This excerpt taken from the PBR 20-F filed May 22, 2009.
Results of Operations2008 compared to 2007
Net (Loss) Income
PifCo had a loss of U.S.$772 million in 2008 compared to net income of U.S.$29 million in 2007.
Sales of Crude Oil and Oil Products and Services
PifCos sales of crude oil and oil products and services increased 58.8% to U.S.$42,443 million in 2008 compared to U.S.$26,732 million in 2007. This increase was primarily due to:
Cost of Sales
Cost of sales increased 60.5% to U.S.$42,231 million in 2008 compared to
U.S.$26,311 million in 2007. This increase was proportionally higher than the increase in sales of crude oil and oil products and services primarily due to the same reasons and also as a result of higher average inventory price formation in the last quarter of 2008, since oil and oil products were largely acquired prior to the decline in international oil prices.
Selling, General and Administrative Expenses
PifCos selling, general and administrative expenses consist primarily of shipping costs and fees for services, including accounting, legal and rating services. These expenses increased 90.8% to U.S.$562 million in 2008 compared to U.S.$294 million in 2007. This increase resulted primarily from increases in offshore sales and average freight rates in 2008, as a result of changes in international market trends and shipping routes in the amount of U.S.$452 million.
Other Operating Expenses
PifCo recognized a loss of US$577 million due to inventory impairment for the year ended December 31, 2008, as a result of the recent decline in the international oil prices.
PifCos financial income consists of the financing of sales to us, inter-company loans to us, investments in marketable securities and other financial instruments. PifCos financial income increased 12.3% to U.S.$2,325 million in 2008 compared to U.S.$2,070 million in 2007. This increase was primarily due to:
This increase was partially offset by a decrease in financial income from loans to related
parties, due to the transfer of U.S.$8,231 million in notes receivable to Braspetro Oil Services Company (Brasoil) as a consequence of the assumption by Brasoil of PifCos obligations under the notes payable to Petrobras in the same amount. See Note 5(v) to PifCos audited consolidated financial statements.
PifCos financial expense consists of interest paid and accrued on PifCos outstanding indebtedness, other fees associated with PifCos issuance of debt and other financial instruments. PifCos financial expense remained substantially stable, at U.S.$2,170 million in 2008 compared to U.S.$2,168 million in 2007.
There was an increase in derivative expenses related to exchange traded contracts as a result of increases in offshore sales and the average price of crude oil and oil products in the international market and an increase in interest expenses relating to recent issuances of notes, including the issuance of U.S.$1.0 billion in Global Notes in November 2007, and a reopening of those Global Notes in the amount of U.S.$750 million in January 2008.
These increases were offset by a decrease in interest expenses due to the assumption by Brasoil of PifCos obligations under notes payable to Petrobras in the amount of U.S.$8,231 million, as a consequence of the transfer of notes receivable to Brasoil in the same amount.