Petrobras (PBR)

INTERNATIONAL: The International segment generated a first-half net loss of R$ 26 million, versus net income of R$ 491 million in the first half of 2006.

This reversal was primarily due to:

• The R$ 202 million decrease in gross profit due to the impact of the 11% appreciation of the Real against the US dollar on the financial statement currency conversion process;
  
  
• The R$ 294 million increase in exploration and drilling expenses (including seismic acquisition) in Turkey, Angola, Iran, the United States, Libya and Venezuela.
  
  
• The R$ 153 million increase in general and administrative expenses, due to increased operations by the foreign subsidiaries, corporate acquisitions and the constitution of new firms.

These effects were partially offset by nom operational results of R$ 95 million from the sale of the Bolivian refineries and the Hydroneuquen plant of PESA-Argentina.

In the second quarter of 2007, the International segment generated net income of R$ 235 million, versus a net loss of R$ 261 million in the first quarter of 2007.

This improvement was caused by:

i) The wider refinery and sales margins in the United States due to the higher sale prices;
ii) the improved result in Bolivia as a result of the new E&P contracts in effect as of May 2007 and capital gains from the sale of refineries; iii) greater E&P sales volume in the USA, caused by increased output from the Cottonwood field; iv) the R$ 283 million reduction in exploration expenses.