Petrobras – Investor Relations

Petrobras

Investor Relations

Share buy back

(Rio de Janeiro, December 15, 2006) - PETRÓLEO BRASILEIRO S/A - PETROBRAS, [Bovespa: PETR3/PETR4, NYSE: PBR/PBRA, Latibex: XPBR/XPBRA], a Brazilian international energy company, announces that its Board of Directors, meeting today, according to Article 29, paragraph 2 of its By-laws, its Share Repurchase Policy, and existing pertinent legislation authorized the repurchase or Petrobras preferential shares in circulation for future cancellation using retained earnings as per the following conditions:
a) Objective: to reduce excess cash holdings and adjust the capital structure, aiming at the reduction of the cost of capital;
b) Quantity: up to 91.500.000 (ninety one million and five hudred thousand) preferential shares, representing 4,9% of the outstanding number of this class of shares which is 1.850.364.700 (one billion, eight hundred and fifty million, three hundred and sixty four thousand and seven hundred);
c) Price: purchases will be through Stock Exchanges, at market prices prevailing on the acquisition dates for the duration of the repurchase period;
d) Financial Intermediaries:
i.) Bradesco SA. Corretora de Títulos e Valores Mobiliários - Av. Ipiranga 282/13º, 14º, 15º andares – Centro - São Paulo – SP CEP. 01046-920ii.) CITIGROUP GMB CCTVM - Av. Paulista 1111/12º andar São Paulo – SP CEP. 01311-920
iii.) CITIGROUP Global Markets - 390 Greenwich Street 5th Floor New York, NY – 10013
iv.) Credit Suisse Brasil SA. Corretora de Títulos e Valores Mobiliários - Av. Brigadeiro Faria Lima 3064/13º andar São Paulo – SP CEP. 01451-000
v.) Itaú Corretora de Valores - Av. Engenheiro Armando de Arruda Pereira 707/15º andar São Paulo – SP CEP. 04309-010
vi.) JP Morgan CCVM SA. - Av. Brigadeiro Faria Lima 3729/13º andar São Paulo – SP CEP 04538-905
vii.) JP Morgan Securities Inc. - 277 Park Avenue 9th Floor New York, NY
viii.) Morgan Stanley Dean Witter CTVM SA - Av. Presidente Juscelino Kubitschek 50/8º andar São Paulo – SP CEP. 04543-000
ix.) Morgan Stanley & CO. Incorporated - 1585 Broadway, New York, NY, 10036 - Estados Unidos da América
x.) Santander Brasil Corretora de Títulos e Valores Mobiliários - Rua Hungria 1400/4ºandar – Jardim Europa São Paulo – SP CEP. 01455-000;e) Repurchase period: up to 365 (three hundred and sixty five) days beginning today. In accordance with its share repurchase policy, the Board of Directors concluded that the company’s current liquidity position permits the implementation of a share repurchase program without comprimising its investment program or dividend payments, while at the same time safeguarding its operational and financial targets established in its Strategic Planning. Moreover, the Board understands that Petrobras shares would be currently undervalued in light
of growth and profitability prospects.

Over the last three years there has been a marked improvement in Petrobras’ financial indicators. Leverage(net indebtedness/net total liabilities) in BRGAAP fell from 53% in December/2002 to 17% by September/2006 (55% to 18% in USGAAP), while financial targets
set by its strategic planning suggest a level of 25% for this indicator. This improvement in the company’s liquidity is also reflected by its risk classification by Moody’s that, after a downgrade in August 2002 to Ba2, has been consecutively upgraded to Ba1 in September/2004, and Baa2 in October/2005, which is considered as “investment grade”.
In October/2006, the company raised US$500 million in the international capital market, for ten year maturity, offering a yield of 6,185% per annum, only 1,55% above US Government securities of similar duration. In light of these yields, its growth prospects compared to current market valuation of its shares, and current and projected conditions of the international oil market, among other alternatives that were considered, the Board of Directors considered sharerepurchases to be the most attractive alternative to reduce Petrobras financing costs in the short run.

Almir Guilherme Barbassa
CFO and Investor Relations Officer
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