Petrobras: 100% Success Rate Drilling in Santos Basin's Pre-Salt Layer

Petrobras has clarified certain aspects of articles published in the Brazilian press, titled respectively "Pre-salt well does not bear oil" and "Petrobras securities depreciated after news about dry well."

Block BM-S-22 is located in the Santos Basin and is operated by the Consortium formed by ExxonMobil (40% - operator), Hess Corporation (40%), and Petrobras (20%). Pursuant to clauses set forth by the Consortium's agreements (such as the Joint Operation Agreements) and a clause in the concession agreement signed by the Consortium with the National Petroleum Association (ANP), only the operator can announce events, such as well drilling results, to the regulator and to the market at large.

The consortium announced to the ANP, through the operator, the results of the second drilling on BMS-22 block. However, as no evidence of hydrocarbons were found, no additional communication to the regulator is required, as determined by legislation, neither to the market at large. Moreover, the company has always stated it cannot comment on blocks that it does not operate.

It is also important to stress that oil exploratory activity is a risk business and so there is a chance the well will be dry (that hydrocarbons will not be found in sufficient amounts for commercialization). Therefore a dry well, rather than an extraordinary fact, is a recurring matter in the oil industry. Furthermore, a dry well is by no means conclusive regarding the commerciality of the entire block potential.

According to information that has been widely announced by the Company, in the six company-operated oil exploration blocks located in the pre-salt layer in the Santos Basin, a 100% success rate has thus far been achieved, indicating Petrobras' belief that the occurrence of dry wells is unlikely in this pre-salt area of the Santos Basin, outside of the oil industry's normal standards. This belief is based on the extensive seismic data program undertaken by the company to date, and on the exploratory wells that have been drilled successfully.

With regard to the article about the stock price, it should be recognized that the performance of Petrobras' stock is linked to a number of factors, such as the performance of the Brazilian and global economies, the exchange rate, the Company's operating and financial performance. In addition, as an oil company, the movements in Petrobras' stock price are highly correlated to oil prices in the international market, and this price has recently been highly volatile.

Brent oil prices declined 3.4% on 07/08, with an accumulated of decline 5.9% during the week (from 07/06 to 07/08). During this same period, the Company's preferred stock fell 0.8% and 3.1%, respectively. It is difficult to single out a single factor or a set of factors that can
definitively explain the performance of the Company's stock traded in stock exchanges in Brazil and abroad.