6-K 1 pbr-6k_20190508.htm 6-K pbr-6k_20190508.htm

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 May 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 ___X___ Form 40-F _______

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

Yes _______ No ___X____

 


 


 

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

11

5.

Trade and other receivables

12

6.

Inventories

14

7.

Disposal of assets and other changes in organizational structure

14

8.

Investments

16

9.

Property, plant and equipment

17

10.

Intangible assets

19

11.

Exploration and evaluation of oil and gas reserves

19

12.

Finance debt

20

13.

Lease liabilities

23

14.

Related-party transactions

24

15.

Provision for decommissioning costs

26

16.

Taxes

26

17.

Short-term benefits

29

18.

Employee benefits (Post-Employment)

29

19.

Equity

31

20.

Supplemental information on statement of cash flows

31

21.

Sales revenues

32

22.

Costs and expenses by nature

32

23.

Other income and expenses

33

24.

Net finance income (expense)

33

25.

Segment information

34

26.

Provisions for legal proceedings

37

27.

Collateral for crude oil exploration concession agreements

39

28.

Risk management

39

29.

Fair value of financial assets and liabilities

44

30.

Subsequent events

44

31.

Information related to guaranteed securities issued by subsidiaries

45

 

 

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

 

 

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 March 31, 2019, and the related interim consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for the three-month periods ended March 31, 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 International Financial Reporting Standards (IFRS) 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, May 7, 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

March 31, 2019 and December 31, 2018

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

 

Assets

Note

03.31.2019

12.31.2018

 

Liabilities

Note

03.31.2019

12.31.2018

Current assets

 

 

 

 

Current liabilities

 

 

 

Cash and cash equivalents

4.1

9,361

13,899

 

Trade payables

 

5,880

6,327

Marketable securities

4.2

1,121

1,083

 

Finance debt

12.1

3,230

3,667

Trade and other receivables

5.1

4,962

5,746

 

Lease liability

13

6,030

23

Inventories

6

8,459

8,987

 

Income taxes payable

16.1

376

211

Recoverable income taxes

16.1

757

739

 

Other taxes payable

16.1

3,121

3,556

Other recoverable taxes

16.1

1,373

1,296

 

Dividends payable

19.2

1,118

1,109

Escrow account - Class action agreement

26.4

2,862

1,881

 

Short-term benefits

17

1,817

1,658

Others

 

2,198

1,485

 

Pension and medical benefits

18.1

853

810

 

 

31,093

35,116

 

Provisions for legal proceedings

26.1

3,394

3,482

Assets classified as held for sale

7

2,424

1,946

 

Agreement with US Authorities

2.1

783

 

 

33,517

37,062

 

Others

 

2,303

2,442

 

 

 

 

 

 

 

28,122

24,068

 

 

 

 

 

Liabilities related to assets classified as held for sale

7

1,015

983

Non-current assets

 

 

 

 

 

 

29,137

25,051

Long-term receivables

 

 

 

 

Non-current liabilities

 

 

 

Trade and other receivables

5.1

5,301

5,492

 

Finance debt

12.1

75,580

80,508

Marketable securities

4.2

52

53

 

Lease liability

13

21,167

162

Judicial deposits

26.2

7,332

6,711

 

Income taxes payable

16.1

543

552

Deferred income taxes

16.2

2,651

2,680

 

Deferred income taxes

16.2

658

654

Other tax assets  

16.1

3,596

3,540

 

Pension and medical benefits

18.1

22,124

21,940

Advances to suppliers

 

543

666

 

Provisions for legal proceedings

26.1

4,096

3,923

Others

 

2,886

2,917

 

Provision for decommissioning costs

15

15,095

15,133

 

 

22,361

22,059

 

Others

 

988

970

 

 

 

 

 

 

 

140,251

123,842

 

 

 

 

 

Total liabilities

 

169,388

148,893

 

 

 

 

 

Equity

 

 

 

Investments

8

2,891

2,759

 

Share capital (net of share issuance costs)

19.1

107,101

107,101

Property, plant and equipment

9

182,007

157,383

 

Capital reserve and transactions

 

1,067

1,067

Intangible assets

10

2,785

2,805

 

Profit reserves

 

59,232

58,161

 

 

210,044

185,006

 

Accumulated other comprehensive (deficit)

 

(94,862)

(94,785)

 

 

 

 

 

