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Risk management | 6 Months Ended
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Jun. 30, 2023
Notes and other explanatory information [abstract] |
Risk management |
| 27. | Risk management
The Company presents a sensitivity analysis of factors relating to its corporate risk management process. The possible and remote scenarios are related to events with low and very low probability of occurrence, respectively. The period of application of the sensitivity analysis is one year, except for operations with commodity derivatives, for which a three-month period is applied, due to the short-term nature of these transactions.
| 27.1. | Derivative financial instruments
A summary of the positions of the derivative financial instruments held by the Company and recognized in other current assets and liabilities as of June 30, 2023 , as well as the amounts recognized in the statement of income and other comprehensive income and the guarantees given is set out as follows:
Schedule of statement of financial position |  |  |  |  |
|  | Statement of Financial Position
|  |  |  | Fair value |
| Notional value | Asset Position (Liability) | Maturity
| 06.30.2023 | 12.31.2022 | 06.30.2023 | 12.31.2022 |
Derivatives not designated for hedge accounting |  |  |  |  |
Future contracts - total (1) | 1,809 | 683 | (12) | (40) |
Long position/Crude oil and oil products | 10,380 | 9,058 | − | - | 2023
Short position/Crude oil and oil products | (8,571) | (8,375) | − | - | 2023
Swap (2) |  |  |  |  | −
Short position/ Soybean oil | (10) | (3) | (2) | − | 2023
Forward contracts (3) |  |  |  |  |
Short position/Foreign currency forwards (BRL/USD) | (9) | − | − | - | 2023
Swap (3) |  | - |  | − |
Swap - CDI X IPCA | R$ 3,008 | R$ 3,008 | 61 | (16) | 2029/2034
Foreign currency / Cross-currency Swap | US$ 729 | US$ 729 | (20) | (64) | 2024/2029
Total recognized in the Statement of Financial Position |  |  | 27 | (120) |
(1) | Notional value in thousands of bbl.
(2) | Notional value in thousands of tons.
(3) | Amounts in US$ and R$ are presented in million.
Schedule of Amounts Recognized and Guarantees Given Related to Derivative Financial Instrument |  |  |  |
| Gains/ (losses) recognized in the statement of income
| Jan-Jun/2023 | Jan-Jun/2022 | Apr-Jun/2023 | Apr-Jun/2022
Commodity derivatives |  |  |  |
Other commodity derivative transactions - Note 27.2 (a) | 69 | (222) | (10) | (169)
Recognized in Other Income and Expenses | 69 | (222) | (10) | (169)
Currency derivatives |  |  |  |
Swap Pounds Sterling x Dollar | − | (156) | − | (126)
Swap CDI x Dollar - Note 27.3 (b) | 78 | 147 | 62 | (22)
Others | − | − | 1 | −
| 78 | (9) | 63 | (148)
Interest rate derivatives |  |  |  |
Swap - CDI X IPCA | 47 | (16) | 40 | (15)
| 47 | (16) | 40 | (15)
Cash flow hedge on exports -Note 27.3 (a) | (2,232) | (2,488) | (1,078) | (1,108)
Recognized in Net finance income (expense) | (2,107) | (2,513) | (975) | (1,271)
Total | (2,038) | (2,735) | (985) | (1,440)
Schedule of Amounts Recognized and Guarantees Given Related to Derivative Financial Instrument of comprehensive income |  |  |  |
| Gains/ (losses) recognized in other comprehensive income
| Jan-Jun/2023 | Jan-Jun/2022 | Apr-Jun/2023 | Apr-Jun/2022
Cash flow hedge on exports - Note 26.3 (a) | 7,104 | 7,561 | 4,482 | (5,415)
Schedule of guarantees given as collateral |  |  |  |
|  |  | Guarantees given as collateral
|  |  | 06.30.2023 | 12.31.2022
Commodity derivatives |  |  | 52 | 96
Total |  |  | 52 | 96
A sensitivity analysis of the derivative financial instruments for the different types of market risks as of June 30, 2023 is set out as follows:
Schedule of sensitivity analysis of the derivative financial instruments |  |  |  |
Financial Instruments | Risk | Probable Scenario | Reasonably possible scenario | Remote Scenario
Derivatives not designated for hedge accounting |  |  |  |
Future and forward contracts | Crude oil and oil products - price changes | - | (92) | (184)
Future and forward contracts | Soybean oil - price changes | - | (3) | (5)
Forward contracts | Foreign currency - depreciation BRL x USD | - | (1) | (1)
|  | − | (96) | (190)
The probable scenario uses market references, used in pricing models for oil, oil products and natural gas markets, and takes into account the closing price of the asset on June 30, 2023. Therefore, no variation is considered arising from outstanding operations in this scenario. The reasonably possible and remote scenarios reflect the potential effects on the statement of income from outstanding transactions, considering a variation in the closing price of 20% and 40%, respectively. To simulate the most unfavorable scenarios, the variation was applied to each asset according to open transactions: price decrease for long positions and increase for short positions.
