RIO DE JANEIRO, March 30, 2015 /CNW/ - Rio de Janeiro, March 31, 2015 -
PetroRio (current brand of HRT Participações em Petróleo S.A. - "HRT",
"HRTP" or "Company" (BM&FBovespa: HRTP3 and TSX-V: HRP.V) announces its
results for the fourth quarter of 2014 ("4Q14"). The financial and
operational information below, except if otherwise indicated, is
presented on a consolidated basis and stated in thousands of Brazilian
Reais (R$) according to the International Financial Reporting Standards
(IFRS), including our direct subsidiaries: HRT O&G Exploração e
Produção de Petróleo Ltda., HRT Africa Petróleo S.A., HRT America Inc.
and their respective subsidiaries and branches.
MESSAGE FROM MANAGEMENT
PetroRio began a new chapter in its history. In 2014 we began producing
oil and, for the first time, we registered income before interest,
taxes, depreciation and amortization (adjusted EBITDA), totaling
R$126.2 million. Our available cash position increased from R$155 million in December 2013 to R$449 million in
2014 was a year of great challenges and even greater achievements for
PetroRio, which has undergone an extensive transformation, even
changing its corporate name and headquarters. These changes symbolize
our new strategic focus on transparency, stability, efficient
production and safety.
Among the many accomplishments that make us proud is the decision to
invest in production assets, which led us to acquire the Polvo,
Bijupirá and Salema (BJSA) fields. While waiting for the relevant
approvals of the BJSA transaction, we achieved excellent results in the
Polvo field, improving its production curve and significantly reducing
production costs. Our operating rates are among the best in the entire
Other important highlight is the end of costly corporate disputes, which
allowed the introduction of this new meritocracy culture focused on
results. The new headquarters, well located and less costly than the
previous, contributed greatly to a harmonic integration of all company
employees due to the open environment without closed spaces. People
interact freely, allowing greater exchange of information and ideas,
thus making the environment more productive.
The growing financial discipline combined with the wise decision to
reduce costs, implemented since early 2014, allowed the company to be
better positioned to face the decline in Brent prices, which is
evidenced by an increase in cash position. We feel that the market
understands PetroRio's vision focused on value creation and growth
plans for the short and long term. Evidence of this analysis was the
excellent demand to our bond issuance.
Finally, we believe that the renewal of our personnel, beginning with
management, will help create the environment we need to successfully
implement a solid growth platform and become a major oil-producing
company in Brazil.
THE POLVO FIELD
The acquisition of 60% of the Polvo Field and the beginning of oil
production in January 2014 is a proof of success and capacity to
overcome challenges in PetroRio's history. During these 12 months of
operations, we worked hard to optimize production, seeking to more
efficiently drain the reservoir, as well as optimize the field's
operating costs, always maintaining the focus on improving safety
Due to this effort throughout 2014, the field's production totaled 3.529
million barrels of oil at an annual manageable operating cost of US$158
million, 7% down year-on-year. In the first quarter of 2015 we will
conclude the renegotiation of the main operational agreements related
to the Polvo Field, and we see potential for an additional operating
cost reduction of between 15% and 20%. (click here)
In 2014, the Polvo Field's operational efficiency averaged 93.3% (record
average of 99.9% registered in October), reflecting a great
improvement, especially when compared to 2013. In addition, the
workover operation time necessary to replace pumps fell from 14 to 7
Finally, we are proud to have celebrated on March 03, 2015 the mark of
1,000 days without accidents resulting in sick leave in the Polvo
Due to the facts mentioned above, we believe we are on the right track.
THE NEAR FUTURE
Based on PetroRio's new strategy to operate oil fields already in
production phase, we seek to achieve operational excellence and,
therefore, we focus on hiring highly motivated and qualified people,
which we believe will allow us to extend the existing benefits in the
Polvo field to the Bijupirá and Salema fields, recently acquired.
After obtaining the relevant approvals, we will begin the operational
integration between the fields, which may contribute to PetroRio
becoming the fifth largest oil producer in Brazil, operating an average
of more than 30,000 barrels of oil per day. This means tripling its
current production and positions PetroRio as one of the major emerging
companies in the Brazilian oil industry. Located only 80 km away, the
Polvo and BJSA fields offer important synergy gains' opportunities.
Our plans for the next fiscal year include divestments of assets such as
the concessions in Namibia, and Solimões, and aircrafts.
We will continue to operate with great safety and we plan to
increasingly strengthen the trust relationship with the various
stakeholders of the company, including its business partners.
