Prio S.A. (PRIO3) Earnings Call Transcript & Summary

Good afternoon and welcome to Prio's First Quarter 2025 Video Conference Call. I am Jose Gustavo, IR Manager, and I will be your host in this event. [Operator Instructions]. The translated presentation is available on our Investor Relations website. The comments on the results will be presented by our CEO, Roberto Monteiro; our CFO, Milton Rangel; and our COO, Francisco Francilmar. After the presentation, they will be available during the Q&A session. [Operator Instructions] This event is being recorded and will be available on our IR website. This presentation contains information based on future estimates and forecasts based on assumptions adopted by the company, which can change and should not be considered facts or be used as the basis for financial projections beyond the plans expressed by the company. I'll turn the floor now to Roberto Monteiro, our CEO.

Good afternoon, everyone, and welcome to our earnings call to discuss first quarter '25. Well, I'm going to go over the highlights. Then Francilmar will present the operational part, Milton will talk about the financials, and I'll come back to close the presentation. I think that the biggest highlight we had was obviously the acquisition of Peregrino 60% working interest. It was a long work. We talked about this field and that we had an intention to somehow in some way make this acquisition for many years now, and we finally managed to get there. We managed to engage in this operation, and once engaged, the deal happened relatively quickly. But anyway, it was a great opportunity for the company. We are very excited about this operation. In addition to Peregrino, we had some positive developments in relation to environmental licensing during this quarter. We obtained the license to start drilling at Wahoo Field. So we are already drilling the first two wells of Wahoo. And we also received approval to perform the work over at TBMT. There are two pumps that have been stopped, I guess, for almost a year or a little over a year, and we finally received approval to carry out the workover to replace these two pumps. So the rig that is at Wahoo right now, on or around May 15, the rig will be in a position to be relocated from Wahoo wells to go to TBMT to work there. So from May 15 onward, we will start the works at TBMT Field, and we should finish them in approximately 40 days. So we are talking about at around the second half of June having the two TBMT wells back in production. Now turning to production. We presented an average daily production of 109,000 barrels and had 10 million barrels sold in Q1. We will see all of these numbers later. And we had a lifting cost of $12.8. This $12.8 already includes the consolidation -- I believe the main factor is the consolidation of Peregrino. Let me remind you that Peregrino is a field that operates with a lifting cost of $18 per barrel. Our intent in the future will obviously be to lower this lifting cost a lot. But what we had throughout the quarter was this, Peregrino Field operating at $18 per barrel. And consolidating it in our operation, we recorded $12.8. It was a little above our expectations of something between USD 11 and USD 12 per barrel, but mainly due to the average production, We produced 109,000 barrels when our production was expected to be closer to 115,000. So this gap of 5,000 barrels daily approximately did make a difference. And this delta happened mainly at Albacora Field throughout the months of February and March when we commissioned a compressor. There was a turbine that we replaced, then a compressor. So these two events led to a lower efficiency throughout the months of February and March. And then in April, as we already showed, we had a much higher efficiency at Albacora. In April, we had already achieved an operating efficiency of 88.8%. So we are already getting very close to our goal of 90% efficiency at that field. The month of May is also going well from the point of view of efficiency at Albacora. And well, I hope we don't have any more problems. It was a great job that the onboard staff did, the offshore team together with the onshore staff as well, so that we could replace the turbine, the compressor and so on because these are complex elements, difficult elements to move. But we did it quite successfully. It did take a little longer, but we were successful. Now addressing some of the financials. We issued one more tranche of local debentures for around $200 million. We posted revenue of $700 million, $720 million. Adjusted EBITDA of $447 million and a net income of $354 million (sic) [ $345 million]. Milton will explain all this a little later. Well, I'll move on to the next slide on Peregrino. A little bit about the acquisition of Peregrino. As I mentioned on May 1, we signed the contracts for the acquisition of 60% stake of Peregrino Field for $3.350 billion. That's the price on January 1, 2024. And then this price will be adjusted for the closing. And we expect the closing of the deal to happen more towards the end of this year -- between the end of this year and the middle of next year. This deal adds 200 million barrels of reserves to the company, considering 1P and 1C reserves. The deal is subject to the normal conditions precedent of this type of transaction which are CADE approval, CADE is the antitrust agency, and ANP approval. The beauty of this business is that it has a huge synergy with our assets. If we look here in this graph, we see TBMT and Polvo in the darker green on the top right of the map. And then just below sits the Peregrino Field. So we have a lot of possibilities to operate these fields as a single cluster. They can share logistics bases, support vessels, helicopters in short, all the logistics of the field. We think it's a deal with a very good return on investment well-suited for our expectations, for our M&A mandate and so on. So we are very, very pleased with this operation. Moving on to the next slide, I'm going to show you some indicators. Milton will obviously go into more detail later. So we see here that the lifting cost had already increased to $11 in the fourth quarter of '24 in part due to the consolidation of Peregrino -- of 1 month of Peregrino. And now here with the consolidation of the 3 months of Peregrino, lifting costs increased to $18.8 as I showed. Our expectation is that this number will come down with an increase in production. As I said, our production was 109,000. We should be producing 115,000 or close to 115,000. With TBMT, we should get close to 120,000 barrels daily. So this would obviously bring a reduction -- a small reduction in the lifting cost. And then when Peregrino is operated jointly, then there would be another reduction. Let's remember that Peregrino operated with a lifting cost of $18 a barrel. And our expectation is to bring that cost substantially down. So we spoke about production. Our cash position today is quite healthy at $700 million, and we have a net debt over EBITDA ratio of 1.3x. That's our net debt over EBITDA. So also quite solid. I'm going to give the floor now to Francilmar, who will talk about the operational part. Then Milton will talk about the financials, and I'll be back for the closing. Thank you very much. Francilmar?

