Earnings Call: Q1 2019

May 16, 2019

Good day, ladies and gentlemen. Welcome to the conference call to discuss First Quarter twenty nineteen Results of Petrovio. Thank you for standing by. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session for analysts and investors when further instructions to participate will be provided. Four zero for the operator. This event is also being broadcast simultaneously over the Internet and may be accessed through Petrovio's Investor Relations website at ri.petrovusa.com.br by clicking on the banner 2019 earnings release. Before proceeding, let me mention that forward looking statements that may be made during this conference call relative to the company's business perspectives, operating and financial goals, projections are based on the beliefs and assumptions of Petrograduate's management and on information currently available to the company. Forward looking statements are not a guarantee of success. They involve risks, uncertainties and assumptions as they are related to future events and therefore, depending on circumstances that may or may not occur in the future, investors should understand that general economic conditions, industry conditions and other operating factors can also affect the future results of Petrolia and could cause results to differ materially from those expressed in such forward looking statements. I would now like to turn the conference over to Mr. Nelson Quiro Stamuri, CEO Mr. Roberto Monteiro, COO Mr. Nelson Panchero, Head of Finance and after to Mr. Buenamejo, CFO, new business officer and Investor Relations Officer. Let us begin with Mr. Panuri. Please go ahead, sir. Good afternoon, everyone, and thank you for joining us today to discuss the Peru's first quarter results. I see that there are many people who work at the company participating in this conference call. So I want to greet all of you. And as I always say, you're the driving force of this company because of your dedication, hard work and devotion, both companies here producing results and with a very good outlook. So thank you very much. For those of you who are not employed, I want to repeat something that is very important. 80% of all Puerto Ville employees are also shareholders, which is a very important element explaining our success. Let's speak about the first quarter of the company. We had a very safe quarter in terms of operating efficiency and very high safety indicators. This is a priority for all of us at the company. Both the fields have been operating at a very high safety level, which is vital for us. Our HFE health safety in the environment continues to reach very high industry standards, and this is a matter of pride for us. Manatee Fields operated by Petrobras has all has been operating at a very satisfactory safety level as well. As we got Friday field, we became the operator only on March 25, but we prepared a lot. So that when Petrovio took over as operator of the field, this transition would be as fluid and safe as possible. In this period, from March 25 until the end of the quarter and until now, we've had a period with a lot of safety and a lot of predictability, which makes us very happy, and we intend to keep the bar high. This is a priority for the company. To start with the highlights of the first quarter. The main one was the completion of the acquisition of Chevron's working interest of Frade Refills. Chevron was the operator of Frade. When we closed the deal, Petrovio became the operator. That happened on March 25. And we now have an increased working interest, and I hope we will soon close the deal with impacts that will bring this to a 30% share of the field. But this is a transformational field for Petrovio. In addition to more than doubling the production of the company, we believe we have a great potential to generate value both from the standpoint of optimizing costs and sharing resources with Polvo fuel and also as regards of better management of the reservoir to increase production. And I believe that most likely in 2020, we will have a drilling campaign at Frade Field to increase production from the asset even further. So we are very happy, and we are very excited with this deal. Just one more comment regarding Frag's results. When we analyze our numbers, it is visible that the whole debt related to this bill is reflected, while only five to six days of results are posted. But I would like to give you some peace of mind that this debt is totally manageable. It will be repaid in two years, actually less than two years. The company remains extremely well capitalized with a very healthy and solid capital structure. Moving on to Polofol. Polofol field continues to generate many results for us as a company. It is a surprising asset regarding its longevity. And this is not just a surprise. It's thanks from the dedication of our technical and operational teams led by Roberto. And Roberto will give you more detail on COVID. The only highlight about COVID that I would like to mention is that in addition to continuing to operate at a very high level of safety, we are preparing ourselves for a drilling campaign in the second half of the year. So all the part of preparing the rig for another campaign, getting quotes from suppliers and preparing to start to effectively drill a povo, all of that is at an advanced stage. And Roberto can give you more on the preparation for the povo campaign. And our third producing asset is Manateen. This field has been producing for quite a while now in