Good morning, ladies and gentlemen. Welcome to the Results First Quarter 2023 at PetroRecôncavo. I'm Marcelo, here with us for this presentation, Executive Directors Magalhães, Director; Troy Finney, Operation; Cunha, Financial and Investor Relations; Moreira, Trading and New Business; and Araujo, People Management and Sustainability. This video conference is being recorded, available at the IR site of the company. If you need simultaneous translation, we have available on interpretation at Zoom toolbar. If you listen to the English, you can silent the original audio. In the end, we open up the floor for Q&A. Please write your question and use the Q&A box on the screen.
As we announce your name to ask your question, you can open up your mic. If you do not open up your mic, write your questions without the mic. Before resuming, we would like to clarify that the statements here during this video call about the business perspective of the company estimates and financial goals are based on beliefs of PetroRecôncavo Board of Directors and information that is available currently for the company. Future foresees risk. We have the industry and economic factors that may affect the result of the company, bringing different results that we are expressing here. I pass the floor to Mr. Magalhães, the President, for his initial consideration. Please, Marcelo.
Thank you so much. Good afternoon to all the participants. It's a pleasure to be here presenting the quarterly results at PetroRecôncavo. I will open up this call already with a statement that the quarter, I would say, was atypical, and the company faced some headwinds, some factors, external or internal factors, making our performance in this quarter was beyond what the company is going to deliver in the future, behind some external factors, not controlled factors, like the drop of the average price of Brent in the international market in three months, 7%.
We understand and we follow in this aspect, we really know the capacity and the agility that this company has to adjust the level of execution and the investment plan, adjusting to these realities and price variability. Some other factors, external factors, not controllable, such as the worse in the yield of gas according to external factors, the way the company trades gas to clients using infrastructure is not managed by the company. Throughout this quarter, because of several problems, there was a drop in the performance. These factors are more external factors, but they bring information that we can use in the future to plan ahead and improve the execution.
Other internal factors already inside what the company sees and take decisions for a while to improve the execution contributed. In this quarter, we did not have a cash flow generation that was so strong as we could have. Although we had an under-execution in the investment plan connected to the lack of availability of equipment, and this has a strong relationship with delays in third-party equipment that the company uses temporarily. In the meantime, we bring our own equipment to consolidate our execution. Somehow, these delays, although they gave an impact in this quarter, they confirm, in our point of view, the competitive, that is, the verticalization strategy and the company's capacity of execution overcomes what's available in the Brazilian market currently.
Although this under-execution, there were other aspects, especially the preparation phase of the company for a higher level of investments, and this brings investments in projects in the cities that are not ready to flow the production. Purchasing and importing and adjusting the equipment in the verticalized structure. The quarter was atypical with lots of activities. We are closer and closer to see ourselves in a position of full internal capacity with our teams and our own equipment. We are going to have it throughout the next quarters. Although all the difficulties we faced, we see our business that is in a positive way.
We trust that this company, not only did we have the best offshore and mature basin, but we also have the best capacity executing the development plan with these assets. Curious things about this quarter, we execute less, but what we execute, they generated results. Better results than what we expected. Our management team is ready, so we can have full capacity to execute our business plan. Certainly, this will reflect upon future quarters that are more typical, and we keep on increasing our production, increasing our cash generation, and generating more and more value to our stakeholders.
I pass the floor to the directors, Troy, Rafael, and João Vitor, and they are going to deep dive the operational aspects, production, and gas trading, and also financial aspects of this quarter. Thank you so much.
Thank you, Marcelo. If we observe the production trend in the last three months, we can see three important factors. First, March, we have Maha integration, 20,000 equivalent barrels in March. The rest of the production is flat, increasing a little. The quarter, previous quarter in the end of 2022. The important factors here to mention, as Marcelo mentioned, was the delay in the beginning of drilling, the third drilling, and some blocks on delivery to production, most are caused by third parties and maintenance of lines, gas lines, and gas production lines that we are delivering in Bahia and also in Potiguar.
Next. In Potiguar, you can see that the gas is flat up to the fourth quarter 2022. In 2023, most of this was caused by third parties, maintenance in the lines, as I mentioned. In Potiguar, with the delay of the precision drilling that was outsourced to start this, instead of that, we kept this drilling, our own drilling, to drill different wells over there, delivering 11 complete areas to produce oil. We are under the conclusion of the commissioning of the third precision drilling in March. In April, we drilled our first well. Now, we are already aligned with Potiguar.
The production in Potiguar is still robust and lots of workovers showing good potential for new areas over there. Bahia and Sergipe, these assets is not like we have Baja in this production, and the focus is 100% in the first quarter in workovers. These workovers give good results, but we need to start our drilling program in the first quarter over there as planned. We are getting ready to start this next week and start drilling in Bahia with our own equipment. Next. The enlargement of our fleet, we've added one workover on the first quarter. Already planning to the end of the year with this new drilling. There's outsourced precision drilling.
