Brava Energia S A S/Adr

Good day everyone and welcome to 3R Petroleum Q3 2021 earnings conference call. Here with us are Ricardo Savini, CEO of 3R, CFO and IRO, Rodrigo Pizarro, the other members of the management as well as the investor relations team. We inform that this conference will be broadcast exclusively through the webcast platform over the web and will be presented in Portuguese. Additionally, the English version of this conference call can be accessed through the webcast with a simultaneous interpreting feature. The company will make a brief presentation of the main highlights of the quarter followed by a Q&A session. Questions should be sent exclusively through the chat of the webcast platform. 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, as well as on information currently available to the company. Forward-looking statements are not a guarantee of performance, they involve risks and uncertainties. Refer to future events and therefore depend on circumstances that may or may not occur. 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 we will start the presentation with the company's CFO Rodrigo Pizarro. Please, Pizarro, you may begin. Good day, everyone. Thank you for joining us today. I am Rodrigo Pizarro, Chief Financial and Investor Relations Officer of 3R. We will start our presentation referring to the third quarter of 2021. It is with great satisfaction that I stress on behalf of 3R's management our delight to be building quarter after quarter since 2019. The solid pillars of a company anchored on production, proved reserves, and a very efficient portfolio put together along the divestment program of Petrobras. We can break down this portfolio building process into three stages. First, 3R as one of the few first comers of this niche in the oil and gas chain, a niche that is so interesting and low risk when compared to other activities in this chain. We had little competition for a great deal of assets for sale. Then we were able to serve a wave of opportunities amidst the huge crisis caused by the COVID pandemic with branch prices ranging from $30 to $40, which enabled very opportunistic negotiations and a very efficient entry multiple, especially for offshore assets. And finally, in this most recent last stage of divestment from great assets, our strategic presence in certain basins, especially in gas assets, allowed us to be very well positioned in some of the best assets, as we are going to be detailing later on. In this first slide with content, slide number three, we highlight that we delivered to the promise made in our latest follow-on to use part of the proceeds for the acquisition of assets with synergy with our portfolio in the Potiguar Basin, adding a little over 11 million barrels of 2P reserves and reinforcing 3R's position as the largest gas producer in the state of Rio Grande do Norte. We also highlight the acquisition of Papaterra Field and the completion of its reserves certification. This is a field offering great opportunities to 3R, where the payment schedule is substantially packed to cash generated by the asset. We enjoyed a very low entry multiple under $1 per barrel of 2P Reserve. in an asset that allows a very competitive lifting cost when compared to other offshore assets. Because in this case, we have an important scale of production and we do not pay a daily rate for the producing units at the asset. In other words, we are also acquiring this surface equipment together with the oil and gas assets. A third aspect that we are very happy with and celebrating is the fact that 3R was selected as preferred bidder for the acquisition of Potiguara Cluster. In our review, the best ENB asset put for sale by Petrobras in their whole divestment process. It combines all the good characteristics of onshore, such as low lifting costs and flexibility for deployment of capex with the best offshore characteristics, i.e. a great storage capability and independent access to the international market to sell the oil produced because it has a terminal and a port which can be used for export purposes. Lastly, as a subsequent event also linked to the probable acquisition of Potiguar Cluster, we highlight that we completed the funding process through our second subsequent offer of shares, settled on November 9, handing approximately 2.1 billion BRL to the company's cash. This was an offer that attracted the interest of large Brazilian and international funds, even in a complex capital market scenario, showing the strength of 3R's investment thesis. A company with dollarized revenues, operating costs in BRL, and that offers organic growth and many low-risk upsides in the E&P chain. On the right, we see some operating and financial highlights, such as increased production of our operations at Macau and Rio Ventura clusters, as well as a gradual increase of revenues and EBITDA, which will be reinforced along the coming quarters with the approval by ANP of the transfer of assets still operated by Petrobras. We posted net revenues amounting to 192 million BRL and EBITDA totaling 105 million BRL in Q3 