Petrobras - 2009 Sustainability Report

• Economic and Financial
  Summary

• Consolidated Results

• Results by Business Segment
• Results per Company
• Volume of Sales
• Inventories
• Investments
• Indebtedness
• Return on Capital Expenditure (ROCE) and Return on Equity (ROE)
• Assets and Liabilities Subject to Exchange Variation
• Net Equity, Distribution of Results and Dividends

Results by Business Segment

Petrobras is an operationally integrated company and the major part of the production of petroleum and gas from the Exploration and Production Department is transferred to other departments of Petrobras.

In the computation of the results by business segment, transactions carried out with third parties and the transfers between the business segments are considered and they are valued by internal transfer prices defined between the segments using calculation methodologies based on market parameters.

a) Exploration and Production

The decrease in net income reflected the change in the level of the international quotations for petroleum and the extra expense with the special interest in the Marlim field, pursuant to an agreement between Petrobras and ANP . A part of these effects was offset by the 6% increase in the daily production of oil and LNG and by the decrease in the costs with government interests (24%).

The spread between the average price of Brazilian petroleum sold/transferred and the average quotation for Brent dropped from US$ 15.44/bbl in 2008, to US$ 7.29/bbl in 2009, reflecting the appreciation on the international market of the "heavy" petroleums compared to the "light" petroleums.

b) Supply

The increase in the results originated from the lower costs for purchase/transfer of petroleum and the importing of oil products, reflecting the behavior of the international quotations for petroleum.

A part of these factors was offset by the decrease in the average realization price of oil products, reflecting the lower prices for exports and, on the domestic market, for oil products indexed to international prices.

c) Gas and Energy

The higher results occurred due to the following factors:

• • an increase in fixed revenue originating from the auctions for power (regulated contracting environment), as well as from the exporting of power;
• • greater availability of power for trading, due to the recovery of ballast;
• • increase in the level of the hydroelectric dams, reducing the average cost for purchase of power and increasing the trading margins. Part of this effect was offset by the decrease in thermoelectric generation;
• • decrease in the costs for importing/transferring natural gas, following the behavior of the international references.

The conclusion of the infrastructure ventures which have made the flow of natural gas production possible also contributed to the increase in the results and, consequently, avoided the penalties for supply failures that were incurred in 2008.

d) Distribution

The increase in net income resulted from the 13% increase in the volume sold, mainly reflecting the inclusion of the commercial activities of Alvo Distribuidora, despite the consequent increase in selling, general and administrative expenses (R$ 313 million).

Trading margins decreased 2%, due to lower average realization prices, offsetting part of the increase in the results.

The market share for distribution of fuels increased from 34.9% in 2008 to 38.6% in 2009.

e) International

The main events that influenced the results for 2009 were:

• • an increase in gross profit (R$ 961 million), due to better margins in the refining operations in the USA and Japan, and a greater volume of sales of oil, diminished by the decrease in prices on the international market;
• • a decrease in losses from devaluation of inventories (R$ 261 million);
• • recognition in 2008 of the provision for decrease in recoverable value of assets (R$ 330 million) and of the loss from the devolution of Block 31 in Ecuador (R$ 182 million).

Extraordinary Items

In 2008 and 2009 the following extraordinary items had an influence on the segmented and consolidated results of the Petrobras System: