Prio S.A. (PTRRY) This autumn 2023 Earnings Name Transcript

Prio S.A. (OTCPK:PTRRY) This autumn 2023 Earnings Convention Name March 11, 2024 10:00 AM ET

Firm Contributors

Jose Costa – Investor Relations

Roberto Monteiro – Chief Government Officer

Francisco Francilmar – Chief Working Officer

Milton Rangel – Chief Monetary Officer

Convention Name Contributors

Pedro Soares – BTG

Bruno Montanari – Morgan Stanley

Luiz Carvalho – UBS

Gabriel Barra – Citi

Vicente Falanga – Bradesco

Bruno Amorim – Goldman Sachs

Jose Costa

Everybody. Welcome to Prio’s Fourth Quarter ’23 Video Convention Name. I’m Jose Gustavo, IR and Treasury Supervisor. I will be the host on this occasion. The presentation and feedback on the outcomes shall be introduced by the CEO, Roberto Monteiro; our CFO, Milton Rangel; and our COO Francisco Francilmar. After the corporate’s outcomes, that shall be out there through the Q&A session. [Operator Instructions] This occasion is being recorded and shall be out there on our IR web site.

This presentation comprises data primarily based on future estimates and forecasts primarily based on assumptions adopted by the corporate which might due to this fact, change and shouldn’t be thought-about information or be used as the premise for monetary projections past the plans expressed by the corporate.

Now, I will flip the ground to Roberto Monteiro, our CEO.

Roberto Monteiro

Good morning, everybody. Welcome to the video convention name to debate Prio’s outcomes. I might like as soon as once more to begin by thanking the Prio crew who did a wonderful work through the 12 months with a variety of dedication, drive and willpower. You’re answerable for the 2023 outcomes that we’ll be presenting in a minute.

2023 was an excellent 12 months. I will begin with the highlights for the interval. After which, I’ll flip the ground to Francilmar to discuss the operations. However let me offer you a abstract of our story. The fourth quarter was the most effective within the firm’s historical past. We achieved a median every day manufacturing, a bit over 100,000 barrels of oil, a file mark for the corporate. We posted a lifting value that was low $6.8. We lowered our lifting value quarter on quarter. The lifting value now stands at $6.8 per barrel which is actually in line with these 100,000 barrels produced every day. One other massive star this quarter was Albacora Area which achieved an working effectivity of 94% in December.

Our plan for the reason that begin of operation at Albacora was to realize ranges near 90%. So the month of December was actually good. We really exceeded our expectations a bit. The sector’s trajectory was actually a bit totally different. We had some higher difficulties than initially deliberate or estimated. By the top of the 12 months, not less than was very related in line with the plan.

We additionally achieved an fascinating mark when it comes to carbon footprint which is completely in step with our elevated working effectivity and with our greater manufacturing. We reached 21 kilos of CO2 per barrel of oil equal within the 12 months, down 20% over 2022. So after we say that our manufacturing technique could be very a lot linked to environmental accountability. That is what we’re speaking about. That is the snapshot. We nonetheless have room to additional enhance our carbon footprint now with the beginning of latest tasks however I feel this was a major step.

From the social standpoint, I want to deliver one particular mission to be highlighted at this level which is Reacao [ph] offshore in partnership with Instituto Reacao [ph] and Todos na Luta which is a coaching program for individuals — for technicians who can then begin working within the offshore business. We deliver technicians who aren’t within the offshore business and we practice them and we offer a variety of coaching and these technicians can work within the offshore business.

We rent an excellent a part of these candidates. And the opposite candidates that aren’t employed initially will be employed later or will be employed by different firms of the sector as effectively. So it is a program that we actually like and that makes us very proud. All of that led to our monetary earnings that you’ve got all seen, i.e., in web income of $2.6 billion and EBITDA of $1.8 billion and a web revenue of $1.1 billion, all being file marks and representing vital will increase over the 12 months 2022.

Properly, I will transfer on to Slide quantity 4 which graphically exhibits a few of the issues we have already talked about, manufacturing and lifting prices. However these 2 on the backside which we all the time present, I consider, are essentially the most fascinating for us to think about at this second. The primary is our money place. We ended the 12 months with $482 million in money that’s excluding the shares we have now in treasury. So that is really firm’s money.

And we ended the 12 months with a web debt over EBITDA ratio of 0.7x. Proper after the acquisition of Albacora, you’ll recall which was within the first quarter of ’23, our money stage was at $100 million and our debt stage was 1.1x. However with the corporate’s money technology all year long, even with all of the CapEx program applied, we managed to get again to an excellent wholesome money stage of $480 million and to this debt stage of 0.7x.

Will hand over to Francilmar after which I will come again to speak a bit about ESG initiatives of the corporate and the subsequent steps. Thanks. Francilmar?

Francisco Francilmar

Thanks, Roberto. Let’s transfer on to the asset efficiency part on Slide 5. Whereas we ended the 12 months with an excellent consequence for all of the property, stability within the operation and in addition reaching a well-controlled manufacturing value which ended up giving us a lifting value beneath $7. I will go right into a bit extra element later. However total, we posted file figures in a number of areas and so we’ll proceed.

Transferring on to Slide quantity 6 to speak particularly in regards to the lifting value. This can be a slide we have identified for a very long time. It is our nice energy, i.e., controlling manufacturing prices. We proceed with the technique by working to extend manufacturing and scale back working prices. This quarter, we managed to realize a lifting value of $6.8. We are going to proceed to try to keep up these total figures. It might be that in some unspecified time in the future, on account of manufacturing points or prices it could fluctuate a bit however that is the nice safety the corporate has to provide us resilience and keep progress.

