Earnings Call: Q2 2021

Aug 5, 2021

Hello everyone. Welcome to Petrobras webcast with analysts and investors about the Q2 2021 results. It's great to have you join us today. We'd like to inform you that all participants will follow the transmission by listeners. After introduction, a Q and A session will begin. You can send us questions by email at petroinvesticpetrobras.com.br. We also inform you that all executives are participating in events remotely in their individual rooms, respecting all security and safety protocols. Today, we have with us Claudio Maestelle, Chief Trading and Logistics Officer Fernando Borges, Chief Exploration and Production Officer Joao Henriquesenhuysen, Chief Production and Development Officer Nicolas Simon, Chief Digital Transformation and Innovation Officer Roberto Ardengi, Chief Institutional Relations and Sustainability Officer Rodrigo Araujo, Chief Financial and Investor Relations Officer Rodrigo Costen, Chief Refining and Natural Gas Officer and Salvador Dahan, Chief Governance and Compliance Officer. To initiate, I'll pass to Rodrigo, our CFO. Please, Rodrigo, go ahead. Thank you, Carla. Thank you. Hello, everyone. It's a great pleasure to be here with you today talking about our Q2 of 2021 results. We had a very impressive quarter with substantial results, and it's very glad to be here with you today. Thank you. Next slide, please. So starting with our safety metrics, it's very important to report that We're continuing to comply in the first half of twenty twenty one with our 0.7 level of alert With respect to total recoverable injuries per minimum hours and of course, you always know that we have 0 fatalities ambition and we unfortunately had 1 fatality in 2021, but we're always working to improve safety. That's an unconditional value for Petrobras and we're always focused on improving safety and we're very glad to be below our alert level of 0.7% for 2021. Next, please. With respect to our emission indicators, it's important To see that in terms of carbon intensity in our E and P operations, we are significantly below level that we set as a target for 2021, we are already below 2020. During the year of 2021, we had a ramp up of Important production units and we have already re injected 4,300,000 tons of CO2 During this year, which is already the same level of 2019, and we expect to have a higher level when compared to 2020 as well. So we continue with our Lower carbon footprint and reducing our emissions significantly. When we talk about our carbon In the refining operations, it's important to realize that we had several scheduled stoppages. We had 6 scheduled stoppages in 2021. And In spite of that, we're still maintaining the same level of 2020. And we believe that we can recover during the second Half of 2021 and achieve our goal for the year 2021. And we have already announced earlier this year our Raftop Program, which is a very important program focused on improving the energy efficiency of our refining operations. And We're therefore highly focused on reducing carbon intensity in our refining operations. Next, please. When we look at the highlights of our operational and financial results for the Q2 of 2021, these results reflect Very clearly, our commitment with executing our business plan and our discipline focused on our strategy. So we have Very important results for this quarter, which is something that the company has been working on since basically 2015, 2016 To manage this portfolio, to have a very resilient portfolio that is resilient to lower prices And also is able to capture the upside of scenarios like the one we're seeing in 2021. We set the company for a 40 Dollar Brent price for the year 2021 and what we see is significantly above that. And we have been able to In the Q2 of 2021 that our portfolio is capturing all the upside that is related to higher Brent prices. We had a recurring Adjusted EBITDA of $11,400,000,000 and an EBITDA margin of 54%. Also, we had $10,800,000,000 operating cash flow and our very substantial level of free cash flow as well After our investments of $9,300,000,000 in the Q2 of 2021, this is, of course, a result of a very important operational performance with High exports of oil and oil products. We're also diversifying the destinations of our exports, of course, Always focused on generating value and trying to find the best consumers for our oil in international market. This is a very important movement and we see oils like the P, Bolzius, Atapol being More and more recognized in the international market as well. We had in the second quarter higher margins and higher sales in the domestic market As well from our refining operations, especially diesel and gasoline in the Brazilian market. And it's good to highlight that the The Q2 is not our highest volume in terms of seasonality, so it was a very important result to have such high volumes in the Q2 of 2021. When we look at our gross debt reduction, we reduced our debt in the 2nd quarter by $7,300,000,000 Reaching a level that is substantially below the target that we set for 2021 of $67,000,000,000 We are already in $63,700,000,000 For 2021, and, of course, that we're highly focused on, reaching our $60,000,000,000 debt target, which is something that, continuing The space that we have now, we believe that we can reach $60,000,000,000 debt target by the end of the year 2021. We also had the support of important cash flows from our portfolio management strategy. We had inflows of $300,000,000 in the first half of the year and in the second quarter, sorry. And we also had the Follow on transaction of our remaining shares in BRDES BUDOR of $2,200,000,000 This cash inflow happened in the beginning of Q3 in July. We had a positive impact in our earnings for the Q2 of The reversal of the impairment that we had in Berard Sibudor, but the cash inflow actually happened in the second in the third quarter, The beginning of July and, of course, we had earnings