March 18, 2020
Petro Rio S.A. (“Company” or “PetroRio”) (B3: PRIO3), following best practices in corporate governance updates its shareholders and the market in general on the ongoing initiatives to protect its employees and stakeholders, given the current market uncertainties and volatility stemming from the new coronavirus outbreak and recent drop in Brent oil prices.
In addition to applying several monitoring and preventive measures, the Company has revised its business plan and decided upon postponing its investments (capex) and reducing its costs (opex and G&A) to manage the current business environment.
Safety and prevention measures
The measures carried out by the Company will result in adjustments in its employees and service providers’ daily activities, as well as costs and administrative expenses (opex and G&A). These are listed below:
- Immediate reduction of POB (People on Board) and extension of onboard periods for all assets the Company operates, keeping personnel movement the a minimum necessary in order to operate safely and efficiently;
- Increased availability of protective, sanitation and hygiene products in onshore and offshore facilities directly related to the Company’s production, particularly in locations with higher exposure;
- Increased frequency of communication and awareness to all employees and service providers stationed in onshore and offshore locations;
- As of Friday (03/13/20), PetroRio has been undertaking screening procedures at the airport – with support from registered nurses – of personnel boarding the platforms. This includes 48h monitoring before embarking to identify potential cases;
- As of Monday (03/16/20), employees located at corporate headquarters and onshore locations will be working remotely (work-from-home). This includes limited commuting for employees whose physical presence is required for regulatory, fiscal and government authorities, keeping these to the bare minimum. The Company will decide on extending these initiatives on 03/31/20;
- All international travel is suspended. Domestic travel is exclusive to employees critical to offshore facilities who reside in other states;
- All events have been suspended.
Additionally, on Friday (03/13/20), the Company successfully carried out Medical Evacuation simulations across all platforms, under supervision of its internal Crisis Committee.
Liquidity, Leverage and Investments (CAPEX) in 2020
The Company began 2020 with a solid cash position of US$ 183 million, and a high level of accounts receivable, at US$ 93 million, which was received throughout January and February, further improving its cash position.
Additionally, on January 6, with the purpose of protecting its financial commitments due in the first half of 2020, PetroRio hedged a relevant volume of its estimated production for the period. Accordingly, the Company set a floor price of US$ 65 per barrel for a volume comprising 100% of the estimated 1Q20 offtakes and 50% of 2Q20 offtakes. With expected offtakes of approximately 1.5 million barrels in March alone, the hedge’s net proceeds could reach an estimated US$ 39 million to US$ 41 million, assuming Brent prices varying between US$ 32 and US$ 28 per barrel, respectively.
Following its decision to postpone capex, the Company has concluded and is currently demobilizing the 3rd Phase of Polvo’s Revitalization Plan and will provide disclosure of the campaign’s results in the coming days.
PetroRio’s business model is resilient and allows the Company to weather challenging environments without compromising safety and the well-being of its employees and stakeholders.
The Company will maintain its level of quality and efficiency in its operations and use its experience and track record in cost reduction initiatives to mitigate the impact of the current scenario. PetroRio will keep the market informed over relevant issues, and new developments will be promptly announced.
Lastly, PetroRio wishes that its employees, shareholders, business partners and their families remain in good health throughout this period.