UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the month of August, 2019

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  ☒            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  ☒

UNAUDITED

INTERIM

FINANCIAL STATEMENTS

—

June 30, 2019 and 2018 with report

of independent registered public

accounting firm

Petróleo Brasileiro S.A. – Petrobras Index

Report of Independent Registered Public Accounting Firm	3
Unaudited Consolidated Statement of Financial Position	4
Unaudited Consolidated Statement of Income	5
Unaudited Consolidated Statement of Comprehensive Income	6
Unaudited Consolidated Statement of Cash Flows	7
Unaudited Consolidated Statement of Changes in Shareholders’ Equity	8
1. Basis of preparation	9
2. The “Lava Jato” (Car Wash) Operation and its effects on the Company	9
3. Summary of significant accounting policies	10
4. Cash and cash equivalents and Marketable securities	12
5. Trade and other receivables	13
6. Inventories	15
7. Disposal of assets and other changes in organizational structure	16
8. Investments	20
9. Property, plant and equipment	21
10. Intangible assets	23
11. Impairment	23
12. Exploration and evaluation of oil and gas reserves	24
13. Finance debt	25
14. Lease liabilities	28
15. Related-party transactions	30
16. Provision for decommissioning costs	32
17. Taxes	33
18. Short-term benefits	35
19. Employee benefits (Post-Employment)	36
20. Equity	38
21. Supplemental information on statement of cash flows	39
22. Sales revenues	40
23. Costs and expenses by nature	40
24. Other income and expenses	41
25. Net finance income (expense)	42
26. Segment information	43
27. Provisions for legal proceedings	48
28. Collateral for crude oil exploration concession agreements	51
29. Risk management	51
30. Fair value of financial assets and liabilities	56
31. Subsequent events	56
32. Information related to guaranteed securities issued by subsidiaries	57

2

KPMG Auditores Independentes

Rua do Passeio, 38, setor 2, 17º andar—Centro/RJ

Edifício Passeio Corporate

20021-290—Rio de Janeiro/RJ—Brasil

Telefone +55 (21) 2207-9400, Fax +55 (21) 2207-9000

www.kpmg.com.br

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of

Petróleo Brasileiro S.A.—Petrobras

We have reviewed the interim consolidated statement of financial position of Petróleo Brasileiro S.A.—Petrobras and subsidiaries (the “Company”) as of June 30, 2019, the related interim consolidated statement of income and comprehensive income for the three-month and six-month periods ended June 30, 2019 and 2018 and changes in shareholders’ equity and cash flows for the six-month periods ended June 30, 2019 and 2018 and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with IAS 34—Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB).

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of financial position of the Company as of December 31, 2018, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 27, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of financial position as of December 31, 2018, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Rio de Janeiro, August 1, 2019

/s/ KPMG Auditores Independentes

KPMG Auditores Independentes, uma sociedade simples brasileira e firma-membro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

3

Petróleo Brasileiro S.A. – Petrobras Unaudited Consolidated Statement of Financial Position June 30, 2019 and December 31, 2018 (Expressed in millions of US Dollars, unless otherwise indicated)

Assets	Note		06.30.2019		12.31.2018		Liabilities	Note		06.30.2019			12.31.2018
Current assets							Current liabilities
Cash and cash equivalents		4.1		16,714		13,899	Trade payables				5,697			6,327
Marketable securities		4.2		641		1,083	Finance debt		13.1		5,695			3,667
Trade and other receivables		5.1		4,047		5,746	Lease liability		14		5,886			23
Inventories		6		8,934		8,987	Income taxes payable		17.1		1,118			211
Recoverable income taxes		17.1		1,267		739	Other taxes payable		17.1		3,291			3,556
Other recoverable taxes		17.1		1,089		1,296	Dividends payable		20.2		332			1,109
Escrow account—Class action agreement		27.4		2,866		1,881	Short-term benefits		18		1,699			1,658
Others				1,939		1,485	Pension and medical benefits		19.1		778			810
				37,497		35,116	Provisions for legal proceedings		27.1		2,962			3,482
Assets classified as held for sale		7		9,821		1,946	Agreement with US Authorities		2.1		—			783
				47,318		37,062	Others				2,898			2,442
											30,356			24,068
							Liabilities related to assets classified as held for sale		7		5,744			983
Non-current assets											36,100			25,051
Long-term receivables							Non-current liabilities
Trade and other receivables		5.1		4,908		5,492	Finance debt		13.1		69,832			80,508
Marketable securities		4.2		52		53	Lease liability		14		19,616			162
Judicial deposits		27.2		7,567		6,711	Income taxes payable		17.1		545			552
Deferred income taxes		17.2		2,641		2,680	Deferred income taxes		17.2		3,835			654
Other tax assets		17.1		3,490		3,540	Pension and medical benefits		19.1		21,500			21,940
Advances to suppliers				442		666	Provisions for legal proceedings		27.1		2,981			3,923
Others				2,287		2,917	Provision for decommissioning costs		16		15,290			15,133
				21,387		22,059	Others				1,437			970
											135,036			123,842
							Total liabilities				171,136			148,893
							Equity
Investments		8		3,806		2,759	Share capital (net of share issuance costs)		20.1		107,101			107,101
Property, plant and equipment		9		176,784		157,383	Capital reserve and capital transactions				1,067			1,067
Intangible assets		10		2,583		2,805	Profit reserves				63,715			58,161
				204,560		185,006	Accumulated other comprehensive (deficit)				(92,654	)		(94,785	)
							Attributable to the shareholders of Petrobras				79,229			71,544
							Non-controlling interests				1,513			1,631
											80,742			73,175
Total assets				251,878		222,068	Total liabilities and equity				251,878			222,068

The notes form an integral part of these interim financial statements.

4

Petróleo Brasileiro S.A. – Petrobras Unaudited Consolidated Statement of Income June 30, 2019 and 2018 (Expressed in millions of US Dollars, unless otherwise indicated)

	Note		Jan-Jun/ 2019			Jan-Jun 2018— Restated			2Q-2019			2Q-2018— Restated
Sales revenues		22		37,305			40,355			18,502			20,753
Cost of sales		23.1		(23,013	)		(24,162	)		(10,800	)		(12,347	)
Gross profit				14,292			16,193			7,702			8,406
Income (expenses)
Selling expenses		23.2		(1,838	)		(2,161	)		(935	)		(1,106	)
General and administrative expenses		23.3		(1,123	)		(1,159	)		(559	)		(557	)
Exploration costs		12		(274	)		(298	)		(100	)		(162	)
Research and development expenses				(284	)		(316	)		(146	)		(164	)
Other taxes				(159	)		(234	)		(66	)		(94	)
Other income and expenses		24		2,862			(2,094	)		3,989			(1,741	)
				(816	)		(6,262	)		2,183			(3,824	)
Income before finance income (expense), results in equity-accounted investments and income taxes				13,476			9,931			9,885			4,582
Finance income				589			1,482			332			1,166
Finance expenses				(3,368	)		(3,235	)		(1,591	)		(1,460	)
Foreign exchange gains (losses) and inflation indexation charges				(1,643	)		(1,282	)		(928	)		(523	)
Net finance income (expense)		25		(4,422	)		(3,035	)		(2,187	)		(817	)
Results of equity-accounted investments		8		251			244			120			86
Net income before income taxes				9,305			7,140			7,818			3,851
Income taxes		17.3		(3,449	)		(2,405	)		(2,960	)		(1,236	)
Net income from continuing operations for the period				5,856			4,735			4,858			2,615
Net income from discontinued operations for the period		7		204			149			77			73
Net income for the period				6,060			4,884			4,935			2,688
Non-controlling interests				179			(55	)		124			(106	)
Net income from continuing operations				121			(98	)		102			(127	)
Net income from discontinued operations				58			43			22			21
Net income attributable to shareholders of Petrobras				5,881			4,939			4,811			2,794
Net income from continuing operations				5,735			4,833			4,756			2,742
Net income from discontinued operations				146			106			55			52
Basic and diluted earnings per weighted-average of common and preferred share—in U.S. dollars		20.3		0.45			0.38			0.37			0.22

The notes form an integral part of these interim financial statements.

5

Petróleo Brasileiro S.A. – Petrobras Unaudited Consolidated Statement of Comprehensive Income June 30, 2019 and 2018 (Expressed in millions of US Dollars, unless otherwise indicated)

	Jan-Jun/ 2019			Jan-Jun/ 2018			2Q-2019			2Q-2018
Net income (loss) for the period		6,060			4,884			4,935			2,688
Items that will not be reclassified to the statement of income:
Actuarial gains (losses) on post-employment defined benefit plans		1			—			1			—
Unrealized gains (losses) on equity instruments measured at fair value through other comprehensive income
Recognized in equity		(3	)		(8	)		(1	)		(6	)
Deferred income tax		1			3			—			2
		(2	)		(5	)		(1	)		(4	)
Items that may be reclassified subsequently to the statement of income:
Unrealized gains (losses) on cash flow hedge—highly probable future exports
Recognized in equity		878			(8,822	)		1,516			(8,484	)
Reclassified to the statement of income		1,494			1,609			739			789
Deferred income tax		(807	)		2,453			(767	)		2,617
		1,565			(4,760	)		1,488			(5,078	)
Cumulative translation adjustments (*)
Recognized in equity		555			(6,255	)		768			(6,076	)
Reclassified to the statement of income		34			—			—			—
		589			(6,255	)		768			(6,076	)
Share of other comprehensive income in equity-accounted investments
Recognized in equity		(17	)		(178	)		(39	)		(238	)
Total other comprehensive income (loss):		2,136			(11,198	)		2,217			(11,396	)
Total comprehensive income (loss):		8,196			(6,314	)		7,152			(8,708	)
Non-controlling interests		184			(185	)		134			(239	)
Comprehensive income (loss) attributable to shareholders of Petrobras		8,012			(6,129	)		7,018			(8,469	)

(*) It includes a US$117 gain (a US$213 loss in the six-month period ended June 30, 2018), of cumulative translation adjustments in associates and joint ventures, as set out in note 8.

The notes form an integral part of these interim financial statements.

6

Petróleo Brasileiro S.A. – Petrobras Unaudited Consolidated Statement of Cash Flows June 30, 2019 and 2018 (Expressed in millions of US Dollars, unless otherwise indicated)

	Jan-Jun/ 2019			Jan-Jun/2018— Restated
Cash flows from Operating activities
Net income for the period		6,060			4,884
Adjustments for:
Net income from discontinued operations		(204	)		(149	)
Pension and medical benefits (actuarial expense)		1,070			1,073
Results of equity-accounted investments		(251	)		(244	)
Depreciation, depletion and amortization		7,429			6,387
Impairment of assets (reversal)		20			(31	)
Allowance (reversals) for credit loss on trade and others receivables		38			411
Exploratory expenditure write-offs		64			65
Reclassification of accumulated losses on cash flow hedge by the sale of interests		—			—
(Gains)/losses on disposals/write-offs of assets		(5,042	)		(687	)
Foreign exchange, indexation and finance charges		4,260			4,444
Deferred income taxes, net		1,684			242
Revision and unwinding of discount on the provision for decommissioning costs		411			349
Reclassification of cumulative translation adjustment and other comprehensive income		34			—
Inventory write-down (write-back) to net realizable value		(10	)		17
Gain on remeasurement of investment retained with loss of control		(546	)		—
Decrease (Increase) in assets
Trade and other receivables, net		1,055			(1,340	)
Inventories		(617	)		(1,894	)
Judicial deposits		(1,085	)		(1,149	)
Escrow account—Class action agreement		(982	)		(1,102	)
Other assets		(918	)		1,115
Increase (Decrease) in liabilities
Trade payables		(843	)		276
Other taxes payable		1,019			1,853
Pension and medical benefits		(495	)		(515	)
Provisions for legal proceedings		(1,190	)		586
Short-term benefits		127			456
Other liabilities		(799	)		(320	)
Income taxes paid		(609	)		(1,075	)
Net cash provided by operating activities from continuing operations		9,680			13,652
Discontinued operations – net cash provided by operating activities		256			298
Net cash provided by operating activities		9,936			13,950
Cash flows from Investing activities
Acquisition of PP&E and intangibles assets		(3,622	)		(5,811	)
Investments in investees		(10	)		(28	)
Proceeds from disposal of assets—Divestment		9,111			4,914
Divestment (Investment) in marketable securities		475			692
Dividends received		816			486
Net cash provided by investing activities from continuing operations		6,770			253
Discontinued operations – net cash provided by (used in) investing activities		(51	)		32
Net cash provided by investing activities		6,719			285
Cash flows from Financing activities
Investments by non-controlling interest		(93	)		(84	)
Proceeds from financing		4,725			8,128
Repayment of principal		(11,957	)		(23,929	)
Repayment of interest		(2,349	)		(3,052	)
Repayment of lease liability		(2,238	)		—
Dividends paid to Shareholders of Petrobras		(1,006	)		(165	)
Dividends paid to non-controlling interests		(86	)		(85	)
Net cash used in financing activities from continuing operations		(13,004	)		(19,187	)
Discontinued operations – net cash used in financing activities		(495	)		(69	)
Net cash used in financing activities		(13,499	)		(19,256	)
Effect of exchange rate changes on cash and cash equivalents		151			(501	)
Net increase (decrease) in cash and cash equivalents		3,307			(5,522	)
Cash and cash equivalents at the beginning of the period		13,899			22,519
Cash and cash equivalents at the end of the period (*)		17,206			16,997

(*) It includes US$ 492 relating to discontinued operations (see note 7).

The notes form an integral part of these interim financial statements.

7

Petróleo Brasileiro S.A. – Petrobras Unaudited Consolidated Statement of Changes in Shareholders’ Equity June 30, 2019 and 2018 (Expressed in millions of US Dollars, unless otherwise indicated)

	Share capital (net of share issuance costs)							Accumulated other comprehensive income (deficit) and deemed cost												Profit Reserves
	Share Capital		Share issuance costs			Capital reserve, Capital Transactions and Treasury shares		Cumulative translation adjustment			Cash flow hedge— highly probable future exports			Actuarial gains (losses) on defined benefit pension plans			Other comprehensive income (loss) and deemed cost			Legal		Statutory		Tax incentives		Profit retention		Retained earnings			Equity attributable to shareholders of Petrobras			Non-controlling interests			Total consolidated equity
		107,380		(279	)		1,067		(61,043	)		(9,573	)		(10,015	)		(791	)		7,919		2,182		720		42,235		—			79,802			1,700			81,502
Balance at December 31, 2017				107,101			1,067											(81,422	)								53,056		—			79,802			1,700			81,502
Initial application of IFRS 9																		(20	)										(299	)		(319	)		(15	)		(334	)
		107,380		(279	)		1,067		(61,043	)		(9,573	)		(10,015	)		(811	)		7,919		2,182		720		42,235		(299	)		79,483			1,685			81,168
Balance at January 1, 2018				107,101			1,067											(81,442	)								53,056		(299	)		79,483			1,685			81,168
Realization of deemed cost		—		—			—		—			—			—			(2	)		—		—		—		—		2			—			—			—
Capital transactions		—		—			—		—			—			—			—			—		—		—		—		—			—			(3	)		(3	)
Net income		—		—			—		—			—			—			—			—		—		—		—		4,939			4,939			(55	)		4,884
Other comprehensive income		—		—			—		(6,125	)		(4,760	)		—			(183	)		—		—		—		—		—			(11,068	)		(130	)		(11,198	)
Appropriations:
Dividends		—		—			—		—			—			—			—			—		—		—		—		(181	)		(181	)		(120	)		(301	)
		107,380		(279	)		1,067		(67,168	)		(14,333	)		(10,015	)		(996	)		7,919		2,182		720		42,235		4,461			73,173			1,377			74,550
Balance at June 30, 2018				107,101			1,067											(92,512	)								53,056		4,461			73,173			1,377			74,550
		107,380		(279	)		1,067		(67,316	)		(13,292	)		(13,224	)		(953	)		8,257		2,452		923		46,529		—			71,544			1,631			73,175
Balance at December 31, 2018				107,101			1,067											(94,785	)								58,161		—			71,544			1,631			73,175
Realization of deemed cost		—		—			—		—			—			—			—			—		—		—		—		—			—			—			—
Capital transactions		—		—			—		—			—			—			—			—		—		—		—		—			—			(92	)		(92	)
Net income		—		—			—		—			—			—			—			—		—		—		—		5,881			5,881			179			6,060
Other comprehensive income (loss)		—		—			—		584			1,565			1			(19	)		—		—		—		—		—			2,131			5			2,136
Appropriations:
Dividends		—		—			—		—			—			—			—			—		—		—		—		(327	)		(327	)		(210	)		(537	)
		107,380		(279	)		1,067		(66,732	)		(11,727	)		(13,223	)		(972	)		8,257		2,452		923		46,529		5,554			79,229			1,513			80,742
Balance at June 30, 2019				107,101			1,067											(92,654	)								58,161		5,554			79,229			1,513			80,742

The notes form an integral part of these interim financial statements.

