Statements. Future results, performance, or achievements may contain words that may not be disclosed. Good morning.
Good morning. Thank you very much for attending the meeting today.
[Foreign language]
This is our second quarter presentation for 2025. As you could all see, this was a quarter that was very challenging in regard to the macroeconomic scenario, with a 10% drop in the average numbers before the valuation and devaluation of the currencies involved. When we compare quarter over quarter, the difference is minus 6% total of BRL 806 million over the period. The lifting cost is remaining stable when compared to the previous quarter. In absolute numbers, the lifting cost had a small reduction of around 2% when compared to the previous quarter, with no effect in the dollar due to the currency exchange.
For this reason, the EBITDA for the quarter was BRL 374 million, with a reduction in 12% compared to the previous quarter. When compared to the second quarter last year, it was minus 16%. The net income had an increase of 5% when compared to 1Q25, and a 75% increase when compared year- over- year. Total BRL 238 million. The net debt [Foreign language] depicts a debt of BRL 1.3 billion. The third debt transition is of around BRL 500 million, at a very good cost of 5.66% in the year. In regard to the operational aspect of the company, the production was 27.4 bbl of oil equivalent per day, pretty flat when compared to the previous quarter, but an increase when in comparison to the same period last year. The acquisition of asset was a 50% stake.
Now, in June, the company received the approval from CADE for the acquisition and paid an additional 25% in the transaction. Of course, we started with the operation with gaining efficiency of the gas pipeline in June, generating additional income for the company. Last but not least, it's the fourth report on sustainability that we issue, which reinforces our commitment with the ESG goals. We are going to detail it further in the presentation. [Foreign language] The average production for the quarter was stable when compared to the previous scenario, but we had some advancements. [Foreign language] The workover comparison totaled more than 16 projects delivered in the last semester. Now, in comparison to the perforation and drilling activity, we had a result in the activity: 80% of all of the drilling happened for the first semester, with nine producing wells, two injection wells, and one is at Sabiá and one in Tiê.
We've also started with the deep wells testing. The three of them are now under formation testing at the moment. It's important to highlight the first results with these deep wells. Of course, more and more, it is important that for 2025, the strategy is the development of search reserves. The deep wells have very good potentials in the 3P curve in our reservoir wells. These are for the expansion of what we have at PetroReconcavo. These reservoirs have been discovered by Petrobras and abandoned due to cost limitations. The three drilled wells in the last months are part of an appraisal plan that envisions to determine better asset for the company to have that producing in the next years. We were successful with these wells [Foreign language] and with the confirmation according to the seismic interpretation that we have.
An important part of the equation will be determined in the next month with the formation testing we are carrying out in each of these reservoir areas so that we can have the final answers in regard to the potential of production of these wells, and then further for us to be able to develop these programs in the next years. In the second semester of 2025, we are going to conclude another well in Tiê, and we are going to drill two horizontal wells, one in Potiguar and one in Bahia. It's important to emphasize that the same way we worked with the deep wells, the horizontal wells represent an important technological milestone for the company, especially because these metrics will maximize the contact with the company.
This is going to promote for a better draining area, and it's going to be good for the recovery of such reservoirs, the same way we've seen in other sedimentary basins in other parts of the world. In regard to CapEx and drilling for the next semester, we can say that the last semester had BRL 307 million capacity increase when compared to the previous one that had much less. BRL 509,000 were destined for the reserves development accumulated over the year. In the first semester, we've invested BRL 204,000 with 20 interventions per year, and which we find adequate. We would like to maintain that for the next few months until the end of the year. Focus on immediate incremental activities would be the LTX for dwelling areas in Forcilia, keeping the strategy of expansion and secondary recovery for the company.
BRL 204 million in recovery, BRL 84 million in deep wells drilling, and BRL 120 million in the most traditional campaigns of drilling in the company. The development focus for this campaign was with Tiê and Sabiá areas. The investment totaled BRL 91 million in facilities, which represent investments with asset integration, water injection, and operational improvement. It's important to emphasize that BRL 37 million for the CapEx for the semester was regarded to the 50% of Guamaré, the acquisition of 50% of that plant, mitigation of delivery risks, and better monetizing of gas. As far as risk is concerned, we believe it's an important part of the resilient plan, especially because it involves air and the processing of everything that we have in the fields. We are now going to share the cost of these air management, and this is going to improve the line for the future.
