Petróleo Brasileiro S.A. - Petrobras (PBR) Q4 2010 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. And welcome to the Petrobras conference call, to discuss the fourth quarter 2010 results. At this time, all lines are in a listen-only mode. Later, there will be a question-and-answer session and instructions will be given at that time. (Operator Instructions) Today with us, we have Mr. Almir Guilherme Barbassa, Petrobras, CFO and Investor Relations Officer and his staff. At this time, I would like to turn the conference over to Mr. Theodore Helms, Investor Relations Executive Manager of Petrobras, who has some additional comments. Please go ahead Mr. Theodore.

Good afternoon, ladies and gentlemen. Welcome to our conference call to discuss fourth quarter and 2010 results. We have a simultaneous webcast on the Internet that could be accessed at the site www.petrobras.com.br/ri/english. Before proceeding, I would like to draw your attention to the slide two. We may make forward-looking statements, which are identified by the use of the words, will, expect, and similar that are based on the beliefs and assumptions of Petrobras' management and on information currently available to the company. Finally, let me mention that this conference call will discuss Petrobras results prepared in accordance with the International Financial Reporting Standards, IFRS and Brazilian legislation. At this moment, we are unable to discuss any issues related to U.S. GAAP results. The conference call will be conducted by our CFO, Mr. Almir Guilherme Barbassa. He will comment on the company's operating and financial highlights and the main events during this quarter, and he will be available to answer any questions you may have. Almir, please begin.

Thank you for joining our conference call to discuss fourth quarter and full year results. We are more than half way through the complete modernization of our existing refining products and are now constructing two new refineries. We have hold that to complete our natural gas infrastructure and we encourage the first growth in production system in [Guará and Tiro]. Next please. Each of our business segments contributed positively throughout 2010 financial results. Results for the year were very strongly influenced by the rising oil production and international oil prices, strong domestic demand and the strengthening reais and stable product price in Brazil. Gas and energy improved on the strength of increasing demand and infrastructure while international operation benefited from higher price in volumes. The consumer pricing actually in Brazil was 5.91% in 2010 causing an increase in costs throughout our operations. Volumes transported and sold grew by 11% leading to high additional cost, even after unit costs were stable. For the year, our annual operating income was up 12% while our net income increased by 17%. Next. For 2010 oil and gas production was 2,004,000 barrels per day, up 2% for the year. We have set a target of 2.1 million barrels of oil in Brazil per day, but we’ve not reached that target. The reason for the shortfall were (inaudible) stoppage interact by the Brazilian National Petrol Agents BNP lead to reduced production in mining gas fueled to recover the pressure off of the (inaudible). And the rates in the start of our production system, (inaudible) it was a highlight in growth in natural growth production of 5% in 2010. We expect to grow even more (inaudible) we completed important connections to our gas network in some of these states. These reveals how our team incorporates non-associated gas…

Thank you. (Operator Instructions) Please go ahead. Sir, you are in the conference you may please proceed. (Operator Instructions)

Okay sorry for (inaudible) net income of first quarter to third quarter we have financial results stable, income start to decline, the result of declaration of interest of capital and minority interest decline by (Inaudible) immediately. The final result was an increase in net income from the prior quarter of 24%. Next please. Turning to CapEx, capital expenditure of R$76 billion issuing to an extent an increase of 8% from the prior year. Capital expenditure by Brazilian exploration products increased by 5% largely related to increase spending in the three sells. Large stream spending grew by 70% for the investment for upgrades regulatory spending and logistic is speaking wide spending on the (inaudible) refinery at (inaudible) the outstanding decline of regarding the structure reach completion. Our international segment also was reduced capital remained focus on integrated operation in Brazil. (inaudible) are fit for (inaudible) business slightly R$93.7 billion. This amount to 5.8% that (inaudible) what was approved last year. These project is similar to the level of investment forecast for our trend 2011, in 2010, 2014 business trend, with as small increase to reflect initial exploration of the trends of price increase. The allocation of investments for 2011 all follows had been amount to 2010, with increased spending Brazilian upstream and downstream and continued reduction in gas and energy is stable extending internationally. We are now planning to give full updates of our business learn for 2011, 2015 in the second quarter of this year. Next, the capital rates into extent has giving us a very comfortable position with respect to the liquidity and leverage. We ended the year with net debts to net cut-off of 70% and net debt to EBITDA of one-time is up. These are well below the limits we have established for the company. We ended the year with cash and equivalents including governments secured with maturity above 90-days of R$55 billion. Our bond continued to be well received by the debt to capital markets, where we issued $6 billion of 5, 10 and 15 years, 30 years maturity in January. For the remainder of the year, we will have our international rolling source as well as some of Angola capital market. With that overview, we will now be happy to answer any questions. Thank you.

