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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 August, 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 SECOND QUARTER OF 2008
(Rio de Janeiro – August 11, 2008) – PETRÓLEO BRASILEIRO S.A. – Petrobras announced today its consolidated results expressed in millions of Brazilian Reais, in accordance with generally accepted accounting principles in Brazil (BR GAAP).

Consolidated net income in the 2Q-2008 was a record R$ 8,783 million, up 29% versus the comparable period for 2007.
The result was due primarily to increases in the sales prices for oil and oil products, as well as increasing production of oil and gas in Brazil. Crude oil prices in particular increased substantially during the period, with Brent averaging US$ 121 per barrel in the 2Q-2008 versus US$ 69 in the 2Q-2007. As a result of rising crude oil prices, refining margins were substantially reduced during the quarter, in Brazil as well as internationally.

In the 1H-2008, consolidated net income increase by 44% year-on-year, as a result of the upturn in average oil and oil product sale prices, higher sales volume and the non-recurring pension plan expenses in 2007.



Operating cash flow (EBITDA) increased by 27% over the 2Q-2007 and by 31% over the previous quarter, generating resources to fund the Company’s investment program while reducing debt.

The EBITDA margin of 33% remained flat year-on-year, but widened by 3 p.p. when compared to the prior quarter. Higher prices and volumes for oil and oil products, and increased production, as well as initiatives to reduce operating expenses (which remained stable versus the 2Q-2007 and fell by 3% versus the prior quarter) contributed to the improved margin.

Nevertheless, higher oil prices continue to create generalized cost pressures within the industry, and led to higher production taxes, which jumped 74% year-on-year and 27% quarter-over-quarter.


Average oil and gas production increased by 4% year-on-year due to the start-up of FPSO-Cidade do Rio de Janeiro (Espadarte), FPSO-Cidade de Vitória (Golfinho) and the P-52 and P-54 platforms (Roncador). The introduction of these units more than offset the decline in output from existing systems and fields. By the end of the year, 3 major new systems are scheduled for start-up in the Jabuti, Marlim Sul and Marlim Leste fields, adding production capacity of 460,000 barrels/day.

This document is divided into five topics: 
 
PETROBRAS SYSTEM    Page    PETROBRAS    Page
Financial Performance    05    Financial Statements    34
Operating Performance    10         
Financial Statements    23         
Appendices    31         



PETROBRAS SYSTEM   
     

Capital expenditures on a fully consolidated basis totaled R$ 20,899 million in the 1H-2008, 6% higher than the first half of 2007. The largest share of investment spending was allocated to boosting future oil and gas production capacity in Brazil.


The Added Value within Petrobras was 24% higher than in the 2Q-2007 and 17% more than in the 1Q-2008. The largest percentage increase in the Added Value went to shareholders, with an increase of 30% year-on-year.


2

PETROBRAS SYSTEM   
     

Statement by the CEO, José Sergio Gabrielli de Azevedo

Dear shareholders and investors,

It gives me great satisfaction to announce second-quarter net income of R$ 8.8 billion, an increase of 29% year-on-year and an all-time quarterly record for the Company. In the year-on-year comparison for the first half of the year, income growth was an even more impressive 44%.

Cash flow measured by EBITDA totaled R$ 18.1 billion during the second quarter and R$ 32.0 billion in the first half. Our robust cash flow enabled us to fund our capital expenditures, which totaled R$ 20.9 billion in the first six months of the year, with internally generated capital.

These excellent results were fueled by the increase in international oil prices, higher oil and gas production, and the increase in gasoline and diesel prices implemented in Brazil in May.

With demand-side pressure and restrictions on supply, oil prices rose from an average US$ 70 per barrel in the second quarter of 2007 to US$ 121 in the second quarter of 2008. If, on the one hand, this meant more revenue for the Company, on the other it generated substantial cost pressure, underlining the need for continual efforts to manage our resources more efficiently.

For our production in Brazil, the operational start-up of the FPSO-Cidade de Vitória, in the Golfinho field, the FPSO-Cidade do Rio de Janeiro, in the Espadarte field, and the P-52 and P-54 platforms, in the Roncador field, not only offset natural declines in output, but also contributed to the 4% increase in total production volume. Growth should become even more vigorous, with the start-up of P-51 (Marlim Sul), P-53 (Marlim Leste) and FPSO-Cidade de Niteroi (Jabuti).

During the second quarter, domestic sales of oil products and natural gas increased by 8% year-on-year, due to more robust economic activity, especially in the agribusiness and tourism sectors, exemplified by the substantial increase in jet fuel and diesel. Natural gas increased by 34% primarily as a result of higher volumes available for sale.

The quarter was also marked by several new discoveries, such as light oil in shallow-water in the southern portion of the Santos Basin where we found oil of 36o API in block BMS-40. Abroad, we discovered oil in the Gulf of Mexico, WR-508 block, Walker Ridge quadrant (operated by Shell), where we have 25% WI, underlining our renowned global capacity for ultra-deep-water exploration.

I would also like to draw your attention to the creation of the Pre-salt Executive Department, which will play a vital part in researching and organizing the exploration of this new frontier, regarded as one of the most important oil and gas discoveries of the last 30 years. One of its first tasks will be to plan and execute the long-duration test in the Tupi field at the beginning of 2009, followed by pilot production in 2010. It is worth noting an important milestone that will occur shortly, when we initiate production of the first pre-salt well in the Jubarte field in the Espírito Santo Basin.

3

PETROBRAS SYSTEM   
     

The scheduled investments in refineries and vertical integration of the production chain are designed to add value to our oil, generating higher revenue from domestic and international sales. Aiming to capture synergies, we are investing in modernizing and expanding our current refineries, such as Abreu Lima, in Pernambuco, and greenfield projects, such as the Premium I and II facilities, in Brazil’s Northeast.

We continued to consolidate our petrochemical assets, a process we began at the end of 2007, helping us prepare for a global scenario marked by fiercer competition and the growing integration of assets.

All of these measures are, of necessity, underpinned by a deep sense of social and environmental responsibility. Income generation programs, biofuel production incentives and marine life protection initiatives are based on the conviction that the Company will play a vital role in promoting responsible development over the long term.

Our new subsidiary created specifically to manage our bio-fuels business will be fully up and running in the near future. Numerous studies have consistently demonstrated that ethanol derived from sugarcane has a series of competitive advantages versus other sources of ethanol, and that castor-oil-based biodiesel production can be an important contributor to social inclusion.

In order to achieve our objectives, investments in human resources and infrastructure are essential. With this in mind, Petrobras continues to fully support the National Oil and Gas Industry Mobilization Program (PROMINP), which will plays an important role in structuring Brazil’s oil and gas industry. Their initiatives lend support to and sustain the future needs of the Company, such as the recently announced commissioning of drilling ships, platforms, drilling units and other facilities. This in turn will contribute to preparing us for the future challenges we face in an increasingly dynamic and competitive scenario as we purse our many opportunities.

4

PETROBRAS SYSTEM  Financial Performance 
     

Net Income and Consolidated Economic Indicators

Petrobras posted a consolidated first-half net income of R$ 15,708 million, 44% higher than in the 1H-2007.

