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RIO DE JANEIRO, Nov. 14, 2016 /CNW/ - Petro Rio S.A. ("PetroRio" or "Company",
BM&FBovespa: PRIO3 and TSX-V: PRJ) announces its results for
the third quarter of 2016 ("3Q16"). The financial and operational
information below, except if otherwise indicated, is presented on a
consolidated basis and in Brazilian Reais (R$) according to the
International Financial Reporting Standards (IFRS), including its
direct subsidiaries: Petro Rio O&G Exploração e Produção de
Petróleo Ltda. (former HRT O&G Exploração e Produção de
Petróleo Ltda.), Petro Rio Internacional
S.A., HRT América Inc. and their respective subsidiaries and
branches.
3Q16 HIGHLIGHTS
- AWARD OF BEST E&P COMPANY IN LATIN AMERICA IN 2016 BY WORLD FINANCE
MAGAZINE
- PRODUCTION OF 771,563 BARRELS IN THE QUARTER, 13% HIGHER THAN 3Q15 AND IN LINE WITH 2Q16
- LIFTING COST (US$ 28.37/BBL) IN
LINE WITH 2Q16 (HISTORIC LOW) AND 26% BELOW 3Q15
- ADJUSTED EBITDA OF R$ 15.0
MILLION AND NET INCOME OF R$ 71.5
MILLION
- HIGH OPERATIONAL EFFICIENCY (94.1%) DESPITE SCHEDULED
MAINTENANCE STOPPAGE IN SEPTEMBER
MANAGEMENT REPORT
We are pleased to present one more quarter of positive results
in an environment with highly volatile oil prices and Brent
averaging less than US$ 50/bbl.
PetroRio's EBITDA adjusted for non-cash expenses reached
R$ 15.0 million, surpassing the
previous quarter. This strong performance was driven by our
continuous operational efficiency, which kept costs in
line with its historic low levels, and our assertive
commercial strategy. Additionally, we are proud to record another
quarter with no accidents, extending the expressive milestone of
1,500 days without lost-time injuries reached on July 14, 2016.
Our success is essentially driven by our entrepreneurial team,
made by dedicated and creative people. The commercial strategy used
in the quarter is another successful example of our DNA that
continuously pursues innovation to maximize returns. In order to
obtain a better realized price and taking advantage of low maritime
freight prices, PetroRio postponed the sale of two offtakes to
September which were priced at the higher Brent average of October,
thus enabling the Company to increase gross selling price by
US$ 4.2 per barrel.
Polvo Field's production was in line with our estimates. After
the operational start-up of the three wells that underwent
interventions, average daily production remained stable at 9,100
bbl for a period of approximately 30 days between July and August.
As expected, Polvo's production showed in 3Q16 a natural monthly
decline of around 100bd. However, average production in the quarter
stood at only 8.4kbd mainly influenced by the scheduled maintenance
stoppage in September, which reduced production by 44 thousand
barrels, and the interventions carried out in July when we operated
with all wells that underwent interventions for only 18 days.
During July and August, before the scheduled stoppage, operational
efficiency reached an exceptional average of 99.3%, with few
operational failures and improved efficiency of the boiler.
In the first nine months of the year, Polvo Field's production
totaled 2.2 Mbbl and we estimate a total production in 2016 of
three million barrels, in line with 2015 and 25% higher than the
amount estimated in our last reserve certification report. This
result shows PetroRio's excellence in the operation of mature
fields, which normally show an annual production decline of around
10%, and it indicates potential for reserves addition. Total
investments in Polvo's redevelopment program came to US$ 17.9 million and we do not expect any
additional expenditure with well interventions and workovers in
2016.