a very satisfactory way. If anything, it has been deposited to price. Manatee is an excellent field. We had a scheduled downtime, and this maintenance was expected, and it was scheduled to happen. And it is something that the field needs to make sure that it will remain very safe. So Menacea is doing quite well. I would like to conclude my remarks with a final take home message for all of you, which is all of us who work at Petrogradient in addition to being passionate about the company, we think about the future of the company, its sustainability. And you want to create value in the short, mid, and long term. You care a lot about operating discipline as well as about financial discipline. But this, I would like to stress and show that you are optimistic that the company will continue to be a player in the M and A market in Brazil, both participating in formal divestment programs, the most famous one, Bimb Metro Drive, and looking at other assets that might not be on the table yet as well as analyzing assets in the Gulf Of Mexico. For the company to continue to grow in such a sustainable fashion, making smart acquisitions that create value for Petrograd, the company has a number of interesting alternatives. We have been approached by banks, funds, offering credit facilities, other exploration and production companies that are already in Brazil and others thinking about coming to Brazil who are approaching us for trading associations and to buy assets jointly, which is very interesting. And there is another alternative that we announced and spoke about, which is the possibility of funding through a Norwegian bond, which is also a very interesting alternative. And I can tell you, we are considering all of these options in order to choose the best for the company. With this, I thank you for your time and turn the floor to Roberto. Thank you very much. Thank you very much, Nelson. I will start on Page four, speaking about our operating performance. Firstly, I would like to speak about Friday. It has been producing around thousand barrels, and this resulted in volume when the field joined Petrogly's structure five days before the quarter ended. At Pogo Field, we produced 9,600 barrels a day approximately, very much in keeping with our expectations. And at Mana 3 Field, we are producing more or less 420,000 cubic meters a day, which is also very much our expectation. In the case of Mana 3, we had a scheduled maintenance stoppage in January. Because of Pepo, we are not going to have any scheduled stoppages along 2019, and the same goes for Friday with no scheduled downtime. Additionally, something important to be highlighted is the increase of our reserves. We increased from more or less 12,000,000 barrels, 12,900,000 barrels to 57,000,000 barrels. Most of this increment obviously came from the acquisition of Frade Field, and all hold of 70% working interest. And in the quarter, that increment came from the drilling campaign at Pogo Field, which happened during 2018. Regarding costs, firstly, we have the lifting costs of Pozo. We have the first quarter with a cost of around $30 per barrel. So we remain highly competitive regarding our costs. Speaking about Friday, we have already signed a number of contracts. We've had what we call an innovation of contracts. Some of the contracts we renegotiated in full. And currently, we are operating in the logistics base of Acu. Actually, a consolidated operation. Our helicopter operation has been consolidated with flights leaving from Macrae. We have added approximately 20 people to our staff. And in here, I'm speaking about onshore, about our office operation. Not to mention, of course, all of the people who work at Friday Field itself, F P F P S 0. With that, with all of these cost reductions and more to come regarding vessels, regarding our integrated emergency plan, what we call PEI and so on and so forth, our expectation is to by year end operating next year with an approximate cost of $20 to $22 a barrel in a consolidated fashion for the company, meaning the production of Olga Plus, Friday, should be having a cost of $20 to $22 a barrel. Obviously, there will be a cost allocation and so on and so forth, but in a consolidated fashion, this is an important number that we should keep in mind. Moving to Slide five, please. In terms of operating efficiency, here we see that Polvoir fuels continues to operate at a high level. We ended the quarter with almost 99% of operating efficiency. So Polvoir fuels has been having a good performance. We did have some quick shutdowns, short stoppages, particularly in the month of February, but nothing that impacted our daily production too much Regarding Friday, we had a quarter with an operating efficiency of 94.6%. In prior quarters, we had 99%, 98% operating efficiency. So an operating efficiency that is very close to what we've been having at Polvo. So probably still have a little room for improvement, but it was nothing new happening at the field. This FPSO historically has always had a very high operating efficiency. And we are going to bring it back to the product level very soon. What is important on this slide that I would like to draw your attention to is that Puerto Rico already operates 30,000 barrels of oil a day when we had the operations of over plus 100% of Friday operations. And that puts us in a very interesting level considering all field operators in Brazil. Coming on to Slide six and talking about the drilling campaign. This is an investment that we will