Prio S.A. (PRIO3) Earnings Call Transcript

[Interpreted] Good afternoon, ladies and gentlemen, Welcome to Prio's conference call. I am Jose Gustavo New Business and IR Manager. For those who want to follow us in English, we have simultaneous interpreting through the globe icon on the bottom of Zoom screen. Translated Presentation is available on our Investor Relations website. The comments on the results will be presented by the management. After the presentation, the officers 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. Now I'll turn the floor to Roberto Monteiro, our CEO.

[Interpreted] Good day, everyone. Welcome to our earnings call for the second quarter of 2026. I will start by going over the highlights of the period. Then I'll hand it over to Jean to discuss the operational side. Milton will cover the financials, and I'll come back at the end to talk about sustainability, the environment and our next steps. Well, to give you a very quick summary of the quarter, I think it was an excellent quarter for the company. Of course, there are 2 aspects explaining this excellent quarter. There's the price factor, right? We had a quarter with oil prices higher than usual, higher than what we had seen in previous quarters. And that was due to a sad reason ofcourse the war and so on. But that's 1 aspect. And I'll leave it at that. We had higher prices indeed. But there was also a second aspect, which I think was the most important and where we are going to focus during this call, which is the operational side and the volume aspect. We had 2 major achievements, 2 great wins this quarter, which were Peregrino field and Wahoo Field. Finally reached 40,000 barrels produced daily at Wahoo Field, which is very stable with FPSO Friday operating at very high efficiency. It's true that there was an issue with one gas lift line, which had to be replaced and so on, but that had nothing to do with Wahoo. The Wahoo project itself is performing very well, with the reservoir meeting our expectations and producing 40,000 barrels daily. We expect this figure to continue for a few more months to come. So this was a major achievement for the quarter. Another very important achievement this quarter was the Peregrino project where we -- well, but we continued the cost reduction trajectory and achieved very high efficiency in that asset. And we brought -- well 815 online in the isolado reservoir. This was a reservoir that had not yet been put into production by the previous operator, Equinor, but we drilled well A15 and it was a huge success. We are now drilling well A13 which is also going very well. We've already passed through the reservoir zone. We are now in the final status of completion and that well should come online by the end of the month. with that regarding Peregrino production, we practically guaranteed those 100,000 barrels daily through the end of the year with A13 and with a third well, C24, which we will also bring online to increase production later on. So I think these were major pillars explaining our numbers that we will be showing going forward. How does this translate into production? We set a production record for the quarter of 172,000 barrels per day, a sales record of 15 million barrels over the quarter. And that obviously generated record revenue and record EBITDA for the company as well. We maintained the lifting costs well under control at $8.90 per barrel. And our -- Well, our leverage decreased substantially to 1.5x net debt over EBITDA ratio. Our cash position remained at over $700 million even after repurchasing 9 million shares -- 9.3 million shares, to be more precise. So the company did very well. Part of it was the price aspect, Yes, and the other part was the production factor, which did very well. although we had to make some adjustments due to a vessel that failed and had to be replaced, and all, we managed to deliver everything we needed to deliver in the quarter and reached a record production level. I'll move on to the next slide. And now I will elaborate on these numbers I'm pointing out with a little more precision in detail. First, to detail this with a little more precision our lifting cost. We've lowered the lifting cost to $8.9. I expect this lifting cost to be around $7, starting at $7 so between $7 and $8 for the third quarter. This is due to a further increase in production and from the gas line. We'll talk a bit more about that in the next steps. But regarding the gas line, we are already in the final stages of recommissioning at Peregrino. So the gain field, which burns diesel will stop burning diesel to generate electricity to power the field and will start banning gas instead. This is not only much better from an environmental standpoint, but it is also much more cost efficient. So combining this increased production with this significant cost reduction from no longer burning diesel to produce electricity. We should be looking at around $7 let's say, starting at $7 and ending up with a lifting cost somewhere between $7 and $8 per barrel. As for our production, we had a second quarter figure of 172,000 barrels. As you saw, July was already a much stronger month. We've already reached more than 196,000 barrels per day. So we're already very close to 200,000, and that's before the 20% stake of Peregrino is included. Let's keep in mind that the 20% stake of Peregrino represents an additional 20,000 barrels that will be added to the company's output. We expect to finalize this between the third and fourth quarters of the year. So putting these 2 factors together, in other words, if we consider production combined with this cost reduction, this should lead us to a lower lifting cost or cash position, which currently stands at $713 million should also continue to rise. We'll continue our share buyback program. I will touch on our dividend policy a bit at the end. But you see nothing changes regarding our guidance to continue buying back shares. We currently own just over 9% of the company. We should reach 10% soon. All canceled the shares again, then it will be up to the Board of Directors to decide whether we'll cancel 5, cancel 3 or how many to cancel to make room to continue the buyback. And our debt level will also continue to fall. Our guidance remains to reach a net debt-to-EBITDA ratio of 1x by the end of next year. That's based on an oil price at $60 with higher oil prices, the debt level should fall. So for example, with oil at $80 a barrel, we would end up with a net debt over EBITDA ratio of 0.8. So all of these guidances remain absolutely unchanged. Share buybacks, cash generation and so on. As for production, we've had some good news. We are slightly ahead of schedule. Will likely end this year above 200,000 barrels daily. Our goal was always to reach 200,000 and maintain that level. This year, we most likely end up with a little over 200,000. But I'll stop here. I've even touched on some future insights, but I'll hand it over to Jan to present field by field and Milton will discuss the financials, and I'll be back. Thank you, Jean your turn.