8

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

1. Basis of preparation

1.1. Statement of compliance and authorization of unaudited consolidated interim financial statements

These unaudited consolidated interim financial statements have been prepared and presented in accordance with IAS 34 – “Interim Financial Reporting” as issued by the International Accounting Standards Board (IASB). They present the significant changes in the period, avoiding repetition of certain notes to the annual financial statements previously reported. Hence, they should be read together with the Company’s audited annual financial statements for the year ended December 31, 2018, which include the full set of notes.

At January 1, 2019, the Company adopted IFRS 16 – Leases and IFRIC 23 – Uncertainty over Income Tax Treatments. The changes in accounting policies arising from the application of these standards are presented in note 3.

In May 2019, the Company’s Board of Directors approved the model for an additional sale of its interest in the subsidiary Petrobras Distribuidora (BR), carried out through a secondary public offering (follow-on) and, in July 2019, the preliminary prospectus was approved by the Brazilian Association of Financial and Capital Market Entities (“ANBIMA”). Accordingly, all the requirements were met to classify the assets and directly associated liabilities as a disposal group that is held for sale at June 30, 2019, in accordance with IFRS 5—Non-current Assets Held for Sale and Discontinued Operations. Furthermore, this investment was classified as a discontinued operation, since it represents a separate major line of business. The consolidated statements of income and cash flows for the three and six-month periods ended June 30, 2019 present net income, operating, investing and financing cash flows of BR in separate line items, as a net result of discontinued operations. Additionally, the consolidated statements of income and cash flows for the three and six-month periods ended June 30, 2018 adjusted in a similar manner, to meet IFRS 5.

These unaudited consolidated interim financial statements were approved and authorized for issue by the Company’s Board of Directors in a meeting held on August 1, 2019.

1.2. Functional and presentation currency

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

Petrobras has selected the U.S. dollar as its presentation currency to facilitate a more direct comparison to other oil and gas companies. The financial statements have been translated from the functional currency (Brazilian real) into the presentation currency (U.S. dollar). All assets and liabilities are translated into U.S. dollars at the closing exchange rate at the date of the financial statements; income and expenses, as well as cash flows are translated into U.S. dollars using the average exchange rates prevailing during the period. All exchange 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.

Brazilian Real x U.S. Dollar	Jun 2019		Mar 2019		Dec 2018		Sep 2018		Jun 2018		Mar 2018
Quarterly average exchange rate		3.92		3.77		3.81		3.95		3.61		3.24
Period-end exchange rate		3.83		3.90		3.87		4.00		3.86		3.32

2. The “Lava Jato” (Car Wash) Operation and its effects on the Company

The Company has monitored the progress of investigations under the “Lava Jato” Operation and, in the preparation of these unaudited interim financial statements for the period ended June 30, 2019, did not identify any additional information that would affect the adopted calculation methodology to write off, in the third quarter of 2014, amounts overpaid for the acquisition of property, plant and equipment. The Company will continue to monitor these investigations for additional information in order to assess their potential impact on the adjustment made.

In the second quarter of 2019, new leniency and plea agreements entitled the Company to receive funds with respect to compensation for damages, in the amount of US$ 79. This amount was accounted for as other income and expenses. Thus, the total cumulative amount recovered from the “Lava Jato” investigation through June 30, 2019 is US$ 991 (US$ 912 through December 31, 2018).

9

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

2.1. Investigations involving the Company

On September 27, 2018, the Company settled the open matters with the U.S. Department of Justice (DoJ) and the U.S. Securities and Exchange Commission (SEC) investigation concerning the Company’s internal controls, books and records, and financial statements from 2003 to 2012.

These agreements fully resolve the inquiries carried out by these authorities. Following this agreement, the Company paid US$ 85 to the DoJ in 2018 and the same amount to the SEC in the first quarter of 2019. Additionally, the agreements also credit a remittance of US$ 683 to the Brazilian authorities, which Petrobras deposited in January 2019 into a court deposit account. The Company fully recognized the effects of these settlements as other income and expenses in the third quarter of 2018.

This resolution meets the best interest of the Company and its shareholders, and eliminates uncertainties, risks, burdens and costs of potential litigations in the United States.

In May 2019, the U.S. Commodity Futures Trading Commission (“CFTC”) contacted Petrobras with an inquiry regarding trading activities related to the Lava Jato Operation. Petrobras reiterates that it will continue to cooperate with the regulatory authorities, including the CFTC, regarding any inquiry, reinforcing its commitment to integrity and transparency.

3. Summary of significant accounting policies

The same accounting policies and methods of computation were followed in these consolidated interim financial statements as those followed in the preparation of the annual financial statements of the Company for the year ended December 31, 2018, except for the changes arising from the adoption of IFRS 16 – Leases and IFRIC 23—Uncertainty over Income Tax Treatments, which became effective on January 1, 2019.

3.1. IFRS 16 – Leases

IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases, from the lessees and lessors’ perspectives.

Among the changes arising from IFRS 16, this standard eliminated the classification of leases as either operating or finance leases for lessees, providing for a single lessee accounting model in which all leases result in the recognition of a right-of-use asset and a lease liability.

Following the adoption of IFRS 16, lease payments under operating leases are not charged to operating results on accrual basis. Instead, depreciation of the right to use a leased asset, as well as the finance expenses and foreign exchange gains or losses over the lease liability, affect the results. See notes 9, 14 and 25 for the impacts of such payments in the statement of income for the period.

The Company applies the short-term lease exemption and recognizes payments associated with such leases as expenses over the term of the arrangements.

In the statement of cash flows, operating lease payments, which were previously presented within Cash flows from operating activities, are presented from 2019 onwards as Cash flows from financing activities, comprising the settlement of lease liabilities. However, such change does not affect the Company’s cash and cash equivalents balance.

The company did not apply the recognition exemption related to leases for which the underlying asset is of low value.

10

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

According to the transition provisions set forth in IFRS 16, the Company applied this standard retrospectively with the cumulative effect of its initial application recognized at January 1, 2019, without restatement of prior period information, and the following practical expedients were chosen:

a) Application of this Standard to contracts that were previously identified as leases (note 18.2 to the Company’s audited financial statements ended December 31, 2018);

b) Lease liabilities measured at the present value of the remaining lease payments, net of applicable recoverable taxes, discounted by the lessee’s incremental borrowing rate at the date of initial application;

c) Recognition of right-of-use assets at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the statement of financial position immediately before the date of initial application, excluding initial direct costs.

Foreign exchange gains and losses arising from lease arrangements denominated in U.S. dollars were designated for hedging relationship according to the current cash flow hedge accounting policy involving the Company’s future exports.

Disclosure

At January 1, 2019, the Company accounted for right-of-use assets and lease liabilities at the same amount (US$ 26,575) and, as a result, the impacts arising from the initial application of this standard did not affect equity. The right-of-use assets are presented as Property, plant and equipment (PP&E), primarily comprising the following underlying assets: oil and gas producing units, vessels, lands and buildings, helicopters, drilling rigs and other exploration and production equipment. The lease liabilities are presented as a separate line item in the statement of financial position.

Right-of-use by underlying asset
Oil and gas producing units	12,925
Vessels	11,996
Lands and buildings	1,011
Others	643
Total	26,575

Reconciliation between operating lease commitments disclosed as of December 31, 2018 and lease liabilities recognized at the date of initial application is presented below:

Commitment to operating lease as of December 31, 2018	95,379
Commitments for which lease terms have not commenced	(54,825	)
Discount	(9,980	)
Short-term leases and others	(3,999	)
Initial application	26,575
Finance lease (IAS 17) recognized at December 31, 2018	185
Lease liability at January1, 2019	26,760

In the statement of cash flows, operating lease payments, which were previously presented within cash flows from operating activities, are presented as cash flows from financing activities. These amounts totaled US$ 2,274 in the six-month period ended June 30, 2019.

Key estimates and judgments

The incremental borrowing rates used to determine the present value of the remaining lease payments were determined mainly based on the Company’s cost of funding based on yields of bonds issued by the Company, adjusted according to the terms and currency of the lease arrangements, economic environment of the country where the lessee operates and similar collaterals.

The average incremental borrowing rate was 6.06% p.a. at the adoption of IFRS 16.

Other significant matters

The changes arising from the adoption of IFRS 16 did not impact the Company’s business practice and there was no need to renegotiate covenant clauses in finance debts.

11

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

3.2. IFRIC 23 – Uncertainty over Income Tax Treatments

IFRIC 23 clarifies how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments. The Company did not identify any material impact arising from IFRIC 23.

4. Cash and cash equivalents and Marketable securities

4.1. 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.

	06.30.2019		12.31.2018
Cash at bank and in hand		201		863
Short-term financial investments
- In Brazil
Brazilian interbank deposit rate investment funds and other short-term deposits		4,882		1,875
Other investment funds		9		12
		4,891		1,887
- Abroad
Time deposits		2,222		3,823
Automatic investing accounts and interest checking accounts		8,482		6,708
Other financial investments		918		618
		11,622		11,149
Total short-term financial investments		16,513		13,036
Total cash and cash equivalents		16,714		13,899

Short-term financial investments in Brazil primarily consist of investments in funds holding Brazilian Federal Government Bonds that can be redeemed immediately, as well as repo operations, that mature within three months as of the date of their acquisition. Short-term financial investments abroad comprise time deposits that mature in three months or less from the date of their acquisition, highly-liquid automatic investment accounts, interest checking accounts and other short-term fixed income instruments.

As of June 30, 2019, the Company classified the assets and liabilities of Petrobras Distribuidora (BR) as held for sale in the consolidated statement of financial position, including Cash and cash equivalents of US$ 492.

4.2. Marketable securities

	06.30.2019		12.31.2018
	Total		Total
Fair value through profit or loss		641		1,083
Fair value through other comprehensive income		6		8
Amortized cost		46		45
Total		693		1,136
Current		641		1,083
Non-current		52		53

Marketable securities classified as fair value through profit or loss refer mainly to investments in Brazilian Federal Government Bonds. These financial investments have maturities of more than three months and are generally classified as current assets due to their maturity or the expectation of their realization in the short term.

12

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

5. Trade and other receivables

5.1. Trade and other receivables, net

	06.30.2019			12.31.2018
Receivables from contracts with customers
Third parties		4,424			6,614
Related parties
Investees (note 15.1)		677			682
Receivables from the electricity sector (note 5.4) (*)		3,965			4,400
Subtotal		9,066			11,696
Other trade receivables
Third parties
Receivables from divestments (**)		1,339			1,296
Finance lease receivables		498			519
Other receivables		1,157			1,325
Related parties
Diesel subsidy (note 15.1)		—			400
Petroleum and alcohol accounts—receivables from Brazilian Government		315			307
Subtotal		3,309			3,847
Total trade receivables		12,375			15,543
Expected credit losses (ECL)—Third parties		(2,541	)		(3,390	)
Expected credit losses (ECL)—Related parties		(879	)		(915	)
Total trade receivables, net		8,955			11,238
Current		4,047			5,746
Non-current		4,908			5,492

(*) It includes the amount of US$ 195 at June 30, 2019 (US$ 199 at December 31, 2018) regarding finance lease receivable from Amazonas Distribuidora de Energia.

(**) It comprises receivable from the divestment of NTS and contingent payments from the sale of interest in Roncador field.

The remaining balance of receivables from the Diesel Price Subsidy Program, established by the Federal Government in 2018, was fully received by February 2019.

Trade and other receivables are generally classified as measured at amortized cost, except for receivables with final prices linked to changes in commodity price after their transfer of control, which are classified as measured at fair value through profit or loss. Changes in such prices during the first half of 2019 amounted to US$ 164.

5.2. Aging of trade and other receivables – third parties

	06.30.2019					12.31.2018
	Trade receivables		Expected credit losses			Trade receivables		Expected credit losses
Current		4,601		(369	)		5,863		(360	)
Overdue:
1-90 days		187		(9	)		484		(54	)
91-180 days		55		(13	)		35		(12	)
181-365 days		121		(22	)		48		(20	)
More than 365 days		2,454		(2,128	)		3,325		(2,944	)
Total		7,418		(2,541	)		9,755		(3,390	)

13

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

5.3. Changes in provision for expected credit losses

	Jan-Jun/ 2019			Jan-Dec/ 2018
Opening balance		4,305			5,945
Initial application of IFRS 9		—			122
Additions		65			104
Write-offs		(94	)		(1,253	)
Transfer of assets held for sale		(866	)		6
Cumulative translation adjustment		10			(619	)
Closing balance		3,420			4,305
Current		1,131			1,715
Non-current		2,289			2,590

In 2018, write-offs in the balance of expected credit losses primarily reflect the effects related to the agreements signed with companies from electricity sector.

5.4. Trade receivables – electricity sector (isolated electricity system in the northern region of Brazil)

Receivables from electricity sector	Receivables outside the scope of DAAs			DAA 2014			DAA 2018			Lease receivables			Others			Total
Receivables		1,348			2,560			739			199			1			4,847
ECL		(1,182	)		(5	)		(1	)		—			(1	)		(1,189	)
Balance at December 31, 2018		166			2,555			738			199			—			3,658
Sales		521			—			—			—			—			521
Amounts received		(462	)		(240	)		(279	)		(18	)		—			(999	)
Interest		11			68			25			12			—			116
Derecognition of receivables		(75	)		—			—			—			—			(75	)
Agreements in 2018		—			—			218			—			—			218
(Additions)/reversals of ECL		(11	)		2			—			(8	)		—			(17	)
Derecognition of receivables—ECL		62			—			—			—			—			62
Transfer to assets held for sale		(6	)		(23	)		(200	)		—			—			(229	)
CTA		(1	)		25			4			2			—			30
Balance at June 30, 2019		205			2,387			506			187			—			3,285
Receivables		1,091			2,391			506			195			—			4,183
ECL		(886	)		(4	)		—			(8	)		—			(898	)
Balance at June 30, 2019		205			2,387			506			187			—			3,285

	Receivables		ECL			Total
Related parties—Eletrobras Group
Eletrobras		3,731		(836	)		2,895
Amazonas Distribuidora de Energia—AmE		234		(42	)		192
Total		3,965		(878	)		3,087
Third parties
Cia de Gás do Amazonas—CIGÁS		198		(5	)		193
Cia de Eletricidade do Amapá—CEA		15		(15	)		—
Others		5		—			5
Total		218		(20	)		198
Balance at June 30, 2019		4,183		(898	)		3,285
Balance at December 31, 2018		4,847		(1,189	)		3,658

14

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

With the conclusion of the process of privatization of the distributors of the Eletrobras Group (“Distributors”), all the conditions precedent provided for in the Debt Assumption Agreements (DAAs) signed between the Distributors and Petrobras were met and, thus, Eletrobras became the debtor of all the related amounts. There is an exception to the DAA signed on December 3, 2018 and its amendments, which covers part of the overdue amounts of AME in the scope of the gas supply agreements, which, although currently under the responsibility of the privatized Distributor, has Eletrobras corporate guarantee.

Regarding the privatization of AME, the Distributor presented a proposal to guarantee the debts that remained in favor of Petrobras Distribuidora (BR), which was not accepted because BR understands there are no elements that show its feasibility. The winning consortium formed by the companies Oliveira Energia Geração e Serviços Ltda and Atem Distribuidora de Petróleo S.A. so far has not submitted any further proposal. Thus, the impacts arising from this process were not recognized in the second quarter of 2019 and negotiations to obtain such guarantees for the renegotiated receivables are still ongoing.

With the privatization of the Distributors and the signature of the DAAs, Eletrobras became debtor of these receivables and the structure of collateralization for them is in progress. Therefore, the risk assessment to account for expected credit losses (ECL) is based on Eletrobras’ credit risk. At June 30, 2019, debts from both Eletrobras, within the scope of the installments assumed, and Amazonas Generation and Transmission (AmGT), responsible for the new gas supply agreements, were current.

On June 30, 2019, the receivables assigned to BR, amounting to US$ 229, were transferred to assets held for sale, as set out in note 7.

6. Inventories

	06.30.2019		12.31.2018
Crude oil		4,543		4,150
Oil products		2,405		2,758
Intermediate products		611		610
Natural gas and Liquefied Natural Gas (LNG)		150		122
Biofuels		25		150
Fertilizers		41		78
Total products		7,775		7,868
Materials, supplies and others		1,159		1,119
Total		8,934		8,987

In the the first half of 2019, the Company recognized a US$ 10 gain as a reversal of cost of sales, adjusting inventories to net realizable value (a US$ 17 loss within cost of sales in the first half of 2018) primarily due to changes in international prices of crude oil and oil products.

At June 30, 2019, the Company had pledged crude oil and oil products volumes as collateral for the Terms of Financial Commitment (TFC) signed by Petrobras and Petros in 2008, without any significant changes in relation to the amounts disclosed on December 31, 2018.

