HRT Announces Its 2Q12 Results
RIO DE JANEIRO, Brazil, Aug. 9, 2012 /CNW/ - HRT Participações em Petróleo S.A. - "HRT" or "Company" (BM&FBovespa: HRTP3) (TSX-V: HRP.V) announces its results for the 2nd quarter of 2012 ("2Q12") and 1st half of 2012 ("1H12"). The financial and operating data described below, except where otherwise stated, are presented on a consolidated basis including our direct and indirect subsidiaries: HRT O&G Exploração e Produção de Petróleo Ltda. ("HRT O&G"), Integrated Petroleum Expertise Company - Serviços em Petróleo Ltda. ("IPEX"), HRT Africa Petróleo S.A. ("HRT Africa"), HRT Netherlands B.V. ("Netherlands"), Air Amazonia Serviços Aéreos Ltda. ("Air Amazonia"), HRT America Inc. ("HRT America"), HRT Canada Inc. ("HRT Canada"), its subsidiaries and branches.
Solid cash position
Receivables in advance from Citibank resulting from the TNK-Brasil and
Splitting of shares (1/50 ratio) made on 05/29
Proposal for alterations of the number of members and the composition of
the Board of Directors at the Special Shareholders` Meeting to be held
Conclusion of the corporate restructuring in the Namibian assets
Signing of the agreement on the semi-submersible Transocean Marianas
drilling unit for a 280 day-term from December 2012 to January 2013
Results of wells 1-HRT-6-AM, 4-HRT-7D-AM and 1-HRT-8-AM
- Spudding-in the well 1-HRT-9-AM
We present the Company`s result for the second quarter of 2012, giving special attention to HRT management commitment to two major focus, which they complement each other, being the first focus on obtaining results and the second on controlling costs. We are still an independent Brazilian company in a pre-operational phase, however with a strong activity in two high-potential assets, with nine wells drilled in the Solimões Basin and planning to spud the first wells in Namibia early 2013.
We are also a company concentrated on establishing the best corporate governance practices, cash management and operating efficiency. Our current cash position, in the amount of R$ 1.4 billion, results from the hard work and commitment we undertook during our management. This value represents an increase by 15.7% over the previous quarter and it is only 4.1% lower than the 2011`s final cash. This figure is the result of receivables in advance from Citibank in the amount of USD 96 million at the end of June, from the sale of participating interests in the Solimões Basin to TNK-Brasil. On the other hand, HRTO&G obtained the total paydown in the acquisition price of 45% stake in the Solimões Blocks.
At the Annual and Special Shareholders` Meeting held on April 27, 2012, the splitting of the Company`s shares was approved, at a ratio of 1/50, so that each share now is represented by 50 shares. The shares became to be traded ex-split since May 29, 2012. Due to the splitting, the relation between the shares and the Global Depositary Shares issued by the Company traded on the Toronto Stock Exchange Venture changed from 1:100(1 common share to each 100 GDS) to 1:2 (1 common share to each 2 GDSs). The subscription bonus and the call option or the subscription of shares issued by the Company were also adjusted at the same proportion in order to reflect the aforementioned split.
The Company, considering appropriate to make improvements in the level of its corporate governance, started the process of evaluating potential candidates to replace suitably the former members of the Board of Directors. Those members were, in part, founders of HRT, and also executives at the company. After evaluating several candidates that could contribute to the development of the Company´s business plan, seven executives (of which five are independent) were selected for nomination to the Board of Directors of HRT. The elections must take place next September 17, when the HRT`s Special Shareholders` Meeting will be held.
From the standpoint of obtaining maximum governance, we performed the corporate restructuring of the HRT Group. For this reason, HRT Africa now holds interest in all assets located in Namibia.
In the operating sphere, we advanced in the exploratory campaign in Solimões concluding the wells 1-HRT-6-AM, 4-HRT-7D-AM and 1-HRT-8-AM, and we ran almost 600km 2D seismic during the first six months of 2012.
