1 SUMMARY MESSAGE FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS MESSAGE FROM THE PRESIDENT OF PETROBRAS PROFILE SECURITIES MARKET Shareholding Position Stock Performance Risk Rating LARGE NUMBERS CORPORATE STRATEGY Strategic Plan 2017-2021 Business and Management Plan INTERNATIONAL ENVIRONMENT, OIL MARKET AND REGULATION International Environment Oil Market Regulation INVESTMENTS Impairment BUSINESS PERFORMANCE Exploration and Production Refining, Transportation, Trading and Petrochemicals Distribution Natural Gas, Electricity and Fertilizers Biofuels Awards and Recognition GOVERNANCE, MANAGEMENT AND COMPLIANCE Ethics Health, Safety, and Environment. Organizational Restructuring Corporate Governance Risk Management Compliance and Internal Controls Social Responsibility Research and Development Human Resources 2 OPERATION CAR WASH CLASS ACTION AND RELATED PROCESSES INFORMATION ON PROVISION OF SERVICES OTHER THAN EXTERNAL AUDIT BY INDEPENDENT AUDITORS – CVM INSTRUCTION 381/2003 FINANCIAL ANALYSIS Consolidated Results Sales Volume Result by Business Area Impairment. Liquidity and Capital Resources Indebtedness Assets and Liabilities Subject to Forex Variation Contingencies Contractual Obligations ACKNOWLEDGMENTS GLOSSARY 3 MESSAGE FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS Dear shareholders, employees and business partners of PETROBRAS, This message has two major purposes. The first is to be the first message from the Board of Directors, through its current Chairman, at the end of the first year of full term. This Chairmanship was initially held throughout 2015 on an interim basis, thereafter replacing its full holder, who took a leave and then resigned during his term. Once this interim cycle and replacement was completed in April 2016, the Board of Directors was mandated by shareholders for a full period of 02 (two) years, ending in April 2018, and over the course of its first year in office, it faced the replacement of the Chairman of the Executive Board. Mr. Pedro Parente was appointed as the new President by the controlling shareholder; was submitted to, and approved by, the integrity background check; and was nominated by the Board. Since then, a partnership has been established between the presidency and the Executive Board, which has practiced fruitful, constructive interaction, continuing the high- level work already established under the presidency of Mr. Aldemir Bendine. As soon as he was sworn in, President Pedro Parente decided to carry out a cycle of constructive conversations focused on an in-depth review of the Strategic Plan of PETROBRAS. The initiative was fully supported by the Board of Directors, which endorsed and supported the promotion of 2 (two) main goals under this new Plan, namely: to pursue a considerable reduction in accidents in our facilities and our activities – thus supporting the larger goal of preserving life and pursuing safe working conditions. Our targets in this regard are ambitious, seeking a dramatic reduction of personal incidents per million hours worked, which will be achieved with much training, intensive improvement of process safety and awareness, and to significantly reduce the company’s debt and the financial leveraging. We are not proud to flaunt the largest corporate debt in the oil and gas sector on the planet. We recognized that our debt has reached such high levels that repairing measures are required - as envisaged in the Strategic Plan - to refocus our debt to a level that will most benefit Petrobras’ businesses. As our President Pedro Parente has already stated, in order to honor the commitment to invest in our core business – oil extraction and fuel industrialization – disinvestment in activities that are not directly related to this business is not a choice between valid alternatives, it is a necessity. Divestment is one of the best ways we can allocate, through active portfolio management, the necessary resources for delivering the production curve we are capable – and obliged – to offer the market. Another key strategy for ensuring the cash flow that will enable us to invest in our core activities consists of technological, exploration, production, and/or financial partnerships. 