Good morning, ladies and gentlemen, and welcome to Petrobras’ Third Quarter of 2012 Earnings Conference Call for Analysts and Investors. We would like to inform you that this call is being recorded and all participants will be in listen-only mode during the Company's conference call. And it is being broadcasted with simultaneous interpretation into English. Afterwards, we will start the question-and-answer period, both in Portuguese and in English, when further instructions will be given. (Operator Instructions) Today with us we have Mr. Almir Guilherme Barbassa, CFO and IRO; Mr. José Miranda Formigli, Exploration and Production Officer; Mr. Jose Carlos Cosenza, Downstream Officer; Mr. Jose Alcides Santoro, Gas and Energy Officer of Petrobras; and other Executives of the Company. Before we start, Mr. Theodore Helms, Executive Manager for Investor Relations, has some remarks to impart. Mr. Helms, you may proceed.

Good morning and we are going to start another call of Petrobras with investors and analysts to discuss the third quarter of 2012 results. Today’s conference call is being broadcast live over the Internet at our website www.petrobras.com.br/ir and can also be followed if you dial the numbers 5511-3127-4971 and the password is petrobras. If you wish to follow this webcast in English we will be having simultaneous translation on the Internet and this can be accessed at www.petrobras.com.br/ri/en or through 1-516-300-1066. Before proceeding, I would like to inform that this call is being recorded and I would like to draw your special attention to slide number two with our disclaimer to shareholders and investors. Words such as believe, expect and other similar words related to forecast and targets are based on the beliefs and assumptions of Petrobras management regarding the future of Petrobras. And finally, I would like to mention that we have already released the third quarter results both in reals and in dollars, both in accordance with the International Financial Reporting Standards, IFRS. Nevertheless today’s conference call will be discussing Petrobras results in reals only. Now I would like to give the floor to Mr. Almir Barbassa, our officer, and he will be talking about the operating and financial highlights of Petrobras during the quarters. And afterwards we will be answering questions that you might have. Almir, you have the floor.

Good morning everyone and thank you for joining us in this conference call related to the third quarter of 2012 of Petrobras. During the period, we delivered the net income of R$5,567 million and the EBITDA was R$14,375 million, both substantially higher than that delivered in the second quarter of this year. Oil production in Brazil was 1.904 million barrels per day, 3% lower than our production in Q2 2012. Now, we will be talking about the reasons for this decline. Nevertheless, the production of natural gas grew by 4%. Also during this period, we installed a new platform, FPSO Cidade de Anchieta with a production capacity of 100,000 barrels per day and full production should be achieved in March 2013, around six months after the production startup. And today we already are producing 43,000 barrels a day from three wells. In this period, we also made important discoveries in the post-salt, particularly in the Northeast of Brazil in the Sergipe-Alagoas and Ceara Basin. In refining, we broke a record in the output of oil products, 2,026,000 barrels in the quarter vis-à-vis 1,866 million one year ago. This was partially driven by the startup of the recently installed units, the REPAR coking unit, for instance, started operating in this period. And Petrobras also maintained its participation in the Dow Jones Sustainability Index for the seventh consecutive year. Now, let's talk about our oil and NGL production in Brazil. As I mentioned before, in this quarters we saw a drop in production of 66,000 barrels per day corresponding to 3% of reduction, and the main drivers were the scheduled maintenance stoppages, that lasted longer than expected and it was the case in the P-52 and P-19 platforms. And a major part of this downtime happened particularly in September. The total impact…

Now we will start our Q&A session starting with the questions in Portuguese and afterwards questions in English. This presentation is being webcast with a simultaneous interpretation into English, so we ask participants when asking their questions, could you please speak clearly and slowly? Please only two questions per participant, and all questions must be asked so that the officers may answer them. (Operator Instructions). Our first question comes from Bruno Montanari, Morgan Stanley. Please sir. Bruno Montanari – Morgan Stanley: Good morning to all, thank you for this conference call. I have some questions about production. In the Roncador, we had a nice reduction in production. Will you add to longer stoppages? Was it a problem in P-52 and the numbers for October, is that considered a completely normalized production in the field of Roncador. My second question is about the S-curve presented in the business and management plan. I would like to understand that the oil projects for 2013, that they have the same timeline. Particularly are you stepping and one in the Northeast, one that will have an operational spread out in the beginning of the year? Thank you.

