Reuters Company Research

Petroleo Brasileiro SA (ADR) (PBR) 26 May 2010

Performance Rating: Neutral

2000 2010

Share Price Summary
Close Price on 5/26/10......................................... $33.56
Absolute Price Change on 5/26/10............................ 0.69
Percent Change..................................................... 2.07%
Off 52-Week High...............................................-37.22%
Over 52-Week Low................................................ 7.53%
Beta....................................................................... 1.449
Overview
Float (mil)........................................................ 2,639.511
10 Day Average Volume (mil)................................. 21.271
1 Day Volume Change on 5/26/10.......................... 8.62%
Market Capitalization (mil)..................................$147,229
TTM Price/Earnings................................................... 9.50
Price/Earnings Current Fiscal Year Estimate................ 8.38
Percent Price Change PBR S&P 500
Year to Date...............................-29.61........... -4.23
One Year................................... -19.87.......... 19.58
Two Years................................. -52.28......... -22.91
Three Years................................ 24.55......... -29.54
Five Years................................. 183.75......... -10.91
Ten Years........................................ NA............... NA

Table of Contents
Reuters Rating ....................................... 2 General Sentiment ..................................5 Footprints of Success ............................. 8
Getting Acquainted ................................. 3 Stock Price Rationale ..............................6
Share Price Trends .................................4 Expectations and Credibility .....................7

REUTERS COMPANY REPORT DISCLAIMER

This research report is provided for informational purposes only and on the condition that it will not form the sole basis for any investment decision. Reference to any company is not a recommendation
to buy or sell the shares of such company. The information used for, or presented in, this report has been obtained from sources believed to be reliable, but Reuters makes no representation as to the
accuracy or completeness of such information. This report in intended only for users in the United States. Reuters has no obligation to update, modify or amend this report or to otherwise notify a reader
thereof in the event that any matter stated herein becomes inaccurate. Reuters and/or its affiliates/investors may hold securities positions in the companies discussed in this report and may frequently
trade in such positions. Such investments may be inconsistent with the quantitative analysis provided in this report.

This report was generated using a proprietary quantitative model that leverages widely accepted statistical methods and financial concepts to rank and rate a universe of more than 4700 US companies
and US-listed ADRs with a market capitalization greater than $50mm based on a series of financial attributes. These ratings are not intended as an indication of how an individual's investment will
perform. As used in this report, "Outperform" designates the companies that rank in the top 30% of companies covered by Reuters, "Neutral" designates the middle 40%, and the bottom 30% are
designated "Underperform". All ratings are relative to the universe of companies covered by Reuters and not to any specific benchmark.

© Reuters 2004. All rights reserved. This report may not be reproduced, modified, distributed or published without the prior written authorization of Reuters. Reuters and the sphere logo are the
trademarks or registered trademarks of the Reuters Group of companies around the world.
Petroleo Brasileiro SA (ADR) (NYSE:PBR) -- Oil & Gas - Integrated/Energy Reuters Company Research

Performance Rating: Neutral

Reuters ratings are based on a proprietary model that leverages widely accepted statistical methods and financial concepts to select attributes shown to be strong indicators of future
stock price performance and applies these to rank stocks along a normal distribution curve. Ranks for Fundamental Quality, Value Catch-up, Operational Trends and Technical Factors
are combined into a Composite Rating of Outperform, Neutral or Underperform.

Reuters Composite Rating Component Rating Component Weight

We cannot guarantee that each stock will perform Types of investment criteria differ in how useful
in accordance with its rank. But we do believe that they are for predicting future stock movement.
over the long term, stocks rated Outperform (30% Based on our research, the Composite Rank
of all stocks we rate) will, in the aggregate, Fundamental Technical assumes these relative degrees of importance.
outperform stocks rated Neutral (40% of all stocks Quality Factors

rm

Ou
fo
we rate), and that stocks rated Neutral will, in the

er

tp
tp

er
l
aggregate, outperform stocks rated Underperform

ra
Ou

fo
Ne
ut

rm
ut
(30%). All analysis is based on publicly available

Ne
Fundamental Quality 36%

ra
Un
de

l
de
company financials, fundamental ratios, relative

Un

r
rankings of financial data and ratios, and observed
Technical Factors 27%
security prices.