Hello, everyone. Thank you, Roberto. Well, let's go to Slide 6 to speak a little about the performance of the assets. This first quarter of '25 was very challenging for the company. We had some hurdles, some problems that impacted efficiency in a good part of the field. I will detail this a little further ahead. While this ended up negatively impacting production at the field, and as a consequence, this put pressure on our production cost. So we recorded in this Q1, as already mentioned, a lifting cost of $12.8. It's far from what we want to work with. This was greatly impacted by -- basically by the drop in production. Costs are well controlled. We actually feel a certain cost pressure, but so far, we have been able to deal with it well. So it's a matter of solving the occasional problems. Each field had a little bit of history. And we think that in the coming months, things should get back on track. I'll move forward to discuss the details. On Slide 7, we are going to focus on Frade Field. In this first quarter, the field did well. Operationally, we had an operating efficiency above 99%, so very stable. The issue here is more of a natural decline of the field. There is nothing abnormal here. Now in April, we had a scheduled downtime of 12 days. And the main objective here was to make the adjustments for Wahoo Field to receive the oil from Wahoo, so control systems, hydraulic systems, a lot of work, and the tariff to install a new head. So a lot of the things were done here. And we now need to make the final adjustments until we have the vessel really ready to receive the first oil from Wahoo. Several operational continuity services were also performed. We dealt with some pending issues to ensure that the asset is in better condition to have a good quality efficiency for a long time. So that's it for Frade. Moving on to Polvo and TBMT, on Slide 8. In terms of stability, this was a good quarter for the cluster. There were occasional problems. We still had production loss from wells 4 and 10. TBMT-10 is the largest producer at TBMT Field. This greatly impacts production and efficiency. We have to remember that we calculate efficiency by capacity by comparing production potential and actual production. So we have these two wells offline. And this had a big impact on efficiency of the field. We also had in Q1 an ERSP that failed in a well at Polvo, well POL-24, which is the largest producer in the field. And this will hurt a bit the efficiency of the field. We managed to perform the workover. We don't have the need to ask for approval for that. We only inform the agency of the event because it's a fixed platform, dry completion, a long time ago, we agreed on this with the regulatory agency. So what's new? In the last few weeks, we received the approval to perform the workovers at the TBMT wells. Wells 10 and 4. This is going to happen very soon. We are finishing the drilling phase of one well at Wahoo, then the rig will be relocated to perform the workovers at TBMT. These workovers will take place in a sequence. First, TBMT-10, then TBMT-4. This should take around 40 to 60 days, depending on whether or not there's a problem there. If everything goes well, it will be much faster. So that's it. We hope that in the next, say, 2 months, we will be able to return the field to its maximum level of production. Now moving on to Albacora Leste. While Q1 was also a quarter of a lot of challenges, we have solved the turbine problem, which dragged on from December to January, hurting us a little. There were some generation problems that we managed to deliver the turbines. We now have three turbines. It's very stable. We stopped having blackouts and power outages. But then subsequently, when we were delivering a second compressor, we had a problem with the compressor that was working. The one that arrived did not work well either. It ended up creating an additional problem for us. So in February and March, production faltered at the field, production was very intermittent. This was solved. Finally, we managed to repair the compressor. So it's stable now and the field is operating well. In April, we already reached a very stable level of production without interruptions at the field. Efficiency reached 88%, and this is directly linked to production loss at the wells that are blocked with hydrate. We had two hydrated wells that were already in our potential curve. And as they didn't start producing, they handled efficiency. If it weren't for this, efficiency would be well above 90%. So we continue to work on the removal of these hydrates that are blocking the production line. This operation was shown to be a little more difficult than we planned, but we believe that in the coming weeks, we expect to have goodwill on at least one of these wells and we'll continue to try to resolve the second well. Moving on to Slide 10 on Peregrino Field, we took over 40% working interest in December. In this Q1, we advanced a lot in our understanding of the field and drilling down on the details, the challenges, the opportunities at the field. And this allowed us to absorb even more information and move forward, including with a desire to move forward and acquire the remaining of the asset. This is an asset that we dreamed to work on, and we tried to get it for a long time. So it was a very long courtship. And now we have finally managed to have the wedding. So it's an asset where we are going to work very hard. Now entering the transition phase, we'll learn even more.15.21. Equinor is an excellent company. They have been doing a good job. And I'm sure the transition will be very round and will run at its best to guarantee the performance of the asset, its operational results, safety and so on and so forth. The expectation is that the field will maintain high performance, maintain the development campaign. It has a large drilling campaign in Phase 2, which is on platform C. The other platforms will be undergoing workovers. There is a large campaign underway to improve integrity maintenance, which is taking place on the FPSO and then we will move to platform A. So all this will be maintained. We will not have any major disruption. We are just trying to optimize things to create more value for the company over the coming months and years. Well, moving on to Slide 11 on Wahoo, I'll give you a general update on the development of the field. We finally received the drilling license at the end of February. We quickly mobilized. We had all the resources ready and waiting for the green light. So we mobilized quickly and started drilling. This strategy we chose in order to gain more time to drill the first two wells in a batch as we call it. So they kind of move ahead more or less phase by phase. So we gain a lot of efficiency and cost savings. So we anticipate the collection of information and can make adjustments for the other two wells. So this is happening. In parallel to that, as I mentioned before, the scheduled stoppage that took place at Frade was a good part due to Wahoo. So this was also accomplished. We now only have the final adjustments. After installing the large equipment, we will move on to commissioning and final adjustments. This should last a few more months, but it is totally in our hands to speed up the process or not. Then the big challenge ahead is really to receive the installation license for the production system, which is the underwater equipment. We have all the resources scheduled and prepared for use. We have two boats that leverage and equipment ready for the second half of the year, a little earlier than that or a little later. Today, the expectation is to have some news towards the middle of the year, between June and July. So let's see how we can move forward. It's all about prepare for the worst and aim for the best and wait for the best. This is always our motto here. Everything is prepared. Everything ready to roll as soon as we have a green light, so we can work. With that, I finish my point and give the floor to my friend, Milton. Thank you.

