long-lived
asset. Subsequently, the asset retirement cost should be allocated to
expense using a systematic and rational method. SFAS No. 143 is effective
for fiscal years beginning after June 15, 2002.
SFAS No. 144 addresses financial accounting and reporting for the
impairment of long-lived assets and for long-lived assets to be disposed
of. It supersedes, with exceptions, SFAS No. 121, Accounting for the
Impairment of Long -Lived Assets and for Long - Lived Assets to be Disposed
Of, and is effective for fiscal years beginning after December 15, 2001.
The Company is currently assessing the impact of SFAS No. 143 and No. 144
and therefore, at this time cannot reasonably estimate the effect of these
statements on its financial condition, result of operations and cash flows.
3 Reclassifications
Certain prior period's amounts have been reclassified to conform with the
current period's presentation. These reclassifications had no impact on the
Company's net income or stockholders' equity.
4 Derivative Instruments, Hedging and Risk Management Activities
The Company is exposed to a number of market risks arising from the normal
course of business. Such market risks principally involve the possibility
that changes in interest rates, currency exchange rates or commodity prices
will adversely affect the value of the Company's financial assets and
liabilities or future cash flows and earnings. The Company maintains an
overall risk management policy that is evolving under the direction of the
Company's executive officers.
The Company may use derivative and non-derivative instruments to implement
its overall risk management strategy. However, by using derivative
instruments, the Company exposes itself to credit and market risk. Credit
risk is the failure of a counterpart to perform under the terms of the
derivative contract. Market risk is the adverse effect on the value of a
financial instrument that results from a change in interest rates, currency
exchange rates, or commodity prices. The Company addresses credit risk by
restricting the counterparts to such derivative financial instruments to
major financial institutions. Market risk is managed by the Company's
executive officers. The Company does not hold or issue financial
instruments for trading purposes.
F-13
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
The Company adopted SFAS 133 on January 1, 2001 and determined that all of
its derivative financial instruments that had previously been treated as
hedges will not qualify for hedge accounting under the new standard. The
following summarizes the Company's current risk management activities:
(a) Foreign Currency Risk Management
The Company's foreign currency risk management strategy may use derivative
instruments to protect against foreign exchange rate volatility, which may
impair the value of certain of the Company's assets. The Company currently
uses zero cost foreign exchange collars to implement this strategy.
During 2001 the Company entered into three zero cost foreign exchange
collars to reduce its exposure to variations between the U.S. Dollar and
the Japanese Yen, and between the U.S. Dollar and EURO relative to
long-term debt denominated in foreign currencies with a notional amount of
approximately US$ 470. The Company treats these instruments as non-hedge
derivative instruments. These collars establish a ceiling and a floor for
the associated exchange rates. If the exchange rate falls below the defined
floor, the counterparty will pay to the Company the difference between the
actual rate and the floor rate on the notional amount. Conversely, if the
exchange rate increases above the defined ceiling, the Company will pay to
the counterparty the difference between the actual rate and the ceiling
rate on the notional amount. The contracts expire upon the maturity date of
each note.
The Company realized a net loss for the three-month period ended March 31,
2002 associated with its zero cost foreign exchange collar contracts of US$
76, which is comprised of market value losses (US$ 74) and payments made
under the agreement (US$ 2).
(b) Commodity Price Risk Management
The Company is exposed to commodity price risks through the fluctuation of
oil and oil product prices. The Company's commodity risk management
activities primarily consist of futures contracts traded on stock exchanges
and options and swaps entered into with major financial institutions. The
futures contracts hedge anticipated crude oil purchases and sales,
generally forecasted to occur within a 30 to 360 day period to reduce the
Company's exposure to volatile commodity prices.
F-14
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
The Company's exposure on these contracts is limited to the differential on
the volumes hedged between the contract value and the market value. Gains
and losses on hedge transactions are recognized concurrently with gains and
losses resulting from the underlying hedged transaction. During the first
three months of 2002 and 2001 the Company carried out hedging activities on
34.9% and 23.1%, respectively, of its total traded volume, and recognized
gains of US$ 27 and US$ 11, respectively.
(c) Interest Rate Risk Management
The Company's interest rate risk is a function of the Company's long-term
debt and, to a lessor extent, short-term debt. The Company's foreign
currency floating rate debt is principally subject to fluctuations in LIBOR
and the Company's floating rate debt denominated in Reais is principally
subject to fluctuations in the Brazilian long-term interest rate (TJLP), as
fixed by the Brazilian Central Bank. The Company currently does not utilize
derivative financial instruments to manage its exposure to fluctuations in
interest rates.
5 Monetary Variation and Transaction Gains and Losses
The U.S. dollar amounts for the periods presented have been remeasured or
translated from the Brazilian Reais amounts in accordance with SFAS 52 -
Foreign Currency Translation ("SFAS 52") as applicable to entities
operating in non-hyperinflationary economies. During the first three months
of 2001 the Real devalued from US$ 1: R$ 1.9554 at December 31, 2000 to US$
1: R$ 2.1616 at March 31, 2001. During the first three months of 2002 the
Real fluctuated from US$ 1: R$ 2.3204 at December 31, 2001 to US$ 1: R$
2.3236 at March 31, 2002.
