Slide Deck

I. Executive Summary

Petróleo Brasileiro S.A. – Petrobras stands as one of the world’s largest integrated energy companies and a dominant force in the Brazilian economy. As a state-controlled enterprise, its investment profile is characterized by a compelling, yet complex, duality. On one hand, the company possesses a world-class asset base, centered on the prolific pre-salt basins offshore Brazil. This geological endowment, coupled with decades of pioneering technological development in ultra-deepwater environments, affords Petrobras an industry-leading low-cost production structure and the capacity for robust, sustained cash flow generation.

The company’s operational prowess is evident across its business segments. In Exploration & Production (E&P), Petrobras has consistently grown its output, replacing reserves and leveraging proprietary technologies like its subsea CO2 separation system (HISEP®) to enhance recovery and lower the carbon intensity of its barrels. In the downstream sector, its vast refining network operates at high utilization rates, securing a dominant share of the domestic fuels market. This operational excellence is underpinned by a formal governance framework, strengthened significantly in the wake of past corruption scandals, and a shareholder remuneration policy designed to provide a predictable return of capital.

Conversely, the investment case is inextricably linked to the substantial risks stemming from its ownership structure. The Brazilian Federal Government, as the controlling shareholder, exerts significant influence over corporate strategy, capital allocation, and executive leadership. This can lead to strategic shifts that prioritize national policy objectives—such as domestic fuel price stability or industrial development—over the maximization of minority shareholder returns. This political risk manifests in fluctuating investment plans, management turnover, and regulatory uncertainty, creating a volatile operating environment. Furthermore, the company remains exposed to global commodity price cycles and the inherent macroeconomic and currency risks associated with a Brazil-centric operational footprint.

Ultimately, the investment thesis for Petrobras hinges on a critical balance. The company’s exceptional operational and geological advantages provide a powerful engine for value creation. However, this potential is perpetually moderated by the non-operational, political, and macroeconomic risks that are inseparable from its identity as a state-controlled national oil company. An investor must weigh the tangible, low-cost barrels produced from its pre-salt fields against the intangible but potent risks emanating from its relationship with its sovereign controller.

II. Company Overview & Strategic Direction

Petróleo Brasileiro S.A. – Petrobras is a Brazilian integrated energy company and a global leader in the exploration and production of oil and gas in deep and ultra-deep waters.¹ Founded in 1953, the company has evolved into a cornerstone of the Brazilian economy and a significant player on the global energy stage.³

Business Model and Segments

Petrobras operates across the full energy value chain, with its activities organized into three primary business segments ³:

1. Exploration and Production (E&P): This is the company’s core business and primary value driver. It focuses on the exploration, development, and production of crude oil, natural gas liquids (NGL), and natural gas. The segment’s strength is its unparalleled expertise and asset base in Brazil’s offshore pre-salt basins.⁴
2. Refining, Transportation & Marketing (RTM): This segment encompasses the company’s extensive downstream operations. It includes the refining of crude oil into a wide range of petroleum products, logistics and transportation via pipelines and terminals, trading activities, and petrochemical operations, primarily through its significant equity interest in Braskem.²
3. Gas & Low Carbon Energies: This division manages the processing, transportation, and commercialization of natural gas and Liquefied Natural Gas (LNG). It also includes the generation and sale of electricity through a portfolio of thermoelectric plants and houses the company’s strategic initiatives in renewable energy and low-carbon businesses.³

Scale of Operations and Shareholding Structure

Petrobras operates on a massive scale. As of early 2024, the company employed over 41,700 people and managed a daily production of approximately 2.78 million barrels of oil equivalent per day (boed).² Its proved reserves stood at approximately 11.4 billion boe.² For the fiscal year 2023, the company generated revenues of US$102.4 billion.⁴

A defining characteristic of Petrobras is its status as a “government-controlled private company”.² The Brazilian Federal Government is the controlling shareholder, directly and indirectly holding 50.26% of the common (voting) shares and 28.67% of the total share capital as of February 2024.² This structure grants the government decisive influence over the company’s board of directors and, consequently, its strategic direction.⁴ The company’s shares are publicly traded on Brazil’s B3 stock exchange (as PETR3 for common and PETR4 for preferred shares) and on the New York Stock Exchange through American Depositary Receipts (ADRs, under the tickers PBR and PBR-A).¹

