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# Petróleo Brasileiro S.A. – Petrobras (PBR, PBR/A): Narrative, Q2 2026 Amounts are in US dollars. Petrobras keeps its books in Brazilian reais but presents its consolidated statements in US dollars, translating income and cash flows at average rates and balances at period-end rates. Almost every amount below is the dollar figure the company printed. The few that Petrobras disclosed only in reais have been converted from reais, and each one is marked where it appears. Each PBR American Depositary Share represents two common shares, and each PBR/A ADS represents two preferred shares. Common and preferred shares earn the same per-share profit and dividend. ## Business *Source: Annual Report and Form 20-F 2025 for the fiscal year ended December 31, 2025, accession 0001292814-26-002168.* Petrobras is Brazil's partly state-owned, vertically integrated oil company. It produces most of Brazil's oil and gas, mainly from deepwater and ultra-deepwater fields in the Santos and Campos basins, and refines most of it in its own Brazilian refineries. It sells the fuels (diesel, gasoline, jet fuel, LPG and naphtha) to wholesalers, retailers and direct customers in Brazil, and exports crude oil and fuel oil. In 2025 consolidated sales revenues were $89.2 billion. Of that, $62.9 billion came from the Brazilian market, where diesel alone brought in $26.9 billion and gasoline $12.3 billion. Exports brought in $25.6 billion. The Brazilian federal government is the controlling shareholder and must by law hold a majority of the voting stock. At December 31, 2025 Petrobras had more than 50 thousand employees. The company reports three segments, plus a corporate unit: - **Exploration & Production (E&P)** explores for and produces crude oil, NGL and natural gas, mainly to supply its own refineries. Its revenue is therefore almost entirely intersegment: $59.3 billion of the segment's $59.5 billion in 2025. Deepwater and ultra-deepwater fields provided 98% of 2025 production, and the pre-salt layer provided 82%. Total production was 2,990 thousand barrels of oil equivalent per day (mboed) in 2025, up 11%, driven by Búzios, Mero and Tupi in the Santos Basin and Jubarte in the Campos Basin. Proved reserves were 12,112 million boe at year-end 2025, including equity-method investees, after 1,680 million boe of upward revisions against 966 million boe produced. At year-end the company held 239 blocks and fields. Outside Brazil it has upstream assets in Argentina and Bolivia, the Sirius gas discovery offshore Colombia (44.44%, operator), a 20% non-consolidated interest in Gulf of Mexico production through a joint venture with Murphy, and exploration acreage in São Tomé and Príncipe and South Africa. - **Refining, Transportation & Marketing (RT&M)** carries out refining, logistics, trading and exports, and also holds the petrochemical and fertilizer interests. Petrobras operates 10 refineries in Brazil with 1,813 thousand barrels per day of crude distillation capacity, about 79% of Brazil's refining capacity according to the ANP. In 2025 they processed 1,670 thousand barrels per day, 92% of it Brazilian crude. Through Transpetro the company runs a pipeline, terminal and shipping network. - **Gas & Low Carbon Energies (G&LCE)** processes and sells natural gas from Petrobras's own fields, from Bolivia and from imported LNG. It also runs gas-fired thermoelectric power plants and trades electricity, and it holds the renewables, biodiesel and carbon-capture businesses. - **Corporate and other businesses** holds corporate finance and overhead, pension and health-plan actuarial costs, and fuel distribution elsewhere in South America. **Strategy and Business Plan 2026-30.