15

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

7. Disposal of assets and other changes in organizational structure

The major classes of assets and liabilities classified as held for sale are shown in the following table:

	Operating segment								06.30.2019		12.31.2018
	E&P		Distribution		Gas & Power		Corporate (*)		Total		Total
Assets classified as held for sale
Cash and Cash Equivalents		—		—		—		492		492		40
Trade receivables		—		966		8		462		1,436		39
Inventories		—		772		19		—		791		47
Investments		773		10		—		—		783		973
Property, plant and equipment		2,510		1,705		82		—		4,297		745
Others		112		1,346		94		470		2,022		102
Total		3,395		4,799		203		1,424		9,821		1,946
Liabilities on assets classified as held for sale
Trade Payables		—		248		20		—		268		1
Finance debt		—		—		—		2,516		2,516		—
Provision for decommissioning costs		1,088		—		—		—		1,088		932
Others		—		801		7		1,064		1,872		50
Total		1,088		1,049		27		3,580		5,744		983

(*) It refers to BR’s assets and liabilities.

As of June 30, 2019, the amounts refer to (i) the sale of Rômulo Almeida and Celso Furtado thermoelectric power generation plants, (ii) the sale of the Company’s interest in Petrobras Oil and Gas BV (corresponding to 50% of the joint venture), (iii) the remaining 10% interest in Lapa field, (iv) three fields in the Campos Basin (Pargo, Carapeba and Vermelho fields, comprising the Nordeste group), (v) 34 onshore fields located in Potiguar Basin in Rio Grande do Norte, (vi) the interest in the Maromba field, (vii) sale of 50% working interest in Tartaruga Verde and Module III of Espadarte fields, and (viii) public offer of shares of Petrobras Distribuidora (BR).

The most significant progresses under the divestment process in 2019 are described below:

Sale of onshore producing fields

On December 27, 2018, the Company’s Board of Directors approved the sale of its total interest in 34 onshore producing fields, located in Potiguar basin, in the state of Rio Grande do Norte, to the company 3R Petroleum, in the amount of US$ 453. However, the transaction was not consummated.

Accordingly, the Company promptly reassessed the other offers and accepted PetroRecôncavo’s offers in the amount of US$ 384, which was the second highest amount offered for this sale. Of this amount, US$ 61 is conditioned on the extension of the concession to be granted by the Brazilian Agency of Petroleum, Natural Gas and Biofuels—ANP and its present value is US$ 47. The agreement was signed on April 25, 2019, when PetroRecôncavo disbursed US$ 29 in advance.    

In addition, the Company will assume US$ 2 (present value) related to provision for decommissioning costs.

The corresponding assets and liabilities of this transaction are classified as held for sale as of June 30, 2019 as the conclusion of the transaction is still subject to certain conditions precedent, such as ANP approval and pre-emption rights.

16

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

Sale of distributors in Paraguay

On June 26, 2018 the Company entered into a Sale and Purchase Agreement (SPA) related to the sale to Copetrol Group of its entire interest held through its wholly-owned subsidiary Petrobras International Braspetro B.V. (PIB BV) in Petrobras Paraguay Distribución Limited (PPDL UK), Petrobras Paraguay Operaciones y Logistica SRL (PPOL) and Petrobras Paraguay Gas SRL (PPG).

On March 8, 2019, this sale was completed after the fulfilment of all conditions precedent and the payment of US$ 332 to the Company, which includes US$ 45 of cash and cash equivalents of the companies and US$ 7 relating to working capital adjustment. This amount sums to the US$ 49 deposited in an escrow account at the signing date (June 27, 2018). As a result of this transaction, the Company recognized a US$ 141 gain within other income and expenses. In addition, a US$ 34 loss relating to cumulative translation adjustment previously recognized in shareholders’ equity was reclassified to the statement of income, within other income and expenses, due to the depreciation of the Paraguayan Guarani against the US dollar, accumulated since the acquisition of the investment.

Sale of Pasadena Refinery

On January 30, 2019, Petrobras America Inc. (PAI) entered into a SPA with Chevron USA Inc. (Chevron) for the sale of the shares held by PAI on Pasadena Refining System Inc. (PRSI) and PRSI Trading LLC (PRST), which comprise the Pasadena refining system in the United States.

On May 1, 2019, this sale was concluded after the fulfillment of conditions precedent. Accordingly, the amount of US$ 467 was received by the Company, of which US$ 350 relates to shares of the Pasadena refinery and the remaining US$ 117 to its working capital.

At the transaction closing, a US$ 49 loss was accounted for as other income and expenses.

Sale of 50% working interest in Tartaruga Verde and Module III of Espadarte fields

On April 25, 2019, Petrobras entered into an agreement with Petronas Petróleo Brasil Ltda. (“PPBL”), for the sale of 50% working interest in Tartaruga Verde field (BM-C-36 Concession) and Module III of Espadarte field. Petrobras will maintain a 50% working interest and the operation of the field.

The transaction amounts to US$ 1,294, to be paid in two tranches: (i) US$ 259 paid at the signing date; and (ii) US$ 1,035 at the closing date, subject to price adjustments. The Company will continue to operate the fields.

The conclusion of the transaction is subject to the conditions precedent provided in the agreement, such as the approval by the ANP and the Brazilian Antitrust Regulator (CADE). Therefore, the corresponding assets and liabilities of this transaction are classified as held for sale as of June 30, 2019.

Sale of interest in Transportadora Associada de Gás—TAG    

On April 25, 2019, the Company entered into an agreement for the sale of a 90% interest in TAG to a group formed by ENGIE and the Canadian fund Caisse de Dépôt et Placement du Québec (CDPQ), acting through Aliança Transportadora de Gás Participações S.A. (“Aliança”), a Brazilian private company, to take over the control of TAG.

17

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

On June 13, 2019, after the fulfilment of all conditions precedent, this sale was closed for US$ 8.5 billion, as follows:

• Aliança paid US$ 7.5 billion to Petrobras for the acquisition of 90% of TAG’s shares;

• the members of the group paid US$ 0.5 billion to Petrobras relating to the sale of additional shares, so that the Company will preserve a 10% interest in TAG after the corporate restructuring to be held by the new controlling shareholder of TAG. This amount was accounted for as other current liabilities and, when recognized as profit or loss, the effect will be offset by the proportional write-off of the investment remeasured at fair value.

• Aliança made a loan to TAG, which repaid the remaining debt with BNDES in the same date, in the amount of US$ 0.5 billion.

Petrobras will continue to use natural gas transportation services rendered by TAG, through contracts already in force between the two companies, with no impacts on its operations.

Following the closing of the transaction, a US$ 5.5 billion gain was accounted for in the second quarter of 2019, within other income and expenses, including US$ 0.5 arising from the remeasurement of the investment.

In the scope of this transaction, Petrobras remained responsible for certain TAG contingencies, in the amount of US$ 0.6 billion, classified as contingent liabilities.

Public offer of shares of Petrobras Distribuidora (BR)

On May 22, 2019, the Company’s Board of Directors approved the sale of a further portion of its interest in Petrobras Distribuidora (BR), to be carried out through a secondary public offering (follow-on).

On July 23, 2019, it occurred the pricing of the common shares under this operation, when the Board of Directors approved the sale of 349,500,000 shares, at a price per share of US$ 6.5123 (R$ 24.50).

On July 25, 2019, an overallotment option was fully exercised and the number of shares offered increased by 43,687,500, under the same conditions and at the same price per share initially offered. Thus, the offering amount totaled US$ 2,561 and Petrobras’ interest in BR’s capital stock was reduced to 37.50%. After the closing of this operation, Petrobras is no longer controller of BR.

The Company estimates a gain of US$ 3.8 billion before taxes, including the gain on remeasurement of US$ 2 billion, as a result of this operation, to be accounted for in the third quarter of 2019, considering the carrying amount of this investment at June 30, 2019. This gain is still subject to adjustments relating to the equity interest until the date of closing.

The supply relationship will continue after the disposal as this transaction does not change the current supply contracts.

As of June 30, 2019, the corresponding assets and liabilities of this transaction are classified as held for sale, since all the internal approvals necessary for the sale had been taken and such sale was subject only to usual and customary conditions.

18

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

BR comprises almost entirely the Distribution business segment of the Company. As it represents a separate major line of business, it is also considered a discontinued operation, for which the statements of income and cash flows are presented below:

Statement of income for the discontinued operation

	Jan-Jun/ 2019			Jan-Jun/ 2018			2Q-2019			2Q-2018
Sales revenues		4,822			6,011			2,396			2,654
Cost of sales		(4,071	)		(5,178	)		(2,067	)		(2,289	)
Gross profit		751			833			329			365
Income (expenses)
Selling expenses		(379	)		(428	)		(184	)		(210	)
General and administrative expenses		(100	)		(114	)		(48	)		(55	)
Other taxes		(13	)		(15	)		(3	)		(6	)
Other income and expenses		(54	)		(92	)		(18	)		(53	)
		(546	)		(649	)		(253	)		(324	)
Income before finance income (expense), results in equity-accounted investments and income taxes		205			184			76			41
Net finance income (expense)		120			66			48			82
Results of equity-accounted investments		1			(1	)		—			—
Net income before income taxes		326			249			124			123
Income taxes		(122	)		(100	)		(47	)		(50	)
Net income for the period from discontinued operations		204			149			77			73

For information relating to sales from Petrobras to BR, see note 26.

Statement of cash flows for the discontinued operation

	Jan-Jun/ 2019			Jan-Jun/ 2018
Cash flows from Operating activities
Net income for the period		204			149
Adjustments for:
Pension and medical benefits (actuarial expense)		62			64
Depreciation, depletion and amortization		66			62
Foreign exchange, indexation and finance charges		(111	)		(68	)
Deferred income taxes, net		120			100
Others		93			11
Decrease (Increase) in assets
Trade and other receivables, net		303			146
Other assets		(166	)		54
Increase (Decrease) in liabilities
Trade payables		(49	)		(170	)
Pension and medical benefits		(134	)		(27	)
Other liabilities		(30	)		(23	)
Income taxes paid		(102	)		—
Net cash provided by operating activities		256			298
Cash flows from Investing activities
Acquisition of PP&E and intangibles assets		(68	)		(50	)
Divestment (Investment) in marketable securities		14			81
Others		3			1
Net cash (used in) provided by investing activities		(51	)		32
Cash flows from Financing activities
Repayment of principal		(30	)		(34	)
Repayment of interest		(51	)		(55	)
Dividends paid to Shareholders of Petrobras		(387	)		—
Others		(27	)		20
Net cash used in financing activities		(495	)		(69	)

19

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

8. Investments

8.1. Investments in associates and joint ventures

	Balance at 12.31.2018		Investments			Restructuring, capital decrease and others (*)			Results of equity- accounted investments		CTA		OCI			Dividends			Balance at 06.30.2019
Joint Ventures		1,170		11			(4	)		129		4		—			(126	)		1,184
Associates		1,573		(1	)		852			122		112		(16	)		(33	)		2,609
Other investments		16		—			(4	)		—		1		—			—			13
Total		2,759		10			844			251		117		(16	)		(159	)		3,806

(*) It includes the transfer of the 10% remaining interest in TAG to Associates (previously a consolidated subsidiary).

Results of equity-accounted investments primarily refer to the MP Gulf of Mexico (US$ 70) and the Petrochemical associates (US $ 113).

20

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

9. Property, plant and equipment

9.1. By class of assets

	Land, buildings and improvement			Equipment and other assets (*)			Assets under construction (**)			Exploration and development costs (oil and gas producing properties) (***)			Right-of-use assets			Total
Balance at January 1, 2018		6,665			75,002			42,521			52,462			—			176,650
Additions		4			1,751			8,707			6			—			10,468
Additions to / review of estimates of decommissioning costs		—			—			—			4,778			—			4,778
Capitalized borrowing costs		—			—			1,810			—			—			1,810
Write-offs		(61	)		(16	)		(327	)		(27	)		—			(431	)
Transfers		(93	)		13,720			(18,667	)		4,086			—			(954	)
Depreciation, amortization and depletion		(359	)		(6,529	)		—			(5,028	)		—			(11,916	)
Impairment recognition		—			(742	)		(250	)		(1,686	)		—			(2,678	)
Impairment reversal		—			309			23			226			—			558
Cumulative translation adjustment		(946	)		(7,467	)		(4,891	)		(7,598	)		—			(20,902	)
Balance at December 31, 2018		5,210			76,028			28,926			47,219			—			157,383
Cost		7,829			128,711			28,926			77,141			—			242,607
Accumulated depreciation, amortization and depletion		(2,619	)		(52,683	)		—			(29,922	)		—			(85,224	)
Balance at December 31, 2018		5,210			76,028			28,926			47,219			—			157,383
Adoption of IFRS 16		—			—			—			—			26,575			26,575
Additions		—			663			3,309			4			1,355			5,331
Additions to / review of estimates of decommissioning costs		—			—			—			(19	)		—			(19	)
Capitalized borrowing costs		—			—			694			—			—			694
Write-offs		—			(20	)		(123	)		—			—			(143	)
Transfers		444			7,219			(9,733	)		2,633			203			766
Transfers to assets held for sale		(760	)		(4,165	)		(608	)		(433	)		(1,156	)		(7,122	)
Depreciation, amortization and depletion		(130	)		(3,153	)		—			(2,290	)		(2,571	)		(8,144	)
Impairment recognition		(1	)		(219	)		(364	)		—			—			(584	)
Impairment reversal		—			20			17			456			—			493
Cumulative translation adjustment		31			618			122			540			243			1,554
Balance at June 30, 2019		4,794			76,991			22,240			48,110			24,649			176,784
Cost		7,250			128,462			22,240			79,721			27,948			265,621
Accumulated depreciation, amortization and depletion		(2,456	)		(51,471	)		—			(31,611	)		(3,299	)		(88,837	)
Balance at June 30, 2019		4,794			76,991			22,240			48,110			24,649			176,784
Weighted average useful life in years		40 (25 to 50 (except land	)  )		20 (3 to 31	)					Units of production method			8 (2 to 47	)

(*) It is composed of platforms, refineries, thermoelectric power plants, natural gas processing plants, pipelines, rights of use and other operating, storage and production plants, also including exploration and production assets depreciated based on the units of production method.

(**) See note 26 for assets under construction by business area.

(***) It is composed of exploration and production assets related to wells, abandonment and dismantling of areas, signature bonuses associated to proved reserves and other costs directly associated with the exploration and production of oil and gas.

21

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

At the adoption of IFRS 16, the Company recognized right-of-use assets at an amount equal to the lease liability. The rights-of-use at June 30, 2019 comprise the following underlying assets:

	Land, buildings and improvement			Equipment and other assets (*)			Total
Cost		893			27,055			27,948
Accumulated depreciation, amortization and depletion		(52	)		(3,247	)		(3,299	)
Balance at June 30, 2019		841			23,808			24,649
Depreciation charges		51			2,468			2,519

(*) It primarily comprises platforms and vessels.

9.2. Unitization Agreements

Since 2018, Petrobras has entered into Production Individualization Agreements (Acordos de Individualização da Produção - AIPs) with Pré-Sal Petróleo S.A. (PPSA) and its partners (Shell, Petrogal and Total) in certain E&P consortiums, submitting these agreements to ANP for approval. As of June 30, 2019, a US$ 138 provision is accounted for within other current liabilities.

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

Petrobras and the Brazilian Federal Government entered into the Assignment Agreement in 2010, which grants the Company the right to carry out prospecting and drilling activities for oil, natural gas and other liquid hydrocarbons located in the pre-salt area, subject to a maximum production of five billion barrels of oil and gas equivalent. The agreement has a term of forty years and is renewable for a further five years subject to certain conditions. As of June 30, 2019, the Company’s property, plant and equipment include the amount of US$ 19,521 (R$ 74,808 million) related to the Assignment Agreement (US$ 19,306 as of December 31, 2018).

The information gathered made possible the identification of volumes exceeding five million barrels of oil equivalent.

In April 2019, the CNPE enacted Resolution 5/2019 approving the clauses of the draft amending the agreement and, according to this resolution, the Company will be entitle to a reimbursement of US$ 9,058 due to the review of the Assignment Agreement.

On May 21, 2019, the Company’s Board of Directors approved the execution of the Amendment to the Assignment Agreement pursuant to the CNPE’s Resolution 5/2019. This approval is conditioned to (i) budgetary proposal of the Federal Government for the payment to Petrobras, and (ii) the publication of a MME Ordinance on the Co-participation Agreement with no violation of the Company’s vested right over the Assignment Agreement and the conditions negotiated in the scope of the revision process, established on the Amendment and on the MME Ordinance 213/2019.

The Company’s Board of Directors also determined that the execution of the Amendment be carried out before the surplus auction of the Assignment Agreement.

A definition about a relevant rule that would enable the Brazilian Government to settle such amount is pending.

Due to the features of the review, any credit in favor of the Company will be only confirmed following an amendment to the agreement that results in a contractual right and would support the recognition of an account receivable with a respective reduction in PP&E.

9.4. Capitalization rate used to determine the amount of borrowing costs eligible for capitalization

The capitalization rate used to determine the amount of borrowing costs eligible for capitalization was the weighted average of the borrowing costs applicable to the borrowings that were outstanding during the period, other than borrowings made specifically for obtaining a qualifying asset. In the the six-month period ended June 30, 2019, the capitalization rate was 6.19% p.a. (6.36% p.a. in the same period of 2018). Since January 2019, finance costs involving lease arrangements have been taken into account in the computation of the capitalization rate.

