Good afternoon, ladies and gentlemen. Welcome to Prio's conference call. I am Jose Gustavo, new business and Investor Relations Manager. For those who want to follow us in English, we have simultaneous interpreting through the globe icon on the bottom of your Zoom screen. The translated presentation is available on our investor relations website. The comments on the results will be presented by the management. After the presentation, the officers will be available during the question-and-answer session. All participants are in listen only mode. To ask written questions, you can use the question-and-answer button, or you can use the Zoom raise hand feature to ask live questions. 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 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 to Roberto Monteiro, our Chief Executive Officer.
Good day, everyone. Welcome to our earnings call for the second quarter of 2026. I will start by going over the highlights of the period. I'll hand it over to Jean to discuss the operational side. Milton will cover the financials, and I'll come back at the end to talk about sustainability, the environment, and our next steps. To give you a very quick summary of the quarter, I think it was an excellent quarter for the company. Of course, there are two aspects explaining this excellent quarter. There's the price factor, right?
We had a quarter with oil prices higher than usual, higher than what we had seen in previous quarters. That was due to a sad reason, of course, the war and so on. That's one aspect, and I'll leave it at that. We had higher prices indeed. There was also a second aspect, which I think was the most important and where we are going to focus during this call, which is the operational side and the volume aspect. We had two major achievements, two great wins this quarter, which were Peregrino Field and Wahoo Field. We finally reached 40,000 bpd at Wahoo Field, which is very stable, with FPSO Frade operating at very high efficiency. It's true that there was an issue with one gas lift line, which had to be replaced and so on, but that had nothing to do with Wahoo.
The Wahoo project itself is performing very well, with the reservoir meeting our expectations and producing 40,000 bpd. We expect this figure to continue for a few more months to come. This was a major achievement for the quarter. Another very important achievement this quarter was the Peregrino Project, where we, first, we continued that cost reduction trajectory and achieved very high efficiency in that asset. We brought well A15 online in the Isolado reservoir. This was a reservoir that had not yet been put into production by the previous operator, Equinor. We drilled well A15, and it was a huge success. We are now drilling well A13, which is also going very well. We've already passed through the reservoir zone. We are now in the final stages of completion, that well should come online by the end of the month.
With that, regarding Peregrino production, we've practically guaranteed those 100,000 bpd through the end of the year with A15, with A13, and with a third well, C24, which we will also bring online to increase production later on. I think these were major pillars explaining our numbers that we will be showing going forward. How does this translate into production? We set a production record for the quarter of 172,000 bpd . A sales record of 15 MMbbl over the quarter. That obviously generated record revenue and record EBITDA for the company as well. We maintained the lifting cost well under control at $8.90 per barrel, and our leverage decreased substantially to 1.5x net debt over EBITDA ratio. Our cash position remained at over $700 million, even after repurchasing 9 million shares, 9.3 million shares, to be more precise.
The company did very well. Part of it was the price aspect, yes, and the other part was the production factor, which did very well. Although we had to make some adjustments due to a vessel that failed and had to be replaced and all, we managed to deliver everything we needed to deliver in the quarter and reached a record production level. I'll move on to the next slide. Now I will elaborate on these numbers I'm pointing out with a little more precision and detail. First, to detail this with a little more precision, our lifting cost. We've lowered the lifting cost to $8.9. I expect this lifting cost to be around $7, starting at $7, so between $7- $8 for the third quarter. This is due to a further increase in production and from the gas line.
We'll talk a bit more about that in the next steps. Regarding the gas line, we are already in the final stages of recommissioning at Peregrino. Peregrino field, which burns diesel, will stop burning diesel to generate electricity to power the field and will start burning gas instead. This is not only much better from an environmental standpoint, but it is also much more cost efficient. Combining this increased production with this significant cost reduction from no longer burning diesel to produce electricity, we should be looking at around $7, let's say, starting at $7 and ending up with a lifting cost somewhere between $7 and $8 per barrel. As for our production, we had a second quarter figure of 172,000 bbl. As you saw, July was already a much stronger month. We've already reached more than 196,000 bpd .
We are already very close to 200,000 bpd, and that's before the 20% stake of Peregrino is included. Let's keep in mind that the 20% stake of Peregrino represents an additional 20,000 bbl that will be added to the company's output. We expect to finalize this between the third and fourth quarters of the year. Putting these two factors together, in other words, if we consider production combined with this cost reduction, this should lead us to a lower lifting cost. Our cash position, which currently stands at $713 million, should also continue to rise. We'll continue our share buyback program, and we'll touch on our dividend policy a bit at the end. You see, nothing changes regarding our guidance to continue buying back shares. We currently own just over 9% of the company. We should reach 10% soon.
We'll cancel the shares again, it will be up to the board of directors to decide whether we'll cancel five, cancel three, or how many to cancel to make room to continue the buyback. Our debt level will also continue to fall. Our guidance remains to reach a net debt to EBITDA ratio of one time by the end of next year. That's based on an oil price at $60. With higher oil prices, that debt level should fall. For example, with oil at $80 a barrel, we would end up with a net debt over EBITDA ratio of 0.8x. All of these guidances remain absolutely unchanged. Share buybacks, cash generation, and so on. As for production, we've had some good news. We are slightly ahead of schedule. We'll likely end this year above 200,000 bpd.
Our goal was always to reach 200,000 bpd and maintain that level. This year, we'll most likely end up with a little over 200,000 bpd. I'll stop here. I've even touched on some future insights, but I'll hand it over to Jean to present field by field, and Milton will discuss the financials, and I'll be back. Thank you. Jean, it's your turn.
Thank you, Roberto. I'm going to present in a little more detail the performance of Prio's assets and fields. Here is a quick summary of this slide, and I'll go into more detail on each field later, highlighting the lifting cost of $8.9, as Roberto mentioned, sales volume of 15 million, average production of 172,000 bpd, and the company's overall efficiency for the period, which was 94%. On slide six, we have Cluster Valente, Frade, and Wahoo fields.