The impact of these exchange rate changes on the Company's monetary assets
and liabilities net of monetary variation, was a gain of US$ 45 and a loss
of US$ 526 for the three-month periods ended March 31, 2002 and 2001,
respectively.
6 Income Taxes
Income taxes in Brazil comprise federal income tax and social contribution,
which is an additional federal income tax. The statutorily enacted tax
rates applicable for the periods presented are 25% for federal income tax
and 8% for social contribution, respectively, which represent an aggregate
rate of 33%.
F-15
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
Pursuant to a provisional measure, the social contribution rate was
increased to 12% for the period May 1, 1999 to January 31, 2000 and it was
reduced to 9% for the period February 1, 2000 to December 31, 2002. The
social contribution rate will become 8% again effective January 1, 2003.
Because provisional measures are valid only for 30 days unless approved by
the Congress, for purposes of application of SFAS 109 - Accounting for
Income Taxes ("SFAS 109"), the enacted rate continues to be 8%. Therefore,
this rate was used to calculate deferred taxes at March 31, 2002 and 2001.
Substantially all of the Company's taxable income is generated in Brazil
and is therefore subject to the Brazilian statutory tax rate. The following
reconciles the tax calculated based upon statutory tax rates to the income
tax expense recorded in this consolidated financial information.
Three-month period
ended March 31,
-----------------------------
2002 2001
------------ -------------
Income before income taxes and minority interest 1,021 1,533
============ =============
Tax expense at statutory rates (347) (521)
Adjustments to derive effective tax rate:
Non-deductible postretirement health-benefits (21) (22)
Tax benefit on interest on stockholders' equity 142
Foreign income subject to different tax rates (28) (20)
Others 39 45
------------ -------------
Income tax expense per consolidated
statement of income (357) (376)
============ =============
F-16
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
7 Inventories
Inventories are comprised of the following:
March 31, December 31,
2002 2001
------------------ -------------------
(Unaudited)
Products
Oil products 1,207 1,088
Fuel Alcohol 173 186
------------------ -------------------
1,380 1,274
Raw materials, mainly crude oil 723 583
Materials and supplies 519 542
------------------ -------------------
2,622 2,399
================== ===================
8 Petroleum and Alcohol Account - Receivable from Federal Government
The Petroleum and Alcohol Account - Receivable from Federal Government (the
Petroleum and Alcohol Account) has been used to accumulate the impact of
the Federal Government's regulation policies for the Brazilian oil and gas
industry on PETROBRAS. The Petroleum and Alcohol Account accrues financial
income on its outstanding balance at the Referential Rate Index - TR, which
was 0.55% for the three-month period ended March 31, 2002 and 0.35% for the
three-month period ended March 31, 2001.
As provided in the applicable regulations, the Petroleum and Alcohol
Account is a legal, valid and binding receivable from the Federal
Government and collectibility of the receivable is not subject to future
operations. The applicable regulations also provide that the Company has
the right to offset amounts owed to the Federal Government relating to the
regulation policies of the Brazilian oil and gas industry against the
receivable. These increases and decreases in the Petroleum and Alcohol
Account relating to the programs described in Note 2(i) to the December 31,
2001 consolidated financial statements, have been recognized in accordance
with applicable law when the underlying transaction occurred. See table
below for the activity in 2002.
F-17
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
According to specific legislation applicable to the Petroleum and Alcohol
Account until December 31, 2001, the Petroleum and Alcohol Account was
realized through collection of the Specific Parcel Price-PPE generated by
the sale of the majority of basic oil products (gasoline, diesel oil and
LPG).
The net effect of these regulations on the income statement for the
three-month periods ending March 31, 2002 and 2001 is summarized below:
Three-month period
ended March 31,
------------------------------
2002 2001
------------- --------------
PPE collected (6) (252)
============= ==============
Cost of sales - decrease in cost of sales due to
commercialization of fuel alcohol 2
============= ==============
Selling, general and administrative expenses -
transport of oil products (1) (17)
============= ==============
Financial income (financial income on the
Petroleum and Alcohol Account) 3
============= ==============
National Treasury Bonds Series H (NTN-H)
On June 30, 1998, PETROBRAS and the Federal Government reached an agreement
whereby the Federal Government issued National Treasury Bonds - H (NTN-H)
into a federal depositary on behalf of PETROBRAS to support the balance of
the account. The value of the outstanding bonds at March 31, 2002 was US$
66, at which time the balance of the Petroleum and Alcohol Account was US$
70. The legal, valid, and binding nature of the account is not affected by
any difference between the balance of the account and the value of the
outstanding bonds.
The Brazilian Government, upon PETROBRAS' consent, can effect the
cancellation of all or a portion of the bonds' outstanding balance. The
NTN-H will mature on June 30, 2003 and PETROBRAS, actually, has no other
rights on those bonds; withdrawal or transfer are not allowed.
F-18
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
Certification by the Federal Government
The Federal Government certified the balance of the Petroleum and Alcohol
Account as of March 31, 1992. In September 1999 the Ministers of Finance,
Agriculture and Internal Supply, and Mines and Energy created a Working
Group to certify the balance of the Petroleum and Alcohol Account, relating
to the period April 1, 1992 to June 30, 1998.
In December 2000, the Working Group concluded its certification process on
a portion of the activity for this period. The Working Group recommended
and the Company agreed to reduce the balance of the Petroleum and Alcohol
Account by US$ 106 during 2000 and US$ 405 during 2001.