In Namibia, the company has been consistently evolving to spud the wells early 2013. At the end of June, we closed down our data-room in Houston, where more than 20 companies visited us interested in learning about our assets potential. In July, we began the negotiation process with those that expressed interest in our assets. We are confident of the prospect potential, which were mapped in the region, and have secured the hiring of the semi-submersible Transocean Marianas drilling unit for a 280 day-term. The drilling rig should arrive at our location between December 2012 and January 2013, and then move to spud our first exploration well in Namibia.
HRT OIL & GAS
HRT O&G was created to capitalize on the expertise developed in geological, geochemical and geophysical services for the oil and natural gas exploration and production activities. Today, after the sale and purchase transaction involving TNK-Brasil and Petra, HRT O&G holds 55% interest over 21 exploration blocks in the Solimões Basin.
The Solimões Basin is located in the Brazil`s Amazon region and the blocks under concession for the HRT and TNK-Brasil consortium occupy an area of 48,507 km². According to official data from ANP, the region is ranked the second largest gas reserve and the fourth largest oil and gas production, both in Brazil, with around 109 thousand BOE per day. The oil produced in the Solimões Basin is of excellent quality, with a specific density between 41o and 47o API, and has a strategic importance for the Brazilian market.
The drilling of well 1-HRT-6-AM, concluded on May 21, 2012, reached the final depth of 3.384m and recorded while drilling oil and gas shows in two intervals, with net pay of 4 and 8 meters, on Devonian reservoirs. Tests were run in two intervals, with drilling mud filtrate production and oil in one of the reservoirs in sub-commercial quantities. The oil recovered during the test was analyzed and showed 41o API, presenting geochemical characteristics similar to the oil produced in the Urucu Field. Tests performed on both intervals showed low permeability on the reservoirs, however, confirming the potential for light oil in the Block SOL-T-170.
On June 16, 2012, the well 1-HRT-9-AM was spudded. This well will test the presence of hydrocarbons in an anticlinal structure of approximately 20 km² area located southern the Juruá Field, in a possible extension of the gas trend, recently confirmed by 1-HRT-5-AM (gas discovery at the Sândalo Prospect). In the past, this trend was successfully tested by other three wells drilled by Petrobras.
It is important to mention that this exploration well will be concluded within an expected 60 day-term, being a milestone in the history of the Amazonian Basin.
The drilling of well 4-HRT-7D-AM was concluded on July 10, 2012. The well crossed the producing reservoir in well 1-HRT-4-AM at 1,250m distance and 11 meters structurally higher, as expected, however, with a smaller thickness (2 meters) and without production capacity. This result confirms that the accumulation of 1-HRT-4-AM does not have continuity to the southwest. It is important to mention that the result of 4-HRT-7D-AM does not alter the expectations for well 1-HRT-4-AM, obtained through its drillstem test.
The well 1-HRT-8-AM was spudded on March 17, 2012, and reached a final depth of 3,345 meters, in Devonian sedimentary rocks. Based on logging data, hydrocarbon shows in cuttings, gas detector and wire line formation tests, two gas-bearing intervals were observed in the Juruá Formation, between 3,045 and 3,130m depth. The well has been cased so that drillstem test can be run to evaluate the production potential of the reservoirs.
The QG-VIII rig, which drilled 1-HRT-8-AM, will likely move to the Aruã Cluster and will test the Acácia prospect, a geological structure that undergone new seismic. The CG-IX rig, after conclusion of 1-HRT-9-AM in block 191, will move back to block 192, and will test the Tucumã prospect. According to our analyses, in the southern part of the block 192, the lack of third sill of igneous rocks was identified, indicating the possibility that the hydrocarbons, if present, were not cracked for gas.
