Good afternoon, everyone. Welcome to PRIO's First quarter 2024 video conference call. I am José Gustavo, IR and Treasury Manager, and I will be your host. The presentation and comments on the results will be presented by our CEO Roberto Monteiro, CFO Milton Rangel, and our COO Francisco Francilmar. After the company's results, they will be available during the Q&A session. At this time, all participants are in listen-only mode. To ask questions live, you can use the Zoom Raise Hand feature or, for written questions, the Q&A button. This event is being recorded and will be available on our investor relations 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.
I'll turn the floor over to Roberto Monteiro, our CEO.
Good morning everyone and welcome to our earnings conference call for the First Quarter of 2024. As always, I'd like to start by thanking our employees for their hard work and resilience. It was not an easy quarter, as we'll explain in a moment, but in the end, we relied on everyone's drive, discipline, and resilience throughout these months. Well, talking a little about the quarter itself, although we posted the second-highest quarterly EBITDA in our history and a controlled lifting cost of around $7.5 per barrel, Q1 was a quarter in which, operationally speaking, we fell short of what we would have liked to have achieved at two important events, which Francilmar will detail a little later. But one of them was related to the gas lift at Frade Field, and the other was related to power generation at Albacora Field.
These two failures lasted throughout the month of February and a good part of March. Albacora, in particular, was only regularized in April. I n other words, they were long-lasting equipment failures that took long to be resolved, and that had an impact on our production. I think these two are the two most important points on the operational side. Another important item to be commented on during the quarter was the environmental license for the Wahoo project. Although we have already received the vast majority of the items for executing the project, all the equipment, practically, I'd say 80% of the equipment, has already been received.
So far, we haven't been able to obtain the environmental license due to the strike-like operation or the strike at IBAMA, the environmental agency that issues this license. Anyway, this has delayed things a bit. It delayed Wahoo's first oil. W e are ready. We continue to be prepared so that as soon as this is cleared, the project will get underway. S till, it's a delay that we had because of the spending item. I believe one positive item in the quarter, there were actually quite a few that I'm going to talk about now, but one positive item was the IBV arbitration process, which came to an end. We were successful in this arbitration.
The arbitration panel gave no merit to any of IBV's claims. Throughout this month of May, we are still in a period of stabilization of the decision from the point of view of requests for clarification and so on. We don't think there's anything more to come, but it was a positive development. We are still under what we call exclusive operations regime, under which we make 100% of the CapEx investment, and we're entitled to 100% of the oil produced. Of course, this will really be translated into the results once we have our environmental licensing completed and when we can effectively implement the project.
Moving on, there are two other items I'd like to comment on during the quarter. The first was the issuance of local debentures. We issued $600 million of local debentures. Of these $600 million, $400 million went to the company's cash in the first quarter of 2024. This meant that we ended the quarter with a cash of $800 million and a second tranche with an inflow of $200 million in the second quarter. A lthough we posted cash totaling $800 million in Q1, today our cash is already a little over $1 billion. Our debt has been falling. Net debt over EBITDA ratio, which is our level of indebtedness, has been falling consistently.
This net debt over EBITDA ratio now stands at 0.6 x. I think these are the main points to present and comment on in the first quarter, which was a little more rocky operationally. We produced 88,000 bbl, an average of 88.3, and a lifting cost of $7.5/ bbl, so a little below our expectations. The environmental licensing, which has already been widely publicized, the IBAMA issue, and so on. On the positive end, we have the issuance of debentures, the reduction in our level of debt, and the positive final decision in the arbitration with IBV. Well, I will now give the floor to Francilmar. He'll go into more detail on the operational side. Milton will then talk about the financials, and I'll come back in the end to talk a little about sustainability and the next steps. Thank you, Francilmar.
Thank you, Roberto. Hello, everyone. Let's continue on slide 5 about the performance of our assets. Well, this quarter was a little more challenging for us. We didn't have the startup of any new wells. The production development side is still working on planning and getting ready to execute, while the production part faced a setback and some obstacles throughout this quarter, which ended up having a negative impact on production. Overall, production was down 12%, very much affected by Frade. I'll explain it in more detail. Even so, we managed to reach a lifting cost of $7.5, showing the company's resilience and preparedness to keep costs in order even when there is an impact in terms of production. On slide 6, we have our lifting cost, and everyone must have heard of it in some way.
I think it's the most important indicator for the company, combined with safety, to maintain the company's growth in a sustainable, safe, and resilient way. 7.5 is a good number. We will make every effort to improve this even further. W ith the startup of new wells, new wells coming online, and in the development campaign moving forward, we will improve this. The cost is within what was expected and planned. There are no scares, nothing to worry about. Let's move on to slide number seven and talk in more detail about the assets. Frade Field, as I said before, was the one that was most affected, that suffered the most due to two major factors. One was maintenance and problems related to plant efficiency. We had a downtime in the compression system. A compressor had a problem there.
Then we ended up restricting the amount of gas used in the oil lifting process, and this took a big bite out of the field's efficiency. The issue was resolved. We have redundancy, and we have the compression system up and running, so it was a one-off issue. The other part was the decline of the wells. In the new wells that came online last year, starting in January, we began to notice a slightly greater decline, both in some reservoirs due to pressure and in other reservoirs due to an increase in water content. So wells that were producing practically 100% oil are now producing with 10, 15, 20% water, which is a natural process. There's a transition after the initial production plateau, and there's a natural settlement with a decline rate of around 8%-10% a year.