make in Polvo Field. It is a continuation of what we did last year in 2018. Compared with the previous campaign, what we did basically was seismic reprocessing with a great focus on carbonate. We did the whole procedure of peer review. We hired people from outside the company to do an independent assessment of the prospects that we had found. And then with that plus our own expectations, We ranked these prospects. Mind you, this is not only a size based ranking, but rather a risk return ranking or risk size ranking, I should say. This is the methodology that we used. We also provided maintenance to the drilling rig to prepare for this new campaign. So considering it all, it seems that the drilling campaign in 2019 will start in July. We estimate about two months for each well. Of course, it can be a little bit more, a little bit less because as much as we have seismic data and all, only when we are actually drilling a well can we really get to know what there is on the ground. So that can vary a little bit. We were estimating a total cost of this investment between $30,000,000 and $60,000,000. So we have been 12 to drill. We already have the three to four prospects aligned out of 18 that we listed that will decide make reprocessing. So we will do this year's campaign. We will reassess. And most likely, we will start thinking about future campaigns. This is what I had about our operation, and I will now give the floor to Milton, who will speak about the financials. Thank you very much. Thank you, Roberto. Good day, everyone. Let us continue with the presentation, and let's move to our financials. Please go to Slide seven for the highlights of the period. We reached a net revenue of almost 140,000,000, up 19% from first quarter 'eighteen. It is important to highlight that this net revenue does not include any impact from Friday because the closing happened at the very end of the quarter. EBITDA now. Comparing with what the EBITDA will be before the IFRS 16 adjustment, we would have posted an EBITDA of 35,600,000.0, 133% higher year on year. The EBITDA that we are reporting, as you will see in the next slide, is higher than that because of the impact of IFRS 16. This EBITDA, just as I mentioned for our revenue, had no contribution from Friday. In this quarter's result, you can see we have a negative bottom line. And I will comment on this negative bottom line in more detail later, but it is basically due to some nonrecurring effects. So with that, we had a cash generation of 36,400,000.0, very much in keeping with the EBITDA before IFRS 16 adjustment. And we as mentioned by Roberto, we have the drilling campaign at Pozo Field in the acquisition of 18.26% stake of Friday. Without the need for new funding or taking on new debt to fund these obligations. So this is important from the standpoint of the company's liquidity. Moving to Slide eight. You can see the numbers I mentioned before in more detail. Company's EBITDA of 55,200,000.0. Basically, the EBITDA increased with the IFRS 16 effect that led to a reduction of leasing expenses, but on the other hand, started to have higher depreciation and amortization hence, an impact on the financial results. Just because of this IFRS 16 change, we estimate an impact of approximately 15,000,000 negative in this quarter just because of an accounting change. Also, we can see that the big offender of our results in this quarter was the financial result. And what happened here? Well, there are some explanations. The first is that we did a hedging operation. Because of the closing of Friday, you will remember that in the beginning of the quarter, all your prices were very volatile. The price ended the year at a very low level below $55 and then started rebounding again. When it reached $61, we took to conduct a hedging operation in order to hedge the floor price of the oil at $60. It means they call option. So to keep this operation cheap, we bought a put and we sold a call at 65. We bought a put option at 60 and sold a call option at 65. So what happens was the dealer price increased to around $65.67 a one in the quarter. And while we were closing the hedging operation, and that brought us a negative financial impact. But our rationale was to be conservative given the volatility of oil prices. If oil prices dropped a lot, price adjustment at Friday would be high. We would be penalized by reducing oil prices. So we chose to have an insurance, so to speak, to back the closing of the operation. And this, of course, had a negative repercussion on our financial result. However, we see this as a conservative approach to our business, And we see this as an extremely one time off event because of that deal that was being closed, more specifically. In addition, we had some financial expenses with no cash effect of an exchange variation nature. There was some exchange variation as part of the cash that was used for the payment to Chevron for the acquisition and closing of Frade. We had an FX variation by recognizing leasing as a liability according to the changes that are owned by IFRS 16. So you see, we had a series of events. The events of a nonrecurring nature, all of them happening during this quarter, which we can basically link to the change of an accounting standard and because of the acquisition of a fairly relevant asset as well as all the insurance measures we adopted to neutralize possible pricing effects and to have a soft closing and uneventful closing for the company. So this makes it clear that despite