CORPORATE PRESENTATION AUGUST 2018

Transcription

1 CORPORATE PRESENTATION AUGUST 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) 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 cash position of BRL 722 million (2Q18) Financial Highlights 1H17 1H18 Net Revenues BRL 230 million BRL 356 million EBITDA BRL 66 million BRL 100 million Net Income BRL 51 million BRL 73 million Cash Position BRL 678 million BRL 722 million FZA-M-254 FZA-M-539 Manati ASSETS Field Stake Production POLVO 100% ~ 9,600 bbl/d MANATI 10% ~ 3,200 boe/d 460 Cash Position BRL million +39% Polvo FZA-M % Exploration FZA-M % Development Q18

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

6 PETRORIO BUSINESS MODEL 1 COST REDUCTION 2 ENHANCED OIL RECOVERY 3 FOCUS Increase in operational efficiency from 80% to 97.4% Significant cost reduction (60%) compared to previous Operator Meticulous reservoir management, greater stability and lower decline rates, extending lifespan of the field BP 2013 Estimated reserves million bbl Assets seen as small by Majors receive special attention from PetroRio Operating leverage potential: Cost advantages and savings opportunities with new assets Polvo s Lifting Costs USD million D&M x Lean overhead % D&M 2016 Polvo s estimated decommissioning (BP) 2017 (PetroRio) BP D&M D&M

7 2Q18 HIGHLIGHTS Net Revenue of R$ 239 million, highest quarterly Revenue in PetroRio's history Highest Operating Results in the Company's history: R$ million, up 132% over 2Q17 EBITDA of R$ 85.8 million for the quarter, up 30% over 2Q17 Net Income of R$ 70.6 million, 50% above 2Q17 Lifting Cost in Polvo of US$ 34.5/bbl in the quarter (US$ 27.8 by June 2018)

8 POLVO FIELD

9 9,600 BARRELS PER DAY 98.8% 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 (2017) POLVO Proved (1P) Proved + Probable (2P) Proved + Probable + Possible (3P) OIL (million bbl) Source: D&M certification report December 2017

11 POLVO PRODUCTION Average Daily Production and Operational Efficiency , % 93.0% 98.6% 98.3% 99.4% 100% , % 80% ,000 60% ,000 2, ,124 6,927 6,484 7,167 8,129 9,176 40% 20% 0 jan-18 feb-18 mar-18 apr-18 abr-18 mai-18 may jun-18 0% Average Daily Production (bbl/d) Operational Efficiency

12 POLVO FIELD: LIFTING COST VS. BRENT Brent x Lifting Cost* (USD/bbl) Resilient performance and actively responding to market environment Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Average Brent Price Lifting Cost *100% of the field (without depreciation, amortization and royalties)

13 REVITALIZATION (2016) ENHANCED OIL RECOVERY Estimated oil production curve (million bbl) Previous operator DeGolyer and MacNaughton 2015 DeGolyer and MacNaughton 2016 Expected production ( ) grew by five times Results ,0x 5.0x BP estimates 1P developed D&M 2015 D&M 2016 reserves New, high-quality reservoirs, mainly sandstone, were successfully accessed Production gains of 20% vs. previous estimate of 7.5kbbl/d Potential to extend field s lifespan in more than a year and proven reserves estimate in more than 1 million bbl Estimated savings of ~USD 1 million as a result of lower diesel consumption driven by the higher gas production Total investment of USD 17.9 million

14 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 Sanstone In Progress CAPEX estimated between US$ MM

15 MANATI NATURAL GAS FIELD

16 Stable and predictable cash flow from take-or-pay contract with Petrobras Project EBITDA margin: 70%

17 MANATI FIELD Natural Gas producing field Located in the Camamu-Almada basin, 65km from Salvador, BAHIA Proved reserves of 0.9 billion m³ (net to Petrorio s 10% stake)* Additional upsides with the development of Camarão Norte Manati - Gas production (m³/d) (Related to PetroRio s 10% W.I.) Volume 700, , Manati - Gas production (m3) (Related to PetroRio's 10% W.I.) 1Q18: 38.5MM m³ 2Q18: 40.7MM m³ 1Q18: 38.5MM m³ 2Q18: 40.7MM m³ 500, , , , , Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Total Production Daily Capacity (m³) * D&M report December 31, 2016