We are going to add two more drills during the following quarters in this year. Three are own workovers drill, and one fracturing unit, additional unit, reaching our fleet of equipment inside PetroRecôncavo. 30 different pieces of equipment, so we can deliver the development program. This acquisition, starting with these pieces of equipment, the company will give us an excellent overview for the following years to deliver the program of development that we planned ahead for the following years. Now I pass the floor to Rafael so he can talk about CapEx.
Thank you. Good afternoon. We have a briefing table of our CapEx for this period of time. We are going to break the main components. We see that in the period, there was a gross CapEx of BRL 397 million. Part of this is because of the way we calculate the stock of the company and the use to the investments that is this characteristic in CapEx. We have the transferences showing the net CapEx, the actual CapEx of the company. This is the CapEx that we have the development of new reserves. The breakdown that we see underneath, there are three big categories: drilling of wells in the period, BRL 47 million.
Almost concentrated in Potiguar, as Troy said. Bahia, some expensive sprit drilling, preparing location, concentrated in Potiguar as in last year, the concentration was in Potiguar. We are going to start in Bahia the second quarter. BRL 99 million in workovers distributed in equivalent amounts Bahia and Potiguar. Facilities on surface, those infrastructures for flowing, separation stations, water and oil, water injection in BRL 41 million. This part of the investment is more comparable to what we have in the reserve certification. The second line is storage and fixed inversions. That's the characteristic. Great part of our stock of the company is for CapEx activities, so the category is fixed asset.
In the period, there is a growth of BRL 78 million. There is a note on the right-hand side of this presentation. This stock suffers an elevation as we bring new assets in for the company, like Miranga last year, and Maha now. It's connected to the capacity, is affected by the delay on the drilling campaign on the first quarter because of the material and the products, and anticipate the schedule when there is a mismatch affecting this. This, we reorganize the structure of the company. Logistic and material is in my structure. CFO is under my structure.
One of the objectives of this new focus on management is the optimization, more efficiency in logistics and optimizing inventory for the next quarters. The third item that is worth mentioning, we call other fixed and intangible assets. When we buy equipment and software, great part is equipment, especially as we have different drillings, precision drillings, three workovers and fracturing unit. This is fixed asset. This was planned to be more concentrated in the first semester of the year. Great part of the expenses is in the first quarter, and we still have remaining BRL 65 million for the next quarters to have this fleet fixed and engaged.
Now understand that once this cycle passes, acquisition cycle passes, the company will have the fleet necessary to meet the asset portfolio demand. We do not see the following years a need to expand this equipment concentrated in the final quarter last year and this year for the future. Next. I pass the floor to João Vitor.
Good afternoon. We all know this point of view on our system of production until we trade natural gas. I would like to highlight for the first quarter with Maha Energy Brasil as part, we have a new natural gas flow. The production was processed in one of Petrobras gas plant, but now we have rich gas traded, not connected to any pipeline to UPGN in Bahia, where we operate, but even in Sergipe. The trading reasoning passes through transport using truck, compressed natural gas traded together with CDGN, selling the final consumers. There is also when we lease the wells, a modality where we pay natural gas, electric generation, and this helps also in the stability of production.
This commercial point of view, currently, we inherit the asset. You are going to see the average payment is lower than what we paid the other natural gas lines that we sell in original contracts. They are important, especially because natural gas produced in the region is associated. For the development of the oil lines continue, we need to maintain these lines, but the strategy in this region is to optimize and align this line to the other contracts. About the other contracts, we are still selling natural gas to the distributors that we have contract, reinforcing the recent contract.
Cegás, the initial price is 3.6% of Brent migrating then after the second year of the contract to 12.6% of Brent curve. This contract has a floor price associated to a payment of oil. We have good prices in the newest contracts. I would like to highlight that March 1st, whenPetroRecôncavo we see UTG-14, there was a swap contract, lasted from January 1st, 2022 until the final day of February 2023. Now we have a permanent contract, GPA with the payment using tolling, the same way that we have in Maré, a characteristic that I will show later, this contract is better considering prices of the processing cost, as it also permits that we can trade dry gas.
We have monetization of C3+, we can use this C3+ in any future project that we have to fractionate. In case of Potiguar and other lines, we are still selling natural gas using TAG to the distributors and free consumers that we have. Here there is a point that Marcelo mentioned in the beginning, one of the extraordinary events that we consider non-recurring events, highlighting that we had in Potiguar Basin a problem that is mentioned in the fourth bullet point that was recurrent events, a non-programmed stop in the gas pipeline connecting our line to UPGN Guamaré. We produce natural gas in the wells, but we could not take it to the UPGN.