The company will be able to monetize the CC5 Plus through better cost contracts. I will now give the floor to Rafael so that he can wrap up the presentation.
Thank you, Firmo, and good morning, everyone.
[Foreign language]
The second semester for 2025, we had a net revenue of BRL 806 million, which represents a reduction in 6% versus the previous semester. This drop is due to the macroeconomic scenario with a negative impact of 13% with 10% in Brent and 3% with the dollar. Apart from this, we also had an increase of 17% in the discount for the crude oil in our contracts. However, these effects have been partially mitigated and compensated because of two factors. First, we've built 21,800 bbl from accumulated inventory from the first semester due to the stops of delivery from Potiguar and Clara Camarão. It's important to emphasize one important factor.
It was a practical test of the evolution and effectiveness of these resilience plans that we have. In regard to our storage and delivery, we had two idle moments in the refinery, but this didn't really mean that the production was interrupted. Another important aspect was the best use of the crude oil and the natural gas with Carnaúba. [Foreign language] Another relevant point is that due to an increase of uncertainty in this scenario, we hired new hedge instruments for the crude oil, protecting ourselves up until 2026, promoting better predictability and protection for the cash flow in the future. According to the production that we have for the second quarter of second semester 2025, 20% of the production is hedged. With natural gas, 88% of the production is fixed or minimum price contracts, functioning with natural hedge and ensuring predictability in view of the variations of the Brent.
With all of these protections combined, 55% of the company is backed up according to the volatility of the Brent. Now, in regard to costs, in this quarter, we see stability in our lifting costs per bbl. This is a result of the reduction of the BRL 4 million, which is partially offset by the depreciation of the U.S. dollar. In regard to the royalties, we saw a drop in comparison to the previous quarter due to the dollar variation. The costs of midstream and the purchasing of gas result in a higher gas processing and transportation volumes, and also a reduced third-party gas purchases, which is a reflection in regard to the production of our plants in the center of Brazil. In regard to G&A, we had an increase, which is explained especially due to the seasonal effect of the distribution of the long-term incentives in the company.
The registered EBITDA was BRL 374 million, which is a reduction when compared to the previous quarter. [Foreign language] Even though the macroeconomic scenario has been a problem, we still have good numbers for the EBITDA. We now analyze the costs per bbl, the net back for the second quarter. The net revenue is BRL 56.52 per equivalent bbl, considering our mix of product, 60% crude oil and 40% natural gas. The difference between this net revenue and the prices within Brent reflects the differences in price with the crude oil, the gas, and the discount, considering the merchandising and selling of these products. They are all calculated according to the whole volume for the quarter. We have gotten to a break-even cash cost of BRL 27.8 per BOE, with a margin of BRL 28.7 per bbl.
When compared to the first quarter of 2025, whereas Brent dropped around BRL 8 per bbl in the period, our drop was of around BRL 4 per bbl only. In this quarter, we had a cash generation impacted of BRL 66 million, impacted by the result of payment of interest compensated by the swap of derivatives. When comparing the semesters and quarters, of course, you're going to see the numbers are going to be geopartised, but they are concentrated in the second quarter and fourth quarter of each year, and this happens yearly. The total CapEx was BRL 367 million. BRL 37 million referred to the payment of the first installment of the acquisition of that 50% of Brava and Guamaré. The other BRL 330 million referred to the more traditional investments coming from the company, concentrating mostly on drilling for 2025, as mentioned before by Firmo.
Now, with this, we register a free cash generation of BRL 100 million negative. We have paid BRL 260 million in interest, representing BRL 0.90 per share. Apart from this, we have added to the repurchasing of the remaining shares. I would like to wrap my part by highlighting two important factors concerning our financial strategy: a capital structure with low leverage and a lower and lower cost of capital. BRL 1.3 billion on debt with a debt leverage of over EBITDA in the last 12 months, which reinforces how strong we are and gives us a lot of resilience and flexibility so that we can make the most of future possibilities. [Foreign language] A debenture issuance has been decreased, especially because of the U.S. dollar denominated swap at a cost of 5.66% per year.
