pbradf4q13usd_6ka.htm - Generated by SEC Publisher for SEC Filing  

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K/A

 

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the

Securities Exchange Act of 1934

 

For the month of March 2014

 

Commission File Number 1-15106

 

PETRÓLEO BRASILEIRO S.A. - PETROBRAS

(Exact name of registrant as specified in its charter)

 

Brazilian Petroleum Corporation - PETROBRAS

(Translation of Registrant's name into English)



 

Avenida República do Chile, 65 
20031-912 - Rio de Janeiro, RJ
Federative Republic of Brazil

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. 

Form 20-F ___X___ Form 40-F _______

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes _______ No___X____

.

 

 

 


 
 

REASON FOR AMENDMENT

 

The reason for this amendment is to include Management’s Report on Internal Control over Financial Reporting and the report of KPMG Auditores Independentes with our consolidated financial statements that were furnished to the SEC in a report on Form 6-K on February 26, 2014, and  to implement minor typographical corrections.


 
 

 

Management’s Report on Internal Control over Financial Reporting

 

Petróleo Brasileiro S.A. – Petrobras announces that its management is responsible for establishing and maintaining effective internal control over financial reporting and for its assessments of the effectiveness of internal control over financial reporting.

 

Our internal control over financial reporting is a process designed by, or under the supervision of our Audit Committee and our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with IFRS, as issued by the IASB.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis.  Therefore even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2013, based on the criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Based on such assessment and criteria, the Company’s management has concluded that Company’s internal control over financial reporting was effective as of December 31, 2013.

 

On May 14, 2013, COSO published an updated Internal Control - Integrated Framework (2013) and related illustrative documents. As of  December 31, 2013, the company is utilizing the original framework published in 1992. The transition period for adoption of the updated framework ends December 15, 2014. 

 

The effectiveness of our internal control over financial reporting as of December 31, 2013, has been audited by PricewaterhouseCoopers Auditores Independentes, an independent registered public accounting firm, as stated in their report dated February 25, 2014 included in our 2013 Audited Financial Statements.

  


 
 

 

 

Petróleo Brasileiro S.A. – Petrobras

 

Consolidated financial statements at

December 31, 2013, 2012 and 2011 with

report of independent registered
public accounting firm

 

 


 
 

Petróleo Brasileiro S.A. – Petrobras

Contents

 

 

 

Reports of Independent Registered Public Accounting Firm  3 
Consolidated Statement of Financial Position  5 
Consolidated Statement of Income  6 
Consolidated Statement of Comprehensive Income  7 
Consolidated Statement of Cash Flows  8 
Consolidated Statement of Changes in Shareholders’ Equity  9 
Notes to the financial statements  10 
1.  The Company and its operations  10 
2.  Basis of preparation  10 
3.  Summary of significant accounting policies  12 
4.  Critical accounting policies: key estimates and judgments  23 
5.  New standards and interpretations  26 
6.  Cash and cash equivalents  29 
7.  Marketable securities  29 
8.  Trade and other receivables  29 
9.  Inventories  30 
10.  Acquisitions, disposal of assets and legal mergers  31 
11.  Investments  36 
12.  Property, plant and equipment  39 
13.  Intangible assets  40 
14.  Impairment  42 
15.  Exploration for and evaluation of oil and gas reserves  44 
16.  Trade payables  45 
17.  Finance debt  46 
18.  Leases  49 
19.  Related parties  49 
20.  Provision for decommissioning costs  52 
21.  Taxes  52 
22.  Employee benefits (Post-Employment)  56 
23.  Profit sharing  63 
24.  Shareholders’ equity  63 
25.  Sales revenues  65 
26.  Other operating expenses, net  66 
27.  Expenses by nature  66 
28.  Net finance income (expense)  67 
29.  Supplemental information on statement of cash flows  67 
30.  Segment Information  68 
31.  Provisions for legal proceedings, contingent liabilities and contingent assets  73 
32.  Natural Gas Purchase Commitments  78 
33.  Collateral in connection with concession agreements for petroleum exploration  78 
34.  Risk management and derivative instruments  78 
35.  Fair value of financial assets and liabilities  86 
36.  Insurance  87 
37.  Subsequent events  88 
38.  Information Related to Guaranteed Securities Issued by Subsidiaries  89 
Supplementary information on Oil and Gas Exploration and Production (unaudited)  90 

 

 

 

  


 
 

 

Report of Independent Registered Public Accounting Firm

 

 

To the Board of Directors and Shareholders of

Petróleo Brasileiro S.A. - Petrobras

In our opinion, the accompanying consolidated statement of financial position and the related consolidated statements of income and comprehensive income, changes in equity and cash flows present fairly, in all material respects, the financial position of Petróleo Brasileiro S.A. - Petrobras and its subsidiaries (the “Company”) at December 31, 2013, and December 31, 2012, and the results of their operations and their cash flows for the years ended December 31, 2013, and December 31, 2012, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013 based on criteria established in Internal Control - Integrated Framework  (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

We also have audited the adjustments to the 2011 financial statements to retrospectively apply the change in accounting for employee benefit plans for the revisions to IAS 19 Employee Benefits as described in Note 2.3. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2011 consolidated financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2011 consolidated financial statements taken as a whole.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Rio de Janeiro, February 25, 2014

 

/s/ PricewaterhouseCoopers

Auditores Independentes

CRC 2SP000160/O-5 “F” RJ

 

 

/s/ Marcos Donizete Panassol

Contador CRC 1SP155975

 

3 


 
 

Report of Independent Registered Public Accounting Firm

 

The Board of Directors and Shareholders of

Petróleo Brasileiro S.A. – Petrobras

Rio de Janeiro - RJ

 

We have audited, before the effects of the adjustments to retrospectively apply the change in accounting described in Note 2.3, the accompanying consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows of Petróleo Brasileiro S.A. – Petrobras and subsidiaries for the year ended  December 31, 2011. The 2011 financial statements before the effects of the adjustments discussed in note 2.3 are not presented herein. The 2011 consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the 2011 financial statements, before the effects of the adjustments to retrospectively apply the change in accounting described in note 2.3, present fairly, in all material respects, the consolidated results of Petrobras and its subsidiaries’ operations and their cash flows for the year ended December 31, 2011, in conformity with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the change in accounting described in note 2.3 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by a successor auditor.

 

 

 

/s/ KPMG Auditores Independentes  

KPMG Auditores Independentes

Rio de Janeiro, Brazil

March 30, 2012

4


 
 

Petróleo Brasileiro S.A. – Petrobras

Consolidated Statement of Financial Position

December 31, 2013, 2012 and January 1, 2012 (In millions of US Dollars)

 

 

Assets

Note

12.31.2013

12.31.2012 (*)

01.01.2012 (*)

Liabilities

Note

12.31.2013

12.31.2012 (*)

01.01.2012 (*)

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

Current liabilities

 

 

 

 

Cash and cash equivalents

6

15,868

13,520

19,057

Trade payables

16

11,919

12,124

11,863

Marketable securities

7

3,885

10,431

8,961

Current debt

17

8,001

7,479

10,067

Trade and other receivables, net

8.1

9,670

11,099

11,756

Finance lease obligations

18.1

16

18

44

Inventories

9

14,225

14,552

15,165

Income taxes payable

21.1

281

345

263

Recoverable income taxes

21.1

1,060

1,462

2,018

Other taxes payable

21.2

4,669

5,783

5,584

Other recoverable taxes

21.2

3,911

4,110

4,830

Dividends payable

21.2

3,970

3,011

2,067

Advances to suppliers

 

683

927

740

Payroll, profit sharing and related charges

 

2,052

2,163

2,528

Other current assets

 

946

1,550

2,065

Pension and medical benefits

22

816

788

761

 

 

50,248

57,651

64,592

Others

 

2,429

2,359

3,187

 

 

 

 

 

 

 

34,153

34,070

36,364

Assets classified as held for sale

10.3

2,407

143

Liabilities on assets classified as held for sale

10.3

1,073

 

 

52,655

57,794

64,592

 

 

35,226

34,070

36,364

Non-current assets

 

 

 

 

Non-current liabilities

 

 

 

 

Long-term receivables

 

 

 

 

Non-current debt

17

106,235

88,484

72,718

Trade and other receivables, net

8.1

4,532

4,441

3,253

Finance lease obligations

18.1

73

86

98

Marketable securities

7

131

176

3,064

Deferred income taxes

21.3

9,906

11,976

12,558

Judicial deposits

31

2,504

2,696

2,080

Pension and medical benefits

22

11,757

19,436

15,057

Deferred income taxes

21.3

1,130

1,277

787

Provisions for legal proceedings

31

1,246

1,265

1,088

Other tax assets

21.2

5,380

5,223

4,912

Provision for decommissioning costs

20

7,133

9,441

4,712

Advances to suppliers

 

3,230

3,156

3,141

Others

 

724

772

1,231

Others

 

1,875

1,887

1,725

 

 

 

 

 

 

 

18,782

18,856

18,962

 

 

137,074

131,460

107,462

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

172,300

165,530

143,826

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

24

 

 

 

Investments

11.2

6,666

6,106

6,530

Share capital

 

107,371

107,362

107,355

Property, plant and equipment

12.1

227,901

204,901

182,918

Additional paid in capital

 

395

349

316

Intangible assets

13.1

15,419

39,739

43,412

Profit reserves

 

75,689

67,238

60,142

 

 

268,768

269,602

251,822

Accumulated other comprehensive income (loss)

 

(34,928)

(14,235)

3,503

 

 

 

 

 

Attributable to the shareholders of Petrobras

 

148,527

160,714

171,316

 

 

 

 

 

Non-controlling interests

 

596

1,152

1,272

 

 

 

 

 

Total Equity

 

149,123

161,866

172,588

Total Assets

 

321,423

327,396

316,414

Total liabilities and shareholder's equity

 

321,423

327,396

316,414

 

 

 

 

 

 

 

 

 

 

(*) Amounts restated, as set out in note 2.3.

The Notes form an integral part of these Financial Statements.

 

5 


 
 

Petróleo Brasileiro S.A. – Petrobras

Consolidated Statement of Income

December 31, 2013, 2012 and 2011 (In millions of US Dollars, unless otherwise indicated)

 

 

 

Note

2013

2012

2011

 

 

 

 

 

Sales revenues

25

141,462

144,103

145,915

Cost of sales

 

(108,254)

(107,534)

(99,595)

Gross profit

 

33,208

36,569

46,320

 

 

 

 

 

Income (expenses)

 

 

 

 

Selling expenses

 

(4,904)

(4,927)

(5,346)

General and Administrative expenses

 

(4,982)

(5,034)

(5,161)

Exploration costs

 

(2,959)

(3,994)

(2,630)

Research and development expenses

 

(1,132)

(1,143)

(1,454)

Other taxes

 

(780)

(386)

(460)

Other operating expenses, net

26

(2,237)

(4,185)

(3,984)

 

 

(16,994)

(19,669)

(19,035)

 

 

 

 

 

Net income before financial results, profit sharing and income taxes

 

16,214

16,900

27,285

 

 

 

 

 

Finance Income

 

1,815

3,659

3,943

Finance Expenses

 

(2,673)

(2,016)

(1,424)

Foreign exchange and inflation indexation charges

 

(1,933)

(3,569)

(2,443)

Net finance income (expense)

28

(2,791)

(1,926)

76

 

 

 

 

 

Share of profit / gains on interest in equity-accounted investments

 

507

43

230

 

 

 

 

 

Profit sharing

23

(520)

(524)

(867)

 

 

 

 

 

Net income before income taxes

 

13,410

14,493

26,724

 

 

 

 

 

Income taxes

21.4

(2,578)

(3,562)

(6,732)

 

 

 

 

 

Net income

 

10,832

10,931

19,992

 

 

 

 

 

Net income (loss) attributable to:

 

 

 

 

Shareholders of Petrobras

 

11,094

11,034

20,121

Non-controlling interests

 

(262)

(103)

(129)

 

 

10,832

10,931

19,992

 

 

 

 

 

Basic and diluted earnings per weighted-average of common and preferred share in U.S. dollars

24.6

0.85

0.85

1.54

 

 

 

 

 

The Notes form an integral part of these Financial Statements.

 

 

 

 

 

    

6 


 
 

Petróleo Brasileiro S.A. – Petrobras

Consolidated Statement of Comprehensive Income

December 31, 2013, 2012 and 2011 (In millions of US Dollars)

 

 

 

2013

2012 (*)

2011 (*)

 

 

 

 

Net income

10,832

10,931

19,992

 

 

 

 

Items that will not be reclassified to profit or loss:

 

 

 

Actuarial gains / (losses) on defined benefit pension plans

7,248

(4,693)

(1,807)

Deferred income tax

(2,153)

1,533

710

Cumulative translation adjustments

(20,397)

(14,049)

(21,859)

 

(15,302)

(17,209)

(22,956)

Items that may be reclassified subsequently to profit or loss:

 

 

 

Unrealized gains / (losses) on available-for-sale securities

 

 

 

Recognized in shareholders' equity

1

498

81

Reclassified to profit or loss

(43)

(714)

8

Deferred income tax

15

72

(30)

 

(27)

(144)

59

Unrealized gains / (losses) on cash flow hedge

 

 

 

Recognized in shareholders' equity

(6,265)

(3)

(33)

Reclassified to profit or loss

312

7

5

Deferred income tax

2,030

1

 

(3,923)

5

(28)

 

 

 

 

Share of other comprehensive income of equity-accounted investments

(236)

6

 

 

 

 

 

(4,186)

(139)

37

 

 

 

 

Other comprehensive income (loss):

(19,488)

(17,348)

(22,919)

 

 

 

 

Total Comprehensive income (loss)

(8,656)

(6,417)

(2,927)

Comprehensive income (loss) attributable to:

 

 

 

Shareholders of Petrobras

(8,263)

(6,136)

(2,773)

Non-controlling interests

(393)

(281)

(154)

Total comprehensive income (loss)

(8,656)

(6,417)

(2,927)

 

 

 

 

(*) Amounts restated, as set out in note 2.3.

The Notes form an integral part of these Financial Statements.

 

 

 

 

 

 

7 


 
 

Petróleo Brasileiro S.A. – Petrobras

Consolidated Statement of Cash Flows

December 31, 2013, 2012 and 2011 (In millions of US Dollars)

 

 

 

2013

2012

2011

Cash flows from Operating activities

 

 

 

Net income attributable to the shareholders of Petrobras

11,094

11,034

20,121

Adjustments for:

 

 

 

Non-controlling interests

(262)

(103)

(129)

Share of (profit) loss of equity-accounted investments

(507)

(43)

(230)

Depreciation, depletion and amortization

13,188

11,119

10,535

Impairment charges on property, plant and equipment and other assets

1,125

880

1,056

Exploration expenditures written off

1,892

2,847

1,480

(Gains) / losses on disposal / write-offs of non-current assets

(1,764)

2

527

Foreign exchange variation, indexation and finance charges

3,167

4,308

3,799

Deferred income taxes, net

402

1,266

3,599

Pension and medical benefits (actuarial expense)

2,566

2,091

1,730

Decrease / (Increase) in assets

 

 

 

Trade and other receivables, net

(1,142)

(1,522)

(2,326)

Inventories

(2,128)

(1,864)

(5,035)

Other assets

(212)

(1,990)

(2,537)

Increase/(Decrease) in liabilities

 

 

 

Trade payables

1,108

1,039

2,455

Taxes payable

(1,517)

(151)

(1,991)

Pension and medical benefits

(796)

(735)

(837)

Other liabilities

75

(290)

1,481

Net cash provided by operating activities

26,289

27,888

33,698

Cash flows from Investing activities

 

 

 

Capital expenditures

(45,110)

(40,802)

(41,377)

Investments in investees

(199)

(146)

(336)

Receipts from disposal of assets (divestment)

3,820

276

Investments in marketable securities

5,718

2,051

6,683

Dividends received

146

241

411

Net cash (used in) investing activities

(35,625)

(38,379)

(34,619)

Cash flows from Financing activities

 

 

 

Acquisition of Non-controlling interest

(70)

255

27

Proceeds from long-term financing

39,542

25,205

23,951

Repayment of principal

(18,455)

(11,347)

(8,750)

Repayment of interest

(5,066)

(4,772)

(4,574)

Dividends paid

(2,656)

(3,272)

(6,422)

Net cash provided by financing activities

13,295

6,069

4,232

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

(1,611)

(1,115)

(1,909)

 

 

 

 

Net increase/ (decrease) in cash and cash equivalents

2,348

(5,537)

1,402

 

 

 

 

Cash and cash equivalents at the beginning of the year

13,520

19,057

17,655

 

 

 

 

Cash and cash equivalents at the end of the year

15,868

13,520

19,057

 

 

 

 

The Notes form an integral part of these Financial Statements.

 

 

8 


 
 

Petróleo Brasileiro S.A. – Petrobras

Consolidated Statement of Changes in Shareholders’ Equity

December 31, 2013, 2012 and 2011 (In millions of US Dollars)

 

 

 

 

 

Additional paid in capital

Accumulated other comprehensive income

Profit Reserves

 

 

 

 

Share Capital

Incremental costs attributable to the issue of new shares

Change in interest in subsidiaries

Cumulative translation adjustment

Actuarial gains (losses) on defined benefit plans

Other comprehensive income and deemed cost

Legal

Statutory

Tax incentives

Profit retention

Retained earnings

Shareholders' equity attributable to shareholders

Non-

controlling

interests

Total

shareholders'

equity

Balance at January 1, 2011 (*)

107,341

(279)

286

30,130

(3,343)

215

5,806

571

698

39,342

(82)

180,685

1,839

182,524

Capital increase with reserves

14

 

 

 

 

 

 

 

(14)

 

 

 

Realization of deemed cost

 

 

 

 

 

(6)

 

 

 

 

6

 

Change in interest in subsidiaries

 

 

309

 

 

 

 

 

 

 

 

309

(292)

17

Net income

 

 

 

 

 

 

 

 

 

 

20,121

20,121

(129)

19,992

Other comprehensive income

 

 

 

(22,433)

(1,097)

37

 

 

 

 

599

(22,894)

(25)

(22,919)

Appropriations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation of net income

 

 

 

 

 

 

1,006

537

43

12,235

(13,821)

 

Dividends

 

 

 

 

 

 

 

 

 

 

(6,905)

(6,905)

(121)

(7,026)

Balance at December 31, 2011 (*)

107,355

(279)

595

7,697

(4,440)

246

6,812

1,108

727

51,577

(82)

171,315

1,272

172,588

Capital increase with reserves

7

 

 

 

 

 

 

 

(7)

 

 

 

Realization of deemed cost

 

 

 

 

 

(5)

 

 

 

 

5

 

Change in interest in subsidiaries

 

 

33

 

 

 

 

 

 

 

 

33

270

303

Net income

 

 

 

 

 

 

 

 

 

 

11,034

11,034

(103)

10,931

Other comprehensive income

 

 

 

(14,434)

(3,160)

(139)

 

 

 

 

563

(17,170)

(178)

(17,348)

Appropriations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation of net income

 

 

 

 

 

 

552

537

9

6,005

(7,103)

 

Dividends

 

 

 

 

 

 

 

 

 

 

(4,499)

(4,499)

(109)

(4,608)

Balance at December 31, 2012 (*)

107,362

(279)

628

(6,737)

(7,600)

102

7,364

1,645

729

57,582

(82)

160,713

1,152

161,866

Capital increase with reserves

9

 

 

 

 

 

 

 

(9)

 

 

Realization of deemed cost

 

 

 

 

 

(5)

 

 

 

 

5

 

Change in interest in subsidiaries

 

 

46

 

 

 

 

 

 

 

 

46

(102)

(56)

Net income

 

 

 

 

 

 

 

 

 

 

11,094

11,094

(262)

10,832

Other comprehensive income

 

 

 

(21,597)

5,095

(4,186)

 

 

 

 

1,331

(19,357)

(131)

(19,488)

Distributions:

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation of net income

 

 

 

 

 

 

555

537

9

7,277

(8,378)

 

Dividends

 

 

 

 

 

 

 

 

 

 

(3,970)

(3,970)

(61)

(4,031)

 

107,371

(279)

674

(28,334)

(2,505)

(4,089)

7,919

2,182

729

64,859

148,527

596

149,123

Balance at December 31, 2013

107,371

 

395

 

 

(34,928)

 

 

 

 

75,689

148,527

596

149,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(*) Amounts restated, as set out in note 2.3.

The Notes form an integral part of these Financial Statements.

 

 

9 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

December 31, 2013 and 2012 (Expressed in millions of US Dollars, unless otherwise indicated)

 

 

1.            The Company and its operations

Petróleo Brasileiro S.A. - Petrobras is dedicated, directly or through its subsidiaries  (referred to jointly as “Petrobras” or “the Company”) to prospecting, drilling, refining, processing, trading and transporting crude oil from producing onshore and offshore oil fields and from shale or other rocks, as well as oil products, natural gas and other liquid hydrocarbons. In addition, Petrobras carries out energy related activities, such as research, development, production, transport, distribution and trading of all forms of energy, as well as any other correlated or similar activities. The Company’s head office is located in Rio de Janeiro – RJ, Brazil.

2.            Basis of preparation

2.1.       Statement of compliance and authorization of financial statements

The consolidated financial information has been prepared and is being presented in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The information is presented in U.S. dollars.

The financial statements have been prepared under the historical cost convention, as modified by available-for-sale financial assets, financial assets and financial liabilities measured at fair value and certain current and non-current assets and liabilities, as detailed in the accounting policies set out below.

The annual consolidated financial information was approved and authorized for issue by the Company’s Board of Directors in a meeting held on February 25, 2014.

2.2.       Functional and presentation currency

The functional currency of Petrobras and all Brazilian subsidiaries is the Brazilian Real. The functional currency of most of the entities that operate outside Brazil is the U.S. dollar. The functional currency of Petrobras Argentina is the Argentine Peso.

Petrobras has selected the U.S. Dollar as its presentation currency. The financial statements have been translated into the presentation currency in accordance with IAS 21 - The effects of changes in foreign exchange rates. All assets and liabilities are translated into U.S. dollars at the closing rate at the date of the financial statements; income and expenses, as well as the cash flows are translated into U.S. dollars using the average exchange rates prevailing during the year. Equity items are translated using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. All exchange rate differences arising from the translation of the consolidated financial statements from the functional currency into the presentation currency are recognized as cumulative translation adjustments (CTA) within accumulated other comprehensive income in the consolidated statements of changes in shareholders’ equity.

The cumulative translation adjustments were set to nil at January 1, 2009 (the date of transition to IFRS).

2.3.       Prior period restatements

The Statements of Financial Position as of December 31, 2012 and January 1, 2012 have been restated for comparative purposes, including the following effects:

10 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

a)             Amendments to IAS 19 – “Employee benefits”

Effective for annual periods beginning on January 1, 2013, amendments to IAS 19 – “Employee benefits” eliminated the option to defer actuarial gains and losses (corridor approach) and requires net interest to be calculated by applying the discount rate used for measuring the obligation to the net benefit asset or liability.

The impact of such amendments, for the year ended December 31, 2012 is: an increase in the Company’s net actuarial liability of US$10,161 (US$6,179 at January 1, 2012), as well as a corresponding decrease in deferred tax liabilities of US$2,988 (US$1,657 at January 1, 2012) and a decrease of US$7,173 in the shareholders’ equity (US$4,522 at January 1, 2012).

b)             Offsetting deferred income taxes

Deferred income tax assets were offset against deferred income tax liabilities by the Company, considering the balance of deferred income taxes of each of the consolidated subsidiaries. The impact of such change for the year ended December 31, 2012 was a decrease of US$ 4,249 in noncurrent assets and liabilities (US$ 3,500 at January 1, 2012).

Those restatements had no significant impact on the Company’s profit or loss or cash flows.

The effects of such changes in the statement of financial position, statement of changes in shareholders’ equity and statement of comprehensive income, for comparative purposes, are set out following:

 

12.31.2012

01.01.2012

Statement of Financial Position

As presented (*)

(a) Impact of IAS 19 amendment

(b) Offsetting Deferred Income Taxes

Restated

As presented (*)

(a) Impact of IAS 19 amendment

(b) Offsetting Deferred Income Taxes

Restated

Non-current assets

 

 

 

 

 

 

 

 

Deferred income taxes

5,526

(4,249)

1,277

4,287

(3,500)

787

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

Pension and medical benefits

9,275

10,161

 

19,436

8,878

6,179

 

15,057

Deferred income taxes

19,213

(2,988)

(4,249)

11,976

17,715

(1,657)

(3,500)

12,558

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

 

 

Other comprehensive income (loss)

(7,144)

(7,091)

(14,235)

7,943

(4,440)

3,503

Retained earnings (profit reserves)

67,320

(82)

 

67,238

60,224

(82)

60,142

 

 

 

 

 

 

 

 

 

(*) As presented for the period ended December 31, 2012.

 

 

 

 

12.31.2012

12.31.2011

01.01.2011

Statement of Shareholders' Equity

Actuarial gains (losses) on defined benefit plans

Retained earnings

Actuarial gains (losses) on defined benefit plans

Retained earnings

Actuarial gains (losses) on defined benefit plans

Retained earnings

Other comprehensive income

 

 

 

 

 

 

As presented (*)

Restated

(7,600)

(4,440)

(3,343)

 

 

 

 

 

 

 

Retained earnings

 

 

 

 

 

 

As presented (*)

Restated

(82)

(82)

(82)

 

 

 

 

 

 

 

(*) As presented for the period ended December 31, 2012.

 

 

 

 

2012

2011

Statement of comprehensive income

As presented (*)

Restated

As presented (*)

Restated

Other comprehensive income

 

 

 

 

Actuarial gains (losses) on defined benefit plans

(4,693)

1,807

Deferred income taxes on actuarial gains (losses)

1,533

(710)

(*) As presented for the period ended December 31, 2012.

 

11 


 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

3.            Summary of significant accounting policies

The accounting policies set out below have been consistently applied to all periods presented in these consolidated financial statements.

3.1.       Basis of consolidation

 The consolidated financial statements include the financial information of Petrobras and the entities it controls (its subsidiaries). Control is achieved when Petrobras: i) has power over the investee; ii) is exposed, or has rights, to variable returns from involvement with the investee; and iii) has the ability to use its power to affect its returns.

Subsidiaries are consolidated from the date on which control is obtained until the date that such control no longer exists. Accounting policies of subsidiaries have been changed, where necessary, to ensure consistency with the policies adopted by the Company.

The consolidation procedures involve combining assets, liabilities, income and expenses, according to their function and eliminating all intragroup balances and transactions, including unrealized profits arising from intragroup transactions.

12 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

The entities and structured entities set out following are consolidated:

 

Equity capital - Subscribed, paid in and voting %

Subsidiaries

2013

2012

Petrobras Distribuidora S.A. - BR and its subsidiaries

100.00

100.00

Braspetro Oil Services Company - Brasoil and its subsidiaries (i)

100.00

100.00

Petrobras International Braspetro B.V. - PIBBV and its subsidiaries (i) (ii)

100.00

100.00

Petrobras Comercializadora de Energia Ltda. - PBEN (iii)

100.00

100.00

Petrobras Negócios Eletrônicos S.A. – E-PETRO (iv)

100.00

100.00

Petrobras Gás S.A. - Gaspetro and its subsidiaries

99.99

99.99

Petrobras International Finance Company - PifCo (i)

100.00

100.00

Petrobras Transporte S.A. - Transpetro and its subsidiaries

100.00

100.00

Downstream Participações Ltda.

99.99

99.99

Petrobras Netherlands B.V. - PNBV and its subsidiaries (i)

100.00

100.00

5283 Participações Ltda.

100.00

100.00

Fundo de Investimento Imobiliário RB Logística - FII

99.00

99.00

Baixada Santista Energia S.A.

100.00

100.00

Sociedade Fluminense de Energia Ltda. – SFE (vi)

100.00

Termoaçu S.A. (vii) (viii)

100.00

Termoceará Ltda.

100.00

100.00

Termomacaé Ltda.

100.00

100.00

Termomacaé Comercializadora de Energia Ltda.

100.00

100.00

Termobahia S.A.

98.85

98.85

Ibiritermo S. A. (x)

50.00

50.00

Petrobras Biocombustível S.A.

100.00

100.00

Refinaria Abreu e Lima S.A. (vi)

100.00

Companhia Locadora de Equipamentos Petrolíferos S.A. – CLEP 

100.00

100.00

Comperj Participações S.A. (vi)

100.00

Comperj Estirênicos S.A. (vi)

100.00

Comperj MEG S.A. (vi)

100.00

Comperj Poliolefinas S.A. (vi)

100.00

Cordoba Financial Services Gmbh - CFS and its subsidiary (i)

100.00

100.00

Breitener Energética S.A. and its subsidiaries

93.66

93.66

Cayman Cabiunas Investment CO. (ix)

100.00

Innova S.A.

100.00

100.00

Companhia de Desenvolvimento de Plantas Utilidades S.A. - CDPU (v)

100.00

Companhia de Recuperação Secundária S.A. - CRSEC (vi)

100.00

Arembepe Energia S.A.

100.00

100.00

Energética Camaçari Muricy S.A.

