Petroreconcavo S.A. (RECV3) Earnings Call Transcript & Summary

Good morning, everyone. We're going to start our webinar from the first quarter of 2026. I'm just going to give them a little more time so people can come into the room, and we're going to start. Good morning, everyone. We are now going to start our webinar from the first quarter, the earnings call from first quarter of 2026. I am Marilia Nogueira, Dr. [Rafael ] is going to do the presentation. Then we're going to have a Q&A session with the Executive Board. This is being transmitted by -- through the Internet and it's going to be in the company's site later on. Please send your questions to the Q&A session so that I can read them at the end of the presentation. So I would like to say that all of the declarations made during this conference that have to do with the company's perspectives and operational and financial results have to do with Petroreconcavo and the information that is available from the company. Future considerations involve risks and cannot be set as the standard.

Thank you, Marilia. Good morning, and thank you for joining us in our presentation of the earnings in the first quarter of 2026. The period was marked by a relevant change in the global macroeconomic scenario, especially starting in March with the escalation of geopolitical tensions and their effects on the oil prices. Throughout the quarter, we achieved significant reductions in costs and CapEx, and these were translated into a better financial performance. At the operational level, the average production was 24,400 barrels of oil equivalent per day, 2.5% less than the previous quarter and 11% less than in the same period of 2025, impacted by a difference in which in the first quarter of 2025 produced approximately 2,000 additional barrels of oil additionally on average. The net revenue totaled BRL 684 million, down 3% compared to the previous quarter and 20% compared to the same period last year. The impact was on the production effect and because of the fall of the dollar. EBITDA was BRL 310 million, an increase of 5% compared to the previous quarter, showing the company's cost efficiency strategy. And in the year-on-year comparison, it was a 27% drop compared to the first quarter of 2025. Net income was BRL 124 million, an increase of 144% compared to the fourth quarter of 2025 due to the currency effects of the mark-to-market debt and hedges. In the annual comparison, profit was 46% lower also due to the effects of market variations in exchange rates. Regarding indebtedness, we ended the period with a net debt of BRL 1.4 billion, equivalent to a leverage of 1.04x net debt over EBITDA. And finally, we maintained a disciplined execution of the company's CapEx plan with a reduction in CapEx compared to the previous period, which resulted in free cash generation in the amount of BRL 80 million. And as a result, reaffirming our commitment to generating value to our shareholders, we announced a distribution of BRL 100 million in interest on equity, equivalent to BRL 0.34 per share. I would also like to highlight that we were included in the portfolio of B3's Great Place to Work Index reinforcing our commitment to an inclusive work environment oriented to people development. And in April, we won the Great Place to Work certification, the second consecutive year. And moving on to production now. The company's average production decreased by 3% compared to the fourth quarter of last year, mainly impacted by the drop in production in Miranga MG. The decline was mainly due to operational shutdowns, including interruptions associated to maintenance of processing units, compression systems and electrical events, which had a significant impact on the production of the Bahia asset in the quarter. In Potiguar, production was stable in the quarterly comparison. We maintained the disciplined execution of the company's reserve development plan with the execution 57 workover projects and the advancement of the 2026 drilling schedule with the completion of 3 new wells in the Potiguar assets, 2 injectors and 1 producer who is still in the completion phase. In line with the project to intensify water injection to repressurize the reservoirs, this quarter, we report the injection volume for the Potiguar. In April, we have new injection wells came into operation in the Sabia-da-Mata and reinforcing initiatives to support the maintenance and recovery of the asset production. And now I'm going to give the floor to Rafael, who will continue the presentation.