[Interpreted] Thank you, Roberto. I'm going to present in a little more detail the performance of Prio's assets and fields. Well, here is a quick summary of this slide, and I'll go into more detail on each field later, highlighting the lifting cost of $8.9. As Roberto mentioned, sales volume of BRL 15 million average production of 172,000 barrels daily in the company's overall efficiency for the period, which was 94%. On Slide 6, we have cluster Valenti, Radi and Wahoo Field. Average production for the quarter was 61,100 barrels per day. And this quarter, we completed the 4 production wells at Wahoo. So we are starting to produce those 40,000 barrels from Wahoo Field. Please keep in mind that in Q1, we connected the first and second Wahoo wells at the end of March in April. The third and on June 13, the fourth well. Initially, the plan was to connect the fourth well in late April or early May, but we had a problem with vessel 102, which ended up delaying the start of production from the fourth well at Wahoo. This connection was made using our own vessel, the genesis. So as soon as we encountered -- the problem with the NO vessel, our team mobilized the genesis and the equipment, and we were able to connect the Wahoo Well using internal resources. This is a practical demonstration of the importance of verticalizing some vessels for pre-use business model. In addition, we experienced the failure of a gas lift line at Frade Field, which caused us to reduce production by 7,000 barrels production wells stopped due to this gasoline shutdown, which occurred in early May and we completed the replacement of that line in July also using Genesis as the vessel. In addition, we drilled 2 RDA or reservoir data acquisition wells at Friday. The purpose of these wells is to explore new areas for production. So after drilling, we obtained quite positive results and therefore, 2 new production wells will be drilled are already wrapping up the drilling of the first production well. It should be finished in the coming weeks. And then we will move on to the subsea connection for these wells. After that, we'll drill the second production well in the second half of this year. Slide 7 on cluster Brave, Polvo and TBMT field. The field produced an average of 14,300 barrels daily. Production was primarily impacted by the shutdown of -- well OGX 44, which stopped producing at the end of March and resumed production in mid-May. This well uses a submersible centrifical pump system, an ESP pump, which requires a workover with a rig to replace it. So the Hunter Queen, which was drilling at Frade, as I mentioned on the previous slide, stopped drilling that well and was relocated to perform the work over on well OGX. The team mobilized all of the equipment, and we were able to complete this work over very quickly resuming production in May and restoring the clusters efficiency. However, having this well offline for a while, did have an impact on our efficiency. And was essentially the major impact on cluster, BRAVO this quarter. On Slide 8, we'll discuss Albacora Leste field or ABL. The field produced an average of 22,100 barrels per day. The main impact this quarter was production halt at ABL 68 which was caused by hydrate formation in the well. As a result, we had to shut down the well. The shutdown occurred back in April. We were only able to resume production or bring the well back online in July, and this led to a significant loss in production and efficiency for the quarter. We had a brief partial shutdown to repair the cooling system of one of the vessels during the month of June. Consequently, we ended quarter with an efficiency of 85.9%, down from 5.4% in the previous quarter. In July, our efficiency was already back at the 95% level. So we are back on track with ABL. On Slide 9, I'll speak a little about Peregrino field. Bergen recorded an average daily production of 74,500 barrels in Q2. That was slightly lower than Q1, mainly on account of the shutdown of El C26 caused by a failure of the -- as soon as the pump failed, the rate was mobilized for the workover, which was completed in April. In addition, we finished drilling well A15 in the Isolado reservoir, which is a new area at Peregrino field. We began production there in May, which brought us back to a production level above 100,000 barrels, and we've been maintaining that production level ever since from late May until now, we've been keeping it above 100,000 barrels. We also continued our drilling campaign on both the C and alpha platforms drilling another well in the isolado reservoir, A13 on the Alpha platform and C14 on the Charlie platform. So we will be finishing both wells now in August, and they are expected to come online in the coming months, thereby helping to maintain the field's production level above 100,000 barrels in the second half of the year. In addition, we have completed the repair on the gas pipeline and have already begun importing gas. We are currently commissioning the entire system. And in the coming days, we should begin to reduce diesel consumption at the field, resulting in a significant reduction in our lifting cost at Peregrino field. Well, I'll wrap up my remarks here. Thank you all. And I'll now turn the floor over to Milton.