This event is non-recurrent. We do not expect this to last long term, but this is a complex problem to be solved. Our production flows every day. It was February and March. Now we also show that there is a conversion of this production, leaving the wells and taking, going to the UPGN, is underneath the average volume. We hope to solve this problem on the first semester. We are interacting with Petrobras, the current provider, the owner of this pipeline, so we can clarify this question as soon as possible. Some other events associated in Bahia impacted the use of natural gas and the availability of the gas.
The blockage of Bahia Terra hub, generating turbulences in UTG Catu. Bahia Terra is back to production, normalizing the situation. Compressor stop in UPGN. It compresses the gas in Fazenda Caruaçu. Because of stop, we had a reduction on the produced gas volume. Another aspect that happened, we need to interrupt, program interruption, the compression system integrating Miranga Tadi, reducing the gas offered for processing use. I believe the revenue and natural gas cost, I'd like to highlight this new contract on processing and flowing that we signed with Petrobras. We finished the contract in swap.
This means that we have unit costs that are lower than what we had in swap formula, respected the aspect that we have a discussion with Petrobras, the rationale of this calculation, the value that we pay to flow and process our natural gas, compare the payment, there is a perspective of generate better revenue to us when what we compare in the second semester, the first month of the year, because we have a unit cost of process with a discount offered by Petrobras. Second and third bullet point, we highlight the average cost of processing in March. Guamaré cost and already in Catu contract, we pay around 11.74 MMBtu to process and flow natural gas.
When you see next bullet, we pay around BRL 1 associated to charges. Without considering charges, we would make BRL 10.74. These charges were related to the fact that we had less gas available in the plant. We paid charges on capacity that was hired but not used. We are going to solve the points, and this level of charges is going to be reduced for numbers that are average that what we had last year. In order to honor all the commitments under the contract, even because of the stop working, we need to buy natural gas. This a swap operation.
We buy natural gas to deliver in our contracts, and this makes sense when we compare the penalty level that we had in the contracts, but it presented as a negative line throughout the first quarter 2023. Better than paying the penalty under the contract, when we see revenue on the right-hand side, there was a payment on processed gas. The green bars show the amount of gas, and in red, flexible contracts, an increase of the amount of hired area under PBGÁS and Bahiagás under the contract. This would be our contract base and the flexible contracts because of seasonality. The national market gas naturally have a seasonal reduction on the demand because of hydroelectric and internal matters.
We had average payment according to flexible contracts without price. We sell according to the demand, according to the market price, lower than what we priced in the first semester 2022. Back to Rafael, he can talk about costs.
Back to costs. The quarter we had lifting cost on production $12.92. As we mentioned earlier, this cost was received the impact of events, extraordinary events. In my calculation, something around BRL 13 million impacting this lifting cost extraordinarily, $1.10-$1.20 per barrel associated with the cost to the transport of oil with Bahia Terra blocked. Some oil pipeline here in the basin were interrupted, the flow in Recôncavo Basin. We need to take great part of this production transport using trucks from another station connected to the pipeline operating normally. In the quarter, we are going to see an impact. The expectation is to normalize the situation in May.
The expectation of resuming the other pipelines that were closed. There was a movement of inventory stocks, oil finished branded December and March, impacting BRL 6 million. There are some costs of BRL 5 million associated with the engagement of equipment. Whenever we engage a big fleet of equipment, workover, streaming, et cetera, we need to bring some operational costs in, personnel that is hired and are trained and qualified, travelings, and this bring higher cost during this pre-operational phase of the equipment . I believe if it's not for these effects, the impact would be $1 in the lifting cost.
Just to mention, we took over the operation in Maha March, and we expect that now from the second quarter on, we can pick up the benefits of the operational synergies, optimizing costs using this logistic process within Campo de Ichu in Bahia. Here we see costs and expenses. In addition to lifting costs, we also have other costs on gas. Now we open the detailed numbers, breaking purchase and swap, flow, processing, transport of gas and losses of credit. We have all these lines related to the business in midstream and flowing the gas production.
Now we present detailed lines, as João said, impacted by charges over the normal level because of the situation of not using all the higher capacity. Here we also have administrative expenses. When we add it all, what I mentioned about operational costs, expenses, for example, BRL 12 million associated with acquisition of Maha. BRL 20 million that João mentioned about gas purchase because of a failure in the flowing system that we need to purchase in the market to supply the client's demand. This is BRL 42 million of the expenses that I would say non-recurring expenses.
Not in the sense the next month they are going to be over because some things are moving to be eliminated, but not yet, as Bahia Terra is stopped and the gas pipelining Guamaré, but it's not something that is business as usual, long and mid-term. BRL 45 million, that's the effect, non-recurring effect, that we see that this EBITDA presented does not reflect the potential of the company in this period of time. Hedge since last year, we did not add a new contract, so basically we are terminating the contracts that we had existing, and these contracts now are expiring.