Strategic Plan 2050 & Business Plan 2025-2029

The company’s long-term vision is to be the “best diversified and integrated energy company in generating value,” aiming to build a more sustainable world by reconciling its focus on oil and gas with diversification into low-carbon businesses, including petrochemicals, fertilizers, and biofuels.⁹

The Business Plan for 2025-2029 outlines the tangible steps toward this vision, with key strategic drivers that include a focus on profitable E&P assets, the modernization of its refining park, and the pursuit of a “fair energy transition”.⁹

A central element of this plan is a significant increase in capital expenditure (CAPEX). The 2025-2029 plan forecasts total investments of US111billion,comprisedofUS98 billion for projects under implementation and an additional US13billionforprojectsunderevaluation.[11]Thisrepresentsasubstantialramp−upfromtheUS102 billion outlined in the previous 2024-2028 plan.¹² This shift in capital allocation reflects a strategic pivot under the current government administration.

• E&P remains the primary destination for capital, with US$77.3 billion allocated. Approximately 60% of this amount is directed toward the high-value pre-salt assets, reinforcing the company’s core competitive advantage.¹¹
• Downstream (RTM, Petrochemicals, and Fertilizers) is set to receive US$19.6 billion, a 17% increase compared to the prior plan.¹¹

This increased allocation to downstream activities marks a clear departure from the divestment-focused strategy of the previous administration. The prior approach aimed to reduce debt and concentrate capital on the highest-return pre-salt E&P projects. The current strategy, however, reflects the controlling shareholder’s policy objectives of enhancing Brazil’s domestic energy security and leveraging Petrobras as an engine for broader industrial development. This change suggests that future investment decisions will be influenced by a combination of commercial return criteria and national policy goals, introducing a layer of strategic complexity and potential risk of capital misallocation not typically present in an independent international oil company.

III. Industry & Regulatory Landscape

Petrobras operates within a dynamic global energy market and a complex, evolving domestic regulatory environment. Understanding these external forces is critical to assessing the company’s prospects and risks.

Global Oil & Gas Outlook (2024-2026)

The global oil market backdrop for the 2024-2026 period appears to be one of ample supply and moderating demand growth, which could exert downward pressure on prices.

• Supply Dynamics: Global oil supply is forecast to continue expanding, with the majority of growth originating from non-OPEC+ producers. The United States, Brazil, and Guyana are expected to be the primary drivers of this new production.¹³ Concurrently, decisions by OPEC+ to gradually unwind voluntary production cuts are set to add more barrels to the market, contributing to a well-supplied outlook.¹³
• Demand Trends: Forecasts for global oil demand growth in 2025 have been revised downward. The International Energy Agency (IEA) projects an increase of approximately 700,000 barrels per day, with this growth concentrated in non-OECD economies.¹³ Recent data has indicated lackluster demand in major economies, including China and Brazil, suggesting that a sharp rebound is unlikely.¹³
• Price Environment: This supply-demand balance has led to a bearish price outlook from some agencies. The U.S. Energy Information Administration (EIA), for instance, projects that global oil inventory builds will accelerate, causing the Brent crude oil price to decline from around US71perbarrelinmid−2025toanaverageofUS58 per barrel in the fourth quarter of 2025, and potentially near US$50 per barrel in early 2026.¹⁶ Such a price environment would create a challenging headwind for Petrobras’s revenue and cash flow generation.

The Brazilian Regulatory Framework

The domestic regulatory landscape is a defining feature of Petrobras’s operating environment, shaping everything from exploration rights to market structure.

• Governing Bodies: The Brazilian oil and gas sector is primarily overseen by two federal entities. The National Energy Policy Council (CNPE) is responsible for setting national energy policy and authorizing bidding rounds. The National Agency of Petroleum, Natural Gas and Biofuels (ANP) acts as the sector’s regulator, tasked with implementing policy, establishing technical regulations, conducting auctions, and supervising industry activities.¹⁷
• Exploration & Production Regimes: Brazil employs a mixed framework for awarding E&P rights, reflecting the varying geology and strategic importance of its basins ¹⁹:

1. Concession Regime: The traditional model, applied in most areas, where the winning bidder takes on all exploration risk and gains ownership of any hydrocarbons produced, subject to royalties and taxes.
2. Production Sharing Agreement (PSA): Mandated for the pre-salt polygon and other designated strategic areas. Under this regime, the government retains ownership of the oil and gas. Companies bear the exploration risk and, in the event of a commercial discovery, are reimbursed for their costs (cost oil) and receive a negotiated share of the remaining production (profit oil).
3. Transfer of Rights (TOR): A specific regime created to grant Petrobras the right to explore and produce up to five billion barrels of oil equivalent in certain un-granted pre-salt areas, in exchange for a payment to the government.