Despite the adverse market conditions, on October 24, PetroRio raised
R$87,192 on the capital market through the issue of 4,359,624
debentures. This result demonstrates investors' trust in the company's
new business model, given that the proceeds ranged from R$60,000 to
These funds will be allocated to the development of already known oil
reserves in the Polvo Field, or for the acquisition and development of
new assets. With a low funding cost and a lock-up period, in case of
conversion, these debentures represent an alignment between investors
and the company, with their return associated with PetroRio's long-term results.
The debenture issue characteristics were disclosed in the notice to
shareholders of October 24, 2014.
SAFETY, ENVIRONMENT, HEALTH AND SOCIAL RESPONSIBILITY
PetroRio's activities are based on fundamental values related to the
safety of all employees, life and nature. PetroRio is committed to
various environment, health and safety (EHS) initiatives and projects
guided by transparency and good governance.
Through these projects, PetroRio plans to meet the legal requirements of
Brazilian regulatory and labor authorities, as well as incorporate and
refer to internationally recognized social and environmental standards.
Formative action of PEA-Observation held with Project participants in
Rio das Ostras (2014). (click here)
To ensure environmental preservation in production sites, independent
consultants audit PetroRio's plans and procedures, so that projects are
developed with maximum environmental and social responsibility, in
accordance with international standards.
The EHS projects developed by PetroRio include, but are not limited, to
Pollution Control Project (PCP)
Environmental Monitoring Project (PMA)
Workers' Environmental Education Project (PEAT)
Environmental Education Program (PEA)
Social Communication Project (PCS)
Procedure for Environmental Impact Evaluation and Mitigating Measures
Procedures for the Evaluation and Management of Subcontractors
Occupational Health Program (PCMSO)
Environmental Risk Prevention Program (PPRA)
Individual Emergency Plan (PEI)
For example, in the Environmental Education Program (PEA-Observation)
project, groups from the communities of ten municipalities in the area
of influence of the Polvo Field participate in training programs for
the creation of observatories. There are ten observatories whose main
goal is the identification and monitoring of the impacts of the oil and
gas production chain, with the use of audiovisual media.
Each person receives training and participates in an ongoing educational
project. The project also provides accounting, administrative, legal
and technical follow up by PetroRio's consultants.
HIGHLIGHTS (click here)
Consolidated net revenue totaled R$487 million, adjusted EBITDA stood at
R$126 million (net of provisions for impairment) and cash position
amounted to R$449 million.
Total production came to 3.5 million barrels in the Polvo Field, with an
average daily output of 9,700 barrels (100% of the field).
Sales totaled 2.3 million barrels of oil (60% of the field)
In 2014, operational efficiency, throughout the year, averaged 93.3%, with record 99.9% in October, a significant improvement compared to 2013.
The workover operation time necessary to replace pumps fell from 14 to 7
Successful execution of simulated emergency response tests under the
full deployment mode, monitored by Ibama.
Revision of the Polvo Field's lifespan until the end of 2017, in view of
the production seen, considering only current producing wells.
Fulfillment of ANP's requirements in audit for compliance check of the
Operational Security Management System.
POLVO (click here)
The Polvo Field's production was more stable in 2014, registering a
weaker decline in production compared to historical levels.
In 2014, operational efficiency averaged 93.3%, with record efficiency
of 99.9% in October, significantly improving compared to 2013 (in 2013,
average efficiency came to 79.8%, with minimum of 71% in August, and
maximum of 86% in March).
One of the main reasons for the strong increase in efficiency is the
reduced need for well workovers, chiefly due to fewer failures in
underwater centrifugal pumps (BCS). In addition to the fewer failures,
the workover operation time necessary to replace pumps fell from 14 to
It is worth mentioning that since it became a field operator, up to
date, PetroRio was liable for the 22% reduction in Polvo's operating
expenses, between the first and the fourth quarter of 2014, which
reiterates the Company's commitment and efforts to pursue an extended
economic lifespan of the field.
In 2014, 3,529 thousand barrels of oil were produced (100% of the
field). Natural gas daily production averaged 11,159 thousand m3. Currently, 97% of gas produced is used as fuel in the field's
At the end of December, PetroRio sold its 5th cargo in the year, corresponding to approximately 473,000 barrels. (click here)
As a non-recurring event, in August, PetroRio sold 43,000 barrels of
slops (liquid deriving from exploration period and stored for
subsequent disposal), equivalent to revenue of R$3.3 million.
Currently, PetroRio is ranked the 7th largest company in oil production in Brazil, according to ANP.