Formigli will answer the two questions about E&P. Officer Formigli, please? José Miranda Formigli: Good morning, Bruno. As for P-52, we completed the scheduled maintenance stoppage in September. In the beginning of October, we will no longer suffer any effects on this production. What happened there? Those in P-52 and P-19 were longer stoppages, were linked to weather conditions. We had workover in the two units. For these workovers, we required a maximum wind and wave conditions, and those conditions were not there in September and that is why we had for the longer stoppages in these two units a few days longer than we had initially forecast. That led to an additional impact is coming from scheduled maintenance stoppages. And this is why the September production contributed more, because of the stoppages of these two units Brazil’s productions have been reduced, there are no problem in the platform or in the well. Moving on to your second question, CapEx (inaudible). We see projects continue 100% on target. We expect good performance in the shipyards, as they will be doing the integration in ESPN. There is no indication of delays in the units in the subsea unit in terms of the wells with interconnect focus to oil. Everything is under control. Well, the target for oil production in 2013 are fully on target. Bruno Montanari – Morgan Stanley: Thank you very much.

: Marcus Sequeira – Deutsche Bank: Good morning to all. Thank you for the call. My two questions are; you mentioned that there was an increase of other operating expenses in the quarter; a strong increase compared to the same quarter of last year and quarter-on-quarter. In case coming, and if not, could you perhaps identify the main factors that contributed to this increase? My second question has to do with refining. With all the interest of the company to increase output, attributed to refineries, are getting to almost 100% of their capacity. My question has to do with downstream and logistics for distribution, transportation and storage. With an increased demand, if the demand continues to grow, is there any bottleneck that we should expect for the distribution and transportation of fuel in the country? Thank you.

Marcus, thank you for the question. We will have one of our officers answering the first question and then we will probably take your second question. José Miranda Formigli: Indeed, we are increasing the output of our refineries. We are reaching a very high level of production. In case of the downstream, refineries in imported goods are getting through the distribution points. In other words related to the market and distribution components both in volume and the quality everything is perfectly satisfied. We might have some difficulties looking forward within just inventory, future inventories outside the refineries. So why we think which is good as well as the formal product and production is compatible with market demand and we’re perfectly supplying market demand. Even at this moment, and the weaker demand should continue in the last quarter of the year. Marcus, this is not up again. As for your second question, regarding other operating expenses, these are non-recurring items. At least the main factors are recurring, which means the payment resulting from the collective bargaining agreement with our workers, which was signed in the third quarter of 2012 and which was also paid in the third quarter. This is a non-recurring item and this is the main factor to be highlighted accounting for this marked increase in operating expenses.

Thank you. Our next question comes from Paula Kovarsky from Itau BBA. Please go ahead. Ms. Kovarsky, please. Paula Kovarsky – Itau BBA: Good morning to all. I have two questions, thanks. First, going back to your discussion related to production, literally I continue finding it very difficult to understand the increase of workovers in the wells and the increases in maintenance stoppages versus the depletion levels that we see in production. I would like to better understand how much of that increase in workovers costs is normal, if you’re just perhaps catching up with a period of where there was a lower focus on increasing production in Campos? Half of these workovers are laid, perhaps that’s why we see a more aggressive depletion now. How much of that can be still catch up, what would be the additional cost for you to effectively recover this production decline in Campos? We are trying to understand for how long this investment will have to continue so high and when we should see some effective improvement in the Campos production? And to be very specific in terms of depletion because I understand because that maintenance is so good but in terms of depletion also the cost increase, what is your expectation perhaps last year? And when can we see effectively an improvement in Africa? That is my first question. My second question has to do with the collective bargaining agreement. We talked about expenses actually recurring, right, because your manpower and payroll cost will be higher. Could you perhaps split how much is bonus and how much is an increased payroll for the next quarter? And I agree (inaudible) understand this comparison year-on-year because it was in the first quarter that that payment happened that have improved year-on-year because this is recurring. So please explain this effect better and then a quick follow-up if you can comment, Barbassa. Why is it as though we have such a good variation in this (inaudible) in this quarter?