In our forecast, we expect this to settle down a little from now on. N o news for Frade. It is now about managing the field to achieve the best possible stability, efficiency, and safety in the field. Moving on to Tubarão Martelo and Polvo, TBMT, Polvo, we've had a very stable month and quarter with no major hiccups here in the asset. We reached 98% operating efficiency. We recently started a drilling campaign at Polvo. The aim here is to test a couple of reservoirs there, and then, depending on the economic feasibility, we'll put two producing wells. Whatever works, whatever is best. There are no great expectations here. It's more to offset the production decline rate in the field, so the next quarter should bring some news. Moving on to slide nine, I'm going to give you a general update on Albacora Leste Field.
It was also a challenging quarter in terms of maintenance and plant efficiency. We also had a problem related to the compression systems, some recurring compressor failures, and we have an entire compressor out doing major maintenance. Until it comes back online, we're a bit fragile, which is what we suffered this quarter. The system is functional now, but we won't be able to relax until the third compressor returns. It is undergoing a retrofit in a workshop on land. U ntil then, we are going to manage the field up close, so to speak, to have the most stability and best efficiency. W e believe that this quarter we'll see better conditions and more stability at Albacora Leste.
Apart from that, along this quarter, we've recently started to carry out a maintenance campaign on the subsea system, on the subsea installations, which was initially scheduled for the second half of the year. We're trying to bring it forward so that we can include and repair two wells that were stopped: two producers and two injectors. T hen, over the course of this month or next month, we can get these wells back into operation, which will improve and give us a better boost in Albacora Leste. T hese two actions: improving maintenance and getting these wells to produce and inject. This will give us an extra boost until we have an operational program for Albacora Leste ready so we can start operating. Moving on to slide 10, I'll give you a quick update on Wahoo.
Here, the main issue today is obtaining the environmental license for both drilling and the pipeline operation. We've been closely following the challenge it's been to obtain this. The agency is kind of paralyzed, so it's very difficult for things to happen. We are monitoring the process very closely. In the meantime, we are receiving the materials. Practically everything is ready in terms of the subsea equipment. Some things are still being done on the FPSO in line with what we need in terms of maintaining operating continuity, integrity. Everything is on track to be operational when we get the green light to start drilling, mobilizing, and installing the rigid pipeline that connects the fields. In addition to the first vessel option, we are already in negotiations with other alternatives.
If the time window we had before, until September, does not materialize, we already have alternatives A, B, and C for other boats that would serve us from September onwards. W e already have a plan B in place, and we can rest easy today. We just haven't signed the contract yet, but the time window has already been negotiated. We can't set a date for first oil yet at Wahoo. We were talking about August, but today we know that we won't be able to make that deadline. W e are moving forward so that as soon as this environmental licensing issue is resolved, we can move on to implement the project on site. Well, that concludes my participation. I'll turn the floor to Milton. Thank you.
Thank you, Francilmar. Good afternoon, everyone. We now get into the company's financial performance, starting on slide 11, where we're now. The first quarter of 2024, total revenue of almost $640 million, an equivalent FOB revenue Free On Board of almost $606 million. This translates into an amount sold of 7.5 million bbl of oil in this quarter. The benchmark Brent was around $85/bbl , and our equivalent selling FOB price was around $79.82 for this quarter. This means an improvement when compared to the first quarter of 2023. Despite the Brent of the first quarter of 2023, on average, being at $84, closer to the first quarter of 2024, we had an improvement in the commercial side, which is captured both in revenue and in the result of trading.
With that, we've reached an EBITDA of $467 million, a margin of 77%. This margin improvement is largely explained by the reduction in lifting cost when compared to the first quarter of 2023. Although it increased slightly compared to the end of last year, there was a relevant improvement when we compared to the first quarter of last year. I mprovement in lifting cost, improvement in commercial performance, although the Brent was stable, this helps us understand the improvement in this EBITDA margin. As a result, we also had an increase in depreciation and amortization expenses, largely justified by the entry of Albacora Leste, which in the first quarter of 2023 did not cover the entire quarter. W e also had an increase in Frade's production, which also pulls this depreciation a little more towards the current result.
Throughout 2023, we had an update on Frade's production that was higher than expected. W ith that, we've reached a net income of $224 million in the first quarter of 2024 compared to $231 million in the first quarter of 2023. Well, moving on to slide number 12, we're going to talk about funding. I think the main highlight here is regarding our liability management effort. In March, we concluded our second issuance of infrastructure debentures, totaling $2 billion in April, which does not reflect in this result. I n April, we made a second, actually a third issuance of infrastructure debentures of $1.3 billion. W e took advantage of a great timing to do this type of issuance.
We raised these $3.3 billion at a rate of USD + 6.14, an extremely competitive level, to reinforce the company's cash and to manage liabilities in a very healthy way while also pushing the duration up. So these two debentures, these two issues that we recently made have a duration of around 6 years. W ith that, we started to repay bilateral debts that we had with relationship banks. We paid $136 million. We still have $150 million to pay in 2024, $225 million in 2025, and that tower over there in 2026, which is our international bond, which we issued in 2021. It's a five-year bond. T oday, the company's situation is very comfortable in terms of liquidity. We have plenty of room to continue our liability management exercise under the best possible conditions for PRIO.
With that, we can see the two charts here on the left of duration and average cost of debt. What's good to note here is from the fourth quarter of 2023 to the first quarter of 2024, we virtually maintained the same cost at around 6% per year in dollars, and we greatly improved the duration of the company due to that second issue that we mentioned of $2 billion. The impact of the third issuance that we made in April is not reflected here in this quarter yet. Okay? Moving on to slide number 13, we're going to talk about cash flow or variation in PRIO's net debt in the quarter. We started with $1.045 billion, which is the balance at the end of the fourth quarter of 2023.