of $7,700,000,000 in the Q2 of 2021. This was positively impacted by our very substantial operational performance and we also had a positive impact of Foreign exchange gains that are non cash, but they impacted positively in our second quarter results. With all the debt reduction that we had and with CapEx discipline, the cost discipline that we have And the portfolio management strategy that we have in place, we've been able to approve and announce anticipated dividend Tribution of $6,000,000,000 for the second half of twenty twenty one, part of it in August, part of it in December of 2021. And we're very glad to announce that. And of course, we're trying more and more to balance our Focus on debt reduction and getting to the $60,000,000,000 debt target, but at the same time being able to add value, to generate value, to reduce Our debt with the lowest cost possible for prepayments and for debt reduction at the same time being able to balance that with dividend distribution for our shareholders. Next, please. When we look at the external environment, Brent prices were 13 Chen, above the Q1 of 2021 and the Q2, which of course, as I mentioned before, we were able to capture this additional prices With our portfolio, which is a very cost resilient portfolio, when we consider the average exchange rate Eyal dollar for the period, we had a slight reduction of 3%. So on average, we had An important improvement in margins and prices for the Q2 of 2021. And as I mentioned For when we consider the anaphyrid exchange rate, we had an appreciation of the Brazilian real during the Q2 of 12%. And this, of course, impacted positively our earnings for Q2 2021, but it's non cash. Next slide, please. It's very interesting to see the trajectory of our gross debt over time. If we go back a couple of years, we can see that in 2015, we had a total gross debt of 135 $1,000,000,000 and without considering the leases that only became part of our debt as of January 1, 2019 when we implemented IFRS So it's basically a $90,000,000,000 debt reduction from 2015 to 2021, which is a very impressive result. And as I mentioned, we're already below the target that we set for 2021. And we've been more selective in trying To balance value generation and dividend distribution with reaching our gross debt level Of CAD60 1,000,000,000 by the end of 2021. Of course, it's very interesting to mention as well that We have a net debt to EBITDA ratio much closer to our peers now. This is, of course, positively impacted by the level of EBITDA that we have, so it's important to continue by the level of EBITDA that we have, so it's important to continue focusing on reducing our total debt as well. But it's a very important result of 1.49 times. And when you look at the ratio between our cash Flow from operations and our interest payments, we already have something around 12, which brings us much closer to our peers and that's a very important Trajectory of reducing our leverage and therefore making the company more sustainable and more reliable and resilient to challenging scenarios. Next slide please. When we look at the results in terms of EBITDA for the 2nd quarter, as I mentioned before, We had a very important quarter, very important operational results. So the increase in oil products margins and the increase of exports as well and sales Reflected in an increase in our recurring EBITDA of 31% to $11,400,000,000 in the 2nd quarter 2021. And, of course, we also had positive impact. When we look at the adjusted EBITDA, we had a positive impact Of the decision, the gain that we had related to the exclusion of the AT of ICMS, There is a state level taxation in Brazil from the calculation of PISCOFINS, but it was a very impressive result in terms of operational Looking at the dynamics of the results by business segment, We can see that our Upstream segment captured an upside of 20% from The Q2 when compared to the Q1, we had higher Brent prices, also an increase in our production. We had a 2,800,000 barrels of oil Equivalent production in the Q2 of 2021 and 70% of that is already represented by oils from the presalt layer, Which are very resilient in terms of costs and of course in terms of emissions as well. So we're very glad to see For results of our exploration in the pre salt area, when we look at the refining, transporting and commercialization segment, Even when we look at the performance, ad replacement costs and excluding the inventory turnover effect, we had a very positive quarter. We basically more than doubled the results from Q1 to Q2 with higher margins and higher volumes in the sale of diesel and gasoline in Domestic markets, and we also have a very lower inventory turnover effect when we look at the results of our EBITDA With inventory turnover, but it's still a very important performance for the RTC segment. And looking at the Gas and Power segment, We had a 20% increase in the results of Q2 when compared to Q1 with the recovery of the natural gas margins Due to higher prices and of course due to higher non thermal demand and to the improve in the Brazilian economy that also improve the levels that we sell of natural gas. Next slide, please. When we look at the cash generation and how we use that cash during the quarter, as I mentioned before, we have a cash flow from our operations of around 10.8 $1,000,000,000 and investments of $1,500,000,000 So we had a free cash flow of $9,300,000,000 And $300,000,000 in close from our portfolio management strategy and that results in $9,600,000,000 of Free cash flow after divestments and we basically used all that free cash flow to prepay debt. And when I mentioned The efforts that we're making in terms of liability management is also important to include the pension plans that we've had a 0.4 Prepayment in the Q2 of 2021, which is of course more expensive debt that we have. So we're also trying to Manage our liabilities in a more structured and consolidated way, looking both at