2010 Second Quarter Results2010 Second Quarter Results

Second Quarter Highlights and Subsequent Events

Commenced drilling of eight wells in the Campos, Santos and Parnaíba basins, OGX‐11D 

Exploratory 

Campaign

to OGX‐18;

New discoveries and commencement of the delineation process in the Campos Basin Beginning of drilling activities in three new regions: northern blocks of the Campos Basin, 

Santos and Parnaíba Basins

Production

Filed the Environmental Impact Study (EIA) and the respective Report of Environmental 

Impact (RIMA) for the Campos Basin with the Brazilian Institute for Environment and Production

Renewable Resources (IBAMA) in order to obtain a preliminary license for hydrocarbon 

production activity

A i i i f fi l bl k i h h b i i C l bi CAcquisition of five exploratory blocks in three onshore basins in Colombia: Cesar‐

Ranchería, Lower Magdalena Valley and Middle Magdalena Valley Basins;

Initiated the process for the sale of a  minority participation in the Campos Basin’s blocks

Portfolio

Stock Market

Adopted IFRS as accounting standard 

Joined the Efficient Carbon Index (“ICO2”), an index composed of companies included in Stock Marketthe IBrX‐50 Index, which tracks the efficiency level of member companies’ emissions of 

greenhouse gases;

2

Financial ResultsFinancial Results

2Q10 Financial Results

2Q10 2Q09 1H10

Adoption of the International Financial Reporting 

Standards (IFRS)

Main Accounts2Q10 2Q09 1H10

Net Financial  Result 135,547 (107,357) 285,370

Financial Income 151,292 208,017 586,935

Fi i l E (15 745) (315 374) (301 565)

Standards (IFRS) 

Net Financial Results: impacted by interest income, losses 

on hedging and the impact of marking‐to‐market the fair 

R$ thousand

Financial Expenses (15,745) (315,374) (301,565)

Exploration Expenses (25,252) (12,594) (48,666)

G&A Expenses (57,120) (52,896) (121,655)

G&A (32,757) (24,187) (73,063)

value of financial instruments 

Exploration Expenses: refer, mainly, to expenses related to 

seismic activitiesStock option plans¹ (24,363) (28,709) (48,592)

Tax (5,346) (4,681) (10,393)

Minority Interest 9,960 ‐                10,021

seismic activities

General and Administrative Expenses: increase in the 

number of employees to 184, resulting in greater Net Result 57,789 (177,528) 114,677personnel and office expenses, and accounting of the stock 

options granted by the Company and by the controlling 

shareholder

(1)  Related to the adoption of IFRS

06/30/2010 12/31/2009 Δ

Intangible 3 159 413 2 099 559 1 059 854

Net Profit: increase from the 2Q09 mainly due to decrease 

in financial expensesR$ thousand

Intangible 3,159,413 2,099,559 1,059,854

Cash and cash equivalents 6,110,919 7,337,901 (1,226,982)Intangibles: intensified drilling campaign and rig 

mobilization used in the exploratory campaign4

2Q10 Financial Results

Average cumulative gross return equivalent to 105 05% of

Cash Position Evolution Allocation by Institution

Solid cash position of R$6.1 billion, or US$3.4 billion,

enough to support all the exploratory commitments until

2013, and the beginning of production

Average cumulative gross return equivalent to 105.05% of

the Interbank Deposit Rate (CDI), generating R$ 145 million

of interest income for the period

Foreign exchange hedge position of US$ 1.6 billion,

representing approximately 15 months of financial

commitments denominated in US$

Cash invested in fixed income instruments with some of the

most solid financial institutions in Brazil

US$ billionR$ billion

$

BTG Pactual, 8.4%

Santander, 16.7%

Votorantim, 12.2%

Safra, 2.2%ABC, 2.1%

Société, 2.1%4.0

4.5

6.5

7.0

Itau Unibanco, 32.8%

Bradesco, 18.5%

Others, 5.2%

3.0

3.5

6.0

5

2.55.51Q10 Apr May Jun

Cash in R$ Cash in US$ * CS (1.7%), HSBC (1.4%), BNP (0.7%), LFT (1.4%) Fundos (0.1%)