It's one of the lowest in the sector, and it's only comparable to companies that are much larger than us, which reinforces the credibility of our company before the market and also the trust in our ability to generate cash in the future. As a result, we are going to resolve the debt, which has been dropping consistently year- over- year, and we have now gotten 6.5% a year, and it's a benchmark for the company with the competition. The duration has been extended to four years, with first amortization happening in 2028, which is going to allow for more financial flexibility with solid capital structure that is also going to be sustainable. I will now give the floor to Firmo again.
Thank you, Rafael. Just to wrap this up, I would like to highlight some of the most important advancements in our fourth sustainability report that was disclosed in June-July, which reinforces how much we want to be transparent and in tune with the ESG goals.
[Foreign language]
We are resilient, connected to the territories where we have our activities. We generate more than 20,000 direct and indirect job positions, with 93% of our employees being located in the Northeast region. We benefit more than 17,000 people. They are reached through our social programs with several activities in the area, which represents a growth when compared to the previous quarter. These milestones, and among them, I can say that we have the project called Educar Pra Valer that happens in Bahia. We are also considered for a certification of Great Place to Work.
We are listed among the most pleasant companies to work for, and we are in the top 10. It just comes to show how strong our companies are generating socioeconomic development and generating job positions where, and this is happening in the Northeastern area of Brazil, which represents an important milestone. We are helping an area tackling social impact to be producing excellence, and we are now transforming the reality of several people. Thank you. I will now give the floor to Marilia so that we can get to the Q&A portion. Thank you.
Thank you, Rafael, Firmo. We are now going to start our Q&A session. I will kindly ask you to please send the questions to the Q&A. Considering that the questions are very similar, I will try my best to gather them. The first one is from Ricardo Denon, and I'm going to probably answer more questions.
In this semester, we have a more elevated CapEx due to the advancement of drilling of new wells. With this final drilling moment, what can we expect in terms of cash and CapEx for this year? Also including Renault's question, how much do you think you're going to spend in investments and total CapEx year to date except midstream?
[Foreign language]
How the certification and the exploratory terms are going to be there?
Okay. Thank you. I'm Thiago. Good morning. Thank you for the question. I believe that what we wanted to give visibility to in this period [Foreign language] would be in regard to the alternatives of cash allocation, capital allocation. We've made a decision last year. That was last year. We've included this in this year, which was to invest in a project in which we believe. We believe the project to have a very good value for the company.
It's a project that we've been preparing for years so that we could be ready for it, which is the entrance of the company into an area where we could dominate efficiency and factoring with gas here in Bahia with Miranda Profundo. This is a project in which we are looking for reserves that are out of 2P and some of them in 3P so that we could enable the company for this future potential because this is going to generate a lot of value for the company. This was a strategic decision we've made, and this was included in the budget because we've been talking about this, considering the market. We were able to work with the first three wells in the first semester, and this caused a very good impact of around BRL 208 million for this CapEx.
Of course, this CapEx is, of course, I cannot call this one-off, but right now it is. [Foreign language] It will really depend on the decisions we are going to make further on in regard to these reserves so that we can outline for the next phase. This is a CapEx that is not going to be part of the second semester. The development of Tiê and Sabiá happened in the first semester, and we are not going to have further drilling in those areas. We are done with Tiê this month. For the second semester, we are going to have a CapEx that's going to be basically a workover CapEx. We consider this to be an acceptable execution in the level we had envisioned, and we are going to keep this for the next semester. The traditional CapEx concerning integrity, facility is what we are going to move forward with.
My expectations for the second semester is that when we are done with this, [Foreign language] we are going to have a CapEx that is similar to what we had last year. Last year, we spent around BRL 950 million, and we discounted some millions. We are now going to have an outline that is going to depict the same thing for this year. We expect to close CapEx in the same level we closed CapEx last year. Answering your questions, this discounts the midstream and the investment midstream we had. This is the expectations. We're going to generate cash, and we're going to have a lower level of investment. This is the structure we are envisioning for the year, and this is what we've designed for our budget this year. This is exactly what we are going to, we are exactly what we are doing.
Our intention here is for the second semester to have a much more reduced CapEx, especially because we are now done with several projects. The production was recovering in December all the way to April, and then it plateaued. What is the perspective in regard to the production for the next quarters and for 2026? [Foreign language] Our expectations for production are the following. We had outlined and talked about 10% for the year. Obviously, when we get to July, the average is around 4%. Our expectation is lower now. The projects and the equation, see, according to what we've been discussing for PetroReconcavo, it's understood and well discussed. First important factor that we consider, especially from last year on, is to reestablish the execution of the company.