our finance debt and pension liabilities as well. And of course, as I mentioned, the level of free cash flow that we have way above what we expected For the year 2021 and the successful movement that we have towards achieving the $60,000,000,000 debt target is Enabling us to anticipate dividends, so that's also very important for the company. Next, please. We're also focused on improving the profile of our remaining debt. We had a very important Transaction in the Q2 of 2021, we issued $1,500,000,000 and we had An almost simultaneous tender offer as well. We were able to have the lowest historical yield for 30 year bond for Petrobras In the history of the company and we also made substantial prepayments and repurchases both in the debt capital market and also with transactions with the banking market as well. We improved the average maturity of our debt To more than 12.5 years and reduced the cost to 5.9%. So this is a very important movement, especially considering the challenges Around the energy transition, so it's very important for us to be able to continue improving the maturity and reducing the average cost of the remaining debt Alongside with reaching the R60 $1,000,000,000 debt target that we have. And also we had important news from S and P during the second quarter during the The 3rd quarter, sorry, in the month of July, S and P announced an upgrade in our standalone credit rating. So this was also very positive and reflects the successful financial recovery of Petrobras. Next please. In terms of portfolio management, it's important to highlight the transaction involving the remaining shares that we had of the artist with Ora and that's a $2,240,000,000 As I mentioned before, I want a follow on transaction in Capital Markets, the largest transaction in the Brazilian market for 2021. The cash inflow happened in the beginning of July, so it's of course supporting our deleveraging and dividend payment. We also had relevant signings during year 2021, especially in the movements that we're making in terms of opening the natural gas and the refining market, we had the signing of Hillel, important Refining plant, we also had a signing of Gasperto now in July as well. So we had important movements. And also When we think about E and P operations, we also had signing of transactions involving onshore and shallow water fields that were very substantial during the quarter. So during the year, we had a total of $5,700,000,000 in transactions And already have a cash inflow of $2,800,000,000 in 2021. Next please. So this is just a general picture of what's happening in All the portfolio management projects that we have, and you can see that the ones that have the yellow box are the ones that have Movements in the 2nd quarter. So you can see that several processes advanced during the Q2, both in terms of Signing or closing of relevant transactions. So we remain very committed to our portfolio management strategy. Next, please. Okay. So in terms of earnings, we had $7,700,000,000 of recurring Net income for the Q2 of 2021, as I mentioned before, this is the result of a very important operational performance and alongside with a positive impact Of non cash foreign exchange gains, given the appreciation of the Brazilian real, the period in Brazilian real that impacts Our exposure in terms of dollar index gross debt, so this was a positive impact for the Q2 of 2021. We also have had earnings related to a reversal of impairment in Via Aze Pidora and also the important results of Braskem in the Q2 of 2021. Next, please. So finally, as I mentioned, we approved anticipated dividend distribution of $6,000,000,000 Which is more than it's around 3 times the average dividend distribution for the last 3 years. And it's Divided into 1st payment in August 2021 and the second one in December 2021, which is a very important movement from the Company, Reinforcing our commitment to add value to our shareholders and of course the Brazilian society as a whole. And it's an Important movement of balancing our deleveraging strategy with the remuneration of our shareholders. And As I mentioned, we're being more and more selective in terms of the next steps for our deleveraging so that we can reach that $60,000,000,000 debt target By the end of 2021, but generating the highest value possible. So that's my last slide. Thank you very much for Been here with us today and we move on with Carla to the Q and A session. Thank you. Thank you, Rodrigo. So the first question that we receive comes from Luis Carvalho with UBS and it's for Marcello. Marcela, we have been following company pricing policy in a very detailed way for a long time and we still see changes on the approach through the years. In certain times, we saw more frequent adjustments on others a gap closer to parity and now calls our attention that price moves are less frequent and with a higher gap than before. Why do we see different approaches to this subject over time? Thank you a lot for your question that will help me clarify. I hope Some issues in the subject so many times criticized either for being too low or being too high, some way to explain that. First, we must say that the alignment of prices with international markets is essential to ensure that The Brazilian market continues to be supplied without risk of shortages by the different suppliers, In the Q1, trying to answer more specifically your question, The increase in international prices and the exchange rate, Brazil dollar required more frequent adjustments More recently, in the last month, the variations in international prices And at the same time, the exchange rates have often moved in opposite directions We had a certain compensation between them. As a result of this, less frequent price adjustments were needed in the second quarter. Well, some of our prices continue to seek balance with international market Following changes in value products and the exchange rate up and down, trying to