Paula, you asked two questions, right? Okay, I'll try to answer the first one related to production and cost of workovers. Director (inaudible) is here to answer your question and then I will try to answer the other.

Paul, good morning. With regards to a production decline, as you know, production is a combination of the potential multiplied by efficiency and with that you’ll get to know our production. Obviously, when there is a production decline, which is due either because we are now able to recover whereas or because it is due to a higher inefficiency, higher than we had before. So what’s drove the decline. The decline that we've seen in the Campos basin and Campos would drive as a whole and Petrobras would drive as a whole, because a decline of 10% to 11%. The decline is perfectly aligned with the best practices, a couple of best practices. With regards to the system that we have if you look and what we considered an adequate number a decline will be 14%, our number for the quarter in Campos basin in around 11%. So, there is a decline. That has been partially offset by a number of actions in new wells. I’m not going to [talk] new wells drilling systems, I’m talking about couple of new fleet development with couple of managed productions in (inaudible) field, field drilling or through the Varredura project where we look for deeper-water over there particularly the production of all these wells that we announced in the Varredura projects just like 100,000 barrels per day. That’s after the so-called well decline. There is no way that we can avoid well decline. But you have to identify all reserves that exist even after we inject the water. And this is what we originally done to try to offset the decline. Okay, so I’ll talk about decline. Declines are under control. I will now talk about the other part of the equation, efficiency. We all know that and we make it very clear,…

Well, to continue with your questions, in terms of the costs linked to the Collective Bargaining Agreement for the workforce and that recurring fees 15% to 20% of that cost is recurring, 80% of that cost will be seen only in this quarter. That will be the breakdown of some of the increase, if it’s calculated in this way. As for the account for priors, if we go back to the chart that shows our trade balance, you’ll see that there was an increase in our imports and the chart of the prices it actually better because you see how fast prices grew and imports grew between July and September. We see how gasoline imports grew in that period and there was also an increase in the imports of oil in this quarter. This is linked to a higher currency value that leads to a debt with suppliers which is also higher. Thank you.

Our next question comes from Mr. Bruno Varella from Bradesco. Mr. Varella. Auro Rozenbaum – Bradesco: Good morning. I am Auro, not Bruno. I have two questions to Formigli. The first one has to do with a decline, I think you mentioned (inaudible) overall what is that decline and how do you calculated?

We can’t here you Bruno. Auro, oh Bruno, okay. Will you able to hear my question? If you could repeat your question Auro, we’ll appreciate it. Auro Rozenbaum – Bradesco: Auro, I can. I have two questions for Formigli. The first one is regarding production declines, he talks about the decline but I’m not sure he was referring to Campos if not representing Campos as an example. I would like to know what is the decline you’re using and how you calculated this decline? José Miranda Formigli: Auro, can you hear me. Good morning Auro. I will explain how we calculate the decline. Decline is calculated field by field. That is the first noted point. Obviously, we had an average decline and we informed that the average declines are only 11% for all fields. But decline potentially is calculated field-by-field, if the field have different characteristics, for your fields what we have, I’m going to concentrate on the major fields, okay. : In managing the reservoir, I am going to that something that I mentioned in the previous answer. You manage your action in terms of pressure in water arrival, in most of our offshore projects, we look to inject a lot of water. And then first among the best practices of the industry and managing this allocated ground inject water the decline is going to be very accelerated because in the reservoir there is a separation between oil and gas, you don’t have you (inaudible) between the volume of oil produced, in this stride having what we call a reservoir saturation which I’m having more oil index volume in the middle long-term oil and gas and this is having a very low recovery factor. We were all able to get a recovery factor P-52 proven with road rock mining,…

