Petrobras (PBR)

Page 114

• A R$ 2,267 million increase in operating expenses, notably:

√ Selling expenses (R$ 356 million), due to higher export and trading volumes, the inclusion of the activities of NSS (Japan refinery) and Alvo companies, and the 23.5% appreciation of the average dollar exchange rate (R$ 139 million);

√ General and administrative expenses (R$ 470 million), due to personnel expenses (R$ 187 million), as a result of the increase in the workforce, the 2008/09 collective bargaining agreement and salary-level advancements and promotions in 2008, partially offset by lower training and development costs. Further contributions came from the negative exchange variation effect (R$ 148 million) due to the 23.5% appreciation of average dollar exchange rate and higher third-party service costs (R$ 74 million), especially expenses related to data processing, partially offset by the reduction following the implementation of the cost optimization policy, of expenses related to travel, materials, ceremonies, gifts and general services. It is also worth noting expenses from the incorporation of new companies (R$ 47 million), especially in Chile and Japan, as well as Alvo;

√ Exploration costs (R$ 473 million) due to increased geological and geophysical costs in Brazil (R$ 414 million), in turn caused by the intensification of the Company’s investment program, and the write-off of dry or economically unviable wells (R$ 128 million), partially offset by the reduction in geological and geophysical costs abroad (R$ 109 million);

√ Other operating expenses (R$ 1,150 million), due to the recognition, in September/2009, of the special take from the Marlim field, pursuant to the agreement between Petrobras and the ANP (R$ 2,048 million) and losses from the depreciation of commodities (R$ 298 million). These effects were partially offset by the reduction in expenses from institutional relations, cultural projects and contractual and regulatory fines (R$ 555million) and provisions for shift-work-related regulations negotiated as part of the 2008/09 collective bargaining agreement (R$ 136 million), plus revenue from the tax benefit on income from the exploration of areas of interest to SUDAM and SUDENE, due to the inclusion of new beneficiary units.

√ A reduction in research and development expenses (R$ 148 million), due to lower provisions for the contracting of projects from ANP-accredited institutions (R$ 276 million), due to the reduction in oil prices, which affected the calculation base for establishing minimum R&D investments, partially offset by the increase in third-party services (R$ 195 million).

Page 114

Total second-quarter oil and gas production (Brazil and abroad) increased by 2% over the 1Q-2009 and by 6% year-on-year in the 1H-2009. Increased output from the P-52 and P-54 platforms (Roncador), coupled with the startup of P-53 (Marlim Leste) and P-51 (Marlim Sul), more than offset the natural decline of the mature fields.

First-half investments came to R$ 32,500 million, mostly allocated to expanding future oil and gas production capacity, the Company’s investment priority, which absorbed 45% of the total. In percentage growth terms, the leaders were the Supply, Gas and Energy, and International segments, where the respective main allocations were refinery investments in Brazil, gas pipeline network in Brazil and the distribution businesses in Chile.