RIO DE JANEIRO, Nov. 13, 2014 /CNW/ - HRT Participações em Petróleo S.A. - "HRT", "HRTP" or "Company" (BM&FBovespa: HRTP3 and TSX-V: HRP) announces its results for the third quarter of 2014 ("Q3 14"). Unless otherwise indicated, the financial and operational information below 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.
Q3 14 HIGHLIGHTS AND SUBSEQUENT EVENTS
- Accumulated Net Revenues of R$405 million, Gross Profits of R$105 million, EBITDA of R$95 million with 23% margin and Net Income of R$21 million, in 2014;
- Net Revenues of R$127 million, Gross Profits of R$28 million, EBITDA of R$24 million with 19% margin and Net Income of R$10 million, in the third quarter of 2014;
- Production of 2.7 million barrels of oil in the Polvo Field, in 9M14, average production of 9.7 thousand barrels per day (100%), in Q3 14, and an average production of 10.0 thousand barrels per day (100%), in 9M14;
- Operational efficiency of 98% in the Polvo Field and 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 - proved and developed reserves;
- Fulfillment of ANP's requirements in audit for compliance check of the Operational Security Management System;
- Proposal submitted to the Ministry of Mines and Energy of Namibia to extend the licenses terms (Petroleum Exploration Licenses - PELs);
- Sale of the IPEX lab;
- Approval of the 1st Issuance of Convertible Debentures into Shares to finance new investments in the Polvo Field and acquire new production assets.
HRT ended the third quarter of 2014 with a free cash flow of R$404 million, accumulated Net Revenues of R$405 million in the nine months ended September 30, 2014, Gross Profit of R$105 million, EBITDA of R$95 million and Net Income of R$21 million, and no loans or debt financing at the end of this 9-month period.
The quarter's highlight was the non-stop production in the Polvo Field of 893,000 barrels of oil and 270,000 m3 of natural gas (100%), with high operational efficiency, 11 p.p. above the previous quarter's registered numbers. In the nine months ended September 30, 2014, 2.7 million barrels were produced (1.6 million barrels considering HRT's stake of 60%). In Q3 14 a fourth sale of oil was carried with the amount of 577,000 barrels of oil and, considering the 9-month period, 1.8 million barrels of oil were exported (referring to the 60% stake). The Polvo Field has represented a turning point for HRT, both considering the production trend seen during its first nine months of operation, and the cost-saving initiatives which have been implemented that mitigates the effects of the drop in oil price in the international market, contributing to the initiatives of extending the field's economic lifespan. In the nine months ended September 30, 2014, HRT was able to reduce production costs in the Polvo Field by 14%, compared to the nine months ended September 30, 2013.
The third quarter was also active with relations between HRT and regulatory authorities, specially Ibama and ANP. HRT, monitored by Ibama, executed a simulated test of answers to emergencies, which went normal, especially on account of perfect performance of FPSO and Polvo A Platform on-board staff. On the other hand, audits carried out by ANP in the Drilling Rig installed in the Polvo A Platform and at the platform itself, identified a number of improvement opportunities which have been observed by HRT, within the deadline indicated by ANP.
For the future, HRT intends to keep executing interventions at wells, as well as new drillings to develop 1P and 2P reserves. These activities rely on concluding investments in the rig, ANP's authorization and the assignment of Maersk's interest in the Polvo Field, to which HRT filed an appeal with ANP against the denial and the Company expects the assignment to be authorized in the near therm.
During the quarter, negotiations were undertaken with Rosneft to conclude the transfer of operations in the Solimões Sedimentary Basin, which was approved by ANP in July 2014, as well as for the acquisition of the four drilling rigs. Factors beyond the control of Rosneft have impacted the ability to complete parts of the transaction but HRT and Rosneft continue to work on such negotiations and believe that a conclusion can be reached in near future.
In Namibia, HRT continues to pursue the farm down of its licenses, aiming at attracting large oil companies to evaluate our assets and enter into a partnership with HRT. Concurrently, we carry on the license renewal processes with the Namibian Government. We remain confident that the Company will reach a favorable solution by the end of this year.
Finally, it is worth mentioning HRT's continued actions to reduce costs and optimize its internal processes aiming at gaining efficiency. Several agreements have been revised at the Polvo Field, i.e., vessels, shorebases in the city of Niterói and helicopters, so that relevant cost savings and higher service quality are attained.