2021. On slide 4, we present the company's shareholding structure. In addition to funds managed by Starboard, we highlight the arrival of Jerval Investimentos as a reference shareholder for the company after the completion of the latest follow-on. On the right, we highlight the three funding moves in the Brazilian capital market, with the IPO in November 2020 and two subsequent offers bringing in more than 3.5 billion BRL to the company's cash. We currently have more than 70% of the company shares in free float, which also reflects the increased liquidity of the company that has been gradually increasing over the last 12 months. On slide five, we present our portfolio in the Potiguar Basin with clusters. Macau, Pescada and Fazenda Belém, strengthened by the recent acquisitions, which total approximately 11 million barrels of 2P reserves, which are the assets from Duna Energia, as well as the additional 50% working interest of the Sanyasu field. 3R then becomes the largest gas producer in the state. And we can also observe here in the map the big synergy of this portfolio with the assets included in the Potiguar cluster in light green on the map. Next slide. On slide six, we present our portfolio of to-be reserves. with the completion of certification of Papaterra cluster, which added 75 million barrels of 2P reserves. So our portfolio now has 264 million barrels in reserves, which is a very representative portfolio. But the biggest highlight here is also the percentage of 1P reserves, which total approximately 70%, in other words, proved reserves. As regards the breakdown between oil and gas, approximately 82% are oil reserves and 18% are gas reserves. Here, if we later on add Potiguar cluster, we will increment even more the share of oil reserves. On the next slide, slide seven, we present our table of reserves. 1P, 2P, and 3P reserves. And we highlight mainly the last column, which is the entry multiple per 2P reserve, both in Potiguar and Reconcavo basins and offshore assets. In here, the average Entry multiple of 3R was under $3 per barrel of 2P reserves, which shows a portfolio that was acquired in a very efficient way, as I mentioned in the beginning of this presentation, along the three stages of the Petrobras divestment program. On slide eight, we present our operating results both at Macau cluster and Rio Ventura cluster. We can see a significant production increase if we compare Q3 2021 with the equivalent quarter in 2020, up approximately 27% year over year and a quarter on quarter increase of approximately 3%. As you see, we can see a gradual and steady production increase at Macau cluster. And that starts being seen, starts being demonstrated at Rio Ventura cluster with a gradual production increase comparing with the previous quarter when Rio Ventura cluster was still operated by Petrobras. We already had in Q3 a production increase of approximately 9%. Revitalization activities in both Macau Cluster and Rio Ventura remain focused on the reactivation of wells, work over activities, which are interventions in the wells, increasing the automation and remote controlling of the main producing wells in these assets. And lastly, we are preparing the company to start. to start some activities focused on drilling along 2022 for Macau cluster, most likely in the second half of 2022. On the next slide, slide nine, we present production of each one of the assets that we have either acquired already from Petrobras or that we signed the contract for with Petrobras. And the stake of 3R totals approximately 25,000 barrels of daily production along the first nine months of 2021. Approximately 65% of that is oil production. for 16.5 thousand barrels daily and approximately 35% of that is gas totaling 1.4 million cubic meters daily. In other words, we have here quite a relevant production. Currently only 25% of the total amount produced is already operated by 3R. Therefore, every quarter for the next nine months, We will be taking over as operator of these assets, which are in a transition phase from Petrobras. On the next slide, we show you the gradual growth quarter by quarter of our adjusted EBITDA with the substantial 110% increase when we compare EBITDA in the third quarter of 2021 with third quarter of 2020. EBITDA margin still remains very positive, although slightly lower than in prior quarters. This is a reflex of the company's preparation to take over the remaining assets that are being transferred from Petrobras, as well as the start of operations at Rioventura Asset. which naturally starts with a margin that is a little lower compared to Macau cluster because at Macau we have already obtained a significant production increase. On the right, we present the company's cash availability in dollars after the follow-on process already completed in November, and also the process of debenture issue totaling 1.6 billion BRL already presented to the market. We highlight here that with this amount, debentures plus follow-on proceeds We will prepay our existing gross debt of approximately $130 million, and this amount already reflects the