In 3Q14, the Polvo Field Operations team implemented a relevant study on
the field's production behavioral profile since 2012 up to date. The
study's results reveal that production, since PetroRio became the
operator, acquired a more stable profile and downtimes significantly
lower than those recorded in previous years.
Even taking into account current oil barrel prices, given the increased
operational efficiency and production cost reduction initiatives, we
concluded, with minor adjustments, the economic lifespan of the field
may last for at least one more year than originally expected, i.e.,
until the end of 2017, considering only existing producing wells.
The following chart shows the monthly daily average oil production in
the last 12 months, considering 100% of the Polvo Field output: (click here)
In early July, PetroRio entered into a purchase and sale agreement with
Maersk to acquire 40% of the exploration, development and production
rights in the Polvo Field area. In October, PetroRio received a letter
from the ANP stating that it had denied the assignment request. This
authorization depends on compliance with requirements whose deadline is
still ongoing. The Company is negotiating with the ANP and Maersk in
order to comply with the pending requirements.
In June 2013, the ANP approved the development plan of OGPar's Tubarão
Martelo field and determined that a review of the plan should be
submitted by December 31, 2014, including "the submission of
formalization of the Production Individualization Agreement (AIP)
related to the extension of reservoir to the Polvo Field area".
Given there were no negotiations between PetroRio and OGX regarding
making use of or dividing the operating results of the Tubarão Martelo
field, on August 5, 2014 PetroRio requested from the ANP an integral
copy of the administrative proceeding which approved said Development
Since then, the parties have been discussing the matter within the ambit
of the ANP without reaching an understanding.
NEXT STEPS: As previously disclosed in the 2Q14 Earnings Release,
PetroRio's technical staff has already prepared a Development Plan to
be submitted to the ANP regarding the extension of Polvo Field's
lifespan, which foresees, among other measures, increased production
from producing wells.
As disclosed in the 2Q14 Earnings Release, in July 2014, the Brazilian
National Agency of Petroleum, Natural Gas and Biofuels (ANP) approved
the assignment of 6% of exploration, development, production and
operation rights of the 19 blocks under HRT O&G's concession in the
Solimões Basin ("Solimões") to Rosneft Brasil (a Brazilian subsidiary
of Rosneft Oil Company) ("Rosneft Brasil"). (click here)
After the transaction, HRT O&G now holds a 49% interest in the blocks
while Rosneft is the operator of the blocks, with a 51% interest. The
transaction totaled US$96 million, US$54 million of which were received
in 4Q13 and US$18 million in 1Q14.
In September 2014, PetroRio, Rosneft Brasil and Petrobras entered into a
new Memorandum of Understanding ("MoU") for the second phase of the Gas
Monetization Project, regarding the cooperation in the review of
development systems to monetize gas in areas under concession of
Petrobras and HRT O&G/Rosneft Brasil in the Sedimentary Basin of
In 3Q14, PetroRio and Rosneft carried on the negotiations to conclude
the assignment of operations in the Sedimentary Basin of Solimões.
Concurrently, the international sanctions Russia has undergone by OECD
countries postponed few of Rosneft's initiatives, which implied the
delay of procedures foreseen in the negotiation, especially referring
to the guarantees required by concession agreements.
Despite these setbacks, we keep confident and endeavoring our best
efforts to reach a solution, as soon as possible. The company adopted
initiatives to control costs and preserve cash, reducing the recurring
disbursements until the conclusion of the transaction.
PetroRio carried on the farm down process of licenses held in Namibia
through meetings with interested companies and providing access to the
data room of data stored at the Houston office, HRT America.
The company concluded the 3D modeling studies of oil systems at the
Walvis and Orange Basins, Namibia onshore, by applying data collected
at source rocks and reservoir from three drillings executed and we
believe in the basins' oil potential.
The company estimates expenses of R$100,000 per month in Namibia until
the conclusion of the farm down of this asset.
The reductions implemented in the Namibia and Solimões projects
represent a cut by 75% to 90% in 2015 disbursements compared to 2014.
In September, PetroRio entered into the Purchase and Sale Agreement with
Eurofins Scientific Group ("Eurofins") to sell its subsidiary
Integrated Petroleum Expertise Company - Serviços em Petróleo Ltda
The signature of this agreement was another important initiative of
PetroRio to implement the corporate cost reduction measures totaling
approximately R$9 million per year.
