Message from the Management
“We thank all our employees for your dedication, resilience and optimism in such a challenging year. We met this trial and remained healthy. You have achieved much in an uncertain scenario, maintaining the highest standards of safety and efficiency, and you deserve our gratitude. The same message is valid for society as a whole, and we hope that all of you remain resilient in the face of the challenges from COVID-19 that are yet to be faced.
PetroRio has always undertaken the best efforts to take care of its employees – during the pandemic we have introduced on-line classes for yoga, meditation, physical therapy, gym, psychological therapy and other measures of emotional and physical well-being. We have implemented weekly COVID-19 tests, as well as tests before boarding our platforms. Accordingly, we take care of the health of our employees to the maximum extent possible.
2020 was marked by challenges and achievements. In PetroRio, we faced this period with consistency and excellence. Despite the unprecedented drop in oil prices, the Company delivered record production and per barrel costs, maintaining its solid financial and operational conditions, as well as implementing important measures to continue its value creation.
Overall, we were able to deliver a year of records. Due to our work in 2020, the Company’s production increased by 30% between the end of 2019 and the end of 2020, from 24.5 thousand barrels per day to 31.7 thousand. Our sales increased by 40%, from approximately 6 million barrels to almost 9 million. The lifting cost decreased by 37% in the year compared to 2019, decreasing to US$ 14.5/bbl.
We began the year with the announcement of the acquisitions of FPSO OSX-3 (renamed to FPSO Bravo) and the operating interest in Tubarão Martelo Field, as well as the results from the successful Drilling Campaign in Polvo Field, which delivered an additional well in the Eocene, increasing the Field’s production by 2,500 barrels per day.
Balancing optimism and caution, we took the opportunity to hedge most of our sales in the first half of the year at a floor of US$ 65/bbl. When we were surprised by the pandemic that impacted global demand for fuel, this hedge gave us the security to maintain our efforts in reducing costs. The lessons learned during the oil crisis from 2014 to 2017, at the beginning of PetroRio’s operations, helped us in 2020 and we were able to maintain operating cash generation during the worst period of the crisis, protecting our cash flow.
In the first half of the year, we continued the process of improving corporate governance, by renewing our Board of Directors, bringing new independent members with extensive experience in the sector, capital markets and business management, protecting the interests of our shareholders. In addition, we changed our independent auditors and hired a “Big Four” auditor, reinforcing our commitment to transparency.
In August, after ANP’s approval, we concluded the acquisition of 80% of the Tubarão Martelo Field, which increased our production by approximately 8,000 barrels per day and further reduced the Company’s lifting cost, with expressive cost reductions in the Field paying off immediately, when we reproduced our operational and management model already implemented in Polvo and Frade.
In 2020, we began investments in the tieback between Tubarão Martelo and Polvo, expected to be concluded in the middle of 2021. The project, widely utilized in other regions, will create the first cluster of private Fields in Brazil and may deliver another relevant reduction of operational costs of the assets. Another important benefit of the project is uniting the production of both fields with less operational assets, reducing risks and emissions while increasing safety.
In November, we announced the acquisition of the operation of Wahoo, an important step for the Company’s expansion. We conceived the project to integrate the Wahoo and Frade Fields, again based on the strategy of creating production clusters. We expect to significantly increase the Company’s production with low additional operating costs. The geological risks involving the project are very low, aligned with our strategy to reduce our exploratory exposure.
Also, at the end of 2020, we began the effort to issue shares, which was concluded in 2021. We raised approximately US$ 370 million, allocated to organic investments and potential new acquisitions. In addition to establishing a new stage for PetroRio, with access to capital markets, the issuance also reinforces the Company’s cash balance in preparation of accelerating growth. Moreover, we would like to thank our new shareholders for the trust they placed with us.
Looking to the future, we will continue investing in our assets to increase production at low costs and looking for acquisitions, maintaining discipline in the evaluation of new fields.
The current moment PetroRio enjoys makes us believe that we are still at the beginning of our story and that we are well placed to benefit from the opportunities we see. We expect that 2021, and the following years, will be even better. We continue working with the same ambition and discipline to make the Company’s dream come true, emphasizing the safety of operations, value generation for our shareholders and social well-being.”
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