22

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

10. Intangible assets

10.1. By class of assets

	Rights and Concessions			Software			Goodwill			Total
Balance at January 1, 2018		1,801			321			218			2,340
Addition		841			85			—			926
Capitalized borrowing costs		—			4			—			4
Write-offs		(15	)		—			—			(15	)
Transfers		(42	)		6			14			(22	)
Amortization		(14	)		(98	)		—			(112	)
Cumulative translation adjustment		(241	)		(46	)		(29	)		(316	)
Balance at December 31, 2018		2,330			272			203			2,805
Cost		2,549			1,592			203			4,344
Accumulated amortization		(219	)		(1,320	)		—			(1,539	)
Balance at December 31, 2018		2,330			272			203			2,805
Addition		6			21			—			27
Capitalized borrowing costs		—			1			—			1
Write-offs		(8	)		(4	)		—			(12	)
Transfers		(82	)		(48	)		(116	)		(246	)
Amortization		(6	)		(21	)		—			(27	)
Impairment recognition		(1	)		(1	)		—			(2	)
Cumulative translation adjustment		22			16			(1	)		37
Balance at June 30, 2019		2,261			236			86			2,583
Cost		2,460			1,511			86			4,057
Accumulated amortization		(199	)		(1,275	)		—			(1,474	)
Balance at June 30, 2019		2,261			236			86			2,583
Estimated useful life in years		(*	)		5			Indefinite

(*) Mainly composed of assets with indefinite useful lives, which are reviewed annually to determine whether events and circumstances continue to support an indefinite useful life assessment.

11. Impairment

The Company annually tests its assets for impairment on December 31 or when there is an indication that their carrying amount may not be recoverable.

In the first half of 2019, impairment losses were accounted for, in the amount of US$ 20, within other income and expenses, mainly due to:

• On July 25, 2019, Petrobras approved the sale of 10 concessions located in shallow waters in the Campos Basin (Rio de Janeiro). As a result, the Company reassessed the recoverability of the carrying amount of these assets and, based on their fair value less costs to sell, accounted for a reversal of impairment loss in the amount of US$ 494 relating to Badejo, Bicudo, Linguado, Pampo e Trilha fields.

• In the first half of 2019, in addition to the regular investments made in the first refining unit facilities of Comperj, which are part of the infrastructure for transporting and processing natural gas from the pre-salt layer in the Santos Basin, the Company also made investments, in the amount of US$ 208, relating to environmental licensing of this project, as set out in note 27.3. As described in the last business and management plan approved by the Board of Directors, the resumption of this project still depends on new partnerships, thus additional impairment losses were recognized in the first half of 2019, totaling US$ 255, since future cash flows are not expected to return from investments.

23

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

• After the Board of Directors approved the sale of the drillship NS-30 (owned by Drill Ship International B.V.—DSI, a subsidiary of PIB BV), in the second quarter of 2019, a US$ 174 impairment loss was recognized on this transaction.

• On June 30, 2019, the Company reviewed the composition of the Parque das Baleias complex, excluding Cachalote and Pirambu fields, which were separately tested for impairment, resulting in a US$ 109 impairment loss.

In the first half of 2018, the Company accounted for a US$ 31 impairment reversal.

12. Exploration and evaluation of oil and gas reserves

The exploration and evaluation activities include the search for oil and gas reserves from obtaining the legal rights to explore a specific area to 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 following table:

Capitalized Exploratory Well Costs / Capitalized Acquisition Costs (*)	Jan-Jun/ 2019			Jan-Dec/ 2018
Property plant and equipment
Opening Balance		4,132			4,522
Additions to capitalized costs pending determination of proved reserves		201			379
Capitalized exploratory costs charged to expense		(38	)		(10	)
Transfers upon recognition of proved reserves		—			(95	)
Cumulative translation adjustment		46			(664	)
Closing Balance		4,341			4,132
Intangible Assets		1,995			1,980
Capitalized Exploratory Well Costs / Capitalized Acquisition Costs		6,336			6,112

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

Exploration costs recognized in the statement of income and cash used in oil and gas exploration and evaluation activities are set out in the following table:

	2019		2018		2019		2018
	Jan-Jun		Jan-Jun		Apr-Jun		Apr-Jun
Exploration costs recognized in the statement of income
Geological and geophysical expenses		191		166		86		75
Exploration expenditures written off (includes dry wells and signature bonuses)		64		65		14		57
Contractual penalties		14		60		—		24
Other exploration expenses		5		7		1		6
Total expenses		274		298		101		162
Cash used in:
Operating activities		196		172		87		80
Investment activities		198		388		104		164
Total cash used		394		560		191		244

24

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

13. Finance debt

13.1. Balance by type of finance debt

	06.30.2019		12.31.2018
In Brazil
Banking Market		5,349		9,576
Capital Market		2,905		3,320
Development banks		2,123		3,346
Others		15		9
Total		10,392		16,251
Abroad
Banking Market		23,130		24,124
Capital Market		37,679		39,627
Development banks		40		41
Export Credit Agency		4,049		3,881
Others		237		251
Total		65,135		67,924
Total finance debt		75,527		84,175
Current		5,695		3,667
Non-current		69,832		80,508

The Company was compliant with debt covenants at June 30, 2019 and there were no change in collateral provided compared to December 31, 2018.

On June 13, 2019, the wholly owned subsidiary Petrobras Global Trading B.V. – PGT, give notice to China Development Bank (CDB) about the prepayment of a US$ 3 billion debt maturing in 2024. Thus, as of June 30, 2019, this amount was reclassified to current finance debt. This payment will occur on August 14, 2019.

25

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

13.2. Changes in finance debt and reconciliation with cash flows from financing activities

	Balance at 12.31.2017		Adoption of IFRS 9		Additions			Principal amortization (*)			Interest amortization (*)			Accrued interest (**)		Foreign exchange/ inflation indexation charges			Cumulative translation adjustment (CTA)			Modification of contractual cash flows			Balance at 12.31.2018
In Brazil		21,930		65		2,442			(5,451	)		(1,220	)		1,338		27			(2,880	)		—			16,251
Abroad		87,116		177		8,644			(27,988	)		(4,465	)		4,400		1,409			(1,357	)		(12	)		67,924
		109,046		242		11,086			(33,439	)		(5,685	)		5,738		1,436			(4,237	)		(12	)		84,175
	Balance at 12.31.2018				Additions			Principal amortization (*)			Interest amortization (*)			Accrued interest (**)		Foreign exchange/ inflation indexation charges			Cumulative translation adjustment (CTA)			Transfer to liabilities classified as held for sale			Balance at 06.30.2019
In Brazil				16,251		1,219			(5,475	)		(427	)		508		64			141			(1,888	)		10,393
Abroad				67,924		3,582			(6,327	)		(1,988	)		1,985		(162	)		120			—			65,134
				84,175		4,801			(11,802	)		(2,415	)		2,493		(98	)		261			(1,888	)		75,527
Reconciliation to the Statement of Cash Flows
PP&E on credit						(76	)		—			—
Debt restructuring						—			(185	)		—
Deposits linked to financing						—			—			16
Discontinued operations						—			30			50
Net cash used in financing activities						4,725			(11,957	)		(2,349	)

(*) It includes pre-payments.

(**) It includes premium and discount over notional amounts, as well as gains and losses by modifications in contractual cash flows.

In line with the Company’s Business and Management Plan and following its liability management strategy, the Company recently raised funds in order to repay older debts, as well as aiming at improving the debt repayment profile taking into account its alignment with investments returns over the long run.

In the first half of 2019, proceeds from financing amounted to US$ 4,725, principally reflecting: (i) global notes issued in the capital market in the amount of US$ 2,980, of which US$ 737 relates to the reopening of bonds maturing in 2029, and the remaining relates to new bonds issued maturing in 2049; and (ii) debentures issued amounting to US$ 955.

In addition, the Company repaid several finance debts, notably: (i) US$ 4,568 relating to repurchase of global bonds previously issued by the Company in the capital market, with net premium paid to bond holders amounting to US$ 181; and (ii) pre-payment of banking loans in the domestic and international market totaling US$ 5,298; and (iii) pre-payment of US$ 578 with respect to financings with the Brazilian Development Bank (Banco Nacional de Desenvolvimento Econômico e Social – BNDES).

26

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

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

Maturity in	2019			2020			2021			2022			2023			2024 onwards			Total (**)			Fair value
Financing in U.S.Dollars (US$)(*):		4,221			972			3,366			3,794			6,924			40,808			60,085			67,926
Floating rate debt		3,542			969			1,938			3,053			5,321			12,461			27,284
Fixed rate debt		679			3			1,428			741			1,603			28,347			32,801
Average interest rate		5.6	%		5.6	%		5.5	%		5.6	%		5.5	%		6.5	%		6.2	%
Financing in Brazilian Reais (R$):		411			615			638			1,597			1,872			5,259			10,392			10,332
Floating rate debt		144			306			392			1,273			1,653			3,383			7,151
Fixed rate debt		267			309			246			324			219			1,876			3,241
Average interest rate		4.4	%		4.5	%		4.7	%		5.0	%		4.8	%		4.2	%		4.5	%
Financing in Euro (€):		15			87			264			491			460			1,513			2,830			3,738
Fixed rate debt		15			87			264			491			460			1,513			2,830
Average interest rate		4.5	%		4.7	%		4.8	%		4.8	%		4.6	%		4.6	%		4.7	%
Financing in Pound Sterling (£):		52			23			—			—			—			2,140			2,215			2,598
Fixed rate debt		52			23			—			—			—			2,140			2,215
Average interest rate		6.8	%		6.2	%		—			—			—			6.3	%		6.3	%
Financing in other currencies:		5			—			—			—			—			—			5			5
Fixed rate debt		5			—			—			—			—			—			5
Average interest rate		9.9	%		—			—			—			—			—			9.9	%
Total as of June 30, 2019		4,704			1,697			4,268			5,882			9,256			49,720			75,527			84,599
Average interest rate		5.4	%		5.4	%		5.4	%		5.5	%		5.4	%		6.4	%		6.0	%
Total as of December 31, 2018		3,667			3,921			7,012			10,317			11,951			47,307			84,175			85,929
Average interest rate		5.5	%		5.9	%		5.9	%		5.8	%		5.8	%		6.4	%		6.1	%

(*) Includes debt raised in Brazil (in Brazilian reais) indexed to the U.S. dollar.

(**) The average maturity of outstanding debt as of June 30, 2019 is 10.25 years (9.14 years as of December 31, 2018).

The fair value of the Company’s finance debt is mainly determined and categorized into a fair value hierarchy as follows:

Level 1- quoted prices in active markets for identical liabilities, when applicable, amounting to US$ 41,878 as of June 30, 2019 (US$ 39,057 as of December 31, 2018); and

Level 2 – discounted cash flows based on discount rate determined by interpolating spot rates considering financing debts indexes proxies, taking into account their currencies and also Petrobras’ credit risk, amounting to US$ 42,721 as of June 30, 2019 (US$ 46,872 as of December 31, 2018).

The sensitivity analysis for financial instruments subject to foreign exchange variation is set out in note 28.2.

27

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

13.4. Lines of credit

							Amount
Company	Financial institution		Date		Maturity		Available (Lines of Credit)		Used		Balance
Abroad
PGT BV		BNP Paribas		12/22/2016		1/9/2021		350		310		40
PGT BV		Syndicate of banks		3/7/2018		2/7/2023		4,350		—		4,350
Petrobras		New Development Bank		8/27/2018		8/27/2022		200		40		160
PGT BV		Syndicate of banks		3/27/2019		2/27/2024		3,250		—		3,250
Total								8,150		350		7,800
In Brazil
Petrobras		Banco do Brasil		3/23/2018		1/26/2023		522		—		522
Petrobras		Bradesco		6/1/2018		5/31/2023		522		—		522
Petrobras		Banco do Brasil		10/4/2018		9/5/2025		522		—		522
Transpetro		Caixa Econômica Federal		11/23/2010		Not defined		86		—		86
Total								1,652		—		1,652

14. Lease liabilities

The Company is the lessee in agreements primarily including oil and gas producing units, drilling rigs and other exploration and production equipment, vessels and support vessels, helicopters, lands and buildings.

Changes in the balance of lease liabilities are presented below:

	Balance at 12.31.2018		Adoption of IFRS 16		Additions (new contracts)		Payment of principal and interest (*)			Unwinding of discount		Foreign exchange gains and losses			Cumulative translation adjustment (CTA)		Transfer to assets and liabilities held for sale			Balance at 06.30.2019
In Brazil		185		5,628		526		(622	)		194		(12	)		32		(189	)		5,742
Abroad		—		20,947		791		(1,652	)		591		(101	)		142		(958	)		19,760
Total		185		26,575		1,317		(2,274	)		785		(113	)		174		(1,147	)		25,502

(*) The Statement of Cash Flows includes US$ 18 received under lease arrangements in which the Company is the lessor.

28

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

A maturity schedule of the lease arrangements (nominal amounts) is are set out as follows:

Maturity	2019		2020		2021		2022		2023		2024 onwards		Total
Balance at June 30, 2019		3,152		5,655		4,669		3,329		2,574		15,158		34,537

Payments in certain lease agreements vary due to changes in facts or circumstances occurring after their inception other than the passage of time. Such payments are not included in the measurement of the lease obligations. Variable lease payments in the first half of 2019 amounted US$ 455, representing 20% in relation to fixed payments.

All extension options were included in the measurement of lease obligations.

The sensitivity analysis of financial instruments subject to exchange variation is presented in note 29.2.

In the first half of 2019, the Company recognized lease expenses in the amount of US$ 437 relating to short-term leases.

At June 30, 2019, the balance of lease agreements for which the lease term has not commenced, as they relate to assets under construction or not yet available for use, is US$ 54,026.

29

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

15. Related-party transactions

The Company has a related-party transactions policy, which is annually revised and approved by the Board of Directors, and is applicable to all the Petrobras Group, in accordance with the Company’s by-laws.

15.1. Transactions with joint ventures, associates, government entities and pension plans

The Company has engaged, and expects to continue to engage, in the ordinary course of business in numerous transactions with joint ventures, associates, pension plans, as well as with the Company’s controlling shareholder, the Brazilian Federal Government, which include transactions with banks and other entities under its control, such as financing and banking, asset management and other transactions.

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

	06.30.2019				12.31.2018
	Assets		Liabilities		Assets		Liabilities
Joint ventures and associates
State-controlled gas distributors (joint ventures)		335		115		307		114
Petrochemical companies (associates)		106		15		90		7
Other associates and joint ventures		236		862		285		744
Subtotal		677		992		682		865
Brazilian government – Parent and its controlled entities
Government bonds		1,334		—		1,958		—
Banks controlled by the Brazilian Government		7,636		5,067		7,445		10,332
Receivables from the Electricity sector (note 5.4)		3,965		—		4,400		—
Petroleum and alcohol account—receivables from the Brazilian Government		315		—		307		—
Diesel Price Subsidy Program		—		—		400		—
Brazilian Federal Government—dividends		—		96		—		324
Empresa Brasileira de Administração de Petróleo e Gás Natural – Pré-Sal Petróleo S.A. – PPSA		—		118		—		144
Others		24		58		64		121
Subtotal		13,274		5,339		14,574		10,921
Pension plans		64		56		59		96
Total		14,015		6,387		15,315		11,882
Current		2,587		1,356		4,345		2,528
Non-Current		11,428		5,031		10,970		9,354
Total		14,015		6,387		15,315		11,882

30

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

The income/expenses of significant transactions are set out in the following table:

	2019			2018			2019			2018
	Jan-Jun			Jan-Jun			Apr-Jun			Apr-Jun
Joint ventures and associates
State-controlled gas distributors (joint ventures)		1,370			1,123			653			560
Petrochemical companies (associates)		1,520			1,856			787			879
Other associates and joint ventures		(307	)		(482	)		(159	)		(285	)
Subtotal		2,583			2,497			1,281			1,153
Brazilian government – Parent and its controlled entities
Government bonds		53			52			24			21
Banks controlled by the Brazilian Government		(414	)		(510	)		(362	)		(163	)
Receivables from the Electricity sector (note 5.4)		208			722			143			644
Petroleum and alcohol account—receivables from the Brazilian Government		2			—			—			—
Diesel Price Subsidy Program		—			164			—			164
Brazilian Federal Government—dividends		(9	)		—			(4	)		—
Empresa Brasileira de Administração de Petróleo e Gás Natural – Pré-Sal Petróleo S.A. – PPSA		(70	)		—			(42	)		—
Others		(27	)		19			(39	)		(12	)
Subtotal		(258	)		446			(280	)		653
Pension plans		—			—			—			—
Total		2,325			2,943			1,001			1,807
Revenues, mainly sales revenues		3,163			3,355			1,568			1,656
Purchases and services		(653	)		(638	)		(351	)		(318	)
Foreign exchange and inflation indexation charges, net		(214	)		(152	)		(102	)		(67	)
Finance income (expenses), net		30			378			(114	)		536
Total		2,325			2,943			1,001			1,807

In addition to the aforementioned transactions, Petrobras and the Brazilian Federal Government entered into the Assignment Agreement in 2010, which grants the Company the right to carry out prospecting and drilling activities for hydrocarbons located in the pre-salt area limited to the production of five billion barrels of oil equivalent. For detailed information on Assignment Agreement, see note 9.