• The ‘Novo Mercado do Gás’ (New Gas Market): The enactment of the New Gas Law (Law nº 14.134/2021) represents the most significant regulatory transformation in Brazil’s energy sector in decades. Its primary objective is to dismantle Petrobras’s historical de facto monopoly in the natural gas midstream sector and foster a competitive, open, and liquid market.²⁰ The reform is built on several key pillars:

• Unbundling: It enforces the structural separation of gas transportation and distribution from other parts of the value chain, such as production and commercialization. This prevents vertically integrated players from using infrastructure control to block competitors.²⁰
• Third-Party Access: The law mandates non-discriminatory access for all market participants to essential infrastructure, including gas processing plants, transport pipelines, and LNG regasification terminals, most of which are owned by Petrobras.²⁰
• Authorization Regime: The process for building new transport pipelines was simplified from a complex concession model to a more streamlined authorization model, intended to accelerate infrastructure investment.²⁰

The New Gas Market presents a strategic inflection point for Petrobras. By forcing the company to open its extensive midstream infrastructure to competitors, the law directly challenges a long-held source of competitive advantage and market control. However, this reform also carries a significant, albeit less obvious, benefit for Petrobras as an upstream producer. A more dynamic and competitive domestic gas market, with more buyers and potentially lower end-user prices, is expected to stimulate industrial demand.²¹ This, in turn, creates a larger and more liquid market for Petrobras to monetize its own vast natural gas reserves from the pre-salt, potentially enhancing the value of its core E&P assets. The law, therefore, does not represent a purely negative development for the company; rather, it shifts the locus of value creation away from midstream dominance and toward upstream production efficiency and scale.

IV. Operational Analysis & Core Asset Base

Petrobras’s operational capabilities, particularly in its upstream segment, form the bedrock of its investment case. The company’s performance is driven by its world-class pre-salt assets and an increasingly efficient and integrated downstream network.

Exploration & Production (E&P): The Pre-Salt Engine

The E&P segment is the heart of Petrobras’s operations and profitability, dominated by its activities in the pre-salt layer of the Santos and Campos basins.

• Production and Asset Base: Pre-salt fields are the company’s primary source of production, accounting for a remarkable 81% of its total output in 2024.⁶ This concentration reflects the superior geology and productivity of these assets. The cornerstone fields—Tupi, Búzios, and Mero—are located in the Santos Basin and are among the largest and most productive deepwater fields globally.²³ Petrobras operates these mega-fields in partnership with several international oil companies (IOCs), sharing capital requirements and technical expertise.

Table 1: Pre-Salt Consortium Stakes (Key Fields)

Field	Operator	Petrobras Stake (%)	Shell Stake (%)	TotalEnergies Stake (%)	Other Key Partners
Mero	Petrobras	38.6	19.3	19.3	CNOOC (9.65%), CNODC (9.65%), PPSA (3.5%)
Atapu	Petrobras	65.7	16.7	15.0	Petrogal (1.7%), PPSA (0.9%)
Tupi	Petrobras	65.0	25.0	–	Petrogal (10.0%)
Sapinhoá	Petrobras	45.0	30.0	–	Repsol Sinopec (25.0%)
Búzios	Petrobras	88.99	–	–	CNOOC (7.34%), CNODC (3.67%)
Source: 23

• Growth and Development: Production growth is underpinned by a systematic and continuous deployment of new Floating Production, Storage, and Offloading (FPSO) units. The company’s 2025-2029 Business Plan calls for the implementation of ten new production systems, nine of which are already contracted, ensuring a clear growth trajectory for the medium term.¹¹ Recent production and sales reports from 2024 and 2025 consistently highlight the positive impact of new FPSOs ramping up, such as the Almirante Tamandaré in the Búzios field and the Marechal Duque de Caxias in the Mero field.²⁶

Competitive Advantages in Pre-Salt

Petrobras possesses two powerful and interconnected competitive advantages in its pre-salt operations: exceptionally low production costs and a significant technological lead.

