Theodore Helms – Executive Manager, IR Almir Guilherme Barbassa – CFO

Frank McGann – Back of America Merrill Lynch Emerson Leite – Credit Suisse Paul Cheng – Barclays Capital Denis Parisien – Deutsche Bank Marcus Sequeira – Deutsche Bank Allen Good – Morningstar Gustavo Gataz [ph] – PKJ Fernando Valley [ph] – Citibank

Good afternoon ladies and gentlemen, welcome to our conference call to discuss first quarter and 2011 results. We have a simultaneous webcast on the Internet that can be accessed at the site, www.petrobras.com.br/ri/english.

Before proceeding, I’d like to draw your attention to the slide two. We may make forward-looking statements, which are identified by use of the words will, expect and similar that are based on the beliefs and assumptions of the Petrobras management and on information currently available to the company.

Finally, let me mention that this conference call will discuss Petrobras results prepared in accordance with the international financial reporting standards and Brazilian legislation. At this moment, we are unable to discuss any issues relating to U.S.

GAAP results. The conference call will be conducted by our CFO, Mr.

Almir Guilherme Barbassa. He will comment on the company’s operating and financial highlights and the main events during this quarter and he will be available to answer any questions you may have.

Mr. Barbassa, you may begin.

Thank you for joining our conference call to discuss first quarter results. The first quarter is more towards for the consistent progress we made throughout the company.

Net income for the quarter was a record. Our activity in the Santo Pre-salt is ramping up very rapidly.

So far this year, we had already drilled 40% of all the wells we drilled in the prior four years. We made significant discoveries in the Pre-salt and Santos and Campos Basin.

We started new extended well test in the Pre-salt of Santos. We connect the final link from our offshore gas facilities into our now completed the gas infrastructure.

Our refining system operated at 9% of capacity refining record amounts of domestic oil into diesel, gasoline and jet fuel. We completed our 6 billion bond offering.

We are tuning our access to the debt capital markets to supplement our internally generated funds. Sequentially and the year-over-year results for the first quarter were influenced by higher production, rising international oil price, stable product price in Brazil and a strengthening Real.

Year over year, quarterly operating income was up 8%, while net income up by 42%. Sequentially, quarterly operating income was up 16% and net income up 4%.

Year-over-year production was up 3% globally and 4% in Brazil. Oil production in Brazil 2 million and 44,000 barrels a day, up 3% from a year ago.

As expected, first quarter production was below our 2011 oil target of 2.1 million barrels per day due to higher casuals maintenance. We concentrate (inaudible) getting maintenance in the first due to lower demand for production of our associated gas, natural gas in the first quarter.

We remain on schedule to reach our target of 2.1 million barrels per day of volume in Brazil for 2011. Natural gas production was up 8% versus from last year production.

Capacity, we’ll expand by approximately 20 million cubic liters a day this year. With the expected start of the fields.

As for production, growth will ultimately depend on demand for natural gas in Brazil, particularly on generation. Our international production increased 3% primarily from Nigeria.

This year we expect, we expect the (inaudible) to move. In the Gulf of Mexico, oil produced [ph] contributing to production growth.

In the pre-salt, we continue to accelerate our activities. During the quarter, we finalized two contracts to charter FPSO for Guará-Norte and Cernambi.

Announced additional discovery in (inaudible) and Parati; drilled eight new wells bringing to 28 the number of wells in the pre-salt of sub-station. Began and extended well test in (inaudible) and we initiated the extended well test in Guará.

And finally, revised all of the asset ramp for the Santos Pre-salt. Moving on Petrobras strength, we had our long term master plan for the Pre-salt based on our appraisal and testing work, as well as refinement, logistics plan.

The plan for the Pre-salt was recently updated. That portion of the Pre-salt CapEx plan that correspond to Petrobras is incorporated into our consolidated business plan and we will be more fully disclosed when we present our updated business plant But I can highlight some of the conclusion from the rate revision of the Pre-salt plan.

Since our initial cost projection in 2008, which were based on a limited number of wells, estimates of the capital required to field have been reduced by 45%. Corresponding to the net present value of this oil when compared with now projection has increased by 52%.

A large reason for the reduction in capital costs is the reduction assuming greater productivity, the result of assuming greater productivity for four wells based on our experience with extended well test and also to reduce time to drill and complete a well. The results of the extended well test that we have reduced so far have had especially some retention (inaudible) our knowledge and reaffirmed our optimism.