r
de
Un

Un
de

l
Ne

ra
r

ut
ut
Operational Trends 13%

rm
Ou

Ne
ra
Underperform Neutral Outperform

fo
l
tp

er
er

tp
fo

Ou
rm
PBR shares are presently rated NEUTRAL. Value Catch-up 24%
No forecast is made for the stock market as a whole. But Value Operational
we believe it is probable that stocks rated NEUTRAL will, Catch-up Trends
in the aggregate, perform generally in line with our
coverage universe. "Under" = Underperform Technical Factors: Underperform
This rating is based on analyses of share price
Fundamental Quality Component: Neutral movements over a variety of time periods. We
compare performance characteristics of individual
This rating is based on characteristics traditionally associated with "good" companies. We focus on how each company stocks with those of all the others we rate.
measures up against others, and give careful attention to recent improvement or slippage relative to other companies. Generally speaking, our goal is to favor up-trending
TTM = Trailing Twelve Months. shares that have experienced recent corrections
Very Negative Negative Neutral Positive Very Positive and de-emphasize down-trending shares
TTM Return on Investment experiencing uncharacteristic periods of strength.
Improvement in TTM Return on Investment Here is how PBR shares performed during the
TTM Pretax Margin various periods we examined.
Improvement in TTM Pretax Margin Price Change
Depreciation in Excess of Capital Spending Needs Past 7 days 0.5%
Issuance/Repurchase of Common Shares Past 30 days -18.6%
Common Shares Dilution Past 60 days -22.2%
Presence/Absence of Unusual Income Items
Change for Past 180 Days: -34.6%
Value Catch-up Component: Underperform
This rating measures the extent to which the share price adequately reflects improving or eroding fundamentals, and favors $51.33
shares whose prices have been slower to "catch up" to improving performance measures. TTM = Trailing Twelve Months.
Very Negative Negative Neutral Positive Very Positive $33.56
Price Catch-up with TTM Earnings Open on 11/30/09 Close on 5/26/10
Price Catch-up to TTM Sales
Price Catch-up to TTM Free Cash Flow
Price Catch-up to MRQ Book Value Change Between 60 and 30 Days Ago: -4.3%

Operational Trends Component: Outperform

This rating reflects how strong a company's recent Sales and EPS (reported as per GAAP) growth have been relative to other $43.11 $41.24
companies we rate. MRQ = Most Recent Quarter. TTM = Trailing Twelve Months.
Very Negative Negative Neutral Positive Very Positive Open on 3/29/10 Close on 4/27/10
Most Recent Quarter EPS Growth
Improvement in EPS Growth for Consecutive Quarters Change Between 180 and 60 Days Ago: -16.0%
Improvement in EPS Growth (MRQ vs. TTM)
Most Recent Quarter Sales Growth
Improvement in Sales Growth (MRQ vs. TTM) $51.33
$43.11
Peer Comparison
Open on 11/30/09 Close on 3/26/10
This section shows the comparison of key components between PBR and several of its peers.
Composite Fundamental Technical Value Operational
Company Name (Ticker) Rating Quality Factors Catch-up Trends Change Between 180 and 90 Days Ago: -16.9%
Petroleo Brasil... (PBR) Neutral Neutral Underperform Underperform Outperform
Exxon Mobil Corporation (XOM) Outperform Outperform Underperform Underperform Outperform
BP plc (BP.) NA NA NA NA NA $51.33
TOTAL S.A. (FP) NA NA NA NA NA $42.65
Chevron Corporation (CVX) Neutral Neutral Neutral Underperform Outperform
Royal Dutch Shell plc (RDSA) NA NA NA NA NA Open on 11/30/09 Close on 2/26/10

May 26, 2010 Page 2

Petroleo Brasileiro SA (ADR) (NYSE:PBR) -- Oil & Gas - Integrated/Energy Reuters Company Research

Getting Acquainted
Start your analysis by learning what the company does, how well it does it, where it stands relative to peers, and whether aspects of the corporate structure or capitalization are
bothersome to you.

Business Summary Contact Info

Petroleo Brasileiro SA-Petrobras is an integrated oil and gas company. During the year ended December 31, 2008, Petroleo Brasileiro SA (ADR) is headquartered
the Company's average domestic daily hydrocarbons production was 2,176 thousand barrels of oil equivalent per at:
day (mboe/d). Approximately 84% of its proved reserves are in fields in the offshore Campos Basin. The Company Avenida Republica do Chile, 65, 24s Andar,
operates the refining capacity in Brazil. The Company's domestic refining capacity is 1,942 thousand barrels per day Centro, Rio de Janeiro, , 20031-912
(mbbl/d). Its domestic refining production is 1,787 mbbl/d and sales of oil products to domestic markets is 1,748 Brazil
mbbl/d. The Company is also involved in the production of petrochemicals and fertilizers. The Company distributes oil +55 21 32242040
products through its own BR network of retailers and to wholesalers. During 2008, it increased its stake in the Sierra www.petrobras.com.br
Chata and Parva Negra blocks to 45.55% and 100%, respectively, and acquired a 13.72% stake in the El Tordillo Almir Guilherme Barbassa, Director of Investor
and La Tapera-Puesto Quiroga blocks. In November 2009, it acquired Chevron Chile SAC. Relations