1. Industry-Leading Low Production Costs: The lifting cost—the direct cost of producing a barrel of oil—in Petrobras’s pre-salt fields is among the lowest in the world for any offshore environment. Multiple sources cite costs as low as approximately US5perbarrel.[29,30]Thiscoststructureprovidesextraordinaryresilience,allowingthecompanytoremainhighlyprofitableeveninperiodsofdepressedglobaloilprices.Forcomparison,leadingU.S.shaleproducerslikeExxonMobiltargetproductioncostsofUS15 per barrel in the prolific Permian Basin, while partners in the pre-salt like TotalEnergies acknowledge costs well below US$20 per barrel of oil equivalent (boe).²⁹
2. Technological Moat: Over decades, Petrobras has developed a suite of proprietary technologies specifically designed to overcome the immense challenges of the pre-salt environment—which include water depths exceeding 2,000 meters, a thick and mobile salt layer, and reservoirs with high gas and CO2 content.²³ This technological leadership is a key differentiator:

• Carbon Capture, Usage, and Storage (CCUS) for Enhanced Oil Recovery (EOR): Petrobras operates the world’s largest deepwater CCUS program. Instead of venting the naturally occurring CO2 from the reservoirs, the company separates it on the FPSOs, compresses it, and reinjects it back into the fields. This process serves a dual purpose: it dramatically reduces the carbon intensity of its production and acts as an EOR mechanism, increasing reservoir pressure and boosting the ultimate recovery of oil.³³ By 2022, the company had already reinjected over 40 million tons of CO2.³⁴
• HISEP® (High Pressure Separation): A groundbreaking and patented subsea technology that separates CO2-rich gas from the oil directly on the seabed. The gas is then reinjected into the reservoir without ever being brought to the surface platform. This innovation reduces the volume of gas that needs to be processed on the FPSO, allowing for smaller, less expensive topside facilities and further lowering the carbon footprint of production.²³
• Advanced Exploration and Drilling: The company leverages a powerful array of supercomputers and artificial intelligence algorithms to process complex seismic data, improving imaging of the sub-salt reservoirs. This, combined with remote drilling operation centers, enhances drilling success rates and optimizes well placement, reducing costs and time.²³

The development of these technologies was born out of necessity to solve the unique problems posed by the pre-salt. In doing so, Petrobras has created a self-reinforcing competitive advantage. The solutions not only make production possible but also make it more profitable and less carbon-intensive, lowering project breakeven costs and increasing the total value of the assets in a way that is difficult for competitors to replicate.

Downstream Operations: Refining, Marketing & Petrochemicals

While E&P is the primary profit center, Petrobras’s downstream segment provides strategic integration, scale, and a dominant position in the vast Brazilian domestic market.

• Refining and Marketing: Petrobras’s refining park is the largest in Latin America.³³ In 2024, the company’s domestic production of oil derivatives reached 2.2 million barrels per day, utilizing 86.4% of Brazil’s total installed refining capacity.³⁷ This confers a market share of over 80%, giving the company significant pricing power and logistical control within Brazil.⁴⁰ The company has demonstrated operational excellence, achieving a total refinery utilization factor (FUT) of 93% in 2024—its highest since 2014.⁶ This high level of efficiency enabled record production of key high-value products, including 420,000 bpd of gasoline and 452,000 bpd of S-10 (low-sulfur) diesel in 2024.⁶ A key strategic shift has been the increased use of its own light, sweet pre-salt crude as feedstock, which reached 70% of the total processed volume in 2024.⁶ This integration optimizes the product slate towards more valuable derivatives like gasoline and diesel and reduces emissions.
• Petrochemicals: Petrobras maintains a strategic foothold in the petrochemical sector through its 36.1% equity stake in Braskem, the largest producer of thermoplastic resins in the Americas.⁴⁵ However, the broader Brazilian chemical industry faces significant headwinds, including high feedstock costs (often naphtha-based) and intense competition from lower-cost imports from the U.S. and Asia. This has led to high levels of idle capacity across the sector, reaching 38% in the first quarter of 2025, according to the Brazilian Chemical Industry Association (Abiquim).⁴⁷ Despite these challenges, Petrobras’s latest strategic plan signals a renewed commitment to the sector, including plans to resume construction of the GasLub petrochemical complex, which will utilize natural gas from the pre-salt as feedstock.⁴⁵