Thank you. (Operator Instructions) Our first question comes from Lilyanna Yang from UBS. Please go ahead. Lilyanna Yang – UBS: Hi good afternoon, thank you. My questions is on downstream, we two have very little good profitability visibility on your Green Field project. And I understood on the Portuguese call, there you were working with an assumption of $7 of the barrel margin in the future. However, I would like to see at least break it down forever how much of your lets say, how much is the CapEx for the pre-annual – pre-matured or the compound, the final complexes in your budget and more specifically of the $58 billion in CapEx and define of this year how much it is for each of this Green Field project? Thank you.

I am great to ask as you bet to pass on the estimate, (inaudible).

(inaudible) refinance they have a designing competition of projects undergoing, these design competition is a new approach that we all riving our – finally how can I say final scheme and all other things (inaudible) to find to have better and more efficient finally at lower cost. And since we don’t have these in results of this designing competition yet, we don’t have the fuels to give you about any movement due to finance. Yes that is definitely next month they people will have results to viewers and the only really we have any – we have better visuals to answer your question that’s why in the morning I (inaudible) talking to a – I did not answer the question of (inaudible) about the return investments of our portfolio. We are expecting those (inaudible) the value competition is (inaudible). Lilyanna Yang – UBS: Now I understand that you have zero of premium one and premium two CapEx in your $38 billion CapEx budget for 2011, is that right. And (inaudible) which is I was finding that there is already half underway. How much of the $15 billion total budget is in the 2011 budget then I believe you probably have these numbers right, because of $38 billion (inaudible)? Thank you.

We don’t have the (inaudible) of the budgets or we do not believe this information should…

We should do not believe…

Usually don’t (inaudible) yeah. So sorry, but we don’t have the great down of the (inaudible). Lilyanna Yang – UBS: Okay. Thank you.

Our next question comes from Frank McGann from Bank of America Merrill Lynch. Please go ahead. Frank McGann – Bank of America Merrill Lynch: Okay, good afternoon everyone. Just to follow-up on the whole refining spending team. As you looking forward over the next couple of years you obviously are going to be finishing a lot of the upgrading projects. You do have a lot of new spending coming in for their premium refineries, but you are trying to reduce those costs somewhat. I was just wondering in terms of the weight of spending for refining and the total amount of spending as we look out of 2011, ‘12, ‘13 once we get beyond this period. Is refining spending likely declined fairly noticeably, I mean how are you looking at the overall mix of spending as you move out over the next couple of years and beyond that?

Okay.

Frank. Frank McGann – Bank of America Merrill Lynch: Yes. Hello.

Are you hearing? Frank McGann – Bank of America Merrill Lynch: I cannot hear you. No, I’m sorry. Maybe it’s the phone line I’m on. I don’t know.

(inaudible) interruption ladies and gentlemen, we’re now having some technical difficulties. Please hold the line. Thank you. Please hold the line. We are having some technical difficulties. Thank you. Sorry for the delay ladies and gentlemen, but we are having some technical difficulties. Please hold the line. Thank you. Following the interruption but we do have the speakers back. Please continue with the presentation. Mr. McGann, you are still in the question queue, sir. Frank McGann – Bank of America Merrill Lynch: Okay, great. Thank you.

McGann? Frank McGann – Bank of America Merrill Lynch: Yes. Can you hear me?

Yes, I can. McGann. Frank McGann – Bank of America Merrill Lynch: Yes, now you can, yes.

