Earnings call transcript: PetroReconcavo Q3 2025 earnings miss EPS forecast

PetroReconcavo SA reported its third-quarter earnings for 2025, revealing a mixed financial performance. The company posted earnings per share (EPS) of $0.3674, falling short of the forecasted $0.4158, marking an EPS surprise of -11.64%. However, revenue came in slightly above expectations at $747 million, compared to the forecast of $741.5 million. Following the earnings announcement, PetroReconcavo’s stock price dropped by 3.83%, closing at $12.04, reflecting investor concerns about the earnings miss.

Key Takeaways

• PetroReconcavo’s Q3 EPS fell short of expectations by 11.64%.
• Revenue exceeded forecasts, reaching $747 million.
• Stock price decreased by 3.83% post-announcement.
• Net profit increased by 49% quarter-on-quarter.
• The company is focusing on cost reduction and technological advancements.

Company Performance

PetroReconcavo’s overall performance in Q3 2025 showed resilience despite the EPS miss. The company reported a net profit of $122 million, a substantial 49% increase from the previous quarter, driven by strategic cost reductions and efficiency improvements. However, the company experienced a 2% decrease in net revenue quarter-on-quarter, totaling $786 million. Despite these challenges, the firm’s nine-month net revenue grew by 1% year-on-year to $2.5 billion.

Financial Highlights

• Revenue: $747 million (slightly above forecast)
• EPS: $0.3674 (missed forecast of $0.4158)
• Net Profit: $122 million (49% increase quarter-on-quarter)
• EBITDA: $350 million (6% reduction quarter-on-quarter)
• Net Debt: $1.5 billion (1x EBITDA leverage)

Earnings vs. Forecast

PetroReconcavo’s EPS of $0.3674 fell short of the forecasted $0.4158, resulting in an 11.64% negative surprise. This shortfall contrasts with the company’s historical performance, where it typically met or exceeded expectations. The revenue, however, slightly surpassed the forecast, achieving a 0.74% positive surprise.

Market Reaction

Following the earnings release, PetroReconcavo’s stock price fell by 3.83%, closing at $12.04. This decline reflects investor disappointment with the EPS miss. The stock remains within its 52-week range of $11.7 to $17.4, indicating potential volatility in investor sentiment.

Outlook & Guidance

Looking ahead, PetroReconcavo plans to maintain a conservative capital expenditure strategy in 2026, focusing on cost reduction and efficiency. The company is exploring new commercial routes and logistics optimizations, which could enhance future profitability. The firm has also hedged 35% of its oil production for 2026 and secured fixed price protection for 89% of its natural gas production.

Executive Commentary

José Firmo, a key executive, remarked, "2025 was a year of investment and setting strategic priorities." The executive team emphasized their strategy of maintaining flexibility in capital allocation, highlighting the company’s ability to internalize advanced drilling technologies.

Risks and Challenges

• Fluctuating oil prices could impact revenue.
• Currency devaluation may affect international operations.
• Increased oil discounts could pressure margins.
• Dependence on technological advancements for cost reduction.
• Potential regulatory changes in the energy sector.

Q&A

During the earnings call, analysts inquired about the deep wells project, which the company views as "seed planting" for future development. Questions also focused on the water injection project in the Chié field, expected to stabilize production. The potential for a dividend policy is under review, reflecting the company’s strategic focus on capital allocation.

Full transcript - Petroreconcavo SA (RECV3) Q3 2025:

Marília, Director, PetroReconcavo: Greeting. I am Marília, the Director of PetroReconcavo. We’re going to start our third quarter seminar, 2025. Dr. José Firmo was going to make the presentation, and then we’re going to have a Q&A session with all of the executive board. I am going to ask you to send the questions together with your name and where you work so that I can ask the questions. This is being streamed through the internet and then through the company site. I would like to say that all the declarations done during this video conference in terms of the business perspectives, projections, and targets of the company, this is from PetroReconcavo as well as the information that the company has. There are risks involved in future activities. I am going to give the floor now.