We posted an EBITDA of $467 million, which basically paid for all of those commitments that we had throughout the quarter, even exceeded these commitments a little bit, reducing this net debt at the end of the first quarter to $975 million. What was relevant here was the expenditures with working capital, that is, reduction of receivables, increase in inventory, payment of suppliers, the normal day-to-day of the company. We paid the earnout of Albacora Leste because of the average price of oil that closed in 2023. We had this commitment, and we paid it at the beginning of this year. That's this amount disbursed. We bought back some shares. We continue with our CapEx. Very relevant. Everybody knows we have an important CapEx, especially for the Wahoo field.
There were still some expenses related to Albacora Leste and Frade, $21 million in financial results and $39 million in taxes of cash disbursement, mainly referring to last year. With this, we reached those $975 million of net debt. Here, we talk a little bit more about leverage on slide 14. We can clearly see the trajectory of leverage reduction, basically explained by the company's strong operating cash generation, which can address the CapEx, all of the investments we have. With that, it's been decreasing. Even with a large CapEx campaign, we have been able to reduce leverage every quarter.
It now stands at 0.6x, which shows a company that is streamlined, prepared if there is a need to take on more debt in order to take advantage of an interesting investment opportunity. We have a very comfortable position in terms of indebtedness. W ith that, I turn the floor to Roberto to continue our presentation.
Thank you, Milton. Well, I'm going to talk a little bit about the environment and society. One of the flagships here is our emissions index, our carbon footprint. We closed the quarter at 24 kg of CO2 per bbl of oil produced. That's an improvement over last year. However, there was a slight worsening compared to the fourth quarter of last year. That's exactly the same thing as with the lifting cost. We had our absolute emissions in absolute terms. Our carbon emissions were more or less constant. We had a smaller production base, which meant that we had a slightly higher carbon rate per barrel, a CO2 equivalent per barrel equivalent. It's the same thing with the lifting cost.
We closed at $7.5 /bbl because the costs were more or less constant in a lower production. Here, the carbon emissions were more or less constant in a slightly lower production. As for health and well-being, we maintained all of the programs that we have been doing here at PRIO. In the first quarter, we took the opportunity to do very strong work with respect to safety, operational discipline, and creating a culture and improving, creating a culture of safe work. That was the main focus. Safe work was a major focus here in our first quarter. I think it's part of the company, but it must always be sad and must always be fostered.
We also continue with our line of sponsorships with incentivized projects in this quarter with the PRIO Humor Award, the support to the Instituto Vini Jr., Mundo Zira, and so on. Moving on to the next slide, let's talk a little bit about the next steps. The first next step here, I think perhaps the most important one of them, is Wahoo's environmental licensing. That's one thing that's important to the company. We are going to add 40,000 bbl a day here as soon as we can move forward with the project, and we have the approval by IBAMA to move forward. I n the end, it's also going to be an important contribution to society. It's more royalties.
In the first year alone, the first 12 months, we're talking about BRL 400 million-BRL 500 million in royalties to be collected by the federal government. T his is in addition to income tax, in addition to more incentivized projects, in addition to projects that will also be approved as conditions of the environmental licensing and so on. I t's a project that's good for the company, and it's also going to bring its returns, let's say it like that, for society. T his, I think, is the main point of attention here at the company in the coming months. After that, a second important point is Albacora Leste. We listed two points here: operational efficiency, which is for us to be able to consolidate these gains that we had over the past year and to no longer have those issues that we had with generators and so on.
This is very much a matter of culture, preventive maintenance, predictive maintenance of not losing track of this. We're also trying, well, not trying, we are anticipating, as Francilmar said, some wells that we were going to work on in Albacora Leste. They are not new wells. They were wells that were producing, but they were closed due to pipeline problems, Christmas tree problems, various issues that since we took on the field were there. W e're going to put at least two wells into production, and they were not producing. W ith that, we hope to bring our production to out. There's also the Polvo campaign that's going on. H ere too, the Polvo wells are wells that come in with a lower production, around 1,000 bbl, 1,500 bbl, sometimes 2,000 bbl and so on.
But anyway, combining all of this, our expectation is to move from the current 93,000 bpd , which is more or less where we're running at, to get close to 95,000 bpd, maybe exceed a little bit these 95,000 bpd so that we can try to maintain this level of production until Wahoo is a reality. Finally, the next steps that are also on our agenda are prospection for new M&A opportunities, new M&As, and so on. We continue to work hard on a series of opportunities that have been coming up. Nothing to disclose at this point. A nyway, that's the company's DNA. We've been preparing in terms of cash, right? We now have a cash position of more than $1 billion, and we are preparing more and more for these new M&A opportunities, which we believe have a great chance of coming up in the future.
Well, I'll end here. I thank you all for attending. I thank our employees once again, society, our investors who are always so great with us. With that, we open up to questions. Thank you.
Hello, everyone, and welcome to the Q&A session of our quarterly earnings call. I will now begin the question and answer session with a question by Milene Carvalho with JP Morgan. Go ahead, Milene.
Hello, everyone. Roberto, Francilmar, Milton, and José, thank you very much for the call. I think that although the company had an operationally challenging quarter, we had some very positive surprises with the results disclosed yesterday. I'd like you to elaborate on trading, as Milton showed in detail, the discounts vis-à-vis the brand improved. You have been talking about autonomy, liquidity, and trading flexibility, so or flexibility for the offtakes. I'd like to understand this better. How is this evolving? What is the expected margin? What are the expectations for this segment? T he second question, I'd like to know in more detail about Albacora. We had a problem with the generator now in the beginning of the year. There were some workovers scheduled.