Attributable to the shareholders of Petrobras

 

72,538

71,544

 

 

 

 

 

Non-controlling interests

 

1,635

1,631

 

 

 

 

 

 

 

74,173

73,175

Total assets

 

243,561

222,068

 

Total liabilities and equity

 

243,561

222,068

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

4


 

Petróleo Brasileiro S.A. – Petrobras

Unaudited Consolidated Statement of Income

March 31, 2019 and 2018

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

 

 

Note

Jan-Mar/2019

Jan-Mar/2018

 

 

 

 

Sales revenues

21

21,229

22,958

Cost of sales

22.1

(14,217)

(14,704)

Gross profit

 

7,012

8,254

 

 

 

 

Income (expenses)

 

 

 

Selling expenses

22.2

(1,097)

(1,273)

General and administrative expenses

22.3

(616)

(660)

Exploration costs

11

(174)

(136)

Research and development expenses

 

(138)

(153)

Other taxes

 

(103)

(148)

Other income and expenses

23

(1,164)

(392)

 

 

(3,292)

(2,762)

 

 

 

 

 

 

 

 

Income before finance income (expense), results in equity-accounted investments and income taxes

 

3,720

5,492

 

 

 

 

Finance income

 

362

339

Finance expenses

 

(1,806)

(1,804)

Foreign exchange gains (losses) and inflation indexation charges

 

(718)

(770)

Net finance income (expense)

24

(2,162)

(2,235)

 

 

 

 

Results of equity-accounted investments

8

132

158

 

 

 

 

Net income before income taxes

 

1,690

3,415

 

 

 

 

Income taxes

16.3

(565)

(1,219)

 

 

 

 

Net income for the period

 

1,125

2,196

 

 

 

 

Non-controlling interests

 

55

51

 

 

 

 

Net income attributable to shareholders of Petrobras

 

1,070

2,145

 

 

 

 

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

19.3

0.08

0.16

 

 

 

 

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

 

 

 

 

 

5


 

Petróleo Brasileiro S.A. – Petrobras

Unaudited Consolidated Statement of Comprehensive Income

March 31, 2019 and 2018

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

 

 

Jan-Mar/2019

Jan-Mar/2018

 

 

 

Net income (loss) for the period

1,125

2,196

 

 

 

Items that will not be reclassified to the statement of income:

 

 

 

 

 

Unrealized gains  (losses) on equity instruments measured at fair value through other comprehensive income

 

 

Recognized in equity

(2)

(2)

Deferred income tax

1

1

 

(1)

(1)

 

 

 

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

(638)

(338)

Reclassified to the statement of income

755

820

Deferred income tax

(40)

(164)

 

77

318

 

 

 

Cumulative translation adjustments (*)

 

 

Recognized in equity

(213)

(179)

Reclassified to the statement of income

34

 

(179)

(179)

 

 

 

Share of other comprehensive income in equity-accounted investments

 

 

Recognized in equity

22

60

 

 

 

Total other comprehensive income:

(81)

198

 

 

 

Total comprehensive income (loss)

1,044

2,394

 

 

 

Non-controlling interests

50

54

 

 

 

Comprehensive income attributable to shareholders of Petrobras

994

2,340

 

 

 

(*) It includes a US$15 loss (a US$16 gain in the three-month period ended March 31, 2018), of cumulative translation adjustments in associates and joint ventures.

 

 

 

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

 

 

 

 

 

6


 

Petróleo Brasileiro S.A. – Petrobras

Unaudited Consolidated Statement of Cash Flows

March 31, 2019 and 2018

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

 

 

Jan-Mar/2019

Jan-Mar/2018

Cash flows from Operating activities

 

 

Net income for the period

1,125

2,196

Adjustments for:

 

 

Pension and medical benefits (actuarial expense)

578

599

Results of equity-accounted investments

(132)

(158)

Depreciation, depletion and amortization

3,716

3,409

Impairment of assets (reversal)

(7)

18

Allowance (reversals) for credit loss on trade and others receivables

32

137

Exploratory expenditure write-offs

50

8

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

(184)

(1,005)

Foreign exchange, indexation and finance charges  

2,222

2,656

Deferred income taxes, net

(137)

195

Revision and unwinding of discount on the provision for decommissioning costs

209

183

Reclassification of cumulative translation adjustment and other comprehensive income

34

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

(41)

18

 

 

 