avoid, it's important, Trying to avoid the transfer to internal prices of the external volatility caused by conjugate events or market movement. The continuing monitoring of the markets by our team remains unchanged, Which includes among other procedures, the daily computation and analysis of the behavior of crisis In relation to international crisis, competitive crisis and the planning of actions to correct deviations The regular and the uninterrupted prices of other players in the Brazilian market, especially in quarters Thank you. Thank you, Marcela. The second question from Luis Carvalho It's for Rodrigo. Rodrigo, where are we? So on the Gazpethro divestment, we saw some recent news about the potential remedies that could be imposed by the antitrust body. Did the company have interactions about the potential solutions to move forward with the process prior to the binding phase. And what about Braskem? Any news on this potential divestment? Thank you, Luis. Thank you for your question. Well, first of all, with respect to the agreement that we have with the Brazilian antitrust body with Respect to the opening of the natural gas market, the CAGR antitrust Straspati is closely following all our movements and of course is following up on all the sale processes that we have. And, of course, Kasperto was a relevant one within this context. And, it's good also To give you a more general perspective in terms of next steps, because, first of all, we have, the state level governments that I have shares in those natural gas distribution companies. So they have Preferred rights that can or cannot be exercised. Then later on, we still have Mitsui, which is our partner in Ingaspetro, which can Exercise their right as well. And then we have the Brazilian antitrust body analysis that, of course, we expect to be a complex one, Given the nature of this natural gas distribution market and the complexity of the transaction, but we are Highly focused on concluding the transaction and we are positive that the resolution with the antitrust It will be positive in the end and we'll be able to conclude the divestment of Gasperto. With respect to Braskem, Of course, we've been following up on the movements Of Novo Nord, that is, of course, a relevant shareholder of Braskem as well. And we have already engaged financial advisors To support us in several possible strategies for conclusion of the divestment and to add value For our portfolio, so we don't have a definite answer with respect to that at this point, but we are moving forward with Potential different paths and we're focused now on realizing the highest value possible The next question comes from Rodolfo Angeli with JPMorgan and it's for Marcela. Marcela, So about fuel pricing, how are talks with the government about a possible fund to stabilize price? Has Petrobras been involved in these discussions with the government? Thank you Rodolfo. Well, as I said, it is very important that Petrobras continues to practice prices in balance with The competitive markets, this economic reason doesn't apply exclusively to petroleum products. Other commodities Traders in Brazilian markets, of course, in any market such as food, core and metals also have their prices Well, using this economic logic and respecting this, there is naturally consented for investments And the traction of new players to Brazil, which contribute, we believe, to the increase in the local offer Our products with direct benefits to the consumers. On the other hand, Prices are out of line with the market value would compromise the industry's Invest in capacity and interest, which can lead to assets of solvency and increase the risk of shortages. Likewise, we do actually contribute to discussions within the Ministry of Mines and Energy in Brazil regarding possible problems such as price, stabilization, and fund. Thank you. Thank you, Marcelo. The second question from Rodolfo Mr. Rodrigo, Rodrigo, about asset sale. Please provide an update on refineries and other key assets. Sorry, Last time I was infeasible, now I was mute. Thank you, Rodolf, for your question. Well, first of all, as I mentioned during the presentation, We had, of course, signed and closed important transactions during the year 2021. Of course, PRD with Dora is the most relevant one That happened in the beginning of July. And as I mentioned, we are highly focused on concluding the transactions, Both in the agreement that we have with CAGI for the natural gas market and for the refining market as well. We are, of course, highly focused on The transaction regarding Hilla, which was signed in March this year and Looking at the process as a whole, we have, Jemo, Lubinore and 6 a little bit more advanced and we are in the negotiations In different stages for, HEFABI, HEPABI and HENESH. We have the agreements with CADE in terms And we're focused and committed to comply with those deadlines. And In terms of other relevant assets, in the presentation I showed a slide regarding the advancement of other processes. As I mentioned, we had the signing of Casperto recently, and we also had other important assets, both in onshore And shallow water E and P assets. So we're very glad with the evolution of our portfolio management Strategy and focus on concluding additional transactions for the year 2021. Thank you. Thank you Rodrigo. The next question comes from Bruno Montanari with Morgan Stanley and it's also for you. So regarding the enhanced dividend policy, once the debt targets are met, how should we think about the actual implementation of the policy? Would the higher payments come only at the end of the fiscal year, be it 2021 or 2022 Or would management be inclined to start distributions as soon as possible? On that aspect, is there a preference for quarterly, semiannually our annual dividend distribution. Thank you. Thank you, Bruno, for your question. Well, 1st of all, it's important to see that 2021 is, of course, a transition year is