Good morning, everyone, and thank you for coming to the presentation of the results of the third quarter of 2025 of PetroReconcavo. This quarter was marked by a reduction in average production, devaluation of the dollar compared to the real, 4%, and according to the average price of Brent. Although it increased a little during the quarter, it remained below $70 per barrel. These are the main impacts of these factors and the indicators of the period. The net revenue was $786 million in the third quarter of 2025, reduction of 2% in the quarter-on-quarter comparison. In the accumulated amount, nine months, we achieved $2.5 billion, a growth of 1% over the same period in 2024. The EBITDA was $350 million, a reduction of 6% with regard to the previous quarter.

In the accumulated amount of the year, $1.1 billion, 7% less versus the same period in 2024. Our net profit was $122 million in the quarter, 49% versus the second quarter. In the accumulated amount, the profit was $588 million, 45% over the same period of the last year. We have finished the period with a debt of $1.5 billion, and that is equivalent to liquid debt over EBITDA. FYI, I was going to tell us about the financial performance during the period. The operational indicators of the company, the average production of the company in the third quarter was 26,400 barrels per day, 3% less than the second quarter of 2025. The accumulated amount of the year is 27,000 barrels a day, which means a growth of 2% versus the same period of last year.

We concluded the acquisition of 50% of the shares of Midstream from Rio Grande do Norte. In October, we started to process the gas and sharing costs. This is going to bring great efficiency gains and monetization of the gas produced in the Potiguar asset. Finally, we celebrated a contract for the movement of a new terminal to be built and operated by Gislube in the Pecém port, establishing a structure dedicated to the production of the company that will allow the new commercial routes to be opened. Also, there is the potential to reduce the discounts practiced in the sales operations in our oil. Operationally speaking, in the quarter, we had important technical advances in spite of the production challenges. As I said, the production presented a lowering of 3% compared to the quarter-on-quarter, especially because of the accentuated fall in the Chié production.

We mitigated this effect, and we finished the injection of water in the Chié field. The details will be on the next slide. In Potiguar, the reduction was 6%, which partially reflects the end of the new completion of the perforated wells in the first quarter. This initial completion was responsible for the incremental production captured in the previous quarter. Besides that, in spite of the intervention, stable intervention in workovers, the performance was lower than the previous campaigns, generating less incremental production and combating the natural decline of the assets. The workover campaign was reviewed, and there are good expectations for the production of the last quarter. Finally, we concluded the first campaign, the evaluation of wells in the history of the company, confirming and validating the geological data and geophysical data previously identified and characterized in the producing zones.

This will be explored later on. On this slide, we bring a historical panorama of the development of the field of Chié to better understand the current development plan. Before the perforation program the company has, the field produced about 2,000-2,500 barrels with 12 producing wells and three injectors. In the second quarter of the second semester of last year, there was a new plan developed in Chié. There were five new wells, doubling the production of the field from the first quarter of 2025, as you can see in the graph. It is important to mention that the T009 well was originally projected as an injector because of the identification of oil-water contact below and what was modeled. It was possible to anticipate the production of this oil for this reason.

With the increased production, we observed an acceleration in the depressurization process, and there was an impact in its production over the last few months. To mitigate these effects, they were already building and implementing the water injection project reservoir, and we completed two new wells, and Chié 009 was converted back to an injection well. In this way, in September, for the first time, the volume of injected water was above the volume of fluid produced, initiating the repressurization process of the reservoir. This process will reverse the tendency for decline, will increase the recovery factor of oil and gas, and prolong the useful life of the field. This effect should be captured over the next few months continuously in the next years of production in this field. We have concluded our first perforation and appraisal program of the deep wells of the company.

This is supposed to find the most efficient way and that will bring the best value to develop our reservoirs over the next few years. We were successful in the perforation as well as the confirmation of the zones with a good hydrocarbon saturation in the reservoirs. These are significant resources that bring the opportunity of unlocking new relevant reserves with potential for increment in the production curve of the future of the company. In this quarter, we have already produced in Jacuípe 44 and Biribá 19. In Biribá 20, after the evaluation of the deeper horizon, which is the Sergi reservoir, in October in the Água Grande area, which is more superficial, we have started the evaluation of the area.

