Brava Energia S A S/Adr

Welcome to 3R Petroleum First Quarter 2023 Earnings Conference Call. The conference call and comments about the results will be presented by Matheus Dias, CEO of 3R, by the CFO and Investor Relations Officer Rodrigo Pizarro, and by the Chief Operating Officer Maurício Diniz. We inform that the simultaneous translation tool is available on the platform. To access it, simply click on the interpretation button at the bottom of the Zoom screen and choose your preferred language. This conference is being recorded and will be available on the company's investor relations website, www.ri.3rpetroleum.com.br. The presentation that we will show here is also found there. 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 will be provided. Before proceeding, we take this opportunity to stress that board-looking statements are based on the beliefs and assumptions of 3R's management and on current information 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. Now we will start the presentation with the company's CEO, Mr. Matheus Dias. Please, Mr. Dias, you may begin. Good afternoon, everyone. Welcome to the conference call to discuss first quarter 2023 results of 3R Petroleum. The presentation will be led partly by myself, and I'll bring you the main highlights of the period. By Maurício Diniz, our Chief Operating Officer, who will be sharing the relevant operational aspects of our assets in production, and by Pizarro, who will present the company's financial results and related performance metrics, as well as information on our capital structure, cash position, and obligations, debt in general. Now, starting on slide three, we have an overview of the period. As the first highlight this quarter, the update of the company's reserves certification report was published, with the assets now grouped into four basins, Potiguar Basin, Reconcavo Basin, Campos Basin, and Espirito Santo Basin. The certification was prepared and now consolidated by one single certifying body, de Gaulleer and McNaughton, as already informed, and the perspective was maintained of a robust portfolio focused on projects with certified reserves and low execution risk. As key elements of this report, we have that the company now has 516 million barrels of oil equivalent of 2P reserves . Of these, 71% or 367 million barrels are of 1P reserves, and 32% of the 2P reserves are classified as PDP . The NPV 10, in other words, the net present value, here calculated at a discount rate of 10% per annum, estimated for the portfolio is $6.32 billion for the 2P reserves and $4.71 billion for 1P reserves. Regarding the highlights of the operation, daily average production reached more than 20,000 barrels of oil equivalent in this first quarter. And this period was marked by the start of operations at Papaterra, an asset of great importance for the company and even more so for the current portfolio of assets being operated by 3R. There are challenges in the asset, and they are linked mainly to the status of many systems on the platforms, even causing production to be halted in March for a period of 21 days. But the existing production potential is already clear and consequently the capacity that the asset has to be, that the asset has to be an effective cash generator for 3R. And this very month, the current production of the asset is already on average between 16,500 and 17,000 barrels produced daily, representing approximately 10,000 barrels per day for the stake belonging to 3R offshore. Regarding the assets of Putigra Basin, also of note in the period, we had greater stability compared to the last quarter and a return to production at Macau of approximately 600 barrels of oil per day after the completion of corrective maintenance of the oil pipeline that drains production in CNB. The company spares no efforts to adjust the separation plans 100% without impacting the current production and thus to be able to increase the cluster's production as soon as possible. As for Potiguar Cluster, the company is in the final phase of fulfilling the obligations of the acquisition contract with Petrobras, the SBA. All that remains for the company now is the transfer of the Ubarana operating license, which will be issued by IBAMA, since the emissary's license, which was also pending, was issued just yesterday, April 26, in the name of 3R Potiguar, by IDEMA, the state agency in charge. This asset will represent approximately 46% of the total production of the company's portfolio and brings in its perimeter relevant mid-downstream structures that directly contribute for a verticalization of part of the chain and brings logistics and economic benefits as well as commercial flexibility to 3R. In view of the proximity that we now see of the closing date, it is worth remembering that in addition to the obligation tied to the acquisition amount foreseen on the completion date, there is also the need for 3R to acquire an inventory of tools, equipment, and spare parts, which are vital for the smooth continuity of the operation, as well as the inventory of products. Oil and oil products, in this case also according to the perimeter of the deal and which will be measured on the effective date of the closing. Lastly, still on the highlights, we remind you that 3R currently enjoys a Sudeni tax benefit in all of its assets, with the exception of Papa Terra in Campus Basin. This benefit gives us a 75% income tax reduction, which, together with social contribution, gives us an effective tax rate of 15.25%. Moving on to the relevant highlights of our operating and financial results, which will be better addressed by Denise and Pizarro momentarily, we see an increase in the company's oil production of 56% quarter on quarter, totaling an average of 13,500 barrels of oil per day. And as I mentioned earlier, with Papa Terra accounting for most of this growth. Compared to the same quarter of 2022, we see a 76% production increase. Considering our consolidated oil and gas production, three are averaged 20,700 barrels of oil equivalent daily, a positive increase of 35% over the last quarter of 2022. As for the financial metrics, I would like to highlight here briefly the quarter's net revenue of 574 million BRLs and EBITDA of 156 million BRLs. Please note that net revenue and consequently EBITDA were negatively impacted during this quarter, as Bizarro will discuss later, due to the 21-day stoppage of Papateja. Moving on to slide four, we bring you again the update on the company's reserves through the publication of the new reserves certification. First of all, in the chart on the left, we highlight the 516 million barrels of 2p reserves and compared to the 2022 report of 534 million barrels of reserves, we have the reduction of last year's production, the addition of 8 million barrels of reserves, and the momentary exclusion of 11 million barrels of Malambi reserves in Perua, which is classified as contingent until we have the declaration of commerciality and therefore all regulatory issues are addressed. On the right hand side of the page, we have some relevant multiples and how they compare with the previous certification. I stress that there were no substantial changes in them, but here I highlight an enterprise value of 6.32 billion BRLs, the NPV 10. And it should always be noted that this amount already includes income tax and social contribution. Another element worth mentioning is the capex per barrel ratio for the development of 2p reserves, which stands at $6.1 per barrel of oil equivalent. As satisfactory as it is, this ratio posted a small increase, not very relevant in relation to the previous one, mainly due to inflation. Lastly, on this page, I stress that oil accounts for 88% of the company's reserves, which clearly shows the robustness of our portfolio. We always remind you that this proportion in the portfolio is very positive for 3R, because the worst possible oil contract will certainly still be higher than the best gas contract we can sign.