The Company executed three offtakes in the third quarter, with
the sale of 1,056,756 barrels of oil, generating revenue of
R$ 139.2 million. EBITDA, adjusted
for non-cash expenses related to the write-down of receivables
(R$ 15.6 million), was positive in
R$ 15.0 million, while earnings
totaled R$ 71.5 million, boosted by
the return of our financial investments. Our consolidated cash
position, including all financial investments, reached US$ 162 million at the end of September,
increasing by US$ 37 million
year-to-date and by US$ 25 million in
the quarter. It is also worth highlighting that the US$ 16 million in receivables from oil sales in
3Q16 were fully received in November, further strengthening
PetroRio's cash position. The Company's financial health has been
enhanced and PetroRio is increasingly prepared to make value
acquisitions in a scenario that continues to offer ample
opportunities both in Brazil and
abroad.
We expect the high oil price volatility observed in the third
quarter to continue in the coming months. However, in the medium
and long term, we remain strongly confident on a structural price
recovery to begin after the first signs of supply weakening
following a long period of low investments. The beginning of the
quarter was marked by the "perfect storm" for oil prices that
started with international pessimism triggered by Brexit at the end
of 2Q16, plus successive weeks of increasing rig counts data in the
U.S. that fueled fears of an upturn in supply by marginal oil
producers. Also contributing to the price decline, there were
successive releases confirming a widespread increase in production
from OPEC countries, particularly Libya, which signaled with the possibility of
tripling production.
In response to the sharp drop in prices (Brent of US$ 41/bbl in early August), OPEC
indicated a possible agreement to freeze production, also including
non OPEC members, particularly Russia, which expressed interest in the
maneuver to raise prices. The quarter ended with a strong price
recovery and a clear indication of an agreement between the Arabs
and Russia. Oil prices followed
this upward trend in October peaking at US$
53/bbl, but at the beginning of November we saw increasing
lack of confidence on the effective announcement of this possible
agreement bringing prices back to current levels of US$ 45/bbl.
Lastly, we highlight the important recognition of PetroRio as
the best E&P Company in Latin
America in 2016. This award reflects the significant results
achieved in 2015 when we initiated our ambitious programme to
reduce costs, optimize operations and increase reserves.
Polvo Field's success case involves key elements of our strategy
and represents the first step in the construction of an even more
solid company.
OPERATING PERFORMANCE
POLVO FIELD
Oil production was in line with our estimates remaining flat at
9.1kbd for a period of approximately 30 days between July and
August, just after the conclusion of the interventions on the
field. As expected, Polvo's production shows a monthly decline
of around 100bd. July production, however, averaged 8.8 kbd as the
three wells that underwent interventions operated for only 18 days,
while production in September was affected in 44 thousand barrels
due to the scheduled maintenance stoppage that interrupted our
operation for five days.
Operational efficiency reached in July and August an exceptional
average of 99.3% with few failures and an improved efficiency of
the boiler. If we excluded the effect of the maintenance stoppage
in September, which reduced our real efficiency to 94%, 3Q16
average would have been even greater than the high levels recorded
in the first half of 2015.
Oil production totaled 771,563 barrels in 3Q16, with daily
production averaging 8,376 barrels, 13% higher than the 3Q15
average and slightly lower than in 2Q16 (-4.6%). PetroRio's average
production since 2Q15 is presented below: [see PDF]
Our focus on cost control remains one of the highlights of our
results. Lifting Cost stayed in line with the previous quarter
(historic low level of US$ 28.17/bbl)
despite the 4.6% reduction in our average production, a U.S. dollar
slightly more depreciated and non-recurring costs related to the
maintenance stoppage.
If we compare to previous years, our Lifting Cost fell
significantly over 3Q15, -26%, and accumulates an expressive 42%
reduction over 3Q14. This result is even more relevant if we
consider that production in 3Q14 averaged 9.7kbd versus 8.4kbd in
this quarter. In case we adjust our costs per barrel to 2014
production levels, our Lifting Cost would have been lower than
US$ 25/bbl, 50% below 3Q14 cost per
barrel. In addition, a significant share of our costs is
denominated in local currency and, therefore, increased with the
strong appreciation of the Brazilian Real against the U.S. dollar
in 2016.
