FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2004
Petrobras International Finance Company - PIFCo
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(Translation of Registrant's Name Into English)
Cayman Islands
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(Jurisdiction of incorporation or organization)
Anderson Square Building, P.O. Box 714
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George Town, Grand Cayman
Cayman Islands, B.W.I.
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.)
(Check One) Form 20-F _X_ Form 40-F ___
(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing information to the Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)
(Check One) Yes ___ No _X_
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- .)
INCORPORATION BY REFERENCE
THIS REPORT ON FORM 6-K IS INCOPORATED BY REFERENCE INTO THE REGISTRATION
STATEMENT ON FORM F-3, FILE NO. 333-92044, OF PETROLEO BRASILEIRO S.A. --
PETROBRAS AND PETROBRAS INTERNATIONAL FINANCE COMPANY.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE-MONTH
PERIOD ENDED MARCH 31, 2004
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 Petroleo Brasileiro S.A. - Petrobras
in its use of our services for market purchases of crude oil and oil products
and changes in government regulations.
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 three-month period ended March 31,
2004 beginning on page F-2. You should also read our audited consolidated
financial statements for the year ended December 31, 2003 and the accompanying
notes, which are included in our annual report on Form 20-F, but which are not
presented in this Form 6-K. The unaudited consolidated financial statements for
the three-month period ended March 31, 2004 and March 31, 2003 and the
accompanying notes have been presented in U.S. dollars and prepared in
accordance with accounting principles generally accepted in the United States of
America ("U.S. GAAP"). As a subsidiary of Petrobras, we also prepare our
financial statements in accordance with accounting practices adopted in Brazil.
Overview
We are a wholly-owned subsidiary of Petrobras. Accordingly, our financial
position 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:
o Petrobras' financial condition and results of operations;
o the extent to which Petrobras continues to use our services for
market purchases of crude oil and oil products;
o Petrobras' willingness to continue to make loans to us and provide us
with other types of financial support;
o our ability to access financing sources, including the international
capital markets and third-party credit facilities; and
o our ability to transfer our financing costs to Petrobras.
We earn income from:
o sales of crude oil and oil products to Petrobras;
o limited sales of crude oil and oil products to third parties; and
o financial income derived from financing of sales to Petrobras,
inter-company loans to Petrobras and investments in marketable
securities and other financial instruments.
Our operating expenses include:
o cost of sales, which is comprised mainly of purchases of crude oil
and oil products; and
o financial expense, mainly from interest on our lines of credit and
capital markets indebtedness, sales of future receivables and
inter-company loans from Petrobras.
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 270 days, which
allows Petrobras sufficient time to assemble the necessary documentation under
Brazilian law to commence the payment process for its shipments. During this
period, we typically finance the purchase of crude oil and oil products through
either funds previously provided by Petrobras or third-party trade finance
arrangements. In years prior to 2003, financial income from sales to Petrobras
was calculated according to a formula based on LIBOR, which was designed to
reimburse us for estimated financing expenses we incurred in connection with
these sales. In January 2003, the interest component of this formula was
modified from a formula based on LIBOR to a formula based on a rate which more
fully passes on our average costs of capital to Petrobras. 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 three-month period ended March 31, 2004 compared
to the three-month period ended March 31, 2003.
Net Income (Loss)
We had a net loss of U.S.$45.3 million in the first three months of 2004, as
compared to a net income of U.S.$7.9 million in the first three months of 2003.
Sales of Crude Oil and Oil Products and Services
Our sales of crude oil and oil products and services increased 20.3% from
U.S.$1,945.7 million in the first three months of 2003 to U.S.$2,340.9 million
in the first three months of 2004. The increase was primarily related to the
purchase of crude oil for export resale, an activity we assumed from another
Petrobras affiliate beginning January 1, 2004. These new sales activities,
principally to PETROBRAS AMERICA INC. - PAI ("PAI"), increased sales volumes of
crude oil and oil products by approximately 20.5% in the first three months of
2004. This increase was partially offset by a reduction in the export price of
sales of oil products conducted by our subsidiary PFL.
Cost of Sales
Cost of sales increased 20.6% from U.S.$1,924.4 million in the first three
months of 2003 to U.S.$2,320.8 million in the first three months of 2004. The
increase was primarily related to additional sales linked to our new export
activities, principally to PAI.
