Prio Energy SA (Prio), in its fourth-quarter earnings call of 2023, announced its most successful quarter to date. The company achieved a record average daily production of over 100,000 barrels of oil, coupled with substantial financial gains.
Prio reported net revenue of $2.6 billion, EBITDA of $1.8 billion, and net income of $1.1 billion, marking significant increases from the previous year. The company also highlighted its reduced carbon footprint and increased reserves, setting a positive outlook for future growth.
Key Takeaways
- Prio hit a record average daily production exceeding 100,000 barrels of oil.
- The company's financial performance showed net revenue of $2.6 billion, EBITDA of $1.8 billion, and net income of $1.1 billion.
- A 20% reduction in carbon footprint was achieved, with 21 kilos of CO2 per barrel of oil equivalent.
- Prio ended the year with $482 million in cash and a low net debt to EBITDA ratio of 0.7x.
- Reserves increased by nearly 10%, reaching 559 million barrels.
- The Wahoo project is on track to start production in August, pending environmental license approval.
Company Outlook
- Prio is committed to environmental responsibility and social initiatives, including the Reacao offshore training program.
- Updates on the Frade Revitalization Plan, Tubarao Martelo and Polvo wells and fields, Albacora Leste field, and the Wahoo project were provided.
- The company is exploring new M&A opportunities in Brazil and the Gulf of Mexico.
Bearish Highlights
- The company is currently waiting for IBAMA's approval to proceed with the Wahoo field's final mobilization and drilling activities.
- Licensing processes for new wells at Wahoo, Albacora, and TBMT are on hold due to IBAMA's paralysis.
- A compressor issue at the Frade field led to a decline in production to 30,000 barrels per day.
Bullish Highlights
- Prio remains confident in its ability to start production at the Wahoo field in August.
- The company has a comfortable liquidity position and a strong focus on ESG initiatives.
- There is an active business pipeline in the Gulf of Mexico, which aligns with Prio's expertise.
Misses
- Significant production increases are contingent upon obtaining environmental licenses, which are currently delayed.
- Without the necessary environmental licenses, only small production increments are expected at the Polvo field.
Q&A Highlights
- Prio addressed questions on royalties, special participation, trading expenses, and capital allocation.
- The company clarified that capital allocation decisions are based on the expectation of future M&A deals rather than a specific time frame.
- Management discussed the impact of a vessel contract and the potential changes in the order of operations for the Wahoo project.
Prio's fourth-quarter earnings call emphasized the company's record-breaking production and financial performance, while also acknowledging current challenges and future prospects. The company's commitment to environmental sustainability and community initiatives, alongside its strategic plans for asset development and potential mergers and acquisitions, positions Prio for continued growth. However, the progression of key projects, such as Wahoo, remains dependent on regulatory approvals, which are currently pending. The next earnings release call is expected to occur in two to three months, where further updates on the company's performance and operations will be provided.
Full transcript - None (PTRRY) Q4 2023:
Jose Costa: Everyone. Welcome to Prio's Fourth Quarter '23 Video Conference Call. I’m Jose Gustavo, IR and Treasury Manager. I'll be the host in this event. The presentation and comments on the results will be presented by the CEO, Roberto Monteiro; our CFO, Milton Rangel; and our COO Francisco Francilmar. After the company's results, that will be available during the Q&A session. [Operator Instructions] This event is being recorded and will be available on our IR website. This presentation contains information based on future estimates and forecasts based on assumptions adopted by the company which can therefore, change and should not be considered facts or be used as the basis for financial projections beyond the plans expressed by the company. Now, I'll turn the floor to Roberto Monteiro, our CEO.
Roberto Monteiro: Good morning, everyone. Welcome to the video conference call to discuss Prio's results. I'd like once again to start by thanking the Prio team who did an excellent work during the year with a lot of dedication, drive and determination. You are responsible for the 2023 results that we're going to be presenting in a minute. 2023 was a very good year. I'll start with the highlights for the period. And then, I will turn the floor to Francilmar to speak about the operations. But let me give you a summary of our story. The fourth quarter was the best in the company's history. We achieved an average daily production, a little over 100,000 barrels of oil, a record mark for the company. We posted a lifting cost that was low $6.8. We reduced our lifting cost quarter on quarter. The lifting cost now stands at $6.8 per barrel which is really in keeping with these 100,000 barrels produced daily. Another big star this quarter was Albacora Field which achieved an operating efficiency of 94% in December. Our plan since the start of operation at Albacora was to achieve levels close to 90%. So the month of December was really good. We actually exceeded our expectations a little. The field's trajectory was certainly a little different. We had some greater difficulties than initially planned or estimated. By the end of the year, at least was very similar in keeping with the plan. We also achieved an interesting mark in terms of carbon footprint which is perfectly in line with our increased operating efficiency and with our higher production. We reached 21 kilos of CO2 per barrel of oil equivalent in the year, down 20% over 2022. So when we say that our production strategy is very much linked to environmental responsibility. This is what we're talking about. This is the snapshot. We still have room to further improve our carbon footprint now with the start of new projects but I think this was a significant step. From the social standpoint, I would like to bring one specific project to be highlighted at this point which is Reacao [ph] offshore in partnership with Instituto Reacao [ph] and Todos na Luta which is a training program for people -- for technicians who can then start working in the offshore industry. We bring technicians who are not in the offshore industry and we train them and we provide a lot of training and these technicians can work in the offshore industry. We hire a good part of these candidates. And the other candidates that are not hired initially can be hired later or can be hired by other companies of the sector as well. So this is a program that we really like and that makes us very proud. All of that led to our financial earnings that you have all seen, i.e., in net revenue of $2.6 billion and EBITDA of $1.8 billion and a net income of $1.1 billion, all being record marks and representing significant increases over the year 2022. Well, I'm going to move on to Slide number 4 which graphically shows some of the things we've already talked about, production and lifting costs. But these 2 at the bottom which we always show, I believe, are the most interesting for us to consider at this moment. The first is our cash position. We ended the year with $482 million in cash that is excluding the shares we have in treasury. So this is actually company's cash. And we ended the year with a net debt over EBITDA ratio of 0.7x. Right after the acquisition of Albacora, you will recall which was in the first quarter of '23, our cash level was at $100 million and our debt level was 1.1x. But with the company's cash generation throughout the year, even with all the CapEx program implemented, we managed to get back to a super healthy cash level of $480 million and to this debt level of 0.7x. Will hand over to Francilmar and then I'll come back to talk a bit about ESG initiatives of the company and the next steps. Thank you. Francilmar?
