Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) Q2 2022 Earnings Conference Call July 29, 2022 11:00 AM ET
Company Participants
Carla Albano – Investor Relations
Rodrigo Araujo – Chief Financial Officer
Rafael Chaves – Chief Institutional Relations and Sustainability Officer
Salvador Dahan – Chief Governance and Compliance Officer
Claudio Mastella – Chief Trading and Logistics Officer
Fernando Borges – Chief Exploration and Production Officer
Rodrigo Costa – Chief Refining and Natural Gas Officer
Joao Henrique Rittershaussen – Chief Production Development Officer
Operator
Good afternoon, everyone. Welcome to Petrobras Webcast with Analysts and Investors about the Second Quarter Results. It’s great to have you join us today. [Operator Instructions] You can send those questions by mail at petroinvest@petrobras.com.br.
Today, we have with us Claudio Mastella, Chief Trading and Logistics Officer; Fernando Borges, Chief Exploration and Production Officer; Joao Henrique Rittershaussen, Chief Production Development Officer; Juliano Dantas, Chief Digital Transformation and Innovation Officer; Rafael Chaves, Chief Institutional Relations and Sustainability Officer; Rodrigo Araujo, Chief Financial and Investor Relations Officer; Rodrigo Costa, Chief Refining and Natural Gas Officer; and Salvador Dahan, Chief Governance and Compliance Officer.
To initiate, I’ll pass the floor to Petrobras CFO, Rodrigo Araujo. Mr. Rodrigo, go ahead.
Rodrigo Araujo
Thank you, Carla. Thanks, everyone, for being with us today in this afternoon. We had a very solid quarter in which our solid operational results translated into solid financial results as well. So I’m very glad to be here with you today to talk about our results for the second quarter of 2022.
So next slide, please, which is remind of our disclaimer about future projections and expectations.
Next, please. So with respect to safety, as you guys know, we have safety as a very strong value for the company, and we’re very concerned about improving our overall safety in our metrics. And we’re glad that we can see the trajectory of the total recoverable injuries over time and especially that we’ve been able to maintain a level that is below our acceptable limit of 0.7%. So we reached 0.52% in the second quarter of ’22. Of course, our ambition is to have zero fatalities and our main concern is to make sure that we can achieve that ambition. Unfortunately, we had 3 fatalities during the year, but we maintain our focus on improving our safety levels and making sure that our operations are always running safely — as safely as possible.
Next, please. So talking about our ESG agenda. In the second quarter, we highlight the living forest initiative that is the initiative of matchfunding from the Brazilian Development Bank, BNDES, to restore 33,000 acres and capture 9 million tons of carbon. Petrobras is investing R$50 million in a 5-year time frame to support that initiative. We think that it’s a very important step towards de-carbonization and supporting the reforestation agenda in Brazil. This is going to go through a public selection process for the managing partner and for the execution alongside with the Brazilian diversity front, biodiversity front, Fundo. So we’re very glad to be part of that initiative alongside with the Brazilian Development Bank.
Next, please. Looking at our emissions in the quarter, we can see that both in the upstream and downstream segment, our results were pretty solid and within the targets that we set for the year. For the upstream, I highlight the levels of emission for Buzios and Tupi, both of them below 10 kilos of CO2 per barrel of oil equivalent, which is about half the industry average. So we reinforce our positioning as a low-carbon low-cost company, and the results of our operations are continually back in our assumption of being a very solid player in that sense.
With respect to the intensity in the refining segment, we can see that the refineries that are part of our RefTOP program that is program-focused on energy intensity in a group of refineries has been performing pretty well. So we’re below the target set for the year and when we look at certain refineries like RPBC, RECAP, REPLAN, REVAP, and REDUC are even below that. So we had the best historical result for us semester, and we keep a very high focus on reducing the intensity in the refining segment as well.
Next, please. Okay. Looking at the absolute emissions, it’s important to remember that in the second half of ’21, we had a very high level of thermal power dispatch in Brazil, so thermoelectricity being produced in Brazil in the second half. So our total emissions increased in the second half of ’21. But when we look at the overall figures, we can see that the downward trajectory in ’22, our results have come back to a normal level and to a normal trajectory of reducing emissions over time. Looking at oil and gas operational emissions, it reinforces our commitment to decarbonize our operations and reduce our emissions in the upstream and downstream operations. So we had very solid results in the second — in the first half of 2022.
Next, please. In terms of carbon capture, as you guys know, we have the largest carbon capture program offshoring the bored and we continue to deliver solid results in that sense. In the first half of ’22, we have already re-injected more than what we re-injected in the entire year of 2019 in terms of CO2. We have a target of re-injecting 40 million tons by 2025, and we continue to be highly committed to the target.
Next, please. During the quarter we also signed our first Sustainability-Linked Loan as a transaction of $1.25 billion maturing in July ’27 is our first financial commitment with ESG KPIs mainly focused on greenhouse gas intensity in the upstream and downstream segment as well as Emissions Intensity. So from our perspective, we think that is a very solid step towards moving from just commitments to actually reinforcing towards Sustainability-Linked Loan our desire to deliver on those targets. Basically, the contracts will become less expensive as we deliver on the lower emission targets that we have. So it reinforces our focus and commitment to deliver those targets.