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 from U.S.$0.9 million in the first three months of 2003
to U.S.$11.6 million in the first three months of 2004, of which U.S.$11.5
million consisted of shipping expenses. In July 2003, Petrobras' management
decided to assign to us the responsibility for payment of shipping expenses
previously paid by Petrobras. We expect shipping costs to figure permanently as
part of our selling, general and administrative expenses.
Financial Income
Our financial income consists of the financing of sales to Petrobras and
inter-company loans to Petrobras, investments in marketplace securities and
other financial instruments. Our financial income increased 44.6% from U.S.$87.6
million in the first three months of 2003 to U.S.$126.7 million in the first
three months of 2004, primarily due to an increase in loans to related parties,
an increase in the periods of time for receipt of payments beyond the time
periods previously agreed with Petrobras and increases in interest income from
short-term investments.
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 80.6% from U.S.$100.0 million in the first three months of
2003 to U.S.$180.6 million in the first three months of 2004, primarily due to
interest expenses associated with our issuances of notes in the international
capital markets beginning in March 2003. Additionally, in the first three months
of 2004, we registered an expense in the amount of U.S.$32.4 million
representing the difference between the face value and the market value of the
repurchase of some of our outstanding securities.
Liquidity and Capital Resources
Overview
We finance our oil trading activities principally from commercial banks,
including lines of credit and commercial paper programs, as well as through
inter-company loans from Petrobras and the issuance of notes in the
international capital markets. In our opinion, our strong cash position at hand
and our ability to access international capital markets will continue to allow
us to meet our anticipated cash needs and financial obligations.
As an offshore non-Brazilian company, we are not legally obligated to receive
prior approval from the Brazilian National Treasury to incur debt or register
debt with the Central Bank. As a matter of policy, however, the issuance of any
debt is recommended by 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 March 31, 2004, we had cash and cash equivalents of U.S.$890.8 million, as
compared to U.S.$1,262.0 million at December 31, 2003. This decrease in cash was
primarily a result of the repayment of outstanding loans to Petrobras and the
liquidation of short-term credit lines. Our operating activities provided net
cash of U.S.$852.2 million in the first three months of 2004, as compared to
using net cash of U.S.$370.4 million in the first three months of 2003. Our
investing activities provided net cash of U.S.$36.1 million in the first three
months of 2004, as compared to using net cash of U.S.$14.3 million in the first
three months of 2003. Our financing activities used net cash of U.S.$1,259.5
million in the first three months of 2004, as compared to providing net cash of
U.S.$481.8 million in the first three months of 2003.
Accounts Receivable
Accounts receivable from related parties decreased 10.5% from U.S.$5,064.5
million at December 31, 2003 to U.S.$4,533.5 million at March 31, 2004, as a
result of an increase in payments received from Petrobras from sales of oil and
oil products.
Our Short-Term Borrowings
Our short-term borrowings are denominated in U.S. dollars and consist of lines
of credit, commercial paper and loans payable. At March 31, 2004, we had access
to short-term capital through U.S.$300.9 million in guarantees, primarily in the
form of irrevocable letters of credit supporting oil imports, as compared to
U.S.$274.6 million in guarantees at December 31, 2003. At March 31, 2004 we had
accessed U.S.$655.5 million in lines of credit, including the current portion of
long-term lines of credit, as compared to U.S.$1,015.3 million accessed at
December 31, 2003. The weighted average annual interest rate on these short-term
borrowings was 3.62% at March 31, 2004, as compared to 3.9% at December 31,
2003. At March 31, 2004 and December 31, 2003, we had fully utilized all
available lines of credit for purchase of imports.
We renewed our commercial paper program in May 2003 in an aggregate principal
amount of U.S.$160 million in order to finance our working capital requirements.
Our commercial paper program is rated A1+ by Standard & Poor's and P-1 by
Moody's and is supported by a letter of credit issued by Barclays Bank and a
standby purchase agreement with Petrobras. At March 31, 2004 and December 31,
2003, we had no commercial paper notes outstanding.
