Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes _______ No___X____INCORPORATION BY REFERENCE
THIS REPORT ON FORM 6-K IS INCORPORATED BY REFERENCE INTO THE REGISTRATION STATEMENT ON FORM F-3, FILE NO. 333-92044, OF PETRÓLEO BRASILEIRO S.A -- PETROBRAS AND PETROBRAS INTERNATIONAL FINANCE COMPANY.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE SIX-MONTH PERIOD
ENDED JUNE 30, 2007
Forward Looking Statements
This report on Form 6-K contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are not based on historical facts and are not assurances of future results. These forward-looking statements are subject to certain risks and uncertainties, including, but not limited to, our ability to obtain financing, changes by Petróleo Brasileiro S.A. – Petrobras in its use of our services for market purchases of crude oil and oil products, and changes in government regulations applicable to us and Petrobras.
All forward-looking statements attributed to us or a person acting on our behalf are expressly qualified in their entirety by this cautionary statement, and you should not place reliance on any forward-looking statement contained herein.
Basis of Presentation
You should read the following discussion of our financial condition and results of operations together with the attached unaudited consolidated financial statements and the accompanying notes for the six-month period ended June 30, 2007 beginning on page F-2. You should also read our audited consolidated financial statements for the year ended December 31, 2006 and the accompanying notes, which are included in our annual report on Form 20-F filed with the United States Securities and Exchange Commission on June 26, 2007, but which are not presented in this Form 6-K. The unaudited consolidated financial statements for the six-month periods ended June 30, 2007 and June 30, 2006 and the accompanying notes have been presented in U.S. dollars and prepared in accordance with U.S. GAAP. As a subsidiary of Petrobras, we also prepare our consolidated financial statements in accordance with accounting practices adopted in Brazil.
Overview
We are a wholly-owned subsidiary of Petrobras. Accordingly, our financial condition and results of operations are significantly affected by decisions of our parent company. Our ability to meet our outstanding debt obligations depends on a number of factors, including:
We earn income from:
Our operating expenses include:
Purchases and Sales of Crude Oil and Oil Products
We typically purchase crude oil and oil products in transactions with payment terms of approximately 30 days. Petrobras typically pays for shipments of crude oil and oil products that we sell to it over a period of up to 330 days, which allows Petrobras sufficient time to assemble the necessary documentation under Brazilian law to commence the payment process for its shipments. The difference between the amount we pay for crude oil and oil products and the amount Petrobras pays for that same crude oil and oil products is deferred and recognized as part of our financial income on a straight-line basis over the period in which Petrobras’ payments to us come due.
Results of Operations
Results of operations for the six-month period ended June 30, 2007 compared to the six-month period ended June 30, 2006.
Loss
We had a loss of U.S.$3.9 million in the first six months of 2007, as compared to a loss of U.S.$9.1 million in the first six months of 2006, primarily due to our financial income.
Sales of Crude Oil and Oil Products and Services
Our sales of crude oil and oil products and services increased 12.6% from U.S.$9,850.7 million in the first six months of 2006 to U.S.$11,094.3 in the first six months of 2007. This increase was primarily due to a 29% increase in our volume of sales, as a result of an increase in offshore sales of crude oil and oil products purchased from third parties and affiliates and subsequently sold to third parties and affiliates and as a result of additional sales in connection with our trading activities in Asia by our new subsidiary PSPL, which initiated its operations in July 2006. This increase was partially offset by a 3.7% decrease in the average price of Brent crude oil, from U.S.$65.69 per barrel during the first six months of 2006 to U.S.$63.26 per barrel during the first six months of 2007, resulting in a 5% reduction in our sales price.
Cost of Sales
Cost of sales increased 12.4% from U.S.$9,736.5 million in the first six months of 2006 to U.S.$10,943.5 million in the first six months of 2007. This increase was primarily due to the same reasons that explain the increase in our sales of crude oil and oil products and services, described above.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses consist primarily of shipping costs and fees for services, including accounting, legal and rating services. These expenses increased 48.2% from U.S.$95.5 million in the first six months of 2006 to U.S.$141.5 million in the first six months of 2007, of which U.S.$79.6 million consisted of shipping expenses due to increases in offshore sales and average freight rates in the first six months of 2007, as a result of changes in international market trends and shipping routes.
Financial Income
Our financial income consists of the financing of sales to Petrobras, inter-company loans to Petrobras, investments in marketable securities and other financial instruments. Our financial income increased 53.5% from U.S.$570.4 million in the first six months of 2006 to U.S.$875.5 million in the first six months of 2007, primarily due to (1) an increase in loans to related parties, and (2) an increase in the amount of sales to Petrobras made during 2006 compared to 2005, resulting in additional financial income due to the financing terms granted to Petrobras and due to interest calculated on a monthly basis (see “Purchases and Sales of Crude Oil and Oil Products”).
2
Financial Expense
Our financial expense consists of interest paid and accrued on our outstanding indebtedness and other fees associated with our issuance of debt. Our financial expense increased 48.5% from U.S.$598.5 million in the first six months of 2006 to U.S.$888.7 million in the first six months of 2007, primarily due to an increase ininter-company loans from Petrobras.
Liquidity and Capital Resources
Overview
We finance our oil trading activities principally from commercial banks, including lines of credit, as well as through inter-company loans from Petrobras and the issuance of notes in the international capital markets.
As an offshore, non-Brazilian company, we are not legally obligated to receive prior approval from the Brazilian National Treasury before incurring debt or registering debt with the Central Bank. As a matter of policy, however, we only issue debt following the recommendation of any of Petrobras’ Chief Financial Officer, Executive Board or Board of Directors, depending on the aggregate principal amount and the tenor of the debt to be issued.