Financial Trends
TTM = Trailing Twelve Months, * = Most Recent Quarter.
Historic Growth Rates
Fiscal Year Ending 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 TTM 3 Year 5 Year 10 Year
Sales (mil) $56,324.0 $72,347.0 $87,735.0 $118,257.0 $91,869.0 $91,869.0 8.29 19.66 19.04
EPS (GAAP) $2.32 $2.92 $2.99 $4.30 $3.53 $3.53 6.52 23.82 32.02
Dividends/Share $0.68 $0.83 $0.85 $0.94 $1.18 $1.18 12.44 22.95 30.64
Book Value/Share $6.42 $8.34 $12.89 $10.67 $18.00 * $21.44 29.23 34.80 23.41
Tangible Book Value/Sh. $6.02 $7.87 $12.22 $10.09 $17.24 * $21.41 29.90 35.61 22.95
Cash Flow/Share $2.98 $3.91 $4.32 $5.39 $5.47 $5.47 11.89 23.56 23.27
Free Cash Flow/Share $0.60 $0.75 ($0.53) ($1.46) ($4.09) ($0.20) NA NA NA

Key Ratios
Historic Averages
Fiscal Year Ending 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 TTM 3 Year 5 Year 10 Year
% Sales Growth 50.4 28.4 21.3 34.8 (22.3) (22.3) 11.2 22.5 22.1
% EPS Growth 91.3 25.9 2.4 43.7 (17.9) (17.9) 9.4 29.1 67.9
% Gross Margin 47.0 44.5 43.3 38.4 46.4 46.4 42.7 43.9 46.2
% Operating Margin 27.5 27.4 23.3 21.4 23.8 23.8 22.8 24.7 25.2
% Tax Rate 30.4 29.7 30.5 34.3 23.7 23.7 29.5 29.7 30.4
% Return on Assets 14.3 15.2 11.7 13.9 10.3 10.3 12.0 13.1 12.0
% Return on Investment 18.4 19.6 14.7 17.2 12.5 12.5 14.8 16.5 15.3
% Return on Equity 44.4 39.6 28.2 36.5 24.7 24.7 29.8 34.7 37.2
Asset Turnover 0.8 0.8 0.8 0.9 0.6 0.6 0.8 0.8 0.7
Receivables Turnover 8.0 8.4 9.3 11.9 8.4 12.5 9.8 9.2 9.1
Inventory Turnover 5.8 6.8 6.3 8.5 5.1 5.1 6.6 6.5 5.7

Equity Information Analyst Footnotes

Whether you are willing to accept companies that have or don't have major shareholders with controlling ownership blocks, Look for accounting changes, restructurings,
multiple classes of common, or convertible debt or preferred issues is a matter of individual preference. Look here for etc.which may affect how useful historic data is
anything along these lines that might make you more or less inclined to invest in this company. inassessing future company prospects.
Common Stock no Par, 9/09, unlim. auth., 5,073,347,344 issd. Insiders own - 47.58% IPO: N/A. Preferred Stock no Par, unlim. auth., FY'98 financials are reclassified.
3,700,729,396 issd. Insiders own - 15.51%. 8/00, Exchange change from OTC. 05/08, 2-for-1 stock split. Updaed from RK -12/31/2009

Peer Comparison
This table gives an indication of how Petroleo Brasileiro SA (ADR) stands in key respects compared with companies in the Oil & Gas - Integrated Industry
Current Fiscal Current Fiscal P/E Based on
Last Fiscal Year Year Projected Projected Year Projected Current Year EPS % Growth EPS % Growth
Company Name (Ticker) Revenue (mil) Revenue (mil) Price/Sales Operating EPS EPS Estimates Previous 5 Years Next 5 Years
Petroleo Brasil... (PBR) $91,869.0 $117,594.2 1.3 $3.53 $4.00 8.4 23.8 5.7
Exxon Mobil Corporation (XOM) $310,586.0 $416,000.3 0.7 $3.98 $5.78 10.3 0.5 8.6
BP plc (BP.) NA NA NA NA NA NA NA NA
TOTAL S.A. (FP) NA NA NA NA NA NA NA NA
Chevron Corporation (CVX) $171,636.0 $217,250.4 0.7 $5.24 $8.57 8.3 (3.1) 19.6
Royal Dutch Shell plc (RDSA) NA NA NA NA NA NA NA NA
ConocoPhillips (COP) $152,840.0 $197,486.1 0.4 $3.24 $6.16 8.0 (10.9) 17.9
Occidental Petroleum Co... (OXY) $15,531.0 $19,739.4 3.2 $3.59 $5.94 13.2 3.7 7.8

May 26, 2010 Page 3

Petroleo Brasileiro SA (ADR) (NYSE:PBR) -- Oil & Gas - Integrated/Energy Reuters Company Research

Share Price Trends

Stock price trends depict the collective opinion of the investment community. You don't have to agree with consensus views but seeing how others feel can help you decide what to
look for as you go further in your analysis. Consider it similar to reading a review before seeing a movie.