Our loans payable to related parties, which are principally composed of notes
payable to Petrobras, decreased 30.1% from U.S.$2,442.8 million at December 31,
2003 to U.S.$1,707.8 million at March 31, 2004, primarily as a result of an
increase in payments received from Petrobras from sales of oil and oil products,
which allowed us to decrease the amount of outstanding loans payable.
Our Long-Term Borrowings
At March 31, 2004, we had outstanding U.S.$323.4 million in long-term lines of
credit due between 2004 and 2006, as compared to U.S.$377.5 million at December
31, 2003. We also had outstanding:
o U.S.$1,550 million in three series of long-term Senior Notes due between
2007 and 2011. We have subsequently repurchased U.S.$2.0 million of these
Notes.
o U.S.$329.9 million in 4.75% Senior Exchangeable Notes due 2007, issued on
October 17, 2002, in connection with Petrobras' purchase of Perez Companc
S.A. (currently known as Petrobras Energia Participaciones - PEPSA). In
exchange, we received notes issued by Petrobras International Braspetro BV
(PIB BV), a related party, in the same amount, terms and conditions as the
Senior Exchangeable Notes. In connection with the acquisition of Perez
Companc, we also provided PIB BV with a loan for U.S.$738.9 million, with
an interest rate of 4.79%.
o U.S.$400 million in Global Step-up Notes due April 2008. The notes will
bear interest from March 31, 2003 at a rate of 9.00% per annum until April
1, 2006 and at a rate of 12.375% per annum thereafter, with interest
payable semiannually. We used the proceeds from this issuance principally
to repay trade-related debt and inter-company loans. We have subsequently
repurchased U.S.$145.0 million of these Notes.
o U.S.$1,500 million in Global Notes, of which U.S.$500 million were issued
on July 2, 2003 and are due July 2013. The notes will bear interest at the
rate of 9.125% per annum, payable semiannually. In September 2003, we
issued an additional U.S.$250 million in Global Notes, which form a single
fungible series with our U.S.$500 million Global Notes due July 2013. The
proceeds from these issuances were used principally to repay trade-related
debt and inter-company loans. On December 10, 2003, we issued an additional
U.S.$750 million of Global Notes due December 2018. The notes will bear
interest at the rate of 8.375% per annum, payable semiannually. The
proceeds from the issuance of these notes were used principally for general
corporate purposes, including the financing of the purchase of oil product
imports and the repayment of existing trade-related debt.
o U.S.$1,671.2 million (U.S.$82.2 million current portion) in connection with
Petrobras' exports prepayment program. On December 21, 2001, the Trust (PF
Export) issued to PFL, our subsidiary, U.S.$750 million of Senior Trust
Certificates in four series and U.S.$150 million of Junior Trust
Certificates. In addition, on May 13, 2003, the Trust issued U.S.$550
million in 6.436% Senior Trust Certificates due 2015, and on May 14, 2003,
the Trust issued U.S.$200 million in 3.748% Senior Trust Certificates due
2013 and an additional U.S.$150 million of Junior Trust Certificates.
An investment fund, in which we have a stake, carries out the repurchases of our
securities, among other investments. These repurchased securities were
reclassified as financings, thus reducing our long term financing balance by
U.S.$147 million in the first three months of 2004 and U.S.$54 million for the
year ended December 31, 2003. In the first three months of 2004, an expense was
registered in the amount of U.S.$32.4 million representing the difference
between the face value and the market value of the repurchased securities.