Our next question comes from Mr. Gustavo Gattass, BTG Pactual. Mr. Gattass. Gustavo Gattass – BTG Pactual: Good afternoon, I have two questions Barbosa the first one is for you. I would like you to speak about management, cash production and dividend. It's been a while that we haven’t seen dividend paying it, dividend to reduce the tax burden as we have done today. I would like to understand from you a little bit about the mindset of the management and the mindset of the Board for dividend payout looking forward? Do you tend to migrate to the minimum dividend payout or the mindset remains to pay the same dividend for common and preferred shares? So I would like to know about the dividend payout policy for Petrobras looking forward? That is my first question. My second question is market consensus. I just want to understand, we were doing our own math about the Petrobras refining results is the price of gasoline and diesel were in par, we still see a large loss, so I would like to understand if structurally speaking you see refining as unable to generate a positive result or perhaps we are doing the wrong calculations here?

Thank you, very much for your questions. Regarding your first question, the decision about interest on capital takes into account some important variables and the cash management is one of them, a very important one. And what do I mean by that? What you see in our income statement in terms of taxes payable, these are the taxes that we’re supposed to pay during the period and our accounting department has a competency and responsibility for the calculation and the disbursement is on a cash basis, and this is how we deal with that with our Internal Revenue Service. And the reason is that we do have time to optimize results until the end of the period, so this is one of the points. And the other points has to do with the preferred and the common shares and the dividends whether we are going to pay the same dividend, this is a decision made by our Board. Only after the Board decides, we'll be able to inform you and our dividend payout policy continues to be the same. There is no change in this policy. So I would like to give the floor to (inaudible) to answer your second question.

Gustavo, we see many opportunities to offset these prices. Cost reduction is an important discipline and we have the program that is establishing the company. It’s in force and we intend to continue working with a lot of determination to achieve important cost reductions. And we have many new facilities in the pipeline and we will be first increasing this with the integration of our refining product and the integration of the new units to the existing refining product as said REPAR coking unit is a very important thing and it started operations in June and August with an important contribution in every well which are unique steps substantially changed the refining process in the industrial units. So this is where we are placing our bet and the new refinery with a differentiated management we intend to offset that bringing our refining to other levels higher than the ones that we have and some others that is being built and with a very strong operations and the support we are looking for in order to cope with the difficulty that you mentioned yourself. Gustavo Gattass – BTG Pactual: I apologize for the third question. You mentioned that the depreciation of refining ended up increasing due to the new equipment installed, could we revisit this point. You had a 50% increase in depreciation in the refining operations, would that be consistent every quarter should we expect?

This has to do with accounting of the assets that were under construction. And when they started up this depreciation it may get started in that scenario in terms of depreciation already counted on most of the equipment already depreciated, so they are coming into play as a new unit, as start up of a new unit ends up having a high relative effect. And this is a fact that occurred into the next quarters, we have other units that will be started up and the investments that we make the improvement of qualities and also we have a higher complexity in this unit. So, our forecast is that by the end of the year practically everything should be concluded. At June this period we should see the inclusion of new units started out but as these are added to a higher value. So, we have all the assets we depreciated and we are adding new assets as I said. So typically will start to decrease gradually and as they are ready to be started up and we have to add them and that too have an effect on depreciation.

Our next question comes from Mr. Pedro Medeiros from Citigroup. Mr. Medeiros. Pedro Medeiros – Citigroup: Good morning. My first question is the following; you mentioned $400 million in the quarter. Is it possible to separate what was maintenance cost from your lifting cost and what was the additional cost; the contribution of the hit by new coking units? And maybe it would be better to ask the second question to (inaudible). Could you make a general evaluation about the project to release cash for the company. The first one is a sale of your assets in the Gulf of Mexico and should we expect something similar to that and in the past you mentioned the acceleration of the recovery of your accounts receivable which is close to R$4.4 billion and the improvement in the working capital as well. So, could you talk about the three projects please?