They have lower price. Next, three months, $51 per barrel during the pandemic that we did, but this amount is getting lower. If we see the amount of hedge for to 2023 to the end of the year represents 15% of the production of oil and gas on the first quarter, and 27% of the production just oil, removing gas. This is the volume of hedge that we still have open. Cash position, the main position of the quarter was the acquisition of Maha. We paid $95 million on the first part of acquiring Maha, and we also have working capital adjusted in the first part of the payment.
The impact is $96 million. We also paid the first part of earn-out in the end of March on the acquisition of Miranga, $27 million. We have for 2023, the second part should be paid of $55 million, Maha in August, and some installments to the end of the year on acquisitions of Miranga. The final field in Riacho da Forquilha, and the extension of the concessions in Riacho da Forquilha field.
Hi, everybody. I will talk about ESG here at the company. We are concluding one more inventory of greenhouse effect, bringing good news that our intensity of carbon has been reduced in both operations, increasing the energy volume on renewable wind that the company acquired. This willingness to get here in Northeast this energy source that we can buy in a competitive and sustainable way, it's important to counterbalance the increase of the emissions of the company because of the production. This is not avoidable in our activity.
The second quarter, we are going to issue this global reporting initiative so we can assess the actions that they need, the company needs to take in the future, helping us as managers to identify the priorities and know how to act. I believe that historically speaking, we had a big drive on social programs at the company. This DS of ESG, there is forums talking about it, validating the fact that the company that operates in the interior of Northeast, in areas with the human development index that is very low, is focusing great part of all the resources on ESG to improve the living conditions of this population and the expectation of contributing to generate the capacity and economic alternatives in these regions and these communities that we impact.
In association with Artus Brasil, we continue the program, and we also increase meaningfully the extension and the reach of our programs like Viva Sabiá in Rio Grande do Norte, and developing now some programs related to water use, land use, with the perspective of environmental, especially in Caatinga biome. We are part of the Global Pact of the U.N., strengthening the commitment, giving us more tools to exercise this kind of activity that is really relevant to us, that is part of the value and the identity of the company, and we are so proud of it as a Northeastern company working in the interior of Bahia, Rio Grande do Norte and now Sergipe.
In our final considerations, I would like to gather all the speeches, get back to what I said in the beginning. This quarter, we consider atypical. We had in this atypical fact something interesting, the conclusion of Maha Energy Brasil acquisition. PetroRecôncavo in a pioneer position in M&A junior Independent. We see ourselves as a company that at some point wants to consolidate this market, but we also understand that the recent close of camps ahead, the partners, and when we acquire Maha and the growth, phenomenal growth of the company, it's a point to get insight to talents, management team.
We add people, talented people, bringing this point of view from outside to get ready and act and make this company more and more efficient so we can deliver quarter after quarter what I see as the main drivers to generate new value for the company. Continued increase of our production in a safe way, in a sustainable way, preferably the costs that are lower to operation, development of reserves. We believe that the investment that the company is having right now, increasing capacity, bringing more equipment in not only new equipment, but new capacities. You can see on the slide a picture of our precision drilling being onboarded in Salvador Port weeks ago.
This shows a moment when the company is getting ready not only to do more of the work, but to do things differently so we can really increase the production, the development of reserves and better operations. That's why we work every day, and that's why we are increasing more and more the focus on internal aspects. That's the right moment. In the moment that we have an M&A, we see that this market is going to be consolidated. This company will be in full capacity and also financial capacity and the appetite to become a company that is going to deliver more and more value to the stakeholders in mature fields offshore. Thank you so much.
We open up the floor for Q&A. The first is Luiz Carvalho, UBS.
Hi, everybody. Thank you so much for getting my question. Marcelo, I'd like to get this final consideration. I like to talk about capital allocation. When I hear you speaking, my understanding is that we are going to see opportunities for M&A, but according to the process of the company last year, it's time to get back inside to see the operation. As you mentioned, a relevant amount of cash. The first question is, preserving this cash in the company, expecting this M&A cycle consolidation of the industry, does it make sense to distribute dividends right now? Buyback because of the liquidity of the stock does not make sense. I'd like to hear from you about this.
The second question is basically about prices of oil and gas. We discussed with you there was a relevant upside in the prices of gas. Bahia Terra, this was an upside more evident, and now without Bahia Terra, I'd like to understand the choices for oil, if you can talk more about the gas contracts, the Brent price dropping down, and we have this all over there, especially now with BM-C-33 being approved, FID? We understand that 2026 and 2027, we are seeing an offer of gas that is relevant in Brazil. This could trigger gas prices, not your region specifically, but generally speaking, gas prices that are lower than what we see right now.
Thank you so much. Luis, thank you for the question. The first part is mine. Then I ask the help of João. As I mentioned, I believe we see a moment now, although all the turbulences and statements that are extreme, the 3R is going to close the asset in Potiguar. You see Karoon Energy, Origem, these companies in one or two years, they are behind us in this process. They start their own process right now, a low-hanging fruit. We expect it successfully, but we think that they are going to face roadblocks. This is natural that it takes longer.