The following table shows the sources of our current and long-term debt at March
31, 2004 and December 31, 2003:
CURRENT AND LONG-TERM DEBT
March 31, 2004 December 31, 2003
----------------------------- -------------------------------
(in millions of U.S. dollars)
Current Long-term Current Long-term
Financing institutions U.S.$655.5 U.S.$323.4 U.S.$1,015.3 U.S.$377.5
Senior notes 38.6 1,550.0 53.6 1,550.0
Global Step-up Notes -- 400.0 9.0 400.0
Global Notes 36.5 1,506.3 4.4 1,506.5
Sale of rights to future receivables 83.5 1,671.2 61.8 1,706.9
Senior exchangeable notes 7.9 329.9 3.8 338.4
Repurchased securities -- (147.0) -- (54.0)
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U.S.$822.0 U.S.$5,633.8 U.S.$1,147.9 U.S.$5,825.3
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The following table shows the sources of our capital markets debt outstanding at
March 31, 2004:
CAPITAL MARKETS DEBT OUTSTANDING(1)
Notes Principal Amount
(in millions of U.S. dollars)
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9.125% Senior Notes due 2007(2) (6) U.S.$500
4.750% Senior Exchangeable Notes due 2007(3) 330
9.875% Senior Notes due 2008(2) (6) 450
6.750% Senior Trust Certificates due 2010(4) 95
Floating Rate Senior Trust Certificates due 2010(4) 55
9.750% Senior Notes due 2011(2) (6) 600
6.600% Senior Trust Certificates due 2011(4) 300
Floating Rate Senior Trust Certificates due 2013(4) 300
3.748% Senior Trust Certificates due 2013(4) 200
6.436% Senior Trust Certificates due 2015(4) 503
Global Step-up Notes due 2008(5) 400
9.125% Global Notes due 2013(2) 750
8.375% Global Notes due 2018(2) 750
--------------------------
Total U.S.$5,233
--------------------------
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(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. In March 2004, the amount was
reduced from U.S.$338.4 million to U.S.$329.9 million due to
unexpected environmental liabilities under the terms of a settlement
agreement with the former owners of Perez Companc S.A.
(4) Issued in connection with Petrobras' exports prepayment program.
(5) The Global Step-up Notes bear interest from March 31, 2003 at a rate
of 9.00% per year until April 1, 2006 and at a rate of 12.375% per
year thereafter, with interest payable semi-annually, and were issued
by us with support from Petrobras through a standby purchase
agreement. We have subsequently repurchased U.S.$145.0 million.
(6) Of the aggregate U.S.$1,550.0 million of Senior Notes, we have
repurchased U.S.$2.0 million.
Off Balance Sheet Arrangements
At March 31, 2004, 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.
CONSOLIDATED FINANCIAL STATEMENTS
PETROBRAS INTERNATIONAL FINANCE
COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of
PETROLEO BRASILEIRO S.A. -
PETROBRAS)
March 31, 2004 and 2003 together
with Independent Accountants'
Review Report
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
FINANCIAL STATEMENTS
March 31, 2004 and 2003
Contents
Report of Independent Registered Public Accounting Firm........................1
Consolidated Balance Sheet.....................................................2
Consolidated Statement of Operations...........................................4
Consolidated Statement of Changes in Stockholder's Equity......................5
Consolidated Statement of Cash Flows...........................................6
Notes to the Consolidated Financial Statements.................................7
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Executive Board and Stockholder of
PETROBRAS INTERNATIONAL FINANCE COMPANY
We have reviewed the consolidated balance sheet of PETROBRAS INTERNATIONAL
FINANCE COMPANY and its subsidiaries at March 31, 2004 and the related
consolidated statements of income, changes in stockholder's equity, and cash
flows for the three-month period ended March 31, 2004. These financial
statements are the responsibility of the Company's management. The consolidated
balance sheet of PETROBRAS INTERNATIONAL FINANCE COMPANY and its subsidiaries at
March 31, 2003 (not presented herein) and the related consolidated statements of
income, changes in stockholder's, and cash flows for the three-month period then
ended were reviewed by other independent accountants whose report (dated May 14,
2003), stated that they were not aware of any material modifications that should
be made to those statements for them to be in conformity with U.S. generally
accepted accounting principles.
We conducted our review in accordance with 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, the objective of
which is the expression 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 accompanying consolidated financial statements as of March 31,
2004 and for the three-month period then ended, for them to be in conformity
with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheet of PETROBRAS INTERNATIONAL FINANCE COMPANY and its subsidiaries as of
December 31, 2003, and the related consolidated statements of income, changes in
stockholder's equity, and cash flows for the year then ended (not presented
herein), and in our report dated February 13, 2004, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
December 31, 2003, is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
Ernst & Young Auditores Independentes S.S.
