Net earnings of R$370 million, compared with losses of R$1.2 billion in 1Q16, driven by:

• 30% reduction in net financial expenses;
• 7% growth in total oil and natural gas production;
• increase in revenues, due to 14% rise in exports of oil and oil products, and reduction in costs of importing natural gas;
• expenses arising from new Program to Encourage Voluntary Severance (PIDV); and
• impairment of Rio de Janeiro Petrochemical Complex (Comperj) assets.

Main Highlights of Results

• Positive free cash flow for 5th consecutive quarter, of R$10.8 billion, 3.5 times higher than in 1Q16 (R$2.4 billion), due to higher operating cash generation and reduction in investments.
• Adjusted EBITDA of R$20.3 billion in 2Q16, down 4% from 1Q16. Adjusted EBITDA margin of 28%.
• Gross debt fell R$95.3 billion, or 19%, from R$493.0 billion in December 31, 2015 to R$397.8 billion. Net debt declined 15%, from R$392.1 billion to R$332.4 billion.
• Net debt to adjusted EBITDA ratio (last 12 months) decreased from 5.31 on December 31,2015 to 4.49 on June 30, 2016, and gearing fell from 60% to 55%.
• Operations to issue global securities of US$6.75 billion and offer to buy back US$6.3 billion helped extend average debt maturity from 7.14 years on December 31, 2015 to 7.30 years on June 30, 2016.

Main Operational Highlights

• Petrobras’ total production of oil and natural gas was 2.804 million barrels of oil equivalent per day (boed), up 7% from 1Q16.
• Production of oil products in Brazil fell 2%, to 1.919 million barrels per day (bpd), while domestic market sales rose 3%, to 2.109 million bpd.
• 14% rise in exports of oil and oil products, to 515,000 bpd, and 34% increase in average price of Brent crude (to US$46 per barrel).
• 55% reduction in LNG imports due to higher supply of domestic gas and lower thermal power plant demand.

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