Moving on.

Please go to slide five. And wrapping up this topic, we observe in the chart on the left, the breakdown of reserves by basin, considering the stake held by 3R Holding. Please note the great share of Potiguar Basin with approximately 60% of total 2P reserves, and the Reconcavo Basin and Papaterra with a balanced share in the portfolio, around 20% each. Again, the highlight goes to the share of oil, around 88% of total reserves in the bottom part. On the right side, we touch on some important elements for you to understand the company's portfolio in which we have 367 million or 71% of total reserves as 1P proved reserves. And the evidence here that 79% of 2P reserves are in onshore and nearshore projects. Now, to continue the presentation, I turn the floor to Denise who will present the main operational highlights of the period by Basin. Thank you, Mateus. We will now go into a little more detail about production starting with the Potiguar Cluster. What we can see is that the various problems that occurred at Potiguar Cluster are beginning to reverse, and now we're effectively starting to solve those problems, highlighting during this month the return to operations of the pipeline, which already allows us to start reopening the wells. We can clearly see in this graph in this first quarter a stabilization of the production that was declining throughout last year, and we effectively now start to see better results starting in April. Another important point that we have to highlight in Potiguar cluster is the number of rigs. We were operating in the last quarter of the year with two rigs. Now we already have four. And this has allowed us to carry out 65 workovers in some wells, broken down into workovers themselves, pull-ins, conversions and reactivation of wells. So we can already see ACAPEX being invested in the area and we are beginning to see an improvement. And another important point to highlight in this area is the beginning of well drilling.