R$ million
    2nd Quarter                First Half     
             
1Q-2008    2008    2007    D  %        2008    2007    D % 
             
 
59,158    67,014    53,633    25    Gross Operating Revenues    126,172    103,760    22 
46,892    54,570    41,798    31    Net Operating Revenues    101,462    80,692    26 
11,344    15,502    11,614    33    Operating Profit (1)   26,846    20,181    33 
(400)   (1,802)   (1,135)   59    Financial Result    (2,202)   (2,070)   6 
6,925    8,783    6,800    29    Net Income    15,708    10,931    44 
1.58    1.00    1.55    (35)   Net Income per Share    1.79    2.49    (28)
364,372    457,401    244,659    87    Market Value (Parent Company)   457,401    244,659    87 
37    39    41     (2)   Gross Margin (%)   38    40     (2)
24    28    28    -    Operating Margin (%)   26    25    1 
15    16    16    -    Net Margin (%)   15    14    1 
13,876    18,131    14,269    27    EBITDA – R$ million(2)   32,007    25,247    27 
 
                Financial and Economic Indicators             
 
97    121    69    77    Brent (US$/bbl)   109    63    73 
1.74    1.66    1.98    (17)   US Dollar Average Price - Sale (R$)   1.70    2.05    (17)
1.75    1.59    1.93    (17)   US Dollar Last Price - Sale (R$)   1.59    1.93    (17)

(1)      Operating income before financial result, equity balance and taxes. 
(2)      Operating income before financial result, equity balance and depreciation/amortization. 

    2nd Quarter            First Half 
             
1Q-2008    2008    2007    D  %        2008    2007    D % 
             
 
10,956    13,557    10,376    31    Operating Income as per Brazilian Corporate Law    24,513    17,924    37 
400    1,802    1,135    59    (-) Financial Result    2,202    2,070    6 
(12)   143    103    39    (-) Equity Income Result    131    187    (30)
               
11,344    15,502    11,614    33    Operating Profit    26,846    20,181    33 
2,532    2,629    2,655     (1)   Depreciation / Amortization    5,161    5,066    2 
               
13,876    18,131    14,269    27    EBITDA    32,007    25,247    27 
               
 
               
30    33    34     (1)   EBITDA Margin (%)   32    31    1 
               

5

The behavior of the main components of consolidated net income, in relation to the 1H-2007, was as follows:

        R$ million 
        Changes
1H-2008 X 1H-2007 
Main Items   Net
Revenues		   Cost of
Goods Sold		   Gross
Profit 
. Domestic Market:                - volumes sold    3,724    (2,452)   1,272 
                                                 - domestic prices    7,923    -    7,923 
. International Market:         - export volumes    (575)   191    (384)
                                                 - export price    5,787    -    5,787 
. Increase in expenses:(*)   -    (10,505)   (10,505)
. Increase in profitability of distribution segment    257    -    257 
. Increase in profitability of trading operations    4,053    (3,390)   663 
. Increase in international sales    1,799    (1,271)   528 
. FX effect on controlled companies abroad    (1,979)   1,647    (332)
. Others        (219)   990    771 
         
        20,770    (14,790)   5,980 
         

(*) Expenses Composition:    Value
- import of crude oil and oil products and gas (1)   (6,433)
- domestic Government Take    (2,074)
- generation and purchase of energy for commercialization    (1,344)
- non-oil products, including alcohol, biodiesel and other    (497)
- transportation: maritime and pipelines (2)   (280)
- materials, services and depreciation    (100)
- salaries, benefits and charges    29 
- third-party services    194 
   
    (10,505)
   

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


6

• Tax expenses (R$ 347 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;

• Other operating expenses (R$ 945 million), especially from the non-recurring expenses with the Petros Plan (R$ 1,050 million) and the bonus associated with the new jobs and salaries plan (R$ 123 million) in 2007, partially offset by contractual fines related to natural gas supply (R$ 295 million);

Offset by the following expenses:

• Selling expenses (R$ 457 million), due to higher sales volume and freight costs (R$ 214 million), the increase in provisions for doubtful credits (R$ 74 million);

• Exploration costs (R$ 233 million), from the write-off of dry and uneconomically wells in Brazil (R$ 528 million), offset by the reduction in seismic costs abroad (R$ 294 million);

• General and administrative expenses (R$ 130 million), due to the increase in the workforce, the 2007/08 collective bargaining agreement, the new jobs and salaries plan and the 2007 advancement and promotion plan.

7

Net income in the 2Q-2008 totaled R$ 8,783 million, 27% up on the R$ 6,925 million posted in the 1Q-2008 due to the factors listed below:

        R$ million 
        Changes
2Q-2008 X 1Q-2008 
Main Items   Net
Revenues		   Cost of
Goods Sold		   Gross
Profit 
. Domestic Market:                - volumes sold    1,856    (1,319)   537 
                                                 - domestic prices    2,337    -    2,337 
. International Market:         - export volumes    1,243    (600)   643 
                                                 - export price    1,957    -    1,957 
. Increase in expenses:(*)   -    (1,479)   (1,479)
. Increase in profitability of distribution segment    59    -    59 
. Increase in profitability of trading operations    502    (627)   (125)
. Increase in international sales    1,527    (1,014)   513 
. FX effect on controlled companies abroad    (1,415)   1,257    (158)
. Others        (388)   89    (299)
         
        7,678    (3,693)   3,985 
         

(*) Expenses Composition:    Value
- import of crude oil and oil products and gas (1)   (1,543)
- domestic Government Take    (622)
- non-oil products, including alcohol, biodiesel and other    (303)
- transportation: maritime and pipelines (2)   36 
- materials, services and depreciation    80 
- salaries, benefits and charges    101 
- generation and purchase of energy for commercialization    341 
- third-party services    431 
   
    (1,479)
   

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

8

•A reduction in the following operating expenses:

• Exploration costs (R$ 91 million), primarily due to the reduction in geological, geophysical and seismic costs, especially abroad (R$ 70 million).

• Other operating expenses (R$ 189 million), chiefly due to reduced costs from contractual charges and fines related to natural gas supply (R$ 211 million).

These effects were offset by the increase in selling expenses (R$ 131 million) due to the upturn in maritime freight charges.

• A negative impact on the net financial result (R$ 1,402 million), due to the impact of the higher appreciation of the Real in the 2Q-2008 on investments abroad, commercial activities and, in the International segment, through subsidiaries, the use of foreign funds to acquire E&P equipment for use in Brazil.

• Reduced holdings in relevant investments (R$ 155 million), chiefly due to greater FX losses on foreign subsidiaries’ shareholders equity.

• A positive impact on the non-operating result (R$ 425 million), primarily due to gains from the change in relevant interests in Quattor (R$ 409 million).

9

PETROBRAS SYSTEM  Operating Performance
     

Physical Indicators (*)

    2nd Quarter            First Half 
             
1Q-2008    2008    2007    D  %        2008    2007    D  %
             
Exploration & Production - Thousand bpd 
                Domestic Production             
1,816    1,854    1,789    4               Oil and LNG    1,835    1,795    2 
304    321    269    19               Natural Gas (1)   312    271    15 
2,120    2,175    2,058    6    Total    2,147    2,066    4 
                Consolidated - International Production             
108    104    117    (11)              Oil and LNG    106    114    (7)
103    96    112    (14)              Natural Gas (1)   99    107    (7)
211    200    229    (13)   Total    205    221    (7)
14    14    16    (13)   Non Consolidated - Internacional Production (2)   14    17    (18)
               
225    214    245    (13)   Total International Production    219    238    (8)
               
2,345    2,389    2,303    4    Total production    2,366    2,304    3 
               

(1) Does not include liquified gas and includes re-injected gas 
(2)Non consolidated companies in Venezuela. 