Okay. The status for the forecast for the next few years, what we see is that the overall spending on modernization project and the current assets we have are going to be reduced gradually from now until 2013, 2014 so actually difficulties are tough on the average spending in modernization, what I mean quality and conversion projects. If you take the average from 2010 to 2014 and compare it with the average spending after 2015 until 2020, you are going to see that this amount, the total amount is going to be reduced by minus 70%, 80%. So we are going to pretty much be done with the upgrading of our current refineries by 2013, 2014 most of which are going to be raised. But in the other hand, the new capacity we are adding now mostly now due to the North Eastern Refinery and the capacity of course marginal of refining capacity, you are going to spend more and gradually until the start up by 2013. So what we see there is going to be a shift from modernization spending to new capacity additions. And but the answer is yes, the overall spending is going to be reduced mostly due to the significant reduction we expect to have in, having in the current assets. Frank McGann – Bank of America Merrill Lynch: Okay, great. Thank you very much. Actually if I can just add one more question. I don’t believe and maybe I missed it in some place, but the amount of the cargos that were not booked in the fourth quarter and they look like they will probably be in the first quarter, is that amount been released?

Yes, the pay back (Inaudible) is about 42,000 barrels per day through third quarter, that’s 14.3 billion down.

Really from our (inaudible) but yeah, we thought that during the fourth quarter, total export was about 140,000 barrels per day, so only 100 was required. There is about 42,000 barrels per day that was not included, was not required on the account that we expect to happen during the first quarter exports.

Our next question comes from Paul Cheng from Barclays Capital. Please go ahead. Paul Cheng – Barclays Capital: Hi, guys. Two questions, one the dividend in interest and capital for 2010 had gone to about 35%, I think historically, you guys are roughly about in the 30%, is that the new percentage guideline that we should use going forward? The second question is on the… yeah?

Yes, not exactly. What happened is that according to the law, I mean the regulation in Brazil, the situation of shares, they have the rights to exceed at least 25% of the net income or 5% of the value of the differential sharing the capital of the company. And in this year, in the second half of 2010, 5% were greeter than the 25%, so we could, we have to take minimum of 5% of the value of the shares as dividend. And that took a different value for the (inaudible) shares. We made the same for all of them. In this way we have to pay a dividend of 25%. But as soon as dividends are (Inaudible) we don’t have to [happen] again where we shall go back to the 25.

Mr. Cheng, you seemed to have been removed from the queue (Operator Instruction). In the meantime, our next question comes from Marcus Sequeira from Deutsche Bank. Please go ahead, sir. Marcus Sequeira – Deutsche Bank: Hello, good afternoon everyone. So just two follow-up, I couldn’t hear the amount of the shipping that were not booked in the quarter and also to ask, I’d like to ask that I believe this is a fairly common thing to right to have shipments booked from a quantity order. But was this an unusual high amount in this quarter or how much you sold at the end of the third quarter and you booked at the beginning of fourth quarter, just want to have an idea if you really this distribution really have, a meaningful impact? And second on the CapEx, could you give us a sense of the impact of this higher industry costs in your CapEx please or everything had already been contracted in for the higher industry costs had an impact in your CapEx for 2011? Thank you.

That will not have (inaudible) from the downstream to explain about the (inaudible) value involving (Inaudible) for that were not recorded. That means volume OpEx in the first part that were not delivered to the value. Marcus Sequeira – Deutsche Bank: Okay. Let’s talk about the number of shipment revolving volume, 100,000 barrels per day and all your products 43,000 barrels per day, so we had in terms of volumes 123,000 barrels per day, talking about the leaders volumes 90,000 barrel per day and oil products are added. So basically we have a difference of 42,000 barrels per day and we are talking about difference between shipments and the reasons (Inaudible).

Could you repeat the second question regarding the CapEx. Marcus Sequeira – Deutsche Bank: Yeah, just a follow-up to the first. I believe that this is this mismatch between selling and accounting probably happens in the other quarters as well, probably is a common thing. I just wanted to know if this in quarter, it was unusually high. And the second question was if the industry costs, efficient costs for the oil service industry and what was the impact of that in your CapEx for 2011?

I’ll taking point to check the information regarding the inflation costs on the industry and probably that interest on the 2011 I don’t have that now. Marcus Sequeira – Deutsche Bank: That’s fine, thank you. Then again on just repeating the question, on the thrust of the 5 billion barrels, you’ve talked about India in the Portuguese call that your CapEx should be around, I think 500 million. Do you guys have an idea of, you know, we have a few of the two wells. Do you see, but do you guys have a plan of when you guys would like to prove commerciality of this field?

