Petrobras (PBR)

The behavior of the main components of consolidated net income, in relation to the first nine months of 2007, was as follows:

• A R$ 9,477 million increase in gross profit:

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PETROBRAS SYSTEM	Financial Performance

• A R$ 518 million increase in operating expenses, notably: 

• Selling expenses (R$ 677 million) due to higher sales volume and freight costs (R$ 324 million), the increase in provisions for doubtful debts (R$ 74 million) and expenses related to logistics and maintenance services (R$ 63 million); 

• Exploration costs (R$ 671 million), from the write-off of dry and economically unviable wells (R$ 823 million), offset by the reduction in seismic costs (R$ 253 million); 

• General and administrative expenses (R$ 569 million), due to the rise in personnel costs as a result of the increase in the workforce and pay rises both in Brazil and abroad (R$ 363 million), as well as third-party consulting, auditing and data processing services in Brazil (R$ 190 million). 

• Other operating expenses (R$ 41 million) as a result of non-recurring expenses with the Petros Plan (R$ 1,050 million) in 2007 despite the booking of provisions for contingencies, pay rises and benefits as part of the collecting bargaining agreements, as well as contractual fines related to natural gas supply and the adjustment to market value of foreign subsidiaries’ oil product inventories (R$ 803 million). 

• More than offsetting the reduction in the following expenses: 

• Tax expenses (R$ 505 million), due to the elimination of the CPMF financial transaction tax as of January/08, offset by the increase in the IOF financial operations tax rate in the same month; 

• Health and Pension Plan (R$ 984 million) due to the commitments assumed with the Reciprocal Obligation Agreement (R$ 697 million) in 2007; 

• Reversal of the financial result (R$ 3,802 million) due to FX gains on financial investments abroad and on the use of funds held by International subsidiaries to acquire E&P equipment for use in Brazil and in commercial activities. 

• An increase in the non-operating result (R$ 460 million), due to gains from changes in capital structure on controlled companies (R$ 409 million). 

• Increase in income tax and social contributions (R$ 5,254 million), considering that in 2007 the Company benefited from provisions for interest on own capital (R$ 1,492 million). 

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PETROBRAS SYSTEM	Financial Performance

The behavior of the main components of consolidated net income, in relation to the first nine months of 2007, was as follows:

• A R$ 9,477 million increase in gross profit: