Brava Energia S.A. ($BRAV3)

Welcome to the conference call to discuss Brava Energia's Fourth Quarter 2025 Earnings Results. The presentation and comments about the results will be made by Brava's CEO, Richard Kovacs, and other members of the management. There is simultaneous interpreting on the platform. To access it, you need to click on the interpretation button on the bottom of the screen and choose the language of your preference. This conference call is being recorded and will be available on the company's IR website, ri.bravaenergia.com. You can also find the presentation that we will show here. [Operator Instructions] Before proceeding, we would like to inform that forward-looking statements are based on beliefs and assumptions of Brava Energia's management and on information currently available to the company. Forward-looking statements may involve risks and uncertainties as they refer to future events, and therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists should take into account the events related to the macroeconomic environment, oil and gas segments and other factors may cause results to differ materially from those expressed in those forward-looking statements. We will begin now the presentation by giving the floor to Mr. Richard Kovacs. Please, Mr. Kovacs, you may proceed. [Presentation]

Good afternoon, everyone. I would like to thank everyone who is joining us on this earnings conference call. I will start by briefly summarizing my history at the company and then highlighting the main results of the year 2025, which was very good for the company. Brava's a great oil and gas investment platform. The fund they represent built a relevant stake in the company in early 2025, which led me to take a seat at the Board of Directors and then to the position of Chairman. I designed the shareholders' agreement, which helps build the necessary alignment between the leadership team, executives and shareholders of the company. After a year of the beginning of this story, I can say that Brava is on the right track. We ended the cycle of project implementation and began a new cycle focused on stabilizing production and unlocking value through portfolio management, capital allocation and consistent results. In this transition, we made changes in the leadership team in a gradual and coordinated manner. In order to reflect this new moment and to ensure focus on the company's goals, I, along with the signatories of the shareholders' agreement, share the view that we have the opportunity and potential to be more than good operators of oil and gas assets. We can be excellent allocators of capital in projects in the sector, and we have the best vehicle to do so. We had a transformational year in '25. Brava showed strong evolution in absolutely all business metrics from the operational safety, efficiency and financial point of view. We renewed our annual production record. We produced more than 81,000 barrels of oil equivalent daily, an increase of 46% year-on-year. Operating efficiency across our portfolio supported records in all financial indicators. Revenue exceeded USD 2 billion, and we recorded the company's lowest level of lifting costs in our history. These milestones boosted our results and the expansion of EBITDA, which exceeded $800 million in the full year and was fundamental with a strong reduction in the net debt over EBITDA ratio, which ended year close to 2x. 2026 marks the beginning of a new cycle for Brava. We will focus on strengthening the safety culture and the sense of ownership of our team for Brava if [indiscernible] accounts. Our industry is cyclical and the focus of this management is to ensure that Brava is prepared to operate profitably in cycles of low oil prices and deliver strong results in cycles of high commodity prices. In January, we started an intense cost reduction program. Our goal is to make the company even more efficient. In this project, we have already identified more than BRL 100 million worth of savings in existing contracts, and we will continue to focus on efficiency strategically. In mid-February, we announced the arbitration decision that will support the consolidation of the full results of Papa-Terra field, an initiative that joins many others focused on the company's portfolio management. I reaffirm our commitment to tireless seek a company that operates safely and efficiently to support achievement of our main goals, i.e., the reduction of the company's leverage, the reduction of our cost of debt, efficient management of the portfolio and capital allocation in addition to creating value for our shareholders and stakeholders. Before closing, I highlight the relevance of the Atlanta project. We received from OTC, the highest award in the oil and gas industry. This shows the high technical and project execution capacity of our team. This is a historic feat for an independent Brazilian oil and gas company, confirming that Brava has the most qualified technical staff in the national oil and gas industry. Now I will turn the floor to our operations officers, Travassos and Boeri. And I'd like to welcome our new CFO, Luiz Carvalho, in his first participation in our earnings call. Thank you, all.