penalty of prepaying the debt. And with that, we are going to have approximately $750 million available to honor the obligations that we have here, down below, already signed with Petrobras. We have approximately $300 million of firm commitments, as well as some contingent commitments, which will be deducted from the cash generation from the following assets, Pescada Arabaiana, Fazenda Belem, and Papa Terra Cluster, each of them with a different effective date to calculate this cash generation. And therefore, we will have approximately a total volume of $425 million in obligations payable to Petrobras. And I should underscore here that Potiguar cluster is not included in this amount. On the next slide, we present the lifting cost of the company and of Macau cluster, representing the high operating efficiency that 3R has in all of its operations. In Macau cluster, this lifting cost increase vis-à-vis prior quarters is still resulting from higher energy costs. In this quarter, throughout the quarter, we have the Special Energy Tariff, which is the most expensive of all. And here for the whole three, our portfolio is still very efficient, a lifting cost of $8.5. This reflects the start of operation of Rio Ventura Cluster. As a reminder, at the start of an operation, we take over a field after a very long period of Zero investments by the previous operator. Therefore, the field is very depleted. So we will start increasing production at Rio Ventura Cluster as we are already doing. And with this higher production, we'll naturally dilute fixed costs, which in Rio Ventura Cluster still account for over 60% of total costs. On the right, we present some activities linked to CAPEX. which we highlight in this chart on the bottom left. We continue to highlight the high efficiency level of these investments in mature assets and the high efficiency of 3R. One example would be Work over activities that we implement with cranes here on the bottom right picture. We are able to perform activities very similar to those performed with work over rigs on the photo on the left, but with great efficiency. This is used for a simple workovers that normally can be performed in less than one day. On the next slide, we summarize the next steps of the company regarding the strategy, We can affirm that 3ER is very happy with our current portfolio, with all deals signed between Petrobras and 3ER, as well as with this possibility, this great opportunity to be able to negotiate with Petrobras on an exclusive basis for the potential acquisition of Potiguar Cluster. So in terms of mergers and acquisitions and inorganic growth strategy, we understand that in the last two years, 3R has been very successful. And now our attention will shift and focus on revitalization activities, i.e. organic growth of the portfolio that has been acquired already, again, with the exception of Potiguara Cluster. As regards our operation, we maintain our focus on increasing production, safety, automation, and on having increasing reliability of our systems. Also a huge focus on completing the construction of the water oil separation plant at Macau cluster so that the increased production will naturally allow us to reduce our lifting cost by diluting fixed costs. Regarding our financials, we expect a gradual increase in cash generation and EBITDA linked to Duna Energia, that was recently acquired as advised to the market, and also linked to the assets that we will be taking over in the coming months, such as Fazenda Belem, Pescada, Peroa and Reconcavo. I also highlight that we are in the last stage of issuing debt amounting to €1.6 billion, as has been broadly communicated to the market. This debt will have a substantially lower cost than the existing debt. It will bring us sufficient proceeds to prepay our existing debt. And it is the last stage in the financial structure for the acquisition of the assets already signed with Petrobras. Again, I would like to thank all of you for joining us today and stress how satisfied we are to be writing this beautiful story with an excellent portfolio of assets and best of all, enjoying the trust of such important investors as all of you are. On November 12 of last year, we had our IPO. In less than a year, we had two subsequent follow-on offers, which reinforces the resilience of the investment thesis of 3R Investing in Mature Fields. On behalf of 3R and our whole management team, I would like to thank you and start the Q&A session. Well, we will now begin the Q&A session. First question comes from Pedro, BTG. We saw the 3R is starting to hedge production for 3R Offshore. In other words, for the expected production from Papa Terra. I would like to hear the strategic reasons for such a decision. Thank you, Pedro. This is Pizarro speaking again. Thank you for joining us. Soon after the signing of Papaterra, we decided to gradually start our hedging policy for Papaterra Field in an attempt to have greater predictability regarding cash generation of a very representative asset. I'd like to remind you that our stake accounts for more than 8,000 barrels out of a