** The plan puts capital expenditure at $109 billion over five years: - **Projects being implemented:** $91 billion. Of this, $81 billion forms a "base" portfolio, and $10 billion of projects go ahead only if quarterly financing reviews allow. - **Projects under evaluation:** $18 billion. - **Split by segment:** E&P takes 72% of capex, RT&M 18%, G&LCE 8% and corporate 2%. On the E&P side, the plan expects: - eight new production systems by 2030, seven of them already contracted; - completion of 11 FPSOs at the Búzios field by 2027, including the contracted platforms P-78, P-79, P-80, P-82 and P-83; - oil output peaking at 2.7 million barrels per day in 2028, and total production peaking at 3.4 million boe per day in 2028 and 2029; - a portfolio breakeven averaging a Brent price of $25 per barrel. In refining, the plan aims to raise processing capacity from 1.8 million to 2.1 million barrels per day by 2030 within existing refineries. Completing RNEST Train 2 and the Boaventura Energy Complex is expected to add low-sulfur Diesel S-10 capacity. The plan was built on Brent assumptions of $63 per barrel in 2026 and $70 in 2030. Its financial guardrails are: - a minimum cash balance of $6 billion; - a gross debt ceiling of $75 billion, with a target of moving toward $65 billion. Under the shareholder remuneration policy, Petrobras pays out 45% of free cash flow (operating cash flow minus capital expenditure and equity acquisitions). This applies while gross debt is at or below the plan's ceiling and accumulated results are positive. The policy also sets a minimum of $4 billion a year in any year Brent averages above $40 per barrel. **Portfolio moves disclosed in the annual report:** - **Petronas fields (pending):** in March 2026, Petrobras exercised preemptive rights to buy Petronas's 50% of the Tartaruga Verde and Espadarte Module III fields in the Campos Basin. This will take Petrobras to 100%. - **Lightsource bp renewables (pending at the time):** in December 2025, Petrobras signed an agreement to acquire 49.99% of Lightsource bp's Brazilian onshore renewables subsidiaries. - **Namibia (pending):** in February 2026, Petrobras agreed to acquire a 42.5% stake in Block 2613 offshore Namibia alongside TotalEnergies. - **Completed in 2025:** the sale of the Cherne and Bagre fields, a 10% stake in South Africa's DWOB block, and a 27.5% stake in São Tomé and Príncipe's Block 4. ## Risks *Source: Form 20-F 2025, accession 0001292814-26-002168, "Risks" section; figures as of December 31, 2025 unless stated.* - **Government control and fuel pricing.** The federal government elects the board majority and has historically steered macroeconomic and social policy through the company. Petrobras prices fuel against customers' alternative supply cost and its own opportunity cost, and the government has at times pushed for prices to reflect domestic conditions. Provisional Measure No. 1,340/2026 (March 12, 2026) did three things. It created a road-diesel subsidy, it imposed export taxes of 12% on crude oil and 50% on diesel, and it introduced new penalties for "abusive" price increases and refusals to supply. The company warns that the export taxes can cut realized export prices and margins and change refining and trading decisions. It also warns that further measures of this kind could follow. - **Commodity prices.** Most revenue comes from crude oil, oil products and natural gas priced off international benchmarks. Lower oil prices hurt results and the value of reserves, and imported LNG costs are volatile. - **Currency and interest rates.** At year-end 2025, 70.7% of finance debt was in currencies other than the real, while most costs are in reais. A weaker real raises debt service and can squeeze cash generation unless domestic prices follow. 38.7% of finance debt carried floating rates, and Petrobras generally does not hedge interest-rate risk. - **Leverage, liquidity and credit rating.** Petrobras carries large debt and lease obligations ($69.8 billion of gross debt at year-end 2025). It is rated below investment grade (BB at S&P and Fitch, Ba1 at Moody's), and its rating is sensitive to Brazil's sovereign rating, which can raise financing costs. - **Litigation, tax disputes and legacy corruption claims.** The company faces large civil, tax, labor, environmental and regulatory claims. These include collective and arbitration proceedings in the Netherlands, Argentina and Brazil brought by investors over the Lava Jato corruption findings. Brazilian tax rules are interpreted inconsistently by federal, state and municipal authorities. The 2025 consumption-tax reform (Complementary Law No. 214/2025) phases in from 2026 to 2033 with key rules still undefined. - **Operating, safety and environmental hazards.