Thank you, Richard. Good afternoon, everyone. Thank you for your presence. And I take this opportunity to register my best wishes and success to Richard in this first earnings conference call. I will highlight some of the key points about the offshore division. But before that, I will use the slide on the screen to provide a snapshot of the company's production results. The slides serves primarily as a reference for those who do not follow our operations so closely. On the left, we highlight our main production clusters in addition to infrastructure in Rio Grande do Norte. And on the right, the slide already illustrates well the production growth that the company has been delivering quite consistently, especially oil production, which accounts for 81% of what we produce. When we look at the bottom of the slide, these are 3 colored bars bring a breakdown of production growth by asset, where we can observe a good consistency in onshore production, which Boeri will detail a little later, and a very substantial growth in the offshore segment caused by BC-10, or made possible with the start of operations of BC-10 in Brava's portfolio, but above all, by the increase in production at Atlanta field as well as by the increase in production and efficiency at Papa-Terra. Production in 2025 grew around 46% compared to 2024, and this is the current production record for the company even when compared to the combined production of the 2 companies that are now Brava Energia. Speaking a little about the offshore business. Now I would like to highlight Papa-Terra field. This is an asset that has throughout 2025 presented higher production in absolute numbers. Since it started with an average production in the first quarter of approximately 14,000 barrels daily, increasing to an average production of 19,000 barrels in the following quarters, without the addition of new wells. And more than that, it has been showing a very consistent operating efficiency. The slight reduction we see in the chart in Q4 '25 results from a production shutdown that was scheduled, which was, by the way, successfully carried out in November. This shutdown took place with duration and cost below budget. Now turning to cost. It is important to highlight the significant reduction in lifting cost during the year of 2025. This is the result not only of the increase in production that I mentioned just now, but also of lower operating costs, renegotiation of contracts, return of leased equipment, optimization of teams among other measures. We are convinced that we will further reduce the lifting cost, not only by increasing production coming from the 2 new wells scheduled in our campaign. I will detail that in a moment, but also by new cost reductions already negotiated in current contracts. Well, moving on to the next slide, I'd like to detail our integrated campaign, Atlanta and Papa-Terra, 2 wells in each asset. I'd like to remind you that this campaign is fully contracted. Therefore, there is no risk of fluctuation in prices or deadlines due to any geopolitical factor. I just want to make that very clear. The rig we will use is the Lone Star rig. It is already on its way to the location after having completed the preparation and loading stage here in Guanabara Bay. It has already been inspected by the control agencies, including IBAMA. It has also presented all the evidence for approval by the environmental agency. So we do not expect any events or complications and we plan to start drilling at Papa-Terra field. That is rig, the seabed now in the second half of March as foreseen in our schedule. The slide brings a time line of the main events planned. We estimate that the wells have production potential. So I am not giving you any prediction of production, but rather their potential with all the uncertainties that exist in this type of production development. To give you a number of estimates between 10,000 and 15,000 barrels daily at Papa-Terra and between 15,000 and 20,000 at Atlanta, considering Bravas 100% working interest. Well, on this slide, I highlight the OTC award. But before talking about the relevance of this award for us, I would like to highlight what it represents for any oil and gas company. Receiving the OTC award, which is also consolidated as the main global forum for the technological and strategic development of the offshore oil and gas industry, represents an important seal of excellence in capacity in the execution of highly complex projects. This award is recurrently considered the Oscar of the oil and gas industry. For us, at Brava, we're the first independent company outside the U.S. to win this award. In addition, we are also the first independent Brazilian company to develop a deepwater project from its conception all the way to efficient and safe production, which is already happening and which was delivered, by the way, on time and on budget. This is clear proof of our ability to develop projects and to operate complex assets to establish partnerships with various players from the most different levels of the industry. This global recognition demonstrated by this award is proof of the technical quality of our team, the courage of our shareholders and the trust of our partners as well as our suppliers. On behalf of Brava Energia, I would like to express my gratitude to all people involved. With that, I give the floor to Jorge Boeri, who will speak about the onshore segment.