Sources of Funds
Our Cash Flow
At June 30, 2007, we had cash and cash equivalents of U.S.$311.3 million, as compared to U.S.$510.8 million at December 31, 2006. The decrease in cash was primarily a result of issuance of notes receivable to subsidiaries of Petrobras, mainly to Petrobras Netherlands BV (PNBV), as a result of its financing needs in order to make investments in platforms, and Petrobras International Braspetro BV (PIB BV), as a result of its acquisition of 50% of Pasadena’s refinery and financing needs of its subsidiaries. Our operating activities used net cash of U.S.$3,221.2 million in the first six months of 2007, as compared to using net cash of U.S.$1,274.1 million in the first six months of 2006, primarily as a result of an increase in our sales of crude oil and oil products and services, primarily due to an increase in the volume of sales. Our investing activities used net cash of U.S.$3,662.1 million in the first six months of 2007, as compared to using net cash of U.S.$84.4 million in the first six months of 2006, primarily as a result of an increase in notes receivable issued to related parties. Our financing activities provided net cash of U.S.$6,683.8 million in the first six months of 2007, as compared to providing net cash of U.S.$1,545.6 million in the first six months of 2006, primarily as a result of an increase in proceeds from loans from Petrobras due to our short-term financing needs.
Accounts Receivable
Accounts receivable from related parties increased 32.4% from U.S.$14,112.7 million at June 30, 2007 to U.S.$10,658.9 million at December 31, 2006, primarily as a result of an increase in the offshore sales of crude oil and oil products.
Our Short-Term Borrowings
Our short-term borrowings are denominated in U.S. dollars and consist of lines of credit and loans payable. Our outstanding position at June 30, 2007 in irrevocable letters of credit was U.S.$838.9 million, as compared to U.S.$552.1 million at December 31, 2006. Considering only the issuance of irrevocable letters of credit supporting oil imports, our outstanding position at June 30, 2007 was U.S.$731.0 million, as compared to U.S.$365.0 million at December 31, 2006. At June 30, 2007, we had accessed U.S.$376.5 million in lines of credit, including the current portion of long-term lines of credit, as compared to U.S.$329.2 million accessed at December 31, 2006. The weighted average annual interest rate on these short-term borrowings was 6.53% at June 30, 2007, as compared to 6.76% at December 31, 2006. At June 30, 2007, we had utilized all the proceeds from lines of credit for the purchase of imports of crude oil and oil products.
3
The short-term portion of our notes payable to related parties consist principally of notes payable to Petrobras and decreased 47.1% to U.S.$2,754.3 million at June 30, 2007 from U.S.$5,206.3 million at December 31, 2006, primarily as a result of our short-term financing needs.
Our Long-Term Borrowings
Our long-term loans from Petrobras increased to U.S.$17,423.3 million at June 30, 2007 from U.S.$7,622.2 million at December 31, 2006, with interest rate at 8.4% and due up to 2010, primarily as a result of our short-term financing needs.
At June 30, 2007, we had outstanding U.S.$839.0 million in long-term lines of credit due between 2008 and 2017, as compared to U.S.$1,041.3 million at December 31, 2006.
As a result of the settlement of the Exchange Offer that occurred on February 7, 2007, we received and accepted a tender amount of U.S.$399.1 million (face value of the Notes). All the Notes received were cancelled on the same day and as a result, we issued U.S.$399.1 million of Global Notes due 2016 that bear interest at the rate of 6.125% per year, payable semi-annually. The new Notes constitute a single fungible series with the U.S.$500 million Global Notes due 2016 issued in October 2006. In total, we have U.S.$899.1 million in outstanding bonds due 2016. We also paid investors a cash amount equivalent to U.S.$56 million as a result of the Exchange (see Note 7(i)). The table below presents the result of the Exchange.
| (in millions of U.S. dollars) | ||||||||
| Interest rate | Maturity | Principal outstanding after Exchange | Total amount tendered | |||||
| PifCo old Notes | ||||||||
| Global Step-Up Notes | 12.375% | 2008 | U.S.$ 126.9 | U.S.$ 7.8 | ||||
| Senior Notes | 9.875% | 2008 | 224.2 | 14.0 | ||||
| Senior Notes | 9.750% | 2011 | 235.4 | 51.0 | ||||
| Global Notes | 9.125% | 2013 | 374.2 | 124.1 | ||||
| Global Notes | 7.750% | 2014 | 397.9 | 202.2 | ||||
| U.S.$ 1,358.6 | U.S.$399.1 | |||||||
| (in millions of U.S. dollars) | ||||||||
| Interest rate | Maturity | Principal outstanding after Exchange | Total reopened | |||||
| PifCo new Notes | ||||||||
| Global Notes | 6.125% | 2016 | U.S.$ 899.1 | U.S.$ 399.1 | ||||
| U.S.$ 899.1 | U.S.$ 399.1 | |||||||
At June 30, 2007, we also had outstanding:
4
At June 30, 2007, we had available standby committed facilities in the amount of U.S.$675 million, which are not specific as to use requirements. We have no drawdown amounts related to these facilities, and, as of the date of this filing, have not scheduled a date for the drawdown.
On June 15, 2007, PifCo assumed the righs and obligations of the NTN and NTS Companies (two Special Purpose Companies of Petrobras related to Malhas Project) under the Loan Agreement with M-GIC that acts as a Facility Agent of JBIC (Japan Bank for International Cooperation). The outstanding amount of the loan is U.S.$394 million and it bears interest of Libor plus 0.8% p.a., payable semi-annualy. The principal amount will also be paid semi-annualy starting on December 15, 2009. As a consequence of this transfer, PifCo received certain obligations of the Special Purpose Companies with the same characteristics of the Loan (principal amount, interest rate and amortization schedule).