Transferring on to Slide quantity 7. Let’s speak particularly in regards to the working efficiency of Frade. Properly, it has been an excellent quarter for Frade area. We have already managed to realize a efficiency of 98% — nearly 99% working effectivity. With a sure stability in manufacturing, all going effectively with no main — no main occasions on this specific quarter. It was the 12 months during which we delivered the second part of the revitalization plan exhibiting the potential of the asset and that it has been performing very effectively in parallel with a really massive preparation when it comes to the vessel, getting her able to obtain the manufacturing coming from Wahoo in 2024.

On Slide 8, we’ll go into a bit extra element in regards to the Frade Revitalization Plan. We carried out each waves. First and second phases. We drilled wells in numerous reservoirs put them into manufacturing and a few into injection. The result’s distinctive elevated manufacturing just a few instances. We collected a variety of data. Right here on the left, on this determine, we see that the traces on this polygon are the wells which can be producing, all of the manufacturing improve. These coloured polygons listed below are the prospects we’re evaluating for a brand new wave. This pink one is known as Maracana was one which we examined all through this 12 months in 2023, confirming presence of oil. We have already got an excellent understanding of the reservoir. And we’re engaged on growing the most effective design when it comes to move, variety of wells to get the most effective quantity of oil out of the reservoir discovered. Different targets are being studied in order that when the time comes sooner or later, we are able to check and consider these prospects.

Transferring on to Slide 9. We’re going to speak a bit extra about Tubarao Martelo and Polvo wells and fields. This quarter has been considered one of stability with an excellent working effectivity. The vessel and the wells have additionally managed to realize a stage of stability inside the usual that we wish to work with with none main scares or issues. Stoppage right here or there at a effectively the place have an ESP pump however we have been again up and working rapidly. There was no work over concerned, no main interruptions. What’s necessary about Tubarao Martelo and Polvo Area is that particularly Polvo on the finish of the primary quarter 24, we should always begin engaged on a drilling marketing campaign there. We’ll check a few targets after which attempt to put a effectively into manufacturing to assist with manufacturing and management the lifting value and all the pieces else. So I hope to deliver you extra information about this cluster within the subsequent earnings name.

On Slide 10, we’re going to speak a bit in regards to the state of affairs of Albacora Leste area. Properly, the final quarter was the easiest of the 12 months. We see a rising enchancment there, mastering some points that have been already there at the start of the 12 months after we began working within the area. We’ve been investing closely within the reliability of the vessel, the standard of upkeep and operation. And we began to reap the rewards on the finish of the 12 months.

In December, we achieved the most effective mark we have needed to date an effectivity of round 94%. When it comes to growing manufacturing, we’re engaged on making ready all of the sources and supplies. Lots of subsea tools is being commissioned. There’s so much available on the market when it comes to set up which we’re making ready to do. This could occur over the course of 2024. We have already got a extra strong plan for the second half of the 12 months. Some issues we’ll attempt to push ahead to the top of the primary half of the 12 months however it’s extra prone to occur over the course of the second half.

Now at the start of the 12 months, primarily in February, we had some main onetime issues at Albacora area, primarily associated to a turbine. We have been nonetheless refurbishing the generators and considered one of them failed. We needed to perform corrective upkeep which ended up penalizing the sector’s manufacturing so much throughout this era. So as soon as that is resolved, then we’re within the last phases now. The sector’s manufacturing ought to return to an excellent stage and we’ll proceed to enhance the standard of upkeep and reliability after which improve manufacturing.

Transferring on to Slide quantity 11. Let me offer you an replace on the Wahoo mission. This can be a mission that’s already within the execution part. The manufacturing half could be very superior. I have been visiting some producers, a variety of tools is being delivered. It is already at a really superior stage and the mission is on schedule. As are the works on the Frade FPSO Valente which can obtain the manufacturing coming from Wahoo. The purpose of consideration in the present day are actually the environmental license on account of this entire state of affairs on the environmental company, IBAMA, of the truth that they’re paralyzed.

We’re ready a bit for his or her definition. However in precept, in the present day, all the data we have now to supply is with the company. And we’re ready to have some interplay and obtain the ultimate okay as quickly as potential. On the execution aspect, the Hunter Queen drilling rig is prepared at any time. Once we obtain a inexperienced line from IBAMA, we’ll have the ability to proceed with the ultimate mobilization in just a few weeks and very quickly in any respect, will begin drilling. It’s doing a little ancillary companies at Frade and Albacora Leste fields assembly the corporate’s wants. On the identical time, we’re already mobilizing for pipeline.

So all of this could occur over the subsequent few months which poses a variety of challenges for us when it comes to beginning manufacturing. However we’re sticking to the August schedule for beginning manufacturing at Wahoo area. In order that’s the overall replace. All the pieces is progressing on the stage of issue that we usually have. There is not any such factor as a simple life for us however we stay assured that we’ll ship one more mission on time and on price range.

So shifting on to Slide quantity 12. Let’s go to a bit extra element in regards to the reserves certification. Once we ended the 12 months with certification and an excellent consequence, we produced round 32 million barrels. We had a lower in reserves in comparison with 2023. After which with the work that was accomplished all through 2023. And right here, I will go into a bit extra element. So the exercise is starting from all of the units of outcomes that we had at Frade area, bringing the brand new wells on-line and placing them into manufacturing with a a lot greater consequence than beforehand estimated, including tasks to be developed, each Maracana and the area of that reservoir that has ODP4 and ODP5 producing and there is ODP6 even potential for one thing extra. All of this has already been included as 1C.

It’s contingent as a result of we simply have to incorporate it within the growth plan however we have already got, so to talk, actual plans to drill and put these areas into manufacturing they usually have been confirmed. In order that they have been included right here. So Frade actually was the largest contribution, including 43 million barrels of 1P reserves contemplating ODP6 and Maracana as 1C.