| 27.2. | Risk management of products prices
The Company is usually exposed to commodity price cycles, although it may use derivative instruments to hedge exposures related to prices of products purchased and sold to fulfill operational needs and in specific circumstances depending on business environment analysis and assessment of whether the targets of the Strategic Plan are being met.
| a) | Other commodity derivative transactions
Petrobras, by use of its assets, positions and market knowledge from its operations in Brazil and abroad, occasionally seeks to optimize some of its commercial operations in the international market, with the use of commodity derivatives to manage price risk.
| 27.3. | Foreign exchange risk management
| a) | Cash Flow Hedge involving the Company’s future exports
The carrying amounts, the fair value as of June 30, 2023, and a schedule of expected reclassifications to the statement of income of cumulative losses recognized in other comprehensive income (shareholders’ equity) based on a US$ 1.00 / R$ 4,8192 exchange rate are set out below:
Schedule of expected reclassifications to the statement of income of cumulative losses |  |  |  |  |
|  | Present value of hedging instrument notional value at 06.30.2023
Hedging Instrument | Hedged Transactions | Nature of the Risk | Maturity Date | US$ million | R$ million
Foreign exchange gains and losses on proportion of non-derivative financial instruments cash flows | Foreign exchange gains and losses of highly probable future monthly exports revenues | Foreign Currency – Real vs U.S. Dollar Spot Rate | July 2023 to June 2033 | 65,472 | 315,523
Changes in the present value of hedging instrument notional value | US$ million | R$ million
Amounts designated as of December 31, 2022 | 62,119 | 324,121
Additional hedging relationships designated, designations revoked and hedging instruments re-designated | 15,874 | 80,388
Exports affecting the statement of income | (3,547) | (18,145)
Principal repayments / amortization | (8,974) | (45,515)
Foreign exchange variation | - | (25,326)
Amounts designated as of June 30, 2023 | 65,472 | 315,523
Nominal value of hedging instrument (finance debt and lease liability) at June 30, 2023 | 79,394 | 382,618
In the six-month period ended June 30, 2023, the Company recognized a US$ 228 gain within foreign exchange gains (losses) due to ineffectiveness (a US$ 83 loss in the same period of 2022). The average ratio of future exports for which cash flow hedge accounting was designated to the highly probable future exports is 54.5%. A roll-forward schedule of cumulative foreign exchange losses recognized in other comprehensive income as of June 30, 2023 is set out below:
Schedule of cumulative foreign exchange losses recognized |  |  |
| Exchange rate variation | Tax effect | Total
Balance at December 31, 2022 | (26,527) | 9,020 | (17,507)
Recognized in Other comprehensive income | 4,872 | (1,657) | 3,215
Reclassified to the statement of income - occurred exports | 2,232 | (760) | 1,472
Balance at June 30, 2023 | (19,423) | 6,603 | (12,820)
| Exchange rate variation | Tax effect | Total
Balance at December 31, 2021 | (36,621) | 12,452 | (24,169)
Recognized in Other comprehensive income | 5,073 | (1,725) | 3,348
Reclassified to the statement of income - occurred exports | 2,488 | (846) | 1,642
Balance at June 30, 2022 | (29,060) | 9,881 | (19,179)
Additional hedging relationships may be revoked or additional reclassification adjustments from equity to the statement of income may occur as a result of changes in forecasted export prices and export volumes following a revision of the Company’s strategic plan. Based on a sensitivity analysis considering a US$ 10/barrel decrease in Brent prices stress scenario, when compared to the Brent price projections in the Strategic Plan 2023-2027, would not indicate a reclassification from equity to the statement of income. A schedule of expected reclassification of cumulative foreign exchange losses recognized in other comprehensive income to the statement of income as of June 30, 2023 is set out below:
Schedule of reclassification of cumulative foreign exchange losses recognized |  |  |  |  |  |  |  |
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 a 2033 | Total
Expected realization | (4,017) | (6,516) | (3,572) | (2,549) | (3,190) | (1,681) | 2,101 | (19,424)