[Interpreted] Thank you, Jean, and good afternoon to everyone that is joining us. So now let's discuss the Prio financial performance for the second quarter on Slide #10. This quarter, we sold 15.2 million. It was a very significant result, driven by the increase in production we've been delivering in recent times. The reference Brent price for this is 94.6% with an equivalent FOB selling price of 87.7 approximately. It's an average discount of 6.90 USD per barrel, which we can see as a weighted average for the second quarter. Another relatively new line item this quarter relates to domestic sales and export taxes. This quarter is mostly export taxes of the $113.9 million, $111 million relates to export taxes that have taken effect and had a very significant impact on our second quarter. Beyond that, our cost of goods sold is in line with our lifting costs, which we reported at $8.9 million per barrel, royalties in special participation also saw a significant increase. When we compare the reference price used to calculate royalties in special participation, we saw a big jump. In the first quarter of the year, the average reference price was $60 per barrel and in the second quarter, it was $89 per barrel. That's why we are seeing here a significant increase in this line item. EBITDA stands at $847 million. But then when we look at it and exclude all nonrecurring items, we arrived at an EBITDA of $878 million. And for the combined first and second quarters of 2026, meaning the first half of '26 we've surpassed BRL 1.73 billion. Keep in mind that first half EBITDA of BRL 730 billion is already higher than our entire EBITDA for last year. Of course, that this is against the backdrop of lower oil prices. In 2026, now after the war, the price naturally has a major impact on revenue and EBITDA and also due to increase in production. Since last year, for the full year, we've already had 80% from Peregrino. We've seen the contribution from Wahoo and the other projects, the company has been executing, which are boosting our production. Now Slide #11, we will quickly discuss funding. So this -- in the central chart, we see the amortization schedule. We had a payment of nearly $170 million of our inaugural bond, that was the remaining balance, which wasn't included in the tender when we issued our new bond last October. And we wrote over more than $350 million in bilateral debt that was due to mature in 2027. We defer that, rolling it over to 2028 and '29. So I would say that the goal of these rollovers is to improve Prio credit spread. We've been able to do that. Well, it's just natural that we are in an environment where costs are rising, but even so regarding our spread previous cost. We've been able to achieve reductions thanks to the company's improved creditworthiness, increase production, profitability and so on. And we will continue to carry out these rollovers as we can secure competitive costs and at the same time, improve the company's debt profile. I mean, alternatively, if the market isn't open to new funding or whether it's through a bond or a debenture. I mean if the terms aren't attractive, we are also fully confident in our ability to honor all maturities on their due dates. Also see a slight reduction in duration, and this is basically due to the normal maturity of our debt. And the average cost of debt while up slightly to 6.40 still remains a very competitive level. Just keep in mind that we've paid off and it's now off our balance sheet, it was one of our cheapest debt, the inaugural bond. But still, we are in a very comfortable position to service our debt in the near future. Slide #12 shows the variation in net debt which is a proxy of our cash flow in the quarter. We started in the first quarter with net debt of 4.372 billion and ended the quarter just over $4 billion. This is a very positive impact from our EBITDA of BRL 879 million. And I mean, it's a small working capital effect, driven mainly by a reduction in accounts payables. CapEx totaled, $285 million, and this relates to the conclusion of the producing wells at Wahoo as well as some drilling and repairs on the Peregrino gas pipeline. This is a very important project for future cost reductions due to the decline in diesel demand. And the start-up of development at [indiscernible] note as well as drilling wells at Frade. So in preparation for all this. We spent $114 million on share buybacks, financial results of $91 million. This is basically interest along with some maturities from hedges and derivatives we enter into for price production plus taxes of approximately $21 million. Regarding leverage on Slide #13 due to the company's very strong cash generation and EBITDA we've been the undergoing significant deleveraging, we reached 1.5x. As a reminder, we ended 2025 at 2.3x following the completion of the acquisition of the additional 40% stake in Peregrino from Equinor, which pushed our leverage up slightly. In the first quarter, with cash flow already in place, leverage stood at 2x and now it's at 1.5x. And we expect this downward trying to continue over the coming quarters due to cash generation synergies, cost reductions and so on. Now with that, I will turn the floor over to Roberto, who will discuss environment and social issues and our next steps. Thank you.

