OREANDA-NEWS. August 17, 2011. In the first half of 2011, the Company's showed a net income of BRL 21.928 billion, 37% up on the same period 2010. Contributing to this result was a 12% increase in sales revenues, driven by a 2% growth in domestic oil and natural gas output and, mainly, a higher oil product (+9%) and gas natural (+7%) sales volume on the domestic market, which were more expensive due to a 5% increase in the average realization price. Commodity prices reflected a 44% surge in the average Brent crude oil price (up from USD 77.27 per barrel to USD 111.16 per barrel), which increased income from exports and international sales.

In the same period, the cost of goods sold (COGS) rose 16%, mainly as an impact of higher oil and oil product import (notably diesel) costs and increased extraction costs, government share and refining costs. Operating expenses were up 7% compared to 1H10, mainly due to higher spending on prospecting and exploration (BRL 512 million) and administrative expenses (BRL 448 million). The Company reported a 3% increase in operating profit and 4% increase in operating cash flow (EBITDA) compared to 1H10.

The improved net financial result (positive variation of BRL 6.249 billion) contributed to the half year earnings, as a result of currency appreciation (+6.3%) on the Company's debt pegged to the US Dollar and of the increase in revenues from financial investments.

In the first half of the year, the Company paid out BRL 4.827 billion as interest on stockholders equity and BRL 1.565 billion as dividends to its shareholders. The second tranche of the early distribution of interest on stockholders equity, totaling BRL 2.609 billion, to be paid out by October, was also approved.

2Q11 net income reached BRL 10.942 billion

Net profit for the quarter remained stable compared to 1Q11. Sales revenues increased 12% in the quarter, reflecting higher domestic sales volumes of oil products (+8%) and natural gas (+2%), at higher prices, and increased oil export prices. This increase was offset by a 19% rise in COGS in the period due to more oil product imports, mainly diesel and gasoline, to meet domestic market needs. Also contributing to offset this increase were the rising costs of extraction and refining.

Operating expenses were up 7% with the highest spending on prospecting and exploration (BRL 257 million) and in provisioning to adjust the inventory to market value (BRL 119 million). The Company posted better financial results (an increase of BRL 873 million) in the quarter due to foreign exchange gains on debt tied to the US Dollar and financial revenues.