You do not acquire an asset, start operating to go for an M&A right after that. No, we understand that according to the market condition, this should take up to 36 months to happen, and that's why this moment I see the PetroRecôncavo going inwards to improve the operational aspects, to increase production, reducing costs on development and operation. This will let us to be well-positioned in the future to use these choices of M&A independently. We had Maha, because at this point it makes sense. The company is in our backyard bringing synergy, not only in operations, in commercial aspect as well.
This was important. We learned a lot from it. We are still incorporating this asset to be part internally. In the future, not only independent players, but the process, it has to be clear in the industry as well that Petrobras does not want to operate offshore anymore. Other alternatives will go for the industry to deal with Petrobras. We are going to be present to assess this discussion, I believe well-positioned. How can we give value to the stockholder? This quarter show that the dividends are on capital, and also buyback. This company's proposed to be permanently in evolution and giving, generating value to the shareholders ready to analyze.
In that point, specifically, what is the best way to do that? I pass the floor to João so he can answer the question about the oil and gas contracts.
Good afternoon, Luis. We look inwards, we have several contracts, as you mentioned. Great part of the allocation are contracts with Bahiagás . We expect December 2023, the contracts will expire, the first ones in January 2022. Our approach to the market and the contracts with Cegás shows an intention of new contracts mid and long-term, with a rationale of prices following the ceiling price as we see in Brazil, working with the concept of floor pricing, connect to the Brent or connect to some other metric we have been discussing.
We have a commercial policy expecting to have reasonable allocation of our gas production in the future under the perspective of production that we can commit under the contract, but within this context, we can have good prices of natural gas. Looking outwards, we understand and follow this new initiative of offshore, cheap gas onshore, but this contract, this initiative has a maturation time in SEAP I and II in the end of the decade. BM-C-33 is also a nice project, but bring the complexities and costs, so we can process and bring this gas to the shore. Also you mentioned, we have the specialty of being the Northeast.
We are interested in accessing producers that are lowers with different granularities, not the focus of the big player, the ones that are interested in allocating high availability of flow. We can still seek new sources for natural gas because we do not treat natural gas to displace other fuels with the margin of prices is also interesting. We add it all to dedication in parallel to what we do in production, optimizing and reducing midstream costs. We see we still pay a lot for processing compared to an ability of monetizing better natural gas that we produce, especially in Bahia.
We pay better when we process in Bahia, we have a C3+ price that is beyond, is below than what we have in Potiguar. The company is assessing way to reduce costs and improve the monetization. Final piece of observation, oil monetization. Oil, we still have some contract issues in Bahia. Our current reality, the prices are not so connected to the price of our oil at a global level. The historical level with Petrobras, now with the change, the other side of the contracts in Potiguar Basin, they are contracts with Petrobras. Then we are going to have 3R providing services of flow and logistics. We are going to see prices connected, global prices for oil streams. For both streams, we hope to see optimization in monetization.
That's clear. Thank you so much.
Thank you, Luis. Next question is Bruno Montanari, Morgan Stanley.
Good afternoon. Thank you so much for getting the question. Marcelo, connected to your comment about Petrobras and Bahia Terra, you mentioned that the company clearly does not want to be an operator in these fields, and it seems part of their strategy and their communication is opposite in Petrobras. They want to keep this structure that are inefficient, swallowed in different states of the country. I'd like to understand how can we can conciliate these two perceptions, and my perception is not correct, maybe, and ask if you think that is, Remanso in Bahia Terra to have a service contract and operate this more efficiently than Petrobras according to the focus.
I'd like to confirm another question, if the problems that you mentioned in the flow and gas infrastructure, this was part of lifting costs. Rafael mentioned that's $1 or $2 per barrel, and transporting oil using truck and in gas as well, if this impacting the consolidated costs?
Bruno, I talk something, it's not so intensively with new Petrobras management, local politicians here in Bahia and at a federal level. We have a close relationship with the ANP, and we were instrumental in bringing SEAP, AIB, Petrobras, and Independencia in Bahia Terra blockage. We have a good communication, this is my point of view. More than that, Bruno, then published articles, especially by this new CEO of Petrobras about their point of view. I agree, I do not think it makes sense Petrobras sell and leave Bahia and leave Rio Grande do Norte.
Petrobras has a historical presence in these states, if position Petrobras within a point of view that is important because they would be in line with their international peers and go more for renewable energy, they must be present in Bahia, Rio Grande do Norte. These are the most and important states for renewable energy source. Keeping their presence in their states, the new management is keeping employment of Petrobras in these states, that's the proposal. I don't think that this implies in keeping the operation of these fields in Petrobras, the contract as Remanso, 20 years ago, does not apply anymore because of the regulatory conditions.