** Deepwater production, refining and pipelines carry risks of spills, fires, explosions and fatalities. Petrobras also faces illegal taps on its pipelines in São Paulo and Rio de Janeiro. The company generally carries no business-interruption insurance in Brazil, and most assets are not insured against war or sabotage. - **Reserves, projects and suppliers.** Growth depends on adding and developing reserves in deep and ultra-deep water, where estimates are uncertain and licensing in frontier areas is difficult. Larger and more complex FPSOs, and the scale of the contracting pipeline, may exceed what the supplier market can deliver on time. That could delay projects. - **Decommissioning and pensions.** Decommissioning is a growing cost under evolving ANP rules. Petrobras stays jointly liable for abandonment costs on assets it has sold if the buyer defaults. Petros pension and AMS health-plan obligations are estimates that can require extra contributions. - **Climate and energy transition.** Demand for fossil fuels may decline. Low-carbon investments may earn lower margins than oil and gas. Physical climate effects such as extreme weather, drought and flooding can disrupt operations. - **Geopolitics.** Conflicts in oil-producing regions, especially the Middle East, together with sanctions and trade restrictions, can disrupt supply chains and drive price volatility. - **ADS holders.** ADS holders have weaker voting rights than holders of the underlying shares, and preferred-share ADSs vote on few matters. ADS holders may be unable to exercise preemptive rights and may find it hard to enforce claims in Brazil. ## Management's discussion of 2025 *Source: Form 20-F 2025, accession 0001292814-26-002168, "Operating and Financial Review and Prospects".* Earnings rose sharply in 2025 even though revenue fell. Sales revenues declined 2.4% to $89.2 billion as Brent averaged $69.1 per barrel against $80.8 in 2024; higher sales volumes, especially exports, partly offset the lower price. Cost of sales rose 2.8% to $46.7 billion, reflecting higher imports of oil products and higher depreciation as new FPSOs came online: Almirante Tamandaré, Alexandre de Gusmão, Maria Quitéria and Marechal Duque de Caxias. Lower crude purchases and production taxes partly offset these costs. Gross profit fell 7.6% to $42.5 billion, and operating income fell 2.8% to $26.1 billion. The swing came below operating income. Net finance results moved from a $15.1 billion expense in 2024 to $734 million of income in 2025. The main reason was a $4.8 billion foreign-exchange gain on the real against the dollar, compared with an $8.5 billion loss a year earlier: the real appreciated 11.1% in 2025 after depreciating 27.9% in 2024. Other operating expenses also eased, because decommissioning of returned or abandoned areas produced $535 million of income against a $2.58 billion charge in 2024. As a result, net income attributable to shareholders rose 160.8% to $19.63 billion from $7.53 billion. Impairments totaled $1.52 billion, mainly on the Marlim Sul, Roncador and Barracuda-Caratinga fields. A $328 million reversal on the Boaventura Energy Complex refining assets, recognized after the project's approval, partly offset them. By segment: - **E&P:** net income fell to $17.23 billion from $18.59 billion. Lower Brent prices, higher depreciation and larger impairments outweighed higher production. - **RT&M:** net income rose to $1.74 billion from $1.32 billion, helped by impairment reversals and cheaper crude feedstock. - **G&LCE:** net income fell to $268 million from $682 million, on lower gas prices and volumes and the expiry of regulated power contracts. Cash generation stayed strong: - **Cash flows:** operating cash flow was $36.05 billion, down 5.1% on lower Brent, and the company reported free cash flow of $16.53 billion and Adjusted EBITDA of $42.52 billion. Spending on property, plant and equipment rose to $19.52 billion from $14.64 billion. Dividends paid fell to $8.11 billion from $18.33 billion, and lease repayments were $9.41 billion. - **Debt at year-end:** finance debt was $26.44 billion and lease liabilities $43.35 billion, giving gross debt of $69.79 billion and net debt of $60.59 billion. The average interest rate on finance debt was 6.7% and the average maturity 11.7 years. During the year the company raised $5.32 