CORPORATE PRESENTATION NOVEMBER 2018

Transcription

1 CORPORATE PRESENTATION NOVEMBER 2018

2 DISCLAIMER This presentation contains forward-looking statements. All statements other than statements of historical fact contained in this presentation are forward-looking statements, including, without limitation, statements regarding our drilling and seismic plans, operating costs, acquisition of equipment, expectations of finding oil, the quality of oil we expect to produce and our other plans and objectives. Readers can identify many of these statements by looking for words such as expects, believe, hope and will and similar words or the negative thereof. Although management believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. By their nature, forward-looking statements require us to make assumptions and, accordingly, forward-looking statements are subject to inherent risks and uncertainties. We caution readers of this presentation not to place undue reliance on our forward-looking statements because a number 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 degree of 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 of equipment or processes; contractor or operator errors; non-performance by third-party contractors; labour disputes, disruptions or declines in productivity; increases in materials or labour costs; inability to attract sufficient labour; requirements for significant capital investment and maintenance expenses which PetroRio may not be able to finance; cost overruns and delays; exposure to fluctuations in currency and commodity prices; political and economic conditions in Brazil; complex laws that can affect the cost, manner or feasibility of doing business; environmental, safety and health regulation which may become stricter in the future and lead to an increase in liabilities and capital expenditures, including indemnity and penalties for environmental damage; early termination, non-renewal and other similar provisions in concession contracts; and competition. We caution that this list of factors is not exhaustive and that, when relying on forward-looking statements to make decisions, investors and others should also carefully consider other uncertainties and potential events. The forward-looking statements herein are made based on the assumption that our plans and operations will not 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 statements included in this presentation are made as of the date of this presentation. Except as required by applicable securities laws, we do not undertake to update such forwardlooking statements.

3 GROUP OVERVIEW Our strategy and results

4 EXECUTIVE SUMMARY One of the largest independent oil producers in Brazil Well positioned to attract capital (leverage potential; listed in BM&Fbovespa; Reporting Issuer in Canada) Financial Highlights 9M17 9M18 Experienced technical team - qualification as an A-Operator granted by ANP Successful track record in Polvo Field: can be replicated to new acquisitions PetroRio seeks to generate value in producing fields via cost reduction and operational efficiency Strong balance sheet with net cash position of BRL 530 million (3Q18) ASSETS Net Revenue BRL 340 million BRL 581 million Gross Profit BRL 108 million BRL 287 million EBITDA BRL 87 million BRL 192 million Net Income BRL 67 million BRL 144 million M&A S FZA-M-254 FZA-M-539 Field Stake Production POLVO 100% 10,218 bbl/d MANATI 10% 3,200 boe/d Manati FRADE* 18.26% 3,120 bbl/d Polvo Frade FZA-M % Exploration FZA-M % Development * Signed a Share Purchase Agreement on Oct-18 pending on precedente conditions 4

5 COMPANY DRIVERS All About People Meritocracy and Accountability Performance-based compensation Only top performers Growth Strategy Growth through acquisition of producing assets Development of current assets PROFIT ORIENTED SHAREHOLDER VALUE CREATION FINANCIAL DISCIPLINE Cost Reduction Measures Operational costs optimization Lean G&A and G&G overhead Safety and Environment World-class HSE practices High Operational Efficiency Process revision and enhancement Quick response to daily events 5

6 PETRORIO BUSINESS MODEL 1 COST REDUCTION 2 ENHANCED OIL RECOVERY 3 FOCUS Operational efficiency above 98% (industry benchmark) Significant cost reduction (60%) compared to previous Operator Lean overhead Polvo s Lifting Costs USD million % Meticulous reservoir management, greater stability and lower decline rates, extending useful life of the field Interventions and Drilling Polvo s estimated decommissioning BP D&M Assets seen as small by Majors receive special attention from PetroRio Operating leverage potential: Cost advantages and savings opportunities with new assets (BP) 2017 (PetroRio) D&M 2017 D&M

7 3Q18 HIGHLIGHTS Net Revenue of R$ million, highest quarterly Revenue in PetroRio's history Highest Operating Results in the Company's history: R$ million Adjusted EBITDA of R$ million for the quarter Net Income of R$ 71.4 million Lifting Cost in Polvo of US$ 26.6/bbl in the quarter (US$ 25.0 by August 2018) 7

8 POLVO FIELD (100% PETRORIO)

9 10,200 BARRELS PER DAY 98.1% OPERATIONAL EFFICIENCY 3 NEW WELLS DRILLING CAMPAIGN 2018

10 POLVO FIELD 100% PETRORIO OVERVIEW Campos Basin Polvo Field Close to Cabo Frio City Area: km² Shallow-water: m Exports destinations Reserves (2018) POLVO Proved (1P) Proved + Probable (2P) Proved + Probable + Possible (3P) OIL (million bbl) Source: D&M certification report July