Refining, Transport and Supply - Thousand bpd 
351    441    410    8    Crude oil imports    396    375    6 
228    167    159    5    Oil products imports    198    128    55 
               
579    608    569    7    Import of crude oil and oil products    594    503    18 
               
314    425    321    32    Crude oil exports    369    349    6 
258    245    271    (10)   Oil products exports    252    259    (3)
               
572    670    592    13    Export of crude oil and oil products (3)   621    608    2 
               
(7)   62    23    170    Net exports (imports) crude oil and oil products    27    105    (74)
               
194    197    157    25    Import of gas and others    195    151    29 
(3) 2    6 (3)   3    100    Other exports    4(3)   2    100 
1,892    2,039    2,074    (2)   Output of oil products    1,974    2,058    (4)
1,776    1,846    1,796    3    • Brazil   1,811    1,789    1 
116    193       278(5)   (31)   • International    163       269(5)   (39)
2,167    2,223    2,227    -    Primary Processed Installed Capacity    2,223    2,227    - 
1,986    1,942    1,986    (2)   • Brazil (4)   1,942    1,986    (2)
181    281       241(5)   17    • International    281       241(5)   17 
                Use of Installed Capacity (%)            
89    95    89    6    • Brazil    93    89    4 
60    64    85(5)   (21)   • International    59    85    (26)
79    77    78    (1)   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. 
(5) Revision due to the consolidation of Bolivia refineries data until 06/25/2007 (sales' date)

Sales Volume - Thousand bpd 
1,703    1,765    1,709    3    Total Oil Products    1,734    1,678    3 
76    90    51    76    Alcohol, Nitrogens, Biodiesel and other    82    53    55 
302    315    234    35    Natural Gas    309    230    34 
               
2,081    2,170    1,994    9    Total domestic market    2,125    1,961    8 
574    676    595    14    Exports    625    610    2 
557    631    619    2    International Sales    594    637    (7)
               
1,131    1,307    1,214    8    Total international market    1,219    1,247    (2)
               
3,212    3,477    3,208    8    Total    3,344    3,208    4 
               

10

Price and Cost Indicators (*)

2nd Quarter        First Half 
             
1Q-2008    2008    2007    D %        2008    2007    D % 
             
Average Oil Products Realization Prices             
163.07    178.03    155.44    15    Domestic Market (R$/bbl)   170.68    153.27    11 
 
Average sales price - US$ per bbl 
                
                Brazil             
86.13    105.46     57.04    85               Crude Oil (US$/bbl)(6)   95.89    52.42    83 
37.16    39.01     36.16    8               Natural Gas (US$/bbl) (7)   38.12    34.36    11 
                International             
62.23    75.41     46.92(8)   61               Crude Oil (US$/bbl)   69.41    44.67 (8)   55 
16.98    17.88     16.82(8)   6               Natural Gas (US$/bbl)   17.41    15.63 (8)   11 

(6) Average of the exports and the internal transfer prices from E&P to Supply. 
 
(7) Internal transfer prices from E&P to Gas & Energy. 
 
(8) Revision of the volumes sold in Bolivia due to the new contracts of operation.

Costs - US$/barrel 
                
                Lifting cost:             
                • Brazil             
8.66    9.88    7.33    35   
      • • without government participation
   9.28    7.27    28 
24.82    31.08    17.95    73   
      • • with government participation
   27.99    17.10    64 
4.01(9)   4.37    4.19    4    • International    4.19    4.05    3 
                Refining cost             
3.61    3.53    2.69    31    • Brazil   3.57    2.62    36 
6.16    5.58     2.83(5)   97    • International    5.82    2.62 (5)   122 
648    702    552    27    Corporate Overhead (US$ million) Parent Company    1,350    1,082    25 

Costs - US$/barrel 
                
                Lifting cost:             
                • Brazil             
15.16    16.34    14.45    13   
      • • without government participation
   15.76    14.83    6 
43.20    51.14    35.03    46   
      • • with government participation
   47.22    34.58    37 
                Refining cost             
6.30    5.84    5.31    10    • Brazil   6.07    5.34    14 

(9) Revision of lifting costs in Argentina. 

11

Exploration and Production – Thousand barrels/day

Increased output from P-34 (Jubarte) and FPSO-Cidade do Rio de Janeiro (Espadarte), coupled with the start-up of FPSO-PRM (Piranema), FPSO-Cidade de Vitória (Golfinho) and the P-52 and P-54 platforms (Roncador) more than offset the natural decline in the mature fields.

Increased output from the new platforms, especially the P-52 and P-54 platforms (Roncador), which started up in the 4Q-2007, more than offset the natural decline in the mature fields.

International oil production by the consolidated companies fell due to the reduction in reservoir pressure in the United States, plus lower output from the mature fields in Argentina and Angola.

Gas production decreased due to the natural decline in the U.S. wells caused by reduced reservoir pressure.

International production was jeopardized by the 25-day strike in the Cuenca Austral field in Argentina and the diminished pressure in oil and gas reservoirs in the United States.

12

Refining, Transportation and Supply – thousand barrels/day

The year-on-year upturn in the first half was due to the lower number of scheduled stoppages in the distillation units and their increased reliability.

Domestic processed crude in the 2Q-2008 moved up 3% than in the 1Q-2008 due to the reduction in programmed stoppages.

Processed crude in the overseas refineries fell due to the sale of the Bolivian refineries in 2007 and the stoppages in the Argentinean and U.S. refineries, partially offset by output from the Japanese refinery acquired in April 2008.

Total processed throughput in the overseas refineries in the 2Q-2008 increased by 44% thanks to the return to normal operations of the Argentinean and U.S. refineries following the scheduled stoppages in the previous quarter, plus the volume added by the Japanese refinery acquired in April 2008.

Costs

Lifting Cost (US$/barrel)

Excluding the impact of the appreciation of the Real, the lifting cost in Brazil climbed by 15% year-on-year in the 1H-2008, due to higher expenses with drilling rigs and vessels, the more robust oil industry, the higher number of programmed platform stoppages, the wage increase, the expansion of the workforce and the higher initial unit cost of the new production systems that began operations in the 4Q-2007, which will gradually come down as production moves up.

Also excluding the impact of the appreciation of the Real, the unit lifting cost in Brazil climbed by 10% quarter-over-quarter, due to preventive maintenance stoppages in the P-26 and P-33 platforms and programmed stoppages in the platforms in the Marlim and Namorado fields.

13

The year-on-year upturn in the first-half lifting cost was due to higher extraction costs, plus the impact of the increase in international oil prices and the higher tax on production from the new FPSO-Cidade do Rio de Janeiro, P-52 and P-54 systems.

The quarter-over-quarter increase was due to the upturn in the average Brazilian oil price used to calculate the government take, based on the international price, and the higher taxes on the Roncador Field, due to the increase in production triggered by the recently-installed platforms.

The year-on-year increase in the international lifting cost was caused by the higher price of outsourced services and the wage hike in Argentina, as well as the upturn in the price of maintenance and surveillance services in Colombia, partially offset by the reduction in transport services in the United States.

The 2Q-2008 increase over the previous three months was due to the strike in the Cuenca Austral field and the May 2008 pay rise in Argentina, plus workover activities in Colombia.

14

Refining Cost (US$/barrel)

Excluding the impact of the appreciation of the Real, the domestic refining cost moved up 16% year-on-year in the first half thanks to higher electricity consumption, maintenance and repair service, due to greater complexity of the existing refineries and oil industry over heated, demanding salary adjusted and higher programmed stoppages.


Also excluding the impact of the appreciation of the Real, the domestic refining cost fell 7% over the 1Q-2008 due to reduced expenses from maintenance and programmed stoppages.

The international refining cost moved up due to higher costs in the USA caused by the programmed stoppage in the Pasadena refinery, associated with the slide in processed crude volume in 2008.

The international refining cost fell over the 1Q-2008 due to the increase in the volume of processed crude, triggered by the end of the scheduled stoppages in the USA and Argentina.

15

Corporate Overhead – Parent Company (US$ million)

Discounting the impact of the 17% appreciation of the Real, corporate overhead moved up 8% year-on-year in the 1H-2008 (all expenditures in this area are in Reais). The increase was due to the growth in the Company’s operation and their greater complexity, leading to higher expenses from data processing, specialized technical and administrative support services, advertising, the pay rise and the upturn in the workforce.