Francisco Francilmar: Thank you, Roberto. Let's move on to the asset performance section on Slide 5. While we ended the year with a very good result for all the assets, stability in the operation and also achieving a well-controlled production cost which ended up giving us a lifting cost below $7. I'll go into a bit more detail later. But overall, we posted record figures in several areas and so we'll continue. Moving on to Slide number 6 to talk specifically about the lifting cost. This is a slide we've known for a long time. It's our great strength, i.e., controlling production costs. We continue with the strategy by working to increase production and reduce operating costs. This quarter, we managed to achieve a lifting cost of $6.8. We will continue to strive to maintain these overall figures. It may be that at some point, due to production issues or costs it may fluctuate a little but this is the great protection the company has to give us resilience and maintain growth. Moving on to Slide number 7. Let's talk specifically about the operating performance of Frade. Well, it's been a good quarter for Frade field. We've already managed to achieve a performance of 98% -- almost 99% operating efficiency. With a certain stability in production, all going well with no major -- no major events in this particular quarter. It was the year in which we delivered the second phase of the revitalization plan showing the potential of the asset and that it has been performing very well in parallel with a very large preparation in terms of the vessel, getting her ready to receive the production coming from Wahoo in 2024. On Slide 8, we'll go into a little more detail about the Frade Revitalization Plan. We conducted both waves. First and second phases. We drilled wells in various reservoirs put them into production and some into injection. The result is exceptional increased production a few times. We collected a lot of information. Here on the left, in this figure, we see that the lines in this polygon are the wells that are producing, all the production increase. These colored polygons here are the prospects we are evaluating for a new wave. This pink one is called Maracana was one that we tested throughout this year in 2023, confirming presence of oil. We already have a good understanding of the reservoir. And we are working on developing the best design in terms of flow, number of wells to get the best amount of oil out of the reservoir found. Other targets are being studied so that when the time comes in the future, we can test and evaluate these prospects. Moving on to Slide 9. We are going to talk a little more about Tubarao Martelo and Polvo wells and fields. This quarter has been one of stability with a very good operating efficiency. The vessel and the wells have also managed to achieve a level of stability within the standard that we like to work with without any major scares or problems. Stoppage here or there at a well where have an ESP pump but we were back up and running quickly. There was no work over involved, no major interruptions. What's important about Tubarao Martelo and Polvo Field is that especially Polvo at the end of the first quarter 24, we should start working on a drilling campaign there. We're going to test a couple of targets and then try to put a well into production to help with production and control the lifting cost and everything else. So I hope to bring you more news about this cluster in the next earnings call. On Slide 10, we are going to talk a little about the situation of Albacora Leste field. Well, the last quarter was the very best of the year. We see a growing improvement there, mastering some issues that were already there at the beginning of the year when we started operating in the field. We have been investing heavily in the reliability of the vessel, the quality of maintenance and operation. And we started to reap the rewards at the end of the year. In December, we achieved the best mark we've had to date an efficiency of around 94%. In terms of increasing production, we are working on preparing all the resources and materials. A lot of subsea equipment is being commissioned. There's a lot on the market in terms of installation which we are preparing to do. This should happen over the course of 2024. We already have a more robust plan for the second half of the year. Some things we're going to try to push forward to the end of the first half of the year but it's more likely to happen over the course of the second half. Now at the beginning of the year, mainly in February, we had some major onetime problems at Albacora field, mainly related to a turbine. We were still refurbishing the turbines and one of them failed. We had to carry out corrective maintenance which ended up penalizing the field's production a lot during this period. So once this is resolved, then we are in the final stages now. The field's production should return to a good level and we will continue to improve the quality of maintenance and reliability and then increase production. Moving on to Slide number 11. Let me give you an update on the Wahoo project. This is a project that is already in the execution phase. The manufacturing part is very advanced. I've been visiting some manufacturers, a lot of equipment is being delivered. It's already at a very advanced stage and the project is on schedule. As are the works on the Frade FPSO Valente which will receive the production coming from Wahoo. The point of attention today are really the environmental license due to this whole situation at the environmental agency, IBAMA, of the fact that they are paralyzed. We are waiting a bit for their definition. But in principle, today, all the information we have to provide is with the agency. And we are waiting to have some interaction and receive the final okay as soon as possible. On the execution side, the Hunter Queen drilling rig is ready at any time. When we receive a green line from IBAMA, we'll be able to proceed with the final mobilization in a few weeks and in no time at all, will start drilling. It is doing some ancillary services at Frade and Albacora Leste fields meeting the company's needs. At the same time, we are already mobilizing for pipeline. So all of this should happen over the next few months which poses a lot of challenges for us in terms of starting production. But we are sticking to the August schedule for starting production at Wahoo field. So that's the general update. Everything is progressing at the level of difficulty that we normally have. There's no such thing as an easy life for us but we remain confident that we