Over the last two months, HRT and its partner in the Solimões Basin, TNK-Brasil, reassessed the basin and in a jointly decision concluded that the exploratory campaign should be rationalized. Priority will be given to seismic surveys, reducing temporarily the drilling activity. The company decided to reduce temporarily the number of rigs operating in Solimões, keeping only two rigs with focus on the exploratory campaign.
The aforementioned decisions will lead HRT into a significant reduction in the disbursement expectation for late 2012, and for 2013. Additionally, as mentioned in the release of the 1Q12 results, gas monetization keep on being analyzed. In short, the drilling activity will be reduced; instead the seismic data acquisition will be increased with the objective to get more understanding in the frontier areas of the Basin.
Air Amazonia is a wholly-owned subsidiary of HRT, created to provide air logistics support for the Solimões Basin exploratory campaign. In the 2Q12, operating a fleet of 18 aircraft (14 helicopters and 4 planes), the Company totted up 2,963 flight hours in helicopters and 554 flight hours in planes, transporting a total of 5,547 passengers and a cargo volume exceeding 5,000 tons for the support of the drilling sites, with excellent operating efficiency.
Efforts spent in Air Amazonia management improvement and restructuring can be clearly observed through the regular offer of air crafts with a significant increase by 25% in the average fleet availability, with a substantial cost reduction. Among the processes implemented, the Company made adjustments in its headcount, improvements in aircraft parts acquisitions, the rearrangement of the maintenance structure, and improvements in the infrastructure of operations in remote areas with permanent focus on operational safety.
In the municipal district of Carauari, in partnership with the local Government, Air Amazonia began repairs in the local Airport, essential to the connection of the city with other cities of Amazonia and considered the most import works of the Region of the last few years.
HRT AFRICA AND HRT CANADA
HRT Africa and HRT Canada today hold ten exploration blocks on the Namibian coast: eight blocks in the Orange Basin and two blocks in the Walvis Basin. Additionally, we hold a participating interest in two exploration blocks in the Namibe Basin.
Namibia is located in the southwest of Africa and has four offshore sedimentary basins: the Namibe Basin, Walvis Basin, Lüderitz Basin and Orange Basin, covering an area of 350 thousand km². HRT operates ten of its twelve exploration blocks on the Namibian coast, encompassing a gross area of 62,892 km² and a net area of 51,513 km². Figure below shows the blocks where HRT holds interest.
In early January 2012, the company`s subsidiaries concluded the largest 3D seismic campaign ever run on the coast of Namibia, totalling 9,075 km². After processing and interpreting the seismic data, on April 2, HRT began meeting with oil companies interested in appraising a possible partnership in its exploratory area in Namibia. A data room was opened at the head office of its subsidiary HRT America, in Houston, with a view to providing access to information to the interested companies. This data room was closed down in the last week of June, and more than 20 oil companies visited us and the negotiations began in the first half of July.
HRT signed an agreement with Transocean to secure the semi-submersible Marianas drilling rig for a 280 day-term. The rig is expected to arrive at the location between December 2012 and January 2013, and then spud the first HRT´s exploration well in Namibia. The exploratory campaign of HRT`s assets in Namibia plans the drilling of exploration wells to test different petroleum systems. It means that the result of a drilling will not change the decision of further well locations.
INTEGRATED PETROLEUM EXPERTISE CO. - IPEX
Integrated Petroleum Expertise Company - Serviços em Petróleo Ltda. or IPEX provides studies and analyses in the fields of Geochemistry, Geology, Geophysics and the environment for either HRT or other oil companies in Brazil and South America. Support received from the IPEX`s laboratories is a key element in the exploration task force of HRT in the Solimões and Namibia basins. Its facilities and staff are among those which provide the best lab analyses available in the global market today. This is, at present, the analysis mechanism that has given support to HRT O&G, HRT Africa and other companies in the sector, as well as other entities in the Brazilian industry.
