2019 conference call - mz group
TRANSCRIPT
2019 Conference CallFebruary 20, 2020
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DISCLAIMER
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This presentation contains forward-looking statements. All statements other than statements of historical fact contained in this presentation areforward-looking statements, including, without limitation, statements regarding our drilling and seismic plans, operating costs, acquisition ofequipment, expectations of finding oil, the quality of oil we expect to produce and our other plans and objectives. Readers can identify many of thesestatements by looking for words such as “expects”, “believe”, “hope” and “will” and similar words or the negative thereof. Although Management believesthat the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to becorrect. By their nature, forward-looking statements require us to make assumptions and, accordingly, forward-looking statements are subject toinherent risks and uncertainties. We caution readers of this presentation not to place undue reliance on our forward-looking statements because anumber of factors may cause actual future circumstances, results, conditions, actions or events to differ materially from the plans, expectations,estimates or intentions expressed in the forward-looking statements and the assumptions underlying the forward-looking statements.
The following risk factors could affect our operations: the contingent resource and prospective resource evaluation reports involving a significant degreeof uncertainty and being based on projections that may not prove to be accurate; inherent risks to the exploration and production of oil and natural gas;limited operating history as an oil and natural gas exploration and production company; drilling and other operational hazards; breakdown or failure ofequipment or processes; contractor or operator errors; non-performance by third-party contractors; labour disputes, disruptions or declines inproductivity; increases in materials or labour costs; inability to attract sufficient labour; requirements for significant capital investment and maintenanceexpenses which PetroRio may not be able to finance; cost overruns and delays; exposure to fluctuations in currency and commodity prices; political andeconomic conditions in Brazil; complex laws that can affect the cost, manner or feasibility of doing business; environmental, safety and health regulationwhich may become stricter in the future and lead to an increase in liabilities and capital expenditures, including indemnity and penalties forenvironmental damage; early termination, non-renewal and other similar provisions in concession contracts; and competition. We caution that this list offactors is not exhaustive and that, when relying on forward-looking statements to make decisions, investors and others should also carefully considerother uncertainties and potential events. The forward-looking statements herein are made based on the assumption that our plans and operations willnot be affected by such risks, but that, if our plans and operations are affected by such risks, the forward-looking statements may become inaccurate.
The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statementsincluded in this presentation are made as of the date of this presentation. Except as required by applicable securities laws, we do not undertake toupdate such forward-looking statements.
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OPERATIONAL HIGHLIGHTS
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97% reduction in Loss Time Incident Rates (LTIR)
Tubarão Martelo’s acquisition allows for additional synergies with Polvo and Frade to be captured
Frade’s operational efficiency at 99.7% for the quarter
Total annual production increased 64.6% year over year
Company lifting cost reduced to US$ 19.7/bbl in the last quarter
Frade producing 15% more than initial Company estimates
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ASSET PERFORMANCE4Q18 2018 1Q19 2Q19 3Q19 4Q19 2019 2019x2018 4Q19 x
4Q184Q19 x 3Q19
Avg. Brent $ 68.60 $ 71.69 $ 63.83 $ 68.47 $ 62.03 $ 62.42 $ 64.16 -10.5% -9.0% 0.6%
Avg. Sales Price $ 63.23 $ 69.69 $ 64.40 $ 68.61 $ 62.31 $ 62.88 $ 64.68 -7.2% -0.5% 0.9%
Avg. Exchange Rate 3.81 3.66 3.77 3.92 3.97 4.12 3.95 7.9% 8.2% 3.8%
Final Exchange Rate 3.87 3.87 3.90 3.85 4.16 4.02 4.02 3.7% 3.7% -3.3%
Offtakes (kbbl)
Frade Field (70%)
n/a n/a n/a 975 995 1,398 3,368 n/a n/a 40.5%
Polvo Field (100%)
1,108 3,056 545 1,025 508 930 3,008 -1.6% -16.0% 83.1%
Production (boepd)
Frade Field (70%)
n/a n/a n/a 9,824 9,865 13639¹ 8,533 n/a n/a 38.3%
Polvo Field (100%)
10,055 8,598 9,567 8,523 8,070 7,478 8,403 -2.3% -25.6% -7.3%
Manati Field (10%)
3,025 3,075 2,033 1,776 2,413 2,859 2,273 -26.1% -5.5% 18.5%
Total PetroRio 13,080 11,673 11,600 20,123 20,348 23,976 19,209 64.6% 83.3% 17.8%
Lifting Cost (US$/bbl)
PetroRio 30.6 32.6 30.8 24.0 22.9 19.7 22.9 -29.8% -35.6% -14.0%
LIFTING COST PER BARREL
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Lower lifting cost from synergies between Fradeand Polvo, and contract renegotiations
TBMT acquisition will increase production levelsand allows for significant synergies to becaptured in 2020 and 2021.