[Interpreted] Thanks, Milton. Well, I'm going to go over the environment, society and people. This quarter, the point I'm most passionate about is this first point. Regarding wealth and well-being. And to that end, I would like to say that we modernized the living quarters of our FPSO 40, which is stationed in Albacora Leste field. When we took over this FPSO when we purchased it, it came with some areas that needed improvement in terms of integrity and so on. And the issue of upgrading the living quarters was always pending. So we finally started upgrading that superstructure, the living quarters. I mean that's not just the living quarters but all the offices, the common areas and so on because we can't have an office as beautiful as the one we have here in Botafogo, whereas we still have very precarious offshore facilities. It's just another way to give back to and look after our people. And this is a project that we like a lot. Nelson himself was also very actively involved in the project, and it's already starting to bear fruit. It's improved a lot, and we are receiving plenty of complement. We wrap up the safety and well-being section with this point. In addition to the safety day we held, the motors stay vigilant forever and so on. And this the point I would like to highlight with particular enthusiasm this quarter regarding safety, health and well being. Another interesting area where we continue to make progress is our carbon footprint. For yet another quarter, we posted another successive reduction. We are at 21 kilograms of CO2 per berry equivalent. That's 16% below the first quarter and 44% below the fourth quarter last year. The main point here is Peregrino, the reduction of emissions at Peregrino and the increase in volume at Wahoo, we are producing more from the same facility. So that's a major positive. And now in the third quarter, we will have another major development, which is the replacement of diesel fuel with natural gas at Peregrino. And this will also significantly reduce our carbon footprint. We expect to likely drop below 20 kilograms of CO2 per barrel equivalent. We continue to make progress from a cultural standpoint. We've wrapped up the ease offshore program that was an entry-level program for people in the offshore industry. So we finalized the schedule, April 2025 and '26, and we continue to support all the initiatives we've always supported. This year, in this coming quarter, in particular, we have the real Marathon, SPARC and so on. I'm going to move on to the next slide, which covers the next steps. As I always say, the first and last points are constant. Our focus on safety and health. And the last one is exploiting new M&A opportunities. But then let's talk a little bit more about the points in the middle, which are, I think, are the main focus this quarter. The first one I think it's worth addressing. And that is the Frade production wells. As we mentioned, we've authorized the drilling of 2 production wells at Frade, 2 additional wells at [indiscernible] we expect to bring the first 1 to production skew in August. Our expectation is to increase the production of [indiscernible] by 4,000 barrels per day or 5,000 barrels per day, something in that range. Most likely, with this well in Frade will surpass 200,000 at some point, maybe not an average monthly basis, but we might already exceed 200,000 barrels per day for fin days. And then with the second page well later in the year. And of course, then with Peregrino as well, we will easily surpass this mark. Another key highlight of the quarter will be [indiscernible] operating efficiency. Avocado Les, from a topside perspective has improved significantly and has shown good and very consistent efficiency. This quarter specifically, what impacted avocado last year's efficiency was the hydrate in well 68, but that has nothing to do with everything we discussed last year regarding the top side, the compressor, the generator and so on. Therefore, I believe that all the issues we addressed in [indiscernible] are finally yielding results. We've had some very good months at Abacos -- in the quarter, there was also the issue with hydrate at well 68% this quarter. Well, Well68 is producing again, July was a great month for [indiscernible], by the way. Therefore, I think that the asset is finally moving in the direction we needed it to go. Another major focus this quarter will be the closing of the Peregrino deal for the remaining 20%. We expect that to happen between October and November. Of course, there are a number of steps here that need to happen for this to materialize. But we are expecting something between October and November for the closing. And finally, the shareholder remuneration policy. We've begun discussing the policy on the board. And there is a general consensus by the Board regarding payouts, share buybacks and so on. But we all agree wait a little while for this turbulent geopolitical and macroeconomic situation to settle down a bit before we announced this policy. But as I told you, our guidance remains unchanged. Our guidance for our leverage of onetime based on an oil equivalent price of $60 per barrel at the end of next year remains in effect. We are still buying back shares and in fact, we are planning to accelerate the buyback a bit in the second quarter. I mean, in the third quarter and in the fourth quarter, given that the bulk of our CapEx is already behind us. We've already completed the Wahoo project. We finished the gas import, which is Peregrino, we've drilled the first well at Frade and we already drilled A13, which was the Peregrino well. Therefore, a lot of things already happened. And now our CapEx is going to start dropping significantly through the end of the year, which will create even more room for us to continue steadily with our share buyback program. Well, that's it. I mean the shareholders' remuneration policy is ready, I would say, or it has been agreed upon by our Board, but we decided to wait a little while for this macroeconomic situation or even, I mean, there's very complex geopolitical situation you're currently pacing to calm down a bit before we move forward with it. Well, regarding the search for new M&A opportunities, as I mentioned, well, that's in our DNA runs in our blood, and we will always keep pursuing them, even though we don't have anything on the horizon right now and no relevant discussions are currently underway. Now I will wrap up this earnings release presentation. I would like to extend my sincere thanks to our investors, the public and our employees. The results were exceptional. But it was a quarter of hard work, a quarter of significant adaptation. We had the Wahoo issue where there was a chartered vessel that failed. We had to replace it with our own vessel, and that led to a major operating reorganization that we had to carry out. There was also the issue of trading that we presented here. Well, we didn't even mention it, but we posted strong numbers. However, day-to-day operations were challenging. It was a Carter with spectacular results but it wasn't necessarily an easy game either. It was a tough one. And -- but with that, I would like to express my gratitude to our employees. And now I'll open the floor for questions. Thank you very much.