Discounting the appreciation of the Real against the dollar, corporate overhead moved up by 4% quarter-over-quarter, chiefly due to higher expenses from technical support associated with solutions management and systemic processes and the increase in the workforce.

Sales Volume – thousand barrels/day

Domestic sales volume moved up 8% over the 1H-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 thermo-plants, while aviation fuel sales were pushed by the expansion of tourism, leveraged by economic growth and the appreciation of the Real against the dollar. Gas sales increased by 34% due to higher sales to the thermo-plants and the increased supply of imported and domestic gas (Manati field and Espírito Santo Basin).

International sales volume fell 7% due to the programmed stoppage in the Pasadena refinery and the sale of the Bolivian refineries in 2007, partially offset by output from the Japanese refinery in the 2Q-2008.

Domestic sales volume climbed by 4% in the 2Q-2008 over the previous quarter, led by higher diesel sales due to the sugarcane harvest.

Oil and oil product exports increased 17% quarter-over-quarter due to higher oil output and the December/07 anticipation of shipments originally scheduled for January/08.

International sales recorded a 13% upturn over the 1Q-2008 due to the increase in offshore operations, the consolidation of the Japanese refinery as of the 2Q-2008, the programmed stoppages in Argentina in the 1Q-2008 and the beginning of VNG sales in Colombia as of March.

16


Result by Business Area R$ million (1)
    2º Quarter            First Half    
           
1Q-2008    2008    2007    D%       2008    2007    D%
               
 
9,430    11,557    6,416    80    EXPLORATION & PRODUCTION    20,987    11,499    83 
(566)   (49)   2,283    (102)   SUPPLY    (615)   4,409    (114)
(396)   237    (215)   (210)   GAS AND ENERGY    (159)   (531)   (70)
313    311    215    45    DISTRIBUTION    624    404    54 
50    293    235    25    INTERNATIONAL (2)   343    (26)   (1,419)
(1,443)   (2,621)   (1,797)   46    CORPORATE    (4,064)   (4,377)   (7)
(463)   (945)   (337)   180    ELIMINATIONS    (1,408)   (447)   215 
               
6,925    8,783    6,800    29    CONSOLIDATED NET INCOME    15,708    10,931    44 
               

(1) Comments on the results by business area begin on page 18 and their respective financial statements on page 27.

(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

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, based on internal transfer prices established between the various areas, 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 financial result is completely allocated to the corporate segment;

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

The improved result was due to the increase in average domestic oil prices and the 2% upturn 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 economically unviable wells.

The spread between the average domestic oil sale/transfer price and the average Brent price widened from US$ 10.84/bbl in the 1H-2007 to US$ 13.25/bbl in the 1H-2008, due to the fact that heavy crude moved up less than light, together with the upturn in international transport costs.

The quarter-over-quarter improvement was due to higher average domestic oil prices and the 2% increase in daily oil and NGL production, partially offset by the higher government take.

The spread between the average domestic oil sale/transfer price and the average Brent price increased from US$ 10.77/bbl in the 1Q-2008 to US$ 15.92/bbl in the 2Q-2008, due to the fact that heavy crude moved up less than light, together with the upturn in international transport costs.

The year-on-year reduction in the Supply result in the 1H-2008 was due to higher oil acquisition/transfer costs and the increase in oil product import costs, reflecting the behavior of international prices. 

18

These effects were partially offset by the upturn in oil product prices in Brazil and abroad.

The quarter-over-quarter improvement was due to the following factors:

These effects were partially offset by higher average oil acquisition/transfer costs and the increase in oil product import costs.

The year-on-year improvement in the first-half Gas and Energy result was due to the wider gas sales margin and the increase in electricity sales volume.

These effects were partially offset by contractual fines and charges related to natural gas supply (R$ 295 million).

The improved G&E result was due to the increase in electricity sales margins, higher gas prices and the reduction in contractual fines and charges related to natural gas supply (R$ 211 million).

The result was positively impacted by the 14% increase in sales volume, which helped raise the Company’s share of the fuel market from 33.8%, in the 1H-2007, to 35.2% in the 1H-2008.

19

The healthier sales margin was due to higher sales volume and prices, although these effects were partially offset by increased operating expenses related to third-party services and freight.

The segment recorded a 34.5% share of the national fuel distribution market, versus 35.9% in the 1Q-2008.


The upturn was caused by higher oil prices plus reduced seismic acquisition costs in Turkey, Angola, the USA and Libya, offset by lower sales margins and volume in the USA and the constitution of provisions for royalty contingencies.

The quarterly improvement in the result was due to the following factors:


The higher result was due to the following factors:

The 2Q-2008 downturn was due to the negative impact of net financial expenses, as detailed on page 9, plus the impact of the negative exchange variation on offshore investments.

20

Consolidated Debt

    R$ million 
 
    06.30.2008    03.31.2008    D % 
Short-term Debt (1)   8,699    7,639    14 
Long-term Debt (1)   33,256    35,674    (7)
       
Total    41,955    43,313    (3)
Cash and cash equivalents    11,046    11,560    (4)
Net Debt (2)   30,909    31,753    (3)
Net Debt/(Net Debt + Shareholder's Equity) (1)   19%    21%    (2)
Total Net Liabilities (1) (3)   240,420    229,746    5 
Capital Structure (third parties net / total liabilities net)   46%    47%    (1)

(1) Includes debt from leasing contracts (R$ 1,202 million on June 30, 2008 and R$ 1,429 million on March 31, 2008). 
(2) Total debt less cash and cash equivalents. 
(3) Total liabilities net of cash/financial investments. 

The net debt of the Petrobras Group on June 30, 2008, was 3% less than the amount recorded on March 31, 2008, due to the appreciation of the Real.

The level of indebtedness, measured by the net debt/EBITDA ratio, fell from 0.57, on March 31, 2008, to 0.48 on June 30, 2008. The portion of the capital structure represented by third parties was 46%, 1 percentage point down on March 31, 2008.

21

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 June 30, 2008, total investments amounted to R$ 20,899 million, 6% up on the total on June 30, 2007.

R$ million
    First Half 
    2008    %    2007    %    D % 
• Own Investments    17,850    85    17,030    86    5 
           
Exploration & Production    9,733    46    9,092    46    7 
Supply    3,679    18    2,856    13    29 
Gas and Energy    1,094    5    730    4    50 
International    2,744    13    3,486    18    (21)
Distribution    192    1    547    3    (65)
Corporate    408    2    319    2    28 
           
• Special Purpose Companies (SPCs)   2,519    12    2,596    13    (3)
           
• Projects under Negotiation    530    3    169    1    214 
           
Total Investments    20,899    100    19,795    100    6 
           

R$ million
    First Half 
    2008    %    2007    %    D % 
International                     
Exploration & Production    2,176    79    3,129    90    (30)
Supply    333    12    202    6    65 
Gas and Energy    133    5    65    1    105 
Distribution    9    -    26    1    (65)
Others    93    4    64    2    45 
           
Total Investments    2,744    100    3,486    100    (21)
           

R$ million
    First Half
    2008    %    2007    %    D % 
Projects Developed by SPCs                     
Gasene    641    25    586    22    9 
CDMPI    371    15    206    8       80 
PDET Off Shore    239    10    186    7       28 
Codajás    523    21    -    -     - 
Mexilhão    350    14    223    9       57 
Marlim Leste    234    9    847    33    (72)
Malhas    161    6    342    13    (53)
Amazônia    -    -    206    8    (100)
           
Total Investments    2,519    100    2,596    100       (3)
           

In line with its strategic goals, 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 103 consortiums. These ventures will require total investments of around US$ 11,068 million by the end of the current year.