Wahoo remained the identical; there have been no main modifications, the identical schedule as earlier than. On the Polvo Tubarao cluster, some issues have been introduced ahead. The beginning of manufacturing was scheduled for 2025 and we introduced ahead the beginning of manufacturing of 1 effectively. We are able to drill a bit greater than that however the begin of manufacturing of 1 effectively is included. In Albacora Leste, we simply made an adjustment in keeping with the work plan which moved the sequence of wells a bit right here, a bit there.

Within the total abstract right here, the rise in reserves was the results of the drilling and revitalization marketing campaign carried out in Frade area which exhibits the potential for creating worth after we managed to hold out these revitalizations or discover what we have now throughout the block throughout the area. So this makes us assured when it comes to what we have been doing at Frade. Albacora Leste has huge potential going ahead. Tubarao and Polvo are actually at a really totally different stage, a lot decrease however it offers the corporate a variety of confidence to proceed working and mastering the experience of revitalizing these mature fields much more.

Properly, in consequence, reserves rose by nearly 10%. We went from 515 million barrels of manufacturing to 559 million barrels, putting the corporate at an excellent stage in leaving, shall we embrace, a really massive job forward of the operations space within the coming years.

So this concludes my participation. I will give the ground to my good friend, Milton.

Milton Rangel

Thanks, Francilmar. Good morning, everybody. So shifting on with the presentation on Slide 13, the place we’ll speak about Prio’s monetary efficiency and some extra particulars in regards to the firm’s capital construction and different monetary components.

Properly, the 12 months 2023 was tremendously impacted by the expansion in Prio’s manufacturing which led to a rise in gross sales. So if you consider gross sales, we simply offered over 12 million barrels in 2022 in comparison with simply over 32 million in 2023. This improve in 2023 is essentially justified by the success of the second part of the Frade revitalization marketing campaign which have been considerably growing the sector’s manufacturing and in addition by the entry of Albacora Leste, as was talked about earlier than on the finish of January. So this greater than offset the discount in Brent seen from 2022 to ’23.

The common Brent in ’22 was near $100. It was round $99, whereas in 2023, the typical Brent was $82. However effectively, we noticed a rise of round 110% in whole income from $1.250 billion to $2.620 billion. And web income FOB, free on board, already deducting taxes and advertising and marketing bills of $2.4 billion, a rise of 94%, whereas our prices or our value of products offered have been up by 43%. Subsequently, it is fascinating to notice that the corporate’s technique of gaining synergy, growing manufacturing whereas sustaining the fee construction or growing this construction lower than the rise in gross sales is what permits to keep up our margins or protect the margins even in a situation of a drop within the common Brent which is what we see right here on this consequence.

With this, EBITDA was $1.8 billion in 2023 in comparison with $927 million in 2022, up 95% with a margin of 75%, tremendous robust. Additionally, with vital will increase in depreciation and amortization, primarily as a result of entry of Albacora Leste and with this, web revenue stood at $1.86 billion in comparison with $711 million which suggests up 53%.

Now persevering with right here on Slide 14, we’ll speak about Prio’s funding. We’ve right here 3 main teams of debt in our stability sheet. This one in mild inexperienced represents working capital money owed, bilateral money owed with relationship banks of greater than $500 million — $511 million between ’24 and ’25. In 2026, we have now this tower of $600 million [ph]; that corresponds to our bond issued in 2021, a 5-year debt.

In 2027 and onwards, we have now native debentures that we issued in August 22 and swapped to {dollars}. With this, we have accomplished our amortization schedule by the top of 2023. We’re all the time looking out for rollover alternatives, alternatives to optimize this amortization schedule. And it is also necessary right here to level out that already on this image exhibiting the top of 2023, we’re very comfy from the viewpoint of leverage, from the viewpoint of liquidity with a view to honor these commitments. However we nonetheless stay very attentive to alternatives. We not too long ago captured a chance however we’ll disclose all the main points on the finish of the primary quarter of ’24, a brand new native debenture during which we raised BRL2 billion.

And this brings much more consolation to our liquidity state of affairs and firepower to grab new alternatives. And we are able to see right here on the left-hand aspect of the slide a period of two.33 years at a median value of debt of round 6% which is tremendous ample for an organization of our measurement, much more so contemplating the current will increase in rates of interest within the U.S. and within the extra developed markets which find yourself impacting the native market, particularly the borrower of debt denominated in U.S. {dollars}.

Properly, now on Slide 15. We’re going to speak about money move within the quarter from the angle of web debt. We began the fourth quarter or ended the third quarter of ’23 with a web debt of $1.237 billion after which we had working money move represented by EBITDA with working capital adjustment of $462 million plus $16 million. We had a one-off impact of M&A as a result of sale of Manati, an influx of $17 million associated to the sale.

And with regard to money expenditure, we additionally had a one-off occasion associated to dividends and we additionally carried out some share buybacks, all totaling $28 million. There was a major CapEx akin to Wahoo’s bills that are mainly essentially the most vital bills within the quarter associated to Wahoo, Wahoo’s tie again with the FPSO Frade, adopted by investments in integrity within the Albacora Leste Area and in addition some bills associated to Frade’s revitalization marketing campaign.

As for the monetary outcomes, this mainly displays quarterly curiosity on our debt place and tax funds, totaling $32 million. And with that as our working money technology could be very robust, it greater than offset these money expenditures and our web debt fell to $1.45 billion on the finish of the 12 months.

Persevering with now; shifting to Slide 16. This picture exhibits the evolution of Prio’s leverage. And what is essential for us to notice is that for the reason that first quarter of ’23, after we concluded the acquisition of Albacora Leste, we had, in truth, a major money outflow for that acquisition. After which we began to have a optimistic leverage of round 1x or 1.1x.