In terms of engagement of our supply chain, we have started a broad survey of the supply chain to engage and collect data from our suppliers. We expect to collect data from about 25% to 30% of our suppliers by the end of ’22, so that we can monitor not only their level of emissions, but also the maturity that they have in terms of programs to reduce emissions. So this is what we expect for ’22 and start working on that data as well, and looking at the training of our workforce, we have delivered online programs for more than 35,000 people in the company. We have 2 different modules. The second module already 10,000 people in the company have been trained with respect to climate change in the company’s position in terms of the energy transition scenario. So very happy to reinforce the commitment internally as well with our workforce.
Next, please. In terms of governance, we’ve been focused on automating our internal controls, and we have announced recently this week, an improvement in terms of the governance of our pricing policy, bringing an additional layer of a provision by the Board of Directors. It doesn’t change the company’s pricing policy. It brings another layer of supervision. And also, we have made public our general guidance for the company’s pricing strategy. We think that is very important that step to make public, pricing guideline document that reinforces the company’s commitment to practicing market prices and being a market price player supporting the market opening scenario. So I think that is very important the fact that we’ve disclosed at the document publicly.
Next, please. And finally, with respect to our contribution, we paid R$77.3 billion in taxes over the second quarter. More than half of our cash generation is returned to the Brazilian society. So we’re very glad with the results and with the fact that the company is a substantial contributor to the Brazilian society.
Next, please. Next. Entering to our financial results, we had a very solid quarter, not only in the upstream segment, but also in the downstream segment. We broke monthly records in Buzios. We topped up the production of P-68. We had production started at FPSO Guanabara and the sailing to Brazil Anna Nery and Almirante Barroso as well. We had important results confirming the productivity of the f Alto de Cabo Frio Central area in our exploration segment, very happy with the prospects of that area.
We also had the beginning of the production sharing contract for Atapu and Sepia. This impacted our production in the quarter. It reduced our production in the quarter, given that our working interest in the area has reduced. But of course, we have received cash in advance for that contract as well. So we’ve been compensated for the deferral of the NPV of the project. So we anticipated cash and de-risked part of the project. It’s interesting to highlight not only the high utilization level of our refineries close to 90% in the quarter, 97% at the end of June, but also the level of integration of our operations and how well our entire supply chain has been working from the upstream segment to the downstream segment.
A general picture, we usually work with 2% to 3% miss ratio for the planning that versus what we produce over time. And this ratio was 0.1% in the second quarter of 2022. So you can see that we’ve been able to deliver what we have said in terms of planning for the entire supply chain. So this translated into more production and the more financial results as a consequence. We started on a pilot basis producing BioJetFuel at REPAR. We also had monthly record sales of low sulfur 10-ppm diesel. And as I mentioned before, lower intensity by our refining segment, our commitment with the RefTOP program is very solid and is already starting to deliver results.
So looking at the financial metrics, we had $20 billion of recurring EBITDA at the quarter $14.5 billion operating cash flow, free cash flow of $12.8 billion. Our gross debt has reduced to $53.6 billion. Our net income, [Indiscernible] $11 billion in the quarter. So basically, looking at the solid financial results and the company’s financial situation, we were able to approve the anticipated dividend of R$6.73 per share. It’s a commitment that we set for the quarter. It does not jeopardize the application of our 60% of the free cash flow formula for the upcoming quarters.
So as you guys know, the way we model this, we look at the results, we apply the 60% formula. We model what we expect to happen and make a risk analysis for the next 12 to 24 months. And this payment is compatible with — we expect in terms of future scenarios, compatible with maintaining the application of the dividend policy for the next 24 months. So we’re very comfortable with the dividends that were approved. Our net debt to EBITDA is 0.6x, it’s very solid and very consistent. And as I mentioned before, we paid R$77.3 billion in taxes — R$77.3 billion in taxes in the form.
Next, please. With respect to the external environment, we saw higher Brent prices in period and an appreciation of the Brazilian Real for the average of the quarter. When we look at the period end exchange rate, we had a negative impact in our net income because of the depreciation of the period end exchange rate. As you guys know, it’s not something that impacts cash flow or it’s not an economic impact. It’s an accounting impact. It doesn’t mean any impact on cash flows or future prospects of the company, but impacted negatively the net income for the period.
Next, please. Okay. So looking at the future prospects for ’23 and ’24, we can see that most of the contracting that has to be done for ’23 and ’24 is already concluded. So we expect 5 units to come online in 2023 and 3 needs to come online in ’24. So we’re very glad with the fact that we’ve been able to anticipate the contracting, not only with respect to FPSOs, but with the drilling wells, the drilling campaigns and also the subsea equipment. So you can see that we’re working strongly to make sure that we secure all the contracting so that we have the projects coming online on time more than 90% of the value of the projects come from making right decisions in terms of investment on the way to explore the different fields and also making sure that we deliver the projects on time. So we have a very strong commitment to deliver those projects on time, and we expect to deliver everything that is set for ’23 and ’24 on time.