having a negative result, the company is interested in making good investments for the future of the company. Of course, we cannot see this future yet translated in our results, but we are convinced of the excellent acquisition of Friday. And there's no problem here. I mean, of course, no one wants to report a negative result, but we will not be necessarily managing the company by quarter. This acquisition was important at this time. So this brings some nonrecurring negative effects. But what matters is that in terms of fundamentals, growth and value creation, this was an excellent acquisition, and we are very convinced to us the successful future of the company. Moving to Slide nine, please. I'm talking about our financial results. And in still talking about our financial results, we have a comparison, a pro form a income statement showing what our results would be had we integrated FRADU since the beginning of the quarter. So it is interesting to note that the company's results had an EBITDA margin of 40%. FRADE would have the potential to contribute with almost 60% of the EBITDA margin, an EBITDA of 125,000,000. And in this pro form a table, we would have reached a margin higher than 50% and an EBITDA of BRL 180,000,000 in the quarter. But it would have contributed quite positively to our results. And we expect that in the coming quarters, the positive impact of Frade's acquisition will be more and more observed and felt. I would like to remind you that this pro form a result reflects Frade Field as it is today. Of course, we have complete plans to more and more improve cost management for the asset and to improve the asset as a whole. So we hope to report increasingly better and stronger results through this important acquisition. On Slide 10, please. The company reported new loans, which is a very good thing in terms of balancing in terms of balancing the capital structure of the company. It is important to note that we tried to be very conservative in this funding and to avoid paying more for third party capital. So the acquisition of was done partly by cash, partly by financing by the seller, what we call vendor finance, at a cost of LIBOR plus 3% per annum with a term of two years in a total amount estimated at $224,000,000 Recently, we also signed an export prepayment agreement with the Chinese bank, ICBC and PetroChina in the commercial part. This loan also has a cost of LIBOR plus 3% per annum of four years and amounts to $60,000,000 We also previously reported contracting a credit facility of up to BRL 90,000,000 from Finet, where we have dispersed the first tranche of this facility of BRL 36,000,000 at a cost of TJLP, long term interest rate, plus 1.5% a year in terms of the need and a two and a half year grace period to amortize the debt principal. In addition, we also have what we call TrueSale. That's the name of this product. It helps us have some working capital comfort at a cost of LIBOR plus 1.6% per annum, basically in connection with advanced payment of receivables amounting to 25,600,000.0 at quarter end. So basically, we can see the average cost of debt, which is quite interesting, both in donors and Brazilian real. We try as much as possible to be as competitive as we can to reduce the company's cost of capital and to maximize return. On Slide 11, we'll give you more color on our amortization program. We see that in the next twenty four months, in years one and two, this debt will be reduced abruptly, which is basically by the repayment of the vendor finance that we have with Chevron. It is important to remember that this is a debt that will be repaid by the asset itself. Now that we have the 52 of working interest of Frade, so the asset itself is expected to repay this debt. Additionally, we are negotiating, as Roberto said, and we expect to soon complete the position of the remaining 18% of Fravi. And this remaining stake has no debt attached to it. It is totally unencumbered. With this, the company's debt schedule after EOT is quite reduced. The company still has a lot of room for future funding. We have a lot of momentum, and this is really good for the growth and strengthening of our business when also considering future acquisition. In terms of currency, we have a great predominance of dollar denominated loans, which is also in keeping with the company that generates a lot of cash in dollars that has the essence of its sales in dollars. So these are my comments regarding the financials of the company. I would like to thank you all for joining us on this webcast. I now turn the floor to Brenner Menchu to speak about the future of the company and about mergers and acquisitions. Thank you. Thank you, Nielsen. Good afternoon to all of our partners. This quarter, Air has been broadly mentioned by my colleagues. The main highlights of the acquisition of Fradefield, which belonged to Chevron. In a moment with the whole industry that focused on Petrobras divestment program, Freddie was not such an obvious asset. With the announcement of the deal, we caught a lot of people by surprise. But actually, we have been pursuing this asset for four years with a lot of resilience and persistence. We were able to structure the deal in such a way that the seller financed a substantial part of the price in installments to be paid every six months along two years. Thus, the deal is affordable to us because we did not have to resort to loans. Not resorting to banks was fundamental to the success of our strategy as we maintained the