Brava Energia S A S/Adr

Good day, everyone. Welcome to Brava Energia's earnings conference call to discuss second quarter 2025 earnings results. The presentation and comments on the results will be made by the company's chief executive officer, Des Rodoni, and other officers of the company. We would like to point out that simultaneous interpreting is available on the platform. To access it, simply click on the interpretation button at the bottom of the screen and choose your preferred language. This conference call is being recorded and will be available on the company's investor relations website. RI.BRAVAENERGIA.COM as well as the presentation that we will show here. We would like to inform you that all participants will be in the salon in mode during the presentation, after which we will begin the question and answer session when further instructions will be provided. Before proceeding, we take this opportunity to advise that forward-looking statements are based on the beliefs and assumptions of Brava Energia's management and current information available to the company. Forward-looking statements may involve risks and uncertainties since they relate to future events and, therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists should take into account that events related to the macroeconomic environment, market segment and other factors could cause results to differ materially from those expressed in such forward-looking statements. We will now give the floor to Mr. Dessio Odoni to start the presentation. Mr. Odoni, please go ahead. Good afternoon, everyone. To all of you joining us in this conference call to discuss Brava Energia results. This quarter was a good quarter, a quarter of consolidation of the company's trajectory of deliveries of results. A better quarter than the previous one, which had already exceeded Q4 2024, which was The first quarter that we reported as an integrated company, as Brava, We will continue to work to post an even better quarter than this one. Over this time, we maintained excellent safety indicators. We posted record production, record revenue, record EBITDA, and record net income. We increased the margins. We improved our cash position. We reduced our debt. And we lower our costs and lengthened the profile of our debt. Since the beginning of the year, we have achieved successive improvements in production, reaching almost 91,000 barrels of oil equivalent on average in July. On occasion, the company exceeded 100,000 barrels. On July 31st, we produced 101,973 barrels of oil equivalent, a volume that does not represent a weekly or monthly average, but it does break a symbolic barrier that is important in our sector, a company producing over 100,000 barrels daily. This increase in production is due to greater efficiency at Papa Terra, and due to the new wells of the FPSO Atlanta. This production reduced our cost of offshore operations. We reached a lifting cost of $14 per barrel without chartering. In July, we connected the last two wells of phase one of Atlanta. And with this, we are now able to reap the results of the investments we made over the past few years in Atlanta. This phase one of Atlanta was completed on time and on budget, which is rare for a project of this size. The next quarter, which we will report on in November, will better capture this progress in our offshore operations and Travassos will show this in more detail. During the quarter, we also improved the terms of sale for our oil. Pedro will talk about this. Onshore, we continue to optimize operations, reducing costs and capex. Our EBITDA remains a benchmark for the sector and we made progress on tertiary recovery or EOR on enhanced oil recovery projects and Boeri will speak more about this. Our EBITDA totaled $235 million, $250 million if we include the results of the oil hedging operations and we strengthen our cash position in Q2. Bizarro worked hard on liability management operations. We prepaid a higher cost debt instruments and reduced the cost of debt. And we just announced the fully monetization of the creditor position we had with Incent, which helped improve leverage. That's a subsequent event of this quarter. The improvement in operations strengthens cash generation and accelerates deleveraging our focus for the coming quarters, and Pizarro will elaborate more. To end the initial remarks, I'd like to say that on August 1st, we completed one year as a new company. As part of our efforts, To integrate teams and build an environment that seeks to create value, we began working to consolidate a culture of safety. That's very important. A company like ours, to have an efficient operation, we need to have a safe operation. What we are doing is the result of the effort of the whole team. So I thank everyone for their work. Let's move to the slides now, please. As I said, we posted good numbers, record production, record net revenue, record EBITDA, robust cash position and costs declining. This is the trajectory that we have been experiencing at BRAVA the last three quarters, and we will continue to work to continue on this path. Some operating highlights before I turn the floor to the other officers of the company. We had an important increase in production, especially in recent times. We had 50,000 barrels in the end of last year, increasing to a level of around 90,000. And this is the