ogx petróleo e gás s.a. - under court- supervised

KPDS 159597

OGX Petróleo e Gás S.A. - Under court-supervised reorganization Interim Financial

Information (ITR) on June

30, 2016 and Independent

Auditors’ Report on review

of the Interim Financial

Information (ITR)

OGX Petróleo e Gás S.A. - Under court-supervised reorganization

Interim Financial Information (ITR) on June 30, 2016

and Independent Auditors’ Report on review of the

Interim Financial Information (ITR)

2

Contents Management report 3

Independent auditor’s report on review of quarterly information 11

Statements of financial position 14

Statements of income 16

Statements of comprehensive income 18

Statements of changes in equity (unsecured liabilities) 19

Statements of cash flows 20

Statements of value added 21

Notes to the financial information 22

3

Management’s Report

Dear shareholders,

The Management of OGX Petróleo e Gás S.A. (“OGX P&G” or “Company”) (in court-

supervised reorganization), in fulfillment of legal and statutory requirements, is submitting

Management`s Report with financial statements and corresponding independent auditors' report

for the quarter ended June 30, and for subsequent events relevant for the market.

Key metrics 2016 2015

Net revenue (R$ million) 54 263

Operating EBITDA (R$ million) (100) (84)

Profit / (loss) (R$ million) 62 (320)

CAPEX (R$ million) 31 11

Cash position (US$ million) 6 6

1. MESSAGE FROM MANAGEMENT

In the second quarter, OGX P&G and OGpar made substantial progress in the negotiation with

OSX-3 Leasing B.V. creditors, and signed an agreement (“Partial Agreement”) on July 15th,

2016, suspending the litigation between the parties for a period of 30 business days as of the

date of approval by the competent Court. The Partial Agreement guarantees the continuity of

the Company’s activities and creates an opportunity for the execution of a definitive agreement

in order to reduce operating costs and end all existing disputes between the parties.

In the same period, the Company ratified a capital increase approved by the Board of

Directors’ Meeting of June 3rd, 2016, with contribution of capital totaling R$ 117,273,261.79

through the capitalization of credit and the private issuance of 12,513,821 shares, under the

negotiation with the creditors of OSX-1 Leasing B.V. in order to decommission the OSX-1

platform.

Given the recovery in oil prices in international markets on the last few months, production

was resumed in the Tubarão Martelo Field on July, averaging 9.8 thousand barrels of oil per

day, allowing the return of cash generation for the Company and new growth prospects.

Also during the second quarter of 2016, OGX received the payment related to PIS and

COFINS tax credits, in the amount of R$ 193.2 million, which contributed to reduce the

pressure on its cash position and comply with short-term obligations until the resume and

stabilization of production at the Tubarão Martelo Field.

4

2. Assets under Development

Development of the Atlanta and Oliva fields (“BS-4”)

Atlanta is a post-salt field located in BS-4 Block, in the Santos Basin. OGX has a 40% interest in

the consortium, in partnership with Barra Energia do Brasil Petróleo e Gás Ltda., with a 30%

interest, and Queiroz Galvão Exploração e Produção S.A. (“QGEP”), the block’s operator, also

with a 30% interest.

On August 10th, 2016, the field’s operator disclosed to the market that, due to challenges found in

the process of customizing the FPSO Petrojarl I, the vessel expectancy to arrive was postponed

to the first quarter of 2017. In this sense, the first oil of the Early Production System (“SPA”) in

the Atlanta Field which was scheduled for the last quarter of 2016, should only occur on the first

semester of 2017. In this first phase, potential production is estimated at 20,000 bbl/d, with two

producing wells that were already drilled and equipped with submersible pumps and wet

Christmas trees. The projection has a margin variation of +/-10%. Production in the SPA may

reach around 30,000 bbl/d with three producing wells, however, the operator will disclose the

production curve in Atlanta Field once the third well drilling schedule is defined.

FPSO Petrojarl I will be chartered for five years, with a termination clause valid after the third

year, and the consortium has also contracted the necessary equipment and underwater solutions.

OGX Austria GmbH, a wholly owned subsidiary of OGX P&G, signed an agreement for the sale

of oil (COSA - Crude Oil Sales Agreement) corresponding to OGX’s share of production for the

Atlanta Field SPA. The agreement has a term of three years and may be extended for another

year. The sale of oil to Shell Western Supplyand Trading Ltd. (“Shell”) will be Free on Board

(“FOB”) in the FPSO with a netback pricing mechanism.

The estimated CAPEX of the consortium is US$ 100 million for 2016 and US$ 150 million for

2017, and OGX P&G is responsible for 40% of the estimated CAPEX. The total estimated

operating cost for the charter and maintenance serves for the SPA is US$ 480 thousand per day,

including leasing, services, logistics, insurance and abandonment fund costs, among others.

3. Mature Assets

3.1 Campos Basin

3.1.1 Tubarão Azul Field

In January 2016, OGX concluded the decommissioning of FPSO OSX-1 platform, fulfilling all

of the commitments entered into with OSX 1 Leasing B.V., its respective creditors and OSX

Serviços Operacionais Ltda. – under Court-Supervised Reorganization. The success of the

decommissioning results from OGX’s capacity to negotiate with its creditors and regulatory

agents.

As part of the agreement, OSX-1 Leasing B.V. deposited US$32 million in an escrow account

with the sole purpose of guaranteeing the fulfillment of the obligations associated with the

abandonment of the Tubarão Azul field wells.

5

The amount deposited by OSX-1 Leasing B.V. was paid to the Company through a capital increase,

approved at the Board of Directors’ Meeting of June 3, 2016, via a private share issue.

3.1.2 Tubarão Martelo Field

A – Production

On March 5th, 2016, the Company temporarily suspended production in the Tubarão Martelo

Field, due to the persistent fall in oil prices in the international market, which made the operation

on the field economically unfeasible at the time.

However, due to the recovery in oil prices in the international market, the Company reviewed its

decision and, on April 26th, 2016, filed with ANP a request to resume production in the four wells

connected on the Tubarão Martelo Field, aiming to generate cash in a more favorable market

scenario. After receiving approval by ANP, on July 1st, 2016, production was resumed on the

field. The activities in the four wells are stable and operating normally.

The chart below shows the evolution in Brent oil prices in the first six months of 2016.

Brent Oil Prices (US$)

6

4. Assets in the Exploration phase

4.1 Exploration Portfolio of Margem Equatorial

ExxonMobil Exploração Brasil Ltda. requested the return of the POT-M-762 block, which is

under review by the ANP.

As for the PAMA-M-591 and PAMA-M-624 blocks, on June 15, 2016, the Company was notified

by the ANP of the waiver from Minimum Exploratory Program compliance, due to the absence

of the environmental permit.

The Company is also awaiting review and final approval by the ANP regarding the sale of its

stake in CE-M-603 and POT-M-475 blocks, operated by ExxonMobil Exploração Brasil Ltda.,

signed in a farm out agreement in September 2015. OGX will keep its shareholders and the market

informed about the developments of this matter.

5. Assets Available for Sale

5.1 Parnaíba Gás Natural Shares

On March 24, 2016, the Company entered into an agreement with Eneva S.A. (“Eneva”), pledging

to subscribe part of the new common shares to be issued under Eneva’s private capital increase,

by means of the contribution of all of its interest held in PGN at the time of subscription.

Cambuhy also signed an agreement with Eneva, whereby it would contribute all of its interest in

PGN and PGN’s third- and fourth-issue convertible debentures.

As a result of the implementation of the aforementioned capital increase, Eneva may hold 100%

of PGN’s capital stock and OGX will hold interest in Eneva.

Additionally, as part of the agreement, OGX signed an agreement with Cambuhy, to sell the 5%

interest it holds in PGN’s capital stock for R$10 million, which is also subject to suspensive

conditions, including the authorization of the court-supervised reorganization.

5.2 Royalties Rights Abroad

In April 2016, the Company sold its rights to royalties of 3% of the revenue generated from the

sale of hydrocarbons in the VIM-5 and VIM-19 blocks for approximately R$10.4 million,

allowing the generation of cash in the short term and concluding the sale of all assets located in

Colombia, pursuant to the Company’s Judicial Reorganization Plan.

7

6. Financial Performance

6.1 Consolidated statement of income/operations (R$ thousand)

(i) This total excludes the portions of Cost of Goods Sold (COGS) related to depreciation/amortization (R$ (19)), which are

presented in specific lines.

(ii) The sum of these lines plus Depreciation and Amortization (R$ (14,523)) corresponds to the “General and Administrative

Expenses” total in the Income Statement of the Quarterly Information of June 30, 2016.

(iii) The sum of these lines corresponds to the total Financial Result in the Income Statement of the Quarterly Information of

June 30, 2016.

(iv) Recorded as "Other Operating Expenses" in the Income Statement of the Quarterly Information of June 30, 2016.

Net Loss

The Company recorded net loss of R$ 62 million in the first six months of 2016, versus net loss

of R$319.8 million in the same period in 2015, substantially reflectin (i) the unrealized revenue

from exchange variation of R$ 98.2 million; (ii) the positive effect of R$ 123.1 million from the

provision related to the recognition of deferred PIS and COFINS taxes on revenue from unrealized

exchange variation; and (iii) recognition of extemporaneous PIS and COFINS tax credits totaling

R$162.7 million.

However, these effects were partially offset by (i) the negative gross margin of R$66.1 million in

the Tubarão Martelo Field, as a result of lower international oil prices in January and February

2016; (ii) operating costs of R$149.9 million in the Tubarão Martelo Field during the period of

interruption; (iii) provisioned interest on DIP financing and the incremental facility, totaling

R$60.1 million; (iv) restructuring costs and general and administrative expenses of R$ 41.7

million.

R$ (´000)

PROFIT & LOSS 2016 2015 ∆ ($) Q2/16 Q2/15 ∆ ($)

Continued operations

Net revenue 53,631 262,951 (209,320) - 165,269 (165,269)

COGS (i) (119,747) (317,759) 198,012 - (183,613) 183,613

EXPEX (478) (749) 271 (238) 1,543 (1,781)

G&A (ii) (35,822) (28,011) (7,811) (30,543) (10,496) (20,047)

Operational EBITDA (102,416) (83,568) (18,848) (30,781) (27,297) (3,484)

Reestructuring Cost (ii) (8,360) (28,596) 20,236 (5,489) (11,716) 6,227

Other Operational Revenues (Expenses) (iv) 15,802 (39,435) 55,237 52,003 (38,489) 90,492

Adjusted EBITDA including non recurring items (94,974) (151,599) 56,625 15,733 (77,502) 93,235

Depreciation/Amortization (14,542) (28,071) 13,529 (8,754) (7,124) (1,630)

Deferred PIS/COFINS (iv) 123,112 - 123,112 61,794 - 61,794

Stock option (ii) (183) 23,124 (23,307) (183) 1,190 (1,373)

Dry wells and Impairment (23,261) 87,829 (111,090) 14,401 (163,077) 177,478

Provision for losses / devaluation on inventories (iv) 33,764 7,336 26,428 6,060 18,164 (12,104)

Equity results (260) 1,912 (2,172) (227) (1,678) 1,451

EBIT 23,656 (59,469) 83,125 88,824 (230,027) 318,851

Net financial results (iii) (53,735) (57,777) 4,042 (22,875) (26,083) 3,208

Currency impacts (iii) 98,179 (112,976) 211,155 66,336 (1,788) 68,124

Derivatives (iii) - 2,267 (2,267) - (1,262) 1,262

EBT 68,100 (227,955) 296,055 132,285 (259,160) 391,445

(+/-) Income tax and social contribution - (7,254) 7,254 - - -

Valuation allowance - - - - - -

Net income (loss) - Continued operations 68,100 (235,209) 303,309 132,285 (259,160) 391,445

Net income (loss) - Discontinued operations (6,085) (84,564) 78,479 (4,913) 7,831 (12,744)

Net income (loss) - Total 62,015 (319,773) 381,788 127,372 (251,329) 378,701

8

Given the recent rise in oil prices in the international market and the more favorable market

scenario, the Company reassessed its decision of interrupting the production in the Tubarão

Martelo Field and, on April 26th, 2016, it filed a request with the ANP, for resumption of

production in the four wells connected at Tubarão Martelo Field to generate cash in a more

favorable scenario. Consequently, after ANP’s approval, on July 1st, 2016, production was

resumed in said field.

6.2 Statement of Financial Position (R$ thousand)

Cash and Cash Equivalents

(*) This total does not include Leasing costs.

R$ (´000)

06/30/2016 12/31/2015 Var. 06/30/2016 12/31/2015 Var.

Assets Liabilities

Current assets Current

Cash and cash equivalents 20,089 23,546 (3,457) Trade payables 47,184 139,057 (91,873)

Escrow deposits - - - Taxes, contributions and government takes 19,368 19,725 (357)

Accounts receivable - - - Salaries and payroll taxes 14,648 20,403 (5,755)

Derivative financial instruments - - - Loans and financings 1,301,337 1,526,411 (225,074)

Taxes and contributions recoverable - 15,000 (15,000) Loans with related parties - - -

Oil inventory - 17,168 (17,168) Accounts payable to related to parties 512,902 457,397 55,505

Other credits and prepaid expenses 7,956 12,538 (4,582) Sundry provisions 177,132 214,479 (37,347)

28,045 68,252 (40,207) Other accounts payable 25,908 10,744 15,164

2,098,479 2,388,216 (289,737)

Non current asset held for sale 234,875 232,433 2,442

Non current Non current

Long-term assets 777,958 733,410 44,548 Sundry provisions 424,301 490,260 (65,959)

Escrow deposits 152,799 59,800 92,999 Deferred PIS/COFINS 18,926 142,038 (123,112)

Materials and supplies 11,731 21,374 (9,643) Loans with related parties 46,154 56,148 (9,994)

Loans with related parties 71,079 85,854 (14,775) 489,381 688,446 (199,065)

Taxes and contributions recoverable 128,045 153,738 (25,693)

Deferred income taxes 358,223 358,223 - Shareholders' equity

Credits with related parties 56,081 54,421 1,660 Paid-in capital 8,607,471 8,607,346 125

Capital Reserve 117,273 - 117,273

Investments 153,112 151,779 1,333 Currency translation adjustments (212,333) (542,428) 330,095

Retained earnings (deficit) (8,681,841) (8,743,856) 62,015

Fixed assets 653,925 639,917 14,008 (169,430) (678,938) 509,508

Intangible 570,515 571,933 (1,418)

Total Asset 2,418,430 2,397,724 20,706 Total Liability + Shareholders' equity 2,418,430 2,397,724 20,706

CASH AND CASH EQUIVALENTS R$ ('000)

Balance as of December 31, 2015 23,546

(+) Cash effects of gross margim (*) 12,030

(-) Idleness of Tubarão Martelo field (*) (42,954)

(+) Receipt of Tax Credits 193,167

(-) Payment of Royalties (15,801)

(-) Payment of Cash Calls (33,962)

(-) Amortisation of debts (7,765)

(-) AFBV Funding (13,809)

(-) G&A - included restructuring costs (44,182)

(-) Exploration expenses (478)

(+) Sale of rights on the royalties Colombia 10,412

(-) Payment of suppliers (64,501)

(+) Others 4,386

Balance as of June 30, 2016 20,089

10

Non-current assets available for sale

This refers to the 36.33% non-controlling interest in Parnaíba Gás Natural S.A. (“PGN”),

which is available for sale and was measured at fair value.

Fixed Assets (CAPEX)

(*) Included amount of discontinued operations.

Borrowings and Financings with Third Parties and Related Parties

Accounts Payable to Related Parties

These basically refer to amounts payable to companies from the OSX Group for the charter of

the FPSOs OSX1 and OSX3. The increase of approximately R$154 million over December

31, 2015 is associated with the leasing of FPSO OSX3 in the first six months of 2016, mainly

offset by the effect of the positive exchange variation on outstanding liabilities due to the

period appreciation of the Real against the dollar.

FIXED ASSETS R$ (´000)

Balance as of December 31, 2015 639,917

(+) CAPEX

Campos Basin (15,618)

Santos Basin 46,131

Parnaíba Basin -

Ceará and Potiguar Basin 148

Pará Maranhão Basin -

Corporate -

30,661

(-) Asset retirement obligation (1,285)

(-) CTA International (27,061)

(-) Depreciation (13,114)

(-) Impairment (i) (24,502)

(+) Write off Dry/Subcommercial wells -

(+) PIS/COFINS Credit 49,309

Balance as of June 30, 2016 653,925

LOANS AND FINANCINGS R$ ('000)

Balance as of December 31, 2015 (1,582,559)

(-) Accrued interests (DIP, Incremental Facility and Intercompanys) (60,081)

(+) Amortization of principal and interests 7,765

(+) Currency exchange 287,384

Balance as of June 30, 2016 (1,347,491)

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7. Personnel Management

The Company closed the second quarter of 2016 with 211 employees on its payroll and 168

outsourced workers, a reduction of approximately 16% in the number of employees and

outsourced workers on the quarterly comparison and a decline of 38% over December 31, 2015.

The reduction in the number of outsourced workers continued in the second quarter of 2016, due

to the decommissioning of the FPSO OSX-1 platform and the temporary suspension of production

in the Tubarão Martelo field.

8. Audit Committee

On August 10, 2016, the Statutory Audit Committee (“CAE”) of OGX Petróleo e Gás S.A.

reviewed the Management Report, the Quarterly Information and related Notes, and the

Independent Auditor’s Report for the period ended June 30, 2016. Based on said review and

considering the information and clarifications provided by the Company’s Management and

KPMG Auditores Independentes, the Committee decided to recommend that the Board of

Directors approve said Quarterly Information, without any qualification.

9. Declaration of the Board of Executive Officers

Pursuant to Article 25 of CVM Instruction 480/2009, the Board of Executive Officers hereby

declares that it has discussed, reviewed and agreed with the conclusion in the independent

auditors’ report, issued on August 12, 2016, and with the quarterly information for the period

ended June 30, 2016.

10. Adherence to the arbitration chamber

The Company, its shareholders, management and members of the Board of Directors are hereby

obliged to resolve, through arbitration, any and all disputes or controversies that may arise

between them, related to or arising from, especially, the application, validity, effectiveness,

interpretation, violations and effects of violations of the provisions included in the Novo Mercado

Listing Agreement, Novo Mercado Listing Regulations, Bylaws, shareholders’ agreements filed

at the Company’s headquarters, Brazilian Corporation Law, standards issued by the National

Monetary Council, the Brazilian Central Bank or the CVM, the Bovespa’s regulations, other

standards applicable to the operation of the capital market in general, Arbitration Clauses and

Arbitration Rules of the Market Arbitration Chamber, conducted pursuant to the Arbitration Rules

of the Market Arbitration Chamber.

KPMG Auditores Independentes, uma sociedade simples brasileira e firma-membro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça.

KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

11

KPMG Auditores Independentes

Av. Almirante Barroso, 52 - 4º andar

20031-000 - Rio de Janeiro/RJ - Brasil

Caixa Postal 2888 - CEP 20001-970 - Rio de Janeiro/RJ - Brasil

Telefone +55 (21) 3515-9400, Fax +55 (21) 3515-9000

www.kpmg.com.br

Independent Auditor’s Review Report on Interim

Financial Information - ITR

(A free translation of the original report in Portuguese, as filed with the Brazilian Securities

and Exchange Commission (CVM), prepared in accordance with the accounting practices

adopted in Brazil, rules of the CVM and the International Financial Reporting Standards -

IFRS)

To

The Board of Directors

OGX Petróleo e Gás S.A. - Judicial Recovery

Rio de Janeiro - RJ

Introduction

We have reviewed the individual and consolidated interim financial information of OGX

Petróleo e Gás S.A. - Judicial Recovery (“Company”), contained in the quarterly information

form - ITR for the quarter ended June 30, 2016, which comprises the balance sheet as of

June 30, 2016 and the respective statements of income and comprehensive income for

the three and six month period ended on that date, and changes in shareholders’ equity

and cash flows for the six month period ended on that date, including the explanatory

notes.

Management is responsible for the preparation of the individual and consolidated interim

financial information in accordance with CPC 21(R1) and the international accounting rule

IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards

Board - IASB, as well as the presentation of this information in accordance with the

standards issued by the Brazilian Securities and Exchange Commission (CVM), applicable

to the preparation of quarterly information - ITR. Our responsibility is to express our

conclusion on this interim accounting information based on our review.

Scope of the review

We conducted our review in accordance with Brazilian and International Interim Information

Review Standards (NBC TR 2410 - Revisão de Informações Intermediárias Executada pelo

Auditor da Entidade and ISRE 2410 - Review of Interim Financial Information Performed by

the Independent Auditor of the Entity, respectively). A review of interim information

consists of making inquiries primarily of the management responsible for financial and

accounting matters and applying analytical procedures and other review procedures. The

scope of a review is significantly less than an audit conducted in accordance with auditing

standards and, accordingly, it did not enable us to obtain assurance that we were aware of

all the significant matters that could have been identified in an audit. Therefore, we do not

express an audit opinion.



12

Conclusion on the interim financial information

Based on our review, we are not aware of any fact that might lead us to believe that the

individual and consolidated interim financial information included in the aforementioned

quarterly information were not prepared, in all material respects, in accordance with CPC

21(R1) and IAS34, issued by the IASB, applicable to the preparation of the quarterly review

ITR, and presented in accordance with the standards issued by the Brazilian Securities and

Exchange Commission.

Emphasis

Judicial Recovery Plan

As mentioned in explanatory note 1, on October 30, 2013 Óleo e Gás Participações S.A. -

Judicial Recovery, Company´s parent company at that time, filed, in the Judicial District of

the capital of the State of Rio de Janeiro, a request for a court-supervised reorganization

(judicial recovery) of the Company and its subsidiaries, that was granted on November 21,

2013. At the June 3, 2014 general meeting, the plans were approved by the creditors,

being approved afterwards, on June 13, 2014 by the 4th Business Court of the Judicial

District in the capital of the State of Rio de Janeiro. In April 2015, the Company signed its

first standstill agreement ("Private Instrument of Non-execution Commitment") with the

holders of convertible debentures (DIP) and credits of "incremental facility" provided in the

original plan, where they abstained from voting or from taking any action related to claim

collection of the amounts or to execute guarantees from DIP or incremental facility for the

term of the contract, which was extended until October 30, 2015. General meetings of

debenture holders subsequent to that date, being the last held on August 12, 2016, have

postponed the resolution of this matter. Actions for the preservation of such guarantees,

and other conditions to the conversion of these debts into shares, are described in the

same note. Our conclusion does not contain any modification with respect to this matter.

Going Concern

As mentioned in explanatory note 1, we draw attention to the fact that the interim financial

information for the six month period ended June 30, 2016 indicate that the Company and

its subsidiaries incurred in losses of R$62,015 thousand (individual and consolidated) and,

on that date, the current liabilities exceeded its current assets by R$1,888,031 thousand

and R$1,835,559 thousand, on the parent company and consolidated balances,

respectively. Additionally, the interim financial information present a deficit in shareholder

equity at the period then ended of R$169,430 thousand (individual and consolidated). The

Company's financial restructuring depends on the success of the court-supervised

reorganization plan, as well as on Management's action to manage the short-term

operating cash flows. Such conditions indicate the existence of significant uncertainty that

could raise relevant doubt as to the Company's ability to continue as a going concern. Our

conclusion does not contain any modification with respect to this matter.



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Other matters

Interim information of added value

We also reviewed the individual and consolidated interim statement of added value for the

six month period ended June 30, 2016, prepared under Management responsibility, for

which presentation is required in the interim information in accordance with the standards

issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the

preparation of quarterly information - ITR, and considered as supplementary information by

IFRS, which does not require the presentation of the statements of added value. These

statements were submitted to the same review procedures described previously and,

based on our review, we are not aware of any fact that might lead us to believe that they

were not prepared, in all material respects, in accordance with the individual and

consolidated interim accounting information, taken as a whole.