V. Financial Performance & Capital Strategy

Petrobras’s financial performance is a direct reflection of its operational scale and low-cost structure, heavily influenced by the global commodity price environment. The company has demonstrated a capacity to generate substantial cash flow, which it allocates between large-scale capital investments and significant shareholder returns.

Historical Financial Performance

An analysis of Petrobras’s financial results from 2022 to 2024 reveals a clear correlation with global energy prices, alongside underlying operational strength.

Table 2: Key Financial & Operational Metrics (2022-2024)

Metric	2022	2023	2024
Sales Revenue (US$ Million)	123,089	102,409	89,357
Adjusted EBITDA (US$ Million)	66,217	52,414	40,399
Net Income (US$ Million)	36,623	24,884	7,528
Operating Cash Flow (US$ Million)	49,717	43,212	39,939
CAPEX (US$ Million)	9,581	12,114	16,621
Free Cash Flow (US$ Million)	40,109	31,074	23,318
Gross Debt (US$ Million)	53,300	62,600	60,311
Net Debt (US$ Million)	37,600	44,700	52,240
Net Debt / Adjusted EBITDA (x)	0.57	0.85	1.29
Total Production (Mboe/d)	2,689	2,698	2,782
Note: Financial data is derived from the 2024 20-F filing. Free Cash Flow is calculated as Operating Cash Flow minus CAPEX. Production data is from company reports.Source: 6

As shown in Table 2, revenues and profitability peaked in 2022, a year characterized by exceptionally high Brent crude prices, and subsequently moderated in 2023 and 2024 as commodity prices normalized.⁴ Despite this revenue decline, the company’s operational cash flow remained robust, consistently and comfortably covering its capital expenditures. This strong free cash flow generation is a testament to the low-cost nature of its pre-salt production base. The company’s balance sheet remains solid, with the Net Debt/Adjusted EBITDA ratio increasing to a still-moderate 1.29x by year-end 2024, reflecting higher investment levels and lower EBITDA.⁸

Capital Allocation and Shareholder Remuneration

Petrobras’s capital allocation framework is detailed in its business plan and aims to balance reinvestment for growth with returns to shareholders, all while maintaining a strong balance sheet.⁴⁹

• Capital Allocation Strategy: The company’s financial strategy prioritizes a flexible and efficient capital structure. A key tenet is the generation of cash flow in excess of investments and financial obligations, ensuring self-funded growth.⁸ The 2025-2029 Business Plan establishes a gross debt limit of US$75 billion, a ceiling that provides ample flexibility for the planned increase in CAPEX while ensuring leverage remains manageable even in lower oil price scenarios.⁸ All investment projects are subject to a rigorous approval process, requiring a positive net present value (NPV) even under a conservative “bear-case” scenario.⁴⁹
• Shareholder Remuneration Policy: Petrobras has implemented a transparent and formula-driven dividend policy to provide predictability to its shareholders.⁸ The policy stipulates that if the company’s gross debt is at or below the US
  75billionthreshold,itwilldistribute4519.0 billion distributed for the 2023 fiscal year and a proposed US$13.5 billion for 2024.⁸ The company’s commitment to these returns is further evidenced by regular announcements of payments, such as the one scheduled for August 20, 2025, for remuneration related to the first quarter of 2025.⁵⁰

The formulaic nature of this dividend policy serves as an important governance feature. In a state-controlled entity where there is a risk of cash flow being diverted to politically motivated projects, linking shareholder returns directly to a transparent metric like free cash flow creates a clear and visible trade-off. To reduce dividends, the controlling shareholder must either accept lower operating cash flow (e.g., by imposing price controls that harm margins) or approve higher capital expenditures. This structure provides a crucial guardrail that enhances financial discipline and offers a degree of protection for minority shareholders against the arbitrary retention of capital.