Next, please. So looking at the quarter results, as I mentioned before, $20 billion EBITDA for the power, better results, not only in the upstream and downstream segment, but also natural gas had lower volumes of LNG imports in the quarter that also supported our results for the second quarter of ’22.
Next, please. So upstream was, of course, favored by higher Brent prices. Downstream results, as I mentioned before, the level of integration and the higher industry planning also supported as delivered solid results. Even when we look at EBITDA replacement cost, it was a very solid quarter for the refining segment as well. And for the natural gas at the gas power segment after 2 quarters with challenging scenarios, given the high level of LNG imports and high prices in the international market. We’ve been working strongly on renewing contracts on changing the contractual dynamics to support better results. And of course, the fact that we had lower LNG imports was also accretive to the quarter. So we had positive results for the Gas & Power segment as well in the second quarter.
Next, please. So looking at the cash flow generation, we come from a $20 billion EBITDA to $14.5 billion operating cash flow, $1.7 billion CapEx. We had divestments and the co-participation agreements of the Sepia and Atapu fields, resulting in $19.6 billion free cash flow after divestment. This was basically used to maintain our leverage within the optimal range and also pay dividends over the quarter, so the cash balance hasn’t changed substantially from Q1 to Q2.
Next, please. In terms of our leverage, as I mentioned, we’re below the optimal range, below the 55% lower end of the range, but we’re comfortable with that level, especially because as you guys know, we have 5 units coming online in ’23, which is going to bring the leverage upwards again. So we’re comfortable with running it a little bit less than the 55%. And we expect the trajectory to bring it back upwards. Of course, part of this was because of the conditions of the capital markets, where we had favorable open market repurchase and tender offer conditions in the market. So we’ve done a lot of repurchases and haven’t had good conditions to issue new debt. So that’s why we brought leverage a little bit down. We also signed a sustainability link. So basically, on a net basis, if we include the $854 million from the tenant offer with the $1.25 billion Sustainability-Linked Loan, it averages out on a positive basis. So we’ll try to continue to maintain leverage closer to the optimal range.
In terms of cash levels, very solid cash levels, we also have the revolving credit facilities that we can use. Of course, the cash level at the end of the quarter doesn’t take into account the dividend payments that occurred after the end of the quarter and the new dividend announcements that we made. So we continue to try to bring the cash levels closer to the optimal range of $8 billion to $10 billion. In terms of the debt maturity in the schedule profile, we’re very comfortable with the current levels and with the profile for the next 5 years. You can see that in terms of financing, the level of maturity over time is very comfortable with the company’s — compared to the company’s cash flow generation. So it’s a very comfortable situation in terms of liquidity and of the next 5 years as well.
Next, please. With respect to portfolio management, we have signed and closed 6 different transactions in 2022, $3.6 billion of cash flows already occurred up to July ’27. As we included in our earnings release, we have around $5 billion of transactions that were signed but not closed yet. So we’re focused on closing those transactions and moving fast towards closing those transactions and we continue to be very committed to the portfolio management strategy of the company and deliver on the business plan.
Next, please. So all of this translated in a net income of $11 million for the quarter, as I mentioned, the one-off is the negative impact of the devaluation of the Brazilian Real, period end, it impacted negatively net income, but it doesn’t change the operational performance and the cash flow and economic situation of the company, so a very solid quarter, very solid operational results.
Next, please. And finally, as I mentioned, keeping all the setting in the company’s financial situation, we approved the dividend of R$6.73 per share to be paid in 2 installments. Basically, as you guys know, we always look at the 60% of free cash flow formula to make sure that we can comply with the dividend policy. And then we look at the next 12 to 24 months and our expected cash generation eventually inflows coming from enter divestments or, for example, the Buzios participation and co-participation agreement. And it allows us to propose extraordinary dividends. Of course, whenever we propose extraordinary dividends, we taking into account the need to continue to comply with the dividend policy over the next 24 months.
So it is something that is very solid for the company and doesn’t jeopardize delivery on the dividend policy in the future. So that was our — that was my last slide. Again, very solid quarter, very happy with the results.
I’ll pass the floor back to you, Carla, so we can jump in the Q&A session. Thanks, everyone, for being with us today.
Question-and-Answer Session
A – Carla Albano
Thank you, Rodrigo. We can now move to the Q&A session. And the first question that we received comes from Frank McGann with Bank of America Merrill Lynch. And it’s for Rafael Chaves. Rafael, has the changing global energy environment over the last couple of quarters changed how the company is looking at the energy transition? Might it not be a good idea for the company to consider increasing exposure to renewables or invest in some technologies that could enable the company to start to have more exposure to business that could prosper over the medium- and long-term? If not, why?