Decrease (Increase) in assets

 

 

Trade and other receivables, net

1,211

558

Inventories

373

(352)

Judicial deposits

(680)

(528)

Escrow account - Class action agreement

(1,018)

(865)

Other assets

(519)

(577)

Increase (Decrease) in liabilities

 

 

Trade payables

(630)

(418)

Other taxes payable

(120)

596

Pension and medical benefits

(194)

(204)

Provisions for legal proceedings

124

183

Short-term benefits

175

146

Other liabilities

(1,242)

507

Income taxes paid

(234)

(453)

Net cash provided by operating activities

4,711

6,849

Cash flows from Investing activities

 

 

Acquisition of PP&E and intangibles assets

(1,611)

(3,058)

Investments in investees

(2)

(7)

Proceeds from disposal of assets - Divestment

314

2,313

Divestment (Investment) in marketable securities

(26)

728

Dividends received

114

221

Net cash (used in) provided by investing activities

(1,211)

197

Cash flows from Financing activities

 

 

Investments by non-controlling interest

(46)

37

Proceeds from financing

4,234

5,938

Repayment of principal

(9,767)

(13,524)

Repayment of interest

(1,557)

(1,851)

Repayment of lease liability

(879)

-

Net cash used in financing activities

(8,015)

(9,400)

 

 

 

Effect of exchange rate changes on cash and cash equivalents

(23)

(199)

 

 

 

Net increase (decrease) in cash and cash equivalents

(4,538)

(2,553)

 

 

 

Cash and cash equivalents at the beginning of the period

13,899

22,519

 

 

 

Cash and cash equivalents at the end of the period

9,361

19,966

 

 

 

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

March 31, 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

-

-

-

-

-

-

(1)

-

-

-

-

1

-

-

-

Capital transactions

-

-

-

-

-

-

-

-

-

-

-

-

-

37

37

Net income

-

-

-

-

-

-

-

-

-

-

-

2,145

2,145

51

2,196

Other comprehensive income

-

-

-

(182)

318

-

59

-

-

-

-

-

195

3

198

Appropriations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

-

-

-

-

-

-

-

-

-

-

-

-

-

(34)

(34)

 

107,380

(279)

1,067

(61,225)

(9,255)

(10,015)

(753)

7,919

2,182

720

42,235

1,847

81,823

1,742

83,565

Balance at March 31, 2018

 

107,101

1,067

 

 

 

(81,248)

 

 

 

53,056

1,847

81,823

1,742

83,565

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

(1)

1

Capital transactions

(46)

(46)

Net income

1,070

1,070

55

1,125

Other comprehensive income (loss)

(174)

77

21

(76)

(5)

(81)

 

107,380

(279)

1,067

(67,490)

(13,215)

(13,224)

(933)

8,257

2,452

923

46,529

1,071

72,538

1,635

74,173

Balance at March 31, 2019

 

107,101

1,067

 

 

 

(94,862)

 

 

 

58,161

1,071

72,538

1,635

74,173

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

These unaudited consolidated interim financial statements were approved and authorized for issue by the Company’s Board of Directors in a meeting held on May 7, 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

Mar 2019

Dec 2018

Sep 2018

Jun 2018

Mar 2018

Quarterly average exchange rate

3.77

3.81

3.95

3.61

3.24

Period-end exchange rate

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 ended March 31, 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.

2.1.

Investigations involving the Company

2.1.1.

U.S. Securities and Exchange Commission and Department of Justice inquiries

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 which concerned 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. 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.

 

9


Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements - unaudited

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

 

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.

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.

The Company applied the short-term lease exemption and recognizes payments associated with such leases as expenses over the term of the arrangements. See notes 9, 13 and 24 for the impacts of such payments in the statement of income for the period.

In the statement of cash flows, operating lease payments, which were previously presented within Cash flows from operating and investing 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.

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:

10


Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements - unaudited

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

 

 

 

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 and investing activities, are presented as cash flows from financing activities. These amounts totaled US$ 886 in the first quarter of 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.

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 impacts arising from this Interpretation.

 

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.

 

03.31.2019

12.31.2018

Cash at bank and in hand

482

863

 

 

 

Short-term financial investments

 

 

- In Brazil

 

 

Brazilian interbank deposit rate investment funds and other short-term deposits

2,132

1,875

Other investment funds

27

12

 

2,159

1,887

- Abroad

 

 

Time deposits

445

3,823

Automatic investing accounts and interest checking accounts

5,621

6,708

Other financial investments

654

618

 

6,720

11,149

Total short-term financial investments

8,879

13,036

Total cash and cash equivalents

9,361

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.

