Provided By MZ Data Products

 


SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934

For the month of November, 2008

Commission File Number 1-15106


PETRÓLEO BRASILEIRO S.A. - PETROBRAS
(Exact name of registrant as specified in its charter)



Brazilian Petroleum Corporation - PETROBRAS
(Translation of Registrant's name into English)



Avenida República do Chile, 65
20031-912 - Rio de Janeiro, RJ
Federative Republic of Brazil
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. 

Form 20-F ___X___ Form 40-F _______

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes _______ No___X____

PETROBRAS ANNOUNCES RESULTS FOR THE THIRD QUARTER OF 2008
(Rio de Janeiro – November 11, 2008) – PETRÓLEO BRASILEIRO S.A. – Petrobras announces today its consolidated results expressed in millions of Brazilian Reais, in accordance with generally accepted accounting practices in Brazil (BR GAAP). 
 

Consolidated net income in the 3Q-2008 reached the record level of R$ 10,852 million, 96% above on the same period in 2007. This result was chiefly due to increased production, the higher average domestic and export oil product sales prices and the FX gain resulting from the depreciation of the Real on net assets exposed to exchange variations in the amount of R$3,478 million.

Year-to-date consolidated net income, also a new record, climbed 61% over the 9M-2007, chiefly due to the 4% increase in total production, higher average oil and oil product sales prices, reduced expenses from the pension plan and the exchange rate effects mentioned above.

Operating cash flow (EBITDA) increased by 20% over the 3Q-2007 and fell by 14% over the previous quarter. The quarter-on-quarter decline was mostly affected by the increase in government take and import costs, as well as the liquidation of inventories acquired at a higher cost in the 2Q-08.

In year-to-date terms, EBITDA grew by 24% to R$ 47,686 million. This figure, jointly with period net income of R$ 26,560 million, reflects the Company’s sound operating, economic and financial performance, ensuring funds for the Company’s investment plan.


Total oil and gas production grew by 6% year-on-year in the 3Q-2008 and 2% quarter-over-quarter, led by natural gas output in Brazil, which moved up by 22% and 3% respectively. The start-up of new wells connected to the P-52 and P-54 platforms, both in the Roncador field, in addition to the startup of the ESS-103 well in the pre-salt layer of the Campos Basin, connected to the P-34 platform, were primarily responsible for the quarterly production increase.

Brazil’s oil output reached a new monthly record of 1,897,000 barrels/day in September/08.

This document is divided into five topics:         
 
PETROBRAS SYSTEM    Page    PETROBRAS    Page 
Financial Performance    05    Financial Statements    35 
Operating Performance    10         
Financial Statements    24         
Appendices    32         

PETROBRAS SYSTEM   
     

The consolidated capital spending for Petrobras totaled R$ 13,151 million in the 3Q-2008, 22% up on the 3Q-2007 and 23% higher than the 2Q-2008. Most of the funds were allocated to boosting future oil and gas production capacity in Brazil.


The Petrobras System’s value added was 32% higher than in the 3Q-2007 and 8% more than in the 2Q-2008. The main beneficiary was the group of shareholders who saw their share of value added increase by 63% in the 3Q-2007.


2

PETROBRAS SYSTEM   
     

Statement by the CEO, José Sergio Gabrielli de Azevedo

Dear shareholders and investors,

It gives me enormous pride to announce the highest quarterly profit in the history of Petrobras. Our net income in the third quarter totaled R$ 10.9 billion, double the figure from the same period last year. This result was the product of operational excellence, growth in production, sales and capital discipline accumulated throughout the years.

In the operational area, oil production moved up 2% year-on-year in the third quarter. In September, we averaged output of 1,897,000 barrels per day in Brazil, our highest ever monthly figure. In the same period, domestic sales volume also moved up 2%, led by diesel, gasoline and fuel oil.

In addition to the increase in volumes, the favorable price environment also helped to bolster results. Although international prices began to recede during the quarter, Brent crude still, averaged US$ 115 per barrel, substantially higher than the US$ 75 average in the third quarter of 2007. Domestic oil product sales prices maintained the same trajectory as international prices, exemplified by the diesel and gasoline adjustments in May.

On the exchange front, our R$ 13.6 billion in net assets subject to exchange variations generated financial gains of R$ 3.5 billion thanks to the hefty appreciation of the U.S. dollar, which moved up by 20% against the Real in the quarter due to the worsening of the international crisis during September.

Operating cash flow measured by EBITDA totaled R$ 15.7 billion, generating more than sufficient funds to finance quarterly investments of R$ 13.1 billion, which are fundamental for ensuring production growth, the expansion and upgrading of the refineries, as well as transportation and commercialization facilities and the continuing growth of our businesses.

As a result of these investments, platforms P-51 and P-53, together with FPSO Cidade de Niterói (chartered), will add 460,000 barrels per day of production capacity in Campos Basin by next January, sustaining our growth trajectory.

In the exploration area, we moved ahead with our activities in the pre-salt layer, achieving positive results. We concluded the 1-RJS-656 well in the Iara Field in the BM-S-11 block, and discovered substantial reserves of light crude and natural gas with a recoverable volume of between 3 and 4 billion barrels. We also confirmed another giant oil and gas reserve in the BM-S-24 block, known as Jupiter, justifying our optimism regarding the pre-salt potential of the Santos Basin.

We also produced our first oil from the pre-salt layer, in the Jubarte Field in the Campos Basin, off the coast of Espírito Santo. This well will allow us to observe and analyze the conditions of the pre-salt oil in the reservoir and in the platform’s processing units, providing valuable data on the pre-salt reservoirs for our geologists and engineers.

On the international front, we participated in a discovery in the deepwater Angolan block 15/06 and initiated production in Nigeria, in the Agbami field, initiating a new and more substantial phase of production on the west coast of Africa. In addition, we acquired distribution and logistics assets in Chile, consolidating the Company’s presence in the Latin American distribution segment.

3

PETROBRAS SYSTEM   
     

In recognition of its social and environmental responsibility initiatives, the Company’s’ inclusion in the Dow Jones Sustainability Index, was renewed for the third consecutive year.

In a joint effort to improve the quality of the air in Brazil’s metropolitan regions, Petrobras will be supplying S-50 diesel, which has a reduced sulphur content, to municipal bus fleets in Rio de Janeiro and São Paulo as of January 2009. It has also established a schedule to extend the supply of this cleaner fuel to all the country’s major cities within the next few years.

Despite these excellent results and prospects, the international financial crisis has led to a new scenario which will demand even greater efficiency. We are adopting important measures to reduce costs and improve our capital discipline still further to ensure that our short term projects and future growth prospects are not affected by the prevailing turbulence. Thus, we are currently revising our Strategic Plan to ensure its strength and sustainability.

4

PETROBRAS SYSTEM  Financial Performance
     

Net Income and Consolidated Economic Indicators

Petrobras posted a consolidated year-to-date net income of R$ 26,560 million, 61% higher than in the same period the year before.

R$ million
        3rd Quarter                Jan-Sep     
               
2Q-2008    2008    2007    D %        2008    2007    D % 
               
 
67,014    81,482    56,572    44    Gross Operating Revenues    207,654    160,332    30 
54,570    67,460    44,469    52    Net Operating Revenues    168,921    125,161    35 
15,502    12,581    10,286    22    Operating Profit (1)   39,426    30,467    29 
(1,802)   2,843    (1,091)   (361)   Financial Result    641    (3,161)   (120)
8,783    10,852    5,528    96    Net Income    26,560    16,459    61 
1.00(3)   1.24    0.63    96    Net Income per Share(3)   3.03    1.88    62 
457,401    344,092    285,333    21    Market Value (Parent Company)   344,092    285,333    21 
39    31    39    (8)   Gross Margin (%)   35    40    (5)
28    19    23    (4)   Operating Margin (%)   23    24    (1)
16    16    12    4    Net Margin (%)   16    13    3 
18,131    15,680    13,075    20    EBITDA – R$ million(2)   47,686    38,321    24 
 
                Financial and Economic Indicators             
121    115    75    53    Brent (US$/bbl)   111    67    65 
 
1.66    1.67    1.92    (13)   US Dollar Average Price - Sale (R$)   1.69    2.00    (16)
1.59    1.91    1.84    4    US Dollar Last Price - Sale (R$)   1.91    1.84    4 

(1)   Operating income before financial result, equity balance and taxes. 
(2)   Operating income before financial result, equity balance and depreciation/amortization. 
(3)   Net Income per Share was restated for purpose of comparison due to the split of shares approved on the Extraordinary General Meeting of March, 24 2008. 

R$ million
    3rd Quarter                Jan-Sep     
             
2Q-2008    2008    2007    D %        2008    2007    D % 
               
 
13,557    15,562    8,993    73    Operating Income as per Brazilian Corporate Law    40,074    26,917    49 
1,802    (2,843)   1,091    (361)   (-) Financial Result    (641)   3,161    (120)
143    (138)   202    (168)   (-) Equity Income Result    (7)   389    (102)
               
15,502    12,581    10,286    22    Operating Profit    39,426    30,467    29 
2,629    3,099    2,789    11    Depreciation / Amortization    8,260    7,854    5 
               
18,131    15,680    13,075    20    EBITDA    47,686    38,321    24 
               
 
33    23    29    (6)   EBITDA Margin (%)   28    31    (3)
               

5

PETROBRAS SYSTEM  Financial Performance
     

The behavior of the main components of consolidated net income, in relation to the first nine months of 2007, was as follows:

• A R$ 9,477 million increase in gross profit:

      R$ million 
      Change 
    Jan-Sep-2008 X Jan-Sep-2007 
Gross Profit Analysis - Main Items    Net    Cost of    Gross 
  Revenues    Goods Sold    Profit 
. Domestic Market:  - volumes sold    6,505    (4,564)   1,941 
  - domestic prices    14,821    -    14,821 
. International Market:  - export volumes    (1,009)   343    (666)
  - export price    9,052    -    9,052 
. Increase in expenses:(*)   -    (18,835)   (18,835)
. Increase in profitability of distribution segment    1,031    (655)   376 
. Increase in profitability of trading operations    4,256    (3,935)   321 
. Increase in international sales    4,126    (3,411)   715 
. FX effect on controlled companies abroad    2,953    (2,840)   113 
. Other   2,025    386    1,639 
         
    43,760    (34,283)   9,477 
         

(*) Expenses Composition:    Value 
- import of crude oil and oil products and gas (1)   (10,429)
- domestic Government Take    (4,751)
- generation and purchase of energy for commercialization    (1,510)
- non-oil products, including alcohol, biodiesel and other    (1,291)
- transportation: maritime and pipelines (2)   (499)
- materials, services and depreciation    (428)
- salaries, benefits and charges    (14)
- third-party services    87 
   
    (18,835)
   

(1) CIF Values. 
(2) Expenditures on cabotage, terminals and pipelines 

6

PETROBRAS SYSTEM  Financial Performance
     

• A R$ 518 million increase in operating expenses, notably: 

• Selling expenses (R$ 677 million) due to higher sales volume and freight costs (R$ 324 million), the increase in provisions for doubtful debts (R$ 74 million) and expenses related to logistics and maintenance services (R$ 63 million); 

• Exploration costs (R$ 671 million), from the write-off of dry and economically unviable wells (R$ 823 million), offset by the reduction in seismic costs (R$ 253 million); 

• General and administrative expenses (R$ 569 million), due to the rise in personnel costs as a result of the increase in the workforce and pay rises both in Brazil and abroad (R$ 363 million), as well as third-party consulting, auditing and data processing services in Brazil (R$ 190 million). 

• Other operating expenses (R$ 41 million) as a result of non-recurring expenses with the Petros Plan (R$ 1,050 million) in 2007 despite the booking of provisions for contingencies, pay rises and benefits as part of the collecting bargaining agreements, as well as contractual fines related to natural gas supply and the adjustment to market value of foreign subsidiaries’ oil product inventories (R$ 803 million). 

• More than offsetting the reduction in the following expenses: 

• Tax expenses (R$ 505 million), due to the elimination of the CPMF financial transaction tax as of January/08, offset by the increase in the IOF financial operations tax rate in the same month; 

• Health and Pension Plan (R$ 984 million) due to the commitments assumed with the Reciprocal Obligation Agreement (R$ 697 million) in 2007; 

• Reversal of the financial result (R$ 3,802 million) due to FX gains on financial investments abroad and on the use of funds held by International subsidiaries to acquire E&P equipment for use in Brazil and in commercial activities. 

• An increase in the non-operating result (R$ 460 million), due to gains from changes in capital structure on controlled companies (R$ 409 million). 

• Increase in income tax and social contributions (R$ 5,254 million), considering that in 2007 the Company benefited from provisions for interest on own capital (R$ 1,492 million). 


7

PETROBRAS SYSTEM  Financial Performance
     

Net income in the 3Q-2008 totaled R$ 10,852 million, 24% above the R$ 8,783 million posted in the 2Q-2008 due to the factors listed below:

• A R$ 535 million reduction in gross profit:

   
R$ million 
   
Changes 
   
3Q-2008 x 2Q-2008 
         
Main Items 
  
Net 
Cost of 
Gross Profit 
   
Revenues 
Goods Sold 
. Domestic Market:                 - volumes sold    1,944    (1,241)   703 
                                                  - domestic price    2,472    -    2,472 
. International Market:         - export volumes    469    (126)   343 
                                                 - export price    (217)   -    (217)
. Increase in expenses:(*)   -    (3,780)   (3,780)
. Increase in profitability of distribution segment    122    (55)   67 
. Decrease in profitability of trading operations    (1,000)   238    (762)
. Decrease in international sales    506    (1,146)   (640)
. FX effect on controlled companies abroad    7,652    (6,742)   910 
. Other   942    (573)   369 
       
    12,890    (13,425)   (535)
       

(*) Expenses Composition: 
   Value 
- import of crude oil and oil products and gas (1)   (1,626)
- domestic Government Take    (1,114)
- non-oil products, including alcohol, biodiesel and other   (401)
- transportation: maritime and pipelines (2)   (272)
- materials, services and depreciation    (113)
- salaries, benefits and charges    71 
- generation and purchase of energy for commercialization    (223)
- third-party services    (102)
   
    (3,780)
   

(1) CIF Values. 
(2) Expenditures on cabotage, terminals and pipelines 

8

PETROBRAS SYSTEM  Financial Performance
     

• A R$ 2,386 million increase in the following operating expenses:

• Selling expenses (R$ 132 million), due to the increase in sales volume;

• General and administrative expenses (R$ 386 million) due to expenses with technical consulting, auditing and data-processing services and the exchange impact on the expenses of foreign subsidiaries;

• Exploration costs (R$ 297 million) from the write-off of dry and non-commercial wells, as well as geological and geophysical costs in Brazil (R$ 135 million), plus higher exploration costs abroad (R$ 134 million);

• Other operating expenses (R$ 1,422 million) due to the increase in thermal plant operating expenses, contractual fines related to natural gas supply, pay rises and benefits established by collective bargaining agreements, the adjustment to market value of foreign subsidiaries’ oil and oil product inventories, and expenses associated with institutional relations and cultural projects, as well as projects associated with health, safety and the environment, totaling R$1,011 million.

• Reversal of the financial result (R$ 4,645 million) due to FX gains on financial investments abroad and the use of funds held by International subsidiaries to acquire E&P equipment for use in Brazil and in commercial activities.

• Increased equity income (R$ 281 million), chiefly due to greater FX gains on foreign subsidiaries’ shareholders equity.

• A negative impact on the non-operating result (R$ 443 million), primarily due a gain on changes in capital structure on controlled companies in shareholdings in the 2Q-2008 (R$ 409 million).

9

PETROBRAS SYSTEM  Operating Performance
     

Physical Indicators (*)
    3rd Quarter        Jan-Sep 
           
2Q-2008    2008    2007    D %        2008    2007    D % 
 
 
Exploration & Production - Thousand bpd             
                Domestic Production             
1,854    1,883    1,797    5               Oil and NGL    1,851    1,796    3 
321    330    271    22               Natural Gas (1)   318    271    17 
2,175    2,213    2,068    7    Total    2,169    2,067    5 
                Consolidated - International Production             
104    110    111    (1)              Oil and NGL    107    113    (5)
96    100    114    (12)              Natural Gas (1)   100    110    (9)
200    210    225    (7)   Total    207    223    (7)
14    14    16    (13)   Non Consolidated - Internacional Production (2)   14    16    (13)
               
214    224    241    (7)   Total International Production    221    239    (8)
               
2,389    2,437    2,309    6    Total production    2,390    2,306    4 
               
(1) Does not include liquified gas and includes re-injected gas             
(2) Non consolidated companies in Venezuela, 
 
Refining, Transport and Supply - Thousand bpd             
441    423    412    3    Crude oil imports    405    387    5 
167    270    201    34    Oil products imports    222    153    45 
               
608    693    613    13    Import of crude oil and oil products    627    540    16 
               
425    457    392    17    Crude oil exports    399    364    10 
245    200    278    (28)   Oil products exports    234    265    (12)
               
670    657    670    (2)   Export of crude oil and oil products (3)   633    629    1 
               
62    (36)   57    (163)   Net exports (imports) crude oil and oil products    6    89    (93)
               
197    213    180    18    Import of gas and others    201    161    25 
6(3)   3(3)   8    (63)   Other exports    4(3)   4    - 
2,050    2,006    2,027    (1)   Output of oil products    1,988    2,046    (3)
1,846    1,821    1,806    1    • Brazil    1,814    1,794    1 
204 (7)   185    221    (16)   • International    174    252    (31)
2,223    2,223    2,167    3    Primary Processed Installed Capacity    2,223    2,167    3 
1,942    1,942    1,986    (2)   • Brazil (4)   1,942    1,986    (2)
281    281    181    55    • International    281    181    55 
                Use of Installed Capacity (%)            
95    93    91    2    • Brazil    92    90    2 
63 (7)   63    93    (30)   • International    60    85    (25)
77    76    78    (2)   Domestic crude as % of total feedstock processed    78    78    - 
(3) Volumes of oil and oil products exports include ongoing exports.             
(4) As per ownership recognized by the ANP.             
Sales Volume - Thousand bpd                     
754    792    734    8   Diesel    749    692    8 
302    323    290    11   Gasoline    308    299    3 
95    103    109    (6)   Fuel Oil    99    104    (5)
152    141    165    (15)   Nafta    153    165    (7)
217    224    216    4   GLP    213    207    3 
75    75    69    9     QAV   75    68    10 
169    132    184    (28)   Other   156    171    (9)
             