We had an execution of our workover and a well service that definitely needed a bolder system for capital allocation, planning, and a system that could bring us to the level that we have finally reached this semester. [Foreign language] To be able to repair everything is what we wanted. The workover with a capacity to evaluate and recover capital was one of the most important achievements we had. This brought us to a level in which production was stabilized, and through projects like Tiê or other projects, we could have the production growing. The second part of this planning was in regard to the production work time or resilience. We had to ensure that we didn't have a long shutdown in any of the fields of operation. This is one of the most important topics we've been working with, especially last year.
I believe that the decision-making in regard to the gas streaming and the decisions, just like Rafael said, storage, for example, and other investments we had and we had to adapt, we believe we are in a production level that is much better than we had before. However, we still have some difficulties, as you have seen, in regard to, for example, Remanso. Although we only had a stopover on idle seven days, ANP replied to it very fast to the documentations that we had. Of course, the idle moment was short, but we had an impact. We have other small impacts in production that we need to address. My expectation is that while we have achieved the level of growth we were looking for, it happened, and it happened in a more harmonic way, in a more predictable fashion too.
This was the maximum we could grow back then, but we grew solid and very balanced. This is what we envision for the future. Still, of course, we have several projects to be in production, but we would like to keep on working on this in regard to our expectations. Of course, we don't have that 10% expectations anymore, but we do have a maintenance and production for the second semester. We have expectations of designing this equation for next year and communicating to you when the budget is approved for the year before the board.
Kohlhado from Safra, could you please talk about what caused the difference in cost and deadline in deep wells?
[Foreign language]
Are these questions okay to be addressed? What about the learning curve? Should we think of effective cost and deadlines for this type of cost?
Another question on the way, what is the budget for the future and what can you say about the findings?
Very good question. I will be very careful to answer this question. I cannot talk about the future of this type of development. Although this development is not exploratory, these are reserves that Petrobras had before. These reserves have a much smaller level of knowledge than the ones that we drilled 15 years ago. There is a difference in, we call this appraisal in the industry, when we have a discovery, but we have to understand this better. This is a process we are working on, especially with the deep wells. Of course, these processes demand a learning curve, and the first well is never going to be a reference. This is not going to be any different.
As we are drilling and as we find things out, we had a very good performance in the last well, for example. The cost of these wells today has no relation with the reality of the cost of these wells in the future. We have to design the way the industry does. For example, Tiê. We started drilling Tiê in the middle of last year, and this year was the best cost we had when we look today and in the past. When you have a drilling campaign, we have the objective of looking for these efficiencies. With efficiencies in deep wells, they are relevant. We can drill these first wells, for example, and it was much easier for us now than it was before in the past. Some of them took months, and these ones took us weeks, six weeks.
The constant challenge is to determine the design for the future. You ask for the design for the future. The answer is we do not have the definition, not so now. We have relevant work to carry out for the next months. This is for us to understand the potential of these wells. At the same time, we need to outline a plan for the future. This plan is going to be designed after the drilling is done. Last year, remember when we told you we are going to drill deep wells and we are going to drill horizontal wells? This means that the bucket, the dedicated CapEx bucket for the company, would have two different components when compared to the previous components because they are not conventional wells, you see.
This is going to be an equation that is going to, of course, we are going to give you transparency on what we do, but we have to keep on balancing investments because they are absolutely necessary for the development of the current reserves and the capacity that we have on the Brazilian old char, which is unique, developed with years and years of dedication, especially with the verticalization of our services so that we can be able to drill efficiently in comparison to having that done by third parties. Today, our CapExs are like this. For next year, we don't have any CapEx allocated for this, but we need to finish the assessment of these wells. Then we outline a deep drilling for the future. We need to work on it before.
Of course, this is very relevant for the company for decision-making here with the management and the board. This was our year in which we had to understand these horizons. Deep wells are done with. We are now going to the second part, which is the execution of these horizontal spaces, and they do depend on the productivity and the cost and everything that is involved. Of course, in a simplistic way, we can say that without using new technology and using the technology available in the world, we can completely transform the development of our reserves at PetroReconcavo. Mostly, this is what we include with cost allocation. Thank you. Eduardo Muniz from Santander. I would like to better understand what challenges for the production increase. We started operating in the end of July. I'd like to know when it's going to be actually producing.