Rafael Chaves
Thank you, Carla. Hi, everyone. Thank you for being with us today. Frank, are we changing our approach to energy transition? Not at all. Brent can be volatile, local exchange rates can be volatile, but our business plan is consistent and stable. We are keeping our [Indiscernible] strategy with oil and gas projects with positive NPV value under very low prices at $35 per barrel, characterized by low carbon, high energy assumptions. We operate with efficiency in our projects and low greenhouse gas emissions. So very low, I would say, comparing to other possible alternatives. So we keep our strategy.
And out of fossil, yes, we have some actions and investments. For example, in forest we are going to invest more than $20 million in the next years, including the project that Rodrigo Araujo presented with [NBS]. And also, we are discussing the possibility of new business, non-fossil alternative to be appraised by a new Board and by directors and eventually to be announced in the next strategic plan, if you include, we have another possibility for diversification. So thank you, everybody, again, for being with us today, and I pass to you, Carla again.
Carla Albano
The second question from Frank is for Rodrigo Araujo. Rodrigo, the company recently confirmed that Braskem continues to be in its divestment portfolio. Has the company considered going in a different direction and buying the Nova stake to take full control of Braskem and expand in petrochemicals?
Rodrigo Araujo
Yes, you’re right. The company continues to have Braskem as one of its divestment assets. We don’t think it’s the best for the company to have a financial interest in the company, even though we think that there are good prospects for the petrochemical segment, but not via financial interest in a petrochemical company. So we continue to be committed to the divestment. At the moment, we do not consider taking control of Braskem or any kind of M&A transaction that increases our share in Braskem. So this is what we have now. We continue to be looking for potential M&A opportunities to divest from the interest that we have. Thank you for the question.
Carla Albano
The next question comes from Luiz Carvalho with UBS. Luiz sent us a message that I would like to read. Would like to start by congratulating the company’s executives and teams for the outstanding results and continue executing our company’s plan while maintaining a healthy corporate governance that was improved in recent years. The first question from Luiz is to Salvador, and I also welcome Mastella to complement. It’s about the new pricing guidelines. The new pricing guideline is clear in the focus given to value creation for the company. Could Petrobras provide more details on how it expects this to translate into pricing decisions? Could you also provide more color on the role of the Board in supervising the policy?
Salvador Dahan
Thanks for your question, Luiz. Basically, we are putting a new layer in our governance. This is part of our continuous improvement process that we understand as part of the natural responsibility of the Board of Directors is to monitor and supervise the execution of all the strategies and all the company policies. We are now formalizing this new guideline to confirm the Board responsibility over the supervision of how the management is observing and is executing the pricing policy.
So basically, is monitoring an oversight responsibility. No changes at all in the execution, how to conduct the pricing policies is still under the authority of the Executive Committee and also it’s important to mention that by keeping these two layers of responsibility, increase our governance with a more robust transparent and more balanced process. So our expectation and our visibility with this new guideline is just to ensure the roles and responsibilities for the Board specifically, maintaining the competence for the Executive Directors to execute the pricing policy.
Claudio Mastella
Really just to emphasize really the pricing policies, the company bylaws has ultimately not been changed. It’s still working nicely.
Carla Albano
The second question from Luiz is to Mastella as well. It’s about supply, imports, prices and market share. So thinking specifically of diesel, several agents in the industry have become more vocal and challenged to find diesel volumes in the international market and an unfavorable scenario for imports to Brazil. How is the company seeing the supply? And how are preparations for an eventual challenge in supplying the country?
Claudio Mastella
Thank you for the question. Well, we are still working with some caution for the coming months, in particular with respect to diesel. Mainly due to seasonal increase in world demand in the second half of the year, lower availability of Russian refining products that affects the whole market. In addition to scheduled maintenance shutdowns and trade finance in Brazil and eventually some unavailability of refineries in the United States, or the Caribbean with the hurricane season from June to November.
But we are constantly monitoring market opportunities, and we are not really, at the moment, at least facing difficulties in acquiring cargoes for the — from the traditional suppliers in Asia, like India or U.S.A., where we already do business on a regular basis. We are all the time concerned and we’re ensuring that our customers are well supplied.
Taking that all into account, we reviewed our planned inventory levels for the second half of the year and anticipated some diesel purchase to provide the best service level possible for them. In this scenario of uncertainty the prices of our traders in our international offices allows us to monitor the flow of oil products, crude oil of course, inventories, gradual demands and other agents movements. That allow us to position ourselves in a new and competitive position. That’s it. I hope I made it clear.
Carla Albano
The next question comes from Christian Audi with Santander. He also sends us a message that I’m going to read now. I would like to congratulate on the very strong operational results and the ability of the company to continue to positively surprise shareholders on the dividend front. Christian’s first question is to Salvador, and Mastella is also welcome to complement. On the pricing policy front, although the new guidelines keep the decision of making price changes in the hands of management, how does the company benefit from having the Board of Directors formally overseeing the process on a quarterly basis?