| b) | Information on ongoing contracts
As of June 30, 2023, the Company has outstanding swap contracts - IPCA x CDI and CDI x Dollar. Swap contracts – IPCA x CDI and CDI x Dollar In September 2019, Petrobras contracted a cross currency swap aiming to protect against exposure arising from the 7th issuance of debentures, settled on October 9, 2019, for the total notional amount of US$ 367 for IPCA x CDI operations, maturing in September 2029 and September 2034, and US$ 240 for CDI x U.S. Dollar operations, maturing in September 2024 and September 2029. In July 2022, the Company approved a repurchase plan for these debentures, to hold them in treasury or resell them. At June 30, 2023, only an immaterial amount of this debt had been effectively repurchased. Thus, the position in this swap remains unchanged. Changes in interest rate forward curves (CDI interest rate) may affect the Company's results, due to the market value of these swap contracts. In preparing a sensitivity analysis for these curves, a parallel shock on this curve was estimated based on the average maturity of these swap contracts, in the scope of the Company’s Risk Management Policy. For possible and remote scenarios, the effects of 40% (400 b.p.) and 80% (800 b.p.) variations, respectively, on the interest rate forward curves were estimated. The effects of this sensitivity analysis, keeping all other variables remaining constant, are shown in the following table:
Schedule of effects of sensitivity analysis |  |
| Possible Result | Remote Result
SWAP Exchange rate (IPCA x USD) | (10) | (19)
The methodology used to calculate the fair value of this swap operation consists of calculating the future value of the operations, using rates agreed in each contract and the projections of the forward curves, IPCA coupon and foreign exchange coupon, discounting to present value using the risk-free rate. Curves are obtained from Bloomberg based on forward contracts traded in stock exchanges. The mark-to-market is adjusted to the credit risk of the financial institutions, which is not relevant in terms of financial volume, since the Company deals in contracts with highly rated banks.
| c) | Sensitivity analysis for foreign exchange risk on financial instruments
A sensitivity analysis is set out below, showing the probable scenario for foreign exchange risk on financial instruments, computed based on external data along with reasonably possible and remote scenarios (20% and 40% changes in the foreign exchange rates prevailing on June 30, 2023, respectively), except for assets and liabilities of foreign subsidiaries, when transacted in a currency equivalent to their respective functional currencies. This analysis only covers the exchange rate variation and maintains all other variables constant.
Schedule of sensitivity analysis for foreign exchange risk on financial instruments |  |  |  |  |
Risk | Financial Instruments | Exposure at 06.30.2023 | Probable Scenario (1) | Reasonably possible scenario | Remote Scenario
Dollar/Real | Assets | 6,771 | 254 | 1,354 | 2,708
| Liabilities | (98,351) | (3,690) | (19,670) | (39,340)
| Exchange rate - Cross currency swap | (624) | (23) | (125) | (250)
| Cash flow hedge on exports | 65,472 | 2,456 | 13,094 | 26,189
| Total | (26,732) | (1,003) | (5,347) | (10,693)
Euro/Dollar | Assets | 1,361 | 43 | 272 | 544
| Liabilities | (2,410) | (77) | (482) | (964)
| Total | (1,049) | (34) | (210) | (420)
Pound/Dollar | Assets | 1,577 | 12 | 315 | 631
| Liabilities | (3,069) | (23) | (614) | (1,228)
| Total | (1,492) | (11) | (299) | (597)
Pound/Real | Assets | 1 | − | − | −
| Liabilities | (28) | (1) | (6) | (11)
| Total | (27) | (1) | (6) | (11)
Euro/Real | Assets | 4 | − | 1 | 2
| Liabilities | (11) | (1) | (2) | (5)
| Total | (7) | (1) | (1) | (3)
Peso/Dollar | Assets | 27 | (14) | (5) | (8)
| Total | 27 | (14) | (5) | (8)
Total at June 30, 2023 | (29,280) | (1,064) | (5,868) | (11,732)
(1) | At June 30, 2023, the probable scenario was computed based on the following risks: R$ x U.S. Dollar - a 3.75% depreciation of the Real; Euro x Dollar: a 3.1% appreciation of the Euro; Pound Sterling x U.S. Dollar: a 0.72% appreciation of the Pound Sterling; Real x Euro: a 6.9% depreciation of the Real; Real x Pound Sterling - a 4.5% depreciation of the Real; and Peso x U.S. Dollar - a 95.6% depreciation of the Peso. Source: Focus and Thomson Reuters.