The following table sets forth the sources of our current and long-term debt at June 30, 2007 and December 31, 2006:
| CURRENT AND LONG-TERM DEBT | ||||||||
| June 30, 2007 | December 31, 2006 | |||||||
| (in millions of U.S. dollars) | ||||||||
| Current | Long-term | Current | Long-term | |||||
| Financing institutions | U.S.$377.5 | U.S.$1,233.0 | U.S.$329.2 | U.S.$1,041.2 | ||||
| Senior notes | 238.4 | 235.4 | 533.9 | 524.6 | ||||
| Global step-up notes | 130.7 | - | 4.2 | 134.6 | ||||
| Global notes | 31.4 | 2,198.6 | 32.7 | 2,181.4 | ||||
| Sale of right to future receivables | 68.7 | 581.5 | 68.4 | 614.4 | ||||
| Senior exchangeable notes | 333.7 | - | 333.7 | - | ||||
| Japanese yen bonds | 1.6 | 284.5 | 1.7 | 293.9 | ||||
| Assets related to export prepayment | ||||||||
| to be offset against sales of rights | ||||||||
| to future receivables | - | (150.0) | - | (150.0) | ||||
| U.S.$1,182.0 | U.S.$4,383.0 | U.S.$1,303.8 | U.S.$4,640.1 | |||||
5
The following table sets forth the sources of our capital markets debt outstanding at June 30, 2007:
CAPITAL MARKETS DEBT OUTSTANDING(1)
| Notes | Principal Amount | |
| (in millions of U.S. dollars) | ||
| 9.875% Senior Notes due 2008(2) | 224 | |
| 9.750% Senior Notes due 2011(2) | 235 | |
| 4.750% Senior Exchangeable Notes due 2007(3) | 330 | |
| 12.375%Global Step-up Notes due 2008(2) | 127 | |
| 4.848% Senior Trust Certificates due 2013(4) | 142 | |
| 6.436% Senior Trust Certificates due 2015(4) | 355 | |
| 9.125% Global Notes due 2013(2) | 374 | |
| 7.750% Global Notes due 2014(2) | 398 | |
| 6.125% Global Notes due 2016(2) | 899 | |
| 8.375% Global Notes due 2018(2) | 577 | |
| 2.15% Japanese Yen Bonds due 2016(5) (2) | 285 | |
| Total | U.S.$3,946 | |
| (1) | Does not include Junior Trust Certificates issued by PF Export Trust in connection with Petrobras’ exports prepayment program, because we are the beneficiary of such Junior Trust Certificates. |
| (2) | Issued by us, with support from Petrobras through a standby purchase agreement. |
| (3) | Issued by us on October 17, 2002 in connection with Petrobras’ acquisition of Perez Companc S.A. |
| (4) | Issued in connection with Petrobras’ exports prepayment program. |
| (5) | Issued by us on September 27, 2006 in the amount of ¥ 35 billion. |
Off Balance Sheet Arrangements
At June 30, 2007, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
6
Petrobras International Finance Company Consolidated financial statements |
Petrobras International Finance Company
and subsidiaries
(A wholly-owned subsidiary of Petróleo Brasileiro S.A. - Petrobras)
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2007 and 2006
Contents
2
Report of Independent Registered Public Accounting Firm
To the Executive Board and Stockholder of
Petrobras International Finance Company:
We have reviewed the accompanying condensed consolidated balance sheet of Petrobras International Finance Company (and subsidiaries) as of June 30, 2007, the related condensed consolidated statements of operations, cash flows and changes in stockholder’s deficit for the six-month periods ended June 30, 2007 and 2006. These condensed consolidated financial statements are the responsibility of the Company’s management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States.
KPMG Auditores Independentes
Rio de Janeiro, Brazil
August 27, 2007
3
Petrobras International Finance Company
and subsidiaries
(A wholly-owned subsidiary of Petróleo Brasileiro S.A. - Petrobras)
| CONSOLIDATED BALANCE SHEETS |
| (In thousands of US dollars) |
| June 30, 2007 | December 31, 2006 | |||
| Assets | ||||
| (Unaudited) | ||||
| Current assets | ||||
| Cash and cash equivalents | 311,336 | 510,812 | ||
| Marketable securities | 454,505 | 645,278 | ||
| Trade accounts receivable: | ||||
| Related parties | 14,112,675 | 10,658,905 | ||
| Other | 943,937 | 835,437 | ||
| Notes receivable - related parties | 1,638,408 | 4,887,395 | ||
| Inventories | 392,358 | 262,720 | ||
| Export prepayments - related parties | 268,973 | 67,785 | ||
| Restricted deposits for guarantees and other | 74,162 | 145,732 | ||
| 18,196,354 | 18,014,064 | |||
| Property and equipment | 1,027 | 700 | ||
| Other assets | ||||
| Marketable securities | 2,742,333 | 1,151,588 | ||
| Notes receivable - related parties | 6,963,658 | 1,466,965 | ||
| Export prepayment - related parties | 431,510 | 464,380 | ||
| Restricted deposits for guarantees and prepaid expenses | 217,873 | 223,618 | ||
| 10,355,374 | 3,306,551 | |||
| Total assets | 28,552,755 | 21,321,315 | ||
See the accompanying notes to the consolidated financial statements.
4
Petrobras International Finance Company
and subsidiaries
(A wholly-owned subsidiary of Petróleo Brasileiro S.A. - Petrobras)
| CONSOLIDATED BALANCE SHEETS (Continued) |
| (In thousands of US dollars, except for number of shares and per share amounts) |
| June 30, 2007 | December 31, 2006 | |||
| Liabilities and stockholder’s deficit | ||||
| (Unaudited) | ||||
| Current liabilities | ||||
| Trade accounts payable: | ||||
| Related parties | 958,690 | 1,142,848 | ||
| Other | 1,571,725 | 1,121,986 | ||
| Notes payable - related parties | 2,754,315 | 5,206,269 | ||
| Short-term financing | 51,628 | 148,447 | ||
| Current portion of long-term debt | 1,052,000 | 1,057,438 | ||
| Accrued interest | 78,393 | 97,865 | ||
| Unearned income - related parties | 246,422 | 248,688 | ||
| Other current liabilities | 58,455 | 60,199 | ||
| 6,771,628 | 9,083,740 | |||
| Long-term liabilities | ||||
| Long-term debt | 4,383,025 | 4,640,134 | ||
| Notes payable - related parties | 17,423,265 | 7,622,191 | ||
| 21,806,290 | 12,262,325 | |||
| Stockholder’s deficit | ||||
| Shares authorized and issued: | ||||
| Common stock - 300,050,000 shares, par value US$ 1 | 300,050 | 300,050 | ||
| Additional paid in capital | 53,926 | 53,926 | ||
| Accumulated deficit | (380,389) | (376,519) | ||
| Other comprehensive income: | ||||
| Gain/(loss) on cash flow hedge | 1,250 | (2,207) | ||
| (25,163) | (24,750) | |||
| Total liabilities and stockholder’s deficit | 28,552,755 | 21,321,315 | ||
See the accompanying notes to the consolidated financial statements.