22

PETROBRAS Financial Statements
     

Income Statement – Consolidated

R$ million
    2nd Quarter        First Half 
       
1Q-2008    2008    2007        2008    2007 
       
59,158    67,014    53,633    Gross Operating Revenues    126,172    103,760 
(12,266)   (12,444)   (11,835)   Sales Deductions    (24,710)   (23,068)
           
46,892    54,570    41,798    Net Operating Revenues    101,462    80,692 
(29,639)   (33,332)   (24,489)      Cost of Goods Sold    (62,971)   (48,181)
           
17,253    21,238    17,309    Gross profit    38,491    32,511 
            Operating Expenses         
(1,592)   (1,723)   (1,443)      Sales    (3,315)   (2,858)
(1,565)   (1,608)   (1,498)      General and Administratives    (3,173)   (3,043)
(685)   (594)   (391)      Exploratory Cost    (1,279)   (1,046)
(417)   (373)   (428)      Research & Development    (790)   (810)
(149)   (126)   (323)      Taxes    (275)   (622)
(356)   (356)   (452)      Pension and Health Plan    (712)   (905)
(1,145)   (956)   (1,160)      Other    (2,101)   3,046 
           
(5,909)   (5,736)   (5,695)       (11,645)   (12,330)
           
               Net Financial Expenses         
705    381    399              Income    1,086    1,083 
(814)   (836)   (768)             Expenses    (1,650)   (1,651)
(159)   (150)   73              Net Monetary Variation    (309)   (62)
(132)   (1,197)   (839)             Net Exchange Variation    (1,329)   (1,440)
           
(400)   (1,802)   (1,135)       (2,202)   (2,070)
           
(6,309)   (7,538)   (6,830)       (13,847)   (14,400)
12    (143)   (103)   Participation in Equity Income    (131)   (187)
           
10,956    13,557    10,376    Operating Profit    24,513    17,924 
(12)   413    24    Non-operating Income (Expenses)   401    51 
(3,971)   (4,557)   (3,168)   Income Tax & Social Contribution    (8,528)   (6,136)
(48)   (630)   (432)   Minority Interest    (678)   (908)
           
6,925    8,783    6,800    Net Income    15,708    10,931 
           

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

23

Balance Sheet – Consolidated

Assets   R$ million 
    06.30.2008    03.31.2008 
     
Current Assets    60,005    54,731 
     
         Cash and Cash Equivalents    11,046    11,560 
         Accounts Receivable    15,601    12,946 
         Inventories    22,999    19,395 
         Marketable Securities    176    268 
         Taxes Recoverable    7,142    7,602 
         Other    3,041    2,960 
Non-current Assets    190,259    185,145 
     
         Long-term Assets    22,001    21,827 
     
         Petroleum & Alcohol Account    801    799 
         Advances to Suppliers    366    421 
         Marketable Securities    3,616    3,730 
         Deferred Taxes and Social Contribution    9,070    8,747 
         Advance for Pension Plan    1,347    1,336 
         Prepaid Expenses    1,414    1,480 
         Accounts Receivable    2,654    2,529 
         Deposits - Legal Matters    1,722    1,728 
         Other    1,011    1,057 
     
         Investments    7,651    7,841 
         Fixed Assets    152,272    146,983 
         Intangible    5,751    5,737 
         Deferred    2,584    2,757 
     
Total Assets    250,264    239,876 
     

Liabilities   R$ million 
    06.30.2008    03.31.2008 
     
Current Liabilities    44,539    42,338 
     
         Short-term Debt    8,301    7,199 
         Suppliers    16,664    14,609 
         Taxes and Social Contribution    11,430    10,207 
         Project Finance    238    147 
         Pension and Health Plan    879    880 
         Dividends    -    2,091 
         Salaries, Benefits and Charges    1,942    1,669 
         Other    5,085    5,536 
Non Current Liabilities    67,191    68,729 
     
         Long-term Debt    32,452    34,685 
         Pension Fund    4,658    4,565 
         Health Plan    9,830    9,558 
         Deferred Taxes and Social Contribution    11,930    11,573 
         Other    8,321    8,348 
Deferred Income    2,246    1,734 
Minority interest    6,580    6,240 
Shareholders’ Equity    129,708    120,835 
     
         Capital Stock    78,967    52,644 
         Reserves    35,033    61,266 
         Net Income    15,708    6,925 
     
Total Liabilities    250,264    239,876 
     

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

24

Statement of Cash Flow - Consolidated

R$ million
    2nd Quarter        First Half 
       
1Q-2008    2008    2007        2008    2007 
           
6,925    8,783    6,800    Net Income    15,708    10,931 
2,846    3,105    6,384    (+) Adjustments    5,951    9,948 
           
2,532    2,629    2,655       Depreciation & Amortization    5,161    5,066 
714    (1,890)   (548)      Charges on Financing and Connected Companies    (1,176)   (1,224)
48    630    432       Minority interest    678    908 
(12)   143    103       Result of Equity Income    131    187 
485    3,243    2,129       Foreign Exchange on Fixed Assets    3,728    3,880 
737    321    (617)      Deferred Income Tax and Social Contribution    1,058    (511)
(1,796)   (3,085)   (1,900)      Inventory Variation    (4,881)   (1,024)
822    1,926    2,169       Supplier Variation    2,748    274 
330    366    524       Pension and Health Plan Variation    696    1,072 
(1,014)   (1,178)   1,437       Adjustments    (2,192)   1,320 
9,771    11,888    13,184    (=) Cash Generated by Operating Activities    21,659    20,879 
(10,070)   (10,969)   (10,236)   (-) Cash used for Cap.Expend.    (21,039)   (18,389)
           
(5,341)   (5,412)   (5,022)      Investment in E&P    (10,753)   (9,386)
(2,380)   (2,255)   (2,419)      Investment in Supply    (4,635)   (3,521)
(1,436)   (1,481)   (1,717)      Investment in Gas and Energy    (2,917)   (2,421)
(82)   (797)   (53)      Investiments in Distribution    (879)   (159)
(1,197)   (1,155)   (1,316)      Investment in International Segment    (2,352)   (2,842)
514    206    364       Marketable Securities    720    164 
37    216    65       Dividends    253    150 
(185)   (291)   (138)      Other investments    (476)   (374)
           
(299)   919    2,948    (=) Free cash flow    620    2,490 
(1,212)   (1,433)   (5,557)   (-) Cash used in Financing Activities    (2,645)   (12,465)
2,862    678    (3,958)      Financing    3,540    (4,993)
(4,074)   (2,111)   (1,599)      Dividends    (6,185)   (7,472)
(1,511)   (514)   (2,609)   (=) Cash generated in the period    (2,025)   (9,975)
           
13,071    11,560    20,463       Cash at the Beginning of Period    13,071    27,829 
11,560    11,046    17,854       Cash at the End of Period    11,046    17,854 

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

25

Statement of Value Added – Consolidated

    R$ million
    First Half
    2008   2007
Description         
Sales of Products and Services and Non-Operating Revenues*    127,481    104,917 
Raw Materials Used    (16,187)   (12,367)
Products for Resale    (27,119)   (16,933)
Materials, Energy, Services & Other    (9,418)   (12,568)
     
Added Value Generated    74,757    63,049 
 
Depreciation & Amortization    (5,161)   (5,066)
Participation in Equity Income, Goodwill & Negative Goodwill    (131)   (187)
Financial Result    1,086    1,147 
Rent and Royalties    300    251 
     
Total Distributable Added Value    70,851    59,194 
     
 
Distribution of Added Value         
Personnel         
Salaries, Benefits and Charges    5,501    6,365 
     
    5,501    6,365 
     
Government Entities         
Taxes, Fees and Contributions    30,265    27,088 
Government Take    11,350    7,107 
     
    41,615    34,195 
     
Financial Institutions and Suppliers         
Interest, FX Rate and Monetary Changes    3,288    3,154 
Rent and Freight Expenses    4,061    3,640 
     
    7,349    6,794 
     
 
Shareholders         
     Minority Interest    678    908 
     Dividends/Interest on Own Capital    -    2,194 
     Retained Earnings    15,708    8,738 
     
    16,386    11,840 
     
Distributed Added Value    70,851    59,194 
     

* Net of Provisions for Doubtful Debts.