Another question that I have here has been already answered. I would like you to tell me better what track you're talking about. One of the techniques that we use and dominate, I can say, [Foreign language] was the site tracker technique. It's a technique that can be discussed here, but it's the use of a ready dwell and a ready well, and we use this well in a different way to improve production and collection. It started with Tiê with one well, and it worked really, really well. We had some work on site tracks, and they are producing really well. I can say that this is one of the best wells we have in production, if this is the question. We are producing really well. From the production challenges, [Foreign language] I tried to bring the components to discussion. [Foreign language] For mature wells, we can say that we can operate reserves. [Foreign language]
Excellence in operation, excellence in production, that is operating all projects, and we have a pool of very rich projects, and we have to operate this pool the best way possible. We need to be compliant with them. Apart from this, learning as we work with this pool, production uptime being worked in a way so that the reserve knows what has to be done, and we are able to implement workovers and work services and drilling so that the production can be or not actually not be impacted by external problems and not ending up in any idle situation. We have to tackle situations in which we do not refrain the production from growing. Last year, we started increasing our production, but we are still far from having it all reserved as far as problems are concerned.
We still have some difficulties, as you have seen in what we reported in the last month. [Foreign language] There are several operations in place. [Foreign language] One of the most important ones that are now in place are the ones in Tiê. Before drilling, we had to implement the injection part in Tiê. Would you like to talk about Tiê? I think you have more authority to talk about this.
Thank you, Firmo. I'll switch to English.
The initial drilling results, as we have to you and seen in the past, have been very, very high cost. As we look to the long sustainability of that reservoir, we need to migrate rapidly into pressure maintenance and sustainability of that reservoir, as well as implementation of secondary recovery methodologies there that will maximize our reserve recovery and ensure long-term production from both of the main reservoirs in that field. This is a practice and an ability that PetroReconcavo has had during its entire history. We have done this repeatedly over the last 25 years in multiple reservoirs and in multiple fields where we have initially had strong success in finding pockets of oil and optimizing the existing production, then following up with intensive water injection, repressurization, and the ability to maximize the reserve recoveries in these reservoirs.
Tiê is in that process, and we have strong convictions that it will work as well as it has in other fields and reservoirs that we have in the area.
[Foreign language]
Just to add to it, Tiê, in June, we got to that injection level so that we could really deliver everything that was designed for Tiê's development according to what we said in the previous quarter. We see that we are delivering little by little according to plan so that we can maintain this project sustainable. Our equation is an equation of understanding of each of these reserves, the understanding of the execution of such tasks, and our ability. I cannot find a better word than ability to work to use with you. We are at a level in which we are able to deliver in a reliable fashion, month over month, and I think that this is the secret to success. This is what we've been implementing. I've been here for 18 months with the team, and this is what we've been pursuing. We now see the results.
Of course, the expectation is that this is only the beginning of this process, a process of transformation that is going to allow for future growth that is going to come bold for the company.
Thank you. Next question is from Monique from Itaú in regard to workovers. There has been an intensification of workover with a much larger impact programs in regard to development CapEx. The result, has it been reflecting in the semester, or are you expecting this to be reflecting in the next quarter?
Thank you for your question, Monique. Definitely. Part of it is starting to come. We are starting to see in several reserves and in several fields
[Foreign language]
this recovery of growth, which is a challenge for a mature or to a declined field. Workover is relevant, and we've been pursuing this. I just would like to call the attention to one thing.
We are not increasing workover. We are actually getting to the workover level that we consider correct for the company. I don't know if you remember, but the harder challenges were months in which we had 10 workovers a month. To us, this is critical, very critical, because the field decline is going to be overcoming it. Finally, we are going to get to the level to which we are able to deliver what the reserve is ready for delivery. Apart from working on the recoveries at the speed we need, one thing we've developed and is helping us is the level of planning and the level of visibility and assessment. I mentioned before that one of my major concerns was the allocation of capital.
Most importantly, this company operates at a high-level operation where it has the ability to fastly understand how the capital allocation is and how it is getting back to cost per workover and bbl per workover. This level of granularity, which we've achieved and we've implemented and we've been using monthly, is working. I can say that this is relevant so that the company can be confident the way it is today. It will also come with a very mature level of revision led by Rafael and the team that is looking into this investment with very, very much in detail so that we can put our hearts at ease, understanding that we are speeding up, but we are speeding up strong and steady.