We are working to do (Inaudible) as fast and also we said, we are going to drill two wells in the blocks that we’re assigned to produce the 5 billion barrels. We have to do a minimum exploratory in order to – in each of this fields and this includes dig wells and learning through seismic. And for (Inaudible) that is the large official production. We need to do an extended well to ask as well. So we have to complete the work for each area and at the end we will – each one has the commercial volume, but we do not need to wait for the completion of all seven as we finish the minimal work that we’re going to declare as commercial and we can enter established refine operation and enter into a new stage of development, (Inaudible) do you want to add something? –

No…

That’s it. Marcus Sequeira – Deutsche Bank: Thank you, thank you very much guys.

Our next question is Paul Cheng from Barclays Capital, your follow-up, sir. Please go ahead. Paul Cheng – Barclays Capital: Thank you. Two question. One, a miss in the tactics sales that I think in the oil industry most of the oil surfaces contra being nominated in U.S. dollar. In your case that when you sign a contract or that for QA agreement. Do you base on VI as the nominal price orders based on dollar, or do you maybe give us a percentage, how much is your contracts or the surface that your 4Q is based on U.S. dollar. So we know when if exchange rate change that have that impact on your CapEx. So that’s the first question and I make as a lot miss it, in your current purchasing of 93.7 billion reais. How much of that is relay the additional spending associated with the new transfer rise at 5 billion barrel operation? Thank you

Okay, regarding the transfer of rights, in the 593 billion reais, we are going to drill two wells. Good, are we doing only seismic acquisition and any (Inaudible). The second question is therefore the total investments. The total investment for 2011 in this transfer of rights, we will be close to 900 million reais which is more or less $500 million. Paul Cheng – Barclays Capital: Okay, so you’ve less than 1 billion. So the bug of the increase is actually not related to this?

No. Paul Cheng – Barclays Capital: And I mean about, how about the FX change and how that impact on your CapEx? How should we look at it?

Just adding something to the previous question. We have $224 billion for five years and it will, you take 2011 that is around 55 million is and multiply it by five will give you a larger number. It means that we are learning not to good the same level of activity year-after-year. There are years that has a larger volume of expanding CapEx than others. And just the – now just what I can tell you is to wait for the next five year plan that we’ll really give it all the years to come, and actually how this is going to perform. Regarding the effects of inflation costs, or known as CapEx. We have in the upstream a larger portion of (Inaudible) groups and serves as a material than in the downstream. The average of the company is about 50/50 and we take this into consideration to improve our calculations. With this together with the volume and the five year plan will recharged the exchange rate we are using. But the total in the company is about 50/50 and it is increasing with all of them reais and rates are not (Inaudible) is being developed in the country. Paul Cheng – Barclays Capital: So Almir, can I read it correct, read it the way based on what you say is that, if we look at the regional budget is 88.5 billion, that is assuming 2 reais for US$1, so that get you to about US$45 billion and you say half of your CapEx is dollar based and half is reais based and if reais appreciate to about 1.6, 1.7 to a $1 from the two, so that half from reais terms should be lower probably by, say about a 15%, so that means that everything are equal on reais term your budget should be maybe more likely in the 82, 83 now that you are in 94, so that is it will increase by about 12%, 13% comparing to your annual plan. Is that interpretation correctly?

It’s not, I cannot tell you that it is wrong. Yes, if you take the 50% dollars and 50% reais, the currency of same variation is going to be offset one way it’s going to offset the other. So, the growth in reais in the CapEx from 89 to 90, this gives the comparison you have to do, that is about 5%. You can say that these deals are equivalent to reais, because of cost base which the reais has a larger value this year compared to stocks, (inaudible) where you are taking the real (inaudible), but turning back to the point reais next the volume of CapEx be the third quarter projector for the 2011 than we did for 2010. Paul Cheng – Barclays Capital: Thank you.

But do not compare that with the volume we actually termed as CapEx, because we can reach at the end of the year with smaller volume of investment (inaudible) I extend? Paul Cheng – Barclays Capital: Thank you.

Our next question comes from Sergio Torres of JPMorgan. Please go ahead. Sergio Torres – JPMorgan: Gentlemen good afternoon to all. I have a question, first of all congratulations on the result of the Planoleo, about that could you please tell us how much of those discoveries were made. Can you just break them down between 2009 and 2010, the 1.1 for post-salt and the 0.8 billion for pre-salt. Can you just tell us how much of that was made in 2009 and how much in 2010?