Insurance Program

OGX secured improved terms in its insurance program for future upstream operations;

Offshore Program

Company carried out a mid-term review of its insurance program resulting in US$ 1.5 million estimated savings for the next 12 months;

Contracted Policies:

Well Control: Limit of US$ 125M in Campos basin, and US$ 250M in Santos with deductibles of US$ 10M and US$ 15M respectively;10M and US$ 15M, respectively;

Third Party Liabilities (TPL): Limit of US$ 100M per occurrence with deductible of US$ 1M;

Property: Total Limit of US$ 30M per occurrence with deductible of US$ 250k.Property: Total Limit of US$ 30M per occurrence with deductible of US$ 250k.

Onshore Program

Insured limits per occurrence: Well Control (US$ 60M) and TPL (US$ 25M) with deductibles of US$ 5M andInsured limits per occurrence: Well Control (US$ 60M) and TPL (US$ 25M) with deductibles of US$ 5M and US$ 100k, respectively

These favorable terms reflect the recognition by the market of an exploratorycampaign highly focused on operational excellence and safety

Exploratory CampaignExploratory Campaign

Important Progress in the Exploratory Campaign

Concluded drilling activities in 12 wells operated by OGX‐1 OGX‐2A

Campos Santos Parnaíba

OGX and 1 operated by Maersk since our

exploratory campaign inception

Initiated drilling activities in three new regions: clud

ed

OGX‐3 OGX‐4

OGX‐5 OGX‐6

MRK‐2A

OGX‐12

Initiated drilling activities in three new regions:

northern blocks of the Campos Basin, Santos and

Parnaíba Basins, of which the first two were already

successful and the third is still in progress

Conc OGX‐8 OGX‐9DB

OGX‐10 OGX‐13

OGX 14successful and the third is still in progress

Six rigs operating simultaneously, of which five are

semi-submersible and one is onshore

OGX‐14

OGX‐15 OGX‐18 OGX‐11D OGX‐16

Secured two new drilling units: one semi-

submersible, which will be available from the third

quarter and one jack up for drilling activities in the ogress Ocean

AmbassadorOcean

Lexington Ocean Quest QG-1

quarter and one jack-up, for drilling activities in the

Pará-Maranhão Basin In pro OGX‐7A OGX‐17

8

Sea Explorer

Ocean Star

Campos Basin

Campos ‐ North

Two drilled wells, with discoveries in the BM‐C‐40 block, one 

already concluded (OGX‐14) and the other one in progress (OGX‐

18), that could indicate a new province of great importance

Conclusion of drilling of the OGX‐9DB and OGX‐13 wells,

Campos ‐ South

Conclusion of drilling of the OGX 9DB and OGX 13 wells, 

representing an important step in the delineation process of the 

Vesúvio prospect, confirming the presence of oil bearing sands in 

both wellsboth wells

Hydrocarbon evidence in the Albian and Aptian sections of the OGX‐

15 well (Santa Helena), strengthening the possibility that the 

9

accumulation encountered in the Albian section is connected to the 

structure formed between the OGX‐2A (Pipeline) and OGX‐6 (Etna)

Santos and Parnaíba Basins

Two wells in progress: OGX‐11D (Natal) and OGX‐17 (Belém)

Santos Basin

Two wells in progress: OGX 11D (Natal) and OGX 17 (Belém)

