Earnings Call: Q1 2021

May 13, 2021

Good morning, everyone. Welcome to Petrobras Webcast with analysts and investors about the Q1 2021 results. It's a pleasure to have you with us today. We'd like to inform you that all participants will follow the transmission by Internet as listeners. After an introduction, a Q and A session will begin. You can send us questions by e mail, petroinvestupetrobras.com.br. Today, we have with us Claudio Marcella, Chief Trading and Logistics Officer Fernando Borges, Chief Exploration and Production Officer Joao Henrique Hitzenhauser, Chief Production Development Officer Marcelo Zencner, Chief Governance and Compliance Officer Nicolas Simon, Chief Digital Transformation and Innovation Officer Roberto Arbenghi, Chief Institutional Relations and Sustainability Officer Quadrigu Araujo Avis, Chief Financial and Investor Relations Officer Rodrigo Castelli Mesilva, Chief Refining and Natural Gas Officer. The presentation will be available throughout the webcast on our company's website. We will start by watching a video of Petrobras' CEO, Mr. Joaquin Silvio Now we start the presentation. I will Call our CFO, Rodrigo Araujo Alevis. Rodrigo, you may start please. Thank you. Thank you, Carla. Hello, everyone. Good morning. It's a pleasure to be here with you for the first time as Pedro Alvares, Chief Financial and Investor Relations Officer. And I hope everyone is safe and doing well. So first of all, let me start next slide please, Gustavo. Next one. Let me start with safety, which is, of course, a fundamental value for our company. And we've been very proud with the results we've achieved over time. And it's important that for the Q1 of 2021, we have a total recordable injuries per million man hours of 0.62, which is within the maximum acceptable limit that we have of 0.7. And of course, with respect to safety, We always have a 0 fatalities ambition and unfortunately we have we had one fatality during the Q1, but our ambition is always to have 0 fatalities. With respect to the recent actions that we developed to support the Brazilian society in the combat against the COVID-nineteen pandemic, We've engaged in the donation of intubation medication to the Ministry of Health in a joint action with other Brazilian companies. And we've also acquired many oxygen units and despite public hospitals and donated oxygen cylinders in an action that was involved the amount above $15,000,000 and we have also changed for certain platforms The boarding schedule in order to reduce the turnover and reduce the risk of contagion within our employees. Some of them have Have already returned to the original schedule, but some of them are still working on a different schedule to support lower income tension. With respect to the emissions in the Q1, we have in terms of E and P carbon intensity, We have reached 16 kilograms of CO2 per boy. And in terms of refining, we had 39.9 percent, they're both within the acceptable maximum limit for the year that we defined as our 2021 target. And in terms of absolute GHG emissions in the Q1, we've emitted 15,400,000 tons of CO2, carbon dioxide equivalent. And we are a little bit above our annual target, but we expect that we can recover throughout the year. Next slide please. So now I'm going to talk a little bit about our financial results in the Q1. We had a very strong quarter with solid operational and financial performance. Our recurring EBITDA achieved a 34% growth in the quarter With 55 percent recurring EBITDA margin and we also posted a very strong cash generation of $7,200,000,000 And when we Reduced by the investments that we made in the Q1, we have a positive free cash flow of $5,600,000,000 And of course, it's important that this free cash flow is supporting our trajectory to reduce our debt and to improve our balance sheet. So basically, When we compare annually, we have reduced already $18,300,000,000 year on year and the quarterly reduction of $4,600,000,000 And it's also good to note that we reduced additional $3,200,000,000 after the end of the quarter to April 2021, so we're highly focused on our deleveraging trajectory. In the Q1, we repurchased bonds in In the amount of $1,400,000,000 and we prepaid bilateral debts in the amount of $300,000,000 as well. We had a cash flow from our divestment proceedings that we've closed during the quarter of $200,000,000 And of course, it's important to note that we've increased our natural gas and oil production in the Q1 in 3%. And even more important is to point out that we had almost 70% of participation of our pre salt layer production, Which of course adds more value to our portfolio. So this was a very important result for the Q1. And we also had record sales of our S10, Our 10 PPM low sulfur diesel. With respect to production, it's good to mention as well that we had Inventories made during the Q1, so there's around 27,000,000 barrels that were not realized as exports in the Q1. So we already have an important improvement coming out for the Q2 with respect to exports that are ongoing by the end of the Q1. When we look at the external environment, we had an important improvement in Brent prices, 30% during the And of course, our performance was positively affected by the improvement on Brent prices. And we