Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- 3R Petroleum Oleo E Gas SA (BSP:RRRP3, Financial) achieved a substantial increase in production, averaging 46,600 barrels of oil equivalent daily in Q2 2024.
- The company reported a record net revenue of BRL2.6 billion, driven by increased production and favorable external factors.
- Adjusted EBITDA rose by 18% quarter-on-quarter to approximately BRL850 million, indicating strong financial performance.
- Free cash flow generation was robust at almost BRL600 million, supported by increased product sales and effective inventory management.
- The integration of Enauta and Maha was completed, positioning the company for significant scale and operational synergies.
Negative Points
- Production increase was only 5% over the previous quarter, indicating a slower growth rate compared to the year-on-year increase.
- Higher lifting costs at $22.6 per barrel of oil equivalent due to workovers and environmental license regularizations negatively impacted margins.
- The average selling price of oil decreased slightly to $76.8 per barrel, reflecting a discount compared to the average Brent price.
- The company faced operational challenges, including temporary limitations in water injection and maintenance activities affecting production.
- Legal and regulatory uncertainties persist, particularly regarding the compulsory assignment process and ongoing arbitration with a partner.
Q & A Highlights
Q: What is the company's plan for capital allocation and potential dividends?
A: The company has an increasing production level and a robust cash position. The Board will discuss capital allocation, focusing on both organic and inorganic growth, as well as dividend payouts. (Mauricio Diniz, Chief Exploration and Production Officer)
Q: Can you provide an update on the resumed negotiations with PGN and potential opportunities?
A: The resumed conversations with PGN are positive, and there are potential opportunities in mid-downstream partnerships. The company is also evaluating its upstream portfolio for potential sales or partnerships. (Rodrigo Pizarro Lavalle Da Silva, Chief Financial Officer and Investor Relations Officer)
Q: How was the performance of Papa-Terra in July, and what are the expectations for this field?
A: Production in July was between 16,000 and 18,000 barrels per day. After scheduled maintenance in August, production is expected to stabilize around 20,000 to 22,000 barrels per day. (Mauricio Diniz, Chief Exploration and Production Officer)
Q: Can you help reconcile the company's recurring cash generation?
A: The company had a better position in terms of inventory, cash flow, and working capital in Q2 compared to Q1. The recurring cash generation is expected to be around 80-90% of EBITDA, net of taxes. (Rodrigo Pizarro Lavalle Da Silva, Chief Financial Officer and Investor Relations Officer)
Q: What are the main risks and challenges with the integration of Enauta and Maha Energy?
A: The main challenges include portfolio assessment, integration of performance monitoring systems, and optimizing logistics and resources. The company is confident in its ability to integrate successfully due to its experienced team. (Rodrigo Pizarro Lavalle Da Silva, Chief Financial Officer and Investor Relations Officer)
Q: What were the effects that impacted production in the Potiguar cluster, and what should we expect in the short run?
A: Production was impacted by limitations in water injection and maintenance activities. The company expects production to increase as these issues are resolved. (Mauricio Diniz, Chief Exploration and Production Officer)
Q: What is the long-term production potential of Papa-Terra?
A: The potential is significant, with plans to drill new wells and increase production. The company expects to reach 20,000 to 23,000 barrels per day in the short term, with further increases in the long term. (Mauricio Diniz, Chief Exploration and Production Officer)
Q: What are the initiatives for financial gains and restructuring post-merger?
A: The company will focus on integrating performance monitoring systems, optimizing logistics, and capturing financial synergies. The goal is to realize most synergies within 12 to 24 months. (Rodrigo Pizarro Lavalle Da Silva, Chief Financial Officer and Investor Relations Officer)
Q: Can you provide an update on the arbitration process with INTE?
A: The arbitration process is expected to take about a year and a half. Meanwhile, the company is managing costs and revenues of the asset as per the joint operating agreement. (Rodrigo Pizarro Lavalle Da Silva, Chief Financial Officer and Investor Relations Officer)
Q: What is the status of the MOU with PetroChina and the potential partnership?
A: The MOU involves gas processing and treatment. The partnership is expected to be finalized within 45 to 60 days, focusing on operational and financial aspects. (Mauricio Diniz, Chief Exploration and Production Officer)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