Thank you, Francilmar, and good afternoon to everyone. Moving to Slide 12, where we talk about Prio's financial performance this quarter. Total revenue for the quarter was $700 million, and it is worth mentioning, a significant impact, which was the sale of 10.2 million barrels. Why did sales increase compared to previous quarters? Well, basically due to the inclusion of 40% from Peregrino now fully consolidated in this quarter. So Peregrino alone contributed 3.2 million barrels, which was definitely relevant to the company's results. This revenue also takes into account a reduction in Brent when compared to last year or the last few quarters. The average Brent price was around $74.70, $74.68, and our net sales price was more in the range of $68.50, $68.55. Well, this gives us a discount, an implicit figure in this account of just over $6 per barrel. This is basically explained by the entry of Peregrino. Peregrino has heavier crude. So it pushes the discount up a little when we compare with previous results when we did not yet have this field. Moreover, the cost of products sold reflects a lifting cost of around $12.8 per barrel. It is also important to remember that the impact of Peregrino, which is fully reflected in this quarter. Peregrino was acquired and carries a lifting cost of around $17 to $18 per barrel which is higher than what we see in Prio's other fields. Before considering the acquisition, Peregrino had a lifting cost of just under $10 or $9 and some. So that explains the increase seen this quarter. EBITDA reached $432 million, a margin of 62% and adjusted EBITDA was $446 million with a margin of 64%. Financial income stood at $85 million, slightly above what we had previously reported. Here, I think it's worth mentioning two adjustments. First, an update on the interest on the -- interest on Peregrino's abandonment provision. I mean this alone accounts for $70 million in the quarter, excluding exchange rate effects, which account for an additional $30 million. With that, we achieved net income of $344 million for the quarter. And this again, is a very solid result, a strong result, even taking into account the downward trend in Brent prices because we were able to maintain healthy margins and the positive result for the company. Moving to Slide 13. Now here, we show Prio's funding situation. I think it is worth separating this by market, the markets that we normally access. The first market refers to bilateral debt with relationship banks. We already noticed a reduction in this tower for 2026. I mean looking at the previous quarters that we presented, we had even more maturities in 2026. So we have already started this rollover and extension of debt, which is something totally natural and healthy move, one that we have been pursuing and have been able to execute very successfully. In addition, we look at the amortization schedule for debentures, and this is basically the local capital market with very long maturities for 2027, 2028 and beyond. And we also have the international bond coming due in 2026. We issued a 5-year bond back in 2021. So as we've been saying for several quarters now, we are very interested in keeping an eye on this market, on being alert and also ready because if it makes sense and if it is opportunistic, we want to reassess this international debt market, not only the local market, and also extend the maturity date to bring in even more cash, even more cushion for the company's commitment. Everybody knows, and everyone saw the announcement of the 60% acquisition of the Peregrino Field from Equinor. Therefore, it's only natural and healthy to think about accessing these markets in order to continue enjoying the smooth liquidity we normally have. Well, looking at the picture at the end of the quarter, the duration was 2.62 years, which reflects the combination of current debt with an average cost of 6.39%, a very healthy cost. Bear in mind that when it comes to rating analysis or Prio's credit analysis, we have a positive outlook with all agencies, a very good perspective on our credit portfolio. Even more so with the contracting of more production, more reserves like the Peregrino Field as we can see in these results with the increase in sales and an improvement in the company's financial health. Moving on now to Slide #14. We have here net debt variation, which is a proxy for cash flow. We started at $2.3 billion with EBITDA of $447 million. It's also important to mention that in January, we paid $175 million related to an earn-out from the transaction with Petrobras for the purchase of Albacora Leste. The impact from a negative cash flow perspective is also on working capital. We had many sales in the quarter, but the cash flow is only received after the closing. So meaning now in April and May, and this has a slight impact on cash generation in the quarter. CapEx USD 130 million, and this is separated with the development of the Wahoo Field, some investments also in Polvo and TBMT. $43 million in share buybacks, $45 million in financial expenses impact cash expenses and $27 million in taxes. And that brings us to a net debt of $2.448 billion. Now on Slide #15 here, we see a very relevant indicator that we always monitor. Net debt to EBITDA ratio, which is a covenant of -- in our financing agreements. The covenant is 2.5x, and today, we ended the first quarter at 1.3x. But this stability from the fourth to the first quarter of '25 is basically explained by the CapEx that we are still carrying out and also by working capital. As I explained on the previous slide, sales that have not yet being received. I mean the cash hasn't been received by which we finally received in April and May and this has increased the company's cash position. However, for covenant purposes, we are slightly above the covenant that we presented in the fourth quarter of '24, but still at a low level, very comfortable and comfortable enough for us to take on new debt and then to make good investments for the company, such as the case recently announced -- the recently announced acquisition of the Peregrino Field. With that, I will now move on to the next slide and turn to Roberto, so he can continue talking about the environment, ESG and the next steps. Thank you very much.

Thank you, Milton. Well, I am now going to talk a little bit about the environment and society. This quarter, we had average emissions of 27 kilograms of CO2 barrel of oil equivalent, up from the first quarter of '24, mainly due to two effects. Actually, we had lower production compared to the first quarter of '24. And there was another issue in the first quarter of '24, that is a year ago, the two Tubarão Martelo wells were also operating. When these two TBMT wells are operating, the FPSO requires less diesel so we can operate the FPSO with gas, with more gas. And in addition to having higher production, you consume less diesel and more gas, which is good or would be good for the environment. So there were these two effects this quarter, in addition to production being slightly lower than that of the first quarter of '24. We were without these two TBMT wells, TBMT-10 and 4, which generated these two effects of a slightly higher emission level. And we also hope to see a reduction with production stabilizing at a slightly higher level, number one. And number two, with the return of these two wells back into operation. Also, in the first quarter, we had what we call Safety Day, which is a company-wide mobilization on safety with lectures by ANP on safety and awareness. And we remain steadfast here with our health and wellness program with trekking, trails and cardio evaluations which we have just included now for both our employees in Rio de Janeiro and also our offshore personnel as well. We are also moving forward with our sponsorships through our I Love Prio initiative with organization such as Vida Livre, Pirilampos, tennis matches and more. In other words, we are always trying to give back to society a little of the warmth we have always received from the community. Moving on to the next slide. Now I will refer to our next steps. Some of them are repeated. For instance, a continuous focus on the safety of our employees and third parties. So this is just obvious. This is part of our DNA. The last topic is also repeated and it refers to prospective for new opportunities and M&A. This is part of our DNA. We always look at opportunities. And of course, now coming out of large transactions like Peregrino, it is just normal to have a slight slowdown in M&As for a while. And then the company goes out looking for new opportunities. But we always have ideas and there are always areas where we have been looking at for some time. But it's also important to talk about the more tactical issues for the second quarter of the year. The first is the resumption of the Frade Field, as announced in our production released yesterday. We had a scheduled shutdown. The resumption following the scheduled shutdown at Frade did not go very well. We had some problems with the Frade gas compression system, which we are solving right now so that we can resume operations as quickly as possible. I mean anyway, nothing that worries us too much. However, it was a setback in terms of the scheduled shutdown time. But we are making up for it. The operating efficiency of Albacora is something we really need to maintain. I think the team did a great job here in the first 3 months of the year to get us to a very interesting level of operating efficiency or maybe go back to an interesting level of operating efficiency. And now it's just a matter of maintaining that work and increasingly providing assurance regarding that efficiency, providing increasing resilience to that operating efficiency figure. Also, we are advancing in the licensing of the Wahoo installation. As I mentioned, we have already obtained the drilling license. Now we just need the installation license. We have made some progress with IBAMA, which is slowly moving forward like the environmental impact report, or IMA, which they asked us to update. Therefore, we are making progress, and we are always very attentive to comply quickly and obtain this license as soon as possible. The first oil from Wahoo, which will be a consequence of the license is therefore a major focus. And now there is a new item, which is Peregrino. We must now submit this Peregrino transaction to CADE. And after CADE's approval, we will formally begin the field transition process. During this transition, we should obtain ANP's approval. And we cannot operate a few before we get the approval by ANP. But before -- but we will begin the entire transition process, let's say, learning how the field works, transfer of knowledge, transfer documentation and so on to be 100% ready for when ANP approves, we can then proceed with the transaction and do what we call the closing of the operation. So these are the main items. And finally, I would like to take this opportunity to thank the market, society and many of our employees for another quarter, which was so important for the company. I think it was perhaps one of the most important quarters of our history. We managed to complete a transaction, the largest transaction in our history. We are also managing to recover from the major setback we had last year regarding Albacora's efficiency. I mean the company continues to progress, always counting on the tremendous support of its employees, in addition, of course, to society and investors. So thank you all very much. And with that, we now open the session for questions.

Good afternoon, everyone. Thank you for joining us. Welcome to the question-and-answer session for this conference call discussing first quarter '25 earnings. Let's start with Luiz Carvalho with BTG.