Identification of liquid hydrocarbons and associated gas with API of 

approximately 41° in the Santonian section of the OGX‐11D, hightening

the attractiveness of the project

Concluded the drilling of the Niterói prospect (OGX‐12) with non‐

commercial volume The result was of great relevance for thecommercial volume. The result was of great relevance for the 

calibration of the geological model for the region

Initiation of drilling activities for the first onshore well by OGX Maranhão

Parnaíba Basin

Beginning of drilling activities of the OGX‐16 well, Califórnia, on July 5th

which is expected to last 70 days

OGX M hã P ól i i l hi l (SPE) f d b

10

OGX Maranhão Petróleo is a special purpose vehicle (SPE) formed by 

OGX (66.6%) and MPX (33.3%)

Expansion of Exploration Beyond Brazil’s Borders : ColombiaColombia

Cesar‐Ranchería: three high potential blocks close to the

Acquisition of five exploratory blocks in three 

onshore basins d ring the Open Ro nd blocks, close to the Maracaibo basin

Lower Magdalena Valley: b l h f

onshore basins during the Open Round 

Colombia 2010

Basins at different stages of maturity with high basin in initial phase of 

exploration with producing fields

g y g

exploratory potential

Total area of approximately 12.5 thousand km² 

Total investment of approximately US$125 

million over an initial three‐year exploratory 

phasephase

Middle Magdalena Valley: mature basin where a giant Colombian field is located: 

11

La Cira‐Infantas

AppendixAppendix

Consolidated Balance Sheet – R$´000

In accordance with IFRS

Assets 6/30/2010 12/31/2009

Current Assets 6,363,892          7,564,268         

Cash and cash equivalents 6,110,919          7,337,901         

Liabilities 6/30/2010 12/31/2009

Current Liabilities 424,495              581,406             

Suppliers 370,769              151,262             Taxes  and contributions  to be 

Recoverable taxes 226,052             209,076           

Financial  derivative instruments ‐                      ‐                    Other 26,921                17,291               

collected 14,345                40,116               Compensations  & benefits 15,264              23,960             Financial  derivative instruments 8,221                300,757           Other 15,896                65,311               

Non‐current Assets 3,411,580          2,205,830         

Inventory 230,567              85,354               Investments ‐                           1,000                 Property plant and equipment 21 600 19 917

Non‐current Liabil ities (1,150)                 2,402                 

Related parties 4,670                  2,402                 Minoritory interest (5,820)                 ‐                      

Property, plant and equipment 21,600               19,917             Intangible 3,159,413          2,099,559          Shareholders' Equity 9,352,127          9,186,290         

0

Capital 8,801,480          8,799,004         Capital  reserves 227,315              250,569             Retained earnings 320,026              248,171             C l i i dj 83

Total  Assets 9,775,472          9,770,098         

Cumulative conversion adjustments 83                      ‐                     Accumulated profit (losses) 3,223                  (111,454)           

Total  Liabil ities  and Shareholders' Equity

9,775,472          9,770,098         

13

Consolidated Income Statement – R$´000

In accordance with IFRS

2Q092Q10 1H10

Exploration expenses (25,252)                (12,594)              (48,666)              General  and administrative expenses (57,120)                (52,896)              (121,655)            Equity Method ‐                        ‐                      ‐                      Financial income 151 292 208 017 586 935

Operating income (expenses)

Financial  income 151,292             208,017           586,935           Financial  expenses (15,745)                (315,374)           (301,565)            Net earnings  (losses) before income tax and social  contribution 53,175                 (172,847)          

115,049             

(‐) Income tax and social  contribution (5,346)                (4,681)              (10,393)            ( ) ( , ) ( , ) ( , )

Net earnings  (losses) before Minority Interest 47,829                 (177,528)           104,656             

Minority Interest 9,960                   ‐                      10,021               

Net earnings  (losses) for the period 57,789                 (177,528)           114,677             Number of shares at the end of the period * 3 232 423 600 32 319 606 3 232 423 600Number of shares  at the end of the period * 3,232,423,600 32,319,606     3,232,423,600Earning (losses) per lot of thousand shares  ‐ R$ 0.02                      (5.49)                  0.03548             

14