With dialogue and a little bit of creativity, industry and Petrobras will reach to a model to bring the economic and social gains that clearly the independent operators bringing to the interior of Northeast and leave with the presence of Petrobras in these states. Politically speaking and economically speaking for Northeast is relevant. PetroRecôncavo is a company based in Bahia. From Bahia, we have interest in developing the economy of Bahia, Sergipe, Rio Grande do Norte, and we are aligned with this new vision of Petrobras. We believe according to our history, not only the track record, and also the relationship with 23 years of Petrobras, we can really have a position in this conversation.
We have to be patient. The moment is to look inwards now and fixate the operational metrics exactly when we see opportunities, we are well positioned. Would you like to say more about the costs of midstream? João, can you explain more midstream?
We are not considering the lifting cost to dollars per barrel, but my answer is yes. This gas failure impact the charges in great numbers. There is the effect that these gas plants we breathe higher, so we have the availability of the capacity that we are going to allocate. Even it's a countersense that the availability of the pipeline is Petrobras' responsibility, but we also have charges. We are back to the average numbers, the amount of gas that Troy produce and the amount of gas that we processed. We received a penalty on charges, processing and flowing.
If you did divide it by the volume that you sold, as if this unit cost, as Rafael said, is not lifting cost, but these are costs associated to the midstream. We have other penalties charged that whenever there is a stabilization of the system, they apply. Lifting cost has an impact in Bahia because of transport. Yes, in Bahia it was because of Bahia Terra block. We get a part of our production and move to Sao Roque Station. This increase the transport cost, as Bahia Terra is returning. Last week they return with a bigger part. It's going to be normalized in the following months.
The big impact is the volume. If we have different areas, 100,000 and 200,000 Cbm/d , this impact is the cost per lifting cost in volume.
Perfect. Thank you so much.
Thank you, Bruno. Next question is André Vidal, XP.
Good afternoon. I have two questions on my side. The first we realize when we talk to the investors, there is noise about CapEx that the company has when we see the cash flow and the reserve report. You mentioned this in other chances, we see confusion. Rafael commented about that, adding fixed assets, maybe you can remind us to conciliate this with reserve report, how can we expect on CapEx according to what we see on the report for 2023, also next year's. This would be useful. My second question is to get the initial perception on the first month operating Bahia Terra assets.
This dynamic is very different of than receiving an asset from Petrobras. I'd like to understand this process. Was it what you expected? Was it worse or better? If you can give me an estimate number on what we can expect average production of these assets for 2023, and if you have something already on reserves.
Thank you so much. André, the first part of your question about CapEx, I know this has generated confusion to the investors, that's why we separated different components. Repeating what's more comparable to the reserve certification is developing of new reserves, investments in drilling workover and facilities, the investments directly related to the development in the field, production of reserves in the field is compared to the reserve certification. This line of storage and fixed, this is inventory stock. We have to think like working capital. This line is growing the last six months, big, as the company was getting ready, six, seven workover drillings and their operation, planning the end of the year with 18, 19 workover drillings.
It's a big growth in the pace of developing and executing process. Unfortunately, we have delays to start the drilling in January, and it starts in April because the drilling is outsourced. This mismatch affects the engagement of stocks. Last year we had the experience of supply exchange in a global way, difficulty in delivering products, so last year we anticipated the stock assembly. The initial part, this is our objective to the end of the year. This line of consolidated 2023 is negative, and promise that is our objective. There was a growth in the first quarter. Our objective is to stabilize that and then reduce.
We have the consolidate of the year with this line in a negative contribution, reducing the stock, not increasing the stock. Another is fixed asset that we buy equipment. Develop and reserve, we can hire outsource to drill wells and workover or we buy it internally according to our strategy. We privileged internalizing it insource. We are ramping up. That started in the second semester, and it's going to be concluded in September, and we have a bigger fleet of drilling and workover drills, including a heavy drill with operational capacity that is higher for the future. We can have horizontal wells, and the cost is higher. Troy, do you remember Bernhardt? This drilling is $10 million-$12 million.
That's correct.
You have with this, the ability of drilling horizontal wells that are deeper, and the capacity of depth in these drills is 6,000 meters. It's a necessary tool to use in part of our reserves that are identifying deeper areas in both basins. I believe when we gather it all, our cash flow is getting penalized by these two events, adding BRL 67 million and BRL 78 million of the stock , is BRL 155 million. That is not something to be recurrent.
We have a big concentration in the second semester, in this first semester related to the engagement of drills that are insourced, that is going to be translated into a future CapEx reduction and reserve certification as well. If we purchase equipment passing through a process of learning curve, that the execution is not in the level of efficiency to be as stabilized, and it suffers, the cash flow suffers, but it's not something that should be recurrent and forever. That is BRL 65 million for drills to be executed this year. After that, we are having the equipment fleet more than enough for the current asset portfolio. Troy, can you talk more about Maha? We have interventions over there.