result of increased production offshore. As I mentioned, efficiency, higher efficiency at Papa Terra and new wells starting up at Atlanta. We can see more clearly on the slide, which brings already the start of the third quarter with a July production above 90,000 barrels daily, a trajectory that we believe will continue. That's what we are working for. I'll now turn the floor to Travassos to speak about offshore production. Good afternoon, I'd like to share with you the good operating result of our offshore operation in Q2 2025. At a glance, looking at the chart, we can see that it really translates the title of the slide. We are now on slide seven, Offshore Strong Evolution. Okay, right, now we are on the right, on the correct slide. It's clear to see the strong growth of production, of offshore production, both when we compare with the previous quarter or with the previous quarters, because we include the Q4 24. But when we analyze the last bar, when we compare the operation in July, we can still see growth. This growth is naturally driven by the completion of phase one of the full development of Atlanta. Décio mentioned this in his initial remarks, but this is also due to increase the production and greater efficiency at Papa Terra. And I'll speak more about that in a moment. Now, looking at the graph in detail, we can see that there was a production increase in all of our assets, one by one. And these values are represented in BOE, barrels of oil equivalent. They represent the working interest of BRAVA. So 80% of Atlanta, 62.5% stake of Papaté and so on and so forth. And I'd like to say that that percentage amount will still have a problem with the slides. Okay, so we can see the share. That's the proportion of oil because we have non-associated gas fields included. Now, analyzing individually the results, we can see that in Atlanta alone, there was a production increase greater than 50% quarter on quarter. This increase was driven by the connection of wells four and five. In the previous conference call, we spoke about this. These wells were connected on April the 13th. Basically, these wells represent in full 12.6 thousand barrels of oil daily. On average, in the chart, we see an increase in 10,000 barrels when we compare Q1 with Q2. Again, because the chart represents the Brava Stake. still on Atlanta. When we look at the results of July, the third bar, we can see again a production increase driven by the connection of wells two and three. This production tends to increase even more in August in Q3 because these wells were collected on July the 19th. So on average, they are not represented in total. And we are at a moment of increasing production. and this should be achieved in the coming weeks so in September we will capture the full value of production of phase one of the full development of Atlanta now looking at Papa Terra we can also see significant production increase quarter on quarter we saw 50% increase in in production in this asset Well, this result is straight from Papa Terra. What I would like to highlight in this asset is that in Papa Terra, we had stability and this is something to pay attention to. We had the best semester since the acquisition of this asset. by 3R with an operating efficiency of 86%, which is very relevant for an asset that is this mature and the result of average production of 19,000. Again, that is translating to 12,000 average production represented in the second quarter of 2025 when we consider Brava's stake. When we look at the results for July, it represents really well what I spoke about in terms of efficiency. There is some production increment, but it's kind of in line with the result of the quarter, which shows the kind of stability we are having at Papaterra. It is important to highlight that stability does not mean that in one month we had 80, the other month 90. That's not the case. We have had stable operating efficiency at the asset, which gives us a lot of optimism. We see in Papaterra a good opportunity of extracting value looking forward. Now I'll speak about Parque das Conchas, an asset operated by Shell, which has been showing good operating efficiency. The increase in production we see on the screen is the result of this higher efficiency, and this was obtained After this submersible pump system, the lifting system at Parque das Conchas, there was a campaign there that increased efficiency and increased production a little beyond expected. At the top of the bar, in lighter green, we added production from assets Perua and Manatee. The non-associated gas assets, Perua is operated by Brava, Manetti is operated by Petrobras, and we had a production increase in these two assets. In Perua, we had a reduction of production at TGC that kind of offset the natural decline of the field and increase of approximately 20,000 cubic meters of oil per day. S A S A S A S A S A S A S A S A S A S A S A S That's when Petrobras restarted production. Now we have production superior to 2 million cubic meters a day and we intend to increase production of air in the coming weeks because now the operator is considering a subsea operation in the resumption of two wells. So During August, we expect to have a full operation at Manatee as well. I will end here. Thank you very much for your attention. I'll turn the floor to Boeri, who will present the results of Onshore.

