Brava Energia S A S/Adr

Good afternoon, everyone. Welcome to 3R Petroleum Third Water 2022 Earnings Conference Call. The conference call and comments about the results will be presented by Ricardo Savini, CEO of 3R and the CFO and IRO Rodrigo Pizarro. We inform that simultaneous translation is available on the platform. To access it, simply click the interpretation button at the bottom of the screen and choose your preferred language. This conference is being recorded and will be available on the company's investor relations website at www.ri.3rpetroleum.com.br. as well as the presentation that we will show here. Please be advised that all participants will be in listen-only mode during the presentation and then we will begin the question and answer session when further instructions to participate will be provided. Before proceeding, we take this opportunity to stress that forward-looking statements are based on the beliefs and assumptions of 3R's management and on information currently available to the company. Forward-looking statements may involve risks and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur. Investors, analysts, and journalists should understand that events related to the macroeconomic environment, the industry, and other factors may cause results to differ materially from those expressed in such forward-looking statements. We will start the presentation turning the floor to Mr. Ricardo Savini, CEO. Mr. Savini, you may proceed. Good day, everyone. We are starting our earnings conference call to discuss third quarter results of 3R Petroleum. It's a pleasure to have you with us. I will start the presentation and then I'll turn the floor to our CFO and IRO Rodrigo Pizarro. On slide three, we show strong results, important marks achieved in this quarter. To start, Regarding our capital structure, we mitigated any funding risk to complete the acquisitions of our portfolio, particularly of the large Potiguar cluster. And regarding that cluster, we signed two firm commitments of funding, one led by Morgan Stanley in the amount of $500 million, and the second one by BTG, again, $500 million. With that, We raised $1 billion for us to finish paying Petrobras at the closing of this cluster, which should happen in the coming months. We issued a local debenture to reinforce our cash position in the amount of 900 million BRLs, also in this Q3. All of these loans, all of this debt, have flexibility and the possibility of prepayment, as Bizarro will detail along our presentation. From the operational standpoint, 3R is already operating six out of the nine clusters acquired from Petrobras. When we consider all production from nine clusters, we're talking about production operated by us and still operated by Petrobras, but with results already coming to the company. With production totaling about 43,000 barrels produced daily as we speak, of which around 16,000 barrels are produced by 3R. Another relevant event in this third quarter was the acquisition of an additional stake of 3R Offshore from our partner, DBO. So we increased our working interest in our subsidiary 3R Offshore to 85%. And with that, our reserves, considering our whole portfolio, including all of the other assets, increased to 534 million barrels. In other words, as we have mentioned before, a portfolio of more than half a billion barrels of 2P reserves, proved and probable reserves. Lastly, in the operating front, Well, we touched on this in the last conference call, and today we can speak openly about it. Our first drilling rig was imported. It's already in Brazil. It's in Mossoró being prepared to start drilling in the last quarter of this year. We should start drilling at Areia Branca cluster, and then we will mobilize this rig, which is an automatic rig manufactured in Italy. And we should mobilize it to Macau Cluster in the first half of next year. Also at Macau Cluster, we finished building our electricity plant powered by our own gas gas from the cluster itself, our gas to wire plant. It's what we call GTW. This electricity generation plant is already working and with that we are going to be able to reduce on one hand emissions and on the other hand our lifting cost. I'd like to remind you that electricity accounts for about 30% of the operating cost of our clusters. In addition, our oil water separation plant, which we have been building for the past months, is now complete. The Macau A plant is ready and working and operational, totally operational. I'd like to remind you that we have two plants at Macau cluster being built. One is Macau A and the other one is Salina Cristal plant in CNB. Macau A Plant is ready and operational. ANP has already inspected the plant and we are waiting for the last approval by ANP to start using a new method to measure production of oil in the region of Macau A. The Salina Cristal Plant is being finalized as we speak and should be ready by December. Still here on slide three, we have four charts to show our operating evolution and our financial performance. For the first time, we can compare this quarter, the third quarter of 2022, with a two-year historical series because our first closed quarter was exactly Q3 of 2020. So in all these graphs here we compared the third quarter of 2020 with 2021 and with 2022. So in a two-year comparison we increased almost two and a half times the production From our portfolio, from 3,900 barrels to over 9,000 barrels of oil. And when we look at total production, oil plus gas at the bottom, we increased production from 4,900 to more than 16,000 barrels. That is, we more than tripled our production in these two years. And from last year to this one, we multiplied production by almost two and a half times. Demonstrating the enormous growth of the company's production in this last year. And our financial performance follows this operating evolution. In terms of sales, we multiplied revenues by six times. Obviously, our sales just from a cow cluster in Q3 totaled 82 million BRLs. And today, in this quarter, we sold more than 500 million BRLs of hydrocarbons. So we have multiplied our revenues by more than six times in the last two years and almost tripled revenues from last year to this one and EBITDA follows this financial performance. We also multiplied by almost four times our EBITDA from Q3 2020 to Q3 2022. And we practically doubled our EBITDA from last year to this one and reached in this quarter 193 million barrels of adjusted EBITDA. Well, here it is important to emphasize this. We will talk about this during the presentation. It's important to emphasize that we generated EBITDA, but at the same time, we still have transaction costs associated with assets There we are in the process of closing, but which are not yet operated by the companies such as Potiguar Cluster, especially Papa Terra Cluster, which we are very close to taking over, but the costs are already in house. So if we did not have these transitions, transition costs, our EBITDA would be around 228 million BRLs this quarter. On slide four, starting here in the graph at the bottom of the slide, we stress the view that we are already a producer that produces over 43,000 barrels. Barrels of oil equivalent per day. So this portfolio has nine different assets, the largest of which is Potiguar cluster as shown in the graph with over 17,000 barrels daily. To build this portfolio, we paid or committed to pay. And as I said in the previous slides, we already have a capital structure prepared to finish paying for these acquisitions. So we paid or committed to pay two point two billion dollars. So these acquisitions are totally sorted out in financial terms. And it is important to emphasize that this portfolio, these assets that 3R has, make us A truly independent oil and gas player in Brazil. We have the capacity. By having specially a Potiguar cluster, we have the Guamaré terminal, the industrial asset of Guamaré, including Clara Camarão Refinery, the tank farm, the piers for importing and exporting crude oil and oil byproducts. All this gives us enormous flexibility and independence from any other player. Today, we have the capacity to export 90% of our production if we want, using our own infrastructure. We have the capacity to import and export crude oil, and especially byproducts if that is the case. So we are really very well positioned in this new oil and gas market in Brazil. Reaffirming what we have already stated a couple of times, our portfolio in terms of reserves is very low risk. 534 million barrels of certified reserves of oil equivalent oil plus gas. 72% of this is proved reserves. In other words, very, very low risk. I always stress this. There is nothing less risky in the oil and gas industry than 1P reserves. And still 34% of those are PDP reserves, proved developed producing reserves with wells already drilled. So a very low execution risk. And as we have already mentioned, we are already operating 16,000 barrels in three basins, Potiguar Basin, Reconcavo Basin, where we already operate our entire portfolio in Bahia State. And in the last quarter, we started operating at Peruá Field in the Espiritu Santo Basin, Peruá being an offshore project. Speaking about Peruá, on slide five, we summarized the Peruá concession which we started operating in August of this year. Here we have a set of images, some photos. On the left, we have a picture of the platform that we are already operating and on the right at the top, We have a picture of the platform from above. You can see the heli deck that is new. It's already painted, also displaying the new name of the platform, which is now called Platform 3R1. And I am very proud to say this. This platform is currently draining the reservoirs of Piruá and Canguá fields. But that we will also use to drain the potential reserves of the Malumbi concession. And I will talk about this in a moment. So our operational transition was very smooth, very uneventful. We didn't have any kind of operational discontinuity. We have been working and please remember that this is an uninhabited platform. We have put a lot of personnel on board exactly to carry out maintenance in this initial phase of our operations, but the asset is producing around 3,500 barrels of oil equivalent. Let me remind you that this is gas with some condensate, but it's basically a gas project and we are selling this gas at a price of $8.8 per million BTUs. With that, we have 11% of our revenue in this quarter already coming from the Perua concession. So a very important result. Perua is a concession that is a strong cash cow and has an EBITDA margin of around 70%. I mentioned that we are working, we are conducting all the studies to proceed with the tie back of the Malumbi discovery. And when we have this tie back concluded, well, Malumbi is a discovery that Petrobras made a few years ago and with a production potential of around 2.5 million cubic meters daily. in a peak production strategy or around 1 million cubic meters per day in a plateau exploration strategy. We mentioned these 2.5 million because this is the real potential of the reservoir. We can opt for a plateau production to have long-term gas sales contracts. So we can have about 10 years producing in this concession in a plateau exploration model.