11 POLVO PRODUCTION Average Daily Production and Operational Efficiency 11, , % 98.4% 99.1% 84.8% 98.8% 98.1% 100% 80% 7, , , ,040 7,654 7,365 6,153 33% 8,157 24% 10,081 60% 40% 1, % -1, Q17 2T17 3Q17 3T17 4Q17 4T17 1T18 1Q18 2Q18 2T18 3T18 3Q18 0% Average Daily Production (bbl/d) Operational Efficiency 11

12 POLVO FIELD: LIFTING COST VS. BRENT Brent x Lifting Cost* (USD/bbl) T16 2T16 3T16 4T16 1T17 2T17 3T17 4T17 1T18 2T18 3T18 Average Brent Price Lifting Cost *100% of the field (without depreciation, amortization and royalties) 12

13 REVITALIZATION (2018) DRILLING CAMPAIGN Production Areas km POL H Drilling: April/May Distance: 3.6km Carbonate POL Z Drilling: June/July Distance: 5.3km Sandstone Key Decomissioned Injector Producer Others/ n.a. New wells No Production Producing Production fields POLVO-A Reach Bathymetry POL M Drilling: August/September Distance: 5.5km Sandstone CAPEX US$ 42 MM 13

14 MANATI NATURAL GAS FIELD (10% PETRORIO)

15 Steady and predictable cash flow from take-or-pay contract with Petrobras Project EBITDA margin: ~70%

16 MANATI FIELD Natural Gas producing field Located in the Camamu-Almada basin, 65km from Salvador, BAHIA Proved reserves of 760 million m³ (net to Petrorio s 10% stake)* Potential upside reducing accrual for abandonment Volume 700, ,000 Manati - Gas production (m³/d) (Related to PetroRio s 10% W.I.) Manati - Produção de Gás (m3) Referentes à Participação de 10% da PetroRio no Consórcio +5.9% +5,9% +8.8% +8,8% 1Q18: 1T18: 38.5MM 38,5MMm³ m³ 2Q18: 40.7MM m³ 3Q18: 2T18: 40,7MM m³ 3T18: 44.3MM 44,3MM m³ m³ 500, , , , ,000 jan-18 fev-18 mar-18 abr-18 mai-18 jun-18 jul-18 ago-18 set-18 Jan/18 Feb/18 Mar/18 Apr/18 May/18 Jun/18 Jul/18 Aug/18 Sep/18 * D&M report February 23, 2018 Total Production 16

17 ASSETS IN FOZ OF AMAZONAS FZA-M-539 Natural Gas Discovery Two wells drilled Estimates of potential reserves of 18 billion cubic meters of natural gas with the possibility of expansion to 28 billion m³ Water Depth: 130m FZA-M-254 Oil asset Ongoing studies for potential assessment and drilling campaign 17

18 FRADE FIELD (18.26% PETRORIO)

19 FRADE FIELD Oil Field Located in Campos Basin Increases Company net production in approximately 25% of boepd, as well as 150% in oil reserves Distance from Polvo Field allows for short term synergies Subject to certain conditions precedent as well as internal and external approvals Working Working Interest Interest in in the the Frade Frade Concession Concession August Daily Production August Daily Production (in barrels of oil equivalente per day - Boepd) (in barrels of oil equivalent per day - Boepd) Petrobras 30.00% Frade Japão 18.26% Total Frade Total Field Frade Production Field Production 17,085 Chevron 51.74% Net Production (PetroRio %) Net Production (PetroRio 18.26%) 3,120-5,000 10,000 15,000 20,000 19

20 OIL & GAS INDUSTRY Impacted by oversupply, geopolitics, and advances in technology, the O&G industry is in constant motion

21 O&G INDUSTRY WORLDWIDE Oil prices have experienced a strong decline since 2014, impacted by the global economic slowdown and imbalance between supply and demand. The commodity gained strength in 2018 and estimates point to the long-term Brent above $65.00 Brent price (US$/bbl) Sep/17 to Sep/18 Average Brent 3Q18: US$ $90 $80 $70 $60 $50 $40 $30 $20 Sep-17 set-17 Oct-17 out-17 Nov-17 nov-17 Dec-17 dez-17 Jan-18 jan-18 Feb-18 fev-18 Mar-18 mar-18 Apr-18 abr-18 May-18 mai-18 Jun-18 jun-18 jul-18 Jul-18 ago-18 Aug-18 set-18 Sep-18 21

22 OIL PRODUCTION IN BRAZIL ANP National Oil Operators Ranking April 2018 OPERATOR PRODUCTION (bbl/d) Petrobras 2,419,056 94% Statoil Brasil O&G 61,382 Shell Brasil 40,846 Total E&P do Brasil 39,555 Chevron Frade 17,370 PetroRio O&G 7,167 Dommo Energia 6, % 4.05% 6% 3.92% 2.22% Maha Energy 1,429 SHB 1, % Petrosynergy 414 Partex Brasil % Nova Petróleo Rec 285 Petrogal Brasil % Source: ANP/SDP/SIGEP April/