will deliver yet another project on time and on budget. So moving on to Slide number 12. Let's go to a bit more detail about the reserves certification. When we ended the year with certification and a very good result, we produced around 32 million barrels. We had a decrease in reserves compared to 2023. And then with the work that was done throughout 2023. And here, I'll go into a little more detail. So the activity is ranging from all the sets of results that we had at Frade field, bringing the new wells online and putting them into production with a much higher result than previously estimated, adding projects to be developed, both Maracana and the region of that reservoir that has ODP4 and ODP5 producing and there's ODP6 even potential for something more. All of this has already been included as 1C. It is contingent because we just have to include it in the development plan but we already have, so to speak, real plans to drill and put these areas into production and they have been proven. So they were included here. So Frade really was the biggest contribution, adding 43 million barrels of 1P reserves considering ODP6 and Maracana as 1C. Wahoo remained the same; there were no major changes, the same schedule as before. At the Polvo Tubarao cluster, some things were brought forward. The start of production was scheduled for 2025 and we brought forward the start of production of 1 well. We can drill a little more than that but the start of production of 1 well is included. In Albacora Leste, we just made an adjustment according to the work plan which moved the sequence of wells a little here, a little there. In the overall summary here, the increase in reserves was the result of the drilling and revitalization campaign carried out in Frade field which shows the potential for creating value when we managed to carry out these revitalizations or explore what we have within the block within the field. So this makes us confident in terms of what we've been doing at Frade. Albacora Leste has enormous potential going forward. Tubarao and Polvo are really at a very different level, much lower but it gives the company a lot of confidence to continue working and mastering the expertise of revitalizing these mature fields even more. Well, as a result, reserves rose by almost 10%. We went from 515 million barrels of production to 559 million barrels, placing the company at a very good level in leaving, shall we say, a very big job ahead of the operations area in the coming years. So this concludes my participation. I'll give the floor to my friend, Milton.
Milton Rangel: Thank you, Francilmar. Good morning, everyone. So moving on with the presentation on Slide 13, where we're going to talk about Prio's financial performance and a few more details about the company's capital structure and other financial factors. Well, the year 2023 was greatly impacted by the growth in Prio's production which led to an increase in sales. So if you think about sales, we just sold over 12 million barrels in 2022 compared to just over 32 million in 2023. This increase in 2023 is largely justified by the success of the second phase of the Frade revitalization campaign which were significantly increasing the field's production and also by the entry of Albacora Leste, as was mentioned before at the end of January. So this more than offset the reduction in Brent seen from 2022 to '23. The average Brent in '22 was close to $100. It was around $99, while in 2023, the average Brent was $82. But well, we saw an increase of around 110% in total revenue from $1.250 billion to $2.620 billion. And net revenue FOB, free on board, already deducting taxes and marketing expenses of $2.4 billion, an increase of 94%, while our costs or our cost of goods sold were up by 43%. Therefore, it's interesting to note that the company's strategy of gaining synergy, increasing production while maintaining the cost structure or increasing this structure less than the increase in sales is what allows to maintain our margins or preserve the margins even in a scenario of a drop in the average Brent which is what we see here in this result. With this, EBITDA was $1.8 billion in 2023 compared to $927 million in 2022, up 95% with a margin of 75%, super strong. Also, with significant increases in depreciation and amortization, mainly due to the entry of Albacora Leste and with this, net income stood at $1.86 billion compared to $711 million which means up 53%. Now continuing here on Slide 14, we'll talk about Prio's funding. We have here 3 major groups of debt in our balance sheet. This one in light green represents working capital debts, bilateral debts with relationship banks of more than $500 million -- $511 million between '24 and '25. In 2026, we have this tower of $600 million [ph]; that corresponds to our bond issued in 2021, a 5-year debt. In 2027 and onwards, we have local debentures that we issued in August 22 and swapped to dollars. With this, we've completed our amortization schedule by the end of 2023. We are always on the lookout for rollover opportunities, opportunities to optimize this amortization schedule. And it's also important here to point out that already in this picture showing the end of 2023, we are very comfortable from the point of view of leverage, from the point of view of liquidity in order to honor these commitments. But we still remain very attentive to opportunities. We recently captured an opportunity but we will disclose all the details at the end of the first quarter of '24, a new local debenture in which we raised BRL2 billion. And this brings even more comfort to our liquidity situation and firepower to seize new opportunities. And we can see here on the left-hand side of the slide a duration of 2.33 years at an average cost of debt of around 6% which is super adequate for a company of our size, even more so considering the recent increases in interest rates in the U.S. and in the more developed markets which end up impacting the local market, especially the borrower of debt denominated in U.S. dollars. Well, now on Slide 15. We are going to talk about cash flow in the quarter from the perspective of net debt. We started the fourth quarter or ended the third quarter of '23 with a net debt of $1.237 billion and then we had operating cash flow represented by EBITDA with working capital adjustment of $462 million plus $16 million. We had a one-off effect of M&A due to the sale of Manati, an inflow of $17 million related to the sale. And in regards to cash expenditure, we also had a one-off event related to dividends and we also carried out some share buybacks, all totaling $28 million. There was a significant CapEx corresponding to Wahoo's expenses which are basically the most significant expenses in the quarter related to Wahoo, Wahoo's tie back with the FPSO Frade, followed by investments in integrity in the Albacora Leste Field and also some expenses related to Frade's revitalization campaign. As for the financial results, this basically reflects quarterly interest on our debt position and tax payments, totaling $32 million. And with that as our operating cash generation is very strong, it more than offset these cash expenditures and our net debt fell to $1.45 billion at the end of the year. Continuing now; moving to Slide 16. This photo shows the evolution of Prio's leverage. And what is very important for us to note is that since the first quarter of '23, when we concluded the acquisition of Albacora Leste, we had, in fact, a significant cash outflow for that acquisition. And then we started to have a positive leverage of around 1x or 1.1x. And over the quarters, with the company's operating cash generation despite the CapEx, we have managed to reduce this leverage to 0.7x at the end of the year in the fourth quarter of '23. I think this is a very interesting and very good picture because it shows that the company has low leverage. It is prepared if necessary. And in case there is an opportunity to make new investments or even to accommodate more debt if necessary. So we find ourselves in a very comfortable situation of generating operating cash, reducing leverage and contributing to a very interesting profile for taking advantage of future opportunities. With that, I'll hand over to Roberto, who will talk a little bit about ESG and Prio's next steps. Thank you and have a good day.
Roberto Monteiro: Thank you, Milton. Well, I will briefly go through a slide on the environment and society. And we've already talked a bit about reducing emissions. As we said, we reduced CO2 emissions to 21 kilos per barrel of oil equivalent, a 20% improvement. Throughout the fourth quarter, we carried out a major safety campaign, cluster safety and so on to share best safety practices, increase our safety, increase reliability, increase performance in the company's operations. Now with regard to health and well-being, we remain very focused on our activities for our employees, for the well-being of our employees. And this involves trekking, outdoor yoga, yoga here in our offices, street running, pottery classes, soccer, jujitsu, working out or you name it. Even psychological support too and often nutritional support and so on. So this has always been a pillar of our culture in relation to people and we continue to support it. Now in terms of sponsorships, this year we launched a logo called I Love Prio which actually symbolizes the love we have for all communities, all the places where we operate. We bring this I Love Prio as a form of sponsorship. And we used that last year, the Blue & Jazz Festival, there is theater plays and winter festival. And we've also put I Love Prio in a theater here in Rio de Janeiro which puts on various performances. This month, in fact, there are several places with women as a tribute to Women's Day and Women's Month in March. Now I'll move to the next slide, Slide 18. And the next steps, they're always very similar aren't they? A continuous focus on safety, a continuous focus on the safety and health of our employees and our third parties as well. For this quarter, I mean, the first quarter, in particular, Wahoo's environmental license, as you all know, the license depends on the environmental agency which in any case, we've been struggling. There have been some setbacks due to the time that the agency has been paralyzed. And I know that this is a discussion that doesn't concern us but the outcome of it does concern us. So we are hoping that it comes to an end soon and then we can start investing. It's a project that will generate $90 million a year in royalties. It's a project that, in short, it's all being carried out within world standards and so on. But in short, we have to wait for the license. We will continue to focus very strongly on the operating efficiency of Albacora Leste. Although we had a great month in December, we still have a lot of work ahead of us. So that this asset can not only show good results but can show good results regularly. This is a big point for us. And this year, we are also going to define and limit the Albacora Leste revitalization campaign. We are receiving the seismic data that we bought last year, including their processing -- their reprocessing so that our geology and reservoir engineering teams which are the 2 teams that define -- I mean, almost define 100% of our expansion. So that these teams can show the way to revitalize the field. And we will continue, as always, very attentive to new M&A opportunities, certainly always within the expected returns. And we've been very vocal about areas here in Brazil. Also, there is some curiosity also starting to appear in the Gulf of Mexico. Thank you very much. Thank you to the society which always welcomes us with great affection. Thank you to investors. And once again, thank you and congratulations to the Prio team. With that, I would like to open for questions.
A - Jose Costa: Good day, everyone. Welcome to the Q&A session regarding fourth quarter and full year 2023 results. We'll now start the Q&A session. First question from Pedro Soares with BTG. Go ahead, Pedro.
Pedro Soares: Hello, everyone. I have 2 questions. So first, I'd like to discuss royalties. I think that looking at your numbers, it seems that a good part of the increase was explained by a more significant growth of what we call special participation or production tax. Could you elaborate on how you calculate that given that production at least in the quarter-on-quarter comparison of production was not great and the price variation was not that great? So how could we explain this growth in production tax? Is it because there was greater profitability of the field perhaps you crossed a certain threshold, that would be helpful. And if you could make some comments regarding the G&A increase. How should we think about that line item in the coming quarters? Second question is about the commercial strategy of the company. We saw that there was an increase in trading expenditures versus prior quarters. But even excluding these trading expenses, it seems the discount has increased. Does this reflect a more specific dynamic of the market now? Perhaps these trading expenses per barrel will normalize over the next few quarters? Could you comment on that?
