This excerpt taken from the PBR 6-K filed Mar 7, 2008.
(Rio de Janeiro March 03, 2008) PETRÓLEO BRASILEIRO S.A. Petrobras announces today its consolidated results expressed in millions of Brazilian Reais, in accordance with generally accepted accounting practices in Brazil (BR GAAP).
The Companys market value increased by 87% in 2007, generating total returns of 131.4% for ADR-holders (PBR) and 83.9% for preferred shareholders whose shares are traded in Brazil, outperforming the Ibovespa by 37 percentage point. The discovery of excellent oil and gas finds in new exploratory frontiers (pre-salt layers) in the Espírito Santo and Santos Basins, coupled with potential production growth due to the start-up of five major platforms in 2007, plus three more scheduled for 2008, have underlined Petrobras position as an outstanding company in its sector.
Operating cash flow, as measured by EBITDA, remained flat versus 2006. Oil production and the average sales price for products sold in Brazil remained stable when calculated in Reais. Increases in operating costs and expenses (including higher costs for imported products and crude oil), combined with the costs of amending the employee pension plan and expanding the workforce to accommodate the Companys growth plans, were offset by the lower incidence of the Special Participation tax and improved distribution and trading margins.
EBITDA in the 4Q07 fell by 8% over the previous quarter due primarily to the increase in international exploration costs (dry holes and seismic acquisition expense), increasing general and administrative expenses, and international losses arising from regulatory changes in Ecuador.
Consolidated net income in 2007 was 17% less than in 2006, primarily due to monetary exchange corrections caused by the strong appreciation of the Real which requires adjustments to foreign dollar-denominated assets of Petrobras when translated into Reais, as well as the costs of agreeing with employees to alter the Companys pension plan.
Consolidated net income in the final quarter fell by 9% over the 3Q-2007, corresponding to the reduction in the operating result (EBITDA).
Average oil and gas production remained very close to 2006 levels, since four of the five new production projects installed in 2007 only commenced operations in the final quarter. In December, however, the Company set a record for a days oil output in Brazil of 2,000,238 barrels. The projects that began operating at the end of 2007 are expected to contribute to a major growth of production during 2008.
The Reserve Replacement Ratio (RRR) stood at 98.4% according to SPE criteria and 131.1% according to SEC methodology (reserves/production ratio of 18.9 and 14.8 years, respectively). In Brazil, the RRR stood at 123.6% and 134.6%, respectively, according to the SPE and SEC criteria. These proven reserves do not include the recently announced oil and gas discoveries in the pre-salt layer.
The Petrobras Systems investments in 2007 were the highest in its history and were allocated as follows:
Oil product output increased 8% over 2006, reaching 90% of installed capacity in Brazil and 85% abroad, mainly due to the acquisition of a refinery in the USA.
The Petrobras Systems added value remained flat over 2006.