5
Petrobras International Finance Company
and subsidiaries
(A wholly-owned subsidiary of Petróleo Brasileiro S.A. - Petrobras)
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| (In thousands of US dollars) |
| (Unaudited) |
| Six-month periods ended June 30, | ||||
| 2007 | 2006 | |||
| Sales of crude oil, oil products and services | ||||
| Related parties | 5,758,793 | 7,022,087 | ||
| Other | 5,335,530 | 2,828,619 | ||
| 11,094,323 | 9,850,706 | |||
| Operating expenses: | ||||
| Cost of sales | ||||
| Related parties | (3,836,660) | (3,706,772) | ||
| Other | (7,106,881) | (6,029,708) | ||
| Selling, general and administrative expenses | ||||
| Related parties | (95,919) | (87,784) | ||
| Other | (45,599) | (7,662) | ||
| (11,085,059) | (9,831,926) | |||
| Operating income | 9,264 | 18,780 | ||
| Financial income | ||||
| Related parties | 715,323 | 427,674 | ||
| Other | 160,256 | 142,736 | ||
| 875,579 | 570,410 | |||
| Financial expense | ||||
| Related parties | (655,788) | (283,940) | ||
| Other | (232,925) | (314,571) | ||
| (888,713) | (598,511) | |||
| Other income, net | ||||
| Other | - | 258 | ||
| Loss for the period | (3,870) | (9,063) | ||
See the accompanying notes to the consolidated financial statements.
6
Petrobras International Finance Company
and subsidiaries
(A wholly-owned subsidiary of Petróleo Brasileiro S.A. - Petrobras)
| CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S DEFICIT |
| (In thousands of US dollars) |
| (Unaudited) |
| Six-month periods ended June 30, | ||||
| 2007 | 2006 | |||
| Common stock | 300,050 | 50 | ||
| Additional paid in capital | 53,926 | 173,926 | ||
| Accumulated deficit | ||||
| Balance at January 1 | (376,519) | (165,994) | ||
| Loss for the period | (3,870) | (9,063) | ||
| Balance at end of the period | (380,389) | (175,057) | ||
| Other comprehensive income | ||||
| Gain/(loss) on cash flow hedge | ||||
| Balance at January 1 | (2,207) | - | ||
| Change in the period | 3,457 | - | ||
| Balance at end of the period | 1,250 | - | ||
| Total stockholder’s deficit | (25,163) | (1,081) | ||
See the accompanying notes to the consolidated financial statements.
7
| Petrobras International Finance Company |
| and subsidiaries |
| (A wholly-owned subsidiary of Petróleo Brasileiro S.A. - Petrobras) |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (In thousands of US dollars) |
| (Unaudited) |
| Six-month periods ended June 30, | ||||
| 2007 | 2006 | |||
| Cash flows from operating activities | ||||
| Loss for the period | (3,870) | (9,063) | ||
| Adjustments to reconcile loss to net cash | ||||
| Used in operations | ||||
| Depreciation, amortization of prepaid expenses and debt amortization | 6,316 | 7,802 | ||
| Decrease (increase) in assets: | ||||
| Trade accounts receivable | ||||
| Related parties | (3,453,770) | (1,563,614) | ||
| Other | (108,500) | (38,955) | ||
| Export prepayments - related parties | (1,490,000) | - | ||
| Receipt of export prepayments - related parties | 1,321,682 | 379,418 | ||
| Other assets | (46,258) | (651,038) | ||
| Increase (decrease) in liabilities: | ||||
| Trade accounts payable | ||||
| Related parties | (184,158) | 22,706 | ||
| Other | 449,739 | 400,270 | ||
| Other liabilities | 287,624 | 178,379 | ||
| Net cash used in operating activities | (3,221,195) | (1,274,095) | ||
| Cash flows from investing activities | ||||
| Marketable securities, net | (1,399,972) | 640,967 | ||
| Issuance of notes receivable - related parties | (5,877,394) | (3,577,225) | ||
| Collection of principal on notes receivable - related parties | 3,615,725 | 2,852,084 | ||
| Property and equipment | (431) | (194) | ||
| Net cash used in investing activities | (3,662,072) | (84,368) | ||
| Cash flows from financing activities | ||||
| Short-term financing, net of issuance and repayments | (96,819) | 3,529 | ||
| Proceeds from issuance of long-term debt | 737,163 | 184,500 | ||
| Principal payments of long-term debt | (988,713) | (632,667) | ||
| Proceeds from short-term loans - related parties | 1,728,000 | 6,453,945 | ||
| Proceeds from long-term loans - related parties | 12,979,275 | - | ||
| Principal payments of loans - related parties | (7,675,115) | (4,463,676) | ||
| Net cash provided by financing activities | 6,683,791 | 1,545,631 | ||
| (Decrease)/increase in cash and cash equivalents | (199,476) | 187,168 | ||
| Cash and cash equivalents at beginning of the period | 510,812 | 230,745 | ||
| Cash and cash equivalents at end of the period | 311,336 | 417,913 | ||
See the accompanying notes to the consolidated financial statements.
8
Petrobras International Finance Company
and subsidiaries
(A wholly-owned subsidiary of Petróleo Brasileiro S.A. - Petrobras)
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
| (In thousands of US dollars, except as otherwise indicated) |
| (Unaudited) |
1. The Company and its Operations
Petrobras International Finance Company - PifCo was incorporated in the Cayman Islands on September 24, 1997 and operates as a wholly-owned subsidiary of Petrobras.
The primary objective of Petrobras International Finance Company and its subsidiaries (collectively, PifCo or the Company) is to purchase crude oil and oil products from third parties and sell them at a premium to Petrobras on a deferred payment basis. Accordingly, intercompany activities and transactions, and therefore the Company's financial position and results of operations, are affected by decisions made by Petrobras. Additionally, to a more limited extent, the Company sells oil and oil products to third parties. PifCo also engages in international capital market borrowings as a part of the Petrobras financial and operating strategy.