Paulo Jose Machado
Partner
Rio de Janeiro, Brazil
May 07, 2004
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
CONSOLIDATED BALANCE SHEET
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
March 31, December 31,
Assets 2004 2003
--------------------------------------
(Unaudited)
Current assets
Cash and cash equivalents 890,832 1,262,039
Marketable securities 18,240 17,960
Accounts receivable
Related parties 4,533,458 5,064,472
Trade 101,336 109,415
Notes receivable - related parties 1,365,048 1,388,004
Inventories 7,479 6,443
Export prepayments - related party 86,835 72,482
Restricted deposits for guarantees
and others 82,589 81,976
--------------------------------------
7,085,817 8,002,791
Property and equipment 38 41
Other assets
Notes receivable - related parties 338,416 338,416
Assets related to export prepayments 300,000 300,000
Export prepayment - related party 1,371,165 1,406,850
Restricted deposits for guarantees and
prepaid expenses 145,537 148,510
--------------------------------------
2,155,118 2,193,776
--------------------------------------
Total assets 9,240,973 10,196,608
======================================
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
CONSOLIDATED BALANCE SHEET
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
March 31, December 31,
Liabilities and stockholder's equity 2004 2003
--------------------------------------
(Unaudited)
Current liabilities
Trade accounts payable
Related parties 395,261 270,950
Other 551,852 349,029
Notes payable - related parties 1,707,836 2,442,778
Short-term financing 600,568 852,390
Current portion of long term debt 137,085 224,002
Accrued interest 84,350 71,494
Unearned income - related parties 78,228 61,866
Other current liabilities 2,354 3,922
--------------------------------------
3,557,534 4,276,431
Long-term liabilities
Long-term debt 5,633,856 5,825,336
--------------------------------------
5,633,856 5,825,336
Stockholder's equity
Shares authorized and issued
Common stock - 2003 and 2002 -
50,000 shares, par value US$ 1 50 50
Additional paid in capital 173,926 173,926
Accumulated deficit (124,393) (79,135)
--------------------------------------
49,583 94,841
--------------------------------------
Total liabilities and
stockholder's equity 9,240,973 10,196,608
======================================
The accompanying notes are an integral part of these financial statements.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands of U.S. dollars)
(Unaudited)
- --------------------------------------------------------------------------------
Periods ended March 31,
------------------------------
2004 2003
------------------------------
Sales of crude oil and oil products and services 2,340,940 1,945,656
------------------------------
2,340,940 1,945,656
Cost of sales (2,320,753) (1,924,413)
Selling, general and administrative expense (11,591) (889)
------------------------------
Total costs and expenses (2,332,344) (1,925,302)
Financial income 126,748 87,559
Financial expense (180,602) (100,038)
------------------------------
Net income (loss) for the period (45,258) 7,875
==============================
The accompanying notes are an integral part of these financial statements.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
(In thousands of U.S. dollars)
(Unaudited)
- --------------------------------------------------------------------------------
March 31, March 31,
2004 2003
----------------------------------
Common stock 50 50
----------------------------------
Additional paid in capital
Balance at January 1 173,926 120,000
Capital contribution from PETROBRAS
related to transfer of
PNBV - 39,135
----------------------------------
Balance at end of period 173,926 159,135
----------------------------------
Accumulated deficit
Balance at January 1 (79,135) (76,124)
Net income (loss) for the period (45,258) 7,875
----------------------------------
Balance at end of period (124,393) (68,249)
----------------------------------
Total stockholder's equity 49,583 90,936
==================================
The accompanying notes are an integral part of these financial statements.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(Unaudited)
- --------------------------------------------------------------------------------
Periods ended March 31,
--------------------------------------
2004 2003
--------------------------------------
Cash flows from operating activities
Net income (loss) for the period (45,258) 7,875
Adjustments to reconcile net income
(loss) to net cash
Depreciation and amortization 2,502 1,585
Decrease (increase) in assets
Accounts receivable
Related parties 531,014 (337,130)
Other 8,079 (28,622)
Export prepayment - related parties 14,000 -
Other assets (7,443) (17,790)
Increase (decrease) in liabilities
Trade accounts payable
Related parties 124,311 (37,013)
Other 202,823 40,096
Other liabilities 22,184 610
--------------------------------------
Net cash provided by (used in)