100.00

71.60

Companhia Integrada Têxtil de Pernambuco S.A. - Citepe

100.00

100.00

Companhia Petroquímica de Pernambuco S.A. - PetroquímicaSuape

100.00

100.00

Petrobras Logística de Exploração e Produção S.A. - PB-LOG

100.00

100.00

Liquigás S.A.

100.00

100.00

Araucária Nitrogenados S.A. (vii)

100.00

Fábrica Carioca de Catalizadores S.A. - FCC (viii) (x)

50.00

(i) Foreign-incorporated companies with non-Brazilian Real consolidated financial statements.

(ii) 11.87% interest of 5283 Participações Ltda.

(iii) 0.09% interest of Petrobras Gás S.A. - Gaspetro.

(iv) 0.05% interest of Downstream.

(v) Companies merged into Comperj Participações S.A.

(vi) Companies merged into Petrobras

(vii) Acquisition of control (business combination).

(viii) Equity-method accounted investee in 2012.

(ix) Extinguished company

(x) Joint operation

 

 

 

13 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Consolidated structured entities

Country

Main segment

Charter Development LLC – CDC (i)

U.S.A

E&P

Companhia de Desenvolvimento e Modernização de Plantas Industriais – CDMPI

Brazil

RT&M

PDET Offshore S.A.

Brazil

E&P

Nova Transportadora do Nordeste S.A. - NTN

Brazil

Gas & Power

Nova Transportadora do Sudeste S.A. - NTS

Brazil

Gas & Power

Fundo de Investimento em Direitos Creditórios Não-padronizados do Sistema Petrobras

Brazil

Corporate

(i) Foreign-Incorporated Companies with non-Brazilian Real consolidated financial statements.

 

 

 

Petrobras has no equity interest in the structured entities above, and control is not determined by voting rights, but by the power the Company has over the relevant operating activities of such entities.

3.2.       Business segment reporting

The information related to the operating segments (business areas) of the Company is prepared based on items directly attributable to each segment, as well as items that can be allocated to each segment on a reasonable basis.

The measurement of segment results includes transactions carried out with third parties and transactions between business areas, which are charged at internal transfer prices defined between the areas using methods based on market parameters.

Information for each business area is presented as defined by the current organizational structure. The Company operates under the following segments:

a) Exploration and Production (E&P): this segment covers the activities of exploration, development and production of crude oil, NGL (natural gas liquid) and natural gas in Brazil for the purpose of supplying, primarily, our domestic refineries; and also selling the crude oil surplus and oil products produced in the natural gas processing plants to the domestic and foreign markets. The exploration and production segment also operates through partnerships with other companies.

b) Refining, Transportation and Marketing (RT&M): this segment covers the refining, logistics, transport and trading of crude oil and oil products activities, exporting of ethanol, extraction and processing of shale, as well as holding interests in petrochemical companies in Brazil.

c) Gas and Power: this segment covers the activities of transportation and trading of natural gas produced in Brazil and imported natural gas, transportation and trading of LNG (liquid natural gas), generation and trading of electricity, as well as holding interests in transporters and distributors of natural gas and in thermoelectric power stations in Brazil, in addition to being responsible for the fertilizer business.

d) Biofuels: this segment covers the activities of production of biodiesel and its co-products, as well as the ethanol-related activities: equity investments, production and trading of ethanol, sugar and the surplus electric power generated from sugarcane bagasse.

e) Distribution: this segment includes mainly the activities of Petrobras Distribuidora, which operates through its own retail network and wholesale channels to sell oil products, ethanol and vehicle natural gas in Brazil to retail, commercial and industrial customers, as well as other fuel wholesalers.

f) International: this segment covers the activities of exploration and production of oil and gas, refining, transportation and marketing, gas and power, and distribution, carried out outside of Brazil in a number of countries in the Americas, Africa, Europe and Asia.

14 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

The corporate segment comprises the items that cannot be attributed to the other segments, notably those related to corporate financial management, corporate overhead and other expenses, including actuarial expenses related to the pension and medical benefits for retired employees and their dependents.

3.3.       Financial instruments

3.3.1. Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, term deposits with banks and short-term highly liquid financial investments that are readily convertible to known amounts of cash, are subject to insignificant risk of changes in value and have a maturity of three months or less from the date of acquisition.

3.3.2. Marketable securities

Marketable securities comprise investments in debt or equity securities. These instruments are initially measured at fair value and are classified and subsequently measured as set out below:

-       Fair value through profit or loss - includes securities purchased and held for trading in the short term. These instruments are subsequently measured at fair value with changes recognized in profit or loss.

-       Held-to-maturity - includes securities with fixed or determinable payments, for which management has the ability and intent to hold until maturity. These instruments are subsequently measured at amortized cost using the effective interest rate method.

-       Available-for-sale – includes securities that are either designated in this category or not classified as fair value through profit or loss or held-to-maturity securities. These instruments are subsequently measured at fair value. Subsequent changes in fair value are recognized within other comprehensive income, in the shareholders’ equity and reclassified to profit or loss when securities are derecognized.

Subsequent changes attributable to interest, foreign exchange, and inflation are recognized in profit or loss for all categories, when applicable.

3.3.3. Trade receivables

Trade receivables are initially measured at the fair value of the consideration to be received and, subsequently, at amortized cost using the effective interest rate method and adjusted for allowances for credit losses and impairment.

The Company recognizes a provision for impairment of trade receivables when there is objective evidence that a loss event occurred after the initial recognition of the receivable and has an impact on the estimated future cash flows, which can be reliably estimated. Such evidence includes insolvency, defaults or a significant probability of a debtor filing for bankruptcy.

3.3.4. Loans and financing (Debt)

Loans and financing are initially recognized at fair value less transaction costs incurred and, after initial recognition, are measured at amortized cost using the effective interest rate method.

3.3.5. Derivative financial instruments

Derivative financial instruments are recognized in the statement of financial position as assets or liabilities and are initially and subsequently measured at fair value.

15 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Gains or losses arising from changes in fair value are recognized in profit or loss as finance income (finance expense), unless the derivative is qualified and designated for hedge accounting.

3.3.6. Hedge accounting

Hedge accounting is formally documented at inception in terms of the hedging relationship and the Company’s risk management objective and strategy for undertaking the hedge.

Hedging relationships which qualify for hedge accounting are classified as:  (i) fair value hedge, when they involve a hedge of the exposure to changes in fair value of a recognized asset or liability, unrecognized firm commitments, or an identifiable portion of such assets, liabilities or firm commitments; and (ii) cash flow hedges when they involve a hedging of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction.

In hedging relationships which qualify for fair value hedge accounting, the gain or loss from remeasuring the hedging instrument at fair value is recognized in profit or loss.

In hedging relationships which qualify for cash flow hedge accounting, the Company designates derivative financial instruments and long-term debt (non-derivative financial instruments) and gains or losses relating to the effective portion of the hedge are recognized within other comprehensive income, in the shareholders’ equity and recycled to profit or loss in the periods when the hedged item affects profit or loss. The gains or losses relating to the ineffective portion are recognized in profit or loss.

When, the hedging instrument expires or is sold, terminated or exercised or no longer meets the criteria for hedge accounting or the Company revokes the designation, the cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income from the period when the hedge was effective remains separate in equity until the forecast transaction occurs. When, the forecast transaction is no longer expected to occur, the cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is immediately reclassified from equity to profit or loss.

3.4.       Inventories 

Inventories are determined by the weighted average cost flow method and mainly comprise crude oil, intermediate products and oil products, as well as natural gas, liquid natural gas (LNG), fertilizers and biofuels, stated at the lower of the average cost, and their net realizable value.

Crude oil and liquid natural gas (LNG) inventories can be traded or used for production of oil products and/or electricity generation, respectively.

Intermediate products are those product streams that have been through at least one of the refining processes, but still need further treatment, processing or converting to be available for sale.

Biofuels mainly include ethanol and biodiesel inventories.

Maintenance materials, supplies, and others, other than raw material, are mainly comprised of production supplies and operating and consumption materials used in the operations of the Company, stated at the average purchase cost, not exceeding replacement cost.

Net realizable value is the estimated selling price of inventory in the ordinary course of business, less estimated cost of completion and estimated expenses to complete its sale.

The amounts presented in the categories above include imports in transit, which are stated at the identified cost.

16 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

3.5.       Investments in other companies

An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those polices.

A joint arrangement is an arrangement over which two or more parties have joint control. A joint arrangement is classified either as a joint operation or as a joint venture depending on the rights and obligations of the parties to the arrangement.

In a joint operation the parties have rights to the assets, and obligations for the liabilities, relating to the arrangement and in a joint venture, the parties have rights to the net assets of the arrangement.

Profit or loss, assets and liabilities related to joint ventures and associates are accounted for by the equity method.

In a joint operation the Company recognizes the amount of its assets, liabilities and related income and expenses. In addition, the Company recognizes its share of the sales revenue and expenses and the joint assets and joint liabilities.

3.6.       Business combinations and goodwill

Acquisitions of businesses are accounted for using the acquisition method when control is obtained. Combinations of entities under common control are not accounted for as business combinations.

The acquisition method requires that the identifiable assets acquired and the liabilities assumed be measured at the acquisition-date fair value. Amounts paid in excess of the fair value are recognized as goodwill. In the case of a bargain purchase, a gain is recognized in profit or loss when the acquisition cost is lower than the acquisition-date fair value of the net assets acquired.

Changes in ownership interest in subsidiaries that do not result in loss of control of the subsidiary are equity transactions. Any excess of the amounts paid/received over the carrying value of the ownership interest acquired/disposed is recognized in shareholders’ equity as an additional paid-in capital.

Goodwill arising from investments in associates and joint ventures without change of control is accounted for as part of these investments. It is measured by the excess of the consideration transferred over the interest in the fair value of the net assets.

3.7.       Oil and Gas exploration and development expenditures

The costs incurred in connection with the exploration, appraisal, development and production of oil and gas are accounted for using the successful efforts method of accounting, as set out below:

-Costs related to geological and geophysical activities are expensed when incurred.

-Amounts paid for obtaining concessions for exploration of oil and natural gas (capitalized acquisition costs) are initially capitalized.

-Costs directly associated with exploratory wells pending determination of proved reserves are capitalized within property, plant and equipment. Exploratory wells that have found oil and gas reserves, but those reserves cannot be classified as proved, continue to be capitalized if the well has found a sufficient quantity of reserves to justify its completion as a producing well and progress on assessing the reserves and the economic and operating viability of the project is under way. An internal commission of technical executives of Petrobras reviews these conditions monthly for each well, by analysis of geoscience and engineering data, existing economic conditions, operating methods and government regulations.

17 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

-Costs related to exploratory wells drilled in areas of unproved reserves are expensed when determined to be dry or non-economical (did not encounter potentially economic oil and gas quantities).

-Costs related to the construction, installation and completion of infrastructure facilities, such as platforms, pipelines, drilling of development wells and other related costs incurred in connection with the development of proved reserve areas and successful exploratory wells are capitalized within property, plant and equipment.

3.8.       Property, plant and equipment

Property, plant and equipment are measured at the cost to acquire or construct, including all costs necessary to bring the asset to working condition for its intended use, adjusted during hyperinflationary periods, as well as by the present value of the estimated cost of dismantling and removing the asset and restoring the site and reduced by accumulated depreciation and impairment losses.

Expenditures on major maintenance of industrial units and vessels are capitalized if the recognition criteria are met. Expenditures comprise: replacement of certain assets or parts of assets, equipment assembly services, as well as other related costs. Such maintenance occurs, on average, every four years. Capitalized expenditures are depreciated on a straight line basis based on the estimated time of the maintenance cycle.

General and specific borrowing costs directly attributable to the acquisition or construction of qualifying assets are capitalized as part of the costs of these assets. General borrowing costs are capitalized based on the Company’s weighted average of the cost of borrowings outstanding applied over the balance of assets under construction. Borrowing costs are amortized during the useful life or by applying the unit-of-production method to the related assets.

Except for assets with a useful life shorter than the life of the field, which are depreciated based on the straight line method, depreciation, depletion and amortization of proved oil and gas producing properties are accounted for pursuant to the unit-of-production method, as set out below:

i) Depreciation (amortization) of oil and gas producing properties, including related equipment and facilities is computed based on a unit-of-production basis over the proved developed oil and gas reserves, applied on a field by field basis; and

ii) Amortization of amounts paid for obtaining concessions for exploration of oil and natural gas of producing properties, such as signature bonus (capitalized acquisition costs) is recognized using the unit-of-production method, computed based on the units of production over the total proved oil and gas reserves, applied on a field by field basis.

Except for land, which is not depreciated, other property, plant and equipment is depreciated on a straight line basis. See note 12 for further information about the estimated useful life by class of assets.

3.9.       Intangible assets

Intangible assets are measured at the acquisition cost, less accumulated amortization and impairment losses and comprise rights and concessions, including the signature bonus paid for obtaining concessions for exploration of oil and natural gas (capitalized acquisition costs) and the Assignment Agreement, referring to the right to carry out prospection and drilling activities for oil, natural gas and other liquid hydrocarbons located in blocks in the pre-salt area (“Cessão Onerosa”); public service concessions; trademarks; patents; software and goodwill.

18 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Signature bonuses paid for obtaining concessions for exploration of oil and natural gas and amounts related to the Assignment Agreement are initially capitalized within intangible assets and are transferred to property, plant and equipment upon the declaration of commerciality.

Signature bonuses and amounts related to the Assignment Agreement are not amortized until they are transferred to property, plant and equipment. Intangible assets with a finite useful life, other than amounts paid for obtaining concessions for exploration of oil and natural gas of producing properties, are amortized over the useful life of the asset on a straight-line basis.

Internally-generated intangible assets are not capitalized and are expensed as incurred, except for development costs that meet the recognition criteria related to completion and use of assets, probable future economic benefits, and others.

Intangible assets with an indefinite useful life are not amortized but are tested annually for impairment considering individual assets or cash-generating units. Their useful lives are reviewed annually to determine whether events and circumstances continue to support an indefinite useful life assessment for those assets. If they do not, the change in the useful life assessment from indefinite to finite is accounted for on a prospective basis.

3.10.   Impairment 

Property, plant and equipment and intangible assets with definite useful lives are tested for impairment when there is an indication that the carrying amount may not be recoverable. Assets related to exploration and development of oil and gas and assets that have indefinite useful lives, such as goodwill acquired in business combinations are tested for impairment annually, irrespective of whether there is any indication of impairment.

The impairment test comprises a comparison of the carrying amount of an individual asset or a cash-generating unit with its recoverable amount. Whenever the recoverable amount of the unit is less than the carrying amount of the unit, an impairment loss is recognized to reduce the carrying amount to the recoverable amount. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs of disposal and its value in use. Considering the specificity of the Company’s assets, value in use is generally used by the Company for impairment testing purposes, except when specifically indicated.

Value in use is estimated based on the present value of the risk-adjusted (for specific risks) future cash flows expected to arise from the continuing use of an asset or cash-generating unit (based on assumptions that represent the Company’s best estimates), discounted at a pre-tax discount rate. This rate is obtained from the Company’s weighted average cost of capital post-tax (WACC). Cash flow projections are mainly based on the following assumptions: prices based on the Company’s most recent strategic plan; production curves associated with existing projects in the Company's portfolio, operating costs reflecting current market conditions, and investments required for carrying out the projects.

For the impairment test, assets are grouped at the smallest identifiable group that generates largely independent cash inflows from other assets or groups of assets (the cash-generating unit). Assets related to exploration and development of oil and gas are tested annually for impairment on a field by field basis.

Reversal of previously recognized impairment losses is permitted for assets other than goodwill.

3.11.   Leases 

Leases that transfer substantially all the risks and rewards incidental to ownership of the leased item are recognized as finance leases.

19 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

For finance leases, when the Company is the lessee, assets and liabilities are recognized at amounts equal to the fair value of the lease property or, if lower, to the present value of the minimum lease payments, each determined at the inception of the lease.

Capitalized lease assets are depreciated on a systematic basis consistent with the depreciation policy the Company adopts for property, plant and equipment that are owned. Where there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, capitalized lease assets are depreciated over the shorter of the lease term or the estimated useful life of the asset.

When the Company is the lessor, a receivable is recognized at the amount of the net investment in the lease.

If a lease does not transfer all the risks and rewards, it is classified as an operating lease. Operating leases are recognized as expenses over the period of the lease.

Contingent rents are recognized as expenses when incurred.

3.12.   Assets classified as held for sale

Assets, disposal groups and liabilities directly associated with those assets are classified as held for sale if their carrying amounts will principally be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is approved by the Company’s management and the asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets. In addition, the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification as held for sale.

However, events or circumstances may extend past the period to complete the sale by more than one year if the delay is caused by events or circumstances beyond the entity’s control and there is sufficient evidence of the commitment to the plan to sell the asset.

Assets (or disposal groups) classified as held for sale and the associated liabilities are measured at the lower of their carrying amount and fair value less costs to sell. Assets and liabilities are presented separately in the statement of financial position.

3.13.   Decommissioning costs

Decommissioning costs are future obligations to perform environmental restoration, dismantle and remove a facility as it terminates operations due to the exhaustion of the area or economic conditions.

Costs related to the abandonment and dismantling of areas are recognized as part of the cost of an asset (associated with the obligation) based on the present value of the expected future cash outflows, discounted at a risk-adjusted rate when a future legal obligation exists and can be reliably measured.

A corresponding provision is recognized as a liability. Unwinding of the discount is recognized as a financial expense, when incurred. The asset is depreciated similarly to property, plant and equipment, based on the class of the asset.

Future decommissioning costs for oil and natural gas producing properties are initially recognized when a field is declared to be commercial, on a field by field basis, and are revised annually.

Decommissioning costs related to proved developed oil and gas reserves are depreciated by applying the unit-of-production method, computed based on a unit-of-production basis over the proved developed oil and gas reserves, applied on a field by field basis.

20 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

3.14.   Provisions and contingent liabilities

Provisions are recognized when there is a present obligation (legal or constructive) that arises from past events and for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, which must be reasonably estimable.

Contingent liabilities for which the likelihood of loss is considered to be possible or which are not reasonably estimable are not recognized in the financial statements but are disclosed unless the expected outflow of resources embodying economic benefits is considered remote.

3.15.   Income taxes

Income tax expense for the period comprises current and deferred tax.

The Company has adopted the Transition Tax Regime in Brazil (RTT) in order to exclude potential tax impacts from the adoption of IFRS in the determination of taxable profit. RTT is based on Brazilian tax/corporate regulations as of December 31, 2007.

a)    Current income taxes

The tax currently payable is computed based on taxable profit for the year, calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Taxable profit differs from accounting profit due to certain adjustments required by tax regulations.

b)   Deferred income taxes

Deferred tax is recognized on temporary differences between the tax base of an asset or liability and its carrying amount. Deferred income tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all temporary deductible differences to the extent that it is probable that taxable profit will be available against which those deductible temporary differences can be utilized.

Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

3.16.   Employee benefits (Post-Employment)

Actuarial commitments related to post-employment defined benefit plans and health-care plans are recognized as liabilities in the statement of financial position based on actuarial calculations which are revised annually by an independent actuary, using the projected unit credit method, net of the fair value of plan assets, when applicable, out of which the obligations are to be directly settled.

Under the projected credit unit method, each period of service gives rise to an additional unit of benefit entitlement and each unit is measured separately to determine the final obligation.

Changes in the net defined benefit liability (asset) are recognized when they occur, as follows: i) service cost and net interest cost in profit or loss; and ii) remeasurements in other comprehensive income.

Service cost comprises: (i) current service cost, which is the increase in the present value of the defined benefit obligation resulting from employee service in the current period; (ii) past service cost, which is the change in the present value of the defined benefit obligation for employee service in prior periods, resulting from a plan amendment (the introduction, changes to, or withdraw of a defined benefit plan) or a curtailment (a significant reduction by the entity in the number of employees covered by a plan); and (iii) any gain or loss on settlement.

21 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

Net interest on the net defined benefit liability (asset) is the change during the period in the net  defined benefit liability (asset) that arises from the passage of time.

Remeasurements of the net defined benefit liability (asset), recognized in other comprehensive income, comprise: (i) actuarial gains and losses; (ii) the return on plan assets, excluding amounts included in net interest on the net defined benefit liability (asset); and (iii) any change in the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability (asset).

Actuarial assumptions include demographical and financial assumptions, medical costs estimates, as well as historical data related to expenses incurred and employee contributions.

The Company also contributes amounts to defined contribution plans, that are expensed when incurred and are computed based on a percentage over salaries.

3.17.   Share Capital and Stockholders’ Compensation

Share capital comprises common shares and preferred shares. Incremental costs directly attributable to the issue of new shares are classified as additional paid in capital and shown (net of tax) in shareholders’ equity as a deduction from the proceeds.

Preferred shares have priority on returns of capital and dividends, which are based on the higher amount of 3% over the net book value of shareholders equity for preferred shares, or 5% of the share capital for preferred shares. Preferred shares do not grant any voting rights; are non-convertible into common shares and participate under the same terms as common shares, in capital increases resulting from the capitalization of reserves and profits.

Dividend distribution comprises dividends and interest on capital determined in accordance with the limits defined in the Company’s bylaws.

Interest on capital is a form of dividend distribution which is deductible for tax purposes in Brazil.  Tax benefits from the deduction of interest on capital are recognized in profit or loss.

3.18.   Government grants

A government grant is recognized when there is reasonable assurance that the grant will be received and the Company will comply with the conditions attached to the grant.

Government grants are recognized as revenue in profit or loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate. Government grants related to assets are initially recognized as deferred income and thereafter are transferred to profit or loss over the useful life of the asset on a straight-line basis.

3.19.   Recognition of revenue, costs and expenses

Revenue is recognized when it is probable that the economic benefits associated with the transaction will flow to the Company and the amount of revenue and the costs incurred or to be incurred in the transaction can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable for products sold and services provided in the normal course of business, net of returns, discounts and sales taxes.

22 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Revenues from the sale of crude oil and oil products, petrochemical products, natural gas, biofuels and other related products are recognized when the Company retains neither continuing managerial involvement nor effective control over the products sold and the significant risks and rewards of ownership have been transferred to the customer, which is usually when legal title passes to the customer, pursuant to the terms of the sales contract. Sales revenues from freight and other services provided are recognized based on the stage of completion of the transaction.

Finance income and expense mainly comprise interest income on financial investments and government bonds, interest expense on debt, gains and losses on marketable securities measured at fair value, as well as net foreign exchange and inflation indexation charges. Finance expense does not include borrowing costs directly attributable to the construction of assets that necessarily take a substantial period of time to become operational, which are capitalized as part of the costs of these assets. 

Revenue, costs and expenses are recognized on the accrual basis.

4.            Critical accounting policies: key estimates and judgments

The preparation of the consolidated financial information requires the use of estimates and judgments for certain transactions and their impacts on assets, liabilities, revenues and expenses. The assumptions are based on past transactions and other relevant information and are periodically reviewed by Management, although the actual results could differ from these estimates.

Information about those areas that require the most judgment or involve a higher degree of complexity in the application of the accounting practices and that could materially affect the Company’s financial condition and results of operations are set out following.

4.1.       Oil and gas reserves

Oil and gas reserves are estimated based on economic, geological and engineering information, such as well logs, pressure data and fluid sample core data and are used as the basis for calculating unit-of-production depreciation rates and for impairment assessments.

These estimates require the application of judgment and are reviewed at least annually and on an interim basis if objective evidence of significant changes becomes available based on a re-evaluation of already available geological, reservoir or production data and  new geological, reservoir or production data, as well as changes in prices and costs that are used in the estimation of reserves. Revisions can also result from significant changes in development strategy or production equipment and facility capacity.

Oil and gas reserves include both proved and unproved reserves. According to the definitions prescribed by the SEC proved oil and gas reserves are the estimated quantities which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions (i.e., prices and costs as of the date the estimate is made). Proved reserves can be further subdivided into developed and undeveloped reserves.

Proved developed oil and gas reserves are reserves that can be expected to be recovered through existing wells with existing equipment and operating methods and represented 59.9% of the total proved reserves of the Company as of December 31, 2013.

Although the Company is reasonably certain that proved reserves will be produced, the timing and amount recovered can be affected by a number of factors including completion of development projects, reservoir performance, regulatory aspects and significant changes in long-term oil and gas price levels.

23 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Other information about reserves is presented as supplementary information.

a)             Oil and gas reserves: depreciation, amortization and depletion

Depreciation, amortization and depletion are measured based on estimates of reserves prepared by the Company’s technicians in a manner consistent with SEC definitions. Revisions to the Company’s proved developed and undeveloped reserves impact prospectively the amounts of depreciation and depletion recognized in profit or loss and the carrying amounts of oil and gas properties assets.

Therefore all other variables being equal, a decrease in estimated proved reserves would increase, prospectively, depreciation expense, while an increase in reserves would reduce depreciation.

See notes 3.8 and 12 for more detailed information about depreciation, amortization and depletion.

b)            Oil and gas reserves: impairment testing

The Company assesses the recoverability of the carrying amounts of oil and gas exploration and development assets based on their value in use, as defined in note 3.10. In general, analyses are based on proved reserves and probable reserves. The percentage of probable reserves that the Company includes in cash flows does not exceed the Company’s past success ratios in developing probable reserves.

The Company performs asset valuation analyses on an ongoing basis as a part of its management program by reviewing the recoverability of their carrying amounts based on estimated volumes of oil and gas reserves, as well as estimated future oil and natural gas prices.

The Company, typically, does not view temporarily low oil prices as a trigger event for conducting impairment tests. The markets for crude oil and natural gas have a history of significant price volatility and although prices will occasionally drop precipitously, industry prices over the long term will continue to be driven by market supply and demand fundamentals. Accordingly, any impairment tests that the Company performs make use of its long-term price assumptions used in its planning and budgeting processes and its capital investment decisions, which are considered reasonable estimates, given market indicators and experience.

Lower future oil and gas prices, considered long-term trends, as well as negative impacts of significant changes in reserve volumes, production curve expectations, lifting costs or discount rates could trigger the need for impairment assessment.

See notes 3.8, 12 and 14 for more detailed information about oil and natural gas exploration and development assets.

4.2.       Identifying cash-generating units for impairment testing

Identifying cash-generating units (CGU’s) requires management assumptions and judgment, based on the Company’s business and management model, and may significantly impact the results of the impairment tests of long-lived assets. The assumptions set out following have been consistently applied by the Company:

-       Exploration and Production CGU’s: producing properties: oil and natural gas producing properties comprised of a group of exploration and development assets.

24 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

-       Downstream CGU’s: i) Refining assets CGU: a single CGU comprised of all refineries and associated assets, terminals and pipelines, as well as logistics assets operated by Transpetro. This CGU was identified based on the concept of integrated optimization and performance management, which focus on the global performance of the CGU, allowing a shift of margins from one refinery to another. Pipelines and terminals complement and are an interdependent portion of the refining assets, to supply the market; ii) Petrochemical CGU: petrochemical plants from PetroquímicaSuape and Citepe; iii) Transportation CGU: the transportation CGU is comprised of the vessel fleet of Transpetro.

-       Gas & Power CGU’s: i) Natural gas CGU: comprised of natural gas pipelines, natural gas processing plants and fertilizers and nitrogen products plants; and ii) Power CGU: thermoelectric power generation plants.

-       Distribution CGU: comprised of the distribution assets related to the operations of Petrobras Distribuidora S.A. and Liquigás Distribuidora S.A..

-       Biofuels CGU’s: i) Biodiesel CGU: group of assets that compose the biodiesel plants. The CGU reflects an integrated view of the biodiesel plants and is defined based on the production planning and operation process, considering domestic market conditions, the capacity of each plant, as well as the results of biofuels auctions and raw materials supply; ii) Ethanol CGU: comprised of investments in associates and joint ventures in the ethanol sector.

-       International CGU: i) International Exploration and production CGU: oil and natural gas producing properties comprised of a group of exploration and development assets outside of Brazil; ii) Other operations of the international business segment: smallest identifiable group of assets that generates largely independent cash inflows.

Investments in associates and joint ventures including goodwill are individually tested for impairment.

See notes 3.10 and 14 for more detailed information about impairment.

4.3.         Pension and other post-retirement benefits

The actuarial obligations and net expenses related to defined benefit pension and health care post-retirement plans are computed based on several financial and demographic assumptions, of which the most significant are:

-       Discount rate: comprises the projected future inflation rate curve and an equivalent real interest rate that matches the duration of the pension and health care obligations with the yield curve of long-term Brazilian government bonds; and

-       Medical costs: comprise several projected annual growth rates based on per capita health care benefits paid for the last five years, which are used to set a starting point for the curve, which decreases gradually in 30 years, converging to a general inflation index.

These and other estimates are reviewed at least annually and may differ materially from actual results due to changing market and financial conditions, as well as actual results of actuarial assumptions.

The sensitivity analysis of discount rates and changes in medical costs as well as additional information about actuarial assumptions are set out in note 22.

4.4.       Estimates related to contingencies and legal proceedings

The Company is a defendant in numerous legal proceedings involving tax, civil, labor, corporate and environmental issues arising from the normal course of its business for which estimates are made by Petrobras of the amounts of the obligations and the probability that an outflow of resources will be required, based on legal advice and management’s best estimates.

25 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

See note 31 for more detailed information about contingencies and legal proceedings.