The following is a brief description of each of the Company’s wholly-owned subsidiaries:
Petrobras Finance Limited
Petrobras Finance Limited (PFL), based in the Cayman Islands, in connection with the Company’s structured finance export prepayment program, whereby PFL purchases fuel oil from Petrobras and sells this product in the international market, including sales to designated customers, in order to generate receivables to cover the sale of future receivables debt. Until June 1, 2006, PFL also purchased bunker fuel from Petrobras. Certain sales were through subsidiaries of Petrobras.
Petrobras Europe Limited
Petrobras Europe Limited (PEL), based in the United Kingdom, consolidates Petrobras’ European trade and finance activities. These activities consist of advising on and negotiating the terms and conditions for crude oil and oil products supplied to PifCo and Petrobras, as well as marketing Brazilian crude oil and other derivative products exported to the geographic areas in which the Company operates. PEL plays an advisory role in connection with these activities and undertakes no commercial or financial risk.
9
Petrobras International Finance Company
and subsidiaries
(A wholly-owned subsidiary of Petróleo Brasileiro S.A. - Petrobras)
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
| (In thousands of US dollars) |
| (Unaudited) |
1. The Company and its Operations(Continued)
Bear Insurance Company Limited
Bear Insurance Company Limited (BEAR), based in Bermuda, contracts insurance for Petrobras and its subsidiaries.
Petrobras Singapore Private Limited
In April 2006, PifCo incorporated a new wholly-owned subsidiary: Petrobras Singapore Private Limited (PSPL) a company incorporated in Singapore to trade crude oil and oil products in connection with the trading activities in Asia. This company initiated its operations in July, 2006.
2. Basis of Financial Statement Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (US GAAP). Although certain information normally included in consolidated financial statements prepared in accordance with US GAAP has been condensed or omitted, the disclosures are adequate to make the information presented not misleading. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2006 and the notes thereto.
The consolidated financial statements as of June 30, 2007 and for the six-month periods ended June 30, 2007 and 2006, included in this report are unaudited. However, they reflect all normal recurring adjustments that are necessary for a fair presentation of such consolidated financial statements. The results for interim periods are not necessarily indicative of trends or of results to be expected for a full year.
The preparation of these consolidated financial statements requires the use of estimates and assumptions that determine the amounts of the assets, liabilities, revenues and expenses reported in the consolidated financial statements, as well as amounts included in the notes thereto.
10
| Petrobras International Finance Company |
| and subsidiaries |
| (A wholly-owned subsidiary of Petróleo Brasileiro S.A. - Petrobras) |
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
| (In thousands of US dollars) |
| (Unaudited) |
2. Basis of Financial Statement Presentation(Continued)
a.Foreign currency translation
The Company’s functional currency is the U.S. dollar. All monetary assets and liabilities denominated in a currency other than the U.S. dollar are remeasured into the U.S. dollar using the current exchange rates. The effect of variations in the foreign currencies is recorded in the consolidated statement of operations as financial expense or income.
b.Financial instruments
All of the Company’s derivative instruments are recorded in the consolidated balance sheet at their fair value. For exchange-traded contracts, fair value is based on quoted market prices. For non-exchange traded contracts, fair value is based on dealer quotes, pricing models or quoted prices for instruments with similar characteristics. The transaction price is used as the initial fair value of the contracts.
PifCo designates at inception whether the derivative contract will be considered hedging or non-hedging for SFAS 133 accounting purposes. Non-hedging derivatives that are considered economic hedges, but not designated in a hedging relationship for accounting purposes, are recorded as other current assets or liabilities, with changes in fair value recorded as financial income or financial expense.
For SFAS 133 hedges, PifCo formally documents at inception all relationships; identifying the hedging instrument and hedged item, as well as its risk management objectives and strategies for undertaking the hedge. The Company assesses at the hedge’s inception and for each reporting date thereafter whether the derivative used in the hedging transaction is expected to be and has been highly effective.
As of June 30, 2007, PifCo has designated one hedging relationship for accounting purposes as a cash flow hedge in order to manage foreign currency exchange rate risk. Changes in the fair value of the derivative hedging instrument are recorded in Accumulated OCI. Any hedge ineffectiveness, as well as the excluded component of the derivative from the effectiveness assessments, are recorded directly in earnings (note 7(v)).
11
Petrobras International Finance Company
and subsidiaries
(A wholly-owned subsidiary of Petróleo Brasileiro S.A. - Petrobras)
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
| (In thousands of US dollars) |
| (Unaudited) |
2.Basis of Financial Statement Presentation(Continued)
b.Financial instruments (Continued)
PifCo had written put options in the past that allows the holder of the options to sell a floating number of heavy fuel oil volumes at a minimum price of US$14/barrel. Such option had served as an economic hedge on related future sales of receivables under the structured finance export prepayment program; the intent of which was to ensure that physical barrels delivered under the project finance agreement generate sufficient cash proceeds to repay related financial obligations. Given the low strike price relative to the market the fair value of these options is immaterial at June 30, 2007 and 2006.
c.Reclassification
Certain reclassifications have been made to prior year financial statements to confirm to current year presentation.
