Brava Energia S A S/Adr

Good day, everyone. Welcome to 3R Petroleum First Quarter 2021 Earnings Conference Call. Today we have here with us Mr. Ricardo Savini, CEO, Mr. Rodrigo Pizarro, CFO and IRO, and other members of the management team. We remind you that at this time all participants are in listen-only mode. After the company's remarks are over, There will be a question and answer session when further instructions to participate will be provided. Should you need assistance during this conference call, please press star zero to reach the operator. I also inform that this conference call will be held in Portuguese with simultaneous translation into English. This event is also being broadcast simultaneously over the web via webcast before proceeding. Let me mention that forward-looking statements that might be made during this conference call relative to the company's business perspectives, projections and operating and financial goals are based on the beliefs and assumptions of the management of 3R Petroleum as well as on information currently available to the company. Such forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions as they relate to future events that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors may also affect the future results of the company and may lead results to differ materially from those expressed in such forward-looking statements. Now, I will turn the conference over to Mr. Riccardo Salvini, who will start the presentation.

Mr. Salvini, you may begin. Good afternoon. Thank you for joining us.

I am Riccardo Savini, CEO of 3R Petroleum. With me in this presentation of the first quarter 2021 earnings results We have Rodrigo Pizarro, our Chief Financial and Investor Relations Officer, as well as the whole management team. And we will be available to answer your questions at the end of the presentation. Let's start with the highlights of the first quarter 2021. Perhaps the biggest highlight is that we had our follow-on offer, our fully primary subsequent offer totaling 823 million BRL. There was a lot of interest by investors as we had a book that was more than three times oversubscribed. So we are very pleased with this follow on that was settled less than four months after our IPO in the previous quarter. And that gives us a lot of strength to our financial structure as Pizarro will explain later in the presentation. We also created a subsidiary focused on offshore operations in partnership with DBO Energy. And we will speak more about this during the presentation. And the first asset of this subsidiary controlled by 3R is the Perua cluster. And that's a highlight for the quarter. As we had mentioned in the previous call, we were about to sign the acquisition of this asset, and we did sign it in the beginning of the year in Q1 in January, and we acquired Perua Cluster, an offshore gas project in Espiritu Santo State with very attractive entry multiples for this cluster, adding almost 17 million barrels of oil equivalent of 2p reserves, proved less probable to the company's portfolio. And to handle these offshore challenges, we strengthened our leadership team quite a lot by hiring two executives from Petrobras, two executives who are very seasoned in offshore projects, as we have mentioned also. In the last call, we have Hugo Hapsald, our new corporate and gas and energy officer. He's highly experienced in oil and gas. given that he served as Petrobras officer in three different areas of the company. So we're very happy to have Hugo on board. And just a few days ago, we had the addition of Mauricio Tinis, our new chief offshore operations officer, as we will detail along the presentation as well. From the standpoint of performance, I will focus on Macau cluster. That's the cluster we've been operating since the end of May of last year, and we had a strong increment in production. In Q1, as you can see on the graph on the top right, we increased our production from 3,900 to 4,600 barrels on average in the quarter. We're very happy with our performance at Macau cluster. And linked to this operating performance with production that increased greatly, we also recorded higher revenues and EBITDA, as you can see in the company's financial performance in the two graphs also on the right. Our revenue grew almost 56% and EBITDA increased 57% quarter on quarter. Here on slide four, We show you our synergistic clusters. For example, the Potiguar Complex. What we are calling Potiguar includes three deals with Petrobras, Macau, Pescada, Arabaiana, and Fazenda Belem. And I'd like to remind you that the only one that we are currently operating is Macau Cluster. In Bahia, we have the Reconcavo Complex with two clusters. And I'd like to remind you that we're talking about sets of fields. So in Bahia, we are talking about two concessions, 22 oil fields, Rio Ventura Cluster and Reconcavo Cluster. And I'd like to underscore that in Rio Ventura, we are preparing and working hard to take over the operations in the coming weeks. All has been approved by the National Oil, Gas and Biofuels Agency A&B and we should take over Rioventura operations very soon. But the big news in the quarter is the signing of the contract for the acquisition of Perua Cluster from Petrobras. It's an offshore gas platform tapping the reservoirs of the Perua and Cangua fields. And we're very