HRT America is headquartered in Houston, TX and is made up of highly specialized and renowned professionals in the oil and gas industry, with more than 20 year-experience in sedimentary basins, both in Brazil and Africa. Its main activity is the provision of geophysical and geological research services, as well as the drilling and natural gas and oil production towards exclusively the HRT Group`s companies, especially the concessions in Namibia.
In the 2Q12, HRT America was responsible for conducting the data room of the Company´s Namibian assets, and received in its office more than 20 oil companies interested in learning more about them.
SAFETY, ENVIRONMENT, HEALTH AND SOCIAL RESPONSIBILITY
In the 2Q12, the renewal of environmental licences was granted for the drilling activities in Block SOL-T-148, for purposes of installing the support base named São Carlos, located in Block SOL-T-172, as well as the Vegetal Suppression Authorization for the seismic data acquisitions in Block SOL-T-194. All the aforementioned licences were issued by the Environmental Protection Institute of the Amazonas State ("IPAAM"). In addition to the referred licences, IPAAM also granted the Vegetal Suppression Authorization for locations 148-1, 148-02 and for the access to location 195-1.
Continuing with the Angiosperm Rescue Plan implementation, as predicted in the environmental licensing sphere by IPAAM, HRT O&G built, in the Support Base of Tefé (Bate-1), a nursery that has already been counting on a significant number of native tree species of Amazonia, besides the seeds that have been already planted. Additionally, our researchers remain in the field carrying out a floristic inventory to characterize the work areas to assist the granting of specific licences to drill the wells in the selected locations.
In the Safety sphere, the Safety Orientation Program - PROSA and the Observe, Stop and Act - OPA (observation and safety behavior) are still up and running in all our areas of operation, with significant results.
HRT Group has been represented by the Sustainability Department in different meetings and events of the United Nations Conference on Sustainable Development. One of the subjects that were attended by us was Rio+20 Corporate Sustainability Forum, from the UN System and Global Compact Local Network. Around 1,500 world business leaders from several different sectors were present to discuss how to reach a consensus on: working with responsibility, bringing benefits to companies and to the world. HRT was also represented at Rio+20 Conference, which took place in Riocentro, on 20- 22 June, with the participation of "Major Groups". Specific areas were reserved for special meetings, as well as work rooms with a view to meeting and discussing on the conference themes.
HRT supported the "+Criança na Rio+20" Project, developed by Fundação Xuxa Meneghel. The project contributed for the participation of children from communities of all over Brazil at the Rio+20 Conference.
HRT was accepted as Member of IBP (Brazilian Petroleum, Natural Gas and Biofuels Institute) in April of this year. It is important to mention that HRT takes part of the Permanent Technical Commission of Sustainability, where only oil and gas companies and the Permanent Technical Commission of Corporate Social Responsibility participate.
Considering the environmental disasters that occurred due to the rain in Amazonas, HRT O&G`s Sustainability team promoted a donation campaign among its employees for the people who live in Tefé and Carauari.
Medical and nursing care and urgent and emergency assistance continue to be carried out at the drilling sites and support bases, bringing benefits to the riverside communities around our facilities in the Tefé River and in the city of Carauari. The Vector Borne Disease Control and Monitoring Program (malaria, leishmaniasis, Chagas disease and filariasis) has been carried out with focus on preventive actions.
In the 2Q12, the Company intensified its costs control, implemented new project monitoring processes, strengthening the corporate role of the holding company, HRT Participações, with a view to obtaining the best synergies in management and control of its subsidiaries.
The table below shows the Company`s summarized consolidated results, which include the results of its subsidiaries HRT O&G, IPEX, HRT Netherlands, HRT America, HRT Africa, HRT Canada, HRT Luxemburgo and Air Amazonia.
The EBITDA result for 2Q12 is influenced by the geology and geophysics activities reduction by 49% in the Solimões Basin, by reducing the costs with taxes allocated under other expenses, which suffered an impact in the 1Q12 in taxes accrued on capital gain with the transfer of participating interest in the Solimões blocks and with the reduction on G&A expenses.