| 27.4. | Interest rate risk management
The Company considers that interest rate risk does not create a significant exposure and therefore, preferably does not use derivative financial instruments to manage interest rate risk, except for specific situations faced by certain subsidiaries of Petrobras. The sensitivity analysis of interest rate risk presented in the table below is carried out for a twelve-month term. Amounts referring to reasonably possible and remote scenarios mean the total floating interest expense if there is a variation of 40% and 80% in these interest rates, respectively, maintaining all other variables constant. The following table presents the amounts to be disbursed by Petrobras with the payment of interest related to debts with floating interest rates at June 30, 2023:
Schedule of interest rate risk management |  |  |  |
Risk |  | Probable Scenario (1) | Reasonably possible scenario | Remote Scenario
LIBOR 3M |  | 12 | 16 | 19
LIBOR 6M |  | 603 | 845 | 1,086
SOFR 3M (2) |  | 91 | 118 | 146
SOFR 6M (2) |  | 17 | 24 | 31
CDI |  | 112 | 157 | 202
TJLP |  | 56 | 79 | 101
IPCA |  | 78 | 110 | 141
|  | 969 | 1,349 | 1,726
(1) | The probable scenario was calculated considering the quotations of currencies and floating rates to which the debts are indexed.
(2) | It represents the Secured Overnight Financing Rate.
| 27.5. | Liquidity risk management
The possibility of a shortage of cash to settle the Company’s obligations on the agreed dates is managed by the Company. The Company mitigates its liquidity risk by defining reference parameters for treasury management and by periodically analyzing the risks associated to the projected cash flow, quantifying its main risks through Monte Carlo simulations. These risks include oil prices, exchange rates, gasoline and diesel international prices, among others. In this way, the Company is able to predict cash needs for its operational continuity and for the execution of its strategic plan. In this context, even these unaudited condensed consolidated interim financial statements presenting negative net working capital, the Company does not believe it presents liquidity risk. Additionally, the Company maintains revolving credit facilities contracted as a liquidity reserve to be used in adverse scenarios (see note 24.5). The Company regularly assesses market conditions and may enter into transactions to repurchase its own securities or those of its subsidiaries, through a variety of means, including tender offers, make whole exercises and open market repurchases, in order to improve its debt repayment profile and cost of debt.
| 27.6. | Fair value of financial assets and liabilities
Schedule of financial assets and liabilities |  |  |  |
| Level I | Level II | Level III | Total fair value recorded
Assets |  |  |  |
Interest rate derivatives | - | 61 | - | 61
Balance at June 30, 2023 | - | 61 | - | 61
Balance at December 31, 2022 | − | − | − | −
Liabilities |  |  |  |
Foreign currency derivatives | - | (20) | - | (20)
Commodity derivatives | (12) | (2) | - | (14)
Balance at June 30, 2023 | (12) | (22) | - | (34)
Balance at December 31, 2022 | (40) | (81) | − | (121)
The fair value of other financial assets and liabilities is presented in the respective notes: 3 – Marketable securities; 9 – Trade and other receivables; and 24 – Finance debt (estimated amount). The fair values of cash and cash equivalents, current debt and other financial assets and liabilities are equivalent or do not differ significantly from their carrying amounts.

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