confidentiality of the deal, which avoided information leaks that could have attracted other companies to continue to be such a leader for the field. So talking about Friday, we need to create a solution to structure the corporate ownership, which allowed us to take over the operation very quickly. We started operating at the field in March, just two months after we signed the purchasing agreement. Regarding the Japanese working interest of 18% on Friday, in my opinion, I think that we are going to be able to close the deal in the coming months. We just need to sort out some details regarding internal approvals by the seller. So I think that in a couple of months, this will be resolved. But Brazil has proven that we can do a lot with little. This is our motto. With our modest cash from our company, scarce access to credit in a period where oil prices reached historical lows. Year after year, we were able to execute our strategy to grow through the position of producing assets. And we have completed two drilling campaigns at Pogo, one in 2016, one in 2018. Reproductive twenty thirteen is a company with no producing assets, a company with zero revenue. Today, after five years, we are a company with a projected revenue of more than 2,000,000,000 in 2019. We are also a company with a diversified portfolio with a total of six assets. We have three producing assets. They are 100% stake of Pogo, 70% of Frade and 10% of Manatifa produces gas. We also have one asset under development, a 100% state of Piratema, a gas field that we are very optimistic about, and we believe it's going to be very promising in the future. It has a proven reserve. We also have two exploratory blocks, one in Fort Duomo Dono, where we have a 100% working interest or neighboring block to Total. This block came with the bread boil deal. And we recently acquired another block, a Sierra offshore block, where we hold a 50% stake. And we are a partner of Ecopetrol, whose field was recently acquired with the new deal of Fragar. It needs to belong to Chevron. Our business ambition is somehow translated by depreciation of our share price. In 2015, when our shares with the government in the stock exchange, our share price was as low as 0.17 Now after a lot of blood, tears and sweat, our share price reached 21 in the beginning of the year, an enviable appreciation of 3000%. And relatively, this is a consolidated success case, not only in the oil industry, but also in the capital market. Now with the production of around 30,000 barrels a day, we became one of the biggest independent players in Latin America. However, we do not intend to stop here. We have a lot of energy, and we have ambitious plans for the future. Because we have in our pipeline deals at different stages of negotiation. These are producing assets, most of them offshore in Brazil and abroad. Some of these assets are more obvious, others are not that obvious. Our key and I for starting this business shows that we are one step ahead of our competitors in the ways to buy new assets. It is always good not to forget financial discipline, responsible leverage and creation of value for our shareholders in all of the acquisitions that we make. I believe that after the completion of the project that we are studying, we will achieve our dreams goal of exceeding 100,000 barrels of daily production. Of course, we don't need new loans to realize this bold plan of acquisition. But for good projects, that will always be capital. We are living a window of opportunity in the oil and gas industry in Brazil, and I believe that this track record, earning leverage to balance sheet and a robust and clear cash generation is undoubtedly best positioned in Brazil to capture these several consolidation opportunities that will arise in the coming years. We are very proud of the work that we have done, and we are very optimistic about the future. Thank you very much to all our shareholders for their confidence and trust. And now I open the floor to questions. Ladies and gentlemen, we will now begin the question and answer session for analysts and investors. Our first question comes from Rodrigo Mendez with Santander. Hello, thank you for the presentation. I have three questions. First, related to portable field. This is a good word regarding lifting cost that had a 30% reduction year over year. I just would like to know, do you have any specific goal to reduce lifting cost even further after the drilling campaign you're going to have in 2019? Can you get perhaps down to $18 per barrel that you envision for Friday? Could you elaborate on that, please? My second question has to do with capital allocation, actually, and cash generation as well. I did a quick math here, and I mentioned that you should be generating about $500,000,000 cash flow when you integrate FRADI. And given that we have an amortization of debt in the next two years, I believe that in the third year, you're going to have more low rate to generate cash to have a dividend payout or to continue with your M and A plan. So I'd like to understand a little bit more about your plans. I'd like to have some clarity on that, please. And my third question is related to leverage. In the credit calculation, net debt over EBITDA is about four times considering the last twelve months as a reference. You mentioned that we have an expectation of 1.5 net debt over EBITDA. That would mean an EBITDA of about BRL 700,000,000 a year. So I'd like to understand from you, when do you expect to reach this goal of 