About Maha takeover, I believe that the takeover, the condition that we found the facilities, this field had a very good condition. The quality of the facility, it's a newer field and developed field. We are also working strongly with people in Maha, integrating them into our company whenever is appropriable. We can see improvement in the scale of PetroRecôncavo surrounding this field. For example, last year, Maha Energy had a drill that was. They paid to be standby, preparing the wells when they fail. We cleared these drills. We are using the drills whenever necessary to repair the wells.
There we also see opportunity, as it was identified in the acquisition, to optimize the production on that field, is starting workovers now, and then we are going to have four wells in the next months to optimize the production over there. Another opportunity that we identified is on the way, the construction of a gas pipeline to connect this gas in this field so we can monetize this gas in the gas contracts that we have. I believe that the transition is doing well, faster and easier than the transitions we had in the past. We observed that there is good opportunities to reduce OpEx, operational costs, and also in the profile of CapEx that we had in this field in the past to develop more.
Anything else, João? Any other piece of comment? Troy, you placed so well.
Maybe oil is a potential that we have to pay better than the current contracts. With the synergy in our operators, Tiê is a neighboring field to Miranga. When we surveil and deliver in Recife, part of Petrobras, as we normalize the flow of Bahia Terra. The system is under operation, not normally, but we have the possibility of optimizing operational arrangement, how we deliver this oil, optimizing lifting cost, operational costs, optimizing the commercial aspects of oil, as you mentioned, for gas, natural gas.
About the production, can you give me a number?
I think that André. Who asked that, André? I believe that recently Rafael and I had meetings with investors because the under investment that we had in the first quarter, we do not understand it is more viable in the average of a year to reach the level of the reserve report working to the end of the year. We are close and so close to that, and this, as it was shown, depends on having in place capacity and external factors. That is something that we assess all the time. Our CapEx has the advantage of being flexible, and then we can react well to external factors.
I believe, as you, we have an expectation of price of oil within a range that is very interesting for the following years, and this permits us to keep on having the level of intensity and execution, especially as this equipment, internal equipment, is available and the teams are trained and qualified, returning to the productive level that we have historically.
Perfect. Thank you so much.
Thank you, André. Next question, Pedro Soares, BTG Pactual .
Hi, good afternoon, everybody. Most of the questions have been addressed, I'd like to have a follow-up, especially on costs. You mentioned atypical factors that impacted the quarter, Rafael quantified in dollar per barrel. I'd like to hear if you can comment if it makes sense to imagine that removing this $1 of the levels that we have and the efficiency gains that was mentioned in the previous question in Maha, if we see the company in the second quarter presenting something closer to $11 per barrel, and how should we think about the second part of the year if these numbers could reach lower levels as the production grows, or if this number seems aggressive?
Pedro, I believe we have been repeating it. In the moment that we are in this company, when we have an expectation of increasing production very meaningfully in the following years, we see there is room for cost per barrel to drop in the scale and also internal work that we have been doing. We are looking inwards to reduce costs and increase productivity. I believe that considering time, you have to wait more. I cannot believe this will happen the second quarter, but we have expectations that in the second semester, we're going to see the results out of this work reflecting upon the lifting cost of the company.
Okay, Marcelo, thank you.
Thank you, Pedro. Next question is Vinicius Andrade, Santander. Vinicius? Next question, Vicente Falanga, Bradesco.
Thank you, Marcelo, everybody, and the team at PetroRecôncavo for my questions. I have two questions. First, if you can detail the scope of $41 million CapEx on facilities, if they were flow lines, equipment to separate oil and water, compression state, and the fields that you used this CapEx, and how much production do you think this can release the bottleneck, and how much we are going to expect CapEx on facilities for the following quarters? Next question, we see that ANP will have the auctions for gas stock. Is the company interested in that? An interesting asset near your assets for the intermittence of the gas.
Troy, would you like to talk about facilities and bottlenecks?
Yes, Marcelo. Thank you so much. We are focusing dominantly in gas system and gas compressors that we have in Potiguar. With the result of various workovers, we are focusing four main areas. The first is O Trevo de Sabiá. Sabiá Bico-de-Osso, Sabiá da Mata. In the final months, we place a compression system there, and we are activating. There was commission in the last weeks. We are waiting to see an increase in the gas production over there, around 40,000–50,000 Cbm/d . When we depressurize these fields, if you remember, in the other calls we mention about the surprising, the amount of gas that we found that in the drilling campaigns.
It was necessary to place various compressors to flow this gas more efficiently for the future. The second field that we are focusing right now, Riacho de Forquilha in Potiguar, in the field LPX. LPX is a station connecting gas from different fields, Boa Esperança especially, already finding gas in the drilling program, and workovers over there with that we are capturing. This compressor is designed for 80,000 Cbm/d , facilitating an expansion for the future program of drilling that we have on these fields. The third area that we are in, Livramento. Livramento station collecting from different concessions in Potiguar Basin, resulting in different workovers.