And over the quarters, with the corporate’s working money technology regardless of the CapEx, we have now managed to scale back this leverage to 0.7x on the finish of the 12 months within the fourth quarter of ’23. I feel it is a very fascinating and excellent image as a result of it exhibits that the corporate has low leverage. It’s ready if vital. And in case there is a chance to make new investments and even to accommodate extra debt if vital. So we discover ourselves in a really comfy state of affairs of producing working money, decreasing leverage and contributing to a really fascinating profile for profiting from future alternatives.

With that, I will hand over to Roberto, who will speak a bit bit about ESG and Prio’s subsequent steps. Thanks and have an excellent day.

Roberto Monteiro

Thanks, Milton. Properly, I’ll briefly undergo a slide on the atmosphere and society. And we have already talked a bit about decreasing emissions. As we stated, we lowered CO2 emissions to 21 kilos per barrel of oil equal, a 20% enchancment. All through the fourth quarter, we carried out a significant security marketing campaign, cluster security and so forth to share finest security practices, improve our security, improve reliability, improve efficiency within the firm’s operations.

Now with regard to well being and well-being, we stay very centered on our actions for our staff, for the well-being of our staff. And this entails trekking, out of doors yoga, yoga right here in our workplaces, road working, pottery lessons, soccer, jujitsu, understanding otherwise you identify it. Even psychological assist too and sometimes dietary assist and so forth. So this has all the time been a pillar of our tradition in relation to individuals and we proceed to assist it.

Now when it comes to sponsorships, this 12 months we launched a brand referred to as I Love Prio which really symbolizes the love we have now for all communities, all of the locations the place we function. We deliver this I Love Prio as a type of sponsorship. And we used that final 12 months, the Blue & Jazz Competition, there’s theater performs and winter competition. And we have additionally put I Love Prio in a theater right here in Rio de Janeiro which places on numerous performances. This month, in truth, there are a number of locations with girls as a tribute to Girls’s Day and Girls’s Month in March.

Now I will transfer to the subsequent slide, Slide 18. And the subsequent steps, they’re all the time very related aren’t they? A steady concentrate on security, a steady concentrate on the security and well being of our staff and our third events as effectively. For this quarter, I imply, the primary quarter, specifically, Wahoo’s environmental license, as you all know, the license relies on the environmental company which in any case, we have been struggling. There have been some setbacks as a result of time that the company has been paralyzed. And I do know that it is a dialogue that does not concern us however the end result of it does concern us.

So we hope that it involves an finish quickly after which we are able to begin investing. It is a mission that may generate $90 million a 12 months in royalties. It is a mission that, briefly, it is all being carried out inside world requirements and so forth. However briefly, we have now to attend for the license. We are going to proceed to focus very strongly on the working effectivity of Albacora Leste. Though we had an important month in December, we nonetheless have a variety of work forward of us. In order that this asset can’t solely present good outcomes however can present good outcomes repeatedly. This can be a massive level for us.

And this 12 months, we’re additionally going to outline and restrict the Albacora Leste revitalization marketing campaign. We’re receiving the seismic knowledge that we purchased final 12 months, together with their processing — their reprocessing in order that our geology and reservoir engineering groups that are the two groups that outline — I imply, nearly outline 100% of our enlargement. In order that these groups can present the best way to revitalize the sector. And we’ll proceed, as all the time, very attentive to new M&A alternatives, actually all the time throughout the anticipated returns. And we have been very vocal about areas right here in Brazil.

Additionally, there’s some curiosity additionally beginning to seem within the Gulf of Mexico. Thanks very a lot. Thanks to the society which all the time welcomes us with nice affection. Thanks to traders. And as soon as once more, thanks and congratulations to the Prio crew.

With that, I want to open for questions.

Query-and-Reply Session

A – Jose Costa

Good day, everybody. Welcome to the Q&A session concerning fourth quarter and full 12 months 2023 outcomes. We’ll now begin the Q&A session. First query from Pedro Soares with BTG. Go forward, Pedro.

Pedro Soares

Hey, everybody. I’ve 2 questions. So first, I might like to debate royalties. I feel that taking a look at your numbers, it appears that evidently an excellent a part of the rise was defined by a extra vital progress of what we name particular participation or manufacturing tax. May you elaborate on the way you calculate that on condition that manufacturing not less than within the quarter-on-quarter comparability of manufacturing was not nice and the value variation was not that nice? So how may we clarify this progress in manufacturing tax? Is it as a result of there was higher profitability of the sector maybe you crossed a sure threshold, that will be useful. And for those who may make some feedback concerning the G&A improve. How ought to we take into consideration that line merchandise within the coming quarters?

Second query is in regards to the business technique of the corporate. We noticed that there was a rise in buying and selling expenditures versus prior quarters. However even excluding these buying and selling bills, it appears the low cost has elevated. Does this replicate a extra particular dynamic of the market now? Maybe these buying and selling bills per barrel will normalize over the subsequent few quarters? May you touch upon that?

Roberto Monteiro

Properly, let’s start with royalties and particular participation. Properly, the royalties improve has to do with the particular participation of Frade area and a bit of Albacora area. There’s a rule to calculate the particular participation. There’s a threshold of manufacturing near 30,000 barrels a day. Should you produce higher than 30,000 barrels every day, you pay a manufacturing tax, what we name particular participation.

Within the case of Frade, there’s an impact that manufacturing has been growing. And we have now now a full quarter, so maybe that is why we have now a better quantity. However the calculation method — it is form of much like revenue tax. You’ve got revenues realized within the quarter and there are the prices referring to the sector. There are some funding installments you could deduct from that area and so forth and so forth. So in Q3 at Frade area after we look from the standpoint of investments, particular participation was greater as a result of we have been extra environment friendly. We drilled much less in This autumn than in Q3. So that you constructed the revenue for the sector. Once I imply — once I say the revenue, the revenue is calculated otherwise the funding is made in a barely totally different manner. So we had extra revenue for a similar manufacturing and particular participation is calculated primarily based on this consequence. This explains the particular participation or manufacturing tax that, if I am not mistaken, was shut to three% of whole income. In order if we paid royalties of 10% plus 3% [ph] particular participation. However that is not calculated. There’s an ANP rule that I recommend that you simply learn. However we are able to share it with you as effectively which is the method to calculate all this. To discuss buying and selling reductions, I noticed that there was a variety of confusion concerning that. And in many of the instances, the evaluation is mistaken concerning the offtakes low cost.