operating activities 852,212 (370,389)
Cash flows from investing activities
Cash rendered in connection with
transfer of subsidiary to
PETROBRAS - (743)
Cash acquired in connection with
transfer of subsidiary from
BRASOIL - 1,288
Issuance of notes receivable -
related parties (312,747) (113,035)
Principal receivables of notes -
related parties 349,115 98,231
Marketable securities, net (280) -
--------------------------------------
Net cash provided by (used in)
investing activities 36,088 (14,259)
--------------------------------------
Cash flows from financing activities
Short-term debt, net issuance
and repayments (251,822) 48,192
Proceeds from issuance of long-term debt - 400,000
Principal payments of long - term debt (269,730) (81,700)
Proceeds from short term loans -
related parties 1,031,707 3,553,834
Principal payments of short term loans
- related parties (1,769,662) (3,438,519)
--------------------------------------
Net cash provided by (used in) financing
activities (1,259,507) 481,807
Increase (decrease) in cash and cash
equivalents (371,207) 97,159
Cash and cash equivalents at beginning
of period 1,262,039 260,629
--------------------------------------
Cash and cash equivalents at end
of period 890,832 357,788
--------------------------------------
Cash paid during the period for interest 223,910 118,790
======================================
Non cash investing and financing activities
Book value of net assets exchanged for
inter-company loan 2,955
Capital increase from recognized gain
with transfer of PNBV 39,135
Cancel of Senior Exchangeable Notes issued
in exchange of Petrobras
loan 8,476
The accompanying notes are an integral part of these financial statements
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
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 (the Company) is to purchase crude oil and oil products from
third parties and sell the products 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 strategy.
On January 2, 2003, the Company entered into a series of transactions as
part of a larger corporate restructuring at PETROBRAS. The restructuring
included the transfer of PETROBRAS NETHERLANDS B. V. - PNBV to PETROBRAS
and the transfer of BEAR INSURANCE COMPANY LIMITED - BEAR from BRASOIL.
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 bunker and fuel oil from PETROBRAS and
sells these products in the international market, principally to
designated customers, in order to generate receivables to cover the sale
of future receivables debt.
In May 2003, PIFCo, upon receiving approval from the Board of Directors,
contributed an additional US$ 15,000 for capital, bringing PFL's total
capital to US$ 30,000 divided into 30,000,000 quotas of US$ 1.00 each.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--Continued
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
1. The Company and its Operations--Continued
PETROBRAS EUROPE LIMITED
PETROBRAS EUROPE LTD. - 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 additional
commercial or financial risk.
BEAR INSURANCE COMPANY LIMITED
BEAR INSURANCE COMPANY LIMITED - BEAR, based in Bermuda, contracts
insurance for subsidiaries of PETROBRAS.
2. Basis of Financial Statement Presentation
The accompanying unaudited financial information has been prepared in
accordance with accounting principles generally accepted in the United
States of America (US GAAP). Although certain information normally
included in 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 financial statements
should be read in conjunction with the audited financial statements for
the year ended December 31, 2003 and the notes thereto.
The financial statements as of March 31, 2004 and for the three-month
periods ended March 31, 2004 and 2003, included in this report are
unaudited. However, such financial information reflects all normal
recurring adjustments that are necessary for a fair presentation. The
results for interim periods are not necessarily indicative of trends or of
results to be expected for a full year.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--Continued
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
2. Basis of Financial Statement Presentation--Continued
(a) Foreign currency transactions
All monetary assets and liabilities denominated in a currency other
than the US 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 statement of operations as financial
expense.
(b) Financial instruments
The changes in market value of derivative instruments that do not
quality for hedge accounting are recognized in the statement of
operations as financial income or expense each reporting period.
The Company holds a derivative instrument that serves as an economic
hedge respective to future sales of oil products receivables under
the structured finance export prepayment program, the intent of which
is to assure a minimum floor price of approximately US$14/barrel
sufficient to comply with financial obligations.
