Petrobras (PBR)

Net income in the 1Q-2008 totaled R$ 6,925 million, 37% up on the R$ 5,053 million posted in the 4Q-2007 due to the factors listed below:

• R$ 790 million growth in gross profit:

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• A reduction in the following operating expenses:
  
  
• General and administrative expenses (R$ 265 million), due to reduced expenses from technical services and higher personnel expenses in the 4Q-2007 as a result of payments related to retroactive promotions as part of the 2007/08 collective bargaining agreement;
  
  
• Exploration costs (R$ 385 million), due to lower exploration expenses, both in Brazil (R$ 129 million) and abroad (R$ 461 million), offset by the December/07 recalculation of provisions for well abandonment (R$ 292 million);
  
  
• Losses from the recovery of assets (R$ 446 million), due to the provisions constituted abroad in the 4Q- 2007;
  
  
• Tax expenses (R$ 156 million), due to the elimination of the CPMF as of January/08 (R$ 179 million), partially offset by expenses from the IOF financial operation tax due to the increase in the rate in the same month (R$ 34 million).

• A positive impact of R$ 459 million on the net financial result due to monetary and exchange gains (R$ 454 million) caused by the lower appreciation of the Real in the 1Q-2008, coupled with a reduction in net financial and commercial hedge losses (R$ 287 million) and higher gains from financial investments (R$ 28 million);
  
  
• Interests in relevant investments (R$ 303 million), due to the constitution of provisions for losses from investments in Venezuela in the 4Q-2007 (R$ 119 million) and exchange gains from the conversion of foreign subsidiaries’ shareholders equity (R$ 128 million).
  
  
• Increase in income tax and social contributions (R$ 1.613 million), due to the tax benefits of interest on equity in the 4Q-2007 (R$ 671 million).

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PETROBRAS SYSTEM	Operating Performance