Petrobras’s Earnings Call Contradictions: Shifting Diesel Import Strategy and Mexico/Africa Expansion Uncertainty Clash

Date of Call: Aug 7, 2026

Financials Results

• Revenue: Not explicitly stated, but record production and highest gross profit in history of $19.5B.
• EPS: Not explicitly stated.
• Gross Margin: Not explicitly stated.
• Operating Margin: Not explicitly stated.

Guidance:

• Production guidance maintained at 2.6M barrels per day, with a 4% leeway to reach up to 2.7M.
• Full-year CapEx expected at the top of the range, around $16.9B with a 5% margin.
• Operating expenses slightly above plan for the first half; may exceed projection if global logistics costs and exchange rates remain high.
• Debt reduction target maintained to converge to USD 65B over the plan horizon.

Business Commentary:

Record Production and Financial Performance:

• Petrobras produced 2.7 million barrels of oil per day in Q2 2026, surpassing their target of 2.5 million barrels by 200,000 barrels and achieving the highest net profit on a recurring basis in the company's history.
• The growth in production was due to increased efficiency in platform production, the delivery of new projects like P-78 and P-79, and the ability to increase oil export levels by 12%.

Operational Efficiency and Refining Capacity:

• The utilization factor of Petrobras' refineries surpassed 100% in Q2 2026, with production of byproducts increasing by 6% compared to the previous quarter.
• This was driven by a focus on higher value-added products such as diesel, gasoline, and jet fuel, maintaining strong refining margins and reducing the need for imports, especially diesel.

Investment and Cash Flow Generation:

• Petrobras invested $5.3 billion in Q2 2026, focusing over 80% on E&P projects with high returns, and generated significant operating cash flow of BRL 12.3 billion for the quarter.
• The strong cash generation was used to fund growth and prepare for the future, including debt reduction and prepayments, with a focus on capital discipline and high-return investments.

Geological Exploration and International Expansion:

• Petrobras emphasized the importance of exploration in new frontiers, such as the equatorial margin and Africa, with a focus on reserve replacement.
• The company's expertise in deep and ultra-deep water exploration is being applied to similar geological structures in these regions, with ongoing negotiations and partnerships to assess opportunities.

Tax Contributions and Government Take:

• Petrobras paid BRL 88.6 billion in taxes and government take in Q2 2026, which is an increase of about BRL 22 billion compared to the same quarter last year.
• The increase in production led to higher tax contributions, benefiting the government, and aligns with the company's strategy of sharing its success with society.

Sentiment Analysis:

Overall Tone: Positive

• President stated 'Petrobras’ capacity to surpass its goals and deliver impressive results,' highlighted 'highest net profit on a recurring basis for the quarter in dollars in the history of Petrobras,' and 'one of its best financial results in history.' Emphasis on operational records, record production, and strong cash flow generation.

Q&A:

• Question from Bruno Montanari (Morgan Stanley): Is the medium and long-term production plan curve conservative given you've surpassed 2.6-2.7M barrels per day?
  Response: The plan is based on a risk analysis with a ~4% leeway; production is expected to reach the top of guidance (2.6M) and efforts are ongoing to bring new platforms online ahead of schedule.

• Question from Monique Greco (Itaú BBA): How is the company assessing the Diesel import strategy given current price volatility and local prices below import parity?
  Response: Commercial strategy remains based on competitiveness and profitability; import decisions are made considering production planning, commitments, demand, refining margins, and logistics.

• Question from George Gabrish (Scotiabank): How sustainable is the low ~4% pre-salt decline rate moving forward?
  Response: Decline management is aided by huge reservoir size, 4D seismic, intelligent completion, water injection, and supplemental wells, allowing production to be maintained despite natural decline.

• Question from Yuri Pereira (Santander): With favorable cash generation, how will incremental capital be allocated versus the 2026-2030 plan?
  Response: Priority is to invest in high-return projects (e.g., P-18), reduce debt to BRL 16.5B target earlier, and distribute via dividend formula; extraordinary dividend sharing is considered unlikely given Brent outlook.

• Question from Gabriel Barra (Citi): What is Petrobras' stance on Braskem's potential legal reorganization and capital injection?
  Response: Petrobras is evaluating options under the new shareholders agreement; discussions are ongoing with Braskem's board, and an injunction is pending resolution.

• Question from Liliana Yang (HSBC): What is Petrobras' role in potential government gas price measures, and what is the update on investments in Africa and new frontiers?
  Response: Regulatory changes will require project reassessments; gas market is already competitive, and regulatory stability is critical. International investments in Africa, Mexico, and the equatorial margin total ~BRL 7B, with ongoing seismic surveys.

• Question from Tasso Vasconcellos (UBS): What are the main priorities for international expansion outside Brazil?
  Response: Focus is on areas with geological similarities to Brazil's pre-salt and deep-water fields, such as Africa's Atlantic margin and Mexico, leveraging Petrobras' expertise in exploration and production.

• Question from Milene Clifford (JP Morgan): What is the outlook for crack spreads and refinery downtimes in the second half?
  Response: No major downtimes were postponed; only regular scheduled downtimes are planned. Refinery utilization is maintained above 95%, with a focus on maximizing value-added products like diesel.