1.5 times? And could you give us more color on that? Rodrigo, thank you for the questions. This is Roberto speaking. I will start speaking about costs approval, and then Milton will speak about capital allocation. That was your second question, and then regarding our debt profile. So regarding costs, the company company have public yield at $30 a barrel and Saudi fuel at more or less $24 a barrel. These are more or less the costs. Our expectation is that particularly with operating synergies, and here, I mean, the same base, helicopters leaving from the same site under the same contract, supporting vessels, rationalizing, supporting vessels. And there's no dramatic reduction of G and A and so on and so forth, G and A allocated to the operation, I mean. So our expectation is that we're going to get a consolidated cost already in December of $20 a barrel or close to that. Considering $20 a barrel, we would have to take into account cost allocation. But considering $20 a barrel, we would have Friday running most likely close to 18 and further running close to $21 a barrel, $20.21 dollars a barrel. The whole operation is smaller than Friday's. And that's why with a simple math, you can get to these numbers. So this is good. Our main focus now in terms of cost reduction, but up until now, we were rationalizing the operation initially in 2015. And along with that, a strong wave of renegotiating contracts. We believe that this front will always happen, and there's always room to cut costs a little bit and so on and so forth. But we believe that the main ways of cost reduction will come from operating synergies and consolidation of operations. And this is the name of the game until the end of this year. And it say that in December, we should be operating at that level of cost, and then we will be able to see 2020 with the company remaining at that level of cost. I will turn the floor to Milton when he will speak about capital allocation and about our indebtedness. Hello. Good evening. Thank you for the question. This is Milton. Now regarding funding, that was the spoiler of your question. Actually, consider different funding options for the company. One of them, as we also mentioned during the call, is the Norwegian bond. We understand the C PACE is a very interesting option. We are really considering that option. But other than that, there are some other alternatives in the market, including new M and As. Do not depend necessarily on that bond because we want to be able to access the debt market with experts prepayment as we did with COVID. Not to mention the possibility of funding these acquisitions with financing from the seller himself as was the case with the deal involving Frade and Chevron. The fact is that with the acquisition of Frade Field, as we showed in the pro form a income statement and we expect it to show in the coming results, cash generation of the company changes. It becomes very strong, very significant. And this will change our indebtedness in future quarters. Regarding the second part of your question, regarding almost four times method of the EBITDA ratio, Actually, this is a non fair comparison because we're considering the current indebtedness, considering for the acquisition, that the EBITDA in the last twelve months doesn't consider anything, any contribution coming from Friday. So when we do a more fair comparison, considering that's coming from Friday and revenue coming from Friday, you will see that that ratio behaves a lot better. And there's an expectation that next year, that ratio will be dramatically reduced. Next question from webcast. The question is, are we negotiating with Petrobras to acquire Petrobras 30% at Friday? And what are the investments expected for Friday? Can Petrobras deny investment? Has Petrobras given a green light for investments at Freddie Field? Well, thank you very much for the question. I'll speak about Freddie. As we said in the past, in several past occasions, Petrovio obviously is interested in having full ownership of Friday. That would obviously include Petrobras' working interest. Our operational agreement, what we call JOA, joint operating agreement, considering CEBUFI, the subsidiary of Petrovio and Petrobras, This j o a includes the right of his refusal for Puerto Rio in case Petrobras intends to sell their stake. And finally, it doesn't seem I'm sorry here, but I don't think Friday is a core asset for Petrobras. So you're talking about something that makes sense from every angle you work at it, from the angle of Petrolene, from the angle of Petrobras. Now, of course, that depends on some internal stages of approval at Petrobras internally. We cannot control that. Particularly, we cannot control the timeline. At the moment, there's nothing to say or to announce regarding Petrobras 30% stake of the field. But we continue to say in the front that, yes, we're interested. Regarding the investment program, I think this is not a question of which regards not approving or approving. When it's an investment, it has a strong net present value for the viewers, it is almost impossible to deny it. So in my opinion, I think that it's a matter of we as operators redesigning the program to redevelop Friday. It was basically done by Shreveren in the past. Though we have to rekindle that or we have to rework with that, adapt it to our to our shape, our strategies and our assumptions and subject this to the conclusion. I don't see Petrobras holding this back. It is just up to us to finalize the