Hugo, can you tell that?

Yes, in fuel we took this number of discoveries from the press release data. We took all the press release just yeah, the idea which just shows to change the view that the vessels have (inaudible) of the all accomplished basing as a major base. When we took all the press release, then it will take maybe two partnerships to be global set to see which one of them maybe in 2009 and 2010. But it is just a combination of the information available in the website about these companies. But basically the idea was to prove that the company agent still have either below the acquisition fuels, acquisition consortium if fuel drive is strong and important, (inaudible). I will take these reports to see, which were from 2009 and 2010 as they are available to understand. Sergio Torres – JPMorgan: Okay, all right understood. Thank you. Thank you, Hugo.

Our next question comes from [Fernando Vela] from Citi. Please go ahead. Fernando Vela – Citigroup: Hi, good afternoon. I just wanted to ask a quick question on refining. Going through press release, your refining costs went up 22% discounting effects for year-over-year and you attribute that to high expenses of maintenance in personnel and I just wanted to understand a little bit on how those change it, what exactly those costs were and is that’s going to be recurring?

(inaudible), can you help us.

Yeah. Okay. I will talk about the cost on the fourth quarter compared to the third quarter not huge. We will have 34% more than we have on the third quarter basically because of chemical products. We expect to improve (inaudible). Personnel have risen in accordance with (inaudible) those few guys, why is that because third quarter we had some unusual effects and probably we’re going to keep on the same amount of money that we are in the fourth quarter. Talking about the maintenance, we had some late especially into refineries (Inaudible) it’s not going to be on those plays. We’re going to reduce that again next quarter. And talking about the turnaround, it’s much less than we had on the third quarter. 73% less than we had on the third quarter because rates for all the units were running and the idea is for the last year is that we’re going to have (Inaudible) that we had on the 2010. So we expect (Inaudible) money on turn around. Fernando Vela – Citigroup: Okay. Thank you.

Our next question comes from Christian Audi from Santander. Please go ahead. Christian Audi – Santander: This is a follow up on production. I don’t know if (Inaudible) is still around. When look at the production targets for 2011 (Inaudible) over the one of the main tests behind it would be that P-57, can you tell me where production is or what level has it reached as of the end of January for example what, how much P-57 is producing.

P-57 is in the very beginning of (Inaudible). It start producing on December and days are yet to come. But in the average, in the whole year, at the end of the year we expect to have pretty close to units of the platform through the contributions maybe bigger than 55,000 barrels in the annual average. And I think it is important to remember that there is also the (Inaudible) and other projects coming and also P-56 at the end of the next year. Some extended like that, there is a lot to come. Fernando Vela – Citigroup: Sure. But say, I just couldn’t hear you. So you said it's more or less at what levels currently?

(Inaudible) Fernando Vela – Citigroup: Thanks.

Do you have any other questions? Fernando Vela – Citigroup: Yes. So, the other question was in addition, in your view in order to return target in addition to P-57, what would be the other two key platforms in order for you to be confident that you can reach that 2100 target. What would be the other two key platforms in your view in addition to P57?

Basically, let me give you some, pretty important point to say. (Inaudible) is very important next year and we are coming back with a budget (Inaudible) is a double cheer. If you (Inaudible) that is coming back and for the fear that was positioning half of the transportation last year in order. It's about you, if you're below unless that is comeback (inaudible) that was specialty ahead of the potential. Let's see in the other equipment that the pressures in the reservoirs were longer selective in the loss. Now this year we expect to double think to give the contributions for also 30,000 barrels a day. (inaudible) I've been profitable needs that we’ll reproduce in this year. Then with this equipments, some of the most important contribution for the next year, 357 to the lower stock customer (inaudible) strategy in this year, we'll move up to (inaudible) and (inaudible). I think these are the main contribution for the next year. Make some more as you see (inaudible) and some (inaudible) come from the bottom but we’ll got strengthening the main contribution are (inaudible). Fernando Vela – Citigroup: And 256 right now you have expected to begin in July of the least 2011. How is that looking and in terms for that for before hand or any risk of delays as we stand here today in February, how realistic is that start up of 256?