an important year in terms of our Target to reduce gross debt. We expect it to reach the $60,000,000,000 debt target only in 2022. And of course, given the Much more favorable conditions in 2021. We've been able to move much faster. And at the current pace, We expect that we may be able to reach the $60,000,000,000 debt target closer to the end of the year 2021. So, it's now it's more of a transition time. And as we announced in this quarter, we want to make sure that we can balance our Focused on reaching the $60,000,000,000 debt target with potential dividend distributions. And we want to do that adding as much value as possible. So we see that The timing of the prepayments is relevant. Of course, we want to get to the $60,000,000,000 debt target, but we also want you to do that Generating more value. So, once we reach the $60,000,000,000 debt target, of course, that we expect To improve our dividend payments and start applying the 60% dividend policy, 60% of our free cash flow. But as I mentioned, 2021 is a transition year, so we will try to balance those two aspects of distributing more dividends and Reaching the $60,000,000,000 debt target. In terms of a preference with respect to quarterly, semiannual or annual, we don't have an It's placed preference. Of course, we want to balance the financial sustainability of the company and We will continue to monitor the scenario to see how can we best balance the sustainability of the company with the But, it's important to highlight that we are highly focused on improving dividend payments and complying with our dividend policy. Thank you. Thank you, Rodrigo. Bruno has another question for you as well. So thinking about energy transition, the company had hinted that upcoming business plan would bring more emphasis on this important topic. When does the company expect to announce the updated plan? Is the mindset increasing the investment level to address energy transition, given that Petrobras is generating very healthy cash flows or is the mindset to stay at a similar investment range with a different composition between fossil fuels and energy transition projects. Thank you. Thank you, Bruno, for your question. Well, first, with respect to the timing of the business plan, we expect to announce the business plan closer to the end of the year, November or beginning of December. But in terms of general picture, We're of course analyzing closely the energy transition subject. And of course, we have to be Very careful with the movements that we make, especially considering that we have a very resilient portfolio. We have a portfolio that has Significant competitive advantages, both in terms of being resilient to lower oil prices and being Environmentally resilient as well. And we see that a profitable diversification is It's a challenge for the industry. So we want to make sure that whatever decision we make in terms of diversification It's one that is accretive in terms of value and creates value to our shareholders. So this is a very important aspect for us. And of course, we want to keep our commitment with having a $35 price Target for approving projects and being environmentally resilient as well. So we acknowledge that you have we have to keep moving towards the ESG agenda, but we want to make very Make movements that are both sustainable and that we are always focused on adding value to our shareholders. Thank you, if you want to jump in as well. Thank you. Yes. Just to add to what Rodrigo just mentioned that we don't see A competition of projects when we see fossil fuels and energy transition, but rather a synergy. And Petrobras has been very focused on that since the early stages of our Production in the Santos Basin, the pre salt, we have been very focused on the reinjection of CO2, for instance, And this creates a double advantage. We are not putting in the atmosphere All the CO2 that has been locked in the reservoir for millions of years, but Also, we are able to improve the recovery factor of the reservoir. The same happens When do we study right now the 2nd generation of biofuels? The green diesel And the jet, bio jet, aviation bio jet, and then we are going to be using Room that we have in our hydrogen plants, in our refining plants to foster the use for those With that end, so working in our own process, understanding how we can improve Our carbon results in terms of oil, it's and other products is key to the Future of this energy transition because with this strategy, we are going to be able to offer to the market in the future Products, a range of products that are competitive in price, but also low in terms of carbon emission. That is the strategy and we are going to be studying those kind of projects in the upcoming Thank you, Arderangi. So the next question is from Andrea Shane with Itau Beber and it's for Fernando. Fernando, with the upcoming Transfer of Rights auction, would Petrobras have the appetite to be the sole operator on these fields or is the company actively discussing with partners? Our strategic plan has a guideline for us to act in partnership. And with them, with this approach, we share risk, we share costs, we share investments and benefits. So Petrobras is seeking for good partners for the next big round. Thank you. Thank you, Fernando. The next question comes from Vicente Falanga with Bradesco and it's for Marcella. Marcella, did Petrobras incurring losses importing diesel in the quarter? If yes, could you provide us a ballpark estimate on how much? Thank you for your question, Vicente. Well, I can answer that by repeating that the presence of other agents in Brazilian market, Especially fuel importers indicated Brazilian prices are in line with international parity. For your reference, Our diesel market share decreased in the 2nd quarter from 87, around 87% On the Q1 to 83 percent on the 2nd quarter, reflecting the increased presence of other suppliers. Worth mentioning that competitive price in Brazil