total of 25,000 barrels produced currently. either by 3R or operated by Petrobras. Of this amount, We forecast a production for next year and we have already started. We have around 10% of the future production estimated for the field between January 22 to June 2023 already hatched at around $67 per barrel on average. With that, we can have some predictability. of a minimum cash generation, operating cash and minimum EBITDA for our stake of $67 million a month. In other words, if we do the math, it would be approximately $120 million for a 62.5% stake and about $90 million for our stake of 43.75%. It's basically this, Pedro. Thank you. Next question by Guilherme Levy with Morgan Stanley. Regarding M&A, how should we think about the company's appetite for assets where you don't have exclusivity? Urucu, Alba Terra and Alba Cora. Thank you, Guilherme. As we tried to make very clear in our release this quarter and also During our conversations during the follow-on, the company has been preparing quite strongly for the acquisition of Potiguar Cluster, an asset that in our view is the very best asset put for sale by Petrobras for all of the reasons we mentioned. It shares good characteristics of onshore and good characteristics of offshore, low lifting cost, and an independent production from third parties so that we can sell not only the production of Potiguar cluster, but all of our production in the Potiguar basin, including Duna and Macau. This is a relevant asset that can practically double the oil reserves of the company. And so our vision starts to focus now on revitalizing and focusing on organic growth of the portfolio that we have built already, including Potiguar cluster that has been negotiated. Today, it's not a focus of ours to assess and think about other acquisitions. We are waiting for Petrobras to continue negotiating with other companies. This is no longer the focus of the company. Right now, we are not considering going back to the market in the next, I should say, two years. And we're not thinking about having any new great acquisition in the next two years except for Portiguar cluster. Another question by Guilherme. How should we think about the production curve for the next quarters? Perfect. Gay learning. We are in a transition process, a gradual transition of the next assets coming from Petrobras. We have just closed the deal of Duna that accounts for about 450 barrels in Q4, we're already going to see the positive effect of that producing volume. In the coming months, we should close Pescada Arabiana and Fazenda Belém that will bring in about 2,000 barrels of oil equivalent for our production. And more towards the beginning of next year, we should close Peruá, bringing 3,800 barrels of oil equivalent to our production. Still, in the first half of 2022, we expect a reconquer with about 4,300 barrels and Papaterra with about 8,500 barrels will be closed. Making up the total portfolio of signed assets. With that, by the end of the first half of 2022, we should have those 24,000-25,000 barrels that we mentioned in our signed portfolio. And Regarding the next steps of Potiguar, we are in an intense negotiation with Petrobras. Both parties are interested in speeding up the signing. We like to joke that 3R is the most experienced company in negotiating with Petrobras. We were the only company that negotiated seven assets with them in the last two years. So we are wise. And we are knowledgeable of the typical SPA provisions with Petrobras. So we are moving ahead at a very fast pace. It's very likely that by January 2022, we will have signed that asset. and we need another 10 to 12 months until the closing. Our internal premise is, or assumption is that by December of 2022, we will be closing this operation. So by 2023, our operation will have started in this asset. And like we mentioned over and over, this asset will take the company to a whole new level. It will bring many benefits, not only for the asset itself, but because of the synergies with the other assets in the Potiguara Basin. We have another question about values being generated during the transition period, which will be deducted from the closing for each one of the deals. So let me remind you, we have. Pescada Rabayana asset being transferred in transition and the cash generation since January 1st 2021 will be deducted from the payment at the closing. We have also Fazenda Belem from April 1st 2019 cash generation will be deducted from the closing. And we have Papa Terra from July 1st, 2021 already generating cash and that will be deducted from future payments. In the case of Pescada, we estimate about $1 million so far. for Fazenda Belém, about $7 million. And in the case of Papa Terra, for our stake of 43.5%, we estimate about $6 million per month. Approximately $9 million for 62.5 that is being acquired by 3R Offshore. This is our expectation. And every quarter we will be updating our shareholders regarding this. Next question about the lifting cost of Rio Ventura, a question by Conrado with Safra. As we mentioned along the presentation for Rio Ventura, we