1 Year Price Chart with Bollinger Bands and Relative Strength

Technical analysts believe a narrowing of the bands suggests a significant price movement, up or down, will soon occur. Also, many say stocks that move outside the bands and then
back inside will soon move toward the opposite band. The Relative Strength Index (RSI) calculates the strength of the current price movement compared to other recent moves and
may signal when a trend is unsustainable. Technical analysts also believe RSI peaks/valleys forecast changes in share price trends.

High: 53.46

$50.00

40.00

Low: 31.21
Relative Strength Indicator 100%
50%

Volume (mil)
Average Volume
15.08

Jun' 09 Jul Aug Sep Oct Nov Dec Jan' 10 Feb Mar Apr May

10 Year Price Chart (Monthly) 5 Year Price Chart (Monthly)

$77.00 $77.00

57.00 62.00

47.00
37.00
32.00
17.00
17.00

0.21 0.31

2001 2002 2003 2004 2005 2006 2007 2008 2009 Vol (bil) 2005 2006 2007 2008 2009 Vol (bil)

6 Month Price Chart (Daily) 1 Month Price Chart (Daily)

$53.00
$42.00

48.00

43.00 37.00

38.00

33.00 32.00

15.30 20.63

Dec' 09 Jan' 10 Feb Mar Apr May Vol (mil) Apr' 10 May Vol (mil)

May 26, 2010 Page 4

Petroleo Brasileiro SA (ADR) (NYSE:PBR) -- Oil & Gas - Integrated/Energy Reuters Company Research

General Sentiment
You can follow popular opinion or choose a contrarian's strategy. Either way, you should know whether the Street is bullish or bearish. Investor sentiment is typically positive when
the 50-day moving average is rising, especially if it's also above the 200-day moving average. Additionally, changes in price trend can be deemed more definitive if supported by
higher than normal volume.

52 Week Price History

50 Day Moving Average $50.00

40.00

200 Day Moving Average

Volume (mil) Average Volume
15.10

Jun' 09 Jul Aug Sep Oct Nov Dec Jan' 10 Feb Mar Apr May

Price History
Calendar Year 2001 2002 2003 2004 2005 2006 2007 2008 2009
High Price 7.63 6.86 7.34 10.14 18.55 26.86 59.58 77.61 53.46
Low Price 4.50 2.34 3.21 5.92 9.30 17.25 20.69 14.73 22.22
Year End Price 5.83 3.74 7.31 9.95 17.82 25.75 57.62 24.49 47.68

High P/E 9.61 51.93 66.77 10.68 14.11 9.31 19.24 24.47 19.18
Low P/E 3.33 2.91 2.61 1.26 5.38 5.92 8.14 2.69 9.43
Year End P/E 7.25 7.02 5.47 8.19 7.67 8.81 19.24 5.69 13.49
Dividend Yield 6.95 7.97 5.10 4.22 3.82 3.22 1.47 3.84 2.47

Price Performance Insider Trading

When stocks significantly beat or trail the S&P 500 or the industry, investors are looking more intently at company- specific Insider buying can be seen as bullish because,
matters than general-market factors. In the two percentile rank columns, a high "Rank in Industry" coupled with a low presumably, their company knowledge is superior.
"Industry Rank" could signify a hot stock in a cold industry. The reverse, is also noteworthy. However, insider sales are less reliable because
insiders may sell for a variety of reasons that have
Actual Percent vs. vs. Rank in Industry
nothing to do with their opinion of the stock.
Time Period Change Change S&P 500 Industry Industry Rank
4 Week (8.15) (19.5)% (10.2)% (7.1)% 34 27
In the last 6 months, there have been no insider
13 Week (8.02) (19.3)% (16.5)% (15.1)% 24 22 purchases, and there have been no insider sales.
26 Week (19.45) (36.7)% (34.2)% (25.0)% 27 0
52 Week (8.37) (20.0)% (31.8)% (18.4)% 29 0 Net Change (6 months) 0 mil
6 Month Net Transactions 0
Year To Date (14.12) (29.6)% (26.5)% (22.4)% 21 10