Salvador Dahan
As I mentioned, by having this new layer in our governance, we are putting this supervisory responsibility under the Board of Directors. Basically, the executive management should report on a quarterly basis, how we are performing and giving full visibility to the Board on our results. At the same time, we expect, as I mentioned before, this will strengthen our governance by offering more robustness and visibility and transparency in our directions. The guideline also emphasized that the executive committee duty is to seek and preserve the value generation of the company and the keep the competitive prices in the local market. And the reason of putting this policy, as I mentioned before, is basically to continuously improving our governance, our internal mechanisms of controls. And basically, this is another step towards this direction.
Claudio Mastella
Nothing to add. I think Salvador made it very clear.
Carla Albano
The second question from Christian is to Fernando Borges and also to Rodrigo Costa. How is inflation impacting our operations? What are you doing? And what can be done to minimize its impact.
Fernando Borges
Christian, the increase in industry costs is not immediately reflected in our operating facilities as we have several different contracts with different durations, which allow us to remove the effects of change in contract on tariffs over time. Some of our current contracts have annual readjustment clause with predefined indicators such as PPI in the U.S. and [IJPDI] in Brazil. We continue to negotiate and seek the best opportunities and contracts as well as managing contract terms and versions, avoiding permanent impacts of increased costs, even though it is natural that as the price of brent remains at high levels, new contracts will face some impact of inflation, although this impact tends to be partially diluted for the reason already mentioned.
Rodrigo Costa
Christian, for the downstream prospective, we have contracts indexed to inflation rates especially in the gas transmission contracts. To minimize these impacts, risk space for future renewals or new contracts are maybe considering different scenarios. Company has three scenarios that we use. And in addition to the close of revenues contracts, we linked to factories that are also in line with inflation rates, such as the exchange rate. So it’s kind of a hedge position for the impact in the supply contracts, especially for the gas transmission contracts.
Carla Albano
The next question comes from Bruno Montanari with Morgan Stanley, and it’s for Salvador. Mastella is also welcome to complement. So it’s about fuel pricing guidelines. Can you clarify what the supervision of the Board of Director means? After the executive officer decided to move price up or down, is there any veto power from the Board?
Salvador Dahan
Thanks, Bruno. As I mentioned, and this is important to highlight and emphasize, there is no veto power or conflict in terms of authorities and responsibility, right? The policy, the pricing policy, the execution of the pricing policy is under the Executive Committee Authority. And Executive Committee is responsible to execute and to report the results to the Board of Directors, which is the instance responsible to supervise and monitor. And by the way, that’s the reason why we gave full disclosure to this guideline and is fully available in our website in case you want to check. Very clear definitions around roles and responsibility with these two different layers, as I already mentioned.
Claudio Mastella
Just to add, sorry. This time, I’d like to talk a little bit. Just that the guidelines, as a matter of fact, gives some broader and comprehensive recommendations in directing the Executive Committee in pursuing better results for the company and making it clear that the policies, wherever the contracts, wherever the evolution of the market can evolve with that. That’s very important.
Carla Albano
The next question comes from Bruno Amorim with Goldman Sachs and it’s for Mastella. What is the best international benchmark for Petrobras gasoline price? Comparing the revised price with Gulf Coast gasoline might be misleading given the difference in quality.
Claudio Mastella
Thank you, Bruno. This question is pretty interesting. This is a very common misconception comparing like U.S. Gulf gasoline prices directly to Brazilian prices. Gasoline in Brazil, as a matter of fact, by mandate is a mixture of 27% of anhydrous ethanol and 63% of [Indiscernible] gasoline, which we call Gasoline A in Brazil. Brazil gasoline, Gasoline A has different quality in relation to its international standards, mainly octane numbers due to the brand we have on octane in Brazil. So the transactions have lower liquidity, making it difficult to evaluate and publish these prices and prices of these transactions to Brazil.
But specialized media, like [Indiscernible], for example, have specific publications for prices already for prices of Gasoline A delivered to Brazilian parts. One of these publications is available weekly at the AMP National Petroleum Agency of Brazil website. The proxies of price parity in Brazil, they do not necessarily match Petrobras’ view of competitive prices, but they are close. So that petrol is a good [Indiscernible] for Brazil. Of course, each player in the market will have their own view of competitive prices, and that’s common and natural. But the AMP published prices is a very good proxy.
Carla Albano
Thank you, Mastella. The next question also from Bruno is for you as well. So the company has to comply with import parity on average during the calendar year, right? If so, who is responsible for this verification? When does it happen, in December or as you release the fourth quarter results?
Claudio Mastella
This is another common doubt. And as a matter of effect, we pursue competitive prices all the time. And while, it’s very important to have [Indiscernible] we continuously monitor the market, and we are continually pursuing competitive prices, but taking care not to translate the international volatility to the domestic market. There’s some learning curve that we evolve during the last years. Well, of course that the electrofication analysis is done all the time. But at the end of the year, we also compare the average of the prices.
As a matter of fact, as we have a plan, we had to have an estimate understand of the alignment of prices in Brazil with the international markets. And that’s a comparison that goes when you do plan in business plan for the year, of course, at the end of the year and every three months, we show the evolution in the pricing practice to the Board of Directors as a way to show that we are effectively going after this target. But no, we don’t wait for the end of the year to online prices. We do that all the time.