4.5.       Dismantling of areas and environmental remediation

The Company has legal and constructive obligations to remove equipment and restore onshore and offshore areas at the end of operations at production sites. Its most significant asset removal obligations involve removal and disposal of offshore oil and gas production facilities in Brazil and abroad. Estimates of costs for future environmental cleanup and remediation activities are based on current information about costs and expected plans for remediation.

These estimates require performing complex calculations that involve significant judgment because the obligations are long-term; the contracts and regulation have subjective descriptions of what removal and remediation practices and criteria will have to be met when the events actually occur; and asset removal technologies and costs are constantly changing, along with political, environmental, safety and public relations considerations.

The Company is constantly conducting studies to incorporate technologies and procedures seeking to optimize the operations of abandonment, considering industry best practices. Notwithstanding, the timing and amounts of future cash flows are subject to significant uncertainty.

See notes 3.14 and 20 for more detailed information about the decommissioning provisions.

4.6.       Derivative financial instruments

Derivative financial instruments are measured at fair value in the financial statements. Fair value measurement requires judgment related to the availability of identical or similar assets quoted in active markets or otherwise the use of alternate measurement models that can become increasingly complex and depend on the use of estimates such as future prices, long-term interest rates and inflation indices.

See notes 3.3.5 and 34 for more detailed information about derivative financial instruments.

4.7.       Hedge accounting

Identifying hedging relationships between hedged items and hedging instruments (derivative financial instruments and long-term debt) requires critical judgments related to the existence of the hedging relationship and its effectiveness. In addition, the Company continuously assesses the alignment between the hedging relationships identified and the objectives and strategy of its risk management policy.

See notes 3.3.6 and 34 for more detailed information about hedge accounting.

5.            New standards and interpretations

a)             IASB – International Accounting Standards Board

During 2013, new standards and amendments to standards and interpretations were issued by the International Accounting Standards Board (IASB) effective for annual periods beginning on January 1, 2013, none of which had a significant effect on the consolidated financial statements for 2013, except for amendments to IAS 19 - Employee Benefits (CPC 33 - R1):

26 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

·      The effects of the adoption of amendments to IAS 19 – “Employee benefits” are set out in note 2.3.

·      Amendment to IAS 1 - ‘Presentation of financial statements’, regarding other comprehensive income requires for entities to group items presented in ‘other comprehensive income’ (OCI) on the basis of whether they are potentially recycled to profit or loss subsequently.

·      IFRS 10 "Consolidated Financial Statements" - defines principles and requirements for the preparation and presentation of consolidated financial statements when an entity controls one or more entities. Establishes the concept of control as the basis for consolidation and sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee.

·      IFRS 11 - “Joint Arrangements” - establishes principles for disclosure of financial statements of entities that are parties of joint agreements. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts for its interest in assets, liabilities, revenue and expenses. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and hence equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed.

·      IFRS 12 - “Disclosure of Interests in Other Entities” - Consolidates all the requirements of disclosures that an entity should carry out when participating in one or more entities, including joint arrangements, associates and structured entities.

·      IFRS 13 - “Fair Value Measurement” – provides a precise definition of fair value, as well as a source of fair value measurement and disclosure. Does not extend the use of fair value accounting but provides guidance on how it should be applied where its use is already required or permitted by other standards.

·      Amendments to IFRS 7- “Financial Instruments: Disclosures” – regarding offsetting financial assets and financial liabilities - establishes disclosure requirements for compensation agreements of financial assets and liabilities.

·      IAS 28 (revised 2011) - "Associates and joint ventures" - Includes the requirements for joint ventures, as well as associates, to be accounted for by the equity method, following the issue of IFRS 11.

A number of new standards and amendments to standards and interpretations issued by the International Accounting Standards Board (IASB) are not effective for 2013, as set out below. They have not been adopted in preparing these financial statements at December 31, 2013.

Standards

Brief Description

Effective Date

IFRS 9, "Financial instruments" and Amendments

IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortized cost and fair value.

January 1, 2018

The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset.

The guidance in IAS 39 on impairment of financial assets and hedge accounting continues to apply.

IFRS 9 includes the new hedge accounting requirements

IFRIC 21, "Levies"

IFRIC 21 is an interpretation of IAS 37, Provisions, Contingent Liabilities and Contingent Assets.

IFRIC 21 addresses when an entity should recognize a liability to pay a government levy (other than income taxes). The Interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy.

January 1, 2014

Amendment to IAS 36 - "Impairment of assets" on recoverable amount disclosures.

 

This amendment addresses the disclosure of information about the recoverable amount of impaired assets.

The amendments clarify that the scope of those disclosures is limited to the recoverable amount of impaired assets that is based on fair value less costs of disposal.

The amendments are required to be applied retrospectively.

January 1, 2014

27 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

 

None of the amendments and new standards listed above is expected to have a significant effect on the financial statements.

b)            Brazilian Tax Law

On November 11, 2013 the Brazilian government issued Provisional Measure No. 627, which:

-       introduces changes to corporate income taxes (including income tax - IRPJ and social contribution on profits - CSLL), as well as changes to social contributions on revenues (including PIS/PASEP and COFINS);

-       repeals the transitional tax regime (RTT), which was introduced by Federal Law No. 11,941 on May 27, 2009;

-       revises the rules related to share of profits earned by foreign subsidiaries (FS) of Brazilian entities subject to corporate income taxes (IRPJ and CSLL) in Brazil;

-       introduces changes to Federal Law No. 12,865/2013, which reopened the federal tax amnesty and refinancing program (REFIS da crise), which was introduced by Federal Law No. 11,941/2009, for tax debts claimed by the Brazilian Internal Revenue Service (Receita Federal do Brasil) and the Office of the Attorney-General of the National Treasury (Procuradoria Geral da Fazenda Nacional - PGFN);

This Provisional Measure is under consideration by the National Congress (Congresso Nacional) and is thus subject to amendment before it can be enacted into law. A number of clarifying regulations must be issued by the Brazilian Internal Revenue Service.

The Company has assessed the effects that these changes could produce and, based on the current text of the Provisional Measure, estimates no material impacts on the 2013 consolidated financial statements.

28


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

6.            Cash and cash equivalents

 

2013

2012

Cash at bank and in hand

951

990

Short-term financial investments

 

 

- In Brazil

 

 

Single-member funds (Interbank Deposit) and other short-term deposits

3,493

8,329

Other investment funds

53

208

 

3,546

8,537

- Abroad

11,371

3,993

Total short-term financial investments

14,917

12,530

Total cash and cash equivalents

15,868

13,520

 

 

 

Short-term financial investments in Brazil comprise single-member (exclusive) funds mainly holding Brazilian Federal Government Bonds and short-term financial investments abroad comprised of time deposits and other short-term fixed income instruments from highly-ranked financial institutions.

Those investments have maturities of three months or less and therefore are considered cash and cash equivalents.

7.            Marketable securities

 

2013

2012

Trading securities

3,878

10,222

Available-for-sale securities

17

239

Held-to-maturity securities

121

146

 

4,016

10,607

Current

3,885

10,431

Non-current

131

176

 

 

 

Trading securities refer mainly to investments in government bonds that have maturities of more than 90 days. These assets are classified as current assets due to the expectation of their realization in the short term.

8.            Trade and other receivables

8.1.       Trade and other receivables, net

 

2013

2012

Trade receivables

 

 

Third parties

9,847

10,785

Related parties (Note 19)

 

 

Investees

658

780

Receivables from the electricity sector

2,156

1,937

Petroleum and alcohol accounts -Federal Government

357

409

Other receivables

2,590

3,081

 

15,608

16,992

Provision for impairment of trade receivables

(1,406)

(1,452)

 

14,202

15,540

Current

9,670

11,099

Non-current

4,532

4,441

 

 

 

 

 

 

 

29 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

8.2.       Changes in the provision for impairment of trade receivables

 

2013

2012

2011

Opening balance

1,452

1,487

1,609

Additions (*)/ (**)

217

300

283

Write-offs (*)

(69)

(203)

(220)

Cumulative translation adjustment

(194)

(132)

(185)

Closing balance

1,406

1,452

1,487

 

 

 

 

Current

800

854

898

Non-current

606

598

589

 

 

 

 

 

 

 

 

(*) Includes exchange differences arising from translation of the provision for impairment of trade receivables in companies abroad.

(**) Amounts recognized in profit or loss as selling expenses.

 

 

 

8.3.       Trade and other receivables overdue - Third parties

 

2013

2012

Up to 3 months

692

769

From 3 to 6 months

159

156

From 6 to 12 months

362

181

More than 12 months

1,643

1,587

 

2,856

2,693

 

 

 

9.            Inventories 

 

2013

2012

Crude Oil

5,849

5,149

Oil Products

4,985

5,880

Intermediate products

924

972

Natural Gas and LNG (*)

401

302

Biofuels

158

282

Fertilizers

26

12

 

12,343

12,597

Materials, supplies and others

1,935

2,000

 

14,278

14,597

Current

14,225

14,552

Non-current

52

45

 

 

 

(*) Liquid Natural Gas

 

 

 

Consolidated inventories are presented net of a US$ 88 million allowance reducing inventories to net realizable value (US$ 90 million in 2012), mainly due to the volatility of international prices of crude oil and oil products. The amounts recognized in profit or loss as other operating expenses are set out in note 26.

A portion of the crude oil and/or oil products inventories have been pledged as security for the Terms of Financial Commitment (TFC) signed by Petrobras and Petros in the amount of US$ 2,976  (US$ 2,923 in 2012), as set out in note 22.

30 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

10.        Acquisitions, disposal of assets and legal mergers

10.1.   Acquisition of assets

Araucária Nitrogenados S.A.

On June 1, 2013, Petrobras assumed control over Araucária Nitrogenados S.A. (FAFEN-PR), under an agreement to acquire all shares of the company executed with Vale S.A. on December 18, 2012. The transaction was approved by the Brazilian Antitrust Authority (Conselho Administrativo de Defesa Econômica – CADE) on May 15, 2013.

The transaction price consideration was US$ 234 and will be paid to Vale through lease income from mineral rights for properties owned  by Petrobras in Sergipe. The assessment of the fair value of assets and liabilities is ongoing and will be completed within 12 months from the date Petrobras assumed control of the investee. A US$ 76 gain on bargain purchase has been recognized in profit or loss, as gains on interest in investees, based on a preliminary assessment of the fair value of assets acquired and liabilities assumed (US$ 310). Provisional amounts recognized may be adjusted during the measurement period.

Termoaçu

On May 14, 2013, Petrobras entered into a contractual arrangement with Neoenergia to acquire its 23.13% interest in the share capital of Termoaçu.

Petrobras increased its interest in Termoaçu to 100% upon the completion of the transaction, which was subject to: the approval by Agência Nacional de Energia Elétrica – ANEEL, obtained on June 14, 2013, consent of Conselho Administrativo de Defesa Econômica – CADE, obtained on July 17, 2013, as well as the arbitral award, regarding the performance of the sales and purchase agreement, awarded by the Arbitral Tribunal on August 14, 2013. The total consideration paid, after price adjustments, was US$74.

10.2.   Disposal of assets

Brasil PCH

On June 14, 2013, Petrobras entered into an agreement with Cemig Geração e Transmissão S.A. (which further assigned the sale and purchase contract to Chipley SP Participações) for the disposal of its entire equity interest in Brasil PCH S.A., equivalent to 49% of the voting stock, for a consideration of US$304, excluding contractual price adjustments.

On February 14, 2014, the remaining conditions precedent for this transaction were concluded for a total amount of US$ 297, including contractual price adjustments.

Due to the pending conditions precedent for conclusion of this transaction as of December 31, 2013, the assets and associated liabilities were classified as held for sale.

Formation of joint venture to operate in Exploration and Production (E&P) in Africa

On June 14, 2013, the Board of Directors of Petrobras approved the agreement between Petrobras International Braspetro B.V. (PIBBV), a subsidiary of Petrobras, and BTG PactuaI E&P B.V, a subsidiary of Banco BTG PactuaI S.A., to form a joint venture to operate in the exploration and production of oil and gas in Africa, comprised of assets in Angola, Benin, Gabon, Namibia, Nigeria and Tanzania.

BTG PactuaI E&P B.V. acquired 50% of the joint-venture shares of Petrobras Oil & Gas B.V. (PO&G), previously held by PIBBV, for the total amount of US$ 1,548, including US$ 36 received as an advance for the disposal of assets in Angola and Tanzania. The transaction was concluded on June 28, 2013 and the Company recognized a US$877 gain before taxes in other operating income (expenses), as set out below:

31 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

Proceeds from disposal

1,512

Carrying amount

(797)

Gain on disposal of assets (*)

715

Fair value measurement of uplift on retained interest

715

 

1,430

Impairment of assets in Angola and Tanzania (**)

(553)

Total gain on contribution of assets to joint venture

877

 

 

(*) Gain on disposed assets, other than Angola and Tanzania

 

(**) Impaired to reduce carrying amounts to fair value less cost of disposal

 

 

 

As the Angola and Tanzania portions of the transaction are subject to approval by their respective governments, the carrying amount of the assets located in those countries was classified as held for sale.

The partnership’s investment in PO&G was classified as a joint venture, and was therefore unconsolidated, reflecting the corporate structure and the terms of the shareholders' agreement, signed on June 28, 2013.

Companhia Energética Potiguar

On August 16, 2013, Petrobras entered into an agreement with Global Participações Energia S.A. to dispose of its 20% interest in the voting capital of Companhia Energética Potiguar for US$ 10, after contractual price adjustments.

The approval by Conselho Administrativo de Defesa Econômica – CADE was obtained on September 25, 2013 and the transaction was concluded on October 31, 2013.

Coulomb field – USA

On August 16, 2013, the Board of Directors of Petrobras approved the disposal by Petrobras America Inc., a subsidiary of Petrobras International Braspetro B.V. (PIBBV), of its 33% interest in the Coulomb field, located at the Mississipi Canyon block 613 (MC 613) for US$ 184. Shell Offshore Inc., operator and holder of a 67% interest in the field, exercised its purchase right of first refusal.

After the price adjustment established in the farm-out agreement and the costs associated with the asset, a gain of US$ 121, net, was recognized when the transaction was concluded, on September 27, 2013.

Innova S.A.

On August 16, 2013, the Board of Directors of Petrobras approved the disposal of 100% of the share capital of Innova S.A. (Innova) to Videolar S.A. and its controlling shareholder, at a consideration of US$ 369, subject to price adjustment before the transaction is concluded.

The transaction was approved in a Shareholders’ Extraordinary General Meeting held on September 30, 2013 and its conclusion is subject to certain conditions, including the approval by Conselho Administrativo de Defesa Econômica – CADE.

Due to the pending conditions precedent for conclusion of this transaction, on December 31, 2013 the assets and associated liabilities involved in this transaction were classified as held for sale.

32 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

BC-10 Block - Parque das Conchas

On August 16, 2013, the Board of Directors of Petrobras approved the disposal of the total interest in the Parque das Conchas offshore project (BC-10 block), representing 35% of the joint venture and 35% of Tambá BV – an equipment supplier, for a consideration of US$ 1.54 billion.

The agreement with Sinochem Group established certain conditions precedent to the conclusion of the sale, including the right of first refusal of the parties in the joint venture and the approval of the transaction by  Conselho Administrativo de Defesa Econômica (CADE) and Agência Nacional de Petróleo, Gás e Biocombustíveis (ANP).

On September 17, 2013 Shell and ONGC Videsh exercised their rights of first refusal to purchase a 23% and a 12% interest, respectively.

After approval by ANP and CADE, the assets were disposed of on December 30, 2013. The transaction resulted in a US$ 446 gain for the Company.

Petrobras Colombia Limited (PEC)

On September  13, 2013, the Board of Directors of Petrobras approved the disposal of 100% of the share capital of Petrobras Colombia Limited (PEC), a subsidiary of Petrobras International Braspetro B.V. (PIBBV), to Perenco Colombia Limited, for a consideration of US$ 380, subject to price adjustment before the closing of the transaction.

The transaction is subject to customary conditions precedent, including its approval by the Agência Nacional de Hidrocarburos – ANH.

Due to the pending conditions precedent for conclusion of this transaction, at December 31, 2013 the assets and associated liabilities involved in the transaction were classified as held for sale.

Exploration Blocks - Uruguai

On October 4, 2013, the Board of Directors of Petrobras approved the disposal to Shell of a 40% interest that Petrobras Uruguay Servicios y Operaciones S.A. – PUSO, a subsidiary of Petrobras Uruguay S.A. de Inversión had in Bizoy S.A. and Civeny S. A., for a consideration of US$ 18. Bizoy S.A. and Civeny S.A. held exploration blocks 3 and 4, respectively, located in the Punta Del Este Basin, in Uruguai.

The transaction is subject to certain conditions precedent, mainly the approval by Administración Nacional de Combustibles Alcohol y Portland (ANCAP).

Due to the pending conditions precedent for conclusion of this transaction, the assets and associated liabilities involved in the transaction were classified as held for sale.

Petrobras Energia  Peru S.A.

On November 13, 2013, the Board of Directors of Petrobras approved the disposal of 100% of Petrobras Energia Peru S.A. by Petrobras de Valores Internacional de España S.L. – PVIE and Petrobras Internacional Braspetro BV – PIB BV to China National Petroleum Corporation (CNPC), for US$ 2,669, subject to price adjustment until the transaction is concluded.

The transaction is subject to certain conditions precedent, including approval by the Chinese and Peruvian governments, as well as compliance with the procedures under their "Joint Operating Agreement (JOA)", where applicable.

33 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Due to the pending conditions precedent for the conclusion of this transaction, the assets and corresponding liabilities related to the transaction objects were classified as held for sale.

10.3.   Assets classified as held for sale

Assets classified as held for sale and associated liabilities, classified under the Company’s current assets and current liabilities are comprised of the following items and business segments:

 

 

 

 

 

 

 

Consolidated

 

 

 

 

 

 

2013

2012

 

Exploration

and

Production (*)

Refining,

Transport.

& Marketing

Gas

&

Power

International

Others

Total

Total

Assets classified as held for sale

 

 

 

 

 

 

 

Property, plant and equipment

50

125

1,605

1,780

143

Trade receivables

104

32

136

Inventories

78

43

121

Investments

15

28

11

54

Cash and Cash Equivalents

4

117

121

Others

15

180

195

 

50

341

28

1,988

2,407

143

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities on assets classified as held for sale

 

 

 

 

 

 

 

Trade Payables

(26)

(138)

(164)

Provision for decommissioning costs

(30)

(30)

Non-current debt

(15)

(597)

(612)

Others

(23)

(244)

(267)

 

(64)

(1,009)

(1,073)

(*) Net of impairment charges, as set out in note 14.3 

 

 

10.4.   Legal mergers, spin-offs and other information on investees

Partial spin-off of Petrobras International Finance Company S.A. - PifCo

On December 16, 2013, the Shareholders’ Extraordinary General Meeting of Petrobras approved the partial spin-off of certain assets and liabilities of Petrobras International Finance Company S.A. – PifCo, with the subsequent merger of the spun-off portion into Petrobras (not impacting share capital or additional paid in capital).

On February 12, 2014, Petrobras Global Finance B.V. (PGF), an indirect subsidiary of Petrobras, acquired the outstanding shares of PifCo for US$ 224 (net book value as of January 31, 2014).

See note 38 for further details about the transactions, which did not affect the consolidated financial statements.

34 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

Legal mergers of subsidiaries

In 2013, the following subsidiaries were merged into Petrobras, but did not increase share capital or additional paid in capital:

 

Date of the Shareholders’ Extraordinary General Meeting / Company:

 

 

On September 30, 2013:

 

 

Comperj Participações S.A

 

Comperj Estirênicos S.A

 

 

 Comperj MEG S.A

 

 

Comperj Poliolefinas S.A.

 

 

Sociedade Fluminense de Energia Ltda. (SFE)

 

 

 

 

 

 

 

 

On December 16, 2013:

 

 

Refinaria Abreu e Lima S.A. (RNEST)

 

Companhia de Recuperação Secundaria (CRSec)

 

Petrobras International Finance Company (PifCo) – partial spin-off

           

 

 

The objective of these mergers is to simplify the corporate structure of the Company, reduce costs and capture synergies. These mergers did not affect the consolidated financial statements.

35 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

11.        Investments 

11.1.   Information about direct subsidiaries, joint arrangements and associates

 

Main business segment

% Petrobras' ownership

% Petrobras' voting rights

Shareholders’ equity (deficit)

Net income (loss) for the year

Country

Subsidiaries

 

 

 

 

 

 

Petrobras Netherlands B.V. - PNBV

E&P

100.00%

100.00%

13,036

2,748

Netherlands

Petrobras Distribuidora S.A. - BR

Distribution

100.00%

100.00%

5,080

988

Brazil

Petrobras Gás S.A. - Gaspetro

Gas & Power

100.00%

100.00%

4,539

770

Brazil

Petrobras Transporte S.A. - Transpetro

RT&M

100.00%

100.00%

2,061

413

Brazil

Petrobras International Braspetro - PIB BV

International

88.12%

88.12%

1,859

1,801

Netherlands

Petrobras Logística de Exploração e Produção S.A. - PB-LOG

E&P

100.00%

100.00%

1,430

91

Brazil

Companhia Integrada Têxtil de Pernambuco S.A. - Citepe

RT&M

100.00%

100.00%

1,069

(100)

Brazil

Petrobras Biocombustível S.A. - PBIO

Biofuels

100.00%

100.00%

905

(150)

Brazil

Companhia Locadora de Equipamentos Petrolíferos S.A. - CLEP

E&P

100.00%

100.00%

653

34

Brazil

Companhia Petroquímica de Pernambuco S.A. - PetroquímicaSuape

RT&M

100.00%

100.00%

640

(257)

Brazil

Petrobras International Finance Company - PifCo

Corporate

100.00%

100.00%

(483)

(727)

Luxembourg

Liquigás Distribuidora S.A.

Distribution

100.00%

100.00%

367

11

Brazil

Araucária Nitrogenados S.A.

Gas & Power

100.00%

100.00%

337

(21)

Brazil

Termomacaé Ltda.

Gas & Power

99.99%

99.99%

319

53

Brazil

Termoaçu S.A.

Gas & Power

100.00%

100.00%

295

(25)

Brazil

INNOVA S.A. ( * )

RT&M

100.00%

100.00%

247

80

Brazil

5283 Participações Ltda.

International

100.00%

100.00%

221

214

Brazil

Breitener Energética S.A.

Gas & Power

93.66%

93.66%

216

Brazil

Termobahia S.A.

Gas & Power

98.85%

98.85%

185

10

Brazil

Termoceará Ltda.

Gas & Power

100.00%

100.00%

143

28

Brazil

Arembepe Energia S.A.

Gas & Power

100.00%

100.00%

134

43

Brazil

Petrobras Comercializadora de Energia Ltda. - PBEN

Gas & Power

99.91%

99.91%

128

38

Brazil

Baixada Santista Energia S.A.

Gas & Power

100.00%

100.00%

115

25

Brazil

Fundo de Investimento Imobiliário RB Logística - FII

E&P

99.00%

99.00%

106

139

Brazil

Energética Camaçari Muriçy I Ltda.

Gas & Power

100.00%

100.00%

77

45

Brazil

Termomacaé Comercializadora de Energia Ltda

Gas & Power

100.00%

100.00%

39

6

Brazil

Braspetro Oil Services Company - Brasoil

E&P

100.00%

100.00%

(29)

(21)

Cayman Islands

Cordoba Financial Services GmbH

Corporate

100.00%

100.00%

23

1

Austria

Petrobras Negócios Eletrônicos S.A. - E-Petro

Corporate

99.95%

99.95%

13

1

Brazil

Downstream Participações Ltda.

Corporate

100.00%

100.00%

(1)

Brazil

 

 

 

 

 

 

 

Joint operations

 

 

 

 

 

 

Fábrica Carioca de Catalizadores S.A. - FCC

RT&M

50.00%

50.00%

130

21

Brazil

Ibiritermo S.A.

Gas & Power

50.00%

50.00%

56

19

Brazil

 

 

 

 

 

 

 

Joint ventures

 

 

 

 

 

 

Logum Logística S.A.

RT&M

20.00%

20.00%

121

(29)

Brazil

Brasil PCH S.A. ( * )

Gas & Power

49.00%

49.00%

61

16

Brazil

Cia Energética Manauara S.A.

Gas & Power

40.00%

40.00%

64

6

Brazil

Petrocoque S.A. Indústria e Comércio

RT&M

50.00%

50.00%

53

10

Brazil

Brasympe Energia S.A.

Gas & Power

20.00%

20.00%

35

3

Brazil

Participações em Complexos Bioenergéticos S.A. - PCBIOS

Biofuels

50.00%

50.00%

26

Brazil

Refinaria de Petróleo Riograndense S.A.

RT&M

33.20%

33.33%

22

1

Brazil

METANOR S.A. - Metanol do Nordeste

RT&M

34.54%

50.00%

21

2

Brazil

Brentech Energia S.A.

Gas & Power

30.00%

30.00%

21

6

Brazil

Companhia de Coque Calcinado de Petróleo S.A. - Coquepar

RT&M

45.00%

45.00%

20

(8)

Brazil

Eólica Mangue Seco 4 - Geradora e Comercializadora de Energia Elétrica S.A.

Gas & Power

49.00%

49.00%

18

Brazil

Eólica Mangue Seco 3 - Geradora e Comercializadora de Energia Elétrica S.A.

Gas & Power

49.00%

49.00%

17

Brazil

Eólica Mangue Seco 1 - Geradora e Comercializadora de Energia Elétrica S.A.

Gas & Power

49.00%

49.00%

16

2

Brazil

Eólica Mangue Seco 2 - Geradora e Comercializadora de Energia Elétrica S.A.

Gas & Power

51.00%

51.00%

15

1

Brazil

GNL do Nordeste Ltda.

Gas & Power

50.00%

50.00%

Brazil

 

 

 

 

 

 

 

Associates

 

 

 

 

 

 

Braskem S.A.

RT&M

36.20%

47.03%

3,241

236

Brazil

Fundo de Investimento em Participações de Sondas

E&P

4.59%

4.59%

1,774

808

Brazil

Sete Brasil Participações S.A.

E&P

5.00%

5.00%

1,099

46

Brazil

UTE Norte Fluminense S.A.

Gas & Power

10.00%

10.00%

388

44

Brazil

UEG Araucária Ltda.

Gas & Power

20.00%

20.00%

300

17

Brazil

Deten Química S.A.

RT&M

27.88%

27.88%

128

32

Brazil

Energética SUAPE II S.A.

Gas & Power

20.00%

20.00%

92

39

Brazil

Termoelétrica Potiguar S.A. - TEP

Gas & Power

20.00%

20.00%

36

Brazil

Nitroclor Ltda.

RT&M

38.80%

38.80%

Brazil

Bioenergética Britarumã S.A.

Gas & Power

30.00%

30.00%

Brazil

(*) Classified as assets held for sale as of December 31, 2013, as set out in note 10.

 

 

 

36 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

11.2.   Investments in associates and joint ventures

 

2013

2012

Investments measured using equity method

 

 

Braskem S.A.

2,201

2,703

Petrobras Oil & Gas BV (i)

1,707

Gas distributors

533

555

Guarani S.A.

510

482

Petroritupano - Orielo

198

233

Petrowayu - La Concepción

185

193

Nova Fronteira Bionergia S.A.

170

203

Other petrochemical investments

84

153

Transierra S.A.

68

69

Petrokariña - Mata

66

75

UEG Araucária

59

64

Termoaçu S.A. (ii)

267

Distrilec S.A. (iii)

41

Other associates and joint ventures

863

948

 

6,644

5,986

Other investments

22

120

 

6,666

6,106

(i) Consolidated company in 2012, as described in note 10.

(ii) Acquisition of control in 2013, as described in notes 3.1 and 10.

(iii) Investment sold in January 2013 by Petrobras Argentina S.A.

 

 

 

11.3.   Investments in listed companies

 

Thousand-share lot

 

Quoted stock exchange prices (US$  per share)

Market value

Company

2013

2012

Type

2013

2012

2013

2012

 

 

 

 

 

 

 

 

Indirect subsidiary

 

 

 

 

 

 

 

Petrobras Argentina

1,356,792

1,356,792

Common

0.80

0.69

1,083

936

 

 

 

 

 

 

1,083

936

 

 

 

 

 

 

 

 

Associate

 

 

 

 

 

 

 

Braskem

212,427

212,427

Common

7.04

4.70

1,496

998

Braskem

75,793

75,793

Preferred A

8.96

6.26

680

475

 

 

 

 

 

 

2,176

1,473

 

 

 

The market value of these shares does not necessarily reflect the realizable value of a large block of shares.

37 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

11.4.   Non-controlling interest

The total amount of non-controlling interest at December 31, 2013 is US$ 596, of which US$ 593 is related to Petrobras Argentina S.A. Summarized information on Petrobras Argentina is set out following:

 

Petrobras Argentina

 

2013

2012

Current assets

980

1,117

Long-term receivables

174

290

Property, plant and equipment

1,468

1,727

Other noncurrent assets

636

763

 

3,258

3,897

Current liabilities

618

882

Non-current liabilities

834

861

Shareholder's equity

1,805

2,153

 

3,257

3,896

Sales revenues

254

270

Net income

139

129

Net change in cash and cash equivalents

(40)

76

 

 

 

Petrobras Argentina is an integrated energy company, indirectly controlled by Petrobras (directly controlled by PIB BV), whose main place of business is Argentina.