pleased with the signing that happened in January of this year. Please go to slide five. As mentioned, we are creating now a new avenue of growth with the establishment of 3R Petroleum Offshore, an association between 3R Petroleum and DBO Energy. They are a Norwegian group, but their company is incorporated in Brazil. They are very experienced in offshore operations. So we created 3R Petroleum Offshore, to broaden our portfolio of offshore operation projects and concessions. We own 70% of this company and TBO, 30%. And the asset that we have in this subsidiary controlled by 3R Petroleum is Perua Cluster that is now owned 100% by 3R Petroleum Offshore. To lead this company, we brought in Mauricio Diniz, who is our offshore operations officer. He's highly experienced in offshore. He had many years of experience at Petrobras, where he led a number of areas, including project deployment, subsea operations. He was production assets manager. He was the logistics manager for the whole south and southeast of Brazil. And his last position at Petrobras was as health, safety and environmental officer. So he's extremely competent and we are very pleased to have Denise with us. Denise will be leading this offshore business unit or 3R Petroleum Offshore. And this company will have Actually, it already has a team fully dedicated to offshore projects. What I mean is today we have an onshore operations officer, Pedro Grijalva, and under him, there's the whole onshore portfolio and the full focus on onshore fields. And now we're putting together a whole new team. As we mentioned a few months ago, it's a new team to run the company's offshore projects. So all of those more classical offshore disciplines, such as subsea systems, logistics, drilling, completion of subsea wells, all of this will be handled by professionals who will be reporting directly to Mauricio Diniz. I'd like to remind you that this company, 3R Petroleum Offshore is an A operator It came from the old Ouro Preto, which was considered an A operator in Brazil. And we are sharing the whole administrative and financial support as well as part of the technical support of 3R Petroleum. So we are not increasing the overhead. We will be using our full corporate governance that we have at 3R Petroleum to support this offshore arm of 3R Offshore. And the focus of this company is very similar to what we already had, only now it has an offshore focus. But we have no exploratory angles in our project. We are focusing on production assets, trying to acquire these assets at very interesting entry multiples for our shareholder base. On slide six, very quickly, I want to talk about our reserves. The major change here, compared to what we have disclosed to the market previously, is that 3R used to own 50% of Peruá, and we now own 70% stake of Peruá. That led to an increase of our reserves. Currently, our 2P reserves, proved plus probable reserves, total 178 million barrels of 2P reserves. Looking at the graph, our biggest cluster in terms of reserves is Recôncavo with 61 million and then Macau with 48 million. And as you can see, we had an increase of almost 17 million barrels of oil equivalent of 2P reserves with the concessions of Perua and Cangua. So we have 178 million barrels of 2P reserves with a good part of that 130 million being proved reserves, which is the last risky category of reserves in the oil and gas industry. So we have today a very robust portfolio in terms of reserves and it is totally low risk. On slide seven, we see our performance at Macau cluster, which is the cluster that we are currently operating. You can see on the chart on the right, a significant production ramp up, and we're very pleased to report these results to you. I have also to mention that these operations are completely safe with no accidents, zero accidents since we started operating there in June of last year. Month after month, as you can see, our production has been increasing consistently. In March, we produced more than 4,800 barrels, which gives us an average quarter production of 4,600 barrels of oil. Here, we're talking only about oil, no gas. And this is a very strong increment, quarter on quarter. In Q420, we produced 3,900 barrels of oil at the cluster. And please note that we reversed a long quarterly downward trend that this cluster had. And now we have a production comparable to what Petrobras was producing back in 2017, before the field started showing that long declining trend. On slide eight, please. we see production at Macau, which is the cluster that we are operating. And here we have the company's consolidated production of the cluster that we operate, Macau, plus the clusters that are in a transition phase between signing and closing. You can see that in March of this year, we reached 17,500 barrels of oil equivalent in our consolidated production. The results of Macau cluster are the main promoter of this increased consolidated production. And in the pie chart, you can see that the Potiguar complex, which includes Macau, Pescada Arabaiana and Fazenda Belém clusters, already accounts for a little over 40% of our consolidated production. Reconcavo Complex in Bahia accounts for about 37%, including Reconcavo and Rio Ventura clusters. And Perua Cluster, the last one we added to our portfolio, accounts for around 22% of our consolidated production.