Carla Albano
The next question comes from Rodolfo De Angele with J.P.Morgan, and it’s for Rodrigo Costa. Utilization rate in the downstream segment was 89% in the second quarter. At one point, utilization was as high as 97%, but Petrobras has scheduled maintenance for the third quarter. So what should we expect in terms of utilization in the third and fourth quarters?
Rodrigo Costa
We should expect high utilization rates, for example, on July we expect to close around 94%. For example, yesterday, we almost reached 99% of the utilization rate. And if we see all the second semester, if we consider the refineries that we don’t have stoppage, probably we are operating at around 94%. But if we consider the refineries that we will have stoppage, we are around 86% on the second semester.
Carla Albano
The next question also from Rodolfo is for Rodrigo Araujo. Rodrigo, the strong payout observed in the first half of 2022 could be maintained for the second half as well?
Rodrigo Araujo
In terms of the framework that we use to decide on dividends, as I’ve mentioned before, of course, our main focus is to make sure that we’re able to comply with the dividend policy over the next 12 to 24 months so to continue to be paying partly the 60% of free cash flow. So that is the main target. And whenever we see and like we did in this quarter, that we have additional inflows that support paying extraordinary dividends, we will do it and we will try to bring the cash balances close to $8 billion to $10 billion.
That is the optimal level of cash for us. So in terms of payout for the second half of the year, of course, it depends on several variables, such as pricing levels over time. Eventually, inflows coming from divestments or, for example, the coparticipation agreement for Buzios. So we will monitor this over the course of the second half. But of course, looking at the current price levels, they are, of course, supportive of higher dividend payments, but we’ll factor all of that into potential payments in the second half.
Carla Albano
The next question comes from Pedro Soares with BTG Pactual. He also sends us a message. Good afternoon to all. Once again, very good to see the company’s results evolving that well in so many different aspects. Pedro’s first question for Rodrigo Costa and it’s about refinery utilization rates. We saw the refining part utilization rate reaching 97% in June. At the same time, there are some expected maintenance stoppage for [Indiscernible]. Could you talk about what’s the level of idleness expected for the second part of the year? And if there is a possibility of any postponement of these maintenance? If so, it would be interesting to hear about the market conditions that you see as a two-year year for debt.
Rodrigo Costa
Pedro, as I told, we will expect higher utilization rates on the second semester, especially due to diesel market conditions, we are expect between August and the end of September, high volumes of diesel on Brazil market. And we are capturing these opportunities. That’s important, have been in mind that our utilization rates of our refineries has two main pillars. The first one is the safe conditions of our operations. And the second one is the market conditions and the economic process of our utilities. So we analyze some possibilities about postponed some stoppages. And at this moment, we decided to postpone a stoppage on REVAP moved from November to the first quarter of 2023. This stoppage cover replacing catalysts in hydro-treatment units.
Carla Albano
The second question from Pedro is to Fernando Borges. Fernando, in the last two months, we have seen some important maintenance stoppage impacting the company’s production. We know that the guidance remains unchanged for the year. But if you can give a little more color on how you see the evolution of production in the second half of the year? And if you understand, there is an upside for annual production to be closer to the top of the guidance.
Fernando Borges
First of all, I would like to highlight that we operate a sixth production producing platforms. Our total operated production is today, 3.6 million BOE per day. So it’s a lot of work to be done. Considering the stoppage for maintenance the first half of the year, we had 22 stops with an average production loss of around 200,000 barrels per day. And for this second half of the year, we expect to have 28 stoppage for maintenance with the same level of production losses around 200,000 barrels per day — BOE, not by equivalent. Considering the opportunities for upside in production, we have two important ramp-ups.
The first one is we [Indiscernible], which expect to reach the marginal production of 180,000 barrels per day. Today, we are around 150,000. We have to — the FPSO Guanabara in Mero field, which we expect to reach the maximum capacity of the unit at the end of this year. Today, we are producing around 60,000 barrels per day. At the end of the year, we hope to have 180,000 barrels per day. And when we look to Campos and Santos base, we have planted more 10 wells which four of them is Roncador Field. So we are stick to our forecast of 2.6 million BOE per day in this year with the range of more or less 4%, and we are targeting the center of this interval.
Carla Albano
Pedro also has another question and is to Joao Henrique. It’s about the FPSO on the [Indiscernible]. The FPSO has already left the shipyard in China and it seems that it remains on time. Is there any expectation of improvement or possible anticipation of the first oil of this platform?
Joao Henrique Rittershaussen
Yes, it’s true. We have informed the market that [Indiscernible] shipyard in July. And we give the first oil for 2023. This unit reached the hydros on the wells to the platforms. And you have an EPCI contract to do our all these connection of the wells. And the two contracts, the charter unit, the EPCI contracts are with the same date and we understand that we don’t have any room to anticipate do you want to do the timeframe that we set for both concepts.