If I'm not mistaken, the maintenance downtime was pushed forward to May? Perhaps you can help me with that. W hat is your expectation regarding a timing for stabilization, and what is the expected level after the maintenance downtime? Because what we have seen is a lot of fluctuation, 30,000, sometimes more than that, sometimes a lot less than that. W hat are your expectations? Thank you.
Thank you, Milene. Regarding trading, it's exactly what we said in the prior quarter call. You have to look at the line item that reads equivalent revenue FOB. If you divide that by the number of barrels produced and sold, actually, we're going to get close to $80 /bbl . T his is the actual realized price. T his is the number that we compare with the Brent. Trading is doing good. I'm pleased with the result. Today, we're running at a level of $4 /bbl of discount, considering commercial discount and logistics to get to that equivalent FOB. T he reason we use FOB is because it is equivalent to the whole offtake coming out of the FPSO. T he good part of the trading is that we can sell 3 million bbl a month or close to it.
Of course, this quarter we didn't sell that, but we have the ability to sell this volume of 3 million bbl a month or a lot more than that without being tethered to 2 or 3 trading companies. W hen we were a smaller company, the big point was we had 2 or 3 buyers. Although the oil would go to a number of refineries, we had the middlemen, the traders, and these are a few. W ith that, of course, we lose a lot of bargaining power when you have to sell 3x , 3 offtakes, and to sell with the equivalent of a vessel in a month. What the trading did for us was open that door to us, that possibility. I do not think that we're going to dramatically improve our trading. There are some optimizations that we are implementing, particularly used to or linked to VLCCs.
We are kind of running with 4, kind of that. We're trying to reduce that. We might perhaps gain $1, $0.50 of a dollar, something in that order of magnitude. T o me, the big advantage, the big benefit that the trading brought us is this ability to put all this volume in the market without being penalized in our selling price. As regards Albacora, what we see, there are those failures in the FPSO. The easy way to see this is that we have an operating efficiency of 80%. We had that in the quarter. So the FPSO was up and running 80% of the time. When it's working 100% of the time, we see those numbers you mentioned, 30,000 or more than 30,000 bbl produced. Sometimes there's a trip.
It stops for 2 or 3 hours in a day, and that's when you see lower numbers. It has nothing to do with the reservoir. It has something to do with the top side. Our expectation is to increase these 80%-90%. Last December, it was 94%. O ur expectation is to have an operating efficiency between 90%-95%. 95% operating efficiency is great. 90% is good. T hat's our expectation. W e still have a journey ahead of us. We thought we were doing better last year, and we are not. The production level of Albacora before we actually perform the workover actually, it's not the workover. Before we begin the drilling campaign, I guess that we can consider 35,000 bbl-40,000 bbl, but not more than that. These numbers will substantially increase when we get the drilling license for Albacora, which is the next after Frade.
Then we'll start drilling new wells, and we'll get close to 60,000 bbl-65,000 bbl. We'll reach our ultimate goal. T hat's it. I just want to add something about the downtime. The downtime was scheduled for May. W hen we stopped the vessel, those big maintenance items are tackled then. W e had the arrival of the materials. W e postponed it to July. After the downtime, we can expect an improvement because a number of pieces of equipment will be replaced. W e can only perform maintenance when the field is stopped. W e have a lot of equipment arriving, and we believe that after July, we are going to increase the level of production.
Okay, thank you very much.
Thank you for the question, Milene. Next question from Bruno Montanari with Morgan Stanley. Bruno?
Thank you for taking my question. Good afternoon. I have a couple of questions for Wahoo and then one for Frade. In Wahoo, if you could give us more color regarding those alternative plans for the vessels, what would be the alternative plan B that Francilmar mentioned, an option that will give more flexibility for the company? I s there any penalty if you don't use the original time window with McDermott? More objectively, your base case, is it still to have first oil flowing in 2024, or is there a risk that this will slip to the beginning of 2025? For Frade, it seems that production has resumed after the challenges in Q1, but at a level of 40,000 or less compared to production levels, which were above 50,000 bbl daily previously.
I'd like to know what to expect about Frade? W hat to expect from Frade in the coming months? Thank you.
Thank you, Bruno. I'll start with Friday. No, 40 is not a 40,000 low. We are producing at 47,000 bbl, 48,000 bbl daily. T hat's the number. It's 40 highs. We believe we can increase it a little more. Our reservoir team decided to reduce production a little bit. Perhaps they were a bit conservative in this moment, as Francilmar mentioned, when we started seeing more water content in the wells. W e wanted to be more conservative. But that's the production at Friday, 47,000 bbl, 48,000 bbl a day. You might have seen one specific day when we had a stoppage. Last week, we were doing some tests. How was the test? That's a test to measure production at the wells. That's an official test that we are obliged to make every now and then.
That restricts the production of some wells a bit when it goes to the test separator. I t's nothing out of the ordinary. As for McDermott, yeah, I mentioned Sapura, but it's not it. As regards McDermott, there is a point to be addressed. I don't want to get into details now because that's part of the contract. It's the contract framework that is being evaluated, reviewed, revisited, and discussed. Y es, we have another vessel, and that belongs to Sapura. I already said the name. It's another vessel that can lay the pipe in the second half of this year. I don't want to give you a date and say if it's this year or the next. We haven't got the environmental licensing. I've spoken about the license so many times before, and we never get it right in terms of the date.