11.5.   Summarized information on joint ventures and associates

The Company invests in joint ventures and associates in Brazil and abroad, whose activities are related to petrochemical companies, gas distributors, biofuels, thermoelectric power stations, refineries and other activities. Summarized accounting information is set out below:

 

2013

 

Joint ventures

Associates

 

In Brazil

Abroad

In Brazil

Abroad

Current assets

1,603

2,391

9,677

2,749

Non-current assets

830

1,865

3,103

53

Property, plant and equipment

1,639

7,068

13,141

2,783

Other non-current assets

933

51

2,945

71

 

5,005

11,375

28,866

5,656

Current liabilities

1,733

978

6,750

2,562

Non-current liabilities

1,022

6,193

13,864

1,035

Shareholders' equity

2,240

4,052

8,190

2,059

Non-controlling interest

9

153

62

 

5,004

11,376

28,866

5,656

Sales revenues

5,646

1,792

21,363

93

Net Income for the Year

254

570

1,201

322

Ownership interest - %

20 to 83%

34 to 50%

5 to 49%

11 to 49%

 

 

38 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

12.        Property, plant and equipment

12.1.   By class of assets

 

Land, buildings and improvements

Equipment and other assets

Assets under construction (*)

Exploration and

development

costs (Oil and

gas producing

properties)

Total

Balance at January 1, 2012

6,588

66,362

84,529

25,439

182,918

Additions

50

2,073

32,571

1,703

36,397

Additions to / review of estimates of decommissioning costs

5,207

5,207

Capitalized borrowing costs

3,792

3,792

Business combinations

83

182

2

267

Write-offs              

(6)

(59)

(2,651)

(106)

(2,822)

Transfers

2,504

24,818

(30,413)

6,994

3,903

Depreciation, amortization and depletion

(477)

(6,626)

(3,765)

(10,868)

Impairment recognition (****)

(20)

(178)

(37)

(149)

(384)

Impairment reversal (****)

44

134

65

243

Cumulative translation adjustment

(558)

(4,908)

(6,264)

(2,022)

(13,752)

Balance at December 31, 2012

8,164

81,708

81,663

33,366

204,901

Cost

10,834

122,647

81,663

62,348

277,492

Accumulated depreciation, amortization and depletion

(2,670)

(40,939)

(28,982)

(72,591)

Balance at December 31, 2012

8,164

81,708

81,663

33,366

204,901

Additions

68

1,794

36,125

663

38,650

Additions to / review of estimates of decommissioning costs

(629)

(629)

Capitalized borrowing costs

3,909

3,909

Business combinations

17

31

16

64

Write-offs              

(4)

(121)

(2,399)

(25)

(2,549)

Transfers (***)

1,224

23,626

(29,620)

25,896

21,126

Depreciation, amortization and depletion

(518)

(7,513)

(4,939)

(12,970)

Impairment recognition (****)

(11)

(6)

(85)

(102)

Impairment reversal (****)

49

72

121

Cumulative translation adjustment

(1,083)

(9,158)

(9,930)

(4,449)

(24,620)

Balance at December 31, 2013

7,868

90,405

79,758

49,870

227,901

Cost

10,729

133,368

79,758

77,117

300,972

Accumulated depreciation, amortization and depletion

(2,861)

(42,963)

(27,247)

(73,071)

Balance at December 31, 2013

7,868

90,405

79,758

49,870

227,901

 

 

 

 

 

 

Weighted average of useful life in years

25 (25 to 40 ) (except land)

20 (3 to 31) (**)

 

Units of production method

 

 

 

 

 

 

 

 

 

 

 

 

 

(*) See note 30 for assets under construction by business area

(**) Includes exploration and production assets depreciated based on the units of production method.

(***) Includes the amount of US$ 22,134, reclassified from Intangible Assets to Property, Plant and Equipment as a result of the declaration of commerciality of areas of the Assignment Agreement (Franco and Sul de Tupi), as described in note 13; the amount related to PO&G (US$ 2,366), which have ceased to be consolidated; and amounts transferred to assets classified as held for sale, set out in note 10.3.

(****) Impairment charges and reversals are recognized in profit or loss as other operating expenses.

 

 

 

At December 31, 2013, property, plant and equipment includes assets under finance leases of US$ 86 (US$ 102 at December 31, 2012).

 

39 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

12.2.   Estimated useful life

Buildings and improvements, equipment and other assets

 

Estimated useful life

Cost

Accumulated depreciation

Balance at 2013

5 years or less

5,396

(3,260)

2,135

6 - 10 years

20,571

(9,899)

10,671

11 - 15 years

944

(417)

526

16 - 20 years

34,986

(8,753)

26,233

21 - 25 years

15,890

(5,007)

10,884

25 - 30 years

22,484

(4,007)

18,477

30 years or more

22,934

(4,540)

18,394

Units of production method

20,175

(9,942)

10,233

 

143,380

(45,825)

97,553

 

 

 

 

Buildings and improvements

10,011

(2,861)

7,150

Equipment and other assets

133,368

(42,963)

90,405

 

 

13.        Intangible assets

13.1.   By class of assets

 

 

Softwares

 

 

 

Rights and Concessions

Acquired

Developed in-house

Goodwill

Total

Balance at January 1, 2012

42,013

180

715

504

43,412

Addition

90

72

146

308

Capitalized borrowing costs

15

15

Write-offs

(119)

(2)

(3)

(124)

Transfers

(80)

12

(97)

(14)

(179)

Amortization

(48)

(61)

(142)

(251)

Impairment - reversal (***)

6

6

Cumulative translation adjustment

(3,349)

(13)

(57)

(29)

(3,448)

Balance at December 31, 2012

38,513

188

577

461

39,739

Cost

38,920

715

1,444

461

41,540

Accumulated amortization

(407)

(527)

(867)

(1,801)

Balance at December 31, 2012

38,513

188

577

461

39,739

Addition

2,931

33

128

3,092

Capitalized borrowing costs

12

12

Write-offs

(80)

(2)

(3)

(85)

Transfers (**)

(22,222)

(15)

(14)

(17)

(22,268)

Amortization

(38)

(47)

(133)

(218)

Impairment recognition (****)

(524)

(524)

Cumulative translation adjustment

(4,199)

(15)

(71)

(44)

(4,329)

Balance at December 31, 2013

14,381

142

496

400

15,419

Cost

14,804

607

1,442

400

17,253

Accumulated amortization

(423)

(465)

(946)

(1,834)

Balance at December 31, 2013

14,381

142

496

400

15,419

 

 

 

 

 

 

Estimated useful life - years

(*)

5

5

Indefinite

 

 

 

 

 

 

 

(*) See note 3.9 (Intangible assets).

(**) Includes the amount of US$ 22,134, reclassified from Intangible Assets to Property, Plant and Equipment as a result of the declaration of commerciality of areas of the Assignment Agreement (Franco and Sul de Tupi) areas, as described below; and the amount related to PO&G (US$ 601), which have ceased to be consolidated, as described in note 10.

(***) Impairment charges and reversals are recognized in profit or loss as other operating expenses.

 

 

 

On December 19, 2013, the Company submitted to the Agência Nacional de Petróleo, Gás Natural e  Biocombustíveis – ANP the declaration of commerciality of Franco and Sul de Tupi, located at the pre-salt area in the Santos basin. The exploration stage confirmed the volumes defined in the Assignment Agreement related to Franco (now Búzios) and Sul de Tupi (now Sul de Lula), of 3,058 billion barrels of oil equivalent and 128 million barrels of oil equivalent, respectively.

40 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

After the declaration of commerciality, the amounts of US$ 21,357 and US$ 777, paid to the Federal Government for the acquisition of Franco and Sul de Tupi, were reclassified from Intangible assets to Property, plant and equipment, according to the policy set out in note 3.9. These amounts will be the subject to the review of the Assignment Agreement, as set out in note 13.2.

13.2.   Concession for exploration of oil and natural gas - Assignment Agreement (“Cessão Onerosa”)

At December 31, 2013, the Company’s Intangible Assets include US$ 10,424 (US$ 36,608 at December 31, 2012) related to the Assignment agreement, net of amounts paid as signature bonuses for Franco (now Campo de Búzios) and Sul de Tupi (now Campo de Sul de Lula) which have been transferred to Property, Plant and Equipment, as set out in note 13.1.

Petrobras, the Federal Government (assignor) and the ANP (regulator and inspector) entered into the agreement in 2010, which grants the Company the right to carry out prospection and drilling activities for oil, natural gas and other liquid hydrocarbons located in blocks in the pre-salt area (Franco, Florim, Nordeste de Tupi, Entorno de Iara, Sul de Guará and Sul de Tupi), limited to the production of five billion barrels of oil equivalent in up to 40 years and renewable for a further five years upon certain conditions having been met.

The agreement establishes that, immediately after the declaration of commerciality for each area, the review procedures, which must be based on independent technical appraisal reports, will commence. The review of the Assignment Agreement will be concluded after the date of the last declaration of commerciality.

If the review determines that the value of acquired rights are greater than initially paid, the Company may be required to pay the difference to the Federal Government, or may proportionally reduce the total volume of barrels acquired in the terms of the agreement. If the review determines that the value of the acquired rights are lower than initially paid by the Company, the Federal Government will reimburse the Company for the difference by delivering cash or bonds, subject to budgetary regulations.

Once the effects of the aforementioned review become probable and can be reliably measured, the Company will make the respective adjustments to the purchase prices of the rights.

The agreement also establishes a compulsory exploration program for each one of the blocks and minimum commitments related to the acquisition of goods and services from Brazilian suppliers in the exploration and development stages, which will be subject to certification by the ANP. In the event of non-compliance, the ANP may apply administrative sanctions pursuant to the terms in the agreement.

Based on drilling results obtained so far, expectations regarding the production potential of the areas are being confirmed and the Company will continue to develop its investment program and activities as established in the agreement.

13.3.   Exploration rights returned to Agência Nacional de Petróleo, Gás Natural e Biocombustíveis (ANP)

Exploration areas returned to ANP in 2013, in the amount of US$ 61 (US$ 113 in 2012) are set out below:

Exclusive Concession Blocks (Petrobras):

-         Campos Basin: C-M-95; C-M-96; C-M-119; C-M-120; C-M-403;

-         Espírito Santo Basin: ES-M-523;

41 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

-         Parecis Basin: PRC-T-104; PRC-T-105;            

-         Solimões Basin: SOL-T-150; SOL-T-173.

Blocks in partnership (returned by Petrobras or by its operators):

-         Ceará Basin: BM-CE-1;

-         Camamu Almada Basin: CAL-M-120; CAL-M-186;

-         Campos Basin: C-M-593;

-         Espírito Santo Basin: ES-M-588; ES-M-590; ES-M-592; ES-M-663;

-         Paraíba-Pernambuco Basin: PEPB-M-837;

-         Potiguar Basin: POT-T-699; POT-T-745; POT-T-774;

-         São Francisco Basin: SF-T-101; SF-T-102; SF-T-111; SF-T-112;

-         Santos Basin: S-M-172; S-M-674; S-M-789.

13.4.   Oil and Gas fields operated by Petrobras returned to ANP

During 2013 the following oil and gas fields were returned to ANP: Coral, Carataí, Corruíra, Biquara, Guaiúba, Iraí, Dentão, Acauã Leste, Guajá and Noroeste do Morro Rosado.

13.5.   Service concession agreement - Distribution of piped natural gas

At December 31, 2013, intangible assets include service concession agreements related to piped natural gas distribution in Brazil, in the amount of US$ 229 maturing between 2029 and 2043, which may be extended. According to the agreements, distribution service can be provided to industrial, residential, commercial, automotive, air conditioning, transport, and other sectors.

The consideration receivable is a factor of a combination of operating costs and expenses and return on capital invested. The rates charged for gas distribution are subject to periodic reviews by the state regulatory agency.

The agreements establish an indemnity clause for investments in assets which are subject to return at the end of the service agreement, to be determined based on evaluations and appraisals.

14.        Impairment 

14.1.   Property, plant and equipment and intangible

Value in use is calculated to assess the recoverable amount of the Cash-Generating Units, and the basis for estimates of cash flow projections include: an estimate of the useful life of the assets in the CGU; budgets, forecasts and assumptions approved by management; and pre-tax discount rate derived from the weighted average cost of capital (WACC) method.

The recoverable amount of the Distribution CGU (including goodwill) was calculated using value in use, and no impairment losses were recognized. The basis for estimates of cash flow projections include: average useful life of 17 years, non-growing perpetuity, budgets, forecasts and assumptions approved by management, and pre-tax discount rate derived from the WACC method.

Based on 2013 impairment tests, the following amounts were recognized as impairment losses / reversals in other operating expenses, in profit or loss:

-       Exploration and Production

42 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Based on impairment tests, impairment losses of US$ 58 were recognized in exploration and production assets, mainly related to mature oil and gas producing properties under concessions in Brazil.

A review of projects, which are now financially viable, along with the implementation of operational efficiency programs and of operating costs optimization programs in certain CGUs led to the reversal of impairment losses recognized in previous years, related to oil and gas producing properties under concessions in Brazil (US$ 118).

-       International 

Based on impairment tests, impairment losses of US$ 11 were recognized in international assets, mainly related to mature oil and gas exploration and producing properties in the United States, representing the carrying amount of Garden Banks 200 and 201 blocks.

A US$ 553 impairment loss was recognized to reduce the carrying amounts of exploration and production assets in Angola and Tanzania classified as held for sale to fair value less cost to sell, as set out in note 10.2.

14.2.   Investments in associates and joint ventures (including goodwill)

Value in use is generally used for impairment test of goodwill associated to investments in associates and joint ventures. The basis for estimates of cash flow projections included: projections covering a period of 5 to 12 years, non-growing perpetuity, budgets, forecasts and assumptions approved by management, and pre-tax discount rate derived from the WACC method.

Based on 2013 impairment tests, no impairment losses were recognized, related to those assets. The carrying amounts and goodwill of the most significant investments in associates and joint ventures are set out below:

Investments

Segment

Pre-tax

discount rate

(real interest rate)

Value in use

Carrying Amount

Braskem S.A.

Petrochemical

16%

2,808

2,201

Natural Gas Distributors

Natural Gas

7% to 14%

2,557

533

Guarani S.A.

Biofuels

9%

553

510

 

 

-       Investment in publicly traded associate (Braskem S.A.):

Braskem’s shares are publicly traded on stock exchanges in Brazil and abroad. The quoted market value as of December 31, 2013, was U.S.$ 2,176, based on the quoted values of both Petrobras’ share in common stock (47% of the outstanding shares), and preferred stock (22% of the outstanding shares). However, there is extremely limited trading of the common shares, since non-signatories of the shareholders’ agreement hold only approximately 3% of the common shares. Thus if common shares and preferred shares were valued at the same price per share, market value would amount to US$ 2,584.

In addition, given the operational relationship between Petrobras and Braskem, the recoverable amount of the investment, for impairment testing purposes, was determined based on value in use, considering future cash flow projections and the manner in which the Company can derive value from these investments via dividends and other distributions to arrive at value in use. As the recoverable amount was higher than the carrying amount, no impairment losses were recognized in 2013 for this investment.

Cash flow projections to determine the value in use of Braskem were based on the following key assumptions: (i) estimated average exchange rate of R$ 2.23 to U.S.$1.00 in 2014 (converging to R$ 1.87 in the long term); (ii) Brent crude oil price of US$ 105.00 for 2014, declining to U.S.$ 95.00 in the long term; (iii) prices of feedstock and petrochemical products reflecting projected international prices; (iv) petrochemical products sales volume estimates reflecting projected Brazilian and global G.D.P growth; and (v) increases in the EBITDA margin along with the next growth cycle of the petrochemical industry during the next years and declining in the long term.

43 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

14.3.   Assets classified as held for sale

Due to the approval by the Board of Directors of the disposal of PI, PIII, PIV and PXIV drilling rigs, these assets were remeasured at fair value and impairment losses of US$ 64 were recognized in the exploration and production segment.

15.        Exploration for and evaluation of oil and gas reserves

The exploration and evaluation activities include the search for oil and gas from obtaining the legal rights to explore a specific area until the declaration of the technical and commercial viability of the reserves.

Changes in the balances of capitalized costs directly associated with exploratory wells pending determination of proved reserves and the balance of amounts paid for obtaining rights and concessions for exploration of oil and natural gas (capitalized acquisition costs) are set out in the table below:

Capitalized Exploratory Well Costs / Capitalized Acquisition Costs (*)

2013

2012

Property plant and equipment

 

 

Opening Balance

10,649

10,120

Additions to capitalized costs pending determination of proved reserves

4,981

6,640

Capitalized exploratory costs charged to expense

(1,251)

(2,782)

Transfers upon recognition of proved reserves (***)

(4,174)

(2,628)

Cumulative translation adjustment

(1,403)

(701)

Closing Balance

8,802

10,649

Intangible Assets (**)

13,880

37,968

Capitalized Exploratory Well Costs / Capitalized Acquisition Costs

22,682

48,617

 

 

 

(*) Amounts capitalized and subsequently expensed in the same period have been excluded from the table above.

(**) The balance of intangible assets comprises mainly the amounts related to the Assignment Agreement (note 13.2).

(***) Includes US$ 736 relative to PO&G, which has been unconsolidated, as set out in note 10.

 

 

 

Exploration costs recognized in profit or loss and cash used in oil and gas exploration and evaluation activities are set out in the table below:

Exploration costs recognized in profit or loss

2013

2012

2011

Geological and Geophysical Expenses

968

1,022

1,024

Exploration expenditures written off (incl.dry wells and signature bonuses)

1,892

2,847

1,480

Other exploration expenses

99

89

101

Total expenses

2,959

3,958

2,605

 

 

 

 

Cash used in activities

2013

2012

2011

Operating activities

1,073

1,139

1,107

Investment activities

8,605

6,640

6,258

Total cash used

9,678

7,779

7,365

 

 

 

44 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

15.1.   Aging of Capitalized Exploratory Well Costs

An aging of the number of wells and the capitalized exploratory well costs based on the drilling completion date, along with the number of projects for which exploratory well costs have been capitalized for a period greater than one year are set out in the table below:

Aging of capitalized exploratory well costs (*)

 

 

 

2013

2012

Capitalized expl. well costs that have been capitalized for a period of one year

2,568

4,219

Capitalized expl. well costs that have been capitalized for a period greater than one year

6,234

6,430

Ending balance

8,802

10,649

Number of projects that have expl. well costs that have been capitalized for a period greater than one year

86

145

 

 

 

 

Amounts capitalized

Number of wells

2012

2,464

39

2011

1,636

34

2010

896

18

2009

432

22

2008 and previous years

806

15

Ending balance

6,234

128

 

 

 

(*) Amounts paid for obtaining rights and concessions for exploration of oil and gas (capitalized acquisition costs) are not included.

 

 

 

Of the amount of US$ 6,234 for 86 projects that include wells suspended for more than one year since the completion of drilling, US$ 989 are related to wells in areas for which drilling was under way or firmly planned for the near future and for which an evaluation plan (“Plano de Avaliação”) has been submitted and is subject to approval by ANP; and US$ 5,245 are related to costs incurred to assess the reserves and their potential development.

16.        Trade payables

 

2013

2012

Current Liabilities

 

 

Third parties

 

 

In Brazil

5,346

6,511

Abroad

6,061

5,104

Related parties (note 19)

512

509

 

11,919

12,124

 

 

 

45 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

17.        Finance debt

Funding requirements are related to the development of oil and gas production projects, building of vessels and pipelines, as well as construction and expansion of industrial plants, among other uses. Changes in the noncurrent debt and the balance of current debt in 2013 and 2012 are set out below:

 

Export

Credit

Agencies

Banking Market

Capital Market

Others

Total

Non-current

 

 

 

 

 

In Brazil

 

 

 

 

 

Opening balance at January 1 , 2012

30,218

1,250

80

31,548

Additions (new funding obtained)

3,163

258

3,421

Interest incurred during the period

45

30

2

77

Foreign exchange/inflation indexation charges

1,184

51

3

1,238

Transfer from long term to short Term

(1,023)

(227)

(15)

(1,265)

Cumulative translation adjustment (CTA)

(2,610)

(107)

(6)

(2,723)

Balance at December 31, 2012

30,977

1,255

64

32,296

Abroad

 

 

 

 

 

Opening balance at January 1 , 2012

5,004

14,430

21,026

710

41,170

Additions (new funding obtained)

879

5,870

9,524

16,273

Interest incurred during the period

3

5

203

211

Foreign exchange/inflation indexation charges

91

536

104

11

742

Transfer from long term to short Term

(677)

(836)

(592)

(85)

(2,190)

Cumulative translation adjustment (CTA)

(255)

(521)

766

(8)

(18)

Balance at December 31, 2012

5,045

19,484

31,031

628

56,188

Total Balance at December 31, 2012

5,045

50,461

32,286

692

88,484

Non-current

 

 

 

 

 

In Brazil

 

 

 

 

 

Opening balance at January 1 , 2013

30,977

1,255

64

32,296

Additions (new funding obtained)

10,463

237

10,700

Interest incurred during the period

86

16

3

105

Foreign exchange/inflation indexation charges

1,510

54

2

1,566

Transfer from long term to short Term

(9,894)

(181)

(13)

(10,088)

Transfer to liabilities associated with assets classified as held for sale

(14)

(14)

Cumulative translation adjustment (CTA)

(4,128)

(170)

(7)

(4,305)

Balance at December 31, 2013

29,000

1,211

49

30,260

Abroad

 

 

 

 

 

Opening balance at January 1 , 2013

5,045

19,484

31,031

629

56,189

Additions (new funding obtained)

1,557

9,178

10,990

87

21,812

Interest incurred during the period

1

14

36

8

59

Foreign exchange/inflation indexation charges

159

893

280

30

1,362

Transfer from long term to short Term

(671)

(1,310)

(418)

(42)

(2,441)

Transfer to liabilities associated with assets classified as held for sale

(393)

(393)

Cumulative translation adjustment (CTA)

(286)

(958)

653

(22)

(613)

Balance at December 31, 2013

5,805

26,908

42,572

690

75,975

Total Balance at December 31, 2013

5,805

55,908

43,783

739

106,235

 

 

 

Current debt

2013

2012

Short-term debt

3,654

3,666

Current portion of long-term debt

3,118

2,795

Accrued interest

1,229

1,018

 

8,001

7,479

 

 

 

 

46 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

17.1.   Summarized information on current and non-current finance debt

Maturity in

up to 1 year

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

5 years and afterwards

Total

Fair value

Financing in Brazilian Reais (BRL):

1,115

1,392

2,920

2,156

2,320

12,922

22,825

22,712

Floating rate debt

743

984

2,571

1,802

1,996

11,183

19,279

 

Fixed rate debt

372

408

349

354

324

1,739

3,546

 

Average interest rate

7.4%

7.8%

9.2%

8.7%

8.9%

8.8%

8.7%

 

Financing in U.S.Dollars (USD):

5,832

5,635

8,939

5,722

11,230

35,583

72,941

73,588

Floating rate debt

4,747

4,249

4,273

3,629

8,861

13,576

39,335

 

Fixed rate debt

1,085

1,386

4,666

2,093

2,369

22,007

33,606

 

Average interest rate

3.1%

3.3%

3.1%

3.0%

3.1%

4.3%

3.7%

 

Financing in Brazilian Reais indexed to U.S. Dollars:

240

104

372

682

682

6,755

8,835

9,016

Floating rate debt

5

5

 

Fixed rate debt

240

104

372

682

682

6,750

8,830

 

Average interest rate

5.2%

4.9%

6.7%

7.0%

7.0%

7.3%

7.1%

 

Financing in Pound Sterling (£):

13

1,859

1,872

1,904

Fixed rate debt

13

1,859

1,872

 

Average interest rate

5.6%

5.9%

5.9%

 

Financing in Japanese Yen (¥):

581

118

446

108

98

1,351

1,373

Floating rate debt

98

98

98

98

98

490

 

Fixed rate debt

483

20

348

10

861

 

Average interest rate

0.9%

0.9%

1.8%

0.8%

0.8%

1.2%

 

Financing in Euro (€):

213

14

11

11

1,721

4,428

6,398

6,631

Fixed rate debt

213

14

11

11

1,721

4,428

6,398

 

Average interest rate

4.4%

1.4%

1.4%

1.4%

4.9%

4.2%

4.4%

 

Financing in other currencies:

7

3

4

14

14

Fixed rate debt

7

3

4

14

 

Average interest rate

12.5%

15.3%

15.3%

14.0%

 

 

 

 

 

 

 

 

 

 

Total as of December 31, 2013

8,001

7,266

12,692

8,679

16,051

61,547

114,236

115,238

Total Average interest rate

3.6%

4.2%

4.6%

4.7%

4.3%

5.6%

5.0%

 

 

 

 

 

 

 

 

 

 

Total as of December 31, 2012

7,479

4,177

7,125

13,665

9,389

54,128

95,963

102,486

 

 

 

 

 

 

 

 

 

* The average maturity of outstanding debt at December 31, 2013 is 7.1 years.

 

 

 

The sensitivity analysis for financial instruments subject to foreign exchange variation and the fair value of the long-term debt are set out in note 34.

  

47 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

17.2.     Weighted average capitalization rate for borrowing costs

The weighted average interest rate, of the costs applicable to borrowings that are outstanding, applied over the balance of assets under construction for capitalization of borrowing costs was 4.5% p.a. in  2013 (4.5% p.a. in 2012).

17.3.   Funding – Outstanding balance

a)             Abroad 

 

Amount in US$ million

Company

Available (Line of Credit)

Used

Balance

PGT

1,000

500

500

Petrobras

2,500

253

2,247

 

 

 

b)            In Brazil

Company

Available (Line of Credit)

Used

Balance

Transpetro (*)

4,272

879

3,393

Petrobras

5,964

3,795

2,169

PNBV

4,217

4,217

Liquigas

47

35

12

 

 

 

 

(*)Purchase and sale agreements for 49 vessels and 20 convoys were signed with six Brazilian shipyards in the amount of US$ 5,017.

 

 

 

 

 

 

17.4.   Guarantees 

Financial institutions do not require Petrobras to provide guarantees related to loans and financing, except for funding from development banks, such as the BNDES, which are collateralized by the assets being financed. Certain subsidiaries issue securities fully and unconditionally guaranteed by Petrobras, as set out in note 38.

The loans obtained by structured entities are collateralized by the project assets, as well as a lien on credit rights and shares of the structured entities.

48 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

18.        Leases 

18.1.   Future minimum lease payments / receipts – finance leases

 

2013

 

Minimum receipts

Minimum payments

At December 31, 2013

 

 

2014

170

22

2015 - 2018

704

77

2019 and thereafter

1,821

266

Estimated lease receipts/payments

2,695

365

Less Interest expense (annual)

(1,174)

(276)

Present value of the lease receipts/payments

1,521

89

 

 

 

2014

96

9

2015 - 2018

398

32

2019 and thereafter

1,027

48

Present value of the lease receipts/payments

1,521

89

Current

58

16

Non-current

1,463

73

At December 31, 2013

1,521

89

Current

60

18

Non-current

1,536

86

At December 31, 2012

1,596

104

 

 

 

18.2.   Future minimum lease payments - operating leases

 

2013

2014

14,683

2015 - 2018

24,189

2019 and thereafter

13,219

At December 31, 2013

52,091

At December 31, 2012

52,051

 

 

 

 

 

During 2013 the Company paid US$ 11,520 (US$ 10,389 in 2012) for operating lease installments, recognized as a period expense. Those operating leases include oil and gas production units, drilling rigs, exploration and production equipment, vessels and support vessels, thermoelectric power plants, helicopters, land and building leases

19.        Related parties

The Company carries out commercial transactions with its subsidiaries, joint arrangements, consolidated structure entities and associates at normal market prices and market conditions. At December 31, 2013 and December 31, 2012, no losses were recognized on the statement of financial position for related party accounts receivable.

19.1.   Transactions with joint ventures, associates, government entities and pension funds

The balances of significant transactions are set out in the table below:

 

49 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

 

2013

2012

 

Profit or Loss

Assets

Liabilities

Profit or Loss

Assets

Liabilities

Joint ventures and associates

 

 

 

 

 

 

Natural gas distributors

3,920

424

209

3,200

446

216

Petrochemical companies

7,456

94

120

7,693

152

109

Other associates and joint ventures

940

140

193

686

182

272

 

12,316

658

522

11,579

780

597

Government entities

 

 

 

 

 

 

Government bonds

1,044

6,247

2,169

18,086

Banks controlled by the Federal Government

(1,973)

2,801

29,791

(1,850)

3,640

31,877

Receivables from the Electricity sector (Note 19.2)

747

2,156

926

1,937

Petroleum and alcohol account - Receivables from Federal government (Note 19.3)

357

409

Federal Government - Dividends and Interest on Capital

(18)

834

3

478

Others

92

209

334

(117)

361

452

 

(108)

11,770

30,959

1,131

24,433

32,807

Pension plan (Petros)

156

(6)

163

 

12,208

12,428

31,637

12,704

25,213

33,567

 

 

 

 

 

 

 

 

 

 

The line items effect in profit or loss and their carrying amounts in the statement of financial position are set out below:

 

2013

2012

 

Profit or Loss

Assets

Liabilities

Profit or Loss

Assets

Liabilities

Revenues (mainly sales revenues)

13,164

 

 

12,365

 

 

Foreign exchange and inflation indexation charges, net

(791)

 

 

(1,083)

 

 

Finance income (expenses), net

(165)

 

 

1,422

 

 

 

 

 

 

 

 

 

Current assets

 

7,622

 

 

20,354

 

Non-current assets

 

4,806

 

 

4,859

 

 

 

 

 

 

 

 

Current liabilities

 

 

3,568

 

 

3,361

Non-Current Liabilities

 

 

28,069

 

 

30,206

 

12,208

12,428

31,637

12,704

25,213

33,567

 

 

19.2.   Receivables from the electricity sector

At December 31, 2013, the Company had US$ 2,156 of receivables from the Brazilian electricity sector (US$ 1,937 at December, 31, 2012), of which US$ 1,743 were classified to non-current assets.