Thank you, Firmo, and good morning, everyone. Net revenue, we ended the quarter with BRL 684 million, a reduction of 3% compared to the fourth quarter of '25, mainly impacted by lower natural gas revenues that totaled BRL 263 million in the first quarter, BRL 31 million less than in the previous quarter and BRL 15 million of this reduction is directly associated with the lower purchase of gas from third parties. In addition, it is important to note that the average realization price of natural gas, which stood at BRL 9.6 per MMBtu equivalent to $56 per barrel of oil equivalent. It does not reflect yet the recent rise in Brent due to the contractual pricing methodology, which provides for quarterly adjustments based on the arithmetic average of Brent prices observed in the previous 3 months. The last readjustment carried out in February of this year considers the average of the prices observed between October and December 2025, while the next readjustment scheduled for May will incorporate the average of the prices observed between January and March of 2026. Therefore, there is a natural lag in the capture of oil movement which indicates that a relevant part of the recent appreciation of Brent has not yet been reflected in the quarter gas prices, reinforcing the expectation of greater value capture over the next few months. This drop in gas revenue was partially offset by higher oil revenue, which reached BRL 442 million in the period, an increase of BRL 51 million due to the improvement in prices in this period, partially impacted by the hedging NDF operations with a negative financial impact of BRL 35 million in the period, totaling a net oil revenue of BRL 407 million. When analyzing the average realization price of oil, we observed a significant increase of 15% reaching USD 63.4 per barrel, mainly reflecting the positive effect of the macroeconomic scenario, although mitigated by hedges and the increase of discounts associated with the spread between ICE Brent and dated Brent, which in March exceeded $4 per barrel, a level significantly higher than that normally observed. It should be noted that some of the company's contracts are indexed to the ICE Brent and others to the dated one, which benefited us in the period. And finally, in the service line, we recorded revenue related to the provision of drilling services with PR-14 rig to third parties contributing positively to the diversification of our revenue during this period. We also demonstrate our oil hedging position and its impact on the company's financial results in the quarter. For 2026, we have about 65% of the 1P oil production protected. With 2027, this number is reduced to 37% and in 2028 to 9%, which guarantees cash predictability that allows us to capture upside in the positive Brent movements. Regarding the accounting of hedges, the settlement of NDF contracts resulted in a negative impact of BRL 35 million on revenue in the first quarter of 2026. In addition, the mark-to-market of these contracts is recorded in shareholders' equity affecting the company's results only as the contracts are settled in the future. The operations via Zero Cost Collar are not considered hedge accounting and thus impact the financial results of the quarter, both by the installments that have already been settled in the first quarter in the amount of BRL 90 million as well as by the mark-to-market of futures contracts, which also have an accounting effect recorded in the financial results of the period. This quarter, we maintained a consistent trajectory of reducing costs and expenses, reinforcing operational discipline and a focus on efficiency. Total costs and expenses totaled BRL 374 million in the first quarter, a reduction of approximately 9% compared to the fourth quarter of the previous 2025. So this reduction is the result of a combination of factors. On the one hand, we observed an increase in royalties, a direct reflection of the higher reference prices of oil and natural gas in the period. On the other hand, this was more than offset by a drop in cost, expenses and other expenses, mainly associated with the reduction of expenses with services, consulting and materials. In the quarterly view, it is important to highlight the positive evolution of the main cost component. The lifting cost remained at the level of the previous quarter, substantially lower than the average of the first 3 quarters of 2025. In dollars per barrel, the indicator was impacted by the drop in production and exchange rate, still remaining at controlled levels compatible with our operating base. We also recorded sequential reductions in midstream costs due to lower processing outflow and transportation costs, mainly driven by efficiency gains in gas processing in Rio Grande do Norte due to the acquisition of the Guamare and GPU in addition to a significant drop in gas purchases in the quarter. And finally, it is worth mentioning that we remain focused on the sustainability of this reduction trend, combining rigor and expense control and operational efficiency. This set of measures is essential to improve margins, increase business resilience and strengthen long-term value creation. This efficiency and discipline are reflected in the company's EBITDA, which in the first quarter of 2026 totaled BRL 310 million, a growth of 5% compared to the fourth quarter of 2025. This progress is mainly the result of cost optimization, which more than offset the impact of reduced revenues and increased royalties observed in the period, allowing the EBITDA margin to advance from 41.9% to 45.3%. From a netback per barrel perspective, the average Brent in the quarter was $81 per barrel, while net revenue was $60 per barrel of oil equivalent. The net realization reflects the combined effect of the product mix where natural gas presented a lower value per BOE than oil, especially in this quarter due to the temporal mismatch of the quarterly price adjustments of gas contracts as previously explained. On the oil side, the discounts applicable to sales contracts also reflected in addition to the negative impact of the NDF. Now the breakeven cash costs totaled $30.61 per barrel, generating a positive margin of USD 29.49 per equivalent barrel. We also highlight the significant reduction in CapEx as a direct reflection of our discipline in capital allocation. In the quarter, the total CapEx was BRL 197 million, a reduction of 26% compared to the fourth quarter of 2025 with prioritization of projects with better returns and greater adherence to cash. In the development of reserves, investments totaled BRL 196 million and remained in line with the operational plan, more concentrated in workovers and water injection projects and operational resilience. We have seen a reduction in drilling with a focus on low-risk projects while increasing the number of workover interventions, diversifying the project and capturing the short-term gains. In facilities, we continue to prioritize investments in water injection infrastructure and asset integrity, which are fundamental for the sustainability of the production and for the preservation of value over time. Overall, the quarter reflects a disciplined selective approach, consistent with our strategy of business resilience growth with profitability and preservation of financial flexibility. On this slide, we reinforce the company's financial strength and the low level of leverage. We ended the quarter with a cash position of BRL 1.657 billion, slightly above the balance recorded at the end of the fourth quarter of 2025, even after the payment of CapEx, interest, hedging effects and other financial commitments. This performance was supported by strong operating cash flow, which totaled BRL 274 million in the quarter, evidencing the business' recurring cash generation capacity. In the perspective of indebtedness, we continue with a comfortable structure. Leverage ended the quarter at 1.04x net debt to EBITDA, remaining at the low and controlled level. The average cost of debt in U.S. dollars remains around 6.12% per year with a duration of close to 4 years, which ensures financial predictability and flexibility to go through different market scenarios. This combination of consistent cash generation, low leverage and elongated low-cost debt profile reinforces our ability to finance growth with capital discipline and sustain recurring shareholder returns responsibly. And now I give the floor back to Firmo.