26

Consolidated Result by Business Area - 1H-2008

    R$ MILLION 
                                 
    E&P    SUPPLY    GAS
&
ENERGY 		   DISTRIB.   INTERN.   CORPOR.    ELIMIN.    TOTAL 
Net Operating Revenues    54,807    82,212    7,190    25,972    9,665    -    (78,384)   101,462 
                 
    Intersegments    54,030    22,039    912    441    962    -    (78,384)   - 
    Third Parties    777    60,173    6,278    25,531    8,703    -    -    101,462 
Cost of Goods Sold    (20,529)   (81,080)   (6,093)   (23,717)   (7,675)   -    76,123    (62,971)
                 
Gross Profit    34,278    1,132    1,097    2,255    1,990    -    (2,261)   38,491 
Operating Expenses    (2,058)   (2,612)   (1,147)   (1,309)   (1,197)   (3,450)   128    (11,645)
 Sales, General & Administrative    (325)   (2,235)   (487)   (1,302)   (733)   (1,531)   125    (6,488)
 Taxes    (34)   (41)   (15)   (14)   (66)   (105)   -    (275)
 Exploratory Costs    (1,059)   -    -    -    (220)   -    -    (1,279)
 Research & Development    (390)   (151)   (53)   (7)   (2)   (187)   -    (790)
 Health and Pension Plans    -    -    -    -    -    (712)   -    (712)
 Other    (250)   (185)   (592)   14    (176)   (915)   3    (2,101)
                 
Operating Profit (Loss)   32,220    (1,480)   (50)   946    793    (3,450)   (2,133)   26,846 
 Interest Income (Expenses)   -    -    -    -    -    (2,202)   -    (2,202)
 Equity Income    -    52    (16)   8    56    (231)   -    (131)
 Non-operating Income (Expenses)   10    389    14    (12)   (6)   6    -    401 
                 
 
Income (Loss) Before Taxes and Minority Interests    32,230    (1,039)   (52)   942    843    (5,877)   (2,133)   24,914 
Income Tax & Social Contribution    (10,958)   371    12    (318)   (339)   1,979    725    (8,528)
Minority Interests    (285)   53    (119)   -    (161)   (166)   -    (678)
                 
Net Income (Loss)   20,987    (615)   (159)   624    343    (4,064)   (1,408)   15,708 
                 

Consolidated Result by Business Area - 1H-2007

    R$ MILLION 
                                 
    E&P    SUPPLY    GAS
&
ENERGY 		   DISTRIB.   INTERN.   CORPOR.    ELIMIN.    TOTAL 
Net Operating Revenues    36,087    62,903    4,358    21,081    9,517    -    (53,254)   80,692 
                 
    Intersegments    33,655    16,884    1,114    384    1,217    -    (53,254)   - 
    Third Parties    2,432    46,019    3,244    20,697    8,300    -    -    80,692 
Cost of Goods Sold    (16,111)   (53,768)   (3,967)   (19,083)   (7,750)   -    52,498    (48,181)
                 
Gross Profit    19,976    9,135    391    1,998    1,767    -    (756)   32,511 
Operating Expenses    (1,896)   (2,516)   (879)   (1,369)   (1,421)   (4,327)   78    (12,330)
 Sales, General & Administrative    (351)   (1,905)   (456)   (1,161)   (731)   (1,376)   79    (5,901)
 Taxes    (15)   (73)   (46)   (91)   (68)   (329)   -    (622)
 Exploratory Costs    (451)   -    -    -    (595)   -    -    (1,046)
 Research & Development    (406)   (149)   (85)   (6)   (2)   (162)   -    (810)
 Health and Pension Plan    -    -    -    -    -    (905)   -    (905)
 Others    (673)   (389)   (292)   (111)   (25)   (1,555)   (1)   (3,046)
                 
Operating Profit (Loss)   18,080    6,619    (488)   629    346    (4,327)   (678)   20,181 
 Interest Income (Expenses)   -    -    -    -    -    (2,070)   -    (2,070)
 Equity Income    -    81    23    (8)   43    (326)   -    (187)
 Non-operating Income (Expense)   (25)   (5)   3    (5)   89    (6)   -    51 
                 
 
Income (Loss) Before Taxes and Minority Interests    18,055    6,695    (462)   616    478    (6,729)   (678)   17,975 
Income Tax & Social Contribution    (6,139)   (2,249)   165    (212)   (248)   2,316    231    (6,136)
Minority Interests    (417)   (37)   (234)   -    (256)   36    -    (908)
                 
Net Income (Loss)   11,499    4,409    (531)   404    (26)   (4,377)   (447)   10,931 
                 

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

27

EBITDA(1) Consolidated Statement by Business Area - 1H-2008

    R$ MILLION 
                                 
    E&P    SUPPLY    GAS
&
ENERGY 		   DISTRIB.   INTERN.   CORPOR.    ELIMIN.    TOTAL 
Operating Profit (Loss)   32,220    (1,480)            (50)   946    793    (3,450)   (2,133)   26,846 
Depreciation & Amortization    2,866    1,057             406    181    570    81    -    5,161 
                 
EBITDA (1)   35,086    (423)   (356)   1,127    1,363    (3,369)   (2,133)   32,007 
                 

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

Statement of Other Operating Income (Expenses) - 1H-2008

    R$ MILLION 
                                 
    E&P    SUPPLY    GAS
&
ENERGY 		   DISTRIB.   INTERN.   CORPOR.    ELIMIN.    TOTAL 
Institutional relations and cultural projects    (37)   (30)   (3)   (25)   -    (459)   -    (554)
Fines and Contractual Charges    -    -    (295)   -    -    -    -    (295)
Losses and Contingencies related to Legal Proceedings    (13)   (26)   (1)   (8)   (129)   (113)   -    (290)
 
Operating expenses with thermoelectric    -    -    (266)   -    -    -    -    (266)
HSE Expenses    (9)   (39)   (2)   -    -    (124)   -    (174)
 
Installations and production equipment    (30)   (41)   -    -    -    -    -    (71)
 
Contractual losses from ship-or-pay transport services    -    -    -    -    (41)   -    -    (41)
Other    (161)   (49)   (25)   47    (6)   (219)   3    (410)
                 
    (250)   (185)   (592)   14    (176)   (915)   3    (2,101)
                 

Statement of Other Operating Revenues (Expenses) - 1H-2007

    R$ MILLION 
                                 
    E&P    SUPPLY    GAS
&
ENERGY 		   DISTRIB.   INTERN.   CORPOR.    ELIMIN.    TOTAL 
Institutional relations and cultural projects    (36)   (28)   -    (21)   -    (462)   -    (547)
Losses and Contingencies related to Legal Proceedings    (136)   (34)   -    (49)   (2)   (2)   -    (223)
 
Operating expenses with thermoelectric    -    -    (245)   -    -    -    -    (245)
HSE Expenses    (9)   (49)   (2)   -    -    (139)   -    (199)
 
Installations and production equipment    (19)   (72)   -    -    -    -    -    (91)
 
Contractual losses from ship-or-pay transport services    -    -    -    -    (44)   -    -    (44)
Career Evaluation    (48)   (23)   (4)   -    (3)   (45)   -    (123)
Expenses with Renegotiation of Petros Fund Plan    (220)   (129)   (11)   (40)   (8)   (642)   -    (1,050)
Other    (205)   (54)   (30)   (1)   32    (265)   (1)   (524)
                 
    (673)   (389)   (292)   (111)   (25)   (1,555)   (1)   (3,046)
                 