Thank you, Travassos. After ending the third quarter with the production of 35,000 barrels of oil equivalent day, the highest level in the history of Brava onshore, in the fourth quarter, we recorded a reduction to 30,000 boe/d. I'd like to reinforce that this variation is exclusively due to the required shutdown of certain facilities in the Potiguar closer, which occurred in October of last year. This is a one-off event unrelated to the quality of the assets or the performance of the reservoir. Since then, our work has been focused on the safe resumption of operations. We have already reestablished 100% of the test stations and made progress in the reactivation of facilities with stock production and steam generators. In heavy oil fields, steam injection is critical to sustain volumes. Its interruption impacts production in the short term, but does not change the reservoir's potential. The experience of 2023 when we also faced the temporary interruption of injection demonstrated that once the steam injection is normalized, volumes tend to recover consistently. This reinforces our confidence in the resumption. It is important to contextualize this performance within our strategy of strong capital discipline. Remember that since June last year, we have not been carrying out drilling activity, and we maintain a minimum level of workover. This significantly reduces our CapEx and increases cash generation in the short term. Maintaining production in a reduced investment scenario is something we achieved until the interdiction and demonstrates the robustness of our assets and the efficiency of our reservoir management. Therefore, we are facing a context impact on volumes while maintaining a structural strategy of financial discipline and operating efficiency. Moving on to the next slide. I would like to highlight a structural vector value creation. The implementation of our IOC, the integrated operations center in Rio Grande do Norte and in Bahia. In Rio Grande do Norte, we are migrating from 21 control rooms distributed at the field to a single centralized room, integrating operational supervision and logistics coordination, and we are starting the first drone flights. This movement brings clear gains in scale and efficiency, focusing on the reduction of operating costs, reduced response times, reduction of production losses, optimization and the use of contracted resources and increased safety in our operations. And by year, we have made progress in consolidating the operating -- operation room into a unified room and implementing inspections with drones, which already have a significant reduction in response time and increased productivity. These initiatives are structural and should generate recurring efficiency gain. Speaking briefly of downstream, our industrial asset is also going through an important phase of operational strengthening. We are finalizing the construction of a tank with capacity of 35,000 cubic meters, expanding logistical flexibility and reducing exposure to possible delays in the arrival of ships. We are also building a fourth oil treatment unit increasing the reliability of the system. And since January 1, we have been operating an unloading station for double trailer trucks, increasing the efficiency of our road transportation. In summary, even in the face of a one-off operational impact, we continue to combine capital discipline, cash generation and structural efficiency initiatives, positioning the onshore business to resume growth with higher operating leverage once the investment cycle is reactivated. With that, I turn the floor to our CFO, Luiz Carvalho.