The movements in the Petroleum and Alcohol Account in the period July 1,
1998 to December 31, 2001, will be subject to audits by the National
Petroleum Agency - ANP, during the first semester of 2002, and the results
of the audit will be the basis for the settlement of the account with the
Federal Government, which should be concluded by June 30, 2002, unless
extended, in accordance with Provisional Measure No. 18 of December 28,
2001.
Since the Company has implemented all recommendations made by the Working
Group to the accounting for the Petroleum and Alcohol Account for the
period from July 1, 1998 to December 31, 2001, the Company does not expect
significant adjustments from the ANP audit of this period.
Liberation of the Brazilian fuel market
In accordance with laws No. 9,478 (Oil Law), No. 9,990 and No. 10,336,
effective August 6, 1997, July 21, 2001 and December 19, 2001,
respectively, the Brazilian fuel market was entirely liberated on January
1, 2002. As part of this action:
. the Brazilian government deregulated sales prices for oil and oil
products, and, as a consequence, realization prices and the PPE were
eliminated; and
. the Contribution of the Economic Domain (Contribuicao de Intervencao
do Dominio Economico - CIDE) was established, a per-transaction
payment to the Brazilian government required to be made by producers,
blenders and importers upon sales and purchases of specified oil and
fuel products at a set amount for different products based on volume.
F-19
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
Consequently, beginning in 2002 the Petroleum and Alcohol Account cannot be
used to reimburse expenses related with the supply of oil products and fuel
alcohol to PETROBRAS and third parties, incurred after December 31, 2001.
Law number 10,453, of May 13, 2002, article 7, authorized the National
Petroleum Agency - ANP to order the settlement of amounts due to and from
PETROBRAS arising from entries in the Petroleum and Alcohol Account covered
in the relevant legislation and arising from events prior to December 31,
2001 as well as the settlement of debits relating to the program for
equalizing the costs of sugarcane production in the North-East Region.
The following summarizes the changes in the Petroleum and Alcohol Account
for the period ended March 31, 2002:
Three-month
period ended
March 31, 2002
-------------------
(Unaudited)
Opening balance 81
-------------------
Advances (collections):
PPE (6)
-------------------
Reimbursements to third parties:
Subsidies paid to fuel alcohol producers 9
Costs reimbursed to distributors for transport of oil products (13)
-------------------
Total reimbursements to third parties (4)
-------------------
Reimbursements to PETROBRAS - Transport of oil products (1)
-------------------
Total reimbursements to PETROBRAS (1)
-------------------
Total reimbursements (5)
-------------------
Ending balance 70
===================
F-20
Petroleo Brasileiro S.A. - PETROBAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
9 Financing
(a) Short-term debt
The Company's short-term borrowings are principally from commercial banks
and include import and export financing denominated in United States
dollars, as follows:
March 31, December 31,
2002 2001
---------- -----------
Import - Oil and equipment 465 352
Working capital 276 749
---------- -----------
741 1,101
========== ===========
(b) Long-term debt
. Composition
March 31, December 31,
2002 2001
---------- -----------
Foreign currency
Financial institutions 1,814 1,861
Suppliers' credits 1,197 1,377
Notes 2,222 1,733
Securitization of receivables 900 900
---------- -----------
6,133 5,871
---------- -----------
Local currency
Debentures (related party) 278 276
BNDES (related party) 641 657
Others 45 44
---------- -----------
964 977
---------- -----------
7,097 6,848
Current portion of long-term debt (761) (940)
---------- -----------
6,336 5,908
========== ===========
F-21
Petroleo Brasileiro S.A. - PETROBAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
.. Composition of foreign currency debt by currency
March 31, December 31,
2002 2001
--------- -----------
Currencies
United States dollars 5,122 4,808
Japanese Yen 751 788
Sterling Pound 2 4
Euro (*) 258 271
--------- -----------
6,133 5,871
========= ===========
(*) The currencies French Franc, Italian Lira and Austrian Schilling were
replaced by the Euro at February 28, 2002.
.. Maturities of the principal of long-term debt
The long-term portion at March 31, 2002 becomes due in the following years:
2003 642
2004 584
2005 370
2006 770
2007 and thereafter 3,970
----------
6,336
==========
F-22
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
. Composition of long-term debt by annual interest rate
Interest rates on long-term debt were as follows:
March 31, December 31,
2002 2001
----------- -------------
Foreign currency
6% or less 1,878 1,890
Over 6% to 8% 1,670 1,755
Over 8% to 10% 2,394 2,074
Over 10% to 15% 191 152
----------- -------------
6,133 5,871
----------- -------------
Local currency
6% or less 529 537
Over 6% to 8% 411 411
Over 8% to 10% 11 13
Over 10% to 15% 13 16
----------- -------------
964 977
----------- -------------
7,097 6,848
=========== =============
On February 4, 2002, the Company, through its wholly - owned subsidiary,
PIFCO, completed an offering of US$ 400,000 9 1/8% Senior Notes due
February 2007. On February 21, 2002, the Company also issued, through
PIFCO, additional Senior Notes of US$ 100,000 with the same terms and
maturities as the notes issued on February 4, 2002. The Company used these
proceeds principally to finance the purchase of oil imports and to repay
short-term indebtedness.