Polvo Field's operating costs in 3Q16 were US$ 21.9 million, totaling US$ 67.6 million year-to-date. We expect
operating costs to be lower than US$ 22.3
million in the fourth quarter which would enable PetroRio to
meet the US$ 90 million goal
established for the year. This target represents a cut of 17% over
2015 and 43% if compared to 2014.
FINANCIAL
PERFORMANCE
|
|
|
R$ million
|
|
Proforma Income
Statement
|
3Q15
|
2Q16
|
3Q16
|
9M16
|
|
Offtakes
(bbl)
|
773,424
|
766,734
|
1,056,756
|
2,203,745
|
|
Average selling price
(US$/bbl)
|
50.82
|
45.41
|
49.98
|
46.03
|
|
Revenues
|
127.941
|
103.381
|
139.242
|
284.132
|
|
Costs of
products/services
|
(90.519)
|
(84.843)
|
(96.048)
|
(231.267)
|
|
Royalties
|
(11.832)
|
(7.868)
|
(13.081)
|
(25.896)
|
Results of
Operations
|
25.590
|
10.670
|
30.113
|
26.969
|
|
G&A, G&G and
Project expenses
|
(15.176)
|
(15.017)
|
(14.438)
|
(44.700)
|
|
Other
revenues/expenses
|
13.075
|
10.265
|
(16.333)
|
(8.236)
|
EBITDA
|
23.489
|
5.918
|
(658)
|
(25.967)
|
|
|
EBITDA
margin
|
18.4%
|
5.7%
|
-0.5%
|
-9.1%
|
|
Depreciation and
amortization
|
(55.269)
|
(21.399)
|
(15.448)
|
(48.428)
|
|
Financial
income
|
29.111
|
(35.877)
|
109.994
|
51.898
|
|
Income and social
contribution
|
2.690
|
336
|
(22.417)
|
(22.441)
|
Profit
(loss)
|
0.021
|
(51.022)
|
71.471
|
(44.938)
|
The Company executed three offtakes in the quarter with the sale
of 1,056,756 barrels at the gross average price of US$ 49.98/bbl and ended the quarter with 271
thousand barrels in inventory, equivalent to R$ 33 million. In November, we executed another
offtake totaling 299 thousand barrels.
EBITDA, adjusted for non-cash expenses related
to the write-down of receivables (R$ 15.6 million), was positive by
R$ 15.0 million and surpassed the
previous quarter when we registered an Adjusted EBITDA of
R$ 12.2 million (non-cash expenses of
R$ 6.3 million). Despite the slight
depreciation of the U.S. Dollar against the Brazilian Real in the
third quarter, we counted with a significant improvement on our
gross selling price (+US$ 4.2/bbl), accompanied by a reduction in
COGS that fully reflected the lower Lifting Cost achieved and
maintained since 2Q16.
General and administrative expenses (G&A) amounted to
US$ 3.3 million in 3Q16, 14% less
than the US$ 3.9 million in 3Q15 and
21% below 2Q16 levels despite the negative impact of the Brazilian
Real appreciation against the US Dollar. Year-to-date G&A
expenses totaled US$ 11 million, in
line with our aggressive annual target of US$ 14 million, which reflects a reduction of
more than 30% over last year.
Other operating expenses amounted R$ 16.3
million and were chiefly driven by the write-down of Rosneft
receivables by R$ 15.6 million. We
expect to receive the remaining balance of US$ 11 million before the end of the year. Net
income in the quarter totaled R$ 71.5
million and was fueled by the high results of our financial
investments.
TOTAL CASH, CASH EQUIVALENTS AND INVESTMENTS
At the end of 3Q16, PetroRio's consolidated cash position,
including cash equivalents and investments in marketable
securities, was R$ 529 million, most
of which allocated abroad and denominated in U.S. dollars. In US
dollars, our cash position reached US$ 162
million at the end of September increasing by US$ 37 million year-to-date.