also had in terms of The average exchange rate during the quarter, an improvement from 5.4 to 5.47. So this was almost flat during the quarter. But when we look at the end of period exchange rate and this is important because there's a relevant impact in our earnings for 1st quarter due to the foreign exchange non cash foreign exchange losses, there was a depreciation of the Brazilian real from BRL5.2 to BRL5.7 It's per dollar, so a 10% depreciation that affected our earnings for the Q1. Next slide please. As I mentioned before, we are highly focused on reducing our debt and we experienced A CAD4.6 billion reduction in the Q1 and additional CAD3.2 billion until the end of April. But when we look at the amortization profile, it's also interesting to note that we have a very solid liquidity at this point And the profile, the schedule of amortization of our debt is very comfortable. We've increased the average maturity of our debt To a point very close to 12 years, so we're at 11.84 years at this point. The average cost of our debt Had a marginal increase from 5.9% to 6%. But as we look at the portfolio and the schedule of our more Of amortization of our debt, we're very comfortable with the current situation. Of course, we're continually monitoring opportunities to reduce the cost of our debt and to Increased the maturity of our debt, but we're comfortable with our amortization profile. And it's also important to note that alongside with our $12,500,000,000 in cash that's of course that's been reduced after the end of the quarter with the prepayments that we made after the end of the first quarter. We also have $8,300,000,000 in revolving credit lines that give us enough support in terms of liquidity even during challenging times like what we had in 2020. Next slide please. Looking at the recurring EBITDA in the quarter, as I mentioned before, we've had a very strong quarter and it's interesting to note that Our recurring EBITDA indicates that we had an increase of 34% of Well, supported by the increase in Brent prices, as I mentioned before, but it was in terms of both financial results and operational results, a very Strong quarter. We had a very strong operational position in the quarter as well. And it's good to mention of course that we had also lower operating expenses in the So our cost resilience is also supporting the improvement in our performance. When we look at the adjusted EBITDA Q on Q, it's basically flat, a little bit of increase from 8.8% to 8.9%. But when we look at the recurring EBITDA, It points out that we had a quarter with less noise and very good financial operational performance. Next please. Looking at our segment performance, of course, E and P was strongly impacted by the positive increase in Brent prices. So we had Brent Appreciation and also we had an increase in our production in the Q1, especially because we had stoppages in the Q4 of 2020. With respect to our RTC segment, we see a very important improvement in performance during the quarter, which of course was highly affected by the inventory and turnover effect, especially coming from the increase in brand prices. So we had higher realization prices and we have lower costs that were made in prior periods. So when we remove the Inventory turnover effect when we look at replacement cost EBITDA, we had a 7% decrease in the quarter, Especially due to the seasonality and of course to the lower levels at the end of the period Given the restrictions that are still remaining with the pandemic, with respect to the Gas and Power segment, We had a 24% decrease, which was mainly affected by lower margins in the generation of energy and in the commercialization of natural gas, Especially given the increase in the cost of importing LNG, especially JKM LNG Has increased substantially in the Q1, so this affected the performance of our Gas and Power segment. Next please. As I mentioned before, when we look at the cash generation for the period, we had a very strong operational cash flow, $7,200,000,000 our operational cash flow was positively affected by tax credits by the decision of Rebooting VAT from the calculation basis of PISCOFINS. So we had tax credits in the Q1, which were Almost offset by prepayments that we made to our pension plan in order to support our divestment of refineries. So we prepaid certain obligations that we had with our pension plan in order to streamline the process of divesting our refineries. And as I mentioned, when we look at the financing part, we paid around CAD2.6 billion when we With leasing and interest payments and we also had net payments of $3,000,000,000 in terms of financing. A substantial part of these payments were prepayments. So we had a strong free cash flow of 5.6 $1,000,000,000 supporting our deleveraging efforts and it's also good to notice that we had a $200,000,000 in inflow of cash from our divestment procedures. Next please. I've already mentioned before, but we are continually focused in line based on the management and capital optimization. So we've repurchased Bonds after the end of the quarter, we had a tender offer of about $2,500,000,000 and we also have the extension of The maturity of revolving credit lines of around $2,000,000,000 to 2026, which supports our liquidity and helps