Average production for the quarter was 61,100 bpd. This quarter, we completed the four production wells at Wahoo, so we are starting to produce those 40,000 bbl from Wahoo field. Please keep in mind that in Q1, we connected the first and second Wahoo wells at the end of March. In April, the third, and on June 13th, the fourth well. Initially, the plan was to connect the fourth well in late April or early May, but we had a problem with vessel NO-102, which ended up delaying the start of production from the fourth well at Wahoo. This connection was made using our own vessel, the Genesis. As soon as we encountered the problem with the NO vessel, our team mobilized the Genesis and the equipment, and we were able to connect the Wahoo well using internal resources.
This was a practical demonstration of the importance of verticalizing some vessels for Prio's business model. In addition, we experienced a failure of a gas lift line at Frade field, which caused us to reduce production by 7,000 bbl. Three production wells stopped due to this gas line shutdown, which occurred in early May, and we completed the replacement of that line in July, also using Genesis as the vessel. In addition, we drilled two RDA, or reservoir data acquisition, wells at Frade. The purpose of these wells is to explore new areas for production. After drilling, we obtained quite positive results, and therefore, two new production wells will be drilled. We are already wrapping up the drilling of the first production well. It should be finished in the coming weeks, and then we will move on to the subsea connection for these wells.
After that, we'll drill the second production well in the second half of this year. Slide seven on cluster Bravo, Polvo, and TBMT fields. The field produced an average of 14,300 bpd. Production was primarily impacted by the shutdown of well OGX-44, which stopped producing at the end of March and resumed production in mid-May. This well uses a submersible centrifugal pump system, an ESP pump, which requires a workover with a rig to replace it. The Hunter Queen, which was drilling at Frade, as I mentioned on the previous slide, stopped drilling that well and was relocated to perform the workover on well OGX-44. The team mobilized all of the equipment, and we were able to complete this workover very quickly, resuming production in May and restoring the cluster's efficiency.
However, having this well offline for a while did have an impact on our efficiency, and that was essentially the major impact on cluster Bravo this quarter. On slide eight, we'll discuss Albacora Leste field, or ABL. The field produced an average of 22,100 bpd. The main impact this quarter was production halt at ABL-68, which was caused by hydrate formation in the well. As a result, we had to shut down the well. The shutdown occurred back in April. We were only able to resume production or bring the well back online in July, and this led to a significant loss in production and efficiency for the quarter. We had a brief partial shutdown to repair the cooling system of one of the vessels during the month of June. Consequently, we ended the quarter with an efficiency of 85.9%, down from 95.4% in the previous quarter.
In July, our efficiency was already back at the 95% level. We are back on track with ABL. On slide nine, I'll speak a little about Peregrino field. Peregrino recorded an average daily production of 74,500 bbl in Q2. That was slightly lower than Q1, mainly on account of the shutdown of well C-26 caused by a failure of the ESP. As soon as the pump failed, the rig was mobilized for the workover, which was completed in April. In addition, we finished drilling well A-15 in the Isolado reservoir, which is a new area at Peregrino field. We began production there in May, which brought us back to a production level above 100,000 bbl, and we've been maintaining that production level ever since. From late May until now, we've been keeping it above 100,000 bbl.
We also continued our drilling campaign on both the C and Alpha platforms, drilling another well in the Isolado reservoir, A-13 on the Alpha platform and C-14 on the Charlie platform. We will be finishing both wells now in August, and they are expected to come online in the coming months, thereby helping to maintain the field's production level above 100,000 bbl in the second half of the year. In addition, we have completed the repair on the gas pipeline and have already begun importing gas. We are currently commissioning the entire system, and in the coming days, we should begin to reduce diesel consumption at the field, resulting in a significant reduction in our lifting cost at Peregrino field. Well, I'll wrap up my remarks here. Thank you all, and I'll now turn the floor over to Milton.
Thank you, Jean, and good afternoon to everyone that is joining us. Now let's discuss Prio's financial performance for the second quarter on slide number 10. This quarter, we sold 15.2 MMbbl . It was the highest quarterly sales volume ever. It was a very significant result, driven by the increase in production we've been delivering in recent times. The reference Brent price for this is $94.6, with an equivalent FOB selling price of $87.70 approximately. It is an average discount of around $6.90 per barrel, which we can see as the weighted average for the second quarter. Another relatively new line item this quarter relates to domestic sales and export taxes. This quarter is mostly export taxes. Of the $113.9 million, $111 million relates to export taxes that have taken effect and had a very significant impact on our second quarter.
Beyond that, our cost of goods sold is in line with our lifting costs, which we reported at $8.9 per barrel. Royalties and special participation also saw a significant increase. When we compare the reference price used to calculate royalties and special participation, we saw a big jump. In the first quarter of the year, the average reference price was $60 per barrel, and in the second quarter, it was $89 per barrel. That is why we are seeing here a significant increase in this line item. EBITDA stands at $847 million. When we look at it and exclude all non-recurring items, we arrive at an EBITDA of $878 million. For the combined first and second quarters of 2026, meaning the first half of 2026, we've surpassed $1.73 billion .
Keep in mind that this first-half EBITDA of $1.73 billion is already higher than our entire EBITDA for last year. Of course, this is against the backdrop of lower oil prices. In 2026, after the war, the price naturally has a major impact on revenue and EBITDA, and also due to increase in production. Since last year, for the full year, we've already had 80% from Peregrino. We've seen the contributions from Wahoo and the other projects the company has been executing, which are boosting our production. Slide number 11, we will quickly discuss funding. This, in the central chart, we see the amortization schedule. We had a payment of nearly $170 million of our inaugural bond. That was the remaining balance, which wasn't included in the tender when we issued our new bond last October.