redevelopment plan and to submit the plan to the consortion. Something that we expect we can do sometime in the first half of next year, perhaps by year end. I think this is what we have to say about Friday. Thank you very much for the question. Next question comes from Thiago Noel with Atino Capital. Hello. Thank you for the call. I have one question regarding Friday as well. You saw the deposit campaign. The first phase was little focused on drilling new wells. It was more focused on management initiatives. For Friday, more specifically, what draws my attention is that for some wells, there's a possibility that we can inject more gas. So what are you planning in terms of initiatives? In terms of management, and what do you see in terms of results of these initiatives? And if you could give us some color regarding the timing of those initiatives. Thank you. Thank you, Thiago. This is Roberto again. I'm gonna be speaking a little about this. We see we see Friday's yield. Our strategy for Friday is divided into four main phases. The first phase actually, the first and the second one are stages that are happening in parallel. One is rationalizing costs, cost reduction, synergies, consolidation of the operation around one logistics base, helicopters moving from the same site, everything we've talked about. That will bring about a strong cost reduction for the field. But let us talk about revenue and production. Today, Frade de Fjord is producing approximately 19,000 barrels a day. We have maintained that production flow, preventing the client. And how are they doing that? Today, Flagifield has some wells that can still produce a little bit more than what they were producing in the past without having major reservoir issues. It's just a matter of managing the reservoirs well. And this is for the short term. During the short term, Florida Field has two wells which are closed. One of them for hydrate and the other one No. We don't really know whether it's hydrate or fines. There's a big discussion about it since Chevron's time. So there are two wells that are halted, closed. And our intuition is to bring these wells back to life. One of them, at least for sure, the hydrate one. We're going to bring this well back to production. It's an intermittent well. It produces every other month. That's the strategy of the well. The the well has been closed for quite a while now. So that's for the short term. And none of that requires investment. For the midterm, we would make some onetime investments, occasional investments that do not require a rig. What kind of investments are these? We're thinking about stimulating the wealth that we saw, what we had in one of of the polar wells, and we think it's perfectly applicable to Friday. We're stimulating with a certain chemical, an acid, so as to clean the reservoir, to dissolve some fines in the reservoir. And with that, we are able to increase the productivity index of the world. So we do have an opportunity for that in some fuzzy wells. We would also do some pollenant treatment to ensure the formation of water channels in the field. So this would be for the midterm. And something we don't really know what is going to happen in the midterm or in the long term is the possibility to inject water in the field. Sherburne itself needs to take this into account in their redevelopment plan. We believe it makes a lot of sense. ANP, because the NREL agency, has analyzed the program. We have analyzed the date possibility in considering some parameters and in some conditions. I would say that there are no problems there. But that depends on the equipment that we need to have to reinject water because this field hasn't have hasn't had water injection for a long time. So this could be for the long term and for the long term. We're talking about 2020. So after that, we would start a drilling campaign, and those were investments that would require a drilling rig. Still on the wrong trend, there's still a lot of other capacity for the rigs. So we have seen very competitive quotes from companies that own drilling rigs. So we're just getting started talking to some of these companies to check with them the possibility of starting to think about this drilling campaign in a more illustrative fashion. So that's what we envisioned for Friday. There are a number of work fronts there, several stages. The first two related to cost and reservoir management. This is underway. Mid term, everything that does not require drilling rigs. So this should start in the first half of next year. And long term, I would say, would be 2020 onward. Our next question comes from webcast. Except for the pump failure in March, global fuel production decline seems to be more marked than expected. What do you think? Andre. Thank you for the question. Overall production is very much in line with our expectations. It is important that excluding that pump failing in March, this is further production, very much in line also with our budget, with our production forecast for the year as well. What is important to say and to remember is that Pogo increased production last year from 6,000 barrels, more or less, to more than 10,000 barrels. And this is because of the new wells. When you add new wells, these new wells specifically, any new well that starts producing, these wells will have a decline rate, which is a little higher than the decline rate for the rest of the field, which is more mature. So sometimes, people might have the wrong impression. When you don't look at