The mobile is mainly important problems that cannot during this kind of big seasons, in the final commitment, final commissioning process where we get best and find and discover some problems. After two days considering the construction the warehouse and the treatment, everything is on schedule, but we are taking care to see at the end if everything will be a key to put the small dispute on similar cases. Fernando Vela – Citigroup: Okay and Barbassa the last question for you related to CapEx, I know you can talk about any quantitative points about the five year CapEx that you announce later in the year, but quantitatively speaking, is it correct to say that in the past two or three years, you had important structural changes to your five year CapEx such as tradition of (inaudible) the introduction of these new refineries, which cause those big increases in CapEx to occur, but now looking out to the next five years that we don’t see any fundamentally major structural changes to the plan and therefore although we could see an increase may be not to the same degree as we’ve seen in the past two or three years, is that a fair or corrected way to look at these trends?

I think yes, but you may see we are expecting as much as that the Southeast going to grow more and more time contributing through more production as well, so the (inaudible) we will not at the same percentage of paybacks, but they are taking today or in the last years, but I believe that is a very important information here regarding this (inaudible). According to once the volume of Northern Europe has publishing their report we were together and not taking our numbers, but their numbers all the 5 billion barrels of oil will be self finance. What we are going to do this for the first platform can install and then it can finance the second and so what. And this is going to be a very important contribution to the production of the company in the future. That means, we are going to grow production, low demanding of new cash flow, the additional cash flow generation from the same source, we’re going to meet self sufficient. I believe this is the most important when you look forward in concerning with the (inaudible) and the possibilities of the company.

I had the information about P57 is close to see 2,000 barrels a day.

Okay. Fernando Vela – Citigroup: All right, thanks Hugo, and thanks Barbassa.

Next question?

Our next question comes from Emerson Leite from Credit Suisse. Please go ahead. Emerson Leite – Credit Suisse: Thank you, good afternoon everybody. Good afternoon Barbassa and Hugo. I have two questions, first is associated with the whole pre-salt development. I would like to split it in two, in terms of a drilling rigs, the win indeed for the first seven rigs on the 28-drilling rig package from Atlântico Sul Shipyard was considered remarkably low by no more established operators in this business. So my question is, are there any provisions in the contract for cost overruns in the construction of this rigs meaning. If the Shipyard ends up building the rig at a much higher cost, who will bear that cost, it’s going to Petrobras or it’s going to the Shipyard? And then associated with that question, I’d like to know if you are already negotiating for the next package of seven rigs or if you at some point will go to the open market to contract some of the remaining 21 rigs that have not been contracted yet? That’s the first question.

Emerson, the seven rigs we just finished with the bidding process. We are going to be owned higher companies with private investors. So they are going to be like any other rigs that we compete from the markets that we are going to have 10% from the capital renewed company to give comforts to the investors, but not today and the overrun costs. So if there is – there are some balance sheet inflation for performers that can cover delays on the deliver if not cost overrun. So if there is any cost overrun, the Shipyard has to bear. And they are of course they are built not the Shipyard, but our company that is part of the Shipyard. We are building drillship at last three licenses designed, we are going to build in Korea right now and they have the opportunity to get the engineers and people trying to improve the costs on the construction. And more than that, we are not building one unit. We are going to build seven units. So we have time to invest and to improve their efficiency to reduce cost. All our work put together to innovate that new builds across the different either or not the rigs and which is by the Shipyard, so both facility of cost overrun to be bear by the owner of the rigs. They have second in Russia. Regarding the remaining 21, last year we were waiting for some operators of drillships that perhaps proposed us some leasing on rigs to be built in Brazil, they present by higher costs – higher price and we were extracting, so we are negotiating with them, see if we can reach to that price we are comfortable. Otherwise, we assess the process of higher contracting yield rigs to be built in Brazil, there is no, so in fact nothing that points to have international built rigs to supply our MCF is 21, remaining rigs is to be built in Brazil. Emerson Leite – Credit Suisse: Okay Barbassa, thank you. And the second question on the replicant FPSOs should be built in the Jurong Shipyard. What’s the latest in terms of the bidding process for the top-sides and the overall schedule of events? You know it seems that the processes are a bit delayed and I’d like to hear from you, what’s the status and things are on track or not?