Thank you, Rafael. And to conclude, on this last slide, we have a good consolidation of the central message of the quarter. The free cash generation coming supported by discipline in capital allocation, structural cost reduction and a more efficient investment profile. In the first quarter of 2026, we generated BRL 80 million in free cash, even though we have not yet fully captured the benefits of the rise in oil prices that occurred only since February. This result directly reflects the continuous effort to optimize our cost base, combined with a relevant reduction in CapEx through the focus on projects with better financial returns. The total CapEx in the quarter was significantly below the level seen throughout 2025. This higher cash generation supports our focus on remuneration to shareholders, which led to the decision to distribute BRL 100 million in JCP in line with cash generation and the preservation of the company's financial strength. We have currently different scenario from the one predicted a few months ago, and we must maintain our agility to adjust the level of investment activity in the coming months depending on the macroeconomic scenario. I take this opportunity to highlight a very relevant advance in our operational resilience strategy in the flow of oil. We signed 3-month amendments with Brava starting in April in the oil sales contract in the Potiguar Asset that increase the predictability of volume delivery and improve risk sharing and market upside with clients to align the companies and the search for systemic efficiency in the Brazilian onshore. Therefore, we continue to execute our strategy with technical rigor and focus on long-term value creation. And we continue this strategy, focusing on this long-term value creation and the combination of operational excellence and resilience, financial discipline and balanced commercial strategy, which gives us confidence in the ability to navigate in the near future. Thank you. And now Marilia is going to conduct the Q&A session.

Thank you, Firmo. Thank you, Rafael. We're going to start the Q&A session now, and I will ask you to send the questions through the Q&A so that I can read them. So starting, I'm going to do it according to topics. I think it's easier to answer. So this is about CapEx. So in the fourth quarter, production had a flat production for 2026 with a more conservative CapEx. Considering this new prices, is the company actually checking CapEx for 2026? What are the specific triggers to accelerate the preparation activities?