(c) Reclassification
Certain immaterial reclassifications have been completed respective
to prior period financial statements to conform their presentation to
presentation standards adopted at March 31, 2004.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--Continued
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
3. Financing
March 31, 2004 December 31, 2003
------------------------------- -----------------------------
Current Long-term Current Long-term
------------------------------- -----------------------------
Financing institutions 655,522 323,400 1,015,346 377,550
Senior notes 38,636 1,550,000 53,612 1,550,000
Sale of rights to future
receivables (iii) 83,446 1,671,165 61,764 1,706,850
Senior exchangeable notes 7,859 329,940 3,840 338,416
Global Step-up Notes (ii) - 400,000 8,951 400,000
Global Notes (iv and v) 36,540 1,506,335 4,373 1,506,524
Repurchased securities (i) - (146,984) - (54,004)
------------------------------- -----------------------------
822,003 5,633,856 1,147,886 5,825,336
=============================== =============================
Financing 600,568 5,633,856 852,390 5,825,336
Current portion of long term debt 137,085 - 224,002 -
Accrued interest 84,350 - 71,494 -
------------------------------- -----------------------------
822,003 5,633,856 1,147,886 5,825,336
=============================== =============================
(i) At March 31, 2004 and December 31, 2003, the Company had amounts
invested in an exclusive fund that held debt securities of PIFCo in
the total amount of US$ 146,984 and US$ 54,004, respectively. These
securities are considered to be extinguished, and thus the related
amounts, together with applicable interest have been removed from the
presentation of cash and cash equivalents and long-term debt.
(ii) On March 31, 2003, the Company issued Global Step-up Notes in an
aggregate principal amount of US$ 400,000 due April 2008. The notes
will bear interest from March 31, 2003 at a rate of 9.00% per annum
until April 1, 2006 and at a rate of 12.375% per annum thereafter,
with interest payable semiannually. The Company used the proceeds
from this issuance principally to repay trade-related debt and
inter-company loans.
(iii) In May 2003, the PF Export Trust issued to the Company additional US$
750,000 in Senior Trust Certificates and US$ 150,000 in Junior Trust
Certificates. The Senior Trust Certificates consist of Series 2003-A
of US$ 550,000 bearing annual interest of 6.436% and due June 2015
and Series 2003-B of US$ 200,000 bearing annual interest due of
3.748% due in June 2013. The Junior Trust Certificates are intended
to compensate any losses PF Export should incur on the value of
exports transferred by PFL and are held in the portfolio of PFL
(presented in the balance sheet under non-current assets - assets
related to export prepayment). These two new issuances complement the
initial structured finance export prepayment program commenced in
December 2001.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--Continued
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
3. Financing--Continued
The assignment of rights to future export receivables represents a
liability of PFL, which will be settled by the transfer of the
receivables to PF Export as and when they are generated. This
liability will bear interest on the same basis as the Junior and
Senior Trust Certificates, as described above. The Senior Trust
Certificates together with the interest on the Junior Trust
Certificates, is due as follows:
Series 2001:
o Principal: Quarterly, beginning March 1, 2005
o Interest: Quarterly, beginning March 1, 2002
Series 2003-A:
o Principal and interest: Quarterly, beginning September 1, 2003
Series 2003-B:
o Principal: Quarterly, beginning September 1, 2004 Interest:
Quarterly, beginning September 1, 2003
(iv) On July 2, 2003, the Company issued Global Notes in an aggregate
principal amount of US$ 500,000 due July 2013. The notes will bear
interest at the rate of 9.125% per annum, payable semiannually. In
September 2003, the Company issued an additional US$ 250,000 in
Global Notes, which form a single fungible series with the US$
500,000 Global Notes due July 2013. The Company used the proceeds
from these issuance principally to repay trade-related debt and
inter-company loans.
(v) On December 10, 2003, the Company issued Global Notes in an aggregate
principal amount of US$ 750,000 due December 2018. The notes will
bear interest at the rate of 8.375% per annum, payable semiannually.
The Company used the proceeds from this issuance principally to repay
trade-related debt and inter-company loans.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--Continued
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
3. Financing--Continued
Long-term maturities:
March 31,
2004
--------------------
2005 226,524
2006 358,878
2007 988,608
2008 868,774
2009 173,218
Thereafter 3,017,854
--------------------
5,633,856
====================
4. 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 contracts which
collectively obligate it to purchase a minimum of approximately
268,154 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 Agreements with PNBV, for the
Platforms P-8, P-15, P-32 and P-47, after the expiration of the
Charter terms with PNBV. Upon exercise of the call option, the
Company will purchase all of the vessels for the greater of (i) the
purchase price, any unpaid and accrued charter hire for all of the
vessels, or any costs and expenses which PNBV has incurred or may
incur by virtue of any such purchase, and the amount equal to the
default amount set forth in each of the charters for all of the
Vessels; and (ii) Ten (10) dollars from PNBV, representation or
warranty of any kind or character, and assume and succeed to all
rights, duties and obligations of PNBV under the charters.