That and consistent production with no indication of decline during the test, good reserve excellent (inaudible) communication of the reserve block. No lower assurance if (inaudible) only the restriction on gas plays.

We have increased our projection of well for (inaudible) by some 20% since the first Pre-salt master plan With wells, well cost responsible for more than 50% of the development costs, the number of wells and the time to drill them is squeezed out with project returns. As you can see the time to drill from the initial wells to those beyond the increment spend has been reduced on an average by one-third.

The road map in the international side of oil during the last six months is obviously an important factor in our results. In the last two quarters, the price of Brent has increased by near 30% – $30 dollar per barrel and almost $20 just in the first quarter alone.

The increase in the light had differential meanings that our own crude increased by layer than that or $22 during the last six months. Due to the dollar pricing costs of minimizing the overall activity of international markets.

For the Brazilian market, the increase in international price was a cooling effect reflected in the domestic market, the domestic price. During the first quarter of 2011 the average rationalization price for all our products sold was up $98.3 per barrel; the absence our Gulf Coast average of $108.35 for the same basket of products.

This is the first quarter since the third quarter of 2008 when Gulf Coast refiner gauged prices were higher than those in Brazil. We continue to monitor price closely and we may inconvenient [ph] to international priority in the medium, long-run.

Lifting costs, expressed in reais, lifting costs before development, they increased by R$1.7 per barrel during the first quarter compared with the fourth quarter of 2010. All our products basically $1 per barrel.

We’re pleased the lifting cost was due to a combination of unusual factors, higher cost associated with the additional systems in fourth quarter (inaudible) are still ramping up. (inaudible) maintenance during the period due to the unusual high number of programmed stoppage, as well as greater well interventions.

Our systems in the Campos Basin are maturing, which will require additional maintenance that are reflected in lifting costs. Due to additional maintenance requirement, we expect that for 2011 lifting costs will average about 1 real more than the average of 17.5 reais for 2010.

Production taxes also rose by nearly $5 a barrel as a result of higher value of our oil which is based on international benchmark. Brazilian GDP growth which has contributed to higher real income is reflected in higher product sales.

For the last two years, demand for petrol in the Brazil has equaled or exceeded the GDP growth. Of note is growth in jet fuel, up 18% year over year as growing income and a stronger real stimulated air traffic.

Gasoline consumption was up substantially during the quarter as higher ethanol price caused switch to gasoline (inaudible) Natural gas consumption for non-thermal electric uses continued to grow, up by 8% year over year. Total natural gas demand declined from the prior quarter as the rainy season strictly reduces demand for thermal electric power.

In the first quarter of 2011, the results from our expansion of the coker and modernization. Due to this investment and the absence of programmed maintenance in the quarter, crude oil processed at our Brazilian refinery increased by 114,000 barrels per day from one year ago with throughput of domestic crude oil growing by even more and now representing 8% of the oil percent.

Literally, all of incremental throughput was reduced as diesel, jet fuel and gasoline products that Brazil currently imports to meet demand. Turning to financial results, revenues for the first quarter were up slightly from the prior quarter.

Our seasonal reduction in demand volume sold was more than offset by higher price. Cost of goods sold was added by the impact of inventory average.

Expense declined during the quarter due to lower selling and administrative cost of 5%, what means 200 million reais and lower exploration expense of 425 million reais. As a result of these factors, operating income increased 16% when compared to the fourth quarter while EBITDA of 16.1 billion reais was 10% higher.

Looking at net income, there were no significant changes to the net financial results from the fourth quarter of 2010 with the exception of income tax expense, which increased as a result of higher operating income and lower deduction for interest on capital. As a consequence of higher operating income, partially offset by higher income taxes, net income increased by 4% from the prior quarter.

Exploration and production, operating income for E&P in Brazil increases by 19% as a result of higher price, partially offsetting the benefit of higher price where the lower sales volume from smaller – the lift and higher lifting costs particularly those associated with production taxes. A higher reserves base from proved reserves booked at the end of 2010 lowered the unit depletion costs by approximately 1 real per (inaudible) The reduction in other expenses were largely a result of lower exploration and dry hole expenses.

Downstream, the downstream segment experienced an operating loss of R$494 million during the first quarter versus operating income of R$1.5 billion in the prior quarter. Downstream revenues increased due to a higher export price and a higher price for the next product that track international prices on a weekly basis.