Thank you, Boeri. I will now go over the financial highlights of the full year of 2025 and the fourth quarter of '25. I think on the slide, it's important to underscore that despite a weaker macroeconomic scenario, the company was able to post a revenue increase even with average Brent 14% lower in 2025, Brava delivered revenue growth of more than 15% year-on-year. This result reflects strong operational growth with production increasing 46% in 2025. That is a consequence of offshore, which already represents the majority of revenue generation, consolidating the company's strategy. Moving on to the slide on adjusted EBITDA. I think the core message here is there was margin expansion and cash generation throughout 2025. The company delivered record EBITDA of USD 806 million, up 21% year-over-year. EBITDA margin expanded to around 39%, reflecting operating efficiency gains. After the implementation of Atlanta Phase 1, all segments started to generate positive cash. Both onshore and offshore posted improvements in terms of profitability throughout 2025. Moving to the slide on lifting costs. Here, it is important to point the strong cost savings we saw along 2025. Lifting costs fell to the company's all-time low of around $15 without chartering. In offshore, the reduction was approximately 16% year-on-year, driven by higher production and efficiency. With the planned drilling campaign, we still see additional room for unit cost reduction throughout the year 2026. Moving on to CapEx. The core message here is Brava's capital discipline. 2024 was a year on the intense investments on account of the Atlanta project. Well, 2025 marked the fifth consecutive quarter of CapEx reduction after that phase. Offshore CapEx was down 60% year-over-year following the completion of the Atlanta implementation. In onshore, the reduction in investments reflected rig optimization and greater operating efficiency in almost all fields. The next slide might be the most important one in the presentation of our financial results. It is very important to highlight the consistent deleveraging we had along 2025. We ended the year with more than $1 billion in cash, reinforcing the company's liquidity. Leverage fell from 3.4x to around 2.1x over the course of 2025, showing a clear deleveraging trajectory. Active liability management has also reduced the average cost of debt, which remains a big priority for the company's management and we see room for additional reductions over the next few years. On the next slide, it is worth mentioning the company's consistent cash generation. The quarter delivered another period with positive free cash flow. Operating cash generation was sufficient to fund CapEx, hedging and other financial obligations. So basically combining robust liquidity and cash generation, we maintain a solid capital structure. Moving on to our hedge strategy. The core message here is the protection of the company's cash generation. Our hedging strategy aims to protect against downside risk while maintaining exposure to potential oil price upside. We use a combination of colors, puts and NDFs while maintaining financial flexibility with contracts that do not provide for margin calls. The objective here is to ensure cash predictability without compromising the upside to Brent. It is important to say that in relation to freight, we were able to lock some loads before the recent spike. Regarding crack spreads, we had not made protections, but now with a more positive scenario, we have been very active in this type of contract. When considering all of these variables, we observed a very positive netback in the company looking at Q2 and beyond. Well, moving on to the final slide. When we look back, we should highlight value creation since the merger that result in the creation of Brava. In 2024, our production was around 55,000 barrels. Our EBITDA, $660 million, lifting cost higher than $17 and our leverage over 3x. In 2025, our production grew to 80,000 barrels. EBITDA increased to $800 million, our lifting cost dropped to $15 per barrel, and our leverage dropped to almost 2x. It is worth noting that in 2026, we created a cost reduction and contract management program called Brava Eficiente, or Efficient Brava. So far, we have already marked around BRL 150 million in cost reduction, with 50% of this amount already realized. Of this total, BRL 90 million are focused on contracts and BRL 60 million on other initiatives. Looking ahead, our focus remains on basically 4 points. First, stability of production with safety in our operations. Two, free cash flow generation with additional leverage reduction by transferring value from debt to equity. Three, execution of the drilling campaign at Papa-Terra and Atlanta on time and on budget. And lastly, managing our portfolio actively with a focus on unlocking value for our shareholders. Now we can move on to the Q&A session.

[Operator Instructions] First question comes from Mr. Vasconcellos with UBS.

Richard, Luiz, we spoke a little about this, but I would like to issue good luck in facing the new challenges. If I may, I'd like to ask two questions. The first is about dividends. When we look at your balance sheet for Q4, it seems that you announced a minimum dividend payout of BRL 50 million. And I would like to understand how you made adjustments to the profit base to calculate the dividend? I'd like to understand what are your internal discussions regarding dividend payout from now onward? Perhaps I want to understand whether it would make sense to zero the minimum dividends in the bylaws of the company so that the company can remain focused on deleveraging process. Second point, second question. Since there was an announcement regarding taxation of oil. Is there any expectation of the impact on Brava? How much have you been exporting? And what are the hedging you've made could, in a way, negatively impact you in a double fashion? So you have some kind of cap in the Brent upside, so there might be another impact with this export fixation. I'd like to get your feedback on this.

Thank you, Tasso. Luiz will answer this.