HRT is ready for accelerated development with a coordinated and confident team, looking at new horizons and new challenges, and a strengthening of its bases for growth through the development of Polvo Field and the acquisition of new producing oil and gas assets.
Milton Romeu Franke
CEO of HRT
3Q14 HIGHLIGHTS AND SUBSEQUENT EVENTS
On October 24, 2014, HRT's Board of Directors approved its 1st Issuance of Debentures Convertible into Shares, totaling up to R$90,000,000.00, through the issuance of up to 4,500,000 Debentures.
The Issue of Debentures aims at raising funds, which will be set aside to develop the mapped oil reserves in the Polvo Field. In addition, funds may be allocated to the acquisition of new production assets, including the subsidiary HRT O&G's acquisition of Maersk Energia Ltda.'s interest ("Maersk") held in the Polvo Field.
The debentures will be converted into common shares, within no later than five years and will earn half-yearly compensatory interest rates corresponding to the 90% of the accumulated variation of the average one-day daily Interbank Deposit, Extra-group Over ("DI Rate"), expressed in percentage form per year based on 252 business days, as calculated and announced daily by the CETIP S.A. - OTC Clearing House ("CETIP").
The number of shares to be delivered to the Debenture holders on the Debenture Conversion Date will be the result of dividing the Par Value of the Debentures, of R$20.00 per Debenture, by the lesser of: (i) the weighted average, by daily volume, of the closing price of the shares over the last 10 BM&FBOVESPA trading sessions, prior to October 27, 2014, with a discount of 25%; or (ii) the weighted average by daily volume of the closing price of the shares over the last 10 BM&FBOVESPA trading sessions prior to the receipt of the request for conversion with a discount of 25%. The shares purpose of the conversion will be subject to a restriction to trade and transfer during 12 months as of the conversion date.
The period for the subscription rights exercise by shareholders began on October 28 and will run until 26 November 2014.
SAFETY, ENVIRONMENT, HEALTH AND SOCIAL RESPONSIBILITY
HRT prioritizes activities, initiatives and controls regarding Safety, Health and Social Responsibility in its Exploration and Production segments. The Safety, Environment, Health and Social Responsibility team is always attentive to training and to procedures required to ensure the good operational performance and compliance with laws in our offshore and onshore operations.
As an essential item of HRT's safety policy and a fundamental key to meeting conditions of its licenses, simulated tests are conducted continuously with operating staff, so that the company and the operating staff are always ready to answer to different emergencies that might occur.
According to its annual planning, in August 2014, HRT executed a simulated emergency response exercise under the full deployment mode, where there is a real mobilization of resources, including boats, helicopters, etc.
The hypothetical accident scenario of these tests include vessel collision, helicopter crash, explosion, toxic gas leakage and even oil spills at sea.
The exercise was attended by observers of the Oil and Gas General Coordination - CGPEG, Environmental Licensing Executive Board - Dilic of Ibama - Brazilian Institute of Environment and Renewable Natural Resources accompanied the tests, who in loco checked and evaluated the team's performance when answering to emergencies.
In August, HRT was inspected by ANP, who visited the Company's facilities to check the conformity with the Operational Safety Management System (SGSO). The inspection included 2-day documentary audit and 2-day inspection at the Polvo A Platform.
ANP issued the report and pointed out a few improvements, which are already being implemented.
HRT GROUP OF COMPANIES
HRT OIL & GAS
As disclosed in the Q2 14 Earnings Release, in early July, 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 18 blocks under HRT O&G's concession in the Solimões Sedimentary Basin ("Solimões"), which now holds a 49% interest, to Rosneft Brasil (a Brazilian subsidiary of Rosneft Oil Company) ("Rosneft Brasil"), which became the blocks' operator, holding a 51% interest.
The transaction totaled US$96 million, US$54 million of which were received in Q4 13 and US$18 million in Q1 14. The remaining amount of US$24 million will be received upon completion of the transaction.
Also in early July, HRT, Rosneft Brasil and Petrobras signed 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 Solimões Sedimentary Basin.
In Q3 14, HRT and Rosneft carried on negotiations to conclude the assignment of operations in the Solimões Sedimentary Basin and four heli-transportable drilling rigs acquired with it. External factors impacted the ability of completion of parts of the transaction, however, HRT and Rosneft continue working to complete these negotiations shortly.