We rolled over more than $350 million in bilateral debt that was due to mature in 2027. We deferred that, rolling it over to 2028 and 2029. I would say that the goal of these rollovers is to improve Prio's credit spread. We've been able to do that. It's just natural that we are in an environment where costs are rising. Even so, regarding our spread, Prio's cost, we've been able to achieve reductions thanks to the company's improved creditworthiness, increased production profitability, and so on. We will continue to carry out these rollovers as we can secure competitive costs and at the same time improve the company's debt profile.
Alternatively, if the market isn't open to new funding, or whether through a bond or a debenture, if the terms aren't attractive, we are also fully confident in our ability to honor all maturities on their due dates. We also see a slight reduction in duration, and this is basically due to the normal maturity of our debt. The average cost of debt, while up slightly to 6.40%, still remains at a very competitive level. Just keep in mind that we've paid off, and it's now off our balance sheet. It was one of our cheapest debt, the inaugural bond. But still, we are in a very comfortable position to service our debt in the near future. Slide number 12 shows the variation in net debt, which is a proxy of our cash flow in the quarter.
We started in the first quarter with net debt of $4.372 billion and ended the quarter just over $4 billion. This is a very positive impact from our EBITDA of $879 million. It's a small working capital effect, driven mainly by a reduction in accounts payable. CapEx totaled $285 million, and this relates to the conclusion of the producing wells at Wahoo, as well as some drilling and repairs on the Peregrino gas pipeline. This is a very important project for future cost reductions due to the decline in diesel demand. The startup of development at Arapuça in Albacora Norte, as well as drilling wells at Frade. So in preparation for all this, we spent $114 million on share buybacks, financial results of $91 million.
This is basically interest, along with some maturities from hedges and derivatives we entered into for price protection, plus taxes of approximately $21 million. Regarding leverage, on slide number 13, due to the company's very strong cash generation and EBITDA, we've been undergoing significant deleveraging. We reached 1.5x . As a reminder, we ended 2025 at 2.3x following the completion of the acquisition of the additional 40% stake in Peregrino from Equinor, which pushed our leverage up slightly. In the first quarter, with cash flow already in place, leverage stood at 2x , and now it's at 1.5x . We expect this downward trend to continue over the coming quarters due to cash generation, synergies, cost reductions, and so on. With that, I will turn the floor over to Roberto, who will discuss environment and social issues and our next steps. Thank you.
Thanks, Milton. I'm going to go over the environment, society, and people. This quarter, the point I'm most passionate about is this first point regarding wealth and wellbeing. To that end, I would like to say that we modernized the living quarters of our FPSO Forte, which is stationed in Albacora Leste field. When we took over this FPSO, when we purchased it came with some areas that needed improvement in terms of integrity and so on. The issue of upgrading the living quarters was always pending. So we finally started upgrading that superstructure, the living quarters. That's not just the living quarters, but all the offices, the common areas, and so on. Because we can't have an office as beautiful as the one we have here in Botafogo, whereas we still have very precarious offshore facilities.
It's just another way to give back to and look after our people. This is a project that we like a lot. Nelson himself was also very actively involved in the project. It's already starting to bear fruit. It's improved a lot, and we are receiving plenty of compliments. We wrap up the safety and wellbeing section with this point. In addition to the safety day we held, the motto saying, "Stay vigilant forever," and so on. This is the point I would like to highlight with particular enthusiasm this quarter regarding safety, health, and wellbeing. Another interesting area where we continue to make progress is our carbon footprint. For yet another quarter, we posted another successive reduction. We are at 21 kg of CO₂ per barrel equivalent. That's 16% below the first quarter and 44% below the fourth quarter last year.
The main point here is Peregrino, the reduction of emissions at Peregrino and the increase in volume at Wahoo. We are producing more from the same facility. That's a major positive. Now in the third quarter, we will have another major development, which is the replacement of diesel fuel with natural gas at Peregrino. This will also significantly reduce our carbon footprint. We expect to likely drop below 20 kg of CO₂ per barrel equivalent. We continue to make progress from a cultural standpoint. We've wrapped up the Reação Offshore program. That was an entry-level program for people in the offshore industry. We finalized the schedule April 2025 and 2026, and we continue to support all the initiatives we've always supported. This year, and this coming quarter in particular, we have the Rio Marathon, SP-Arte, and so on.
I'm going to move on to the next slide, which covers the next steps. As I always say, the first and last points are constants, our focus on safety and health. The last one is exploiting new M&A opportunities. Let's talk a little bit more about the points in the middle, which are, I think, are the main focus this quarter. The first one I think is worth addressing. That is the Frade production wells. As we mentioned, we've authorized the drilling of two production wells at Frade, two additional wells at Frade. We expect to bring the first one to production still in August. Our expectation is to increase the production at Frade by 4,000 bpd or 5,000 bpd, something in that range. Most likely, with this well in Frade, we will surpass 200,000 bpd at some point.
Maybe not an average monthly basis, but we might already exceed 200,000 bpd for a few days. With the second Frade well later in the year and, of course then, with Peregrino as well, we will easily surpass this mark. Another key highlight of the quarter will be Albacora Leste's operating efficiency. Albacora Leste, from a topside perspective, has improved significantly and has shown good and very consistent efficiency. This quarter, specifically, what impacted Albacora Leste's efficiency was the hydrate in Well 68. That has nothing to do with everything we discussed last year regarding the topside, the compressor, the generator, and so on. I believe that all the issues we addressed in Albacora Leste are finally yielding results. We've had some very good months at Albacora Leste. In the quarter, there was also the issue with hydrate at Well 68 this quarter.
Well 68 is producing again. July was a great month for Albacora Leste, by the way. Therefore, I think that the asset is finally moving in the direction we needed it to go. Another major focus this quarter will be the closing of the Peregrino deal for the remaining 20%. We expect that to happen between October and November. Of course, there are a number of steps here that need to happen for this to materialize, but we are expecting something between October and November for the closing. Finally, the shareholder remuneration policy. We've begun discussing the policy on the board. There is a general consensus by the board regarding payouts, share buybacks, and so on. What we all agree was wait a little while for this turbulent geopolitical and macroeconomic situation to settle down a bit before we announce this policy.