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

28

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 

Consolidated Assets by Business Area - 03.31.2008

    R$ MILLION 
                                 
    E&P    SUPPLY    GAS
&
ENERGY 		   DISTRIB.   INTERN.   CORPOR.    ELIMIN.    TOTAL 
ASSETS    94,007    58,813    30,388    9,970    23,010    34,202    (10,514)   239,876 
                 
                 
   CURRENT ASSETS    5,698    26,364    5,409    5,223    4,198    17,963    (10,124)   54,731 
                 
           CASH AND CASH EQUIVALENTS    -    -    -    -    -    11,560    -    11,560 
           OTHER    5,698    26,364    5,409    5,223    4,198    6,403    (10,124)   43,171 
   NON-CURRENT ASSETS    88,309    32,449    24,979    4,747    18,812    16,239    (390)   185,145 
                 
           LONG-TERM ASSETS    4,173    1,138    2,154    506    1,027    13,197    (368)   21,827 
           PROPERTY, PLANTS AND EQUIPMENT    80,627    26,973    21,755    2,801    13,116    1,733    (22)   146,983 
           OTHER    3,509    4,338    1,070    1,440    4,669    1,309    -    16,335 

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

29

Consolidated Results – International Business Area - 1H-2008

    R$ MILLION
INTERNATIONAL
                             
    E&P   SUPPLY    GAS
&
ENERGY		   DISTRIB.    CORPOR.    ELIMIN.    TOTAL 
ASSETS (06.30.2008)   15,544    6,279    2,357    781    2,591    (3,660)   23,892 
               
               
                             
Income Statement                             
Net Operating Revenues    2,402    6,023    885    2,128    3    (1,776)   9,665 
               
   Intersegments    1,250    1,225    211    52    -    (1,776)   962 
   Third Parties    1,152    4,798    674    2,076    3    -    8,703 
Operating Profit (Loss)   771    47    170    91    (291)   5    793 
Net Income (Loss)   399    35    91    66    (253)   5    343 

Consolidated Results – International Business Area

    R$ MILLION
INTERNATIONAL
                             
    E&P   SUPPLY    GAS
&
ENERGY		   DISTRIB.    CORPOR.    ELIMIN.    TOTAL 
ASSETS - (03.31.2008)   15,949    4,835    2,430    713    3,050    (3,967)   23,010 
               
               
Income Statement - (1H-2007)                            
Net Operating Revenues    2,402    6,233    1,127    1,780    25    (2,050)   9,517 
               
   Intersegments    1,664    1,389    201    13    -    (2,050)   1,217 
   Third Parties    738    4,844    926    1,767    25    -    8,300 
Operating Profit (Loss)   135    206    305    (29)   (282)   11    346 
Net Income (Loss)   (95)   161    211    (23)   (291)   11    (26)

30

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$ 801 millions on June 30, 2008 (R$ 799 millions on March 31, 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 Brazil, measured through the generation of current taxes, duties and social contributions, totaled R$ 28,376 million.

R$ million
    2nd Quarter        First Half 
             
1Q-2008   2008    2007   D  %       2008   2007   D  %
               
4,550    4,883    4,484    9    Economic Contribution - Country Value Added Tax (ICMS)   9,433    8,616    9 
1,944    1,422    1,973    (28)   CIDE (1)   3,366    3,826    (12)
3,046    3,214    2,974    8    PASEP/COFINS    6,260    5,723    9 
3,888    4,265    3,005    42    Income Tax & Social Contribution    8,153    5,897    38 
577    587    658    (11)   Other    1,164    1,314    (11)
               
14,005    14,371    13,094    10    Subtotal Country    28,376    25,376    12 
               
852    1,037    824    26    Economic Contribution - Foreign    1,889    1,712    10 
               
14,857    15,408    13,918    11    Total    30,265    27,088    12 
               

(1) CIDE – ECONOMIC DOMAIN CONTRIBUTION CHARGE 

31

3. Government Take

R$ million
    2nd Quarter        First Half 
             
1Q-2008    2008    2007    D  %       2008    2007    D  %
               
                Country             
2,397    2,847    1,778    60    Royalties    5,244    3,405    54 
2,430    3,313    1,647    101    Special Participation    5,743    3,156    82 
30    26    28    (7)   Surface Rental Fees    56    61    (8)
               
4,857    6,186    3,453    79    Subtotal Country    11,043    6,622    67 
               
146    161    186    (13)   Foreign    307    485    (37)
               
5,003    6,347    3,639    74    Total    11,350    7,107    60 
               

The Brazilian government take increased by 67% year-on-year in the 1H-2008, due to the 44% upturn in the reference price for local oil (R$ 148.88 in the 1H-2008 versus R$ 103.16 in the 1H-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 2Q-2008, the Brazilian government take moved up 27% over the previous quarter, due to the 9% upturn in the reference price for local oil (R$ 155.28 in the 2Q-2008, versus R$ 142.47 in the 1Q-2008), reflecting the average Brent price on the international market, plus increased output from the recently installed platforms in the Roncador field.

4. Reconciliation of Consolidated Shareholders’ Equity and Net Income

    R$ million
         
    Shareholders' Equity   Result
. According to PETROBRAS information as of 06.30.2008    131,110    15,117 
. Profit in the sales of products in affiliated inventories    (491)   (491)
. Reversal of profits on inventory in previous years    -    669 
. Capitalized interest    (803)   7 
. Absorption of negative net worth in affiliated companies *    135    222 
. Other eliminations    (243)   184 
     
. According to consolidated information as of 06.30.2008    129,708    15,708 
     

* 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
    2nd Quarter        First Half 
       
1Q-2008    2008    2007         2008    2007 
           
-14.60%    25.91%    13.61%    Petrobras ON    7.52%    7.87% 
-16.30%    24.91%    11.92%    Petrobras PN    4.55%    3.69% 
-11.39%    38.73%    21.87%    ADR- Level III - ON    22.93%    17.75% 
-11.98%    36.85%    19.40%    ADR- Level III - PN    20.45%    15.01% 
-4.57%    6.64%    18.75%    IBOVESPA    1.77%    22.30% 
-7.55%    -7.44%    8.53%    DOW JONES    -14.44%    7.59% 
-14.07%    0.61%    7.50%    NASDAQ    -13.55%    7.78% 

Petrobras’ shares had a book value of R$ 14.94 on June 30, 2008.

32

6. Foreign Exchange Exposure

Assets   R$ million
    06.30.2008    03.31.2008 
     
 
Current Assets    6,692    8,334 
     
     Cash and Cash Equivalents    2,312    4,049 
     Other Current Assets    4,380    4,285 
 
Non-current Assets    20,228    18,626 
     
     Amounts invested abroad via partner companies, in the international segment, in E&P equipments to be used in Brazil and in commercial activities.   19,271    17,618 
     Long-term Assets    488    554 
     Property, plant and equipment    469    454 
 
     
Total Assets    26,920    26,960 
     

Liabilities   R$ million
    06.30.2008    03.31.2008 
     
Current Liabilities    (6,332)   (4,859)
     
     Short-term Debt    (2,476)   (2,435)
     Suppliers    (3,252)   (1,792)
     Other Current Liabilities    (604)   (632)
Long-term Liabilities    (12,601)   (14,124)
     
     Long-term Debt    (11,645)   (13,024)
     Other Long-term Liabilities    (956)   (1,100)
     
Total Liabilities    (18,933)   (18,983)
     
 
     
Net Assets (Liabilities) in Reais    7,987    7,977 
     
( + ) Investment Funds - Exchange    14    20 
( - ) FINAME Loans - dollar-indexed reais    (272)   (355)
     