Revenues from higher prices were partially offset by lower volume. Cost of goods sold increased as a result of higher price for the crude oil fixed or trending quarter products, which increased after the price sold in Brazil.

The impact of these higher costs on the operating result was reduced by the impact on the inventory average. Gas and then the international and distribution, they have a reached expense improving operating performance during the quarter.

Together, these three segments contributed with R$2.207 billion of operating income or 18% of the total operating income as compared to R$1.478 billion in the first quarter or 14% of operating income. The gas and power segment continued to benefit from the completion of infrastructure and the flexibility of the need to have created to generate income on the branch of market condition.

International operation benefits largely from higher oil prices. Our distribution subsidiary benefited from higher margin, partially offset by lower volumes.

Capital spending totalled R$16 billion during the first quarter of 2011, a decline of 10% when compared with the first quarter of last year. Capital expenditure by Brazilian exploration and production were down because of reduced exploration outstanding for the quarter.

Downstream spending grew by 11% as investment for upgrades, regulatory spending and logistics is picking, while spending on the Abreu e Lima Refinery and Comperj are ramping up. In the first quarter, quality upgrades accounted for 37% of our investment, while expansion 33% and logistics and the infrastructure another 30%.

Gas and power investment declined as the gas infrastructure reached completion. Our international segment also was reduced.

Our capital spending remains focused on integrated operations in Brazil. Next please.

Capital structure. We continue to have a very comfortable position with the liquidity at an average.

We ended the quarter with net debt to net capital of 70% and the net debt to EBITDA of one-time. Cash and equivalents including government securities, maturities above 90 days, where R$63 billion as of March 31.

Cash flow during the quarter was netted by $6 billion bond offering. With that of the review, we will now be happy to answer any questions.

Thank you.

Hello. Good afternoon.

Just a question on the refining side. Two questions, one, in terms of the incremental production of diesel and gasoline that you did see in the first quarter based on continuing investments in upgrading projects.

I was just wondering what your expectations are for increased production, further production for the rest of this year and in 2012 that might enable better overall earnings in the segment? And then, secondly, import needs in the first quarter were clearly very strong, and not a positive factor.

I was just wondering how you are seeing overall demand right now relative to your own production and how you see imports as you go through the rest of this year to get into the second quarter?

Okay, Frank. I have (inaudible) to help us in these two answers.

Alright. In fact, we have these good results with – especially with the cokers and the quality program that is essentially adding hydrotreatment capacity to improve the quality of diesel and gasoline in Brazil.

A better diesel yields we will have in 2012 with another coker that will be implement in refinery and mostly of Sudan, we will face the challenge of providing the Brazilian market a better quality diesel and gasoline in this period. So, what we will have then is that that what we’ve seen from the way we see that Brazilian market today that the demand will keep increasing and we will have to still diesel and gas to supply the market until we expand refinery capacity and we will have the first new refinery being implemented by ’13.

So, up to then, we will have a hard time importing the significant – rather volumes to supply the market, despite our own production.

Okay. Thank you, very much.

Okay. Good morning.

Thank you. I have a question on the plant cell slide.

I think it’s number seven. I am trying to understand what was the improvement in net present value X the effect of the rights – and try.

The slide shows the plant cell were areas under construction with a net present value, 152% of the initial plant cell and some 20% above of those last year’s plant cell, Does that NPV assessment include or not the transfer of rights?

(inaudible).

Actually, what we see is that on the investment side what the charts try to tell is that we can see a reduction of 45% on the CapEx program especially for the licensed areas. And if we add up the transfer of rights, then we would come back to the initial level of investment of 100%.

And on the net present value side, we are saying that only for the license areas NPV grew roughly 50%, especially because of a reduction in the well program and staff utilizations in the FPSL [ph] and topside as well.

Okay. So, only for the areas under construction that –?

Yes. The NPV is now for the areas under construction.

Okay. So now since this NPV is probably 20% or so higher than last year’s NPV and comparing a 162% versus 180%, have you already estimated how much more you have to pay back to the government for the five billion barrels that you acquired last year under assumptions that were not as positive as they were that you now have in your hands?

Well, (inaudible) sorry. We have done the transaction of right transferring last year.

So, all the data we have is too valid now when you compare with the ones you have here. The last position you have here is to stretch then.

So, the expand was the moment of an acquisition. So, we don’t have this calculation.