In the 2Q12, HRT implemented a retention plan approved by the Board of Directors, which increased by 64%, if compared with prior quarter, the personnel expenses, in a non-recurring way. In this period, the group reduced its own headcount by 14%. Expenses with third parties, 47% higher, resulted from a greater use of external consultants, hired to support us in the transfer of participating interest in Brazil, as well as in the corporate restructuring operations abroad.
Total expenses (operating, financial and taxes) showed 16% reduction in the 2Q12 compared to the 1Q12, as it can be seen in the graphic below. Financial revenues showed an increase by 39% compared to the prior quarter, basically due to an increase in cash balance and the exchange variation related to investments and receivables in foreign currency.
The table below presents the variation of balances of main equity accounts in 2Q12 compared to balances as of 1Q12 and December 31, 2011.
Accounts receivable concerning the letter of credit issued by Citibank upon TNK-BP`s request in guarantee of acquisition of 45% participating interest over the Solimões blocks was reduced, in part, due to the receiving of the 1st installment, in the amount of USD 200 million, on April 2012. The remaining debt was settled through a new transaction intermediated by the Citibank in June 2012.
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES
The Company ended 2Q12 with a consolidated cash of R$ 1.4 billion, presenting an increase by 16% over the balance of the prior quarter, regardless of the exploratory campaign in the Solimões Basin and advances of the seismic campaign on the coast of Namibia, especially due to receivables resulting from the transfer of participating interest in the Solimões blocks to TNK-BP.
The following graph presents changes in HRT Group`s consolidated cash and the respective financial income in the last eight quarters.
The graphs below presents the liquidity of HRT`s consolidated cash, impacted by the grace period of some financial instruments and a guarantee deposit of approximately R$ 60 million (US$ 30 million) to hire a drilling rig to be used in the exploratory campaign in Namibia. Additionally, we present the breakdown by financial institution where HRT`s cash are invested, which are remarkably renowned institutions.
The table below presents the breakdown of disbursements for the 1H12:
Exploratory campaign expenses totalled R$386 million and refer to disbursements with exploration, drilling, air, fluvial and ground logistics allocated under intangible assets, in addition to costs of personnel, third-party services and other expenses allocated as expenses.
Disbursements with the seismic surveys, in the amount of R$105 million, are related to exploratory activities in the Solimões and Namibian basins and include 2D (Solimões) and 3D (Namibia) seismic acquisition and processing services.
G&A expenses in the amount of R$34 million refer to corporate expenses with personnel, third-party services, general and administrative expenses and taxes not allocated directly to the exploratory campaign, though incurred to serve the development of the HRT Group`s exploration activities.
Non-recurring disbursements with fixed assets totalled R$54 million and mostly refer to the purchase of 2 helicopters and advances for the acquisition of 4 rigs, which are in final construction, in agreements entered into in 2011, all intended to the exploratory campaign in the Solimões Basin.
The two following tables present the breakdown of fixed assets and intangible assets, in both groups, changes are associated with the exploratory campaign in the Solimões Basin.
With the volume of investments made up to 2Q12, its strong cash position of R$ 1.4 billion and its focus on cost control and operational efficiency, HRT keeps focused on its exploratory activity aiming to maximize its assets' value.
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information contained in this document, including any information as to our strategy, projects, plans or future financial or operating performance and other statements that express management's expectations or estimates of future performance constitute "forward-looking statements". All statements, other than statements of historical fact, are forward-looking statements. The words "believe", "expect", "will", "anticipate", "contemplate", "target", "plan", "continue", "budget", "may", "intend", "estimate" and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. HRT cautions the reader that such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of HRT to be materially different from HRT's estimated future results, performance or achievements expressed or implied by those forward-looking statements and the forward-looking statements are not guarantees of future performance.
HRT disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.
SOURCE: HRT Participações em Petróleo S.A.For further information:
Fábio Bueno - IR Manager
+55 21 2105-9745