In the third quarter, our operating cash flow was slightly
positive due to an increase in working capital with higher
receivables in US$ 16 million (last
offtake) despite lower inventories. Investments totaled
US$ 4 million, of which US$ 1.3 million was allocated to the
acquisition of spare equipment while the
remaining balance went to interventions and
workovers in the Polvo Field. It is also worth mentioning the
expressive appreciation of PetroRio's financial investments by
US$ 25 million in 3Q16 and the sale
of an aircraft for US$ 1.3 million.
Our consolidated cash position varied in 2016 due to the
following aspects:
- Inflow of R$ 226 million related
to oil sales;
- Divestments/M&A of R$ 147
million with (a) the inflow of R$ 113
million related to the reimbursement of payments made in
advance to Bijupirá and Salema fields, (b) R$ 15.4 million (US$ 5
million) from Rosneft related to the farm-out of the
Solimões Basin, (c) R$ 3.5 million (US$ 1 million) related to the
reimbursement for the non-utilization of the letter of credit
acquired with Glencore, (d) R$ 3.8 million (US$ 1.3 million)
related to the sale of an aircraft, and (e) inflow of R$ 11.2
million (US$ 3.5 million) paid by Maersk and related to Polvo
transaction;
- Production costs, operating expenses, G&A and royalties
totaling R$ 321 million;
- Disbursements related to investments of R$ 62 million;
- Negative impact of R$ 77 million
from exchange variation;
- Financial result of R$ 119
million.
BALANCE
SHEET
|
(in thousands of
R$)
|
|
|
|
|
|
|
ASSETS
|
|
|
|
LIABILITIES
|
|
Current
assets
|
Sep 30,
2016
|
Dec 31,
2015
|
|
Current
liability
|
Sep 30,
2016
|
Dec 31,
2015
|
|
Cash and cash
equivalents
|
13.273
|
283.951
|
|
|
Suppliers
|
32.836
|
52.469
|
|
Marketable
securities
|
515.293
|
213.090
|
|
|
Labor
obligations
|
5.167
|
7.373
|
|
Accounts
receivable
|
110.525
|
244.499
|
|
|
Taxes and social
contribution
|
10.041
|
13.082
|
|
Taxes
recoverable
|
24.373
|
26.801
|
|
|
Debentures
|
1.706
|
664
|
|
Derivative financial
instruments
|
6.165
|
-
|
|
|
Derivative financial
instruments
|
1.040
|
-
|
|
Advances to
suppliers
|
23.895
|
28.291
|
|
|
Advances from
partners
|
6.702
|
7.658
|
|
Prepaid
expenses
|
4.304
|
722
|
|
|
Other
liabilities
|
854
|
4.177
|
|
Inventories
|
33.108
|
25.279
|
|
Total Current
liability
|
58.346
|
85.423
|
|
Other
credits
|
3.308
|
3.546
|
|
|
|
|
Total Current
assets
|
734.244
|
826.179
|
|
Non-current
liability
|
|
|
|
|
|
|
|
Suppliers
|
12.710
|
12.710
|
Non-current assets
available for sale
|
50.056
|
73.644
|
|
|
Debentures
|
31.431
|
31.461
|
|
|
|
|
|
Provision for
abandonment (ARO)
|
46.787
|
68.033
|
Non-current
assets
|
|
|
|
|
Provision for
contingencies
|
53.907
|
60.879
|
Long term
assets
|
|
|
|
|
Deferred taxes and
social contributions
|
36.146
|
4.087
|
|
Advances to
suppliers
|
12.596
|
12.596
|
|
|
Other
liabilities
|
256
|
340
|
|
Deposits and
pledges
|
12.368
|
11.594
|
|
Total Noncurrent
liability
|
181.237
|
177.510
|
|
Recoverable
taxes
|
18.285
|
20.084
|
|
|
|
|
|
Deferred
taxes
|
10.844
|
1.226
|
|
Equity
|
|
|
|
Property, plant and
equipment
|
48.938
|
69.949
|
|
|
Capital
|
3.265.216
|
3.265.185
|
|
Intangible
assets
|
199.804
|
161.766
|
|
|
Capital
reserves
|
101.720
|
101.720
|
Total fixed
assets
|
302.835
|
277.215
|
|
|
Accumulated
translation adjustment
|
365.804
|
387.451
|
|
|
|
|
|
Accumulated
losses
|
(2.840.251)
|
(2.950.672)
|
|
|
|
|
|
Loss for the
year
|
(44.938)
|
110.421
|
|
|
|
|
Total
Equity
|
847.551
|
914.106
|
|
|
|
|
|
|
|
Total