1,764    1,790    1,767    1    Total Oil Products    1,753    1,706    3 
91    97    61    59    Alcohol, Nitrogens, Biodiesel and others    88    57    54 
315    328    258    27    Natural Gas    315    239    32 
               
2,170    2,215    2,086    6    Total domestic market    2,156    2,002    8 
677    660    678    (3)   Exports    637    633    1 
631    580    560    4    International Sales    589    622    (5)
               
1,308    1,240    1,238     -    Total international market    1,226    1,255    (2)
               
3,478    3,455    3,324    4    Total    3,382    3,257    4 
               

 

10

PETROBRAS SYSTEM  Operating Performance 
     

Price and Cost Indicators (*)
3rd Quarter        Jan-Sep 
             
2Q-2008    2008    2007    D %       2008    2007    D %  
             
                             
Average Oil Products Realization Prices 
178.03    187.02    155.97    20    Domestic Market (R$/bbl)   176.38    154.21    14 
 
Average sales price - US$ per bbl 
                Brazil            
105.46    100.58    64.42    56       Crude Oil (US$/bbl)(5)   97.51    56.52    73 
39.01    51.01    36.98    38       Natural Gas (US$/bbl) (6)   42.63    35.25    21 
                International             
75.41    68.74    54.12    27       Crude Oil (US$/bbl)   69.19    47.59    45 
17.88    15.67    16.06    (2)      Natural Gas (US$/bbl)   16.82    15.76    7 
(5) Average of the exports and the internal transfer prices from E&P to Supply. 
(6) Internal transfer prices from E&P to Gas & Energy. 
                             
Costs - US$/barrel 
                Lifting cost:             
                • Brazil             
9.88    10.21    7.65    33       • • without government participation    9.60    7.40    30 
31.08    30.27    20.13    50       • • with government participation    28.77    18.12    59 
4.37    5.16    4.20    23    • International    4.52    4.10    10 
                Refining cost             
3.53    3.46    2.55    36    • Brazil    3.53    2.59    36 
5.43 (7)   6.32    3.34    89    • International    5.94    2.83    110 
702    853    647    32    Corporate Overhead (US$ million) Parent Company    2.203    1.722    28 
                             
Costs - R$/barrel 
                Lifting cost             
                • Brazil             
16.34    17.61    14.66    20       • • without government participation    16.40    14.77    11 
51.14    54.40    37.92    43       • • with government participation    49.68    35.71    39 
                Refining cost             
5.84    5.94    4.91    21    • Brazil    6.02    5.19    16 

(7) Adjustment/elimination of 1 month delay from Japan Refinery information retroactive to April/2008.

11

PETROBRAS SYSTEM  Operating Performance 
     

Exploration and Production - thousand barrels/day


Increased output from FPSO-Cidade do Rio de Janeiro (Espadarte) and the start-up of the Cidade de Vitória (Golfinho), P-52 (Roncador) and P-54 platforms (Roncador) in the 4Q-2007 more than offset the natural decline in mature fields.


Increased output from new systems, especially P-52 and P-54 platforms (Roncador), more than offset the natural decline in the mature fields.


International oil production by consolidated companies fell due to the reduction in reservoir pressure in the USA, associated with lower output from mature fields in Argentina, Angola and Colombia, offset by the startup of production in Nigeria on July 29, 2008.

Gas production by consolidated companies decreased by 9%, also due to reduced reservoir pressure in the USA.

International oil production by the consolidated companies increased due to the start-up of production in the Agbami field in Nigeria on July 29, 2008, the return to normal operations in Argentina after a 25-day strike, which affected production in May/08, offset by the Ike and Gustav hurricanes that jeopardized production in the USA.

Gas production by the consolidated companies climbed by 4% due to the growth in Argentina, offset by the reduction in the USA, as mentioned above.

12

PETROBRAS SYSTEM  Operating Performance 
     

Refining, Transportation and Supply – thousand barrels/day


The year-on-year increase in the first nine months was due to the lower number of scheduled stoppages in refineries and their increased reliability.

Domestic processed crude in the 3Q-2008 remained flat over the 2Q-2008, as expected.

Processed crude in the overseas refineries fell 13% due to the sale of the Bolivian refineries in 2007, the stoppages in the Argentinean and U.S. refineries and the passage of hurricane Ike in September 2008, partially offset by output from the Japanese refinery acquired in April/08.

In the 3Q-2008, processed crude in the overseas refineries fell 9% due to the passage of hurricane Ike, in addition to repairs to the catalytic cracking plant in the USA.

Costs

Lifting Cost (US$/barrel)


Excluding the impact of the appreciation of the Real, the lifting cost in Brazil climbed by 18% year-on-year in the 9M-2008 due to the higher number of interventions and scheduled stoppages in the production units, the pay rises related to the 2007/08 and 2008/09 labor agreements, the expansion of the workforce and the higher initial unit cost of the new production systems, which will gradually come down as production moves up.

Excluding the impact of the depreciation of the Real, the unitary lifting cost in Brazil increased by 4% quarter-over-quarter due to the pay rise established by the 2008/2009 labor agreement and higher expenses from intervention and maintenance in the Marlim, Roncador, Marlim Sul and Jubarte fields.

13

PETROBRAS SYSTEM  Operating Performance 
     


The year-on-year increase in the 9M-2008 lifting cost was due primarily to the higher taxes caused by 70% increase in the average Brazilian oil price used to calculate the government take, based on the international price, and the higher tax rate on the Roncador and Espadarte fields, due to the increase in production triggered by the new production systems, FPSO-Cidade do Rio de Janeiro, P-52 and P-54.


Excluding the effects of the depreciation of the Real, the unitary lifting cost rose 4% due to the increase in extraction costs, associated with the higher tax rate, especially in the Roncador Field, due to higher output from the platforms installed in the 4Q-2007.

The year-on-year increase in the international lifting cost was caused by higher costs from outsourced services and the pay rise in Argentina, as well as the increase in the price of maintenance and surveillance services in Colombia, partially offset by the reduction in transport services in the USA.


The quarter-over-quarter increase in the international lifting costs was due to price adjustments by Argentine material suppliers and service providers in August/08 and increased workover activities in Colombia.

14

PETROBRAS SYSTEM  Operating Performance 
     

Refining Cost (US$/barrel)


Excluding the impact of the appreciation of the Real, the domestic refining cost moved up 18% year-on-year due to higher personnel expenses, related to the 2007/08 and 2008/09 labor agreements, increased electricity costs, repair and conservation services, structural additions due to the more vigorous performance of the oil industry and more programmed stoppages in quality and conversion units.


Excluding the impact of the depreciation of the Real, the domestic refining cost fell 3% due to reduced expenses for maintenance and fewer programmed stoppages in quality and conversion units.


The international refining cost moved up due to higher costs in the USA caused by a programmed stoppage in the Pasadena refinery and technical problems in the FCC catalytic cracking unit associated with the slide in processed crude volume in 2008.


The quarter-over-quarter increase in the international refining cost was also due to higher costs in the USA, caused by repairs in the Pasadena refinery due to damages caused by hurricane Ike, technical problems in the FCC catalytic cracking unit and a reduction in processed crude volume in the 3Q-2008.

15

PETROBRAS SYSTEM  Operating Performance 
     

Corporate Overhead – Parent Company (US$ million)


The increase was due to the growth in the Company’s operations and their greater complexity. Discounting the impact of the appreciation of the Real, corporate overhead moved up 12% year-on-year, due to higher expenses from data processing, specialized technical and administrative support services, advertising, the 2007/08 and 2008/09 labor agreement and the increase in workforce.


Discounting the depreciation of the Real against the dollar, corporate overhead moved up by 22% quarter-over-quarter, chiefly due to higher expenses from technical support associated with solutions management and systemic processes and the increase in personnel expenses due to the pay rise established by the 2008/09 labor agreement.

Sales Volume – thousand barrels/day

Domestic sales volume moved up 8% over the first nine months of 2007, led by diesel, aviation fuel and natural gas. The diesel increase was due to the improved performance of the economy, especially agribusiness, and the increased use of emergency diesel-driven thermal plants, while aviation fuel sales were pushed by the expansion of tourism, leveraged by economic growth and the appreciation of the Real for most of the year. Gas sales increased by 32% due to higher sales to thermal plants and the increased supply of imported and domestic gas (Manati field and Espírito Santo Basin).

International sales volume fell 5% year-on-year due to the programmed stoppage in the Pasadena refinery, the sale of the Bolivian refineries in 2007 and the reduction in Bolivian gas and oil sales volume due to the new operational agreements, offset by output from the Japanese refinery as of the 2Q-2008.

Domestic sales volume moved up 2% over the 2Q-2008, led by diesel, gasoline and fuel oil. The diesel increase was due to the normal seasonal upturn in consumption caused by the planting of the grain harvest and strong industrial activity. The higher gasoline volume was triggered by the increase in ethanol prices in certain states and cut-backs by other players. The increase in fuel oil was due to the startup of Alunorte units, growth in industrial activity as a whole and the manufacturing industry in particular, and higher consumption by Ultrafértil.