Rio de Janeiro, August 12, 2016

KPMG Auditores Independentes

CRC SP-014428/O-6 F-RJ

Anderson C. V. Dutra

Accountant CRC RJ-093231/O-6

OGX Petróleo e Gás S.A. - Under court-supervised

reorganization

(Publicly-held Company)

Statements of financial position at June 30, 2016 and December 31,

2015

(Amounts in thousands of Reais)

14

Company Consolidated

Note 06/30/2016 12/31/2015 6/30/2016 12/31/2015

Assets

Current Assets

Cash and cash equivalents 5 326 21,979 20,089 23,546

Income tax, social contribution and other

recoverable taxes 13 - 15,000 - 15,000

Oil inventories 8 - 17,168 - 17,168

Other credits and prepaid expenses 9 8,278 12,603 7,956 12,538

8,604 66,750 28,045 68,252

Non-current asset held for sale 10 234,875 232,433 234,875 232,433

Total Current Assets 243,479 299,183 262,920 300,685

Non-Current Assets

Long-term assets

Escrow deposits 6 152,799 59,800 152,799 59,800

Material supplies 8 5,676 15,319 11,731 21,374

Loans with related parties 14 12,238,291 14,860,630 71,079 85,854

Income tax, social contribution and other

recoverable taxes 13 126,940 152,780 128,045 153,738

Deferred income tax and social

contribution 13 358,223 358,223 358,223 358,223

Credits with related parties 14 44,530 44,530 56,081 54,421

12,926,459 15,491,282 777,958 733,410

Investments 10 4,533 6,979 153,112 151,779

Fixed assets 11 535,539 491,818 653,925 639,917

Intangible assets 12 570,515 571,933 570,515 571,933

Total Non-Current Assets 14,037,046 16,562,012 2,155,510 2,097,039

Total Assets 14,280,525 16,861,195 2,418,430 2,397,724

The accompanying notes are an integral part of the quarterly information.


reorganization


Statements of financial position at June 30, 2016 and December 31,

2015


15


Note 06/30/2016 12/31/2015 6/30/2016 12/31/2015

Liabilities

Current liabilities

Trade accounts payable 15 46,587 134,729 47,184 139,057

Income and social contribution taxes,

government takes and other taxes to be

paid 13 19,352 19,725 19,368 19,725

Salaries and payroll charges 14,635 20,403 14,648 20,403

Accounts payable to related parties 14 550,509 487,114 512,902 457,397

Borrowings and financing 16 1,301,337 1,526,411 1,301,337 1,526,411

Sundry provisions 17 177,132 214,479 177,132 214,479

Other accounts payable 21,958 5,938 25,908 10,744

Total Current Liabilities 2,131,510 2,408,799 2,098,479 2,388,216

Non-Current Liabilities

Loans with related parties 14 and

16 10,648,023 12,488,322 46,154 56,148


Deferred PIS and COFINS 13 and

26 18,926 142,038 18,926 142,038

Provision for losses on investments in

subsidiaries 10 1,227,195 2,010,714 - -

Total Non-Current Liabilities 12,318,445 15,131,334 489,381 688,446

Equity (unsecured liabilities)

Capital stock 19 8,607,471 8,607,346 8,607,471 8,607,346

Capital reserves 19 117,273 - 117,273 -

Currency translation adjustments (212,333) (542,428) (212,333) (542,428)

Accumulated losses (8,681,841) (8,743,856) (8,681,841) (8,743,856)

Total Equity (unsecured liabilities) (169,430) (678,938) (169,430) (678,938)

Total Liabilities and Equity (unsecured

liabilities) 14,280,525 16,861,195 2,418,430 2,397,724



reorganization


Statements of income

Three- and six-month periods ended June 30, 2016 and 2015

(In thousands of Reais, except for basic and diluted earnings (loss) per share

16

Company

04/01/2016

to 01/01/2016 to

04/01/2015 to 01/01/2015 to

Note 06/30/2016 06/30/2016 06/30/2015 06/30/2015

Net sales revenue 21 - 53,631 165,269 262,951

Cost of goods sold 22 - (124,318) (195,674) (349,212)

Gross profit (loss) - (70,687) (30,405) (86,261)

Operating expenses

Exploration expenses 24 (238) (478) 1,543 (679)

General and administrative expenses 23 (35,469) (45,190) (17,417) (30,846)

Other operating revenues / expenses 26 114,769 164,744 (20,112) (30,448)

79,062 119,076 (35,986) (61,973)

Provision for/realization of impairment 27 10,564 (31,373) (178,047) 69,291

Equity in the earnings of subsidiaries 10 228,307 432,235 80,465 (328,346)

Results before financial result and taxes on

income

317,933 449,251 (163,973) (407,289)

Financial Results

Financial revenue 25 15,122 17,476 4,226 11,813

Financial expenses 25 (42,309) (77,921) (28,054) (64,753)

Net exchange variation 25 (158,461) (320,706) (71,359) 232,274

(185,648) (381,151) (95,187) 179,334

Results before taxes on income 132,285 68,100 (259,160) (227,955)

Income tax and social contribution 13 - - - (7,254)

Net results of continuing operations 132,285 68,100 (259,160) (235,209)

Discontinued operations 33 (4,913) (6,085) 7,831 (84,564)

Profit (loss) for the period 127,372 62,015 (251,329) (319,773)

Basic and diluted earnings (loss) per share

(R$)

34

0.48838 (2.64804)


17

Consolidated

04/01/2016 to 01/01/2016 to 04/01/2015 to 01/01/2015 to

Note 06/30/2016 06/30/2016 06/30/2015 06/30/2015

Net sales revenue 21 - 53,631 165,269 262,951

Cost of goods sold 22 - (119,766) (186,843) (336,108)

Gross profit (loss) - (66,135) (21,574) (73,157)

Operating expenses

Exploration expenses 24 (238) (478) 1,543 (679)

General and administrative expenses 23 (44,969) (58,888) (24,916) (43,205)

Other operating revenues / expenses 26 119,857 172,678 (20,325) (32,099)

74,650 113,312 (43,698) (75,983)

Provision for/realization of impairment 27 14,401 (23,261) (163,077) 87,759

Equity in the earnings of subsidiaries 10 (227) (260) (1,678) 1,912

Results before financial result and taxes on

income

88,824 23,656 (230,027) (59,469)

Financial Results


Financial expenses 25 (43,089) (76,722) (30,958) (68,683)

Net exchange variation 25 66,086 97,929 (1,788) (112,976)

43,461 44,444 (29,133) (168,486)

Results before taxes on income 132,285 68,100 (259,160) (227,955)

Income tax and social contribution 13 - - - (7,254)

Net results of continuing operations 132,285 68,100 (259,160) (235,209)

Discontinued operations 33 (4,913) (6,085) 7,831 (84,564)


Basic and diluted earnings (loss) per share

(R$)

34

0.48838 (2.64804)


reorganization


Statements of comprehensive income

Three- and six-month periods ended June 30, 2016 and 2015


18

Company and Consolidated

04/01/2016 to 01/01/2016 to 04/01/2015 to 01/01/2015 to

06/30/2016 06/30/2016 06/30/2015 06/30/2015


Currency translation adjustments (CTA) 129,227 330,095 41,476 (159,457)

Total comprehensive income 256,599 392,110 (209,853) (479,230)




Statements of changes in equity

Periods ended June 30, 2016 and 2015


19


Note

Capital

stock/

Advances for

future capital

increase

(AFAC)

Capital

reserve

Other

comprehensi

ve income

Retained

earnings /

accumulated

losses Total

Balances as of January 1, 2015 8,607,346 461,941 (21,592) (8,429,384) 618,311

Pro rata recognition and cancellation / forfeiture of stock options 19 - (22,127) - - (22,127)

Currency translation adjustments (CTA) 20 - - (159,457) - (159,457)

Profit (loss) for the period 10 - - - (319,773) (319,773)

Balances as of June 30, 2015 8,607,346 439,814 (181,049) (8,749,157) 116,954

Currency translation adjustments (CTA) 35 - - (361,379) - (361,379)

Profit (loss) for the period 19 - - - (434,513) (434,513)

Offsetting accumulated losses - (439,814) - 439,814 -

Balances as of December 31, 2015 8,607,346 - (542,428) (8,743,856) (678,938)

Capital increase / AFAC 20 125 - - - 125

Goodwill in the issuance of shares 20 - 117,273 - - 117,273

Currency translation adjustments (CTA) 10 - - 330,095 - 330,095

Profit for the period - - - 62,015 62,015

Balances as of June 30, 2016 8,607,471 117,273 (212,333) (8,681,841) (169,430)


reorganization


Statements of cash flows



20



Note 06/30/2016

06/30/2015

06/30/2016

06/30/2015

Cash flows from operating activities

Profit (loss) for the period from continuing operations 68,100 (235,209) 68,100 (235,209)

Profit (loss) for the period from discontinued operations (6,085) (84,564) (6,085) (84,564)

Adjustments to reconcile results to cash flows from operating activities:

Depreciation of fixed assets and amortization of intangible assets 8, 11 and 12 13,606 22,220 14,542 32,034

Equity in the earnings of subsidiaries 10 (432,235) 328,346 260 (1,912)

Restatement - non-current assets available for sale 10 (2,442) (13,199) (2,442) (13,199)

Stock options (pro rata, cancellation, forfeiture and guarantees) 17 and 20 183 (23,125) 183 (23,125)

Write-offs of dry wells and sub-commercial areas 11 and 12 - (70) - (70)

Impairment losses on decommissioned assets 89,158 92,651 89,158 92,651

Impairment losses 11, 12, 27 and 33 (68,689) (79,686) (64,656) (87,984)

Provision for inventory losses 8 (43,688) (25,033) (43,688) (25,033)


Unrealized exchange variation on loans and financing 521,665 (352,839) 111,849 (20,342)

Interest/charges on financing 16 56,704 41,429 58,491 43,656

Amortization of funding costs 16 - 10,954 - 10,954

Deferred income tax and social contribution 13 - 7,254 - 7,254

Deferred PIS and COFINS 13 and 26 (123,112) - (123,112) -

Interest and exchange variation on provision for ARO 17 (108,519) 93,126 (108,519) 93,126

MTM valuation of derivatives - 2,561 - 2,561

Other (10,328) - (10,328) -

Cash provided by (used in) operations (39,367) (211,626) (9,932) (205,644)

Changes in assets and liabilities:

Other credits and related parties 9 and 14 90,019 194,285 102,109 174,253

Income tax, social contribution and other recoverable taxes 13 (8,469) 16,851 (8,616) 16,676

Trade accounts receivable 7 - 22,285 - 25,590

Inventories 8 70,489 (51,904) 70,489 (51,264)

Escrow deposits 6 (130,902) - (130,902) -

Trade accounts payable 15 (75,585) 16,068 (79,316) 8,272

Salaries and payroll charges (5,768) (3,797) (5,755) (3,797)

Income and social contribution taxes, government takes and other taxes to be paid 13 (373) (1,011) (357) (1,011)

Sundry provisions - guaranteed minimum payment 17 - (13,967) - (13,967)

Other accounts payable 16,020 (2,394) 15,164 1,164

(44,569) 176,416 (37,184) 155,916

Net cash provided by (used in) operating activities (83,936) (35,210) (47,116) (49,728)

Cash flows from financing activities

Escrow deposits 6 227 (15,645) 227 (15,645)

Capital increase in equity interest 10 (18,743) (51,307) (35,051) (30,250)

Acquisition of fixed assets 11 (28,344) (36,480) (30,660) (42,990)

Sale of fixed assets 11 - 2,708 - 2,708

Acquisition of intangible assets 12 - (22) - (22)

Net cash provided by (used in) financing activities (46,860) (100,746) (65,484) (86,199)

Cash flows from financing activities

Capital increase 19 125 - 125 -

Amortization of principal 16 (7,650) - (7,650) -

Payment of interest 16 (605) - (605) -

Cash received on conversion of stocks of liabilities associated with TBAZ Field

abandonment guarantee 20 117,273 - 117,273 -

Net cash provided by (used in) financing activities 109,143 - 109,143 -

Cash and cash equivalents (21,653) (135,956) (3,457) (135,927)

Variation in cash and cash equivalents

Opening balance of cash and cash equivalents 21,979 172,537 23,546 177,607

Closing balance of cash and cash equivalents 326 36,581 20,089 41,680

Variation in cash and cash equivalents (21,653) (135,956) (3,457) (135,927)


reorganization


Statements of value added



21


Note 06/30/2016 06/30/2015 06/30/2016 06/30/2015

Net sales revenue

Sale of products 21 53,631 262,951 53,631 262,951

Inputs acquired from third parties

Costs of products, merchandise and services, less

royalties

22 (118,401) (302,560) (113,849) (289,456)

Materials, energy, outsourced services and others 51,263 (24,271) 45,431 (26,002)

(Provision for)/realization of impairment 27 (31,373) 69,291 (23,261) 87,759

Effect of stock options 20 (183) 23,124 (183) 23,124

(98,694) (234,416) (91,862) (204,575)

Gross added value (45,063) 28,535 (38,231) 58,376

Retentions

Depreciation of fixed assets and amortization of

intangible assets

11 and

12 (13,606) (22,220) (14,542) (32,034)

Amortization of funding costs 16 - (10,954) - (10,954)

(13,606) (33,174) (14,542) (42,988)

Net value added produced by the Company (58,669) (4,639) (52,773) 15,388

Value added received in transfer

Equity in the earnings of subsidiaries 10 432,235 (328,346) (260) 1,912

Equity in the earnings of subsidiaries 33 (6,085) (84,564) (6,085) (84,564)


443,626 (168,823) 16,892 (69,479)

Total value added to distribute 384,957 (173,462) (35,881) (54,091)

Distribution of value added

Employees

Direct remuneration 25,030 23,604 25,204 23,854

Benefits 3,411 5,090 3,422 5,090

Accrued severance pay (FGTS) 3,126 4,261 3,126 4,261

31,567 32,955 31,752 33,205

Taxes

Taxes, fees and contributions (113,150) 20,300 (114,339) 22,515

Royalties 22 5,898 28,303 5,898 28,303

Financial expenses 25 398,627 64,753 (21,207) 181,659

Value distributed to shareholders

Profit (loss) for the period attributable to shareholders 62,015 (319,773) 62,015 (319,773)

Total value added distributed 384,957 (173,462) (35,881) (54,091)






22

Notes to the quarterly information

(Amounts expressed in thousands of Brazilian Reais, except when indicated

otherwise)

1 Operations

1.1 Corporate Structure

As of June 30, 2016, the corporate structure of OGX P&G is as follows:

OGX Petróleo e Gás S.A. - Under court-supervised reorganization (“OGX P&G” or

“Company”): Originally founded as a limited liability company (Ltda.) on June 27, 2007 and

headquartered in the city of Rio de Janeiro, the Company’s purpose is to engage in activities

authorized or granted by the Brazilian federal government involving research, extraction, refining,

processing, sale and transportation of oil, natural gas and other hydrocarbons, as well as any other

correlated activities. By acting either directly or through subsidiaries, OGX P&G may further

carry out the activities that make up its purpose in Brazil or outside of the nation’s territory and

hold interests in other companies. On July 2, 2012, it became a joint stock corporation (S.A.) and,

on account of this change, its reference name was changed from “OGX Ltda.” to “OGX P&G”.

On September 30, 2014, in order to optimize the operating costs of the OGPar Group, the interests

that OGPar held in OGX International and OGX R-11 were transferred to OGX P&G. Further on

the latter date, all the conditions precedent required for extinction of the pre-petition and post-

petition debts of OGX P&G through the issue of equity instruments had already been fulfilled.

As a result, the conversion was already mandatory as prescribed by the court-supervised

reorganization Plan approved by the creditors and ratified by the Reorganization Court. The

conversion and resulting dilution of the interest of OGPar to





23

28.57% was formalized on October 16, 2014. And finally, on March 30, 2016, the Board of

Directors of OGX P&G resolved on the increase of capital stock by capitalizing the credit

associated with the abandonment guarantee related to the Tubarão Martelo field (See Note 19 (a)),

within the limit of authorized capital, pursuant to Article 6 of the Bylaws of OGX P&G. The

capital increase was carried out upon private issue of 12,531,821 registered book-entry common

shares with no par value, at the issue price of R$ 9.38 per share, being R$ 0.01 per share allocated

to the capital stock account given the Company’s negative shareholders’ equity, and the remaining

R$9.37 per share allocated to the capital reserve. Although the issue of shares is still in progress,

the Company understood that the conversion of equity instruments in the first quarter of 2016 was

appropriate. As a result of the issue of shares referred to above, OGpar’s interest in OGX P&G

was once again diluted from 28.57% to 25.89%.

Sucursal Colômbia (“OGX Colômbia”): The Colombian branch of OGX P&G was founded on

October 26, 2010 to manage operations involving the exploration blocks acquired in that country.

Parnaíba Gás Natural S.A. (“PGN”): Founded on September 25, 2009 under the legal name

OGX Maranhão Petróleo e Gas Ltda, and headquartered in the city of Rio de Janeiro, this

subsidiary has the same corporate purpose as OGX P&G. On December 29, 2011, it was

transformed from a limited liability company into a joint stock corporation and on September 10,

2013 OGPar transferred the shares it held in PGN to OGX P&G through a capital increase. On

October 30, 2013, its name was changed from OGX Maranhão Petróleo e Gás S.A. to the current

name. On February 19, 2014, DD Brazil Holdings S.À.R.L. (“E.ON”) and an investment fund

managed by Cambuhy Investimentos Ltda. (“Cambuhy”) concluded their investment in Parnaíba

Gás Natural S.A. (“PGN”) by means of a capital increase, as prescribed in the Subscription

Agreement entered into on October 30, 2013 by the Company, E.ON, Cambuhy, Eneva S.A.,

PGN and others. After the completion of the capital increase, OGX Petróleo e Gás S.A., had an

interest equivalent to 36.36% of PGN’s capital stock, while Eneva, E.ON and Cambuhy had

interests of 18.18%, 9.09% and 36.37%, respectively. On March 24, 2016, an agreement was

entered between OGX P&G and Eneva S.A. (“OGX Subscription Agreement”) and an agreement

was entered between Eneva and Cambuhy I Fundo de Investimento em Participações

("Cambuhy") ("Cambuhy Subscription Agreement"), and jointly with OGX Subscription

Agreement, "Subscription Agreements"). Pursuant to the agreement, OGX P&G undertook to

subscribe part of the new common shares to be issued within the scope of Eneva’s private capital

increase, upon contribution of its total equity interest held in Parnaíba Gás Natural S.A. ("PGN")

at the time of subscription ("OGX Interest"). In turn, under the Cambuhy Subscription Agreement,

Cambuhy undertook, subject to certain conditions precedent, to subscribe part of the new common

shares to be issued within the scope of Eneva’s private capital increase, upon contribution (i) of

its total equity interest held in PGN ("Cambuhy Interest"); and (ii) of PGN’s total convertible

debentures of the 3rd and 4th issues ("Debentures" and, jointly with Cambuhy Interest, " Cambuhy

Assets" and, jointly with OGX Interest, "PGN Assets"). Eneva, in turn, subject to certain

conditions precedent, will hold a capital increase for private subscription ("Private Capital

Increase "), enabling the contribution of the PGN Assets by Cambuhy and by OGX at an estimated

amount of approximately R$1.15 billion, subject to approval of the respective valuation reports

by the general shareholders’ meeting of Eneva, pursuant to Article 8 of Brazilian Corporation

Law. The agreed price of the shares issue is R$0.15 per share, determined pursuant to Article 170,

paragraph 1, item III, of Brazilian Corporation Law. As a result of the Private Capital Increase

upon contribution of the Cambuhy Assets or of the total PGN Assets into Eneva’s capital (as the

case may be, the “Transaction”), Eneva may thereafter hold up to 100% of the capital stock of

PGN, thus becoming its sole

shareholder. On the other hand, Cambuhy and OGX P&G may thereafter become shareholders of





27

Eneva. On July 15, 2016, the Company informed the market that Nordic had agreed to the

immediate sale, by OGX P&G, of shares corresponding to five percent (5%) of its interest in

PGN. For further information, see Note 35.

OGX R-11 Petróleo e Gás S.A. (“OGX R-11”): This subsidiary was founded on October 4,

2013, headquartered in the city of Rio de Janeiro, and it has the same corporate purpose as OGX

P&G.

OGX International GmbH - Under court-supervised reorganization (“OGX

International”): Founded on November 11, 2009, headquartered in the city of Vienna, Austria,

this subsidiary’s purpose is to hold interests in other companies and engage in any type of

business.

OGX Austria GmbH - Under court-supervised reorganization (“OGX Austria”): Likewise

founded on November 11, 2009 and headquartered in Vienna, Austria, this subsidiary’s purpose

is to engage in all activities related to the sale of oil, natural gas and all other hydrocarbons,

including import, export, processing, transportation and storage. It may further acquire, maintain

and dispose of interests in other companies and sign lease agreements.

OGX Netherlands Holding B.V. (“OGX Netherlands Holding”): Founded on July 23, 2012,

headquartered in The Hague, in the Netherlands, this subsidiary’s purpose is to engage in the

exploration, production and sale of oil and its by-products, natural gas and other hydrocarbons. It

may further hold interests in other companies and provide technical services for the O&G

industry, and also engage in other activities associated with this industry. At present, its main

operating activities consist of holding interests in other Dutch companies.

OGX Netherlands Holding B.V. (“OGX Netherlands”): This subsidiary was founded on

March 19, 2010, also headquartered in The Hague, in the Netherlands. Its corporate purpose is

the exploration and production, as well as sale of oil and its by-products, natural gas and other

hydrocarbons. It may further provide technical services for the O&G industry, as well as engage

in other activities associated with this industry. At present, its main operating activities consist of

acquiring and leasing equipment to OGX P&G for use in the O&G industry.

Parnaíba B.V. (“Parnaíba B.V.”): Founded on November 15, 2012, this subsidiary is also

headquartered in The Hague, in the Netherlands, and has the same purpose as OGX Netherlands.

Currently, its main operations consist of acquiring and leasing to PGN equipment to be used in

the O&G industry.

Atlanta Field B.V. (“Atlanta Field”): This subsidiary was founded on November 2, 2012, and

is headquartered in Rotterdam, in the Netherlands. At present, its main operations consist of

acquiring and leasing equipment to be used in O&G exploration and production by the consortium

comprised of OGX P&G, Queiroz Galvão E&P and Barra Energia for operations in the Atlanta

and Oliva fields.





25

1.2 Portfolio

Fields being developed and producing As of June 30, 2016, the Company holds interests in the following fields:

No. Country Basin Blocks Field Operator

% held

by OGX

P&G

Contractual production

phase

1 Brazil Campos BMC 41 Tubarão Azul OGX P&G 100% 05/09/2012 to 05/09/2039 (iv)

2 Brazil Campos BMC 39 / 40 Tubarão Martelo OGX P&G 100% 04/19/2012 to 04/19/2039 (v) 3 Brazil Santos BS-4 Atlanta Queiroz Galvão E&P 40% 12/27/2006 to 12/27/2033

4 Brazil Santos BS-4 Oliva Queiroz Galvão E&P 40% 12/27/2006 to 12/27/2033

Exploratory concessions

As of June 30, 2016, the Company participates in the following exploratory concessions:

No.

Country

Basin

Blocks

Operator

% held by OGX

P&G

Contractual exploration

phase

1 Brazil Espírito-Santo BM-ES-40 Perenco 50% (i)

2 Brazil Espírito-Santo BM-ES-41 Perenco 50% (i) 3 Brazil Potiguar POT-M-475 ExxonMobil 65% 09/15/2020 (ii)

4 Brazil Ceará CE-M-603 ExxonMobil 50% 08/28/2020 (ii)

5 Colombia Cesar Rancheria CR-2 OGX P&G 30% (iii) 6 Colombia Cesar Rancheria CR-3 OGX P&G 30% (iii)

7 Colombia Cesar Rancheria CR-4 OGX P&G 30% (iii)

(i ) The operator filed a revised proposal for the Discovery Appraisal Plan for BM-ES-40 and BM-ES-41. On April 19,

2016, the Company submitted to the ANP a request for authorization of the assignment of rights. After approval by

the ANP, the 50% interest held by the Company will be assigned as follows: (i) 40% to the current operator Perenco

and (ii) 10% to Sinochem.

(ii) Date of the end of the second exploratory period. On September 11, 2015, the Company signed an agreement to

assign these areas to Azibras Exploração de Petróleo e Gás Ltda, including but not limited to approval by the ANP.

(iii) In December 2014, Colombia’s National Hydrocarbon Agency (“ANH”) approved the sale of 100% of the blocks

located in the Lower Magdalena Valley basins (“VIM-5” and “VIM-19”) and 100% of the economic rights to the

blocks located in the Cesar Rancheria basins (“CR-2”, “CR-3” and “CR-4”). The sale of blocks CR-2, CR-3 and

CR-4 calls for an initial transfer of 70% of the interest held by OGX in the blocks to the buyer, with OGX remaining,

on a provisional basis, as operator and holder of 30% of such assets until the exploratory period ends.

(iv) In the process of definitive ARO. As per material fact of January 22, 2016, we concluded the decommissioning of

production ship FPSO OSX-1, which operated in the field.

(v) On January 19, 2016, the Company filed a request for the temporary suspension of production in the Tubarão Martelo

Field (”TBMT Field”) with the Brazilian National Agency of Petroleum, Natural Gas and Biofuels ("ANP"). The

temporary suspension of production in the TBMT Field was requested mainly based on (a) the current challenges

faced by the O&G industry, including the downward trend of Brent prices in the international market; (b) the initial

high estimate of productivity of the wells, which later proved to be incompatible with the field’s effective potential;

and (c) high operating lease costs of FPSO OSX-3. On April 26, 2016, the Company filed a request with the ANP

to resume production at the TBMT field. On July 1, 2016, the Company received a letter from the ANP authorizing

the immediate resumption of production at the TBMT field, through FPSO OSX-3. The TBMT field is currently

operational.





28

1.3 Return of areas On February 3, 2015, the Company sent an official letter to the ANP informing it of the return of

the Rêmora field in block BMC 40 of the Campos basin. The return of this field, whose CAPEX

was already provisioned for the loss, does not affect the Company’s Business Plan, as approved

by the Board of Directors at the beginning of 2015, which already did not consider any revenues,

expenses and other expenditures relating to Rêmora. On October 19, 2015, the ANP’s Board of

Directors approved the return of the Rêmora Field.

On April 1, 2015, the Company informed the ANP of the return of five exploratory blocks it was

operating in the Pará-Maranhão Basin, as further exploratory activity in such blocks was rendered

unfeasible owing to lack of definition regarding the environmental licensing process for such

areas. On May 27, 2015, the ANP approved the return of Pará Maranhão blocks PAMA–M-407,

PAMA –M-408, PAMA –M-443 PAMA –M-591, PAMA –M-624.

1.4 Court-supervised reorganization

I. Court-supervised reorganization of the OGX Group On October 30, 2013, Óleo e Gás Participações S.A. - Under court-supervised reorganization

(“OGPar”), in view of the unfavorable financial situation facing it and the series of losses, as well

as the then recently and shortly due maturity of most of its indebtedness, filed for court-

supervised reorganization, under No. 0377620-56.2013.8.19.0001, in the Fourth Judicial

Corporate District of the Capital of the State of Rio de Janeiro. This petition was filed by OGPar

together with similar petitions for its subsidiaries OGX Petróleo e Gás S.A. - Under court-

supervised reorganization (OGX P&G), OGX International GmbH - Under court-supervised

reorganization and OGX Austria GmbH - Under court-supervised reorganization, as provided by

Article 51 and subsequent articles of Law 11101/05 (“LFR”), as an urgent measure, as decided

by its Board of Directors on October 30, 2013 (“Court-supervised reorganization”).

The Management of OGPar and its subsidiaries controlled until that time believed that, given the

challenges arising from the Group’s economic-financial situation, a court-supervised

reorganization was the most appropriate measure to preserve the continuity of its business as a

going concern and to protect the interests of OGPar and its stakeholders.