Let me have Hugo to help me on that.

Okay. The design of the facility, we still require some information regarding the marketing shares, some winding shares and the results to see the results of the facility. Then it is a much more in time to design and to see, to set data and to define the right design for the facility and then we’ll be ready to move forward. Right. Emerson Leite – Credit Suisse: Okay, Hugo. And maybe one final question. You know one thing that I’ve been watching closely is the level of depletion in the production of the Campos – or the central part of Campos Basin fields and the data form ANP suggests that the depletion in the May fields is were only at a 15%, 15. I always had in the back of my mind the number of 10%, which has been the guidance of Petrobras was a while. So I’d like to understand what’s going on with those fields, if depletion is accelerating, if you are concerned with that and how should we think of the current updates of production? How much is depleting in order to module the future production I think that these are very important points to be accurate in the estimates. So if you can give more clarity on what’s going on there would be helpful? Thank you.

Okay, this is always be very important points for us in managing production and the decline rate. The depletion is one of the most important indicators of the opportunities, the remaining opportunities to improve recovery factor and to keep the production as late as possible optimizing the use of this in infrastructure and production needs. Then behavior of this big joint fuels they do not behave as a linear declines like 10% or 8%. In general, in the very beginning of the production yields for you to higher decline and – there is a more nature for after the few years in a very low decline rate, which means that it tends to be much more hyperbolic than the linear or even explanation. But in the case of disputes, there’s always an opportunity to drill our wells and to keep it for the new opportunities close to review in order to keep the oil producing as late as possible with a lowest decline rates as possible, that’s what we are doing with the combination of – we called it projected by (inaudible) we called the explanation side of (inaudible) it’s also combined with GPU drilling and the management of water injection. This is a number of factors to manage these – the depletion in the decline rate. In some cutes we can experience a rates still get the 10% in the beginning that I’m assuming that’s what you could see in the data from ANP, but we are not concerned with this figure nor but for disputes because it’s far of the management to mange. So that we don’t have to expect capacity to reduce the decline rates because some times it is because of the water production. Then the liquids in the platform can be the same with some decline in volume and replace it by water and then we cannot do anything and sometimes in the beginning we can face higher decline rates in some disputes which is in general compensated by a low decline rates in order to use, that’s why in the average we have the 9, 10, sometimes 8% of decline rates as an average for the company. Emerson Leite – Credit Suisse: Okay. It’ll go. Thank you very much.

Our next question comes from (inaudible) from UBS. It’s a follow up. Please go ahead. Emerson Leite – Credit Suisse: (inaudible). The government deal to the production channel agreement. Barbassa would you please give us an idea when you assess this options you have in. And how is to deliver on the confession for coming. Thank you.

(inaudible) We are boosting ourselves to know when the extreme capacity. That I have some moves on that I cannot say why than a (inaudible) maybe in the flip of outfit that you can think but in the front is somewhat expanded you know them in the bank. They are averaging for volume talk about. Emerson Leite – Credit Suisse: Okay I'm regarding the business plan. Can you still expect to be disclose sometime in April remain may likely and I want if you would be able by then to give us more clarity about the CapEx because mostly for the downstream business. Thank you.

(inaudible)

Usually become the cell to tell us information. Emerson Leite – Credit Suisse: (inaudible) we have nothing to change our same.

No. Emerson Leite – Credit Suisse: Okay so and we still see the CapEx to be reviewed and disclosed, I mean the whole business stand for 7 and 1115 by April. Did you reserve that.

Yeah. There we have (inaudible) begin up rate. We’re looking to, we are so much fast and at times and very compact with that. We’re (inaudible), we’re set under process for short and we’ll be looking in that. Emerson Leite – Credit Suisse: Of course, thank you very much.

Thank you. Ladies and gentlemen there are no further question at this time Mr. Barbassa, please proceed with the closing remarks.

Thanks very much for being with us in this (inaudible) the results of the year in the quarter. Hope you to meet you in the next quarter. (inaudible) results. Thank you very much. (inaudible)

Ladies and gentlemen, the host is making today’s conference available for replay starting one hour from now. You may access this replay at the company’s IR website at www.petrobras.com.br also as RI for first comers. This concludes petrobras conference call for today. Thank you very much for your participation. You may now disconnect.