Carla Albano
The next question is from Regis Cardoso with Credit Suisse. Regis sent us a message that I’m going to read. Congratulations to our management team and the company for the extraordinary results. They are, in fact, memorable. Regis first question is to Rodrigo Costa, and it’s about impact from LNG imports. LNG prices are still very high in international markets. After the reduction in imports from Bolivia, what is Petrobras’ current needs in terms of LNG imports? How does the company see that evolving going forward?
Rodrigo Costa
When we see the thermoelectrical market, we see better conditions in water reservoirs. Actually, the current level, it’s around 6% to 8% better than last year. And this impact our needs on import LNG cargoes. When we see the outlook for this year, we are working with around 30 cargos in port to our operations. This is very decreased number if we consider the scenario that we had on 2021, that it’s around 112 cargoes. When we see the second semester for the third quarter, we can — we can have an increase in dispatch, but it’s until today, with the information that we have, we don’t see a high dispatch on this first quarter, but we have a lot of uncertainty on the fourth quarter. So the best information that we have until today take us to this outlook around 40 cargoes this year.
Carla Albano
Regis second question is to Fernando Borges. Fernando, what are your expectations around timing for closing the 5% stake purchase option transaction exercised by [Indiscernible]?
Fernando Borges
The construction work with the initial expectation for July for us, but we are still waiting for ADP and M&E for their approval. So they know the expectation of the conclusion of this process is between August and September.
Carla Albano
Now we have questions from Vicente Falanga, with Bradesco BBI. He sends us a message. Congratulations on the fast delivery and the maintenance of government’s policies. Vicente’s first question is for Mastella. Mastella how is the gasoline parity today after the two price cuts were announced? What is the management view for Gulf price spreads looking ahead?
Claudio Mastella
Well, the recent reduction in gasoline prices just follow the view of the international market evolution, which has stabilized at a lower level for gasoline, which is happening abroad also and is consistent with the best practice of our pricing, which seeks to have prices in balance with market while avoiding best in ongoing volatility caused by local events. The cracks will — the cracks in our view will remain strong in the Gulf as well as worldwide, suffering pressure of the ongoing geopolitical conflict and tighter supply and demand balances. I’d say, mainly I will talk about diesel. However, by inflation expectations and stronger monetary policies by the main central banks may raise [Indiscernible], easing demand and consequently elevating pressure on cracks that we are observing, but not translated into the batches.
Carla Albano
The next question comes from Gabriel Barra with Citi and it’s for Rodrigo Araujo. Rodrigo, considering the latest material fact and recent news about Albacora’s divestment could you give us an update for the next steps regarding the sale of the assets? Is there a possibility of trading the assets leaving for earnout or even changing possible earnouts?
Rodrigo Araujo
Well, first of all, as we announced recently this week, the asset is still under negotiation. I wouldn’t have any further updates to give. But with respect to the potential spinoff or cover of the full part of the asset, as you guys know, if we change the scope from the regional teaser, we do need to restart the process. So the straightforward answer is no. I mean, we’re not going to restart everything by spinning part of the asset. Of course, in terms of potential earnouts or potential price discussions earnouts can be and are being discussed with respect to the future prospects of the assets, carving out and changing the scope needs to trigger the need to restart the process. So that’s not in our plans for now.
Carla Albano
The next question also from Gabriel is for you, and it’s regarding the commitment with CADE. So regarding the commitment with CADE signed by the company to carry out divestments of downstream assets — is there any penalty in a scenario in which the company is not successful in sale of these assets? Is there a possibility of extending the deadline to comply with the terms? If so, does the expansion have a limit?
Rodrigo Araujo
So first of all, out of the eight refineries that the company agreed to divest four of them have been already signed. So a lot has been signed and closed. We have [Indiscernible] already signed but not closed. So working on closing them as fast as we can. We expect to be able to close them during the timeframe of the year. But with respect to the agreement with CADE we don’t have any penalties as long as the company shows that it’s making the best efforts and making everything that is possible to make the transactions occur.
So the trustee that monitors the agreement is continually monitoring the company with respect to the steps that it takes, for example, the relaunch of the process that we’ve done recently as part of the agreement in terms of the next steps. There’s a penalty that — it’s not a mature penalty, but it’s only in the case in which the company cannot prove that it’s on its best efforts and eventually in the case that there’s no buyer or just no price agreement, there’s no penalty associated as long as the company can show that it’s done — everything that it could do to make transactions occur.
Carla Albano
There’s one more question also for Joao Ritte. Could you give us more information about the start-up process of FPSO on [Indiscernible]? What is the expected date for FPSOs first oil? How can we expect the platform to ramp up?
Rodrigo Araujo
On the [Indiscernible], we expect the first oil in the first half of 2023. We have a good projections for the HAMPA. And we feel to have a high weight in wells. We have designed the wells to absorb this potential of the reservoir and so we understand that we have a good chance to have the peak of the production June 15, four wells. So it will be a fast ramp up is our expectation for this unit.