Congratulations on the acquisition. We spoke a few days ago about this I have two questions. The first related to Peregrino. Roberto, in our latest interaction, you gave us a little more color regarding the synergies between Peregrino and the other fields and the OpEx is about $550 million. There is the gas pipeline that can reduce this by $120 million. There is also the logistics. And of course, we had also the SG&A of Equinor that you were able to reduce perhaps having a normalized OpEx close to $250 million. So all of these numbers, I'm just trying to understand and perhaps to clarify, are these numbers considering 100% stake, the 40% you had acquired from Sinochem or for the 60% referring to the acquisition? And my second question is about a time adjustment. We had a report. We released a report where we made a mistake in our analysis from the standpoint of how to recognize revenue and cash generation against the disbursement for the closing because our model was closed for 2026. So we ended up pushing that forward for the end of the year. So our IRR was brought down. But when we make adjustment for this gradual integration, it goes back to that IRR of 20%, which we always mentioned. So I just want to understand. Given that you have perhaps a monthly model, Bruno probably does this on a daily basis, but how do you see this capturing of cash over time. And if I may ask a third question, it's going to be a brief one. We saw a lifting cost increasing in this last quarter, obviously, because of Peregrino and everything you mentioned, but perhaps you could give us an idea of what you think would be a normalized lifting cost post Wahoo and the closing of Peregrino. That would be very much appreciated.

Thank you, Luiz, for the questions. First, regarding OpEx. When we analyze the numbers, it is $250 million, 400% of the field. So we have the synergy of the 60% that we acquired. And when we do the analysis of the Sinochem stake. We also have another gain because when we acquired 40% from Sinochem, our agreement with Equinor is that we would get to $350 million of OpEx in the long term. So two things happened. And that's for 100% of the field, by the way. So 2 things happened. Number one, our OpEx should be lowered from $350 million to $250 million. And this will also apply to the 40% stake that we already had. So when we spoke about a 20% gain on the Sinochem stake under operatorship by Equinor, there's also an implicit gain, which is, when we reduce our OpEx from currently, $550 million to $250 million, we will enjoy a gain based on that portion as well. So it applies to the whole field. So whenever I speak about OpEx, it's for 100% of the field. For Peregrino, $250 million, for Polvo plus TBMT, a little over $90 million, almost $100 million. Frade, we are close to $75 million, $80 million. In Albacora, kind of the same order of magnitude or a little more. So these are the numbers for the company. So Peregrino, $250 million. Proportionally speaking, it's a little high, but still we wanted to be conservative at this initial moment. Regarding the IRR, what happens is according to the contract, we have two payments. In our case, three payments because we divided the contract into two a tranche of $40 million and a tranche of $20 million. So this will generate three payments. When we acquired a field on Thursday, that's when we acquired the field, we paid $335 million to Equinor. So this is money that is out of the cash. And we and Bruno do a monthly modeling for this. So this is money out of our cash, and it is already considering the internal rate of return. And the next disbursement to happen will be when we close 40%. The closing of 40% will be equivalent to the $3.330 billion. 2/3 of that. I don't have to do the math, but 2/3 of the $3.330 billion with a price adjustment. So adjusted for price. And we're going to have a third payment, which is going to be 1/3 of the $3.330 billion, again, with a price adjustment until the moment of the second closing. So we will have a price adjustment from January 1, '24 all the way to, let's call the first closing in the first quarter of next year. So that's one part of the payment. And then we are going to have a second payment, which will happen perhaps in mid-next year when we close the remaining 20% stack. So the total price adjustment should be around, please, this is not a guidance. Okay, it really depends on the future oil price. It depends on a number of things. But it should be -- order of magnitude of about $1 billion, okay? So there's the $3.350 billion drops to [ $2.350 billion ], something around that. It's not a perfect number. It really depends on a number of things, but we are considering oil price at $60 a barrel. But you know, oil can float. Oil prices can float a lot. So of this $2.350 billion, this would be your total cash deployment. We would pay $3.335 billion last Thursday. Most of it in the closing of the -- of the 40%, the closing of the 40% stake and then the remaining 20%. And we start accruing cash flow on the following day after payment when we close 40% or when we close the 20% because that's provisioned for the contract. If we close today, as of tomorrow, our production number is incremented. By daily field production, our responsibility in face of ANP is ours, but the cash is also ours. And that's how it works, and that's the difference. In order to capture that, and I did understand the point of your report. I think that it's kind of hard if you prepare a quarterly report or an annual report because we don't capture that. And that's why we have a monthly model. We are much more accurate. The moment we deploy the money and the moment, we have the cash flow flowing in or else we make mistakes and we try to be very, very precise. In your third question, I can't really remember -- oh, the consolidated lifting cost. The consolidated lifting cost is running currently at $12.8 per barrel. I think that until we have Wahoo and Peregrino online, the lifting cost should be closer to $12 rather than $12.8. I always question this internally. And I think it should be close to $12. And by close to $12, I mean something between $11 and $12, $12 being the maximum cap. Well, it increased a bit to $12.8, but the main reason for $12.8 -- well from $11 to $12.8, the main culprit was Peregrino -- consolidation of the rest of Peregrino. But the reason for the lifting cost increasing from $12 to $12.8 was our production. We produced 109,000 and little below expected. Our number for this quarter should have been closer to 115,000, not 109,000. So I didn't do the math, to be very candid, but I think that with 115,000 barrels, we would be much closer to $12 lifting cost. The reason we didn't get to the 115,000 barrels is that we had a setback at Albacora. The commissioning phase of the compressor took longer, longer than we mentioned, much longer than we imagined. And this is what happened. But it should be fluctuating at around $12 until year-end. When Peregrino now comes in very little time, their lifting cost of $18 will soon come down. If we do the reverse math, we'll get to less than $12. Well, let's consider the Peregrino will get to $12 of lifting costs, let's suppose we get to $12. Then we'll have the company's operation with 40%. The rest of the company operating with a lifting cost of $12 and Peregrino will lower their lifting costs from $18 to $12, and Wahoo will come in with a lifting cost of practically $0 or $1 lifting cost. With that, we should have a consolidated lifting cost close to $8. I would say, between $7 and $8. But let's be conservative and work with $8. And the two things will happen close. First oil of Wahoo and the closing of Peregrino will happen almost together. So when we get both Peregrino running at $12 and Wahoo running with it's lifting cost that is very low, I believe the lifting cost will stabilize at around $8. This is our main objective.

Our next question comes from Monique with Itaú BBA.

Roberto, could you please elaborate a bit more on the issue of Frade. You said that it would be in May. But can you tell us a little bit about the level of complexity involved whether you just exchanged the compressor or whether it's something simpler than that? And what would be the expected average production for the field in May when the repairs are concluded? And my second question is about your licensing strategy for your next moves. I think you are just waiting for a license for Wahoo in the next few weeks. And I think that what would follow that would be the drilling campaign in Frade. Is that the correct pipeline? Could you just give me an update, please?