take into account not only international prices, but also values that Added to them such as freight costs and some that are subtracted from For example, US prices such as RVO, which is the renewable volume obligations, Which is a cost added to the published prices of gasoline, for example, in diesel in US. I have to remove that from the press when we compose Our important priorities in Brazil are the domestic prices and their margins cannot be directly perceived as a sum Thank you, Marcella. The second question from Vicente is for Juan Hickey. So, Juan Hickey, could you please provide updates On the Amorantio Barroso FPSO, in what quarter of 2022 are operations expected to start up? Good afternoon, Vincente. Thank you for the question. We already started lifting the models on April 2001. We are facing some challenges about the COVID-nineteen, But until now, we will have scheduled to start the production till the end of 2022. I'd like to address the development of the field. You have Already 4 units in operation, we already have Uzos 5, Uzos 6, 7, 8 already hired. And under construction, we are on the bidding phase of Busas 9, The P80 unit, we have upstream segment, me and Mr. Carnando Borics is working we are working hard in order to reduce the time To start production of all these new units and the heavy high efficiency units when they start Operations. Buzuz field is bringing a lot of value to the company And we understand that it is very important to speed the first oil Thank you for the question. Thank you, Joao Henriques. The next question comes from Cristiano with Santander. So he sends a message with congratulations for the results and also with the anticipated payments of dividends. And his first question is for Rodrigo. It's about CapEx. So given the very strong cash flow generation and payment of dividends, I was wondering if This may allow you to also adjust CapEx up in order to incorporate new higher return projects, for example, in exploration and production or any other segments. Thank you. Thank you, Christian, for your question. Well, as I mentioned before, we are always going to be To have appetite for projects that are accretive in terms of value, of course, those projects that Our resilience to lower Brent prices and that support the 35, breakeven price that we have for approving projects. So we're in the middle of the provision of our business plan. And of course, whatever we have projects that add value to the portfolio And that are resilient both in terms of lower Brent prices and environmental behavior, especially in terms of emissions. We We'll be looking into those projects. And of course, as I mentioned in the Portuguese earnings call as well, We have projects that are able to add value to the remaining portion of our refining portfolio, Like Gasluby, for example, and we are also focused on that kind of projects, projects that create value, that are connected with our Refining plants, especially in the Southeast and that can enjoy the benefits of the oil and natural gas from the pre salt. So whenever we have projects that are resilient and value adding projects, we'll be, of course, always interested in looking at them. And of course, we want to maintain our commitment with a much higher level of dividend payments. So This is something that we will always balance, but we want to maintain our 60% free cash flow, 60% of paying dividends that represents 60% of our free cash flow. So this is what we're going to be focused on. Thank you for the question. Thank you, Rodrigo. Christian also has another question for you and it's about use of cash. So given, 1, how strong your cash flow generation? 2, that you're almost at $60,000,000,000 gross debt target and 3, that the large payment of dividends, how would you prioritize your use of cash going forward between debt reduction, CapEx and dividends? Thank you. Thank you, Christian. Well, first of all, as I mentioned before, we're highly focused on reaching Our $60,000,000,000 debt target. And we believe that given the current pace, we'll be able to do that In the end of this year, in the end of 2021. But of course, we want you to do that in the most value Accretive form possible. So we want to make sure that our prepayments have the lowest cost possible. We want to balance that Going forward, so that we can add value to our shareholders and be able to reach the $60,000,000,000 debt target At the same time, in terms of CapEx, of course, we have a very robust business plan and a significant level of CapEx for the upcoming years In our 2021, 2025 business plan, we are currently reviewing the business plan for 2022, 2026. But as I mentioned, we are always going to be focused on only adding projects that are resilient to lower prices and that add value to the portfolio. So we may see future increases in CapEx, but we don't expect substantial increases. And We do expect that whatever increase in our CapEx is always a very resilient and value adding project. And again, as I mentioned, we are expecting to improve substantially dividend payments and To as soon as possible, we'll start paying the 60% of our free cash flow That is the expected dividend policy. Thank you. Thank you, Rodrigo. The next question comes from Regis Cardoso with Credit Suisse and it's for Fernando and Joao Hickey. It's about E and P projects. So What E and P projects can be included in Petrobras production curve? Can you comment specifically about the status of Jupter and Sergipe Alagolos? [SPEAKER VERONIQUE LAURY DEROUBAIX:] Thank you for the question, Helges. In addition to The 13 units that we start production till 2025, we have started the Buzoz 9 and the CEP Sergio Peguos ProFundas bid in for us in the first half of this year. Buses 9 P18 will be finally under the EPC under EPC contact. We use the high capacity project that belongs to Petrobras And Cearpi that you named the SP81 We'll be highly using the BOT model. We understand that is a very important