recently restarted the operation and Very well, we're all very happy at the company with the production increase that we were able to get. However, we have to remember some assets It applies to all, but to some in particular. Petrobras stopped investing years ago. And so we started with a production that is very low. Until we rise to production by 70, 80% of the current volumes, we should still see a lifting cost of above $15 per barrel. To give you an idea, the quarter average was close to $22, but in the last month, It was under $20 per barrel. And gradually, we will dilute the fixed costs of Rio Ventura, which account for around 70% of the lifting cost of that asset. So as we increase production, things will get better. There's another question here about the water oil separation plant at Macau. And I'm answering this question together with the previous one because it has synergies with Macau. We have a plan to complete the plant by June of next year. We have been implementing an attempt to speed up the process, which would allow us to bring the completion to the end of March. of 2022. We are not sure if we are going to be successful in our acceleration plan, but for obvious reasons, particularly to end the uncertainty of the text measurement between 3R and Petrobras of the whole production of Potiguar Basin and now linking with the lifting cost in this quarter, the cost to process the whole water and oil produced by 3R amounted to approximately 18% of the lifting cost of Macao. or $1.2 per barrel of oil equivalent was spent for water treatment. As soon as the water oil separation plant is complete, we will no longer bear this cost. So the lifting cost of Macau will go down significantly.

Next question by Conrado with Safra.

about the short term movement in gas monetization strategies. I will turn the floor to Hugo. Our corporate gas and energy officer has been dealing or leading all of the strategies to monetize gas in Rio Grande do Norte, Espirito Santo and Bahia. Hello, Conrado. Thank you very much for the question. Today, The main gas that 3R will have in the beginning of the next quarter gas available in Spiritus Santo. It is the gas in Spiritus Santo and we are trying to monetize it compared with LNG because it is a flexible gas which is not associated with oil production and it gives us flexibility and that kind of flexibility can help companies that are consuming L N G can give us some discount always linking our gas prices. This is an opportunity that we are looking for in the market and we will look for customers that have the ability to pay. In Bahia and Rio Grande do Norte we have a volume of gas that is very restricted. We will need the gas of Rio Grande do Norte for our own consumption and we are assessing the volumes of Bahia and we have to look for clients to monetize the gas in the best way possible. The complement Ugo's response part of the gas in Rio Grande do Norte will be directed to generate electricity again linking to the lifting cost in this quarter the percentage of the energy cost was about 20 22 percent of total cost in other words another significant cost when we generate electricity from gas with the gas to wire project this cost will go down Question from Victor with Iridium. Very good question, Victor, regarding Potiguar Cluster and the infrastructure that allows us to export, which is the port, and the possibility of oil off-takes of the oil produced at the cluster and in Rio Grande do Norte. So for an objective response, One of the main reasons that led TRIOR to consider Putiqua Cluster, the best asset sold by Petrobras, is exactly that. Precisely that. We have significant production. We have the possibility of having a very competitive lifting cost compared to offshore. It's precisely the storage capability. Now we have about 1.8 million barrels worth of storage capacity, including refined products and crude oil. And we have two boilers that allow for Imports or exports of oil and another why that allows for the imports and exports of refined products. So we start having access to the international market again for the production of Potiguar, Macal, Duna and Piscata Raballona. And with that, we will definitely be able to have a better monetization of the oil produced. and it's very high quality product less than half a percent of sulfur an average APEI degree between 25 and 27 degrees in other words exceptional production That will entail very low discounts. Depending on the timing, we might even collect a premium on this very high quality oil. So in a nutshell, yes, we have been discussing, have been in contact with many players, including some of the largest trading companies that operate in Brazil. discussing the possibility of having a better monetization of the oil. Here, we also have the flexibility to continue to use Clara Camarão until it reaches its refining limit, which is currently 39.6 thousand barrels a day. We'll definitely overcome, exceed that capacity with the revitalization of Macau, of Potiguar cluster, So we will definitely export part of what we are producing at these fields.