Good morning. It’s something $396 million, $357 million in net present value. It didn’t happen only in the third quarter. It is accumulated and we’re following this locally since April, although, we have announced to as externally. I think it was in June. We had already implemented products in April, and so we followed that up very frequently to be sure that the actions are bringing about us expected results, as regarding the assets of the Campos Basin. We have over 72% of earnings today, and you can say well this is very good because in the past our efficiencies were lower than 70%. And to grow capital very difficult and it's quite a lot of work that is necessary. So we intend to further improve this in the next few quarters. You asked about the percentage? I can tell this in relative terms, this is a characteristic now due to the ForEx. What I can tell you is as follows one-third approximately of our costs in real has to do with maintenance and two-thirds, we had the collective bargaining agreement, and it is appropriated to what you the call the direct operating cost, which is the lifting cost of Petrobras. The maintenance cost is very much impacted by the operating improvement activities in the Campos Basin.

And in general, this is not a situation, but this is what you should consider. I’m not going to talk about absolute figures, but one-third maintenance and two-third operations. So you can do the math yourself. Okay, thank you. Next question, so we’ll be answering the next question. Pedro Medeiros – Citigroup: The impact in terms of costs, I am talking about stoppages and the bargaining agreements, 95% it’s represented by the stoppage costs and the collective agreement. So these are the major impacts. We have over 20 different products and the impact is very small total?

In terms of your third question, which has to do with the release of some total company cash in the third quarter, we added difference of other [profitability] as a guarantee of an actuarial debt of our pension fund. That allowed us to improve our debt levels. This is something very important for Petrobras, the fact that we could release the funds. In the electric industry, for example, we continue to negotiate with them, ’08 to end has this deal with them, we managed that we have a result in October, so this was not included in the balance sheet. We were able to stop the pending issue. With that, we intended to materialize our production forecast. In our investments area, we restructured our whole organization here had headquartered concentrating those activity here, in order to optimize them and they continue to work to optimize our working capital. Our program is very matured with the high level of activity. And we have our program also available to other suppliers, so that we can work with our cash anticipation for the company in the right and adequate way. And at this point, we are planning to release as many funds as possible to have our cash robust. Our cash is quite lucrative. The balance sheet that does not include gross funding that we had in Europe, £400 million and millions and millions of euros. Thank you very much. We would like to make a correction, just a quick correction, in terms of those figures about cumulative expenses and at the end of September we wanted to close NPV for the month of September. Due to this number of close at the end of August, so we should consider actually that those expenses from April to August versus the NPV. Every month, we follow for the area of spending and what is NPV? And whether we are on the right track and have to do this really because whenever we make a workover or we implement an action, we have immediate results. Pedro Medeiros – Citigroup: Thank you for the clarification from (inaudible). And finally I’d like to ask the third question. I’ve been observing that for future production projects particularly for 2013 and 2014, you still have to finish the bidding process but did I assume through end of September, do you have any comments on those two projects, on the West Coast of those two projects?

The answer is what would you purposely need to complete? Pedro Medeiros – Citigroup: The bidding process for general equipment

But I still didn't understand, you are talking about (inaudible) in the [Hiroshima II]? Pedro Medeiros – Citigroup: Yes, about those two projects.

Well, Petrobras is working for an alternative, that we have for that not certain time to offset (inaudible), Petrobras alternative that we chose because we got to work profitable to support this UO there. But we continue to work into developer’s alternative with our suppliers. Now we can consider the weighted and the flexible alternatives. We are now applying the vast contract conditions possible. Thank you very much.

Our next question comes from Brandon Mei from Tudor Pickering, Holt & Co., You may proceed. Brandon Mei – Tudor Pickering, Holt & Co.,: Hi, thanks for taking my call. My question is on investments. How is the divestment process progressing specifically in the Gulf of Mexico and I was just thinking about the net debt to capital already at a high level. What would be free cash flow and investments are lagging?

Mr. Brandon, could you please repeat your question. Brandon Mei – Tudor Pickering, Holt & Co.,: Hi, can you hear me. My question is on how the process is progressing specifically in the Gulf of Mexico and then on while the net debt-to-capital is already at a high level what would you do if crude prices fell and could you get the rest of it done in a timely fashion?