billion, including $1.96 billion of global notes due 2030 and 2036. - **Ratings:** Moody's moved its outlook to positive in 2025 while keeping Ba1, and S&P and Fitch held BB with stable outlooks. ## Current quarter: Q2 2026 *Sources: unaudited condensed consolidated interim financial statements as of June 30, 2026, Form 6-K accession 0001292814-26-004133 (furnished August 7, 2026); management's "Financial Information Jan-Jun/2026", Form 6-K accession 0001292814-26-004304 (furnished August 20, 2026). A Form 6-K/A, accession 0001292814-26-004623 (September 21, 2026), re-furnished the same interim statements solely to add the inline XBRL exhibit. Its figures are identical to the original.* Brent's surge with the Middle East conflict and the fuel subsidies the government introduced in response drove a sharply stronger quarter. Brent averaged $92.57 per barrel in the first half of 2026 against $71.74 a year earlier, having jumped from $62.6 at the end of 2025. **The quarter (April–June 2026 against April–June 2025).** - **Revenue:** sales revenues rose 59.8% to $33.61 billion from $21.04 billion. Exports more than doubled to $12.67 billion from $5.68 billion, led by crude oil exports of $10.38 billion, and China alone took $5.46 billion. Domestic revenue rose 36.6% to $20.69 billion. That included $2.10 billion of revenue from government fuel subsidy programs, mainly for road diesel. - **Profit and per-share results:** gross profit nearly doubled to $19.49 billion and operating income rose to $14.25 billion from $5.35 billion. Net income attributable to shareholders was $10.43 billion, against $4.73 billion, or $0.81 per share ($1.62 per ADS) against $0.37 ($0.74 per ADS). - **Segments:** E&P earned $8.25 billion, against $3.97 billion. RT&M earned $1.92 billion, against $217 million, on wider diesel and jet-fuel margins and higher crude exports. G&LCE earned $190 million. - **Adjusted EBITDA and operating cash flow:** Adjusted EBITDA for the quarter was $18.62 billion, and operating cash flow was $12.25 billion. Four items held back the quarter's profit: - **Export tax.** The new export tax cost $965 million in the quarter, recorded in "other taxes", which rose to $1.18 billion from $127 million. - **Production taxes.** Royalties and special participation rose with higher prices and production, and production taxes in cost of sales reached $4.61 billion against $2.56 billion. - **Finance result.** The finance line swung to a $288 million net expense from $1.02 billion of income a year earlier, mainly because the foreign-exchange gain on the real shrank to $373 million from $2.14 billion. - **Impairment.** A $227 million impairment hit platform P-52 in the Roncador field after the restart of its production was pushed from September 2026 to March 2027. On the other side, the effective tax rate was 25.8%. It was held down by $1.16 billion of tax benefit from interest-on-capital distributions recognized in the quarter: $617 million on the first-quarter 2026 distribution and $545 million on the complementary 2025 distribution. **The half year (January–June 2026 against January–June 2025).** - **Revenue and profit:** sales revenues rose 35.7% to $57.14 billion. Net income attributable to shareholders rose 55.3% to $16.63 billion ($1.29 per share, $2.58 per ADS), and Adjusted EBITDA rose 52.2% to $29.96 billion. - **Subsidy revenue:** the subsidy programs contributed $2.23 billion of revenue, net of sales taxes, and $2.02 billion of it was still receivable at June 30. - **Export tax:** the export tax cost $1.09 billion in total. - **Impairment reversal:** a $405 million impairment reversal on the UFN-III nitrogen fertilizer plant in Três Lagoas, after its construction was approved to resume, outweighed the P-52 charge. - **Production:** output rose 15.1% to 3,281 mboed. The main drivers were the ramp-up of FPSOs Almirante Tamandaré, Marechal Duque de Caxias, Maria Quitéria, Alexandre de Gusmão, Anna Nery and Anita Garibaldi, and the start of production at P-78 and P-79. - **Refining:** refinery utilization rose to 98% from 91%, and refined output rose 8.7% to 1,867 thousand barrels per day. - **Customer concentration:** a single RT&M customer accounted for 12% of half-year revenues. - **Cash flows:** operating cash flow was $20.65 billion and free cash flow $11.51 billion. Capital expenditure, as defined in the Business Plan, rose 22.5% to $10.41 billion, 84.6% of it in E&P, chiefly Búzios and Sépia in the Santos Basin pre-salt. The company repaid $4.21 billion of finance debt, including $694 million of international bonds repurchased or redeemed, and borrowed $1.93 billion. **Balance sheet at June 30, 2026.