As previously released, in Q1 14, HRT filed with ANP a request to extend the exploratory phase for the blocks SOL-T-148 and SOL-T-149. Rosneft and HRT are still awaiting a final position from ANP regarding the last review.
During Q3 14, HRT maintained an operational efficiency level of 98%, which allowed the production of 893,000 barrels of oil (100%), in the period. The operating efficiency in the previous year was approximately 80%.
The adoption of preventive measures and the ongoing technical monitoring resulted in a more stable production profile at the field, thus, mitigating the decline of production in the quarter.
It is worth mentioning that since it became a field operator, up to date, HRT was liable for 14% reduction of Polvo's operating expenses, compared to the same period last year, which reiterates the Company's commitment and efforts to pursue an extended economic lifespan of the field.
At the end of October, 2014, 3,040 thousand barrels of oil were produced (100%) in 2014 to date. The average production of natural gas in the quarter was 31,000 m3 per. Currently, 97% of produced gas is used as fuel in the field's activities.
At the end of September, HRT sold its 4th cargo in the year with a volume of approximately 577,000 barrels. Through this sale, HRT recognized net revenues of R$123.4 million in Q3 14. The Company expects to sell the fifth cargo, with a volume of approximately 500,000 barrels, in December 2014.
As a non-recurring event, in August, HRT sold 43,000 barrels of slops (liquid deriving from exploration period and stored for subsequent disposal), with a revenue of R$3.3 million.
Currently, HRT is ranked the seventh largest company in oil production in Brazil, according to ANP.
In Q3 14, 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 HRT became the operator, acquired a more stable profile and downtimes significantly lower than those recorded in previous years.
These observations bring a new estimate to the field's future production behavior, 11.8% higher than initially estimated. Taking into account current market prices, higher operational efficiency and initiatives to reduce production costs, the Company believes that the field's economic lifespan has capacity to be extended for another year than the initial estimate, until the end of 2017, considering current production wells.
The chart below shows the quarterly oil production, considering 100% of the Polvo Field output: (click here)
In early July, HRT entered into a purchase and sale agreement with Maersk to acquire 40% of the exploration, development and production rights in the Polvo Field area, located in the Campos Sedimentary Basin. In October, HRT received a letter from ANP informing that it denied the assignment request. HRT immediately filed an appeal with the regulatory agency to request a review on the decision by presenting further documentation. Once approved, the operation will grant HRT 100% stake on the Polvo Field.
In mid-October, HRT submitted to the Exploration Superintendence (ANP's SDP) a request to have access to the Administrative Proceeding which contains the technical reports and the Development Plan ("DP") of the Tubarão Martelo field, in view of Óleo e Gás Participações S.A. - under Court-supervised Reorganization ("OGPar") statement referring to the actual status of the Production Unitization Agreement - AIP ("Unitization") of the Polvo Field, with Tubarão Martelo Field, operated by OGX Petróleo e Gás S.A. - under Court-supervised Reorganization ("OGX"), wherein OGPar disagrees with HRT's evaluation about a connection between the Tubarão Martelo and Polvo fields and, accordingly concerning the need of unitization of fields required by ANP Resolution 25 of July 8, 2013.
Despite the studies conducted by OGPar in 2012, attest that one of the reservoirs located in the Tubarão Martelo Field advances towards the ring fence of the Polvo Field and ANP has formally conditioned the approval of the Tubarão Martelo Field's DP to the submission, until December 31, 2014, "[of] the submission of formalization of the Production Unitization Agreement - AIP related to the extension of the reservoir into the area of the Polvo Field"", up to date, HRT has not received the seismic and geological data from OGPar.
At the end of October, ANP notified OGPar to submit the information required, so that HRT may interpret the unitization process.
As previously disclosed in the Q2 14 Earnings Release, HRT's technical staff has already prepared a Development Plan to be submitted to ANP, contemplating new investments to extend the Polvo Field's lifespan, which foresees, among other measures, increased production from new wells to be drilled in proven undeveloped reserves and probable (1P and 2P), besides alternatives to increase production efficiency from current producing wells and wells that have been temporarily shut in, by means of investments of up to US$75 million.
In Q3 14, HRT moved ahead with 3D modeling studies of oil systems at the Walvis and Orange Basins, on the Namibian coast, by applying data collected at source rocks and reservoir from three drillings that were executed. The studies clearly evidence the basins oil potential.
At the same time, HRT carried on the farm down process of licenses held in Namibia through meetings with interested companies and provided access to the data room.
