Petróleo Brasileiro S A Petrobras : Petrobras Financial Performance (RMF USD)

PETROBRAS FINANCIAL PERFORMANCE -

4Q20

TABLE OF CONTENTS

Message from the CEO ........................................................................................................................................ 3

Consolidated Results ........................................................................................................................................ 9

Net Revenues ...................................................................................................................................... 9

Cost of Goods Sold ............................................................................................................................ 11

Operating Expenses ............................................................................................................................ 12

Adjusted EBITDA ............................................................................................................................... 14

Financial Results ................................................................................................................................ 15

Net Income ........................................................................................................................................... 16

Special Items ..................................................................................................................................... 17

CAPEX ................................................................................................................................................................ 19

Portfolio Management ....................................................................................................................................... 21

Liquidity and Capital Resources ....................................................................................................................... 23

Debt .................................................................................................................................................................. 25

Results per Segment ........................................................................................................................................ 26

Exploration and Production ................................................................................................................. 26

Refining .......................................................... ..................................................................................... 28

Gas and Power ................................................................................................................................... 29

Reconciliation of Adjusted EBITDA ................................................................................................................. 30

Financial Statements ...................................................................................................................................... 31

Financial Information by Business Area ........................................................................................................ 35

Glossary ......................................................................................................................................................... 44

Disclaimer

This report may contain forward-looking statements. Such forward-looking statements only reflect expectations of the Company's managers regarding future economic conditions, as well as the Company's performance, financial performance and results, among others. The terms "anticipates", "believes", "expects", "predicts", "intends", "plans", "projects", "objective", "should", and similar terms, which evidently involve risks and uncertainties that may or may not be anticipated by the Company and therefore are not guarantees of future results of the Company's operations that may differ from current expectations. The readers should not rely exclusively on any forward-looking statement contained herein. The Company does not undertake any responsibility to update the presentations and forecasts in the light of new information or its future developments, and the figures reported for 4Q20 onwards are estimates or targets. These indicators do not have standardized meanings and may not be comparable to indicators with a similar description used by others. We provide these indicators because we use them as measures of company performance; they should not be considered in isolation or as a substitute for other financial metrics that have been disclosed in accordance with BR GAAP or IFRS. See definitions of Free Cash Flow, Adjusted EBITDA and Net Indebtedness in the Glossary and their reconciliations in the Liquidity and Capital Resources sections, Reconciliation of Adjusted EBITDA and Net Indebtedness. Consolidated accounting information audited by independent auditors in accordance with international accounting standards (IFRS).

MESSAGE FROM THE CEO

Dear Shareholders,

I am very happy to present the report on Petrobras financial performance in 2020, a superb performance in a very challenging environment.

Amidst a severe global recession and the effects of a major global shock to the oil industry, we promised to engineer a J-shaped recovery. The goal was to emerge better than before.

We delivered on our promises.

Costs were reduced and are set to remain on a downward path, productivity is growing, the company is laser focused on investing in world-class assets and has a large pipeline of non-core assets to divest.

We are very proud of our team for the fast and efficient response to the oil crisis. Our employees worked relentlessly to win, corporate people at their homes and operations people at the refineries, plants and oil and gas platforms in the sea.

The execution of the strategy launched in January 2019 was accelerated as well as digital transformation to support the efforts to lower costs and to boost efficiency and operational safety. The work of multidisciplinary agile teams was instrumental to leverage our key resources and to enhance resiliency.

Oil and oil & gas production reached all-time highs at 2.28 MMbpd and 2.84 MMboed, respectively, while most of our global competitors showed output reduction. A major part of our production - about 66% - came from the pre salt fields at an average lifting cost of US$2.5 per boe. This means also higher oil quality sold at a premium on the Brent price as well as less greenhouse gases (GHG) emissions.

Total average lifting cost, at US$ 5.2 per boe in 2020, dropped 42.2% relatively to the 2015-2019 average of US$9.0 per boe.