 

11


Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements - unaudited

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

 

4.2.

Marketable securities

 

03.31.2019

12.31.2018

 

Total

Total

Fair value through profit or loss

1,121

1,083

Fair value through other comprehensive income

7

8

Amortized cost

45

45

Total

1,173

1,136

Current

1,121

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.

 

5.

Trade and other receivables

5.1.

Trade and other receivables, net

 

03.31.2019

12.31.2018

 

 

 

Receivables from contracts with customers

 

 

Third parties

6,474

6,614

Related parties

 

 

Investees (note 14.1)

677

682

Receivables from the electricity sector (note 5.4) (*)

4,341

4,400

Subtotal

11,492

11,696

Other trade  receivables

 

 

Third parties

 

 

Receivables from divestments (**)

1,299

1,296

Finance lease receivables

511

519

Other receivables

920

1,325

Related parties

 

 

Diesel subsidy

-

400

Petroleum and alcohol accounts - receivables from Brazilian Government

308

307

Subtotal

3,038

3,847

Total trade receivables

14,530

15,543

Expected credit losses (ECL) - Third parties

(3,345)

(3,390)

Expected credit losses (ECL) - Related parties

(922)

(915)

Total trade receivables, net

10,263

11,238

Current

4,962

5,746

Non-current

5,301

5,492

(*)It includes the amount of US$ 197 at March 31, 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 until 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 quarter of 2019 amounted to US$ 164.

12


Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements - unaudited

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

 

5.2.

Aging of trade and other receivables – third parties

 

03.31.2019

12.31.2018

 

 

 

 

 

 

Trade receivables

Expected credit losses

Trade receivables

Expected credit losses

Current

5,398

(382)

5,863

(360)

Overdue:

 

 

 

 

1-90 days

339

(15)

484

(54)

91-180 days

127

(15)

35

(12)

181-365 days

54

(20)

48

(20)

More than 365 days

3,286

(2,913)

3,325

(2,944)

Total

9,204

(3,345)

9,755

(3,390)

 

 

 

 

 

 

 

5.3.

Changes in provision for expected credit losses

 

Jan-Mar/2019

Jan-Dec/2018

Opening balance

4,305

5,945

Initial application of IFRS 9

-

122

Additions

32

104

Write-offs

(18)

(1,253)

Transfer of assets held for sale

(37)

6

Cumulative translation adjustment

(15)

(619)

Closing balance

4,267

4,305

Current

1,680

1,715

Non-current

2,587

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

309

-

-

-

-

309

Amounts received

(245)

(71)

(116)

(7)

-

(439)

Interest

14

27

8

6

-

55

Derecognition of receivables

(1)

-

-

-

-

(1)

Agreements in 2018

-

-

74

-

-

74

(Additions)/reversals of ECL

(8)

1

-

(7)

-

(14)

Derecognition of receivables - ECL

4

-

-

-

-

4

CTA

(3)

(14)

(3)

(1)

-

(21)

Balance at March 31, 2019

236

2,498

701

190

3,625

Receivables

1,415

2,503

702

197

1

4,818

ECL

(1,179)

(5)

(1)

(7)

(1)

(1,193)

Balance at March 31, 2019

236

2,498

701

190

3,625

 

 

 

13


Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements - unaudited

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

 

 

 

 

 

Receivables

ECL

Total

Related parties - Eletrobras Group

 

 

 

 

 

 

Amazonas Energia - AME

 

 

 

3,715

(920)

2,795

Eletrobras

 

 

 

626

(2)

624

Total

 

 

 

4,341

(922)

3,419

Third parties

 

 

 

 

 

 

Cia de Gás do Amazonas - CIGÁS

 

 

 

197

(3)

194

Cia de Eletricidade do Amapá - CEA

 

 

 

227

(227)

-

Others

 

 

 

53

(41)

12

Total

 

 

 

477

(271)

206

Balance at March 31, 2019

 

 

 

4,818

(1,193)

3,625

Balance at December 31, 2018

 

 

 

4,847

(1,189)

3,658

 

 

 

 

 

 

 

 

 

On April 8, 2019, the Company entered into a debt acknowledgement agreement with AME and Eletrobras, concerning the balance of overdue receivables between October 31 and December 3, 2018, in the amount of US$ 80. On the same date, the parties also entered into a debt assumption agreement under which Eletrobras guarantees this amount.