Well, as you can See in the screen, our production chart remains stable, both in the second quarter and in July as well. This was reached due to several different factors. We continue to expand the steam generation process in Rodriguez with a very positive result in the production. And there was also improvement in the secondary recovery in Macau, in Amaro. And we are also seeing the first positive result of a nitrogen injection process in Fazenda Belém. This is a pilot project and it's still too soon to draw any conclusion, but the production had an important push. We also add to production, especially in Reconcavou, Macau, in Rodrigues today. The BRAVA field of production is higher. It's higher, is the highest one in the last five years. So the production reached record levels. We almost doubled the production in the field since the beginning that BRAVA, since the beginning of BRAVA's operation. In terms of CAPEX in the second quarter, we removed three drilling rigs, one was gone in April, then in May and June. And we still continue to produce a good work over rig. And in the second quarter, most part of the CapEx to generate steam was utilized. We acquired the generators and now we are in the final stage of installing the last five ones. So four of them will ramp up this year and the fifth one will start operations in early next year. So in the second half of the year, most of our capex for steam generation will be in place. And also there will be the reduction of the work over rigs that is happening in the third quarter. One left in June and the other one will leave in September. So capex will be much lower than in the second quarter. Now, speak about operating efficiency and OPEX reduction. We are still operating in different fronts onshore. Mainly, the main costs are usually maintenance and operation and Power costs, energy costs and the maintenance of the subsurface of the wall. Speaking about maintenance and the operation, we reduce the number of onshore rigs for different services, always keeping in mind a way to integrate the different assets. Speaking about energy, Pedro will give you more details about all of the actions that we are implementing to ensure our energy Since we are one of the largest ones in that location, in terms of OPEX, we made quite good improvements. To give you an idea, all of these interventions have to do with repairs to the surface of the well, like replacement of pumps or centrifuges, et cetera. Historically, these maintenance usually were done by work over rigs that are There are significant and important moments to maintain a well with these rigs. Usually it takes three to four days for every work over. So we hire a small pooling rig and I think it's the only one that we have available in the country and we made the work over that used to take three to four days. Now it only takes 26 hours and we still have some more room for further improvements. In addition to this reduction in timing and thanks to some of the improvements on the engineering side and the selection of components and the way through which we recover the wells, we also reduce the number of strips in the wall. So if you do things faster, of course that the maintenance to the bottom of the well is expedited. So finally, we continue to reduce costs, capex. We have some important projects ahead of us and EBITDA per barrel is one of the best ones in the industry. And now I turn the floor to Pedro and he will give us some more details on the commercial area. Good afternoon, everyone. So I will talk about new business. And I'll start by speaking about oil exports. There was an important increment in spreads in all of the ship cargo. In relation to the past quarter, this movement in part reflects, especially vis-a-vis the first quarter, the fact that there was a mismatch as previously explained. There was a mismatch in average rent vis-a-vis the period because the majority of the shipments were offload. So the improvement in spreads becomes more visible in the second quarter for that reason. But this was also followed by a recovery in fuel oils of low sulfur, especially in the Asian market, because at the end of the first quarter, they struggled with excess supply. And the Asian market is one of the main destinations of our imports and exports. And this quarter, due to all of these changes in the international market, We were very assertive because we were able to demonstrate the flexibility of all of the shipments associated to Parque das Conchas, which opened good opportunities in the US market. Still speaking about oil, I would like to say that we had a record offload level. We had multiple offloads per week in scatter between Atlanta, Parque das Conchas, Papa Terra, and our refinery unit in Potiguar. Then we also sign a new agreement in Papaterra, which will reflect the investments in the improvements of the platform. And this will bring about a good profitability increments that should start in the third quarter in terms of spread. Number three, in July, we ended the trade contract that we had with Shell at Parque das Conches and now we entered a new phase which is solely managed by Brava and we will be able to show the results throughout the third and fourth quarters. Speaking about products and the margins of the refinery, the results were also very positive. I would like to highlight trading from Brava over trading and contracts with Raising and the results led to better pricing for both JLP and diesel oil in the domestic market. Natural gas, I would like to emphasize number one, the maintenance of positive margins despite market conditions having a surplus of supply and an increment of Availability and ramp up of Route 3. I would like to highlight the trade strategies that were implemented in the second half of last year. And then next we have the signature of a partnership to process natural gas. in Potiguar, and the investment involves $65 million. This is an agreement signed between Brava and Petro Recôncavo, and this was recently approved by CAGI, and we hope to conclude this transaction throughout