33.3 32.6
22.9
2017 2018 2019
-2%
-30%
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OPERATIONAL PERFORMANCE
Short-term (completed)
1) Gas injection
2) Well re-opening with hydrates
3) Initiatives to improve reservoir
management and drainage
Medium-term (ongoing)
3) Water Shutoff / RPM
4) Well stimulation
Measures taken to contain natural decline in 2019
Current production levels are 15% higher than theField's expected decline curve.
Long-term – Drilling Campaign
15%
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OPERATIONAL PERFORMANCE
Lower operational efficiency in onewell
Polvo FPSO unplanned shutdown
Recompletion made in one well
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The 1st drilled well undergoing technicalanalysis
Initial investment of approximatelyUS$ 16 million
REVITALIZATION PLANPHASE 3
POLVO DRILLING CAMPAIGN - 2019
The replacement of 2 pumps (ESP) and one recompletion were added to the project scope
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Drilling of 1st producer well planned to startin the 2nd half of 2020. Estimated capex: US$ 70 MM
FRADE REVITALIZATION
FRADE DRILLING CAMPAIGN - 2020/2021
Global drilling project – 4 producers and 3 injectors
= 1st phaseCurrent producers
Current injectors (disabled)
Scheduled producers
Scheduled injectors
ODP1
ODP4
ODIJ
N5I1
N5P1
UPP1
ODP3
MDP1
OUP3 MDP2
MUP5
MUP6
MUP3
MUP2
MUI2
OUP2
MUP2
OUP1
OUI2
OUI3
N5I2
OUI1
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FINANCIAL HIGHLIGHTS
Net Revenue of over R$ 1.6 billion in 2019, an increase of 94% vs 2018
Adjusted EBITDA (ex-IFRS 16) of R$ 792 MM. Highest ever adjusted EBITDA margin (48%)
Operating Cash Flow of R$ 569 million in the year
Signing of the remaining 30% of Frade Field
OSX-3 FPSO acquisition and farm-in of TBMT in early 2020
US$ 65/bbl hedges cover 100% of sales planned for 1Q20 and 50% of sales planned for 2Q20
FINANCIAL PERFORMANCE
1111
(R$ thousands) Includes IFRS 16 fromJanuary 1st, 2019 onwards
*Adjusted EBITDA excludes “Other revenues/expenses” due to non-recurring items.
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OSX-3 FPSO ACQUISITION AND TBMT FARM-IN
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Pre-tieback
80% of TBMT’s oil
US$ 840 thousand monthly Charter fee
Merger of logistics and support vessel contracts
Merger of Support Bases
OSX-3 FPSO ACQUISITION AND TBMT FARM-IN
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OSX-3 FPSO ACQUISITION AND TBMT FARM-IN
Post-tieback
95%* of Polvo + TBMT’s oil
*After the production of the first 30 million barrels, this percentage rises to 96%
Decommissioning ofPolvo FPSO
FINANCIAL PERFORMANCE
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Leverage remains in a downwardtrajectory due to growing EBITDA,even without a full-year of Frade’sfigures.
Most of 4Q19 offtakes took place inlate December, which resulted in aR$ 374 million Accounts Receivable,well above the Company’s standards.Adjusted, Net Debt/EBITDA ratiowould have reached 0.4x in thequarter
-455-491 -498
-530
1.001
714 694
908
3.3x
1.5x1.2x 1.1x
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19
Net Debt (ex-IFRS 16) Net Debt / Adj. EBITDA (ex-IFRS 16)
1Q18 2Q18 3Q18 4Q18
FUNDINGLoans and Funding
(R$ thousand)
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TrafiguraUS$ 47 million6 month termLibor + 2.75% p.a.Prepaid export
CitibankUS$ 48 million4 month termLibor + 3% p.a.Working capital
Vendor Finance(Chevron)US$ 224 million2 year termLibor + 3% p.a.
Paying for the asset usingits own cash flow with vendor finance
PPE (ICBC)US$ 60 million4 year termLibor + 3% p.a.
Guarantees PolvoProduction sales to PetroChina
FUNDINGLoans and Funding
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Vendor Finance(Chevron)US$ 224 million2 year termLibor + 3% p.a.
Paying for the asset usingits own cash flow with vendor finance
PPE (ICBC)US$ 60 million4 year termLibor + 3% p.a.
Guarantees PolvoProduction sales to PetroChina
TrafiguraUS$ 47 million6 month termLibor + 2.75% p.a.Prepaid export
CitibankUS$ 48 million4 month termLibor + 3% p.a.Working capital
< 12 months 2nd year 3rd year 4th year > 5 years
Amortization ScheduleR$ MM
Chevron PPE (ICBC) Citibank Trafigura Others (Short Term)
1,215
336
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