On November 21, 2013, the Reorganization Judge rendered a decision (i) granting the processing

of the court-supervised reorganization of OGPar and OGX P&G, as well as (ii) not granting the

processing of the court-supervised reorganization of OGX International and OGX Austria, since

the judge believed that his court had no jurisdiction over the latter two companies. An

interlocutory appeal (No. 0064658-77.2013.8.19.0000) was filed against the latter decision,

which was unanimously granted on February 19, 2014. On July 23, 2014, the appeal for

clarification of the cited decision filed by the prosecution office was denied. The special appeal

filed by the prosecution office against the decision in the appeal was not admitted by the Court

of Justice of Rio de Janeiro by decision published on July 2, 2015, and is not yet unappealable.

On February 14, 2014, each company filed an individual Court-supervised Reorganization Plan

(“Plan”), detailing the reorganization means to be employed, demonstrating their economic

feasibility , and appraisal reports of their assets. The companies further submitted the list of

creditors that are being paid under the terms and conditions indicated in each Plan. The notice

containing the list of creditors was published on March 6, 2014 and the interested parties

submitted to the court-appointed administrator (“Deloitte”) their qualifications or disagreements

as regards the credits listed. The Plan was approved by the respective creditors in each of the





28

general meetings held on June 3, 2014 and ratified by the Reorganization Court, according to the

decision published in the Diário Oficial de Justiça of June 26, 2014 (“Confirmatory Decision”).

II. COGX Group Reorganization Plan In brief, the OGX Group Plan calls for the following means of reorganization: (i) obtaining new

financings; (ii) selling off assets; (iii) resizing operations; (iv) paying off part of the debts in cash;

(v) converting part of the debts into OGX P&G’s capital stock; and (vi) carrying out the corporate

reorganization of the OGX Group.

The OGX Group has obtained funding through the following financings, in the manner prescribed

by Articles 66 and 67 of the above-cited Law (LFR), in chronological order:

i. Bridge Loans Very short-term loans contracted by OGPar in the amounts of US$15 million and US$50 million,

used to recover OGX’s working capital and settle obligations with the consortium known as

Consórcio BS-4;

ii. Debtor-in-Possession (DIP) Financing This type of financing has been granted by creditors and some new financing entities, by means

of subscription to debentures, in the total amount of US$215 million, which will be converted

into capital in the event certain conditions precedent are fulfilled, such that these creditors and

new financing entities become shareholders of OGX (“DIP Financing”); and

iii. Additional Loan The main portion of the additional loan, in the amount of approximately US$73 million, was

allocated to the settlement of cash calls outstanding with respect to Consórcio BS-4, in view of

the importance of this asset for OGX.

a. Details on the DIP financing

Form: OGX P&G issued convertible debentures in the total amount of US$215 million

(“Debentures”). The Debentures have been issued in 3 series, as follows:

i. 1st Series Debentures: issued, subscribed and paid up in the total amount of US$125 million;

ii. 2nd Series Debentures: issued, subscribed and paid up in the total amount of US$82.5 million;

iii. 3rd Series Debentures: issued, subscribed and paid up in the total amount of US$7.5 million.

Destination: the funds obtained by means of the DIP Financing have been used to pay off post-

petition obligations, finance certain capital investments and operating expenses in order to

maintain the activities of OGX P&G, as well as paying expenses related to the court-supervised

reorganization.

Guarantees:

Chattel mortgage of the oil and gas owned by OGX P&G in any of the following production

fields, respecting OGX P&G’s interests in each one of these fields: (a) Block BS-4; (b) Tubarão

Martelo; and (c) Blocks POT-M-762, CE-M-661, POT-M-475 and CE-M-603;

Fiduciary assignment of: (a) all the credit rights arising from the sale of oil and gas owned by

OGX, (b) the credit rights held by OGX P&G with respect to PGN arising from the Shared Costs





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Agreement Termination and Release entered into by OGX P&G, PGN and Eneva S.A. on

October 30, 2013, as well as the promissory notes issued by PGN in favor of OGX P&G related

to the Shared Costs Agreement Termination and Release; and (c) the restricted account into which

the funds derived from such credit rights will be deposited;

Fiduciary assignment of: (a) the credit rights held by OGX P&G against the Brazilian Federal

Government based on its right to reimbursement for overpayment of Corporate Income Tax, and

(b) the restricted account into which the funds derived from such credit rights will be deposited;

Pledge of the rights emerging from the interest held by OGX P&G in the contracts related to the

BS-4 concession;

Fiduciary assignment of the following, among other rights: (a) the credit rights held by OGX

with respect to Cambuhy derived from the Purchase and Sale Agreement, (b) OGPar’s credit

rights from any subrogation with respect to the rights of the respective creditors of the Private

Indenture for the First Public Issue of Non-Convertible Unsecured Debentures, with Personal

Guarantee, in a Single Series, of Parnaíba; Credit Agreement entered into by PGN, OGPar, MPX

Energia S.A. and Morgan Stanley Bank, N.A.; and the Private Instrument for Chattel Mortgage

of Shares and Other Settlements entered into by OGPar, MPX Energia S.A., Planner Trustee

Distribuidora de Títulos e Valores Mobiliários Ltda. and PGN, (c) the restricted accounts into

which the funds derived from such credit rights will be deposited;

Fiduciary assignment of the credit rights held by OGX P&G and OGPar arising from: (a)

insurance contracts; (b) judicial and extrajudicial litigation (including in the case of

commencement of litigation against Brasil E&P Ltda.); (c) agreements and other instruments; (d)

any other credit rights that are not the object of another specific guarantee, and (e) fiduciary

assignment of the restricted accounts into which the funds derived from such credit rights will be

deposited;

Chattel mortgage of the assets owned by Parnaíba B.V.;

Fiduciary assignment of: (a) any and all credit rights held by OGX P&G arising from the paying

in of the 1st Series of Debentures under the Credit Instrument, which will be deposited into an

restricted account maintained by OGX and (b) the restricted account in question;

Pledge of all the shares issued by Parnaíba B.V.;

Pledge of the credit rights held by OGX Netherlands against MPX Energia GmbH derived from

the sale of the shares issued by Parnaíba B.V.;

Pledge of the credit rights held by OGX Netherlands against Parnaíba B.V.;

Pledge of receivables, right of sale and other rights related to the exportation agreement of OGX

P&G and the Guarantors;

Chattel mortgage of OGX P&G and OGPar shares, to be constituted by the parties after approval

of the Reorganization Plan;

Pledge of the rights emerging from the interests held by OGX P&G in the concession agreements

relating to Tubarão Martelo’s BM-C-39 and BM-C-40, and the concession agreements for the

11th Round to be constituted by the parties after approval of the Reorganization Plan; and





28

Pledge of shares issued by OGX International, OGX Austria, OGX Netherlands B.V. and OGX

Netherlands Holding B.V., to be constituted after approval of the Reorganization Plan.

Conversion into capital: The Debentures will be automatically converted into shares after

fulfillment or express waiver of the conditions precedent indicated in the respective debenture

indenture and subscription agreement (“Capital Increase Through Conversion of Debentures”).

b. Restructuring of the pre-petition and post-petition debts held by debtors expressly

adhering to the Plan

Form The JR Plans call for restructuring of concourse and extra-concourse credits held by held by

creditors signing on to the Plan through conversion of such credits into capital of OGX P&G

(“Capital Increase Through Capitalization of Credits”).

OGPar’s unsecured creditors are to be paid in 48 equal and consecutive monthly installments,

with the first payment occurring on January 30, 2015, and the remaining payments on the 30th

day of each month through December 30, 2018. Creditors that are suppliers of OGX P&G may

choose to receive a cash amount corresponding to as much as R$30,000, limited to the amount

of the respective credit. This amount was paid in three equal and consecutive monthly

installments on January 30, February 28 and March 30, 2015. Any remaining credit balance was

converted into OGX P&G’s capital stock.

Finally, the financial credits of OGPar and OGX P&G, including, but not limited to, the pre-

petition debts retained by the Bondholders relating to the 2018 Bonds and the 2022 Bonds, as

well as the credits held by the OSX Group, will be paid in full through the conversion of the

credits into OGX P&G’s capital, provided that certain conditions precedent, which are listed in

the Plans, are fulfilled.

Such conversion of the pre-petition and post-petition debts occurred on October 16, 2014. See

item G - Status of implementing the means for reorganization.

So far, the OGX Group does not have any labor credit subject to the court-supervised

reorganization. In the event any labor credits are recognized by court decision or agreement

between the parties, such labor credits will be paid in twelve (12) equal and consecutive monthly

installments.

Moreover, so far the OGX Group does not have any credit with tangible guarantee posted. In the

event any credits with personal guarantee are recognized owing to a court decision, arbitration

proceeding or agreement between the parties, said creditors will be treated in the same manner as

the unsecured creditors.

The credits held by related parties that are direct or indirect subsidiaries of OGPar are novated

by the Plan and will be paid in a lump sum of the principal due in twenty (20) years counting

from the Plan approval date or on July 30, 2034, whichever occurs last. In addition, OGX Austria

has acknowledged that it is a debtor of OGX P&G by force of the subrogation in favor of OGX

P&G as a result of the delivery of shares for payment of the Bondholders’ pre-petition debts, as

per implementation of the Capital Increase Through Capitalization of Credits.





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Amount of the capital increase, unit price of shares and first refusal rights

The amount of the capital increase corresponds to the total amount of the pre-petition debts in

the list of creditors, plus the total amount of the post-petition debts adhering to the Plan. In the

event of an increase in the amount of credits arising from a unappealable court decision, OGX

P&G is to issue as many common shares as are required to allow the capitalization of the new

credits. The unit price of the shares was calculated in such a manner as to grant the pre-petition

and post-petition debtors adhering to the Plan a joint interest equivalent to 71.43% of the shares.

After the conversion of the 1st, 2nd and 3rd series of Debentures into OGX’s capital and merger

of OGPar by OGX P&G (see the following section entitled “Merger and Restructured OGX”),

the final joint interest of the creditors will be 25% of the shares issued by Restructured OGX.

The Capital Increase Through Capitalization of Credits occurred in a private manner, therefore

granting first refusal rights to the shareholders of OGX. The shareholders of OGX P&G waived

this right, thus allowing the entire amount of the credits to be capitalized in shares.

c. Corporate Restructuring (Merger and Restructured OGX) After carrying out and implementing (i) the Capital Increase Through Capitalization of Credits;

and (ii) the Capital Increase Through Conversion of Debentures, the Management of OGPar and

OGX P&G undertake to take such steps as required for the merger of OGPar by OGX (“Merger”),

including proposing such operation to the respective shareholders. The Merger will result in a

new publicly-held company with shares traded on the listing segment known as the

BM&FBOVESPA’s Novo Mercado (“Restructured OGX”).

The exchange ratio to be proposed to the shareholders of OGPar and OGX P&G for the Merger

will be that which results in the following final corporate structure of Restructured OGX

immediately after the Merger:

Shareholders Stake in

Restructured OGX

Eike Batista 1 share

EBX 5.02%

Other OGPar shareholders (as of the date of the calling of the Extraordinary Shareholders’

Meeting related to the Merger) 4.98%

New financing entities of the 1st Series of Debentures 41.98%

New financing entities of the 2nd and 3rd Series of Debentures 23.02%

Pre-petition and post-petition debtors (that adhered to the Plan) 25.00%

The purpose of the Merger, after the capitalization operations prescribed in the Plan are carried

out, is to level all the stakeholders in one company and to grant all the then shareholders access

to the capital markets, with the possibility of trading their shares and monetizing them as they

deem fit, as well as to participate in any appreciation in the value of the assets, if such is the case.

Warrants As an additional advantage to the subscription of the new shares of OGX P&G to be issued as a

result of the Merger, the shareholders of OGPar will receive a warrant of Restructured OGX

under the following terms and conditions: (i) exercise term of five years; (ii) a number of

common shares to be subscribed to that represents 15% of the total capital stock of Restructured

OGX, considering an issue price based on the appraisal value of the Restructured Company in

the amount of US$1.5 billion.





32

d. Resolutory terms and conditions of the Plan The following are resolutory terms and conditions that may result in the cancellation of the

approval already granted to the Plan and the immediate calling of a new meeting of creditors to

decide on an alternative to the Plan or the bankruptcy of OGPar: (i) the verification, up to the

time the Capital Increase Through Capitalization of Credits occurs, of any false or incorrect

statement in any representation or guarantee provided by OGPar in the Plan; (ii) non-compliance

by any of the direct and indirect shareholders of OGPar with any obligation assumed under the

Plan or the carrying out of any act or measure that is incompatible with the Plan’s provisions;

(iii) failure to meet the conditions precedent for the Capital Increase Through Capitalization of

Credits within 120 days of the ratification of the Plan or by September 30, 2014, whichever occurs

first (a condition which was waived at the general creditors’ meeting held on September 29,

2014); (iv) failure to hold an Extraordinary Shareholders’ Meeting and perform other acts

required to implement the Capital Increase Through Capitalization of Credits within 140 days of

the ratification of the Plan or by October 20, 2014, whichever occurs first; (v) the non-adherence

to the Plan by post-petition debtors that are related parties, especially the companies of the OSX

Group; and/or (vi) non-approval of the Plan by the General Creditors’ Meeting, in the manner

provided by the Brazilian Bankruptcy Law.

e. Appeals pending judgment Although a special appeal to the Superior Court of Justice (STJ) was lodged against the decision

that admitted processing of the court-supervised reorganization in relation to OGX International

and OGX Austria, the Company’s Management, supported by its external legal counsel, believes

that the outcome of such appeal will not materially affect implementation of the means for

reorganization set out in the Plan. Moreover, four interlocutory appeals (no. 0032962-

86.2014.8.19.0000, 0033122-14.2014.8.19.0000, 0033135-13.2014.8.19.0000 and 0039682-

69.2014.8.19.0000) were filed against the Confirmatory Decision. On December 3, 2014, the

Court of Justice of Rio de Janeiro partly granted the Interlocutory Appeals filed against the

Confirmatory Decision, solely and exclusively in order to: (i) declare null and void the Plan

clause which deems that the agent is not liable for any loss resulting from the sale of shares

granted to him/her by the pre-petition and/or post-petition debtors, and (ii) extend the invalidity

of the clause governing the Put Option also to those creditors that abstained from voting or did

not appear at the general creditors’ meetings that resolved on the Plans. These four appeals are

still being analyzed by the Court of Justice of Rio de Janeiro, owing to the fact that special appeals

have been lodged by the respective appellants, which were denied by the Court of Justice of Rio

de Janeiro. At the moment, the interested parties may still file new appeals regarding the decisions

related to unappealability with the STJ. Once again, the Company’s Management, supported by

its external legal counsel, believes that the results of such appeals will not materially affect the

implementation of the means for reorganization in the Plan.

f. Status of implementation of the means for reorganization On September 1, 2014, the subscription and paying in of the 2nd Series of Debentures of the DIP

Financing were concluded. The deadline for subscribing to and paying in the 3rd Series of

Debentures of the DIP Financing, the conclusion of which, according to the terms and conditions

of the Court-supervised reorganization Plan, had been set for August 29, 2014, was suspended

by a decision of the Reorganization Court rendered on the cited date, owing to the filing of a

petition by certain creditors that, although expressing interest in participating in the DIP

Financing, did not qualify, in the Company’s view, to subscribe to the 3rd Series of Debentures

under the Plan’s requirements. Accordingly, such creditors pleaded their right to participation,

without, however, causing any loss or effect to the creditors that already subscribed to and paid

in the 3rd Series of Debentures of the DIP Financing.





32

On September 18, 2014 the Brazilian Securities Commission (CVM) granted OGX P&G

Registration as a Category A Issuer.

On October 16, 2014, unanimous approval was granted at an Extraordinary Shareholders’

Meeting held by OGX P&G to the Capital Increase Through Capitalization of Credits, in the total

amount of eight hundred and sixty-two thousand, five hundred and fifty-nine reais and eighty-six

centavos (R$862,559.86), with the amount of thirteen billion, eight hundred million, one hundred

and eight thousand, one hundred and eighty-nine reais and sixty-six centavos

(R$13,800,108,189.66) being attributed to the capital reserve, for a total capitalization of thirteen

billion, eight hundred million, nine hundred and seventy thousand, seven hundred and forty-nine

reais and fifty-two centavos (R$13,800,970,749.52), with eighty six million, two hundred and

fifty-five thousand, nine hundred and eighty-six (86,255,986) new OGX P&G registered book-

entry common shares with no par value, at one hundred and sixty reais (R$160.00)per share. Such

new shares were distributed to the creditors holding the Credits, in proportion to the amount of

their respective Credits held against OGX. The capitalization of the pre-petition and post-petition

debts was implemented on that same date in October. Notwithstanding the fact that the

Extraordinary Shareholders’ Meeting formalizing extinction of the debts through the issue of

equity instruments occurred on October 16, 2014, as of September 30, 2014, all the conditions

precedent for extinction of the debts in question had already been fulfilled so that conversion was

mandatory under the terms of the court-supervised reorganization plans approved by the creditors

and confirmed by the Court. Accordingly, as of September 30, 2014, the Company was no longer

obliged to settle said liabilities by turning over cash or other assets and, on account of this, in the

third quarter of 2014, it eliminated such debts from its financial statements, with contra entries

in the capital stock, capital reserve and profit and loss for the period.

In April 2015, the Company entered into a Support and Standstill Agreement with certain

consenting creditors, who hold the majority of the convertible debentures (DIP) and the credits

resulting from the incremental facility of US$73 million. This agreement establishes that, subject

to the fulfillment of the conditions established therein, during the standstill period, consenting

creditors will refrain from voting or taking any action to collect amounts or perform any

guarantees of the DIP or incremental facility. The standstill period, except in the case of early

maturity, would remain in force until the conversion of the DIP or August 15, 2015, whichever

came first. On August 14, 2015, with no conditions having been established for the conversion

of the DIP and/or payment of the incremental facility through the First Amendment

to the Support and Standstill Agreement, such contract was extended to October 30, 2015.

Considering that the conditions and requirements were not met until October 30, 2015, a

Debenture Holders’ Meeting was called for November 13, 2015. The majority of the debenture

holders decided to suspend said Meeting and reopen it on November 25, 2015 in view of the

ongoing negotiations regarding the sale of Parnaíba Gas Natural’s shares held by the Company.

On August 12, 2016, the majority of the debenture holders attending the General Meeting of the

holders of convertible debentures did not object to the proposal to end said Meeting without

resolving on the extension of the term for the “Covenant Not to Do” signed on May 14, 2015 by

and between OGX, OGPar and Oliveira Trust Distribuidora de Títulos e Valores Mobiliários

S.A. in the latter’s capacity as fiduciary agent. The Company does not have control over

execution of guarantees whereas these debenture holders do. The Company's management

believes that executing these guarantees will not affect its 'going concern' basis, since the

recoverable value of existing assets is sufficient to cover debenture holders’s debt. In order to

encourage the concurring creditors to sign the agreement, the OGX Group will take such

measures as are required to preserve the value of the guarantees, including the equity stake of





34

OGX P&G in BS-4 and its equity interest in Parnaíba Gás Natural S.A. As part of the support

and standstill agreement, the concurring creditors under the DIP financing agreed that, subject to

the fulfillment of certain conditions precedent, they will approve the agreement with OGX P&G

for conversion of the DIP financing into common shares of OGX P&G on the same terms and

conditions originally set under the DIP financing. Such conditions precedent include, among

others, the signing of acceptable agreements to terminate chartering, operation and maintenance

related to FPSO OSX-3 and FPSO OSX-1 and costs related to the abandonment of the Tubarão

Martelo and Tubarão Azul fields respectively; the payment or incremental facility refinancing.

It is worth noting that Management periodically provides the information required by the trustee.

1.5 Short-term financial situation

In the six-month period of 2016, OGX P&G’s operations generated a negative EBITDA of R$

105 million against the likewise negative EBITDA of R$ 84 million for the same period of the

previous year. Due to the extremely adverse scenario in the first two months of 2016, the

Company decided to halt production at the Tubarão Martelo field. On April 26, 2016, with oil

prices continuously improving of during the second quarter of 2016, the Company applied to the

ANP to resume production at the field. On July 1, 2016, the Company resumed production in

the Tubarão Martelo field, after approval by the ANP, recording an average 9.988 thousand

barrels of oil per day in July, with growth and cash generation prospects.

In this context, the Company revised its Business Plan in early 2016 and incorporated certain

strategies that should be sufficient to ensure continuity of operations. Among these strategies

are:

(a) halting production from two fields, Tubarão Azul (August / 2015) and Martelo (March / 2016)

and negotiating to return platforms to their owners in order to minimize abandonment costs for

these fields;

(b) signing an agreement for a Eneva S.A. (“Eneva”) capital increase through the Company´s

36.33% holding Parnaiba Gas Natural . This agreement should add to the Company´s liquidity

since Eneva is a publicly listed company whose stock is traded on the BM & FBovespa.





34

(c) obtaining additional funding in the form of a bridge loan and sharing CAPEX with partners;

(d) rolling over the US $ 73 million incremental facility and converting or rescheduling the DIP

loan;

(e) farming down the Atlanta and Oliva fields;

Other strategies not covered by the Business Plan would be:

(f) obtaining loans secured by reserves;

(g) getting a strategic partner to invest in the Company in exchange for shares, among other

alternatives.

(h) obtaining funds by resuming production from Tubarão Martelo field due to the more favorable

oil industry scenario.

Note, however, that although it is based on management's best judgment, the business plan is subject to financial uncertainty (estimated costs and expenses, oil prices going forward, currency exchange rates, etc.), operational uncertainty (equipment and production team efficiency), regulatory uncertainty (e.g. ANP, IBAMA, tax law, etc.), business uncertainty (successfully selling assets, debt rollovers, converting or rescheduling debt) and geological uncertainty (reservoir volume and behavior).

In addition, the Company's current scenario requires agile negotiating and decision-making.

Faced with these uncertainties, the dynamics of negotiations and decision-making, our earnings

and cash position may vary significantly in relation to estimates.

2 Presentation of quarterly information

Basis of preparation

a. Statement of compliance with international (IFRS) and the Accounting

Pronouncements Committee (CPC) This quarterly information was prepared on the basis of an ongoing business concern.

The Company presents its individual quarterly information according to CPC 21 – Interim

Statement, issued by CPC – the Brazilian Accounting Pronouncements Committee, and its

consolidated statements according to CPC 21 and IAS 34 – Interim Financial Report, issued by

IASB – International Accounting Standards Board, and the rules established by CVM – the

Brazilian Securities Commission.

b. Basis of measurement

The company and consolidated quarterly information have been prepared based on historic cost,

except for derivative financial instruments and other financial instruments, which have been

measured at fair value.

c. Functional and reporting currency





36

These company and consolidated quarterly information are being presented in thousands of

Brazilian Reais, which is the Company’s functional currency. All financial information shown in

Reais has been rounded to the nearest thousand, except as indicated otherwise.

d. Use of estimates and judgments

The preparation of company and consolidated quarterly information in accordance with IFRS and

CPC standards requires Management to make judgments, estimates and assumptions that affect

the application of accounting policies and the reported amounts of assets, liabilities, revenues and

expenses. Actual results may differ from such estimates. Management’s estimates and

assumptions are reviewed on an ongoing basis. Revisions in relation to accounting estimates are

recognized in the period in which they are revised and in any future periods affected. Information

on assumptions and estimates that may result in adjustment in the next financial reporting period

is included in the following Notes:

Note 1 - Approval of the Court-supervised reorganization Plan.

Notes 11 and 12 - Depreciation and Amortization - useful lives, rates and impairment testing.

Note 13 - Deferred income tax and social contribution - period for realization.

Notes 17 - Provisions for Asset Retirement Obligation (ARO) - discount rate assumptions - and

18 - Contingencies - expectation of success/ loss.

Note 20 - Stock option plan - fair value calculation assumptions; and

Note 30 - Financial instruments - fair value calculation assumptions.

Basis of consolidation

The financial statements of subsidiaries are included in the consolidated financial statements from

the date that control commences until the date that control ceases to exist. The accounting policies

of subsidiaries are aligned with the policies adopted by the Company.

The subsidiaries’ financial statements are recognized in the parent company´s individual financial

statements using the equity equivalence method.

Intergroup (sic) balances and transactions and any revenues and expenses arising from intergroup

(sic) transactions have been eliminated in preparing the consolidated financial statements.

Unrealized gains arising from transactions with subsidiaries and recognized as equity equivalence

have been eliminated against investments in proportion to the Company's holdings in these

subsidiaries. Unrealized profits (losses) have been eliminated on the same basis unrealized gains,

but only to the extent that there is no evidence of impairment loss.

Approval of quarterly information

Management examined the June 30, 2016 quarterly statements and authorized their disclosure on

August 12, 2016.





37

3 Summary of Significant Accounting Practices The accounting policies described below have been applied in a consistent manner to all periods

presented in these company and consolidated quarterly information.

a. Accrual of results The results of operations are recorded in compliance with the accrual basis of accounting.

b. Financial instruments

Types of financial instruments

Financial assets can be classified as:

Loans and receivables;

Measured at fair value through profit or loss.

Held for sale.

Held to maturity.

Financial liabilities can be classified as:

Measured at fair value through profit or loss.

Other financial liabilities.

Classification

Loans and receivables The Company initially recognizes loans and receivables as well as debt instruments on the date

they were originated. All other financial assets and liabilities are recognized on the date of the

negotiation when the entity becomes a party to the instrument’s contractual provisions.

Financial assets and liabilities measured at fair value through profit or loss Included in this category are financial assets and liabilities that meet any one of the following

conditions:

They are held for trading: cases of financial instruments contracted for the purpose of short-term

sale or repurchase and derivatives, except in any situations of hedge accounting, which is not

adopted by OGX P&G at present.

They are designated upon initial recognition as being measured at FVTPL, as the documented

investment and risk management strategy for such instrument is based on fair value.

The financial assets of the Company and its associates measured at FVTPL are exemplified by:

Financial investments classified as cash equivalents: these are highly liquid short-term financial

investments readily convertible into a known amount of cash and subject to an insignificant risk

of change in value.

Escrow deposits

Other financial liabilities. The financial liabilities that are not classified as measured at FVTPL are classified as other

financial liabilities.





38

The other financial liabilities of the Company and its subsidiaries are exemplified by:

Trade accounts payable.

Accounts payable to related companies and third parties.

Loans and financing payable.