International sales fell 8% over the 2Q-2008 due to the decline in offshore operations, aimed at capturing commercial opportunities abroad.

16

PETROBRAS SYSTEM  Operating Performance 
     

Result by Business Area R$ million (1)
3rd Quarter        Jan-Sep 
           
2Q-2008    2008    2007    D %        2008    2007    D % 
               
 
11,557    10,691    7,257    47    EXPLORATION & PRODUCTION    31,678    18,756    69 
(49)   (1,969)   1,274    (255)   SUPPLY    (2,586)   5,683    (146)
237    (98)   (364)   (73)   GAS AND ENERGY    (257)   (895)   (71)
311    308    269    14    DISTRIBUTION    932    673    38 
293    79    (57)   (239)   INTERNATIONAL (2)   422    (83)   (608)
(2,621)   1,524    (2,473)   (162)   CORPORATE    (2,538)   (6,850)   (63)
(945)   317    (378)   (184)   ELIMINATIONS    (1,091)   (825)   32 
               
8,783    10,852    5,528    96    CONSOLIDATED NET INCOME    26,560    16,459    61 
               

(1) Comments on the results by business area begin on page 18 and their respective financial statements on page 28.

(2) In the international business segment, given that all operations are executed abroad, comparisons between the periods are influenced by foreign exchange variations in dollars or in the currency of those countries in which the companies in question are headquartered. As a result, there may be substantial variations in Reais, primarily arising from and reflecting changes in the exchange rate.

17

PETROBRAS SYSTEM  Operating Performance 
     

RESULTS BY BUSINESS AREA

Petrobras is a company that operates in an integrated manner, with the greater part of oil and gas production in the Exploration and Production area being sold or transferred to other Company areas.

The main criteria used to report results per business area are as follows:

a) Net operating revenues: revenues from sales to external clients, plus intra-Company sales and transfers, using internal transfer prices established between the various areas as a benchmark, with assessment methodologies based on market parameters;

b) Operating income: net operating revenues, plus the cost of goods and services sold, which are reported per business area considering the internal transfer price and other operating costs for each area, plus the operating expenses effectively incurred by each area;

c) The entire financial result is allocated to the corporate group;

d) Assets: refers to the assets as identified by each area. Equity accounts of a financial nature are allocated to the corporate group.


The higher year-on-year result was due to the increase in average domestic oil prices and the 3% increase in daily oil and NGL production

Part of these effects were offset by the higher government take and the increase in exploration costs, the latter due to the write-off of dry and non-commercial wells.

The spread between the average domestic oil sale/transfer price and the average Brent price widened from US$ 10.61/bbl in the first nine months of 2007, to US$ 13.51/bbl in the first nine months of 2008.

The quarter-over-quarter reduction was due to the decline in international oil prices, associated with the following factors:

Part of these effects were offset by the 2% increase in total oil and NGL production and the reduction in the spread between the average domestic oil sale/transfer price and the average Brent price narrowed from US$ 15.92/bbl in the 2Q-2008 to US$ 14.20/bbl in the 3Q-2008.


18

PETROBRAS SYSTEM  Operating Performance 
     

The year-on-year reduction in the Supply result in the 9M-2008 was due to higher oil acquisition/transfer costs and the increase in oil product import costs, reflecting the behavior of international prices.

These effects were partially offset by the increase in oil product average realization prices in Brazil and abroad.


The quarter-on-quarter decline was due to:

These effects were partially offset by higher average realization prize of oil products in domestic market and higher sales volumes.


The year-on-year reduction in the negative gas and energy result was due to the wider gas sales margin, influenced by higher realization prices, and the increase in electricity and natural gas sales volume.

These effects were partially offset by the increase in contractual fines and charges related to natural gas supply.

The quarter-on-quarter decline was due to:

These effects were partially offset by the increase in the average natural gas sales.

19

PETROBRAS SYSTEM  Operating Performance 
     


The result was positively impacted by the 12% increase in sales volume, which helped raise the Company’s share of the fuel market from 34.1% in the first nine months of 2007 to 35.0% in the same period of 2008.

The quarter-over-quarter decline was due to the margin compression as a result of sharper competition and higher SG&A expenses, partially offset by the 6% rise in sales volume.

The segment recorded a 34.8% share of the national fuel distribution market, versus 34.5% in the 2Q-2008.


The year-on-year increase was caused by higher oil and oil product prices, associated with lower exploration costs in Turkey, Argentina and the USA, as well as the incorporation of Nigerian production, the acquisition of the Okinawa refinery and the improved contractual conditions in Bolivia as of May 2007.

These effects were partially offset by i) lower sales margin and volume in the USA (R$ 516 million); ii) the constitution of provisions for royalty contingencies. (R$ 173 million); iii) provisions for the reduction of inventories to market value (R$ 96 million); iv) lower capital gains as a result of the sale of companies in Bolivia and Argentina in 2007 (R$ 88 million).


The quarter-on-quarter downturn was due to:

20

PETROBRAS SYSTEM  Operating Performance 
     

These effects were offset by the impact of the depreciation of the Real against the dollar on the conversion of accounting statements.


The lower negative result was due to the following factors:


The result obtained in the 3Q-2008 was due to the reversal of the net financial result (R$ 4,645 million), as detailed on page 9, associated with the effect of FX gains on foreign investments.

These effects were partially offset by higher operating expenses associated with third-party services and the 2008/09 labor agreement.

21

PETROBRAS SYSTEM  Desempenho Operacional 
     

Consolidated Debt

    R$ million 
             
    09.30.2008    06.30.2008    D % 
Short-term Debt (1)   12,048    8,699    38 
             
Long-term Debt (1)   36,277    33,256    9 
       
             
Total    48,325    41,955    15 
             
Cash and cash equivalents    10,776    11,046     (2)
             
Net Debt (2)   37,549    30,909    21 
             
Net Debt/(Net Debt + Shareholder's Equity) (1)   21%    19%    2 
             
Total Net Liabilities (1) (3)   262,450    240,420    9 
             
Capital Structure 
(third parties net / total liabilities net)		   46%    46%    - 

(1)
Includes debt from leasing contracts (R$ 1,282 million on September 30, 2008 and R$ 1,202 million on June 30, 2008).
(2)
Total debt less cash and cash equivalents.
(3)
Total liabilities net of cash/financial investments.

The net debt of the Petrobras System rose by 21% over June 30, 2008 due to the period depreciation of the Real and increased funding for the SPEs.

The level of indebtedness, measured by the net debt/EBITDA ratio, increased from 0.48, on June 30, 2008, to 0.59 on September 30, 2008. The portion of the capital structure represented by third parties was 46%, remaining flat over to June 30, 2008.

22

PETROBRAS SYSTEM  Desempenho Operacional 
     

Consolidated Investments

In compliance with the goals outlined in its strategic plan, Petrobras continues to prioritize investments in the expansion of its oil and natural gas production capacity by investing its own funds and by structuring ventures with strategic partners. On September 30, 2008, total investments amounted to R$ 34.050 million, 11% up on the total on September 30, 2007.

R$ million
    Jan-Sep 
    2008    %    2007    %    D % 
• Own Investments    29,502    86    26,060    85    13 
           
Exploration & Production    15,775    46    14,295    47    10 
Supply    6,423    19    4,607    15    39 
Gas and Energy    2,207    6    1,057    3    109 
International    4,071    12    4,867    16    (16)
Distribution    319    1    702    2    (55)
Corporate    707    2    532    2    33 
           
• Special Purpose Companies (SPCs)   3,685    11    4,205    14    (12)
           
• Projects under Negotiation    863    3    341    1    153 
           
Total Investments    34,050    100    30,606    100    11 
           
 
R$ million
    Jan-Sep 
    2008    %    2007    %    D % 
International                     
Exploration & Production    3,379    83    4,330    89    (22)
Supply    396    10    295    6    34 
Gas and Energy    178    4    85    2    109 
Distribution    15    -    40    1    (63)
Others    103    3    117    2    (12)
           
Total Investments    4,071    100    4,867    100    (16)
           
 
 
R$ million
            Jan-Sep         
    2008    %    2007    %    D % 
Projects Developed by SPCs                     
Gasene    786    21    969    23    (19)
CDMPI    504    14    455    11    11 
PDET Off Shore    306    8    555    13    (45)
Codajás    926    26    -    -     - 
Mexilhão    478    13    387    9    24 
Marlim Leste    419    11    766    18    (45)
Malhas    266    7    699    17    (62)
Amazônia    -    -    374    9    (100)
           
Total Investments    3,685    100    4,205    100    (12)
           

In line with its strategic objectives, PETROBRAS acts in consortiums with other companies as a concessionaire of oil and natural gas exploration, development and production rights. Currently the Company is a member of 108 consortiums. These ventures will require total investments of around US$ 11,099 million by the end of the current year.