So let me clarify and I will get technical right here however I hope it will be important. And for future quarters, I’ve talked with my individuals, we’re going to have a higher breakdown within the accounting and we’ll add an explanatory notice concerning that. However let’s go. The way in which during which we have a look at low cost is in This autumn, we offered 8.5 million barrels, roughly, 8.4 million of this quantity. Round 3.6 million or 3.7 million have been priced within the month of December, the place the Brent common was $77 a barrel. 400,000 barrels have been priced in October, the place the Brent common was $82 — really, not in October, in November, the place the Brent common was $82. In October, sadly, we did not promote something and it was — the Brent common was $88. The remaining, 2 million have been priced in January and a pair of million have been priced in February. So what we have now to take a look at, Brent, after we evaluate it, we have now to have a weighted common of the Brent and never the typical of the Brent for the quarter. However the effectivity of offtakes needs to be in contrast with a weighted common of the Brent contemplating the costs I gave you.

We shut our accounting someday in January. So the reference worth of the Brent that we use to provision income was $77 per barrel. So really, you need to have a weighted common of $82 per barrel in November, $77 in December, $77 in January and in February. That is what we had to make use of to shut our accounting. So it is a weighted common of the Brent. In accordance with our calculations, the typical is round $77 per barrel, a bit over $77 per barrel. It is not even $78. And you need to evaluate with FOB divided by the variety of barrels. And within the FOB equal income should exclude $3 million and you need to exclude additionally changes for the prior quarter — within the prior quarter. We had some offtakes priced in October. So the identical factor occurred since October, the upper was — the quantity was greater, it brings the income up. On this quarter, once more, we’re going to change the income up a bit bit as a result of we priced at a median of $77 and the value is greater. To get the FOB income, you exclude these results and also you divide by 8.5 million barrels that may give us $73 per barrel, $73 and a few cents. And this delta is precisely in step with what we have been saying in regards to the business low cost, the buying and selling low cost. We all the time say that it was round $4 per barrel.

So what’s the drawback of utilizing buying and selling bills? Complete income. Once we have a look at whole income, it is all about what refineries pay in China, in Europe, wherever they’re. Oftentimes, the refinery pays the Brent worth and a bit extra. Let me offer you a classical instance. The refinery goes to pay Brent plus $2 [ph]. The price we’re going to should ship to China, for instance, can attain $6 per barrel. So really, what we see is, though the refinery paid Brent worth plus $2 [ph], what we see in FOB is Brent minus $4 [ph]. That is why you can’t use buying and selling value as a result of for those who use buying and selling or commercialization value to say, you spend $6 [ph] you need to spend $6 [ph] however the base just isn’t Brent, it’s Brent plus $2 [ph] or Brent plus $1 [ph]. It actually relies on what’s occurring at that second. The one manner we are able to do an evaluation of the buying and selling value and I noticed that numerous individuals spoke in regards to the buying and selling value or commercialization prices. The one manner to make use of on the weighted common of Brent weighted by quantity when in comparison with our FOB income additionally adjusted for these little results.

I do know that this was not clear in our launch, I do know this was not clear in our revenue assertion however we’ll embrace an explanatory notice within the revenue assertion as of the subsequent quarter. I’ve spoken with Milton about this, as a way to have an thought of the efficient effectivity of our buying and selling firm. Right now, we’re buying and selling at about $4 of low cost in comparison with Brent and I proceed to say, I feel the buying and selling space was a giant win in 2023. They did an excellent job. We have been unlucky if we are able to say so, of getting concentrating 4 million of the 8.4 million, 4 million have been concentrated in December. And the remaining 4 million in January and February. January and February are performing higher than in December. However when it comes to the accounting, we had to make use of a Brent of $77. So in Q1, we’re additionally going to have a optimistic evaluate up in Q1 ’24.

So I am sorry for the lengthy reply however I assume that, that may reply a variety of questions concerning that as a result of the evaluation is completed simply contemplating buying and selling bills is the mistaken one; it would not work.

Jose Costa

Subsequent query from Bruno Montanari with Morgan Stanley.

Bruno Montanari

I’ve to 2. Talking a bit about Wahoo; we perceive that the environmental license is a matter that’s not the palms — underneath the management of the corporate. However I might like to know what can be Plan b and even Plan C if the state of affairs on the environmental company, IBAMA, drags on and it’ll affect the vessel that was contracted? That is primary.

Second query is about capital allocation. It is vitally clear what the corporate’s precedence is, to develop maybe to seek out acquisitions that make sense from the standpoint of return on funding. However I might like to know a bit extra the timing. To what extent does it make sense to carry on to the money technology — generated for a bit longer and have a capital construction which is much less environment friendly? And maybe you may elaborate on what’s enticing to you within the Gulf of Mexico? When it comes to asset, the configuration. It will likely be fascinating to know what you are considering.

Roberto Monteiro

Let me reply the primary two concerning capital allocation. After which I will let Francilmar discuss Wahoo. However let me — simply need to say one factor about Wahoo. The month of March shall be crucial to us. Right now and Emiliano can discuss deadlines from IBAMA, what he is seeing when it comes to developments at IBAMA. However the month of March is essential to us. Right now, if IBAMA unlocks the licenses, we might have only a few diversifications to make. If this drags on past March, then we’ll have to begin engaged on different plans however Francilmar will communicate a bit extra about this.