I think it's a question that we were all asking in the oil industry around the world. The answer for this year is no, we will continue to maintain the original strategy that was decided on late last year. Obviously, we are reviewing the portfolio -- sorry about that. It was an audio problem. Okay. Now it's back. Right. So we are reviewing our portfolio for a possible implementation of change in investment. However, it has not been defined yet. And at this point, we're still maintaining limitation of our strategy. So we are trying to understand the medium and long-term effect, especially on the future price because today, in my opinion, it's still very uncertain.

Okay. The next question is from UBS. The CapEx is lower in the quarter. Can you give more details? Was it below the expectations? Or can we expect this level of CapEx for the next quarters as well?

So this is a level of CapEx that we designed. This year, we were able to design a structure of activity that was quite stable and our expectation is to maintain this this year.

Then we have a question from BTG. We presented that we're operating with only PR-21 that is -- which is in operation. Is there any expectation for PR-14 to continue to activate or is it going to be activated PR-04?

Well, our drilling structure, and we are proud to say that it's the best one in Brazil, it has a lot of flexibility in terms of depth as well as the technological profile of these wells. So this year, we planned conventional and focusing on PR-21, there is a little in PR-14. Usually, this is done throughout the year. And today, we have PR-14 working for an external project with third parties. So the possibility of drilling the other wells, this is being evaluated. The decisions are made throughout the year. PR-04, there's no forecast to use it. We're still going to maintain it and waiting for this change in the drilling profile in the future. So this year, these 2 are being planned -- are being applied like we planned it.

Okay. XP is asking the priority project to deliver a growing increase in the curve -- growth increase.

2026 was a very important change for us. We made an adjustment so that the year would be focused on the generation in the middle, midterm. So what do I mean by that? That phase where when the company actually buys new assets, there's always an initial phase, which we call the low-hanging fruit, and they focus on -- we focus on activities that generate short-term growth. We definitely agree, and we've been talking about this with you. The company is in the stage of thinking in the medium and long term. So we're thinking about projects to manage mature fields, especially with water injection and water flooding. These are projects that have to be seen in a more -- in a longer term, not just getting more production to get more production next month. So this is a change that we started for this year in the company, and we are delivering this aspect. So in general, what we see is the development of workover and the drilling is focused on the projects, the waterflooding projects, also focusing on trying to get stability so that the capital that is used will have a better return compared to what we got, especially in the last 2 years. So it is a change in perspective for a long-term perspective. We're not only looking at this period. So our commitment this year is to try and get stabilization of the average production this year and last year. So we're 5% below what we had program in the first quarter because of the well-known seasonal problems of maintenance and interruptions. We believe that we're still working to be able to -- at the end of the year to achieve the CapEx that we set and the average production will be flat compared to the next year and the return will be much better this year compared to last year. So this structure has not been modified yet. We're working on this. And we have several workover projects as well as drilling projects to be able to achieve this final objective.

All right. Now for production. Itau was asking -- so when we talk about increased production expectations with the start of the use of these wells that were drilled.

So we have 2 injector wells that we drill. So basically, once again, we make our technical analysis. You drill a well, an injector well has stabilized the production of several wells, but it's not a direct production. So it's not like when we drilled the TIE-11 well, the next month, we're already producing 1,000 barrels of oil or more. So once again, this change that today's activity is part of a process to generate medium-term value that obviously tries to bring the management of the reservoir, the management of the mature field to the company's core activities. Of course, we continue to work on the portfolio, especially in the surface portfolio. We're still looking for opportunities to increase production trying to find opportunities that can bring additional production. But the core of what we're doing now was designed this year is still being implemented. And the reason between what is invested and increase in production is not as linear as what we were talking about before. So answering Monique, Monique, we have a workover structure and a drilling structure that focuses on the injection process and these injection projects are going to bring a lot of value in the future. If we look at what the company did in the 25 years of existence, what we planted for many years and what we harvested for decades was a management structure for the portfolio that made us invest a lot less for maintenance and growth of the production. And this level of investment that we have today, this model that we are using today is exactly to establish this, so it's not an immediate response. It's a more long-term response. It's just something to say that we believe in stabilization and growth in production, but it's not going to be immediate. It's not like drilling a well and then next month already having an increase in production. But the objective is exactly the same, keeping a flat production this year with less CapEx activity. If we stabilize that, we're going to continue doing this over the next few years, trying to get growth. And we have growth leverages that are very interesting. Last year, we tested technology. We brought other opportunities. These projects are being developed. They are there to be able to stable and gain maturity. And when we believe that these projects are ready and that they should go into our portfolio of activities, we're going to give you a better view about the CapEx acceleration which obviously is more comfortable with a higher oil price. So if we see a higher oil price, especially in the medium-term horizon, we can actually accelerate these projects, but we have not changed the strategy up to now for this year.