** - **Debt:** finance debt was $25.83 billion and lease liabilities $44.97 billion. Gross debt was therefore $70.81 billion, up 1.5% on new leases, which keeps it under the Business Plan's $75 billion ceiling. Net debt edged down to $60.39 billion, and net debt to twelve-month Adjusted EBITDA fell to 1.14x from 1.42x at year-end. Average debt maturity was 11.92 years at an average rate of 6.8%. - **Cash and credit lines:** cash and cash equivalents were $6.48 billion, and adjusted cash including longer-dated investments was $10.42 billion. Undrawn credit lines totaled $7.26 billion. - **Equity:** equity rose to $93.08 billion from $75.89 billion. **Shareholder distributions.** - **2025 dividends:** the April 16, 2026 shareholders' meeting approved $7.51 billion of dividends for 2025 ($0.5814 per share). This included $1.47 billion of complementary dividends, paid as interest on capital in May and June 2026. - **First-quarter 2026 distribution:** the board approved $1.85 billion of interest on capital ($0.1431 per share), payable on August 20 and September 21, 2026. **Deals and portfolio in the period.** - **Petronas fields (pending):** on April 9, 2026, Petrobras signed agreements to buy Petronas's 50% of the Tartaruga Verde and Espadarte Module III fields for $450 million. The price is payable as $50 million at signing, $350 million at closing, and up to $25 million at each of 12 and 24 months after closing. Closing still required ANP approval. - **Argonauta ring-fence (pending):** on April 27, 2026, Petrobras agreed to buy the ring-fence of the Argonauta field (BC-10) in the Campos Basin for $134 million (R$700 million), plus $150 million payable two years after closing, subject to adjustments. This would raise its share of the Jubarte pre-salt shared reservoir to 98.11%. Closing awaits ANP and CADE approval. - **Itaimbezinho (pending, 6-K 0001292814-26-003409):** on June 10, 2026, Petrobras agreed to acquire a 50% interest in the Itaimbezinho exploration block in the Campos Basin from Equinor, which holds 100%. After completion Equinor stays operator with 50%, with Pré-Sal Petróleo S.A. (PPSA) as manager of the production sharing contract. The assignment requires CADE and ANP approval. No price was disclosed. - **Lightsource Brasil NewCo (completed):** on May 20, 2026, Petrobras closed its acquisition of 49.99% of the voting capital of Lightsource Brasil NewCo Holding S.A., through a $32 million capital contribution. The holding is an onshore renewables joint venture. - **Braskem:** on April 23, 2026, Petrobras declined its preemptive and tag-along rights over Novonor's Braskem stake. It signed a new shareholders' agreement with Shine I FIP establishing joint control of Braskem, effective June 3, 2026. Petrobras keeps 36.15% of Braskem's share capital and 47.03% of the voting capital, and now accounts for it as a joint venture. - **Shared reservoirs:** Petrobras received $595 million from partners and paid $119 million to PPSA in the equalization of the Tupi shared reservoir. The ANP approved the Berbigão and Sururu production individualization agreement effective May 1, 2026. **Legal and tax exposures.** - **Possible-loss contingencies:** contingent liabilities rated as possible losses rose to $47.48 billion from $41.57 billion at year-end. Tax claims made up $29.64 billion of the total. - **Uncertain tax positions:** these totaled $11.61 billion. - **Netherlands class action:** on June 30, 2026, the Court of Appeal of The Hague dismissed the Stichting Petrobras Compensation Foundation's appeal as it concerned Petrobras International Braspetro B.V. and Petrobras Global Finance B.V. The Foundation's remaining appeal against Petrobras, and the appeals by Petrobras and PGF, remain pending. Petrobras says it cannot estimate any loss. - **Exploration drilling:** exploration additions in the half were concentrated in pre-salt wells in block FZA-M-59 in the Foz do Amazonas basin on the Equatorial Margin, and in the Aram block in the Santos Basin. ## Subsequent events *Source for the first three items: interim financial statements, Form 6-K accession 0001292814-26-004133, note 30 "Subsequent events" and notes 13.4 and 28.1.1. Later items: the Forms 6-K cited in each line.