Now let me discuss capital allocation which was your second query. Once you ask about the time-frame we have to determine whether or not it is sensible to carry on to our money. Properly, I do not take into consideration a timeframe. I see this when it comes to what’s our M&A expectation trying ahead? There are M&A offers that take longer and a few that take much less. Take Albacora, as an example. We began working with Petrobras in ’20 — I feel it was again in 2020, on the finish of 2020, it was COVID 12 months and we spent the cash in January of ’23.

That course of particularly was very public information. Everybody knew that the public sale was occurring that the method was unfolding. However think about if this was not public information, we might not have been in a position to pay dividends. It might have been a mistake to pay dividends. We did not have the cash to pay dividends. However nobody questioned that as a result of it was a public course of — public information course of. So it isn’t about the time-frame. It is all about our expectation, our real expectation concerning M&A offers.

I consider that in the present day, we have no visibility concerning M&As and offers that may begin within the brief time period. That is after we could have a dividend payout or relying on our money technology, if we predict we can not allocate all that capital, we’ll have a payout. However it’s laborious to say right here to inform you a rule and a timeframe. As I’ve spoken to lots of you earlier than, we and I specifically, in Nielsen [ph] actually follows me. He is with me, he is the Chairman of the Board, who spent This autumn touring in every single place, making an attempt to know potential M&A alternatives, M&A agendas and so forth and so forth.

That is why we consider we’ll have to carry on to the money move a bit bit. As for the Gulf of Mexico, what’s enticing to us that we have now to have the identical return on funding of 20% full cease, nothing totally different than that. The jurisdiction appears enticing. I do not need to say it is easy, I do not need to be too simplistic however it’s a really steady jurisdiction. And clearly there, what we have been seeing there for a very long time is the deal move of enterprise pipeline that’s much more energetic than in Brazil.

In Brazil, there are some one-off alternatives. We have spoken about numerous them. However within the Gulf of Mexico, there’s a way more intense pipeline. There’s much more enterprise pipeline however it’s all in regards to the return on the funding. There is not any enterprise with out an ample return, oh, it is america after which you need to have a decrease return on funding. We do not agree with that. We’ve to have the identical return on funding, the return for the exercise, regardless of the jurisdiction.

And from the operational and technical level in deep waters of the Gulf of Mexico, we see an operation much like us close to area exploration, tiebacks. So it is precisely what we do. Lots of firms there are used to doing that however it’s extra of the identical. And that is why we form of prefer it. Francilmar, maybe you may discuss Wahoo plan in additional element?

Francisco Francilmar

Bruno, we clearly have been working with many plans, A, B, C, D. However in the present day, what’s on the desk is, after all, if all the pieces goes effectively now within the brief time period in March, there isn’t any nice loss for the enterprise. After that, even in negotiation with McDermott, the corporate offering the vessel for pipe laying, there’s a mission that may begin after hours in Africa.

The vessel simply has to cross the Atlantic Ocean. So we form of spoke about this chance of reversing the order. The vessel will go to Africa after which come again to Brazil. So we might push that ahead — push the mission ahead to September. So it isn’t what we would like however it’s a chance if the IBAMA situation continues. And there are a variety of different alternatives which can be potential many choices however we’ll by no means sit nonetheless. We’ve plans A, B and C in home and prepared.

Jose Costa

Our subsequent query from Luiz Carvalho from UBS.

Luiz Carvalho

But when I may return to the topic of capital allocation and Milton talked about issuing debentures in 2022. And also you additionally talked a few optimistic method in the direction of M&A. Do you assume we may see that debenture extra like a debt administration factor or perhaps one thing extra associated to that optimistic view in the direction of M&A in order that you may have higher firepower on this regard? The second query is about Albacora Leste. We have seen the reserves certification report that you simply revealed. And I solely need to perceive on the working aspect, what may we anticipate for 2024 with regard to manufacturing? Should you may give me a bit bit extra mild, I’d recognize it.

Roberto Monteiro

Thanks, Luiz. This debenture it may very well be one factor however it may be one other factor, in truth. We’ve nearly $300 million maturing this 12 months. Is that $300 million or $400 million? $250 million maturing this 12 months in bilateral banking traces, services. And due to our low leverage, we all the time have the potential for rolling over the debt. We all the time have the potential for rolling over the debt. However 2 billion — however they have been 2 billion barrel. So $400 million. In order a part of that, $250 million may very effectively go to pay for our financial institution debt. And so this shall be at administration. So the typical period is near 7 years or much like a 7 12 months onboard at [indiscernible]; and this was excellent as a result of this locations our debt curve at an excellent worth; in order that’s it. However within the case of an M&A, this $250 million may very well be rolled over, which means that we may prolong our debt after which that — these $400 million may very well be completely earmarked for M&A. So an important factor for us is no matter is sensible when it comes to charges and period, we have now a bond overseas [ph] that matures in 2026. So in all probability sooner or later, we may even have one other situation with a 7 12 months maturity however it’s additionally topic to value. And I feel that this simply locations in a distinct level in that curve.

Now I will flip over to Francilmar as a result of he can inform you a bit extra about manufacturing in Albacora and what we take into consideration. I feel so it is necessary that Francilmar feedback on that.

Francisco Francilmar

Properly, to provide you a bit bit extra mild, Albacora Leste, when it comes to the operations of the corporate, we’re specializing in Wahoo. We’ve a rig. So the entire Wahoo wells are already scheduled. So all we have now to do is Albacora Leste. The reserves they’re in step with our manufacturing plan. This 12 months, there shall be many workovers within the schedule, each when it comes to subsea, I imply, substitute traces, pipe laying after which work over wells, issues which have an issue after which we’ll begin drilling of the brand new wells. So, the 12 months — I imply the schedule for the 12 months is sort of full. When it comes to manufacturing, after we have a look at the tools that want restore, I feel on the finish of the 12 months, we should always provide you with about 40; in order that’s it on common.