As I told you, our guidance remains unchanged. Our guidance for a year-end leverage of one time based on an oil equivalent price of $60 per barrel at the end of next year remains in effect. We are still buying back shares. In fact, we are planning to accelerate the buyback a bit in the second quarter, I mean, in the third quarter and in the fourth quarter, given that the bulk of our CapEx is already behind us. We have already completed the Wahoo project. We've finished the gas import, which is Peregrino. We've drilled the first well at Frade, and we already drilled A-13, which was the Peregrino well. Therefore, a lot of things already happened.
Now our CapEx is going to start dropping significantly through the end of the year, which will create even more room for us to continue steadily with our share buyback program. Well, that's it. I mean, the shareholders' remuneration policy is ready, I would say, or it has been agreed upon by our board. We've decided to wait a little while for this macroeconomic situation or even this very complex geopolitical situation we are currently facing to calm down a bit before we move forward with it. Well, regarding the search for new M&A opportunities, as I mentioned, well, that's in our DNA, runs in our blood. We will always keep pursuing them, even though we don't have anything on the horizon right now and no relevant discussions are currently underway. Well, I will wrap up this earnings release presentation.
I would like to extend my sincere thanks to our investors, the public, and our employees. The results were exceptional. It was a quarter of hard work, a quarter of significant adaptation. We had the Wahoo issue, where there was a charter vessel that failed. We had to replace it with our own vessel. That led to a major operating reorganization that we had to carry out. There was also the issue of oil trading that we presented here. Well, we didn't even mention it. We posted strong numbers. However, day-to-day operations were challenging. It was a quarter with spectacular results. It wasn't necessarily an easy game either. It was a tough one. With that, I would like to express my gratitude to our employees. Now I'll open the floor for questions. Thank you very much.
Well, good afternoon, everyone. Welcome to the question-and-answer session during this earnings call. Now we're going to open the floor to questions. Our first question comes from Monique Greco with Itaú BBA. Monique?
Hello, everyone. Good afternoon. Thank you for the opportunity to ask questions. I have two. Roberto, perhaps we could start with the trading discounts. We understand that there is a factor which is external to the company. It is related to the ongoing context, but there is a lot of your commercial strategy, the use of a VLCC, the blend. Could you perhaps state how much is coming from each aspect so we can understand what is structural in this trading strategy? My second question, you made a comment at the end that your expectation is that CapEx will slow down by the end of the year. Could you position us and give us perhaps a full number for the year? At the end of 2026, what the CapEx will have been, and if you have some visibility regarding CapEx and the order of magnitude for 2027. Thank you.
Good afternoon, Monique. Look, as regards trading, I cannot really tell what led to what because so many things happened. It was quite confusing during the quarter. I can mention some major points that led us to positive results. First, we were very exposed to Dated Brent. There is Dated and ICE Brent. Dated is the physical market. It's the day-to-day. As much as possible, we tried to be exposed to Dated Brent. We had the physical market that was tighter. When we compare with ICE Brent, which is the Brent that we see on Bloomberg and so on, there was a mismatch, and that's why our discount improved because of that mismatch. Since the beginning of the Middle East war, we have prioritized contracts in Dated Brent, and I think that this was a major pillar.
There was a call with Gustavo and Bruno thinking the market is going to stretch, and if the market stretches, we would better be in Dated Brent. The opposite is also true. When there was that partial opening o f the Strait about a month ago, a while ago. We had a flooding of oil. Dated Brent was the one that suffered the most. I think that we had a Q at 690. The third quarter will not be 690. It will be around nine, eight, closest to nine because of this effect that China stopped buying. There was that opening and so on and so forth.
These were the big moves. As for VLCC, for Peregrino, we save $1, $2, $1.50. The oil blend is extremely important for the Peregrino sales in VLCC. There were two things about Peregrino. We loaded a VLCC at Peregrino directly. That had never been done before. The prior operator had never done it. It was always done through Aframax, which is a smaller vessel than Suez. We increased to Suez, and now we increased to VLCC. That was a big one. Together with VLCC, we are blending so that we will not have to heat the oil at the VLCC.
We have done that, right? Yes, we mixed it with ABL. We saw the super heavy grade, a mix with Albacora, and we had a medium one mixed with Mero. These two did really well. One went to China, one went to Europe. Monique, let me add to that. Both were shipped to China and Europe. They were well-received and unloaded. We gain what? About $2 per barrel. This is not what is going to make a difference. We are much more exposed to this geopolitical aspect, Dated versus ICE Brent. What is going to happen in the Strait?
The canal is closed. Dated is stretching again. In August, we will see what is going to happen. If they reopen the Strait, there will not be too many ships loaded. We will not feel so much of a flooding of oil flooding the market. These are the pillars that will make a difference. We will keep monitoring the performance of Dated Brent vis-à-vis the ICE Brent. You also asked about CapEx. We had an initial budget of about $500 million, a little over that. We are now at $600 million. $6 million and up.
There will be a reclassification of Wahoo. We will get a part of the inventory and put it in Wahoo. This is not real CapEx. This is a simple reclassification. Wahoo with this reclassification will go to $840 million. $ 824 million with that reclassification at Wahoo. Next year we will drill the injectors and we will freeze at $824 million. Net of this reclassification of Wahoo, we are at $600 million, give or take. Why did we have a mismatch of about $150 million? Because we decided to drill another well at Peregrino. One additional well in Isolado Reservoir, A13, which we are drilling.
We accelerated the program to maintain those 100,000 bbl at Peregrino by year-end. This is guaranteed. Nothing is guaranteed in this industry, but we have practically guaranteed 100,000 bpd at Peregrino until the end of the year. With the advanced drilling of A13, we decided to drill the two wells at Frade. One should be delivered still this month, until the end of the month. The second one will be in the next quarter. That is one. That is two, actually. The third thing that we should do this year, and this is moving well ahead, quite well, is Arapuça. We have signed. We, Petrobras, Repsol, and Equinor have signed the development plan.