The privatization process of AME was completed on April 10, 2019, with the transfer of its control to the consortium formed by the companies Oliveira Energia Geração e Serviços Ltda and Atem Distribuidora de Petróleo S.A. However, given the stage of this process by the end of March 2019, which was conditioned on certain conditions precedent, notably the effective transfer of its control and additional investments and collaterals, the credit risk assessment for such receivables was not significantly affected.

The Company will continue to assess the impacts of this privatization on the fair value of such receivables and any changes in estimates will be recognized in subsequent reporting periods.

 

6.

Inventories

 

03.31.2019

12.31.2018

Crude oil

4,040

4,150

Oil products

2,439

2,758

Intermediate products

563

610

Natural gas and LNG (*)

65

122

Biofuels

163

150

Fertilizers

59

78

Total products

7,329

7,868

Materials, supplies and others

1,130

1,119

Total

8,459

8,987

 

 

 

(*) Liquefied Natural Gas

 

 

 

 

 

 

 

In the the first quarter of 2019, the Company recognized a US$ 41 gain as a reversal of cost of sales, adjusting inventories to net realizable value (a US$ 18 loss as of the first quarter of 2018) primarily due to changes in international prices of crude oil and oil products.

At March 31, 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.

 

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:

14


Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements - unaudited

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

 

 

Operating segment

03.31.2019

12.31.2018

 

E&P

Distribution

RT&M

Gas

&

Power

Total

Total

Assets classified as held for sale

 

 

 

 

 

 

Cash and Cash Equivalents

-

-

100

-

100

40

Trade receivables

-

-

5

-

5

39

Inventories

-

-

268

-

268

47

Investments

898

-

-

898

973

Property, plant and equipment

667

4

362

80

1,113

745

Others

-

-

40

-

40

102

Total

1,565

4

775

80

2,424

1,946

Liabilities on assets classified as held for sale

 

 

 

 

 

 

Trade Payables

-

-

28

-

28

1

Provision for decommissioning costs

938

-

-

-

938

932

Others

-

-

50

-

49

50

Total

938

78

1,015

983

 

 

 

 

 

 

 

 

 

As of March 31, 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 Pasadena Refinery and (vii) the interest in the Maromba field.

The most significant progresses under the divestment process 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 the 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 ANP (Brazilian Agency of Petroleum, Natural Gas and Biofuels) and its present value is US$ 47. PetroRecôncavo will disburse US$ 29 at the signing of the sale.  

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 March 31, 2019 as the conclusion of the transaction is still subject to certain conditions precedent, such as ANP approval and pre-emption rights.

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 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.

15


Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements - unaudited

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

 

As of March 31, 2019, the related assets and liabilities were classified as held for sale since the closing of this transaction was still subject to usual conditions precedent.  

On May 1, 2019, this sale was concluded after the fulfillment of such conditions. Accordingly, the amount of US$ 467 million was disbursed to the company, of which US$ 350 million relates to Pasadena shares. The remaining US$ 117 million relates to its working capital and is still subject to adjustments to reflect changes to be computed until the closing date.

 

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  

03.31.2019

Joint Ventures

1,170

3

5

57

(4)

(17)

1,214

Associates

1,573

(1)

21

75

(11)

22

(14)

1,665

Other investments

16

-

(4)

-

-

-

-

12

Total

2,759

2

22

132

(15)

22

(31)

2,891

 

 

 

 

 

 

 

 

 

 

 

 

Results of equity-accounted investments primarily refer to the MP Gulf of Mexico (US$ 32) and the Petrochemical associates (US $ 79).