During the second quarter of 2019, the wholly owned subsidiary Transpetro signed an agreement with Transportadora Associada de Gás SA—TAG, an associate of Petrobras since June 13, 2019, to provide technical support services for gas transportation for a period of ten years.

For more information on the disposal of TAG, see note 7.

31

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

15.2. Compensation of key management personnel

The total compensation of Executive Officers and Board Members of Petrobras parent company is set out as follows:

	Jan-Jun/2019						Jan-Jun/2018
	Officers		Board members		Total		Officers		Board members		Total
Wages and short-term benefits		1.3		0.2		1.5		1.9		0.2		2.1
Social security and other employee-related taxes		0.6		—		0.6		0.5		—		0.5
Post-employment benefits (pension plan)		0.2		—		0.2		0.1		—		0.1
Variable compensation		0.9		—		0.9		—		—		—
Benefits due to termination of tenure		0.3		—		0.3		—		—		—
Total compensation recognized in the statement of income		3.3		0.2		3.5		2.5		0.2		2.7
Total compensation paid		4.0		—		4.0		2.5		0.2		2.7
Average number of members in the period (*)		7.00		9.50		16.50		7.83		9.50		17.33
Average number of paid members in the period (**)		7.00		6.00		13.00		7.83		5.83		13.66

(*) Monthly average number of members.

(**) Monthly average number of paid members.

For the first half of 2019, charges related to compensation of the board members and executive officers of the Petrobras group amounted to US$ 10 (US$ 13 for the first half of 2018).

The Company’s General Shareholder’s Meeting held on April 25, 2019 determined the amount of US$ 8.3 as the threshold of executive officers and board members compensation for the period from April 2019 to March 2020, regarding only continuing operations.

16. Provision for decommissioning costs

Non-current liabilities	Jan-Jun/ 2019			Jan-Dec/ 2018
Opening balance		15,133			14,143
Adjustment to provision		(19	)		4,129
Transfers related to liabilities held for sale (*)		(118	)		(1,221	)
Payments made		(256	)		(481	)
Interest accrued		385			649
Others		(1	)		51
Cumulative translation adjustment		166			(2,137	)
Closing balance		15,290			15,133

(*) In 2018, it includes transfer to held for sale related to Campos basin (US$ 850); Potiguar basin (US$ 70) and Lapa field (US$ 11), as set out in note 7.

32

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

17. Taxes

17.1. Income taxes and other taxes

Income taxes	Current assets				Current liabilities				Non-current liabilities
	06.30.2019		12.31.2018		06.30.2019		12.31.2018		06.30.2019		12.31.2018
Taxes in Brazil
Income taxes		1,263		733		1,021		66		—		—
Income taxes—Tax settlement programs		—		—		58		56		545		552
		1,263		733		1,079		122		545		552
Taxes abroad		4		6		39		89		—		—
Total		1,267		739		1,118		211		545		552

(*) See note 20.2 for detailed information.

Other taxes	Current assets				Non-current assets				Current liabilities				Non-current liabilities (*)
	06.30.2019		12.31.2018		06.30.2019		12.31.2018		06.30.2019		12.31.2018		06.30.2019		12.31.2018
Taxes in Brazil
Current / Deferred ICMS (VAT)		627		781		517		700		711		922		—		—
Current / Deferred PIS and COFINS		388		442		2,800		2,668		331		309		39		32
CIDE		21		22		—		—		39		50		—		—
Production taxes		—		—		—		—		1,959		1,757		356		—
Withholding income taxes		—		—		—		—		90		308		—		—
Tax Settlement Program (**)		—		—		—		—		—		2		—		—
Others		35		36		158		158		143		184		84		75
Total in Brazil		1,071		1,281		3,475		3,526		3,273		3,532		479		107
Taxes abroad		18		15		15		14		18		24		—		—
Total		1,089		1,296		3,490		3,540		3,291		3,556		479		107

(*) Other non-current taxes are classified as other non-current liabilities.

(**) The amount is related to refinancing program (REFIS) from previous periods.

On April 5, 2019, Petrobras signed an agreement that formalizes the unification of fields in the region known as “Parque das Baleias”, located in the portion of the Campos Basin on the coast of Espírito Santo state, in the amount of US$ 903, of which US$ 387 was paid by the Company at the signing date and the remainder amount will be settled in 42 monthly installments. Accordingly, as of June 30, 2019, the balance relating to production taxes on this unification is US$ 508.

The amount of US$ 903 was accounted for as provision for legal proceedings in the last quarter of 2018.

17.2. 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.

33

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

The changes in the deferred income taxes are presented as follows:

Balance at January 1, 2018	2,364
Recognized in the statement of income for the year	(764	)
Recognized in shareholders’ equity (*)	1,799
Cumulative translation adjustment	(159	)
Use of tax credits	(1,222	)
Others	8
Balance at December 31, 2018	2,026
Recognized in the statement of income for the period	(1,684	)
Recognized in shareholders’ equity (*)	(806	)
Cumulative translation adjustment	(68	)
Use of tax credits	(354	)
Others	(308	)
Balance at June 30, 2019	(1,194	)
Deferred tax assets	2,680
Deferred tax liabilities	(654	)
Balance at December 31, 2018	2,026
Deferred tax assets	2,641
Deferred tax liabilities	(3,835	)
Balance at June 30, 2019	(1,194	)

(*) The amounts presented as Loans, trade and other receivables/payables and financing relate to the tax effect on exchange rate variation recognized within other comprehensive income (cash flow hedge accounting) as set out in note 29.2.

17.3. Reconciliation between statutory tax rate and effective tax expense rate

The following table provides the reconciliation of Brazilian statutory tax rate to the Company’s effective rate on income before income taxes:

	2019			2018—Restated			2019			2018—Restated
	Jan-Jun			Jan-Jun			Apr-Jun			Apr-Jun
Net income before income taxes		9,305			7,140			7,818			3,851
Nominal income taxes computed based on Brazilian statutory corporate tax rates (34%)		(3,164	)		(2,428	)		(2,658	)		(1,309	)
· Tax benefits from the deduction of interest on capital distribution		112			62			112			62
· Different jurisdictional tax rates for companies abroad		702			258			514			213
. Brazilian income taxes on income of companies incorporated outside Brazil (*)		(83	)		(79	)		(30	)		(54	)
· Tax incentives		278			39			266			16
· Tax loss carryforwards (unrecognized tax losses)		(94	)		(105	)		(16	)		(94	)
· Non-taxable income (non-deductible expenses), net (**)		(1,247	)		(138	)		(1,128	)		(65	)
· Others		47			(14	)		(20	)		(5	)
Income taxes expense		(3,449	)		(2,405	)		(2,960	)		(1,236	)
Deferred income taxes		(1,684	)		(242	)		(1,816	)		(97	)
Current income taxes		(1,765	)		(2,163	)		(1,144	)		(1,139	)
Total		(3,449	)		(2,405	)		(2,960	)		(1,236	)
Effective tax rate of income taxes		37.1	%		33.7	%		37.9	%		32.1	%

(*) It relates to Brazilian income taxes on earnings of offshore investees, as established by Law No. 12,973/2014.

(**) It includes results in equity-accounted investments and expenses relating to health care plan. In 2019, it also includes provisions for legal proceedings.

34

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

18. Short-term benefits

	06.30.2019		31.12.2018
Accrued vacation pay		951		781
Profit sharing		15		355
Employees variable compensation program		469		269
Voluntary Severance Program (PDV)		94		36
Salaries and related charges		199		217
Total		1,728		1,658
Current		1,699		1,658
Non-current		29		—

Employees variable compensation program

In the first quarter of 2019, the Board of Directors approved a new variable remuneration model for all the Company’s employees for 2019: the Performance Award Program (Programa de Prêmio por Performance—PPP). This program is in line with the Business and Management Plan, focusing on meritocracy and bringing flexibility to a scenario in which the Company seeks more efficiency and alignment with the best management practices.

The PPP will be paid in a lump sum payment if the Company presents a net income higher than R$ 10 billion in 2019 and the estimated amount of disbursement will depend on certain factors such as individual employee performance and results of the areas, as well as performance metrics of the Company.

This new model replaces other benefits related to variable compensation, such as profit sharing and the Variable Compensation Program – PRVE.

The provision for variable compensation as of June 30, 2019 amounting to US$ 469 comprises US$ 206 recognized in the first half of 2019, and the remaining balance regards the program for the previous year, which was paid on July 12, 2019.

Voluntary Severance Program

On April 24, 2019, the Board of Directors approved the Company’s Voluntary Severance Program (PDV). Petrobras employees may join the program from May 2, 2019 to June 30, 2020, provided they are retired under the Brazilian Social Security Institute (INSS) by the end of the enrollment period. The program aims to adapt size of the Company’s workforce and optimize costs as provided for in its 2019-2023 Business and Management Plan.

The recognition of the provision for expenses with this plan occurs to the extent that the employees join the program. Accordingly, the Company has already registered 1.389 enrollments, with the separations scheduled to start in July 2019. As of June 30, 2019, changes in the provision for expenses relating to separation plans implemented by the Company are set out as follows:

	06.30.2019			12.31.2018
Opening Balance		35			34
Discontinued operations (*)		(21	)		—
Enrollments		86			29
Revision of provisions		—			(7	)
Separations in the period		(9	)		(16	)
Cumulative translation adjustment		3			(5	)
Closing Balance		94			35
Current		65			35
Non-current		29			—

(*) See note 7.

35

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

19. Employee benefits (Post-Employment)

19.1. Pension and medical benefits

Changes in the net defined benefits are set out as follows:

	Pension Plans												Medical Plan
	Petros			Petros Renegotiated			Petros Non-renegotiated			Petros 2			AMS			Other plans			Total
Balance at January 1, 2018		10,728			—			—			260			10,802			40			21,830
Remeasurement effects recognized in other comprehensive income		—			(12	)		531			138			2,471			2			3,130
Costs incurred in the period		23			53			7			56			1,082			11			1,232
Interest income and expenses		255			1,144			374			23			927			4			2,727
Contributions paid		(93	)		(229	)		(74	)		—			(319	)		—			(715	)
Payments related to Term of financial commitment (TFC)		—			(141	)		(54	)		—			—			—			(195	)
Transfer due to spin-off		(10,858	)		8,155			2,703			—			—			—			—
Others		—			—			—			—			—			31			31
Cumulative Translation Adjustment		(55	)		(1,818	)		(607	)		(66	)		(2,727	)		(17	)		(5,290	)
Balance at December 31, 2018		—			7,152			2,880			411			12,236			71			22,750
Discontinued operations (*)		—			(401	)		(177	)		(17	)		(655	)		(1	)		(1,251	)
Current service cost		—			26			3			20			106			2			157
Interest income and expenses		—			262			105			19			525			2			913
Contributions paid		—			(144	)		(41	)		—			(210	)		(7	)		(402	)
Payments related to Term of financial commitment (TFC)		—			(66	)		(27	)		—			—			—			(93	)
Remeasurement effects recognized in other comprehensive income		—			—			—			—			—			(1	)		(1	)
Others		—			—			—			—			—			(16	)		(16	)
Cumulative Translation Adjustment		—			68			28			3			120			2			221
Balance at June 30, 2019		—			6,897			2,771			436			12,122			52			22,278
Current		—			280			99			—			397			2			778
Non-current		—			6,617			2,672			436			11,725			50			21,500
Balance at June 30, 2019		—			6,897			2,771			436			12,122			52			22,278

(*) See note 7.

Pension and medical benefit expenses, net recognized in the statement of income are set out as follows:

	Pension Plans								Medical Plan
	Petros		Petros Renegotiated		Petros Non-renegotiated		Petros 2		AMS		Other Plans		Total
Related to active employees		—		82		14		30		238		3		367
Related to retired employees		—		206		94		9		393		1		703
Net costs for Jan-Jun/2019		—		288		108		39		631		4		1,070
Net costs for Jan-Jun/2018 (*)—Restated		262		180		56		29		542		5		1,074

(*) It also includes the costs of PPSP before the split in April 1, 2018.

36

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

	Pension Plans								Medical Plan
	Petros		Petros Renegotiated		Petros Non-renegotiated		Petros 2		AMS		Other Plans		Total
Related to active employees:		—		37		6		14		110		2		169
Related to retired employees		—		95		43		4		181		—		323
Net costs for Apr-Jun/2019		—		132		49		18		291		2		492
Net costs for Apr-Jun/2018—Restated		—		180		57		14		256		2		509

For the first half of 2019, the Company’s contribution to the defined contribution portion of the Petros Plan 2 was US$ 117 (US$ 127 for the first half of 2018) recognized in the statement of income. In the second quarter of 2019, it was US$ 56 (US$ 55 for the same period of 2018).

Deficit settlement of pension plans

Additional contributions from participants and sponsors of Petros Plan, due to the deficit computed in 2015, commenced in March 2018, although certain participants appealed before the judiciary and have had their contributions suspended based on judicial injunctions. In these cases, the Company has not paid its parity contributions and all judgments related to these injunctions were in favor of the Company. In the first half of 2019, the Company made contributions amounting to US$ 86 with respect of contributions under the PED (US$ 80 during the same period of 2018).

Financial statements for the Petros Renegotiated (PPSP-R) and Non-renegotiated (PPSP-NR) plans for 2018 were approved by the Executive Council of Petros on March 29, 2019, presenting an accumulated deficit of US$ 1,436 and US$ 733, respectively, according to the general accepted accounting standards for the post-retirement sector, regulated in Brazil by the Post-Retirement Benefit Federal Council – CNPC.

The deficits were computed based on annual actuarial review carried out by an independent actuary and were already incorporated into the Company’s audited financial statements ended December 31, 2018.

The table below presents the reconciliation of the deficit of Petros Plan registered by Petros Foundation as of December 31, 2018, according to the standards issued by CNPC and according to international accounting standards (IAS 19):

							2018
	PPSP-R			PPSP-NR			Total
Deficit registered by Petros		1,436			733			2,169
Extraordinary sponsor contributions		2,906			826			3,732
Changes in fair value of plan assets (*)		2,269			949			3,218
Ordinary sponsor contributions		1,230			569			1,799
Financial assumptions		1,063			288			1,351
Actuarial valuation method		(1,601	)		(463	)		(2,064	)
Others		(153	)		(20	)		(173	)
Net actuarial liability registered by the Company		7,150			2,882			10,032

(*) Balance of accounts receivable arising from the Term of Financial Commitment—TFC signed with Petrobras, which Petros recognizes as equity.

As the accumulated deficits in 2018 were higher than the ceiling amount determined by relevant regulation, Petros Foudantion must implement a new settlement plan in 2019. The Executive Council of the foundation must assess and approve its amounts and settlement features, and submit it to the Secretariat of Management and Governance for the State-owned Companies (Secretaria de Coordenação e Governança das Empresas Estatais – SEST).

37

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

Petros 3 Plan

On April 26, 2019, the SEST approved the Company’s proposal for a new pension plan with defined contribution characteristics (PP-3) to be offered to participants of PPSP-R and PPSP-NR.

However, the implementation of the PP-3 still depends on the approval of the Superintendency of Post-retirement Benefits (PREVIC).

20. Equity

20.1. Share capital (net of share issuance costs)

As of June 30, 2019, subscribed and fully paid share capital, net of issuance costs, was US$ 107,101, represented by 7,442,454,142 common shares and 5,602,042,788 preferred shares, all of which are registered, book-entry shares with no par value.

Preferred shares have priority on returns of capital, do not grant any voting rights and are non-convertible into common shares.

As of June 30, 2019, the Company held treasury shares, of which 222,760 are common shares and 72,909 are preferred shares.

20.2. Distributions to shareholders

On July 05, 2019, the Company paid anticipated remuneration to shareholders as interest on equity, in the total amount of US$ 327, corresponding to US$ 0.0251 per outstanding common and preferred share, based on the shareholder position on May 21, 2019. This distribution will be deducted from the Company’s distribution for 2019 and will be adjusted by the Selic rate from the date of the payment to the end of the fiscal year.