Institutional Ownership
BarChartKey Rank Key It's worthwhile to know what institutions are doing
YTD R 4 Wk. Worst R Best 1 R 100 simply because their stock positions can be so
large. In the short term, stocks will perform well if
Short Interest institutions are buying and perform poorly if
institutions are selling.
A high or increasing short interest implies that many investors expect the stock price to decline. You can treat that as a
warning. Or you can disagree with the crowd and buy stocks with high short interest in anticipation of a short squeeze (a rally 1,031 institutions own 10.7% of the 4.39 billion
that occurs when short sellers rush to buy a stock, fearing losses they might incur if they wait too long). Prospects for a common shares outstanding. This is lower than the
squeeze are indicated by high readings in the "Days to Cover" column (which tells how many days it would take for all short average institutional ownership of the Oil & Gas -
interest positions to be covered if recent trading volume levels persist). The risk: The bears may be right. So research other Integrated Industry at 30.6%, and lower than the
aspects of the company. average of the S&P 500 as a whole which is 66.9%.
Month Shares % Outstanding Percent of Float Days to Cover Net Change (3 month) (0.6)%
April 2010 12,189,220 0.48 1.09 0.57 Net Purchases (3 month) (27.41) mil
March 13,830,860 0.55 1.23 1.15 Shares Purchased (3 month) 62.22 mil
February 15,908,120 0.63 1.48 1.04 Shares Sold (3 month) 89.64 mil
January 10,681,100 0.42 0.99 0.57

May 26, 2010 Page 5

Petroleo Brasileiro SA (ADR) (NYSE:PBR) -- Oil & Gas - Integrated/Energy Reuters Company Research

Stock Price Rationale

Determine if the stock price is justified by: growth-based value, comparative value, liquid assets, or dividends. The better the company, (in terms of growth or quality), the higher the
valuation measures can be. And if valuation ratios are extremely low, double-check to see if the company appears excessively weak. In any case, you don't have to say yes to any
valuation measure - many buy shares based on other factors (e.g., growth). But if you do that, at least understand what you're doing and consider the risks.

Viewing Things In Context

Many people erroneously work with valuation ratios calculated based on numbers that aren't truly representative of a company's underlying sustainable financial characteristics. Thus
it's important to determine if today's sales and EPS are significantly depressed or elevated due to temporary factors such as business cycles. Higher ratios can be tolerated if sales and
EPS are temporarily depressed. But if the company is experiencing unsustainable boom conditions, seek lower ratios. GAAP = Generally Accepted Accounting Principles.

Fiscal Year Ending 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10E 12/31/11E
Sales/Share $7.02 $8.54 $12.84 $16.49 $20.00 $26.96 $20.94 $26.80 $29.60
Price/Sales NA NA 1.52 1.45 2.75 0.96 2.28 1.25 1.13
EPS (GAAP) $1.34 $1.21 $2.32 $2.92 $2.99 $4.30 $3.53 $4.00 $4.73
P/E (GAAP) NA NA 8.43 8.16 18.35 6.03 13.49 8.38 7.09
EPS (Normalized) $1.35 $1.22 $2.35 $2.93 $3.04 $4.38 $3.59 $4.00 $4.73
P/E (Normalized) NA NA 8.34 8.15 18.09 5.93 13.28 8.38 7.09
Dividend Yield (%) NA NA 3.47 3.48 1.54 3.62 2.47 3.02 3.40

Valuation Based On Growth

The faster a company grows, the higher its stock's P/E can be. Contrary to popular belief, PEG (P/E over Growth Rate) need not always be 1.00 or less. But all else being equal, lower is
better (and 3.00 is usually too high). Try to favor company PEGs that are lower than industry and market PEGs. In all cases, watch for very high growth estimates. If overly optimistic
projections get cut, PEG would wind up being higher. FY = Fiscal Year.

Price/EPS (Est.) for Current FY Price/EPS (Est.) for Next FY Long Term Growth Estimate Next FY P/E over LT Growth
Petroleo Brasileiro SA (ADR) 8.38 7.09 5.70 1.24
Oil & Gas - Integrated 10.20 8.09 12.54 0.79
S&P 500 14.80 12.38 10.83 1.31