PIFCo may designate any affiliate or subsidiary to perform its
obligations under this agreement.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION--Continued
(In thousands of U.S. dollars)
- ---------------------------------------------------------------------------------------------------------------------------
5. Related Parties
PETROBRAS BRASPETRO
PETROLEO DOWNSTREAM INTERNATIONAL OIL SERVICES - BRASPETRO
BRASILEIRO PARTICIPACOES BRASPETRO - BRASOIL OIL COMPANHIA
S.A. - S.A. AND ITS PIB B.V.AND ITS AND ITS COMPANY PETROLIFERA
PETROBRAS SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES BOC MARLIM Others
---------------------------------------------------------------------------------------------
Current assets
Accounts receivable
Mainly by sales 4,093,223 121,770 310,458 - - - 8,007
Notes receivable - - 800,324 330,227 234,497 - -
Export prepayments 86,835 - - - - - -
Marketable securities 3,240 - - - - 15,000 -
Other assets
Notes receivable - - 338,416 - - - -
Export prepayment 1,371,165 - - - - - -
Current liabilities
Trade accounts payable 322,651 648 42,518 29,444 - - -
Loans payable 1,707,836 - - - - - -
Unearned income 78,228 - - - - - -
Statement of operations
Sales of crude oil and oil
products 1,186,838 187,510 619,888 - - - -
Cost of sales and services (709,563) (17,496) (45,112) (73,543) - - -
Selling, general and
administrative expense (11,351) - - - - - -
Financial income (expenses),
net 67,400 2,002 13,596 3,579 2,730 457 -
March 31, December 31,
--------------------------
2004 2003
--------------------------
Current assets
Accounts receivable
Mainly by sales 4,533,458 5,064,472
Notes receivable 1,365,048 1,388,004
Export prepayments 86,835 72,482
Marketable securities 18,240 17,960
Other assets
Notes receivable 338,416 338,416
Export prepayment 1,371,165 1,406,850
Current liabilities
Trade accounts payable 395,261 270,950
Loans payable 1,707,836 2,442,778
Unearned income 78,228 61,886
For the three months ended
March 31, March 31,
2004 2003
--------------------------
Statement of operations
Sales of crude oil and oil
products 1,994,236 1,540,447
Cost of sales and services (845,714) (905,591)
Selling, general and
administrative expense (11,351) -
Financial income (expenses),
net 89,764 46,211
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 incurred during the extended
payment period.
The transactions were realized to support the financial and operational
strategy of the Company's Parent Company, PETROLEO 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 270 days.
(ii) Notes payable to related parties principally include balances to
PETROBRAS for intercompany loans made on a 90 and 180 day basis.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION--Continued
(In thousands of U.S. dollars)
- --------------------------------------------------------------------------------
6. Capital Increase
In connection with the transfer of PNBV, the Company recognized US$
53,926 as a capital contribution from PETROBRAS. From that amount,
US$ 39,135 refers to the unamortized portion of the deferred gain of
the platform P-47 (US$ 37,271) and the deferred gain on other
equipment (US$ 1,864) under similar transaction structures, which
upon transfer of PNBV to PETROBRAS was treated as a capital
transaction. This platform was acquired from BRASOIL in December
2001, for its book value of US$ 142,729. On the same date, the P-47
was sold to PB-47, an independent trust, for a market value of US$
180,000. PB-47 subsequently entered into a charter agreement with
PNBV, which in turn entered into a subcharter agreement with
PETROBRAS.
7. Subsequent Events
In May 2004, the Company, PFL, and the PF Export 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.
* * *
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PETROBRAS INTERNATIONAL FINANCE COMPANY - PIFCo
By: /s/ Almir Guilherme Barbassa
----------------------------
Name: Almir Guilherme Barbassa
Title: Chairman of the Board
Date: August 12, 2004