We have submitted it to ANP, and we will get the request to anticipate wells so that when ANP and IBAMA authorize, we can connect them. The line has been laid for Arapuça. So I think that there is a reasonable chance that Arapuça will start flowing oil this year, given that we obtain the licenses. So these things played in our favor. Another thing to consider to reduce CapEx is the reimbursement of the gas import. This is going to happen this year, so this is something else to take into account.
Thank you, Roberto.
Thank you, Monique. Next question from Gabriel Barra with Citi. Barra, go ahead.
Hi, folks, Roberto and the team. I have two points, actually still on Peregrino. When we talked about Peregrino, we talked about great synergies and cost reductions for Peregrino, and I guess that over 2026, we will be covering the last mile which would be the change from diesel to gas to power the field. And perhaps you could remind us, Roberto, of those $500 million, how much of this has been captured? And when we look at the savings compared to diesel, we are following the diesel market, and the prices are increasing. Diesel is costing a lot more than it was costing when we talked about synergy and cost reductions. So does this still make sense perhaps?
The $70 million worth of savings have increased compared to what we expected in the past. So that is the first point. Secondly, one of the negative news in the quarter is the export tariff. I don't think you touched a lot on it during the presentation, but that is a very delicate point, very important point for the sector, including for Prio, that exports about 100% of your production. And I think that this caught the market by surprise. I don't know whether you were caught by surprise, but we were. We did not expect that the 12% would continue. We didn't expect that the export tariff would continue. So I would like to hear from you, what are the next steps?
What is your base case regarding the export tariff, and what you can do about it? I have seen companies moving, and even the unions moving, so I would like to hear from you what can be done regarding that. Thank you.
All right, Gabriel, let's speak about Peregrino, and then we will speak about the export tax. Well, Peregrino, let's start with the guidance of $17 million of reduction. It might be more. Of those $300 million that we meant to reduce when we acquired Peregrino, the field cost $550 million. Today, the field is running at $260 million. So we have already reduced almost the $300 million that we aimed at reduce. We have reduced $280 million, $290 million. So that is given. And the gas will be a bonus. We will go beyond the $300 million. So let's keep it at $17 million because there is still some little things to be done. We have to commission the new line. There is something else that we can do. You see, the total of this can get to $100 million. But this involves taking gas from Platform C.
We enrich oil from Platform C to the FPSO of Peregrino, and the FPSO with Peregrino will burn that artificially enriched with gas. That's another system that we can try. It has never been done. Let's be cautious. I don't want to give you a guidance. I don't want to take a larger step or bite more than I can chew. We have reduced a lot the cost. We will reduce even further. Things are really going really well. Peregrino is actually a great field. The Peregrino team is very good. They have responded really well to everything. I think we've been able to do excellent work at the field. Let's talk about the export tax. We were also caught by surprise. I think everyone was.
What the company has been doing, and what we've been doing, is to try to take this to court, judicialize it, as we call it. If you're not an expert in the industry, you might think, "Oh, these guys are making money, so they have to pay." It's not really what's happening. We have to understand market dynamics. Today, Brazil produces more than 4 MMbbl of oil, and we can only refine two. It's no use saying you're not going to export oil. Even if we don't export the oil, no one will be able to refine it, number one. Number two, what Brazil needs is diesel. Our oil, in Peregrino, you don't get diesel out of that. You get bunker fuel. It's ship fuel. It's an equation that doesn't make sense. Why do they have to tax oil? That's number one.
Number two, when you look at what's happening in the world, oil today is almost like in pre-war prices. It's not so different than pre-war levels. There's high inflation, and there's a problem that can lead to recession in countries worldwide, is the product. The product today, there's a refining margin, which is gigantic. Refining makes more money than E&P, which does not make any sense for a processed barrel. Refining is a fee business. E&P, you have to work for oil, have to extract, lift the oil from the bottom of the sea. There's a big mismatch. The margin of refining, the price of the product itself is what is damaging and getting in the way of the economy, the price of gasoline, the price of diesel. The price of oil does not reflect that today. We have a very high refining margin.
The reason is that China left the market. When this confusion started to happen, China stopped importing oil and forbade the export of oil products, diesel, jet fuel, and gasoline, which are the three main ones. When China did that, it removed that ability from the market and all the refineries in the world other than China. By the way, to complement that, Russia also lost some capacity given some of the bombing from Ukraine. They lost the capacity to have refined products. There is a big shortage of refining in the world and there is a supply of oil which is not so stretched. The refining margin increases a lot. This export tax on oil, we have nothing to do about it. We could perhaps tax the banks because the banks are making money. That's kind of our thesis.
It's not a measure to regulate the market. You can hold back exports to regulate the market, we can keep the oil in Brazil and refine it here. You can do that as much as you want, but the oil will not remain in Brazil. We won't be able to refine it. We haven't got refining capability to cope with all of the oil we produce. Brazil has to import fuel, diesel, oil by-products, and this is the foundation of our thesis. That's kind of a long answer, but this is a very delicate point in our review. If you look at your investors, look at Marathon Petroleum, Phillips 66, Valero, all-time high. They have a gigantic margin. It is exactly that process. These are refineries abroad. They are importing oil from the United States like there's no tomorrow, and they are exporting product for everyone at high margins.
There was also that comment by Trump two days ago saying exactly about the extraordinary results that were coming from refining from Exxon or I can't remember. I'm not going to get into that teeny nitty-gritty detail. This is the whole case that we are trying to use in our legal thesis. Having said all that, we would have that for another 60 days. It seems that the war is easing up a bit. Apparently, there is an agreement about to come to fruition, and we believe that this might disappear. Yeah, this is what we're thinking. I cannot really tell you, "Oh, this will end in 15 days or in 45 days." I would love to be able to, but I can only tell you what is our base case and what we are discussing and what we are trying to do to cope with this.