VI. Competitive Positioning & Peer Analysis

Petrobras occupies a unique position in the global energy landscape, blending the characteristics of a state-backed National Oil Company (NOC) with the operational capabilities of a top-tier International Oil Company (IOC).

Competitive Moat: A Hybrid NOC/IOC Profile

As a National Oil Company, Petrobras benefits from privileged access to Brazil’s vast hydrocarbon resources, particularly the world-class pre-salt province.⁵¹ This sovereign backing provides a foundational competitive advantage that most IOCs lack, as they must compete globally for access to high-quality reserves.⁵³ This has allowed Petrobras to build immense scale, becoming one of the world’s largest oil producers with an integrated network of infrastructure that dominates the domestic market.⁴

However, unlike many NOCs that are plagued by operational inefficiency and high costs ⁵⁴, Petrobras has developed elite technical expertise in deepwater E&P. This operational prowess allows it to execute complex projects with an efficiency and cost structure that rivals or exceeds that of the most capable IOCs.²⁹ This combination of sovereign resource control and elite operational capability in its core E&P segment is the company’s defining strength.

The primary disadvantage of its NOC status is the persistent risk of government interference. Strategic decisions, pricing policies, and management appointments can be influenced by political considerations that may diverge from the goal of maximizing shareholder value.⁵⁴ The company’s history of corruption scandals, though addressed with significant governance reforms, also remains a consideration for investors.⁵⁷ The central tension in the Petrobras investment case is therefore the balance between its IOC-like efficiency in the pre-salt and the inherent risks associated with its NOC structure.

Peer Benchmarking

To contextualize Petrobras’s performance, it is benchmarked against a group of international majors and key Latin American peers. The data reflects the latest full fiscal year (2024).

Table 3: Peer Comparison – Financial Metrics (FY 2024)

Company	Revenue (US$B)	Adj. EBITDA Margin (%)	Net Margin (%)	ROACE (%)	Net Debt / Adj. EBITDA (x)	Dividend Yield (%)
Petrobras	89.4	45.2%	8.4%	N/A	1.29	14.0%
Equinor	103.8	28.7%	8.5%	21.0%	0.32	6.5%
Eni	96.1	10.8%	2.9%	N/A	0.95	6.4%
TotalEnergies	215.0	8.5%	7.3%	N/A	0.18	5.1%
Repsol	71.5	11.2%	4.3%	11.0%	0.21	5.5%
Ecopetrol	32.2	41.5%	10.4%	N/A	1.35	19.8%
YPF	19.3	21.3%	-0.1%	N/A	1.80	0.0%
Note: Revenue for Eni is Sales from Operations (€88.8B converted at 1.08 USD/EUR). Repsol revenue (€66.2B) and EBITDA are converted. TotalEnergies Adj. Net Income used for margin. Ecopetrol Revenue (COP 133.3T) and EBITDA are converted. YPF Revenue (US$19.3B) and Adj. EBITDA are from 20-F. Dividend yields are approximate as of late 2025. ROACE not uniformly reported.
Source: 8

Table 4: Peer Comparison – Operational Metrics (FY 2024)

Company	Total Production (Mboe/d)	Liquids % of Production	Proved Reserves (Bboe)	Reserve Life (Years)
Petrobras	2.78	79%	11.4	11.2
Equinor	2.07	48%	5.5	7.3
Eni	1.71	48%	6.5	10.4
TotalEnergies	2.43	57%	11.1	12.5
Repsol	0.56	41%	2.0	9.8
Ecopetrol	0.75	71%	1.9	6.9
YPF	0.55	50%	1.2	6.0
Note: Data is for the full year 2024. Liquids % is approximate. Reserve Life = Proved Reserves / Annual Production.Source: 6

The peer comparison highlights several key aspects of Petrobras’s competitive standing. Operationally, its production scale is on par with supermajors like TotalEnergies and significantly larger than its Latin American peers. Its production is heavily weighted towards liquids, reflecting the nature of its pre-salt assets. Financially, Petrobras exhibits a superior Adjusted EBITDA margin, a direct result of its low-cost production base. Its leverage is moderate and in line with regional peer Ecopetrol, but higher than the European majors who have aggressively de-levered their balance sheets. The company’s dividend yield is notably higher than all peers except Ecopetrol, suggesting the market demands a higher return to compensate for the perceived political and country-specific risks.