us to Reduce the optimal level of cash that we remain in our balance sheet. And looking at liability management from a broader perspective, we So settle tax contingencies during the quarter. This is very important for us. We're continually monitoring opportunities to settle tax liabilities and All kinds of contingent liabilities in terms that are favorable for the company. So we've paid Around BRL500 million, a little bit less than BRL100 1,000,000,000 to reduce liabilities of BRL1.5 BRL1 1,000,000,000 in the Q1 and we are also recovering around BRL0.2 R1 $1,000,000,000 in judicial deposits that we had. So it was a very relevant transaction and a very good transaction in terms of In terms of portfolio management, our portfolio management agenda is continuing very strongly and we're trying to Implement as fast as we can our M and A processes. We had already closed we had already signed 6 Transactions in 2021 and we have closed 7 transactions. Of course, the most relevant is the Helane refinery and that we signed in the Q1 of 2021. So up until May 11, We have already signed $2,500,000,000 in transactions and we had cash inflows of around $500,000,000 Next please. This is a general picture of our portfolio. We have around 50 transactions ongoing and Of course, we are highly focused on expediting our M and A transactions and we have signed relevant Procedures with the stack with highlight to the NTS, to the natural gas transportation company that we sold the remaining 10% that we had. We closed this before May 2021. So this is the general picture. Next please. And finally, with respect to our net income to our earnings in the Q1, we had recurring net income of $200,000,000 compared to 5.4 in the Q4 of 2020. And this is basically Due to the impact of the devaluation of the Brazilian real, as you know, we have our debt indexed 2 U. S. Dollars and we look at the period end foreign exchange rate to mark our debt by the end of the period. So we had a negative Foreign exchange loss in the Q1, non cash of course, but this impacted substantially our recurring net income. So this is the general picture of our financial highlights of the Q1. And now I'll give the word back to you Carlos. Thank you. Thank you, Rodrigo. We can move now to the Q and A session. And the first question that we receive comes from Frank McGann with Bank of America Merrill Lynch. And it's for you Rodrigo. The new deadlines for refinery sale, though giving more time to complete the sale, still seem to be challenging in terms of time. How does the company see the process to sell the refineries advancing? What are the key challenges? Would contracts include any guarantee in terms of pricing or returns that could be provided by Petrobras? Good morning, Frank. Thank you for your question. First of all, in terms of the general picture of our M and A process, it's good to highlight that they continue normally And we're going through the predefined gates that you already know that occur in our M and A activity. But of course, you know that especially for refining assets, this involves complex transactions that of course have several steps Both from our side and from the buyer side and of course with the regulators as well. But we are highly focused on complying with the deadlines that were established by And in the Q1, we've signed the sale of Hilla, our refinery. So we're focused on complying with the deadlines of the antibody antitrust body in Brazil. And in terms of guarantees and returns, we don't expect To provide those, of course, each transaction has its own SPA, its own contract, but this is more of a general picture. Thank you for your question. Thank you, Rodrigo. The second question from Frank is for Abengui. So Abengui, in recent months, there seemed to be a more focused effort globally to deal with climate change that could, at least on the margin, speed energy transition. To date, understandably, Petrobras has focused on maximizing its own privileged hydrocarbons asset base. Over the medium to long term, what are the options? If any, the company could be studying to possibly adjust its strategy to meet long term challenges? Hello, Frank. Thank you for the question. And I'll divide the answer in 2 parts. First, what we have accomplished over the years. And it's true that Petrobras has been very focused on the recovery and the financial side. But also, we have done a lot in terms of carbon performance because carbon performance Q is key to the future of any oil and gas company. It's what we call the double resilience, Not just have a good project, a profitable project, but also a low carbon project that we can market our products in the world in the future. And in this particular area, looking at the past, we have done a lot already. The carbon the so called carbon intensity for the exploration and production of Petrobras has been very improving over the years. We have reduced the amount of Carbon greenhouse gases produced by barrel In more than 47% from 2,009 to 2020. So that's a good number. And also, in the pre salt that is today the key project for Petrobras, We have today the 3rd largest carbon capture project in the world. Last year, we have been able to capture and put back to the reservoir 7,000,000 tons of CO2. This is 18% of the