18 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 Phase of studies for potential assessment and well drilling scheduling

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

20 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) Jun/17 to Jun/18 $90 Average Brent 2Q18: US$ $80 $70 $60 $50 $40 $30 $20 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18

21 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 6,947 6% 0.24% 0.13% 0.24% 0.24% Maha Energy 1,429 SHB 1, % Petrosynergy 414 Partex Brasil % Nova Petróleo Rec 285 Petrogal Brasil % Source: ANP/SDP/SIGEP April/2018

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

23 UNIQUE OPPORTUNITIES IN O&G MARKET Political and economic environment bring opportunities O&G companies in financial distress due to oil price drop Brazil s political and economic crisis Shell-BG USD30 billion global divestment plan Petrobras divestment program Petrochemicals Biofuels Gas Pipelines US$ 13,6 B US$ 21 B Distribution Foreign assets Strategic Partnerships

24 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 Low oil prices WELL POSITIONED FOR GROWTH THROUGH M&A S

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

27 ANNEX I: PRO FORMA INCOME STATEMENT In thousands of BRL unless otherwise stated R$ thousand Proforma Income Statement 6M18 6M17 D 2Q18 2Q17 D Sales Volume - Oil (thousand bbl) 1,255 1, % % Sales Volume - Gas (thousand m³/d) 79,216 41, % 40,735 37, % Revenues 356, , % 239, , % Cost of products/services (170,803) (137,041) -24.6% (104,237) (89,442) -16.5% Royalties (27,494) (23,026) -19.4% (16,732) (15,029) -11.3% Gross profit 158,263 70, % 118,436 51, % G&A, G&G and Project expenses (54,291) (46,144) -17.7% (25,738) (27,285) 5.7% Other revenues/expenses (3,360) 42, % (6,893) 42, % EBITDA 100,612 66, % 85,805 66, % EBITDA Margin 28.2% 28.9% -0,7 p.p. 35.8% 42.5% -6,7 p.p. Adjusted EBITDA 103,972 24, % 92,698 23, % Adjusted EBITDA Margin 29.2% 10.5% 18,7 p.p. 38.7% 15.3% 23,4 p.p. Depreciation and amortization (44,018) (40,107) -9.8% (27,096) (27,391) 1.1% Financial results 16,670 32, % 12,177 10, % Income tax and social contribuition (10) (7,574) 99.9% (326) (2,270) 85.6% Profit (loss) for the period 73,254 51, % 70,560 47, %

28 ANNEX II: BALANCE SHEET In thousands of BRL Assets Liabilities and shareholders' equity Current assets 31-dec jun-2018 Current liabilities 31-dec jun-2018 Cash and cash equivalents 92,445 69,331 Suppliers 70,535 91,620 Securities 511, ,191 Labor obligations 9,979 7,996 Restricted cash 17,965 - Taxes and social contributions 20,076 32,505 Accounts receivable 62,046 88,073 Loans and financing 75, ,166 Oil inventories 41,174 47,596 Debentures 21, Recoverable taxes 59,492 63,079 Derivative financial instruments 7,129 6,445 Advances to suppliers 28,781 28,615 Advances from partners - 10,587 Advances to partners 3,639 3,089 Other liabilities 12, Prepaid expenses 3,106 2,598 Total current liabilities 216, ,923 Other receivables Total Current assets 821, ,554 Non-current liabilities Suppliers 13,456 13,161 Non-current assets available for sale 28,316 29,535 Debentures 31,391 31, , ,089 Provision for abandonment (ARO) 74,119 88,930 Provision for contingencies 15,120 17,486 Non-current assets Deferred taxes and social contributi 36,177 18,859 Advances to suppliers 12,596 12,596 Others - - Deposits and pledges 16,010 16,619 Total non-current liabilities 170, ,677 Recoverable taxes 51,669 57,390 Deferred taxes 18,480 17,692 Shareholders' equity Property, plant and equipment 61,286 60,786 Realized capital 3,265,256 3,273,114 Intangible assets 260, ,432 Capital reserves 73,852 49,067 Total non-current assets 420, ,515 Other comprehensive income 91,800 93,347 Accumulated losses (2,598,629) (2,547,778) Income (loss) for the period 50,851 73,254 Total shareholders equity 883, ,004 Total assets 1,270,244 1,459,604 Total liabilities and shareholders eq 1,270,244 1,459,604