Also highlighted in the Q2 14 Earnings Release, the Company's representatives are still attending international events in Namibia and South Africa, for meetings with companies interested in HRT's assets.
In early November, HRT requested from the Ministry of Mines and Energy of Republic of Namibia ("MME") an extension of the exploratory period of its blocks, for another three years. The extension of the exploratory period will allow HRT to carry on its farm down process and obtain new partnerships in order to develop this large area. HRT expects to receive an answer from MME over the next few weeks.
In September, HRT entered into the Purchase and Sale Agreement with Eurofins Scientific Group ("Eurofins") to sell its subsidiary, Integrated Petroleum Expertise Company - Serviços em Petróleo Ltda ("IPEX").
The purchase and sale transaction between HRT and Innolab do Brasil Ltda ("Innolab"), Eurofins' subsidiary in Brazil, was completed days after the execution of the agreement and includes, besides transferring 100% of HRT's interest in IPEX's capital to Innolab, the transfer of all equipment, contracts and employees.
The execution of this agreement was another HRT's important initiative to implement measures reducing the corporate costs and executing the divestment program of non-strategic assets, initiated in 2013, which enables the Company to be more and more focused on its core business.
Eurofins is a global leader in bio-analytical services and offers a wide range of tests and essays for the food analysis, pharmaceutical, agro-science and environmental segments. Eurofins has more than 200 laboratories located in more than 36 countries.
We show below the changes in HRT's own headcount: (click here)
At the close of Q3 14, HRT's staff levels were reduced by 38 employees, mainly through restructuring the IPEX and Solimões Project.
The decrease in personnel evidences HRT's commitment with cost-saving and optimization initiatives implemented since 2013.
FINANCIAL RESULTS - Q3 14
The following table shows the Company's consolidated results, including the results of its direct subsidiaries HRT O&G, HRT Africa, HRT America and their respective subsidiaries and branches: (click here)
EBITDA was R$24 million in Q3 14, an R$841 million improvement over Q3 13. It is worth mentioning the write-off of dry wells of R$134 million and the provision for impairment (realization risk) of R$616 million in the same period in 2013, which also impacted the Operating Expenses variation, resulting in 96% reduction year-on-year. The consolidated EBITDA margin stood at 19%, mainly due to the oil sale in the quarter, representing a Gross Profit of R$28 million. The consolidated Gross Profit represents the sheer result of the production operation in the Polvo Field, excluding the allocation of corporate expenses (G&A) and geology and geophysics expenses (G&G). If costs amortization are excluded from Gross Income, there is a gross margin on Revenues of 43% in Q3 14 and 9M14.
Personnel expenses went down 42%, due to a significant 34% reduction in the Company's headcount, when compared with Q3 13. Personnel expenses in Q3 14 are net of amount allocated to the Polvo and Solimões projects, and offset by partners proportionally to their stake in these projects.
As evidence of efforts endeavored to cut down operating expenses, mainly costs deriving from structure maintenance at Solimões, general, administrative expenses added to outsourced expenses declined by 30%. 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 HRT's exploration works started in the Polvo Field. Out of the total amount of R$28 million of consolidated depreciation and amortization expenses, R$26 million refer to the amortization of amounts preliminarily allocated as Polvo Field's subscription bonus and abandonment costs.
In addition, in Q3 14, the Company sold its subsidiary IPEX, with a positive net effect in the operating income of R$3 million (revenues from sales less the residual value written-off from the investment), recorded as divestment. The results of this company, both in the current quarter and previous quarters, were transferred to the line named Results of Discontinued Operations, in accordance with CPC 31 - Non-current Assets Held for Sale and Discontinued Operations.
The graphs below show, in millions of Reais, the quarterly variation of the main groups of accounts in HRT's Consolidated Income Statement: (click here)
TOTAL CASH, CASH EQUIVALENTS AND INVESTMENTS
The Company closed Q3 14 with a consolidated cash flow of R$404 million, 11% up on Q3 13.
It is worth noting in Q3:
- Inflow of R$125.8 million from sales, in September, of oil produced in the Polvo Field and offtake of 577,000 barrels;
- Inflow of R$3.3 million from sales of slops produced in the Polvo Field of approximately 43,000 barrels of fluids;
- R$27 million were received from partners, referring to Cash Calls from the Oil Exploration and Production (E&P) Campaigns;
- R$7.2 million were received from the sale of the subsidiary IPEX;
- R$2 million were received by the Group's subsidiaries referring to services rendered with third parties;
- R$4.4 million were disbursed to Maersk referring to the advance for acquisition of 40% interest in the Polvo Field.
