Petrobras hereby responds to Official Letter 458/2015/CVM/SEP/GEA-1 requesting clarifications, as transcribed below:

Official Letter 458/2015/CVM/SEP/GEA-1

“We refer to the news item published on November 8, 2015 in Miriam Leitão’s column in the newspaper O Globo, entitled Retrato da Corrupção (Portrait of Corruption), which states that:

An internal Petrobras audit report drawn up this month shows how a combination of corruption and poor management has led to continuing losses. An analysis of four drilling rigs showed the same series of suspicious decisions that were revealed by Operation Car Wash. In addition, one of these rigs is idle, costing the company US$0.5 million per day.

These events took place when the international area was under the command of Nestor Cerveró and Jorge Luiz Zelada. The subject of the document, of which this column has a copy, was the Petrobras 10000, Vitoria 10000, Pride/Ensco DS-5 and Titanium Explorer drilling rigs. In each case, there was overpricing, inexplicable clauses increasing the contracted amount, decisions taken by a tiny group of people, breaches of the company’s own principles and the presence of the Operation Car Wash lobbyists in the negotiations.

The first conclusion of the audit was that there was essentially no need to contract or build the rigs in the first place, the decision having been taken in the midst of that “never before” euphoria, without determining the costs or respecting the technical reports.

The accepted scenario was that the company would acquire four new blocks per year. The initial study was carried out in 2005, with contracting in 2008 and 2009. “We estimated the need for at least two rigs in the following five years and at least six in the next ten years with no technical basis whatsoever, but based on the idea of not losing an opportunity”. The same baseless study was behind the decision to build the Petrobras 10000 and Vitoria 10000 rigs and contract, without competitive bids, the DS-5 drill ship, which was twice assigned to other companies and has been idle since March. The Titanium was contracted in January 2009, when the financial market was at a standstill due to the crisis. The decision also ran counter to the technical report, which stated the need for a different type of equipment.

The proposals were received and the memoranda signed without the Executive Board being consulted, “revealing the international area’s high degree of autonomy”. There were no “competitive proposal selection processes” and the Titanium decision was taken by three people only: the area head, the general manager and the executive manager.

Shortly after the deal was closed, construction of the Petrobras 10000 and Vitoria 10000 rigs suffered a 3% adjustment. After a year, the price had already increased by 5%, or US$31 million, not to mention the fact that the initial amount had been overestimated by US$11 million, while the exchange rate clause (the variation between the U.S. dollar and the Norwegian krone) was responsible for a further hike of US$11.4 million. Schahin was hired to operate the Vitoria 10000 under the argument that “it had the best operating indices”. This was simply not true – at the time, Schahin had only one drill ship with good indices. In addition, the performance bonus was 17%, well above market levels. “The delay in finalizing the negotiations with Schahin for the arrival of the Vitoria 10000 in Brazil led to costs of around US$126 million”. After some time, Schahin stopped honoring its leasing payments, but requested and received its bonus in advance.

In the case of the DS-5 contract, the overpricing came to US$118 million. In addition, the drill ship has been idle since March, costing Petrobras another US$120 million in lost daily rates.

The document makes for frightening reading because it shows in detail how the deals for these four rigs were managed in such a bungling manner and how the price became more bloated after each inept decision. All this without mentioning the promiscuity of the lobbyists currently under investigation or already condemned for their part in the Mensalão scandal. They held meetings in the company, one of which attended by Cerveró, Julio Camargo, Fernando Soares, Mitsui and Samsung.

The audit, which was concluded in May 2015, recommended that the company try to recover the overpayments related to the construction of the two drill ships, renegotiate the contracts for the other two and, depending on what comes to light regarding the participation of the lobbyists, break the contract. It is only one report, but it clearly reveals the corrosive power of corruption within Brazil’s biggest company.

Given all the above, we would like you to confirm if the content of this news item is in fact true and, if so, why such information was not deemed to constitute a material fact, as well as informing us of any further developments regarding this matter and the respective measures taken by the company in relation to the conclusions of the audit report cited in the news item.”

Clarification

Petrobras hereby declares that an internal audit was carried out in the first half of 2015 in order to assess the control procedures applied to the contracting of the Petrobras-10000, Vitoria-10000, Pride/Ensco DS-5 and Titanium Explorer drill ships.

This audit resulted in a report containing recommendations regarding the recovery of said undue payments and the renegotiation or termination of the contracts in question.

The report was forwarded to the Federal Prosecution Office, care of the Force Task of Operation Car Wash (Operação Lava Jato), immediately on its conclusion. This document served as proof for judgment in the criminal proceedings related to the irregularities in the contracting of the Petrobras-10000 and Vitória-10000 drill ships.

Petrobras has already begun to adopt measures to comply with the report’s recommendations, including the Company acting as a Prosecution Office Assistant in said criminal proceedings. The minimum damages to be paid to Petrobras have been fixed at R$54.5 million.

In the case of the Titanium Explorer, Petrobras America Inc., a Petrobras subsidiary, terminated the contract on August 31, 2015 due to non-compliance with the contractual clauses, while the Petrobras-10000 and Vitória-10000 are currently operating regularly in the Santos Basin. As for the DS-5, Petrobras has reduced its operating costs and is studying the best options for its use, either in its portfolio of projects or by subleasing to third parties.