(Inaudible) Brandon Mei – Tudor Pickering, Holt & Co.,: Hello, my question was on progress of how that is going specifically in the Gulf of Mexico assets and while net debt-to-capital is already at high level; if crude prices fall and the investments are coming in a delight fashion what would you do?

(Inaudible)

I will try to answer to your question as much as possible, but there is a technical problem and it's very hard to hear your question. I believe it is related to our debt level. Looking forward, we look at our investments and production of in our business and management plan, an estimated production of 2,022,000 barrels per day more or less 2%. We should achieve that production. We estimated an increase in prices, which has not totally happened. We continue with our goal to continue to pursue a balance increase first to maintain our debt level or lower. Therefore, due to our price policy, the deductible plant adjustment and demand be able to grow over the 2.5 times net debt over EBITDA. But we are pursuing this issue right now. It will depend on some variables on the lines of variables. We can project the results but only project them. So we want to get to our business plan, we are working very hard on other variables, so there we can release fund to our cash as mentioned before. We will be able to achieve our level and maintain them at the most adequate level if possible. Now again, it depends on a lot of things that can happen on several fronts looking forward. We are working on those variables that are strictly under our control. Thank you.

(Inaudible) you may proceed.

This is a follow-up on a question that has already been asked. I would like to understand what is the reason for the non-payment of interest on equity? I'm saying that what you have on the balance sheet of interest on capital, then what would be not state has already been reimbursed.

As I said before the inclusion of decline in our balance sheet, when you repeat the balance sheet by accrual basis, but anyway we can optimize this over the year. This doesn't mean that we're changing our policy. This means that we're optimizing our analysis and our cash management. Thank you.

Thank you.

Luiz Pinho from UBS. Luiz Pinho – UBS: My question has to do with the Greenfield refineries, I would like to understand what is the stage of a negotiation with maybe partners and whether this is a reality or not and then what ways this could impact your pricing policy for oil product? And afterwards I'll ask the second question.

Well, we're going to answer the first question. A partner is always welcoming this kind of operation. As we are in the oil industry and the pricing with the partnership, or we are just studying this, we will not consider that this has to be win-win situation. It is impossible to make a deal feasible if it is not a win-win situation. A win-lose situation is not acceptable, so a partnership has to be a true partnership where everybody gains. Luiz Pinho – UBS: Thank you for the answer. Just a follow-up question, so in the sense that you're looking for partnerships based on your answer and having said that, could we imagine something even more concrete by the end of this year regarding a partnership to be signed. And now my second question, how do you see the role of fuel distributors in Brazil due to this very high consumption of oil products and the need to import? Are you working on this or changing your relationship with distributors, really in terms of fuel orders or investments or tanking or logistics or whatever? So this is my second question.

Companies are looking for new markets due to this high demand and there is need for the construction of new tanking facilities and companies are moving in this direction. So, we already see the package is down the part of the company. They don't see this as an opportunity for our business and with this growing market, what we are doing is the following. We have to work even closer to them in order to avoid any surprise difficulties, but this is something that we have to do everyday and our commercial department is working very strongly on that, hand in hand with distributors. And we are doing our best in this regard and consumption in October is also extremely high. And we expect no difficulty whatsoever with this very strong contribution between our company and the distribution people. Luiz Pinho – UBS: And what about the follow-up of my first question? Could we expect anything regarding partnerships to be announced still this year or the first half of 2013, a definition about the partnership?

Any partnership depends on two parties; if I say yes I would be making a decision on behalf of the other party as well. So it's a very tough question to answer. Okay, thank you very much.

Now, I would like to give the floor back to Mr. Barbassa for his closing remarks.

I thank you very much for your patience for waiting for us during the interruption, the technical interruption that we had. We had over half an hour delay and we apologize for that and thank you very much for your patience and thank you for your presence. And we would like to invite you to join us in our fourth quarter conference call during which we expect to present even better results. Thank you very much.