23

PETROBRAS SYSTEM  Financial Statements 
     

Income Statement – Consolidated

R$ million
3rd Quarter        Jan-Sep 
       
2Q-2008    2008    2007        2008    2007 
       
 
67,014    81,482    56,572    Gross Operating Revenues    207,654    160,332 
(12,444)   (14,022)   (12,103)   Sales Deductions    (38,733)   (35,171)
           
54,570    67,460    44,469    Net Operating Revenues    168,921    125,161 
(33,332)   (46,757)   (27,264)      Cost of Goods Sold    (109,728)   (75,445)
           
21,238    20,703    17,205    Gross profit    59,193    49,716 
            Operating Expenses         
(1,723)   (1,855)   (1,635)      Sales    (5,170)   (4,493)
(1,608)   (1,994)   (1,555)      General and Administratives    (5,167)   (4,598)
(594)   (891)   (453)      Exploratory Cost    (2,170)   (1,499)
(373)   (478)   (410)      Research & Development    (1,269)   (1,220)
(126)   (170)   (329)      Taxes    (446)   (951)
(356)   (356)   (1,147)      Pension and Health Plan    (1,068)   (2,052)
(956)   (2,378)   (1,390)      Other    (4,477)   (4,436)
           
(5,736)   (8,122)   (6,919)       (19,767)   (19,249)
           
               Net Financial Expenses         
381    392    529                         Income    1,478    1,612 
(836)   (1,000)   (721)                        Expenses    (2,650)   (2,372)
(150)   (27)   (12)                        Net Monetary Variation    (336)   (74)
(1,197)   3,478    (887)                        Net Exchange Variation    2,149    (2,327)
           
(1,802)   2,843    (1,091)       641    (3,161)
           
(7,538)   (5,279)   (8,010)       (19,126)   (22,410)
(143)   138    (202)   Participation in Equity Income    7    (389)
           
13,557    15,562    8,993    Operating Profit    40,074    26,917 
413    (30)   (139)   Non-operating Income (Expenses)   372    (88)
(4,557)   (5,641)   (2,779)   Income Tax & Social Contribution    (14,169)   (8,915)
(630)   961    (547)   Minority Interest    283    (1,455)
           
8,783    10,852    5,528    Net Income    26,560    16,459 
           

Certain figures relating to previous periods have been reclassified to bring them into line with the current financial statements, thereby facilitating comparisons.

24

PETROBRAS SYSTEM  Financial Statements 
     

Balance Sheet – Consolidated

Assets    R$ million 
    09.30.2008    06.30.2008 
     
Current Assets    64,885    60,005 
     
         Cash and Cash Equivalents    10,776    11,046 
         Accounts Receivable    16,924    15,601 
         Inventories    25,977    22,999 
         Marketable Securities    364    176 
         Taxes Recoverable    7,725    7,142 
             3,119    3,041 
Long-term Assets    207,060    190,259 
     
         Long-term Assets    22,310    22,001 
     
         Petroleum & Alcohol Account    805    801 
         Advances to Suppliers    410    366 
         Marketable Securities    3,511    3,616 
         Deferred Taxes and Social Contribution    10,072    9,070 
         Advance for Pension Plan    1,385    1,347 
         Prepaid Expenses    1,416    1,414 
         Accounts Receivable    2,043    2,654 
         Deposits - Legal Matters    1,743    1,722 
         Other    925    1,011 
     
         Investments    7,762    7,651 
         Fixed Assets    168,178    152,272 
         Intangible    6,438    5,751 
         Deferred    2,372    2,584 
     
Total Assets    271,945    250,264 
     
 
Liabilities    R$ million 
    09.30.2008    06.30.2008 
     
Current Liabilities    52,348    44,539 
     
         Short-term Debt    11,564    8,301 
         Suppliers    17,421    16,664 
         Taxes and Social Contribution    13,654    11,430 
         Project Finance    334    238 
         Pension and Health Plan    946    879 
         Salaries, Benefits and Charges    2,282    1,942 
         Other    6,147    5,085 
Non Current Liabilities    71,169    67,191 
     
         Long-term Debt    35,479    32,452 
         Pension Fund    4,669    4,658 
         Health Plan    10,099    9,830 
         Deferred Taxes and Social Contribution    11,911    11,930 
         Other    9,011    8,321 
Deferred Income    1,770    2,246 
Minority interest    6,209    6,580 
Shareholders’ Equity    140,449    129,708 
     
         Capital Stock    78,967    78,967 
         Reserves    34,922    35,033 
         Net Income    26,560    15,708 
     
Total Liabilities    271,945    250,264 
     

Certain figures relating to previous periods have been reclassified to bring them into line with the current financial statements, thereby facilitating comparisons.

25

PETROBRAS SYSTEM  Financial Statements 
     

Statement of Cash Flow – Consolidated

R$ million
3rd Quarter        Jan-Sep 
       
2Q-2008    2008    2007        2008    2007 
           
8,783    10,852    5,528    Net Income    26,560    16,459 
3,105    2,161    4,134    (+) Adjustments    8,113    14,082 
           
2,629    3,099    2,789       Depreciation & Amortization    8,260    7,854 
(1,890)   5,429    (351)      Charges on Financing and Connected Companies    4,253    (1,575)
630    (961)   547       Minority interest    (283)   1,455 
143    (138)   202       Result of Equity Income    (7)   389 
3,243    (6,756)   1,597       Foreign Exchange on Fixed Assets    (3,029)   5,477 
321    (206)   1,013       Deferred Income Tax and Social Contribution    852    502 
(3,085)   (2,917)   (318)      Inventory Variation    (7,799)   (1,342)
1,926    394    (417)      Supplier Variation    3,142    (143)
366    346    1,166       Pension and Health Plan Variation    1,041    2,238 
(1,178)   3,871    (2,094)      Other Adjustments    1,683    (773)
11,888    13,013    9,662    (=) Cash Generated by Operating Activities    34,673    30,541 
(10,969)   (14,127)   (12,928)    (-) Cash used in Investment Activities    (35,167)   (31,317)
           
(5,412)   (6,533)   (5,672)      Investment in E&P    (17,286)   (15,057)
(2,255)   (3,505)   (1,715)      Investment in Refining and Transportation    (8,140)   (5,236)
(1,481)   (1,520)   (763)      Investment in Gas and Energy    (4,437)   (3,185)
(797)   (71)   (198)      Investiments in Distribution    (950)   (356)
(1,155)   (1,832)   (1,070)      Investment in International Segment    (4,185)   (3,911)
206    (84)   (3,148)      Marketable Securities    637    (2,984)
216    (166)   (67)      Dividends    87    83 
(291)   (416)   (295)      Other investments    (893)   (671)
           
919    (1,114)   (3,266)   (=) Free cash flow    (494)   (776)
(1,433)   844    (372)   (-) Cash used in Financing Activities    (1,801)   (12,837)
678    846    (371)      Financing    4,386    (5,364)
(2,111)   (2)   (1)      Dividends    (6,187)   (7,473)
(514)   (270)   (3,638)   (=) Cash generated in the period    (2,295)   (13,613)
           
11,560    11,046    17,854       Cash at the Beginning of Period    13,071    27,829 
11,046    10,776    14,216       Cash at the End of Period    10,776    14,216 

Certain figures relating to previous periods have been reclassified to bring them into line with the current financial statements, thereby facilitating comparisons.

26

PETROBRAS SYSTEM  Financial Statements 
     

Statement of Added Value – Consolidated

    R$ million 
    Jan-Sep 
    2008    2007 
Description         
Sales of Products and Services and Non-Operating Incomes*    209,154    161,768 
Raw Materials Used    (29,115)   (19,575)
Products for Resale    (48,501)   (27,050)
Materials, Energy, Services & Other    (16,350)   (18,616)
     
Added Value Generated    115,188    96,527 
 
Depreciation & Amortization    (8,260)   (7,854)
Participation in Equity Income, Goodwill & Negative Goodwill    7    (390)
Financial Revenue    4,618    1,690 
Rent and Royalties    474    385 
     
Total Distributable Added Value    112,027    90,358 
     
 
Distribution of Added Value         
Personnel         
Salaries, Benefits and Charges    9,418    10,020 
     
    9,418    10,020 
     
Government Entities         
Taxes, Fees and Contributions    48,091    41,148 
Government Take    18,304    11,192 
     
 
    66,395    52,340 
     
Financial Institutions and Suppliers         
Interest, FX Rate and Monetary Changes    3,976    4,773 
Rent and Freight Expenses    5,961    5,311 
     
    9,937    10,084 
     
 
Shareholders         
     Minority Interest    (283)   1,455 
     Dividends/Interest on Own Capital    -    4,387 
     Retained Earnings    26,560    12,072 
     
    26,277    17,914 
     
Distributed Added Value    112,027    90,358 
     

* Net of Provisions for Doubtful Debts.