[Operator Instructions] Our first question comes from Munira with Itaú BBA.

[Interpreted] I have two, Roberto perhaps we could start with the trading discounts. We understand that there is a factor which is external to the company. It is related to the ongoing context. But there is a lot of your commercial strategy, the use of the LCC. When could you perhaps -- could you perhaps state how much is coming from each aspect, so we can understand what is structural in this trading strategy. And my second question, you made a comment at the end that your expectation is that CapEx will slow down by the end of the year. Could you position us and give us perhaps full number for the year. At the end of 2026, what the CapEx will have been? And if you have some visibility regarding CapEx in the order of magnitude for 2027.

[Interpreted] Look, as regards trading, I cannot really tell what led toward because so many things happened. It was quite confusing during the quarter. I can mention some major points that led us to positive results. But we were very exposed to dated brand. There is dated and IC brand. dated is the physical market is the day to day. So as much as possible, we try to be exposed to dated. And we have the physical market that was tighter. So when we compare with ICE Brent, which is the brand that we see on Bloomberg and so on, there was a mismatch. And that's why our discount improved because of that mismatch. Since the beginning of the Middle East war, we have prioritized contracts in dated brand. And I think that this was a major pillar. And there was a call with Gustavo and Bruno thinking the market is going to stretch and if the market stretches, we would better be in dated Brent. The opposite is also true. When there was that partial opening of the Strait about a month ago, a while ago, and we had a flooding of oil dated brand was the one that suffered the most. So I think that we had queue at 690. But the third quarter will not being 60 90, it will be around 9%, 8%, closest to 9% because of this effect that China stopped buying. There was that opening so on and so forth. So these were the big moves. As for VLCC or Peregrino. Well, we save $1 to $1.50. The oil brand is extremely important for the Peregrino sales in VLCC. So there were 2 things about Peregrino. We loaded a VLCC at Peregrino directly. That had never been done before. The prior operator had never done it. It was always done through Aframax, which is a smaller vessel than Swiss. And we increased to Swiss and now we increased to VLCC. So that was a big one. Together with VLCC, we're blending so that we won't have to heat the oil at the VLCC. We've done that, right? Yes, we mixed it with ABL. So we the super heavy grade mix with Albacora and we had a million mixed with Merrell, and these 2 did really well. One went to China, 1 went to Monica to that. Both were shipped to China and Europe, they were well received and unloaded. And we gave about $2 per barrel, but this is not what's going to make a difference. We are much more exposed to this geopolitical aspect, dated versus ICE Brent, what's going to happen in the Street, the canal is closed. So dated is stretching again -- so in August, we'll see what's going to happen if they reopen the straight, there won't be too many ships loaded. So we won't feel so much of a flooding of oil flooding the market. So these are the pillars that will make a difference. We will keep monitoring the performance of Dated Brent vis-a-vis the ICE brand. You also asked about CapEx. We had an initial budget of about $500 million a little over that. We are now at $600 million, $6 million and up. And there will be a reclassification of Wahoo. We'll get a part of the inventory in put it in Wahoo. So this is not real CapEx. This is a simple reclassification. Wahoo would this reclassification will go to 840, 824 with that reclassification at Wahoo, and then next year, we will drill the injectors, and we will freeze that 824. Net of this reclassification of Wahoo, we are at 600 million give or take. And why did we have a mismatch of about $150 because we decided to drill another well at Per -- so 1 additional well in isolado reservoir A13, which we are drilling. So we accelerated the program to maintain those 100,000 barrels at Peregrino by year-end. So this is guaranteed. I mean nothing is guaranteed in this industry. But have practically guaranteed 100,000 barrels daily at Peregrino until the end of the year with the advanced drilling of A3, we decided to drill the 2 wells at Friday, 1 should be delivered still this month, until the end of the month and the second one will be in the next quarter. So that's one. And the 2 actually. And the third thing that we should do this year, and this is moving well ahead quite well is Arauca. We have signed. We Petrobras, Repsol and Equinor have signed the development plan. We have submitted it to and we'll get the request to anticipate wealth. So that when ANP and Ibama authorized, we can connect them. The line has been late for Rapa. So I think that there is a reasonable test that repos will start flowing oil this year given that we obtain the licenses. So these things played in our favor. Another thing to consider to reduce CapEx is the reimbursement of the gas import. This is going to happen this year. So this is something else to take into account.