We are seeing this level of recovery, not only its increase and the cost of increase is under control, but also the bbl per workover numbers are increasing, which is very relevant for us. This is a great achievement for us. It took us quite some time, but now we are confident that we are on the right track and looking forward to. Like to add to it.
[Foreign language]
Now, I just would like to say that by answering Monique's question, what is in the long term and in the midterm is exactly what you said. Water injection is one thing. We had spoken about this part of the investment are dedicated to water injection in several fields. It's the type of project that has a midterm, long-term return. As we start injecting more and producing more, we repressure the reserve, and it promotes for better sustainability of production.
Next question is from Luiz Carvalho BTG. The company has a very defensive profile with low leverage, mediated production, low cost of operation, but in this semester, I see some cash burn. How can you give more visibility in regard to your cash flow for the next quarters?
I tried to describe it clearly. Yes, it was a quarter in which we had a lot of investment, especially grounded on, there were no CapEx overrun in any of the lines. We invested in a bucket, which was very significant to us, the deep wells, and of course, this accelerated CapEx. This is natural. Our expectation for the second semester, of course, it depends on the price of crude oil. To us, it's not going to be as robust as in the previous quarters, but we need to produce cash.
We are in this phase in which the company today does not have any acquisition payment to be done in the future, no giant bills to pay, but it's positive. [Foreign language] Quarter- over- quarter, we can say this was a strategic decision. It's going to bring a lot of return to the company because the dominance of these reserves and the generation of new reserves is going to promote for a cash increase, especially with the deep wells. There is also a component to it, which is much smaller. We are just going to work on two different wells. The planning on two wells for the second semester is a much lower CapEx when compared to the first semester, and it's going to generate voter cash. That really depends on the macroeconomic scenario and our capacity for growth.
Production growth and maintaining our macroeconomic scenario, we believe that we have all of the possibilities to generate cash in the end of the year.
Gabriel Baja from Citi. In view of the second semester results reflecting lower crude oil prices, I'd like to understand this scenario. Are there initiatives for the company to increase efficiency or cost reduction when compared to the lifting cost and CapEx? In your view, do you believe we can have lower numbers for the next semester, close to BRL 13 per bbl? What do you think?
I think that there are several components to the question. Let me talk about the lifting cost. The company's lifting cost when compared to last year is higher. This was a strategic decision we've made. I gave an example the way I understood it.
This is a company that was growing a lot, but needed to work better on the foundation concerning contingency in production, and we've invested a lot last year. We invested a lot last year, creating a maintenance department and asset integrity, looking for this specific balance, and this is what we pursue. We also invest on the electric resilience. We had a much lesser effect this year with the investment on what we call our climate management assets. It's resilience, production uptime, and investment in lifting costs. I don't have expectations on the lifting costs that's going to be materially smaller than last year, but the pursuit of efficiency is going to be more organic and more harmonic. Essentially, we are going to maintain production so that the lifting cost is going to be lower. Now, there's no news to talk about right now in this regard.
There's no specific project to change lifting costs. It's going to be a consequence of what we've been doing. As we see in this quarter, we see the numbers changing every quarter. In this quarter, we had a currency exchange effect. In cost, in reals, it's a little bit smaller than last semester. This is what is going to happen. It's going to be more robust and more organic. We are already a benchmark in lifting costs in Brazil for onshore operations, but we are not here sitting and standing waiting for something to happen. We are looking for that efficiency organically. Would anyone like to add to it in regard to all the costs?
I agree with you. We don't see a big variation.
Conchiné is also working some stability, but every time the oil numbers are shaken, we try our best to work efficiently and eliminate costs and eliminate the nice-to-have as well. There are great expectations we have, but not large variations. It's going to be better than the previous semester, as you mentioned.
I'm going to collect all questions in one.
[Foreign language]
In regard to the deal closing, when should we see impacts in the company after the conclusion of this deal? Is there a firm group for this transition for the conclusion of the deal? After the deal, I see, of course.
In regard to the deal,
[Foreign language]
this was one of the most obvious ones. It was one of the hardest ones, I can say. I will hand over to the one that actually solved the problem and signed the acquisition to talk.