10 Project Financings
Since 1997, the Company has utilized project financing to provide capital
for the continued development of the Company's exploration and production
and related projects. The following summarizes the nature of the projects
in progress at March 31, 2002 and December 31, 2001.
F-23
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
The Company's arrangements related to these projects are considered leasing
transactions. PETROBRAS' responsibility under these contracts is to complete the
development of the oil and gas fields, operate the fields, pay for all operating
expenses related to the projects and remit a portion of the net proceeds
generated from the fields to fund the special purpose companies' debt and return
on equity payments. At the end of each financing project, the Company will have
the ability to purchase the leased or transferred assets from the special
purpose company. Because the Company had commenced development or construction
activities on each of these projects prior to completing the financing
arrangement, and because of the Company's continuing involvement in these
projects, the Company continues to reflect the assets related to the projects as
a component of property plant and equipment and the related obligation as a
component of project financing.
March 31, December 31,
2002 2001
------------ -------------
Marlim 718 713
Nova Marlim 971 933
Barracuda/Caratinga 1,011 773
Espadarte/Voador/Marimba (EVM) 498 498
Cabiunas 569 529
Albacora 277 303
Pargo, Carapeba, Garoupa and Cherne (PCGC) 86 84
------------ -------------
4,130 3,833
Current portion of project financings (1,020) (680)
------------ -------------
3,110 3,153
============ =============
At March 31, 2002, the long-term portion of project finance becomes due in the
followings years:
2003 321
2004 446
2005 637
2006 569
2007 and thereafter 1,137
--------
3,110
========
F-24
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
As of March 31, 2002 the amounts of commitments assumed rose from
structured projects that will be reflected in future financial statements
are presented as follows:
Cabiunas 340
Barracuda/Caratinga 1,291
Espadarte/Voador/Marimba (EVM) 91
Albacora 43
Pargo, Carapeba, Garoupa and Cherne (PCGC) 32
-------
1,797
=======
11 Capital Leases
The Company leases certain offshore platforms, which are accounted for as
capital leases. At March 31, 2002, these assets had a net book value of US$
1,847 (US$ 1,886 at December 31, 2001).
The following is a schedule by year of the future minimum lease payments at
March 31, 2002 and December 31, 2001:
March 31,
2002
----------
2002 287
2003 385
2004 368
2005 320
2006 266
Thereafter 1,117
----------
Estimated future lease payments 2,743
Less amount representing interest at 6.187% to 11.0% (573)
Less amount representing executory costs (14)
----------
Present value of minimum lease payments 2,156
Less current portion (291)
----------
Long-term portion 1,865
==========
F-25
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
12 Pension Plan
In May 2001, the Board of Directors of PETROBRAS approved the creation of a
mixed social security plan, for current and new employees, based on a
defined contribution formula for programmable benefits and a defined
benefit formula for risk benefits.
The new plan, PETROBRAS VIDA, was also approved by the Coordination and
Control Department of State Companies (DEST) and by the Supplementary
Social Security Secretariat (SPC) in October 2001, and was ratified by
PETROBRAS' Board of Directors.
The migration process of participants in the current plan to PETROBRAS VIDA
is currently temporarily suspended as a result of a judicial ruling by the
Regional Federal Court of the 1st Region handed down on January 10, 2002.
Therefore the impact of migration to the new plan will only be computed and
recognized in the accounts in accordance with the requirements of SFAS 88 -
" Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits", when the issues being
litigated have been resolved and the migration process finalized.
The determination of the expense and liability relating to the PETROBRAS
pension plan involves the use of actuarial assumptions. These include
estimates of future mortality, withdrawal, changes in compensation and
discount rate to reflect the time value of money as well as the rate of
return on plan assets. These assumptions are reviewed at least annually and
may differ materially from actual results due to changing market and
economic conditions, regulatory events, judicial rulings, higher or lower
withdrawal rates or longer or shorter life, spans of participants.
PETROBRAS and its actuarial consultants are currently reviewing the basis
for estimating the assumed discount rate in light of the recent development
of a secondary bond market in Brazil for high-grade long-term government
securities. In the event the rate of return offered by these securities is
deemed to be consistent with the requirements of SFAS No. 87, and
subsequent interpretations, for measurement of defined benefit obligations,
PETROBRAS may adopt different assumptions in the future, which may have a
significant impact on the amount of pension liability and expense.
F-26
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
13 Stockholders' equity
The Company's subscribed and fully paid-in capital at March 31, 2002 and
December 31, 2001 consisted of 634,168,418 common shares and 451,935,669
preferred shares.
At the Extraordinary Stockholders' Meeting, held jointly with the
Stockholders' General Meeting on March 22, 2002, the increase of the
Company's capital stock from US$ 4,834 to US$ 6,220 was ratified. This was
done by partial capitalization of the Undistributed Earnings Reserve,
without issuing new shares.
The stockholders also approved amendments to the Company's Bylaws, for the
purpose of adjusting them to the modifications introduced by Law No 10303,
dated October 31, 2001, in addition to introducing changes aimed at
improving corporate governance practices and bringing them into line with
the requirements of Level 2, created by the Sao Paulo Stock Exchange -
BOVESPA. The principal changes introduced by the amended Bylaws include a
requirement that preferred shares have priority in the case of
reimbursement of capital and the receipt of dividends, to a minimum of 3%
(three percent) of the book value of the stock, or 5% (five percent)
calculated on the portion of capital corresponding to this type of share, a
criterion that had been established previously, the higher value
prevailing, and participating on an equal basis with common shares in
capital increases resulting from the capitalization of reserves and income.