4 The second purpose of this message concerns the formal record of changes in company Governance, of which the current Board of Directors is particularly proud. Let it be said that the current Board is the first, basically since the creation of Petrobras in the 1950s, composed solely of Members with no relation to any government agencies. Additionally, care was been taken in 2015, and the principle was preserved in 2016, to appoint a multidisciplinary Board – legal operators are present, financial reporting experts are present, accounting and auditing professionals are present, investors are present, there is a representative elected by the employees, there is an expert in oil, gas, and deepwater, because, ultimately, all facets of the life of the company count on the experts and representatives on the Board. After being sworn in in 2015,, the Board immediately reinforced the mission and the internal rules of 5 (five) Advisory Committees to the Board itself: the Auditing Committee, which became Statutory in 2016 in compliance with the corresponding requirements from the Comissão de Valores Mobiliários – CVM (the Brazilian Securities and Exchange Commission) and the Securities and Exchange Commission – SEC, USA; the Strategic Affairs Committee; the Finance Committee; the Committee on Nomination, Compensation, and Succession; and the Health, Safety, and Environment Committee. More recently, the Board of Directors incorporated a Minority Shareholders Committee, which has the duty and prerogative to speak for the care of company interests in transaction proposals with parties related to the Federal Government and its Autarchies and Foundations, within the authority of the Board of Directors. Each of these six Committees is chaired by a member of the Board of Directors. The Statutory Audit Committee is composed only of members of the Board of Directors. On the other Committees, non-Board members who have knowledge and expertise in matters within the scope of each Committee participate. It should be said, to give insight into the intensity of Committee operations, that in 2016, the Statutory Audit Committee met 29 (twenty-nine) times; the Committee on Nomination, Compensation and Succession met 32 (thirty-two) times; the Health, Safety, and Environment Committee met 13 (thirteen) times; the Finance Committee met 26 (twenty-six) times; and the Strategic Committee met 21 (twenty-one) times. All of this alongside the 47 (forty-seven) Ordinary and Extraordinary meetings of the Board of Directors meetings. Our Whistleblowing Channel was enormously improved and background checks of suppliers are in the thousands. Additionally, vetoes to the nomination of persons with inappropriate curricula for positions with decision-making authority and vetoes to suppliers from which we demand change in stance for a better governance have been frequent. 5 It is our duty in rendering accounts of this nature to also confront specific challenges. Two of them are worthy of record: divestmentthe vital decision to abide by orders to improve transparency, issued by competent authorities, will directly result in extended periods to operationalize divestments; and discussions with the DoJ – the United States Department of Justice – and the SECin our defense in Class Action suits, in addition to several proceedings before Brazilian authorities (CVM, TCU, Prosecutor’s Office, the Judiciary Branch) will ensure final results once such cases are closed, although Petrobras is a victim in this process and at no time benefited directly or indirectly from the illicit acts. As I said in the beginning, this is the start of an “accountability” report in this first year of the current mandate. And if we can summarize the understanding of our Mission beyond the safety of human life and the return to investment grade ratings, perhaps the best expression of our task is to contribute to recovering the self-esteem of employees, investors and Brazilians in their largest state-owned company, which we all want to be, once again, the best one. Nelson Carvalho Chairman of the Board of Directors 6 MESSAGE FROM THE PRESIDENT OF PETROBRAS Dear shareholders and investors, I present my first message as President of Petrobras to our shareholders and investors with the sense of immense responsibility for leading the Executive Board of the largest company in Brazil, which is among the four largest companies in Brazil in terms of market value, in full recovery. The global oil and gas industry faced the second year of adversity, which began with the abrupt drop in oil prices in the last quarter of 2014 when barrel price dropped from US$ 100 level to less than US$ 35 in early 2016. More recently, those prices have fluctuated in a range between US$ 45 and US$ 55 per barrel. The industry had to adapt to this new reality of prices by selling assets and reducing investments and costs. An important aspect of this new competitive framework is the consolidation of so-called unconventional oil and gas production (shale and tight oil/gas), which represents a disruptive change in exploration and production of hydrocarbons and imposes great challenges to players in so-called conventional production, including Petrobras. This industry context, challenging in and of itself, also found Petrobras in the midst of the biggest crisis in its history. The height of these