27

PETROBRAS SYSTEM  Financial Statements 
     

Consolidated Result by Business Area - Jan-Sep/2008

    R$ MILLION 
                                 
    E&P    SUPPLY     GAS 
& 
ENERGY 		  DISTRIB.   INTERN.   CORPOR.    ELIMIN.    TOTAL 
 
Net Operating Revenues    84,810    136,552    11,442    41,140    18,857    -    (123,880)   168,921 
                 
  Intersegments    83,632    36,244    1,442    836    1,726    -    (123,880)   - 
  Third Parties    1,178    100,308    10,000    40,304    17,131    -    -    168,921 
Cost of Goods Sold    (32,379)   (136,214)   (9,900)   (37,661)   (15,600)   -    122,026    (109,728)
                 
Gross Profit    52,431    338    1,542    3,479    3,257    -    (1,854)   59,193 
Operating Expenses    (3,767)   (4,368)   (1,858)   (2,089)   (2,246)   (5,638)   199    (19,767)
 Sales, General & Administrative    (509)   (3,501)   (741)   (2,042)   (1,256)   (2,482)   194    (10,337)
 Taxes    (47)   (71)   (34)   (18)   (118)   (158)   -    (446)
 Exploratory Costs    (1,702)   -    -    -    (468)   -    -    (2,170)
 Research & Development    (637)   (254)   (80)   (10)   (3)   (285)   -    (1,269)
 Health and Pension Plans    -    -    -    -    -    (1,068)   -    (1,068)
 Other    (872)   (542)   (1,003)   (19)   (401)   (1,645)   5    (4,477)
                 
Net Operating Profit (Loss)   48,664    (4,030)   (316)   1,390    1,011    (5,638)   (1,655)   39,426 
 Interest Income (Expenses)   -    -    -    -    -    641    -    641 
 Equity Income    -    (273)   (16)   24    65    207    -    7 
 Non-operating Income (Expenses)   (4)   370    20    (14)   (7)   7    -    372 
                 
 
Income (Loss) Before Taxes and Minority Interests        (3,933)   (312)   1,400    1,069    (4,783)   (1,655)   40,446 
    48,660                             
Income Tax & Social Contribution    (16,545)   1,244    101    (468)   (483)   1,418    564    (14,169)
Minority Interests    (437)   103    (46)   -    (164)   827    -    283 
                 
Net Income (Loss)   31,678    (2,586)   (257)   932    422    (2,538)   (1,091)   26,560 
                 

Consolidated Result by Business Area - Jan-Sep/2007

    R$ MILLION 
                                 
    E&P    SUPPLY     GAS 
& 
ENERGY 		  DISTRIB.   INTERN.   CORPOR.    ELIMIN.    TOTAL 
 
Net Operating Revenues    57,720    97,370    7,252    32,758    14,151    -    (84,090)   125,161 
                 
  Intersegments    53,839    26,559    1,686    550    1,456    -    (84,090)   - 
  Third Parties    3,881    70,811    5,566    32,208    12,695    -    -    125,161 
Cost of Goods Sold    (25,341)   (85,000)   (6,420)   (29,655)   (11,709)   -    82,680    (75,445)
                 
Gross Profit    32,379    12,370    832    3,103    2,442    -    (1,410)   49,716 
Operating Expenses    (2,863)   (3,843)   (1,734)   (2,058)   (1,869)   (7,040)   158    (19,249)
 Sales, General & Administrative    (473)   (3,026)   (745)   (1,772)   (1,052)   (2,180)   157    (9,091)
 Taxes    (31)   (111)   (75)   (132)   (102)   (500)   -    (951)
 Exploratory Costs    (826)   -    -    -    (673)   -    -    (1,499)
 Research & Development    (606)   (231)   (133)   (8)   (3)   (239)   -    (1,220)
 Health and Pension Plan    -    -    -    -    -    (2,052)   -    (2,052)
 Other    (927)   (475)   (781)   (146)   (39)   (2,069)   1    (4,436)
                 
Net Operating Profit (Loss)   29,516    8,527    (902)   1,045    573    (7,040)   (1,252)   30,467 
 Interest Income (Expenses)   -    -    -    -    -    (3,161)   -    (3,161)
 Equity Income    -    82    29    (12)   (19)   (469)   -    (389)
 Non-operating Income (Expenses)   (192)   2    2    (7)   85    22    -    (88)
                 
 
Income (Loss) Before Taxes and Minority Interests    29,324    8,611    (871)   1,026    639    (10,648)   (1,252)   26,829 
Income Tax & Social Contribution    (9,970)   (2,900)   306    (353)   (412)   3,987    427    (8,915)
Minority Interests    (598)   (28)   (330)   -    (310)   (189)   -    (1,455)
                 
Net Income (Loss)   18,756    5,683    (895)   673    (83)   (6,850)   (825)   16,459 
                 

Certain figures relating to previous periods have been reclassified to bring them into line with the current financial statements, thereby facilitating comparisons.

28

PETROBRAS SYSTEM  Financial Statements 
     

EBITDA(1) Consolidated Statement by Business Area - Jan - Sep/2008

    R$ MILLION 
                                 
    E&P    SUPPLY     GAS 
& 
ENERGY 		  DISTRIB.   INTERN.   CORPOR.    ELIMIN.    TOTAL 
Operating Profit (Loss)   48,664    (4,030)   (316)   1,390    1,011    (5,638)   (1,655)   39,426 
                                 
Depreciation / Amortization    4,316    1,690    638    266    1,028    322    -    8,260 
                 
EBITDA (1)   52,980    (2,340)   322    1,656    2,039    (5,316)   (1,655)   47,686 
                 

(1) Operating income before the financial results and equity income excluding depreciation /amortization.

Statement of Other Operating Income (Expenses) - Jan - Sep/2008

    R$ MILLION 
                                 
    E&P    SUPPLY     GAS 
& 
ENERGY 		  DISTRIB.   INTERN.   CORPOR.    ELIMIN.    TOTAL 
Institutional relations and cultural projects    (59)   (44)   (5)   (46)   -    (713)   -    (867)
Labor Agreement    (256)   (82)   (19)   -    (18)   (167)   -    (542)
Thermoelectric    -    -    (443)   -    -    -    -    (443)
 
Losses and Contingencies related to Legal Proceedings    (25)   (60)   (3)   (24)   (174)   (119)   -    (405)
Fines and Contractual Charges    -    -    (375)   -    -    -    -    (375)
HSE Expenses    (44)   (61)   (3)   -    -    (189)   -    (297)
Inventory adjustment    -    (197)   -    -    (96)   -    -    (293)
Non programmed stoppages in installations and production                                 
equipment    (58)   (60)   -    -    -    -    -    (118)
 
Contractual losses from ship-or-pay transport services    -    -    -    -    (77)   -    -    (77)
 
Other    (430)   (38)   (155)   51    (36)   (457)   5    (1,060)
                 
    (872)   (542)   (1.003)   (19)   (401)   (1,645)   5    (4,477)
                 

Income - Statement of Other Operating Revenues Income (Expenses) - Jan - Sep/2007

    R$ MILLION 
                                 
    E&P    SUPPLY     GAS 
& 
ENERGY 		  DISTRIB.   INTERN.   CORPOR.    ELIMIN.    TOTAL 
 
Institutional relations and cultural projects    (57)   (47)   -    (39)   -    (680)   -    (823)
Labor Agreement    (114)   (55)   (11)   -    (8)   (99)   -    (287)
Thermoelectric    -    -    (394)   -    -    -    -    (394)
 
Losses and Contingencies related to Legal Proceedings    (142)   (41)   -    (57)   (11)   (11)   -    (262)
Fines and Contractual Charges    -    -    (263)   -    -    -    -    (263)
HSE Expenses    (13)   (87)   (3)   -    (11)   (216)   -    (330)
Non programmed stoppages in installations and production                                 
equipment    (23)   (74)   -    -    -    -    -    (97)
 
Contractual losses from ship-or-pay transport services    -    -    -    -    (68)   -    -    (68)
 
Expenses with Renegotiation of Petros Fund Plan    (220)   (129)   (12)   (40)   (8)   (642)   -    (1,051)
Others    (358)   (42)   (98)   (10)   67    (421)   1    (861)
                 
    (927)   (475)   (781)   (146)   (39)   (2,069)   1    (4,436)
                 

29

PETROBRAS SYSTEM  Financial Statements 
     

Consolidated Assets by Business Area - 09.30.2008

    R$ MILLION 
                                 
    E&P    SUPPLY     GAS 
& 
ENERGY 		  DISTRIB.   INTERN.   CORPOR.    ELIMIN.    TOTAL 
ASSETS    106,637    67,453    33,667    10,610    29,497    35,380    (11,299)   271,945 
                 
 CURRENT ASSETS    7,525    30,768    5,678    5,785    6,917    19,235    (11,023)   64,885 
                 
           CASH AND CASH EQUIVALENTS    -    -    -    -    -    10,776    -    10,776 
           OTHER    7,525    30,768    5,678    5,785    6,917    8,459    (11,023)   54,109 
 NON-CURRENT ASSETS    99,112    36,685    27,989    4,825    22,580    16,145    (276)   207,060 
                 
           LONG-TERM ASSETS    4,140    1,392    2,568    571    878    13,007    (246)   22,310 
           PROPERTY, PLANTS AND EQUIPMENT    91,580    31,347    24,389    2,842    16,172    1,878    (30)   168,178 
           OTHER    3,392    3,946    1,032    1,412    5,530    1,260    -    16,572 

Consolidated Assets by Business Area - 06.30.2008

    R$ MILLION 
                                 
    E&P    SUPPLY     GAS 
& 
ENERGY 		  DISTRIB.   INTERN.   CORPOR.    ELIMIN.    TOTAL 
ASSETS    97,300    64,343    31,824    10,181    23,892    34,130    (11,406)   250,264 
                 
 
 CURRENT ASSETS    6,675    30,211    5,603    5,441    5,579    17,707    (11,211)   60,005 
                 
           CASH AND CASH EQUIVALENTS    -    -    -    -    -    11,046    -    11,046 
           OTHER    6,675    30,211    5,603    5,441    5,579    6,661    (11,211)   48,959 
 NON-CURRENT ASSETS    90,625    34,132    26,221    4,740    18,313    16,423    (195)   190,259 
                 
           LONG-TERM ASSETS    3,912    1,276    2,119    536    993    13,339    (174)   22,001 
           PROPERTY, PLANTS AND EQUIPMENT    83,293    28,536    22,963    2,802    12,906    1,793    (21)   152,272 
           OTHER    3,420    4,320    1,139    1,402    4,414    1,291    -    15,986 

Certain figures relating to previous periods have been reclassified to bring them into line with the current financial statements, thereby facilitating comparisons.