Okay. There's a question from an investor. It's in English, but I'm going to read it in Portuguese because you have the translation. Yes, just I have to change the channel. So you've already answered a bit of it. It's a question from -- a question from Monique, but it's important to emphasize this. When are you planning to return to the production growth path? And after the lessons from the pilot wells from last year, what is going to happen to Petroreconcavo thinking about increased production going forward?

Well, we're going to repeat what we see. So as from the change in phase, the establishment of our understanding that the phase where we got these assets and we brought a lot of what we call the RTP return to production to the business. we have the responsibility of looking at this business in the same way that we looked at the most decades ago. So now it's time to structure projects, water flooding projects that allow the future to be much better in terms of allocation of capital compared to now. So the equation of capital allocation to the return to quick production, it is replaced by an investment now and the return of capital will be more long term. I think that's the topic. And after we establish this, and this is a project that we see, especially this year and probably also a good part of last year. At the same time, we can also start thinking about other projects with the increase in production, let's call it that. So the increased production projects are anchored to the investment that Petroreconcavo did the investment in equipment and technology for future development of the company. So they're going to be implemented inside the company's plan when we acquired the right level of maturity. Last year was very relevant. It was very important to test horizontal technologies and test the deep well technologies that allows us to check the potential of the surface, but also in terms of technical capacity of the company, the cost and all this. And this potential has a transforming potential for the company, and we can simply continue to have mature fields and not develop them, but each of them reach their own maturity at their own speed for implementation. So this is a year that everything that we put into practice last year is being developed this year. And it's a future where the company is able to make horizontal wells, multistage with depth to be able to reach the reservoirs, the deep gas reservoirs that we know we have in the company's portfolio. This transforms not only the reserves of the company in the future. So this is a moment that we have to talk about later on when the maturity of these projects become more well known and our decision to manage risks and the investments when everything is decided. At this point, we're focused on this current strategy, which is the implementation in a very disciplined manner and the water flooding projects that are going to work on the allocation of capital in the future and will generate more value later on.

Okay. The next question is from Bradesco about the water injection project in Siri. Is that finished? Or is there more work? What is your evaluation about that now?

So water injection projects are very similar to the safety culture projects. You never stop looking at them and you have to be very humble to learn all the time with them. So in terms of investment, it's fundamental investments that we made in Siri in terms of construction of wells and the structure of the service. This has been done. There are still a few things to do, but later on, nothing too big. And the project in terms of implementation is ready, but there's still a lot of work. We have adjustments and refining and understanding of the technology that we are doing in Chile for this project to actually give us the results and more control decline curves, the oil and water proportion much better compared to what we have today, and that's what we want in all the injection projects.

Okay. One more question from Citi. Are you more confident about the oil price because the oil price can become stronger for a longer time considered to what was priced at the end of 2025?