 

16


Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

(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

-

209

1,650

2

930

2,791

Additions to / review of estimates of decommissioning

costs

-

-

-

(19)

-

(19)

Capitalized borrowing costs

-

-

345

-

-

345

Write-offs

-

(4)

(10)

-

-

(14)

Transfers (****)

401

2,253

(3,767)

1,017

150

54

Depreciation, amortization and depletion

(67)

(1,536)

-

(1,147)

(1,328)

(4,078)

Impairment recognition

(1)

(42)

(22)

-

-

(65)

Cumulative  translation adjustment

(40)

(361)

(174)

(256)

(134)

(965)

Balance at March 31, 2019

5,503

76,547

26,948

46,816

26,193

182,007

Cost

8,198

128,803

26,948

77,603

28,269

269,821

Accumulated depreciation, amortization and depletion

(2,695)

(52,256)

-

(30,787)

(2,076)

(87,814)

Balance at March 31, 2019

5,503

76,547

26,948

46,816

26,193

182,007

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 25 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 to the exploration and production of oil and gas.

(****) It includes transfers to/from assets held for sale.

 

 

 

 

 

 

 

 

 

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 March 31, 2019 comprise the following underlying assets:

17


Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

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

 

 

Land, buildings

and

improvement

Equipment and other assets (*)

Total

Cost

1,123

27,146

28,269

Accumulated depreciation, amortization and depletion

(43)

(2,033)

(2,076)

Balance at March 31, 2019

1,080

25,113

26,193

Depreciation charges

45

1,283

1,328

(*) It primarily comprises platforms and vessels.

 

 

 

 

 

9.2.

Unitization Agreements

On March 13, 2019, ANP informed the Company about its approval of the Production Individualization Agreement (Acordos de Individualização da Produção - AIP) pertaining to the portion of Lula reservoir, located in Santos basin, shared by the parties under the BM-S-11 concession (Lula field) operated by the Company with Shell and Galp as partners, South block of Tupi under the Assignment Agreement (Lula South field), also operated by the Company with 100% of the non-contracted area owned by Pré-Sal Petróleo S.A. (PPSA). In addition, the parties must enter into another agreement providing for equalization of expenses, revenues and production volumes by the effectiveness date of this AIP.

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 equivalent. The agreement has a term of forty years and is renewable for a further five years subject to certain conditions. As of March 31, 2019, the Company’s property, plant and equipment include the amount of US$ 19,198 (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 November 2017, the Company set up an internal commission responsible for the negotiation with the Brazilian Federal Government, composed of representatives of the Chief Exploration and Production Officer and the Chief Financial Officer.

In January 2018, the Brazilian Federal Government established, through the Interministerial Ordinance No. 15/2018, the Interministerial Commission responsible for negotiating and concluding the terms of this review.

On September 14, 2018, the Brazilian Energy Policy Council (Conselho Nacional de Política Energética – CNPE) enacted Resolution 12/2018 recommending the Brazilian Ministry of Mines and Energy (Ministério de Minas e Energia - MME) to send a draft of an amendment to the agreement to the Brazilian Federal Auditor’s Office (Tribunal de Contas da União – TCU) in order to make an assessment of its terms.

The CNPE also recommended that the MME, by means of Resolution 12/2018, send drafts of the public auction and the agreement for the bidding rounds of the exceeding volume under production-sharing regime. Aiming to support an eventual negotiation where this compensation would be paid through the right over exceeding volume, the Company completed its assessment based on reports issued by the independent specialist it has engaged.

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. However, 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.

As a related party transaction involving the Brazilian Federal Government, the signing of the amendment to the Assignment Agreement must be submitted  to the Company’s Minority Shareholders Committee and Audit Committee in order to provide support to the Board of Director’s decisions through opinions about this matter.

18


Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements

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

 

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 the purpose of obtaining a qualifying asset. In the first quarter of 2019, the capitalization rate was 5.90% p.a. (6.26% p.a. in the first quarter of 2018). Since January 2019, finance costs involving lease arrangements have been taken into account in the computation of the capitalization rate.

 

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

3

34

-

37

Capitalized borrowing costs

-

1

-

1

Write-offs

(4)

-

-

(4)

Transfers

(11)

(1)

-

(12)

Amortization

(3)

(21)

-

(24)

Impairment recognition

(1)

-

-

(1)

Cumulative  translation adjustment

(15)

(1)

(1)

(17)

Balance at March 31, 2019

2,299

284

202

2,785

Cost

2,498

1,599

202

4,299

Accumulated amortization

(199)

(1,315)

-

(1,514)

Balance at March 31, 2019

2,299

284

202

2,785

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.