Recognition and measurement All financial instruments that have been recognized in the statements of financial position of the

Company and its subsidiaries, both under assets and liabilities, are initially measured at fair value.

After initial recognition and according to the respective classification:

Financial assets and liabilities measured at fair value through profit or loss are measured at fair

value and any changes are recognized in profit or loss.

Loans and receivables and other financial liabilities are measured at their amortized cost using

the effective interest rate method, excluding impairment losses.

c. Foreign currency The Company’s Management has defined that its functional currency is the Brazilian Real (R$).

Transactions in foreign currency are translated to the functional currency at the exchange rate in

effect on the date of each transaction. On the reporting dates, monetary assets and liabilities in

foreign currency are translated to the functional currency at the closing exchange rate and the

exchange variation gains and losses are recognized in the Statements of Income. Non-monetary

assets and liabilities acquired or contracted in foreign currency are translated on the reporting

dates based on the exchange rates in effect on the transaction dates and thus do not generate

exchange variations.

The assets and liabilities of foreign subsidiaries and associates operating in stable economic

environments with functional currencies other than that of the company are translated into Reais

for consolidation purposes at the exchange rate in effect on the reporting dates, while their equity

is translated at the historical rate and results at the average monthly exchange rate. The difference

generated by translating currencies at such distinct rates is recognized in Equity under Other

comprehensive income, as Currency translation adjustments (CTA) and recognized in the

Statements of Income when such investments are disposed of either in whole or in part. The

foreign subsidiaries have defined their functional currency as the United States Dollar (US$).

Brazilian subsidiaries use the Real as their functional currency.

d. Inventories The inventories are represented by assets acquired from third parties in the form of materials and

supplies to be consumed or used in the exploratory drilling campaign for, as well as in the

production of, oil and gas. Once used, such materials and supplies are reclassified from

Inventories to fixed assets. Inventories are recorded at the cost of acquisition or production and

adjusted to their realizable amounts when applicable. Oil inventories are represented by crude oil

produced or acquired by the Company and its subsidiaries. These inventories are recorded at the

cost of production and adjusted to their realizable amounts when applicable. The Company uses

the average cost method to calculate the cost of products sold. If there is a halt in production for

a period exceeding that required for routine maintenance work, expenditures on production

operations (such as costs of leasing, O&M, fuel, logistic expenditures, etc.) are





39

recognized directly in results, without transiting through Inventories.

e. Investments These are recognized under the equity accounting method in the company financial statements.

In the consolidated financial statements, they are also recognized under the equity method if

Company does not retain control, except when they are classified as non-current assets available

for sale. The data on jointly-held subsidiaries is also recorded under the equity accounting

method, both in the company and consolidated financial statements. The data on subsidiaries is

included in the consolidated financial statements from the date on which control begins through

the date on which control ceases to exist. The accounting information on the associates is

recorded in the company and consolidated financial statements under the equity accounting

method.

In the case of investments in subsidiaries, associates or jointly-owned subsidiaries with equity

(unsecured liabilities), these are presented as non-current liabilities. The Company’s

Management believes there is no difference between the accounting practices adopted in Brazil

and IFRS, given that the Company has joint and several liability on the debt of its subsidiaries

with unsecured liabilities.

Loss of control If there is a capital increase in one of the Company’s direct or indirect subsidiaries and said

increase does not involve the exercise of tag-along rights by all shareholders, an accounting gain

or loss associated with the variation in the other equity accounts is generated in order to maintain

their percentage interests in the pre-increase capital. If the capital increase leads to loss of control,

such gain or loss in recognized in results for the period. Moreover, the interest maintained is

measured at fair value.

f. Recognition of sales and costs prior to declaration of commerciality During exploration activities and prior to declaration of commerciality, the Company may

conduct long-duration testing (LDT) to appraise technical aspects of the reservoirs and support

the economic-financial evaluation of the viability of such assets.

Considering that during exploration activities there are still a series of uncertainties that will only

be mitigated upon start-up of the development phase, the companies of the OGX Group adopt as

an accounting practice the recognition of the amounts associated with the sale of oil and gas

produced during LDT and prior to the declaration of commerciality (i.e. sales occurring during

the exploration phase), net of the respective costs, as recovery of the costs capitalized in such

assets. As from the declaration of commerciality, the results accrued through sale of oil begin to

be recognized in the Statement of Income (Loss) and no longer as a reduction of the capitalized

costs. There was no production or sale from exploratory areas without declaration of

commerciality in the period.

g. Fixed assets The Company’s fixed assets are recorded at cost of acquisition or construction, adjusted when

applicable to their recoverable value. Fixed assets are chiefly represented by assets associated

with the phases for acquisition of and exploration for oil and gas, such as, for example,

expenditures on well drilling and completion, support vessels and E&P equipment. They further

include machinery and equipment and other tangible assets used for administrative purposes, such





40

as furniture, telephone and information processing equipment and vehicles.

Successful efforts Expenditures on exploration and development of oil and natural gas production are recorded under

the successful efforts method. This method determines that the costs for development of all

production wells and successful exploration wells linked to economically viable reserves are to

be capitalized, while the costs of geological, geophysical and seismic surveys should be

considered as expenses for the period when incurred. In addition, exploration wells that turn out

dry and expenditures linked to un-commercial reserves are to be recorded in results when

identified as such.

Asset retirement obligation (ARO) expenditures The Company’s expenditures with abandoning the areas for development and production of oil

are recorded under fixed assets, with a contra entry to the provision for asset retirement obligation

(ARO) under liabilities. See Notes 3 (j) and 17.

Borrowing costs The costs of loans that are directly attributable to the acquisition, construction or production of a

qualified asset are part of the cost of such asset and, therefore, are capitalized. The remaining

costs of loans are recognized as expenses for the period in which they are incurred. Qualified

assets are assets that necessarily take a substantial period of time to be ready for their intended

use or for sale. Capitalization of the costs of loans is initiated when expenditures are incurred

with the qualified asset and loan costs are incurred, and capitalization ceases when the qualified

asset is ready for use of when construction or production of the asset is suspended for long periods.

The costs of loans include interest and exchange variation, with the latter only being capitalized

to the extent that the interest on foreign currency funding is equal to the interest that would be

incurred in funding on similar terms and conditions on the Brazilian domestic market. In addition,

in determining the costs of loans eligible for capitalization, the Company has excluded any yields

accrued through financial investments made with funds arising from such loans.

Depreciation Expenditures on exploration and development of production are depreciated as from the

declaration of commerciality and commencement of production under the units of production

method (DUP). According to this method, the monthly depreciation rate is obtained by dividing

the monthly production by the total estimated balance of the reserves (proved plus probable) at

the beginning of the month. The Company’ s Management reviews the total balance of its

reserves on an annual basis. Machinery and equipment is depreciated under the straight-line

method at the rates mentioned in Note 11, which take into consideration the estimated useful life

of the assets with their respective residual values. When a provision is set up for complete loss

of the fixed assets of a project, depreciation thereof is halted.

h. Intangible assets These assets are recognized at cost, adjusted to their recoverable value, when applicable. They

are mainly represented by the subscription bonuses paid to obtain concessions to engage in oil

and natural gas E&P activities in certain blocks. They further include the expenditures associated

with the acquisition of information processing systems and programs.





42

Amortization The subscription bonuses are amortized as from the declaration of commerciality and

commencement of production under the units of production method (DUP). Other intangible

assets are amortized on a straight-line basis at the rates mentioned in Note 12, which take into

consideration the estimated utilization period. When a provision is set up for complete loss of the

intangible assets of a project, depreciation thereof is halted.

i. Impairment

Analysis of indications of impairment

The carrying values of the Company’ s non-financial assets are reviewed as of each reporting date

to check whether there are any indications of impairment. In case such indications are found,

then the recoverable value of the asset is determined. Specifically regarding assets related to oil

and gas exploration activities, the Company considers certain factors as indications that an asset

will not be recoverable, such as the following, for example: (i) there is no approved budget for

the viability studies of the wells drilled; (ii) the concession period is nearing the end, the

exploration activities are still in the initial phase and concession renewal is not likely; (iii) the

wells drilled are considered dry wells; (iv) the hydrocarbons found are not sufficient to constitute

a reserve, that is, they are not recoverable given present economic and technological conditions.

If the appraisal indicates potential impairment and OGX P&G’ s Management believes that in

fact there is a case of an unrecoverable loss, then such impairment loss is recognized in results for

the period. In addition, Management conducts specific tests each year to analyze indications of

impairment, with such annual testing consisting of comparing the net present value of estimated

future cash flows with the carrying value. Highlights of the premises of such cash flows include

the following aspects:

Volumes of reserves and production estimated by our internal specialists or by third parties;

Barrel price estimated based on projections made by banks and specialized agencies; and

Average discount rate of 10%, taking the oil industry benchmark into consideration.

j. Provisions A provision is recognized in the balance sheet when the Company and its associates have a legal

or constituted obligation as a result of a past event and it is probable that economic resources will

be required to settle the obligation. Provisions are recorded based on the best estimates

Management can make of the risks involved.

Provision for Asset Retirement Obligation (ARO) for E&P fields Prior to the declaration of commerciality of a determined area, the Company does not provide for

the expenditures forecast for abandonment at the end of the concession or production period. No

provision is set up since, given the stage of the operation, it is not yet possible to reliably measure

the expenditures to be incurred or to predict the date for abandonment of the area. When the asset

enters into the development phase and there are more inputs for making a reasonable estimate of

such expenditures, an ARO provision is set up with a contra entry under fixed assets. The

methodology for calculating the ARO provision consists of estimating as of the reporting date

how OGX P&G would have to disburse if it abandoned the area at that moment. The estimated

amount is corrected by the inflation rate through to the date scheduled for abandonment and

subsequently discounted to present value at a risk-free rate. The risk associated with the ARO

provision is considered in the estimated flow of payments. The risk-free rate used is the rate for

a government bond with currency and term similar to that of the provision. The inflation and





42

discount rates are periodically reviewed and any increases or decreases in the ARO provision are

recorded as a contra entry under Fixed assets. In addition, each month the provision is increased

by the effect of the discount rate (accretion of interest), with a contra entry under Financial

Results. The provision is also periodically increased as activities are carried out that give rise to

the obligation to abandon a field, such as for example the drilling of wells, installation of lines

and FPSO vessels, etc.

Provision for guaranteed minimum payment See Note 3 (q).

Provision for contingencies Each month OGX P&G’s Management appraises the forecasts for success or loss in cases in

which the Company is a defendant. If chances of success are under 50%, a provision for

contingencies is recognized in the financial statements.

k. Income tax and social contribution The corporate income tax (IRPJ) and social contribution on net income (CSLL) of the Company

and its associates are calculated based on the IRPJ rate of 15% plus a 10% surtax on taxable

income in excess of R$240 per year, and 9% for CSLL, and IRPJ tax loss and negative CSLL base

carryforwards are limited to 30% of taxable income.

l. Leasing A leasing operation is classified as a finance lease if it transfers substantially all the risks and

benefits of ownership from the lessor to the lessee; otherwise, it is classified as an operating lease.

The payments made for operating leases are recognized in the income statement under the straight-

line method over the term of the lease. Finance leases are capitalized at the beginning of the lease

term at the lower of the fair value of the leased asset and the present value of the minimum lease

payments. The contra entry for the capitalized amount is recorded as either a current or non-

current liability, depending on the period for settlement. Management has not identified any

operation that would characterize the need to record a finance lease.

m. Expenditures associated with joint E&P operations In their capacity as operators of concessions for oil and gas E&P, one of the obligations of

companies is to represent a joint venture before third parties. In this sense, operators are

responsible for contracting and paying the suppliers of such joint ventures and, for this reason, the

invoices received by the operators include the total amount of the materials and services acquired

by the joint ventures. Even so, the impacts on the individual results of companies merely reflect

their shares in the concessions, since the portions associated with the other joint venture partners

are recharged to them. Such recharging takes place each month. The operators estimate the

disbursements estimated for the subsequent month, based on the total expenditures already

incurred by the joint ventures, regardless of whether or not they are billed by the suppliers, and

report to the partners through a billing statement. Such estimates of reimbursements are compared

with the balance of the current accounts retained for the joint ventures’ expenditures and the

differences are recharged to the partners through cash calls.

n. Earnings (Loss) per Share The basic earnings per share are calculated by dividing the results for the period attributable to

the controlling shareholders by the weighted average number of common shares outstanding

during the period, since OGPar does not have preferred shares. The diluted earnings (loss) per

share are calculated using the above-mentioned average number of shares outstanding adjusted





43

by the instruments potentially convertible into shares as a diluting effect in the periods reported.

o. Information per segment An operating segment is a Company component that engages in business activities from which

revenues can be obtained and on which expenses are incurred, including revenues and expenses

related to transactions with other components of OGX P&G. The results of the operating

segments are frequently reviewed by Management for decisions regarding the resources to be

allocated to the segment and for evaluation of its performance. The results of segments that are

reported to Management include items directly attributable to the segment, as well as those that

can be allocated on a reasonable basis. The unallocated items chiefly comprise corporate assets:

Cash and cash equivalents; Loans and financings; Shareholders’ Equity; G&A expenses;

Financial results and Income taxes and social contributions.

p. Assets and liabilities held for sale and discontinued operations When the Company is committed to a plan for sale of an asset or set of assets and they are

available for immediate sale, they are classified as Assets held for sale. A discontinued operation

is a component of the entity that has been written off or is classified as held for sale and represents

an important line of business or geographic area of operations. The Company’s assets held for

sale are recorded under Non-current Assets, separate from the other assets. The same applies to

the liabilities associated with these assets held for sale. The results for the year, other

comprehensive income (loss), cash flows and statement of value added relating to discontinued

operations are shown separately from the results of OGX P&G’s continuing operations. Assets

and liabilities held for sale are measured at the lower of their carrying value and fair value less

selling expenses. The Company discontinues the use of the equity method as of the date on which

an investment no longer qualifies as an associate, subsidiary or joint venture.

q. Benefits for employees and Management

Short-term obligations Obligations relating to the Company’s short-term benefits for its employees are measured on a

non-discounted basis and are incurred as expenses or part of the cost of fixed assets as the related

service is provided. Liabilities in this regard are recognized in the amounts that are expected to

be paid for the plans for cash bonuses or short-term profit sharing if OGX P&G has a legal or

constructive obligation to pay such amounts based on past service performed by the employee

and if the obligation can be reliably measured.

Share-based payments As described in Note 20, OGX P&G has two share-based payment plans: the option plan granted

by the Company and the option plan granted by the controlling shareholder.

These plans were recorded as follows:

Financial statements of the entities that benefit from the service provided by the grantees: the

options are recognized at their fair value, charged to the Statement of Income as G&A expenses

and credited to Equity under Capital reserve.

All transactions involving share-based payments were classified as being equity settled. The

Company does not have stock options that can be settled in cash.

Fair value and appropriation The fair value of the stock options is calculated by using the Black & Scholes option pricing





44

model individually for each beneficiary on the grant date and is recognized on a pro rata basis

over the vesting period. The methodology for calculating the accrued amount to be recognized

under Equity can be expressed by the following formula:

Accrued balance to be recognized = ∑ (VJ unit x Q x n/t), where:

VJ unit = unit fair value of the stock option, as determined on the grant date under the Black &

Scholes option pricing model.

Q = number of stock options granted;

n = number of months incurred from the grant, and limited to t; and

t = vesting period, expressed in months.

Forfeiture of options Upon non-fulfillment of the vesting conditions, which in the case of both existing plans involves

the grantee remaining at the Company for a pre-defined vesting period, the expense previously

recognized associated with the future vesting period is cancelled through a credit to profit or loss

and charged to the capital reserve. The effects of the balances accumulated in the Capital Reserve

are reclassified to the Retained Earnings/ Accumulated Losses Reserve.

Cancellation of options When stock options are cancelled by the Company, the future pro rata is immediately recognized

in profit or loss for the period.

Exercise of options Upon exercise of the options by the beneficiaries, the respective fair values accrued in the capital

reserve are reclassified to the Earnings reserve.

Guaranteed minimum payment Some stock option plans feature guarantee clauses through which the Company ensures the

beneficiary of a minimum gain on the final anniversary of the contract. If the grantee does not

obtain this minimum gain through the options exercised, the Company complements the

difference through a cash disbursement. In order to be entitled to the total guaranteed minimum

payment, grantees must remain with the Company until they fulfill the entire vesting period,

which is equivalent to the vesting period for the stock options. If they are dismissed prior to the

expiration of the vesting period, they will only be entitled to a portion of the total minimum

payment. This portion is established individually and increases progressively until it reaches

100% of the minimum payment at the end of the vesting period.

Thus, when applicable, recognition of such guarantees is made as the services are rendered during

the vesting period and occurs in a manner similar to a cash settled share-based payment

transaction, being recorded as follows in the:

Company financial statements of the benefiting entities - the options are recognized at their fair

value, charged to the Statement of Income as G&A expenses and credited to Liabilities.

The fair value of the guarantees is re-measured at the end of each reporting period and on the

settlement date, with any changes in the fair value being recognized in profit or loss for the period.

The formula employed by the Company to calculate this fair value is detailed as

follows: GMCont = GM - (GR + GE), where:

GMCont = Minimum gain to be recorded as a liability;





46

GM = Minimum contractual gain already assured by fulfillment of part of the vesting period,

updated according to the IPCA through the reporting date;

GR = Gain already realized by the grantee, as calculated according to the following formula:

GR = ∑ [(PV - PE) * QV], where:

PE = contractually established exercise price;

PV = sale price obtained by the grantee upon partially exercising the options,

QV = quantity sold by the grantee upon partially exercising the options; and

GE = Estimated gain to be obtained by the grantee upon exercise of the options outstanding. This

minimum gain is calculated based on the Black & Scholes methodology and the formula data is

updated as of each reporting date.

r. Financial revenues and expenses These basically encompass interest on loans, financings, financial investments, changes in the fair

value of financial assets measured at FVTPL, gains and losses on derivative financial instruments

and amortization of funding costs. Exchange gains and losses are also recognized as financial

revenues or expenses. Interest paid is presented as financial activities in the statement of cash

flows.

s. Settlement of financial liabilities with equity instruments

When the Company issues its own securities and turns them over to its creditors in order to

extinguish all or part of a financial liability, such equity instruments are initially recognized under

Equity and measured at fair value. If the fair value of such instruments cannot be measured,

OGPar’s own equity instruments are to be measured at the fair value of the extinguished financial

liability. The difference between the fair value recognized directly in Equity and the carrying

value of the financial liability is recorded in results for the period as a gain or loss.

t. New accounting standards and interpretations not yet adopted A series of new accounting standards, alterations to standards and interpretations were to have

taken effect for reporting periods beginning after January 1, 2016, but have not been adopted for

their preparation. Those that may be relevant for the Company are explained below. The

Company does not plan to adopt such standards on an early basis.

IFRS 9 Financial Instruments IFRS 9, published in July 2014, replaces the guidelines existing in IAS 39 Financial Instruments:

Recognition and Measurement. IFRS 9 includes revised guidelines regarding the classification

and measurement of financial instruments, including a new model for expected credit losses for

calculation of the impairment of financial assets, as well as new requirements for hedge

accounting. The standard maintains the existing guidelines regarding the recognition and de-

recognition of financial instruments under IAS 39. IFRS 9 is effective for reporting periods

beginning on or after January 1, 2018, with early adoption being permitted.





46

IFRS 15 Revenue from Contracts with Customers IFRS 15 requires an entity to recognize the amount of revenues reflecting the consideration that

it expects to receive in exchange for control of such goods and services. When it is adopted, the

new standard will replace most of the detailed guidelines on the recognition of revenues presently

existing under IFRS and U.S. GAAP. It is applicable as from or after January 1, 2018, with early

adoption permitted by IFRS. The standard may be adopted in retrospective fashion, using a

cumulative effects approach. The Company is appraising the effects that IFRS 15 will have on

its financial statements and disclosures, but has not yet chosen the method for transition to the

new norm or determined the effects of the new norm on its current financial statements.

In addition, it is not expected that the following new standards or modifications will have a

significant impact on the Group’s consolidated financial statements.

IFRS 14 - Regulatory Deferral Accounts

Accounting for Acquisitions of Interests in Joint Operations (alteration of IFRS 11)

Clarification of Acceptable Methods of Depreciation and Amortization (alteration of IAS 16 and

IAS 38)

Defined Benefit Plans: Employee Contributions (alteration of IAS 19)

IFRS 16 – Leasing

The Brazilian Accounting Pronouncements Committee (CPC) has not yet issued any accounting

pronouncements of alterations in currently effective pronouncements corresponding to such

standards. Early adoption is not permitted.

4 Preparation of the consolidated quarterly information The company and consolidated quarterly information includes data on all the companies listed

below.

% interest

06/30/2016 12/31/2015

Direct subsidiaries:

OGX International 100.00 100.00

OGX R-11 100.00 100.00

Indirect subsidiaries:

OGX Austria 100.00 100.00

OGX Netherlands Holding 100.00 100.00

OGX Netherlands 100.00 100.00

Parnaíba B.V. 100.00 100.00





48

Joint ventures:

Atlanta Field (i) 40.00 40.00

Non-current asset available for sale

Parnaíba Gás Natural (ii) 36.33 36.33

(i) Jointly (“operated jointly”) owned by Queiroz Galvão Exploração e Produção and Barra Energia.

(ii) As of June 30, 2016, the other shareholders are as follows: Cambuhy I FIP and Eneva S.A..

Until September 2013 PGN was a subsidiary of OGPar. In that same month OGPar increased

the capital of OGX P&G by using in such operation the shares it held in PGN and which

comprised 66.67% of PGN’s capital. Subsequently, in February 2014 we carried out a capital

increase in PGN, which was not accompanied by OGX P&G, whose interest in the capital of said

company fell to 36.36%, with consequent loss of control. On March 24, 2016, an agreement was

entered between OGX P&G and Eneva S.A. (“OGX Subscription Agreement”) and an agreement

was entered between Eneva and Cambuhy I Fundo de Investimento em Participações

("Cambuhy") ("Cambuhy Subscription Agreement"), and jointly with OGX Subscription

Agreement, "Subscription Agreements"). Pursuant to the agreement, OGX P&G undertook to

subscribe part of the new common shares to be issued within the scope of Eneva’s private capital

increase, upon contribution of its total equity interest held in Parnaíba Gás Natural S.A. ("PGN").

See more details in note 1.1. This transaction still pending approval.

Accordingly,

the equity interest held by OGX P&G in PGN is presented as Non-current assets available

for sale in the Company and Consolidated Balance Sheets at June 30, 2016 and December

31, 2015.

the results of PGN are presented as results of “discontinued operations” in both the

Company and Consolidated Statements of Income (Loss) for June 30, 2016 and 2015 (sic).

5 Cash and cash equivalents Company Consolidated

06/30/2016 12/31/2015 06/30/2016 12/31/2015

Current assets

Cash and current bank accounts 293 21,907 551 23,473

Investment fund

Itau Top DI Referenciado (*) 33 72 19,538 73

326 21,979 20,089 23,546

The fair values of the balances maintained in current bank accounts are equivalent to the carrying

values and are classified as loans and receivables.

Financial investments, classified as cash and cash equivalents are treated as financial assets

measured at fair value through profit or loss.

The breakdown of the balance of cash and cash equivalents per financial institution is shown

below.





49


Financial institution 06/30/2016 12/31/2015 06/30/2016 12/31/2015

Cash on hand 28 28 28 28

Banco do Brasil 7 10 7 10

Bradesco 13 46 13 46

BTG Pactual 70 21,772 316 21,816

Deutsche - - - 1,414

DVB Bank - - - (2)

Itáu Unibanco 171 47 183 157

Corpbanca 4 4 4 4

Total cash and banks 293 21,907 551 23,473

Itáu Unibanco (*) 33 72 19,538 73

Total investment funds 33 72 19,538 73

Total cash and cash equivalents 326 21,979 20,089 23,546

(*) TOP DI FI REFERENCIADO investment fund

The objective of this fund is to invest its resources in quotas (ownership units) of investment funds

classified as being referenced to interbank deposits (DI), which in turn invest in financial assets

that seek to keep pace with the variation in the Certificate of Interbank Deposit (CDI) or SELIC

rate, such that at least ninety-five per cent (95%) of the financial assets comprising their respective

portfolios are directly or indirectly pegged to this parameter, it being further noted that the fund’s

profitability will be impacted owing to the fund’s costs and expenses, including any

administration fee. This fund is considered to have immediate liquidity and guarantees the

repurchase of the securities.

6 Escrow deposits


Issuing bank 06/30/2016 12/31/2015 06/30/2016 12/31/2015

Deutsche Bank (floating rate CDB) 3,769 3,542 3,769 3,542

DNB Bank 46,319 56,258 46,319 56,258

DVB Bank 102,711 - 102,711 -

152,799 59,800 152,799 59,800

The Company’s escrow deposits are classified as financial assets measured at FVTPL.

The Deutsche Bank CDB has been posted as guarantee for the services contracted by OGX P&G

for implementation of structured operations under the scope of its restructuring process.

The DNB Bank escrow deposit is associated with the agreement for charter and operation of the

floating production, storage and offloading (FPSO) unit Petrojarl I of Teekay Offshore Partners

L.P., to be used in the early production system (SPA) for the Atlanta Field. The total to be

deposited by commencement of production is US$33 million, spread out as follows: 5 equal and

consecutive quarterly installments of US$3.6 million and US$15 million upon delivery of the





49

FPSO vessel.

DVB Bank`s restricted deposit refers to the amount of US$ 32 million credited by OSX 1 Leasing

BV in a guarantee account on behalf of OGX, to be used solely to guarantee liabilities associated

with abandonment of wells in the Tubarão Azul field.

7 Trade accounts receivable

On June 30, 2016 and December 31, 2015, there were no receivables associated with outstanding

sale of oil.

8 Inventories Company Consolidated

06/30/2016 12/31/2015 06/30/2016 12/31/2015

Current assets

Oil inventories - 29,038 - 29,038

(-) Provision for loss (iii) - (11,870) - (11,870)

- 17,168 - 17,168

Non-current assets

E&P supplies (i) 110,117 151,578 116,172 157,633

(-) Provision for loss (ii) (104,441) (136,259) (104,441) (136,259)

5,676 15,319 11,731 21,374

5,676 32,487 11,731 38,542

(i) Comprised basically of materials required for the Company’s exploratory drilling campaign, such as pipelines

and drill bits, for example.