Well, by decades of oil and gas, I think we should run away from people who know what the price of -- the future price of oil will be. Our strategy is agility and flexibility. And we were a few months ago with the expectation that we had a completely different profile for oil compared to what we see today. And in my opinion, what is the total effect in the middle and long term compared to everything that we've seen in the first few months of this year. I think that all of us have a view that this effect is not absolutely in the short term. Definitely, there is a medium-term effect, especially when we talk about risk of the Gulf oil, that was one of the great reasons for the price of oil to change. Now if this is going to be solved in the next few months and if we're going to change the supply and demand model we're using for oil, and we don't know. We can clearly see that it's not going to be in the short term, it's probably going to be in middle term. But that's a little I can say in my perspective about oil later on. Apparently, what we've seen is not going to be solved quickly. What we've seen is going to have a more long-term effect. Now how long it's going to be at the size of these effects, I would not dare to say based on what I know about the oil industry. But our strategy, our way of working is to have our portfolio reviewed all the time and able to react different changes. And one of the main protections of our asset portfolio that it benchmarks on the production cost of Brazil, Brazil onshore. So this is something we're not going to stop using. Now to hedge, there is an individual asking about what percentage of the production is in hedge and what is the value per barrel? Yes, this is in one of the slides in the presentation, 65% of the production of the reserves foreseen for 2026, 37% for 2027, 9% for 2028. The size is about 10,000 barrels a day now for 2026, and we produced about 14,000 barrels a day. And that's more or less the proportion. The average price has 2 different formats. There's an NDF where it's a fixed price $65 per barrel more or less. And you have those that are in the collar where you capture a certain window and usually, there is a standard of about $60. So you protect below any drops below $60 and the upside is like $70 a barrel. It's important to remember that the company produces 40% of its gas capacity, and it is a company where the oil hedging is important, but it is not -- it does not determine the capacity to generate for the company. Gas takes longer to capture these price variations, but the capital structure and the hedging structure is very well sought to be able to maintain a balance to ensure predictability and at the same time, allow the company to continue being an oil and gas company that captures the oil upside.

Still about the hedge. So Rafael has explained it a little, but there are some questions about this. This is from Bank of America. And we evaluate the hedging strategy currently in terms of prices and if it is possible to renegotiate or close positions of NDF as -- manner.

Well, the hedging strategy is discussed a lot, especially in the financial areas here in our Board, and they were designed to think about this scenario, having a protection that is big enough against downsizing the prices and this is what we had a few months ago, but also allowing us to capture the upside as well. So that's how it was designed, and we actually do reviews of the hedge position periodically according to the evolution of the scenario. I think at this point, we don't have the intention of closing any hedge contracts. I don't see any benefits on this path. So I think the idea is to continue. And as I said, most of this is treated with hedge accounting, and these are contracts that have monthly settlements. So I'm protected until 2026 in December. And then you do the settlement of the results from that month and then this is going to affect the result of the company during this period. So if this disbursement is cash, it's always according to my physical selling oil. So I have to pay some value to the bank because of the hedging operation, but I receive -- I have more production, I receive a lot more than that in the physical selling of oil. So the net effect is always positive in terms of cash generation for the company. There is no temporary mismatch. And we don't have any call to margin in our contract. Everything is well structured so that it will never be damaging for the company. The opposite. It only helps the cash flow for the company.

Okay. So now about lifting costs. This is a question from Citi. What can we expect for the lifting cost over the next few months in 2026? Does it make sense to say that the cost in Reais is going to be flat and it's going to be diluted by a potential increase in cost?

Our lifting cost is really our great, let's say, it is what we really focus on. Of course, the lifting cost per barrel is an important reference and Petroreconcavo has this as a Brazilian benchmark onshore, it's very relevant for us. But what we really control is the lifting cost in Reais and in production. So that your understanding is exactly the one that we have maintenance of the cost, and we were able to -- after a joint effort, we were able to bring this cost down in the beginning of last year. So the beginning of last year, we had a lot of difficulty and a lot of challenges, especially in terms of operational resilience. And obviously, the idea is to continue pushing the lifting cost down, maintaining the standard that we're at, and it really depends a lot on how much each new function will be able to extract efficiency over the next -- I'm going to let him say something about that. But this is exactly the case. So doing this and being able to lift part of the lifting cost, it varies and it goes up according to the production, but most of it is fixed. So when we're able to get bigger production, then we have a change in the ratio. Would you like to comment on that?