world projects in a global scale. So this is what we have done. Also, it's worth to mention the Low sulfur diesel in our refining plants, we have already mentioned this in our press release that the increase of the sales of low sulfur diesel is very important for Petrobras and has been improving over the years. That's very important to Brazil. As you know, Brazil is very diesel prone. We are a country that is very high in terms of consuming diesel, especially for Transportation and public transportation in our urban areas. So reducing the amount of sulfur In our diesel brings a lot of benefit for society. But looking at the future, because as you said, The annual transition is speed up, and we have to be prepared. So we are very focused on technology. Petrobras, as you know, very technology driven company. So we see opportunities in projects like the all electric in our platforms. If we can receive the necessary authorization from the authorities to Put this kind of systems in our platform. We are going to be able to reduce in 20% our greenhouse emissions in our Offshore projects in ultra deepwater, especially in the Crystal. The HiSET that is A technology developed by Petrobras in which we are able to capture the gas Leaving the reservoir and separating the gas and returning back to the reservoir the CO2. That's also very, very important. And also the renewable fuels that we are also waiting for the authorities here in Brazil to authorize us to produce the renewable diesel in our refining plants. And as a side effect of this production, The aviation biokerosan for as a jet fuel. And so those are the areas in which we are Seeing the progress, so we are very much focused on progressing and improving our carbon efficiency over the next years. Thank you. Thank you, Adejeng. The next question comes from Gavin Willey with Scotiabank. And it's for Rodrigo. Rodrigo, do you expect higher dividends to shareholders to remain a priority for Petrobras, staying consistent with plans to distribute $30,000,000,000 to $35,000,000,000 over the period of 2021 to 2025. Will the new Board look to review the various aspects of Petrobras dividend policy? In particular, do you expect any amendments to the 60% payout of free cash flow once gross debt plus capitalized leases moves below $260,000,000,000 Good morning, Gavin. Thank you for your question. First of all, we'll stay consistent both with our dividend policy and with our expected dividend payments. Of course, our focus now is on achieving our debt target of $60,000,000,000 to 2022, so we're moving as fast as we can to achieve our debt target. And you can see that as I mentioned during We're using basically all the free cash flow that we have to reduce our debt. Given the challenges that's imposed By the pandemic, of course, that we're still running on a higher cash level than what we think it's optimal. But our focus of the free cash flow at this point is to reduce our leverage. And of course, we want to improve our at the level of our dividend payments. And once we reach our $60,000,000,000 debt target, our Current dividend policy gives us enough flexibility to evaluate the timing and how to better implement our additional dividend payments In order to also ensure that we are we have a financial sustainability both in terms of our short term, medium term and long term. So it's important of course to preserve our financial stability as well. So this is what we had in terms of targets and prospects. Thank you. The second question also for Gavin is to Joao Henriques. Joao Henriques, the 5 year plan outlines the majority of Capital spending will be allocated to upstream, pre salt developments and has de emphasized exploration. Do you expect any changes to capital allocations relatively to what has been outlined in the current 2021 2025 plan? Do you believe the upstream production growth or exploration should be accelerated? Good morning, Gavin. Thanks for the question. Our expectation is to follow the premises of the plan present To the market in 2020. The discussions for the next 5 year plan, they are ongoing. And we hope that we approve this, let me see, in the next strategic plan. But we expect no major changes in this direction. I would like to make a complement to this answer to Gavin. We have allocated for this 5 year plan $6,500,000,000 in exploration. We have BRL46,500,000,000 allocated to upstream We think that this €6,500,000 is a huge amount of money allocated to exploration. We have to look out that we do this exploration in partnership with other Companies, we are focusing on equatorial margin and the first result could Increase our appetite to deploy more efforts in the coming years. If you look to the development plan, we have, as already mentioned, 13 production units to come. We have the prior preferential rights, 2 areas that Our head has an FPS for each one. SEK will come on stream in the second half of this year and The production increase in this year is a result of the ramp up of P-seventy in Atapu area. And in these two areas, we have room for another and production units. So, we are doing, I think, a good speed on even production development and exploration. Thank you. Thank you, Joao Henriques. Thank you, Fernando. Now the next question comes from