assets
|
1.087.135
|
1.177.038
|
|
Total liabilities
and equity
|
1.087.135
|
1.177.038
|
INCOME
STATEMENT
|
(in thousands of
R$)
|
|
|
|
|
Quarter
|
Quarter
|
|
September 30,
2016
|
September 30,
2015
|
Net
revenues
|
139,242
|
127,941
|
|
Cost of
products/services
|
(96,048)
|
(90,519)
|
|
Depreciation and
amortization
|
(15,485)
|
(54,459)
|
|
Royalties
|
(13,081)
|
(11,831)
|
Gross
profit
|
14,628
|
(28,868)
|
Operating income
(expenses)
|
|
|
|
Geology and
geophysics expenses
|
(210)
|
(1,064)
|
|
Personnel
expenses
|
(5,179)
|
(4,513)
|
|
General and
administrative expenses
|
(3,600)
|
(1,683)
|
|
Expenses with third
party services
|
(4,949)
|
(7,000)
|
|
Taxes and
fees
|
(500)
|
(916)
|
|
Depreciation and
amortization expenses
|
37
|
(811)
|
|
Other operating
income (expenses), net
|
(16,333)
|
31,491
|
|
Financial
results
|
109,994
|
29,111
|
|
Income before income
and social contribution taxes
|
93,888
|
15,747
|
Income and social
contribution taxes
|
|
|
|
Current
|
-
|
(6)
|
|
Deferred
|
(22,417)
|
2,696
|
|
(22,417)
|
2,690
|
Income (loss) from
continuing operations
|
71,471
|
18,437
|
Net
income
|
71,471
|
18,437
|
STATEMENT OF CASH
FLOW
|
(in thousands of
R$)
|
|
|
|
|
Sep 30,
2016*
|
Sep 30,
2015*
|
Earnings for the
period (before tax)
|
(22,497)
|
(75,064)
|
Adjusts
for
|
|
|
|
Depreciation and
amortization
|
48,428
|
103,804
|
|
Financial
income
|
(283,788)
|
(162,003)
|
|
Financial
expense
|
229,820
|
222,413
|
|
Share-based
compensation
|
-
|
3
|
|
Loss/write-off of
fixed assets
|
2
|
6,656
|
|
Provision for
contingencies/losses
|
(1,801)
|
3,022
|
|
Provision for
impairment
|
6,712
|
-
|
Subtotal
|
(23,124)
|
98,831
|
|
|
|
(Increase)
decrease in assets
|
|
|
|
Accounts
receivable
|
81,282
|
(267,017)
|
|
Taxes
recoverable
|
3,749
|
(1,610)
|
|
Prepaid
expenses
|
(3,609)
|
93
|
|
Advances to
suppliers
|
(3,870)
|
120
|
|
Advances to/from
partners in oil & gas operation
|
-
|
7,214
|
|
Other
credits
|
59
|
(3,354)
|
Subtotal
|
85,668
|
(268,751)
|
|
|
|
Increase
(decrease) in liabilities
|
|
|
|
Suppliers
|
(13,794)
|
12,071
|
|
Labor
charges
|
(2,189)
|
(1,938)
|
|
Income and social
contribution charges
|
(6,651)
|
3,031
|
|
Contingencies
|
(381)
|
-
|
|
Advances to/from
partners in oil & gas operation
|
(833)
|
30,766
|
|
Other
liabilities
|
(2,650)
|
2,350
|
Subtotal
|
(26,498)
|
46,280
|
|
|
|
Net cash generated
by (used in) operating activities
|
36,046
|
(123,640)
|
|
|
|
Cash flows from
investment activities
|
|
|
|
(Investment in)
Redemption of securities
|
(234,063)
|
(132,656)
|
|
Deposited in
court/guarantees
|
(1,188)
|
(427)
|
|
Asset held for
sale
|
3,789
|
180,908
|
|
(Purchase) sale of
fixed assets
|
273
|
(292)
|
|
(Purchase) sale of
intangible assets
|
(72,561)
|
(45)
|
|
(Purchase) of
noncurrent assets
|
-
|
(96,109)
|
Net cash used in
investing activities
|
(303,750)
|
(48,621)
|
|
|
|
Cash flows from
financing activities
|
|
|
|
Debentures and
loans
|
(1,880)
|
(3,160)
|
|
Derivative
transactions
|
(6,697)
|
-
|
Net cash flow from
financing activities
|
(8,577)
|
(3,160)
|
|
|
|
Exchange
variation
|
5,603
|
(8,019)
|
Net increase
(decrease) in cash and cash equivalents
|
|
|
Cash and cash
equivalents - beginning of period
|
283,951
|
350,634
|
Cash and cash
equivalents - end of period
|
13,273
|
167,194
|
Net increase in
cash and cash equivalents
|
(270,678)
|
(183,440)
|
|
|
|
*Period of 9 months
ended in September 30, 2016 and September 30, 2015
|
Sedar Profile # 00031536
Neither the TSX Venture
Exchange nor its Regulation Services Provider (as that term is
defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
About PetroRio
PetroRio is one of the largest
independent companies in the oil and gas production in Brazil. It is the operator of the Polvo Field,
located in the Campos Basin, which has Brazil's seventh largest daily production of
barrels of oil equivalent (boe). PetroRio is the owner of "Polvo A"
fixed platform and a 3.000HP drilling rig, currently in operation
in this 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. The Company´s corporate culture
seeks to increase production through the acquisition of new
production assets, the re-exploration of assets, increased
operational efficiency and reduction of production costs and
corporate expenses. PetroRio's main objective is to create value
for its shareholders with growing financial discipline and
preserving its liquidity, with full respect for safety and the
environment. For further information, please visit the Company's
website: www.petroriosa.com.br.
Disclaimer
This news release contains forward-looking
statements. All statements other than statements of historical fact
contained in this news release are forward-looking statements,
including, without limitation, statements regarding our drilling
and seismic plans, operating costs, acquisitions of equipment,
expectations of finding oil, the quality of oil we expect to
produce and our other plans and objectives. Readers can identify
many of these statements by looking for words such as "expects",
"believe", "hope" and "will" and similar words or the negative
thereof. Although management believes that the expectations
represented in such forward-looking statements are reasonable,
there can be no assurance that such expectations will prove to be
correct. By their nature, forward-looking statements require us to
make assumptions and, accordingly, forward-looking statements are
subject to inherent risks and uncertainties. We caution readers of
this news release not to place undue reliance on our
forward-looking statements because a number of factors may cause
actual future circumstances, results, conditions, actions or events
to differ materially from the plans, expectations, estimates or
intentions expressed in the forward-looking statements and the
assumptions underlying the forward-looking statements. The
following risk factors could affect our operations, as well as our
ability to complete the proposed acquisition: 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; limited
operating history as an oil and natural gas exploration and
production company; drilling and other operational hazards;
breakdown or failure of equipment or processes; contractor or
operator errors; non-performance by third party contractors; labor
disputes, disruptions or declines in productivity; increases in
materials or labor costs; inability to attract sufficient labor;
requirements for significant capital investment and maintenance
expenses which PetroRio may not be able to finance; cost overruns
and delays; exposure to fluctuations in currency and commodity
prices; political and economic conditions in 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 inaccurate. The
forward-looking statements contained herein are expressly qualified
in their entirety by this cautionary statement. The forward-looking
statements included in this news release are made as of the date of
this news release. Except as required by applicable securities
laws, we do not undertake to update such forward-looking
statements.
SOURCE PetroRio