Good morning. The process is moving forward as expected. In July, we had approval with no CADE restrictions to move forward to work on the consultation and creation of the consortium. Yes, we already have a team. Within PetroReconcavo, we have one dedicated structure for this type of acquisition, and we have been able to have improvements semester over semester. The expectation is that we work in the future with a multidisciplinary team, and we are already working on it, working on the management, on the putting together of a team that's going to work on this, working on earnings jointly. In regard to the expectations, we intend to close this transaction in the third quarter, and immediately, we should be able to work on a cost model.
Instead of having the DOI and the delivering and processing of our products, we are going to actually work on the costs, and we are going to have an efficiency curve. I hope that after this deal closing, we are going to see a reduction in the midstream cost at Potiguar with gas.
Next question is in regard to Bahia- Terra.
[Foreign language]
Have you considered rethinking your activities in Bahia -Terra? Maybe working with third parties? Are you going to sell it? What's going to happen? In regard to working with third parties, with Petrobras, would this be a business model you have interested or not?
I believe that this is a traffic question, actually. I have a very strong conviction in regard to onshore and how we are generating value as companies, and I include Petrobras when I say companies, extending these fields.
[Foreing language]
We have discussed that a pungent environment, a plural environment, would bring a lot of benefit. We had the ability to have that measured, actually, with one study we are carrying out with FIEBI, looking into the social aspects of this project to the communities. Of course, this is positive for Brazil and for the communities where the project is inserted in the Northeast region of Brazil. It's not only Petrobras. Petrobras has this ability, and I've been working in this industry for over 30 years, and I've seen this. They're successful in every area they work with. It is legit that they decide to work Bahia fields the way they want, whether on themselves or with third parties. This legitimacy is fine.
Of course, we have the interest, and we have publicly shown our interest to integrate Bahia fields within our operations because we believe that when we work together, especially in regard to the equipment efficiency, structural efficiency, everything's going to increase, especially if we integrate this to PetroReconcavo. This is an opportunity that has to be decided by Petrobras. They have to decide. Of course, we are willing. We are an innovative company. We have helped design different business models for the market. The discussions with partners, Petrobras and other partners on the onshore market was to look for a better business model that would benefit everyone so that both can do business. Although the model is different and the Brazilian onshore is new, maybe there is an adaptation model. This is a widely used model all over the world.
There are several contracts that can meet the need of all partners involved needing to develop everything. To give you a simplistic answer is, yes. Of course, we are interested, and we discuss this all the time, not only with Petrobras, but with other partners. We discuss what to do. Maybe it's a purchase of 50% with shared operation, the same way we did in Guamaré. Maybe a definite purchase or a farm in or an exclusive field, the same way we do with Tartaruga in Petrobras. There is a realm of opportunities here. Of course, we do have the interest, and obviously, PetroReconcavo's interest is known to everybody. We are the best operators of these types of fields in Bahia onshore. Just to wrap, I left this question as the last one.
[Foreign language]
Marcia from EBS. What do you envision five years from now? Does it make sense to have better production considering we are high in numbers and the distribution of dividends? How do you envision this within 10 years?
Thank you very much for your question. According to my perspective, and of course, this needs to be well balanced to what is expected by the board, I can say that it is all fed by the discussions we've been having for the last 18 months. My perspective, fed by working with you all shoulder- to- shoulder, is definitely the fact that we are willing to grow [Foreign language] and expect. We do not have the expectations of aligning production and having that flat for the next years. We need to do this in balance with discipline in capital allocation to extract maximum value for everyone involved, for all stakeholders, and this is what we envision.
The company has production alternatives and growth intentions that are very well mapped, but with a lot of potential. We also have the possibility of transforming the reserve development technologically with better results, fast results. This is what we are looking for. Any expectations within organic growth with reserves within our ring fence, sub-explored or not even explored. The conditions of our cash and our finance allow us for a very good M&A, putting us as the front runner in the M&A. We have several other alternatives here, definitely. My perspective, so that I can answer your question, is this is a company that we are in that is envisioning growth, not stability of production, but we need to be anchored in reality, which is now brutal. Capital allocation is brutal today.
We are doing this after very long and bold discussions with the board, showing the board exactly where the capital should or need to be allocated. Would anyone like to add to it? I believe we share the same thought, right? Thank you very much. We have more questions, but please feel free to contact our research and our results and investment team. The call is now ended. Thank you very much.