Offshore Activity

Petrobras Revision of the Transfer of Rights Agreement – Surplus Volumes

Rio de Janeiro, November 6, 2017 – Petróleo Brasileiro S.A. – Petrobras clarifies, regarding the volumes in surplus to the contracted volumes in areas under the Transfer of Rights Agreement, that:

1. The Transfer of Rights Agreement, through which Petrobras acquired the right to produce up to 5 billion barrels in pre-salt areas, was signed between Petrobras and the Federal Government in 2010.  As a result of the activities under transfer of rights, commerciality has been declared for the fields of Búzios, Sépia, Itapu, Sul de Lula, Sul de Sapinhoá, Norte and Sul de Berbigão, Norte and Sul de Sururu, and Atapu. The beginning of commercial production will occur in the first half of 2018.

2. Over the past 7 years, with the volume of information acquired through the drilling of more than 50 wells and long-duration production testing, plus the extensive knowledge acquired in the pre-salt layer of the Santos Basin, it was possible to conclude that there are volumes higher than the 5 billion barrels of oil equivalent originally contracted.

3. To support the Revision process provided for in the Transfer of Rights Agreement, Petrobras has commissioned the preparation of reports from DeGolyer & MacNaughton, and ANP has hired the services of Gaffney, Cline & Associates. Both certification companies are recognized as international references in the oil industry.  The opinion by DeGolyer & MacNaughton, hired by Petrobras, was prepared to quantify the cash flows from Transfer of Rights areas, in order to support the valuation of the 5 billion barrels under contract, and does not address scenarios of surplus volumes. Petrobras, based on the large volume of data that it has acquired, built its own estimates of surplus volumes, whose upper and lower statistical limits are lower than those disclosed by ANP.

4. Petrobras considers that the existence of surplus volumes in areas under Transfer of Rights constitutes an opportunity for both parties, namely, the Government and Petrobras, to build an agreement related to compensating Petrobras in the Contract Revision process. As such, in order to support a possible negotiation related to the payment in the form of rights on the surplus volumes, Petrobras is complementing its assessment on such volumes, through an opinion of DeGolyer & MacNaughton, which will be available in approximately 30 days.

Facts deemed material in this matter shall be timely communicated to the market.

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