Roberto Monteiro: Well, let's begin with royalties and special participation. Well, the royalties increase has to do with the special participation of Frade field and a little of Albacora field. There is a rule to calculate the special participation. There is a threshold of production close to 30,000 barrels a day. If you produce greater than 30,000 barrels daily, you pay a production tax, what we call special participation. In the case of Frade, there is an effect that production has been increasing. And we have now a full quarter, so perhaps that's why we have a higher number. But the calculation formula -- it's kind of similar to income tax. You have revenues realized in the quarter and there are the costs referring to the field. There are some investment installments that you can deduct from that field and so on and so forth. So in Q3 at Frade field when we look from the standpoint of investments, special participation was higher because we were more efficient. We drilled less in Q4 than in Q3. So you built the profit for the field. When I mean -- when I say the profit, the profit is calculated in a different way the investment is made in a slightly different way. So we had more profit for the same production and special participation is calculated based on this result. This explains the special participation or production tax that, if I'm not mistaken, was close to 3% of total revenue. So as if we paid royalties of 10% plus 3% [ph] special participation. But that's not calculated. There is an ANP rule that I suggest that you read. But we can share it with you as well which is the formula to calculate all this. To speak about trading discounts, I saw that there was a lot of confusion regarding that. And in most of the cases, the analysis is wrong regarding the offtakes discount. So let me explain and I'm going to get technical here but I hope it is important. And for future quarters, I've talked with my people, we are going to have a greater breakdown in the accounting and we'll add an explanatory note regarding that. But let's go. The way in which we look at discount is in Q4, we sold 8.5 million barrels, approximately, 8.4 million of this volume. Around 3.6 million or 3.7 million were priced in the month of December, where the Brent average was $77 a barrel. 400,000 barrels were priced in October, where the Brent average was $82 -- actually, not in October, in November, where the Brent average was $82. In October, unfortunately, we didn't sell anything and it was -- the Brent average was $88. The rest, 2 million were priced in January and 2 million were priced in February. So what we have to look at, Brent, when we compare it, we have to have a weighted average of the Brent and not the average of the Brent for the quarter. But the efficiency of offtakes has to be compared with a weighted average of the Brent considering the prices I gave you. We close our accounting sometime in January. So the reference price of the Brent that we use to provision revenue was $77 per barrel. So actually, you have to have a weighted average of $82 per barrel in November, $77 in December, $77 in January and in February. That's what we had to use to close our accounting. So this is a weighted average of the Brent. According to our calculations, the average is around $77 per barrel, a little over $77 per barrel. It's not even $78. And you have to compare with FOB divided by the number of barrels. And in the FOB equivalent revenue have to exclude $3 million and you have to exclude also adjustments for the prior quarter -- in the prior quarter. We had some offtakes priced in October. So the same thing happened since October, the higher was -- the number was higher, it brings the revenue up. In this quarter, again, we are going to change the revenue up a little bit because we priced at an average of $77 and the price is higher. To get the FOB revenue, you exclude these effects and you divide by 8.5 million barrels that will give us $73 per barrel, $73 and some cents. And this delta is exactly in line with what we've been saying about the commercial discount, the trading discount. We always say that it was around $4 per barrel. So what is the problem of using trading expenses? Total revenue. When we look at total revenue, it's all about what refineries pay in China, in Europe, wherever they are. Oftentimes, the refinery pays the Brent price and a little more. Let me give you a classical example. The refinery is going to pay Brent plus $2 [ph]. The cost we are going to have to ship to China, for example, can reach $6 per barrel. So actually, what we see is, although the refinery paid Brent price plus $2 [ph], what we see in FOB is Brent minus $4 [ph]. That's why you cannot use trading cost because if you use trading or commercialization cost to say, you spend $6 [ph] you have to spend $6 [ph] but the base is not Brent, it is Brent plus $2 [ph] or Brent plus $1 [ph]. It really depends on what's happening at that moment. The only way we can do an analysis of the trading cost and I saw that a number of people spoke about the trading cost or commercialization costs. The only way to use at the weighted average of Brent weighted by volume when compared to our FOB revenue also adjusted for these little effects. I know that this was not clear in our release, I know this was not clear in our income statement but we will include an explanatory note in the income statement as of the next quarter. I've spoken with Milton about this, so that you can have an idea of the effective efficiency of our trading company. Today, we are trading at about $4 of discount compared to Brent and I continue to say, I think the trading area was a big win in 2023. They did a very good job. We were unfortunate if we can say so, of having concentrating 4 million of the 8.4 million, 4 million were concentrated in December. And the remaining 4 million in January and February. January and February are performing better than in December. But in terms of the accounting, we had to use a Brent of $77. So in Q1, we are also going to have a positive review up in Q1 '24. So I'm sorry for the long answer but I guess that, that will answer a lot of questions regarding that because the analysis is done just considering trading expenses is the wrong one; it doesn't work.
Jose Costa: Next question from Bruno Montanari with Morgan Stanley.
Bruno Montanari: I have to two. Speaking a little about Wahoo; we understand that the environmental license is an issue that is not the hands -- under the control of the company. But I'd like to understand what would be Plan b or even Plan C if the situation at the environmental agency, IBAMA, drags on and it will impact the vessel that was contracted? That's number one. Second question is about capital allocation. It is very clear what the company's priority is, to grow perhaps to find acquisitions that make sense from the standpoint of return on investment. But I'd like to understand a little more the timing. To what extent does it make sense to hold on to the cash generation -- generated for a little longer and have a capital structure which is less efficient? And perhaps you could elaborate on what is attractive to you in the Gulf of Mexico? In terms of asset, the configuration. It will be interesting to understand what you're thinking.
