Petrobras (PBR)

EBITDA COMPONENTS

4

The increase in consolidated operating income for the 1Q-2006 was primarily a result of the increase in prices and volumes sold in the domestic and international markets, the increase in production of oil and NGL’s in Brazil (14%), and the production and higher quality of oil products. These factors, as well as others, are detailed below:

• Gross profit increased R$ 2,855 million:

5

EBITDA COMPONENTS

4

• Gross profit increased R$ 13,438 million:

• Increase in Selling Expenses (R$ 725 million) related to the greater volumes sold and the increase in freight costs resulting from the increased exports.
  
  
• Increase in the General and Administrative Expenses (R$ 1,287 million), due to higher personnel, network maintenance and software licensing fees.
  
  
• Increase in expenses for healthcare and retirement plans, due to changes stemming from the proceedings set forth in the actuarial review of Dec/2004 (R$ 690 million).
  
  
• Increase in drilling and exploration expenses (R$ 540 million) due to an increase in the geological and geophysical activities, the capping of dry and/or non-commercial wells and the effect of provisioning for abandonment of the area.
  
  
• Increase in research and development expenses (R$ 239 million) related to greater research activities and seismic data exploration contracts.
  
  
• Increase in other operating expenses (R$ 403 million), due mainly to institutional relations and cultural sponsorships (R$ 221 million) and Net Losses in the Gas and Energy Business Segment.
  
  
• Decrease in tax expenses (R$ 360 million), due to a change in tax laws in August/2004 (Decreto nº 5.164/04) that eliminated the PIS/PASEP and COFINS tax applicable to financial income.

5

• Positive effect from the net financial result of R$ 478 million, which was a result of the following: 
  
  
  • A decrease in net financial expenses of R$ 691 million, as a result of the reduction in expenses from loans and financings caused by the 12% appreciation in the Brazilian real against the U.S. dollar during the year, and in spite of the increased Libor rate incurred on some of these loans and financings.
    
    
  • Negative exchange rate and monetary variation (R$ 213 million), caused by a reduction in the exchange variations (R$ 419 million), as a result of the appreciation of the Brazilian real against the U.S. dollar during the year (12%) compared to the appreciation in the previous year (8%), combined with that fact that the parent company has shifted from net debtor to net creditor with its its subsidiaries and other controlled companies.
    
    
• Increase in the provisioning for income tax and social contribution over net income in the amount of R$ 3,898 million, due to the increase in income before tax and despite having taken advantage of a higher fiscal benefit resulting from the provisioning for interest on own capital in 2005 (R$ 5,483 million, which was higher than the R$ 4,386 million taken in 2004).
  

6

PETROBRAS SYSTEM	Operating Performance

EBITDA COMPONENTS

4

• Gross profit increased R$ 13,438 million:

• Increase in Selling Expenses (R$ 725 million) related to the greater volumes sold and the increase in freight costs resulting from the increased exports.
  
  
• Increase in the General and Administrative Expenses (R$ 1,287 million), due to higher personnel, network maintenance and software licensing fees.
  
  
• Increase in expenses for healthcare and retirement plans, due to changes stemming from the proceedings set forth in the actuarial review of Dec/2004 (R$ 690 million).
  
  
• Increase in drilling and exploration expenses (R$ 561 million) due to an increase in the geological and geophysical activities, the capping of dry and/or non-commercial wells and the effect of provisioning for abandonment of the area.
  
  
• Increase in research and development expenses (R$ 239 million) related to greater research activities and seismic data exploration contracts.
  
  
• Increase in other operating expenses (R$ 403 million), due mainly to institutional relations and cultural sponsorships (R$ 221 million) and Net Losses in the Gas and Energy Business Segment.
  
  
• Decrease in tax expenses (R$ 360 million), due to a change in tax laws in August/2004 (Decreto nº 5.164/04) that eliminated the PIS/PASEP and COFINS tax applicable to financial income.

5

• Positive effect from the net financial result of R$ 478 million, which was a result of the following: 
  
  
  • A decrease in net financial expenses of R$ 691 million, as a result of the reduction in expenses from loans and financings caused by the 12% appreciation in the Brazilian real against the U.S. dollar during the year, and in spite of the increased Libor rate incurred on some of these loans and financings.
    
    
  • Negative exchange rate and monetary variation (R$ 213 million), caused by a reduction in the exchange variations (R$ 419 million), as a result of the appreciation of the Brazilian real against the U.S. dollar during the year (12%) compared to the appreciation in the previous year (8%), combined with that fact that the parent company has shifted from net debtor to net creditor with its its subsidiaries and other controlled companies.
    
    
• Increase in the provisioning for income tax and social contribution over net income in the amount of R$ 3,898 million, due to the increase in income before tax and despite having taken advantage of a higher fiscal benefit resulting from the provisioning for interest on own capital in 2005 (R$ 5,483 million, which was higher than the R$ 4,386 million taken in 2004).
  

6

PETROBRAS SYSTEM	Operating Performance

EBITDA COMPONENTS

4

EBITDA COMPONENTS

91

EBITDA COMPONENTS

3

EBITDA COMPONENTS