23 READY FOR GROWTH Defined growth strategy, strong liquidity, a team prepared and motivated to achieve its goals

24 UNIQUE OPPORTUNITIES IN O&G MARKET Political and economic environment bring opportunities Companies reviewing their asset portfolios due to oil price decline since 2014 Brazil s political and economic crisis Shell-BG USD30 billion global divestment plan Petrobras divestment program Petrochemicals US$ 20 Bi Biofuels Gas Pipelines Distribution Foreign assets Strategic Partnerships 24

25 PETRORIO: POTENTIAL FOR VALUE CREATION A strong balance sheet, coupled with the skills and competitive advantages in a distressed business environment lead to M&A opportunities in the Oil and Gas industry in Brazil and abroad PETRORIO Current Business Environment Technical team with solid experience Profit oriented instead of production oriented Economy s slower growth cycle International competitors leaving Brazil Successful track record with offshore assets Bold growth plan: 100,000 bbl/d Petrobras Crisis + Asset Sales Lower oil prices WELL POSITIONED FOR GROWTH THROUGH M&A S 25

26 BEST LATIN AMERICAN E&P COMPANY PETRORIO AWARDED BY BRITISH MAGAZINE WORLD FINANCE watch?v=3u7-wsi0eje etrorio-flourishing-in-the-face-of-adversity PETRORIO RECEIVED THE AWARD OF BEST INDEPENDENT OIL AND GAS COMPANY IN THE CATEGORY "BEST E&P COMPANY, LATIN AMERICA" FOR THE SECOND YEAR IN A ROW. 26

27 PETRORIO: BRAZIL S LARGEST INDEPENDENT OIL PRODUCER Investor Relations ri@petroriosa.com.br (21)

28 ANNEX I: PRO FORMA INCOME STATEMENT In thousands of BRL unless otherwise stated R$ thousand Proforma Income Statement 9M18 9M17 D 3Q18 3Q17 D Revenues 581, , % 224, , % Cost of products/services (247,046) (199,099) -24.1% (76,608) (62,058) -23.4% Royalties (45,771) (33,054) -38.5% (17,911) (10,028) -78.6% Gross profit 288, , % 130,107 37, % G&A, G&G and Project expenses (77,292) (61,234) -26.2% (23,000) (15,090) -52.4% Other revenues/expenses (19,264) 40,582 n.a (15,906) (1,849) % EBITDA 191,814 87, % 91,202 20, % EBITDA Margin 33% 26% 7 p.p 41% 19% 22 p.p Adjusted EBITDA 211,078 46, % 107,108 22, % Adjusted EBITDA Margin 36.3% 13.8% 22.5 p.p 47.7% 20.8% 26.9 p.p Depreciation and amortization (67,151) (61,603) -9.0% (23,132) (21,313) -8.5% Financial results 45,812 46, % 29,143 14, % Income tax and social contribuition (25,763) (4,910) % (25,754) 2,664 n.a. Profit (loss) for the period 144,712 67, % 71,458 16, % 27

29 ANNEX II: BALANCE SHEET In thousands of BRL Assets Liabilities and shareholders' equity Current assets 31-dec sep-2018 Current liabilities 31-dec sep-2018 Cash and cash equivalents 92,445 28,160 Suppliers 70,535 92,833 Securities 511, ,935 Labor obligations 9,979 5,192 Restricted cash 17,965 - Taxes and social contributions 20,076 56,227 Accounts receivable 62,046 37,097 Loans and financing 75,011 - Oil inventories 41,174 79,501 Debentures 21, Consumable inventories - 2,314 Derivative financial instruments 7,129 4,781 Recoverable taxes 59,492 82,211 Advances from partners - 13,445 Advances to suppliers 28,781 34,684 Other liabilities 12,500 Advances to partners 3,639 3,178 Total current liabilities 216, ,249 Prepaid expenses 3,106 2,534 Other receivables 828 1,226 Non-current liabilities Total Current assets 821, ,840 Suppliers 13,456 13,161 Debentures 31,391 31,241 Non-current assets available for sale 28,316 27,467 Provision for abandonment (ARO) 74,119 91, , ,307 Provision for contingencies 15,120 14,882 Deferred taxes and social contribu 36,177 2,108 Non-current assets Others - - Advances to suppliers 12,596 12,596 Total non-current liabilities 170, ,872 Deposits and pledges 16,010 17,448 Recoverable taxes 51,669 36,135 Shareholders' equity Deferred taxes 18,480 12,438 Realized capital 3,265,256 3,273,114 Property, plant and equipment 61,286 60,338 Capital reserves 73,852 50,510 Intangible assets 260, ,504 Other comprehensive income 91,800 39,086 Total non-current assets 420, ,459 Accumulated losses (2,598,629) (2,547,777) Income (loss) for the period 50, ,712 Total shareholders equity 883, ,645 Total do Ativo 1,270,244 1,285,766 Total liabilities and shareholders e 1,270,244 1,285,766 28