(ii) OGX P&G continuously evaluates opportunities to sale of such supplies and behaves as convenient. On

account of this, has set up a provision for loss so as to recognize the assets at their expected realizable amount.

(iii) Due to the recent decline in Brent oil prices, the Company has been evaluating the situation and if needed will

set up a provision for impairment of its oil inventories. On June 30, 2016 , due to Tubarão Martelo field

production being halted, the Company holds no stocks of oil.

Reconciliation with cash flow statements Company Consolidated Balances as of December 31, 2015 32,487 38,542

Balances as of June 30, 2016 5,676 11,731

Variation in inventories 26,811 26,811

Portion of depreciation/amortization comprising balance of inventories at December 31, 2015 (10) (10)

Portion of depreciation/amortization comprising balance of inventories at June 30, 2016 - -

Provision for inventory losses at December 31, 2015 148,129 148,129

Provision for inventory losses at June 30, 2016 (104,441) (104,441)

Variation in inventories in the cash flow statements 70,489 70,489

https://www.google.com.br/search?espv=2&biw=1440&bih=809&q=cota%C3%A7%C3%A3o+barril+petroleo+brent&revid=821141697&sa=X&ei=bRPJVIvIKfOAsQT-iYDgBQ&ved=0CGwQ1QIoAw





51

9 Other credits and prepaid expenses


06/30/2016 12/31/2015 06/30/2016 12/31/2015

Insurance premiums 1,193 647 1,193 647

Advances to suppliers 6,233 11,252 5,911 11,174

Advances to employees 442 349 442 362

Loans to employees - 325 - 325

Other 410 30 410 30

8,278 12,603 7,956 12,538

10 Investments and non-current assets held for sale


Investment 06/30/2016 12/31/2015 06/30/2016 12/31/2015

OGX International (i) (1,227,195) (2,010,714) - -

Atlanta Field B.V - - 153,112 151,779

OGX R11 4,533 6,979 - -

(1,222,662) (2,003,735) 153,112 151,779

(i) Recorded under non-current liabilities, in “Provision for losses on investments in subsidiaries”.

a. Changes in Investments Company:

Balances as of January 1, 2015 (776,315)

Capital contribution in shareholding interests 119,437

Currency translation adjustments (CTA) (520,394)

Equity in the earnings of subsidiaries (826,463)

Balances as of December 31, 2015 (2,003,735)


Currency translation adjustments (CTA) 330,095

Equity in the earnings of subsidiaries 432,235

Balances as of June 30, 2016 (1,222,662)





51

Consolidated:

Balances as of January 1, 2015 32,103


Currency translation adjustments (CTA) 31,059

Equity in the earnings of subsidiaries (1,281)

EQP OGX Netherlands adjustments (1,383)

Balances as of December 31, 2015 151,779


Currency translation adjustments (CTA) (33,458)

Equity in the earnings of subsidiaries (260)

Balances as of June 30, 2016 153,112

b. Data on shareholding interests

06/30/2016

Number Profit

% capital of shares / Capital (loss) for the

Data of investees stock quotas (i) Equity (i) stock (i) period (i)

Direct

OGX International 100% 1 (1,227,195) 662,064 434,681 OGX R-11 100% 12,056,631 4,533 12,233 (2,446)

Indirect

OGX Austria 100% 1 (1,445,362) 16,726 421,682 OGX Netherlands Holding 100% 18,000 266,243 702,832 14,222

OGX Netherlands 100% 18,000 112,155 525,931 15,043

Parnaíba B.V. 100% 4,667 8,901 6,646 (2) Atlanta Field 40% 10,000 382,778 380,933 (650)


Parnaíba Gás Natural (ii) (*) 36.33% 676,301,634 804,848 619,071 (17,680)

(*) Relating to March 31, 2016

12/31/2015

Number Profit

% capital of shares / Capital (loss) for the

Data of investees stock quotas (i) Equity (i) stock (i) period (i)

Direct

OGX International 100.00 1 (2,010,713) 643,321 (821,018) OGX R-11 100.00 12,056,631 6,978 12,233 (5,445)

Indirect

OGX Austria 100.00 1 (2,227,265) 16,422 (861,118)

OGX Netherlands Holding 100.00 18,000 273,738 684,389 39,433

OGX Netherlands 100.00 18,000 120,631 525,931 41,019

Parnaíba B.V. 100.00 4,667 10,829 6,646 800 Atlanta Field 40.00 10,000 379,445 293,305 (3,203)


Parnaíba Gás Natural (ii) 36.33 676,301,634 731,673 619,071 5,977

(i) These figures refer to the total number of shares, equity, capital stock and profit (loss) for the year.

(ii) PGN is classified as non-current asset available for sale. See Note 10 (c).





51

The balances of the statement of financial position groups of the companies in which OGX invests, directly or indirectly, on June 30, 2016 and December 31, 2015 are as follows:





55

June 30, 2016

In Brazil Offshore

OGX R-11

Parnaíba Gás Natural (*)

OGX Austria

OGX International

OGX

Netherlands B.V.

OGX

Netherlands Holding

Parnaíba B.V.

Atlanta

Field B.V.

(i) (i) (i)

Current assets 19,517 268,003 123 25 82 39 34 6,661

Long-term assets 6,504 116,343 10,651,384 13 118,927 1,709 11,474 1,997

Investments - - - - - 274,168 - - Fixed assets - 1,361,880 - - 844 - 117,542 389,725

Intangible assets - 33,414 - - - - - -

Total assets 26,021 1,779,640 10,651,507 38 119,853 275,916 129,050 398,383

Current liabilities 16 392,499 401 1 3 204 - 12,220 Non-current liabilities 21,472 582,293 12,096,468 1,227,232 7,695 9,469 120,149 3,385

Equity 4,533 804,848 (1,445,362) (1,227,195) 112,155 266,243 8,901 382,778

Total liabilities + equity 26,021 1,779,640 10,651,507 38 119,853 275,916 129,050 398,383

(*) Relating to March 31, 2016

December 31, 2015

In Brazil Offshore

OGX

R-11

Parnaíba Gás

Natural

OGX

Austria

OGX

International

OGX

Netherlands

B.V.

OGX

Netherlands

Holding

Parnaíba

B.V.

Atlanta

Field

B.V.

(i) (i) (i)

Current assets 109 357,440 403 168 968 149 194 65,040 Long-term assets 6,943 153,541 12,492,106 15 128,358 1,964 9,802 2,165

Investments - - - - - 283,239 - -

Fixed assets - 1,215,688 - - 1,027 - 147,071 356,335 Intangible assets - 19,782 - - - - - -

Total assets 7,052 1,746,451 12,492,509 183 130,353 285,352 157,067 423,540

Current liabilities - 333,123 4,126 1 32 93 74 38,128

Non-current liabilities 74 681,655 14,715,648 2,010,895 9,690 11,521 146,164 5,967 Equity 6,978 731,673 (2,227,265) (2,010,713) 120,631 273,738 10,829 379,445

Total liabilities + equity 7,052 1,746,451 12,492,509 183 130,353 285,352 157,067 423,540

(i) These figures refer to the total number of shares, equity, capital stock and profit (loss) for the year.





51

c. Other

Investment by E.ON and Cambuhy in PGN, sale of OGX P&G’s stake in PGN and

sale of stake of OGX Netherlands in Parnaíba BV On October 30, 2013 OGPar and OGX P&G signed a subscription agreement (“Subscription

Agreement”) with Cambuhy Investimentos Ltda., Eneva S.A. and DD Brazil Holdings S.a.r.l.

(“E.ON”) whereby Cambuhy and E.ON agreed to invest in PGN. On February 19, 2014 Cambuhy

and E.ON injected R$200,000 and R$50,000, respectively. Besides the Subscription Agreement, OGX P&G and Cambuhy also signed a share purchase

agreement (“Share Purchase Agreement I”) whereby Cambuhy agreed to acquire from OGX P&G

the latter’s remaining stake in PGN for a purchase price of R$199,999 (to be updated according

to the IPCA from October 30, 2013 through the payment date). On August 6, 2014 the competitive

process called for under the Court-supervised reorganization plan was carried out and Cambuhy

made the minimum bid of R$199,999 plus IPCA inflation indexing. Payment of this amount and

effective disposal depend on certain conditions precedent, among them a final decision on the

court-supervised reorganization process. In addition, also on October 30, 2013, it was agreed to

wind up the agreement that called for the sharing of certain general and administrative costs

between PGN and OGX P&G. Based on this, it was agreed that OGX P&G would receive from

PGN an amount of approximately R$145,000 (to be updated by the IPCA from October 30, 2013

to the payment date), corresponding to the net debt of PGN with OGX P&G on account of such

shared costs. This amount was paid in full by November 26, 2014.

Also, on October 30, 2013, the Share Purchase Agreement (“SPA”) was entered into between

OGPar, OGX Netherlands Holding B.V. and MPX Energia GmbH, which called for the latter to

pay approximately US$3 million for purchase of the shares of Parnaíba B.V. and further make a

capital injection of around US$22.1 million in Parnaíba B.V. The funds from such injection were

to have been used to settle the debt that Parnaíba B.V. had with respect to OGX Netherlands

B.V., resulting from equipment used in the production of gas in the onshore fields in the northeast

state of Gas Treatment Unit (GTU) owned by PGN, located in the municipality of Santo Antônio

dos Lopes, which was originally acquired by OGX Netherlands and later sold to Parnaíba B.V.

According to the understanding of OGX P&G’s Management, the receipt of the US$3 million

was linked to a final court decision on the Court-supervised reorganization, but even so the

US$22 million was to have been received on July 1, 2015.

Given non-receipt of the US$22 million on the expected date, OGX P&G notified MPX Energia

GmbH, Eneva S.A.’s subsidiary, on August 10, 2015 and is now appraising the next steps to be

taken.

On October 26, 2015, the Company received a notice from the companies Cambuhy

Investimentos Ltda. and Cambuhy I Fundo de Investimento em Participações (jointly referred to

as "Cambuhy"), informing that they cannot execute the purchase of remaining equity interest held

by the Company in PGN.

On October 29, 2015, the Company disclosed a Notice of Relevant Event informing the market

that it received a notice from Cambuhy Investimentos LTDA. and Cambuhy I Fundo de

Investimento em Participações (jointly referred to as "Cambuhy") communicating that:

"...considering, mainly, that the shares issued by Parnaíba Gás Natural S.A. ("PGN") held by OGX

are at bar", Cambuhy cannot execute the purchase these shares. The abovementioned notification

from Cambuhy referred to the court ruling recently handed down by the 45th Civil Court of the





51

Capital of Rio de Janeiro, determining the pledge of common shares issued by PGN owned by

OGX, at the request of Nordic Trustee ASA, as representative holders of bonds issued by OSX 3

Leasing B.V.

Finally, on October 29, 2015, the Company notified Nordic Trustee ASA of the latter’s

responsibility for any loss or damage that it may suffer arising from the prevention of completion

of the acquisition by Cambuhy or any third party, of PGN shares held by OGX, due to conduct

contrary to Brazilian law on the part of Nordic Trustee ASA and its decision makers, including

presenting erroneous and incomplete information for consideration by the Brazilian Courts.

In this regard, on November 5, 2015, the Company published a new Material Fact announcing a

new decision that determined the cancellation of said pledge, because Nordic Trustee ASA failed

to inform the judgment of the 45th Civil Court that the offering of the shares held by OGX issued

by PGN occurred via judicial auction, within the scope of OGX’s court-supervised reorganization

plan, and under the supervision of the trustee and the court of competent jurisdiction.

On March 24, 2016, an agreement was entered between OGX P&G and Eneva S.A. (“OGX

Subscription Agreement”) and an agreement was entered between Eneva and Cambuhy I Fundo

de Investimento em Participações ("Cambuhy") ("Cambuhy Subscription Agreement"), and

jointly with OGX Subscription Agreement, "Subscription Agreements"). Pursuant to the

agreement, OGX P&G undertook to subscribe part of the new common shares to be issued within

the scope of Eneva’s private capital increase, upon contribution of its total equity interest held in

Parnaíba Gás Natural S.A. ("PGN"). In turn, under the Cambuhy Subscription Agreement,

Cambuhy undertook, subject to certain conditions precedent, to subscribe part of the new common

shares to be issued within the scope of Eneva’s private capital increase, upon contribution (i) of

its total equity interest held in PGN ("Cambuhy Interest"); and (ii) of PGN’s total convertible

debentures of the 3rd and 4th issues ("Debentures" and, jointly with Cambuhy Interest, " Cambuhy

Assets" and, jointly with OGX Interest, "PGN Assets"). Eneva, in turn, subject to certain

conditions precedent, will hold a capital increase for private subscription ("Private Capital

Increase "), enabling the contribution of the PGN Assets by Cambuhy and by OGX at an estimated

amount of approximately R$1.15 billion, subject to approval of the respective valuation reports

by the general shareholders’ meeting of Eneva, pursuant to Article 8 of the Brazilian Corporation

Law. The agreed price of the shares issue is R$0.15 per share, determined pursuant to Article 170,

paragraph 1, item III, of Brazilian Corporation Law. As a result of the Private Capital Increase

upon contribution of the Cambuhy Assets or of the total PGN Assets into Eneva’s capital (as the

case may be, the “Transaction”), Eneva may thereafter hold up to 100% of the capital stock of

PGN, thus becoming its sole shareholder. On the other hand, Cambuhy OGX P&G may thereafter

become shareholders of Eneva. On July 15, 2016, the Company informed the market that Nordic

had agreed to the immediate sale, by OGX P&G, of shares corresponding to five percent (5%) of

its interest in PGN. See more information in Note 35.





56

11 Consolidated fixed assets

Consolidated fixed assets

Furniture and

fixtures

Machinery and

equipment

IT equipment

Leasehold

improvements

Vehicles

Advances for fixed

inversions (d)

E&P fixed assets

(e)

Total Cost

As of January 1, 2015 5,884 2,370 11,282 8,780 404 14,963 496,004 539,687

Additions - - - - - - 78,970 78,970

Additions - provision for ARO (a) - - - - - - (61,616) (61,616)

Write-offs - unrecoverable exploratory costs (b) - - - - - - 70 70

Disposals (606) (1,481) (403) - - - - (2,490)

Impairment (including discontinued operations) - - - (2,089) - - 215,479 213,390

Non-cumulative PIS/COFINS credits (h) - - - - - - (116,779) (116,779)

Other / Reclassifications - - - - - (14,963) 14,963 -

Accumulated currency translation adjustments of offshore

companies (g) -

-

-

-

-

-

20,195

20,195

December 31, 2015 5,278 889 10,879 6,691 404 - 647,286 671,427 Additions - - - - - - 30,660 30,660

Additions - provision for ARO (a) - - - - - - (1,285) (1,285)

Impairment (including discontinued operations) - - - - - - (31,521) (31,521)

Non-cumulative PIS/COFINS credits (h) - - - - - - 49,309 49,309

Accumulated currency translation adjustments of offshore companies

(g) -

-

-

-

-

-

(28,676)

(28,676)

June 30, 2016 5,278 889 10,879 6,691 404 - 665,773 689,914

Accumulated depreciation

As of January 1, 2015 (2,331) (895) (8,922) (3,973) (387) - (4,480) (20,988)

Depreciation and depletion in the year (c) (536) (113) (1,194) (734) - - (36,286) (38,863)

Disposals 126 555 269 - - - - 950

Write-off of depreciation impairment (c) - - - 1,040 - - 28,129 29,169


companies (g) -

-

-

-

-

-

(1,778)

(1,778) December 31, 2015 (2,741) (453) (9,847) (3,667) (387) - (14,415) (31,510)

Depreciation and depletion in the period (c) (268) (45) (460) (353) - - (11,988) (13,114)

Write-off of depreciation impairment (c) - - - - - - 7,019 7,019


companies (g) -

-

-

-

-

-

1,616

1,616

June 30, 2016 (3,009) (498) (10,307) (4,020) (387) - (17,768) (35,989)

Annual percentage depreciation and depletion rates 10 10 20 10 20 - (f) Net residual value

As of June 30, 2016 2,269 391 572 2,671 17 - 648,005 653,925

December 31, 2015 2,537 436 1,032 3,024 17 - 632,871 639,917

As of January 1, 2015 3,553 1,475 2,360 4,807 17 14,963 491,524 518,699





57

(a) See Notes 3 (g) and 17 (a). This movement has no cash effect.

(b) Refers to write-offs of costs associated with wells considered dry, exploratory areas returned and other unrecoverable

exploration costs. See the sub-section of this Note entitled “E&P fixed assets - Write-offs”.

(c) Depreciation for the period ended June 30, 2016 is recognized in: CPV R$ 9; General and administrative expenses R$

13,105.

.

(d) Refers basically to advances to various suppliers for acquisition of E&P equipment, such as wet and dry Christmas

trees, flexible lines, umbilicals and other subsea equipment.

(e) See the breakdown per basin in the following section of this Note.

(f) Depreciation and depletion of E&P fixed assets occur as from the declaration of commerciality and commencement of

production, based on the units of production (DUP) method. See the sub-section of this Note entitled “E&P fixed assets

- Depreciation”.

(g) Refers to the currency translation adjustments of the asset balances of the Company’s international subsidiaries OGX

Netherlands and Parnaíba B.V.

(h) See Note 13 (b).

Fixed Assets - Company:

The difference between Company and Consolidated fixed assets, in the amount of R$118,386,

refers to the fixed assets of OGX Netherlands of R$844 and Parnaiba BV of R$117,542, as

indicated in Note 10 (b). The changes in the fixed assets of these two companies in 2016, in the

total amount of R$14,008 basically derives from variation in the exchange rate.

E&P fixed assets

Breakdown per basin

Consolidated 06/30/2016

Changes in E&P fixed assets

Write-offs

Additions

(a)

Depreciation

PIS/Cofins credits

CTA -

Offshore

companies

(e)

Provision

for ARO

Dry wells

and sub-

commercial

areas

Impairment

(b) Total

Campos (c) (15,618) (8,113) 49,309 1,094 (3,152) - (23,520) - Pará-Maranhão (g) - - - - - - - -

Santos 46,130 - - - 1,867 - (834) 47,163

Espírito Santo - - - - - - - - Colombia - - - - - - - -

Ceará (f) - - - - - - - -

Potiguar (f) 148 - - - - - (148) - Parnaíba (d) - (3,875) (28,154) - - - (32,029)

Total 30,660 (11,988) 49,309 (27,060) (1,285) - (24,502) 15,134





58



Write-offs

Additions

(a)

Depreciation

PIS/Cofins credits

CTA -

Offshore

companies

(e)

Provision

for ARO

Dry wells

and sub-

commercial

areas

Impairment

(b) Total

Campos (c) 29,600 (28,129) (116,779) (32,911) (116,572) 70 264,721 -

Pará-Maranhão (g) 71 - - - - - (14,156) (14,085)

Santos 42,265 - - - 54,956 - 1,423 98,644 Espírito Santo - - - - - - - -

Colombia - - - - - - (3,774) (3,774)

Ceará (f) (326) - - - - - (2,003) (2,329) Potiguar (f) 2,500 - - - - - (2,603) (103)

Parnaíba (d) 19,823 (9,935) - 53,106 - - - 62,994

Total 93,933 (38,064) (116,779) 20,195 (61,616) 70 243,608 141,347



Write-offs

Additions

(a)

Depreciation

Asset sale /

other adjustments

CTA -

Offshore

companies

(e)

Provision

for ARO

Dry wells and

sub-

commercial

areas

Impairment

(b) Total

Campos (c) 13,291 (18,911) - (1,846) (109,089) 70 116,485 -

Pará-Maranhão (g) 71 - - - - - (14,156) (14,085) Santos 26,152 - - - 13,972 - - 40,124

Espírito Santo - - - - - - - -

Colombia - - - - - - (3,774) (3,774) Ceará (f) - - (1,357) - - - (972) (2,329)

Potiguar (f) 2,566 - - - - - (2,669) (103)

Parnaíba (d) - (1,516) - 14,002 - - - 12,486

Total 42,080 (20,427) (1,357) 12,156 (95,117) 70 94,914 32,319

(a) Includes “additions”, “provision for environmental compensation”, “financial charges” and “reclassification of advances for E&P

fixed assets”.

(b) See section of this Note on Impairment, as well as Note 27.

(c) At present, the blocks of the Campos Basin correspond to parts of BMC-39, BMC-40 and BMC-41 where the Tubarão Azul and

Tubarão Martelo fields are located.

(d) Movements associated to B.V.

(e) Refers to the currency translation adjustments of the asset balances of the Company’s subsidiaries OGX Netherlands B.V. and Parnaíba

B.V.

(f) Amounts classified as “Results of discontinued operations” in the Statement of Income.

(g) In April 2015, the Company notified the ANP of the return of the areas.





59

Historical background of acquisitions and returns of exploratory concessions

November 2012

BS-4: OGX P&G signed a farm-in contract with Petrobras for acquisition of a 40% stake in Block

BS-4, located in the Santos Basin. The Company's other partners in this concession are Queiroz

Galvão Exploração e Produção S.A., which has a 30% stake and serves as operator, and Barra

Energia do Brasil Petróleo e Gás Ltda., with 30%.

May to October

2013

11th Round of Bidding for the ANP Exploratory Blocks: On May 14, 2013, OGX P&G acquired a

total of 13 exploratory concessions, distributed in the Basins of Foz do Amazonas (FZA-M-184),

Barreirinhas (BAR-M-213, 251 and 389), Potiguar (POT-M-762 and 475), Ceará (CE-M-603, 661

and 663) and Parnaíba (PN-T-168, PN-T-153, PN-T-113 and PN-T-114), for the amount of

R$376,011 relating to the subscription bonus. However, at a meeting held in October of 2013 the

Company's Executive Committee decided to give up on the acquisition of Blocks BAR-M-213,

BAR-M-251, BAR-M-389, CE-M-663, FZA-M-184, PN-T-113, PN-T-114, PN-T-153 and PN-T-

168, where it did not sign consortium agreements with other companies. Concession agreements

were signed for Blocks CE-M-603, CE-M-661, POT-M-762 and POT-M-475 with a total

subscription bonus of R$96,009 relating to the Company's stake; subsequently OGX signed a farm-

out agreement for Block POT-M-475, remaining with a cost of R$84,009.

January to

September 2014

Return of BM-C-37, BM-C-38, BM-C-42, BM-C-43, BM-S-56, BM-S-58 and BM-S-59: In the 1st

half of 2014, after being unable to identify economically recoverable volumes of hydrocarbons, the

Company returned these areas to the ANP.

December 2014

OGX P&G concluded the sale for US$30 million of its stakes in Blocks CR-2, CR-3 e CR-4 in the

Cesar Rancheria Basin and in VIM-5 and VIM-19 in the Lower Magdalena Valley, both in

Colombia. As part of this sale operation, the Company is also entitled to royalties of 3% of any net

revenues that may be generated from the sale of oil or gas produced from such blocks. See Note

1.2.

February 2015

Return of the Rêmora Field (block C-M-499), due to unfeasibility of technical and economic

solutions for development of this field.

April 2015

Return of exploratory areas in the Pará-Maranhão Basin (blocks PAMA-M-407, PAMA-M-408,

PAMA-M-443, PAMA-M-591 and PAMA-M-624), owing to non-issuance of a technical report or

operating environmental license on the part of the Brazilian Environmental Protection Agency

(IBAMA). On April 10, 2015, the Company signed a farm-out agreement for Block CE-M-661,

which was approved by the ANP on September 29, 2015, thus the assignment of rights and

obligations of this area was executed.

September 2015

On September 11, 2015, the Company signed a farm-out agreement for Blocks CE-M-603 and POT-

M-475, subject to certain conditions precedent, including, but not limited to, approval by the ANP.

January 2016

On January 19, 2016, the Company requested the temporary suspension of production in the

Tubarão Martelo field, mainly due to (i) the decline of Brent prices in the international market; (ii)

effective production potential incompatible with the initial estimates, and (iii) high operating lease

costs.

On January 22, 2016, the Company concluded the decommissioning of platform FPSO OSX1 in

the Tubarão Azul Field.

April 2016

On April 26, 2016, the Company filed a request to resume production in the Tubarão Martelo Field

(”TBMT Field”) with the Brazilian National Agency of Petroleum, Natural Gas and Biofuels

("ANP").

July 2016

On July 1, 2016, the Company received an official letter from the ANP authorizing the immediate

resumption of production at the Tubarão Martelo field, through FPSO OSX-3. The Tubarão Martelo

field is currently operational.





60

Appraisal of indications of impairment The Company conducts quarterly analyses of the status of its exploratory wells. If they are

classified as dry or sub-commercial, OGX P&G writes them off and charges them to results. In

addition, the Company appraises the indications of impairment listed in Note 3 (i).

a. Tubarão Martelo / Rêmora:

In 2014, the discounted cash flow prepared for the Tubarão Martelo / Rêmora fields indicated that

the price scenario, the future projections used by the Company and the costs incurred in the

Tubarão Martelo and Rêmora fields made production economically unfeasible. This resulted in

the recording of a provision for impairment of the assets related to the Tubarão Martelo / Rêmora

field, in the amount of R$3,237,254 in fixed assets, R$691,758 of which recorded in 2013 and

R$2,602,681 in 2014, and R$80,473 in intangible assets, R$23,288 of which recorded in 2013

and R$57,185 in 2014.

In 2015, the Company carried out cost-reduction initiatives, which, due to the adversities in the

oil and gas sector, were insufficient to render the maintenance of the field economically feasible.

On January 19, 2016, the Company requested that the ANP temporarily suspend production in

the Tubarão Martelo field, given that these assets are not expected to be recovered in the future.