Carla Albano
The next question comes from [Indiscernible]. He sent us a message. Congratulations on the wonderful results and the creation of another pillar to strengthen corporate governance, which was established with the pricing guideline. Andres first question is for Rodrigo Araujo. So Rodrigo, excluding the signing bonus CapEx in the first half of the year was $4 million. The business plan foresaw a CapEx of $11 million, and this is with more depreciated exchange range in addition to cost inflations in the period. Should CapEx at the end of the year be lower than previously forecast, if yes, why?
Rodrigo Araujo
If we adjust the forecast of the business plan for the second half of the bidding ground, it will go up to around $11.9 billion in expected CapEx for the year. Our most recent outlook is 11%. So that’s what we expect to perform throughout the year. Of course, as you guys know, the second half of the year is usually a ramp up in terms of CapEx in the second half. So that’s what we expect to perform in our most recent outlook.
Carla Albano
The next question also from Andres is to Fernando Borges. What is the expectation regarding the listing costs for both pre-salt and post-salt in the third quarter? Should we expect further cost increases?
Fernando Borges
Andres, we expect a lifting cost in the range of $6 per barrel during the coming months for the total Petrobras production. In the pre-salt, you see a lifting cost in the range of $3 to $4 per barrel. And in the post-salt, we should have something around $10 to $12 per barrel in the coming months. But it’s very important to stress that the total production costs considering other expenses such as government participation and depreciation will be in the range of $42 per barrel. That’s the real cost.
Carla Albano
The next question comes from Monique Greco with Itau BBA. Monique has sent us a message as well. I’m going to read it. Congratulations on the results. The team’s capacity for generating results is impressive. Monique’s first question is to Rodrigo Araujo. How is the status of the divestments in the refineries Albacora and also Bahia Terra?
Rodrigo Araujo
So with respect to the refineries in Albacora, I just answered the question recently. So I’m going to focus on Bahia Terra. What we had in Bahia Terra, we had just stopped the process for legal injunction from one of the potential bidders. It’s a competitive process. We have very good prospects. We have other interested bidders on the process. We think we can sign it very fast as soon as we remove the legal barriers that have been imposed on it. It’s not related to the company or to the asset or anything like that. It was an injunction that was upheld by a judge in favor of one of the potential bidders. We expect to be able to reward its own and right after continue with the signing and closing of the transaction. That’s where we are now.
Carla Albano
The next question also from Monique is to Rittershaussen and also Fernando Borges. What’s the schedule of maintenance stoppage for refiners in the second half of the year? And how could this eventually impact production? And how about the stoppage in other platforms? Is there a plan for more stoppage this year?
Joao Henrique Rittershaussen
For the refineries, we have a stoppage on [Indiscernible] on the distillation and coking unit between August and September that will take around 43 days. The other stoppage is on [Indiscernible] on the hydro treatment unit between August and September around 28 days. The next stop is on [Indiscernible]. It’s on the hydro treatment units also, and we will take 35 days between August and September. And HEPAR will have works on the distillation in hydro treatment units, and will take 31 days on September and 43 days on October and November. And all these stoppage will impact on diesel around 42,000 barrels per day and on gasoline, 20,000 barrels per day. That’s our estimation on these impacts.
Fernando Borges
Well, considering the platforms, we have a total of six production platforms. For this year, we have planned 50 stoppage for maintenance purposes. In this case of this year, we have some of them that were postponed by pandemic reasons. And the impact in the production were incorporated in our predictions. So we hope to reach the target of 2.6 million of BOE per day this year.
Carla Albano
Monique has another question and it is for Joao Henrique. How is the planned CapEx for this year being carried out? And how will this estimate to be impacted by the delay in the Route 3 projects, [Indiscernible].
Joao Henrique Rittershaussen
In the part of this year we have our added around 40% of the total CapEx plan for 2022. We expect an increase of the CapEx in first half when you compare to the first half. We have some milestone of the new units that we are building a lot of wells that will conclude on this time. And hope we have well-connection activities that will include our performance in the second half of the year. Around the Route 3, the impact in the CapEx of this project is less than 1% of the total CapEx of Petrobras. It is not relevant for the total amount that we intended to expand for the rest of the year.
Carla Albano
The last question comes from Conrado Vegner with Safra and it’s for Rodrigo Costa. Rodrigo, with regards to the local gas distribution companies that have injunctions to suspend the price increase, has there been a new development? Is there any discussion being done directly with them?
Rodrigo Costa
We had progress on the second quarter. We are on the table with distribution companies that has this legal situation around our contracts, and we expect close on the first quarter.
Carla Albano
Thank you all. At this time, the Q&A session is over. And if you have any further questions, you can send us to our Investor Relations team. Rodrigo Araujo will now make his final remarks. Please, Rodrigo, go ahead.
Rodrigo Araujo
Thank you, Carla. Thanks, everyone, for being here with us today this morning. We’re very glad with the solid operational results and of course, with the translation of the results into solid financial results for the company in the second part of the year. Thank you for your time and for the questions. Please look at our results and our releases in the company’s IR website. We have also released alongside with the earnings release, our financial statements and our tax report for the second quarter of 2022. Thank you for your time, and thank you for being with us. We’re very happy with the results of the second quarter.
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