We have a question here by Lucas regarding abandonment.

and the commissioning costs to be paid by the old operator, the previous operator, Petrobras. This is another very positive aspect about 3R. I would say that no one enjoys the same position that 3R enjoys, either listed or not listed companies. Petrobras will bear about 331 million dollars for the future abandonment of the assets that we are acquiring, that we acquired. We always stress that particularly in offshore, three are always pursued negotiating particularly the abandonment amount so that we can have good predictability regarding the future of offshore assets and a lot of peace of mind that a relevant portion of the abandonment costs will be borne by the old operation. Of the 331 million, more than 200 are referring to offshore assets and out of the 331 million, It accounts for 45% of the total estimated by 3R. That percentage might be even higher. We have been negotiating internally and externally to try to gain scale in the abandonment of onshore and offshore fields, though this 331 might represent an even higher percentage of the whole amount due. Another question about partnerships in Potiguar Cluster. Question by Jorge. Great question, Jorge. Thank you. Jorge from Sumaúma Capital. We have been negotiating with three types of potential partners for Potiguar cluster. Like I said, the trading companies of the big players in Brazil, international trading companies that bring in the possibility of reducing import cost of refined byproducts that go in through the Guamareia terminal in the Potiguar cluster. We have also been negotiating with large distribution companies, some domestic, some international ones operating in Brazil, with the possibility to increase the market share of products either produced in Potiguar cluster coming from Clara Camarão or refined by products imported by the Guamare terminal. So these distribution companies also bring a positive bias of increasing the market share of byproducts coming from Potiguar cluster. In other words, also increasing our ability to generate cash and EBITDA through this terminal, which is so important and that we intend to acquire. Third type of investor would be infrastructure funds. Some Brazilian funds that are also very interested and having new opportunities that can be realized in Putigware cluster and we are also in contact with some of them. Intense conversations. Our expectation is that we will define who will be our strategic partners But our decision will not be made only according to the size of the check that will be shared with these partners. The decision will be rather a lot more linked to the ability to increase monetization, cash generation, and the commercial strategy that the partner can offer to 3R. I'm going to read a question from Lucas Costa to Denise, our offshore officer. An officer who came from Petrobras, who used to be general manager and executive director at Petrobras in the last 10 years. What is your evaluation of the three or group considering that you recently joined the company after many, many years of service at Petrobras? Thank you, Lucas. Obviously, these are very different companies in terms of size, so we have to compare them, having that in mind. Something very interesting and very different in the two companies is a focus to match volume and cost at all levels of the company. In Petrobras, things were more separate. We had an operational area which was geared to production volume, Expected volumes for the future forecasting, and there was a financial area more geared to costs. So that is an important difference, an interesting difference that we see in 3R.

And even when we think about bringing a well back to production.