I believe that if IBAMA resumes work, we'll need IBAMA to work for some months to issue the license. The moment we obtain the license, we'll need about three months, 60 days-90 days, after issuance of the license, to have first oil flowing, considering that we have to use the vessels and make it all match. I guess it's likely that we'll have first oil flowing still this year, but I don't want to tell you that it's going to be in October or September or November because there is an unknown in our hands, an unknown element, which is the license. It is unfortunate, but I don't want to give anybody a date.
I f I may add something so we can all be on the same page, the contract we had with the first pipe-laying support vessel had a time window until September. We mentioned that over and over. When we saw the license taking longer, we started looking for alternatives. We found some alternatives in the market. There are two. We are moving forward with one of them. One of the options that is from today that is on the table gives us a very good operational window from September to the start of next year. The strategy of the company is to be ready. T hat as soon as we get the green light, we'll proceed and we'll spare no efforts to move ahead as we've always done. There's another point, McDermott, that we have this window until September.
For whatever reasons, they are delayed in a project that they are delivering in the Gulf of Mexico. There is another contract clause of them with us. That's why I don't want to get into the nitty-gritty of the contract yet, but we are working on it. We already have a vessel available in September onwards. T he vessel, which was a big concern for us a couple of months ago, well, I wouldn't say it's sorted out, but it's on the way of being sorted out. I think it's just a matter of getting the environmental license as soon as possible.
It's very clear. If I may ask a follow-on question regarding the license, perhaps you could explain to us what is the mechanics of the type of license you still need to obtain. You mentioned a couple of months for the license to be issued. Is it something that requires a lot of work, a lot of analysis by IBAMA, or these months would be needed because of the agency backlog?
I guess it's a mix of the two. I know that our drilling license is more advanced in terms of IBAMA's internal analysis. I know that even with IBAMA being on strike and so on, I know that IBAMA still is moving ahead with their analysis. They are not issuing any licenses, but they continue to do their analysis work. Some time ago, I said, "Oh, I believe we have three months to get it." The drilling license is really close to be ready to be given. Now, the installation license, some months ago, we spoke about two to three months to obtain that license. T his number is shrinking over time because, like I said, it's not that IBAMA is 100% paralyzed. They are not issuing environmental licenses, but the information that we have is that they continue to do their analysis work.
They continue to do everything that needs to be done. I guess that this time will be reduced, but it's hard to say how long it will take after IBAMA resumes 100% their work. I guess that there will be some backlog at IBAMA. Things are building up at all levels. We see other companies with drilling rigs idle. I had news of at least three drilling rigs that are idle in Brazil, just waiting for the environmental license. I know that there are some other drilling rigs that are arriving this week. T here will be some effect. What we are trying, we'll always try, is to follow the order, order of arrival, so that the order of arrival will be respected. We'll need to see how this will unfold.
I know it's a moment of little certainty, but believe me, to us, it's as frustrating as it is for you or more.
Absolutely. Thank you very much.
Our next question, Monique Greco from Itaú. Monique, you can go ahead, please.
Good afternoon, everyone. Thank you for the presentation and the opportunity to ask questions. I have two here on my side. One is a follow-up on Milene's question about trading. Thinking a little bit forward, when Wahoo starts production, how do you expect this activity, this trading activity, and this trajectory of lower discounts, better conditions, will be impacted by Wahoo's entry? It's a lighter oil from the current portfolio. H ow will that impact trading? Is it going to be positive or negative, or are there synergies? The other question is that Petrobras has a decommissioning plan for the next five years, a major decommissioning plan, especially for the strategic commissioning that will direct 13 platforms, six of them being floating platforms.
Is there any possibility for Prio to acquire these platforms if Wahoo proves to be better than expected?
Well, Monique, regarding the trading of oil, if you look at the Wahoo oil specifically and alone on its own, you'd say that if Frade trades at 3 something and our average is 4, Wahoo should trade at 2 something, 2-point something. In reality, what we're going to see is not one oil being traded at 2 and the other for 3. It's a blend being traded because all of the oil will be treated. It's going to be mixed in the tank. T he Frade crude oil will change a little bit the characteristics into a slightly lighter oil. I t will be a little bit more similar to Wahoo's oil. Y ou can do the proportional math. Frade produces close to 50. Wahoo's going to produce 40.
You're going to have 50 of an oil that sells for $3.3-something, and 40 of an oil that should be traded at around $2. It's not such a clear, linear math, okay, but the trend is for it to improve. Of course, sometimes things happen in the market that we don't foresee. I mean, a country that produces heavy oil may stop producing heavy oil. There's a sanction or something. Automatically, heavy oil acquires more value than light oil. Wahoo today is more towards light oil. It's a medium grade towards a lighter oil. T hat's it. T here will be an impact. I think it's going to be a positive, a marginal positive impact, but it is positive. As for Petrobras's decommissioning, Monique, I don't think so. I don't see our Wahoo plan. I mean, there's room for growth.
We're working on the Wahoo project with two oil production lines and a potential third water injection line. T hese two oil lines are precisely there for the eventuality where we want to increase the Wahoo project. W e would never have the history of bringing another unit and changing the architecture. I believe we'd maintain the same architecture we already have and have more wells in the Wahoo area, like satellites, and integrate them. Monique, just to give you a better view, I'll add this. Wahoo was designed to support, in addition to the field itself, other connections, other tie-backs that were already in the early concept. The risk that we have is to get to FPSO Friday. It's nominal 100,000 barrels. We have an advanced study internally to see how far we can go. There's two paths that we can follow.