20.3. Earnings per share

	Jan-Jun/2019						Jan-Jun/2018—Restated
	Common		Preferred		Total		Common		Preferred		Total
Net income attributable to shareholders of Petrobras		3,354		2,527		5,881		2,818		2,121		4,939
Continuing operations		3,271		2,464		5,735		2,758		2,075		4,833
Discontinued operations		83		63		146		60		46		106
Weighted average number of outstanding shares		7,442,231,382		5,601,969,879		13,044,201,261		7,442,454,142		5,602,042,788		13,044,496,930
Basic and diluted earnings (losses) per share—in U.S. dollars		0.45		0.45		0.45		0.38		0.38		0.38
Continuing operations		0.44		0.44		0.44		0.37		0.37		0.37
Discontinued operations		0.01		0.01		0.01		0.01		0.01		0.01
Basic and diluted earnings (losses) per ADS equivalent—in U.S. dollars (*)		0.90		0.90		0.90		0.76		0.76		0.76
Continuing operations		0.88		0.88		0.88		0.74		0.74		0.74
Discontinued operations		0.02		0.02		0.02		0.02		0.02		0.02

(*) Petrobras’ ADSs are equivalent to two shares.

38

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

	2Q-2019						2Q-2018—Restated
	Common		Preferred		Total		Common		Preferred		Total
Net income attributable to shareholders of Petrobras		2,744		2,067		4,811		1,594		1,200		2,794
Continuing operations		2,713		2,043		4,756		1,564		1,178		2,742
Discontinued operations		31		24		55		30		22		52
Weighted average number of outstanding shares		7,442,231,382		5,601,969,879		13,044,201,261		7,442,454,142		5,602,042,788		13,044,496,930
Basic and diluted earnings (losses) per share—in U.S. dollars		0.37		0.37		0.37		0.22		0.22		0.22
Continuing operations		0.36		0.36		0.36		0.21		0.21		0.21
Discontinued operations		0.01		0.01		0.01		0.01		0.01		0.01
Basic and diluted earnings (losses) per ADS equivalent—in U.S. dollars(*)		0.74		0.74		0.74		0.44		0.44		0.44
Continuing operations		0.72		0.72		0.72		0.42		0.42		0.42
Discontinued operations		0.02		0.02		0.02		0.02		0.02		0.02

21. Supplemental information on statement of cash flows

	Jan-Jun/ 2019			Jan-Jun/ 2018
Additional information on cash flows:
Amounts paid/received during the period:
Withholding income tax paid on behalf of third-parties		658			445
Capital expenditures and financing activities not involving cash
Purchase of property, plant and equipment on credit		76			42
Lease (*)		1,319			—
Provision/(reversals) for decommissioning costs		(19	)		24
Use of deferred tax and judicial deposit for the payment of contingency		2			8

(*) The effects arising from the adoption of IFRS 16 are set out in note 3.

39

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

22. Sales revenues

	2019		2018 Restated		2019		2018 Restated
	Jan-Jun		Jan-Jun		Apr-Jun		Apr-Jun
Diesel		11,368		10,572		5,949		5,871
Diesel subsidy		—		149		—		149
Gasoline		4,945		5,967		2,598		3,140
Liquefied petroleum gas		2,100		2,276		1,090		1,120
Jet fuel		1,924		1,933		946		945
Naphtha		895		1,115		475		543
Fuel oil (including bunker fuel)		545		524		259		231
Other oil products		1,667		1,787		832		885
Subtotal oil products		23,444		24,323		12,149		12,884
Natural gas		2,933		2,520		1,417		1,280
Renewables and nitrogen products		141		165		62		78
Breakage		334		362		169		130
Electricity		659		873		162		520
Services, agency and others		507		813		178		346
Domestic market		28,018		29,056		14,137		15,238
Exports		7,794		7,909		3,937		3,858
Sales abroad (*)		1,493		3,390		428		1,657
Foreign market		9,287		11,299		4,365		5,515
Sales revenues (**)		37,305		40,355		18,502		20,753

(*) Sales revenues from operations outside of Brazil, including trading and excluding exports.

(**) Sales revenues by business segment are set out in note 26.

In the first half of 2019 and 2018, there was no customer whose sales revenues totaled 10% or more of the Company’s sales revenues.

23. Costs and expenses by nature

23.1. Cost of sales

	2019			2018 Restated			2019			2018 Restated
	Jan-Jun			Jan-Jun			Apr-Jun			Apr-Jun
Raw material, products for resale, materials and third-party services		(10,182	)		(10,942	)		(4,347	)		(5,605	)
Depreciation, depletion and amortization		(6,155	)		(5,900	)		(3,015	)		(2,830	)
Production taxes		(5,003	)		(5,507	)		(2,605	)		(3,033	)
Employee compensation		(1,673	)		(1,813	)		(833	)		(879	)
Total		(23,013	)		(24,162	)		(10,800	)		(12,347	)

23.2. Selling expenses

	2019			2018 Restated			2019			2018 Restated
	Jan-Jun			Jan-Jun			Apr-Jun			Apr-Jun
Materials, third-party services, rent and other related costs		(1,426	)		(1,576	)		(740	)		(761	)
Depreciation, depletion and amortization		(278	)		(92	)		(142	)		(35	)
Allowance for expected credit losses		(27	)		(388	)		2			(258	)
Employee compensation		(107	)		(105	)		(55	)		(52	)
Total		(1,838	)		(2,161	)		(935	)		(1,106	)

40

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

23.3. General and administrative expenses

	2019			2018 Restated			2019			2018 Restated
	Jan-Jun			Jan-Jun			Apr-Jun			Apr-Jun
Employee compensation		(728	)		(747	)		(359	)		(366	)
Materials, third-party services, freight, rent and other related costs		(306	)		(354	)		(153	)		(170	)
Depreciation, depletion and amortization		(89	)		(58	)		(47	)		(21	)
Total		(1,123	)		(1,159	)		(559	)		(557	)

24. Other income and expenses

	2019			2018 Restated			2019			2018 Restated
	Jan-Jun			Jan-Jun			Apr-Jun			Apr-Jun
Pension and medical benefits—retirees		(703	)		(745	)		(345	)		(353	)
Unscheduled stoppages and pre-operating expenses		(709	)		(516	)		(387	)		(277	)
Gains / (losses) related to legal, administrative and arbitration proceedings (*)		(566	)		(798	)		(212	)		(429	)
Gains/(losses) with Commodities Derivatives		(378	)		(559	)		(153	)		(340	)
Profit sharing		(25	)		(319	)		(21	)		(180	)
Impairment		(20	)		31			(27	)		49
Institutional relations and cultural projects		(72	)		(72	)		(32	)		(40	)
Operating expenses with thermoelectric power plants		(73	)		(51	)		(39	)		(25	)
Health, safety and environment		(33	)		(41	)		(16	)		(16	)
Allowance for impairment of other receivables		(12	)		(23	)		(16	)		(16	)
Reclassification of cumulative translation adjustments—CTA		(34	)		—			—			—
Variable compensation program		(205	)		—			(106	)		—
Government grants		58			41			30			17
Gains / (losses) on disposal/write-offs of assets (**)		5,042			687			4,859			(318	)
Expenses/Reimbursements from E&P partnership operations		96			135			46			79
Amounts recovered from Lava Jato investigation		79			—			79			—
Voluntary Separation Incentive Plan—PDV		(85	)		1			(85	)		1
Gain on remeasurement of investment retained with loss of control		546			—			546			—
Equalization of expenses—Production Individualization Agreements		(9	)		—			(9	)		—
Ship/Take or Pay agreements		47			17			47			14
Others		(82	)		118			(170	)		93
Total		2,862			(2,094	)		3,989			(1,741	)

(*) In 2019, it includes foreign exchange gains relating to the Class Action Settlement provision in the amount of US$ 36.

(**) In 2019, it primarily comprises gains on the sale of TAG and distributors in Paraguay. In 2018, it mainly relates to sale of assets in the scope of the strategic alliance with Total.

41

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

25. Net finance income (expense)

	2019			2018 Restated			2019			2018 Restated
	Jan-Jun			Jan-Jun			Apr-Jun			Apr-Jun
Finance income		589			1,482			332			1,166
Income from investments and marketable securities (Government Bonds)		239			292			114			150
Discount and premium on repurchase of debt securities		3			242			1			242
Gains from signed agreements (electric sector)		80			574			80			574
Other income, net		267			374			137			200
Finance expenses		(3,368)			(3,235)			(1,591)			(1,460)
Interest on finance debt		(2,547	)		(3,152	)		(1,233	)		(1,546	)
Unwinding of discount on lease liabilities		(785	)		(6	)		(452	)		(2	)
Discount and premium on repurchase of debt securities		(185	)		(604	)		(1	)		(185	)
Capitalized borrowing costs		693			988			347			491
Unwinding of discount on the provision for decommissioning costs		(411	)		(349	)		(202	)		(166	)
Other finance expenses and income, net		(133	)		(112	)		(50	)		(52	)
Foreign exchange gains (losses) and indexation charges		(1,643	)		(1,282	)		(928	)		(523	)
Foreign exchange		(221	)		234			(202	)		242
Expenses		(1,494	)		(1,610	)		(739	)		(789	)
Other foreign exchange gains (losses) and indexation charges, net		72			94			13			24
Total		(4,422	)		(3,035	)		(2,187	)		(817	)

42

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

26. Segment information

The operating segment information is reported in the manner in which the Company’s senior management assesses business performance and makes decisions regarding investments and resource allocation.

	Exploration and Production		Refining, Transportation & Marketing		Gas & Power		Biofuels		Distribution		Corporate		Eliminations			Total
Consolidated assets by operating segment—06.30.2019
Current assets		7,069		12,022		1,751		78		4,976		25,507		(4,085	)		47,318
Non-current assets		147,056		34,281		12,085		139		78		10,624		297			204,560
Long-term receivables		7,241		3,635		1,559		2		—		8,614		336			21,387
Investments		618		1,507		1,629		46		—		6		—			3,806
Property, plant and equipment		137,107		28,982		8,723		91		42		1,878		(39	)		176,784
Operating assets		120,958		25,689		6,051		89		42		1,754		(39	)		154,544
Under construction		16,149		3,293		2,672		2		—		124		—			22,240
Intangible assets		2,090		157		174		—		36		126		—			2,583
Total Assets		154,125		46,303		13,836		217		5,054		36,131		(3,788	)		251,878
Consolidated assets by operating segment—12.31.2018
Current assets		5,324		11,964		2,027		79		2,575		18,750		(3,657	)		37,062
Non-current assets		126,989		32,119		13,582		137		2,565		9,418		196			185,006
Long-term receivables		8,115		3,286		1,525		2		837		8,059		235			22,059
Investments		650		1,303		757		45		—		4		—			2,759
Property, plant and equipment		116,153		27,356		11,057		90		1,529		1,237		(39	)		157,383
Operating assets		93,172		24,347		8,517		89		1,313		1,058		(39	)		128,457
Under construction		22,981		3,009		2,540		1		216		179		—			28,926
Intangible assets		2,071		174		243		—		199		118		—			2,805
Total Assets		132,313		44,083		15,609		216		5,140		28,168		(3,461	)		222,068

43

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

Consolidated Statement of Income by operating segment

	Q2—2019
	Exploration and Production			Refining, Transportation & Marketing			Gas & Power			Biofuels			Distribution			Corporate			Eliminations			Total
Sales revenues		12,660			16,673			2,575			55			223			—			(13,684	)		18,502
Intersegments		12,522			3,937			826			53			8			—			(13,684	)		3,662
Third parties		138			12,736			1,749			2			215			—			—			14,840
Cost of sales		(6,825	)		(15,125	)		(1,602	)		(60	)		(214	)		—			13,026			(10,800	)
Gross profit (loss)		5,835			1,548			973			(5	)		9			—			(658	)		7,702
Income (expenses)		(566	)		(1,181	)		4,909			(5	)		(7	)		(956	)		(11	)		2,183
Selling		(1	)		(489	)		(428	)		(1	)		(6	)		—			(10	)		(935	)
General and administrative		(84	)		(92	)		(38	)		(3	)		(1	)		(341	)		—			(559	)
Exploration costs		(100	)		—			—			—			—			—			—			(100	)
Research and development		(104	)		(3	)		(2	)		—			—			(37	)		—			(146	)
Other taxes		(8	)		(14	)		(8	)		(1	)		(1	)		(34	)		—			(66	)
Other income and expenses		(269	)		(583	)		5,385			—			1			(544	)		(1	)		3,989
Net income / (loss) before financial results and income taxes		5,269			367			5,882			(10	)		2			(956	)		(669	)		9,885
Net finance income (expenses) (*)		—			—			—			—			—			(2,187	)		—			(2,187	)
Results in equity-accounted investments		37			47			40			(4	)		—			—			—			120
Net income / (loss) before income taxes		5,306			414			5,922			(14	)		2			(3,143	)		(669	)		7,818
Income taxes		(1,791	)		(125	)		(1,999	)		3			(1	)		726			227			(2,960	)
Net income from continuing operations for the period		3,515			289			3,923			(11	)		1			(2,417	)		(442	)		4,858
Net income from discontinued operations for the period		—			—			4			—			57			16			—			77
Net income for the period		3,515			289			3,927			(11	)		58			(2,401	)		(442	)		4,935
Non-controlling interests		(1	)		3			37			—			15			70			—			124
Net income from continuing operations		(1	)		3			36			—			—			64			—			102
Net income from discontinued operations		—			—			1			—			15			6			—			22
Net income attributable to shareholders of Petrobras		3,516			286			3,890			(11	)		43			(2,471	)		(442	)		4,811
Net income from continuing operations		3,516			286			3,887			(11	)		2			(2,482	)		(442	)		4,756
Net income from discontinued operations		—			—			3			—			41			11			—			55

The total amounts of intersegment sales (US$ 3,662) relates to sales from the Refining, Transportation and Marketing (RT&M) to BR, which is currently presented as discontinued operation within distribution operating segment, and whose assets and liabilities are classified as held for sale.

44

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

Consolidated Statement of Income by operating segment

	Jan-Jun/2019
	Exploration and Production			Refining, Transportation & Marketing			Gas & Power			Biofuels			Distribution			Corporate			Eliminations			Total
Sales revenues		24,044			32,810			5,783			115			524			—			(25,971	)		37,305
Intersegments		23,575			7,624			1,754			110			—			—			(25,971	)		7,092
Third parties		469			25,186			4,029			5			524			—			—			30,213
Cost of sales		(13,629	)		(30,030	)		(3,903	)		(122	)		(494	)		—			25,165			(23,013	)
Gross profit (loss)		10,415			2,780			1,880			(7	)		30			—			(806	)		14,292
Income (expenses)		(1,126	)		(1,801	)		4,410			(9	)		120			(2,391	)		(19	)		(816	)
Selling		(1	)		(953	)		(845	)		(1	)		(18	)		(3	)		(17	)		(1,838	)
General and administrative		(154	)		(178	)		(74	)		(7	)		(4	)		(707	)		1			(1,123	)
Exploration costs		(274	)		—			—			—			—			—			—			(274	)
Research and development		(198	)		(7	)		(7	)		—			—			(72	)		—			(284	)
Other taxes		(29	)		(36	)		(24	)		(2	)		(2	)		(66	)		—			(159	)
Other income and expenses		(470	)		(627	)		5,360			1			144			(1,543	)		(3	)		2,862
Net income / (loss) before financial results and income taxes		9,289			979			6,290			(16	)		150			(2,391	)		(825	)		13,476
Net finance income (expenses) (*)		—			—			—			—			—			(4,422	)		—			(4,422	)
Results in equity-accounted investments		73			140			44			(5	)		—			(1	)		—			251
Net income / (loss) before income taxes		9,362			1,119			6,334			(21	)		150			(6,814	)		(825	)		9,305
Income taxes		(3,158	)		(333	)		(2,138	)		5			(51	)		1,946			280			(3,449	)
Net income from continuing operations for the period		6,204			786			4,196			(16	)		99			(4,868	)		(545	)		5,856
Net income from discontinued operations for the period		—			—			8			—			164			32			—			204
Net income for the period		6,204			786			4,204			(16	)		263			(4,836	)		(545	)		6,060
Non-controlling interests		(2	)		(6	)		66			—			46			75			—			179
Net income from continuing operations		(2	)		(6	)		64			—			—			65			—			121
Net income from discontinued operations		—			—			2			—			46			10			—			58
Net income attributable to shareholders of Petrobras		6,206			792			4,138			(16	)		217			(4,911	)		(545	)		5,881
Net income from continuing operations		6,206			792			4,132			(16	)		100			(4,934	)		(545	)		5,735
Net income from discontinued operations		—			—			6			—			117			23			—			146

(*) It includes US$ 333 of finance expenses following the adoption of IFRS 16.

The total amounts of intersegment sales (US$ 7,092) relates to sales from the RT&M to BR, which is currently presented as discontinued operation within distribution operating segment, and whose assets and liabilities are classified as held for sale.