Luiz Carvalho

Properly, for those who permit me a observe up query, about IBV, if there’s any replace? And 40,000 — 40,000 whole just isn’t web; it could be — web can be near 35,000 [ph] I feel.

Roberto Monteiro

IBV, I feel there was — we obtained a discover from the arbitration chamber. And I feel on February 22 and I feel they knowledgeable that they obtained from the arbitration courtroom, the minutes of their resolution. However this has to undergo an inner evaluate. Subsequently, we have now to attend a short time till a last opinion is awarded. Subsequently, it is tough for us to say that given the truth that the choice is prepared now.

So — in abstract, I imply the choice has been made. The arbitration award is already in place. We do not know which one it’s, no one is aware of what that award is however they reached the choice on February 23. They already notified us. However once more, we have no idea what the choice is. However we anticipate, we estimate that within the brief time period, it will likely be communicated to us. So I’d say, kind of on the finish of March or near that. And I feel that is after we will know. I imply, there’s a nice probability that we’ll get there very quickly, perhaps by the top of March or perhaps early April.

Jose Costa

Our subsequent query comes from Gabriel Barra from Citi.

Gabriel Barra

I’ve two questions. The primary, I imply, trying on the report on reserves certification, you simply up to date the numbers for Albacora in relation to that. However I want to point out two issues. To begin with, what’s your estimate for each effectively? I simply need to get some extra particulars about that case. Should you may share with us, it will likely be fairly helpful. As well as, with regards to Hunter Queen within the assist vessel. How do you see that when it comes to CapEx? I feel it is a greater CapEx, contemplating that you have already got the rig, it looks as if you don’t see that as OpEx. I do not know whether or not my studying is right in order that I could make some adjustment to my numbers. And the second level is about Wahoo. About Plan B or C. These B and C fields, do you additionally anticipate altering the design and even altering that to a versatile? Wouldn’t it be too absurd to assume that manner? I simply need to know the way a lot — I imply, what’s the standing of the mission?

Roberto Monteiro

Thanks. I will simply reply that however please right me if I am mistaken. After which my colleagues [indiscernible] is a negotiation and this negotiation is sort of superior. The goal participations, the TPs, the best way we name it, ought to begin 70% PetroRio and 30% is the Roncador Consortium.

Right now, what we have now are 3 wells already recognized with a manufacturing of 8,000 barrels per effectively. Properly, you additionally requested about CapEx. We do have the rig, we have now the vessel however what’s included within the consortium worth is the market worth of the enterprise. So we verify costs. We run a quote and that is what is included within the quantity. Within the case of Petrobras, extra particularly, in the price of CapEx, perhaps there can be a lump sum and that is what we’re presently negotiating with them however this can take note of a rig inside regular worth markets. So the truth that we already personal the rig. The truth is, while you put this rig in a distinct consortium, the place you’ve got a accomplice, the rig is calculated in keeping with market costs. So that is the way it works.

The opposite query was about Albacora Leste. Let me simply offer you some extra shade. One other factor we make the most of is that we have now our primary work after which we have now Hunter Queen. However in each mission we do, we have now a really conservative aspect of market worth. That is after we can use the sources of an extra market.

After which we do not place costs down after which we greater up the costs. When it comes to Wahoo, technically talking, we may additionally do launch some versatile traces. However in sensible phrases, that is not potential as a result of we have already got the inflexible line in place. And this whole line is already in our stock. So what we have now to do in the present day is simply to maneuver ahead with that inflexible line. Properly, in sensible phrases that can assist you perceive, the mission is prepared. The road is [indiscernible] traces are prepared, the brand new workplace et cetera. However what we’d like is to have the pipe-laying vessel. However we — that vessel works all around the world. So it is only a matter of working window. So if we’re doing the pipelining from June to September or from September to October or right here or there, it relies on that window however it would occur.

We perceive that you simply’re all very anxious and we’re anxious as effectively. However we simply should be very calm proper now and simply wait to see what’s going to occur when it comes to the environmental license. And on high of that, we’ll simply make our resolution primarily based on totally different potentialities and speculation. However we simply have to attend for the ultimate resolution till we are able to act in a extra assertive manner.

So simply to conclude, after we have a look at the reserves certification, if we have been to make use of Hunter Queen, I feel you’ll have to work with a a lot decrease CapEx web for PetroRio. So I’d say that when it comes to value recognition, for those who needed to rent in keeping with market costs, it would not be so much decrease however it’s decrease, okay?

Jose Costa

Vicente Falanga with Bradesco.

Vicente Falanga

I had two questions on Frade area. Once we have a look at every day manufacturing, certainly, Frade is again about 50,000 barrels every day, should drop in to about 30,000 given the difficulty with the compressor. So I might like to know, do you anticipate to stay at 50,000, as a result of proper earlier than the issue, we had hit a 60,000 quantity. So I might like to know what Francilmar is considering this.

And my second query about Frade. When do you fake to submit a growth plan to ANP? Do you need to watch for extra drilling? Or are you able to submit it straightaway to incorporate within the reserves for subsequent 12 months?

Roberto Monteiro

Vicente, effectively, Frade manufacturing may need reached 60,000 in 1 day however we have been extra at 55,000. We have been extra at this stage of 55,000. So oil fields decline. We’ve to maintain that in thoughts. 50,000 just isn’t so regular both as a result of after we had a complete of the wells operational once more after the issue with the fuel compressor. One of many wells had their drawback within the valve that regulates the quantity of fuel injected within the effectively. And so we’re engaged on that valve. Sadly, we do not know whether or not this valve will have to be changed if we have to substitute it. We’ll want a vessel for that. We’ve to, we are able to do this form of work. One in every of them is Gemini. Really, he corrects himself Genesys [ph] that has not arrived deal. And the opposite one is a vessel allotted to do some form of work. We’d have to switch the valve later. But when we remedy the issue, manufacturing shall be again. There’s a bit little bit of Frade area, a bit little bit of manufacturing that may return. However you should not anticipate 60,000. However after we stopped, we have been at a stage near 55,000. I do not know whether or not we’ll proceed at 55,000. There could be some decline however there’s additionally a delta to be captured at Frade area.

