• Average Production: Approximately 90,000 barrels daily.

• Lifting Cost: $7.6 per barrel.

• Oil Sales: 8.5 million barrels sold.

• Commercial Discount: Average discount of $3.56 per barrel.

• Adjusted EBITDA: $546 million, up 64% year-over-year.

• Cash Position: $1.2 billion.

• Net Debt over EBITDA Ratio: 0.4 times.

• Total FOB Revenue: Almost $700 million.

• Adjusted EBITDA Margin: 78%.

• Net Income: $272 million.

• Net Debt: Reduced to $740 million from $975 million.

• Emissions Rate: 21.9 kilograms of CO2 per barrel of oil equivalent.

• Warning! GuruFocus has detected 4 Warning Signs with PTRRY.

Release Date: August 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• PRIO SA (PTRRY) achieved an adjusted EBITDA of $546 million, marking a 64% increase compared to the previous year.

• The company maintained a strong cash position of almost $1.2 billion, with a net debt over EBITDA ratio of 0.4 times.

• PRIO SA (PTRRY) successfully sold 8.5 million barrels of oil, benefiting from a competitive commercial discount of approximately $3.56 per barrel.

• The company is well-prepared for future challenges, including the implementation of the Wahoo project and potential M&A opportunities.

• PRIO SA (PTRRY) reported improved operational efficiency at Albacora Leste, achieving around 85% efficiency.

Negative Points

• The Wahoo project has been delayed due to pending environmental licenses, impacting production and growth plans.

• Production losses occurred due to halted wells and maintenance issues, affecting overall output.

• The lifting cost increased to $7.6 per barrel, partly due to production losses from certain wells.

• There is ongoing uncertainty regarding the timing of environmental approvals, which could further delay projects.

• The company faces potential challenges in capital allocation and M&A competition, particularly in the Gulf of Mexico.

Q & A Highlights

Q: Can you provide an update on Albacora Leste's production efficiency and expectations for the coming months? A: Francisco Francilmar Fernandes, COO: We aim to increase production from 27,000 barrels to close to 30,000 barrels this year. Maintenance work has improved conditions, and we are working on additional wells to achieve this target.

Q: What is the status of the Wahoo project's CapEx and the expected timeline for environmental license approval? A: Roberto Bernardes Monteiro, CEO: We have spent approximately $600 million on equipment, which is ready. The remaining costs are related to installation and drilling. We expect to spend about two months on well preparation after receiving the environmental license, with full project completion in about eight months.

Q: How is PRIO approaching potential M&A opportunities, particularly regarding the Peregrino asset? A: Roberto Bernardes Monteiro, CEO: We are interested in the Peregrino asset if Sinochem decides to move forward. Our priority is M&A, but if opportunities do not materialize within 12 months, we may consider share buybacks or dividends.

Q: What are the challenges and expectations regarding the environmental licensing process with IBAMA? A: Roberto Bernardes Monteiro, CEO: We are in discussions with IBAMA to resolve licensing issues. While permits for maintenance are expected soon, the main challenge is obtaining the environmental license for new projects like Wahoo.

Q: How does the current exchange rate impact PRIO's financials, particularly lifting costs? A: Roberto Bernardes Monteiro, CEO: The depreciation of the BRL has a positive impact on lifting costs, as approximately half of our costs are denominated in BRL. However, the full effect was not seen this quarter due to the timing of the exchange rate changes.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.