VII. Management Quality & Governance Structure

The quality of management and the integrity of the corporate governance structure are paramount considerations for any investment, but they take on heightened importance in the context of a state-controlled enterprise like Petrobras.

Leadership and Board Composition

Petrobras’s senior leadership is appointed by its Board of Directors, which is in turn heavily influenced by the controlling shareholder, the Brazilian Federal Government.

• Executive Management: The executive team is led by a President (CEO) and eight executive officers, who are elected by the board for two-year terms, with a maximum of three consecutive re-elections permitted.⁷⁰ The current CEO, Magda Chambriard, was appointed in May 2024.⁷¹ She possesses a strong technical background, with a master’s degree in Chemical Engineering and a long career at Petrobras, followed by a tenure as head of the regulatory agency ANP.¹ A notable characteristic of the current leadership is its relative newness; the average tenure of the management team is approximately 1.2 years, indicative of the high turnover that can accompany changes in government administration.⁷¹
• Board of Directors: The Board is composed of a minimum of seven and a maximum of eleven members.⁷² The company’s bylaws grant the Federal Government the right to appoint the majority of these members, ensuring its strategic control.⁷ To ensure a degree of independence and representation, the bylaws also mandate that the roles of Chairman of the Board and CEO must be separate and guarantee board seats for representatives of minority shareholders and employees.⁷

Corporate Governance Framework

In the aftermath of the “Operação Lava Jato” (Operation Car Wash) corruption scandal, Petrobras undertook a comprehensive overhaul of its governance and compliance systems to regain market credibility.

• Regulatory Adherence: As a publicly traded company on multiple exchanges, Petrobras adheres to the rules of the Brazilian Securities and Exchange Commission (CVM), the U.S. Securities and Exchange Commission (SEC), and is listed on B3’s Level 2 Corporate Governance segment in Brazil.⁷
• Compliance Program: The company implemented a robust, three-pillared Compliance Program focused on prevention, detection, and remediation of misconduct, including fraud and corruption.⁵⁷ This program is designed to align with stringent international anti-corruption laws such as the U.S. Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act.⁵⁷
• Oversight Structure: The formal governance structure is multi-layered, comprising the General Shareholders’ Meeting, a Fiscal Council, the Board of Directors, and an Executive Board. These bodies are supported by a network of advisory committees, including a Statutory Audit Committee, a People Committee, and a Governance and Compliance Technical Committee, designed to provide specialized oversight.¹ Significant efforts have also been made to cascade these best practices down to the company’s numerous subsidiaries.⁵⁶

Despite the sophistication of this formal governance framework, a fundamental tension persists due to the company’s ownership. The established policies, committees, and compliance checks are designed to function like those at an independent, widely-held corporation. However, the practical reality is that the controlling shareholder retains the power to change key personnel and influence strategic direction. The frequent, politically-driven changes in leadership, evidenced by the short tenure of the current executive team, demonstrate that the government’s influence can override these formal mechanisms. Therefore, while the governance structure is robust on paper, the de facto governance reality is that the interests and policies of the incumbent government administration remain the ultimate authority in the company’s decision-making process.

VIII. Key Investment Merits & Risks

The investment case for Petrobras is defined by a sharp contrast between its world-class operational attributes and the significant non-operational risks it faces.

Investment Merits

1. World-Class Upstream Asset Base: Petrobras controls and operates one of the most significant hydrocarbon discoveries of the 21st century: the Brazilian pre-salt. These fields are characterized by giant reservoirs, highly productive wells, and high-quality light oil, forming a resource base that is the envy of the global oil industry.²³
2. Industry-Leading Low Production Costs: The company’s lifting costs in its core pre-salt assets are exceptionally low, estimated at around US$5 per barrel.²⁹ This provides a substantial competitive advantage, ensuring high profitability and strong cash flow generation even in periods of low to moderate oil prices.
3. Robust and Predictable Cash Flow: The combination of high production volumes and low operating costs results in powerful and predictable operating cash flow. This financial strength allows the company to self-fund its large-scale capital expenditure program while simultaneously providing substantial returns to shareholders through its formula-based dividend policy.⁸
4. Dominant and Integrated Domestic Position: Petrobras’s control over the vast majority of Brazil’s refining capacity provides a captive market for its crude oil and a dominant position in the country’s fuel market.⁴⁰ This integration across the value chain offers a degree of earnings stability and strategic advantage.