As a result, on June 30, 2016, the Company continued to record the full provision for impairment

of the assets related to the Tubarão Martelo field. On April 26, 2016, the Company filed a request

to resume production in the Tubarão Martelo Field with the Brazilian National Agency of

Petroleum, Natural Gas and Biofuels ("ANP"). On July 1, 2016, the Company received an official

letter from the ANP authorizing the immediate resumption of production at the Tubarão Martelo

field, through FPSO OSX-3. The Tubarão Martelo field is currently operational.

b. Exploratory complex of the Pará-Maranhão Basin

In April of 2015 the Company submitted an official letter to the ANP under protocol, formalizing

the return of the exploratory complex of the Pará-Maranhão Basin owing to non-issue of a

technical report or operating environmental license by IBAMA. As of March 31, 2015 the

Company set up a provision for full impairment of the investments made so far in such exploratory

area. See Note 33.

c. 11th Round of Bidding for the ANP Exploratory Blocks

Also as of March 31, 2015 the Company set up a provision for full impairment of the investments

made so far in the exploratory complexes of Ceará (CE-M-603 and 661) and Potiguar (POT-M-

762 and 475), since given the current price situation it does not intend to make the investments

required for exploration of such blocks. Instead, at the beginning of the in April 2015, OGX P&G

signed an agreement farm-out CE-M-661, and the transaction was approved by the ANP in

September 2015. In September 2015, the Company also signed an agreement for farm-out of CE-

M-603 and POT-M-475, subject to the fulfillment of certain conditions precedent, among them

approval by the ANP. See Note 33.

d. Atlanta and Oliva – BS-4

In 2015, the business plan was updated considering the following main assumptions: (i) scenario

based on the 2P flow certified by GC&A; (ii) long-term Brent, using the average of projections

disclosed in January 2016 by the 11 main financial institutions. The price projected for 2016

ranges between US$34 in the first quarter and US$48 in the fourth quarter. In the subsequent

years, the projected price will increase up to US$70 in 2019 and remain fixed for the years after

that; (iii) US$18/bbls discount in Brent due to the oil’s characteristics. The Company did not





62

identify signs of impairment on June 30, 2016, but decided there was no need to record a provision

after quarterly revaluation based on the specific test carried at the end of 2015.

Depreciation

As explained in Note 3 (g), E&P fixed assets are depreciated as from declaration of commerciality

and commencement of production, under the units of production (DUP) method.

12 Intangible assets

The Company’s intangible assets correspond to: (a) E&P intangible assets represented by the

subscription bonuses paid in order to obtain concessions for exploration, development and

production of the blocks, as well as amounts paid for farm-ins; and (b) other intangible items,

chiefly represented by computer software programs.

IT systems and

programs

E&P

intangible

assets

Total

Cost

As of January 1, 2015 40,475 675,087 715,562

Additions 32 - 32 Impairment - (98,789) (98,789)

December 31, 2015 40,507 576,298 616,805

Additions - - - Impairment - - -

June 30, 2016 40,507 576,298 616,805

Accumulated amortization

As of January 1, 2015 (33,609) (6,888) (40,497)

Amortization (4,375) (256) (4,631)

Impairment 256 256

December 31, 2015 (37,984) (6,888) (44,872)

Amortization (1,418) - (1,418) Impairment - - -

June 30, 2016 (39,402) (6,888) (49,290)

Annual percentage amortization rates 20 (b)

Net residual value

June 30, 2016 1,105 569,410 570,515 December 31, 2015 2,523 569,410 571,933

As of January 1, 2015 6,866 668,199 675,065

(a) Amortization of E&P intangible assets occurs as from the declaration of commerciality and commencement of production, based on

the units of production (DUP) method. Recognition of amortization for the six-month period ended June 30, 2016 is broken down as

follows: General and administrative expenses - R$1,418.





62

Breakdown per basin



Basin Additio

ns

Amortization

Disposals

Write-offs

Adjustments

and

Reclassification Total

Sub-

commercial

areas

returned

Impairment

Campos - (256) - - 256 - -

Pará-Maranhão (**) - - - - (9,779) - (9,779)

Santos - - - - - - - Ceará (*) - - - - (35,072) - (35,072)

Potiguar (*) - - - - (53,938) - (53,938)

Total - (256) - - (98,533) - (98,789)



Basin Additio

ns

Amortization

Disposals

Write-offs

Adjustments

and

Reclassification Total

Sub-

commercial

areas

returned

Impairment

Campos - (256) - - 256 - - Pará-Maranhão(**) - - - (9,780) - - (9,780)

Santos - - - - - - -

Ceará (*) - - - - (35,072) - (35,072)

Potiguar (*) - - - - (53,938) - (53,938)

Total - (256) - (9,780) (88,754) - (98,790)

(*) Amounts classified as “Results of discontinued operations” in the Statement of Income.

(**) In April 2015, the Company notified the ANP of the return of the areas.

Write-offs and impairments As of March 31, 2015 the Company carried out full impairment of the blocks associated with the

Pará-Maranhão, Ceará and Potiguar in the North and Northeast Regions of Brazil, in the amounts

of R$9,779, R$35,072 and R$53,938, respectively. The effects of the impairments of the Ceará

and Potiguar blocks have been recognized as “Results of discontinued operations” (See Note 33).

Impairment of the Pará-Maranhão blocks was carried out in April 2015, when the Company

notified the ANP of the return of the area.

Furthermore, as explained in Note 11, in the 4th Quarter of 2014 the Company revised its Business

Plan and recognized impairment of the Tubarão Martelo and Rêmora fields. The amount of

R$57,185. As of June 30, 2016, due to continuing adversities in the oil and gas sector, the

Company still has no estimate for recoverability of the assets related to the Tubarão Martelo field.

Amortization Amortization of E&P intangible assets occurs as from the declaration of commerciality and

commencement of production, based on the units of production (DUP) method. As of December





64

31, 2014, the sole fields with declared commerciality and already producing were: (a) the Tubarão

Martelo field in the Campos Basin; and (b) the Tubarão Azul field in the Campos basin. In 2016,

depreciation for the Tubarão Martelo and Azul fields remained suspended since the assets were

fully provisioned for impairment and recognized as effective loss respectively.

Intangible assets - Company

As from the first quarter of 2014, owing to the decrease in the Company’s equity interest in PGN

and the resulting loss of control, the amount related to Parnaíba Gás Natural’s assets was

deconsolidated from the statement of financial position. As of June 30, 2016, there is no difference

between company and consolidated intangible assets balances.

13 Income tax, social contribution, government take and other taxes and

contributions


06/30/2016 12/31/2015 06/30/2016 12/31/2015

Current assets

PIS offsettable - 7,786 - 7,786

COFINS offsettable - 7,214 - 7,214

- 15,000 - 15,000

Non-current assets

Withholding tax (IRRF) on financial investments 233 1,149 424 1,149

IRRF offsettable 2,603 2,472 2,603 2,472

Corporate income tax (IRPJ) prepayments - - 40 48

IRPJ tax losses 2,280 1,153 2,341 1,240

PIS offsettable (b) 20,397 20,831 20,397 20,831

COFINS offsettable (b) 99,892 125,646 99,892 125,641

State VAT (ICMS) recoverable 390 390 390 390

Other (includes Colombian VAT - IVA) 1,145 1,139 1,958 1,967

Deferred IRPJ 263,193 263,193 263,193 263,193

Deferred CSLL 95,030 95,030 95,030 95,030

485,163 511,003 486,268 511,961

Total deferred and recoverable taxes and contributions 485,163 526,003 486,268 526,961

Current liabilities

IRRF 12,711 9,737 12,711 9,737

Social contributions withheld 236 176 236 176

PIS payable - - 2 -

COFINS payable - - 13 -

Royalties payable (a) - 3,143 - 3,143

Taxes levied on disposal of assets by OGX Colombia 6,263 6,263 6,263 6,263

Other 142 406 143 406

19,352 19,725 19,368 19,725

Non-current liabilities

Deferred PIS (c) 2,646 19,855 2,646 19,855

Deferred COFINS (c) 16,280 122,183 16,280 122,183

18,926 142,038 18,926 142,038

Total taxes, contributions and

government taxes payable 38,278

161,763 38,294

161,763

(a) The rate of the royalties for the Tubarão Martelo field is 10% of the reference price, which is defined as the effective

sale price and the minimum price disclosed by the ANP.





64

(b) In the third quarter of 2015, the Company concluded the study on untimely PIS and COFINS credits, arising from

expenditures classified under fixed assets and inputs, from 2010 to 2014. With the conclusion of this study, the

Company recorded a portion of these credits in “taxes and contributions recoverable” under current assets as a

corresponding entry to “other operating revenues (expenses)” in the statement income (loss), and has been using them

to offset other federal taxes. At the end of the study related to the credits and, together with the accounting records, the

Company submitted the Reimbursement Requests and, consequently, in the second quarter of 2016, it received

approximately R$193 million corresponding to 50% of the balances of credits not yet offset. The Company also

recorded in the Taxes and contributions recoverable line, under Non-current assets, with a corresponding entry in

“provision/realization of impairment”, under profit or loss, since these credits are related to the Tubarão Martelo field,

the other portion of the extemporaneous credits, which will be amortized in accordance with the monthly depreciation

criterion adopted by the Company. In the second quarter of 2016, the Company also recognized the credits of the

period and reclassified extemporaneous credits related to the Tubarão Azul field to “taxes and contributions

recoverable”, under non-current assets, due to the discontinuity of the field.

(c) On April 1, 2015, Decree 8426 was published, establishing the return of PIS and COFINS rate on financial income

calculated by legal entities subject to the non-cumulative calculation system as of July 1, 2015. The rates will be of

0.65% for PIS and 4% for COFINS, except for certain cases provided for by the Decree, on which the rate is 0%.

Considering that the Company taxes gains or losses on inflation adjustments based on exchange rate on a cash basis, it

recorded a provision for deferred PIS and COFINS on these unrealized gains on inflation adjustments.

Reconciliation of the IRPJ and CSLL expenses is as follows:

06/30/2016

Consolidated

IRPJ CSLL

Loss of the year prior to IRPJ and CSLL

Continuing and discontinued operations 62,015

62,015

Permanent additions/exclusions:

Adjustment - Transfer Price 2,198 2,198

Other non-deductible additions 19,523 2,471

Results of offshore companies (434,681) (434,681)

Adjustment of results abroad - 2015 42,487 42,487

Taxable income for IRPJ and CSLL purposes (308,458) (325,510)

Tax rates (%)

15% +

Additional

10%

9%

Current and deferred IRPJ and CSLL 77,114 29,296

Current and deferred IRPJ and CSLL 77,114 29,296

Provision for non-realization of deferred IRPJ and CSLL (77,114) (29,296)

Breakdown of IRPJ and CSLL

IRPJ and CSLL - current - -

IRPJ and CSLL - deferred - -

Total IRPJ and CSLL - -

Effective tax rates - -

Deferred taxes and Business Plan As of June 30, 2016 the Company and its subsidiaries recognized in their tax record books a

deferred IRPJ/CSLL balance of R$7,229 billion. Of this total, based on its Business Plan, the





66

Company expects to recover R$358,223. Thus, as of June 30, 2016 there was a provision for non-

realization of such tax credits in the amount of R$6,871 billion.

Expectations for

annual

realization of

deferred taxes

2015 2016 2017 2018 2019 2020 2021 2022

2023

onwards Total

- - (14,943) (16,736) (37,655) (81,649) (75,767) (50,995) (80,478) (358,223)

The Business Plan employed to appraise recovery of the balance of deferred IRPJ/CSLL considers

the following aspects as the main assumptions thereof:

(a) Projects: Atlanta/Oliva. Given the uncertainties associated with the phase of operations, the model

used to appraise recovery of the deferred tax credits does not consider revenues from exploratory

assets. In addition, as a means of cutting down on expenditures, the Company considers in its

Business Plan the disposal of exploratory assets over the course of 2015. For the Tubarão Martelo

field, given the scenario of projected future prices, the Company has been considering halting

production in March 2016.

(b) OGX’s interest: The Business Plan considers that OGX will be reducing its stake in the

Atlanta/Oliva field from 40% to 20%.

(c) Volumes recoverable (100%): 201.67 million barrels from Atlanta/Oliva;

(d) Long-term Brent prices: The Company uses a price curve corresponding to the average of the

projections disclosed between December of 2015 and January of 2016 by 11 financial institutions.

The price forecast for 2016 varies between US$34 in the first quarter and US$48 in the fourth

quarter. In the forthcoming three years the price forecast rises until it reaches US$70 in 2019.

From 2019 onwards the price holds steady at US$70.

(e) Proceeds from disposal of the 36.33% holding in Parnaíba Gás Natural and the holding in Parnaíba

BV;

(f) Additional funding in the form of a bridge loan and sharing CAPEX with partners;

(g) Financings: The model considers rollover of the US$73 million incremental facility and

conversion of the DIP financing into capital;

Based on these premises, the model indicates that the Company will be able to maintain positive

cash flow for at least 12 months and manage to realize R$358,223 from already existing deferred

IRPJ and CSLL credits.

Note, however, that although it is based on management's best judgment, the business plan is subject to financial uncertainty (estimated costs and expenses, oil prices going forward, currency exchange rates, etc.), operational uncertainty (equipment and production team efficiency), regulatory uncertainty (e.g. ANP, IBAMA, tax law, etc.), business uncertainty (successfully selling assets, debt rollovers, converting or rescheduling debt) and geological uncertainty (reservoir volume and behavior).





66

In addition, the Company's current scenario requires agile negotiating and decision-making. Faced

with these uncertainties, the dynamics of negotiations and decision-making, our earnings and cash

position may vary significantly in relation to estimates.





67

14 Related parties

Company

Credits with related parties

Loans with related parties -

Assets Accounts payable to related

parties


Liabilities

(non-current) (non-current) (current) (current and non-current)

06/30/2016 12/31/2015 06/30/2016 12/31/2015 06/30/2016 12/31/2015 06/30/2016 12/31/2015

OGPar (i) 5,237 5,237 71,079 85,854 - - - -

OGX Austria (ii) - - 12,096,468 14,715,648 - - (10,464,023) (12,488,322)

OGX International (viii) - - 45,875 54,973 - - - - Parnaíba Gás Natural S.A. (iii) 38,041 38,041 - - - - - -

OGX Netherlands (iv) - - 3,470 4,155 (38,353) (30,350) - -

OSX 1 Leasing B.V. (v) - - - - - (22,042) - - OSX 3 Leasing B.V (vi) - - - - (512,156) (434,722) - -

OSX Serviços Operacionais Ltda. (vii) 1,179 1,179 - - - - - -

OGX R-11 73 73 21,399 - - - - -

44,530 44,530 12,238,291 14,860,630 (550,509) (487,114) (10,464,023) (12,488,322)

Consolidated

Credits with related parties


Assets Accounts payable to related

parties


Liabilities

(non-current) (non-current) (current) (current and non-current)

06/30/2016 12/31/2015 06/30/2016 12/31/2015 06/30/2016 12/31/2015 06/30/2016 12/31/2015

OGPar (i) 5,237 5,237 71,079 85,854 (633) (633) - -

Parnaíba Gás Natural S.A. (iii) 49,665 48,005 - - - - (46,154) (56,148) OSX 1 Leasing B.V. (v) - - - - - (22,042) - -

OSX 3 Leasing B.V (vi) - - - - (512,156) (434,722) - -

OSX Serviços Operacionais Ltda. (vii) 1,179 1,179 - - - - - - OSX GmbH - - - - (113) - -

56,081 54,421 71,079 85,854 (512,902) (457,397) (46,154) (56,148)





68

(i) Refers basically to an intercompany loan agreement between related parties

(ii) Under Assets, referring to the credits held against OGX Austria, in consideration for the assumption of the debt relating to the senior

unsecured notes that was guaranteed by OGX P&G, as prescribed in the Court-supervised reorganization Plan. The variation of R$2,024,2999 from December 31, 2015 to June 30, 2016 is exclusively exchange variation. Under Liabilities, referring to the export

pre-payments, non-convertible debentures and the intercompany loan payable to OGX Austria (See Note 16).

(iii) Credits with related parties: Refer basically to the sharing of resources in the technical and administrative areas, the contra entry for

which is recorded either under permanent assets or results, depending on their nature. The transfer of expenditures was carried out according to the prorating criteria established in the records of the hours worked on each project, including the “Parnaíba Project”, which

is associated with related company PGN. This agreement was terminated in October 2013 [see Note 10 (c)]. Loans with related parties

- Liabilities: Refer to the intercompany loan granted by PGN to Parnaíba B.V., so that the latter could acquire equipment to be leased to PGN itself. The companies have flexibility to roll over maturity of this intercompany loan.

(iv) Refers substantially to the amount payable relating to the agreement for lease of subsea equipment signed between the Company and investee OGX Netherlands and advances for purchase of equipment made by the Company to OGX Netherlands.

(v) Costs for charter of FPSO OSX-1. See Note 29 (b).

(vi) Costs for charter of FPSO OSX-3. See Note 29 (b).

(vii) Amounts relating to performance of O&M services for the FPSO OSX-1 unit on the part of OSX Serviços.

(viii) Amounts relating to intercompany loan agreement between related parties. In May 2015, an agreement was signed for assignment of the credits that OGPar had with respect to OGX International, in the amount of R$44,139, to OGX P&G, making the latter a debtor of

OGPar. Nonetheless, OGX P&G also has intercompany loan credits with OGPar (“Loans with related parties - Assets”) and, accordingly, the two companies agreed to offset the balances.

Management Compensation The compensation of OGX’s Management is detailed in Note 28.

15 Trade accounts payable Company Consolidated

06/30/2016 12/31/2015 06/30/2016 12/31/2015

Domestic suppliers 18,214 32,978 18,566 33,914

Foreign suppliers 11,351 77,706 11,596 81,098

E&P provisions (i) 17,022 24,045 17,022 24,045

46,587 134,729 47,184 139,057

(i) The E&P provisions basically consider the costs incurred on subsea installation services and production of O&G that

have not yet been billed. The provisions for development and production are based on the contractual daily rates.

Classification and measurement These balances are classified as Other financial liabilities and recognized at their amortized cost.





69

16 Borrowings and financing

Company

06/30/2016 12/31/2015

Borrowings and financing Currency

Interest rate

Counterparty Principal

Interest

(-)

Transaction

costs to be

appropriated

Total Total Payment of interest

Amortization of

principal Premium

Premium

Export pre-payment (PPE) (i) US$ Semi-annual 07/30/2034 9% p.a. -- OGX Austria 8,114,053

322,547

- -

8,436,600 10,263,330

Law 12,431 infrastructure

debentures (ii) R$ Semi-annual 07/30/2034 10.5% p.a. -- OGX Austria 2,025,000

126,553

-

-

2,151,553 2,151,553

Debtor in Possess (“DIP”)

financing - 1st series (iii) US$ at the end of

agreement 10/30/2015 (**) 10% p.a. 37.22% Sundry 401,225

93,619

154,598

-

649,442 764,523


financing - 2nd and 3rd series (iii) US$ at the end of

agreement 10/30/2015(**) 10% p.a. 3.5% Sundry 288,882

53,933

11,999

-

354,814 413,251

Export pre-payment (PPE) /

Incremental Facility (iv) US$ at the end of

agreement 10/30/2015 (*) See item (iv) of this Note -- Sundry 255,871

41,210

-

-

297,081 340,948

Loan (v) US$ at the end of

agreement 07/30/2034 Libor 6M + 2.5% -- OGX Austria 59,319

551

-

-

59,870 73,439

Logshore loan R$ at the end of

agreement 2/29/2016 0.95% p.m. -- Logshore -

-

-

-

- 7,689

11,144,350

638,413

166,597 -

11,949,360 14,014,733

Current assets

945,978

188,762

166,597 -

1,301,337

1,526,411


10,198,372

449,651

- -

10,648.023 12,488,322

(*) Maturity upon conversion of the DIP financing or October 30, 2015, whichever occurs first. See Note 1.4 (f).

(**) See Note 1.4 (f).





70

Consolidated

06/30/2016 12/31/2015

Borrowings and financing Currency

Interest rate

Counterparty Principal

Interest

(-)

Transaction

costs to be

appropriated

Total Total Payment of interest

Amortization of

principal Premium

Premium


financing - 1st series (iii) US$ at the end of agreement 10/30/2015 (**) 10% p.a. 37.22%

Sundry 401,225

93,619

154,598

-

649,442 764,523


financing - 2nd and 3rd series (iii) US$ at the end of agreement 10/30/2015 (**) 10% p.a. 3.5%

Sundry 288,882

53,933

11,999

-

354,814 413,251

Export pre-payment (PPE) /

Incremental Facility (iv) US$ at the end of agreement 10/30/2015 (*) See item (iv) of this Note -

Sundry 255,871

41,210

-

-

297,081 340,948

Loan (v) US$ at the end of agreement (***) Libor 6M + 2.5% - PGN 45,409

745

- - 46,154 56,148

Logshore loan R$ at the end of agreement 2/29/2016 0.95% p.m. - Logshore -

-

- - - 7,689

991,387

189,507

166,597 - 1,347,491 1,582,559

Current assets

45,409

745

- - 46,154 -


945,978

188,762

166,597

-

1,301,337 1,582,559

(*) Maturity upon conversion of the DIP financing or October 30, 2015, whichever occurs first. See Note 1.4 (f).

(**) See Note 1.4 (f).

(***) Intercompany loan granted by PGN to Parnaíba B.V., so that the latter could acquire equipment to be leased to PGN itself. The companies have flexibility to roll over maturity of this

intercompany loan.





71

Changes in liabilities


14,014,733

Balances as of December 31, 2015 1,582,559

(+) Interest incurred (a) 60,154 61,085

(-) Amortization of principal and interest (b) (8,255) (8,255)

(+/-) Exchange variation (2,117,272) (287,898)

Balances as of June 30, 2016 11,949,360 1,347,491

(a) Interest on DIPs and incremental facility.

(b) Interest charges paid on loans and financing are classified fully in 'financing activity' in the statement of cash flow

Other information

i. US$2.563 billion in senior unsecured notes and US$2.528 billion PPE On June 3, 2011 OGPar issued senior unsecured notes on the international market in the amount

of US$2.563 billion (equivalent to R$4,035,187) under the heading Overseas Securities (senior

unsecured notes). Settlement of the principal of this issue was to occur in 2018, while interest was

due semi-annually at the rate of 8.5% p.a. in the months of June and December. The funds were

intended on a priority basis for financing development of production in the Campos and Parnaíba

basins. The funding costs for this issue, in the amount of US$46.072 million (equivalent to

R$74,310), have been recognized under liabilities, thus reducing the amount funded. This amount

is appropriated to profit and loss over the loan term by employing the effective interest rate

method. In October 2011 an amendment to the instrument for issue of the senior notes was signed

in the amount of US$2.563 billion, whereby the Company was substituted by its subsidiary OGX

Austria as issuer and principal debtor of such notes. In consideration for such operation, the

Company and its subsidiary OGX Austria signed an agreement whereby the former granted to the

latter the funds obtained from issue of the above-cited notes (plus the interest revenue generated

through investment of the funds obtained through the grant date, as well as issuing cost discounts).

Further in October 2011 an export pre-payment (PPE) agreement was signed whereby OGX

Austria granted to OGX P&G early payment of the amount of US$2.528 billion, in order to

finance development and production of oil to be exported by OGX P&G to OGX Austria. In

consideration for the early payment made, OGX P&G undertook to export the number of barrels

of oil required to settle the early payment through one or more shipments to OGX Austria by May

27, 2018. The amount paid in advance and not yet settled through oil exports is subject to semi-

annual interest payments at the rate of 9.00% p.a.

With the approval of the court-supervised reorganization plan on June 3, 2014, OGX P&G, in its

capacity as guarantor for the debts, recognized the notes as liabilities and, as a contra entry,

recorded an asset held against OGX Austria. In turn the latter subsidiary derecognized the debt to

the bondholders and recognized another in the same amount to the guarantor, OGX P&G. On

September 30, 2014, after fulfillment of all the conditions precedent prescribed in the court-

supervised reorganization plan for conversion of the debt into equity instruments, OGX P&G

recorded the extinction of such notes. The court-supervised reorganization plan postponed

maturity of the PPE and OGX’s credit with OGX Austria through subrogation of the bonds to

July 30, 2034. See Note 1.4 II (b). The court-supervised reorganization plan further calls for the

PPE interest between OGX P&G and OGX Austria to be frozen as of the date the court-supervised

reorganization petition was filed. Exchange variation continues to occur.





72

ii. US$1.063 billion in senior unsecured notes and R$2.025 billion in debentures under

Law 12.431/11 for infrastructure projects: On March 30, 2012, OGX Austria issued senior unsecured notes on the international market in

the amount of US$1.063 billion (equivalent to R$1,936,892). Settlement of the principal of this

issue was to occur in April 2022, while interest was due semi-annually at the rate of 8.375% p.a.

in the months of April and October. The funding costs of US$17.8 million (equivalent to

R$39,032) have been recognized under liabilities, thus reducing the amount funded. This amount

is appropriated to profit and loss over the loan term by employing the effective interest rate

method. On September 28, 2012 OGX P&G - Under court-supervised reorganization issued

simple, unsecured non-stock convertible debentures on the Brazilian securities market in the

amount of R$2.025 billion, under CVM Instruction No. 476. Offset of the operation occurred in

October of 2012. The debentures in question are securities under Law No. 12.431/11 and the

funds raised as a result of the issue have been fully used to reimburse capital expenditures incurred

on the issue during the exploratory campaign in the Campos Basin, as expressly provided in

Article 1, paragraph 1, item VI of the cited law. The debentures call for remuneration in the form

of semi-annual interest at the rate of 10.5% p.a. The principal falls due in March of 2022. On the

debenture issue date, the securities in question were subscribed to in full by OGX Austria GmbH.

With the approval of the court-supervised reorganization plan on June 3, 2014, OGX P&G, in its

capacity as guarantor for the debts, recognized the notes as liabilities and, as a contra entry,

recorded an asset held against OGX Austria. In turn the latter subsidiary derecognized the debt to

the bondholders and recognized another in the same amount to the guarantor, OGX P&G. On

September 30, 2014, after fulfillment of all the conditions precedent prescribed in the court-

supervised reorganization plan for conversion of the debt into equity instruments, OGX P&G

recorded the extinction of such notes. The court-supervised reorganization plan postponed

maturity of the Debentures and OGX’s credit with OGX Austria through subrogation of the bonds

to July 30, 2034. See Note 1.4 II (b).