the third quarter. And number three, So advances that will lead to the opening of Manatee gas process to process gas for Brava in Bahia. And this will lead to better revenues, better costs, then we will make use of idle installations in that area. So I will conclude my presentation here. And now, Pedro, thank you. Good afternoon, everyone. So now let me go through the financial highlights of the second quarter of 2025. Starting with net revenue, the company posted the best in terms of revenue, an all time high reaching $24 million, which is 9% above the revenues from the first quarter. The next slide, we show a breakdown of revenue between offshore and onshore. We now see that the revenue increase vis-a-vis the first quarter comes from offshore. IMPACTED BY INCREASED PRODUCTION IN ATLANTA AND PAPATEJA, WHICH TOTALED $272 MILLION IN THE QUARTER. I mean, onshore, if you look at downstream and revenues of the year, we reached $272 million in the quarter. Next slide. We show adjusted EBITDA that also posted record numbers of $235 million in the second quarter. And if you look at the effects of hedging contracts, which were settled in the period, we would have $250 million. As a reminder, our adjusted EBITDA contemplates other expenses as though they were part of the operation costs. I would like to highlight offshore EBITDA margin, which superseded 50%, and EBITDA Poor Boy of Bravo, which is one of the best in Latin America. Following slide, we show the evolution of lifting costs. with onshore stability and the reduction in offshore assets stemming from higher production in Papaterra and Atalanta. Discounting chartering, we arrive at $12 per barrel in offshore, even though there is further room for reduction, both in Atalanta and Papaterra. Next slide. We show CAPEX for the period with a progressive reduction since the third quarter of 2024. As for onshore, with a reduction in the number of drilling rigs, we achieved $57 million in the quarter. But as mentioned before, the trend is for further reductions since we do not have any program or a scheduled drilling campaign for the third and fourth quarter. And offshore, we concluded Atlanta with a demobilization of PLSG in June, and we started phase two with the acquisition of materials for the next two wells. Next slide. We show the capital structure of the company. Gross debt remains flat vis-a-vis the first quarter. However, with an increase of $100 million in our cash position, net debt contemplating obligations and acquisitions was down by $100 million. We started on our deleverage path. No. And considering prepayment of receivables of FPSO Atlanta, which occurred in the past few days, we would have been below two times, which is our goal for the end of the year. Next slide here, we show the amortization profile Before and after our intense liability management work, we were able to reprofile our obligations. We reduce the average cost of the debt, and now we have enough liquidity to cover all of our obligations until 2028. I would like to emphasize that prepayment of receivables at FPSO Atlanta not only reinforce our cash operation by $260 million, but also this has an effect in cash generation of at least $40 million at present value already contemplating the effects of 2025. As a subsequent event, we also received $16 million related to 25% of the partial sale transaction of PGN in particular. And we also receive some in the amount of $100 million, which should be posted in the third quarter. Next slide. We have the company's cash flow. Maybe this is one of the most important highlights of the second quarter. Our operating cash generation was 1.6 billion BRLs, quite robust. We had investments close to 810 million BRLs and the financial result, if excluding the effect of Exchange rate variation and non-recurring effects like monetization of shares in Treasury and the payment was close to 220 million BRLs, meaning that our free cash flow after financial results was quite robust considering or not considering the non-recurring effects.

On the bottom of the slide, we present our hedging position. We have about 45% of oil production hedged until the end of the year, about 35% in Q1 2026, and we started hedging the last six months of 2026. The biggest part of our position is protected in color type contracts in which we protect at $62 per barrel. However, we do not miss the upside in case the brand price increases to up to $77. For the current hedge position, we have a lot of resilience in our cash position, cash generation, and we continue on the path of deleveraging in the coming months. For this final message, I turn the floor back to Desium. Okay, before we close the presentation, let's speak a little about the next steps for the second half 25. We will continue to focus on free cash generation and deleveraging, which is our number one priority. We have been unlocking synergies after the merge. In the recent moves made, we will accelerate this movement. and we have been working with Pizarro, Boeri, Pedro and Travassos as they said to continue to cut down costs Both in onshore operations, Papa Terra mainly, offshore Papa Terra and onshore and to reduce our GNA. In terms of growth, as Pizarro mentioned, we started preparing the drilling campaign of the next two wells at Papa Terra in Atlanta. We have acquired some equipment for that. and the expectation is to start this by the end of the year to have these two wells connected by 2027 when we are going to have a significant increase in production resulting from the connection of these wells. We are also going to know more with the completion of the pilot project of enhanced oil recovery. These are the projects of nitrogen in Potiguar Basin, and we will start a polymer project as well to try to improve the recovery factor and production of our mature fields onshore. We received some news. which is the individualization of a job party field in the BC 10. So we are going to negotiate a compensation for that with Petrobras. And we will move to the closing of the deal for the partial sale of UPGN at Guamaré so