3. Cash and Cash Equivalents
| June 30, 2007 | December 31, 2006 | |||
| (Unaudited) | ||||
| Cash and banks | 4,374 | 461 | ||
| Time deposits and short-term investment | 306,962 | 510,351 | ||
| 311,336 | 510,812 | |||
12
Petrobras International Finance Company
and subsidiaries
(A wholly-owned subsidiary of Petróleo Brasileiro S.A. - Petrobras)
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
| (In thousands of US dollars) |
| (Unaudited) |
4. Marketable Securities
| Total | ||||||||||
| Security | Maturity | Interest rate per annum | June 30, 2007 (i) | December 31, 2006 (i) | ||||||
| (Unaudited) | ||||||||||
| Available for Sale (iii) | Clep (ii) | 2014 | 8% | 921,425 | 975,840 | |||||
| Available for Sale (iii) | Marlim (ii) | 2008 | 12.25% | 341,696 | 295,588 | |||||
| Held to Maturity | NTS (ii) and (iv) | 2009-2014 | 5.77%/6.21% | 565,097 | - | |||||
| Held to Maturity | NTN (ii) and (iv) | 2009-2014 | 5.77%/6.21% | 511,193 | - | |||||
| Held to Maturity | Mexilhão (ii) | 2009 | 5.68%/5.72% | 244,637 | 87,589 | |||||
| Held to Maturity | Gasene (ii) | 2007 | 5.66% | 218,122 | 212,184 | |||||
| Held to Maturity | CDC (ii) | 2009 | 5.66% | 201,227 | - | |||||
| Held to Maturity | TUM (ii) | 2008 | 5.70% | 117,458 | - | |||||
| Held to Maturity | PDET (ii) | 2007 | 5.74% | - | 207,721 | |||||
| Held to Maturity | Third parties | 2009 | 5.87% | 75,983 | - | |||||
| Trading | Third parties | 2007 | 3.50% | - | 17,944 | |||||
| 3,196,838 | 1,796,866 | |||||||||
| Less: Current balances | (454,505) | (645,278) | ||||||||
| 2,742,333 | 1,151,588 | |||||||||
| (i) | The balances include interest and principal. | |
| (ii) | Securities held by the fund respective to the special purposes companies, established to support Petrobras infrastructure projects, are not US exchange traded securities. | |
| (iii) | Changes in fair value related to the securities classified as available for sale in accordance with FAS 115 are diminimus and were included in the Statement of Operations as financial income or expense. | |
| (iv) | On June 15, 2007, PifCo assumed the righs and obligations of the NTN and NTS Companies (two Special Purpose Companies of Petrobras related to Malhas Project) under the Loan Agreement (see note 7(viii)). |
5. Inventories
| June 30, 2007 | December 31, 2006 | |||
| (Unaudited) | ||||
| Crude oil | 223,631 | 60,097 | ||
| Oil products | 168,727 | 202,623 | ||
| 392,358 | 262,720 | |||
13
PetrobrasInternationalFinanceCompany
andsubsidiaries
(A wholly-ownedsubsidiary ofPetróleoBrasileiro S.A. -Petrobras)
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
| (In thousands of US dollars) |
| (Unaudited) |
6.Related Parties
PetróleoBrasileiro S.A. - Petrobras | Petrobras Internationa Braspetro B.V. - PIB.B.V. and its subsidiaries | Downstream Participações S.A. and its subsidiaries | NBV and its subsidiaries | Clep | NTS / NTN | Marlim | Gasene | TUM | Mexilhão | CDC | Termobahia (iv) | Other | June 30,2007 | December 31,2006 | ||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||
| Current assets | ||||||||||||||||||||||||||||||
| Marketable securities | 118,925 | 218,122 | 117,458 | 454,505 | 627,335 | |||||||||||||||||||||||||
| Accounts receivable, principally for sales (i) | 13,735,875 | 93,027 | 283,701 | 72 | 14,112,675 | 10,658,905 | ||||||||||||||||||||||||
| Notes receivable | 1,514,410 | 588 | 123,410 | 1,638,408 | 4,887,395 | |||||||||||||||||||||||||
| Export prepayment | 268,973 | 268,973 | 67,785 | |||||||||||||||||||||||||||
| Other | 1,453 | 1,453 | 1,453 | |||||||||||||||||||||||||||
| Other assets | ||||||||||||||||||||||||||||||
| Marketable securities | 802,500 | 1,076,290 | 341,696 | 244,637 | 201,227 | 2,666,350 | 1,151,588 | |||||||||||||||||||||||
| Notes receivable | 3,785,703 | 3,125,410 | 40,535 | 12,010 | 6,963,658 | 1,466,965 | ||||||||||||||||||||||||
| Export prepayment | 431,510 | 431,510 | 464,380 | |||||||||||||||||||||||||||
| Current liabilities | ||||||||||||||||||||||||||||||
| Trade accounts payable | 763,993 | 124,129 | 70,568 | 958,690 | 1,142,848 | |||||||||||||||||||||||||
| Notes payable | 2,754,315 | 2,754,315 | 5,206,269 | |||||||||||||||||||||||||||
| Unearned income | 243,930 | 2,492 | 246,422 | 248,688 | ||||||||||||||||||||||||||
| Long-term liabilities | ||||||||||||||||||||||||||||||
| Notes payable (ii) | 17,423,265 | 17,423,265 | 7,622,191 | |||||||||||||||||||||||||||
| For the six-month periods ended | ||||||||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||||||
| Consolidated Statement of operations | 2007 | 2006 | ||||||||||||||||||||||||||||
| Sales of crude oil and oil products and services | 4,944,846 | 239,846 | 574,101 | 5,758,793 | 7,022,087 | |||||||||||||||||||||||||
| Purchases (iii) | (2,955,611) | (639,816) | (241,233) | (3,836,660) | (3,706,772) | |||||||||||||||||||||||||
| Selling, general and administrative expense | (86,890) | (9,029) | (95,919) | (87,784) | ||||||||||||||||||||||||||
| Financial income | 413,025 | 179,001 | 5,354 | 114,469 | 1,573 | 1,901 | 715,323 | 427,674 | ||||||||||||||||||||||
| Financial expense | (655,788) | (655,788) | (283,940) | |||||||||||||||||||||||||||
Commercial operations between PifCo and its subsidiaries and affiliated companies are carried out under normal market conditions and at commercial prices, except for the sales of oil and oil products to Petrobras, which have an extended settlement period consistent with PifCo’s formation as a financing entity, and include finance charges accrued during the extended payment period.
Certain affiliates of PifCo and PFL, which are subsidiaries of Petrobras, serve as agents in connection with export sales to certain customers under the export prepayment program. Those transactions have been classified as related party transactions for purposes of these financial statements.
The transactions were realized to support the financial and operational strategy of the Company's Parent Company, Petróleo Brasileiro S.A. - Petrobras.
(i) Accounts receivable from related parties relate principally to crude oil sales made by the Company to Petrobras, with extended payment terms of up to 330 days.
(ii) Long-Term Liabilities – Notes payable relate to loans executed between the Company and Petrobras due up to 2010. The annual interest is 8.4% .
(iii)Purchases from related parties are presented in the cost of sales section of the statement of operations.