Roberto Monteiro: Let me answer the first two regarding capital allocation. And then I'll let Francilmar speak about Wahoo. But let me -- just want to say one thing about Wahoo. The month of March will be very important to us. Today and Emiliano can speak about deadlines from IBAMA, what he's seeing in terms of developments at IBAMA. But the month of March is very important to us. Today, if IBAMA unlocks the licenses, we would have very few adaptations to make. If this drags on beyond March, then we'll have to start working on other plans but Francilmar will speak a little more about this. Now let me speak about capital allocation which was your second question. When you ask about the time frame we need to decide whether it makes sense to hold on to our cash. Well, I don't think about a time frame. I see this in terms of what is our M&A expectation looking forward? There are M&A deals that take longer and some that take less. Take Albacora, for instance. We started working with Petrobras in '20 -- I think it was back in 2020, at the end of 2020, it was COVID year and we spent the money in January of '23. That process specifically was very public knowledge. Everyone knew that the auction was going on that the process was unfolding. But imagine if this was not public knowledge, we would not have been able to pay dividends. It would have been a mistake to pay dividends. We didn't have the money to pay dividends. But no one questioned that because it was a public process -- public knowledge process. So it's not about the time frame. It's all about our expectation, our genuine expectation regarding M&A deals. I believe that today, we don't have any visibility regarding M&As and deals that will start in the short term. That's when we will have a dividend payout or depending on our cash generation, if we think we cannot allocate all that capital, we'll have a payout. But it's hard to say here to tell you a rule and a time frame. As I have spoken to many of you before, we and I in particular, in Nielsen [ph] really follows me. He's with me, he's the Chairman of the Board, who spent Q4 traveling everywhere, trying to understand possible M&A opportunities, M&A agendas and so on and so forth. That's why we believe we'll have to hold on to the cash flow a little bit. As for the Gulf of Mexico, what is attractive to us that we have to have the same return on investment of 20% full stop, nothing different than that. The jurisdiction seems attractive. I don't want to say it's simple, I don't want to be too simplistic but it's a very stable jurisdiction. And obviously there, what we've been seeing there for a long time is the deal flow of business pipeline that is a lot more active than in Brazil. In Brazil, there are some one-off opportunities. We've spoken about a number of them. But in the Gulf of Mexico, there is a much more intense pipeline. There's a lot more business pipeline but it's all about the return on the investment. There's no business without an adequate return, oh, it's the United States and then you have to have a lower return on investment. We don't agree with that. We have to have the same return on investment, the return for the activity, whatever the jurisdiction. And from the operational and technical point in deep waters of the Gulf of Mexico, we see an operation similar to us near field exploration, tiebacks. So it's exactly what we do. A lot of companies there are used to doing that but it's more of the same. And that's why we kind of like it. Francilmar, perhaps you could speak about Wahoo plan in more detail?
Francisco Francilmar: Bruno, we obviously have been working with many plans, A, B, C, D. But today, what's on the table is, of course, if everything goes well now in the short term in March, there is no great loss for the business. After that, even in negotiation with McDermott, the company providing the vessel for pipe laying, there is a project that will start after hours in Africa. The vessel just has to cross the Atlantic Ocean. So we kind of spoke about this possibility of reversing the order. The vessel will go to Africa and then come back to Brazil. So we would push that forward -- push the project forward to September. So it's not what we want but it is a possibility if the IBAMA issue continues. And there are a number of other opportunities that are possible many options but we'll never sit still. We have plans A, B and C in house and ready.
Jose Costa: Our next question from Luiz Carvalho from UBS.
Luiz Carvalho: But if I could go back to the subject of capital allocation and Milton talked about issuing debentures in 2022. And you also talked about a positive approach towards M&A. Do you think we could see that debenture more like a debt management thing or maybe something more related to that positive view towards M&A so that you could have better firepower in this regard? The second question is about Albacora Leste. We've seen the reserves certification report that you published. And I only want to understand on the operating side, what could we expect for 2024 in regards to production? If you could give me a little bit more light, I would appreciate it.
Roberto Monteiro: Thank you, Luiz. This debenture it could be one thing but it could also be another thing, in fact. We have almost $300 million maturing this year. Is that $300 million or $400 million? $250 million maturing this year in bilateral banking lines, facilities. And because of our low leverage, we always have the possibility of rolling over the debt. We always have the possibility of rolling over the debt. But 2 billion -- but they were 2 billion barrel. So $400 million. So as part of that, $250 million could very well go to pay for our bank debt. And so this will be at management. So the average duration is close to 7 years or similar to a 7 year onboard at [indiscernible]; and this was very good because this places our debt curve at a good price; so that's it. But in the case of an M&A, this $250 million could be rolled over, meaning that we could extend our debt and then that -- those $400 million could be totally earmarked for M&A. So the most important thing for us is whatever makes sense in terms of fees and duration, we have a bond abroad [ph] that matures in 2026. So probably in the future, we could also have another issue with a 7 year maturity but it's also subject to cost. And I think that this just places in a different point in that curve. Now I'll turn over to Francilmar because he can tell you a bit more about production in Albacora and what we have in mind. I think so it's important that Francilmar comments on that.