Then one takes a little longer, and there's a CapEx associated to that. I f it happened that there's a surprise where we exceed that, and then we'll evaluate. We've studied relocation of platforms. It's not something trivial. W hen the platform is being decommissioned, usually their physical condition is complicated. So it's very unlikely, but we're always monitoring.
Excellent. Thank you very much.
Thank you, Monique. Next question, Gabriel Barra from Citi. Please go ahead, Gabriel.
Hello, everyone. Thank you. Two quick follow-ups and a question about capital allocation and M&A. The first point, about Wahoo and the Plan B, Plan C that you've been studying for some time. I remember we discussed possible engineering adjustments given the change of vessel and how that would fit into additional investments. I don't know if you could give us more details about that, whether there would require a big engineering adjustment and how much it would cost for the company to make that adjustment. Second point about maintenance in Albacora, but there's also an important maintenance at Frade to be done this year that I believe will be along with the tie-back.
I don't know how you're seeing this in terms of timing for this maintenance since it's a topic with such an accurate visibility in terms of the tie-back and the environmental license. I f you can tell us about your expectation about this maintenance, that would be helpful. About M&A, we've been asking you for quite some time. I think Roberto was very clear about this at the beginning of the presentation. T he point that I wanted to try to understand a little bit more is about the environment we see in Brazil today. This movement of a consolidation in the industry was already expected. We've been seeing some moves, and we've been discussing this with you for some time, the process of looking at assets outside of Brazil and seeking to internationalize the company.
What I'd like to try and understand from you is if this process should go international, if it would mean an exhaustion of our assets in Brazil for M&A, or whether it's a process that's going to be parallel and how you see that in the medium to long term as Petrobras's position and the size you imagine for a further future for the company. If you can help me with those,
I'll let Francilmar talk about the operational side.
Okay, so two questions there. First, about the project. Yeah, Wahoo. Wahoo was designed for two production lines. One line with more equipment. It was designed to be installed with a McDermott vessel that has a specific mode of pipeline. T he other one is a flat line without any major pieces of equipment. That's for more common vessels. W hat we're going to do is to first, for Plan B, there's no adaptation required. The second line is ready. It's here already. It's simply a matter of laying the pipes, and the engineers are already working on that plan. The other line, the condition we have today for the future, after all this confusion with the vessel, we may use the same line without adaptation. I f we need to adapt it, it will depend on the vessel to do it, and it's nothing major.
It's the time there for them to adapt the points and how to lay the pipes and maybe minor adjustments. It's more a matter of how to lay them on the sea, but it's just a few million that we would have to invest if it is necessary. N othing that's going to hurt the project. The other question about the adjustment of the upside and the maintenance in Frade, there are the maintenance points, but part of the scope is tied to the adjustments for Wahoo oil and control. It was planned for April. We delayed, and that's how we see it today. We're going to keep monitoring it. It's a major stoppage. W e're going to calibrate and adjust it for when we're close. Until we get to the maintenance, we'll keep running things as possible, and then later we'll decide to do the stoppage.
Gabriel, now talking about M&A, the matter of going international or not, it's the only industry, the only place that interests us to have a look and potentially go outside of Brazil is the Gulf of Mexico. We did start to have a look at some opportunities, but these are things that are run in parallel. I don't think there will be the Brazilian market will be saturated or exhausted. hat happens is very simple. The size of our company, we have a market cap of about $8 billion, more or less, close to that. W e look at every M&A in the company, we look at through two main sides. One, how much complexity do we add and how much of synergy or value that new deal brings, the absolute value.
It makes no sense for us to buy an oil field that also has an FPSO, and it's going to be confusing, and it's only going to add $100 million. Because then you're wasting the company's operating capacity into a deal that's not really going to change the size of the business. T hese oil fields often produce little, but the difficulty of getting them to work, it's so big as a platform, it's a high complexity. D on't think it's a field that produces only a little bit. It's easy. It's not. It may actually be more difficult. So that's what we look at. We think that there are some opportunities in Brazil still, but we're also starting to look at the Gulf of Mexico because we're starting to see opportunities that are in that negotiation window and the transactions that we like to look at.
Something like $750 million and $1 billion, $1.2 billion, something around those numbers. It's something that we seek. It can be slightly more or less, but that's the type of transaction that we seek, the ticket we seek. T hat means it would be worth it for us to allocate Francilmar's time to be able to turn around and run those assets. T hose two axes, those two lines started to make more sense for us to look outside as well, where there's a good pipeline that's active. Deals around those values that I said, and that's why we're looking there. I t's not that it's either here or there. It's things that we're going to look at at the same time in parallel. Okay, that's it.
Great. Thank you, Roberto.
Next question from Luiz Carvalho with UBS.
Hello. Good afternoon to the whole team. I have perhaps two questions, and if there's time, I'll ask a third one. Well, built on what you've just said, Roberto, about M&A. Sinochem, in a recent call abroad, announced that they would be leaving the oil industry to focus on petrochemicals, and they are partners of Peregrino. I'd like to understand, are you considering this? Are they putting this stake for sale? I n that case, how would you consider working in or being part of a field where you would not have the operatorship and that approach of holding 20% of having 20% returning dollars? How would you analyze this, given that you would have perhaps the right to purchase if Equinor decides to leave the business in the future? I just would like to explore this a little bit more.