These wells represent a great operational advance for the company, and there was a total CapEx of $148 million, a great gain in efficiency observed to the first well in the perforation and completion phases. The initial production of the wells is still well below the potential of these reservoirs, and this is a cost and technology challenge for us that we are dealing with, and we are committed to developing the plan of being the pioneers in Brazilian onshore and conquering these new frontiers. The data obtained in this project is fundamental for the development of this plan that will enhance the economic capacity of these wells. There will be the adoption of new technologies that will reduce the perforation costs and revolutionize the designs of these completions. With only the three wells built, there’s already a reduction in the costs of perforation, development, and completion of the wells.

We will keep this commitment for continuous search to get best economic efficiency in the development of these reserves. Besides that, in the month of October, we have our first horizontal well in the history of the company. This technical conquest has value not only because it is unheard of and because there is the development of an internal capacity for design and implementation of a new frontier of technology in the construction of wells at PetroReconcavo. Today, we can say that we have the capacity to navigate horizontally in the reservoirs using our fleet of perforation probes, our directional perforation system, the LWD log well drilling, our cementation, and stimulation of the wells. With the internalization of our RSO team, Rig and Services Organization, the inaccessible costs of the oil operators in Brazil.

It’s a fact that production is not here yet, but these are important conquests that motivate us very much and make us determined to follow, trying to grow production and reduce the cost of development of our reserves. I would like to give the word to Rafael to continue the presentation, and I’ll come back at the end. Thank you, Firmo. Good morning, everyone. The total CapEx of the quarter was $569 million, out of which $260 million are regarding the acquisition of midstream assets in Rio Grande do Norte that I will, in a simple manner from now on, call UPGN Guamaré. It is important to say that at the end of October, we have the payment of about $36 million that have to do with the remaining installment of acquisition.

There is only the payment of the final 5%, and then we are going to have the real estate transfer over the next few months. With regard to the reserve development CapEx, we have finished the quarter with an investment of $287 million, an amount similar to the second quarter of 2025, however, with greater execution of workover projects and facilities and a reduction in perforation. Accelerating the rhythm of execution of the workovers in the quarter, this resulted in an increase of 20% in this line of comparison per quarter. We have significantly reduced perforation, as anticipated, and then the period of projects and the finalization of the injector well, T015, and the perforation of the first horizontal well in Sabiá, and the conclusion of the tests and completion of the three deep wells.

Considering the recent worsening in the scenario of the oil price curves, the company has started a movement to re-adequate the execution of the rhythm of the investments. We already have some measures in this direction, and we have three workover probes that we are giving back to third parties, and we have reduced the number of probes in the operation from 17 at the end of September to 14 at the end of October. We estimate a reduced, approximate reduction of 15% in the CapEx for reserve development for the last quarter compared to the two previous ones. In the third quarter of 2025, we have registered net revenues of $786 million, a reduction of 2% versus the previous quarter.

This is mainly because of the macroeconomic scenario of devaluation of the dollar compared to the real, and a 4% increase in the average discount of oil, reflecting the contract renovation effects of Remanso that started in September. These effects were mitigated with a 2% increase in the average price of Brent in the quarter, and the revenues with the external services, perforation for third parties, and the selling of approximately 35,000 barrels of oil from the accumulated amount, together with Brava, as communicated before. With the objective of mitigating the risk of variations in the price of commodities, the company maintained part of its production protected through hedge operations associated to the Brent price.

According to the uncertainties and the worsening of the future price curve of oil, in October, we took the opportunity to hire new oil hedge instruments in the format of non-deliverable forward until the end of 2026. Summing up the hedge contracts of zero-cost collar that already exist, and looking at 2026, we have approximately 35% of the oil production protected by hedge instruments. In natural gas, 89% of the production has been hired with fixed price or minimum price clauses working as a natural hedge and guaranteeing predictability of the revenues of gas compared to the variations of Brent. Combining these protections, about 57% of the total production of the company has been protected against volatility in the future Brent prices. This quarter, the total costs and expenses the company has had increased 1% compared to the previous quarter.