[Interpreted] Next question from Gabriel Barra with Citi.

I have 2 points actually still on Peregrino. When we talked about Peregrino, we talked about great synergies and cost reductions for Peregrino. And I just said over 2026, we will be covering the last mile, which would be the change from diesel to gas to power the field. And perhaps you could remind as Roberto. Of those $500 million -- how much of this has been captured. And when we look at the savings compared to diesel, we are following the diesel market and the prices are increasing, diesel is costing a lot more than it was costing when we talked about synergy and cost reductions. So does this still make sense perhaps the [indiscernible] 70 million worth of savings have increased compared to what we expected in the past. So that's the first point. Secondly, one of the negative news in the quarter is the export tariff. And I think you touched a lot on it during the presentation, but that's a very delicate point. Very important point for the sector, including for Prio that exports about 100% of your production. And I think that this caught the market by surprise. I don't know whether you were caught surprised, but we were. We do not expect that the 12% would continue. We didn't expect the export tariff would continue. So I'd like to hear from you. What are the next steps? What is your base case regarding the export tariff and what you can do about it? I've seen companies moving even the unions moving. So I'd like to hear from you what can be done regarding that.

[Interpreted] speak about Peregrino and then will speak about the export tax. Well, Peregrino, -- let's start with the guidance of BRL 70 million of reduction. It might be more. But of those BRL 300 million that we meant to reduce when we acquired Peregrino field cost 550. Today, the field is running at 260 million. So we have already reduced almost BRL 300 million that we aimed at reduced. We've reduced BRL 280 million, BRL 290 million. So that's given. And the gas will be a bonus. We will go beyond the BRL 300 million. So let's keep it at [indiscernible] 70 million because there're still some little things to be done. We have to commission the new line. There's something else that we can do. So the total of this can get to $100 million. But -- this involves taking gas from Platform -- we enrich oil from platform to the FPSO of Peregrino and the FPS Peregrino will burn that artificially enriched with gas. So that's another system that we can try. It has never been done. So let's be cautious. I don't want to give you a guidance. they want to take a larger step or more than I can chew. We have reduced a lot the cost. We will reduce even further. Things are really going really well. Peregrino is actually a great field. The Peregrino team is very good. They have responded really well to everything. I think we've been able to do excellent work at the field. Now let's talk about the export tax. We will also cut by surprise. I think everyone was. And what the company has been doing what we've been doing is to try to take this to court, to digitalize it as we call it. If you're not an expert in the industry, you might think, "Oh, these guys are making money. So you have to pay. But it's not really what's happening. We have to understand market dynamics. Today, Brazil produces more than 4 million barrels of oil, and we can only refine to -- so you're saying you're not going to export oil. Even if we don't export the oil, no on, we'll be able to refine it, number one. Number two, what Brazil needs is diesel. And our oil. I mean, in Peregrino, you don't get diesel out of that. You get bunker fuel. It's ship. So it's an equation that doesn't make sense. So why do they have to tax oil? That's number one. And number two, when you look at what's happening in the world, oil today is almost like in pre-war prices. It's not so different than pre-roll levels. Now there's high inflation and there's a problem that can lead to recession in countries worldwide is the product. But the product today, there is a refining margin, which is Jagan refining makes more money than AMB, which does not make any sense for a processed barrel. Refining is a fee business. E&P, you have to work for oil have to extract and lift the oil from the bottom of the sea. So there is a big thickness match. The margin of refining, the price of deep product itself is what is damaging and getting in the way of the economy, the price of gasoline, the price of diesel. But the price of oil does not reflect that today. We have a very high refining margin. The reason is that China left the market. When this confusion started to happen, China stopped importing oil. And for bad, the export of oil products, the jet fuel and gasoline, which are the 3 main ones. When China did that, it removed that ability from the market. in all the refineries in the world other than China, by the way, to complement that, Russia also lost some capacity given some of the bonding from Ukraine, that they lost the capacity to have refined products. So there's a big shortage of refining in the world. And it will supply of oil, which is not so stretched. So the refining margin increases a lot. And this export tax on oil, I mean we have nothing to do about it. We could perhaps text the banks because the banks are making money. That's kind of our thesis -- it's not a measure to regulate the market. You can hold back exports to regulate the market, so we can keep the oil in Brazil and refine it here. You can do that as much as you want, but the oil will not remain in Brazil. We won't be able to refine it. We haven't got refining capability to cope all of the oil we produce. So Brazil has to import fuel diesel. Oil by product and this is the foundation of our thesis. I have kind of a hung answer, but this is a very delicate point in our view. And if you look your investors, look at Martin. B66 were lower, all-time high. They have taken a margin. It is exactly that process. These are refineries are broad. They are importing oil -- from the United States, like there's no tomorrow in the exporting product for everyone at high margins. It was also the comment by Trump 2 days ago. Say exactly about the extraordinary results that were coming from refining from a I can't remember. I'm not going to get into that great detail. So -- this is the whole case that we are trying to use legal thesis. Now having said all that, we would have that for another 60 days. it seems that the war is easing up a bit. Apparently, there is an agreement about to come to fruition. And we believe that this might disappear. But yes, this is what we're thinking. I cannot really tell you, "Oh, this will end in 15 days or in 45 is I would love to be able to, but I can only tell you what is our base case and what we are discussing and what we are trying to do to cope with this.

