RIO DE JANEIRO--(BUSINESS WIRE)--Petro Rio S.A. (“Company” or “PetroRio”) (B3: PRIO3), in accordance with art. 26 of the Novo Mercado Regulation, and in addition to the Material Facts of October 30, 2018 and February 21, 2019, announces that on this date, it has begun Phase 3 of Polvo’s Revitalization Plan.
This follows Phase 1, which took place in the first quarter of 2016, resulting in a 20% increase in production and reserves, and Phase 2, which took place in 2018 and further increased production by 65%, of Polvo’s Revitalization Plan.
For Phase 3, twenty-two prospects with oil potential were mapped, of which up to 4 (four) have been selected for drilling and 18 (eighteen) kept for future campaigns.
PetroRio will initiate the Campaign after having completed maintenance works on the drilling rig owned by the Company. This maintenance consists of a major overhaul of some equipment, which increases the unit’s reliability, performance and safety. The first stage of the 2019 Drilling Campaign will include a workover and the drilling of two wells. The workover, which is expected to take 10 days from start to finish, consists of the substitution of an electric submersible pump (ESP) in the POL-R producing well and is expected to increase production by approximately 300 barrels of oil per day. Once finished, PetroRio will begin the drilling of the Ipanema (POL-N) and Leblon (POL-Na) prospects. The primary objectives of both prospects will test 1,900 meter-deep carbonates from the Quissamã formation, with rock quality and API characteristics similar to other carbonate reservoirs in Polvo. The prospects’ secondary objectives to be tested are sandstone from the Carapebus formation.
The Company estimates that the drilling of each well will take approximately two months, and that the initial investment for the first two wells will be approximately US$ 20 million. Furthermore, PetroRio also estimates that the aforementioned drillings could add between 3 to 6 million barrels to its reserves, to be confirmed by the reserve certification report.
Once the first stage of the 2019 Drilling Campaign is concluded, the collected data will be used to decide on the second stage, which could include the Arpoador and Piratininga prospects. The total investments for Phase 3 of Polvo’s Revitalization Plan could add up to U$ 60 million, depending on the success and completion of all four prospected wells.
Aiming at reducing the Company’s cost of capital and funding working capital at a low cost, in September 2019 PetroRio signed a line of credit of US$ 48 million with Citibank, at a cost of Libor + 3% p.a.
PetroRio’s finance team is continuously working towards optimizing the Company’s capital structure and maintaining cash levels for further investments in Polvo, Frade and potential M&As. This allows the Company to carry on its investment plans, keep minimum cash position for operations and to be nimble in order to seize any upcoming opportunities that may sprout from the current business-friendly Brazilian O&G scenario. PetroRio maintains low leverage with a decreasing Net Debt/EBITDA index due to the new free cashflow generation level, which stems from recent investments and acquisitions.
The new investments in Polvo reaffirm PetroRio’s position as an Enhanced Oil Recovery (EOR) specialist and pioneer; pursuit of technical innovation; increased recovery factors, margins and profitability; and the extension of its fields’ useful life.
PetroRio is one of the largest independent companies in the oil and gas production in Brazil. The Company´s corporate culture seeks to increase production through the acquisition of new production assets, the re-exploration of assets, increased operational efficiency and reduction of production costs and corporate expenses. PetroRio's main objective is to create value for its shareholders with growing financial discipline and preserving its liquidity, with full respect for safety and the environment. For further information, please visit the Company's website: www.petroriosa.com.br.
This news release contains forward-looking statements. All statements other than statements of historical fact contained in this news release are forward-looking statements, including, without limitation, statements regarding our drilling and seismic plans, operating costs, acquisitions of equipment, expectations of finding oil, the quality of oil we expect to produce and our other plans and objectives. Readers can identify many of these statements by looking for words such as “expects”, “believe”, “hope” and “will” and similar words or the negative thereof. Although management believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. By their nature, forward-looking statements require us to make assumptions and, accordingly, forward-looking statements are subject to inherent risks and uncertainties. We caution readers of this news release not to place undue reliance on our forward-looking statements because a number of factors may cause actual future circumstances, results, conditions, actions or events to differ materially from the plans, expectations, estimates or intentions expressed in the forward-looking statements and the assumptions underlying the forward-looking statements.