This is going to happen. The end of the appraisal periods of each area individually, they are not going to happen altogether, but we’ll have – on each one according to the appraisal is concluded.

Okay. Let me see if I understand.

What you’re saying is that the evaluation of the rights transfer areas already takes into account all these improvements that you recently announced that were able to drive lower CapEx. So there is no incremental improvement from the assumptions that were made in the exercise of the rights transfer.

We did not do an exercise. On comparing what were the results of 2010 that is presented here that represents a reduction of CapEx of 45%.

We did figures we had when we did the appraisal of right transferring. So, we don’t have the answer for you.

I’m so sorry.

Okay. So, my second question is on the – on last week, the Board of Petrobras did not approve the plan, strategic plan review and asked for incremental studies, the local press reported the Board instructed the management to lower the total amount of investment.

I’d like you to confirm if that reading is correct or if it’s not, what was asked for you to do?

Okay. Thank you, very much.

Hi, good afternoon. Almir, in the first quarter spending, one way, that’s much lower than your budget for 2011.

And, if you’re going to meet the budget, you need to spend about R$25 billion, $26 billion. I mean, basically that you said possible for the company to spend in such a high run rate.

So, we assume that – I mean, in the past that you always underspent your budget. So, we assume that this year, you’re going to underspend maybe more money in the 15% instead of in the past maybe 5% to 10% on the spend?

I tend to agree with you that we’re not going to increase so much the next quarters, our CapEx in the next three quarters. But, I cannot get the conclusion that is going to be at 15% under invested at the end of the – I can agree, we are not is a probability no to do 100%.

How less than that? We have to wait for a little bit more.

Right?

And, the second question is that in the CapEx for the (inaudible) you dropped 45% present number from the 2008 level. Do you have a breakdown by function that where does the saving come from?

You said such as now the reduced tuning time that contribute 5%, 10%, I mean, any kind of maybe a further elaboration of where the saving or by function [ph]?

The gross figures, that’s been even higher than that because the costs go up. So, I mean, without an inflation that your copy is reducing or saving more like this 60% to 70%.

Is that a fair estimate, because I think inflation probably over the last two or three years has been in the 15% plus a year for you guys?

Okay. Thank you.

Hi, thanks very much for the call, ladies and gentlemen. I’m wondering about your financing plans for the rest of the year, after having executed the jumbo 6 billion in us dollar, what markets you intend to tap next?

And will you come back to the dollar markets this year or not? If you can give us any kind of color on your financing front for rest of the year, I’d appreciate it very much.

Thank you

We have always working with different financiers for financing the company. As I showed you, we have very liquidity at the moment, but this does not mean that we’ll be out of the market, we’ll be looking not to go back to the dollar markets.

And, this we did well and that’s for now for the year. We may go for euro or the currency as well as in the bilateral of the international bank where we had a very good source, important source for the company to remain (inaudible) for the development bank like the ENDEAS [ph] that is very important supplier of funds in Brazil.

So, we’re always looking for opportunity and as it arises, we may approach the market.

Any thoughts on liability management, (inaudible) inefficient. Now, it’s an exchange for some new lower class notes.

There’s a lot of other companies in Latin America, especially Brazil have been executing.

We are the – we have the – maybe, other companies have a different situation. Petrobras, total cost is not more as much as other Brazilian companies that are doing the liability management.

We have done that in the past and always where we see an opportunity, we do. But, this is not the case for the time being.

Thanks very much.

Yes, good afternoon. Two questions, one related to the domestic oil production for this year.

If you guys, – how do you guys think of your guidance for average for the year for Sakhalin-I, if you guys still expect to see more maintenance shutdowns in the upcoming months? And, the second question is with regards to Comperj, you said the Comperj is, the project is going ahead.

I heard in the – I saw in the local press sometime ago that you guys could use natural gas as the main feedstock of this plant instead of heavy oil. I just would like to hear from you guys if that is really the case?

2.1 million barrels a day is a good number. We’ll stick to that and we’re going to deliver.

Could you please your recite your questions on Comperj?

Comperj is an excellent effect – refined product, petrochemical product that are associated with refinery – the refinery – the steel using heavy oil. While it’s being stated today by Petrobras and evaluated is that there’s an alternative, instead of using for the petrochemical production using the natural gas.

That’s a business that’s under evaluation.

We’re still studying and we cannot anticipate business plan presentation – information that will be presented in the future. Okay?