Key Risks

1. Commodity Price Volatility: As an oil and gas producer, Petrobras’s revenues, profitability, and cash flows are directly and materially exposed to the inherent volatility of global prices for crude oil, natural gas, and refined products.⁸
2. Political and Regulatory Risk: This is the most significant and complex risk facing the company. As a state-controlled entity, Petrobras is subject to direct intervention from the Brazilian government. This can manifest in several ways detrimental to minority shareholders:

• Strategic Misalignment: The government may direct the company to pursue investments or strategies that align with national policy (e.g., job creation, industrial development) but offer suboptimal financial returns.⁸
• Pricing Policy: The government has historically pressured the company to subsidize domestic fuel prices to control inflation, which directly compresses refining margins and profitability. A revised reference oil price framework implemented in 2025, aimed at boosting state revenue, underscores the ongoing risk of policy changes that can negatively impact project economics.⁷⁵
• Management and Board Changes: The government can and does change the CEO and board members to align the company with its political agenda, leading to strategic instability and uncertainty.⁸

3. Currency Exposure (BRL/USD): The company reports in U.S. dollars, but a significant portion of its operating expenses and taxes are denominated in Brazilian reais. Furthermore, a large part of its debt is denominated in U.S. dollars. A depreciation of the real against the dollar increases the real-equivalent cost of servicing its dollar-denominated debt, which can negatively impact net income.⁸
4. Operational and Legal Hazards: The company faces the inherent operational risks of ultra-deepwater drilling, including spills and accidents. Notably, Petrobras does not maintain insurance against business interruption for most of its Brazilian operations, meaning a significant incident could have a material adverse financial impact.⁸ Additionally, the company is subject to significant contingent liabilities from ongoing legal proceedings, such as a R$36 billion lawsuit filed by Sete Brasil.⁷⁶

IX. Investment Thesis Synthesis

The investment thesis for Petróleo Brasileiro S.A. – Petrobras is built upon a fundamental and enduring tension: the exceptional quality of its underlying assets versus the significant and unpredictable risks associated with its sovereign ownership.

The primary driver of value for Petrobras is its unparalleled portfolio of low-cost, high-productivity pre-salt assets. This is not merely a cyclical advantage but a deep, structural one rooted in geology and reinforced by decades of proprietary technological innovation. The company’s ability to extract oil from these challenging deepwater reservoirs at a lifting cost around US$5 per barrel is a world-class achievement that provides a formidable competitive moat. This operational excellence translates directly into superior margins and the generation of massive, predictable cash flows, which form the basis of the company’s ability to invest in growth and reward shareholders.

The sustainability of this competitive advantage in the pre-salt is high. The technical barriers to entry in ultra-deepwater, combined with Petrobras’s vast and established infrastructure, operational expertise, and unique technological solutions like HISEP®, make its leadership position difficult to challenge. This operational prowess effectively places Petrobras in the top tier of global E&P operators.

However, the realization of this intrinsic value for minority shareholders is not guaranteed. The central question for any investor is how to properly discount this operational excellence for the considerable political and macroeconomic risks inherent in its operating environment. The controlling shareholder, the Brazilian government, has demonstrated both the capacity and the willingness to utilize Petrobras as an instrument of national policy. This can manifest in strategic pivots away from pure value maximization, pressure on domestic fuel pricing to manage inflation, and politically motivated changes in senior leadership. These actions create a layer of uncertainty that clouds long-term strategic planning and can lead to periods of significant share price volatility.

Therefore, the investment case for Petrobras is not simply an evaluation of its oil fields, but an assessment of the political and economic climate in Brazil. It requires an investor to conclude that the economic rent generated by its unique pre-salt assets is sufficiently large to absorb potential value destruction from government intervention. The company’s future performance will be a continuous negotiation between its technical mastery in the deep ocean and the political currents in Brasília. An investment in Petrobras is a calculated position that the profound value of its assets will, over the long term, outweigh the inherent risks of its sovereign parentage.

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