step In the development of SAP field and about Schuberta, Schuberta is a field that will have High volume, but with a big challenge, the CO2 content. We are studying hard the New technology and the project in order to make it feasible to develop this field under our Approval scenarios that we need to have resilient projects. I pass to Fernando to complement about The new project that we are studying in the EAP area. Jesus, thank you for the question. Just to stress a little bit more, the P81, the Sergipe Alagoz, is In the market for a bidding process that's going to bring production we expect in 2026. As Joao Ihik said, Jukta, we are progressing with the bottlenecking of The technological challenges with the high step, we're going to go to the market for the high step of Mero 3 In the coming months, it's a key element in Having a robust design for Jupiter development, once we have very big Volume is injected and we have to manage the high CO2 content and HiCEP is a very good way. We can reinject this phase direct from the sea bottom. And considering the next bid round for Atapu and Sepia areas, For sure, there is or there are extra volumes that can encompass new projects For SEPE and for Atapu, that's going to be we have risen with the bidding process. And we have the continuity of the development of Buzios. We have until now contract we are contracting the Buzios 9, but the whole Production development project for the Busesco Incompeso is up to 12 units, and for sure that's going to add New production to our next business plan. I think that we can talk now, And for sure you have a great effort in exploration that for sure will bring some more discoveries to be developed in the coming years. Thank you. Thank you, Fernando. The next question is also from Regis is to Marcella. So Marcela, regarding fuel prices, Petrobras seems to be taking a growing share of gasoline and diesel imports in recent months. Can you explain if this is related to the recent maintenance stoppage in the refining park or if this could be the result of the company not passing through All the upward volatility in brand prices to the pump. Thank you, Rejis. You're right about the relationship between increased imports and our refineries maintenance. In this First half of twenty twenty one there was a greater amount of scheduled maintenance mainly Due to the restrictions imposed by the pandemic in 2020, you can imagine the difficulty. It was almost impossible to put 2, 3000 people in the site to to to do the scheduled predictive maintenance in the farm. So We have a concentration really in the first half and in this way to ensure the commitment to our customers We do imported oil products to meet this temporary reduction in production. Well, just to assure that the regular presence of other engines in the Brazilian market, especially fuel important indicates Again, the prices in Brazil are in line with the international parity. Another important point in this decision, of course, is based on the is based always all the time the import The importance of products is always subject to economic analysis to support them. So Thank you, Marcelo. The next question is from Liliana Young with HSBC and it's for Rodrigo. So Rodrigo, do you believe it's now a good time to rethink Petrobras investment strategy? Thank you, Lidiano, for your question. Well, as I mentioned before, we're in the process of reviewing our business plan and we Expect to announce our 2022, 2026 business plan closer to the end of the year, end of November, beginning of December. But of course, we don't expect major changes in terms of the overall strategy. We want you to continue to be a company that is that has a significant cost resilience That is focused on approving projects that are resilient to lower oil prices and are also environmentally resilient as well. Of course, we're looking into projects that can add value to our portfolio, as I mentioned, both in the upstream And related to the integration between the oil from the pre salt, Especially in the Southeast with the remaining portion of the refining portfolio that we have, like GasLogi, for example. But we don't expect Substantial changes. Of course, the energy transition is an important subject, and we want to take further steps Toward our energy transition strategy, but as I mentioned, having a profitable Diversification strategy is still a challenge for the industry as a whole. So this is what we can Share with you for the moment and we expect you to announce our business plan closer to the end of the year. Thank you for your question. Thank you, Rodrigo. The next question comes from Thiago Duarte with Betege Pactual and it's for you as well. So it's about dividends. So annualizing the first half of twenty twenty one profit, earnings would be about $70,000,000,000 in 2021. Dividends that were announced yesterday are equivalent to a payout of about 36% or above the 25% minimum. Can we assume that the company is already anticipating dividends assuming the form of 60% payout of the free cash flow? Thank you for your question, Thiago. As I mentioned before, 2021 is a transition year. As you all know, we expected to reach the $60,000,000,000 debt target in 2022. And given the current pace And the more positive scenario, we think that at this pace we may be able to reach by the end of the year. But our dividend policy gives us enough Flexibility to approve extraordinary dividends. So we as I mentioned, we are trying to balance What we still have to do in terms of debt reduction to reach the $60,000,000,000 debt target And adding value for our shareholders through dividend payment. So this is not an anticipation of the Formula of the 60% of free cash flow. As I mentioned, we are still focused on reaching the 60 A $1,000,000,000 debt target and prospectively distribute 60% of our free cash flow. But as 2021 is a Transition year and we're seeing a much more favorable scenario. And given the prospects