And when 3R considers M&A and new projects, there's a huge focus on volume and cost. A focus on bringing results to the company's shareholders. That's an interesting point. And that's a big difference compared to Petrobras. In terms of, you know, safety, all companies are trying to improve safety in all of their projects. So the two companies are quite similar in that regard. Concentration. Because there are too many assets in Petrobras, it's hard to pay attention to all assets. So this is what we see today. Assets that were divested from and Petrobras stopped investing in the assets, stopped doing work overs. That's a big difference. Here in 3R, we pay special attention. All areas of the company pay attention from the board of the company to the management, paying a lot of attention to the business of the company, regardless of the type of business. So we see a lot of objectivity from everyone, from the members of the board to somebody performing a work over in a given well in an asset, always seeking to bring results to the company, paying a lot of attention. So I think that this kind of work and this kind of working mode is very interesting in the three-year group. Thank you, Denise. There's another question. I'm going to read another question asked by Pedro with BTG. He asks about expenses of the holding company that in his view were a little higher than in prior quarter. And did you write, Pedro? And the reason is precisely because TRIO is getting prepared. Actually, we are 100% prepared to take over Pazenda Belem Cluster, Pescada Rabayana Cluster. We are getting ready for the Reconcavo Complex and we are 100% ready for Peroa Cluster. Not to mention the preparation that is ongoing for Papaterra Cluster. It is only natural that during a transition phase, we need to hire more crews, hire some third parties. So for a certain period, there will be a mismatch between cash generation and what we are spending in terms of G and A. On the other hand, I think that many investors tend to forget, and that's why I'm going to stress it here, that such assets such as Papatera, Fazenda Belem and Pescada are already generating cash on behalf of 3R and that cash will be deducted from future installments payable to Petrobras. The best case is Papatera with the current oil production curve, even in the Petrobras cost, even with a discount, that is higher than what we are going to have after closing a discount of the oil barrel, still it is generating irrelevant cash. There's another question regarding Putiguerra cluster, regarding production expectation and when Putiguerra and how much Putiguerra cluster can add production-wise to 3R. Well, I would like to draw your attention to the history of production. Between 2009 and 2016, it was producing 37,000 barrels of oil in addition to gas. As Hugo mentioned, gas in Rio Grande do Norte ends up being used substantially. for the processing, but I highlight the 37,000 barrels of oil produced almost in a flat production while Petrobras was minimally investing throughout that period. From 2016 onward, when Petrobras decided to sell all onshore assets, that decision was actually made in 2016. And then we see a decline. And internally, we mentioned that this is an artificial decline. It's not a decline for technical reasons. It is a decline because all investments and capex were stopped and also some OPEX expenses for repairing a pump or a piece of equipment or a pipeline. So because Petrobras was not performing certain activities, there was an accelerated decline in production. The current production is around 22, 23,000 barrels. It's something, and we can recover to the peak production level. We can resume revitalization activities, work over activities, secondary water injection, which is still done very little in Potiguar cluster and also with a drilling campaign. Of course, with all of that, we intend to quickly resume to former levels of production and with more investments to continue to increase production and that's why we say this is a very important asset in terms of oil reserves with a low lifting cost and in terms of production and consequently cash generation. We like to stress that the combination that exists in Rio Grande do Norte, not only with Potiguar Cluster, but it's this combination that will give us one of the lowest break-evens for EBITDA generation among all assets in the Brazilian coast, both onshore and offshore. And also we reported the October production. There is a question here exactly about that production. We have been working hard and strong, as we mentioned, in the process to recalibrate all collecting stations in Rio Grande do Norte, both TRIAR and Petrobras. This is an ongoing process. During some days, we had a reduction in our measured production, but then a pickup and a gradual resumption of production. So what we can say is that we still have some instability, some uncertainty, and these will only be resolved when we complete the water oil separation plant. During that period, it is possible that we'll have some instability, some ascending or descending curve because of the measuring process, but most likely In December, when we'll be able to separate part of the water, this uncertainty will be reduced. Still, I always like to stress that we reported here about 4,800 barrels in Macau. with an ascending expectation for the coming days. It may decrease later, but this is an order of magnitude which represents a 30% increase from the first month and from the last quarter operated by Petrobras. It's a substantial rise and we've been working hard to continue to increase production. We also had, during that period, A loss of production linked to a scheduled maintenance. It's a small part, but