Excellent. Thank you very much. It is a long discussion indeed.
Thank you, Barra. Next question is from Rodrigo Almeida with BTG. Go ahead, Rodrigo.
Good afternoon, Roberto. I think I would like to hear more about Albacora Leste. I think this is the major investment driver for the company. Roberto, you talked already about CapEx, but going forward, you focus on Albacora Leste. I would just like to get a little bit more details. Let me break it in two parts. First, I will talk about Arapuça and how is the tieback moving along. You said that the development plan is fully aligned with the rest of the partners. If you could give us some light about how the project is moving along, tieback, and also when do you think that we will see some production, and maybe the mid-term and long-term for Albacora Leste. During your Investor Day, you mentioned seven wells to be drilled in 2027.
Could you give us some light about how you see this project? What are the most promising areas? I don't know whether you could say anything about it, but what do you expect about the next prospects? If you look in the mid-range for the 2027 campaign, how do you see the environmental issues and CapEx expenditures for the projects of next year? What will be the timing that you will start spending money for these projects? Albacora Leste, and I have an additional question on Wahoo. What about the performance of the wells of the reservoir in Frade and isolation? You also talked about injection wells that are more productive. I believe you must be very excited with Wahoo performance. Albacora Leste and Wahoo, if you could give me a follow-up. Thank you.
Good afternoon, Rodrigo. Arapuça, we already launched the line. We laid the line. Now we are just waiting for the workover license that should be granted by IBAMA soon. We are just waiting for ANP. Authorization to complete the well and connect it. Once these two things happen, we will do the workover with the rig in the upper part of the well. At the same time, we will connect the well to the rigid pipeline that has been laid. We have to lay the rigid duct. Also, we have to lay the umbilical in the third quarter.
We have to connect the well to the pipeline. The hardest part of the project is behind us. To lay the rigid duct, we needed a special vessel. The edges of the rigid, one part connects to the well, and the other part connects to the FPSO. We can do that with our own vessel once we have IBAMA's authorization to make the interconnection and once we have ANP's authorization to connect them. We believe that if everything goes well, we can reach first oil by December. The bottleneck is IBAMA's authorization or the workover authorization from IBAMA or IBAMA's concurrence and ANP's authorization that can allow us to initiate the work in the reservoir.
We went through a very important phase involving the laying of the rigid line, as I said. Also the ANP's protocol for the PD. At the beginning, this was an agreement signed between us and Petrobras because only Prio and Petrobras have a stake in that field. ANP came back asking for the signature of the other partners. We already submitted the protocol with all of the signatures from Repsol and Equinor as well. Things are moving. It's just a matter of time until we can connect the well.
In regards to the rest of Albacora Leste, we do intend to start drilling next year pending the environmental license for Wahoo. What we are doing is that our plan for next year will take into account two scenarios. One, when we have the license and the other one without the license. Having the license for Albacora to drill the wells there. If we do not have the license for Albacora, we will start drilling wells at Frade and even some that we have already identified in that campaign where we have the RDA. We could move from one scenario to the other depending on the license. Certainly the Albacora wells should be slightly better when compared to Frade because it's a field that still has a lot of work to be done.
If we just drill Frade, we can have 100 bpd . Not only Frade but our plan for next year to stick to that 200,000 bpd a day involves drilling five wells in deep waters and five wells at shallow waters. In deep waters, the wells will vary between Frade and Albacora depending on having or not a license and this will cost $500 million per well, so $200 million in total, and five wells in shallow waters in Peregrino, and this will cost $20,000 per well, $100,000 in totals adding up $250,000 in CapEx. Moreover, you have maintenance CapEx. We should reach something close to $450 million-$500 million. This is pretty much it. Very close to the range of $450 million that we still have to drill.
It will depend on the injection of two Wahoo wells, but we don't know how much still will be done this year or next year. That's it in terms of Albacora Leste. Today, we have already identified seven wells at Albacora. You might remember that back then when we started our first plan, we had 11 wells. Three of them were injection wells, then the number went down to eight wells. Today, there is only one well at Albacora to be drilled. We are using new seismic that has been rerun that corroborates with all the wells. The bulk of the work is done. We are very comfortable with Albacora and Albacora's topside is bearing good fruit. We will have another scheduled shutdown this year, 12 days maybe.
It was supposed to have been done earlier this year, but it will probably be done in November or December. With that, we will solve most of Albacora's integrity, and then we can move on to the next phase. The second question was about Wahoo's reservoir. Things are good. I would say that it is the size that we imagined. The wells have slightly better productivity than what we envisioned at first, but it's pretty much in line with what we thought it would be. Production will be around 40,000 bpd. This production of 40,000 bpd should be sustained for a few months, and then there will be a decline. Just business as usual. The beginning of this decline should be at the end of this year or maybe closer to the end of the year and early next year.
It will start declining, and then it will follow its normal decline curve. We will start injecting water at some time next year. I'll say the first half of next year.
Perfect. Thank you.
Thank you, Rodrigo. Next question is from Tasso Vasconcellos with UBS. Go ahead, Tasso.
Thank you. Good afternoon, Roberto and the Prio team. Roberto, I would like to take this opportunity to ask a more general question. In the past few months, we've talked a lot about the possibility of new capital allocation, dividend payout. Given the strong cash generation from the company, I would just like to understand about your internal discussions in terms of these organic projects. When you're looking at a new project or a new drilling operation, what are the main metrics that you look at? Minimum amount of production per well is kbpd or if it's IRR, what is the minimum level that you look, the same 20% of M&A or some other metric?
If you could also give me some more details about what else is part of this calculation. I know that you operate several assets, FPSO, you own your own rigs, you have your own vessels, meaning that you already have a minimum fixed cost because you have some assets that can maybe facilitate your decision-making. I would just like to understand that process of decision-making when it comes to allocation of capital to new investments and the surplus of cash, looking at a scenario of three to four years ahead.