The Company supplies fuel to thermoelectric power plants located in the northern region of Brazil, which are direct or indirect subsidiaries of Eletrobras, the Federal Government electric energy company. Part of the costs for supplying fuel to these thermoelectric power stations is borne by the Fuel Consumption Account (Conta de Consumo de Combustível - CCC), managed by Eletrobras.

Collections of amounts related to fuel supply to Independent Power Producers (Produtores Independentes de Energia - PIE), which are companies created for the purpose of generating power exclusively for Amazonas Distribuidora de Energia S.A. - AME, a direct subsidiary of Eletrobras rely directly on AME, which transfers funds to the Independent Power Producers.

In March 2013 a private instrument of debt acknowledgement was signed by AME, having Eletrobras as a guarantor. The amount of US$ 422 will be paid in 60 successive monthly installments of US$ 7, indexed to the SELIC interest rate.

The Company continues to vigorously pursue an agreement to recover these receivables in full and partial payments have been made. The balance of these receivables at December 31, 2013 was US$ 1,977 (US$ 1,723 at December 31, 2012), of which US$ 1,450 was past due (US$ 1,451 at December 31, 2012).

50 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

The Company also has electricity supply contracts with AME signed in 2005 by its subsidiary Breitener Energética S.A., which, pursuant to the terms of the agreements, are considered a finance lease of the two thermoelectric power plants, since the contracts determine that the power plants should be returned to AME at the end of the agreement period with no residual value (20-year term), among other contractual provisions. The balance of these receivables was US$ 179 (US$ 214 at December, 31, 2012) none of which was overdue.

19.3.   Petroleum and Alcohol accounts - Receivables from Federal Government

At December 31, 2013, the balance of receivables related to the Petroleum and Alcohol accounts was US$ 357 (US$ 409 at December 31, 2012). Pursuant to Provisional Measure 2,181 of August 24, 2001, the Federal Government may settle this balance by using National Treasury Notes in an amount equal to the outstanding balance, or allow the Company to offset the outstanding balance against amounts payable to the Federal Government, including taxes payable, or both options.

The Company has provided all the information required by the National Treasury Secretariat (Secretaria do Tesouro Nacional - STN) in order to resolve disputes between the parties and conclude the settlement with the Federal Government.

Following several negotiation attempts at the administrative level, the Company filed a lawsuit in July 2011 to collect the receivables.

19.4.   Compensation of employees and officers

The criteria for compensation of employees and officers are established based on the current labor legislation and the Company’s policies related to Positions, Salaries and Benefits (Plano de Cargos e Salários e de Benefícios e Vantagens).

The compensation of employees (including those occupying managerial positions) and officers in the month of December 2013 and December 2012 were:

 

2013

2012

Amounts refer to monthly compensation in U.S. dollars

 

 

Compensation per employee

 

 

Lowest compensation

1,169.61

1,118.64

Average compensation

6,246.79

5,631.54

Highest compensation

36,077.81

33,233.06

 

 

 

Compensation per officer of Petrobras (highest)

44,144.51

41,415.24

 

 

 

The total compensation of Petrobras’ key management are set out below:

 

2013

2012

 

Officers

Board

Total

Officers

Board

Total

 

 

 

 

 

 

 

Short-term compensation

4.6

0.5

5.1

5.1

0.6

5.7

Long-term compensation (post-retirement benefits)

0.3

0.3

0.3

0.3

Total compensation

5.0

0.5

5.5

5.4

0.6

6.0

 

 

 

 

 

 

 

Number of members

7

10

17

7

10

17

 

 

 

In 2013 the compensation of board members and officers for the consolidated Petrobras group amounted to US$ 27.6 (US$ 29.0 in 2012).

51 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

20.        Provision for decommissioning costs

Non-current liabilities

2013

2012

Opening balance

9,441

4,712

Revision of provision

(902)

5,226

Payments made

(506)

(286)

Interest accrued

199

134

Others (*)

59

4

Cumulative translation adjustment

(1,158)

(349)

Closing balance

7,133

9,441

 

 

 

(*) Includes amounts related to liabilities associated with assets classified as held for sale, as set out in note 10.

 

 

21.        Taxes  

21.1.   Income taxes

 

2013

2012

Current assets

 

 

Taxes In Brazil

951

1,255

Taxes Abroad

109

207

 

1,060

1,462

 

 

 

Current liabilities

 

 

Taxes In Brazil

158

280

Taxes Abroad

123

65

 

281

345

 

 

 

52 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

21.2.   Other taxes

Current assets

2013

2012

Taxes In Brazil:

 

 

ICMS (VAT)

1,623

1,542

PIS/COFINS (Taxes on Revenues)

2,069

2,279

CIDE

20

23

Others

151

193

 

3,863

4,037

Taxes Abroad

48

73

 

3,911

4,110

Non-current assets

 

 

Taxes In Brazil:

 

 

Deferred ICMS (VAT)

879

903

Deferred PIS and COFINS (Taxes on Revenues)

4,197

4,051

Others

292

252

 

5,368

5,206

Taxes Abroad

12

17

 

5,380

5,223

Current liabilities

 

 

Taxes In Brazil:

 

 

ICMS (VAT)

1,164

1,488

PIS/COFINS (Taxes on Revenues)

230

491

CIDE

16

17

Production Taxes

2,432

2,624

Withholding income taxes

256

565

Others

350

360

 

4,448

5,545

Taxes abroad

221

238

 

4,669

5,783

 

 

53 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

21.3.   Deferred income taxes - non-current

Income taxes in Brazil comprise corporate income tax (IRPJ) and social contribution on net income (CSLL). Brazilian statutory corporate tax rates are 25% and 9%, respectively. The changes in the deferred income taxes are presented as follows:

a)             Changes in deferred income taxes

 

Property, Plant & Equipment

 

 

 

 

 

 

 

 

Oil and gas exploration costs

Others

Loans, trade and other receivables / payables and financing

Finance leases

Provision for legal proceedings

Tax losses

Inventories

Interest on capital

Others(*)

Total

Balance at January 1, 2012 (*)

(11,374)

(2,203)

(425)

(844)

335

343

634

473

1,289

(11,772)

Recognized in profit or loss for the year

(2,327)

(1,284)

961

217

59

998

(119)

595

(366)

(1,266)

Recognized in shareholders’ equity

1,519

1,519

Cumulative translation adjustment

1,038

341

24

77

(76)

(213)

(48)

(18)

(314)

811

Others

(14)

35

1

(38)

28

(19)

16

9

Balance at December 31, 2012(*)

(12,677)

(3,111)

561

(588)

346

1,109

467

1,050

2,144

(10,699)

Recognized in profit or loss for the period

(2,567)

(1,487)

330

(53)

133

3,481

177

351

(767)

(402)

Recognized in shareholders’ equity

1,407

53

71

(1,504)

27

Cumulative translation adjustment

1,842

427

(221)

72

(63)

(330)

(77)

(50)

(350)

1,250

Others

(4)

165

(93)

(2)

(7)

480

8

(8)

509

1,048

Balance at December 31, 2013

(13,406)

(4,006)

1,984

(518)

409

4,811

575

1,343

32

(8,776)

 

 

 

 

 

 

 

 

 

 

 

Deferred tax assets

 

 

 

 

 

 

 

 

 

1,277

Deferred tax liabilities

 

 

 

 

 

 

 

 

 

(11,976)

Balance at December 31, 2012 (*)

 

 

 

 

 

 

 

 

 

(10,699)

 

 

 

 

 

 

 

 

 

 

 

Deferred tax assets

 

 

 

 

 

 

 

 

 

1,130

Deferred tax liabilities

 

 

 

 

 

 

 

 

 

(9,906)

Balance at December 31, 2013

 

 

 

 

 

 

 

 

 

(8,776)

 

 

 

 

 

 

 

 

 

 

 

(*) Restated, as set out on note 2.3.

 

 

 

Management considers that the deferred tax assets will be realized in proportion to the realization of the provisions and the final resolution of future events, both of which are based on estimates.

  

54 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

b)            Timing of reversal of  deferred income taxes

Management considers that the deferred tax assets will be recovered as provisions are settled and future events occur, both based on estimates that have been made.

At December 31, 2013 the estimated recovery / reversal dates of net deferred tax assets (liabilities) recoverable (payable) is set out in the following table:

 

Deferred income tax

 

Assets

Liabilities

2014

111

102

2015 and thereafter

1,019

9,804

Recognized deferred tax credits

1,130

9,906

Brazil

642

Abroad

2,223

Unrecognized deferred tax credits

2,865

Total

3,995

9,906

 

 

 

At December 31, 2013, the Company had unused tax loss carryforwards from companies abroad, for which no deferred tax assets have been recognized, in the amount of US$ 2,223 (US$ 2,122 at December 31, 2012) resulting from net operating losses mainly from oil and gas exploration and production and refining activities in the United States in the amount of US$ 1,680 (US$ 1,329 at December 31, 2012), as well as from entities in Spain, in the amount of US$ 543, subject to applicable statute of limitations that lapse in 20 years from the date the losses are recognized.

An aging of the tax carryforwards not recognized, from companies abroad, by lapse of the applicable statute of limitations is set out below:

 

 

 

 

 

 

 

 

 

 

 

 

2013

Lapse of Statute of Limitations

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030 and afterwards

Total

Unrecognized deferred tax credits

55

174

79

74

94

6

113

130

163

203

1,132

2,223

 

 

55 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

21.4.   Reconciliation between statutory tax rate and tax expense

A reconciliation between tax expense and the product of “income before income taxes” multiplied by the Brazilian statutory corporate tax rates is set out in the table below:

 

2013

2012

2011

Income before income taxes

13,410

14,493

26,724

Income taxes computed based on Brazilian Statutory Corporate Tax Rates (34%)

(4,558)

(4,928)

(9,089)

Adjustments between Income Taxes based on Statutory Rates and on the Effective Tax Rate:

 

 

 

·   Tax benefits from the deduction of interest on capital distribution

1,306

1,612

2,123

·    Different jurisdictional taxes rates for Companies abroad

644

335

422

·    Tax incentives

57

58

220

·    Tax losses not recorded as assets

(1)

(341)

(345)

·    Non-deductible/(deductible) expenses, net (*)

(198)

(559)

(268)

·    Tax credits of companies abroad in the exploration stage

(2)

(2)

·    Others

174

263

205

Income taxes expense

(2,578)

(3,562)

(6,732)

Deferred income taxes

(402)

(1,266)

(3,599)

Current income taxes

(2,176)

(2,296)

(3,133)

 

(2,578)

(3,562)

(6,732)

Effective Tax Rate

19.2%

24.6%

25.2%

 

 

 

 

(*) Includes share of profit of equity-accounted investments.

 

 

22.        Employee benefits (Post-Employment)

The carrying amounts of employee benefits (post-employment) are set out below:

 

2013

2012

01.01.2012

Liabilities

 

 

 

Petros Pension Plan

5,342

11,141

6,871

Petros 2 Pension Plan

121

547

606

AMS Medical Plan

6,999

8,390

8,214

Other plans

111

146

127

 

12,573

20,224

15,818

 

 

 

 

Current

816

788

761

Non-current

11,757

19,436

15,057

 

12,573

20,224

15,818

 

 

 

The current balance relates to an estimate of the payments to be made in the next 12 months.

22.1.   Petros Plan and Petros 2 Plan

The Company’s post-retirement plans are managed by Fundação Petrobras de Seguridade Social (Petros), which was established by Petrobras as a nonprofit legal entity under private law with administrative and financial autonomy.

56 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

a)             Petros Plan - Fundação Petrobras de Seguridade Social

The Petros Plan was established by Petrobras in July 1970 as a defined-benefit pension plan and currently provides post-retirement benefits for employees of Petrobras and BR Distribuidora, in order to complement government social security benefits. The Petros Plan has been closed to new participants since September 2002.

Petros contracts with an independent actuary to perform an annual actuarial review of its costs using the capitalization method for most benefits. The employers (sponsors) make regular contributions in amounts equal to the contributions of the participants (active employees, assisted employees and retired employees), on a parity basis.

In the event an eventual deficit is determined, participants of the plan and employers (sponsors) shall cover this deficit, pursuant to Brazilian Law (Constitutional Amendment 20/1998 and Complementary Law 109/2001), on the basis of their respective proportions of regular contributions made to the plan during the year in which the deficit arose.

At December 31, 2013, the Terms of Financial Commitment (TFC), signed by Petrobras and Petros in 2008 comprise a balance of US$ 3,514, including US$ 209 related to interest expense due in 2014. The TCF are due in 20 years, with 6% p.a. semiannual coupon payments based on the updated balance.  The carrying amount of US$ 2,976 related to crude oil and oil products pledged as security for the TFC replaced the long-term National Treasury Notes that were previously held as collateral in July 2012.

The employers' expected contributions to the plan for 2014 are US$ 456.

 The duration of the actuarial liability related to the plan, as of December 31, 2013 is 12.26 years.

 

b)            Petros Plan 2 - Fundação Petrobras de Seguridade Social

Petros Plan 2 was established in July 2007 by Petrobras and certain subsidiaries as a variable contribution plan recognizing past service costs for contributions for the period from August 2002 to August 29, 2007 (or from the date the employee was hired, for those admitted during this period) in which the Petros Plan was closed and the participants did not have a pension plan. The plan is open to new participants although there will no longer be payments relating to past service costs.

Certain elements of the Petros Plan 2 have defined benefit characteristics, primarily the coverage of disability and death risks and the guarantee of minimum defined benefit and lifetime income. These actuarial commitments are treated as defined benefit components of the plan and are accounted for by applying the projected unit credit method. Contributions paid for actuarial commitments that have defined contribution characteristics are recognized in profit or loss and are intended to constitute a reserve for programmed retirement. The contributions for the portion of the plan with defined contribution characteristics were US$ 308 in 2013.

The defined benefit portion of the contributions has been suspended from July 1, 2012 to June 30, 2014, as decided by the Deliberative Council of Petros, based on advice from by the actuarial consultants from Fundação Petros. Therefore, the entire contributions are being appropriated in the individual accounts of plan participants.

For 2014 the employers' expected contributions to the defined-benefit portion of the plan are US$ 292. The duration of the actuarial liability related to the plan, as of December 31, 2013 is 27.86 years.

57 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

22.2.   Other plans

The Company also sponsors other pension and health care plans of certain of its Brazilian and international subsidiaries, including plans with defined benefit characteristics abroad, for subsidiaries in Argentina, Japan and other countries. Most of these plans are funded and their assets are held in trusts, foundations or similar entities governed by local regulations.

22.3.   Pension Plans assets

Pension plans assets follow a long term investment strategy to meet the assessed risk of each different class of asset and provide for diversification, in order to lower portfolio risk. The portfolio must comply with the Brazilian National Monetary Council regulations. Portfolio allocation limits for the period between 2014 and 2018 are 30% to 60% in fixed-income securities, 30% to 50% in variable-income securities, 3.0% to 8.0% in real estate, 1.5% to 15% in loans to participants, 4% to 10% in structured finance projects and up to 1% in investments abroad.

Fundação Petros establishes investment policies for 5-year periods, annually reviewed. Based on the last investment policy established (2013-2017), Petros determined that an asset liability management model (ALM) be used to solve net cash flow mismatches of the benefit plans, based on liquidity and solvency parameters, simulating a 30-year period.

The pension plan assets by type are set out following:

 

2013

2012

Type of asset

Quoted prices in active markets

Unquoted prices

Total fair value

%

Total fair value

%

Fixed income

6,523

1,998

8,521

37%

12,792

46%

Corporate bonds

536

536

 

863

 

Government bonds

6,523

6,523

 

10,000

 

Other investments

1,462

1,462

 

1,929

 

Variable income

10,152

347

10,499

47%

10,928

39%

Common and preferred shares

10,152

10,152

 

10,792

 

Other investments

347

347

 

136

 

Structured investments

1,571

1,571

7%

1,836

7%

Private equity funds

1,464

1,464

 

1,729

 

Venture capital funds

29

29

 

39

 

Real estate Funds

78

78

 

68

 

Real estate properties

1,388

1,387

6%

1,304

5%

 

16,675

5,304

21,978

97%

26,860

97%

Loans to participants

 

 

757

3%

825

3%

 

 

 

22,735

100%

27,685

100%

 

 

 

At December 31, 2013, the investments include Petrobras’ common and preferred shares in the amount of US$ 228 and US$ 169, respectively, and real estate properties leased by the Company in the amount of US$ 172.

Loans to participants are measured at amortized cost, which is considered to be an appropriate estimate of fair value.

22.4.   Medical Benefits: Health Care Plan - Assistência Multidisciplinar de Saúde (“AMS”)

Petrobras and BR Distribuidora operate a medical benefit plan for employees in Brazil (active and inactive) and their dependents: the AMS health care plan. The plan is managed by the Company based on a self-supporting benefit assumption and includes health prevention and health care programs. The plan is most significantly exposed to the risk of an increase in medical costs due to new technologies and new types of coverage or to a higher level of usage of medical benefits. The Company continuously improves the quality of its technical and administrative processes, as well as the health programs offered to beneficiaries in order to hedge such risks.

58 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

The employees make fixed monthly contributions to cover high-risk procedures and variable contributions for a portion of the cost of the other procedures, both based on the contribution tables of the plan, which are determined based on certain parameters, such as salary levels. The plan also includes assistance towards the purchase of certain medicines in registered drugstores throughout Brazil. There are no assets held as collaterals for the health care plan. Benefits are paid and recognized by the Company based on the costs incurred by the participants.

The duration of the actuarial liability related to the plan, as of December 31, 2013 is 20.34 years.

22.5.   Net actuarial liabilities and expenses calculated by independent actuaries and fair value of plans assets

Aggregate information is presented for other plans, whose total assets and liabilities are not material. All plans are unfunded (excess of benefit liabilities over plan assets).

59 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

a)             Movement in the actuarial liabilities, in the fair value of the assets and in the amounts recognized in the statement of financial position

 

2013

2012 (*)

 

Pension plan

Medical Plan

Other plans

 

Pension plan

Medical Plan

Other plans

 

 

Petros

Petros 2

A M S

Total

Petros

Petros 2

A M S

Total

Changes in the present value of obligations

 

 

 

 

 

 

 

 

 

 

Obligations at the beginning of the year

38,548

789

8,390

182

47,909

32,966

780

8,214

162

42,122

Interest expense:

3,373

73

735

20

4,201

3,551

86

892

8

4,537

· Term of financial commitment (TFC)

298

1

299

303

(1)

(5)

3

300

· Actuarial

3,075

73

735

19

3,902

3,248

87

897

5

4,237

Current service cost

484

145

192

10

831

(9)

197

146

7

341

Contributions paid by participants

182

182

197

28

225

Benefits paid

(1,155)

(6)

(364)

(10)

(1,535)

(1,168)

(3)

(363)

(10)

(1,544)

Remeasurement: Experience (gains) / losses

1,701

(118)

(1,978)

(2)

(397)

(2,795)

(703)

(1,738)

(6)

(5,242)

Remeasurement: (gains) / losses - demographic assumptions

323

(31)

2

(5)

289

726

36

352

6

1,120

Remeasurement: (gains) / losses - financial assumptions

(11,215)

(443)

1,066

5

(10,587)

8,180

403

1,566

15

10,164

Others

22

(27)

(5)

(6)

32

40

20

86

Cumulative Translation Adjustment

(4,437)

(77)

(1,044)

(22)

(5,580)

(3,094)

(67)

(719)

(20)

(3,900)

Obligations at the end of the year

27,804

354

6,999

151

35,308

38,548

789

8,390

182

47,909

Changes in the fair value of plan assets

 

 

 

 

 

 

 

 

 

 

Fair value of plan assets at the beginning of the year

27,407

242

36

27,685

26,096

174

35

26,305

Interest income

2,461

22

4

2,487

2,829

25

2

2,856

Contributions paid by the sponsor (Company)

255

364

24

643

257

22

363

5

647

Contributions paid by participants

182

182

196

28

224

Receipts from the Term of financial commitment (TFC)

153

153

164

164

Benefits Paid

(1,155)

(6)

(364)

(10)

(1,535)

(1,168)

(3)

(363)

(10)

(1,544)

Remeasurement: Return on plan assets exceeding interest income

(3,458)

8

3

(3,447)

1,339

8

2

1,349

Others

(13)

(13)

2

7

7

16

Cumulative Translation Adjustment

(3,383)

(33)

(4)

(3,420)

(2,308)

(19)

(5)

(2,332)

Fair value of plan assets at the end of the year

22,462

233

40

22,735

27,407

242

36

27,685

Amounts recognized in the Statement of Financial Position

 

 

 

 

 

 

 

 

 

 

Present value of obligations

27,804

354

6,999

151

35,308

38,548

789

8,390

182

47,909

( -) Fair value of plan assets

(22,462)

(233)

(40)

(22,735)

(27,407)

(242)

(36)

(27,685)

Net actuarial liability as of December 31,

5,342

121

6,999

111

12,573

11,141

547

8,390

146

20,224

Changes in the net actuarial liability

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2011

 

 

 

 

 

2,271

327

6,909

132

9,639

(+) Adoption of amendments to IAS 19

 

 

 

 

 

4,600

279

1,305

(5)

6,179

Balance as of January 1,

11,141

547

8,390

146

20,224

6,871

606

8,214

127

15,818

(+) Remeasurement effects recognized in other comprehensive income

(5,733)

(600)

(910)

(5)

(7,248)

4,772

(272)

180

13

4,693

(+) Costs incurred in the period

1,396

218

927

25

2,566

705

284

1,077

25

2,091

(-) Contributions paid

(255)

(364)

(24)

(643)

(257)

(22)

(363)

(5)

(647)

(-) Payments related to Term of financial commitment (TFC)

(153)

(153)

(164)

(164)

Others

(13)

(13)

(1)

1

1

1

Cumulative Translation Adjustment

(1,054)

(44)

(1,044)

(18)

(2,160)

(786)

(48)

(719)

(15)

(1,568)

Balance as of December 31,

5,342

121

6,999

111

12,573

11,141

547

8,390

146

20,224

(*) Amounts restated, as set out in note 2.3.

  

60 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

b)              Defined benefit costs

 

2013

2012 (*)

2011 (*)

 

Pension

Plans

Medical

Plan

 

 

Pension

Plans

Medical

Plan

 

 

Pension

Plans

Medical

Plan

 

 

 

Petros

Petros 2

AMS

Other Plans

Total

Petros

Petros 2

AMS

Other Plans

Total

Petros

Petros 2

AMS

Other Plans

Total

Service cost

484

145

192

10

831

(9)

197

146

7

341

(9)

182

146

6

325

Interest on net Liabilities (Assets)

912

51

735

16

1,714

722

61

892

6

1,681

629

33

926

10

1,598

Others

22

(1)

21

(8)

26

39

12

69

(226)

3

30

(193)

Net costs for the year

1,396

218

927

25

2,566

705

284

1,077

25

2,091

394

218

1,102

16

1,730

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related to active employees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in the cost of sales

597

119

267

3

986

218

124

228

4

574

123

91

212

8

434

Operating expense recognized in profit or loss

355

94

211

20

680

121

153

180

21

475

58

122

180

8

368

Related to retired employees

444

5

449

2

900

366

7

669

1,042

213

5

710

928

Net costs for the year

1,396

218

927

25

2,566

705

284

1,077

25

2,091

394

218

1,102

16

1,730

(*) Amounts restated, as set out in note 2.3.

 

  

61 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

c)             Sensitivity analysis of the defined benefit plans

The effect of a 100 basis points (bps) change in the assumed discount rate and medical cost trend rate is as set out below:

 

Discount Rate

Medical Cost

 

Pension Benefits

Medical Benefits

Medical Benefits

 

+100 bps

-100 bps

+100 bps

-100 bps

+100 bps

-100 bps

 

 

 

 

 

 

 

Pension Obligation

(2,689)

3,256

(712)

865

981

(814)

Current Service cost and interest cost

(119)

140

(47)

55

157

(128)

 

 

 

d)            Significant actuarial assumptions

Assumptions

2013

2012

Discount rate

12.88% (1) / 12.97% (2) / 12.90% (3)

9.35% (1) (2) / 9.42% (3)

Salary growth rate

8.03% (1) / 10,21% (2)

7.62% (1) / 9.51% (2)

Medical plans turnover

0.590% p.a (4)

0.700% p.a (4)

Pension plans turnover

Null

Null

Variance assumed in medical and hospital costs

11.62% to 4.09%p.a (5)

11.74% to 4.11%p.a (5)

Mortality table

Basic AT 2000, sex-specific, 20% smoothing coefficient (6)

AT 2000 sex specific. 30% smoothing coefficient - female(6)

Disability table

TASA 1927 (7)

TASA 1927 (7)

Mortality table for disabled participants

Sex-specific Winklevoss, 20% smoothing coefficient (8)

Sex-specific Winklevoss, 20% smoothing coefficient (8)

 

 

 

 

 

 

 

 

 

(1) Petros Plan for Petrobras Group.

(2) Petros 2 Plan.

(3) AMS Plan.

(4) Average turnover according to age and employment time. In 2013, except for BR (1.247%) and Liquigas (8.546%).

(5) Decreasing rate, converging by the end of the next 30 years to the long-term expected inflation.

(6) Except for Petros 2 Plan, for which AT 2000 (80% male + 20% female) 10%-smoothed has been used.

(7) Except for Petros 2 Plan, for which Álvaro Vindas invalidity table has been used.

(8) Except for Petros 2 Plan, for which tables IAPB 1957 (2013) and AT 49 Male (2012) for disabled have been applied.

 

                 

 

 

e)             Expected maturity analysis of pension and medical benefits

 

2013

 

Pension Plan

Medical Plan

 

  

 

Petros

Petros 2

AMS

Other Plans

Total

Up to 1 Year

1,715

12

357

3

2,087

1 To 2 Years

1,681

14

365

3

2,063

2 To 3 Years

1,644

15

363

2

2,024

3 To 4 Years

1,600

15

378

2

1,995

Over 4 Years

21,164

298

5,536

141

27,139

 

27,804

354

6,999

151

35,308

 

 

22.6.   Other defined contribution plans

Petrobras, through its subsidiaries in Brazil and abroad, also sponsors defined contribution pension plans for employees. Contributions paid in 2013, in the amount of US$ 3 were recognized in profit or loss.

62 


 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

23.        Profit sharing

Profit sharing benefits comply with Brazilian legal requirements and those of the Brazilian Department of Coordination and Governance of State‐Owned Enterprises (DEST), of the Ministry of Planning, Budget and Management, and by the Ministry of Mines and Energy, and are computed based on the consolidated income before profit sharing and non‐controlling interests.

The Company has recognized profit sharing expenses in the amount of US$ 520 (US$ 524 in 2012) pursuant to these regulations, considering a 4.5 percentage applied over the income before profit sharing and non-controlling interest in Brazilian reais

A negotiation between the Company and the unions to determine a new method for determining profit sharing benefits is underway, as established in the 2013 Collective Bargaining Agreement.

24.        Shareholders’ equity

24.1.   Share capital

At December 31, 2013, subscribed and fully paid share capital was US$ 107,371, represented by 7,442,454,142 outstanding common shares and 5,602,042,788 outstanding preferred shares, all of which are registered, book-entry shares with no par value.

Capital increase with reserves in 2013

The Shareholders’ Extraordinary General Meeting, held jointly with the Annual General Meeting on April 29, 2013 approved a capital increase through capitalization of a portion of the profit reserve relating to tax incentives, recognized in 2012 in the amount of US$ 9 (in compliance with article 35, paragraph 1, of Ordinance 2,091/07 of the Ministry for National Integration), without issue of new shares (pursuant to article 169, paragraph 1, of Law 6,404/76). Share capital increased from US$ 107,362 to US$ 107,371.

Capital increase with reserves in 2014

A proposal will be made to the Shareholders’ Extraordinary General Meeting, to be held jointly with the Annual General Meeting in 2014 to increase capital through capitalization of a portion of the profit reserve for tax incentives established in 2013, of US$ 9. Share capital will increase from US$ 107,371 to US$ 107,380.

24.2.   Additional paid in capital

a)             Incremental costs directly attributable to the issue of new shares

These include any transaction costs directly attributable to the issue of new shares, net of taxes.

b)            Change in interest in subsidiaries

These include any excess of amounts paid/received over the carrying value of the interest acquired/disposed. Changes in ownership interest in subsidiaries that do not result in loss of control of the subsidiary are equity transactions.