Francisco Francilmar: Well, to give you a little bit more light, Albacora Leste, in terms of the operations of the company, we are focusing on Wahoo. We have a rig. So all of the Wahoo wells are already scheduled. So all we have to do is Albacora Leste. The reserves they are in line with our production plan. This year, there will be many workovers in the schedule, both in terms of subsea, I mean, replacement lines, pipe laying and then work over wells, things that have a problem and then we will start drilling of the new wells. So, the year -- I mean the schedule for the year is quite full. In terms of production, when we look at the equipment that need repair, I think at the end of the year, we should come up with about 40; so that's it on average.
Luiz Carvalho: Well, if you allow me a follow up question, about IBV, if there is any update? And 40,000 -- 40,000 total is not net; it would be -- net would be close to 35,000 [ph] I think.
Roberto Monteiro: IBV, I think there was -- we received a notice from the arbitration chamber. And I think on February 22 and I think they informed that they received from the arbitration court, the minutes of their decision. But this has to go through an internal review. Therefore, we have to wait a little while until a final opinion is awarded. Therefore, it's difficult for us to say that given the fact that the decision is ready now. So -- in summary, I mean the decision has been made. The arbitration award is already in place. We don't know which one it is, nobody knows what that award is but they reached the decision on February 23. They already notified us. But again, we do not know what the decision is. But we anticipate, we estimate that in the short term, it will be communicated to us. So I would say, more or less at the end of March or close to that. And I think that's when we will know. I mean, there is a great chance that we will get there very soon, maybe by the end of March or maybe early April.
Jose Costa: Our next question comes from Gabriel Barra from Citi.
Gabriel Barra: I have two questions. The first, I mean, looking at the report on reserves certification, you just updated the numbers for Albacora in relation to that. But I would like to mention two things. First of all, what is your estimate for every well? I just want to get some more details about that case. If you could share with us, it will be quite useful. In addition, when it comes to Hunter Queen in the support vessel. How do you see that in terms of CapEx? I think it's a higher CapEx, considering that you already have the rig, it seems like you do not see that as OpEx. I don't know whether my reading is correct so that I can make some adjustment to my numbers. And the second point is about Wahoo. About Plan B or C. These B and C fields, do you also anticipate changing the design or even changing that to a flexible? Would it be too absurd to think that way? I just want to know how much -- I mean, what is the status of the project?
Roberto Monteiro: Thank you. I'm going to just answer that but please correct me if I'm wrong. And then my colleagues [indiscernible] is a negotiation and this negotiation is quite advanced. The target participations, the TPs, the way we call it, should start 70% PetroRio and 30% is the Roncador Consortium. Today, what we have are 3 wells already identified with a production of 8,000 barrels per well. Well, you also asked about CapEx. We do have the rig, we have the vessel but what is included in the consortium price is the market price of the business. So we check prices. We run a quote and that's what is included in the amount. In the case of Petrobras, more specifically, in the cost of CapEx, maybe there would be a lump sum and this is what we are currently negotiating with them but this will take into account a rig within normal price markets. So the fact that we already own the rig. In fact, when you put this rig in a different consortium, where you have a partner, the rig is calculated according to market prices. So this is how it works. The other question was about Albacora Leste. Let me just give you some more color. Another element we utilize is that we have our basic work and then we have Hunter Queen. But in every project we do, we have a very conservative side of market value. This is when we can use the resources of an additional market. And then we don't place prices down and then we higher up the prices. In terms of Wahoo, technically speaking, we could also do launch some flexible lines. But in practical terms, that's not possible because we already have the rigid line in place. And this entire line is already in our inventory. So what we have to do today is just to move forward with that rigid line. Well, in practical terms to help you understand, the project is ready. The line is [indiscernible] lines are ready, the new office et cetera. But what we need is to have the pipe-laying vessel. But we -- that vessel works all over the world. So it's just a matter of operating window. So if we're doing the pipelining from June to September or from September to October or here or there, it depends on that window but it will happen. We understand that you're all very anxious and we are anxious as well. But we just have to be very calm right now and just wait to see what will happen in terms of the environmental license. And on top of that, we will just make our decision based on different possibilities and hypothesis. But we just have to wait for the final decision until we can act in a more assertive way. So just to conclude, when we look at the reserves certification, if we were to use Hunter Queen, I think you will have to work with a much lower CapEx net for PetroRio. So I would say that in terms of cost recognition, if you had to hire according to market prices, it wouldn't be a lot lower but it is lower, okay?
Jose Costa: Vicente Falanga with Bradesco.
Vicente Falanga: I had two questions about Frade field. When we look at daily production, indeed, Frade is back about 50,000 barrels daily, have to drop in to about 30,000 given the issue with the compressor. So I'd like to understand, do you expect to remain at 50,000, because right before the problem, we had hit a 60,000 number. So I'd like to understand what Francilmar is thinking about this. And my second question about Frade. When do you pretend to submit a development plan to ANP? Do you have to wait for more drilling? Or can you submit it straightaway to include in the reserves for next year?