if we add that to Pescada Arabiana and with the lost production from Sanyasu, a loss linked to gas production. As Hugo mentioned, Espirito Santo gas is dissociated. In Rio Grande do Norte, gas is associated, so it's a stop gas production and oil production, consequently also reduced. And so this is a scheduled maintenance this month. It will not be repeated in the next month. Well, we are now ending the Q&A session. I hope that we have addressed all of your questions. Our investor relations department is always available. Our IR and our management team is open to any investor, institutional investors and individual investors alike. I turn the floor to Savini, our CEO and founder of the company, for his final statements. Thank you, Pisa. Hello, everyone. Very quickly, just towards the closing of our call, I think Bizarro has conveyed to you our vision. This Q3, the Q3 results and this conference call marks a turning point in our strategy for the next few years. Basically, we are saying that We will now focus on finishing the transitions with Betrobras. And we'll focus on our efficiently built portfolio. We will be working to increase production, but always with operating efficiency and with a full focus on signing. We always have this disclaimer. We are negotiating exclusively with Petrobras, but we haven't signed the sales and purchase agreement, SPA of Portico Cluster. And this is the main focus of the company right now. There was one question today about this, and I'd like to remind you, 3R already operates 15 fields. I sometimes feel that some people lose sight of that. We already operate 15 fields in two basins in Brazil, Potiguar Basin and Reconcavo Basin. We are preparing to operate 38 fields in the short term. In the short term, by short term I mean until June of next year, which is Papaterra that we signed back in July. So Fazenda Belém, Pescada Raballona and Portiguera Basin, Reconcavo Cluster in the Reconcavo Basin and Perua Canguá. For those, we are 100% prepared and mobilized to start operations. And that's why we see an impact on our costs because we are mobilized to offer 38 fields, but we are getting revenue from only 15. But this is a transient effect. It is an expected effect. It is not reasonable to expect that we will be 100% prepared without having to invest. Also considering operating safety to start operating in relatively complex assets, such as Piroag Kangawa, which is an offshore gas platform. So we are operating already 15 fields. We are mobilized to operate 38 fields. And with the signing of Portugal Cluster, we will have 64 oil and gas concessions in five Brazilian states. So it's a very robust portfolio. And again, we built this portfolio, like I always say, by the book, as the books say that we should do. In other words, buying reserves when the commodity price is low, And this is what we did with a very low brand price when we built the portfolio. In addition to a low brand price, we acquired these 264 million barrels without Potiguar because Potiguar cluster will almost double Probable Plus Approved Reserves. And we built this portfolio with a very low brand price and with an acquisition cost of around $3 per barrel, which is a huge efficiency of our portfolio. And now there's another phase. We are already producing. We are already doing everything I'm talking about, but it's time to produce oil, increase production with efficiency, with a low lifting cost. This will always be the focus of a company managing mature fields. And another focus is safety and something Mauricio Diniz mentioned. And I will underscore this. We have been operating for a year and a half. And we didn't have any lost time incidents, lost time injuries at the company. We're a recent company. We've been operating for a little time and we're very proud to say that we're a safe company. Now's the time to increase oil production, increase oil and gas production curbs with high efficiency, low lifting costs and safety. And the consequence of that is a huge rise in the cash flow expected for the coming quarters. So I hope that in the next meetings we'll speak more and more about a rise in our cash flow, a strong EBITDA generation, because we will be doing this in a moment when the Brent price is high. So we acquired and built a portfolio at a low Brent price. Now we are going to use our portfolio with a high Brent oil price. We have our expectations regarding the Brent price. It might fall a little, but not too much. So we could have many, many quarters ahead of us with a high oil price, strong cash generation, strong EBITDA, and high operating efficiency, as I mentioned. So now we are moving to a new phase. We fought hard during the M&A phase to build a portfolio. We're very happy. We are very satisfied with what we did. As Pizarro mentioned, we have already signed seven contracts with Petrobras. We're by far the company that has negotiated more contracts with Petrobras. We have negotiated seven. We're negotiating the eighth one. which is the jewel of the crown in our portfolio, i.e. Putiguerre cluster. And we also completed the acquisition of Duna, which was a contract that the old sanctuary was signed with Petrobras. So we are talking about the Petrobras divestment program. and we will have acquired nine clusters that Petrobras put for sale in onshore and offshore. Oil and gas, the two types of hydrocarbons that interest us. So my take home messages, we are here prepared to operate 38 fields and we will get prepared for the signing of Portugal cluster. 100% focus on operating efficiency, looking forward, cash generation and EBITDA. As Pizarro said, we are available. If you have any further questions after this conference call. Thank you very much.