that we can complete this deal and start the year with a new partnership operational. So these are the next steps that we intend to take over the next two quarters. We are in a path of deleveraging. in reducing costs and increasing production. We have a lot of work ahead of us. With that, we end the presentation and open the floor to questions. Thank you very much. We will now begin the question and answer session. If you want to ask a question, please click on the Q&A icon on the bottom of your screen and type in your question. If you want to ask a live question, click on the same icon and type in your name and company or click on raise hand. First question from Vicente Falanga with Bradesco BBI. Go ahead, sir. Good afternoon, Décio, Pizarro, Pedro, Travassos, Boeri, the whole team. I have two questions. You mentioned that you had good results in the pilot project of nitrogen injection in Fazenda Belém. Can you give us more on the results obtained, production, estimate of increased recovery factor? And when will these projects be scaled up to other wells, including those that were closed? And my second question is, you talked about, well, you posted a significant cash generation quarter on quarter. What is the expectation of cash generation in Q3 and Q4? Thank you. Thank you, Vicente. Before I turn the floor to Boeri, we started with the nitrogen injection. Project in Potiguar in Fazenda Belém. And our goal was to identify the parameters that make this injection efficient. The goal is that this operation will be paid by the additional oil volume that we will lift from these wells. We are at the very beginning of the process and hopefully in the coming months we will have a pretty good idea of how the project will perform and the adjustments we'll need to make in injection factors. Hello, Vicente. Thank you for the question. With a nitrogen project, We have finalized the injection in the wells of Fazenda Belém and in the wells in Estreito and we are now injecting nitrogen in Alto Rodrigues wells. And as you said, it is still too early to have any conclusions, but Fazenda Belém has quickly presented a relevant production increase. Fazenda Belém reached the production of 900 odd barrels. An amount that we didn't achieve since 2019, but it is too early to come to any conclusions about the project. It involves logistics, it involves costs, and it's about learning, continuing to learn with the process. As for polymer injection, we haven't started that yet. The A polymer injection plant is ready to arrive in the country and we will start injecting 4 injectors in saline cristal field and next year we will expand to 10 injectors in saline cristal. And with the results, we will see how the rest of the field would evolve. We have potential in Salina, Cristal, and Canto do Amaro. And with nitrogen, we intend to continue to evolve at Fazenda Belém, Alto Rodrigues, Estreito, and then others. So that's what we intend to do for now. As for cash generation, Vicente, I can answer that myself. For the next two quarters, We have a positive outlook in terms of cash generation. We will maintain our efforts to cut down costs. We'll have a production increase, especially at Atlanta with the connection of the last two wells and with that resulting volume and with the reduction of capex. Because we've lived through the phase of highest capex at Atlanta and now it's under control and we expect now to have an acceleration in cash generation and the leveraging. As Pizarro said, we want to finish with net debt over EBITDA below two by year end. Thank you. Thank you. Next question from Monique Greco with Itaú BBA. Ms. Greco, go ahead. Hello. Good afternoon. Thank you for the opportunity to ask questions. I think I'm going to ask three questions. One is a follow up to Falanga's question, but my first question is about CAPEX. This path of reducing CapEx starts becoming more visible now with Q2 results. And Pissarro mentioned that this reduction is going to be even greater in the second half of the year. What can we expect in terms of CapEx for Q3 and Q4? Should we consider that estimate of 450 million maintained for this year? The follow up question is on capex as well. It's about EOR with nitrogen. So I have a question. Once the pilot projects are confirmed and you start scaling up these projects, should this have a reflection on onshore capex increasing again because of the nitrogen projects when they are scaled up? And my third question has also to do with onshore. Now, zooming out of the quarter, how are you thinking about the possibility of resuming the process of divestment of onshore assets in the midterm? Thank you very much. All right. We are working with a CapEx level of about $450 million, perhaps a little more than that this year. This is our target. It will really depend. The final number, I mean, will depend on the evolution of the projects of the four new wells at Atlanta and Papateja that we're expecting until the end of the year. It really depends on when the rig will be released. This operation doesn't rely only on us, but that's the target that we have in mind. 450 million for the year with a significant reduction in the second half for the reasons we have mentioned. If it's not 450 million, it might be a little more, but this is the result of this campaign of the second and third wells at the third and fourth well at Atlanta and Papaterra fields. On short, we should not increase the capex with the EOR project, enhanced oil recovery. We are basically doing some modeling where we would have OPEX, And our evaluation is whether the oil volume coming out of each well will pay for the additional OPEX that we would have with polymer or nitrogen injection, so we should not expect an increase the capex because of that. because of the OPEX and we don't have any onshore divestment in our radar, except for those little fields that are not material in case we identify that it's best to get them out of the portfolio. But a large scale divestment of our assets, that's not in our plan. Thank you very much, Monique. Thank you, Décio.