EFTA01380760

7 October 2015 Corporate Credit,Energy Petroleo Brasileiro S.A. Figure 5: Leverage and Funding Gap - Forecasts by DB Credit Research 7017 Net EcirreA Forecast Avg. 2-yr Brent Price (MAW) 40 45 50 55 60 65 3.5 c% 3.7 C vi 3.9 ▪ 4.1 re 4.3 4.5 L. 4.6 4.5 4.4 4.4 4.8 4.7 4.6 4.5 5.0 4.9 4.8 4.7 5.2 5.1 5.0 4.9 ,S, 4 C 53 5.2 5.0 X38_ 5.2 4.4 4.4 4.6 4.5 4.8 4.7 4.9 4.8 5.1 5.0 2C,20 Net Debt to [BETA l'crecast Avg. 5-yr Brent Price (050/trbt) 40 45 50 55 60 65 3.6 to ilall _six Atli .7..r.rf as 3.8 4.2 4.2 4.1 4.1 4.0 44 4.0 4.5 4.4 4.4 4.3 4.3 4.2 S. 43 48 4.7 4.6 4.6 4.5 4.4 45 5.0 4.9 4.8 4.7 4.7 at 4.7 5.1 5.1 5.0 4.9 2016.17 Funding Gap Forecast (LISDbri) Avg. zair Brent Price (USD/bbl) 40 45 50 55 60 65 3.5 18 18 18 18 17 17 ff, 3.7 19 18 18 18 18 17 0, 3.9 19 19 18 18 18 17 f•• 4.1 19 19 19 18 18 18 el 4.3 20 19 19 19 18 18 45 20 19 19 19 18 18 2016-20 Funding Gap Forecast (15Vbni Avg. S-yr Brent Price (U50/bbl) 40 45 50 55 60 65 3.6 co • 3.8 9 4.0 S. 4.3 Lt 45 et • 47 The Fund rig Gap Forecast is cumulative from 2018 Key ass.anpbons. Domes c E&P production growing 4.5%m 2015 and 2.0% thereafter. mtematicael UP production flat Domes c demand for oil products 4% in 2015. flat in 2016, .9% in 2017..2% p • thereafter: international emend for 04 products flat. Domes c gasoline end deal prices .6% pa in SRL terms variable costs denominated in BBL 36% of total in 2015. growing with inflation of 5% p a marginal interest rate 8% p.• for U50 dett. 14%D a. for 6RL debt. Gaga USD25bn al 2015. USDlgen thereafter. %Wong capital variation usosen negative in 2016 Asset SSP uSOieen in 2016 sad USD3to ri 2017 No dividend payments. New debt breakdown 75%in USD. 25% in SRL Minimum cash position. USD5bn San* one. art Olaf Rosa* Elm\ rtiotivated is Petrohrw to reduce capex further' One of the key initiatives a levered cyclical company normally takes (or is forced by creditors to take) during a downcycle is to significantly cut capex, in addition to cutting costs and dividends and selling non-core assets, particularly in more capital intensive industries like the oil and gas one. How much such company actually does reduce its capex depends on its cash burn, funding gap, cost profile and access to credit. Cutting capex beyond the level to sustain production levels is normally not advisable unless doing so is highly accretive to leverage, which normally happens to high-cost producers. In the case of Petrobras, we estimate that the marginal E&P capex has a marginal leverage impact of about 4.5x with Brent of USD40/bbl, 3.5x with Brent of USD45/bbl and 2.8x with Brent of USD50/bbl. These estimates are based on the cost of about USD5bn to fully deploy and ramp up a 150kbpd pre-salt production unit (FPSO with subsea equipment and about 15-17 production/injection wells). Given the accretive nature of E&P development capex with oil above USD45/bbl, and its relevance to total capex, we then believe that Petrobras' management could be reluctant to materially reduce its plan to increase domestic production, thus limiting the prospects for capex reduction. It is thus hard to imagine a capex level smaller than USD19bn guided for 2016 in the absence of a more aggressive stance on exploration and non-E&P segments. Deutsche Bank Securities Inc. Page / CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0079289 CONFIDENTIAL SDNY_GM_00225473 EFTA01380760