30

PETROBRAS SYSTEM  Financial Statements 
     

Consolidated Result by International Business Area- Jan-Sep/2008

  R$ MILLION 
INTERNATIONAL 
 
 
          GAS                 
  E&P    SUPPLY    &    DISTRIB.    CORPOR.    ELIMIN.    TOTAL 
          ENERGY                 
ASSETS (09.30.2008) 19,688    7,721    2,816    881    3,192    (4,801)   29,497 
               
 
Income Statement                           
Net Operating Revenues  4,296    12,475    1,544    3,862    3    (3,323)   18,857 
               
    Intersegments  2,176    2,407    367    99    -    (3,323)   1,726 
    Third Parties  2,120    10,068    1,177    3,763    3    -    17,131 
Operating Profit (Loss) 1,295    (161)   283    104    (527)   17    1,011 
Net Income (Loss) 692    (60)   165    75    (467)   17    422 

Consolidated Result by International Business Area

  R$ MILLION 
INTERNATIONAL 
 
 
          GAS                 
  E&P    SUPPLY    &    DISTRIB.    CORPOR.    ELIMIN.    TOTAL 
          ENERGY                 
ASSETS - (06.30.2008) 15,544    6,279    2,357    781    2,591    (3,660)   23,892 
               
Income Statement - (Jan - Sep 2007)                          
Net Operating Revenues  3,489    9,355    1,491    2,661    25    (2,870)   14,151 
               
   Intersegments  1,989    2,048    266    23    -    (2,870)   1,456 
   Third Parties  1,500    7,307    1,225    2,638    25    -    12,695 
Operating Profit (Loss) 476    222    377    (72)   (429)   (1)   573 
Net Income (Loss) (74)   156    261    (52)   (373)   (1)   (83)

31

PETROBRAS SYSTEM  Appendices
     

1. Petroleum and Alcohol Accounts – National Treasury

In order to settle the accounts with the Federal Government, in accordance with Provisional Measure No. 2181 of August 24, 2001, Petrobras, after having submitted all the information required by the National Treasury (STN), is seeking to reconcile the remaining differences between the parties.

The account balance of R$ 805 million on September 30, 2008 (R$ 801 million on June 30, 2008) may be paid by the Federal Government through the issuance of National Treasury bonds, in an amount equal to the final settlement amount or with other amounts that Petrobras may owe to the Federal Government, including those related to taxes, or through a combination of these options.

2. Consolidated Taxes and Contributions

The economic contribution of Petrobras to the country, measured through the generation of current taxes, rates and social contributions, totaled R$ 44.473 millions.

R$ million
    3rd Quarter        Jan-Sep 
             
2Q-2008    2008     2007    D %        2008    2007     D % 
               
                Economic Contribution - Country            
4,883    5,310    4,864    9    Value Added Tax on Sales and Services (ICMS)   14,743    13,480    9 
1,422    1,230    1,976    (38)   CIDE (1)   4,596    5,802    (21)
3,214    3,631    3,066    18    PASEP/COFINS    9,891    8,789    13 
4,265    5,439    2,545    114    Income Tax & Social Contribution    13,592    8,442    61 
587    487    650    (25)   Other    1,651    1,964    (16)
               
14,371    16,097    13,101    23    Subtotal Country    44,473    38,477    16 
               
1,037    1,729    959    80    Economic Contribution - Foreign    3,618    2,671    35 
               
15,408    17,826    14,060    27    Total    48,091    41,148    17 
               
(1) CIDE – ECONOMIC DOMAIN CONTRIBUTION CHARGE 

32

PETROBRAS SYSTEM  Appendices
     

3. Government Take

R$ million
    3rd Quarter        Jan-Sep 
             
2Q-2008    2008     2007    D %        2008    2007     D % 
               
                Country             
2,847    3,003    1,985    51    Royalties    8,246    5,392    53 
3,313    3,664    1,955    87    Special Participation    9,406    5,111    84 
26    25    28    (11)   Surface Rental Fees    83    86    (3)
               
6,186    6,692    3,968    69    Subtotal Country    17,735    10,589    67 
               
161    262    117    124    Foreign    569    603    (6)
               
6,347    6,954    4,085    70    Total    18,304    11,192    64 
               

The government take in the country increased by 67% year-on-year in the first nine months of 2008 due to the 43% increase in the reference price for local oil (R$ 155.12 versus R$ 108.42 in the first nine months of 2007), reflecting the average Brent price on the international market, and the increase in output, due to the operational start-up of the FPSO-Cidade do RJ (Espadarte), P-52 (Roncador) and P-54 (Roncador) platforms.

In the 3Q-2008, the government take in the country moved up 8% over the previous quarter, due to increased output from the recently installed platforms in the Roncador field, as well as the 1% increase in the reference price for local oil (R$ 162.30 in the 3Q-2008, versus R$ 160.59 in the 2Q-2008), reflecting the average Brent price on the international market.

4. Reconciliation of Consolidated Shareholders’ Equity and Net Income

    R$ million 
         
    Shareholders' Equity   Result
 
. According to PETROBRAS information as of 09.30.2008    142,463    26,469 
. Profit in the sales of products in affiliated inventories    (573)   (573)
. Reversal of profits on inventory in previous years    -    666 
. Capitalized interest    (405)   23 
. Absorption of negative net worth in affiliated companies *    (873)   (282)
. Other eliminations    (163)   257 
     
. According to consolidated information as of 09.30.2008    140,449    26,560 
     

* Pursuant to CVM Instruction 247/96, losses considered temporary on investments evaluated by the equity method, where the investee shows no signs of stoppage or the need for financial support from the investor, must be limited to the amount of the controlling company’s investment. Thus losses generated by unfunded liabilities (negative shareholders’ equity) of the controlled companies did not affect the results or shareholders’ equity of Petrobras on December 31, 2007, generating a conciliatory item between the Financial Statements of Petrobras and the Consolidated Financial Statements.

5. Performance of Petrobras Shares and ADRs

        Nominal Change         
    3rd Quarter        Jan-Sep 
       
2Q-2008    2008    2007        2008    2007 
           
25.91%    -25.21%    17.90%    Petrobras ON    -19.58%    27.18% 
24.91%    -24.04%    14.64%    Petrobras PN    -20.59%    18.88% 
38.73%    -37.95%    24.52%    ADR- Level III - ON    -23.72%    46.62% 
36.85%    -35.43%    21.30%    ADR- Level III - PN    -22.22%    39.50% 
6.64%    -23.80%    11.17%    IBOVESPA    -22.45%    35.96% 
-7.44%    -4.40%    3.63%    DOW JONES    -18.20%    11.49% 
0.61%    -8.77%    3.77%    NASDAQ    -21.13%    11.85% 

Petrobras’ shares had a book value of R$ 16.24 on September 30, 2008.

33

PETROBRAS SYSTEM  Appendices
     

6. Assets/Liabilities Foreign Exchange Exposure

Assets    R$ million 
 
    09.30.2008    06.30.2008 
     
 
Current Assets    6,884    6,692 
     
     Cash and Cash Equivalents    2,153    2,312 
     Other Current Assets    4,731    4,380 
 
Non-current Assets    26,498    20,227 
     
     Amounts invested abroad via         
         partner companies, in the international segment,         
         in E&P equipments to be used in Brazil and in         
         commercial activities.    25,878    19,271 
     Long-term Assets    570    487 
     Investments         
     Property, plant and equipament    50    469 
 
     
Total Assets    33,382    26,919 
     
 
 
Liabilities    R$ million 
 
    09.30.2008    06.30.2008 
     
 
Current Liabilities    (6,632)   (6,332)
     
     Short-term Debt    (3,733)   (2,476)
     Suppliers    (2,276)   (3,252)
     Other Current Liabilities    (623)   (604)
 
Long-term Liabilities    (12,845)   (12,601)
     
     Long-term Debt    (11,696)   (11,645)
     Other Long-term Liabilities    (1,149)   (956)
 
     
Total Liabilities    (19,477)   (18,933)
     
 
 
     
Net Assets (Liabilities) in Reais    13,905    7,986 
     
 
( + ) Investment Funds - Exchange    6    14 
( - ) FINAME Loans - dollar-indexed reais    (328)   (272)
 
 
     
Net Assets (Liabilities) in Reais    13,583    7,728 
     

* The results of investments in Exchange Funds are booked under Financial Revenue.