Comparative Valuation Ratios Dividends

Valuation below industry or S&P 500 averages can be attractive - unless the company is materially worse in terms of quality Dividend is the most classic basis for
growth prospects. Year-by-year trends in comparative valuations can give clues about company merit. Be especially on guard stockvaluation, and high dividend yields are
if comparative ratios are deteriorating over time. On the other hand, relatively low valuations that are moving toward the usuallydeemed preferable. Today, with many
averages might indicate that the market is tuning in to heretofore under-appreciated company merit. companiesreinvesting profits back into the
FY = Fiscal Year, TTM = Trailing Twelve Months, * = Most Recent Quarter. business, moderateor low yields can be accepted if
Petroleo Brasileiro SA (ADR) dividends growrapidly. The main risk is that poor
performance willcause the dividend to be cut or
Price/ Price/ Price/ Price/ Price/ Price/Free omitted. A very highpayout ratio is one warning
Earnings Sales Book Cash Flow Tang. Book Cash Flow signal. Another is ayield that is very high relative to
Trailing 12 Months 9.50 1.60 * 1.86 6.13 * 1.57 NA industry peers.
FY Ending 12/31/09 13.49 2.28 2.65 8.71 2.77 (11.67) TTM = Trailing Twelve Months.
FY Ending 12/31/08 6.03 0.96 2.43 4.81 2.57 (17.79)
FY Ending 12/31/07 18.35 2.75 4.26 12.72 4.50 NM
FY Ending 12/31/06 8.16 1.45 2.86 6.10 3.03 31.81 PBR Industry
Current Dividend Yield 0.4% 3.4%
5 Yr. Avg. Dividend Yield 0.9% 2.3%
Bar Chart Key 5 Yr. Dividend Growth Rate 22.9% 10.7%
2006 R TTM TTM Payout Ratio 33.3% 39.8%
5 Yr. Average Payout Ratio 27.0% 23.9%
Oil & Gas - Integrated
Price/ Price/ Price/ Price/ Price/ Price/Free
Earnings Sales Book Cash Flow Tang. Book Cash Flow
Trailing 12 Months 12.83 0.78 * 1.94 6.90 * 1.98 22.10 Liquid Assets
FY Ending 2009 19.59 1.02 2.22 8.91 2.28 (34.09)
FY Ending 2008 8.56 0.74 2.74 4.41 2.79 31.67 Get a general sense of the extent to which the
FY Ending 2007 12.55 1.25 3.30 8.75 3.48 22.32 stockprice is offset by the presence of assets that
FY Ending 2006 9.90 1.02 2.96 7.40 3.14 20.64 can beconverted to cash immediately or in the near
future. Often, these ratios will not be meaningful.
Most companies are valued as ongoing businesses,
rather than liquidation/buyout prospects. If you're
Bar Chart Key lookingat an especially troubled company, be aware
2006 R TTM
that seemingly liquid-asset windfalls can be
dissipatedby continuing operating losses and/or
S&P 500
shutdown costs.
Price/ Price/ Price/ Price/ Price/ Price/Free
Earnings Sales Book Cash Flow Tang. Book Cash Flow
Trailing 12 Months 18.99 2.21 * 3.22 12.70 * 5.24 18.64 Price to ... PBR Industry
FY Ending 2009 20.48 2.36 3.20 11.97 3.67 16.26 General Working Capital 50.4 35.7
FY Ending 2008 17.05 2.32 3.31 10.56 3.65 22.83 (current assets minus current liabilities)
FY Ending 2007 22.94 2.92 4.13 15.08 5.85 26.75
FY Ending 2006 20.72 2.93 3.83 14.13 5.29 29.98 Net Working Capital (9.3) (3.4)
(current assets minus all liabilities)

Bar Chart Key Cash (& cash equivalents) 36.3 31.1

2006 R TTM Cash minus total debt (14.4) 37.9
Cash minus all liabilities (6.5) (2.0)

May 26, 2010 Page 6

Petroleo Brasileiro SA (ADR) (NYSE:PBR) -- Oil & Gas - Integrated/Energy Reuters Company Research

Expectations And Credibility

In theory, stock prices are based on the "present value" of expected future company cash flows. Therefore, we try to obtain accurate estimates of future financial performance. But
remember, these are just estimates. Since we cannot really know what will happen tomorrow, we evaluate estimates critically by seeking clues that help us distinguish between
normal versus excessive degrees of uncertainty.

Estimates In Context
Below are the present consensus revenue and EPS estimates. Notice whether analysts expect recent year-to-year growth trends to persist, or are forecasting sharp improvement or
deterioration. The sharper the predicted change, the greater the level of uncertainty in the forecast. (GAAP = Generally Accepted Accounting Principles)

Revenue ($mil) GAAP Earnings Per Share ($)

Mar 31st Jun 30th Sep 30th Dec 31st Year Total Mar 31st Jun 30th Sep 30th Dec 31st Year Total
FY Ending 12/2007 18,400.0 38,964.0 23,447.0 25,324.0 87,735.0 0.49 1.48 0.87 0.64 2.99
FY Ending 12/2008 26,342.0 33,495.0 36,083.0 22,337.0 118,257.0 1.03 1.42 1.37 0.49 4.30
FY Ending 12/2009 18,212.0 21,582.0 25,875.0 26,200.0 91,869.0 0.60 0.91 0.85 1.17 3.53
FY Ending 12/2010 32,370.0 E 31,099.0 E 33,579.9 E 33,950.6 E 117,594.2 E 0.91 E 1.07 E 1.15 E 1.20 E 4.00 E
FY Ending 12/2011 31,459.0 E 32,818.0 E 33,151.0 E 35,163.0 E 129,835.3 E 1.31 E 1.39 E 1.43 E 1.49 E 4.73 E