Christian Audi with Santander and it's for Rodrigo Raul. Rodrigo, uses of cash. So with your continued strong cash flow generation and already lower debt, how could you prioritize the use of your cash between paying down debt versus increasing CapEx versus paying dividend? Thank you. Good morning, Christian. Thank you for your question. Well, in terms of if we can Talk about a financial framework, it's important to see that the first dollar from the cash flow of our operations and of our M and A activity It's of course directed to the payment of our commitment and our commitments and the CapEx that is already committed in our business plan. Then of course that the second dollar is to reduce debt. So as I mentioned before, we're highly focused on achieving our $60,000,000,000 debt target As fast as we can, our 2022, dollars 60,000,000,000 debt target. If we look at the general picture for 2021, We are very close to achieving our annual target of $67,000,000,000 And of course, when we reach the The $1,000,000,000 targets, our current dividend policy gives us enough flexibility to evaluate the timing and the best A way to implement our policy and pay additional dividends, of course, making sure that it is sustainable in terms of our financial ability For short, medium and long term. With respect to future CapEx, of course, we are now focused on executing our 20 'twenty one, 'twenty five business plan. And as you know, we annually review our business plan as Roni mentioned before. But of course, our CapEx will always be focused on value generating assets, optimizing our portfolio In terms of maximizing returns and efficiently allocating capital so that we maximize our returns. So this is the general framework that we have. Thank you for the question. Thank you, Rodrigo. The next question is for Fernando Borjes. It's about production outlook. So could you just touch on potential start up schedule and maintenance schedule for the FPSO for the rest of the year and how it could impact production. We had a very busy Maintenance work in the last quarter of 2020 just because of the COVID pandemic and We postponed at maximum the intervention, which brings more people to our units, but we had to do them. Now for this year, we see a steady level of maintenance not causing any special decrease in production. So finally, we have Come back to the normal in the speed of maintenance, the rate of maintenance of our production units. That's. Thank you, Fernando. The next question comes from Liliana Yang with HSBC And it's for Rodrigo. Rodrigo, how do you see Petrobras current strategy plan and what key issues pertaining to the plan do you foresee this new administration should review or improve. Could you please share your top three priorities for this year. Do you believe that Petrobras should raise CapEx towards $15,000,000,000 as opposed to the current $10,000,000,000 given the current levels of operating cash flow? Thank you, Carla. Thank you, Liana for the question. Good morning. First of all, with respect to our business plan, we have a very solid business plan in place. And of course, our focus will remain on the efficiency of our capital allocation and portfolio management in order to maximize our returns. So This is a top priority for us and we're going to be continually focused on maximizing returns before portfolio management. We have, As you know, a significant challenge of reducing our leverage, reducing our debt levels in order to be closer to what our Peer companies have and this of course brings a lot of resilience both to our future plans and to our portfolio as well. Another important message that we have is our focus on resilient projects. So resiliency is a key word. And as Adeeng mentioned For not only financial resilience, but financial and environmental resilience is a main topic for us as well. As I mentioned before, Antonio Hickey, we have this annual process of reviewing our business plan, But we don't expect to see any major changes in terms of the general guidance. Our capital allocation would be focused on maximizing Returns and on having an effective portfolio management policy, again focused on the dual resilience of Being resilient for lower brand prices as we experienced last year, all the companies had Major experience in terms of realizing the resilience scenarios that they had and of course focusing on our environmental And resilience as well. Talking about the top three priorities, I would say that, of course, for 2021, our main priority It's to ensure that our projects are on schedule. They support our cash flow generation. They support the cash flow of operation. So our committed CapEx and making sure that the projects are on schedule for 2021 is very important for us. I would say also that Priority is to ensure that we are able to move as fast as we can with our portfolio management agenda, which is also important, both to improve the returns in our portfolio and to reduce our leverage as well. And of course, I've mentioned before, reducing our debt is definitely very important for us in order to give us a solid financial Position to support the additional dividend payments that would come from our dividend policy, which As I mentioned before, it gives us enough flexibility to analyze the