The court-supervised reorganization plan further calls for the interest on the Law 12.431/11

debentures between OGX P&G and OGX Austria to be frozen as of the date the court-supervised

reorganization petition was filed. Exchange variation continues to occur.

iii. Convertible debentures / Debtor-in-possession (“DIP”) financing

1st series On March 13, 2014 funding was obtained in the amount of R$293,263 (equivalent to

US$125,000) relating to the first series of the convertible debentures (debtor in possession or DIP

financing) called for in the Court-supervised reorganization plan. The deed for the debentures

calls for interest of 10% p.a., exchange variation and a premium of 3.5%, plus a further 34.215%,

on the face value of the debentures (R$1,000.00 - one thousand Reais). This remuneration

/updating will not be due in the event the debentures are converted into capital. The original due

date of the debentures was April 11, 2015, and the most recent extension was agreed up to October

30, 2015. See Note 1.4 (f). The debentures will be automatically converted into shares after

fulfillment or express waiver of the conditions precedent indicated in the Subscription Agreement

and presented in Note 1.4.

2nd and 3rd series In September of 2014 the process for subscribing to and paying in the second series of

convertible DIP debentures was concluded, the principal terms of which are set out in the Court-

supervised reorganization plan. The deadline for subscription and paying in was suspended by





74

decision of the Judge of the 4th Business Court of the Judicial District of the Capital of the State

of Rio de Janeiro, due to the lodging of a petition by certain creditors that, although expressing

interest in participating in such DIP financing were not qualified, in the Company’s view, to

subscribe to the 3rd series, under the requisites of the Court-supervised reorganization plan, and

such creditors pressed their plea for participation. The deed for the 2nd and 3rd Series of

debentures calls for an interest rate of 10% p.a., plus exchange variation and a premium of 3.5%.

Just as in the case of the 1st Series, this remuneration/updating will not be due in the event the

debentures are converted into capital. The original due date of the debentures was April 11, 2015,

and the most recent extension was agreed up to October 30, 2015. See Note 1.4 (f). The

debentures will be automatically converted into shares after fulfillment or express waiver of the

conditions precedent indicated in the Subscription Agreement and presented in Note 1.4 - Court-

supervised reorganization.

iv. 2nd export pre-payment (PPE) agreement / Incremental facility On April 15, 2014 OGPar communicated to the market that it had signed a PPE agreement

whereby certain investors granted to its subsidiary, OGX P&G (the Company), non-convertible

financing in the amount of up to US$73.2 million, which was subscribed to with a discount rate

of 18%. The net resources obtained under this PPE agreement will be used by OGX P&G to

finance exports and pay costs and expenses related thereto. The initial interest rate for the first

eight months is 8% p.a. As from the ninth month, this rate increased to 10% p.a. According to the

agreement, as from April 2015, due to default, interest rate rose from 10% p.a. to 13% p.a. The

original due date was in April 2015, and the most recent extension was agreed up to October 30,

2015 or until such time as the DIP financing is converted into capital, whichever occurs first.

v. Intercompany loans The cash of the companies that are subsidiaries of OGX P&G is managed in an integrated fashion,

such that a cash surplus at one Group company e transferred to the others.

Other commitments associated with loans and financings DIP: Without prejudice as to seniority, extra-concourse rights and corresponding protection

afforded to the New Funds, the debentures have substantially the tangible guarantees presented

in Note 1.4 - Court-supervised reorganization.

Court-Supervised Reorganization Plan The Court-Supervised Reorganization Plans of OGPar, OGX P&G, OGX International and OGX

Austria call for conversion of the senior unsecured notes into capital (see Note 1.4). Conversion

of the senior unsecured notes into capital was recorded as of September 30, 2014, after fulfillment

of all the conditions precedent, being subsequently formalized at the Extraordinary Shareholders’

Meeting of October 16, 2014. Moreover, the Court-supervised reorganization plan approved in

June of 2014 allowed the Company to convert into capital the interest on the financings provided

for through the date the Court-supervised reorganization was filed (October 30, 2013). Based on

this, in June of 2014 the Company cancelled the interest on the senior unsecured notes, the

US$2.528 billion PPE and the Law 12.431 debentures incurred between November 2013 and May

2014. Such cancellation, net of the interest previously provided for, generated a credit impact of

R$116,342 on results for the year 2014.

Covenants The Company has not identified any default on the contractual covenants to which it is party.

Even so, owing to the lack of expectations for fulfillment of all the conditions precedent for

conversion of the DIP financing into capital, OGX P&G has negotiated a standstill agreement

with certain creditors holding the majority of the convertible debentures. See Note 1.4 (g).





74

17 Sundry provisions


06/30/2016 12/31/2015 06/30/2016 12/31/2015

Current

Provision for ARO (a)

Tubarão Azul 173,329 210,859 173,329 210,859

Provision for guaranteed minimum payment - stock options (b) 3,803 3,620 3,803 3,620

177,132 214,479 177,132 214,479


Provision for ARO (a)

Tubarão Martelo 271,933 330,698 271,933 330,698

BS-4 79,831 93,340 79,831 93,340

351,764 424,038 351,764 424,038

Provisions for obtaining environmental licenses (d)

Tubarão Azul 9,441 8,846 9,441 8,846

Tubarão Martelo 34,204 32,046 34,204 32,046

Campos Basin 1,695 2,335 1,695 2,335

Santos Basin 3,851 4,685 3,851 4,685

49,191 47,912 49,191 47,912

ANP provisions (c) 23,346 18,310 23,346 18,310

424,301 490,260 424,301 490,260

601,433 704,739 601,433 704,739

(a) Provision for Asset Retirement Obligation (ARO) for E&P fields: As explained in Note 3 (j), as from the declaration

of commerciality of its fields and beginning of development activities, the Company begins to set up a provision for

abandonment or asset retirement obligation (ARO) at the end of the concession period. Such provision reflects the

estimated expenditures to be incurred in the future, chiefly with respect to: (i) plugging of the wells; and (ii) removal

of the lines and production equipment.

(b) Provision for guaranteed minimum payment - stock options: This provision refers to the guaranteed minimum payment

associated with the stock option contracts. See Note 3 (q). Over the course of the third quarter of 2014, the Company

renegotiated the terms of the agreement with the beneficiaries of the guaranteed minimum payment. For those

beneficiaries accepting the proposal, the Company undertook to pay in the month of the agreement 10% of the amount

provided for plus a further 40% in 8 equal and consecutive monthly installments in the immediately subsequent months.

The beneficiaries accepting the agreement accepted the fact that the remaining 50% would no longer be due by the

Company, thus reducing the immediate impact on its cash flow to the tune of at least R$37,796.

(c) ANP Provisions: Refer to the provisions for fines imposed by the ANP.

(d) Provisions for obtaining environmental licenses: In order to obtain environmental licenses, the Company has

undertaken with the Brazilian Environmental Protection Agency (IBAMA) to make certain environmental

compensations, with transfer of resources to conservation units.

18 Contingencies

As of June 30, 2016, the Company was not a defendant in any litigation where expectations for

loss were ranked as probable, except for the “ANP Provisions” described in Note 17 (c). Also on

the cited date OGX P&G was a defendant in the following litigation involving material amounts

and potential losses ranked as possible, in the opinion of its external legal counsel. No provisions

have been set up for losses of such amounts, since accounting practices adopted in Brazil (BR

GAAP) do not require the booking of same.





76

a. a. Federal contribution for intervention in the economic domain (CIDE - a sort of fuel tax)

and IRRF on payments made to foreign companies under vessel charter party agreements:

R$84,988.

b. b. Acceptance of the capacity of guarantor claimed for it in relation to federal taxes

suspended on the basis of temporary admission under the Repetro system with respect to the FPSO

OSX-3 unit: R$507,950.

c. Labor grievance cases claiming overtime pay, nighttime pay, pain and suffering damages, etc.:

R$16,493.

d. UTE Parnaíba I and II: On July 22, 2014, the Company was served process involving a lawsuit

filed by UTE Parnaíba II Geração de Energia S.A. (“UTE Parnaíba II”) regarding the assignment

of rights resulting from guarantees purportedly posted by the Company on behalf of PGN in

certain agreements signed by PGN, UTE Parnaíba II and Eneva S.A. (“Eneva”), in relation to the

project for implementation of the gas-fired thermoelectric power plant known as UTE Parnaíba

II. It was alleged that the Company posted the guarantee on behalf of UTE Parnaíba II and thus

had undertaken, on a joint and several basis with PGN under Brazilian Law, to guarantee certain

obligations the latter had with respect to UTE Parnaíba II and certain financial institutions that

financed implementation of the UTE Parnaíba II project (“Financiers of UTE Parnaíba II”). The

supposed default on such obligations, it was alleged, resulted from failure on the part of PGN to

deliver gas in the context of preliminary agreements for lease and supply of gas intended for such

project. Based on the interpretation of its legal counsel, the Company believes that such guarantee

is no longer in effect and cannot be executed. Even though OGPar has not yet received any service

of process relating to UTE Parnaíba Geração de Energia S.A. ("UTE Parnaíba I"), the Company

informs that, in relation to such unit, it did undertake, on a joint and several basis with PGN, to

guarantee certain obligations that latter had regarding UTE Parnaíba I and determined financiers

thereof (“Financiers of UTE Parnaíba I”), resulting from PGN’s failure to deliver gas as provided

in lease and gas supply agreements. Besides the Company, there are other guarantors. According

to the terms thereof, the guarantee obligation assumed by the Company was limited to: (i)

damages caused by default on the obligation to supply gas according to the lease and gas supply

agreements relating to the UTE Parnaíba I project; or (ii) costs and damages resulting from early

maturity of or default on certain agreements signed with the Financiers of UTE Parnaíba I,

provided that such early maturity or default resulted from default on the obligation assumed by

PGN to supply gas according to the lease and gas supply agreements. As of the date of this report,

the Company is not aware of any failure to supply gas on PGN’s part or any other default on the

latter’s contractual obligations that would permit that UTE Parnaíba I or the Financiers of UTE

Parnaíba I to execute such guarantee posted by the Company. Just as occurs with respect to the

alleged guarantee posted in relation to UTE Parnaíba II, questioning arises regarding the validity

of such guarantee and the feasibility of executing same. The Company thus reserves the right to

challenge such notifications and defend itself from any attempt to execute such guarantees by

third parties.

e. Charter of FPSO OSX 3: On December 22, 2014, the Company communicated to the market that

it had obtain a court restraining order (preliminary injunction) to reduce the amount of the daily

rate for charter of the vessel known as the FPSO OSX 3, from US$250 thousand/day to US$130

thousand/day. The restraining order was granted and, as of March of 2015 was still being

maintained by the Judge of the 4th Business Court of the Judicial District of the Capital of the

State of Rio de Janeiro with respect to OSX 3 Leasing B.V., in the latter's capacity as owner of

the vessel, as well as Nordic Trustee ASA, in its capacity as assignor of rights resulting from the

charter of the vessel. The order was petitioned for owing to the sharp drop in the price of oil,





76

which caused blatant imbalance in the charter agreement, according to the Company’s

interpretation. On March 18, 2015 a decision was rendered by the Judge of the same Business

Court upholding the decrease in the daily rate to US$130 thousand/day. Nordic filed an

interlocutory appeal against this decision, which was allowed to proceed at the judgment session

held on May 27, 2015 at the 14th Civil Chamber of the Court of Justice of Rio de Janeiro, which

ruled that the 4th Business Court did not have jurisdiction over same and declared null and void

the decision that reduced the daily charter rate. OGX filed an appeal requesting clarification of

the 14th Chamber’s decision, which is still pending judgment. Moreover, considering the amount

of US$130 thousand/day for the charter rate, on May 15, 2015 Nordic filed for foreclosure against

OGX, whereby it requested blockage of all the rights resulting from the sale agreement, as well

as all the receivables arising from sale of oil extracted from the Tubarão Martelo field, in order to

ensure payment of the debt resulting from the Charter Party signed with OSX, the credits of which

were assigned through an appropriate instrument. Such foreclosure suit was distributed to the

Judge of the 45th Civil Court of Rio de Janeiro. On June 23, 2015, after submission of a debtor’s

appeal by OGX, a decision was handed down by such Judge turning down the petition for

blockage filed by Nordic. Nordic filed an appeal against this decision, which is still pending

judgment by the 14th Civil Chamber of the Court of Justice of Rio de Janeiro. Given the expiration

of the order that reduced the daily rate to US$130 thousand, OGX P&G has once again set up a

provision for the cost of the charter at the rate of US$265 thousand/day from October of 2014 up

to January 2015 and as from February 2015 it started to record a provision for charter cost at

US$265 thousand/day. This generated an additional impact of R$89 million, calculated from

October 2014 through June 2015, which was recorded between June and July 2015 as follows:

(a) cost of products sold (CPS): R$61,546; (b) other operating revenues (expenses): R$27,069

(see Note 26), relating to the difference between the difference between the CPS from October to

December 2014, based on the court order and the adjusted CPS without the order. As from July

2015 the provision has been set up on the basis of US$265 thousand/day. See Note 29 (b) for

further information.

Contingent assets

The Company has filed a lawsuit claiming refund of R$11,738 thousand relating to the state value-

added tax on circulation of goods and services (ICMS) paid on international lease operations.

Based on a recent decision, the Federal Supreme Court (STF) recognized that the ICMS should

not be levied on lease agreements where there is no option to purchase merchandise, such that the

tax is not due. Over the course of the past 5 (five) years, the Company signed lease agreements

for equipment used in its oil production operations and has incorrectly paid over R$11,738

thousand by way of ICMS, and so now it has filed a court motion for refund of this entire amount.





79

19 Equity / (Unsecured Liabilities)

a. Capital stock

The following table shows the changes in the Company’s paid-in capital in the year 2016.

Capital stock as of January 1, 2016 8,607,346

(+) capital increase with extinction of liabilities (i) 125

Capital stock as of June 30, 2016 8,607,471

Share capital on June 30, 2016 is represented by 133,272,201 registered non-par value common

shares.

(i) On January 22, 2016, the Company informed the market that FPSO OSX-1 decommissioning

had been concluded, thus fulfilling its commitments to OSX 1 Leasing B.V. and their creditors.

In January 2016, as part of an agreement between the companies, OSX1 credited US$ 32 million

(approximately R$ 117 million) in a secured account on behalf of OGX, to be used solely to

guarantee liabilities associated with abandonment of wells in the Tubarão Azul field. On March

30, 2016, the Company´s board of directors approved the capital increase by capitalizing credit

within the limits of authorized capital under Article 6 of the Company's articles. The capital

increase took the form of a private issue of 12,531,821 registered non-par value common shares

at an issue price of R$ 9.38 per share, of which R$ 0.01 per share was allocated to the capital

account in view of the Company´s negative equity and the remaining R$ 9.37 per share was

allocated to the capital reserve.

b. Dividends The Company’s Bylaws call for distribution of minimum mandatory dividends of 0.001% of

profit for the year, adjusted pursuant to Article 202 of Law No. 6,404/1976 (as amended by Law

No. 10,303/2001). At Management’s discretion, the Company may pay interest on equity, the net

amount of which is to be imputed to minimum mandatory dividends, in compliance with Article

9 of Law No. 9,249/1995.

In the six-month period ended June 30, 2016, the Company recorded profit. However, the

Company’s Management decided not to pay interim dividends since it understood it was in fact

unrealized profit. In the year ended December 31, 2015, no earnings were accrued and no

dividends were distributed.

c. Accumulated translation adjustment Due to currency conversion relating to investments in foreign subsidiaries, accumulated currency

translation adjustments were recognized under comprehensive income.

20 Stock Option Plan

Options granted by the Company (“Company Plan”) The Company introduced a stock option plan based on its shares, which granted participants the

option of subscribing to a pre-defined quantity of shares of capital stock for a term that may vary

from 3 to 7 years, depending on the agreement.





80

Given that the options granted by the Company are not expected to resume their “in the money”

status in the short-term, i.e. their market value is not higher than their exercise value, in the fourth

quarter of 2014, OGX negotiated with all the beneficiaries holding Company Plan options an

agreement to compensate them for cancellation of these plans in exchange for R$0.01 per option.

Since said agreement involves cancellation of packages through the signing of compensatory

agreements, the remaining fair value of the stock option plans negotiated was advanced and

recognized in full as an expense for the year. At the end of 2014 there were no longer any options

granted by the Company to be exercised.

Options granted by the Controlling Shareholder (“Controlling Shareholder Plan”) Through this plan, the Controlling Shareholder granted participants the option to purchase a pre-

defined number of the shares he owned in OGPar for a term that may vary from 5 to 10 years,

depending on the agreement. At the end of the first quarter of 2015, the last beneficiaries of this

plan left the company, thus closing out any outstanding option position.

Guaranteed minimum payment As of July of 2014, the Company began negotiating agreements with the benefits of such

guarantees and managed to reduce by 50% the amount due, establishing a 9-month payment

schedule. As of June 30, 2016, the amount of the minimum payment owed by the Company totaled

R$3,803. See Notes 3 (q) and 17.

21 Net sales revenue


06/30/2016 6/30/2015

Oil

Gross sales revenue 53,631 262,951

(-) Taxes on sales - -

Net sales revenue 53,631 262,951

Volume (bbls)(*) 651,541 2,066,694

(*) Information not reviewed by our Independent Auditor

22 Cost of goods sold


6/30/2016 6/30/2015 6/30/2016 6/30/2015

Leasing 82,698 112,138 78,146 99,034

O&M 13,226 79,007 13,226 79,007

Logistics 18,791 100,282 18,791 100,282

Depreciation/Amortization 19 18,349 19 18,349

Royalties 5,898 28,304 5,898 28,304

Other expenditures 3,686 11,132 3,686 11,132

124,318 349,212 119,766 336,108





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Leasing: refer to the costs for lease of the vessels known as FPSOs OSX-1 and OSX-3. See Note 29 (b). At

the Company such costs further include the lease of subsea equipment between OGX P&G and OGX

Netherlands, the effect of which is eliminated at the Consolidated level.

O&M: refer to the costs for operations and maintenance of the above FPSO units, as well as the submerged

centrifugal pumps. See Note 29 (b).

Logistics: : refer to the costs incurred support vessels, helicopters and fuel for the support vessels and the

FPSO units.

Other expenditures: Include, among other aspects, the allocation of G&A expenses and the cost of chemical

products.

23 General and administrative expenses Company Consolidated

06/30/2016 6/30/2015 06/30/2016 6/30/2015

Personnel expenses 20,337 10,483 20,523 10,733

Stock option plan - (22,127) - (22,127)

Guaranteed minimum payment - stock

options 183

(998) 183

(998)

Depreciation and amortization 2,536 1,782 14,523 9,722

Office expenses 2,245 2,694 2,572 2,814

Restructuring expenses 8,360 28,596 8,360 28,596

Outsourced services 9,929 9,053 10,907 13,102

Other 1,600 1,363 1,820 1,363

45,190 30,846 58,888 43,205

24 Exploration expenses

The Company’s exploration expenses are related to the acquisition, processing and interpretation

of seismic data, geological and geophysical studies, as well as the write-offs of dry/sub-

commercial wells and sunk costs.


6/30/2016

Write-offs

Basin

Fixed assets

Intangible

assets

Total

Other

exploration

expenses

Total

exploration

expenses

Campos - - - - -

Pará-Maranhão (*) - - - - -

Santos - - - 478 478

Total - - - 478 478





80


6/30/2015

Write-offs

Basin

Fixed assets

Intangible

assets

Total

Other

exploration

expenses

Total

exploration

expenses

Campos - - - 32 32

Pará-Maranhão - - - 169 169

Santos (70) - (70) 548 478

Espírito Santo - - - - -

Colombia - - - - -

Total (70) - (70) 749 679

(*) In April 2015, the Company notified the ANP of the return of the Pará-Maranhão Basin blocks.

25 Financial Results


6/30/2016 6/30/2015 6/30/2016 6/30/2015

Financial expenses

Interest/charges and premiums on financing (60,154) (43,316) ( (61,085) (45,193)

Interest on provision for ARO (4,230) (4,680) (4,230) (4,680)

Sundry interest (5,942) (923) (5,942) (955)

Reversal of the fair value of derivative in the

settlement of the operation - (2,561) - (2,561)

Transaction costs of loans/financings - (10,954) - (10,954)

Exchange and monetary variation (*) (320,706) - - (112,976)

Other (7,595) (2,319) (5,465) (4,340)

(398,627) (64,753) (76,722) (181,659)

Financial revenue

Interest/charges on financing - 1,887 2,594 89

Interest 3,450 143 - 144

MTM for derivative operations - 4,828 - 4,828

Yields from financial investments 558 2,303 1,546 2,303

Exchange and monetary variation (*) - 232,274 97,929 -

Other 13,468 2,652 19,097 5,809

17,476 244,087 121,166 13,173

Net financial Results (381,151) 179,334 44,444 (168,486)

(*) Exchange and monetary variation have been presented in the net amount. See Note 2 (e).





82

26 Other operating revenues (expenses)


Description Ref. 06/30/2016 6/30/2015 06/30/2016 6/30/2015

Idleness of Tubarão Martelo field (a) (155,719) - (149,960)

Provision for inventory losses (b) 33,764 7,336 33,764 7,336

PIS/COFINS recoverable/reimbursable (d) 216,147 10,846 216,147 10,846

Deferred PIS/COFINS (e) 123,112 - 123,112 - Taxes levied on imports (3,045) (6,218) (3,045) (6,218)

Indemnities received - 1,694 - 1,694

Daily rate charter contingencies – OSX-3 - (27,069) - (27,069)

Provision for losses on taxes recoverable (258) (3,528) (4,827) (7,206)

ANP Provisions (c) (5,036) (3,558) (5,036) (3,558)

Loss on sale of inventories of E&P supplies (42,910) (3,558) (42,910) (3,558)

Provision for loss of reimbursable asset retirement costs in the Tubarão Azul Field

(22,143)

-

(13,976)

-

Royalties received 10,412 10,412

Other 10,420 (6,393) 8,997 (4,366)

164,744 (30,448) 172,678 (32,099)

(a) Idleness of Tubarão Martelo field: As of February 5, 2016 , there was no production in the Tubarão Martelo field. From this point onwards, the production costs were charged directly to results, without transiting through inventories.

(b) Provision for inventory losses: set up to maintain inventories at their expected realizable amounts.

(c) Provision for ANP fine: See Note 17.

(d) PIS/COFINS recoverable: See Note 13 (b).

(e) Deferred PIS/COFINS: See Note 13 (b).

27 Impairment provision /(realization)

Consolidated - 06/30/2016

Changes in provision for impairment (1) Basin Fixed assets

Intangible

assets

Translation

adjustments

(d) Total

Tubarão Azul (g) Campos 1,865,428 25,867 - 1,891,295 Tubarão Tigre, Gato and Areia fields Campos - - - -

Tubarão Martelo Campos 24,058 - 1,094 25,152

Rêmora (e) Campos - - - - Campos Basin exploratory complex (a) Campos - - - -

Santos Basin exploratory complex (b) Santos - - - -

1,889,486 25,867 1,094 1,916,447





82

Effective impairment losses

in 2016 (2) Basin Fixed assets

Intangible

assets

Translation

adjustments

(d) Total

Tubarão Azul (g) Campos (1,915,334) (25,867) - (1,941,201)

Tubarão Tigre, Gato and Areia fields Campos (15) - - (15)

Tubarão Martelo Campos - - - - Rêmora (e) Campos - - - -

Campos Basin exploratory complex (a) Campos 674 - - 674

Santos Basin exploratory complex (b) Santos 834 - - 834 Pará-Maranhão Basin Exploratory complex (f) PAMA - - - -

Colombia Colombia - - - -

Corporate (c) Corporate - - - -

(1,913,841) (25,867) - (1,939,708)

(1) + (2) Effect on results as of June 30, 2016 (24,355) - 1,094 (23,261)

(a) Included Viedma, Tulum, Vesuvio and Itacoatiara.

(b) Includes Natal, Belém and Curitiba.

(c) Write-off of costs relating to improvements in the Serrador building, the former head offices of OGX P&G, and in

other offices.

(d) Currency Translation Adjustment (CAT) affecting impairment of offshore companies.

(e) Reclassification for effective loss due to return of Rêmora Field (block C-M-499) in February 2015.

(f) In April 2015, the Company notified the ANP of the return of the Pará-Maranhão Basin exploratory blocks.

(g) Tubarão Azul field reclassified in March 2016.

28 Management Compensation The impact of the compensation paid to the Company’s Management on profit or loss for the

period ended June 30, 2016 is shown in the following table:


06/30/2016 6/30/2015

Board of Directors (fees) 197 60

Audit Committee and disclosure of information 198 128

Guaranteed minimum payment - 229

Management (compensation + salaries and charges) 4,185 2,104

Bonus 5,814 -

Subtotal 10,394 2,521

Stock options cancelled and forfeited - (22,127)

Effect on profit or loss 10,394 (19,606)





84

29 Commitments Assumed

a. Minimum Exploratory Program (“PEM”) The Company has assumed the commitment to fulfill the PEM, which encompasses the drilling

of exploratory wells and the acquisition, processing and reprocessing of seismic data. As of June

30, 2016, the guarantees posted with the ANP for fulfillment of the PEM are as follows:

In thousands of R$

Balances as of 12/31/2015 Additions Write-offs Balances as of 6/30/2016

PEM with pledge of oil (*)

Basin

Potiguar 93,679 - (39,579) 54,100

Ceará 15,889 - (14,896) 993

Pará-Maranhão 39,888 - (39,888) -

Total 149,456 - (94,363) 55,093

On May 27, 2015, the ANP approved the return of Pará Maranhão blocks PAMA-M-407, PAMA –

M-408 PAMA –M-443 PAMA –M-591, PAMA –M-624. However, the commitment signed for the

fulfillment of the PEM related to blocks PAMA –M-591 and PAMA –M-624 remains effective until

the ANP confirms the fulfillment of the obligations.