Thank you, Tasso. As for dividends, starting with the first question, the company has a policy. We follow minimum compulsory dividend payout of 25%. There was a discussion regarding perhaps using a portion of the so-called noncash profit, but we understood that given what is set forth as minimum compulsory dividend payout, we thought it made sense without hurting our liquidity. Today, we have more than $1 billion in cash at the company. $50 million is not a relevant amount in that context. So the Board of Directors thought it would be good to distribute that amount. But looking forward, that's a discussion that we will have eventually at the right timing. The moment that the company achieves a net debt over EBITDA ratio below 1.5x, we might then discuss whether we can change the bylaws or not. At the moment, there is no such discussion at the moment, we decided to pay the minimum dividend. Second question was about taxation. This is obviously very recent news. Our tax team is walking into that to calculate and see what possible impacts the company can deal. What I can say is that in 2025, approximately 30% of our revenue was geared or came from exports. And in terms of portfolio, and that's the beauty of Brava's portfolio. We have the most verticalized and integrated portfolio. And this, in a way, is protective for us. It protects us against this kind of measure. So we are relatively comfortable in what it relates to all of these changes announced today. But again, it is way too soon for us to understand the possible implications for the company. And lastly, you asked about hedging. Perhaps we'll speak more about this in another question. But basically, we have a policy of hedging our cash generation in 2026, where we'll have a concentration of investments related to the drilling campaign at Papa-Terra and Atlanta. So up until 2 weeks ago, we had 10 out of 10 analysts having an opinion that oil prices would be down to $50 or more challenging levels of price. And the company decided to hedge an unsubstantial part of our production to ensure cash generation. Regarding hedging, there is no type of contract that would have predicted a margin call. Secondly, the curve that we use to define the threshold is relatively conservative, not to say, very conservative. We use the PDP curve. So we have a significant portion of our production still exposed to short-term oil spot price. And there is an expectation for Brava to capture part of those upsides. To end this explanation on hedging, we presented during the presentation, the slide and in our earnings release, that we are discussing the Brent hedge. We have to take into account that there are other very relevant portions in the composition of the final price. In that context, we had good hedging for freight for the next 3 or 4 offloads, so we got a freight price before the spike that we saw recently. And in terms of the crack spread, which is the difference between our product vis- -vis the Brent, we have not hedged anything. And we are able to capture these better spreads that we are seeing now. In the past quarter, we saw Brent minus 10, minus 11 given the whole geopolitical context. And now in the last offload, we saw a positive Brent. Just to say that when we talk about hedging, vis- -vis what we have seen in terms of freight, frac spread and Brent, the netback is positive for Brava in this context.

Next question from Bruno Montanari with Morgan Stanley.

I have a follow-up and two questions. Going back to hedge, if you could confirm how much is hedged in Q1 and Q2? And with the current market situation, are you not rolling over 12 months and perhaps leaving a greater part of the long curve unprotected considering the current scenario? And my first question is about cash generation. It was super strong in the quarter with a good component in our analysis coming from a strong release of working capital. So in terms of cash generation, what are you expecting for 2026? And is the working capital going to be offset now in Q1 or Q2 of '26? My second question is about recycling of the portfolio. What's new regarding analysis and discussions at the Board and at the management meetings regarding potential M&A purchase and sale of assets?