Okay. Tasso, we look at three things. We look at return from the asset, we look at new wells. We look return and the NPV, and that's that 20%. We look at payback because in fact, all these projects have 70% or 70%, very high. What is the payback? Three months, four months. These are very quick paybacks, and IRR is very high. Honestly, there isn't much you can do or say, "Okay, I'm no longer buying shares," or, "I'm not doing this or that so I can buy more shares, buy back more." The valuation gap would have to be gigantic, much bigger than what it is today.
Our first priority is inorganic projects because it's much better than anything else that you can think of. If you have a project of 60% of IRR in dollars that can be paid off in three months. The answer is already given right there. We look at these three things. Usually, when we have this RDA, we already include that in the cost, we have an expectation that it will work. You say, "Okay, if I drill a pilot well" No, not a pilot or a pioneer well, or a wildcat well, and something goes wrong, you lose $30 million. If I drill and it works well, okay, I will drill this one, another well, I can gain $300 million. If it goes wrong, I lose $30 million, and if I do it well, I gain $300 million. It's a no-brainer.
The decision is a no-brainer. That's the way we approach it. On the buyback subject, we have enough money to do both. It's not either/or. We are not letting go of organic projects for the sake of buyback. Organic projects are always more economical. We've already stopped because of M&A, in particular Peregrino, because that was a big thing, $3 billion. That was a major project. Apart from that, I won't say that this is a no-brainer solution. We'll have to look at things, but that's it.
That's very clear. Thank you.
Thank you, Tasso. Next question from Yuri Pereira with Santander. Yuri, go ahead.
Good afternoon. Thank you. If I may, I'd like to stress a topic Tasso has just addressed with you regarding the dividend policy. You mentioned just a minute, Roberto, that you want to wait for some kind of geopolitical improvement If the Brent price is very high for very long, do you think this possible dividend policy would change? I just want to get a sense of why you're waiting. Are you considering any M&A possibility or any big organic project in the short term? You also mentioned that you talked about 0.8x net debt- over- EBITDA ratio as leverage, assuming a Brent at $80. Would that be a target in that kind of scenario? Thank you.
Thank you for the question. I think that the dividend policy will not change. We're executing it. One way to look at the policy is saying, "I want to get to a net debt of $3.8 billion at the end of this year and $3 billion in the end of next year." This is one way of looking at the policy. We're moving in that direction. Our net debt is $4 billion. By year-end, we'll pay $550 million, $600 million to Equinor. We'll generate cash. We'll get to the $3.8 billion of net debt. We will distribute or we'll buy back what we need to get to $3 billion net debt next year. Our target is unchanged.
The flip side of the coin is to say that we'll get at 0.8x by the end of next year, getting to 0.8 net debt- over- EBITDA ratio with oil at $80, which is equivalent to one time at oil prices at $60. It doesn't really change. It's just a matter of being cautious. Not that any opportunities will arise. We're not thinking about that. What we are seeing is that oil prices increase 10, then fall six, and then increase again nine or 10, and it's fluctuating, the board of directors is being more cautious. They said, "Let's wait a little longer just to have a little bit more peace of mind." Because once we adopt a policy, you will be pressuring us about it. Not that we are not executing the policy. We are executing the policy exactly. There is no discussion.
Given the scenario, which is so complex, so volatile, we wanted to wait a little. Nothing will change. We'll continue to buy back. We have 9% of the company. Today, we are not buying back, but we will resume the buyback soon. We'll get to 10%, we'll cancel some shares. Candidly speaking, this should be a non-event because this policy, well, sometimes you design a policy for dividends to force the management to do something the management does not want to do. This is not our case. We are all shareholders of the company. Heavy weight.
If you add up the whole management of the company, I guess that, as a group, we would be one of the biggest shareholders of the company. We are all here together with the same incentives. It's just a matter of being cautious. It's so confusing. Today is something, tomorrow it's something else. Keep thinking about what the Americans call unforeseen consequences. We're executing the policy, but everything is so volatile that we said, "Okay, let's wait." Let's wait for this moment to pass, and then we'll disclose it. Because it has no practical effect now, because now we are buying back shares. It's not like formally adopting the policy will change anything. That's it.
Okay. Very clear. Thank you very much.
Thank you.
Thank you, Yuri. Next question from Leonardo Marcondes with Bank of America. Leo, go ahead. Hi there.
Good afternoon. Thank you for taking my question. I just have one question. It is about Wahoo. You mentioned the productivity of the wells came a little higher than expected. The reservoir is in keeping with the expectation. I'd like perhaps to look at the other side. I'd like to understand if there was any bigger challenge that you encountered in addition to what was expected when you considered the project initially. Also about depletion. It was mentioned that we should start seeing some level of depletion, perhaps in the coming months. I'd like to know whether you can give us some indication of what the depletion might be in the short term. I know that there is a certification, perhaps if you have a more up-to-date number or perhaps a more efficient study, that would help us understand the reservoir better. Thank you.
Sure. Actually, I think that, well, perhaps, yeah, we have been a little more cautious than we could have been. We could have been perhaps a little more aggressive in the project as a whole in terms of floor assurance, et cetera. Everything we did had a margin because this was the first big project for us. We did the project with three lines. We could have done it with one or two lines. We did it with three. Not that we're not going to use them. We are, we could have done it in phases. We could have started with a slightly more slim project we've done that. These are our lessons learned for the future. If we made a mistake, we made a mistake because we were too cautious. I'm happy with that because the field is producing really well.
As for depletion, when I say it is in keeping with what was expected, it is according to the stratification, and this is the best data for us to use. I don't want to reinvent the wheel. When I say that the well had a higher productivity and the reservoir as well, imagine I have a car that can ride at more than 100 km per hour, the speed limit is 100 km per hour. It's the same thing for the well. If the well can produce 40,000 bpd, we're going to produce 40,000 bpd. I know it's kind of a silly analogy, I think it's the best analogy we can have. We have to use the data from the stratification. To me, this was a very good project.