With regard to the lifting cost or the extraction cost, we had a 5% increase in the comparison between quarters, reflecting greater expenses with the integral assets and repairing of the wells. In the cost per barrel, there was a 12% increase due to variation of the exchange rate and the reduction in the production of the comparison versus the second quarter, 2025. In the royalties, we observed a lowering of 12% compared to the previous quarter, reflecting the smaller average prices referring to gas, the exchange rate variation, and the reduction in the production of Chié.

Because there are different aliquots for each field, the midstream costs and the buying of gas have registered a reduction of 6% total, resulting in the reduction of the prices for the buying of gas from third parties, as well as the costs in the processing, the flowing, and transport because of smaller processed volumes. I’d like to highlight here that since October, the costs related to UPGN Guamaré have presented a great reduction with a change in the modality of the services provided up to now, and there’s a modality of sharing of costs from now on after the closing of the acquisition. Finally, the general and administrative expenses had a reduction of 14% compared to the previous quarter, reflecting less expenses with consulting companies and labor.

The EBITDA registered was $350 million, a reduction of 6% with regard to the previous quarter, with the result of the effects already mentioned before. This also impacted the EBITDA margin that was 44.5%. On the right, we have updated the analysis of costs and margin of the company per barrel based on the results from the third quarter of 2025. The average revenue per barrel was $58.38 US dollars, considering our mix of products, which is approximately 60% of oil and 40% of natural gas. The difference between the average revenues per barrel and the average price of Brent during the period reflects the differences in value between oil and gas, as well as the discounts in the selling of oil.

In terms of costs calculated based on the total volume produced in the quarter, we have come to a break-even cash cost of approximately $29.1 per barrel, with the expectations of improving the reduction of costs in Guamaré. The margin per barrel was $29.3 per barrel of oil equivalent. In this quarter, we had an operational cash flow of $346 million with a positive impact because of the absence of payment of interest in the debentures during the period. The total CapEx was $569 million, where $260 million referred to the acquisition of UPGN Guamaré, and $309 million referred to the more traditional investments of the company that had a higher concentration with regard to the workovers over the quarter, as previously mentioned. Therefore, the generation of free cash of the third quarter, excluding the effects of acquisition of UPGN Guamaré, was approximately $38 million.

In the financial aspect, the highlight is with the third emission of debentures that I will talk about now in the next slide. To conclude my presentation, I’d like to highlight the two essential pillars of our financial strategy: the maintenance of a capital structure with low leverage and the continuous search for the reduction of our capital cost. Currently, our net debt is $1.5 billion, representing leverage of only 1x with regard to the EBITDA of the last 12 months. This result shows the robustness of our balance, providing resilience and flexibility to take advantage of future opportunities. In the month of July, we concluded the third emission of debentures in the amount of $500 million, mainly directed to the reinforcement of cash for investment and the acquisition of new assets, especially 50% from UPGN Guamaré.

This last amount presented a dollarized cost via swap of only 5.66% a year, positioning itself amongst the lowest in the sector and comparable to the companies with a significantly bigger size compared to ours. This fact reinforces the differentiated credibility of the company in the market, as well as the trust that our capacity for generation of future cash. As a consequence, we have been able to reduce the average debt cost that has remained consistent over the years. With this new emission, this new issuing, we have reached the same 6.5% a year level, a reference in the peers of the sector. Besides, the average deadline of the debt was moved about four years, and the first amortization, it will only be in 2028, which strengthens our financial flexibility and guarantees a solid, sound, efficient, and sustainable capital. Back to Firmo now. Thank you, Rafael.