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:

 

19


Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements - unaudited

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

 

Capitalized Exploratory Well Costs / Capitalized Acquisition Costs (*)

Jan-Mar/2019

Jan-Dez/2018

Property plant and equipment

 

 

Opening Balance

4,132

4,522

Additions to capitalized costs pending determination of proved reserves

77

379

Capitalized exploratory costs charged to expense

(30)

(10)

Transfers upon recognition of proved reserves

-

(95)

Cumulative translation adjustment

(25)

(664)

Closing Balance

4,154

4,132

Intangible Assets

1,966

1,980

Capitalized Exploratory Well Costs / Capitalized Acquisition Costs

6,120

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

 

Jan-Mar

Jan-Mar

Exploration costs recognized in the statement of income

 

 

Geological and geophysical expenses

105

91

Exploration expenditures written off (includes dry wells and signature bonuses)

50

8

Contractual penalties

14

36

Other exploration expenses

5

1

Total expenses

174

136

Cash used in :

 

 

Operating activities

109

92

Investment activities

94

224

Total cash used

203

316

 

 

 

 

 

 

 

12.

Finance debt

12.1.

Balance by type of finance debt

 

 

 

03.31.2019

12.31.2018

In Brazil

 

 

Banking Market

6,671

9,576

Capital Market

4,222

3,320

Development banks

2,842

3,346

Others

8

9

Total

13,743

16,251

Abroad

 

 

Banking Market

23,322

24,124

Capital Market

37,801

39,627

Development banks

40

41

Export Credit Agency

3,658

3,881

Others

246

251

Total

65,067

67,924

Total finance debt

78,810

84,175

Current

3,230

3,667

Non-current

75,580

80,508

 

 

The Company was in compliance with debt covenants at March 31, 2019 and there were no change in collaterals provided compared to December 31, 2018.

20


Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements - unaudited

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

 

12.2.

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)

Modification of contractual cash flows

Balance at 03.31.2019

In Brazil

 

16,251

1,141

(3,736)

(220)

287

28

(8)

-

13,743

Abroad

 

67,924

3,131

(5,847)

(1,146)

1,028

39

(62)

-

65,067

 

 

84,175

4,272

(9,583)

(1,366)

1,315

67

(70)

78,810

Reconciliation to the Statement of Cash Flows

 

 

 

 

 

 

 

 

 

 

PP&E

on credit

 

 

(38)

-

-

 

 

 

 

 

Debt restructuring

 

 

-

(184)

-

 

 

 

 

 

Deposits linked to financing

 

 

-

-

(191)

 

 

 

 

 

Net cash used in financing activities

 

 

4,234

(9,767)

(1,557)

 

 

 

 

 

(*) 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 quarter of 2019, proceeds from financing amounted to US$ 4,234, 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$ 4,186 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$ 182; and (ii) pre-payment of banking loans in the domestic and international market totaling US$ 3,863; and (iii) pre-payment of US$ 322 with respect to financings with the Brazilian Development Bank (Banco Nacional de Desenvolvimento Econômico e Social – BNDES).

 

21


Petróleo Brasileiro S.A. – Petrobras

Notes to the financial statements - unaudited

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

 

12.3.

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$)(*):

1,485

1,399

3,806

4,474

7,786

41,326

60,276

66,227

Floating rate debt

979

1,334

2,310

3,667

6,180

12,612

27,082

 

Fixed rate debt

506

65

1,496

807

1,606

28,714

33,194

 

Average interest rate

5.3%

5.9%

5.7%

5.8%

5.7%

6.5%

6.2%

 

 

 

 

 

 

 

 

 

 

Financing in Brazilian Reais (R$):

827

1,930

1,786

1,806

1,873

5,277

13,499

12,849

Floating rate debt

549

1,615

1,543

1,487

1,657

3,458

10,309

 

Fixed rate debt

278

315

243

319

216

1,819

3,190

 

Average interest rate

5.1%

5.0%

5.3%

5.6%

5.4%

4.2%

4.9%

 

 

 

 

 

 

 

 

 

 

Financing in Euro (€):

28

58

260

485

455

1,500

2,786

3,458

Fixed rate debt

28

58

260

485

455

1,500

2,786

 

Average interest rate

4.2%

2.7%

3.0%

2.9%

3.6%

4.6%

3.9%

 

 

 

 

 

 

 

 

 

 

Financing in Pound Sterling (£):

32

11

-

-

-

2,201

2,244

2,504

Fixed rate debt

32

11

-

-

-

2,201

2,244

 

Average interest rate

5.9%

6.2%

-

-

-

6.3%