Second, if we could speak about aligning goals and compensation, perhaps you could tell us about your production targets, EBITDA target for the management in 2024. Given that we have this roadblock of Wahoo, that is delaying first oil. I'd like to know how this relates with the targets for the management of the company? Thank you.
Thank you, Luiz. Regarding Sinochem, I had already made some comments. I had this interpretation that Sinochem would leave E&P, the E&P industry, to focus exclusively on petrochemicals. I didn't know about this call. However, this is not new to me. It's not a surprise to me. Well, we'll consider that business. Of course, it's our duty to understand what the project is. I t's a field that is not operated by us, so it's more difficult for us. We cannot consider a lot of synergies because we are not going to be the operators. Well, the player purchasing is a non-op purchaser, so they are the non-op purchaser or buyer. We know how to handle trading and so on and so forth, but we have to see what the business can bring us. You see, our whole business, our whole franchise was conceived based on return.
This is the most important thing for us. We are not going to change our return expectation. It's not about Brazil or elsewhere. It's just that this industry requires a somewhat higher return. We'll always pursue a good return on the investment. It's harder to justify. We'll look at things from two perspectives. One perspective is how much more complexity this will bring, in this case, not a lot. How much more value will the business bring us? Synergies, absolute valuation. T hose are the perspectives. Now, in this case, there's no extra complexity. L ikewise, the value created will only materialize depending on the negotiation and so on and so forth. I mean, I cannot talk a lot about this because it's not something that is right there on the table. Wh en it's a non-op partner, that's more challenging.
There was another question. I answered that one. What was the other one?
Oh, the compensation targets for the management considering a possible delay because you disclosed the targets for 2023, general targets and by role. I just would like to understand what's happening now because the delay is not under the control of the company?
Well, our compensation works in this way. We have a target that we set in December of last year. It's a free cash flow target. It's what we call cash generation, but it's very close to the free cash of the company. We have to beat that target. We have some positives happening. For example, we have oil price slightly more expensive than what we budgeted. There's also the IBV theme. Well, in the beginning, it's kind of negative because we have the whole CapEx, but there's also the IBV story, and this is quite transparent. There's also Wahoo. O ur compensation is if we meet our cash generation goal, great, we got the bonus and all. If we don't meet the target, we don't get it. This is what is the agreement. We have also fatal accident rates, which are 0, and accidents with an environmental impact, 0.
If these three things are not met, there's no variable compensation. In some moments of the company, actually, in one moment in the history of the company, during a more catastrophic time of the COVID-19 pandemic, in the end of the year, we kind of revisited. We dealt with COVID, and in June, July, when we had kind of more visibility of what was happening in the world, we revisited the budget and fine-tuned a few things with the approval of our board of directors. So whatever happens, if we consider this as an event like COVID, this decision will be made more in the future. It's not in my hands. Today, what we have is our goal is cash generation. We have to meet cash generation, no fatal accidents, and no environmental accidents. If all of that materializes, we have variable pay. If not, we don't.
T hat's all I can say for now. Of course, we have to look at what's going to happen until the end of the year, how we are going to operate. Our Q1 was not so good, so I don't have a lot of merit here to say. W e didn't do so well in Q1, let's revisit the target. No, that's not the reality. We still have a good game ahead of us. We are counting on a slightly higher oil price, and we have to give it time to see how the environmental licensing process will unfold. I t depends on IBAMA. It's a little too early to think about it. Today, what we have are these three pillars that need to be met.
Okay, if I may ask a quick question to Francilmar. Francilmar, a question about Frade that support vessel Genesis. You had come to help replace one of the gas valves of one of the wells at Frade, which until the date of the prior call had not returned. Can you give us more detail on that? Was this replacement concluded? Because if it's yet to do, if it didn't impact Q1, there could be a production delta to be gained at Frade to get close to 55,000 in December. Is this feasible? Is it a fair statement?
Okay, Luiz. Well, the valve has been repaired. There was a gas lift valve control in the Christmas tree. If we don't have any other well coming online, there's nothing in the short term to increase the production at Frade. We have to increase the production at Frade responsibly. Our commitment at Frade in all fields is to maximize the recovery factor. The company always focuses on the long run. We can push, but the costs would increase. W e want to stabilize production and ensure the best recovery factor. Genesis is already part of the fleet. It's a subsea intervention vessel. W e have the Albacora Leste field. There should be an increase in production with the two wells. T hen we'll come in to do other things as we feed our portfolio.
Okay, very clear. Thank you very much.
Thank you, Luiz. Next question from Pedro Soares with BTG. Go ahead, Pedro.
Hello, Roberto, Milton, Francilmar, and José. My first question is kind of an accounting one about CapEx. Perhaps this question goes to Milton. I just want to clarify because in your presentation, when you talked about net debt, there's a CapEx of about $153 million. I n another document, the CapEx is about $137 million-$140 million, excluding M&A and the earnout of Albacora Leste. I believe that part of this difference is due to classification of a part of the investment that would go to working capital, maybe related to equipment purchase. I just want to understand if this is it or if there's anything that we're missing here. Perhaps you could clarify about the early acquisition of equipment for Albacora Leste and even Wahoo that you mentioned in the release.
How should we think about these acquisitions, these purchases throughout the year? Is most of it done already? Or is there anything else to be brought forward regarding the CapEx and for the revitalization of the fields? The second question to Francilmar, a follow-up on Albacora Leste and those wells that also Roberto talked about. They were offline, and they might be put back in production to boost production. I just want to confirm, are these two producers, two producing wells, or is one of them an injector? Do you need to mobilize the Hunter Queen, mobilize something on-site, or is it possible to do it without the rig? Those are my questions. Thank you.