Concerning the reserves certification, we are able to put together a plan at any time. However what’s thought-about 1C, what’s contingent? Do you need to reply that, Francilmar?

Francisco Francilmar

Okay. Properly, through the 12 months, we’ll make some changes. Some issues which can be as 1C aren’t an issue. We will definitely evaluate this subsequent 12 months. And there’s — this was one thing else as a result of we’re finishing up a variety of research we divided by property, by area. Our crew is engaged on different prospects that aren’t mature but.

So throughout 2024, we need to have this third part with extra issues, not simply 2 wells, extra issues. Our growth plan at Frade doesn’t embrace any additional wells. And what we have now is 1C. We’re being very conservative about Maracana. That one on high of Maracana that was renamed Bertioga [ph], just isn’t included. And there’s additionally ODP6 effectively in that very same reservoir the place we drilled ODP4 and ODP5. However since our growth plan would not have something included concerning that, it is technicality. However we simply need to be very conservative. We needed to do that on this method to keep a sample much like what we had in Wahoo, Wahoo was 1C. Bear in mind, as a result of we did not have the declaration of commerciality. We’ve not submitted a growth plan. So identical factor right here. We’ll have the event plan. As soon as we do this, these shall be included as reserves.

And that is why through the presentation, we have been very comfy so as to add 1B with 1C reserves. There aren’t any tough contingencies. It is only a technicality.

Jose Costa

Subsequent query by Bruno Amorim with Goldman Sachs.

Bruno Amorim

I would love you to remark for those who can, what we are able to anticipate when it comes to progress for the corporate within the coming months. In a situation the place Wahoo license is delayed and it doesn’t unlock the opposite request for license, Albacora is working at a comparatively excessive stage. So it appears the low hanging fruits have already been collected. So I might wish to know from you what occurs if there’s extra delay in Wahoo environmental license and the implications of that for the opposite property?

Roberto Monteiro

I am undecided I understood your query. You need to know the way the corporate will develop if we do not have the environmental license for Wahoo or…

Bruno Amorim

Within the subsequent 6 months, if there’s a delay for Wahoo, if there’s any implication for the opposite property, how a lot you’ll be able to develop within the different property?

Roberto Monteiro

Environmental license for Wahoo presets the environmental license for different areas. Properly, the Wahoo mission will deliver us 40,000 barrels. After that, we’d like an environmental license for the basin which can embrace Albacora, it could possibly embrace Frade, TBMT that is it. Right now, we have not bought any environmental license, so we can not improve manufacturing. We could have small increments, issues that we are able to do at Polvo. We’ll be drilling 2 or 3 wells at Polvo area. We could have some workovers at Albacora area however all of that, finest case situation we’ll keep manufacturing on the present ranges. There isn’t any manufacturing improve. If we do not have extra issues operational. If we do not have extra wells producing.

Bruno Amorim

Good. Sooner or later wells, they’ll begin manufacturing this 12 months. Is it a good assertion to say this can solely occur after the Wahoo license? Or are you able to acquire licenses for these fields — for these wells earlier than?

Roberto Monteiro

What wells are we speaking about right here Bruno?

Bruno Amorim

I am speaking typically, maybe the conclusion you could develop the opposite property whatever the licensing course of for Wahoo. There aren’t any different processes locked at IBAMA relying on Wahoo to be unlocked?

Roberto Monteiro

What you see, first, to drill new wells, the one license that the corporate has to drill new wells is the Polvo license. And Polvo will deliver 1,500 or 2,000 barrels extra. It is little issues. It won’t considerably improve the manufacturing of the corporate. And that is what we have now.

Concerning new wells, we’d like an environmental license for something and all the pieces we do concerning new wells at Wahoo, Albacora or TBMT. We’d like an environmental license. There’s nothing locked up at IBAMA. What’s occurring is that IBAMA’s not working now. It is paralyzed. There aren’t any hurdles. We’ve to separate issues. Our course of for Wahoo unfolded. They bought very near the environmental license. After which, IBAMA stopped working. And that is the place we’re. However there isn’t any hurdle that will make an environmental license unimaginable. When IBAMA resumes work after they cease their paralysis, they will begin granting the licenses for us, for the entire different firms. What can we do that doesn’t require environmental license for this stuff that Francilmar talked about. Workovers within the wells. So this doesn’t improve manufacturing considerably however this can keep manufacturing near this stage of 95,000 to 100,000.

So we’ll keep manufacturing as is. These are workovers. This is a effectively with a riser with a gap, after all, we can not produce in that effectively. We’ve to change the riser after which put it again into manufacturing. You do not want a drilling license for that. The effectively is already drilled, we have now an working license for that and we are able to remedy the issue. So it is actually necessary to separate these 2 issues. Right now, what we have now in our palms are issues that we are able to do to keep up manufacturing, to attempt to keep manufacturing so long as potential near the present ranges. Now considerably growing manufacturing would require an environmental license for Wahoo or for Albacora, it is all within the palms of IBAMA.

Jose Costa

I feel these have been all of the questions we had. We now conclude the Q&A session for this earnings launch name. And now I flip the ground again to Roberto for his last remarks.

Roberto Monteiro

Thanks all very a lot. Thanks for becoming a member of us in the present day. It was 1 / 4 that made us all very proud when it comes to manufacturing, variety of wells and the entire achievements. We’re working diligently in Wahoo and Albacora. And I will see you once more in 2 months or 3 months in our subsequent earnings launch name. Thanks very a lot.