Well, it's a fact. We have followed up the last 3 quarters, a nominal value of 10% reduction per quarter when we compared with the quarters from last year, sequence of investment in terms of the assets, but it's at a lower level and it's more located in CapEx. This is one of the things that we have invested a lot on water injection, the integrity of the assets, but this impacts the lifting cost, but we also have benefits because of improvement in the breaking of wells year-on-year, and this has made the repair cost smaller. So the repair is continuous and our expectation is to maintain this standard and with other levels of efficiency in the repairing of wells and other efficiency of energy or something that will allow us to continue this reduction path.

So we've answered all of the questions here. Yes, you've already answered all the other questions about lifting costs. So the next question, I'm going to do with them all at the same time. Obviously, it's about the contract, the 3-month contract and the signing with Brava. So the question is, what is the improvement of the average discount for commercialization practice by the company that we should expect with the changes announced with this new contract pricing with Brava. So if you could give more details about this, about the signed contract. And I think that's it. Yes, the rest is just repeated.

Well, I think this contract, of course, it is very important to us. The additional has a function of starting the negotiation process and marking the term for us to be able to have long-term contracts. So I think that's part of our strategy. So the objective, the fundamental objective for Petroreconcavo is to go for what we want. And remember, I came 1 month after Petroreconcavo had its biggest losses in terms of closing of the wells in Potiguar for 12 days. So something that has never happened in the company, and it took months for us to recover in terms of the service. So at that moment, we made a decision, and we have been very efficient in finding alternatives for the production and alternatives that are economically possible. So this advance with Brava is another phase of the operational resiliency that we have been designing. And ever since I got here, I said that onshore was going to be one of the best for the companies to work together for the systemic reduction of costs. So we still have situations in the onshore. We hope to have something that -- we did not have something that growth efficiency, but we have some advances in this path. So before we had better outcome so that we could reduce the risk of the spread that the refineries bring and moving together so that we can get a level of efficiency that we wanted. Of course, there is visibility in the delivery that is extremely important for the rigs, and this is necessary. And at the same time, it also brings benefits to Petroreconcavo. And it allows Petroreconcavo to have the options. So when we have the project that is ready, we deliver both sides and everything that we design. So I'm very satisfied, and we have the generation of value to both companies. The discussions are always what do we need to do so that the total systemic costs can go down and both companies can generate value. We did this with Guamare when we acquired it, and it was extraordinarily positive. Even months after we joined with Guamare, we managed to reduce the cost. The methodology is the same. So it allows for a reduction of costs and improvement in easy selling well in the short term. I don't like to talk about my history in services. You should never discuss private contracts and public. This does not bring any value, but you're going to have the opportunity of checking the quarter-on-quarter, there will be an improvement that you will see. So that is something we announced yesterday. And it's a contract that in the right direction. So it's going to bring positive gains for both companies. Of course, there will be a discount to improve the monetization of our oil in the same way that we did in the reduction of midstream costs together with Brava. So this is my view. So after the long term, the objective of we're going to have a better 5-year view, a much better view compared to the value that is generated to Brava and Petroreconcavo is the work we're going to do over the next few months.

A question from Safra. How the replacement of diesel for GNL will increase the -- its use in trucks? And is that a more attractive product to sell?

I'm going to use the word attractiveness. Yes, it is more attractive, yes. But it's a pilot study, right? GNL has already started being produced. We have started moving cargo as a pilot study with GNL, and we want to understand what is possible. So in my opinion, in terms of the gas strategy, micro distribution of GNL and especially in transport in the model of transport in Brazil, cars in Brazil, it is transforming. So Brazil has gas that is able to use it and it's able to balance the dependence on diesel that we have that is now highly complicated at this moment of stress. So I really believe in the entrance of GNL, the way that we're doing it in the Brazilian transport system. And we are testing this pilot. It's very attractive. yesterday, I heard this question. I'm going to consider it attractive when we have a volume of activity that is enough for us to understand everything in terms of maintenance and cost and in terms of safety and everything that we want to do with LNG, LNG in Portuguese. So it's relevant for us, and we need more time to really be able to shed some light on potential. So step on this project, but it is definitely very attractive using the same word.