45

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

	Q2—2018—Restated
	Exploration and Production			Refining, Transportation & Marketing			Gas & Power			Biofuels			Distribution			Corporate			Eliminations			Total
Sales revenues		13,383			18,147			2,876			60			375			—			(14,088	)		20,753
Intersegments		12,859			4,075			897			56			(6	)		—			(14,088	)		3,793
Third parties		524			14,072			1,979			4			381			—			—			16,960
Cost of sales		(7,601	)		(15,603	)		(2,121	)		(55	)		(348	)		—			13,381			(12,347	)
Gross profit (loss)		5,782			2,544			755			5			27			—			(707	)		8,406
Income (expenses)		(915	)		(539	)		(592	)		(5	)		(18	)		(1,745	)		(10	)		(3,824	)
Selling		(19	)		(408	)		(507	)		(1	)		(18	)		(147	)		(6	)		(1,106	)
General and administrative		(59	)		(94	)		(32	)		(5	)		(2	)		(364	)		(1	)		(557	)
Exploration costs		(162	)		—			—			—			—			—			—			(162	)
Research and development		(117	)		(2	)		(6	)		—			—			(39	)		—			(164	)
Other taxes		(9	)		(35	)		(14	)		(1	)		(1	)		(34	)		—			(94	)
Other income and expenses		(549	)		—			(33	)		2			3			(1,161	)		(3	)		(1,741	)
Net income / (loss) before financial results and income taxes		4,867			2,005			163			—			9			(1,745	)		(717	)		4,582
Net finance income (expenses) (*)		—			—			—			—			—			(817	)		—			(817	)
Results in equity-accounted investments		3			85			4			(7	)		—			1			—			86
Net income / (loss) before income taxes		4,870			2,090			167			(7	)		9			(2,561	)		(717	)		3,851
Income taxes		(1,655	)		(682	)		(56	)		—			(3	)		917			243			(1,236	)
Net income from continuing operations for the period		3,215			1,408			111			(7	)		6			(1,644	)		(474	)		2,615
Net income from discontinued operations for the period		—			—			3			—			44			26			—			73
Net income for the period		3,215			1,408			114			(7	)		50			(1,618	)		(474	)		2,688
Non-controlling interests		(1	)		(48	)		39			—			15			(111	)		—			(106	)
Net income from continuing operations		(1	)		(48	)		39			—			(5	)		(112	)		—			(127	)
Net income from discontinued operations		—			—			—			—			20			1			—			21
Net income attributable to shareholders of Petrobras		3,216			1,456			75			(7	)		35			(1,507	)		(474	)		2,794
Net income from continuing operations		3,216			1,456			72			(7	)		12			(1,533	)		(474	)		2,742
Net income from discontinued operations		—			—			3			—			23			26			—			52

The total amounts of intersegment sales (US$ 3,793) relates to sales from the RT&M to BR, which is currently presented as discontinued operation within distribution operating segment, and whose assets and liabilities are classified as held for sale.

46

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

Consolidated Statement of Income by operating segment

	Jan-Jun/2018—Restated
	Exploration and Production			Refining, Transportation & Marketing			Gas & Power			Biofuels			Distribution			Corporate			Eliminations			Total
Sales revenues		25,933			35,207			5,702			128			737			—			(27,352	)		40,355
Intersegments		24,888			7,813			1,812			118			(14	)		—			(27,352	)		7,265
Third parties		1,045			27,394			3,890			10			751			—			—			33,090
Cost of sales		(15,030	)		(30,759	)		(3,922	)		(119	)		(680	)		—			26,348			(24,162	)
Gross profit (loss)		10,903			4,448			1,780			9			57			—			(1,004	)		16,193
Income (expenses)		(652	)		(1,270	)		(1,380	)		(11	)		(38	)		(2,891	)		(20	)		(6,262	)
Selling		(41	)		(853	)		(1,069	)		(1	)		(34	)		(149	)		(14	)		(2,161	)
General and administrative		(134	)		(200	)		(69	)		(10	)		(7	)		(738	)		(1	)		(1,159	)
Exploration costs		(298	)		—			—			—			—			—			—			(298	)
Research and development		(221	)		(5	)		(10	)		—			—			(80	)		—			(316	)
Other taxes		(59	)		(60	)		(25	)		(2	)		(2	)		(86	)		—			(234	)
Other income and expenses		101			(152	)		(207	)		2			5			(1,838	)		(5	)		(2,094	)
Net income / (loss) before financial results and income taxes		10,251			3,178			400			(2	)		19			(2,891	)		(1,024	)		9,931
Net finance income (expenses) (*)		—			—			—			—			—			(3,035	)		—			(3,035	)
Results in equity-accounted investments		3			222			27			(9	)		—			1			—			244
Net income / (loss) before income taxes		10,254			3,400			427			(11	)		19			(5,925	)		(1,024	)		7,140
Income taxes		(3,485	)		(1,081	)		(136	)		1			(6	)		1,954			348			(2,405	)
Net income from continuing operations for the period		6,769			2,319			291			(10	)		13			(3,971	)		(676	)		4,735
Net income from discontinued operations for the period		—			—			8			—			147			(6	)		—			149
Net income for the period		6,769			2,319			299			(10	)		160			(3,977	)		(676	)		4,884
Non-controlling interests		(3	)		(80	)		75			—			43			(90	)		—			(55	)
Net income from continuing operations		(3	)		(80	)		75			—			—			(90	)		—			(98	)
Net income from discontinued operations		—			—			—			—			43			—			—			43
Net income attributable to shareholders of Petrobras		6,772			2,399			224			(10	)		117			(3,887	)		(676	)		4,939
Net income from continuing operations		6,772			2,399			216			(10	)		13			(3,881	)		(676	)		4,833
Net income from discontinued operations		—			—			8			—			104			(6	)		—			106

The total amounts of intersegment sales (US$ 7,265) relates to sales from the RT&M to BR, which is currently presented as discontinued operation within distribution operating segment, and whose assets and liabilities are classified as held for sale.

47

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

27. Provisions for legal proceedings

27.1. Provisions for legal proceedings, judicial deposits and contingent liabilities

The Company recognizes provisions based on 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 reliably estimated. These proceedings mainly include:

• Labor claims, in particular: (i) opt-out claims related to a review of the methodology by which the minimum compensation based on an employee’s position and work schedule (Remuneração Mínima por Nível e Regime—RMNR) is calculated; (ii) lawsuits relating to overtime pay and (iii) actions of outsourced employees;

• Tax claims including: (i) claims relating to Brazilian federal tax credits applied that were disallowed; and (ii) alleged misappropriation of VAT (ICMS) tax credits;

• Civil claims relating to: (i) agreement to settle the Consolidated Securities Class Action before the United States District Court for the Southern District of New York; (ii) collection of royalties over the shale extraction; (iii) non-compliance with contractual terms relating to oil platform construction; (iv) compensation relating to an easement over a property; (v) collection of production taxes over natural gas production; (vi) penalties applied by ANP relating to measurement systems; and (vii) the arbitrations in Brazil involving the company Sete Brasil.

• Environmental claims, mainly arising from the Conduct Adjustment Declaration (“TAC”) to close the public civil action requesting the environmental licensing of Comperj.

Provisions for legal proceedings are set out as follows:

	06.30.2019		12.31.2018
Current and Non-current liabilities
Labor claims		990		1,093
Tax claims		579		491
Civil claims		4,041		5,710
Environmental claims		333		111
Total		5,943		7,405
Current liabilities		2,962		3,394
Non-current liabilities		2,981		4,096

	Jan-Jun/ 2019			Jan-Dec/ 2018
Opening Balance		7,405			7,026
Additions, net of reversals		769			1,325
Use of provision		(2,031	)		(650	)
Accruals and charges		45			736
Transfer to assets held for sale		(275	)		—
Others		(11	)		95
Cumulative translation adjustment		41			(1,127	)
Closing Balance		5,943			7,405

In preparing its consolidated financial statements for the first half of 2019, the Company considered all available information concerning legal proceedings in which the Company is a defendant, in order to estimate the amounts of obligations and probability that outflows of resources will be required.

The main additions to provisions for legal proceedings in the first half of 2019 relate to (i) the arbitrations in Brazil involving the company Sete Brasil, in the amount of US$ 365, (ii) the TAC to close the public civil action requesting the environmental licensing of Comperj, in the amount of US$ 208, and (iii) ICMS debts under the ICMS Agreement 7/2019 in the states of Bahia and Ceará, in the amount of US$ 94.

48

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

27.2. Judicial deposits

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

	06.30.2019		12.31.2018
Non-current assets
Tax		5,297		4,563
Labor		1,174		1,161
Civil		925		823
Environmental		165		160
Others		6		4
Total		7,567		6,711

	06.30.2019			12.31.2018
Opening Balance		6,711			5,582
Additions		1,072			1,883
Use		(115	)		(86	)
Accruals and charges		146			294
Others		—			26
Transfer to assets held for sale		(313	)		—
Cumulative translation adjustment		66			(988	)
Closing Balance		7,567			6,711

27.3. Contingent liabilities

The estimates of contingent liabilities for legal proceedings are indexed to inflation and updated by applicable interest rates. As of June 30, 2019, estimated contingent liabilities for which the possibility of loss is not considered remote are set out in the following table:

Nature	06.30.2019		12.31.2018
Tax		36,276		37,290
Labor		9,345		8,619
Civil—General		6,383		6,539
Civil—Environmental		3,280		4,221
Total		55,284		56,669

A brief description of the nature of the main contingent liabilities (tax, civil, environmental and labor) is set out below:

• Tax matters comprising: i) withholding income tax (IRRF), Contribution of Intervention in the Economic Domain (CIDE), Social Integration Program (PIS) and Contribution to Social Security Financing (COFINS) on remittances for payments of vessel charters; (ii) income from foreign subsidiaries and associates located outside Brazil not included in the computation of taxable income (IRPJ and CSLL); (iii) requests to compensate federal taxes disallowed by the Brazilian Federal Tax Authority; and (iv) collection and crediting of ICMS in internal consumption operations of bunker oil and oil by several states;

• Labor matters comprising mainly actions requiring a review of the methodology by which the minimum compensation based on an employee’s position and work schedule (Remuneração Mínima por Nível e Regime—RMNR) is calculated;

49

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

• Civil matters comprising: (i) arbitrations in Brazil and lawsuit in the USA regarding Sete Brasil; and (ii) administrative proceedings challenging an ANP order requiring Petrobras to pay additional special participation fees and royalties (production taxes) with respect to several fields;

• Environmental matters comprising: (i) four public civil actions filed by the Public Prosecutor’s Office of the State of Rio de Janeiro against Petrobras, the State Environmental Institute—INEA and Rio de Janeiro State, requesting proof of compliance with regulation relating to the environmental licensing of COMPERJ, complementation of technical research, as well as compensation for collective material and moral damages.

In the first half of 2019, the main changes in the balance of contingent liabilities are related to:

(i) a US$ 2,792 reduction relating to BR contingencies, after the follow-on of this company, as set out in note 7;

(ii) a US$ 1,226 reduction due to the TAC to close the public civil action requesting the environmental licensing of Comperj, of which US$ 208 transferred to provision for legal proceedings, and the remaining balance had its likelihood of outflow of resources considered remote;

(iii) a US$ 470 reduction regarding the ICMS Agreement 7/2019 in the states of Bahia and Ceará, resulting in a US$ 94 provision;

(iv) a US$ 372 reduction due to a dispute involving the limit of standby work and period for rest between workdays, which was deemed remote in the first quarter of 2019 following a favorable decision from the Superior Labor Court (Tribunal Superior do Trabalho—TST);

(v) a US$ 365 reduction due to the provision for arbitral litigations in Brazil involving the company Sete Brasil;

(vi) an increase due to the balance update by applicable interest rates;

(vii) a US$ 287 increase due to a dispute relating to the compensation for costs incurred in charter contracts of two drill ships, for which the possibility of outflow of resources was previously deemed remote.

27.4. Tax amnesty programs – Agreement ICMS 7/2019

On March 15, 2019, the Brazilian National Council of Finance Policies (CONFAZ) released the ICMS Agreement 7/2019, authorizing the states to establish a partial tax remission program and the reduction of interest and fines related to ICMS debts arising from disallowances of tax credits in the refining activity, and to implement the presumed tax credit system.

The rules for redemption and reduction, as well as the system of presumed ICMS credit, were implemented by the states of Bahia and Ceará in the second quarter of 2019. In this context, the Company evaluated that adherence to the programs aiming at terminating US$ 470 contingent liabilities for US$ 94 represent an economic benefit, since the continuation of discussions would imply higher financial effort.

The states of Pernambuco, Paraná, Rio de Janeiro, Rio Grande do Norte, Rio Grande do Sul, and São Paulo are also authorized to implement rules in their legal system, but the program has not yet been implemented.

27.5. Class action and related proceedings

27.5.1. Class action and related proceedings in the USA

Under the Class Action Settlement, Petrobras (together with its subsidiary PGF) has agreed to pay US$ 2,950 to resolve claims in two installments of US$ 983 and a further installment of US$ 984. Accordingly, the Company charged US$ 3,449 to its statement of income for the last quarter of 2017 as other income and expenses, taking into account the gross up of tax related to Petrobras’s portion of the settlement. The three installments were deposited on March 1, 2018, July 2, 2018 and January 15, 2019 into an escrow account designated by the lead plaintiff and accounted for as other current assets. Certain objectors have appealed the District Court’s final decision to approve the Class Action Settlement, and one such appeal remains pending.

Additionally, during the first half of 2019, there was no other event that modified the evaluation and judgment of this action.

50

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

27.5.2. Class action in the Netherlands and arbitration in Argentina

During the first half of 2019, there were no events that modified the assessment and judgment of the collective action in the Netherlands.

Regarding the arbitration in Argentina, the General Arbitration Court of the Buenos Aires Stock Exchange (“Arbitral Tribunal”) acknowledged the withdrawal of the arbitration filed against the Company (and other individuals and companies) by Finance Consumers Civil Association for its Defense (Consumidores Financieros Asociación Civil para su Defensa—“Association”).

The Argentine Arbitral Tribunal understood that the Association withdrew from the arbitration because it had not paid the arbitration fee within the established period. The Association appealed to the Argentine Judiciary against this decision.

27.5.3. Arbitrations in Brazil

The Commitment Assumption Agreement signed with the Brazilian Federal Prosecutor’s Office remains suspended, due to a decision of the Brazilian Federal Supreme Court on March 15, 2019. By this moment, the Company is prevented from using half of the amount of US$ 683 paid on January 30, 2019 to the Brazilian authorities, as provided for in the agreement, in the event of any convictions in these arbitrations.

28. Collateral for crude oil exploration concession agreements

The Company has granted collateral to 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$ 2,344 of which US$ 1,632 were still in force as of June 30, 2019 , net of commitments undertaken. The collateral comprises crude oil from previously identified producing fields, pledged as collateral, amounting to US$ 1,533 and bank guarantees of US$ 99.

29. Risk management

A summary of the positions of the derivative financial instruments held by the Company and recognized in other current assets and liabilities as of June 30, 2019 , as well as the amounts recognized in the statement of income and other comprehensive income and the guarantees given is set out as follows:

							Statement of Financial Position
	Notional value						Fair value Asset Position (Liability)						Maturity
	06.30.2019			12.31.2018			06.30.2019			12.31.2018
Derivatives not designated for hedge accounting
Future contracts—total (*)		(11,981	)		(14,043	)		16			108
Long position/Crude oil and oil products		38,336			40,017			—			—			2019/2020
Short position/Crude oil and oil products		(50,317	)		(54,060	)		—			—			2019/2020
OTC Options(*)
Put/Crude oil and oil products		186,000			—			87			—			2019
Forward contracts
Long position/Foreign currency forwards (BRL/USD) (**)		US$ 81			US$ 137			—			(2	)		2019
Short position/Foreign currency forwards (BRL/USD) (**)		US$ 0			US$ 92			—			(1	)		2019
Long position/Foreign currency forwards (EUR/USD) (**)		EUR 2477			EUR 3000			34			(123	)		2019/2020
Long position/Foreign currency forwards (GPB/USD) (**)		GBP 450			GBP 450			(19	)		(11	)		2019
Short position/Foreign currency forwards (GPB/USD) (**)		GBP 31			GPB 31			—			—			2019
Swap
Foreign currency / Cross-currency Swap (**)		GBP 700			GBP 700			6			1			2026
Foreign currency / Cross-currency Swap (**)		GBP 600			GBP 600			(132	)		(70.5	)		2034
Total recognized in the Statement of Financial Position								(8	)		(99	)

(*) Notional value in thousands of bbl.

(**) Amounts in US$, GBP and EUR are presented in million.

51

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

	Gains/ (losses) recognized in the statement of income (*)												Gains/(losses) recognized in Shareholders’ Equity (**)
				Restated						Restated					Restated					Restated
	2019			2018			2019			2018			2019		2018			2019		2018
	Jan-Jun			Jan-Jun			Apr-Jun			Apr-Jun			Jan-Jun		Jan-Jun			Apr-Jun		Apr-Jun
Commodity derivatives		(378	)		(559	)		(153	)		(340	)		—		—			—		—
Foreign currency derivatives		(171	)		(69	)		(139	)		(178	)		—		—			—		—
		(549	)		(628	)		(292	)		(518	)		—		—			—		—
Cash flow hedge on exports (***)		(1,494	)		(1,610	)		(739	)		(789	)		2,372		(7,213	)		2,256		(7,695	)
Total		(2,043	)		(2,238	)		(1,031	)		(1,307	)		2,372		(7,213	)		2,256		(7,695	)

(*) Amounts recognized in finance income in the period.