Bruno, I'm going to take your first two questions that have to do more with the financial part, and then Richard will speak about the portfolio, although I handle M&As. So regarding your question on hedging, we have now, for Q1, approximately 80% of the PDP curve hedged at a Brent of $64, $65. And again, I'd like to remind you, there is a freight component also and the crack spread component. Looking forward, our policy is an 18-month forward policy, where in every quarter, we have both an upper and a lower limit to work with in terms of hedge. What is important to highlight is that we don't have a goal of taking risk related to hedge. Hedge is a tool that the company has been using to protect part of our cash generation in a year that up until recently was pointing to more challenging oil scenarios and with the concentration of our CapEx given the drilling campaign at Papa-Terra and Atlanta. So basically, looking forward, which is the second part of your question, we have analyzed not just towards the end of the year, but also for next year, we are analyzing the curves. And the curves are very volatile. We honestly saw greater volatility in the more short-term contracts. Just this week, we saw the greatest intraday volatility of Brent in history. It's very hard to capture the short-term volatility. But for the long run, we have been seeing -- we have been very active. We have been discussing this topic daily at the company to see what kind of hedge protection we want to have for our company. But this hedging policy is a living organism. So we analyze both macroeconomic conditions and the balance sheet of the company. And we evolve accordingly and make adjustments accordingly. As for your second question, I think that this was the fourth or fifth consecutive quarter with cash generation, which shows that in 2024, the company had a disbursement or an investment base that was very intense because of the Atlanta project, of course. 2025 was a year of certain CapEx normalization, CapEx returning to levels that were much lower. 2026 is a year of investment to grow with these 4 wells, as Travassos mentioned in his presentation. So 2026 will concentrate investments to capture organic growth by year-end and beginning of 2027. And starting in 2027, we do not have any project with an FID or a new investment. So we will probably work with a lower CapEx than what we have for 2026. As for cash generation, it will depend a lot on the oil outlook. We see a lot of volatility right now. But I guess the core message from our company is that we want to be prepared to deal with a $50 barrel of oil without having a problem. So that's why we're reducing our debt, the cost of debt, we're improving efficiency. And our goal here is to be able to balance the company with oil costing $50. If oil costs more than that, good, the company will be well positioned to capture these returns. And going back to your previous question, perhaps we could think about dividends or share buyback. But this is for the future. Richard, regarding portfolio.

As for portfolio management, thank you for the question, Bruno. I do want to get into the nitty-gritty of M&A because this hurts more than helps the deals. Portfolio management in the oil and gas industry should be routine. We should not have any type of dogma. At the end of the day, what we want to do is reduce the reliance on some types of assets and focus on those assets with a greater return for us and for the company. At the end of the day, it's about that.

Next question, Gabriel Barra from Citi.

I have two. First, there have been some advances in the arbitrage process at Papa-Terra. I'd like to hear from you about the next step now, what we should expect with the next development, the discussion of this arbitration. And the second point, going back to the first question even, I think these discussions about the import tax, I think it's very important. I remember going back to 2023, I think there were very important discussions for the industry about the legal insecurity in Brazil and investment. When we look at your case specifically, it's a company that was hedged, tried to prepare. And at this moment, you end up having this almost presumably negative impact as was mentioned in the question. But within that, I don't know if Luiz or Richard, maybe could discuss this a little further to understand about the hedge policy considering your hedging policy that ended up locking your cap somehow, maybe to rethink it and only lock the floor. I know it's early to discuss that, but I'd like to hear about this from you, if maybe we should think about a different hedging way from now on, considering this uncertainty scenario when the price goes up too much and with the export tariffs as well. So the second question is your capacity to manage maybe the export side, maybe delay exports a little bit longer, wait a little bit more to see what's going to happen with the war in the scenario or maybe revert more to the domestic market. I'd like to hear about your flexibility in exports. So those are the two points, hedging policy and exports in Papa-Terra.