63 


 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

24.3.   Profit reserves

a)             Legal reserve

The legal reserve represents 5% of the net income for the year, calculated pursuant to article 193 of the Brazilian Corporation Law.

b)            Statutory reserve

The statutory reserve is appropriated by applying a minimum of 0.5% of the year-end share capital and is retained to fund technology research and development programs. The balance of this reserve may not exceed 5% of the share capital, pursuant to article 55 of the Company’s bylaws.

c)             Tax incentives reserve

Government grants are recognized in profit or loss and are appropriated from retained earnings to the tax incentive reserve in the shareholders’ equity pursuant to article 195-A of Brazilian Corporation Law. This reserve may only be used to offset losses or increasing share capital.

In 2013, government grants of US$ 9 related to investments (using resources provided by income taxes benefits) for the development of the Northeast of Brazil (Superintendências de Desenvolvimento do Nordeste – SUDENE) and the Amazon region (SUDAM) were appropriated from profit or loss.

d)            Profit retention reserve

Profit retention reserve appropriates funds intended for capital expenditures, primarily in oil and gas exploration and development activities, included in the capital budget of the Company, pursuant to article 196 of the Brazilian Corporation Law.

An appropriation of US$ 7,277 to profit retention reserve, to provide partial funding for our 2014 capital budget, will be proposed and voted at the 2014 Annual General Meeting.

24.4.   Accumulated other comprehensive income

a)             Cumulative translation adjustment

This account comprises all exchange differences arising from the translation of the consolidated financial statements from the functional currency (Brazilian real) into the presentation currency (U.S. dollar), recognized as cumulative translation adjustments (CTA) within accumulated other comprehensive income.

b)            Other comprehensive income

This account comprises gains or losses arising from measurement at fair value of available-for-sale financial assets; from cash flow hedges; and from remeasurements of the net pension and medical benefits liability.

24.5.   Dividends 

Shareholders are entitled to receive minimum mandatory dividends (and/or interest on capital) of 25% of the adjusted net income for the year proportional to the number of common and preferred shares, pursuant to Brazilian Corporation Law.

64 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Preferred shares have priority in case of capital returns and dividend distribution, which is based on the highest of 3% of the preferred shares’ net book value, or 5% of the preferred share capital.

Dividends for 2013 of US$ 3,970 are to be voted at the 2014 Annual General Meeting and are consistent with the rights granted to preferred shares in the bylaws of the Company and to the minimum mandatory dividend for common shares. Dividends proposed for 2013 represent 41.85% of the adjusted net income in Brazilian Reais (adjusted in accordance with Brazilian Corporation Law), as 3% of the book value of shareholders’ equity regarding preferred shares stake was higher than the minimum mandatory dividend (25% of the adjusted net income for the year).

Interest on capital will be indexed based on the SELIC rate from December 31, 2013 to the date of payment, which will be voted at the 2014 Annual General Meeting.

Interest on capital is subject to a withholding income tax rate of 15%, except for shareholders that are declared immune or exempt, pursuant to Law 9,249/95. Interest on capital is a form of dividend distribution, which is deductible for tax purposes in Brazil and is included in the dividend distribution for the year, as established in the Company’s bylaws. The tax credit from the deduction of interest on capital is recognized in profit or loss. An amount of US$ 1,389 was recognized in 2013 (US$ 1,612 in 2012) relating to tax benefits from the deduction of interest on capital. For accounting purposes, shareholders’ equity is reduced in a manner similar to a dividend, pursuant to CVM Deliberation 207/96.

24.6.   Earnings per Share

 

2013

2012

2011

Net income attributable to Shareholders of Petrobras

11,094

11,034

20,121

Weighted average number of common and preferred shares outstanding

13,044,496,930

13,044,496,930

13,044,496,930

Basic and diluted earnings per common and preferred share (US$ per share)

0.85

0.85

1.54

 

 

 

25.        Sales revenues

 

2013

2012

2011

 

 

 

 

Gross sales

172,016

176,714

183,022

Sales taxes

(30,554)

(32,611)

(37,107)

Sales revenues (*)

141,462

144,103

145,915

Domestic Market

106,464

100,497

98,941

Exports

15,172

22,353

24,649

International Sales (**)

19,826

21,253

22,325

 

 

 

 

(*) See note 30 for a breakdown of sales revenues by business segment

(**) Sales revenues from operations outside of Brazil, other than exports

 

 

65 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

26.        Other operating expenses, net

 

2013

2012

2011

Unscheduled stoppages and pre-operating expenses

(923)

(856)

(901)

Pension and medical benefits - inactive employees

(900)

(1,042)

(928)

Institutional relations and cultural projects

(821)

(777)

(884)

Inventory write-down to net realizable value

(580)

(742)

(643)

Collective bargaining agreement

(419)

(444)

(430)

Legal, administrative and arbitration proceedings

(269)

(716)

130

Expenditures on health, safety and environment

(225)

(289)

(474)

Impairment

(544)

(137)

(369)

Expenditures/reimbursements from operations in E&P partnerships

241

268

10

Government Grants

181

385

378

Gains / (losses) on disposal/write-offs of assets

1,764

(2)

7

Others

258

167

120

 

(2,237)

(4,185)

(3,984)

 

 

 

27.        Expenses by nature

 

2013

2012

2011

Raw material / products for resale

(60,116)

(58,410)

(57,274)

Production taxes

(14,498)

(16,083)

(16,228)

Employee Compensation

(12,769)

(12,071)

(12,207)

Depreciation, depletion and amortization

(13,188)

(11,119)

(10,535)

Changes in inventories

1,681

724

5,278

Materials, Freight, rent, third-party services and other related costs

(22,608)

(24,016)

(23,457)

Exploration expenditures written off (inc. dry wells and signature bonuses)

(1,892)

(2,847)

(1,480)

Other taxes

(780)

(386)

(460)

Legal, administrative and arbitration proceedings

(269)

(716)

130

Institutional relations and cultural projects

(821)

(777)

(884)

Unscheduled stoppages and pre-operating expenses

(923)

(856)

(901)

Expenditures on health, safety and environment

(225)

(289)

(474)

Inventory write-down to net realizable value (market value)

(580)

(742)

(643)

Impairment

(544)

(137)

(369)

Gains / (losses) on disposal/write-offs of assets

1,764

(2)

7

 

(125,768)

(127,727)

(119,497)

 

 

 

 

Cost of sales

(108,254)

(107,534)

(99,595)

Selling expenses

(4,904)

(4,927)

(5,346)

General and Administrative expenses

(4,982)

(5,034)

(5,161)

Exploration costs

(2,959)

(3,994)

(2,630)

Research and development expenses

(1,132)

(1,143)

(1,454)

Other taxes

(780)

(386)

(460)

Other operating expenses, net

(2,237)

(4,185)

(3,984)

Profit sharing

(520)

(524)

(867)

 

(125,768)

(127,727)

(119,497)

 

 

 

66 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

28.        Net finance income (expense)

 

2013

2012

2011

 

 

 

 

Foreign exchange and inflation indexation charges on net debt (*)

(1,603)

(3,327)

(2,918)

Debt interest and charges

(5,491)

(5,152)

(4,866)

Income from investments and marketable securities

1,278

1,716

2,948

Financial result on net debt

(5,816)

(6,763)

(4,836)

Capitalized borrowing costs

3,921

3,807

4,403

Gains (losses) on derivatives

(181)

(52)

(215)

Interest income from marketable securities

(95)

919

286

Other finance expense and income, net

(320)

404

(39)

Other exchange and indexation charges, net

(300)

(241)

477

Finance income (expenses), net

(2,791)

(1,926)

76

Income

1,815

3,659

3,943

Expenses

(2,673)

(2,016)

(1,424)

Foreign exchange and inflation indexation charges, net

(1,933)

(3,569)

(2,443)

 

(2,791)

(1,926)

76

 

 

 

 

(*) Includes indexation charges on debt in local currency indexed to the U.S. dollar.

 

 

 

29.        Supplemental information on statement of cash flows

 

2013

2012

2011

Additional information on cash flows:

 

 

 

Amounts paid during the period

 

 

 

Income taxes paid

1,244

1,093

2,049

Withholding income tax paid for third-parties

1,733

2,045

2,377

 

2,977

3,138

4,426

 

 

 

 

Investing and financing transactions not involving cash

 

 

 

Purchase of property, plant and equipment on credit

209

187

8

Finance leases

19

Amounts related to the recognition (reversal) of a provision for decommissioning costs

(629)

5,208

1,407

 

 

 

67 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

30.        Segment Information

Consolidated assets by Business Area - 12.31.2013

 

Exploration

and

Production

Refining,

Transportation

& Marketing

Gas

&

Power

Biofuels

Distribution

International

Corporate

Eliminations

Total

 

 

 

 

 

 

 

 

 

 

Current assets

5,902

19,064

3,864

77

2,457

5,089

21,643

(5,441)

52,655

Non-current assets

146,805

73,043

23,839

1,119

5,224

13,034

6,897

(1,193)

268,768

Long-term receivables

6,251

4,387

1,853

2

2,253

1,987

3,168

(1,119)

18,782

Investments

94

2,318

749

895

6

2,511

93

6,666

Property, plant and equipment

126,716

66,200

20,882

222

2,672

7,971

3,312

(74)

227,901

Operating assets

90,888

32,313

16,698

205

2,009

3,792

2,312

(74)

148,143

Under construction

35,828

33,887

4,184

17

663

4,179

1,000

79,758

Intangible assets

13,744

138

355

293

565

324

15,419

Total Assets

152,707

92,107

27,703

1,196

7,681

18,123

28,540

(6,634)

321,423

 

 

 

 

 

 

 

 

 

 

Consolidated assets by Business Area - 12.31.2012

 

 

 

 

 

 

 

 

 

 

Current assets

6,565

20,362

3,610

117

3,176

3,517

27,382

(6,935)

57,794

Non-current assets

144,873

70,973

24,593

1,131

4,954

15,087

8,482

(491)

269,602

Long-term receivables

4,760

4,459

1,464

16

1,852

2,102

4,694

(491)

18,856

Investments

80

2,897

1,160

860

15

937

157

6,106

Property, plant and equipment

102,779

63,463

21,585

255

2,733

10,882

3,204

204,901

Operating assets

64,455

29,327

18,106

237

2,061

6,814

2,237

123,237

Under construction

38,324

34,136

3,479

18

672

4,068

967

81,664

Intangible assets

37,254

154

384

354

1,166

427

39,739

Total Assets

151,438

91,335

28,203

1,248

8,130

18,604

35,864

(7,426)

327,396

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

68 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Consolidated Statement of Income by Business Area - 2013

 

2013

 

Exploration

and

Production

Refining,

Transportation

& Marketing

Gas

&

Power

Biofuels

Distribution

International

Corporate

Eliminations

Total

 

 

 

 

 

 

 

 

 

 

Sales revenues

68,210

111,051

14,017

388

41,365

16,302

(109,871)

141,462

Intersegments

67,096

38,103

1,191

324

995

2,162

(109,871)

Third parties

1,114

72,948

12,826

64

40,370

14,140

141,462

Cost of sales

(34,279)

(119,617)

(12,149)

(433)

(37,580)

(13,886)

109,690

(108,254)

Gross profit (loss)

33,931

(8,566)

1,868

(45)

3,785

2,416

(181)

33,208

Income (expenses)

(4,133)

(3,791)

(1,167)

(102)

(2,424)

(541)

(4,932)

96

(16,994)

Selling, administrative and general expenses

(443)

(2,781)

(1,087)

(55)

(2,417)

(860)

(2,406)

163

(9,886)

Exploration costs

(2,784)

(175)

(2,959)

Research and development expenses

(523)

(242)

(57)

(16)

(2)

(2)

(290)

(1,132)

Other taxes

(238)

(162)

(81)

(1)

(19)

(141)

(138)

(780)

Other operating expenses, net

(145)

(606)

58

(30)

14

637

(2,098)

(67)

(2,237)

Income / (loss) before financial results and income taxes

29,798

(12,357)

701

(147)

1,361

1,875

(4,932)

(85)

16,214

Net finance income (expense)

(2,791)

(2,791)

Share of profit of equity-accounted investments

2

73

243

(20)

2

174

33

507

Profit sharing

(181)

(133)

(23)

(1)

(40)

(14)

(128)

(520)

Income / (loss) before income taxes

29,619

(12,417)

921

(168)

1,323

2,035

(7,818)

(85)

13,410

Income taxes

(10,070)

4,247

(230)

51

(447)

(246)

4,087

30

(2,578)

Net income (Loss)

19,549

(8,170)

691

(117)

876

1,789

(3,731)

(55)

10,832

Net income attributable to:

 

 

 

 

 

 

 

 

 

Shareholders of Petrobras

19,523

(8,162)

631

(117)

876

1,729

(3,331)

(55)

11,094

Non-controlling interests

26

(8)

60

60

(400)

(262)

 

19,549

(8,170)

691

(117)

876

1,789

(3,731)

(55)

10,832

 

 

 

  

69 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Consolidated Statement of Income by Business Area - 2012

 

2012

 

Exploration

and

Production

Refining,

Transportation

& Marketing

Gas

&

Power

Biofuels

Distribution

International

Corporate

Eliminations

Total

 

 

 

 

 

 

 

 

 

 

Sales revenues

74,714

116,710

11,803

455

40,712

17,929

(118,220)

144,103

Intersegments

73,871

37,950

1,288

365

878

3,868

(118,220)

Third parties

843

78,760

10,515

90

39,834

14,061

144,103

Cost of sales

(33,622)

(130,088)

(9,621)

(481)

(36,997)

(14,082)

117,357

(107,534)

Gross profit (loss)

41,092

(13,378)

2,182

(26)

3,715

3,847

(863)

36,569

Income (expenses)

(5,448)

(4,075)

(1,080)

(102)

(2,290)

(1,886)

(4,937)

149

(19,669)

Selling, administrative and general expenses

(494)

(3,052)

(967)

(64)

(2,235)

(922)

(2,376)

149

(9,961)

Exploration costs

(3,613)

(381)

(3,994)

Research and development expenses

(540)

(228)

(36)

(34)

(2)

(303)

(1,143)

Other taxes

(53)

(66)

(57)

(1)

(12)

(111)

(86)

(386)

Other operating expenses, net

(748)

(729)

(20)

(3)

(41)

(472)

(2,172)

(4,185)

Income / (loss) before financial results and income taxes

35,644

(17,453)

1,102

(128)

1,425

1,961

(4,937)

(714)

16,900

Net finance income (expense)

(1,926)

(1,926)

Share of profit of equity-accounted investments

(1)

(104)

193

(27)

1

(14)

(5)

43

Profit sharing

(178)

(142)

(18)

(1)

(40)

(14)

(131)

(524)

Income / (loss) before income taxes

35,465

(17,699)

1,277

(156)

1,386

1,933

(6,999)

(714)

14,493

Income taxes

(12,057)

5,981

(367)

44

(472)

(1,147)

4,213

243

(3,562)

Net income (Loss)

23,408

(11,718)

910

(112)

914

786

(2,786)

(471)

10,931

Net income attributable to:

 

 

 

 

 

 

 

 

 

Shareholders of Petrobras

23,406

(11,718)

861

(112)

914

719

(2,565)

(471)

11,034

Non-controlling interests

2

49

67

(221)

(103)

 

23,408

(11,718)

910

(112)

914

786

(2,786)

(471)

10,931

 

 

 

  

70 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

Consolidated Statement of Income by Business Area - 2011

 

2011

 

Exploration

and

Production

Refining,

Transportation

& Marketing

Gas

&

Power

Biofuels

Distribution

International

Corporate

Eliminations

Total

Sales revenues

74,117

118,630

9,738

320

44,001

16,956

(117,847)

145,915

Intersegments

73,601

38,146

1,304

288

731

3,777

(117,847)

Third parties

516

80,484

8,434

32

43,270

13,179

145,915

Cost of sales

(32,883)

(122,897)

(5,698)

(351)

(40,347)

(12,933)

115,514

(99,595)

Gross profit (loss)

41,234

(4,267)

4,040

(31)

3,654

4,023

(2,333)

46,320

Income (expenses)

(4,198)

(4,194)

(1,519)

(134)

(2,459)

(1,901)

(4,809)

179

(19,035)

Selling, administrative and general expenses

(489)

(3,306)

(1,038)

(66)

(2,403)

(928)

(2,456)

179

(10,507)

Exploration costs

(2,182)

(448)

(2,630)

Research and development expenses

(743)

(280)

(69)

(30)

(5)

(327)

(1,454)

Other taxes

(48)

(53)

(97)

(1)

(24)

(113)

(124)

(460)

Other operating expenses, net

(736)

(555)

(315)

(37)

(27)

(412)

(1,902)

(3,984)

Income / (loss) before financial results and income taxes

37,036

(8,461)

2,521

(165)

1,195

2,122

(4,809)

(2,154)

27,285

Net finance income (expense)

76

76

Share of profit of equity-accounted investments

44

(98)

238

15

5

24

2

230

Profit sharing

(271)

(194)

(34)

(1)

(66)

(29)

(272)

(867)

Income / (loss) before income taxes

36,809

(8,753)

2,725

(151)

1,134

2,117

(5,003)

(2,154)

26,724

Income taxes

(12,495)

3,025

(845)

56

(360)

(926)

4,145

668

(6,732)

Net income (Loss)

24,314

(5,728)

1,880

(95)

774

1,191

(858)

(1,486)

19,992

Net income attributable to:

 

 

 

 

 

 

 

 

 

Shareholders of Petrobras

24,326

(5,718)

1,862

(95)

774

1,179

(721)

(1,486)

20,121

Non-controlling interests

(12)

(10)

18

12

(137)

(129)

 

24,314

(5,728)

1,880

(95)

774

1,191

(858)

(1,486)

19,992

 

 

 

  

71 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Statement of Income - breakdown of International Business Area

 

 

 

 

 

 

 

 

2013

 

Exploration

&

Production

Refining,

Transportation

& Marketing

Gas

&

Power

Distribution

Corporate

Eliminations

Total

 

 

 

 

 

 

 

 

Sales revenues

4,134

8,633

556

5,223

7

(2,251)

16,302

Intersegments

2,382

1,982

37

7

5

(2,251)

2,162

Third parties

1,752

6,651

519

5,216

2

14,140

Income before financial results, profit sharing and income taxes

2,030

(22)

66

105

(303)

(1)

1,875

Net income attributable to shareholders of Petrobras

1,644

(12)

68

92

(62)

(1)

1,729

 

 

 

 

 

 

 

 

 

2012

 

Exploration

&

Production

Refining,

Transportation

& Marketing

Gas

&

Power

Distribution

Corporate

Eliminations

Total

Sales revenues

5,369

8,989

601

5,184

(2,214)

17,929

Intersegments

3,834

2,194

38

16

(2,214)

3,868

Third parties

1,535

6,795

563

5,168

14,061

Income before financial results, profit sharing and income taxes

2,438

(407)

132

73

(291)

16

1,961

Net income attributable to shareholders of Petrobras

1,317

(400)

121

70

(403)

14

719

 

 

 

 

 

 

 

 

 

2011

 

Exploration

&

Production

Refining,

Transportation

& Marketing

Gas

&

Power

Distribution

Corporate

Eliminations

Total

Sales revenues

5,148

8,510

543

4,972

(2,217)

16,956

Intersegments

3,808

2,142

23

27

(2,223)

3,777

Third parties

1,340

6,368

520

4,945

6

13,179

Income before financial results, profit sharing and income taxes

2,379

(136)

115

80

(304)

(12)

2,122

Net income attributable to shareholders of Petrobras

1,331

(128)

158

67

(237)

(12)

1,179

 

 

 

 

 

 

 

 

 

Exploration

&

Production

Refining,

Transportation

& Marketing

Gas

&

Power

Distribution

Corporate

Eliminations

Total

Total assets - breakdown of International Business Area

 

 

 

 

 

 

 

At 12.31.2013

13,656

2,652

602

1,085

1,970

(1,842)

18,123

At 12.31.2012

15,080

2,404

759

1,085

1,449

(2,173)

18,604

 

 

  

72 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

31.        Provisions for legal proceedings, contingent liabilities and contingent assets

Legal proceedings provided for, contingent liabilities and judicial deposits are set out following.

31.1.   Provisions for legal proceedings

The Company has recognized provisions for the best estimate of the costs of proceedings for which it is probable that an outflow of resources embodying economic benefits will be required and that can be reasonably estimated. These proceedings are mainly comprised of labor claims, losses and damages resulting from the cancellation of an assignment of excise tax (IPI) credits to a third party and fishermen seeking indemnification from the Company for a January 2000 oil spill in the State of Rio de Janeiro.

The Company has provisions for legal proceedings, in the amounts set out below:

Non-current liabilities

2013

2012

Labor claims

569

336

Tax claims

94

341

Civil claims

545

514

Environmental Claims

26

63

Other claims

12

11

 

1,246

1,265

 

 

 

 

2013

2012

Opening Balance

1,265

1,088

New provisions, net (*)

415

647

Payments made

(249)

(440)

Accruals and charges

77

99

Others

(57)

(26)

Cumulative translation adjustment

(205)

(103)

Closing Balance

1,246

1,265

(*) Includes reversal of tax claims provisions due to the adherence to REFIS, as set out in note 31.5.

 

 

 

31.2.   Judicial Deposits

Judicial deposits made in connection with legal proceedings and guarantees are set out in the table below according to the nature of the corresponding lawsuits:

Non-current assets

2013

2012

Labor

882

869

Tax

1,002

1,117

Civil

529

638

Environmental

83

69

Others

8

3

 

2,504

2,696

 

 

 

73 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

31.3.   Contingent Liabilities

Contingent liabilities for which the likelihood of loss is considered to be possible are not recognized in the financial statements but are disclosed unless the expected outflow of resources embodying economic benefits is considered remote.

The estimated contingent liabilities for legal proceedings for which the likelihood of loss is considered to be possible are set out in the table below.

Nature

Estimate

Tax

30,395

Civil - General

2,496

Labor

2,402

Civil - Environmental

1,248

Others

2

 

36,543

 

 

 

A brief description of the nature of the main contingent liabilities (tax, civil and environmental) is set out in the following tables. Labor claims include a large number of individual claims and, therefore, are not presented.

74 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

a)             Tax Proceedings

Description of tax proceedings

Estimate

Plaintiff: Secretariat of the Federal Revenue of Brazil

 

1) Deduction of expenses from the renegotiation of the Petros Plan from the calculation basis of income tax (IRPJ) and social contribution (CSLL) and penalty charged.

 

Current status: Awaiting the hearing of an appeal at the administrative level.

1,962

2) Profits of subsidiaries and associates domiciled abroad in the years of 2005, 2006, 2007, 2008 and 2009 not included in Petrobras' calculation basis of IRPJ and CSLL.

 

Current status: Awaiting the hearing of an appeal at the administrative level.

2,020

3) Deduction from the calculation basis of IRPJ and CSLL of expenses incurred in 2007 and 2008 related to employee benefits and Petros.

 

Current status: This claim is being disputed at the administrative level, involving three administrative proceedings.

786

4) Non-payment of withhold income tax (IRRF) and Contribution of Intervention in the Economic Domain (CIDE) over remittances for payment of platforms' affreightment.

 

Current status: This claim involves lawsuits in different administrative and judicial stages, in which the Company is taking legal actions to ensure its rights.

5,771

5) Non-payment of CIDE on imports of naphtha.

 

Current status: This claim is being discussed at the administrative level.

1,553

6) Non-payment of CIDE in the period from March 2002 until October 2003 in transactions with distributors and service stations that were holders of judicial injunctions that determined the sale of fuel without the gross-up of such tax.

 

Current status: This claim is in judicial stage, in which the Company is taking legal actions to ensure its rights.

647

7) Non-payment of tax on financial operations (IOF) over intercompany loans with, PifCo, Brasoil and BOC in 2007, 2008 and 2009.

 

Current status: Awaiting the hearing of an appeal at the administrative level.

2,437

8) Non-payment of withhold income tax (IRRF) over remittances abroad for payment of crude oil imports.

 

Current status: This claim involves lawsuits in different administrative and judicial stages, in which the Company is taking legal actions to ensure its rights.

1,722

9) Tax credits recovery denied due to failure to comply with an accessory obligation.

 

Current status: Awaiting the hearing of an appeal at the administrative level.

1,813

Plaintiff: State Finance Department of AM, BA, DF, ES, PA, PE and RJ

 

10)Non-payment of ICMS on crude oil and natural gas sales due to differences in measuring beginning and ending inventory.

 

Current status: This claim involves lawsuits in different administrative levels, in which the Company is taking legal actions to ensure its rights.

1,646

Plaintiff: State Finance Department of Rio de Janeiro

 

11) ICMS on exit operations of liquid natural gas (LNG) without issuance of tax document by the main establishment.

 

Current status: This claim involves lawsuits in different administrative and judicial stages, in which the Company is taking legal actions to ensure its rights.

1,366

12) Dispute over ICMS tax levy in operations of sale of jet fuel, as Decree 36,454/2004 was declared as unconstitutional.

 

Current status: This claim involves lawsuits in different administrative and judicial stages, in which the Company is taking legal actions to ensure its rights.

772

Plaintiff: State Finance Department of São Paulo

 

13) Dispute over ICMS tax levy on the importing of a drilling rig – temporary admission in São Paulo and clearance in Rio de Janeiro and a fine for breach of accessory obligations.

 

Current status: This claim involves lawsuits in different administrative and judicial stages, in which the Company is taking legal actions to ensure its rights.

1,921

Plaintiff: Municipal governments of Anchieta, Aracruz, Guarapari, Itapemirim, Marataízes, Linhares, Vila Velha, Vitória and Maragogipe.

 

14) Failure to withhold and collect tax on services provided offshore (ISSQN) in some municipalities located in the State of Espírito Santo, despite Petrobras having made the withholding and payment of these taxes to the municipalities where the respective service providers are established, in accordance with Complementary Law No. 116/03.

 

Current status: This claim involves lawsuits in different administrative and judicial stages, in which the Company is taking legal actions to ensure its rights.

923

Plaintiff: State Finance Departments of Rio de Janeiro and Sergipe

 

15) Use of ICMS tax credits on the purchase of drilling rig bits and chemical products used in formulating drilling fluid.

 

Current status: This claim involves lawsuits in different administrative and judicial stages, in which the Company is taking legal actions to ensure its rights.

409

16) Other tax proceedings

4,647

Total for tax proceedings

30,395

 

75 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

 

b)            Civil Proceedings – General

Description of civil proceedings

Estimate

Plaintiff: Agência Nacional de Petróleo, Gás Natural e Biocombustíveis - ANP

 

1) Dispute on differences in the payment of special participation charge in fields of the Campos Basin. In addition, the plaintiff is claiming fines for alleged non-compliance with minimum exploratory programs. Administrative proceedings are in course in connection with alleged irregularities in the platforms' measurement system.

 

Current status: This claim involves proceedings in different administrative and/or judicial stages, in which the Company is taking legal actions to ensure its rights.

1,252

2) Other civil proceedings

1,244

Total for civil proceedings

2,496

 

 

 

c)             Environmental Proceedings – General

Description of environmental proceedings

Estimate

Plaintiff: Ministério Público Federal, Ministério Público Estadual do Paraná,

 

AMAR - Associação de Defesa do Meio Ambiente de Araucária e IAP - Instuituto Ambiental do Paraná

 

1) Legal proceeding related to specific performance obligations, indemnification and compensation for damages related to an environmental accident that occurred in the State of Paraná on July 16, 2000.

 

Current status: The court partially ruled for the plaintiff, however both parties (the plaintiff and the Company) filed an appeal.

764

2) Other environmental proceedings

483

Total for environmental proceedings

1,247

 

 

31.4.   Contingent assets

31.4.1.  Legal proceeding in the United States - P-19 and P-31

In 2002, Braspetro Oil Service Company (Brasoil) and Petrobras obtained a favorable decision  in related lawsuits filed before U.S. courts by the insurance companies United States Fidelity & Guaranty Company and American Home Assurance Company in which they were seeking to obtain (since 1997 and regarding Brasoil) a judicial order exempting them from their payment obligations under the performance bond related to platforms P- 19 and P-31, and seeking reimbursement from Petrobras for any amounts for which they could ultimately be held liable in the context of the execution proceedings of such performance bond.

On July 21, 2006, the U.S. courts issued an executive decision, conditioning the payment of the amounts owed to Brasoil on a definitive dismissal of the legal proceedings involving identical claims that are currently in course before Brazilian courts.

76 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Brasoil, Petrobras and the insurance companies already pleaded the dismissal of the Brazilian legal proceedings but their definitive dismissal is awaiting the hearing of an appeal filed by the platforms’ shipbuilding company before the Superior Court for Non-Constitutional Matters (STJ).

The Company is intensifying actions taken, in an attempt to settle this lawsuit. The amount of damages claimed is approximately US$ 245.

31.4.2.  Recovery of PIS and COFINS

Petrobras and its subsidiaries filed a civil lawsuit against the Federal Government claiming to recover, through offsetting, amounts paid as taxes on finance income and foreign exchange variation gains (PIS) in the period between February 1999 and November 2002 and COFINS between February 1999 and January 2004 claiming that paragraph 1 of article 3 of Law 9,718/98 is unconstitutional.