(**) Amounts recognized as other comprehensive income in the period.

(***) Using non-derivative financial instruments as designated hedging instruments, as set out in note 29.2.

	Guarantees given as collateral
	06.30.2019		12.31.2018
Commodity derivatives		113		(48	)
Foreign currency derivatives		186		70
Total		299		22

A sensitivity analysis of the derivative financial instruments for the different types of market risks as of June 30, 2019 is set out as follows:

Financial Instruments	Risk	Probable Scenario (*)		Reasonably possible scenario (*)			Remote Scenario (*)
Derivatives not designated for hedge accounting
Future contracts	Crude oil and oil products—price changes		—		(133	)		(266	)
Forward contracts	Foreign currency—depreciation BRL x USD		1		(20	)		(41	)
Options OTC	Crude oil and oil products—price changes		—		(78	)		(86	)
			1		(231	)		(393	)

(*) The probable scenario was computed based on the following risks: oil and oil products prices: fair value at June 30, 2019 / R$ x U.S. Dollar—0.8% appreciation of the Real. Source: Focus and Bloomberg. Reasonably possible and remote scenarios consider 25% and 50% deterioration in the associated risk variables, respectively.

29.1. Risk management of crude oil and oil products prices

The Company is usually exposed to commodity price cycles, although it may use derivative instruments to hedge exposures related to prices of products purchased and sold to fulfill operational needs and in specific circumstances depending on business environment analysis and assessment of whether the Business and Management targets are being met.

In March 2019, Petrobras implemented a hedge strategy for part of its oil exports foreseen for 2019. Over-the-Counter (OTC) put options referenced in the average Brent oil prices from April to the end of 2019 were purchased with strike price of US$ 60/barrel, with premium of US$ 320. In 2018, a similar strategy was implemented, with an average strike price of US$ 65/barrel and total cost of approximately US$ 445.

In the first half of 2019, due to the decrease in the fair value of these put options driven by the increase in the commodity price in the international market, a US$ 235 loss was accounted as other income and expenses (a US$ 402 loss in the first half of 2018). In the second quarter of 2019 there was a US$ 140 loss (a US$ 250 loss in the same period of 2018).

52

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

Additionally, since September 2018, the Company also has executed a hedge strategy related to gasoline prices and foreign exchange rates by using commodity derivatives and non-deliverable forwards (NDF), in order to give flexibility on its pricing policy for this oil product, allowing the Company to hold gasoline prices constant in the domestic market for periods of up to 15 days. The Company recognized a US$ 7 gain arising from this strategy in the first half of 2019, recorded in other income and expenses (a US$ 3 gain in the second quarter of 2019).

With the objective of giving additional flexibility to the pricing policy, in December 2018, Petrobras adopted a hedge strategy applied to diesel prices and foreign exchange rates by using NDF, in a manner similar to the strategy applied to gasoline. In June 2019, Petrobras approved the review of the frequency of adjustments in the prices of diesel and gasoline. From then on, the price adjustments of diesel and gasoline are carried out without defined frequency. The Company recognized a US$ 8 loss arising from this strategy on diesel in the first half of 2019, recorded in other income and expenses (a US$ 10 gain in the second quarter of 2019).

When applying this hedge strategy, the Company maintains the principles that govern the practice of competitive prices, such as international parity price, margins according to the risks inherent to the operation, share of participation in the market and mechanisms of protection through derivatives.

29.2. Foreign exchange risk management

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

Aligned with Company’s foreign exchange risk management, and considering the initial adoption of IFRS 16 on January 1, 2019, the Company performed additional designations in the first half of 2019, amounting to US$ 26,752 (R$ 103,499 million), in which the hedged item was the highly probable future exports in US dollars, and as hedging instruments lease agreements denominated in US dollars.

The carrying amounts, the fair value as of June 30, 2019, and a schedule of expected reclassifications to the statement of income of cumulative losses recognized in other comprehensive income (shareholders’ equity) based on a US$ 1.00 / R$ 3.8322 exchange rate are set out below:

Present value of hedging instrument notional value at 06.30.2019
Hedging Instrument	HedgedTransactions	Nature of theRisk	Maturity Date	(US$ million)		(R$ million)
Foreign exchange gains and losses on proportion of non-derivative financial instruments cash flows	Foreign exchange gains and losses on a portion of highly probable future monthly exports revenues	Foreign Currency – Real vs U.S. Dollar Spot Rate	July 2019 to June 2029		89,352		342,414

Changes in the present value of hedging instrument notional value	US$			R$ million
Amounts designated as of December 31, 2018		66,168			256,390
Additional hedging relationships designated, designations revoked and hedging instruments re-designated		36,106			139,359
Exports affecting the statement of income		(3,863	)		(14,889	)
Principal repayments / amortization		(9,059	)		(34,891	)
Foreign exchange variation		—			(3,555	)
Amounts designated as of June 30, 2019		89,352			342,414
Nominal value of hedging instrument (finance debt and lease liability) at June 30, 2019		105,429			404,024

In the first half of 2019, the Company recognized a US$ 4 gain within foreign exchange gains (losses) due to ineffectiveness.

The average ratio of future exports for which cash flow hedge accounting was designated to the highly probable future exports is 80.3%.

53

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

A roll-forward schedule of cumulative foreign exchange losses recognized in other comprehensive income as of June 30, 2019 is set out below:

	Exchange rate			Tax effect			Total
Balance at January 1, 2018		(14,508	)		4,935			(9,573	)
Recognized in shareholders’ equity		(8,950	)		3,043			(5,907	)
Reclassified to the statement of income—occurred exports		3,315			(1,127	)		2,188
Balance at December 31, 2018		(20,143	)		6,851			(13,292	)
Recognized in shareholders’ equity		878			(299	)		579
Reclassified to the statement of income—occurred exports		1,494			(508	)		986
Balance at June 30, 2019		(17,771	)		6,044			(11,727	)

Additional hedging relationships may be revoked or additional reclassification adjustments from equity to the statement of income may occur as a result of changes in forecasted export prices and export volumes following a review of the Company’s business plan. Based on a sensitivity analysis considering a US$ 10/barrel decrease in Brent prices stress scenario, when compared to the Brent price projections in our BMP 2019-2023, would not indicate a reclassification adjustment from equity to the statement of income.

A schedule of expected reclassification of cumulative foreign exchange losses recognized in other comprehensive income to the statement of income as of June 30, 2019 is set out below:

	2019			2020			2021			2022			2023			2024			2025		2026 to 2028		Total
Expected realization		(2,373	)		(4,188	)		(4,019	)		(4,394	)		(2,575	)		(1,285	)		180		883		(17,771	)

b) Cross currency swap – Pounds Sterling x Dollar

In 2017, the Company, through its wholly owned subsidiary Petrobras Global Trading B.V. (PGT), entered into cross currency swaps maturing in 2026 and 2034, with notional amounts of £ 700 million and £ 600 million, respectively, in order to hedge its Pounds/U.S. Dollar exposure arising from bonds issued amounting to £ 1,300. The Company recognized a US$ 94 loss in the first half of 2019 (a US$ 89 gain in the first half of 2018) arising from this strategy, recorded in finance income (expense). In the second quarter of 2019 there was a US$ 140 loss (a US$ 176 loss in the same period of 2018). The Company does not expect to settle these swaps before their expiration dates.

c) Non Deliverable Forward (NDF) – Euro x Dollar and Pounds Sterling x Dollar

In 2018, the Company, also through PGT, entered into non deliverable forwards with notional amounts of Euro 3,000 million and £ 419 million, maturing in 2019, in other to reduce its euro x dollar and pounds x dollar exposures raised by bonds issued. In the first half of 2019, the notional amount was reduced to Euro 2,477 million, adjusting the protection to a lower exposure to the Euro provided by the repurchase of bonds in that currency over the course of this semester. The Company recognized a US$ 83 loss in the first half of 2019 arising from this strategy (US$ 3 in the same period of 2018), recorded in finance income (expense). In the second quarter of 2019 there was a US$ 2 loss (a US$ 2 loss in the same period of 2018). The Company does not expect to settle these NDFs before their expiration dates.

d) Sensitivity analysis for foreign exchange risk on financial instruments

A sensitivity analysis is set out below, showing the probable scenario for foreign exchange risk on financial instruments, computed based on external data along with stressed scenarios (a 25% and a 50% change in the foreign exchange rates), except for assets and liabilities of foreign subsidiaries, when transacted in a currency equivalent to their respective functional currencies.

54

Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

Financial Instruments	Exposure at 06.30.2019			Risk	Probable Scenario (*)			Reasonably possible scenario			Remote Scenario
Assets (**)		7,603				(64	)		1,901			3,802
Liabilities (***)		(96,533	)	Dollar/Real		811			(24,133	)		(48,267	)
Cash flow hedge on exports		89,352				(751	)		22,338			44,676
		422				(4	)		106			211
Assets		5				—			1			2
Liabilities		(20	)	Euro/Real		—			(5	)		(10	)
		(15	)			—			(4	)		(8	)
Assets		2,809		Euro/Dollar		(18	)		702			1,404
Liabilities		(5,697	)			37			(1,424	)		(2,848	)
Non Deliverable Forward (NDF)		2,817				(18	)		704			1,409
		(71	)			1			(18	)		(35	)
Assets		1				—			—			1
Liabilities		(21	)	Pound Sterling/Real		—			(5	)		(11	)
		(20	)			—			(5	)		(10	)
Assets		2,283		Pound Sterling /Dollar		(1	)		571			1,141
Liabilities		(4,507	)			1			(1,127	)		(2,254	)
Derivative—cross currency swap		1,652				(1	)		413			826
Non Deliverable Forward (NDF)		532				—			133			266
		(40	)			(1	)		(10	)		(21	)
Total		276				(4	)		69			137

(*) On June 30, 2019, the probable scenario was computed based on the following risks: R$ x U.S. Dollar—a 0.8% appreciation of the Real / Euro x U.S. Dollar: a 0.7% depreciation of the Euro / Pound Sterling x U.S. Dollar: a 0.03% depreciation of the Pound Sterling / Real x Euro: a 1.5% appreciation of the Real / Real x Pound Sterling—a 0.9% appreciation of the Real. Source: Focus and Bloomberg.

(**) It includes the Escrow account for the Class action agreement, as set out note 27.4.

(***) It includes the provision for the Class Action agreement, as set out note 27.4.

29.3. Liquidity risk

Following its liability management strategy, the Company regularly evaluates market conditions and may enter into transactions to repurchase its own securities or those of its affiliates, through a variety of means, including tender offers, make whole exercises and open market repurchases, in order to improve its debt repayment profile and cost of debt.

A maturity schedule of the Company’s finance debt (undiscounted), including face value and interest payments is set out as follows:

Maturity	2019		2020		2021		2022		2023		2024 and thereafter		Balance at June 30, 2019		Balance at December 31, 2018
Principal		3,530		1,723		4,422		6,029		9,405		51,641		76,750		85,279
Interest		2,206		4,100		3,990		3,777		3,387		32,989		50,448		51,359
Total		5,736		5,823		8,412		9,806		12,792		84,630		127,198		136,638

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Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

30. Fair value of financial assets and liabilities

	Fair value measured based on
	Level I		Level II			Level III		Total fair value recorded
Assets
Marketable securities		647		—			—		647
Commodity derivatives		16		87			—		103
Foreign currency derivatives		—		40			—		40
Balance at June 30, 2019		663		127			—		790
Balance at December 31, 2018		1,091		1			—		1,092
Liabilities
Foreign currency derivatives		—		(150	)		—		(150	)
Balance at June 30, 2019		—		(150	)		—		(150	)
Balance at December 31, 2018		108		(208	)		—		(100	)

The estimated fair value for the Company’s long-term debt, computed based on the prevailing market rates, is set out in note 12.3.

The fair values of cash and cash equivalents, short-term debt and other financial assets and liabilities are equivalent or do not differ significantly from their carrying amounts.

31. Subsequent events

Result of debt tender offer

On July 1, 2019, the Company, through its wholly owned subsidiary Petrobras Global Finance B.V., announced two global bonds repurchase offers: any-and-all and waterfall. The settlement of the offers occurred as below:

(i) on July 11, 2019, in the any-and-all repurchase offer, when the Company settled the principal amount of € 222.4 million and £ 252.6 million, respectively, excluding capitalized interest;

(ii) on July 17, 2019, in the waterfall repurchase offer, when the Company prepaid the principal amount of US$ 1,790, excluding capitalized interest; and

(iii) on July 31, 2019, in the waterfall repurchase offer, when the Company settled the principal amount of US$ 64, excluding capitalized interest.

Debentures Public Offering

Petrobras approved the seventh issuance of simple, non-convertible unsecured debentures (“Debentures”), in up to 3 series, with allocation of volumes among the series to be defined in a bookbuilding procedure (“interconnecting tranches”), in the initial amount of US$ 798 (R$ 3,000 million) for public distribution, under a regime of best efforts, pursuant to CVM Instruction 400, considering the procedure indicated for issuers with large exposure in the market, according to articles 6 -A and 6-B of the referred instruction (“Offer”). This issue provides for, at least, US$ 266 (R$ 1,000 million), as well as the possibility of an increase of up to 20% of the initial amount US$ 159 (R$ 600 million).

The Debentures of the first and second series will mature on September 15, 2029 and September 15, 2034 respectively, and will count on the incentive provided in Law 12.431/2011, and in the applicable regulations, the respective funds being invested exclusively in the priority project, whose scope is the exercise of exploration and evaluation activities in the area of the blocks of Franco, Florim, Northeast of Tupi and Entorno de Iara, under the terms of the Assignment Agreement and the activities of development and production of oil and natural gas in the Búzios, Itapu, Sepia and Atapu fields, limited to the activities approved by ANP.

The Debentures of the third series will mature on September 15, 2026 and will not count on the incentive provided in Law No. 12,431/ 2011 and on the relevant regulation. These funds are destined to reinforce cash to be used in the ordinary course of business of the Company.

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Petróleo Brasileiro S.A. – Petrobras Notes to the financial statements – unaudited (Expressed in millions of US Dollars, unless otherwise indicated)

Sale of Pampo and Enchova groups and Baúna field

On July 24, 2019, Petrobras signed two contracts for the sale of upstream assets in shallow waters in Campos and Santos Basins. The transactions refer to:

(i) the sale of 100% of its interest in the Pampo and Enchova groups, located in shallow waters in the Campos Basin, on the coast of the state of Rio de Janeiro, containing Enchova, Enchova Oeste, Marimbá, Piraúna, Bicudo, Bonito, Pampo, Trilha, Linguado and Badejo fields, to Trident Energy do Brasil LTDA, a subsidiary of Trident Energy L.P. (“Trident Energy”). This transaction amounts to US$ 851, of which US$ 53 was paid at the signing date and the remaining will be paid at the closing of this transaction, including adjustments;

(ii) the sale of 100% of its interest in the Baúna field (awarded area BM-S-40), located in shallow waters in the Santos Basin, to Karoon Petróleo & Gás Ltda., a subsidiary of Karoon Energy Ltd (“Karoon”). This transaction amounts to US$ 665, of which US$ 50 was paid at the signing date and the remaining will be paid at the closing of this transaction, including adjustments.

The transaction closing is subject to the fulfillment of some conditions precedent, such as the approval by the Brazilian Antitrust Regulator (CADE) and the National Agency of Petroleum, Natural Gas and Biofuels (ANP).

Leniency agreements and repatriations – “Lava jato” operation

In July 2019, the Company received US$ 117 (R$ 444 million) resulting from leniency agreements and repatriations carried out by the Federal Prosecutor’s Office. Thus, the total amount of funds returned to the Company arising from these agreements and repatriations exceeds US$ 1,100 (R$ 4,000 million). Additionally, the leniency agreement in which Technip and Flexibras entered into with the Brazilian Federal Prosecutor’s Office, the General Federal Inspector’s Office, and the Brazilian Federal Attorney-General’s Office also provides for two additional payments to Petrobras, in 2020 and 2021, of US$ 67 (R$ 253 million), which will be accounted for upon their receipt.

Distribution to shareholders

On August 1, 2019, the Board of Directors approved the payment of interest on capital, in the amount of US$ 694 (R$ 2,608 million), which corresponds to US$ 0.05 (R$ 0.20) per common and preferred shares. These interest on capital will be paid on October 4, 2019, based on the shareholding position of August 12, 2019, and shall be deducted from the remuneration to be distributed to shareholders at the end of this fiscal year. The distribution will be adjusted according to the SELIC rate, from the effective payment date to the end of the fiscal year.

32. Information related to guaranteed securities issued by subsidiaries

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

Petróleo Brasileiro S.A.—Petrobras fully and unconditionally guarantees 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.

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SIGNATURES

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.

Date: August 2, 2019.

PETRÓLEO BRASILEIRO S.A.—PETROBRAS
By:	/s/    Andrea Marques de Almeida
	Andrea Marques de Almeida
	Chief Financial Officer and Investor Relations Officer