Roberto Monteiro: Vicente, well, Frade production might have reached 60,000 in 1 day but we were more at 55,000. We were more at this level of 55,000. So oil fields decline. We have to keep that in mind. 50,000 is not so normal either because after we had a whole of the wells operational again after the problem with the gas compressor. One of the wells had their problem in the valve that regulates the amount of gas injected in the well. And so we're working on that valve. Unfortunately, we don't know whether this valve will need to be replaced if we need to replace it. We'll need a vessel for that. We have to, we can do that kind of work. One of them is Gemini. Actually, he corrects himself Genesys [ph] that has not arrived deal. And the other one is a vessel allocated to do some kind of work. We might have to replace the valve later. But if we solve the problem, production will be back. There's a little bit of Frade field, a little bit of production that will return. But you shouldn't expect 60,000. But when we stopped, we were at a level close to 55,000. I don't know whether we will continue at 55,000. There might be some decline but there's also a delta to be captured at Frade field. Regarding the reserves certification, we can prepare a plan at any time. But what's considered 1C, what is contingent? Do you want to answer that, Francilmar?
Francisco Francilmar: Okay. Well, during the year, we'll make some adjustments. Some things that are as 1C are not a problem. We will certainly review this next year. And there is -- this was something else because we're carrying out a lot of studies we divided by assets, by field. Our team is working on other prospects that are not mature yet. So during 2024, we want to have this third phase with more things, not just 2 wells, more things. Our development plan at Frade does not include any extra wells. And what we have is 1C. We're being very conservative about Maracana. That one on top of Maracana that was renamed Bertioga [ph], is not included. And there is also ODP6 well in that same reservoir where we drilled ODP4 and ODP5. But since our development plan doesn't have anything included regarding that, it's technicality. But we just want to be very conservative. We wanted to do this in this way to maintain a pattern similar to what we had in Wahoo, Wahoo was 1C. Remember, because we didn't have the declaration of commerciality. We haven't submitted a development plan. So same thing here. We'll have the development plan. Once we do that, these will be included as reserves. And that's why during the presentation, we were very comfortable to add 1B with 1C reserves. There are no difficult contingencies. It's just a technicality.
Jose Costa: Next question by Bruno Amorim with Goldman Sachs.
Bruno Amorim: I would like you to comment if you can, what we can expect in terms of growth for the company in the coming months. In a scenario where Wahoo license is delayed and it does not unlock the other request for license, Albacora is running at a relatively high level. So it seems the low hanging fruits have already been collected. So I'd like to know from you what happens if there is more delay in Wahoo environmental license and the implications of that for the other assets?
Roberto Monteiro: I'm not sure I understood your question. You want to know how the company will grow if we don't have the environmental license for Wahoo or...
Bruno Amorim: In the next 6 months, if there is a delay for Wahoo, if there is any implication for the other assets, how much you can grow in the other assets?
Roberto Monteiro: Environmental license for Wahoo presets the environmental license for other areas. Well, the Wahoo project will bring us 40,000 barrels. After that, we need an environmental license for the basin which will include Albacora, it can include Frade, TBMT that's it. Today, we haven't got any environmental license, so we cannot increase production. We will have small increments, things that we can do at Polvo. We're going to be drilling 2 or 3 wells at Polvo field. We will have some workovers at Albacora field but all of that, best case scenario we'll maintain production at the current levels. There is no production increase. If we don't have more things operational. If we don't have more wells producing.
Bruno Amorim: Perfect. In the future wells, they can start production this year. Is it a fair statement to say this will only happen after the Wahoo license? Or can you obtain licenses for these fields -- for these wells before?
Roberto Monteiro: What wells are we talking about here Bruno?
Bruno Amorim: I'm talking generally, perhaps the conclusion that you can develop the other assets regardless of the licensing process for Wahoo. There are no other processes locked at IBAMA depending on Wahoo to be unlocked?
Roberto Monteiro: What you see, first, to drill new wells, the only license that the company has to drill new wells is the Polvo license. And Polvo will bring 1,500 or 2,000 barrels more. It's little things. It will not significantly increase the production of the company. And this is what we have. Regarding new wells, we need an environmental license for anything and everything we do regarding new wells at Wahoo, Albacora or TBMT. We need an environmental license. There's nothing locked up at IBAMA. What's happening is that IBAMA's not working now. It's paralyzed. There are no hurdles. We have to separate things. Our process for Wahoo unfolded. They got very close to the environmental license. And then, IBAMA stopped working. And that's where we are. But there is no hurdle that would make an environmental license impossible. When IBAMA resumes work when they stop their paralysis, they'll start granting the licenses for us, for all of the other companies. What can we do that does not require environmental license for these things that Francilmar mentioned. Workovers in the wells. So this does not increase production significantly but this will maintain production close to this level of 95,000 to 100,000. So we'll maintain production as is. These are workovers. Here's a well with a riser with a hole, of course, we cannot produce in that well. We have to exchange the riser and then put it back into production. You don't need a drilling license for that. The well is already drilled, we have an operating license for that and we can solve the problem. So it's really important to split these 2 things. Today, what we have in our hands are things that we can do to maintain production, to try to maintain production as long as possible close to the current levels. Now significantly increasing production will require an environmental license for Wahoo or for Albacora, it's all in the hands of IBAMA.
Jose Costa: I think these were all the questions we had. We now conclude the Q&A session for this earnings release call. And now I turn the floor back to Roberto for his final remarks.
Roberto Monteiro: Thank you all very much. Thank you for joining us today. It was a quarter that made us all very proud in terms of production, number of wells and all of the achievements. We are working diligently in Wahoo and Albacora. And I'll see you again in 2 months or 3 months in our next earnings release call. Thank you very much.
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