[Interpreted] Next question is from Rodrigo Almeida with BTG.

[Interpreted] I think I would like to hear more about [indiscernible] I think this is the major investment driver for the company. I mean, Robert, you talked already about CapEx. But going forward, you focus on Abacarolesi. So I would just like to get a little bit more details. Let me break it in 2 parts. First, I'll talk about [indiscernible] how is the tieback moving along? You said the development plan is fully aligned with the rest of the partners. If you could give us some light about how the project is moving along. Tie back. And also, when do you think that we will see some production and maybe the mid and long term for [indiscernible] During our Investor Day, you mentioned 7 wells to be drilled in 2027. Could you give us some light about how you see this project? What are the most promising areas. I don't know whether you could say anything about it, but what do you expect about the next prospect -- and if you look in the mid-range for the 2027 campaign, how do you see the environmental issues and CapEx expenditures the projects of next year. I mean what will be the timing that you will start spending money for these projects? I mean so [indiscernible] and I have an additional question on Wahoo. What about the performance of the wells, the reservoir in Fradin isolation. And you also talked about injection wells that are more productive. I believe you must be very excited with Wahoo performance. So [indiscernible] and Wahoo, if you could give me a follow-up.

[Interpreted] We are ready launched the line. We laid the line. And so now we are just waiting for the workover license that should be granted by Ibama soon. We are just waiting for ANP authorization to complete the well and connected. Once these 2 things happen, we will do the workover with the rig in the well in the upper part of the well. And at the same time, we will connect the well to the rigid pipeline that has been laid. So then we have to lay the rigid dot. So Also, we have to lay the umbilical. In the third quarter, Yes, we have to connect the well to the pipeline. I mean, the hardest part of the project is behind us. I mean, to lay the -- we needed a special vessel. And then the edges of the rigid one part connects to the well and the other part connects to the effort to the FPSO. Well, we can do that with our vessel once we have bema's authorization to make the interconnection and once we have ANP's authorization to connect them we believe that if everything goes well, we can reach first oil by December. But the bottleneck is Ibama authorization or the workover authorization from IbemaorIbamas and concurrence. And ANP's authorization that can allow us to initiate the work in the reservoir. We went through a very important phase involving the laying of the rigid line, as I said, and also the A&B's protocol for the PD at the beginning, this was an agreement signed between us and Petrobras because only Pro and Petrobras have a stake in that field, but then A&P came back asking for the signature of the auto partners. So now we already submitted the protocol with all of the signatures from Epson and Equinor as well. So things are moving. It's just a matter of time until we can connect the well. Now in regards to the rest of Albacora less, we do intend to start drilling next year, pending the environmental license in Coal. However, what we are doing is that our plan for next year will take into account 2 scenarios. One, when we have the license in the other 1 without the license. I mean, having the license for all the products to drill the wells there -- if we do not have the license for [indiscernible] we will start drilling wells at Frade. And even some that we have already identified in that campaign, where we have the RDA. So we could move from 1 scenario to the other, depending on the license. Well, certainly, the Albacora wells should be slightly better when compared to frag because it's well it's a field that still has a lot of work to be done. But we can -- if we just drill trade, we can have 100 barrels a day, not only Fragibut our plan for next year to stick to that 200,000 barrels a day involves drilling 5 wells in deepwater and 5 wells at shallow waters. In deepwater, the wells will vary between FrageandAbacora, depending on having or not a license, and this will cost per well, so $200 million in total and 5 wells in shallow waters in Peregrino, and this will cost $20,000 per well, $100,000 in total adding up $250,000 in CapEx. And moreover, you have maintenance CapEx. I mean, so we should reach something close to $450 million to $500 million. So this is pretty much very close to the range of 400 million, 450 million