Message from the Management
“In this quarter, we continued to focus on keeping our operations safe and reliable, protecting the health of our employees and contractors on board, reducing the risk of Covid-19 spreading in our operations and minimizing the impact on our business.
At the same time, we delivered the review and adjustment of costs as planned, and we are overcoming this challenging moment with greater production volumes, a smaller structure and better capitalization.
These achievements are the result of the resilience of our business model, of the agility of our teams, and also a consequence of the ability to integrate our assets (Frade, Polvo and Tubarão Martelo), and the high potential to generate value that this integration brings. Thus, we present in this quarter greater reduction in costs per barrel, in increase in liquidity, and further deleveraging.
Among these achievements, we integrated the operation of the recently acquired Tubarão Martelo Field. Like Frade in 2019, the successful incorporation was carried out in an agile, safe and incident-free manner.
These achievements were also reflected in the Company’s visibility in the capital market, which enshrined PetroRio’s shares among the most traded on the stock exchange, through its listing on the BOVESPA index on September 2020.
On the operational front, we produced a record volume of 2.5 million bbl in the quarter, reaching a production of 33 thousand bbl per day in September, and we had offtakes totaling 2.4 million bbl. The volume sold offset the strong 34% drop in the brent price, year over year. Accordingly, the Company recorded revenues of R$ 488 million and an adjusted EBITDA margin (ex-IFRS) of 42%, even with the strong volatility of the commodity verified during the period.
As for the financial performance, as well as in the first two quarters of 2020, the devaluation of the local currency generated a negative non-cash impact on the financial results of 3Q20. In the nine months to September 2020, the negative impact of this exchange variation on the Company’s net income accounted for R$ 697 million (R$ 557 million ex-IFRS 16).
It is important to note, however, that Companies like PetroRio, with 96% of its revenue is expressed in U.S. Dollars and around 50% of costs in local currency, find in this scenario a favorable environment for cash generation.
Also, in the third quarter, we started Polvo and Tubarão Martelo’s tieback project and the connection project for the new TBMT-10 well. By the end of September, we had invested approximately US$ 8.7MM and purchased the vast majority of equipment with long delivery times. Both projects are expected to be completed in mid-2021.
Over the next few months, we expect to close the acquisition of Frade’s remaining 30% interest. The incorporation of the asset shall add 5.5 thousand barrels to the production and 18 million barrels of 1P reserves, contributing to the reduction of the cost per barrel of the Company.
Also, in the 4th quarter, we have already contracted the sale of approximately four million barrels, with hedges locking the minimum price at US$ 43.46 per barrel.
Finally, we continue to study both new acquisition opportunities and opportunities for revitalization in Frade, Polvo and Tubarão Martelo, with the purpose of continuing to make high-value investments.
We thank our employees and key business partners for their efforts and commitment amid the unprecedented challenges faced throughout this year.”
Click here for the Earnings Release.
Brazil Energy Insight 
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