Well, Monique, about Frade in the midst of that shutdown, we made an adjustment in the compressors. A compressor consists of two parts. There is a high pressure and the low pressure parts of the compressor. The high pressure was the part that we had problems with because we had to fix that. There was a problem with the controller that control of that high pressure. So we exchanged the compressor. But then there was a commissioning process. It was with the high-pressure mode. As for Frade, we didn't change anything, but we just did the upgrade of all of the logic system of the compressor. But in this case, we are talking about the low pressure part of the compressor. And now I'm not saying that it's something similar to what happened in Albacora. But now we are looking at the logic issue in the low-pressure system. I mean there is an advantage, maybe the advantage of having problem in the low pressure part of the compressor is that you can still use the high compression part of the compressor up to a certain level in the field. So today, we are -- I mean, from last night to this morning, yes, we already produced 20,000 barrels a day at Frade. So we are operating Frade at a level of 20,000 because we are using the high compressor part of the compressor. But the low pressure that feeds the high pressure of the compressor is not working properly yet. So as soon the low-pressure compressor is working properly, we will resume normal production of Frade. I cannot really give you any precise numbers. I mean we have our own expectations. But I don't want to give you a very precise answer because Albacora will still have some electric issues. And it's not easy to identify things at Albacora. It took us some time. But with Frade, things are simpler. It's not going to be anything major. So you can just go back. I think the problem is much easier to control instead of being idle for 2 months. But let's assume that in the mid of May, the operation will be resumed. I mean, the worst-case scenario is that we would have 20,000 barrels until the end of May. But I don't think this will be the case. I think we will be able to resume normal production before the end of the month. There is another possibility that we will be able to resume production much sooner than that. Your second question, I think it was about IBAMA's strategy. Our strategy with IBAMA involves two things. I mean there are two separate processes related to the IBAMA licensing. The line laying happened at the production construction [indiscernible], that's the acronym. In our particular case, the case of Prio, they are looking at the pipeline system. And they already asked us to update the environmental impact report called RIMA. They already approved our oil inspection modeling, and this is very lengthy subject. I mean it involves the entire license. So they approved parts of it. So things are progressing. And the production team, I mean, of course, there are many other projects from other companies. So for Prio, they are working in the Wahoo license. And then there is another thing called COEXP. It's another entity that deals with drilling. Therefore, it is this entity was the one granting the Wahoo license, and then this organization had a change in the coordination team, and their understanding about the process was a little bit different than the previous administration. So they asked us to update the process for TBMT, and then they gave us their approval. And so now we are asking COEXP to make an addition to the number of wells that can be drilled in Frade. I mean, this is in the order of our request. We are asking for an increase in the number of wells at Frade. We are also asking for some additional permits for Albacora, [ ARAPUCA ] workover. I mean there is everything. And then the third request involves area licensing. We already asked that. I mean they already issued something called TR, which is a reference term, whereby they give us an idea of what should be studied. And so during this period, we are already producing the RIMA. And then yes, we are asking, and we ask them for these additional wells in Frade and the approvals for Albacora. And if we are successful in Frade and Albacora in regards to these two issues, it means that our rigging agenda will be very good until like the end of 2027. And if we want to do everything there is to do according to these approvals, which gives us enough time to receive the rig-fencing license, and then we go back to the Albacora project to add more than 30,000 barrels of oil in that field production. So this is the overall plan. But in practical terms, we used to say that in 2026 or right after Wahoo, we would initiate Albacora. And then we will add another 30,000 barrels. But now what we're saying is that after Wahoo, we will go to Frade and with the approval of Albacora, we will probably add something close to that 30,000. So it won't make a lot of difference in terms of production costs for the company. However, we are just reversing the order of things merely because of all of the environmental license possibilities that we see going forward.

Our next question comes from Gabriel Barra from Citi.

Well, first, congrats on that acquisition. We were expecting to see that soon. I think it came sooner than we thought. And I think this is a very good moment. It was a very good moment for the acquisition. I have two questions and also something that I would like to clarify. First point is about OpEx. When we acquired -- when you acquired 40% we thought that when you acquire the remaining 60%, there will be a relevant OpEx reduction. I mean not considering also the exchange from diesel to gas, which is an important part of OpEx at Peregrino. But there are other things like operating costs, some contract reviews, et cetera. So I don't know how much more detail you could give me in terms of further reductions and how you can do that after the closing or whether you can do that even before the closing in terms of some of these operating synergies. The second point is, I mean, we've been talking a lot about dividends. I think you will be close to 200,000 barrels a day, and there will be a time of deleveraging. And I believe that the company is a bit more leveraged at this time. But I just want to get a better understanding about capital allocation and oil prices. I mean how much oil prices impact your capital allocation? And even how much that has an impact on oil prices? And at what level you would be safer? So this is my second point. And out of curiosity, when you talk about a 20% return out of that 60%, I know you have greater power to cut costs. There is about $120 million or $180 million that could be cut in terms of cost. I mean those 20%, does that take into account, I mean, the cost cuts or only 40% that you already had in the field and you just incorporated that 20%? Or this is just an upside from the first tranche from way back then.

Okay. Until the transition and until the end of that transition for primarily due to ANP approvals. That's part of Equinor's work. When I referred to about $1 billion of price adjustments going from [ 3.300 to 2.300 ]. This takes into account Equinor's operation that is still in progress. So there is a formulation that rules price adjustments. So there is also a formulation for oil prices. Of course, then with Brent variation, remember we will also vary up or down. But for regulatory reasons, I mean, so far, we cannot do anything. Equinor is operating in the field. The responsibility for running the well is Equinor. If they want to reduce cost is okay. But if they don't, it's okay as well. I mean they are operating it. The only thing that we put in our transition agreement is the possibility of us helping Equinor when it comes to the gas line. As Equinor's basic plan or original plan, they want to install the gas line and the OpEx will be reduced from $550 million to $430 million. So this number of $120 million will depend on some works of pipeline, et cetera. In the transition agreement, we said that we will work and do our best efforts to help Equinor to accomplish that task. The problem is that Equinor, they do not have vessels in Brazil. They do not have any vessels allocated to Peregrino. I mean we have pipe-laying vessels. We have also other vessels that can lay equipment under the ocean or even do some pipe-laying, if that is the case, in order to get things running as fast as possible. And things that are independent from the operation, we agreed on a best efforts regime so that we could render services to Equinor. I mean we'll be rendering services to ourselves at the end of the day. But that was the only thing -- this is the only thing that legally speaking, we can do. And then once we do that with SG&A, we cut that immediately, and the other things will follow suit. Whenever we acquire a field, it takes approximately 6 months until you arrive at an agreed number of OpEx. I would say that once you take that 40%, 6 months down the line, you would have everything according to our OpEx. I mean this cost reduction is important to say that it will help us to promote further reductions or this will improve the cost adjustments of the 20% that didn't -- I mean that is not concluded. We did it with the initial 40%. So these 20% will have to accrue with Equinor's costs. And once that 40% is in place, the origin will be a bit better because this will accrue in our favor. Now regarding Sinochem, I mean our IRR is closer to 25%. It's very close to 25%, more towards 25% than 20% of IRR. So when I refer to the acquisition of that asset -- I mean ex-Sinochem, our asset is over 20%. And then when we put Sinochem, we put it in the upside. One of the upsides we might have is that where we arrived at that 25%, not 20% to 25%, it would be like from 25.5% to 25%. It will be something around that area. So even without Sinochem, the deal continues flat over 20%. But with Sinochem's gain, it will be even better. And there is something else. All of this return in this calculation is based on oil at a discount of around $10.50. With Sinochem, we were using $12 as a discount. And today -- I mean, at Sinochem, we are running at $12, but for Equinor, it's $10.50. And today -- I mean, $10.75, in fact. And today, we are running at $9.80 with a sale that was back at $8. And that means that logistically speaking, we had some gains. Now speaking about investments, is there a level of oil that in your view, would include other assets like Albacora or Frade. Even in terms of covenant, I think your plan is, I mean, 1.5x. I don't know at what level of volume you would think it would be tighter in terms of covenant? Well, Gabriel, the major issue here is that Wahoo, even though we have more than $150 million, it should be around that number. I mean, $150 million to spend to add 40,000 barrels a day at zero cost. So you can do any math you want. The payback is very fast and also very high. So when you look at things on the marginal point of view, for Wahoo, it wouldn't make sense to delay. Peregrino, the transaction is concluded, is a done deal. So the projects we have. And also, we are talking about Frade, Albacora. And really, we are looking at next year and the moment will be gone. What we have from today until closing, which should be close to two, we have the implementation of Wahoo and also Albacora's closing. The closing of Peregrino is already a done deal. There is nothing else to be done. And Wahoo, maybe we can save $200 million or something. I mean no equity or debt. I mean I'll say, I will spend $140 million to put 40,000 at zero cost. I think it's super positive for both sides for anywhere you would. I mean let's say, we're not going to change all of our business plan. No.