(iv)On December 28, 2005, in order to lend support to Petrobras in its transactions related to the Termobahia power plant, PifCo entered into a series of agreements with Blade Securities Ltd , a special purpose company holding 49% of the equity shares of Termobahia (consolidated by Petrobras) . Under the agreements, PifCo paid to Blade US$ 1,453, and in return, Blade transfers to PifCo the right of any dividends to be received from Termobahia and the rights to the shares of Termobahia either for PifCo or a Petrobras subsidiary. Additionally, PifCo paid to Blade US$ 38,185, and in return, Blade transfers to PifCo any amounts received from Termobahia related to the subordinated loan recorded as notes receivable, which has an interest rate of 8% p.a. and an expiry date of 2023, and the right to the loans receivable for PifCo or a Petrobras subsidiary.
14
Petrobras International Finance Company
and subsidiaries
(A wholly-owned subsidiary of Petróleo Brasileiro S.A. - Petrobras)
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
| (In thousands of US dollars) |
| (Unaudited) |
7. Financing
| Unaudited | ||||||||
| June 31, 2007 | December 31, 2006 | |||||||
| Current | Long-term | Current | Long-term | |||||
| Financial institutions (viii) | 377,528 | 1,233,000 | 329,180 | 1,041,250 | ||||
| Senior notes (i), (iv) and (vii) | 238,434 | 235,350 | 533,945 | 524,602 | ||||
| Global notes (i), (iv), (vi) and (vii) | 31,374 | 2,198,615 | 32,725 | 2,181,420 | ||||
| Senior exchangeable notes | 333,684 | - | 333,684 | - | ||||
| Global step-up notes (i), (iv) and (vii) | 130,729 | - | 4,165 | 134,622 | ||||
| Japanese yen bonds (v) | 1,579 | 284,550 | 1,658 | 293,860 | ||||
| Sale of right to future receivables (ii) | 68,693 | 581,510 | 68,393 | 614,380 | ||||
| Assets related to export prepayment to be offset | ||||||||
| against sales of right to future receivables (iii) | - | (150,000) | - | (150,000) | ||||
| 1,182,021 | 4,383,025 | 1,303,750 | 4,640,134 | |||||
| Financing | 51,628 | 4,383,025 | 148,447 | 4,640,134 | ||||
| Current portion of long-term debt | 1,052,000 | - | 1,057,438 | - | ||||
| Accrued interest | 78,393 | - | 97,865 | - | ||||
| 1,182,021 | 4,383,025 | 1,303,750 | 4,640,134 | |||||
(i) As of June 30, 2007 and December 31, 2006, the outstanding balance of net premiums on reissuances amounted to US$ 6,211 and US$ 10,273, respectively. PifCo did not incur in expenses on extinguishment of debt during the period ended June 30, 2006. In connection with the Exchange Offer (7(vii)) PifCo paid US$ 54,812 related to the amount above the face amount of the old Notes exchanged. This amount was associated to the new Notes and has been amortizated in acordance with the effective interest method.
(ii) On May 26, 2006, PFL successfully completed a solicitation of consents from holders of the Series 2003-A 6.436% Senior Trust Certificates due 2015 issued by PF Export Receivables Master Trust. The amendments sought to eliminate exports of bunker fuel from the transaction so that the securities will be collateralized only by receivables from sales of fuel oil exported by Petrobras and to reduce the minimum average daily gross exports of fuel oil for any rolling twelve-month period. PFL also obtained the consent from the holders of Series 2003-B 3.748% due 2013. The amendments became effective on June 1, 2006.
As a result of these amendments, the premium rate of the guarantee of the Series 2003-B was reduced from 1.8% to 1.1% .
On March 1, 2006, PFL prepaid the fixed rate Senior Trust Certificates (Series A1 and B related to the 1st tranch) in accordance with the applicable provisions of the governing agreements in the amount of US$ 333,860. On prepayment the fixed rate Senior Trust Certificates (Series A1 and B) PFL paid premium in the total amount of US$ 13,650.
15
Petrobras International Finance Company
and subsidiaries
(A wholly-owned subsidiary of Petróleo Brasileiro S.A. - Petrobras)
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
| (In thousands of US dollars) |
| (Unaudited) |
7.Financing (Continued)
(iii) In May 2004, PFL and the PF Export Trust (the Trust) executed an amendment to the Trust Agreement allowing the Junior Trust Certificates to be set-off against the related Notes, rather than paid in full, after fulfillment of all obligations pursuant to the Senior Trust Certificates. The effect of this amendment is that amounts related to the Junior Trust Certificates have been presented net, rather than gross in these consolidated financial statements, and thus US$ 150,000 has been reduced from the “long term debt” financing respective to sales of right to future receivables.
(iv) On July 24, 2006, PifCo concluded its debt repurchase offer (Tender) announced on July 18, 2006. The amount of notes tendered for five series of notes listed below was US$ 888,260. Including the notes previously repurchased by Petrobras and its affiliates, also included in the tender, the total value reached US$ 1,215,661. The purpose of this initiative was to reduce total debt outstanding and simplify the debt profile, thus benefiting from the Company’s current strong cash generation. The transaction was settled on July 27, 2006 and all the notes tendered were canceled from this date. Upon conclusion of the debt repurchase offer (Tender), PifCo incurred expenses in the total amount of US$ 160,048.
| Securities Repurchased | Interest Rateper annum | Maturity | US$ | |||
| Global Step-Up Notes | 12.375% | 2008 | 265,378 | |||
| Senior Notes | 9.875% | 2008 | 211,754 | |||
| Senior Notes | 9.750% | 2011 | 313,644 | |||
| Global Notes | 9.125% | 2013 | 251,665 | |||
| Global Notes | 8.375% | 2018 | 173,220 | |||
| 1,215,661 | ||||||
(v) On September 27, 2006, the Company concluded a private placement of securities in the Japanese capital market (“Shibosai”) for a total of ¥ 35 billion (US$ 297,780) due September 2016. The issue was a private placement in Japanese market with a partial guarantee of Japan Bank for International Cooperation (JBIC) and bears interest at the rate of 2.15% per annum, payable semiannually. PifCo used the proceeds principally to finance PNBV, an affiliate, for construction of lines interconnecting the P-51, P-52 and P-53 production platforms to the PRA-1 autonomous repumping unit.