the detailed data well by well, you can have the impression that the field is declining faster. But it's not true. We just increased production in new wells. These new wells have a more massive decline in the beginning, and that is totally normal. Third, our whole investment seems this remains exactly unchanged, exactly the same. From now on with the decline of these wealth, we will be closer to the general decline for the fields. But we will start drilling again. And if all wells are successful, we should add more wells, more production, and we're going to see this effect again by year end, beginning of next year. Next question also from webcast. Why is the company selling the shares that you normally keep at treasury? Hello, Bruno. Thank you for the question. This is Maritan speaking. Why are we selling our shares? Well, this move is basically to give even more comfort for the company in terms of liquidity and to maintain a minimum cash. We think it's very prudent to maintain a minimum cash for our operation and to have a good working capital management. Also, see a very positive effect, which is increased liquidity for our securities. In a recent past, we saw our shares entering the small caps industry. And now, with the new new balances of IDRX, there's an expectation that we're going to have an upgrade. So I think that this is what moved us to sell some of our shares. Our next question comes from webcast. Any expected maintenance stoppages for the next month? Hello, Nicolas. Thank you for the question. No. No scheduled maintenance at Peru nor at Friday in twenty nineteen. Yes. We will be stopping for in Friday in twenty twenty, and this will be scheduled downtime. It's too soon to say that they will probably last seven to ten days, seven to twelve days, something along those lines. For Manati, for Manati, we've had a maintenance shutdown. It stopped for almost ten days in January. I think eight days. Eight. Actually, twenty days. Twenty days in January. But but that's still behind us. So from now until your end, no more scheduled stoppages. Next question from Thiago Morell with the team at Capital. I have one more question. You mentioned you are prospecting some assets in the Gulf Of Mexico. It's unnaturally, in the numbers what you do that pose on the potential of Friday. And couple of location in Brazil is higher. And this big group model, more specifically in the Northern Sea and in the Gulf Of Mexico. Don't you think it is a more competitive and developed model? Do you think it is possible to replicate your strategy with the same level of return that you have been obtaining in Brazil also in the Gulf Of Mexico? Or perhaps this endeavor would be less transformational. Thank you. Hello again, Thiago. Well, in the past, we analyzed a lot of the Northern Sea and the Gulf Of Mexico. The Gulf Of Mexico in particular, which is what we spoke more about. And we got even very close to closing some deals in the Gulf Of Mexico. Well, the Gulf Of Mexico has some interesting characteristics. The market overall is moving shallow waters, is moving to deep waters in the Gulf Of Mexico. And there's nothing a lot to onshore. So regarding returns, what we saw that was very attractive at that time, where we even bid for the Gulf Of Mexico was the entry price. The starting price was very interesting and the possibility of raising very cheap capital very quickly. From the standpoint of synergies, etcetera, our intent in the past was to serve as nonoperators in the Gulf Of Mexico. That was our first reaction because the entry price made a lot of sense. In general terms, what I can tell you is that particularly in the Gulf Of Mexico I'm talking more about the Gulf Of Mexico because that's what we know more about, what we studied more. Well, because of Mexico has many synergies realized. We have a field producing in a platform that is producing in another field. There's an integrated logistics and so on and so forth. So I think that synergy gains will not be that great, also because we have been in another country. But sometimes we see enterprises that are very interesting. Okay. Thank you very much. This concludes today's question and answer session. I would like to invite Mr. Robes de Monteiro to proceed with the closing statement. Go ahead, sir. Well, in the first place, I would like to thank very much all of you who joined us today. Thank you for your questions. Thank you for your regarding your dedication to Prosper Hill and to our company. I want to say that I've been with Prosper Hill since 2015, and I've seen a lot of things happening here. We went through a lot. We went through several different moments of the company. And I should say that this moment we are living now in 2019, 2019 perhaps, would be one of the most dramatic transformational moments for the company. We increased our production a lot. We have a field that has a relationship of barrels produced versus rigid, which is gigantic. It's a total outlier and it brings huge possibilities of upside for the company when we look at Friday field. And when we consider normal recovery factors for Friday, we see that there is a huge amount of potential gains. So I just want to say that the whole management of the company, all of our staff are very excited about this new stage of being able to deliver good results, seeking synergies and so on and so forth. So thank you very much. That does conclude the Pepezius conference call for today. Thank you very much for your participation, and have a good day.