that we have, both in terms of earnings and free cash flow, We have been able to announce the anticipated dividends. And for the remaining part of 2021, we're going to be focused on Balancing value generation for our shareholders and getting to the $60,000,000,000 debt target by the end of the year. Thank you, Rodrigo. Now we receive questions from Bruno Morin with Goldman Sachs and it's for you as well. So Petrobras has been successfully selling no core assets and becoming a leaner and more efficient company. With a much lower leverage and now similar to Global Peers, what's next? A significant and consistent increase in dividends? How to reconcile this with the need to comply with ESG standards in the future? Thank you. Thank you for your question, Bruno. When we look at the results of 2020 2021, They show how important it is for us to have a leaner and more resilient portfolio. When we think about 2020, we had $40 average price in our portfolio showed that it was resilient to that level of prices. So this was very important. And at the same time in 2021, when we have an important upside with higher prices, our portfolio shows that it's Also able to capture the additional value that comes from higher prices. So this is very important for us. And, of course, part of our future Strategy is to become a more consistent and higher dividend payment. You guys already know that we have the 60% of free cash flow Dividend policy and we're studying how to be more consistent as well in terms of paying dividends even when we have lower Brand prices scenarios. And with respect to the ESG agenda, as I mentioned before, We acknowledge that we have to continue moving towards that direction, reducing our emissions. But we also want To be conservative in that sense, so that we don't destroy value to our shareholders. So we want to make sure that the steps that we take Both towards new projects or reducing emissions are always value accretive and always generate Value to our shareholders. So this is how we see this now. And as I mentioned, we expect to announce Our 2022-twenty 6 business plan by the end of the year. Thank you for your question. Thank you Rodrigo. Now we have a question from Barbara Halberstadt with JPMorgan. Will the pace of the bone redemption decelerate from here? Any significant change to capital allocation strategy? And it's for you as well, Rodrigo. Thank you. Thank you for your question, Barbara. No, we don't see substantial changes to the capital allocation strategy. As I've already mentioned, we expect to continue to invest in projects that are resilient to lower prices and are environmentally resilient as well. And with respect to the bond redemption, I'll divide your question into Two different parts. Of course, at this moment, we're focused on reaching the $60,000,000,000 debt target. So we want to be able to both Do that and generate value to our shareholders. So we're always looking for the cheapest opportunities to reduce our gross debt. But even when we achieved the $60,000,000,000 debt target, with the remaining debt that we will still have, we will be focused on Doing liability management transactions so that we can improve the maturity and reduce the cost of our debt. So that's also an important action in terms of resilience for the energy transition scenarios. So even Reduce the cost and improve the maturity of our gross debt. Thank you for your question. Thank you, Rodrigo. We have one last question from Bader Emultaliwaki with Barclays and it's for you as well. So it's about liability management. Will gross debt reduction still be a priority once you reach the $60,000,000,000 mark? Is the idea to keep the €60,000,000,000 gross debt target or you measure your credit profile by another metric? Will the company continue to do liability management after the $60,000,000,000 mark? Thank you. Thank you for your question, Baader. Well, as I mentioned in the prior question, once we reach the $60,000,000,000 debt target, of course, we will continue to do liability management once you improve The profile of the remaining debt, so that's, of course, be going to happen, but always Focused on either cash neutral or cash negative transactions that improve the maturity and reduce the cost of our debt. In terms of credit profile, as I mentioned during the presentation, we can see that through several different lenses, We've been able to have a very positive credit profile. We have a very substantial level of Cash flows from operations compared to the interest expenses that we have. And that's, of course, very Positive for us in terms of resilience. When we look at the future of our business plan, we can see that with Additional units coming online, we see an increase in the level of our leases. So that's of course something that is Important for us and it's necessary to reduce our finance debt so that we can remain in the $60,000,000,000 target after we reach it. So we want to be able to make that level sustainable in the long run. And, of course, we'll continue to monitor. Now, we don't expect to reduce that level substantially, But we even in that scenario, we will have to have an important liability management strategy So that we can sustain our $60,000,000,000 debt level going forward. Thank you for your question. And, well, I think that's the last question that we have, right, Carla? Yes, that's right. Well, thank you everyone for being with us today. We're very glad to announce the very positive operational and financial results for the Q2. We're also very glad To announce anticipated dividend distribution that is part of our strategy, to be able to deleverage the company and at the same time, Generate value for our shareholders, so we're very happy with the results. It's of course very relevant work from all the Petrobras team. So I want also to Thank all the Petrobras team and all the officers for this impressive results and thank you for being with us today. Have a great day.