Thank you, Gabriel. About Papa-Terra, I think that the arbitration is going along well for us, as was released. I think soon the team is looking into it, but we expect to be able to consolidate the results. We need to wait for the final modeling. As for the hedging policy that Luiz already mentioned, if you look back at the beginning and the end of the year or the end of last year, we have a very strong policy this year. At the end of the day, we are increasing production for next year. So it's a moment for the company to invest and would like to preserve liquidity and cash predictability so that we can meet up with all of our commitments. Of course, we still have upside in terms of the oil scenario. The netback, as Luiz mentioned, is positive. It's not that we are capped. And about the taxes, it's too early to say, but Luiz also mentioned that last year, 30% of our results came from exports. So considering that, we are a little bit less exposed than other players. If I may just add, Barra, in the discussion we have with shareholders, what we don't want or didn't want to do is to end the year of '25 with leverage close to 2x. That's the lowest level that the company has reached. And get to the end of '26, needing to discuss leverage higher than 2.5x, 3x. The scenario up to 2, 3 weeks ago was a consensus that the oil would be at $50, a more challenging scenario, but there's no guarantees that this scenario might not occur at some point. But in this context, as I said in the previous question, we've been preparing the company to be able to live with comfortably with a scenario where the oil is at $50. With that said, we have been working on structures that protect a part of our cash generation to be able to meet the investments we have during the year of '26 without capturing -- while also capturing those opportunities. So we have some structures, zero cost collar, NDF, so that we don't reach the cap of a relevant part of our production. As I said, the volume that we have hedged is very conservative. As regards what we could have, we have a very active risk management so that we can capture these upsides as well without compromising, again, the company's leverage in a scenario that until recently was quite adverse.

Great. About the exports only. Is there any way to maybe bring these exports to a level that is lower than what you have today? Or is there not a lot of flexibility? I'm sorry, just going to that.

So on exports, basically, the export products come from Atlanta and Parque das Conchas. There are some very short-term contracts that we need to fulfill with certain cargoes, but it is a scenario where we may -- we will be able to reassess. It's very early, just a few hours of the publication of this resolution, but we will look into it and evaluate the possibility of maybe directing those cargoes to the domestic market. But again, you talked about the double impact of the hedge and the tax, but that was portfolio, in our opinion, presents a level of defensiveness against that, considering that we're more integrated, more verticalized. We have products here, diesel, jet fuel. So one way or another, not only considering the volume that is exported, that is not in its totality as much as this verticalization that we have because of the downstream, which somehow makes us more protected than other peer players of upstream.

Our next question, Bruno Amorim, Goldman Sachs.

First is a follow-up on the comments you made about the drilling campaign. It helps to have the scenario. And the follow-up is to understand as much as possible from you what you expect in terms of reduction in Papa-Terra and Atlanta ex those drillings, but what's the growth match from here to the beginning of next year when the new wells enter operations? And if you can as well remind us the ballpark CapEx expectation for this year overall for the company, that would be very helpful.

Okay. I'll take this one, Bruno. I'll start talking about the drilling campaign. It is very much in line with what we planned program. Early this morning, the rig left here, the Guanabara Bay. It spent some time here loading some materials, meeting some requirements of the environmental agency. And now it is arriving at Papa-Terra. We still have some time to prepare the rig, and we expect now that the second half of March, we may start effectively the drilling in Papa-Terra. I highlighted in and talked about the contracts already being signed, the equipment bought, acquired already. So we don't have any expectation of impacts due to the geopolitical scenario we are seeing. So the campaign is going very well. Speaking a little bit about this reduction in Papa-Terra and Atlanta. This is a contract that we always mentioned. It's an oil -- heavy oil field. It has as a very typical behavior in terms of this reduction starting at around 20%, maybe steeper and then against to a perennial level of decreased rates that is much below that. Atlanta and Papa-Terra are at different moments. Papa-Terra, we have today a range of decrease already starting at this below 20%, but closer to 15%, that's the rate at Papa-Terra. But Atlanta is at a different moment. We still have a more significant decrease. But noting that we operate Atlanta with 3 different systems, 3 pumps with 3 wells at different levels, the different status. We have one pump on well 6 and 7. The last one are the first ones that we implemented. We have 4 and 5, and we have 2 and 3, which were wells that were already operating in Petrojarl system. In these wells, we have DSW around 60%; 4 and 5 as well, 60%; and 6 and 7 are at 20%. This DSW is determinant in this definition of this decrease because as it increases, we adjust this decrease range. So that's what we have in these 2 main assets. We follow this up very closely, and they comply very much with what we planned and what we expected in our models, both for Papa-Terra and Atlanta.

