OREANDA-NEWS. Petroleo Brasileiro S.A. - Petrobras announces that its Board of Directors has approved the 2013-2017 Business & Management Plan (2013-17 BP), with investments of USD 236.7bn, maintaining the same level of investments as last year's Plan. Of the total Plan, USD 207.1 bn of investments are classified as under implementation.

As a continuation of the 2012-16 BP, the 2013-17 BP was based on the following principles:

• Maintaining the same production targets for oil & natural gas production;

• No additional projects, except those related to oil & natural gas exploration and production in Brazil;

• Incorporating the results of the structural support programs: PROCOP, PROEF, PRCPogo and INFRALOG;

• Expanding the scope of the divestment program (PRODESIN).

2013-2017 Business & Management Plan (in USD bn)

Segments

Investments

%

Exploration & Production (E&P)

147.5

62%

Dowstream

64.8

27%

Gas & Power (G&P)

9.9

4%

International

5.1

2%

PBio - Petrobras Biocombustiveis

2.9

1%

BR Distribuidora

3.2

1%

ETP*

2.3

1%

Other areas**

1.0

0,4%

Total

236.7

100%

* Engineering, Technology and Procurement Area

** Finance, Stratigic and Corporate-Services Areas

The 2013-17 BP maintains the project management practice of separating projects into four phases according to their maturity. The portfolio of projects under implementation amounts to USD 207.1 bn and includes all Phase IV projects that have already been contracted, and all E&P projects in Brazil. The portfolio under evaluation, with USD 29.6bn, encompasses projects of other business areas that are currently in Phase I (opportunity identification), II (conceptual project) and III (basic project) which, in order to proceed to the implementation phase, must have their technical and economic feasibility confirmed (Phase III approval).

The analysis of the 2013-17 BP portfolio resulted in the maintenance of 2012-16 BP projects for the 2013-17 period, without including or excluding new projects in the portfolio under implementation, except for cases of E&P in Brazil where, in order to meet planned production targets, there were inclusions and exclusions as well as accelerations and postponements of projects.

All 2013-17 BP projects incorporate the use of S-Curves (graphs that represents a project's physical and financial progression) and projections are based on an analysis of executing these curves. The S-Curves are closely monitored by the Executive Board in order to ensure that the Plan's targets are met.

Business Plan Management Actions

The 2013-2017 BP continues with supporting programs initiated in 2012, and incorporates new initiatives, totaling 5 (five) programs that support the Plan and contribute to the Company's profitability:

(a) Campos Basin Operational Efficiency Improvement Program (Proef) - Increases reliability of achieving the oil production curve by improving operational efficiency and integrity of older Campos Basin production systems and reducing risks of efficiency losses of newer production systems.

(b) Operating Expenses Optimization Program (Procop) - Increases cash flow generation, productivity and strengthens management model geared towards cost excellence, with operating expenses (opex) savings target of RUSD 32bn from 2013 to 2016.

(c) Divestment Program (Prodesin) - Contributes to financing the Plan through the sale of assets in Brazil and overseas with cash proceeds estimated at USD 9.9bn in 2013, largely.

(d) Logistical Infrastructure Optimization Program (Infralog) - Integrated planning, monitoring and management of projects and actions to meet Petrobras' logistical infrastructure needs by 2020. By seeking simpler logistical solutions and capturing synergies among the company's business areas, investment reductions have already been incorporated into the 2013-17 BP, notably USD 2.6bn in E&P.

(e) Well Cost Reduction Program (PRC-Pogo) - Reduces well costs (capex), optimizes project scopes and productivity gains through 23 initiatives due to the significant increase of the drilling rigs fleet under operation and the relevance of wells construction capex in the E&P budget from 2013 to 2017 (38%). Identified gains of USD 1.4bn, already incorporated into the 2013-17 BP, from initiatives related to decreasing well construction time and optimizing operational sequencing.

Oil and Natural Gas Production Target in Brazil

The 2013-17 BP confirms the production curve established in the previous Plan, keeping targets unaltered and reiterating our confidence in its execution.

Oil and NGL (natural gas liquids) production target in Brazil is 2.5 million bpd in 2016, 2.75 million bpd in 2017 and 4.2 million bpd in 2020. As in 2012, the target for 2013 is to maintain production in line with 2011 levels (+/- 2%). From 2013 to 2015, 11 new production units will go on stream, representing a capacity increase of 1.45 million bpd for Petrobras. In 2016 and 2017, most Pre-salt and Transfer of Rights projects will start up, leading to production growth acceleration. The Pre-salt will account for 35% of total production in 2017.

The production target for oil, NGL and natural gas in Brazil is 3.0 million boed for 2016, 3.4 million boed for 2017 and 5.2 million boed for 2020.

Investments

The Exploration & Production segment in Brazil will invest USD 147.5bn, which represents an increase of USD 15.9bn from 2012-16 BP, mainly due to the inclusion of 2017 investments that reflect the acceleration of planned production between 2016 and 2020. Of the investment total, 73% will be allocated to production development, 16% to exploration and 11% to infrastructure. Pre-salt and Transfer of Rights investments correspond to 68% of the total amount invested in production development.

In addition to these investments, the execution of projects during the 2013-17 BP will demand from Petrobras's partners USD 39.7bn for E&P activities in Brazil.

The portfolio of projects under implementation has allocated USD 43.2bn investments for investments in Downstream, the principal projects being the Abreu e Lima Refinery and the first phase of Comperj. Downstream investments were reduced by USD 12.6bn versus the 2012-16 BP, due to the completion of investments in quality and conversion, and the completion of the new refineries by 2016. Additional refining projects, under evaluation, advanced in their maturity phase and are currently being optimized to align costs with international standards.

The Gas&Power segment has USD 9.9 bn allocated in the 2013-17 BP, of which USD 5.9bn is for the completion of projects under implementation, notably the Tres Lagoas Fertilizers Plant and the Baixada Fluminense Thermal Power Station.

The Distribution bussiness has investments of USD 2.9bn in projects under implementation, with highlight to logistics projects aimed at maintaining market leadership and increasing market share in the automotive segment.

The Biofuels segment has allocated investments of USD 1.1bn in projects under implementation. Most resources are related to ethanol and biodiesel projects.

The International area will have investments of USD 3.2bn in the portfolio under implementation, with stronger emphasis on the E&P segment, which represents 90% of these investments.

Financing

In evaluating the capacity to finance the Plan, the company based cash flow generation on a long term Brent price per barrel of USD 100 and an exchange rate ranging between RUSD 2.00/USD and RUSD 1.85/USD .

The resources necessary to finance projects under implementation will come from operating cash flow generation (USD 164.7bn), use of surplus cash (USD 10.7bn), divestment and financial restructuring (USD 9.9bn) and debt (USD 61.3bn gross, USD 21.4bn net).

2013 will experience higher annual investment combined with less operating cash flow generation, however this situation will be reverted during the Business Plan period, with free cash flow, before dividends, becoming positive as of 2015.

The increase of cash flow generation due to production growth and investments maturation will reduce the need for financing during 2013-17. In 2017, is expected to have an operating cash flow generation of approximately USD 50bn.

Financial leverage will not exceed 35%, keeping within the target of 25-35% and the net debt/EBITDA ratio will return, as of 2014, to the limit established by the company of up to 2.5x, ending 2017 at 27% and 1.65x, respectively.

The company maintains its commitment to an investment grade rating and not issuing shares.