The graph below shows the evolution of the Company's consolidated cash and cash equivalents as of Q4 13, 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 chart below presents, in a summarized way, the cash flow stating its main inflows and outflows during the nine months of 2014, highlighting disbursements, inflow from revenues and receivables due to loans: (click here)
The table below shows the breakdown of disbursements recorded in the nine months ended September 30, 2014 and September 30, 2013, by project, grouped into recurring and non-recurring disbursements, highlighting the Cash Calls received from partners. It is worth mentioning that in 2014 we commenced operations at the Polvo Field, in partnership with Maersk. In 2013, we highlight the operation in the Solimões Sedimentary Basin where 11 explorations wells were made in partnership with Rosneft, as well as the offshore campaign in Namibia, which featured three exploratory wells in partnership with Galp: (click here)
To view HRT's full Q3 14 Earnings and Financial Results, please view at the following link: (click here)
HRT, through its subsidiaries, holds a 60% participating interest and it is also the operator of the Polvo Field, which is located in the southern portion of the Campos Basin, at 100km east of the city of Cabo Frio, Rio de Janeiro. HRT has Brazil's seventh largest daily production of barrels of oil equivalent (boe), with 20.3º API, deriving from three producing reservoirs. HRT is the owner, through its subsidiaries, of "Polvo A" fixed platform and a 3.000HP 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 134km2, with several prospects with potential for further explorations. Additionally, HRT holds a 55% interest and is the operator of 18 exploration blocks in the Solimões Basin, and also operate s ten exploration blocks off the Namibian coast, in the Orange and Walvis sub-basins. HRT is committed to minimizing any possible environmental impacts on the sites where it acts. Our commitment to the local communities is towards health conditions, safety and quality of life. For more information, please visit the Company's website: www.hrt.com.br/ir.
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.
This document contains statements about future events. All statements contained in this document, except those relating to historic facts, refer to future events, including, without limitation, statements about drilling plans and seismic acquisitions, operating costs, equipment purchases, expectations of oil finds, the quality of the oil we expect to produce and our other plans and objectives. Readers may identify a number of these statements from the use of words such as "estimate", "believe", "expect" and "intend", and similar words or their negatives. Although management believes that the expectations indicated in these statements are reasonable, we cannot give any assurance that such expectations will be fulfilled. By their nature, statements about future events require us to make suppositions and so such statements are subject to inherent risks and uncertainties. We warn readers of this document not to place undue trust in our statements about future events, since various factors can lead to future circumstances, results, conditions, actions or events that may differ substantially from the plans, expectations, estimates and intentions expressed in these statements about future events and their underlying assumptions. The following risk factors could affect our operations: assessment reports on contingent or prospective resources involving a significant degree of uncertainty, and based on projections that may not be accurate; risks inherent to the exploration and production of oil and natural gas; limited history of operating as an oil and natural gas exploration and production company; drilling and other operating problems; breakdown or failure in equipment or processes; mistakes made in agreements or by operators; failure of contractors to perform; labor disputes, interruptions or loss of productivity; increase in material or personnel costs; inability to attract sufficient personnel; intensive capital requirements for investment and maintenance expenses that HRT may not be able to finance; costs caused by delays; exposure to fluctuations in exchange rates and commodity prices; economic conditions in Namibia and Brazil; complex laws that may affect costs or the means of carrying on the business; regulations in respect of the environment, health and safety that may become stricter in future and lead to an increase in liabilities and capital costs, including indemnities and penalties for damage to the environment; the early cancellation, non-renewal or other similar factors affecting the concession agreements; and competition. We warn you that this list of factors is incomplete, and that investors and others basing their decisions on statements about future events should carefully consider other uncertainties and potential occurrences. The statements about future events contained herein are based on the assumption that our plans and operations will not be affected by these risks. If our plans and operations are so affected, our statements about future events may prove to be inaccurate.
This legal notice applies expressly to all statements about future events contained in this document. These statements are made as of the date of this document. We do not undertake to update these statements about future events, except when required to do so by the applicable securities legislation.
SOURCE: HRT Participações em Petróleo S.A.
For further information:
Investor Relations Contacts
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Organizational Management and Investor Relations Officer
Corporate Legal and IR Manager