We have wells over there restricted now because of the legal capacity, and we are installing a new compressor over there. The fourth area that we are in the half of our program of putting overhauls in all the compressors existing in Potiguar, and Petrobras left for maintenance in this compressor, and we are finishing these overhauls this year. In this project we are optimizing the capacity of each compressor. We have eight planned already for this year. We completed three. In these compressors, we are hope to increase the capacity of the system under 80,000 Cbm/d .
Troy, if I may add something, it's an interesting piece of information. I don't know if you were present in the event in Alagoas last month of oil and gas, and there was a presentation of Tabita representing Admiral Savoy of ANP. In this presentation that was an enthusiast about the mature fields in Northeast Brazil, she brought a graph of gas production in Riacho da Forquilha hub. It's interesting to see that she showed that this hub now produces more gas than any other point of its story. I believe we've seen a potential of gas that is above the estimate anteriorly. This good surprise on gas generates bottlenecks on infrastructure because the fields never produce so much.
Even when the compressors were active, there was no capacity to flow the volume of gas that we see, naming specifically the field of Sabiá da Mata, Bico do Osso. You see gas, and you cannot burn in a certain volume, and this gas is associated, this affects the oil production, because we cannot optimize the wells in these two fields to produce oil, because the increase of oil production generate gas that I have maximum limit. Troy said that the four factors that he brings in general, the investment on infrastructure allows to increase our flow, gas flow capacity.
About the stock, and it was communicated in the press, is associated to the availability of the areas hired with the objective of storage. That is interesting, that is estimating the new gas bill anteriorly was exclusive concession. We are in a more advantaged position if you want to operate like this. We do not need necessarily to go to a specific bidding for that. We have reservoirs, we have hundreds of units. Some of these units have interesting characteristics because they present ideal condition. They are original formations that produce gas, or they are depleted, that does not make sense to apply the recovery mechanism to increase production.
We have these fields. With this new gas bill, we are concession, we need a permit, and then a revision of ANP development to convert a reservoir, also to have a reservoir to become storage as well. We have a positive and negative balance in the volume. In order to be pragmatic, we believe in our rationale of trading is better than natural gas. I can sell in the market without a need of seasonality. We can maximize this eventual change in this environment.
In order to meet an availability, we studied some of these projects in the acquisition of these assets in Miranga Hub. We still have this point of view that the best rationale is to trade. I remember that we trade 100% of our gas production. We can anticipate revenue maximize, and we can access the market as the demand is still elevated compared to the supply in Northeast.
Thank you so much for detailing. It's very important to us. I don't know if you can have an estimate, BRL 41 million that you spent in compressors, what we can expect up to the end of the year, and the other projects that Troy mentioned finish?
Most of these projects will be completed in the first three quarters. You can see that in the next quarter, the third quarter, the numbers will be similar.
A little bit lower, but similar in the compression projects.
Thank you so much. Thank you for detailing.
Thank you, Vicente. There is a written question about the drilling activities. Is there any different, the business plan of the company in the next two years according to the initial expectation of the reserve report communicated in March? Vinicius Safra.
We are assessing this. We talk to you throughout the next quarters. I am not going to set a date. The company intends to give more visibility to the reserve report, as Rafael mentioned, is detailing, but also bringing scenarios where we get the reserve report as basic, but work with scenarios, prices, cost, delivery, to assess the best alternative for the company. Clearly, we convey the message since the last reserve. We are not connected.
It's a point of view, photographic point of view, a snapshot of a certain price. We do not control. With the cost, we try to control. We manage this company, we try to control our actions about these external variables. Not necessary the best action is to fulfill that two-peak curve. If the condition was favorable, we go beyond this two-peak curve. This is an assessment that we have permanently. Clearly, I'm telling you, we are not committed in delivering that two-peak curve as a basic scenario.
No more questions. Marcelo, your final considerations.
I'd like to thank you so much for your attendance. I'm back here mentioning that quote in the beginning that it seems to us this quarter was atypical. We had headwinds. I do not believe they are going to disappear magically, the ones we control, the ones we do not control.
The company has a clear conviction that is up to us here. Get all the variables that we control and improve it on daily basis. The company has a business plan that is very good. The assets is wonderful. The strategy is more proof to us of verticalized structure as autonomy and flexibility and cost reduction factor. We are on the right track. We are having the necessary adjusts, so we can have that key driver that is permanent to deliver quarter after quarter operational conditions that are better, including production increase, under control costs, and cash generation that is stronger, returning this to the shareholders as we see to optimize the capital structure.
We already have an M&A area. This area had an initial transition that was soon. There is too much work to assess not only the exploration aspects in our operation to understand our peer operations, to understand what is the point that this consolidation process is going to be consolidated. We are going to be ready to be a consolidator in this market for mature operations offshore in Brazil. Thank you, everybody. Good afternoon.