Okay. Thank you very much.

Good morning. I wonder if you could address the potential need or like they are out for the future rigs given the lower CapEx demand and how that may translate into the needed or the built 2011 rates on these lines on building in Brazil?

Actually, we don’t see a reduction on the rig necessarily for us. We have an entire trans operate area to appraise and to develop.

E&P is a lease that will still need all of that portfolio of rigs and, of course, this can change in the future. But mainly related to my exploratory success.

And, the last years, we’ve been very, very fortunate to find lots of oil. And, in summary, from now on I don’t see a lowering our demand for rigs on a 10-year periods.

To that, I’d like to add that in the where anticipated as necessary into 2008. And last year, we added to the Pre-salt all the 5 billion barrels to be produced.

This will bring a lot of new needs. So, even if we were to use the initial smaller shorter time, we have much more to do.

Do you still have confidence that the 21 rigs you’re planning to build in Brazil would still be built there and delivered on time?

These are the assumptions we are working. We give timing for the shipyards that – they are then delivered, the first one.

And then they have – next one to be built, they have a number of them in case of the first building was giving seven rigs. Of the seven rigs, allow them to invest what they need to do, to do what they need to increase their productivity and delivering on time.

Okay. Thank you.

Hi, guys. I had two quick questions.

The first one; on the business plan, is there any internal estimates from you guys for how long it might take to run the sensitivities and effectively get back to the Board? And ultimately in the event that you have to go with something that’s smaller than what the management initially proposed last week, is there enough flexibility in the investments that you guys have on outside of E&P which have some as pretty much locked up for a long period to cut back on something or is that going to be something impossible?

That would be the first question. The second question is a very quick one on the natural gas prices question from the ANP that we had on the other call.

I just wanted to understand as you reduce your E&P price. Is that something that the ANP also does for the calculation of royalties or are the royalties calculated on a separate pricing mechanism?

And that’s it.

Gustavo, we’re working hard on the demands of the Board. We hope to have the answer in the shortest period of time, but I cannot tell you how long it’s going to take.

For sure, all the companies working to get the answer as soon as possible and the kickbacks on E&P.

You are pretty right when you that the E&P CapEx is pretty much locked out for the period. And, the general management of a planning area of E&P is conducting all those sensitivity analysis, but when you say that we are locked up for quite some time, it takes you three years.

You’re quite right. And on the royalty side that you have asked, not necessarily our internal prices are the same that ANP uses for taxation purposes, you see, but the good news is that think that they disclosed in their website what price they are using, but not necessarily the same that we use internally.

Okay, thank you guys.

Would you please, the second?

Yes, we had a limitation on that project because of the – well, we had a delay on the environmental license for the gas pipeline, see, but we expect that till this semester we’ll be able to normalize the production there on the Uruguay field and then there is some biofuels we’ll also be starting yet this year. I’m quite sure that in this semester we’ll be able to normalize the situation on the Uruguay field.

Sure, that quarter you said there was some revenue that I believe due to exports they were still in transit that weren’t recognized, you sold but they were still in transit, so you didn’t recognize that revenue on the fourth quarter and part of those sales were going to be recognized on this quarter, so I just wanted to know how much of the revenues from this quarter were actually sales from last quarter that were recognized now?

Okay, great thank you very much.

Yes, just a follow up on something, the rigs that you mentioned that will be in place by year end are less, I was under the impression that it would be 13 and I was just wondering are the other two just pushed into 2012? And then, secondly in terms of gas prices and I unfortunately got cut off for a second from the call, but I don’t think this is asked, what drove the decline really in the quarter?

Regarding the number of rigs..

What we have stated that we’ll have a – those two have split, one for 2012 and one for 2013, you see. On the clients side that’s a self question.

I would have to get back to you on that. What we’ve seen in 2010 was 9.5%.

I would have to get back to you on that. I don’t have a precise figure now.

Okay, the general transfer of price weekly is (inaudible) a component related to the international price and (inaudible). Okay.

Okay. And then, not other – there are no factors that drove that was the only thing?

Yeah, it’s basically that you consider also another five in the calculation of the price that is partly related to the infrastructure, that these then come together in some way related to infrastructure pipeline that we had given, so – but it’s not a (inaudible)

Okay, thank you very much.

Thank you all for being with this in the release of our results and quarter. We will be here in the (inaudible) results as we have at this moment.

Thank you very much.