timing and the best way to implement considering the Need to support our financial stability as well. Thank you for the question. Thank you, Rodrigo. The second question from Liliana is also for you. So what are your thoughts about the privatization of refining assets in Brazil? Is it necessary for Petrobras to sell the assets that are in the company's divestment plan in the coming 2 years or a 3 to 5 year agenda for divestments is a more welcome one. Thank you for the other question, Liliana. Well, first of all, with respect to the refining assets, as I mentioned before, We have a committed schedule with the Brazilian antitrust body. So we're very focused on complying with that schedule. And of course that improving the number of players in the Brazilian refining market is good for the market, Good for the Brazilian society and good for Petrobras as well. So we have an important output that comes from our divestments. So we're focused on complying with The deadlines that we agreed with the Brazilian Audit Court with the Brazilian Antibody Trust, sorry. With respect To the divestment to the portfolio management plan as a whole and to the 3 to 5 year agenda, of course, we are always trying to anticipate Those process and to streamline them looking for opportunities that we have in the market. So we're focused on doing things as fast as We can, but we're comfortable with the plan that we have in place now. Thank you for the question. Thank you, Rodrigo. We also received questions from Luis Carvalho with UBS. And the first question is for Marcela. So Marcela, the company has been successfully in keeping with the international priority and somehow the results of refining have been solid. Would it make sense to think of a deadline of 24, 48 or even 72 hours for implementation of adjustments looking forward? What could change in the pricing policy? Well, thanks for the question, Luis. Our internal pricing policy went through some learning process in the Previous years with the period we got very low volatility and another with very high volatility even with daily adjustments. Today, we are at an intermediate level that, to my view, provides a balance with international market, allowing us to compete efficiently and flexibly without immediately passing on the volatility of international prices or the exchange rate to the domestic market. So the adjustments up or down occur without a defined frequency and are announced on the business day prior to their implementation. We buy visibility on the prices practice by location and mode. And this information is immediately published on Petrobras' website. Thank you. Thank you, Marcelo. The second question also from Luis Carvalho, it's for Rodrigo. So Rodrigo, the RGT Stock price reached on Wednesday the level above the price of the last to follow on. In your view, would this be triggered to unlock the sale of the remaining 37.5 percent stake. Otherwise, can you give more color on the rationale of the process? Good morning, Luis. Thank you for the question. As you know, we've announced and it's of course in our 2021 2025 business plan, Our intention to divest of our remaining stake in NBR Distribuidor. What we're doing now is evaluating the timing of the transaction In order that we can maximize the value of the transaction for us. So this is basically where we are now. Thank you for the question. Thank you, Rodrigo. We received questions from Bruno Montanari with Morgan Stanley and they are both for you. So the first, Does the company still intend to implement the enhanced dividend policy distributing 60% of free cash flow once the optimal capital structure is achieved? Well, good morning. Thank you for your question. As I mentioned before, Bruno, we're Of course, currently focused on reaching our debt target of $60,000,000,000 for the year of 2022 and we've been using All the free cash flow that we have to reduce debt, we know that given the scenarios to impose by the pandemic, We're still running on a higher cash level than we think it's optimal, but we think that it's necessary at this point. But We definitely want to improve our level of dividend payments. And as I mentioned before, Our existing dividend policy gives us enough flexibility to evaluate the timing to implement Policy and to ensure, of course, we maintain our short, medium and long term financial sustainability. Well, thank you for your question. So the second question also for you Rodrigo is about the agreements with CADE. So the company was recently granted an extension in the deadlines to sell refineries and also material gas assets. If Petrobras is not able to meet the new deadlines, could it be subject to any sort of fines from CADE? In the case of Hepa Refinery, whose sale process had to be restarted, how to expedite the procedures in order to meet the new deadline? Well, Thank you, Bruno. I've mentioned before that in general terms, our M and A, our portfolio management process are pretty normally are ongoing Through the gates that we have defined in our through our M and A activity. Of course, as I mentioned, you know that the refining transactions are complex Transactions that involve activities from our side, from the buyer side, from the regulators. And Of course, as I mentioned, we are highly