Net Assets (Liabilities) in Reais    7,729    7,642 
     

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

33

PETROBRAS Financial Statements
     

Income Statement – Parent Company

R$ million
    2nd Quarter        First Half 
       
1Q-2008     2008     2007        2008    2007 
           
44,861    52,961    41,691    Gross Operating Revenues    97,822    79,677 
(11,053)   (11,374)   (10,866)   Sales Deductions    (22,427)   (20,984)
           
33,808    41,587    30,825    Net Operating Revenues    75,395    58,693 
(19,655)   (23,704)   (16,180)      Cost of Products Sold    (43,359)   (31,461)
           
14,153    17,883    14,645    Gross Profit    32,036    27,232 
            Operating Expenses         
(1,486)   (1,480)   (1,237)      Sales    (2,966)   (2,494)
(1,092)   (1,110)   (1,025)      General & Administrative    (2,202)   (2,064)
(538)   (521)   (236)      Exploratory Cost    (1,059)   (451)
(413)   (370)   (425)      Research & Development    (783)   (805)
(90)   (58)   (185)      Taxes    (148)   (340)
(336)   (337)   (424)      Health and Pension Plans    (673)   (848)
(1,071)   (1,098)   (1,162)      Other    (2,204)   (2,964)
           
(5,026)   (4,974)   (4,694)       (10,035)   (9,966)
           
               Net Financial         
1,326    1,541    967            Income    2,902    1,953 
(934)   (1,445)   (735)           Expenses    (2,379)   (1,323)
(96)   (152)   50            Net Monetary Variation    (248)   (69)
(186)   (2,262)   (1,267)           Net Exchange Variation    (2,448)   (2,121)
           
110    (2,318)   (985)       (2,173)   (1,560)
           
(4,916)   (7,292)   (5,679)       (12,208)   (11,526)
798    1,126    507    Paticipation in Equity Income    1,924    559 
           
10,035    11,717    9,473    Operating Income    21,752    16,265 
1    337    (33)   Non-operating Income (Expense)   338    (34)
(3,285)   (3,688)   (2,588)   Income Tax / Social Contribution    (6,973)   (5,043)
           
6,751    8,366    6,852    Net Income    15,117    11,188 
           

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

34

Balance Sheet – Parent Company

Assets   R$ million
    06.30.2008   03.31.2008
     
Current Assets                 59,434                   50,464 
     
   Cash and Cash Equivalents    17,358    15,088 
   Accounts Receivable    17,197    12,618 
   Inventories    17,665    15,354 
   Dividends Receivable    542    478 
   Deferred Taxes & Social Contribution    4,596    5,048 
   Other    2,076    1,878 
Non-current Assets    189,837    180,935 
     
   Long-term Assets                 70,422                   67,472 
     
   Petroleum & Alcohol Account    801    799 
   Subsidiaries and affiliated companies    52,767    50,230 
   Structured Projects    2,077    1,824 
   Advances to Suppliers    322    377 
   Marketable Securities    3,336    3,419 
   Advance for Pension Plan    1,347    1,336 
   Deferred Taxes and Social Contribution    6,520    6,116 
   Judicial Deposits    1,458    1,466 
   Anticipated Expenses    683    723 
   Other    1,111    1,182 
     
   Investments    28,659    27,940 
   Property, plant and equipment    86,886    81,690 
   Intangible    3,156    3,079 
   Deferred    714    754 
     
Total Assets    249,271    231,399 
     

Liabilities   R$ million 
    06.30.2008    03.31.2008 
     
Current Liabilities                 80,938                   71,668 
     
   Short-term Debt    2,845    757 
   Suppliers    47,865    43,073 
   Taxes & Social Contribution Payable    9,756    8,561 
   Dividends / Interest on Own Capital    -    2,091 
   Structured Projects    522    472 
   Health and Pension Plan    816    816 
   Clients Anticipation    199    163 
   Receivable Cash Flow    14,699    11,134 
   Other    4,236    4,601 
Long-term Liabilities                 36,773                   36,710 
     
   Long-term Debt    5,920    6,024 
   Subsidiaries and affiliated companies    1,372    1,676 
   Pension plan    4,227    4,169 
   Health Care Benefits    9,074    8,819 
   Deferred Taxes & Social Contribution    9,652    9,464 
   Provision for abandonment    5,972    5,919 
   Other    556    639 
Deferred Income    451    258 
Shareholders' Equity    131,109    122,763 
     
   Capital    78,967    52,644 
   Capital Reserves    37,025    63,368 
   Net Income    15,117    6,751 
     
Total liabilities    249,271    231,399 
     

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

35

Statement of Cash Flow – Parent Company

R$ million
    2nd Quarter        First Half 
       
1Q-2008    2008    2007        2008    2007 
           
6,751    8,366    6,852    Net Income    15,117    11,188 
5,367    4,470    7,672    (+) Adjustments    9,837    11,056 
           
1,541    1,609    1,482           Depreciation & Amortization    3,150    2,742 
(2)   (1)   (4)          Oil and Alcohol Accounts    (3)   (7)
6,159    4,273    4,458           Oil and Oil Products Supply - Foreign    10,432    4,617 
(179)   3,986    650           Charges on Financing and Affiliated Companies    3,807    1,434 
(2,152)   (5,397)   1,086           Other Adjustments    (7,549)   2,270 
12,118    12,836    14,524    (=) Cash Generated by Operating Activities    24,954    22,244 
(7,262)   (6,971)   (5,689)   (-) Cash used for Cap.Expend.    (14,233)   (10,323)
           
(3,929)   (4,179)   (3,472)      Investment in E&P    (8,108)   (6,584)
(2,285)   (1,490)   (2,037)      Investment in Supply    (3,775)   (3,051)
(703)   (694)   (532)      Investment in Gas and Energy    (1,397)   (830)
(13)   (3)   (8)      Investments in International Area    (16)   (8)
-    (706)   -       Investment in Distribution    (706)   - 
(355)   (250)   (135)      Structured Projects - Net of Advance    (605)   (229)
208    452    717       Dividends    660    753 
-    105    -       Marketable Securities    105    - 
(185)   (206)   (222)      Other Investments    (391)   (374)
           
4,856    5,865    8,835    (=) Free Cash Flow    10,721    11,921 
2,384    (3,595)   (10,587)   (-) Cash used in Financing Activities    (1,211)   (20,633)
7,240    2,270    (1,752)   (=) Cash Generated in the Period    9,510    (8,712)
           
7,848    15,088    13,139    Cash at the Beginning of Period    7,848    20,099 
15,088    17,358    11,387    Cash at the End of Period    17,358    11,387 

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

36

Statement of Value Added - Parent Company

    R$ million
    First Half
    2008   2007
Description         
Sale of products and services and non operating income*    98,355    80,322 
Raw Materials Used    (10,487)   (6,547)
Products for Resale    (11,678)   (4,870)
Materials, Energy, Services & Others    (7,179)   (10,703)
     
Added Value Generated    69,011    58,202 
 
Depreciation & Amortization    (3,150)   (2,742)
Participation in subsidiaries, goodwill & discount amortization    2,265    559 
Financial Income    2,230    1,132 
Rent and royalties    238    196 
     
Total Distributable Added Value    70,594    57,347 
     
 
Distribution of Added Value         
 
Personnel         
Salaries, Benefits and Charges    4,144    5,166 
     
    4,144    5,166 
     
Government Entities         
Taxes, Fees and Contributions    30,439    27,195 
Government Participation    11,043    6,622 
     
    41,482    33,817 
     
Financial Institutions and Suppliers         
Interest, FX Rate and Monetary Variations    4,402    2,628 
Rent and Freight Expenses    5,449    4,549 
     
    9,851    7,177 
     
Shareholders         
     Dividends / interest on own capital    -    2,193 
     Net Income    15,117    8,994 
     
    15,117    11,187 
     
Value Added distributed    70,594    57,347 
     

* Net of Provisions for Doubtful Debts.

37

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.

38

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: August 12, 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.