On February 27, 2002, PETROBRAS made available to tax-exempt shareholders
the supplementary dividend for the 1998, 1999 and 2000 financial years, in
the amount of US$ 123 million, identical to the amount added to the
dividend on account of compensation for withholding tax on the payment of
interest on equity allocated to taxpaying shareholders in those financial
years, as a result of interpretation of CVM Ruling No. 207/96, which
establishes that interest paid or credited may only be allocated to the
minimum compulsory dividend at the amount net of withholding tax.
The dividends for the 2001 financial year approved at the Stockholders'
General Meeting held on March 22, 2002, in the amount of US$ 989 million
(net of the interim dividend distributed on August 22, 2001) were made
available to shareholders on May 3, 2002, duly restated according to the
variation in the SELIC rate (from January 1 through May 3, 2002).
F-27
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
14 Basic and Diluted Earnings per Share
Basic and diluted earnings per share amounts have been calculated as
follows:
Three-month period
ended March 31,
-----------------------------------
2002 2001
----------------- -----------------
Net income for the period 613 1,221
Less priority preferred share dividends (117) (125)
Less common shares dividends, up to the priority preferred
shares dividends on a per-share basis (164) (176)
----------------- -----------------
Remaining net income to be equally allocated to
common and preferred shares 332 920
================= =================
Weighted average number of shares outstanding
Common/ADS 634,168,418 634,168,418
Preferred/ADS 451,935,669 451,935,669
================= =================
Basic and diluted earnings per share
Common and Preferred 0.56 1.12
F-28
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
15 Segment Information
The following presents the Company's assets by segment. Prior year segment
information has been restated to the extent possible as noted below.
Three-month period ended March 31, 2002
---------------------------------------------------------------------------------------------
Exploration International
and Gas and (see separate
Production Supply Energy disclosure) Distribution Corporate Eliminations Total
------------ -------- -------- -------------- ------------- ---------- ------------- -------
Current assets 1,702 4,524 645 562 983 6,256 (910) 13,762
------------ ------- ------- -------------- ------------- --------- ------------- -------
Cash and cash equivalents 577 102 135 23 5,608 6,445
Other current assets 1,702 3,947 543 427 960 648 (910) 7,317
Investments in non-consolidated
companies and other investments 2 295 58 17 20 102 3 497
------------ ------- ------- -------------- ------------- --------- ------------- -------
Property, plant and equipment,
net 12,704 4,164 1,471 996 331 260 (2) 19,924
------------ ------- ------- -------------- ------------- --------- ------------- -------
Non current assets 339 256 646 85 178 1,910 (478) 2,936
------------ ------- ------- -------------- ------------- --------- ------------- -------
Petroleum and Alcohol Account 70 70
Government securities 2 210 212
Other assets 339 254 646 85 178 1,630 (478) 2,654
------------ ------- ------- -------------- ------------- --------- ------------- -------
Total assets 14,747 9,239 2,820 1,660 1,512 8,528 (1,387) 37,119
============ ======= ======= ============== ============= ========= ============= =======
F-29
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
Three-month period ended March 31, 2002
----------------------------------------------------------------------------
International
----------------------------------------------------------------------------
Exploration
and Gas and
Production Supply Energy Distribution Corporate Eliminations Total
----------- ------ ------- ------------ --------- ------------- -----
Current assets 212 140 31 90 157 (68) 562
----------- ------ ------- ------------ --------- ------------- -----
Cash and cash equivalents 53 14 1 16 51 135
Other current assets 159 126 30 74 106 (68) 427
Investments in affiliated companies and other
investments 11 4 2 17
----------- ------ ------- ------------ --------- ------------- -----
Property, plant and equipment, net 787 152 4 51 2 996
----------- ------ ------- ------------ --------- ------------- -----
Non current assets 12 4 15 6 48 85
----------- ------ ------- ------------ --------- ------------- -----
Petroleum and Alcohol Account
Government securities held-to-maturity
Other assets 12 4 15 6 48 85
----------- ------ ------- ------------ --------- ------------- -----
Total assets 1,022 296 54 149 207 (68) 1,660
=========== ====== ======= ============ ========= ============= =====
F-30
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specificially indicated)
The following presents the Company's assets by segment. Prior year segment
information has been restated to the extent possible as noted below.