We had that additional difficulty in the end with the vessel that was going to lay for the last well, and it started failing. That actually corroborated our thesis of verticalization. That was the only bigger hiccup that we had.
All right. Very clear. Thank you very much.
Next question from Bruno Montanari with Morgan Stanley. Go ahead, Bruno.
Good afternoon, thank you for taking my questions. I just have a follow-up of two questions. Going back to the question on CapEx, if I'm looking at the numbers correctly, in the first half, due to your cash flow, you invested close to $595 million. In the second half, in your cash view, you would only have $100 million to be dispersed from now to the end of the year? My first question is on Peregrino. Now that you are in the Isolado reservoir, do you see any upsides that would allow you to be slightly above 100,000 bbl a day? Whether there is any incremental item that we should look at at Peregrino, maybe not now, but throughout the development of the asset. On the demand side, my second question, do you see any signs of improvement in China's interest, or is still totally out of the market?
Thank you. Bruno. Jean will talk about Peregrino, and Bruno will talk about China. CapEx, the calculation is not this one. You have to remove the reimbursement of gas import from CapEx. This should give you something around $80 million, meaning that you generate an additional $80 million. There is something also related to inventory reclassification for CapEx. I think the main thing is the issue of the gas import that we will be reimbursed to compensate for the CapEx that we already spent. Jean can talk about China.
Peregrino, the Isolado reservoir was a pleasant surprise. Bear in mind that the vessel produces a maximum of 100,000 bpd , we are seeking to get average production of 100,000 bpd . We may produce 103,000 bpd , 104,000 bpd , or slightly below that. The new wells can ensure a level closer to 100,000 bpd for a longer period of time. You won't see a production that probably surpasses 105,000 bpd or 106,000 bpd . In the production, on the other hand, will not go much lower than 97,000 bpd .
The Peregrino guidance is close to 100,000 bbl. About this last part, as Roberto said, China is no longer importing derivatives, they reduce the consumption of additional byproducts. In addition to that, they had also other state companies that are no longer sending oil there, they reduce their purchases. They are still buying. Occasionally at lower levels. They didn't disappear completely.
They disappear, sometimes they come back, mostly due to flat price when we see that China is reducing its stake. They are still in the game, volumes are down.
Thank you.
Thank you, Bruno. Our next question is from Bruno Amorim with Goldman Sachs. Go ahead, Bruno.
Good afternoon. Roberto, tell me how you see the M&A market currently given the conflicts in Iran. Are conversations still going? Do you see any structural changes in the M&A market as a consequence of the conflict? Some Asian countries may probably look for other assets outside the Middle East to reduce the geopolitical risk. On the other hand, there are other players that may venture into new frontiers. They want to diversify their portfolio. Smaller assets will probably be out in the market. How do you see the M&A market?
Precisely now at day zero, every time there is an extreme event, the market disappears, it's very difficult to engage in any transaction. Now I am saying, higher level, not even higher, because I don't even know how much oil is now, imagine an oil closer to $90 bbl. From $90 bbl on, the M&A market starts to decline because there is a big gap between the buyer and the seller. The buyer wants to buy at $90 bbl, and says, "I can't sell you at $90 bbl," but look at how things will move on in a timeline. The same thing happens when the price is very low, like it goes down to $50 bbl. This is the moment where we find ourselves now. I don't know how much the oil price is. I think it's 70-some.
You may say, okay, 70 is a normal number, but then there is volatility that may come as an impediment for any business, or maybe it can go down to 69. I think in the future, I don't know whether it will happen through the M&A market, but I believe that especially Asian countries, they will probably rethink their oil sourcing. This is just my own speculation, but I think that countries will think more about the level of risk they accept in the Middle East. Depending on what the solution is, but obviously it will be something debatable. I don't know whether this will change the M&A market.
I don't know whether you will see a larger number of Asian companies, but these guys do not compete with us too much because we are operators, and usually these are large companies or branches of large companies that come up with a non-op. They don't really compete with us. This debate will pop up at some point, but I don't know where this will lead us. I have no expectation, but in my view, I don't think any of that should compete with us. The other discussion has to do with storage. Would it make sense to have more storage in Asia and where? So on.
Perfect. Thank you.
Thank you, Bruno. Our last question from Vinícius Andrade with Safra. Vinícius , go ahead.
Hi, Roberto and the whole team. Good afternoon. I'd like to go back to one point related to the remuneration policy. Basically, I would like to know whether the result of the upcoming elections in Brazil can change in any relevant way, any aspects of the policy you're working on.
When we spoke about a remuneration policy, we knew that we would have elections in Brazil, and we already imagined that this was going to be a very polarized election, and the policy is sufficiently flexible to deal with that. The board of directors can, if we run into an M&A opportunity, can tell us to suspend the distribution so that the company can accumulate cash to handle any investment opportunity that the board considers interesting. The way it is written gives us sufficient flexibility to deal with the elections. We don't really know what can happen in terms of new assets, perhaps in a new administration. I don't know whether there could be a mature asset for sale by Petrobras. You never know.
The policy addresses that independently from the elections. I don't want to say that depending on the election results, that this or that will happen. No. It will really depend on any opportunities for mergers and acquisitions. We will have different opinions about M&A opportunities depending on the moment we're living in Brazil, but the policy is flexible enough for us to embrace all that.
Perfect. Thank you very much.
Thank you, Vinícius . With this, we are ending the question-and-answer session. I would like to turn the floor now to Roberto for his final statements.
I just want to thank everyone. We had a lot of participants joining us today. As always, I would like to thank you for the way you welcome our company, and I would like to thank again our team. Like I said, it was not an easy game, but we had a good result, and I'll see you in the next quarter. Thank you very much