On November 9, 2005, the Federal Supreme Court declared such paragraph as unconstitutional.

On November 18, 2010, the Superior Court of Justice upheld the claim filed by Petrobras in 2006 to recover the COFINS for the period from January 2003 to January 2004. Petrobras then recognized the amount of US$ 290 as recoverable taxes in its non-current assets.

At December 31, 2013, the Company had US$ 975 related to this lawsuit that is not yet recognized in the financial statements due to the lack of a final favorable decision.

31.5.   Tax settlement program (REFIS)

In December 2013, the Company decided to adhere to the federal tax amnesty and refinancing program (Programa de Recuperação Fiscal – REFIS), introduced by Federal Laws No. 11,941/2009 and No. 12,249/2010, the deadlines for which were extended pursuant to Federal Law No. 12,865/2013.

REFIS includes tax debts and tax claims related to CIDE (taxation on fuel), II (import tax), IPI (tax on industrial production), IOF (tax on financial operations), IRRF (withholding income tax), as well as COFINS (tax on revenues). By deciding to adhere the program, the Company disbursed US$ 570 related to tax expenses, along with the use of judicial deposits of US$ 17.

The adherence to REFIS resulted in savings of US$ 432 from penalties and interest reductions pursuant to regulations. Amounts recognized in profit or loss, including reversals of provisions related to tax claims are set out below:

 

2013

Taxes

(313)

Finance income (expenses), net

(306)

 

(619)

Other operating income (expenses), net (*)

358

Income taxes

76

 

(185)

(*) Reversal of provision for tax claims

 

 

 

The Company has complied with all legal requirements necessary to adhere to the REFIS and is now awaiting approval from the Brazilian Internal Revenue Service (Receita Federal do Brasil) and the Office of the Attorney-General of the National Treasury (Procuradoria Geral da Fazenda Nacional - PGFN) regarding payments made in connection with the Company’s adherence to the REFIS  in order to settle such tax proceedings.

77 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

32.        Natural Gas Purchase Commitments

Petrobras has entered into an agreement with Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) to purchase 201.9 billion m³ of natural gas during the term of the agreement and to purchase a minimum annual volume commitment at a price calculated based on a formula comprising the price of fuel oil. The agreement is valid until 2019, renewable until the total volume commitment has been consumed.

At December 31, 2013, the minimum purchase commitment from 2014 to 2020 is approximately 52.7 billion m³ of natural gas, equivalent to 24.06 million m³ per day, which corresponds to an estimated amount of US$ 15.17 billion.

33.        Collateral in connection with concession agreements for petroleum exploration

The Company has granted collateral to the Agência Nacional de Petróleo, Gás Natural e Biocombustíveis (ANP) in connection with the performance of the Minimum Exploration Programs established in the concession agreements for petroleum exploration areas in the total amount of US$ 3,408, of which US$ 3,088 are still in force, net of commitments that have been undertaken. The collateral comprises crude oil from previously identified producing fields, pledged as security, amounting to US$ 1,943 and bank guarantees in the amount of US$ 1,145.

34.        Risk management and derivative instruments

The Company is exposed to a variety of risks arising from its operations: market risk (including price risk related to crude oil and oil products), foreign exchange risk, interest rate risk, credit risk and liquidity risk.

34.1.   Risk management

Petrobras’ officers are responsible for performing risk management based on a corporate policy. The objective of the overall risk management policy of the company, which considers all positions held and their respective risks in the analysis and decisions made, is to achieve an appropriate balance between growth, increased return on investments and risk exposure level, which can arise from its normal activities or from the context within which the Company operates, so that, through effective allocation of its physical, financial and human resources it may achieve its strategic goals.

34.2.   Market risk

34.2.1.  Risk management of price risk (related to crude oil and oil products)

Petrobras does not use derivative instruments to hedge exposures to commodity price cycles related to products purchased and sold to fulfill operational needs.

Derivatives are used as hedging instruments to manage the price risk of certain transactions carried out abroad, which are usually short-term transactions similar to commercial transactions.

78 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

a)             Notional amount, fair value and guarantees of crude oil and oil products derivatives

 

Notional value

(in thousands of bbl)*

Fair value**

Maturity

Statement of Financial Position

2013

2012

2013

2012

 

Futures contracts

10,224

(3,380)

(20)

(18)

2014

Purchase commitments

52,267

16,500

 

 

 

Sale commitments

(42,043)

(19,880)

 

 

 

 

 

 

 

 

 

Options contracts

(2,050)

(1.5)

2014

 

 

 

 

 

 

Call

(1,080)

(1)

 

Long position

2,200

3,204

 

 

 

Short position

(2,200)

(4,284)

 

 

 

 

 

 

 

 

 

Put

(970)

(0.5)

 

Long position

1,869

2,029

 

 

 

Short position

(1,869)

(2,999)

 

 

 

 

 

 

 

 

 

Total recognized in other current assets and liabilities

 

 

(20)

(19.5)

 

 

 

 

 

 

 

* Negative notional values (in bbl) represent short positions.

** Negative fair values were recorded in liabilities and positive fair values in assets.

 

 

 

 

Finance income

2013

2012

2011

Gain / (Loss) recognized in profit or loss for the period

(105)

(103)

(199)

 

 

 

 

Guarantees given as collateral

2013

2012

Generally consist of deposits

143

103

 

 

 

b)            Sensitivity analysis of crude oil and oil products derivatives

The probable scenario is the fair value at  December 31, 2013. The stressed scenarios consider price changes of 25% and 50% on the risk variable, respectively, comparatively to December 31, 2013.

Crude Oil and Oil Products

Risk

Probable Scenario at 2013

Stressed Scenario

(∆ of 25%)

Stressed Scenario

(∆ of 50%)

 

 

 

 

 

 

 

Crude oil

Derivative (WTI prices decrease)

(23)

(187)

(347)

 

Inventories (WTI prices increase)

16

177

337

 

 

 

 

(7)

(10)

(10)

Diesel

Derivative (Diesel prices decrease)

7

(33)

(72)

 

Inventories (Diesel prices increase)

(8)

31

70

 

 

 

 

(1)

(2)

(2)

Gasoline

Derivative (Gasoline prices increase)

(1)

(10)

(18)

 

Inventories (Gasoline prices decrease)

3

11

19

 

 

 

 

2

1

1

Fuel Oil

Derivative (Fuel Oil prices increase)

(1)

(50)

(97)

 

Inventories (Fuel Oil prices decrease)

3

51

99

 

 

 

 

2

1

2

Propane

Derivative (Propane prices increase)

(2)

(28)

(53)

 

Inventories (Propane prices decrease)

1

26

52

 

 

 

 

(1)

(2)

(1)

 

 

 

79 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

c)             Embedded derivatives – sale of ethanol

On March 8, 2013 the Company entered into an agreement to amend the ethanol sale contract, modifying prices and quantities. The selling price of each future ethanol shipment will be based on the price of ethanol in the Brazilian market (ESALQ) plus a spread. The amended agreement therefore no longer has a derivative instrument measured as an embedded derivative.

The notional value, fair value and the sensitivity analysis of the swap are presented below:

 

 

Fair Value

Sensitivity analysis at 2013

Forward Contract

Notional value

(in thousands of m³)

2013

2012

Risk

Probable Scenario

Stressed

Scenario

(∆ 25%)

Stressed

Scenario

( ∆ 50%)

Long position (maturity in 2015)

 

36

Decrease in spread (Naphtha x Ethanol)

 

 

 

 

Finance Income

2013

2012

2011

Gain/ (loss) recognized in profit or loss for the period

(37)

10

(31)

 

 

34.2.2.  Foreign exchange risk management

Petrobras seeks to identify and manage foreign exchange risk in an integrated manner, considering an integrated analysis of natural hedges, to benefit from the correlation between income and expenses. The Company chooses the currency in which to hold cash, such as the Brazilian Real, U.S. dollar or other currency for short-term risk management.

The risk management strategy of the Company may involve the use of derivative instruments to hedge certain liabilities, minimizing foreign exchange exposure.

a)             Hedge Accounting

i) Cash Flow Hedge involving the Company’s future exports

Effective mid-May 2013, the Company formally documented and designated hedging relationships to account for the effects of the existing natural hedge between a portion of its obligations denominated in U.S. dollars and a portion of its future export revenues in U.S. dollars, relative to foreign currency rates risk. The foreign currency rates risk is related to the spot rates and the hedged future exports are those considered highly probable.

Individual hedging relationships were designated, in a one-to-one proportion, meaning that a portion of the total monthly exports will be the hedged transaction of an individual hedging relationship, for which a portion of the company’s long-term debt in U.S. dollars is the hedging instrument. The hedging instruments (long-term debt) have different maturities, with an average of approximately 7.1 years. 

The principal amounts and the carrying amount of the hedging instruments as of December 31, 2013, along with the foreign currency losses recognized in other comprehensive income (shareholders’ equity) are set out below:

80 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Hedging

Instrument

Hedged

Transactions

Nature

of the

Risk

Maturity

Date

Principal Amount (US$)

Carrying amount of the Hedging Instruments on 2013 (R$)

 

 

 

 

 

 

 

 

 

Non-Derivative

Financial

Instruments

Portion of

Highly Probable

Future Monthly

Export Revenues

Foreign Currency

– Real vs U.S. Dollar

Spot Rate

January 2014 to

November 2020

40,742

95,443

 

                 

 

 

Changes in the Principal Amount

US$

Amounts designated in May 2013

43,859

New hedging instruments designated

3,062

Exports affecting profit or loss

(2,904)

Principal repayments / amortization

(3,274)

Amounts designated as of December 31, 2013

40,742

 

 

 

Finance income and shareholders' equity

2013

2012

Gain /(loss) recognized in profit or loss for the period

(303)

Gain/ (loss) recognized in other comprehensive income - shareholders' equity

(5,924)

 

 

A schedule of the expected reclassification to profit or loss of the balance of losses recognized in other comprehensive income in the shareholders’ equity as of December 31, 2013 is set out below:

Period

2014

2015

2016

2017

2018

2019

2020

Total

Expected reclassification

(820)

(852)

(1,031)

(1,101)

(936)

(834)

(350)

(5,924)

 

 

ii) Cash flow hedges involving swap contracts – Yen x Dollar

The Company has a cross currency swap to fix in U.S. dollars the payments related to bonds denominated in Japanese yen. The Company does not intend to settle these contracts before the maturity. The relationship between the derivative and the loan qualify as cash flow hedge and hedge accounting is applied.

b)            Notional value, fair value and guarantees of derivative financial instruments

 

Notional value (in millions)

Fair Value

Statement of financial position

2013

2012

2013

2012

 

 

 

 

 

Cross Currency Swap (Maturity in 2016)

 

 

11

76

Long position (JPY) - 2.15% p.a.

JPY 35,000

JPY 35,000

353

434

Short position (USD) - 5.69% p.a.

USD 298

USD 298

(342)

(358)

U.S. dollar forward

 

 

(1)

0.5

U.S. dollar forward (short position)

USD 17

USD 1,077

(1)

0.5

Total recognized in other current assets and liabilities

 

 

10

76.5

 

 

 

Finance income and shareholders' equity

2013

2012

2011

Gain /(loss) recognized in profit or loss for the period

(39)

41

15

Gain/ (loss) recognized in other comprehensive income - shareholders' equity

10

7

4

 

 

 

Margin is not required for the operations the Company has entered into, related to foreign currency derivatives.

81 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

c)             Sensitivity analysis for foreign exchange risk on financial instruments

The Company has assets and liabilities subject to foreign exchange risk. The main exposure involves the Brazilian Real, relative to the U.S. dollar. Foreign exchange risk arises on financial instruments that are denominated in a currency other than the Brazilian Real. Assets and liabilities of foreign subsidiaries, denominated in a currency other than the Brazilian Real are not included in the sensitivity analysis set out below when transacted in a currency equivalent to their respective functional currencies.

The probable scenario, computed based on external data, as well as the stressed scenarios (a 25% and a 50% change in the foreign exchange rates) are set out below:

Financial Instruments

Exposure at 12.31.2013

Risk

Probable Scenario*

Stressed

Scenario

(∆ of 25%)

Stressed

Scenario

(∆ of 50%)

Assets

2,616

 

42

654

1,308

Liabilities

(50,756)

Dollar

(810)

(12,689)

(25,378)

Cash flow hedge on exports

40,742

 

651

10,186

20,371

Forward Derivative (Net short Position)

(17)

 

(4)

(9)

 

(7,415)

 

(117)

(1,853)

(3,708)

Liabilities

(842)

Yen

(8)

(210)

(421)

Cross-currency Swap

333

 

3

117

353

 

(509)

 

(5)

(93)

(68)

Assets

3,286

Euro

(113)

821

1,643

Liabilities

(9,290)

 

319

(2,323)

(4,645)

 

(6,004)

 

206

(1,502)

(3,002)

Assets

925

Pound

(24)

231

462

Liabilities

(2,662)

Sterling

70

(665)

(1,331)

 

(1,737)

 

46

(434)

(869)

Assets

368

Peso

(14)

92

184

Liabilities

(731)

 

27

(183)

(365)

 

(363)

 

13

(91)

(181)

 

(16,028)

 

143

(3,973)

(7,828)

 

 

 

 

 

 

(*) The probable scenario was computed based on the following changes for December, 31, 2013: Real x Dollar – a 1.60% depreciation of the Real relative to the Dollar / Yen x Dollar – a 0.91% appreciation of the Yen / Dollar x Euro: a 3.43% depreciation of the Euro / Dollar x Pound Sterling: a 2.61% depreciation of the Pound Sterling / Dollar x Peso: a 3.83% depreciation of the Peso. The data were obtained from the Focus Report of the Central Bank of Brazil and from Bloomberg.

 

 

The impact of foreign exchange depreciation / appreciation does not jeopardize the liquidity of the Company in the short term due to the balance between liabilities, assets, revenues and future commitments in foreign currency, since most of its debt mature in the long term.

34.2.3.  Interest rate risk management

The Company considers that exposure to interest rate risk does not cause a significant impact and therefore, preferably does not use derivative financial instruments to manage interest rate risk, except for specific situations encountered by certain companies of the Petrobras group.

82 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

a)             Main transactions and future commitments hedged by interest rate derivatives

Swap contracts

Floating-to-fixed swap (LIBOR USD) vs. Fixed rate (USD)

The Company has an interest rate swap, in order to exchange a floating interest rate for a fixed rate, aiming at eliminating the mismatch between the cash flows of assets and liabilities from investment projects. The Company does not intend to settle the operation before the maturity date, and therefore, adopted hedge accounting for the relationship between the finance debt and the derivative.

Other positions held are set out in the table below.

b)            Notional value, fair value, guarantees and sensitivity analysis for interest rate derivatives

 

Notional value

Fair value

Statement of Financial Position

2013

2012

2013

2012

 

 

 

 

 

Swaps (maturity in 2020)

 

 

 

 

Short position

USD 440

USD 460

(20)

(42)

 

 

 

 

 

Swaps (maturity in 2015)

 

 

(0.6)

(1)

Long position – Euribor

EUR 10

EUR 15

0.5

Short position – 4.19% Fixed rate

EUR 10

EUR 15

(0.6)

(1.5)

 

 

 

 

 

Total recognized in other assets and liabilities

 

 

(20.6)

(43)

 

 

 

Finance income and shareholders' equity

2013

2012

2011

Gain / (Loss) recognized in profit or loss for the period

(0.5)

Gain/(Loss) recognized in other comprehensive income - shareholders' equity

22

(9)

(22)

 

 

 

Interest Rate Derivatives

Risk

Probable

Scenario (*)

Stressed

Scenario

(∆ de 25%)

Stressed

Scenario

(∆ de 50%)

HEDGE (Derivative - Swap)

LIBOR decline

4

(0.4)

(1)

Debt

LIBOR increase

(4)

0.4

1

Net effect

 

 

 

 

 

 

 

(*) The probable scenario was obtained based on LIBOR futures.

 

           

 

 

Margin is not required for the operations the Company has entered into, related to interest rate derivatives.

34.3.   Capital management

The Company’s objectives when making its financial decisions is to achieve an adequate capital management and indebtedness level in order to safeguard its ability to continue as a going concern and to fund its Business and Management Plan (BMP), adding value to its shareholders.

The planned investments will be mainly financed by funds generated internally, debt issuance in the international capital markets, loan agreements with commercial banks, cash provided by asset disposals (divesting), among other sources, assuming that no new shares will be issued.

83 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Petrobras has determined the upper limits of 2.5 times net debt to adjusted EBITDA ratio and 35% financial leverage ratio (net debt to net total capitalization) in order to maintain a strong financial situation and considering oil product prices in Brazil converging to international prices.

Net debt is calculated as total debt (short-term and long-term) less cash, cash equivalents and government bonds with maturities higher than 90 days. Adjusted EBITDA is calculated by adding back net finance income (expenses), income taxes, depreciation/amortization, share of profit of equity-accounted investments and impairment charges to net income. Net total capitalization is calculated by adding net debt to shareholders’ equity. These measures are not defined by the International Financial Reporting Standards – IFRS (non-GAAP measures) and should neither be considered in isolation or as substitutes for profit, indebtedness and cash flow provided by operating activities as defined by the IFRS, nor be compared to those measures of other companies.

 

2013

2012

Total debt (current and noncurrent)

114,325

96,067

Cash and cash equivalents

(15,868)

(13,520)

Government securities (maturity of more than 90 days)

(3,878)

(10,212)

Net debt

94,579

72,335

Net debt/(net debt+shareholders' equity)

39%

31%

Adjusted EBITDA

29,426

27,632

Net debt/Adjusted EBITDA ratio

3.21

2.62

 

 

 

Undertaking capital expenditures in the oil and gas industry is financial-capital intensive and involves long-term maturity. Thus the Company’s ratios may temporarily exceed the established upper-limits during periods in which there is no cash flow from operations of ongoing capital expenditures.

34.4.   Credit risk

Petrobras is exposed to the credit risk arising from commercial transactions and from cash management, related to financial institutions and to credit exposure to customers. Credit risk is the risk that a customer or financial institution will fail to pay amounts due, relating to outstanding receivables or to financial investments, guarantees or deposits with financial institutions.

Credit risk management in Petrobras is a portion of its financial risk management, which is performed by the Company’s officers, under a corporate policy of risk management.

The credit risk management policy is part of the Company’s global risk management policy and aims at reconciling the need for minimizing exposure to credit risk and maximizing the result of commercial and financial transactions, through an efficient credit analysis process and efficient credit granting and management processes.

The Company manages credit risk by applying quantitative and qualitative parameters that are appropriate for each of the market segments in which it operates.

The Company’s commercial credit portfolio is much diversified and the credits granted are divided between clients from the domestic market and from foreign markets.

Credit granted to financial institutions is spread among the major international banks rated by the international rating agencies as Investment Grade and highly-rated Brazilian banks.

84 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

34.4.1.  Credit quality of financial assets

a)             Trade and other receivables

Most of the company’s customers have no credit agency ratings. Thus, credit commissions assess creditworthiness and define credit limits, which are regularly monitored, based on the client’s main activity, commercial relationship and credit history with Petrobras, solvency, financial situation and external market assessment of the customer.

Allowances for impairment of trade and other receivables have been recognized in an amount considered adequate by management to cover losses on these assets.

b)            Other financial assets

Credit quality of cash and cash equivalents, as well as marketable securities is based on external credit ratings provided by Standard & Poors, Moody’s and Fitch. The credit quality of those financial assets, that are neither past due nor impaired, are set out below:

 

2013

2012

Cash and cash equivalents

 

 

AAA

23

61

AA

7

5

A

4,959

1,942

BBB

62

76

AAA.br

9,926

10,555

AA.br

462

Other ratings

429

881

 

15,868

13,520

Marketable securities

 

 

 

 

 

AAA.br

3,979

10,387

Other ratings

37

220

 

4,016

10,607

 

 

34.5.   Liquidity risk

The Company's liquidity risk is represented by the possibility of a shortage of funds, cash or another financial asset in order to settle its obligations on the established dates.

Liquidity risk management by the Company involves several policies, such as: Centralized cash management, in order to optimize the level of cash and cash equivalents held and reduce working capital needs; a robust minimum cash level to ensure that the need of cash for investments and short-term obligations is met, even in adverse market conditions; the use of several funding sources in the domestic and international markets, increasing the number of investors of the Company and development a strong presence in the international capital markets; along with the search for new funding sources, including new markets and financial products.

A maturity analysis of the long-term debt, including face value and interest payments is set out in the following table:

85 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

Maturity

 

2014

12,283

2015

12,998

2016

15,572

2017

12,548

2018

16,769

2019

18,555

2020 and thereafter

66,450

Balance at December 31, 2013

155,175

Balance at December 31, 2012

136,068

 

 

34.6.   Financial investments (derivative financial instruments)

Operations with derivatives are, both in the domestic and foreign markets, earmarked exclusively for the exchange of indices of the assets that comprise the portfolios, and their purpose is to provide flexibility to the managers in their quest for efficiency in the management of short-term financial assets.

The market values of the derivatives held in the exclusive investment funds at December 31, 2013 are set out below:

Contract

Number of

Contracts

(Thousands)

Notional

value

Fair

value

Maturity

Future DI (Interbank Deposit)

 

 

2014 to 2016

Long position

4,821

187

 

Short position

(35,658)

(1,331)

 

DDI (Foreign Exchange Coupon) forward

 

 

2014

Long position

413

21

 

Short position

(73)

(4)

 

 

35.        Fair value of financial assets and liabilities

Fair values are determined based on market prices, when available, or, in the absence thereof, on the present value of expected future cash flows. The fair values of cash and cash equivalents, trade accounts receivable, short term debt and trade accounts payable are the same as their carrying values. The fair values of other long-term assets and liabilities do not differ significantly from their carrying amounts.

The hierarchy of the fair values of the financial assets and liabilities, recorded on a recurring basis, is set out below:

-       Level 1 inputs: are the most reliable evidence of fair value, quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.

-       Level 2 inputs: are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

-       Level 3 inputs: are unobservable inputs for the asset or liability.

86 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

 

Fair value measured based on

 

 

Level I

Level II

Level III

Total fair

value

recorded

Assets

 

 

 

 

Marketable securities

3,895

3,895

Foreign currency derivatives

10

10

Balance at December 31, 2013

3,895

10

3,905

Balance at December 31, 2012

10,463.5

76

36

10,575.5

 

 

 

 

 

Liabilities

 

 

 

 

Commodity derivatives

(20)

(20)

Interest derivatives

(20.6)

(20.6)

Balance at December 31, 2013

(20)

(20.6)

(40.6)

Balance at December 31, 2012

(62.5)

(62.5)

 

 

 

The estimated fair value for the Company’s long term debt as of December 31, 2013, computed based on the prevailing market rates for operations that have similar nature, maturity and risk to the contracts recognized, is set out in note 17.

36.        Insurance 

The Company’s insurance policies involve acquiring insurance to cover assets that might lead to material negative impacts in the shareholders’ equity (in the case of an eventual damage), as well as risks subject to legal or contractual mandatory insurance. The remaining risks are subject to self-insurance and Petrobras intentionally assumes the entire risk by abstaining from contracting insurance. The Company assumes a significant portion of its risk, by including franchises that may reach an amount equivalent to US$ 80 in its insurance policies.

The risk assumptions adopted are not part of the audit scope of the financial statements audit and therefore were not examined by independent auditors.

The main information concerning the insurance coverage outstanding at December 31, 2013 is set out below:

Assets

Types of coverage

Amount insured

 

 

 

 

Facilities, equipment inventory and products inventory

Fire, operational risks and engineering risks

180,341

Tankers and auxiliary vessels

Hulls

3,039

Fixed platforms, floating production systems and offshore drilling units

Oil risks

33,037

Total

 

 

216,417

 

 

 

Petrobras does not have loss of earnings insurance or insurance related to well control, automobiles and pipeline networks in Brazil.

87 


 
 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

37.        Subsequent events

Funding

a)             Pricing of Global Notes

On January 14, 2014, Petrobras, through Petrobras Global Finance B.V. (PGF), its wholly-owned indirect subsidiary, issued 4, 7 and 11-year Global Notes denominated in Euros (€) and 20-year Global Notes denominated in Pounds Sterling (£), as set out below:

Currency

Amount

Maturity

Coupon*

Euro

€ 1,500 million

Jan/2018

2.75% p.a.

Euro

€ 750 million

Jan/2021

3.75% p.a.

Euro

€ 800 million

Jan/2025

4.75% p.a.

Pounds Sterling

£ 600 million

Jan/2034

6.625% p.a.

(*) Coupon payments begin in 2015.

 

 

 

 

 

 

 

The Global Notes are unsecured and unsubordinated obligations of PGF B.V., unconditionally and irrevocably guaranteed by Petrobras.

b)            Banking market

On January 29, 2014, Petrobras, through its indirect subsidiary Petrobras Global Trading BV (PGT BV), signed a credit line agreement of US$ 3 billion in the banking market.

On February 14, 2014 Petrobras, through PGT BV, signed two credit line agreements of US$ 1 billion in the banking market.

88 


 

Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(Expressed in millions of US Dollars, unless otherwise indicated)

 

38.        Information Related to Guaranteed Securities Issued by Subsidiaries

38.1.   Petrobras Global Finance B.V. (PGF)

Petróleo Brasileiro S.A. - Petrobras has fully and unconditionally guaranteed the debt securities issued by Petrobras Global Finance B.V. (PGF), a 100-percent-owned finance subsidiary of Petrobras. There are no significant restrictions on the ability of Petrobras to obtain funds from PGF.

38.2.   Petrobras International Finance Company – PifCo

A partial spin-off of certain assets and liabilities of Petrobras International Finance Company S.A. (PifCo), a wholly -owned subsidiary of Petrobras, with the subsequent merger of the spun-off portion into Petrobras was approved for immediate implementation by the Shareholders’ Extraordinary General Meeting held by Petróleo Brasileiro S.A. - Petrobras on December 16, 2013. The transaction resulted in the transfer of the assets and liabilities related to PifCo’s commercial activities to Petrobras. After the spin-off, PifCo became a 100-percent-owned finance subsidiary of Petrobras. There are no significant restrictions on the ability of Petrobras to obtain funds from PifCo.

PifCo’s remaining assets and liabilities related to capital-raising activities and loan transactions with companies in the Petrobras Group, including various series of notes issued by PifCo and guaranteed by Petrobras, will subsequently be merged into Petrobras Global Finance B.V. – PGF, resulting in the dissolution of PifCo. That merger will not affect the guarantees and commitments undertaken by Petrobras regarding the bonds previously issued by PifCo, and those bonds will continue to be fully and unconditionally guaranteed by Petrobras. As an initial step for the merger, PGF acquired all of PifCo’s outstanding shares on February 12, 2014.

89 


 
 

Petróleo Brasileiro S.A. – Petrobras

Supplementary information on Oil and Gas Exploration and Production (unaudited)

(Expressed in millions of US Dollars, unless otherwise indicated)

 

 

In accordance with Codification Topic 932 - Extractive Activities – Oil and Gas, this section provides supplemental information on oil and gas exploration and production activities of the Company. The information included in items (i) through (iii) provides historical cost information pertaining to costs incurred in exploration, property acquisition and development, capitalized costs and results of operations. The information included in items (iv) and (v) presents information on Petrobras’ estimated net proved reserve quantities, standardized measure of estimated discounted future net cash flows related to proved reserves, and changes in estimated discounted future net cash flows.

Beginning in 1995, the Federal Government of Brazil undertook a comprehensive reform of the country’s oil and gas regulatory system. On November 9, 1995, the Brazilian Constitution was amended to authorize the Federal Government to contract with any state or privately owned company to carry out the activities related to the upstream and downstream segments of the Brazilian oil and gas sector. This amendment eliminated Petrobras’ effective monopoly. The amendment was implemented by the Oil Law, which liberated the fuel market in Brazil beginning January 1, 2002.

The Oil Law established a regulatory framework ending Petrobras’ exclusive agency and enabling competition in all aspects of the oil and gas industry in Brazil. As provided in the Oil Law, Petrobras was granted the exclusive right for a period of 27 years to exploit the petroleum reserves in all fields where the Company had previously commenced production. However, the Oil Law established a procedural framework for Petrobras to claim exclusive exploratory (and, in case of success, development) rights for a period of up to three years with respect to areas where the Company could demonstrate that it had “established prospects”. To perfect its claim to explore and develop these areas, the Company had to demonstrate that it had the requisite financial capacity to carry out these activities, alone or through financing or partnering arrangements.

The adoption of the SEC rules seeking to modernize the supplemental oil and gas disclosures and the FASB’s issuance of the Accounting Standards Update nº 2011-03, “Oil and Gas Reserve Estimation and Disclosure”, generated no material impact on the Company’s consolidated financial statements other than additional disclosures.

The international geographic area includes activities in South America, which includes Argentina, Colombia, Ecuador, Peru, Uruguay and Venezuela; North America, which includes Mexico and the United States of America; Africa, which includes Angola, Libya, Tanzania, and Others, which includes Portugal and Turkey. The equity investments are composed of the operations of Petrobras Oil and Gas B.V. (PO&G) in Namibia and Nigeria, as well as Venezuelan companies involved in exploration and production activities.