Year Ended December 31, 2001
-------------------------------------------------------------------------------------------
Exploration International
and Gas and (see separate
production Supply energy disclosure) Distribution Corporate Eliminations Total
----------- ------ ------ -------------- ------------ --------- ------------ ------
Current assets 1,529 4,125 604 566 1,002 7,425 (925) 14,326
----------- ------ ------ -------------- ------------ --------- ------------ ------
Cash and cash equivalents 553 60 145 30 6,572 7,360
Other current assets 1,529 3,572 544 421 972 853 (925) 6,966
Investments in non-consolidated
companies and other investments 5 281 52 36 22 103 499
----------- ------ ------ -------------- ------------ --------- ------------ ------
Property, plant and equipment, net 12,133 4,026 1,373 1,080 309 258 19,179
----------- ------ ------ -------------- ------------ --------- ------------ ------
Non current assets 325 250 637 33 192 2,099 (676) 2,860
----------- ------ ------ -------------- ------------ --------- ------------ ------
Petroleum and Alcohol Account 81 81
Government securities 3 209 212
Other assets 325 247 637 33 192 1,809 (676) 2,567
----------- ------ ------ -------------- ------------ --------- ------------ ------
Total assets 13,992 8,682 2,666 1,715 1,525 9,885 (1,601) 36,864
=========== ====== ====== ============== ============ ========= ============ ======
F-31
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specificially indicated)
Year ended December 31, 2001
------------------------------------------------------------------------------------------
International
------------------------------------------------------------------------------------------
Exploration
and Gas and
Production Supply Energy Distribution Corporate Eliminations Total
----------- -------- ---------- --------------- ----------- --------------- ---------
Current assets 215 170 6 124 84 (33) 566
----------- -------- ---------- --------------- ----------- --------------- ---------
Cash and cash equivalents 72 30 11 32 145
Other current assets 143 140 6 113 52 (33) 421
Investments in non-consolidated companies
and other investments 5 25 3 3 36
----------- -------- ---------- --------------- ----------- --------------- ---------
Property, plant and equipment, net 766 217 3 93 1 1,080
----------- -------- ---------- --------------- ----------- --------------- ---------
Non current assets 11 11 1 8 2 33
----------- -------- ---------- --------------- ----------- --------------- ---------
Petroleum and Alcohol Account
Government securities
Other assets 11 11 1 8 2 33
----------- -------- ---------- --------------- ----------- --------------- ---------
Total assets 997 423 13 228 87 (33) 1,715
=========== ======== ========== =============== =========== =============== =========
F-32
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
--------------------------------------------------------------------------------
Exploration International
and Gas and (see separate
production Supply energy disclosure) Distribution
------------ ----------- ---------- -------------- ---------------
Net operating revenues to third parties 132 2,639 172 237 1,549
Intersegment net operating revenues 2,290 1,268 45 20 30
------------ ----------- ---------- -------------- ---------------
Net operating revenues 2,422 3,907 217 257 1,579
Cost of sales (942) (3,283) (150) (196) (1,438)
Depreciation, depletion and amortization (269) (79) (15) (29) (8)
Exploration, including exploratory
dry holes and impairment (97) (2)
Selling, general and administrative
expenses (21) (193) (13) (23) (100)
Research and development expenses (17) (11) (1)
------------ ----------- ---------- -------------- ---------------
Costs and expenses (1,346) (3,566) (179) (250) (1,546)
Results of non-consolidated companies (4) (72)
Debt expenses, net (93) 24 (19) 11 3
Employee benefit expense (1)
Other expenses, net (43) (13) (65) 22 (5)
------------ ----------- ---------- -------------- ---------------
Income before income taxes and
minority interest 940 348 (46) (32) 31
Income tax benefits (expense) (323) (123) 19 (16) (10)
Minority interest (3) (7) 1 (6)
------------ ----------- ---------- -------------- ---------------
Net income (loss) 617 222 (34) (47) 15
============ =========== ========== ============== ===============
Three-month period ended March 31, 2002
-----------------------------------------
Corporate Eliminations Total
---------- ------------ -----------
Net operating revenues to third parties 4,729
Intersegment net operating revenues (3,653)
---------- ----------- -----------
Net operating revenues 3,653) 4,729
Cost of sales 3,533 (2,476)
Depreciation, depletion and amortization (2) (402)
Exploration, including exploratory
dry holes and impairment (99)
Selling, general and administrative
expenses (103) (453)
Research and development expenses (9) (38)
---------- ----------- -----------
Costs and expenses (114) 3,533 (3,468)
Results of non-consolidated companies (76)
Debt expenses, net 194 120
Employee benefit expense (151) (151)
Other expenses, net (43) 14 (133)
Income before income taxes and
minority interest (114) (106) 1,021
Income tax benefits (expense) 52 44 (357)
Minority interest (36) (51)
---------- ----------- -----------
Net income (loss) (98) (62) 613
========== =========== ===========
F-33
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specificially indicated)
Revenues and net income by segment are presented as follows:
Three-month period ended March 31, 2002
-------------------------------------------------------------------------------------------
International
-------------------------------------------------------------------------------------------
Exploration
and Gas and
Production Supply Energy Distribution Corporate Eliminations Total
----------- -------- ---------- --------------- ----------- --------------- ---------
Net operating revenues to third parties 23 119 1 94 237
Intersegment net operating revenues 42 108 (130) 20
------- -------- --------- ---------- ----------- ----------- --------
Net operating revenues 65 227 1 94 (130) 257
Cost of sales (18) (210) (1) (97) 130 (196)
Depreciation, depletion and
amortization (23) (4) (2) (29)