FINANCIAL PERFORMANCE (click here)
Adjusted EBITDA amounted to R$126 million in 2014, R$429 million up on
2013. Operating result was positive by R$1,509 million compared to the
previous year. The cost of products/services is divided into manageable costs and
royalties (R$302 million), with a cash effect, and amortization and
depreciation (R$166 million), with no cash effect, the second group
being responsible for the gross result of R$19 million.
It is worth mentioning the non-cash expenses of R$1,029 million related
to impairment/well write-offs in 2014 (R$2,276 million in 2013). Impairment and write-offs confirm the company's new philosophy and
strategy, focusing on production assets and divestment of exploration
assets. (click here)
Personnel expenses dropped by 77%, from R$168 million to R$39 million,
due to the 45% reduction in the company's workforce compared to 2013,
from 203 to 111 employees. Personnel expenses are net of the amount
allocated to the Polvo and Solimões projects, and offset by partners
proportionally to their stake in these projects.
General and administrative expenses contracted by 34%, to R$16 million.
It is worth mentioning that, different from 2013, when drilling
exploratory campaigns were in progress and accordingly, exploratory
expenses were allocated to the intangible assets, maintenance expenses
and operating agreements of Namibia and especially Solimões are
directly allocated to 2014 results.
The Depreciation/Amortization line was impacted by PetroRio's
exploration works started in the Polvo Field. Out of the R$176 million
in consolidated depreciation and amortization expenses, R$166 million
refer to the amortization of amounts allocated to the Concession and
Polvo Field's abandonment costs.
In addition, in 3Q14, the company sold its subsidiary Integrated
Petroleum Expertise Company - Serviços em Petróleo Ltda ("IPEX"),
impacting the operating income by approximately R$3 million, recorded
as sale of interest. The results of this company, both in the current
and previous quarters, were transferred to the Income from Discontinued
Operations line, in accordance with CPC 31 - Non-Current Asset held for
Sales and Discontinued Operations. (click here)
The charts below show, in millions of Reais, the quarterly variation of
the main groups of accounts in PetroRio's Consolidated Income
Statement. (click here)
TOTAL CASH, CASH EQUIVALENTS AND INVESTMENTS
The company closed 2014 with a consolidated cash flow of R$449 million,
190% up on 2013 and 11% up on the previous quarter.
Amounts worth noting:
Inflow of R$468 million from sales of oil produced in the Polvo Field;
Inflow of R$6 million from Revenue from Financial Investments;
R$4 million were received from outsourced personnel services by
Integrated Petroleum Expertise Company - Serviços em Petróleo Ltda
Inflow of R$3 million from leasing of helicopters to third parties;
Net disbursements of R$311 million related to the Oil Exploration and
Production Campaigns (E&P). This amount includes the reception of Cash
Calls from third parties in the Polvo, Solimões and Namibia projects,
totaling R$216 million;
R$164 million were disbursed related to the acquisition of BP's 60%
interest in the Polvo Field;
R$4 million were disbursed to Maersk related to the advance for
acquisition of 40% interest in the Polvo Field;
Disbursement of R$2 million related to the Solimões project;
Early payment of the overdue balance (approximately R$96 million) of the
loan taken out with Credit Suisse for the acquisition of interest in
the Polvo Field;
Disbursement of R$31 million related to the area retention rate of the
Polvo Field Exploratory Campaign and return of the SOL-T-148 and
SOL-T-149 blocks of the Solimões project;
Inflow of R$60 million related to the divestment plan including (i)
transactions for the sale of a 6% interest in the Solimões Blocks and 4
onshore drilling rigs to Rosneft Brasil, (ii) sale of one aircraft, and
(ii) sale of the subsidiary IPEX;
Inflow of R$87 million from the first issue of debentures convertible
The graph below summarizes cash flow, stating main financial
transactions in 2014, highlighting disbursements, revenue inflow and
capital inflow deriving from financing. (click here)
The graph below shows the evolution of the Company's consolidated cash
and cash equivalents as of 4Q13, and the collateralized amounts during
such period. Currently, the Company has no obligations deriving from
loans and/or financing, and no collaterals to restrict its liquidity. (click here)
The table below shows the breakdown of disbursements recorded in the
periods ended December 31, 2014 and December 31, 2013, by project,
grouped into recurring and non-recurring disbursements, highlighting
the Cash Calls received from partners: (click here)
To view HRT's full Q4 14 Earnings and Financial Results, please view at
the following link: (click here)
PetroRio is one of the largest independent oil and gas production
companies in Brazil. PetroRio is the operator of the Polvo Field, which
is located in the southern portion of the Campos Basin, Rio de Janeiro,
holding a 60% participating interest in the field. The Polvo Field has
Brazil's seventh largest daily production of barrels of oil equivalent
(boe), with 20.3º API, deriving from three producing reservoirs.