Confidence In Estimates EPS Estimate Accuracy

The range of estimates can be measured by standard deviation. The narrower the range (the lower the standard deviation Assess the extent to which analysts are
compared to the "mean" estimate) and/or the greater the number of analysts, the more definitive the expectations. Note, too, accurateand have a handle on the earning trends
the extent to which company expectations are consistent with or diverge from those for industry and/or market. bycomparing Estimates to Actual figures (which
mayomit various charges/credits included in
Long Term Growth Rate Near Term Growth Rate GAAPresults). The Actual figures are the ones that
Mean # of Estimates Standard Dev. Mean # of Estimates Standard Dev. aremost comparable in accounting method to the
Estimates. (GAAP = Generally Accepted Accounting
5.7 3 1.63 PBR 9.1 14 26.72
Principles)
12.5 2 6.77 Industry 23.1 10 15.43
10.8 5 3.34 S&P 500 12.7 14 6.84 Quarter Estimate Actual GAAP
12/09 qtr. $0.90 $1.03 $1.17
Reasonableness 09/09 qtr. $0.85 $1.23 $0.85
06/09 qtr. $0.68 $0.96 $0.91
Look at the tables below to see if analysts are expecting the company to accomplish more than it has accomplished in the 03/09 qtr. $0.45 $0.64 $0.60
past. Such things can and do happen. But the stronger the predicted future (compared to the past), the greater the burden of 12/08 qtr. $0.77 $0.71 $0.49
proof on the part of those issuing the estimates.

Annual Growth EPS (%) Sales (%) Quarterly Growth EPS (%) Sales (%) Quarterly EPS Estimate Revisions
5 year Estimate 5.7 NA 09/10 qtr. Estimate (7.1) NA
2010 Estimate 13.3 28.0 06/10 qtr. Estimate 11.6 27.7 06/10 qtr.
Last 5 years 23.8 19.7 03/10 qtr. NA NA
Last 3 years 6.5 8.3 12/09 qtr. 45.2 (0.6)
Last Year (17.9) (22.3) 09/09 qtr. 10.3 NA There is currently not enough data available to use
Trailing 12 Months (17.9) (22.3) 06/09 qtr. (22.6) (28.1) to display quarterly EPS estimate revisions.

Analyst Recommendation Trends Aug Nov Feb May

Difference of opinion is normal, so don't demand unanimity. Look for ratings clusters in a part of the best-to-worst scale and 09/10 qtr.
at Mean Rating scores. Also important is whether analyst sentiment is improving or declining over time.
There is currently not enough data available to use
Buy Outperform Hold Underperform Sell Mean to display quarterly EPS estimate revisions.
(Value 1) (Value 2) (Value 3) (Value 4) (Value 5) Rating
As of 5/26/10 5 6 6 0 0 2.06
As of 4 Weeks ago 4 7 5 0 0 2.06 Aug Nov Feb May
As of 8 Weeks ago 5 7 4 0 0 1.94 12/10 qtr.
As of 12 Weeks ago 5 7 4 0 0 1.94
There is currently not enough data available to use
to display quarterly EPS estimate revisions.
Bar Chart Key Mean Rating
12 Wks ago R 5/26 1.00 = Best
5.00 = Worst Aug Nov Feb May

Annual EPS Estimate Revisions

Since estimates address an unknowable future, revision (often prompted by company guidance) is to be expected. Investors are usually happy when analysts are scrambling to chase
reality upward. So increases in estimates tend to spark strong share price performance. The reverse is usually true when estimates are falling.

There is currently not enough data available to use to display annual EPS estimate revisions.

Jun' 09 Jul Aug Sep Oct Nov Dec Jan' 10 Feb Mar Apr May

May 26, 2010 Page 7

Petroleo Brasileiro SA (ADR) (NYSE:PBR) -- Oil & Gas - Integrated/Energy Reuters Company Research

Footprints of Success
In many respects, business success requires subjective judgment. However, over time, good companies tend to leave good footprints, which become most visible when company data
is compared to industry/sector/market benchmarks. That's how you see when companies perform well, not just because a rising business tide lifts all boats, but because the company
is doing unique, good things. Look, too, at time-series comparisons, and take note of companies that are improving faster or suffering less than peers.