90 


 
 

Petróleo Brasileiro S.A. – Petrobras

Supplementary information on Oil and Gas Exploration and Production (unaudited)

  (Expressed in millions of US Dollars, unless otherwise indicated)

 

i) Capitalized costs relating to oil and gas producing activities

The following table summarizes capitalized costs for oil and gas exploration and production activities with the related accumulated depreciation, depletion and amortization, and asset retirement obligation assets:

 

Consolidated entities

Equity

Method

Investees

 

Brazil

South America

North America

Africa

Others

International

Total

Total

December 31, 2013

 

 

 

 

 

 

 

 

Unproved oil and gas properties

21,261

826

685

22

1,533

22,794

Proved oil and gas properties

71,638

2,410

5,907

8,318

79,956

3,972

Support Equipaments

63,833

490

(277)

(15)

4

202

64,036

1

Gross Capitalized costs

156,732

3,727

6,316

7

4

10,053

166,785

3,973

Depreciation and depletion

(44,694)

(2,045)

(948)

(4)

(2,997)

(47,690)

(1,455)

 

112,039

1,682

5,367

7

7,056

119,095

2,518

Construction and installations in progress

28,421

(131)

3

(127)

28,293

 

Net capitalzed costs

140,460

1,551

5,370

7

1

6,929

147,389

2,518

 

 

 

 

 

 

 

 

 

December 31, 2012

 

 

 

 

 

 

 

 

Unproved oil and gas properties

48,255

705

1,641

1,500

25

3,871

52,126

Proved oil and gas properties

52,012

3,950

3,572

2,467

9,989

62,001

491

Support Equipaments

55,729

1,488

26

7

1,522

57,251

Gross Capitalized costs

155,996

6,143

5,213

3,994

32

15,382

171,378

491

Depreciation and depletion

(43,277)

(3,013)

(625)

(1,415)

(3)

(5,057)

(48,333)

(170)

 

112,719

3,130

4,588

2,579

29

10,326

123,045

321

Construction and installations in progress

27,314

11

2

13

27,327

Net capitalzed costs

140,033

3,141

4,590

2,579

29

10,339

150,372

321

 

 

 

 

 

 

 

 

 

December 31, 2011

 

 

 

 

 

 

 

 

Unproved oil and gas properties

51,773

523

1,898

593

36

3,050

54,823

Proved oil and gas properties

43,940

3,915

2,141

3,235

9,291

53,231

575

Support Equipaments

51,509

1,119

24

(24)

2

1,121

52,630

1

Gross Capitalized costs

147,222

5,557

4,063

3,804

38

13,462

160,684

576

Depreciation and depletion

(39,518)

(2,937)

(454)

(1,316)

(1)

(4,708)

(44,226)

(198)

 

107,704

2,620

3,609

2,488

37

8,754

116,458

378

Construction and installations in progress

23,640

286

90

376

24,016

Net capitalzed costs

131,344

2,906

3,609

2,578

37

9,130

140,474

378

 

 

 

91 


 
 

Petróleo Brasileiro S.A. – Petrobras

Supplementary information on Oil and Gas Exploration and Production (unaudited)

  (Expressed in millions of US Dollars, unless otherwise indicated)

 

ii) Costs incurred in oil and gas property acquisition, exploration and development activities

Costs incurred are summarized below and include both amounts expensed and capitalized:

 

Consolidated entities

Equity

Method

Investees

 

Brazil

South America

North America

Africa

Others

International

Total

Total

December 31, 2013

 

 

 

 

 

 

 

 

Acquisition of properties

 

 

 

 

 

 

 

 

Proved

17

973

990

990

Unproved

Exploration costs

9,605

183

397

1

1

582

10,187

Development costs

16,732

656

165

282

2

1,105

17,837

237

Total

26,337

856

1,535

283

3

2,677

29,014

237

 

 

 

 

 

 

 

 

 

December 31, 2012

 

 

 

 

 

 

 

 

Acquisition of properties

 

 

 

 

 

 

 

 

Proved

118

498

617

617

Unproved

Exploration costs

5,670

282

601

86

1

970

6,640

Development costs

16,217

759

538

285

60

1,642

17,859

19

Total

21,887

1,160

1,638

371

60

3,229

25,116

19

 

 

 

 

 

 

 

 

 

December 31, 2011

 

 

 

 

 

 

 

 

Acquisition of properties

 

 

 

 

 

 

 

 

Proved

16

36

52

52

3

Unproved

4

194

344

15

553

557

Exploration costs

5,643

316

160

322

20

818

6,461

1

Development costs

14,370

437

98

535

14,905

58

Total

20,017

963

602

337

56

1,958

21,975

62

 

 

(iii) Results of operations for oil and gas producing activities

The Company’s results of operations from oil and gas producing activities for the years ended December 31, 2013, 2012 and 2011 are shown in the following table. The Company transfers substantially all of its Brazilian crude oil and gas production to the Refining, Transportation & Marketing segment in Brazil. The prices calculated by the Company’s model may not be indicative of the price the Company would have realized had this production been sold in an unregulated spot market. Additionally, the prices calculated by the Company’s model may not be indicative of the future prices to be realized by the Company. Gas prices used are those set out in contracts with third parties.

Production costs are lifting costs incurred to operate and maintain productive wells and related equipment and facilities, including operating employees’ compensation, materials, supplies, fuel consumed in operations and operating costs related to natural gas processing plants.

Exploration expenses include the costs of geological and geophysical activities and non-productive exploratory wells. Depreciation and amortization expenses relate to assets employed in exploration and development activities. In accordance with Codification Topic 932 – Extractive Activities – Oil and Gas, income taxes are based on statutory tax rates, reflecting allowable deductions. Interest income and expense are excluded from the results reported in this table.

92 


 
 

Petróleo Brasileiro S.A. – Petrobras

Supplementary information on Oil and Gas Exploration and Production (unaudited)

  (Expressed in millions of US Dollars, unless otherwise indicated)

 

(iii) Results of operations for oil and gas producing activities

 

Consolidated entities

Equity

Method

Investees

 

Brazil

South America

North America

Africa

Others

International

Total

Total

December 31, 2013

 

 

 

 

 

 

 

 

Net operation revenues:

 

 

 

 

 

 

 

 

Sales to third parties

1,114

1,033

513

206

1,752

2,866

546

Intersegment

67,096

1,708

674

2,382

69,478

762

 

68,210

2,742

513

879

4,134

72,344

1,308

Production costs

(26,465)

(1,420)

(177)

(65)

(1,663)

(28,128)

(197)

Exploration expenses

(2,784)

(61)

(88)

(28)

(3)

(180)

(2,964)

(2)

Depreciation, depletion and amortization

(7,814)

(519)

(322)

(89)

(931)

(8,745)

(263)

Impairment of oil and gas properties

(4)

1

(14)

(560)

(573)

(577)

Other operating expenses

(1,345)

(256)

(75)

(50)

1,748

1,367

22

Results before income tax expenses

29,798

486

(162)

86

1,744

2,154

31,952

847

Income tax expenses

(10,131)

(141)

(2)

(367)

(1)

(510)

(10,642)

(348)

Results of operations (excluding corporate

overhead and interest costs)

19,667

345

(164)

(281)

1,744

1,644

21,311

498

 

 

 

 

 

 

 

 

 

December 31, 2012

 

 

 

 

 

 

 

 

Net operation revenues:

 

 

 

 

 

 

 

 

Sales to third parties

843

1,148

19

368

1,535

2,378

186

Intersegment

73,871

1,659

290

1,886

3,834

77,705

 

74,714

2,807

309

2,254

5,369

80,083

186

Production costs

(27,094)

(1,360)

(40)

(178)

(1,578)

(28,672)

(154)

Exploration expenses

(3,613)

(176)

(48)

(81)

(56)

(361)

(3,974)

Depreciation, depletion and amortization

(6,528)

(476)

(177)

(191)

(1)

(845)

(7,373)

(79)

Impairment of oil and gas properties

(34)

(16)

(16)

(50)

Other operating expenses

(1,801)

(152)

(113)

176

(42)

(131)

(1,932)

Income before income tax expenses

35,644

643

(69)

1,964

(99)

2,438

38,082

(47)

Income tax expenses

(12,119)

(150)

(929)

1

(1,078)

(13,197)

14

Results of operations (excluding corporate

overhead and interest costs)

23,525

493

(69)

1,035

(98)

1,360

24,885

(33)

 

 

 

 

 

 

 

 

 

December 31, 2011

 

 

 

 

 

 

 

 

Net operation revenues:

 

 

 

 

 

 

 

 

Sales to third parties

516

1,018

8

290

1,316

1,832

289

Intersegment

73,601

1,553

108

2,123

3,784

77,385

7

 

74,117

2,571

116

2,413

5,100

79,217

296

Production costs

(26,755)

(1,198)

(31)

(134)

(1,363)

(28,118)

(142)

Exploration expenses

(2,182)

(224)

(28)

(92)

(97)

(441)

(2,623)

(1)

Depreciation, depletion and amortization

(6,358)

(408)

(53)

(263)

(1)

(725)

(7,083)

(121)

Impairment of oil and gas properties

(229)

1

1

(228)

(56)

Other operating expenses

(1,557)

(214)

(216)

258

(22)

(194)

(1,751)

Income before income tax expenses

37,036

528

(212)

2,182

(120)

2,378

39,414

(24)

Income tax expenses

(12,592)

(151)

(791)

(942)

(13,534)

4

Results of operations (excluding corporate

overhead and interest costs)

24,444

377

(212)

1,391

(120)

1,436

25,880

(20)

 

 

 

93 


 
 

Petróleo Brasileiro S.A. – Petrobras

Supplementary information on Oil and Gas Exploration and Production (unaudited)

  (Expressed in millions of US Dollars, unless otherwise indicated)

 

(iv) Reserve quantities information

The Company’s estimated net proved oil and gas reserves and changes thereto for the years 2013, 2012 and 2011 are shown in the following table. Proved reserves are estimated by the Company’s reservoir engineers in accordance with the reserve definitions prescribed by the Securities and Exchange Commission.

Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.

Developed oil and gas reserves are reserves of any category that can be expected to be recovered: (i) through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and (ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is done by means not involving a well.

In some cases, substantial new investments in additional wells and related facilities will be required to recover these proved reserves. Due to the inherent uncertainties and the limited nature of reservoir data, estimates of reserves are subject to change as additional information becomes available.

Bolivian proved reserves were not classified as such in 2010 due to the new Bolivian Constitution, which restricts the disclosure of estimated reserves for properties under its authority. The initial balance of Bolivian proved reserves for 2010 is adjusted under the line item “Revisions of previous estimates”.

94 


 
 

Petróleo Brasileiro S.A. – Petrobras

Supplementary information on Oil and Gas Exploration and Production (unaudited)

  (Expressed in millions of US Dollars, unless otherwise indicated)

 

(iv) Reserve quantities information

A summary of the annual changes in the proved reserves of oil is as follows (in millions of barrels):

 

Consolidated Entities

Equity Method Investees

Proved developed and undeveloped reserves

Brazil

South America

North America

Africa

International**

Synthetic Oil

Total

Total

Reserves at December 31, 2010

10,379.0

209.8

10.1

124.9

344.8

7.4

10,731.2

33.5

Revisions of previous estimates

571.6

(2.5)

36.4

8.1

42.0

2.4

616.0

(1.1)

Extensions and discoveries

151.2

9.4

8.0

17.4

168.6

Improved Recovery

1.9

6.1

6.1

8.0

Sales of reserves

Purchases of reserves

Production for the year

(692.5)

(25.5)

(0.8)

(21.0)

(47.3)

(1.2)

(741.0)

(2.8)

Reserves at December 31, 2011

10,411.2

191.2

53.7

118.1

363.0

8.6

10,782.8

29.6

Revisions of previous estimates

69.7

(2.6)

23.5

22.4

43.3

0.7

113.7

(3.0)

Extensions and discoveries

424.4

11.4

11.4

435.8

Improved Recovery

324.6

0.6

18.7

19.3

343.9

Sales of reserves

Purchases of reserves

Production for the year

(690.7)

(25.2)

(3.3)

(19.0)

(47.5)

(1.0)

(739.1)

(2.3)

Reserves at December 31, 2012

10,539.2

175.4

74.0

140.2

389.6

8.3

10,937.1

24.3

Transfers by loss of control*

(140.2)

(140.2)

(140.2)

140.2

Revisions of previous estimates

(110.0)

13.4

21.9

35.4

1.3

(73.4)

1.8

Extensions and discoveries

818.3

33.0

33.0

851.4

Improved Recovery

124.2

124.2

Sales of reserves

(42.3)

(1.5)

(1.5)

(43.8)

(65.4)

Purchases of reserves

0.0

0.0

Production for the year

(671.0)

(22.8)

(4.3)

(27.1)

(0.8)

(698.9)

(16.5)

Reserves at December 31, 2013

10,658.4

166.0

123.1

(0.0)

289.2

8.8

10,956.4

84.5

 

 

 

 

 

 

 

 

 

*Amounts transferred from consolidated entities to equity-method entities, as the Company ceased to consolidate PO&G. See note 10.2 for further details.

** Includes 105 million barrels related to assets classified as held for sale.

 

 

 

95 


 
 

Petróleo Brasileiro S.A. – Petrobras

Supplementary information on Oil and Gas Exploration and Production (unaudited)

  (Expressed in millions of US Dollars, unless otherwise indicated)

 

(iv) Reserve quantities information

A summary of the annual changes in the proved reserves of natural gas is as follows (in billions of cubic feet):

 

Consolidated Entities

Equity Method Investees

Proved developed and undeveloped reserves

Brazil

South America

North America

Africa

International**

Synthetic Gas

Total

Total

Reserves at December 31, 2010

10,554.0

1,235.7

51.7

40.4

1,327.8

12.0

11,893.8

59.8

Revisions of previous estimates

993.9

(9.7)

15.2

(1.1)

4.4

3.3

1,001.6

(15.0)

Extensions and discoveries

192.3

76.3

9.1

85.4

277.7

Improved Recovery

0.3

0.3

Sales of reserves

Purchases of reserves

Production for the year

(673.5)

(112.7)

(4.1)

(116.8)

(1.9)

(792.2)

(1.3)

Reserves at December 31, 2011

11,067.0

1,189.6

71.9

39.3

1,300.8

13.4

12,381.2

43.5

Revisions of previous estimates

373.4

(18.3)

2.7

6.2

(9.4)

1.8

365.8

5.2

Extensions and discoveries

275.8

19.6

19.6

295.4

Improved Recovery

(624.3)

0.8

0.8

(623.5)

Sales of reserves

Purchases of reserves

Production for the year

(747.3)

(108.0)

(6.9)

(114.9)

(1.9)

(864.1)

(0.9)

Reserves at December 31, 2012

10,344.6

1,083.7

67.7

45.5

1,196.9

13.3

11,554.8

47.8

Transfers by loss of control*

(45.5)

(45.5)

(45.5)

45.5

Revisions of previous estimates

(291.2)

75.2

2.6

77.8

(0.1)

(213.5)

(8.0)

Extensions and discoveries

1,113.0

80.4

80.4

1,193.4

Improved Recovery

916.0

916.0

Sales of reserves

(17.3)

(13.4)

(13.4)

(30.7)

(22.8)

Purchases of reserves

0.4

0.4

Production for the year

(773.8)

(100.4)

(4.4)

(104.8)

(1.4)

(880.0)

(0.6)

Reserves at December 31, 2013

11,291.7

1,058.5

132.9

0.0

1,191.4

11.8

12,494.8

61.9

 

 

 

 

 

 

 

 

 

*Amounts transferred from consolidated entities to equity-method entities, as the Company ceased to consolidate PO&G. See note 10.2 for further details.

** Includes 363 billion cubic feet related to assets classified as held for sale.

 

96 


 
 

Petróleo Brasileiro S.A. – Petrobras

Supplementary information on Oil and Gas Exploration and Production (unaudited)

(Expressed in millions of US Dollars, unless otherwise indicated)

 

(iv) Reserve quantities information

 

2013

2012

2011

 

Crude Oil

Synthetic Oil

Natural Gas

Synthetic Gas

Crude Oil

Synthetic Oil

Natural Gas

Synthetic Gas

Crude Oil

Synthetic Oil

Natural Gas

Synthetic Gas

 

(millions of barrels)

(billions of cubic feet)

(millions of barrels)

(billions of cubic feet)

(millions of barrels)

(billions of cubic feet)

Net proved developed reserves:

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Entities

 

 

 

 

 

 

 

 

 

 

 

 

Brazil

6,509.3

8.8

6,578.9

11.8

6,397.5

8.3

6,811.5

13.3

6,973.5

8.6

6,836.0

13.4

South America

86.0

368.4

96.5

414.1

106.6

440.9

North America

46.2

9.9

21.2

25.2

4.5

32.1

Africa

77.8

35.8

70.3

39.3

Others

International

132.2

378.3

195.5

475.1

181.4

512.3

Total Consolidated Entities

6,641.6

8.8

6,957.3

11.8

6,593.0

8.3

7,286.6

13.3

7,154.9

8.6

7,348.3

13.4

Nonconsolidated Entitites

 

 

 

 

 

 

 

 

 

 

 

 

Brazil

South America

12.4

14.9

12.7

14.6

17.5

20.2

North America

Africa

37.3

15.7

Others

International

49.8

30.5

12.7

14.6

17.5

20.2

Total Nonconsolidated Entities

49.8

30.5

12.7

14.6

17.5

20.2

Total Consolidated and Nonconsolidated Entities

6,691.4

8.8

6,987.8

11.8

6,605.7

8.3

7,301.2

13.3

7,172.4

8.6

7,368.5

13.4

Net proved undeveloped reserves:

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Entities

 

 

 

 

 

 

 

 

 

 

 

 

Brazil

4,149.1

4,712.7

4,141.7

3,533.0

3,437.5

4,231.0

South America

80.1

690.1

78.9

669.5

84.7

748.6

North America

77.0

123.1

52.8

42.5

49.3

40.1

Africa

62.4

9.8

47.8

Others

International

157.1

813.2

194.1

721.8

181.8

788.7

Total Consolidated Entities

4,306.2

5,525.9

4,335.8

4,254.8

3,619.3

5,019.7

Nonconsolidated Entitites

 

 

 

 

 

 

 

 

 

 

 

 

Brazil

South America

8.8

26.4

11.6

33.2

12.1

23.3

North America

Africa

25.9

4.9

Others

International

34.7

31.3

11.6

33.2

12.1

23.3

Total Nonconsolidated Entities

34.7

31.3

11.6

33.2

12.1

23.3

Total Consolidated and Nonconsolidated Entities

4,340.8

5,557.2

4,347.4

4,288.0

3,631.4

5,043.0

  

97 


 
 

Petróleo Brasileiro S.A. – Petrobras

Supplementary information on Oil and Gas Exploration and Production (unaudited)

  (Expressed in millions of US Dollars, unless otherwise indicated)

 

(v) Standardized measure of discounted future net cash flows relating to proved oil and gas quantities and changes therein

The standardized measure of discounted future net cash flows, related to the above proved oil and gas reserves, is calculated in accordance with the requirements of Codification Topic 932 – Extractive Activities – Oil and Gas. Estimated future cash inflows from production in Brazil and international segments are computed by applying the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. Future price changes are limited to those provided by contractual arrangements in existence at the end of each reporting year. Future development and production costs are those estimated future expenditures necessary to develop and produce year-end estimated proved reserves based on year-end cost indicators, assuming continuation of year-end economic conditions. Estimated future income taxes are calculated by applying appropriate year-end statutory tax rates. These rates reflect allowable deductions and are applied to estimated future pre-tax net cash flows, less the tax basis of related assets. Discounted future net cash flows are calculated using 10% mid-period discount factors. This discounting requires a year-by-year estimate of when the future expenditures will be incurred and when the reserves will be produced.

 

 

98 


 
 

Petróleo Brasileiro S.A. – Petrobras

Supplementary information on Oil and Gas Exploration and Production (unaudited)

  (Expressed in millions of US Dollars, unless otherwise indicated)

 

 

The valuation prescribed under Codification Topic 932 – Extractive Activities – Oil and Gas requires assumptions as to the timing and amount of future development and production costs. The calculations are made as of December 31 each year and should not be relied upon as an indication of Petrobras’ future cash flows or the value of its oil and gas reserves.

 

Consolidated entities

Equity

Method

Investees

 

Brazil

South America

North America

Africa

International**

Total

Total

At december 31, 2013

 

 

 

 

 

 

 

Future cash inflows

1,134,383

16,770

12,071

28,841

1,163,225

8,724

Future production costs

(469,442)

(8,742)

(3,484)

(12,226)

(481,668)

(3,051)

Future development costs

(72,675)

(2,146)

(2,795)

(4,942)

(77,617)

(1,927)

Future income tax expenses

(205,938)

(1,693)

(169)

(1,862)

(207,800)

(1,221)

Undiscounted future net cash flows

386,328

4,189

5,622

9,811

396,139

2,524

10 percent midyear annual discount for timing of estimated cash flows*

(197,760)

(1,435)

(2,288)

(3,723)

(201,483)

(820)

Standardized measure of discounted future net cash flows

188,569

2,754

3,335

6,088

194,657

1,704

 

 

 

 

 

 

 

 

At december 31, 2012

 

 

 

 

 

 

 

Future cash inflows

1,107,784

18,010

7,318

15,682

41,010

1,148,794

4,155

Future production costs

(458,630)

(8,822)

(1,676)

(3,105)

(13,603)

(472,233)

(2,880)

Future development costs

(58,197)

(2,245)

(2,002)

(3,785)

(8,032)

(66,229)

(177)

Future income tax expenses

(204,258)

(2,010)

(3,166)

(5,176)

(209,434)

(405)

Undiscounted future net cash flows

386,699

4,933

3,640

5,626

14,199

400,898

693

10 percent midyear annual discount for timing of estimated cash flows*

(198,081)

(1,733)

(1,174)

(1,872)

(4,779)

(202,860)

(282)

Standardized measure of discounted future net cash flows

188,618

3,200

2,466

3,754

9,420

198,038

411

 

 

 

 

 

 

 

 

At december 31, 2011

 

 

 

 

 

 

 

Future cash inflows

1,099,570

17,606

4,839

13,064

35,509

1,135,079

2,273

Future production costs

(432,615)

(7,911)

(1,485)

(2,714)

(12,110)

(444,725)

(1,205)

Future development costs

(62,488)

(1,923)

(1,349)

(2,618)

(5,890)

(68,378)

(59)

Future income tax expenses

(209,065)

(2,321)

(2,753)

(5,074)

(214,139)

(341)

Undiscounted future net cash flows

395,402

5,451

2,005

4,979

12,435

407,837

668

10 percent midyear annual discount for timing of estimated cash flows*

(203,006)

(2,006)

(871)

(1,514)

(4,391)

(207,397)

(223)

Standardized measure of discounted future net cash flows

192,396

3,445

1,134

3,465

8,044

200,440

445

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Semiannual capitalization

** Includes the amount of US$ 1,758 related to assets classified as held for sale in 2013.

 

 

 

99 


 
 

Petróleo Brasileiro S.A. – Petrobras

Supplementary information on Oil and Gas Exploration and Production (unaudited)

(Expressed in millions of US Dollars, unless otherwise indicated)

 

(v)          Standardized measure of discounted future net cash flows relating to proved oil and gas quantities and changes therein

 

Consolidated entities

Equity

Method

Investees

 

Brazil

South America

North America

Africa

Others

International**

Total

Total

 

 

 

 

 

 

 

 

 

Balance at January 1, 2013

188,618

3,200

2,466

3,755

9,421

198,039

411

 

 

 

 

 

 

 

 

 

Transfers by loss of control*

 

 

 

(3,755)

 

(3,755)

(3,755)

3,755

Sales and transfers of oil and gas, net of production cost

(33,988)

(1,159)

(398)

(1,557)

(35,545)

(735)

Development cost incurred

16,732

656

165

282

2

1,105

17,837

237

Net change due to purchases and sales of minerals in place

(1,008)

272

(116)

157

(851)

(1,878)

Net change due to extensions, discoveries and improved recovery less related costs

33,171

673

673

33,844

Revisions of previous quantity estimates

(4,075)

28

936

963

(3,112)

84

Net change in prices, transfer prices and in production costs

(9,710)

(370)

303

(282)

(2)

(351)

(10,061)

(416)

Changes in estimated future development costs

(19,155)

(404)

(346)

(750)

(19,905)

(86)

Accretion of discount

18,862

447

271

718

19,579

251

Net change in income taxes

(877)

189

(12)

176

(701)

272

Timing

 

(3)

(654)

(657)

(657)

Other – unspecified

 

(102)

46

(56)

(56)

(192)

 

 

 

 

 

 

 

 

 

Balance at December 31,2013

188,569

2,754

3,335

6,088

194,657

1,704

 

 

 

 

 

 

 

 

 

*Amounts transferred from consolidated entities to equity-method entities, as the Company ceased to consolidate PO&G. See note 10.2 for further details.

** Includes the amount of US$ 1,758 related to assets classified as held for sale.

 

 

 

  

100 


 
 

Petróleo Brasileiro S.A. – Petrobras

Supplementary information on Oil and Gas Exploration and Production (unaudited)

(Expressed in millions of US Dollars, unless otherwise indicated)

 

(v)          Standardized measure of discounted future net cash flows relating to proved oil and gas quantities and changes therein

 

Consolidated entities

Equity

Method

Investees

 

Brazil

South America

North America

Africa

Others

International

Total

Total

Balance at January 1, 2012

192,396

3,446

1,133

3,465

8,044

200,440

445

 

 

 

 

 

 

 

 

 

Sales and transfers of oil and gas, net of production cost

(47,822)

(1,241)

(67)

(1,721)

(3,029)

(50,851)

(116)

Development cost incurred

16,217

759

538

285

60

1,642

17,859

19

Net change due to purchases and sales of minerals in place

Net change due to extensions, discoveries and improved recovery less related costs

17,855

180

1,017

1,372

2,569

20,424

40

Revisions of previous quantity estimates

3,410

246

(59)

1,774

1,961

5,371

(58)

Net change in prices, transfer prices and in production costs

(6,848)

84

114

(341)

(60)

(203)

(7,051)

(138)

Changes in estimated future development costs

(8,958)

(823)

(380)

(1,058)

(2,261)

(11,219)

(114)

Accretion of discount

19,240

485

130

344

959

20,199

67

Net change in income taxes

3,129

154

(100)

54

3,183

1

Timing

(37)

54

17

17

Other – unspecified

(54)

(15)

(265)

(334)

(334)

265

Balance at December 31,2012

188,619

3,199

2,465

3,755

9,419

198,038

411

 

 

 

  

101 


 
 

Petróleo Brasileiro S.A. – Petrobras

Supplementary information on Oil and Gas Exploration and Production (unaudited)

(Expressed in millions of US Dollars, unless otherwise indicated)

 

(v)          Standardized measure of discounted future net cash flows relating to proved oil and gas quantities and changes therein

 

Consolidated entities

Equity

Method

Investees

 

 

 

 

 

 

 

 

 

Brazil

South America

North America

Africa

International

Total

Total

 

 

 

 

 

 

 

 

Balance at January 1, 2011

124,274

3,714

230

3,062

7,006

131,280

324

 

 

 

 

 

 

 

 

Sales and transfers of oil and gas, net of production cost

(45,745)

(1,076)

(82)

(2,037)

(3,195)

(48,940)

(70)

Development cost incurred

13,943

437

98

535

14,478

44

Net change due to purchases and sales of minerals in place

Net change due to extensions, discoveries and improved recovery less related costs

4,892

212

307

377

896

5,788

Revisions of previous quantity estimates

19,483

44

1,071

570

1,685

21,168

(32)

Net change in prices, transfer prices and in production costs

114,630

661

49

2,735

3,445

118,075

133

Changes in estimated future development costs

(15,984)

(441)

(517)

(120)

(1,078)

(17,062)

(30)

Accretion of discount

12,427

476

23

294

793

13,220

54

Net change in income taxes

(35,524)

(48)

(982)

(1,030)

(36,554)

(6)

Timing

(70)

26

(44)

(44)

Other - unspecified

(463)

(72)

(434)

(969)

(969)

28

 

 

 

 

 

 

 

 

Balance at December 31,2011

192,396

3,446

1,133

3,465

8,044

200,440

445

 

 

 

 

 

 

EXHIBIT INDEX

 

Exhibit A: Consent of PricewaterhouseCoopers Auditores Independentes

Exhibit B: Consent of KPMG Auditores Independentes

 

 

 


 
 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

PETRÓLEO BRASILEIRO S.A--PETROBRAS

 

 

 

 

 

By:

/s/ Almir Guilherme Barbassa

 

 

Almir Guilherme Barbassa

 

 

Chief Financial Officer and Investor Relations Officer

 

 

 

Date: March 10, 2014

 

 

 

 

 

FORWARD-LOOKING STATEMENTS

This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act) that are not based on historical facts and are not assurances of future results.  These forward-looking statements are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words “anticipates”, “believes”, “estimates”, “expects”, “plans” and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results o f operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.


All forward-looking statements are expressly qualified in their entirety by this cautionary statement, and you should not place reliance on any forward-looking statement contained in this press release. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events or for any other reason.