Petrobras oil and fuel oil exports also reached historical records. Crude oil sales increased 33% and our Tupi and Buzios brand names were consolidated with Asian clients.

Our sales and marketing team is developing initiatives to diversify by geographies and clients. In 2020 they were able to add 14 new clients to the clientele.

Exports of fuel oil climbed 45,9%, primarily due to the successful exploration of low sulphur grade to the Singaporean market, a global shipping hub.

New and successful inroads were made in the sales of naphta, propane, ethane and coke.

Whereas oil prices plunged 35%, our operational cashflow (CFFO) went up 13% and free cash flow (FCF) 20%.

CFFO reached US$ 28.9 billion, the highest of the last 10 years, even comparing with a period of oil prices around

US$ 100 per bbl, more than double of last year's average price of US$42/bbl. When compared to major oil companies, Petrobras was the only one to show an increase in a very challenging environment.

FCF of US$22.1 billion (US$ 24.1 billion if divestments are included) was an all-time high figure for our company. It was also the highest among major oil companies, and almost eight times the average number for the group, at US$2.8 billion.

Consistently with the focus on meritocracy and value creation, we started the implementation of EVA® as a management system in 2019.

The strength of cashflow generation and a more efficient capital allocation were the main factors underlying the EVA® increase of US$2.3 billion in relation to 2019.

The strong cashflow allowed us to continue to deleverage the balance sheet. Total debt was reduced by US$11.6 billion, to US$ 75.5 billion, from US$87.1 billion as of December 31, 2019, another great achievement.

Net debt of US$63.2 billion at the end of 2020 dropped US$15.7 billion against the position of December 31, 2019.

Cash holdings of US$ 12.4 billion are still greater than optimal. They should be reduced over time to improve the efficiency of capital allocation as attractive opportunities for debt pre-payment arise.

Debt reduction and lower costs of debt contributed to a substantial decline in interest burden. For instance, the interest paid to barrel of oil produced ratio was US$3.80 in 2020 against US$7.80 in 2015 - a 51% drop - and the average of US$7.70 for 2015-2019.

Total interest payment of US$3.2 billion in 2020, represents a sea change when compared to large payments of over US$7.0 billion per year in the recent past, equivalent to more than the CAPEX required to build an offshore oil production system with capacity of 150-180,000 bpd.

Lower debt and interest payments are key to improve risk perception and to free funds to be invested in world-class assets, particularly in a capital- intensive business such as oil.

Petrobras´ total shareholders return have been very poor over the last few years. Given the strong cash flow performance and continued debt reduction, we are proposing to the Board of Directors a dividend distribution of R$ 10.3 billion - R$0,787446 per common and preferred shares -still relatively modest but more than twice the mandatory for the 2020 calendar year. Dividends are scheduled to be paid on April 29.

Manageable operating expenses fell to US$16.9 billion against US$21.8 billion in 2019 and general and administrative expenses went down by US1.0 billion, to US$1.1 billion against US$2.1 billion.

Lifting costs declined 33% on year-on-year basis to US$5.2 from US$7.8/boe. 63 oil platforms were mothballed given low productivity and high operational costs.

We managed to cut costs with air, storage, maritime and port operations. At the same time, the ship-to-ship operations performed by our wholly owned subsidiary Transpetro increased by 66% relative to 2019 and ship availability was raised to 99.2% in 2H20, against 90% in December, 2019. Transpetro sold 11 ships, most of which with 30 or more years, demanding much higher costs of maintenance.

The company is taking steps to optimize inventory management. The inventory was reduced, reaching the lowest level since 2011, and the inventory of oil declined 8 million barrels in a move to eliminate inefficiency and to reallocate capital to better uses.

By the same token, we put for sale some 50,000 tons of scrap and 550 real estate assets.

More than 11,000 employees of Petrobras and its subsidiaries enlisted for the various voluntary dismissal programs, out of which 6,100 left Petrobras in 2019 and 2020 and 5,000 as of 2021. Almost 1,500 managerial positions