The next question is from Bank of America. So what is the allocation of capital of the company because of the low leverage. So would you still like to focus more on the current portfolio and the distribution of dividends? All of the above. Can we answer that in this way?

We're still structuring. We just we did it and the decision came out of [ JCC ]exactly where we were 2 years ago. So we have not only a capital structure that allows the company to do a lot of flexibility in its strategy. It allows us to do a lot, the allocation of capital, stronger allocation of capital, just like the payment of dividends that is more aggressive as we see this year. And we also have the operational capacity to do this. And this is going to be maintained as the main source of -- potential source to be able to do something that will bring value to the company in the long term. So maintaining the same assumptions. Flexibility is our strategy. We want to have it all the time. The M&A evaluations that are coming out, the midstream evaluations, also increased investment in our portfolio and other portfolios as well, farm-ins and farm-outs, and the distribution of dividends or any other kind of structure or return on investor capital. So maintaining the same assumptions and strategies of flexibility. That is our strategy.

Okay. And Bradesco sent a question, and they would like to hear your opinion, Firmo, about the probable entry of Petro in the Brazilian onshore. You have a lot of experience working with majors. So what do you think?

Well, Petro was a customer of mine for several years, and I respect them very much because of its operational capacity, its technical knowledge, its team as well. So it is a company that definitely has the capacity to do whatever they decide to do. So there's this category, and they're going to -- that's as much as I can say. Of course, it's a company that -- I can also say what I said in the acquisition when we formed Brava. Brazilian onshore every day needs the E&P companies that are focused on solving the efficiency problems. So we are going to be robust. We're going to be robust onshore when we actually face the challenge of systemic transformation of the onshore efficiency. And a company like Ecopetrol that can participate in this market is welcome. And I always consider the coming of companies who want to solve these problems welcome. So it's these efficiency problems that will demand long-term solutions, more difficult solutions like these. And we are doing it, of course, through the Petroreconcavo drive improving the equipment, reducing the midstream costs and improving the treatment of our processing of our products. So I think this search for systemic efficiency. I definitely am always welcoming IC companies that know the surface well, that know the IP very well so that we can address this well. That's my personal perspective of this question that was done.

Okay. So last question for us to close. It is from Scotia. And even without a formal guidance, what is the main message that you would like the investors to take for the next 2 years, 2026 and 2027, preservation of cash, production stability, preparation to start growth again. What needs to happen operationally for this to be achieved?

Well, I'm going to try to simplify this. It's not easy, but I'm going to try to say what we here together with the Board are definitely focused on. So we need to bring to the company the capacity that it always has to provide return on capital above what we were able to do in the last 2 years, let's say. So this is a big topic. So it's a topic of return of capital. It is -- so it's the return on capital and the consumption of capital through projects that are very well designed, very well carried out in terms of development of reserves. I think this is a big topic the company has, trying to get short-term production and short-term growth. This competes better with a return on capital that is more structured. Now with the outlook is enabling the capacity to go back to growth that the company has. So it's a structure that includes strategy where we focus this basically over the next 2 years on the projects, on the development of projects in an efficient manner, the water flooding projects and the return on capital will go back to a much better level compared to what we have today. And at the same time, we are also observing the development of technology, new projects so that we can, in fact, go back to growing in this production, but going back to having the return on capital a better one compared to what we did in the last 2 years. So in general, I think this is what I would love as an answer to this. Everything else we're doing. It depends on the cost. Definitely, this never comes out of our agenda. The only reason for the existence of companies, they operate at much lower cost compared to the others. So otherwise, we wouldn't survive the cost, especially the operational cost, the investment that is very well done with a focus on the capacity of evaluating return on investment in a more granular manner and being able to learn very quickly and understand what you're investing in, in a cycle in a [ PDCA ] that is very fast. And at the same time, bringing this capacity and still counting on the portfolio of the company and the opportunity to find new reserves.

So these are the great topics. I don't know if anybody else wants to add anything. If not, that's it. Thank you. Thank you, everyone, and see you in the next call.

Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]