focused on meeting the deadlines that were established by the Brazilian antitrust body. So this is where we are in terms of general picture of the processes. Specifically with respect To HIPAA, we're still evaluating how to restart and evaluating what we do with respect to the process, keeping our failed attempt in the first time. Thank you. Thank you, Rodrigo. We received questions from Rodolfo Angioli with JPMorgan. The first question is for Fernando Borje. So Fernando, pre salt lifting costs seem to have stabilized at very interest levels, below $3 per barrel. Is there room for further improvements? What is the expected trend here? Thanks for the question. In a more broad view, Rodolfo, I could say, if you look back 5 years, We have a lifting cost of $9 per barrel of equivalent oil. The whole Petrobras, today we are in 5.2. In our strategic plan for the next 5 years, we hold on 5.2 percent. Even with the decline of the fields and increase of the cost of the assets we have to manage, If you put a big eye on Persalt, in the previous 5 years, we had $4.3 per barrel. Today, we are around $3 per barrel, but in the next 5 years, we have a project of $3.84 per barrel and goes steady with that. So that's the whole view of lifting cost. And so The whole Petrobras, we could focus on something around $5 and result something around $4 per barrel. Thank you for the question. Thank you, Fernando. The next question from Rodolfo is for Juan Hickey. So Juan Hickey, this is about the Bouzis development. So can you give us an update on how things are moving along? Will all the new FPSOs have 225,000 barrels per day of capacity. Currently, we have 4 episodes in production In Bouzou's field, and you have already highlighted 3 vessels, the Terrem Construction, We have planned the Start production for these units in 2022, 2024 and 2025. And the capacity of these units It will be EUR 150,000 to EUR 125,000 barrels per day We have already 2 new units on the procurement phase, P79 and P80, With the 100 and 800 and to 125,000 barrels per day and another 2 units are on planning in the studying phases. This unit will be contacted probably in the EPC format. And the idea is To have this unit with the production capacity up to 125,000 barrels per day. On the end of the development phase of Brzos field, we expect to have total production Around 2,000,000 barrels per day, even in total barrels per day. Thank you for the question. Thank you, Joao Henriques. Now we have questions from Bruno Morin with Goldman Sachs. And the question is for Rodrigo. Rodrigo, Has there been any change recently to the offers previously made for assets up for sale? Thank you, Bruno. Good morning. Thank you for your question. Well, we haven't seen any changes to offers previously made for assets. What we see of course is a usual negotiation process that is Part of any M and A transactions going through the gates that you know exist in our M and A activity process. And of course, what I can say is that we're focused on moving as fast as we can in our M and A transactions, but we haven't seen any specific changes. Thank you for your question. Thank you, Rodrigo. The next question comes from Andrea Chen with Itau BBA and it's for you. So, amidst the recent volatility in the fuel price environment, how has the sale of the refiners been evolving? And how the new management team sees this topic? It's reasonable to assume that the sale of Repar and Refati could still happen this year and closing and signings could come through next year? Good morning, Andres. Thank you for your question. Well, as I mentioned before, We are focused on complying with the deadlines that were established by the Brazilian antitrust body and including FAPI of course. So this is what we can say for now. We don't see any disturbance in the process at this point. But Of course, we remain focused on complying with the deadlines. And as I mentioned before, with respect to Hepar Specifically, we're still reevaluating the process given our first failed attempt. Thank you. Thank you, Rodrigo. The second question from Andrea is to Fernando Duborg. So Fernando, the agreement over the TOR surplus with the Chinese NOC was expected to occur during the second half of twenty twenty. How has this been evolving? When should we expect to see a final agreement? Andre, the negotiations are going well. It's a complex one because we have a field with 4 units installed and we have room for more 8 units, up to 8 units. So it complies in Compensation, so the sales are going very well. We expect next September to finalize this and It's going to be an opportunity for Petrobras to receive the compensation and start ensuring the production with the 2 partners. Thank you. Thank you, Fernando. The next question is from Vicente Falanga with Bradesco Bebe. So it's for Rodrigo. Rodrigo, do you believe the sale of Bjar de Cibre Dora is positive for Petrobras from the perspective of capital reallocation? Thank you, Vincentio. Thank you for your question. Good morning. Well, as I mentioned before, you know that BR with Loris is One of the assets that we intend to divest from the remaining stake in our business plan. So yes, we do believe that is positive in terms Capital location. And what we're doing now is evaluating the