that we still have to drill. It will depend on the injection of 2 Wahoo wells, but we don't know how much still will be done this year or next year. And that is in terms of Albacora less. Today, we have already identified 7 wells at albacore. You might remember that back then when we started our first plan, we had 11 wells, 3 of them were injection wells, then the number went down to 8 wells. Today, there is only 1 well at Albacora to be drilled. I mean we are using new seismic that has been rerun that corroborates with all the wells. But the bulk of the work is done. So we are very comfortable with Albacora. And Avocado top side is very good fit. We will have another -- no schedule shutdown this year, 12 days, maybe you were supposed to have been done earlier this year. But it will probably be done in November or December. And with that, we will solve most of Avocados integrity, and we can move on to the next phase. The second question was about Wahoo's reservoir. Things are good. I would say that it is the size that we imagine the wells have slightly better productivity than what we envision it first. But -- it's pretty much in line with what we thought it would be. Production will be around 40,000. And this production of 40,000 should be sustained for a few months, and then there will be a decline. -- is business as usual. The beginning of this decline should be at the end of this year, or maybe closer to the end of the year and early next year. So it will start declining and then it will follow its normal decline curve. And then we will start injecting water at some time next year. I would say the first half of next year.

[Interpreted] Next question from Tasso Vasconcellos with UBS.

[Interpreted] Roberto, I would like to take this opportunity to ask a more general question. In the past few months, we've talked a lot about the possibility of new capital allocation, dividend payout given the strong cash generation from the company. I would just like to understand about your internal discussions in terms of these organic projects when you're looking at a new project or a new drilling operation, what are the main metrics that you look at, minimum amount of production per well, is PD or if it's IRR, what is the minimum level that you book, the same 20% of M&A or some other metrics. And if you could also give me some more details about what else is part of this calculation. I know that you operate several assets, FPSO, you own your own rigs, you have your own vessels meaning that you already have a minimum fixed cost because you have some assets that can maybe facilitate your decision making up. But I would just like to understand that process of decision-making when it comes to allocation of capital to new investments and the surplus of cash looking at a scenario of 3 to 4 years ahead.

[Interpreted] So Tasso, we look at 3 things. We look at return from the asset we look at new wells -- new wells we look return and the NPV and that's that 20%. And also, we look at payback because, in fact, -- all these projects have like $70 million. I mean very high. What is the payback? 3 months, 4 months? These are very quick paybacks. And IRR is very high. Honestly, there isn't much you can do or say, okay, I'm no longer buying shares or I'm not doing this or that so I can buy more shares, buy back more. I mean the valuation gap would have to be gigantic, much bigger than what it is today. And then our first priority is inorganic projects. I mean, because it's much better than anything else that you can think of, if you have a project of 60% of IRR in dollars that can be paid off in 3 months. I mean the answer is already given by there. So we look at these 3 things, Usually, when we have this RDA, we already include that in the cost. So we have an expectation that it will work. And then you say, okay, if I drill a pilot well, no, not a pilot or pioneer well, a wildcat well and something goes wrong, I mean you lose $30 million. If I drill and it works well, okay, I'll drill this one and another well. And then I can gain 300 -- and if it goes wrong, I lose 30 and if I do it, well, I didn't 300. I mean, it's a no brainer. The decision is a no-brainer. So that's the way we approach it. And on the buyback subject, I mean we have enough money to do both. It's not either or. We are not letting go of organic projects for the sake of buyback, organic projects are always more economical. We've already stopped because of M&A, in particular, Peregrino because there was a big thing, $3 billion. That was a major project. But apart from that, I won't say that this is a no-brainer solution. We'll have to look at things, but...

[Interpreted] Next question from Yuri Pereira with Santander.