• Question from Rodrigo Almeida (BTG): What are updates on Tupi concession extension, 2P Alto do Cabore Central, and the equatorial margin?
  Response: 2P is under negotiation. For the equatorial margin, drilling is awaited for the BM-FZA-49 block; additional contingent wells are pending permits to assess the large frontier area.

• Question from Vicente Falanga (Bradesco BBI): How much does Petrobras plan to invest in rare metals and offshore exploration (e.g., Júpiter Field)?
  Response: Currently, there is no commitment to invest in rare metals or the mentioned opportunities; all investments are subject to governance approval and economic feasibility assessments.

• Question from Caio Ribeiro (Bank of America): What are M&A priorities regarding licensing, ethanol, and the Mataripe refinery, and what is the timing?
  Response: Strategic planning remains the driver; distribution (B2B) is a focus, Mataripe has ongoing due diligence with no updates, and ethanol is a priority with negotiations in progress, but no specific timing provided.

Contradiction Point 1

Diesel Import Strategy and Refinery Utilization

Contradiction on the necessity and timing of diesel imports, impacting supply strategy and operational planning.

Monique Greco (Itaú BBA) - Monique Greco (Itaú BBA)

2026Q2: Importing decisions are based on competitiveness and profitability... The commercial strategy remains unchanged. - Angélica Laureano(Executive Logistics and Commercialization Director)

How is the company evaluating the decision to import diesel considering current price volatility and local prices falling below import parity? - Rodolfo Angele (JPMorgan)

2026Q1: Diesel imports are likely needed in the second half of the year due to higher seasonal demand and planned refinery outages. - Angélica Laureano(Executive Logistics and Commercialization Director)

Contradiction Point 2

Strategic Focus on International Expansion (Mexico/Africa)

Inconsistency in the level of commitment and investment focus for international regions, affecting growth strategy and capital allocation.

Tasso Vasconcellos (UBS) - Tasso Vasconcellos (UBS)

2026Q2: Petrobras is currently analyzing seismic data with Pemex to identify valuable areas. - Magda Chambriard(CEO), Sylvia Anjos(CFO)

What are the key priorities and target regions for international expansion? - Lilyanna Yang (HSBC)

2026Q1: Opportunities in the unexplored Mexican Gulf of Mexico and Venezuela were discussed in initial meetings but are still in the early, 'wish list' stage. Significant investment quantification is not possible at this time for these regions. - Magda Chambriard(CEO)

Contradiction Point 3

Capital Allocation for Surplus Cash and Strategic Plan Execution

Contradiction on whether surplus cash is distributed as dividends or retained for strategic plan execution, impacting financial strategy and shareholder returns.

Yuri Pereira (Santander) - Yuri Pereira (Santander)

2026Q2: Surplus cash beyond these priorities could, in theory, lead to an extraordinary dividend, but this is considered very unlikely as Brent prices are expected to remain stable, requiring the new strategic plan to be built. - Fernando Melgarejo(CFO)

How is Petrobras allocating additional capital in the favorable cash flow environment compared to its 2026-2030 plan? - Lilyanna Yang (HSBC Global Investment Research)

2025Q4: If cash flow becomes unnecessarily high, the rationale is to distribute extraordinary dividends after ensuring it does not impact the financial ability to execute the 2026–2030 strategic plan projects. - Magda de Regina Chambriard(CEO)

Contradiction Point 4

Capital Expenditure (CapEx) Flexibility and Outlook

Contradiction on the flexibility to adjust 2026 CapEx and the driver behind accelerated spending, affecting operational planning and financial forecasting.

Yuri Pereira (Santander) - Yuri Pereira (Santander)

2026Q2: The primary uses for additional cash are: 1) Priority #1: Invest in high-return projects... 2) Priority #2: Converge debt to BRL 65 billion... Surplus cash beyond these priorities could, in theory, lead to an extraordinary dividend... - Fernando Melgarejo(CFO)

How is Petrobras allocating incremental capital given current cash generation compared to its 2026-2030 plan? - Monique Natal (Itaú)

2025Q3: 2026 CapEx is largely fixed as most projects are already contracted (90% of E&P CapEx), leaving little flexibility. The focus is on execution, not cost increases. - Renata Baruzzi(CSO)

Contradiction Point 5

Production Capacity and Decline Rate for FPSOs

Contradiction on the sustainability and management of production decline rates in key fields, impacting long-term production forecasts and reservoir management strategy.

George Gabrish (Scotiabank) - George Gabrish (Scotiabank)

2026Q2: The low decline rate is due to world-class reservoir management in huge fields like Tupi... These efforts have maintained significant production and benefited partners. - Magda Chambriard(CEO), Sylvia Anjos(CCO)

How sustainable is the ~4% pre-salt production decline rate moving forward? - Guilherme Costa (Goldman Sachs)

2025Q3: The production peak is a temporary phase in a field's lifecycle, designed based on reservoir response. It is part of the development plan and will eventually decline. - Fernando Alvarezio(CFO), Angelica Laureano(CFO)