Growth Rates (%)

Investors are accustomed to looking at EPS growth. Check sales growth, too. EPS gains can't persist indefinitely without good sales growth. Do further investigation if sales trends are
falling short. (A big short fall might reflect a divestiture. On the other hand, if sales growth looks too good, check to see if it's being boosted by an acquisition.) Also, compare sales
growth to capital spending growth. Over a prolonged period, it's reasonable to expect capital spending growth to more or less keep pace with sales growth. If the latter is significantly
higher, capital spending may have to accelerate in the next few years.
Company Rank PBR PBR PBR
% Growth Rate PBR Industry Sector S&P 500 in Industry vs. Industry vs. Sector vs. S&P 500
Sales Growth For Most Recent Quarter 17.3 39.1 33.7 16.1 46
Sales Growth For Trailing 12 Months (22.3) (6.2) (13.0) 1.0 50
Sales Growth For Past 5 Years 19.7 2.0 10.5 9.8 76

Capital Spending Growth for Past 5 Years 35.4 15.8 19.7 6.4 90

EPS Growth for Most Recent Quarter 137.4 91.8 55.6 22.9 64
EPS Growth for Trailing Twelve Months (17.9) (27.8) (34.5) 8.2 43
EPS Growth for Past 5 Years 23.8 (2.3) 7.7 11.5 90
Worst R Best = Co. underperforming = Co. outperforming

Company Quality
Some companies excel in obtaining high margins (watch out for very low tax rates, which may reflect special benefits that often won't persist indefinitely) while others are highly
efficient. Still others are strong in both respects. These trade-offs are balanced in the Management Effectiveness returns, which combine both factors. TTM = Trailing Twelve Months.

Company Rank PBR PBR PBR

Profitability Ratios (%) PBR Industry Sector S&P 500 in Industry vs. Industry vs. Sector vs. S&P 500
Gross Margin for Trailing Twelve Months 46.4 27.6 40.5 44.7 96
Gross Margin for Past 5 Years 43.3 28.3 41.2 44.7 98
Operating Margin for Trailing Twelve Months 23.8 11.0 15.9 18.6 89
Operating Margin for Past 5 Years 24.1 14.3 20.2 18.4 82
EBITD Margin for Trailing Twelve Months 31.6 16.4 28.8 24.0 88
EBITD Margin for Past 5 Years 30.1 18.1 29.2 22.8 84
Pretax Margin for Trailing Twelve Months 24.0 10.9 14.5 16.4 91
Pretax Margin for Past 5 Years 23.9 14.2 19.3 17.3 80
Net Margin for Trailing Twelve Months 18.3 6.0 9.7 12.4 93
Net Margin for Past 5 Years 16.8 7.9 11.9 12.1 90
Effective Tax Rate for Trailing Twelve Months 23.7 45.4 37.7 28.9 23
Effective Tax Rate for Past 5 Years 29.9 43.3 37.1 30.2 49
Company Rank PBR PBR PBR
Efficiency Ratios (TTM) PBR Industry Sector S&P 500 in Industry vs. Industry vs. Sector vs. S&P 500
Asset Turnover 0.6 1.3 0.9 0.9 62
Receivables Turnover 12.5 12.7 10.1 11.1 77
Inventory Turnover 5.1 19.9 15.1 14.6 4
Revenue/Employee $1,194,345 $3,830,751 $2,558,439 $804,795 48
Net Income/Employee $218,708 $225,925 $237,234 $100,443 86
Company Rank PBR PBR PBR
Management Effectiveness Ratios (%) PBR Industry Sector S&P 500 in Industry vs. Industry vs. Sector vs. S&P 500
Return on Assets for TTM 10.3 7.8 6.2 7.8 96
Return on Assets for Past 5 Years 12.7 13.1 10.6 8.3 90
Return on Investment for TTM 12.5 9.6 7.5 10.7 96
Return on Investment for Past 5 Years 16.1 16.8 13.5 12.0 90
Return on Equity for TTM 24.7 15.8 12.3 18.3 95
Return on Equity for Past 5 Years 32.6 25.7 21.6 20.0 98
Worst R Best = Co. underperforming = Co. outperforming

Financial Strength
Quick Ratio (cash and marketable securities divided by current liabilities) and Current Ratio (all current assets divided by current liabilities) give a sense of how readily the company
could cover current obligations if the sales were to stop. Higher ratios indicate greater liquidity. Different businesses have different cash inflow-outflow characteristics, so compare
companies to industry averages. Similar comparisons are relevant for debt ratios (higher ratios indicate more debt and, hence, more financial risk) and interest coverage (lower
numbers signify greater risk).
Company Rank PBR PBR PBR
PBR Industry Sector S&P 500 in Industry vs. Industry vs. Sector vs. S&P 500
Quick Ratio 1.0 0.8 1.1 1.4 70
Current Ratio 1.4 1.2 1.6 1.9 77
Total Debt to Equity 60.7 17.1 37.0 72.4 11
Long Term Debt to Equity 51.4 15.2 34.5 63.5 13
Interest Coverage NA 9.6 13.1 14.2 75 NA NA NA
Worst R Best = Co. underperforming = Co. outperforming

May 26, 2010 Page 8