Next question from Tasso Vasconcellos with UBS.

Roberto, let me ask a question, which is opposite the line of Barra's question. You made the acquisition of Peregrino and I think that the timing was actually surprising. And we know that mergers and acquisition deals don't necessarily happen at the timing we are predicting. An opportunity arises sometimes not at the moment when you're looking for it. I remember, Roberto, some time ago, we discussed that with the Brent price close to $50, that would be an optimal scenario for M&A. You could pay a fairer value. The seller is more willing to sell. So in this discussion, I understand that in the short term, you're focused on digesting the acquisition of Peregrino. But do you see room for other M&A deals, perhaps it's not the focus now. But if a new opportunity arises, what are you thinking? And could you move forward, should you find new opportunities in this short term? And the second question, Roberto. What have you mapped as the main challenges in operating now more fields and clusters in parallel because we know that there are some growth pains. And one of the pains is being able to focus a lot on many assets without having them or one of them lose focus or attractiveness. So internally, what are the main challenges you see now with the company operating for clusters with the integration of Peregrino?

Tasso, as regards M&A deals, well, it is true what you said. Actually, the sweet spot for business, it's when the oil price is close to $70. When it comes to $60, it's kind of hard because the buyer tends to be more opportunistic and the seller are not willing to sell unless they are very much in need of money. So this conversation with Equinor started when the barrel price was at $70, $75. $60 is a context that happened since then, and this did not change our long-term Brent price expectation. And M&A is part of our DNA. Are you to look for opportunities, I don't think there will be anything until we digest this asset. By digesting, I mean we start seeing our leverage drop. I think that our leverage will be 2. But I don't want to do anything to go beyond 2. I think that we have to have a cushion for leverage. So I guess that by -- until midyear or end of next year, we shouldn't be seeing any M&A activities. Now after that, yes, there are opportunities of mergers and acquisitions. And I think that these opportunities are in the Campos Basin, but nothing as big as Peregrino. Unless Petrobras goes back to the market, putting assets for sale in the market. But I don't see -- I don't envision anything as big as Peregrino in the Campos Basin. I can see some minor things. And this has to be discussed because somebody mentioned dividends. So these things work hand in hand. When we have a growth plan, that will take us to more than 200,000 barrels a day. Depending on the oil we'll use, the company will generate around $3 billion per annum in cash flow. And that's hard to get $3 billion per annum in cash flow. It's very, very hard. So we can invest in M&A, but the rest will be returned via share buyback, dividend payout and so on and so forth. So the only separation between us and this scenario of high cash generation, well, then we won't have an ability to allocate the money. I mean it's difficult to say this, but it is a possibility. So it's the operational. We have to integrate Peregrino, put Wahoo to production and solve the problems of Albacora. Albacora is doing fine. For Wahoo, we'll obtain the license. And Peregrino will be integrated. So it's just a matter of time. So I think that M&As will come back, but it might be less relevant. And we'll have to play around with the dividends, share buyback and returning value to our shareholders. There was another question, Bruno. All the challenges of operating many fields together. That's a good question. That was a big lesson learned for us, Tasso, which has to do with the Albacora deal. And looking back, in Albacora, we kind of underestimated our operating capacity. We were coming from a series of huge wins in Frade, Polvo, everywhere. Very high operating efficiencies of Frade running at 99%. It's running today at 98%, 99%. So Frade has its issues, but it's running at operating efficiency of 99%, everything running at high operating efficiency. Even TBMT we had the problem of the two wells, but the operating efficiency is very high to TBMT if we disregard these two wells. So we had a lot of wins, and we kind of underestimated the ability to have the turnaround of the operation, especially taking into account that this Albacora operation came in without a crew. So we kind of bought the FPSO. And guess what? We got the FPSO empty in terms of personnel and knowledge. But that was the deal we had available at the time. That's the way the deal was designed. And we said, okay, we'll hire people. We'll have people from our other FPSOs and hire new people to get accrued to Albacora. But guess what, it was much harder than we imagined. We had Petrobras deploying a number -- a large number of FPSOs in Brazil. So the market was difficult in terms of personnel. And when we closed the operation, we lacked a little knowledge regarding the operations. So that was a lesson learned. And after a lot of hard work now, we are now getting to the top of that hill and cross it. And that leads us to Peregrino. When we look at Peregrino, we think, okay, this is a well-operated asset. Equinor might have a high operating cost that we want to reduce because we enjoy synergies and so on and so forth, but it is an asset that is really well-operated. It has no integration -- integrity issues. It is an asset that in our agreement with Equinor, the contract includes provisions that allow Equinor people to come to work at Prio. Every -- all the offshore crews can come to work for Prio. Several onshore teams, engineers, technicians can also join Prio. So this was a very well-designed agreement, so we won't miss the knowledge. And we have a starting point which is not efficient, which is not difficult. It is a starting point that is running really well, smoothly. And with that, the main value creation source for us is capturing synergies with our other fields. And we've done this many, many times. Perhaps we'll have to have another plan and I have to rely on IBAMA for another expansion plan, to add another unit, to have a tieback. Yes, we're considering tiebacks in the future. I'm not including any of that in the calculations. So also in terms of capturing value, it is a lot easier for Peregrino because we just need OpEx in commercial. I forgot to say this, but we are doing very good work at the trading level, the commercial level. And that applies to Peregrino. We're already trading the oil from Peregrino. We've already had some trades. Of course, there's some tailwind for heavy oils, but we do excellent work to sequentially reduce the discounts we are having. So things are a lot easier and a lot more under our control. And that's why I have peace of mind regarding this deal and moving forward with the deal. But yes, that is something that we are paying a lot of attention, i.e., the operational effort that is needed to operate a field.