34

PETROBRAS  Financial Statements 
     

Income Statement – Parent Company

R$ million
    3rd Quarter        Jan-Sep 
 
2Q-2008     2008     2007         2008    2007 
         
 
52,961    58,129    44,201    Gross Operating Revenues    155,950    123,880 
(11,374)   (12,219)   (11,043)   Sales Deductions    (34,645)   (32,028)
           
41,587    45,910    33,158    Net Operating Revenues    121,305    91,852 
(23,704)   (28,480)   (18,271)      Cost of Products Sold    (71,839)   (49,733)
           
17,883    17,430    14,887    Gross Profit    49,466    42,119 
            Operating Expenses         
(1,480)   (1,620)   (1,483)      Sales    (4,586)   (3,977)
(1,110)   (1,361)   (1,113)      General & Administrative    (3,565)   (3,177)
(521)   (643)   (376)      Exploratory Cost    (1,702)   (826)
(370)   (475)   (407)      Research & Development    (1,258)   (1,212)
(58)   (82)   (194)      Taxes    (230)   (534)
(337)   (335)   (1,086)      Health and Pension Plans    (1,008)   (1,935)
(1,098)   (1,922)   (1,209)      Other    (4,124)   (4,172)
           
(4,974)   (6,438)   (5,868)       (16,473)   (15,833)
           
               Net Financial         
1,541    1,203    1,266                   Income    4,105    3,220 
(1,445)   (1,320)   (841)                  Expenses    (3,698)   (2,164)
(152)   3,310    (1,390)                  Net Monetary Variation    3,061    (3,512)
(2,262)   2,250    (1)                  Net Exchange Variation    (198)   (70)
           
(2,318)   5,443    (966)       3,270    (2,526)
           
(7,292)   (995)   (6,834)       (13,203)   (18,359)
1,126    614    (253)   Paticipation in Equity Income    2,538    306 
           
11,717    17,049    7,800    Operating Income    38,801    24,066 
337    (23)   (15)   Non-operating Income (Expense)   315    (50)
(3,688)   (5,674)   (2,113)   Income Tax / Social Contribution    (12,647)   (7,156)
           
8,366    11,352    5,672    Net Income    26,469    16,860 
           

Certain figures relating to previous periods have been reclassified to bring them into line with the current financial statements, thereby facilitating comparisons.

35

PETROBRAS  Financial Statements 
     

Balance Sheet – Parent Company

Assets    R$ million 
    09.30.2008    06.30.2008 
     
Current Assets    57,577    59,434 
     
     Cash and Cash Equivalents    7,770    17,358 
     Accounts Receivable    23,097    17,197 
     Inventories    19,972    17,665 
     Taxes Recoverable    59    542 
     Deferred Taxes & Social Contribution    4,687    4,596 
     Other    1,992    2,076 
Non-current Assets    214,978    189,837 
     
     Long-term Assets    88,616    70,422 
     
     Petroleum & Alcohol Account    805    801 
     Subsidiaries and affiliated companies    70,331    52,767 
     Structured Projects    2,302    2,077 
     Advances to Suppliers    367    322 
     Marketable Securities    3,216    3,336 
     Advance for Pension Plan    1,385    1,347 
     Deferred Taxes and Social Contribution    7,118    6,520 
     Judicial Deposits    1,468    1,458 
     Anticipated Expenses    581    683 
     Other    1,043    1,111 
     
   Investments    29,495    28,659 
   Property, plant and equipment    93,013    86,886 
   Intangible    3,148    3,156 
   Deferred    706    714 
     
Total Assets    272,555    249,271 
     
 
Liabilities    R$ million 
    09.30.2008    06.30.2008 
     
Current Liabilities    92,934    80,938 
     
     Short-term Debt    3,267    2,845 
     Suppliers    65,141    47,865 
     Taxes & Social Contribution Payable    11,804    9,756 
     Dividends / Interest on Own Capital    -    - 
     Structured Projects    576    522 
     Health and Pension Plan    890    816 
     Clients Anticipation    236    199 
     Receivable Cash Flow    5,542    14,699 
     Other    5,478    4,236 
Long-term Liabilities    36,481    36,773 
     
     Long-term Debt    5,562    5,920 
     Subsidiaries and affiliated companies    829    1,372 
     Pension plan    4,206    4,227 
     Health Care Benefits    9,324    9,074 
     Deferred Taxes & Social Contribution    10,049    9,652 
     Other    6,511    6,528 
Deferred Income    677    451 
Shareholders' Equity    142,463    131,109 
     
     Capital    78,967    78,967 
     Capital Reserves    37,027    37,025 
     Net Income    26,469    15,117 
     
Total liabilities    272,555    249,271 
     

Certain figures relating to previous periods have been reclassified to bring them into line with the current financial statements, thereby facilitating comparisons.

36

PETROBRAS  Financial Statements 
     

Statement of Cash Flow – Parent Company

R$ million
    3rd Quarter        Jan-Sep 
       
2Q-2008    2008    2007       2008    2007
           
8,366    11,352    5,672    Net Income    26,469    16,860 
4,470    2,517    2,275    (+) Adjustments    12,355    13,116 
           
1,609    1,764    1,380           Depreciation & Amortization    4,914    4,122 
(1)   (4)   (3)          Oil and Alcohol Accounts    (7)   (10)
4,273    14,861    (1,392)          Oil and Oil Products Supply - Foreign    25,293    3,225 
3,986    (11,829)   1,617           Charges on Financing and Connected Companies    (8,022)   3,051 
(5,397)   (2,275)   673           Other Adjustments    (9,823)   2,728 
12,836    13,869    7,947    (=) Cash Generated by Operating Activities    38,824    29,976 
(6,971)   (8,168)   (9,510)   (-) Cash used for Cap.Expend.    (22,400)   (19,618)
           
(4,179)   (4,253)   (3,957)      Investment in E&P    (12,361)   (10,541)
(1,490)   (2,905)   (1,679)      Investment in Supply    (6,680)   (4,731)
(694)   (905)   (528)      Investment in Gas and Energy    (2,302)   (1,358)
(3)   (2)   (14)      Investments in International Area    (17)   (22)
(706)   -    -       Investment in Distribution    (706)   - 
(250)   (359)   (176)      Structured Projects - Net of Advance    (964)   (405)
452    554    77       Dividends    1,214    832 
105    75    (3,104)      Marketable Securities    180    (2,889)
(206)   (373)   (129)      Other Investments    (764)   (504)
           
5,865    5,701    (1,563)   (=) Free Cash Flow    16,424    10,358 
(3,595)   (15,289)   (2,634)   (-) Cash used in Financing Activities    (16,502)   (23,267)
2,270    (9,588)   (4,197)   (=) Cash Generated in the Period    (78)   (12,909)
           
15,088    17,358    11,387    Cash at the Beginning of Period    7,848    20,099 
17,358    7,770    7,190    Cash at the End of Period    7,770    7,190 

Certain figures relating to previous periods have been reclassified to bring them into line with the current financial statements, thereby facilitating comparisons.

37

PETROBRAS  Financial Statements 
     

Statement of Value Added - Parent Company

    R$ million 
    Jan-Sep 
    2008    2007 
Description         
Sale of products and services and non operating income*    157,000    124,821 
Raw Materials Used    (16,702)   (10,461)
Products for Resale    (19,774)   (9,151)
Materials, Energy, Services & Others    (13,084)   (15,827)
     
Added Value Generated    107,440    89,382 
 
Depreciation & Amortization    (4,914)   (4,121)
Participation in Equity Income, goodwill & negative goodwill   2,538    306 
Financial Income    4,463    1,738 
Rent and royalties    377    301 
     
Total Distributable Added Value    109,904    87,606 
     
 
Distribution of Added Value         
 
Personnel         
Salaries, Benefits and Charges    7,145    8,193 
     
    7,145    8,193 
     
Government Entities         
Taxes, Fees and Contributions    48,888    40,974 
Government Take    17,735    10,589 
     
    66,623    51,563 
     
Financial Institutions and Suppliers         
Interest, FX Rate and Monetary Variations    1,193    4,187 
Rent and Freight Expenses    8,474    6,803 
     
    9,667    10,990 
     
Shareholders         
     Dividends / interest on own capital    -    4,387 
     Net Income    26,469    12,473 
     
    26,469    16,860 
     
Value Added distributed    109,904    87,606 
     

* Net of Provisions for Doubtful Debts.

38

PETROBRAS   
     

http://www.petrobras.com.br/ri/english

Contacts:

Contacts: PETRÓLEO BRASILEIRO S. A. – PETROBRAS
Investor Relations Department I E-mail: petroinvest@petrobras.com.br / acionistas@petrobras.com.br
Av. República do Chile, 65 – 22nd floor - 20031-912 - Rio de Janeiro, RJ - Tel.: 55 (21) 3224-1510 / 9947


This document may contain forecasts that merely reflect the expectations of the Company’s management. Such terms as “anticipate”, “believe”, “expect”, “forecast”, “intend”, “plan”, “project”, “seek”, “should”, along with similar or analogous expressions, are used to identify such forecasts. These predictions evidently involve risks and uncertainties, whether foreseen or not by the Company. Therefore, the future results of operations may differ from current expectations, and readers should not base their expectations exclusively on the information presented herein.

39

SIGNATURE
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 17, 2008

 
PETRÓLEO BRASILEIRO S.A--PETROBRAS
By:
/S/  Almir Guilherme Barbassa
 
Almir Guilherme Barbassa
Chief Financial Officer and Investor Relations Officer
 

 

 
FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates offuture economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.