On August 14, 2015, the Brazlian National Agency of Petroleum, Natural Gas and Biofuels (ANP)

approved the sale of all 30% of OGX's share in the CE-M-661 block to the company Premier Oil do

Brasil Petróleo e Gás Ltda. Once its financial guarantee had been submitted and approved, Premier

assumed responsibility for commitments relating to this block, including its minimum exploratory

program (PEM).

On April 13, 2016, the ANP approved, subject to the presentation of financial guarantees, the

assignment of OGX’s interest in the CE-M-603 and POT-M-475 blocks, operated by ExxonMobil

Exploração Brasil Ltda.

Regarding the PAMA-M-591 and PAMA-M-624 blocks, on June 15, 2016, the company was notified

by the ANP of the waiver of compliance with the PEM, due to the lack of environmental licenses.

(*) On April 22, 2015 the ANP requested replacement of the pledge of oil from the Tubarão Martelo field as guarantee for the PEM for such blocks with a letter of credit or surety. The Company is appraising the measures to be taken in this regard. Even so, it should

be emphasized that a provision was set up for full impairment of these fields in the first quarter of 2015.

b. Operating lease and operation and maintenance (O&M) agreements

FPSO OSX-3 The bare boat charter party agreement for this unit was amended on September 12, 2014 with related

company OSX 3 Leasing BV. It featured a term of 20 years, counting from date of delivery of the

vessel on November 19, 2013. OGX has the right to terminate the agreement without incurring any

burden as from July 1, 2015 if the average daily production from the Tubarão Martelo field in the six

months immediately prior to the latter date is less than 8,500 barrels per day. The daily rental agreed

upon was US$250,000 (two hundred and fifty United States Dollars), in line with what was set out in

the Court-supervised reorganization Plan Support Agreement signed by the parties on December 24,

2013 and the Notice to the Market disclosed by the OSX Group on March 13, 2014. The agreement calls for retroactive application of the rate to November 19, 2013. Associated with this charter party,





84

on September 6, 2013 signed a 20-year agreement with related company OSX Serviços Operacionais

Ltda. for operation and maintenance (“O&M”) of the FPSO OSX-3 unit. The latter contract stipulated

that once the costs agreed upon (especially personnel and supplies) were incurred, they should be

recharged with a margin varying from 0% to 10%, according to the level of operational efficiency. On

December 22, 2014, the Company obtained a preliminary injunction (court restraining order) for

decrease of the daily rate for charter of the OSX-3 vessel from US$250 thousand/day to US$130

thousand/day owing to the blatant contractual imbalance resulting from the steep drop in the price of

Brent type oil on international markets .

On March 16, 2015, OGX P&G, together with OGPar, signed agreements with OSX Brasil S.A., OSX

3 Leasing BV, OSX 3 Holding BV and OSX Serviços Operacionais Ltda. aimed at the following: (a)

suspension for a period of six months the payments outstanding owed by OGX P&G associated with

the charter of the FPSO OSX3; and (b) suspension for the same period of future payments resulting

from this same charter. In this same context, in order to bring about the decrease and optimization of

the costs for the O&M services at the Tubarão Martelo Field, OSX Serviços and OGX P&G decided

to amicably terminate the O&M agreement for the FPSO OSX 3, undertaking to negotiate the terms

for transfer of the activities, crew, agreements, know-how, etc., as well as indemnity to be paid by

OGX P&G. As of December 31, 2015, the Company has not recorded any provision for such

indemnity, since it has not been possible to estimate what this would amount to.

On March 18, 2015 a decision was rendered by the Judge of the same Business Court upholding the

decrease in the daily rate to US$130 thousand/day. Nordic filed an interlocutory appeal against this

decision, which was allowed to proceed at the judgment session held on May 27, 2015 at the 14th

Civil Chamber of the Court of Justice of Rio de Janeiro, which ruled that the 4th Business Court did

not have jurisdiction over same and declared null and void the decision that reduced the daily charter

rate. OGX filed an appeal requesting clarification of the 14th Chamber’s decision, which is still

pending judgment.

Moreover, considering the amount of US$130 thousand/day for the charter rate, on May 15, 2015

Nordic filed for foreclosure against OGX, whereby it requested blockage of all the rights resulting

from the sale agreement, as well as all the receivables arising from sale of oil extracted from the

Tubarão Martelo field, in order to ensure payment of the debt resulting from the Charter Party signed

with OSX, the credits of which were assigned through an appropriate instrument. Such foreclosure

suit was distributed to the Judge of the 45th Civil Court of Rio de Janeiro. On June 23, 2015, after

submission of a debtor’s appeal by OGX, a decision was handed down by such Judge turning down

the petition for blockage filed by Nordic. After the judgment creditor refused to accept OGX P&G’s

offer of 365,000 barrels of oil to be levied upon, on July 23, 2015, the Judge of the 45th Civil Court

of Rio de Janeiro granted the levy upon amount deposited by judgment debtors before the Judge of the

4th Business Court of the Judicial District of the Capital of the State of Rio de Janeiro. In addition, on

October 15, 2015, the Judge of the 45th Civil Court of Rio de Janeiro granted the levy upon common

shares issued by Parnaíba Gás Natural S.A. held by OGX P&G, however, at the beginning of

November 2015, the same Court revised its decision and canceled the pledge on the common shares

issued by Parnaíba Gás Natural S.A. ("PGN") and owned by OGX.





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30 Financial instruments and risk management

The Company engages in operations involving financial instruments. These instruments are

managed by means of operating strategies and internal controls aimed at ensuring liquidity,

security and profitability.

The control policy consists of permanently monitoring the contractual terms versus those

prevailing in the market and future expectations. The Company does not make any investments

of a speculative nature in derivatives. The results obtained from operations are in compliance with

the policies and strategies defined by the Company’s Management.

The estimated realizable amounts of the Company’s financial assets and liabilities have been

determined by means of information available on the market and appropriate appraisal

methodologies. However, considerable judgment has been required in interpreting market data in

order to produce the most appropriate estimate of realizable amounts. As a result, the following

estimates do not necessarily indicate the amounts that could be realized on the current market.

The use of different market methodologies can have a material effect on the estimated realizable

amounts.

30.1 Derivatives and risk management

a. Risk management objectives and strategies The Company has a formal risk management policy. Financial instruments for hedge purposes

are contracted by conducting a periodic analysis of the exposure to the risk that Management

wishes to hedge against, as approved by the Board of Directors. The hedge guidelines are applied

according to the type of exposure. Whenever risk factors related to foreign currencies, interest

rates and inflation arising from assets and liabilities acquired are deemed to be material, they may

be neutralized in accordance with Management’s appraisal of the economic and operational

context. The risk of oil price swings is subject to the limits of physical exposure and volatility set

forth in the Company’s Sales Policy.

b. Market risk Risk of swings in the prices of commodities, exchange rates and interest rates.

b.1 Risk of change in price: oil

Risk management The Company has a formal policy for sales and inventory management that defines the levels of

decision-making for oil sales and the criteria for management of oil sale prices. The guidelines

for hedging the price of this commodity call for the use of derivative instruments to set the sale

price in order to assure enhanced stability and predictability for the Company’s flow of revenues.

Given the recent significant drop in the price of Brent type oil, the Company has conducted

impairment testing of its assets. See Notes 11 and 27.

Operations hedged by derivative instruments against changes in prices Pursuant to its Sales Policy, the Company can use derivative instruments to establish the sale price

of the oil produced, and may also set the price for up to three months of production or occasionally

any other horizon that is approved by the Board of Directors. The derivative instruments used in

such hedge operations could involve oil futures, swaps, collars and options. The operations may





86

be carried out on the following exchanges: the NYMEX - New York Mercantile Exchange and

the ICE - Intercontinental Exchange, as well as on the over-the-counter (OTC) market.

Sensitivity analysis - stress testing As of June 30, 2016, the Company is not presenting any sensitivity analysis for petroleum

derivatives, since on the base date in question there were no outstanding positions.

b.2 Exchange risk Risk of fluctuations in exchange rates associated with the Company’s assets and liabilities.

Risk management The Company manages exchange risk at the consolidated level in order to identify and mitigate

the risks associated with fluctuations in the value of currencies to which assets and liabilities are

pegged. The objective is to identify or create natural hedges, taking advantage of the synergy

between the operations of the Company’s subsidiaries. The idea is to minimize the use of hedge

derivatives by managing exchange risk over net exposure. Derivative instruments may be used in

cases in which it is not possible to use the natural hedge strategy. The Company may contract

derivative operations within the following limits:

For amounts effectively committed or contracted, in which there are agreements signed with

suppliers, a coverage position of up to 100% may be adopted, irrespective of the period of

exposure.

For estimated amounts, a position with coverage period limited to 12 months may be adopted and

the coverage position may be under 100%, weighted based on conservative prospects for

realization.

Operations hedged by derivative instruments against exchange variation At the end of the year 2014 the Company has two NDF (non-deliverable forward) operations

outstanding. They were contracted to hedge exposures of the guarantees provided to Colombia’s

ANH in US$ for the PEM and the PEA (Advanced Exploratory Program) in Colombia. Both

operations were closed out in the second quarter of 2015 (in May), when the escrow deposits for

such guarantees were released by the ANH after it granted its approval of the farm-out of the

exploratory blocks involved, generating a gain of R$4,828.

Net exchange exposure Consolidated

06/30/2016

Assets

Current assets (i) 12,850

Non-current assets (i) 274,571

287,421

Liabilities

Current liabilities (ii) (1,604,934)

Non-current liabilities (iii) (351,764)

(1,956,698)

Net assets and liabilities (1,669,277)

Refer largely to the balance of cash and cash equivalents and escrow deposits maintained in US$ and accounts receivable in

foreign currency.





88

(ii) Refer mostly to: (a) the DIP financing and the 2nd PPE / Incremental facility (US$73 million). it should be pointed out

that the DIP financing agreement includes a convertibility clause (see Note 16); (b) trade bills payable to suppliers in

foreign currencies; (c) provision for future ARO for the Tubarão Azul field; and (d) intercompany loans in US$.

Refer to the provision for future ARO for the Atlanta, Oliva and Tubarão Martelo fields. See Note 17.

Sensitivity analysis for exchange risk The scenarios defined in this analysis are based on the exchange rate in effect on June 30, 2016:

Scenario I: Depreciation of the R$ against the US$- by 25%.

Scenario II: Depreciation of the R$ against the US$- by 50%.

The following table details the sensitivity analysis of the net balance of outstanding foreign

currency assets and liabilities as of June 30, 2016. Positive amounts represent revenues and

negative amounts expenses.

Notional

amount

(US$ thousand) Scenario I

(R$ thousand) Scenario II

(R$ thousand)

Net foreign currency liabilities (520.056) (*) (417,319) (834,638)

(*) Corresponding to the amount of R$1,669,277 presented in the section above entitled “Net exchange exposure” in Note

30.1 (b.2), translated into US$ at the closing rate for June 2016 (3.2098).

(**) As shown in the section above entitled “Net exchange exposure” in Note 30.1 (b.2), the balance of net assets and

liabilities is negative (net debt), mainly due to Non-current Liabilities that correspond to the DIP and 2nd PPE

financings (US$73 million). See Note 16. The Company chose not to contract financial instruments to hedge against

this exchange exposure, since in the court-supervised reorganization process the Company does not expect to have to

disburse funds to settle DIP financing (a total of US$312,873 on June 30, 2016). The proposal of the Court-supervised

reorganization plan is to convert this debt into capital. See Note 1.4.

b.3 Interest rate risk This represents the risk of displacement of interest rate structures with which flows for payment

of principal and interest on the debt may be associated. The Company does not consider the

interest rate risk material given its current status, since it does not expect to have to settle its

principal liability (DIP financing) with interest. Expectations are that this liability will be

converted into capital. (see Note 1.4).

c. Credit risk The credit risk derives from the possibility that the Company may incur losses due to the default

of its counterparts or the financial institutions with which its funds are deposited or where it has

financial investments. This risk factor may arise from commercial and cash management

operations. To mitigate such risks, OGPar has adopted a practice of analyzing the financial and

equity situation of their counterparts, and also conducting ongoing tracking of outstanding

positions. To appraise the financial institutions through which they conduct operations, the

Company employs the Risk Bank Index put out by the consulting firm Lopes Filho e Associados

and the rating of the risk rating agency Standard & Poor’s (S&P). In order to appraise its

commercial counterparts, the Company has a norm whereby a set of criteria and guidelines are

established that represent the basis for granting credit to its domestic and foreign customers. The

basic fundamentals that guide this instrument are providing enhanced security for realization of

the credits granted and minimizing any risks in commercial relations.

Maximum exposure to credit risk





88

The Company’s maximum exposure to credit risk corresponds to the total set out below:


Credit risk 06/30/2016 12/31/2015 06/30/2016 12/31/2015

Cash and cash equivalents 326 21,979 20,089 23,546 Escrow deposits 152,799 59,800 152,799 59,800

Trade accounts receivable - - - -

Other credits 8,278 12,603 7,956 12,538

Loans/Credits with related parties 12,282,821 14,905,160 127,160 140,275

Non-current assets held for sale 234,875 232,433 234,875 232,433

12,679,099 15,231,975 542,879 468,592

d. Liquidity risk The Company monitors its level of liquidity considering the expected cash flows, in comparison

with the amount of cash and cash equivalents available. Management of liquidity risk entails

keeping on hand sufficient cash and marketable securities and having capacity to settle short-term

market positions. The recent deterioration in the Company’s cash position has affected the

management of its liquidity risk. The current strategy for managing liquidity is described in Note

1.5. The following chart sets out OGPar’s financial liabilities per due date (aging list).

06/30/2016 - Consolidated

Overdue

Overdue

up to 6

months

Overdue

from 6

months to

1 year

Overdue

from 1

to 2

years

Overdue

for more

than 2

years Other

Total

Trade accounts payable(i) 26,945 3,217 - - - 17,022 47,184

Borrowings and financing (ii) - 1,301,337 - - - 46,154 1,347,491

Accounts payable to related

parties - 512,902 - - - - 512,902

Total 26,945 1,817,456 - - - 63,176 1,907,577

(i) The balance of “Other accounts payable overdue” corresponds to the portion of the provision for expenditures not yet billed by the

suppliers. See Note 15.

30.2 Fair value of financial assets and liabilities The concept of fair value calls for the appraisal of assets and liabilities based on market prices, in the

case of liquid assets, or on mathematical pricing methodologies otherwise. The hierarchical level of

fair value grants priority to unadjusted quoted prices on an active market. The hierarchy of fair value

for derivative instruments is structured as follows:

Prices observable on

active market Pricing model based on prices

observable on active market

Pricing model without

use of observable prices

(Level I) (Level II) (Level III)

Financial investments - 19,538 -

Balances as of June 30, 2016 - 19,538 -

Prices observable on

active market Pricing model based on prices

observable on active market

Pricing model without

use of observable prices

(Level I) (Level II) (Level III)

Financial investments - 73 -

Balances as of December 31, 2015 - 73 -





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31 Insurance Coverage

Given the nature of its activities, OGX P&G has adopted a policy of taking out insurance coverage

according to best market practices and within limits considered sufficient by Management to

cover any claims.

The Company took out a continuous Petroleum Risk insurance policy that took effect when its

exploratory campaign began, including the following coverage: 3rd Party Civil Liability for

material damages and / or personal injury; Well Control Insurance, which covers such accidents

as kick- and blow-outs, well eruption due to uncontrolled pressure, which may lead to

abandonment of same, in addition to expenses such as re-drilling wells or cleaning and

decontamination. On March 1, 2016 the latter coverage was renewed for a further 12 months,

offering coverage through March 1, 2017. The policy was issued by FairFax Brasil.

On February 20, 2016, the Company acquired a P&I vessel insurance exclusively related to

pollution and waste removal. The policy, issued by Marsh, is valid until February 20, 2017.

On July 31, 2015, the insurance coverage for the General Civil Liability, by Fairfax Brasil, and

Equity, by ACE, was renewed and remains in effect through July 31, 2016.

Tokio Marine and ACE renewed the D & O civil liability policy for another 12 months ending

February 2, 2017.

As of March 31, 2016, the main assets or interests covered by insurance policies taken out by

OGX P&G and the respective amounts thereof are as follows:

Type of insurance Insured amounts

Exploratory campaign US$

thousands

Offshore blow-out risks in the Campos basin 30,000

General civil liability and pain & suffering claims relating to offshore O&G exploration 25,000

Protection and Indemnity OSX 3 (P&I) 500,000

Other insurance R$ thousands

Operating risks to property 11,240

General civil liability

Civil liability of administrators – D&O

20,000

60,000





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32 Information per segment

The information broken down by segment that appears on the following pages has been prepared

in relation to the business lines of OGX P&G, identified based on its management structure and

internal managerial reports.

Company Management considers that there is only one business activity: exploration and

production of oil and natural gas (O&G E&P).

The Company is segmented operationally according to the location of the exploratory blocks per

basin (geological segment), subject to different risks and remuneration.

In the presentation of the information per operating segments, the main items allocated to the

segments are: (a) receivables and liabilities at the joint-ventures; (b) intangible assets; (c) E&P

fixed assets; (d) provision for ARO; (e) net sales revenues; (f) cost of products sold; and (g)

exploration expenses. The principal balances not allocated to the operational segments and those

allocated to the Corporate segment are: (a) cash and cash equivalents; (b) escrow deposits; (c)

loans and financings; (d) shareholders’ equity; (e) G&A expenses; (f) financial results; and (g)

income taxes and social contribution (IRPJ/CSLL).

Per-segment information is broken down as follows:





91

Statements of financial position per segment

June 30, 2016 Campos

Pará-

Maranhão

Santos

Parnaíba

Colombia

Ceará

Potiguar Corporate Consolidated

Assets

Current assets - - - - - - - 28,045 28,045

Non-current asset available for sale - - - 234,875 - - - - 234,875

Long-term assets - - - - - - - 777,958 777,958

Investments - - - - - - - 153,112 153,112

Fixed assets - - 528,497 118,386 738 - - 6,304 653,925

Intangible assets - - 569,275 - - - - 1,240 570,515

Total Assets - - 1,097,772 353,261 738 - - 966,659 2,418,430

Liabilities

Current liabilities 173,329 - - - - - - 1,925,150 2,098,479

Non-current liabilities 317,273 - 83,682 - - - - 88,426 489,381

490,602 - 83,682 - - - - 2,013,576 2,587,860

Equity - - - - - - - (169,430) (169,430)

Total liabilities and equity 490,602 - 83,682 - - - - 1,844,146 2,418,430





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December 31, 2015 Campos

Pará-

Maranhão

Santos

Parnaíba

Colombia

Ceará

Potiguar Corporate Consolidated

Assets

Current assets 17,168 - - - - - - 51,084 68,252

Non-current asset available for sale - - - 232,433 - - - - 232,433

Long-term assets - - - - - - - 733,410 733,410

Investments - - - - - - - 151,779 151,779

Fixed assets - - 483,649 148,099 738 - - 7,431 639,917

Intangible assets - - 569,275 - - - - 2,658 571,933

Total Assets 17,168 - 1,052,924 380,532 738 - - 946,362 2,397,724

Liabilities

Current liabilities 210,859 - - - - - - 2,177,357 2,388,216

Non-current liabilities 373,925 - 98,025 - - - - 216,496 688,446

584,784 - 98,025 - - - - 2,393,853 3,076,662

Equity - - - - - - - (678,938) (678,938)

Total liabilities and equity 584,784 - 98,025 - - - - 1,714,915 2,397,724





93

Statement of income per segment

Basin


Pará-

Maranhão

Santos

Parnaíba

Colombia

Ceará

Potiguar

Corporate

Consolidated

Net sales revenue 53,631 - - - - - - - 53,631 Cost of goods sold (119,766) - - - - - - - (119,766)

Gross profit (66,135) - - - - - - - (66,135)

Operating revenues (expenses)

Exploration expenses (384) 112 (206) - - - - - (478)

General and administrative expenses - - - - - - - (58,888) (58,888)

Other operating revenues (expenses) (114,627) - - - 10,412 - - 276,893 172,678

Impairment losses (24,095) - 834 - - - - - (23,261)

Equity in the earnings of subsidiaries - - - - - - - (260) (260)

Results before financial result and taxes (205,241) 112 628 - 10,412 - - 217,745 23,656

Financial Results

Financial revenue - - - - - - - 23,237 23,237

Financial expenses - - - - - - - (76,722) (76,722) Exchange variation - - - - - - - 97,929 97,929

Results before taxes on income (205,241) 112 628 - 10,412 - - 262,189 68,100

Income tax and social contribution - - - - - - - - -

Net result of continuing operations (205,241) 112 628 - 10,412 - - 262,189 68,100

Net results of discontinued operations - - - 2,442 - (3,242) (5,285) - (6,085)

Profit (loss) for the period (205,241) 112 628 2,442 10,412 (3,242) (5,285) 262,189 62,015





94

Basin


Pará-

Maranhão

Santos

Parnaíba

Colombia

Ceará

Potiguar

Corporate

Consolidated

Net sales revenue 262,951 - - - - - - - 262,951 Cost of goods sold (336,108) - - - - - - - (336,108)

Gross profit (73,157) - - - - - - - (73,157)

Operating revenues (expenses)

Exploration expenses (32) (169) (478) - - - - - (679)

General and administrative expenses - - - - - - - (43,205) (43,205)

Other operating revenues (expenses) (27,069) - - - - - - (5,030) (32,099)

Impairment losses 116,652 (23,936) (134) - (3,774) - - (1,049) 87,759

Equity in the earnings of subsidiaries - - - - - - - 1,912 1,912

Results before financial result and taxes 16,394 (24,105) (612) - (3,774) - - (47,372) (59,469)

Financial Results

Financial revenue - - - - - - - 13,173 13,173

Financial expenses - - - - - - - (68,683) (68,683)

Exchange variation - - - - - - - (112,976) (112,976)

Results before taxes on income 16,394 (24,105) (612) - (3,774) - - (215,858) (227,955)

Income tax and social contribution - - - - - - - (7,254) (7,254)

Net result of continuing operations 16,394 (24,105) (612) - (3,774) - - (223,112) (235,209)

Net results of discontinued operations - - - 13,199 - (36,265) (61,498) - (84,564)

Profit (loss) for the period 16,394 (24,105) (612) 13,199 (3,774) (36,265) (61,498) (223,112) (319,773)





95

33 Equity in the earnings of subsidiaries


6/30/2016 6/30/2015

Basin

Parnaíba - See Note 10 (c) 2,442 13,199

Ceará (3,242) (36,265)

Impairment - fixed assets - (972)

Impairment - intangible assets - (22,933)

Effective loss -intangible assets - (12,139)

Recovery - billings - 2,095

Exploration expenses (3,242) (2,316)

Potiguar (5,285) (61,498)

Impairment - fixed assets (148) (2,669)

Impairment - intangible assets - (53,938)

Exploration expenses (5,137) (4,891)

(6,085) (84,564)

34 Earnings (Loss) per Share


Basic and diluted earnings (loss) per share 06/30/2016 06/30/2015 06/30/2016 06/30/2015

Basic and diluted numerator:

Profit (loss) attributable to shareholders 62,015 (319,773) 62,015 (319,773)

Basic and diluted denominator:

Weighted average number of shares 126,980,722 120,758,380 126,980,722 120,758,380

Earnings (Loss) per Share 0.48838 (2.64804) 0.48838 (2.64804)

35 Events after the reporting period

Resumption of Production at the Tubarão Martelo Field

On July 1, 2016, the Company received an official letter issued by the Brazilian National Agency

of Petroleum, Natural Gas and Biofuels ("ANP") authorizing the immediate resumption of

production at the Tubarão Martelo field ("TBMT field"), through FPSO OSX-3. As a result of

said authorization, the Company resumed operation at the TBMT Field and continues monitoring

the process and awaiting production stabilization.

Signature of an Agreement with OSX-3 Bondholders

On July 15, 2016, OGpar and OGX P&G (jointly referred to as "Companies"), informed the

market that the Companies and Nordic Trustee ASA ("Nordic") – representing the holders of

bonds issued by OSX 3 Leasing B.V. (the Companies and Nordic, jointly referred to as "Parties"),

through an agreement to suspend certain litigation between the Parties for thirty (30) business

days ("Suspension Period") as of the date of the ratification decision of said agreement ("Partial





96

Agreement"), which establishes interim conditions for the negotiation of the definitive agreement

in order to end the conflicts between the Parties and to allow the Companies to prosper

("Definitive Agreement ").

Also within the scope of the Partial Agreement, Nordic agrees to the immediate sale, by OGX

P&G, of shares corresponding to five percent (5%) of its interest in Parnaíba Gás Natural S.A.

("PGN") to Cambuhy I Fundo de Investimento em Participações ("Cambuhy") for ten million

reais (R$10,000,000), in the Suspension Period, and also agrees with the use of the other shares

held by OGX P&G in the capital of PGN ("PGN Shares") that have not been sold to Cambuhy for

the subscription and payment of new common shares to be issued by Eneva S.A. ("Eneva"),

pursuant to a Material Fact disclosed by the Companies on March 28, 2016 ("Payment of Eneva

Capital").

On the other hand and as a result of the abovementioned Partial Agreement, all PGN Shares (until

the "Payment of Eneva Capital") and, after the Payment of Eneva Capital, all the shares issued by

Eneva paid by OGX P&G with PGN Shares will be fully blocked and unavailable for a maximum

term of eighteen (18) months as of the ratification of the Partial Agreement, and this term may be

anticipated in specific cases, including execution and ratification of the Definitive Agreement.





96

Board of Directors Board of Executive Officers

Pedro de Moraes Borba Paulo Narcélio Simões Amaral

Chairman CEO

Paulo Narcélio Simões Amaral Márcia Lemos Mainenti

Financial and Investor Relations Officer

Julio Alfredo Klein Junior

Francisco Aurélio Sampaio Santiago

Chief Operating Officer

Statutory Audit Committee Controller and Accounting-in-charge

Carlos Roberto de Oliveira Pauseiro Dennis Hochman

CRC-RJ 122702/O-4

Julio Alfredo Klein Junior

Willian de Mello Magalhães Junior

ogx petróleo e gás s.a. - under court- supervised

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