Talking now about the Macau cluster, we have been working a lot, remembering that we have been operating at this cluster for more than two years. Keep it in mind that we are taking over the operations of mature fields, older fields with an older infrastructure. So normally in the first years, there's a lot of work to do to increase the installed capacity at the surface for oil and water treatment, water injection, et cetera. And here we have some pictures of what we have been doing over the last few months. Starting at the bottom center. This is our three phase separator in Macau A. As I mentioned, this is ready, commissioned, waiting only for ANP's permit. But we are already capable of separating oil from water. and delivering oil within specification that is with less than 1% of water. Speaking of water in the picture also at the bottom and on the left, we see an image of our water injection system that we are still in the process of commissioning, but that is already quite advanced. This green tank is the tank of water that will be injected in the injector wells. In secondary recovery projects, we are already quite advanced. And at the bottom right, the GTW plant, our gas to wire plant, is also ready, commissioned. And we shall see the results affecting or rather reducing our lift costs more robustly as of the first quarter of 2023. Although it is already working, we have a transition here with the electricity contract that we have with the grid. So the results themselves will appear in the first quarter of next year. As you see, we're working very strongly in the McCall cluster. We're also working on the pipeline, replacing pipes that had maintenance issues from the previous operator. Here as a strategy, we work in a very safe way. So some pipes we already started to replace some stretches of pipeline, replacing and placing new pipes so that we don't have any problems with leaks, but also with very low operational loss. We're working, doing the maintenance on one side and replacing equipment on the other while keeping the asset in production. Well, the result of all this that I showed so far is a constant growth in our production. Here on slide seven, we see two charts, oil production at the top and below the production of oil and gas. So we can see that we have been achieving constant increase in our production over the quarters. Starting in 2020, only with the Macau cluster, and the not operated part of Pescada.

We're partners.