Next question from Vicente Falanga with Bradesco BBI.

Congratulations on the acquisition. I know that considering Roberto's comment, the idea is to maintain the Equinor team and Peregrino. I want to know whether you plan to work or if you have an option to work with a smaller POB. If so what are the benefits and risks involved? And what are the benefits of doing that? And my second question is perhaps to Milton. After Peregrino and Wahoo acquisitions, Prio will be a relevant company in terms of size, robust company. So I'd like to understand if the rating agencies have contacted you or if you are proactively contacting them to have a liability management based on the size of the company?

Do you want to start, Milton?

Yes. Absolutely. Vicente, yes, we have been contacting the rating agencies. Actually, even before we announced the acquisition of the 60% working interest, we had a positive outlook with the 40% stake plus Wahoo. Now with this deal, one of the agencies told us that we are getting into credit watch. So with the closing, we'll have an upgrade with the other two agencies. We have a very positive outlook for an upgrade as soon as we materialize the oil through the closing and first oil of Wahoo. So that's the feedback we are getting. So overall, it's a very good outlook. It's credit with a lot of upside. We'll increase production a lot, as Roberto mentioned, as everyone mentioned during the presentation. So we are very excited with these contacts with the rating agencies.

And to speak about people on board, POB. Today, we don't consider reducing people on board. Our synergies -- when we talk about synergies, we don't mean POB reduction. Sometimes there's a POB reduction because we removed some of the expats and it is normal. Equinor will keep its expats that are working here and Equinor will reallocate them somewhere else. So this will be managed skill POB reduction, let's say, 10 people may be. If that much, it's nothing. So technically, there is a reduction because of these expats, but what we try to do is to promote people who are working at the FPSOs, so that they can take over these positions that were taken by the expats. And that's a strategy we've had since Polvo Field, and it's always worked really well. This will seem silly, but it even improves communication because normally, the experts speak English, and not everyone speaks English. So it's better actually to have everyone speaking Portuguese at the FPSO so as to avoid misunderstanding. It may sound silly, but it can happen. So there's no POB reduction. This -- our case is based on contract synergies, logistic synergies, synergies here at the office, SG&A. You see every field, when you operate, you allocate SG&A to your partners, to your office. And this will no longer happen. So that's kind of synergy capturing that we are considering.

Okay. So I can understand the allocation of G&A would not be included in the OpEx?

Yes, it is included. It is. When we say SG&A -- when we talk about SG&A, it's technical SG&A. So it's part of the OpEx. When we look at the field OpEx, it's not just people offshore, it's everyone working on site plus everyone working here at the office related to that field. So here, we have an asset manager, we have the maintenance guy, we have reservoir engineering teams, we have procurement. So a number of people who are dedicated exclusively to one single field.

Next question from Leonardo Marcondes with Bank of America.

I have two questions. The first is on Peregrino. Roberto already talked about the price in the field. But do you see any greater potential now with your recently announced stake of 60%. I don't know whether through a larger volume, you would be able to get better prices or even maybe with land from other fields. So your answer will help us to take a longer-term view. And my second question is about buyback. Should we expect the return of the program now that the acquisition has been announced? Or this is just a time to look at the leverage with oil at the current level or maybe we should take a closer look to the net debt-to-EBITDA ratio. And once you look at the shares in that 10% limit, the buyback is not going to happen. We stopped -- we interrupted our buyback program. Now the main focus, obviously, will be leverage and also, we want to prepare the company for that. I want -- I mean we want to have some margin in terms of leverage.

Yes, but the covenant is 2.5, let's get to 2. Okay. We will get to 2. We will maintain the discipline today. We think that even with price, I mean, with the 60% share, I think there is an absurd covenant vis-a-vis the price of our share. I mean this is what we think, but the market has to think. It's not up to us. So I think that we could do a lot of buyback. However, this time, we are favoring leverage. We want this transaction to lead our leverage to 2. And if the shares remain as it is, I mean, $3 million a year, how can -- how can we not solve it? We will solve that issue, be it through buyback or buyback plus dividend or whatever it is. Speaking about the canceling of the shares, we have to accept the view from the Board. I haven't taken that to the Board. We haven't arrive at a number of 10 people. So I mean, nothing is going to happen. It doesn't mean that we are no longer buying back because there is no more room. That's not it. We are no longer doing the buyback due to funding and saying, no, we cannot do it because we just concluded a major transaction. But this is another subject to be debated by the Board. But there is no practical effect. What I mean is that it does not even cross our minds that the company will sell shares in the market at the levels that we have today. It's not canceled, but it's just in the parking lot at our treasury. The trading that Bruno mentioned, our trading perception today, we are trading at $9. It was $90.8, we sold at $8. I don't know whether this #8 will be consistent or not, but we already sold it at $8. And I think that was June. Now we are selling in July. And we still have to see how that will go. But what we think is that we can gain maybe $2 once we operate the field and if we are able to send loads in VLCC. And in this case, I think we should have like gains of $2 be it -- we also see with a mixed cargo and then we would need Wahoo to produce. And there are very few VLCCs in the world that have heating. So maybe we'll see whether we get one or the other or what will be the possibility. We haven't even factored that in. I mean this -- I'm not saying that this is an upside, so you shouldn't go crazy with that number. But I think we should try to get another $2 per barrel. Gustavo, our trader has this mission to gain about $2 more per barrel based on the numbers we have today.

Our next question is from Regis Cardoso from XP.

I just have some very quick follow-ups. I don't know whether the answers will be quick. But at one point, you said that you could add another 30,000 barrels without the geographic license for Albacora last year. So my question is whether it's 30,000 and then with the campaign, you add another 30,000 or that is not precisely because part of the campaign have to do with the approvals that would precede it. But it seems like that there is an additional production part of that additional campaign in Frade. And maybe also, I would like you to comment on the decline. I think this is a topic that stirs up a lot of controversies.

I mean the declining is just a decline. There is nothing we can do. It will happen no matter what we do. But let me put both things together. In terms of production or adding new volumes, we see that 30,000 without the area license because we have six wells at Frade. And in addition to these six wells, we have also the permits in Albacora. And these cannibalize that additional 30,000 at Albacora, not much, but maybe 8,000 or something in that vicinity. But in fact, if you add them both, you will have 30,000 prior to the area license and if you were to do a perfect math, you would have about 30,000 more. Once you start drilling, you might find more things, but we never do the math with the full total because you have to offset the decline. You have to try to offset it somehow. Today, we lose 15,000 barrels a year. So every year, when you start a new year, you start with 15,000 barrels less. So this is pretty much the number that we would have by the end of the year. Today, we have a capacity to reach close to 120,000. You have to factor in TBMT. That's why I'm not saying oh, okay, we have Frade plus Albacora, and then you add more, and then we have 50,000 more, yes, but you also have to take into account that decline. And I know people look at it and say, yes, but then there is a reduction. I mean, unfortunately, it is -- that's a reality in terms of that decline or reduction.