Exploration, including
exploratory dry holes (2) (2)
Selling, general and administrative
expenses (7) (2) (6) (8) (23)
Research and development expenses
------- -------- --------- ---------- ----------- ----------- --------
Costs and expenses (50) (216) (1) (105) (8) 130 (250)
Results of affiliated companies (72) (72)
Debt expenses, net 10 (6) 7 11
Employee benefit expense
Other expenses, net 2 (1) 21 22
------- -------- --------- ---------- ----------- ----------- --------
Income before income taxes and
minority interest 27 5 (12) (52) (32)
Income tax benefits (expense) (8) (2) 4 (10) (16)
Minority interest (1) 1 1 1
------- -------- --------- ---------- ----------- ----------- --------
Net income (loss) 18 4 (8) (61) (47)
======= ======== ========= ========== =========== =========== ========
F-34
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
----------------------------------------------------------------------
Exploration International
and Gas and (see separate
production Supply Energy disclosure)
----------------- --------------- -------------- --------------
Net operating revenues to third parties 11 4,400 154 213
Intersegment net operating revenues 2,867 1,383 38
----------------- --------------- -------------- --------------
Net operating revenues 2,878 5,783 192 213
Cost of sales (1,184) (4,708) (126) (123)
Depreciation, depletion and amortization (473) (115) (17) (24)
Exploration, including exploratory
dry holes and impairment (60) (5)
Selling, general and administrative
expenses (24) (174) (20) (12)
Research and development expenses (12) (9)
----------------- ---------------- -------------- --------------
Costs and expenses (1,753) (5,006) (163) (164)
Results of non-consolidated companies 3
Debt expenses, net (179) (113) (147) 1
Employee benefit expense
Other expenses, net (206) (2) (6) (8)
----------------- ---------------- -------------- --------------
Income before income taxes and
minority interest 740 665 (124) 42
Income tax benefits (expense) (165) (227) (6) (24)
Minority interest 70
----------------- ---------------- -------------- --------------
Net income (loss) 575 438 (60) 18
================= ================ ============== ==============
Three-month period ended March 31, 2001
----------------------------------------------------------------
Distribution Corporate Eliminations Total
---------------- ------------- -------------- -----------
Net operating revenues to third parties 1,776 6,554
Intersegment net operating revenues 18 (4,306)
---------------- ------------- -------------- -----------
Net operating revenues 1,794 (4,306) 6,554
Cost of sales (1,643) 4,626 (3,158)
Depreciation, depletion and amortization (8) (11) (648)
Exploration, including exploratory
dry holes and impairment (65)
Selling, general and administrative
expenses (92) (111) (433)
Research and development expenses (10) (31)
---------------- ------------- -------------- -----------
Costs and expenses (1,743) (132) 4,626 (4,335)
Results of non-consolidated companies (2) 1
Debt expenses, net 1 144 (13) (306)
Employee benefit expense (93) (93)
Other expenses, net (18) (48) (288)
---------------- ------------- -------------- -----------
Income before income taxes and
minority interest 32 (129) 307 1,533
Income tax benefits (expense) (10) 144 (88) (376)
Minority interest (6) (64)
---------------- ------------- -------------- -----------
Net income (loss) 16 15 219 1,221
================ ============= ============== ===========
F-35
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
Three-month period ended March 31, 2001
----------------------------------------------
International
----------------------------------------------
Exploration
and Gas and
Production Supply Energy Distribution Corporate Eliminations Total
------------- ---------- --------- ------------ ----------- --------------- ------------
Net operating revenues to third parties 62 151 213
Intersegment net operating revenues 44 (44) -
------------- ---------- --------- ------------ ----------- --------------- ------------
106 151 (44) 213
Net operating revenues
Cost of sales (22) (145) 44 (123)
Depreciation, depletion and
amortization (23) (1) (24)
Exploration, including
exploratory dry holes (5) (5)
Selling, general and administrative
expenses (9) (1) (2) (12)
Research and development expenses
------------- ---------- --------- ------------ ----------- --------------- ------------
Costs and expenses (59) (147) (2) 44 (164)
Results of affiliated companies
Debt expenses, net 1 1
Employee benefit expense
Other expenses, net 2 (2) (8) (8)
------------- ---------- --------- ------------ ----------- --------------- ------------
Income before income taxes and
minority interest 50 2 (10) 42
Income tax benefits (expense) (24) (24)
Minority interest ------------- ---------- --------- ------------ ----------- --------------- ------------
Net income (loss) 26 2 (10) 18
============= ========== ========= ============ =========== =============== ============
F-36
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
Capital expenditures by segment were as follows:
Capital expenditures as March 31,
---------------------------------
2002 2001
------------- ---------------
Exploration and production 711 748
Supply 165 92
Gas and energy 81 27
International
Exploration and production 63 36
Supply 2 1
Gas and energy 1
Distribution 29 17
Corporate 48 37
------------- ---------------
1,100 958
============= ===============
16 Commitments and Contingencies
PETROBRAS is subject to a number of commitments and contingencies arising
in the normal course of its business. Additionally, the operations and
earnings of the Company have been, and may be in the future, affected from
time to time in varying degrees by political developments and laws and
regulations, such as the Federal Government's continuing role as the
controlling shareholder of the Company, the status of the Brazilian
economy, the continued deregulation of the Brazilian petroleum industry,
forced divestiture of assets, imports and exports, price controls, tax
increases and retroactive tax claims, and environmental regulations. Both
the likelihood of such occurrences and their overall effect upon the
Company are not predictable.