* The material events after June 30, 2026 are: - **Second-quarter shareholder distribution.** On August 6, 2026 the board approved $3.41 billion (R$17.38 billion) based on second-quarter profit, equal to $0.2642 per common and preferred share. It comprises $1.19 billion of interim dividends and $2.22 billion of interest on capital, for holders of record on August 21, 2026. It will be paid in two equal installments on November 23 and December 21, 2026, indexed to the Selic rate, and counts toward 2026 remuneration. - **Subsidy cash received.** Petrobras collected a further $844 million under the fuel subsidy programs in July 2026. Further installment notices (6-Ks 0001292814-26-004262, -004540, -004610 and -004768) brought the cumulative amount received under the diesel, gasoline and LPG programs to about R$13.3 billion ($2.57 billion, converted from reais) by September 30, 2026. - **Export tax status.** Provisional Measure No. 1,340 expired in July 2026. Brazil's foreign-trade authority kept the crude and diesel export tax in force for up to 60 days, with a reassessment after 30 days. The filings in hand do not say whether the tax was later lifted. - **New diesel subsidy (6-K 0001292814-26-004612).** On September 18, 2026 the board approved joining a new program under Provisional Measure No. 1,391/2026. It pays R$1.00 per liter (about $0.19, converted from reais) on road-use Grade "A" diesel for 30 days and can be extended once. It adds to the existing R$1.12 per liter ($0.22) subsidy under Provisional Measure No. 1,363/2026. - **Bond redemption (6-Ks 0001292814-26-004365 and -004672).** Petrobras Global Finance called its outstanding 5.999% Global Notes due 2028 ($1,080,945,000 principal) for redemption on September 25, 2026, funded from cash on hand. The make-whole redemption price came to $1.09 billion, including an $11.5 million premium, plus $10.4 million of accrued interest. - **Equatorial Margin discoveries (6-Ks 0001292814-26-004270 and -004836).** On August 14, 2026 Petrobras reported hydrocarbons in the Morpho well in block FZA-M-59 (100%, operator) off Amapá, in 2,886 meters of water. On October 2, 2026 it reported a second, deeper oil-bearing interval in the same well, and said analyses confirmed good-quality oil from the first discovery. - **Colombia gas discovery (6-K 0001292814-26-004038).** On August 3, 2026 Petrobras reported gas in the Sandia-1 exploratory well in Block GUA-OFF-0, in deep water offshore Colombia. The well is in 1,251 meters of water, about 42 kilometers from the coast and 18 kilometers from the Sirius-1 and Sirius-2 wells. Petrobras is operator with 44.44%, alongside Ecopetrol with 55.56%. - **São Tomé and Príncipe Block 3 acquisition completed (6-Ks 0001292814-26-002392 and -003721).** On July 9, 2026 Petrobras concluded its acquisition of an interest in, and operatorship of, Block 3 offshore São Tomé and Príncipe, under an agreement signed April 17, 2026. The consortium is now Petrobras (operator, 75%), Oranto (15%) and the national petroleum agency ANP-STP (10%). No price was disclosed. - **New African exploration (6-Ks 0001292814-26-004314 and -004582).** On August 21, 2026 Ghana approved direct negotiations with Petrobras for four offshore blocks in the Keta Basin. On September 17, 2026 Petrobras signed production sharing contracts for eight offshore blocks in Côte d'Ivoire, with a 90% operated interest alongside PETROCI Holding's 10%. - **ANP bidding round (6-K 0001292814-26-004868).** On October 8, 2026 Petrobras won 21 blocks in the ANP's permanent offer cycles, adding more than 18,000 km² of exploration acreage. They are: - Azurita (Campos) and Cruzeiro do Sul (Santos), both 100%, under production sharing; - 12 Campos Basin concession blocks at 100%; - seven Ceará Basin blocks at 70% as operator, with QatarEnergy holding 30%. Signature bonuses total R$3.22 billion (about $616.45 million, converted from reais), payable by December 30, 2026.