In the same date, PifCo entered into cross currency swaps under which it swaps the principal and interest payments on Yen denominated funding into U.S. dollars; and designated the hedging relationship as a qualifying cash flow hedge under SFAS 133. The hedged item is a ¥ 35 billion 10 year issued bond, with a semi-annual coupon of 2.15% p.a. The hedging instrument is a series of cross currency swaps, whose notional amounts, underlyings and maturities match the terms of the funding; in which U.S. dollars are paid and Japanese Yen are received.
The transaction gain or loss arising from the remeasurement of Yen denominated bonds is offset by the reclassification relating to the remeasurement of the hedged item at spot rates from other comprehensive income to earnings. The cross currency swap at June 30, 2007 had a fair value of US$ 14,568 due to the devaluation of the Japanese Yen when compared to U.S. dollar since the inception of the instrument. No amounts were recognized in earnings during the year as hedge ineffectivenesses. Accumulated other comprehensive income were reclassified at the reporting date in order to offset the foreign currency exchange gain or losses on the hedged item.
16
Petrobras International Finance Company
and subsidiaries
(A wholly-owned subsidiary of Petróleo Brasileiro S.A. - Petrobras)
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
| (In thousands of US dollars) |
| (Unaudited) |
7. Financing (Continued)
(vi) On October 06, 2006, the Company issued Global Notes of US$ 500,000 due October, 2016. The notes bear interest at the rate of 6.125% per annum, payable semiannually. The Company used the proceeds from this issuance principally to repay trade-related debt and inter-company loans.
(vii) As a result of the settlement of the Exchange Offer occurred on February 7, 2007, PifCo received and accepted a tender amount of US$ 399,053 (face value of the Notes). All the Notes received were cancelled in the same day and as consequence, PifCo issued US$ 399,053 of Global Notes due 2016 that bear interest at the rate of 6.125% per annun, payable semi annually. The new Notes constitute a single fungible series with the US$ 500,000 Global Notes due 2016 issued in October 2006. In total, there are US$ 899,053 in outstanding bonds due 2016. PifCo also paid to the investors a cash amount equivalent to US$ 56,056 as a result of the Exchange (see Note 7(i)). The table below presents the result of the Exchange.
| US$ | ||||||||
| PifCo old Notes | Interest rate per annum | Maturity | Principal outstanding after Exchange | Total amount tendered | ||||
| Global Step-Up Notes | 12.375% | 2008 | 126,868 | 7,754 | ||||
| Senior Notes | 9.875% | 2008 | 224,212 | 14,034 | ||||
| Senior Notes | 9.750% | 2011 | 235,350 | 51,006 | ||||
| Global Notes | 9.125% | 2013 | 374,211 | 124,124 | ||||
| Global Notes | 7.750% | 2014 | 397,865 | 202,135 | ||||
| 1,358,506 | 399,053 | |||||||
| US$ | ||||||||
| Interest rate per annum | Maturity | Principal outstanding after Exchange | Total reopened | |||||
| PifCo new Notes | ||||||||
| Global Notes | 6.125% | 2016 | 899,053 | 399,053 | ||||
| 899,053 | 399,053 | |||||||
(viii) On June 15, 2007, PifCo assumed the righs and obligations of the NTN and NTS Companies (two Special Purpose Companies of Petrobras related to Malhas Project under the Loan Agreement with M-GIC that acts as a Facility Agent of JBIC (Japan Bank for International Cooperation). The outstanding amount of the loan is US$ 394,000 and it bears interest of Libor plus 0.8% p.a., payable semi-annualy. The principal amount will also be paid semi-annualy starting on December 15, 2009. As a consequence of this transfer, PifCo received certain obligations of the Special Purpose Companies with the same characteristics of the Loan (principal amount, interest rate and amortization schedule) (see note 4 (i)).
17
Petrobras International Finance Company
and subsidiaries
(A wholly-owned subsidiary of Petróleo Brasileiro S.A. - Petrobras)
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
| (In thousands of US dollars) |
| (Unaudited) |
7.Financing (Continued)
Long-term maturities
| June 30, 2007 | ||
| 2008 | 160,745 | |
| 2009 | 253,037 | |
| 2010 | 399,876 | |
| 2011 | 397,296 | |
| 2012 | 164,816 | |
| 2013 | 533,933 | |
| Thereafter | 2,473,322 | |
| 4,383,025 | ||
8. Commitments and Contingencies
(a) Commitments - Purchases
In an effort to ensure procurement of oil products for the Company’s customers, the Company currently has several short and long-term normal purchase contracts with maturity date up to 2017, which collectively obligate it to purchase a minimum of approximately 270,692 barrels of crude oil and oil products per day at market prices.
(b) Purchase Option - Platforms
The Company has maintained the right to exercise the call option on the existing Subchartered Asset Option Agreement granted by PNBV and has maintained the obligation to purchase the vessels in case the Owners exercise the Put Option, on condition of an event of default, under the same Option Agreement, for the Platforms P-8, P-15, P-32. PifCo also has an obligation to purchase the platforms after the expiration of the Charter terms.
18
Petrobras International Finance Company
and subsidiaries
(A wholly-owned subsidiary of Petróleo Brasileiro S.A. - Petrobras)
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
| (In thousands of US dollars) |
| (Unaudited) |
8.Commitments and Contingencies (Continued)
(b) Purchase Option – Platforms (Continued)
In relation to P-47, PifCo has maintained the right to exercise the call option on the existing Subchartered Asset Option Agreement granted by PNBV and has maintained the obligation to purchase the vessel in case the Owner exercise the Put Option, on condition of an event of default or of the expiration of the Charter.
PifCo may designate any affiliate or subsidiary to perform its obligations under this agreement.
(c) Loans Agreement
The Company had available standby committed facilities in the amount of US$ 675,000, which are not specified as to use requirements. PifCo has no drawdown amounts related to these facilities and does not have a scheduled date for the drawdown.
* * *
| PETROBRAS INTERNATIONAL FINANCE COMPANY-PIFCo | ||
| By: | /S/ Daniel Lima de Oliveira | |
Daniel Lima de Oliveira Chairman of the Board | ||
This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates offuture economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.