F-37
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
(a) Litigation
The Company is a defendant in numerous legal actions arising in the normal
course of its business. Based on the advice of its internal legal counsel
and management's best judgment, the Company has recorded accruals in
amounts sufficient to provide for losses that are considered probable and
reasonably estimable. The following presents these accruals by the nature
of the claim:
March 31, December 31,
2002 2001
--------------- -------------------
Labor claims 8 9
Tax claims 8 10
Civil claims 70 81
--------------- -------------------
86 100
=============== ===================
On May 28, 1981, Kallium Mineracao S.A. brought an action against
Petromisa, a former subsidiary of PETROBRAS, in the federal court of the
State of Rio de Janeiro seeking approximately US$ 450 in alleged damages
and lost profits relating to Petromisa's rescission of a contract to
develop a potassium salt mine. The plaintiff's claims are based on its
alleged investment in the development of the project and related loss of
expected profits. PETROBRAS has been brought into the lawsuit because of
its relationship with Petromisa. However, Petromisa was statutorily
dissolved by the Federal Government as part of a privatization program and,
under Brazilian law, all of its obligations should have been transferred to
the Federal Government. Therefore, PETROBRAS maintains that any indemnity
payable by the dissolved subsidiary should be borne by the Federal
Government, rather than by PETROBRAS. Accordingly, the Federal Government
has been brought into the lawsuit as a party to the litigation. On August
10, 1999, the trial judge dismissed most of the plaintiff's claims, and
ordered PETROBRAS to indemnify the plaintiff only with respect to its
preliminary research expenses. Once the amount of the award is determined,
an additional amount equal to ten percent (10%) of the award in respect of
attorney's fees will be added. There has been no condemnation as to the
lost profits, as requested by the
F-38
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
plaintiff. The total amount eventually payable would be adjusted for
inflation and would bear interest at a per annum rate of 6%, which would be
applied from the date of the commencement of the action. In September 1999,
both parties to the lawsuit appealed to the federal appeals court in the
State of Rio de Janeiro. Both appeals are still pending. Based upon the
opinion of its internal legal counsel, management does not consider the
risk of loss to be probable and, accordingly, has not recorded an accrual
for this contingency.
On August 8, 1993, Industria Bahiana de Adubos, Importacao e Exportacao
Ltda. filed a lawsuit against the Company in the state court of Bahia
claiming approximately US$ 129 in damages. The claim is based upon
PETROBRAS' refusal to sell fertilizers to the plaintiff due to the
plaintiff's payment default under prior contracts with PETROBRAS. The
plaintiff claims that such a refusal harmed its financial condition and,
ultimately, caused its bankruptcy. On December 9, 1993, the trial court
decided in favor of the plaintiff. However, the Company appealed and the
decision was reversed by the State Court of Appeals. Subsequently, the
plaintiff filed a request for clarification (embargos de declaracao) with
the court; however, on September 26, 1998, the court upheld its decision.
On August 31, 1999, the plaintiff appealed (recurso especial) to the
Brazilian Superior Court of Justice (Superior Tribunal de Justica). Based
on the willingness of the Brazilian Superior Court of Justice to hear the
plaintiff's appeal, management considers the risk of loss with respect to
this lawsuit to be reasonably possible. However as of March 31, 2002,
management has not recorded an accrual based on the lack of available
information through this date.
PETROBRAS was sued by several oil product distributors alleging that
PETROBRAS does not pass on to state governments the Value-added Tax on
Sales and Services (ICMS) retained by PETROBRAS for interstate sales of
naphtha. The Company believes these amounts represent valid state value
added tax credits, which the Company may claim when paying state
value-added tax charged on certain intrastate transactions. These suits
were filed in the states of Goias, Tocantins, Bahia, Para, Maranhao and in
the Federal District.
At March 31,2002 and December 31, 2001, in accordance with Brazilian law,
the Company had paid US$ 353 and US$ 337 into federal depositories to
provide collateral for these and other claims until they are settled. These
amounts are reflected in the balance sheet as restricted deposits for legal
proceedings and guarantees.
F-39
Petroleo Brasileiro S.A. - PETROBRAS
and Subsidiaries
Notes to Consolidated Financial Information
Expressed in Millions of United States Dollars
(except when specifically indicated)
(b) Environmental matters
The Company is subject to various environmental laws and regulations. These
laws regulate the discharge of oil, gas or other materials into the
environment and may require the Company to remove or mitigate the
environmental effects of the disposal or release of such materials at
various sites.
On February 21, 2002, a Brazilian court published a ruling in favor of the
Rio de Janeiro State Federation of Fishermen in their lawsuit against the
Company stemming from the oil spill that occurred on January 18, 2000 in
the Guanabara Bay. The Federation of Fishermen initially requested damages
for a variety of claims, including consequential damages and the infliction
of emotional distress, in the amount of approximately US$ 224. The judge,
however, refused to award the amount claimed and specified that proof of
actual damages must be provided to the court. Proof of actual damages
inflicted on the fishermen is pending, however, the Company believes that
the amounts ultimately paid by the Company will be immaterial.
* * *
F-40
SIGNATURES
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.
Petroleo Brasileiro S.A. - PETROBRAS
(Registrant)
Date: July 1, 2002 By: /s/ Luciana Bastos de Freitas Rachid
----------------------------------------------
Name: Luciana Bastos de Freitas Rachid
Title: Executive Manager of Investor Relations