Pedro, well, regarding CapEx, due to our system, it's a matter of standardization. When you look at the CapEx in the income statement, a part of it is going straight to PP&E, and part of it is kind of in a transition from inventory to PP&E depending on when it's being used, when it's being used. So when we include in the cash flow, we are already having a direct allocation. F or Frade, ABL, Genesis, Wahoo, etc. Y ou asked also about the perspective of what is the planned versus actual CapEx, particularly for the Wahoo project. We are on budget, of course, obviously, with the IBAMA issue. We have an expectation of a slight postponement, particularly regarding the drilling, CapEx, and subsea installation services, basically. The equipment will continue in the normal flow on schedule. No great changes there.
To answer my part of the question, the ABL system has four wells, two producers, and two injectors. Today, we already have the ability at the company, both with the installation vessels and the rig, to do almost everything in-house. We just don't have the rigid pipe vessel that needs to be hired. R egarding the equipment, we decided strategically to have a pool of things in-house so that we can be more agile and enjoy the opportunities. For Wahoo, we have received more than 80% of the equipment. The budget for Wahoo is almost $500 million just for subsea. A good part of that is materials. Service accounts for a smaller part. About Albacora Leste, ABL, the two injectors have been connected during the phase of commissioning to start operating, and the producers, we are working on one now.
This should be completed in a matter of a week, about that. The other producer will take about two weeks. T his is just subsea service. It's just a subsea intervention vessel, relocation, repair of equipment, and so on and so forth. A few things in the FPSO for the commissioning and to start production.
Okay, very clear. Thank you very much.
[Foreign language] Our next question, Vicente Falanga, Bradesco.
Good afternoon. Thank you for taking my questions. I'd like to go back to the subject about the two older wells in Albacora Leste that you're planning to reopen. What months do you think that this could happen? You said about the total production of 92,000 bpd-93,000 bpd , raising that to 95,000 bpd pre-Wahoo. U ntil then, is there going to be a decline? I'd like to understand if we could interpret that those wells in Albacora Leste are each going to produce 1,000 bpd-2,000 bpd . I'd like to understand if I'm interpreting this right. M y second question is about Wahoo, about the vessels on the Plan B, Plan C. You mentioned Sapura. Are they pipe layers? Have they laid pipes before? H ow reliable would the performance of those vessels be? Thank you.
I wouldn't say that each well is going to produce 1,500 bbl. It can be a little bit more and then go slightly down. I'm thinking about the company's production overall. Let's imagine it's going to get to 95. Maybe it will go over that, but on average, maybe we can get to 95 until the entry of Wahoo. M aybe going slightly over 95 once we have the wells in production and then dropping. There's also the drilling at Polvo, that at some point we're going to get results. S o it goes. I mean, I'm thinking about this. Instead of saying, "Oh, this well produces this much, the other well will produce that much." W hat has to be clear is that those wells will not produce 5,000 bbl. It's not going to happen.
It's going to be a smaller production helping to cover that decrease. Wahoo, we are figuring maybe end of May or early June. I'd say that by mid-June, we should have those two wells in Albacora already connected. T here's another two injector wells that we already put in commissioning, and they're running. I njector wells today, Albacora plant is fine in that sense.I t's more like a backup that we have for an eventuality rather than a need to increase production today at this time. Y ou had another question about the vessels. They are pipe laying vessels. They're pipe layers. T his vessel has just finished. The one that's in Malaysia has just finished the job, and it went well, had a very good predicted time. T hey're vessels made for that. They have a long history, even longer than Amazon that we had from McDermott.
Okay, great. Thank you.
Thank you, Vicente. Next question, Leonardo Marcondes with Bank of America. Hi, Leonardo. Please go ahead.
Hi everyone. How are you? Good afternoon. Thank you for taking my question. Actually, most of my questions have been answered, but I have a doubt here about IBV still. From what I understood, IBV, from what I understood, IBV has not left the field, right? It's simply outside of the current development plan that are the 4 producer wells and 2 injectors, right, on the field. M y first point is to understand or to know if my understanding is correct and also to check with you if my understanding is correct, of course. If there's still an intention of buying their stake, maybe at a much lower valuation now? Thank you.
Yes. To summarize greatly, that's it. Today, we're in the exclusive operation regime. Exclusive operation regime is basically that. We built a development plan for that specific area in Wahoo. F or that, we're developing according to plan that we got approved by ANP, and we're going to develop 100% of it. If, by chance, in the future, we conclude that there's something else or another reservoir, anything else to drill in that field, they're going to be our partner in that share, and we're going to have to present it to them, and they'll make a decision again whether or not they want to participate. It's going to be exactly the same thing. As for buying, we're always open.
We've been open to this. When did we buy it? 2021. W hen we made the first offer to them, the last offer we made was one week before the arbitration. W e're always open. We're going to remain open. We've always been very commercial, and we'll remain so. I t's going to depend a little bit on their mindset. For this deposit, let's say, for this reservoir, the decision is being crystallized now. As I said, I mean, this period of any questions that may come up or requests for clarification. I can't say questions. It's a request for clarification. B asically, the process is concluded. It will be formally concluded on May 15th, and that's that.
Great. It's very clear. Thank you for your answer.
Thank you. I think that with this, we are going to end this earnings video conference call. Thank you very much for your participation. I'll turn the floor back to Roberto for his final statement.
Thank you very much. It's been a pleasure to hold another video conference call with you. I hope to have you on board next quarter. I'd like to thank once again our employees and society that supports us a lot. Thank you.