PetroRio is the owner, through its subsidiaries, of "Polvo A" fixed
platform and a 3,000-HP drilling rig, currently in operation in the
field, being the platform connected to the "Polvo FPSO" vessel, with
capacity to segregate hydrocarbons and water treatment, oil storage and
offloading. Polvo Field license covers an area of approximately
134,000,000 sqm, with several prospects with potential for further
In January 2015, PetroRio announced the acquisition of 80% of the
Bijupirá and Salema Fields located at the same basin, the Campos Basin,
at a distance of approximately 80 km from the Polvo Field, tripling its
current daily production to more than 33,000 barrels of oil. Such
acquisition is subject to the approval of Brazil's Council for Economic
Defense (CADE) and the National Agency of Petroleum, Natural Gas and
Biofuels (ANP). Furthermore, PetroRio is born of a new corporate
culture focused on increasing production through the acquisition of
production assets, the re-exploration and optimization of the Polvo,
Bijupirá and Salema fields, increasing operational efficiency and
reducing production costs and corporate expenses. The Company's main
objective is to create value for its shareholders, protecting its
liquidity and increasing revenue and profits, with full respect for
safety and the environment. For more information please visit the
Company's website: www.petroriosa.com.br
This document contains statements about future events. All statements
other than those of historical fact contained herein are
forward-looking statements, including but not limited to, statements
regarding plans for drilling and seismic acquisition, operational
costs, equipment acquisition, expected oil discoveries, the quality
which we expect to produce oil and our other plans and objectives.
Readers can identify these statements by reading several words such as
"estimate," "believes," "expect" and "will" and similar words or their
negative. Although management believes that the expectations
represented in such statements are reasonable, it cannot ensure that
such expectations will be confirmed. By their nature, statements about
future events require us to make assumptions and, thus, such statements
are subject to risks and uncertainties. We caution readers of this
document not to place undue reliance on our forward-looking statements
considering that certain factors may cause future circumstances,
results, conditions, actions or events which may differ materially from
the plans, expectations, estimates or intentions expressed in said
statements regarding future events and assumptions that support them.
The following risk factors may affect our operations: the contingent
resource and prospective resource evaluation reports involving a
significant degree of uncertainty and being based on projections that
may not prove to be accurate; inherent risks to the exploration and
production of oil and natural gas; inherent risks to the exploration
and production of oil and natural gas; drilling and other operational
problems; breaches or failures of equipment or processes; errors in
contracts or operators; execution failure of contractors, labor
disputes, interruption or decline in productivity; increase in material
or personnel costs; downtime to attract sufficient personnel;
requirements for intensive capital investment and maintenance costs
that PetroRio may not be able to finance; delay costs; exposure to
fluctuations in currency and commodity prices; political and economic
conditions in Namibia and Brazil; complex laws that can affect the
cost, manner or feasibility of doing business; environmental, safety
and health regulation which may become stricter in the future and lead
to an increase in liabilities and capital expenditures, including
indemnity and penalties for environmental damage; early termination,
non-renewal and other similar provisions in concession contracts; and
competition. We caution that this list of factors is not exhaustive and
that, when relying on forward-looking statements to make decisions,
investors and others should also carefully consider other uncertainties
and potential events. The forward-looking statements herein are made
based on the assumption that our plans and operations will not be
affected by such risks, but that, if our plans and operations are
affected by such risks, the forward-looking statements may become
The forward-looking statements contained herein are expressly qualified
in their entirety by this cautionary statement. Such declarations were
made on the date hereof. We do not undertake to provide updates on
statements regarding future events, except as required by applicable
As previously disclosed the Company's Management included in the
Management Proposal submitted to the Annual and Extraordinary Meetings
to be held on April 30, 2015, a proposal for changing the Company's
corporate name HRT Participações em Petróleo S.A. to Petro Rio
Participações S.A., as well as its tickers on the BM&FBOVESPA and TSX
Venture Exchange. The corporate name and tickers remain the same until
their changes are approved at said Meeting. HRP, on the TSX-V, until
the new corporate name is approved and the requests for changing the
tickers are authorized by the BM&FBOVESPA and the Brazilian Securities
and Exchange Commission (CVM). The Company will keep its shareholders
and the market in general informed about the process.
SOURCE HRT Participações em Petróleo S.A.
For further information:
Investor Relations Contacts
+55 21 3721-3810
Chief Financial and Investor Relations Officer
Corporate Legal and IR Manager