timing in order to maximize the value of the transaction for us. Thank you for the question. Thank you, Rodrigo. So next question also from Vicente is for Marcela. So Marcela, what in your view is an optimum price policy for Petrobras. Do you believe that the government will push for a stabilization fund? [SPEAKER CARLOS GOMES DA SILVA:] Well, Vincente, good morning. Trying to answer your question, we do believe it's the one we are currently practicing, The best one. But of course, we want to always adapt to the business environment, take into account our options and also our competitors' Options, of course, aiming for the best profitability. It's important to say that we don't we try not to pass on So the customers' eventual market volatilities, but we maintain the alignment of price with international market. This It is very important to ensure that the market continues supply without risk of shortages by not only Petrobras, but several actors responsible today for serving different Brazil regions. In addition to Petrobras today, we have distributors, importers, other refiners doing this job. The same balance, this competitive balance is responsible for price reductions when the supply grows in the international market as occurred throughout 2020, for example. Important to Say that fuel prices practiced by Petrobras are not the only component The price felt by end consumers. We have to add Federal taxes, state taxes, cost of acquisition, Mandatory mix of biodiesel and ethanol, diesel and gasoline. On top of that, gross margins for distribution companies and So we do our part trying not to That's on volatility, but it's very, very important for us and for the other actors in this market To keep on keeping on making our prices In equilibrium with the international market, it's very important for the good workings of this market. Thank you, Marcelo. The next question comes from Regis Cardoso with Credit Suisse And it's for Fernando Borreira. Fernando, Petrobras recently declared interest in both SEPIA and Atapur areas. Does it make sense to participate in the auction with a consortium? Is there any synergy in replicating Inatapu in the new surplus volumes auction, the same consortium of the conceptual contract and for SEKES, would it make sense to enter in the bidding process alone? Yes. This strategy is something that any company use to open. Petrobras has Apolis, Petrobrasco has a value that is well with partnership in all Our new activities in the ultra deep waters or exploration. So we are a company that's open to share the risks and the profits of our activities even Always with partners. That's the one component of our strategic plan. Thank you. Thank you, Fernando. We have one last question from Barbara Halberstadt with JPMorgan. And it's for Marcela. Marcela, it would be great to get some additional color on the dynamic for the export markets after the Q1 of 2021? Well, thank you, Barbara, for the question. I'd like to Share our crystal ball related to the Q2 scenario. Well, what we've seen in the Q1 this year, Some weaker premiums, but since then, the market fundamentals in our view have improved significantly. So China demand is picking up and we are getting some strong support for premiums and soup crudes. Vaccines rollout on several places in the world have also improved the market sentiment. In our view, this provides a path for the recovery of the oil demand. So We do see some improvement in the premiums for our oil crude oils over the next quarters. Thank you. Thank you, Marcela. We also have one more question from Barbara to Rodrigo. It's about liability management. So, Rodrigo, what do you expect in terms of liability management for the rest of the year? Thank you, Barbara. Good morning. Thank you for the question. Well, First of all, as I mentioned, we of course we are highly focused on reaching our debt targets both the $67,000,000,000 For 2021 $60,000,000,000 for 2022. But we are of course always looking for opportunities to reduce the cost and to increase the maturity of our debt profile for the remaining portion of the debt that we'll We still carry after we achieved our targets. So we're continually focused on this. And when we think about liability management in a broader perspective, As I mentioned during the presentation, we are continually looking for opportunities to settle Liabilities that we have in general, contingent liabilities in general, whenever we find opportunities to settle them In favorable terms for the company, we are of course always looking for opportunities to do this. So this is how we view liability management as a whole. Thank you, Rodrigo. At this time, we conclude our Q and A session. If you have any further questions, you can send it to our Investor Relations team. Rodrigo will now make his final remarks. So please, Rodrigo. Thank you. Thank you, everyone, for your time today for being here with us For our earnings call of the Q1 of 2021, as I mentioned before, we had a very strong quarter both in terms of operational and financial And we are highly focused on executing our strategy and delivering our 2021, 2025 business plan. So thank you for being here today and feel free to contact our IR team with whatever questions you still have. Thank you very much.