If you can remind us quickly, I think you made a comment about the potential production of the new wells. Can you just clarify that? You're talking about numbers per well or for the group of wells?

Yes, I was talking about the set of wells, the group of wells, noting that we're talking about potential, these projects, and that's not a specificity of Atlanta or Papa-Terra, all of this new production projects are based on estimates that we have. There's a team highly experienced and very competent. But they are estimate. That's why the numbers that I brought was something around 11, 14 in Papa-Terra, and at this order of magnitude, Atlanta a little bit more, 15,000 to 20,000 barrels, refer to both wells together, both in Atlanta and Papa-Terra. And another important point with the working interest of 100% Brava. So what we're going to effectively produce at the units is that.

Excellent. And finally, CapEx that you expect for this year, please, for the company overall.

So CapEx, I'll be a little bit more cautious, Bruno, due to guidance. But I'll bring you some figures so that I don't leave you hanging, so to speak. We have the growth CapEx that is a lot of the CapEx that we're going to have this year, and we have a part of CapEx that's a recovery of integrity. In 2025, we had the CapEx of around $500 million. This CapEx this year is slightly higher, but it's the true CapEx. That's that order of magnitude. Despite the campaign at Papa-Terra occurring before the campaign in Atlanta, the CapEx in Atlanta is slightly higher than Papa-Terra, because in Atlanta, we are acquiring new equipment. In Papa-Terra, we have a large number of pieces of equipment that we are able to use. So the CapEx to Papa-Terra this year is basically the drilling campaign and the placement of the rig.

Next question from Regis Cardoso with XP.

Perhaps you could give us an update on the investment plan on 2 aspects, the drilling campaign because I'm thinking more towards 2027 because there will be substantial CapEx reduction in 2027? So we understand that we will need to be contracting more towards the second half of 2027. So could you give us an update on the investment expectation looking forward more than a year ahead from now? And also on hedging, that's my second question. Perhaps you could give us an example of the margin calls. I think that Luiz mentioned that the contracts were done in a way that you wouldn't have margin calls. But I understand that normally, this is a usual condition in these contracts. You also mentioned that sales domestically are not impacted. So you sell part of the oil as bunker fuel. And I would like to confirm that this is truly a domestic sale and that would be an important protection regarding the announcement made just today.

Okay. Let me start with the 2027 CapEx. Other than the drilling campaign, the 4 wells for Papa-Terra and Atlanta, we do not have any project with an FID or a new drilling, as you mentioned, for FID for an investment decision. In 2026, we do -- in 2024, we had an intense CapEx because of the Atlanta project. 2025 is our normalization. 2026, we'll increase the CapEx, as Travassos mentioned, because of this growth campaign, drilling campaign for new wells, which will drive our production up in addition to offsetting decline. And in 2027, we should get back to a level closer to maintenance levels for the company. Again, there's a part of the CapEx in -- of the drilling campaign that will stretch to 2027 because of the drilling of wells. But in 2027, we should expect a CapEx reduction. Again, there is nothing contracted for new projects. As for the contract, you're correct. We have clean contracts. They have no expectation of a margin call. We are very careful regarding basically two things in our hedging strategy. One, not having any chance of us to be over hedged. And two, not having contracts that have any expectation of margin calls. So regarding that, we have a lot of peace of mind. As for bunker, bunker is not included in the MP, at least this was the initial view of our tax team, but we are still studying this. Like I said, the resolution was published a couple of hours ago. So we are still looking into this to see whether bunker is not included. This is our initial understanding of the resolution.

I would like to thank all of you for joining our call. I think it's very clear that we have a lot to do in our company. We have to make the company more efficient, improve the results for shareholders and to leverage the company. I think that we are on the right track, and we will pursue this tirelessly. Thank you very much for joining us today.

Brava Energia's conference call has now ended. We would like to thank you for your participation, and we wish you a good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]