I'm now referring to leverage. That 2x net debt over EBITDA. So I shouldn't put any last 12 months EBITDA of already acquired assets and 0 from Wahoo in order to arrive at that 2x leverage. So you would deleverage very quickly once the denominator is lower. You wouldn't even have to reduce your net debt. Am I right? Is that what you see as well?

Go ahead.

The main deleveraging factor at the company is Wahoo because you don't have any past EBITDA. I mean there is a little bit of money that we need. So this is the main deleveraging factor. And that's why I say that I'm very comfortable that we will reach that 2 net debt-to-EBITDA ratio. This is not something usual. We never get too close to that. But I am totally comfortable that we will get there because once Wahoo comes in and Peregrino and we reduce costs by the end of the year, we will be very close to 1 in terms of net debt to EBITDA. So it's just a matter of time. In 6 months, it will lower a lot because your EBITDA will grow out of proportion. Your production base will grow a lot. And that's why we can deleverage very quickly. But you're right. I mean, the main point, if you look at the model, and I'm sure you already looked at it very carefully. The point is Wahoo. Once Wahoo comes in, deleveraging happens quickly. It's just absurd.

Yes, that was the same conclusion that I arrived at. And if you allow me yet another comment about IBAMA's timing is that the area licensing topics follow a different schedule when compared to what happens with Wahoo. So as I understood it, you can move forward. Could you please elaborate a bit more about that timing? And the last topic, and I promise is my last one, are other opportunities with Peregrino thinking about the fact that it has a proximity with TBMT and synergies, producing units, et cetera?

Well, we do have that tieback issue. It's something that we look very closely. Nothing of that is in our model. That's why, I mean, you have -- I mean, TBMT is -- is it 25 kilometers far, therefore, you can do the tieback. But then you may say, okay, it is heavy crude, but there is a way of going around it, which is using water. In the case of Polvo to TBMT, I mean we never talk much about this topic. But Polvo and TBMT, what we need. I mean, at Polvo is heavy oil. The tieback is only 11 kilometers far, but what you needed to distribute is PSW higher than 60% or 65%. I do not recall the number exactly. And the same thing goes for Peregrino. You can only distribute the oil in PSW is x. I mean all of these oils coming from the platforms, they have to come with a certain PSW, otherwise, they would never arrive in a PFSO (sic)[ FPSO ]. And so we look at the possibility of integrating the fields at a certain moment because you either have to integrate or produce a little bit more at TBMT or you have to integrate or bring the production to Polvo. So there are several possibilities. There are neighboring wells that could be possible future possibilities. We still have a lot of exploit. I mean this is something that we can talk about for the next 5 years. This is something we're to start thinking about it next year after we deliver everything that we have yet to deliver, but I'm certain that our engineers will come up with an idea in that direction. They always have very good ideas. And finally, IBAMA and the coordination. Well, there are two coordinations by IBAMA. One is called COPROD, with licensing for the pipe that will be laid, and the other one is COEXP, coordination of exploration, everything that has to do with drilling. So all of our drilling process were there. So we got the license for Wahoo, TBMT. And now we have Frade and the area license and the approvals for Albacora until we can start working on the area license. Why don't we submit a request for an area license now. In order to have that, we have to have EIA/RIMA, which is environmental impact assessment and report. So we submitted a request for an are license. They gave us a TR, reference term. Based on that, we do some homework. And there's some time there at IBAMA, and while time elapses, we are trying to resolve all the licenses for Frade, Albacora. Towards the end of the year, we will submit environmental impact assessment and report so that we can apply for the area license.

Congratulations on the deal.

Thank you.

Next question from Rodrigo Almeida with Santander.

Roberto, I only have one quick follow-up question and it's regarding Wahoo and the injectors. Any idea of the timing? Or will they be drilled in 12, 18 times in 6 months, I just want to get an idea of your rig time.

The injector well at Wahoo will be drilled after the producing wells. So we will leave Wahoo on May 15 to relocate the rig at TBMT, but will end Wahoo most likely in the first quarter of next year, the whole Wahoo will be ready, and then we'll have two more producing wells that can take between 5 and 6 months -- two injector wells actually that can take 5 to 6 months to drill. And then the rig will be free to be relocated to Frade and we'll look at the approvals for Albacora. So it's just a matter of return. Wherever we have the highest return, that's where we will take rig. That's where we will take the rig.

One point about trading, you were able to...

No, we just -- that happened only once. So that's a very onetime off. So you think that the market is still very tight for the type of oil from Peregrino. So do you have any structural view for this kind of specific oil? Do you take these things into account when you may speak about the 9.8, which is, if I'm not mistaken, what you mentioned. This is an oil that has a life of its own. There's also the matter of Venezuela. Low Venezuelan production helps price this oil. There's also a logistic matter of having a bigger vessel. But now at this specific moment, that's a moment where this oil is strong. We have all the technical part that Gustavo could speak about. And it has to do with the summertime in the Middle East, and there is greater demand for heavier oil, to generate energy, cooling, et cetera. But what we see is that from the physical standpoint, the market is quite good. It's not getting worse. Even with this tariff, nothing got worse. The oils are being sold more or less with the same discounts. Frade, 2, 2.5. Albacora oil is being sold with $3 discount and Albacora $4. So the discounts are not varying a lot. All of our oil is heavy. Peregrino is particularly heavier. But the market seems to be really very good. Congratulations on the deal.

Next question from Bruno Amorim with Goldman Sachs. Bruno?

Congratulations on the Peregrino deal. I have a quick follow-up question. It's actually a clarification. If you can update on the way you see things. You are closer to the asset. What is the pace of decline did you expect for Frade, excluding these campaigns you mentioned that can happen perhaps next year? We just want to understand the decline and couple this decline with the initiatives that you have mentioned that can reduce decline and even drive some growth.

Well, our best estimate of decline is in the reserves certification, which is a production close to 12 million barrels for Frade in 2025. So if you look at the reserves certification this year, we broke down Frade from Wahoo. If you look at Frade, you need to use to look at the PDP of Frade. And this number is our best estimate of decline today.

Perfect. And looking forward, thinking about the next 2 years, if you don't drill there, what would it be?

PDP means producing developed producing, so proved developed producing, which is exactly that. I don't do anything at a field what happens. And if you look at the PDP, you have it until the end of the life span of the field. So the best reference is the reserves report? It always is. Last year, we made adjustments to the report to reflect all of our end of year views, and this is our best number.

Well, with that, we are closing the question-and-answer session, and I'll turn the floor to Roberto for his final statements.

Well, I just want to say thank you to all. This was a very exciting quarter, particularly because of the Peregrino deal. I would like to thank investors, society, our employees, mainly our employees, and I'll see you again at 3 month's time. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]