This was also an important period with advances in governance and the initiatives regarding sustainability for the company. In partnership with CNI, a program that I was able to participate in the launch, it’s called Women in Oil and Gas, talking about technical training of women to act in the energy sector, and the objective of stimulating productive inclusion and to also have a greater female representativeness in the technical areas. The first group has 30 participants who have already started their activities, and this will be concluded in 2026. We also have the Viva Sabiá project in two new communities with the installation of 45 new bioagua or aqualuz systems, benefiting over 500 people directly and 2,900 in education and agroecological assistance actions.

In the pillar of governance, we have our ethical and conduct code, restating our commitment with the continuous evolution of the best practices and the ecosystem of integrity of PetroReconcavo. Thank you very much. I’m going to now ask Maria to coordinate our Q&A session. Thank you, Firmo. Thank you, Rafael. I’d like to say that the questions can be sent through the ICON P&R, and I’m going to select the questions so that we can start. The first question is from Monique from Itaú. About the recent learning that you had with the perforation of deep wells, what paths do you think are possible to improve the economic accumulation in these activities? Is there a solution with lower CapEx, and what are the possibilities in this opportunity? Good morning, Monique. Thank you.

Over here, maybe I have the opportunity of bringing the perspective with a little more detail, talking about the project that we had this year. This year was a year of planting the seeds, and it is also a year of very strong investment by the company in a project that is supposed to enable for the company known reserves that were developed, and they were bought. We have a potential. There is a horizon. Today in Brazil, in the condition of supply chain in Brazil, there is no capacity for it to be economically developed. In terms of PetroReconcavo, over several years, over the last five years, there is verticalization and integralization of technologies in the company, and this is possible to be done in Brazil at very similar costs, and especially in Canada and the US. This is our objective.

This is a year to test the first steps of this objective. Once you acquire this perforation capacity in the work that is highly specialized and the costs that are not possible to be developed here in Brazil, we gave the first step in this search. The first outcomes show that we are already at a level which is completely different from what PetroReconcavo has faced 10, 20 years ago, as I said before. Wells that were perforated months before, over here, they were perforated in five weeks, five and a half weeks. That is already a great advance. It is not enough yet for us to be able to have a robust development investment plan with a very short term over the next few months for these.

That what we did this year, what we did in terms of the subsurface and the quality of the hydrocarbons, the composition of the hydrocarbons, the pressure of the reservoirs, which is what we had from Pedro Braz, and also validating that we have a way to be able to find efficiency. The cost that is necessary to perforate and develop these fields in large scale, this is still not available, and it’s going to be developed from now on. This project is extremely important. It was one that we were aligned this year, and this is according to the long-term development process.

I’d say that over the next few years, I have seen that the drilling of the company, the drilling of the campaign the company has, will be adjusted to be able to adapt to this new reality so that we can use this in the deeper wells and also in the conventional reservoirs that we have. The horizontal drilling that we started in October and the deep wells, there is the function of enhancing what you’re asking for. There is a new investment level for us to be able to produce oil and gas at a much lower cost. It’s not only the cost we’re talking about, there’s also the fact that these reservoirs are reservoirs whose permeability and porosity are challenging. There’s technology, and that has to be developed and tested, but we’re bringing this to Brazil.

We’re bringing the state of the art in terms of technology for this to be used. This is also developed and implemented. It will be developed over the next few years. Definitely our campaign, they have invested a lot, and this was absolutely important for the campaign over the next few months. You asked me about the break-even. I think it’s still too early to estimate costs. What we have to find is maximization in productivity of each well. At the same time, we mitigate and minimize the cost of production, not only production, but also perforation and completion of these wells. It’s an equation that is still being developed. Just like we are not going to continue this investment immediately, it needs to be developed, and the business case, let’s say, will be developed over the next few months in the company.

Okay, the next question is from Regis from XP Investimentos. The drilling campaign with good saturation of hydrocarbons, just like you mentioned, these new zones should not contribute in the short term in terms of production. Is there a sufficient pipeline to reverse the decline in production in these new zones without these new zones? That’s a great question. Thank you. Definitely. The proof of this is that we have maintained a stable production year on year. If you look at our production this year, it is slightly higher than the average production last year. It’s 2% above, but in the market, we had a better production.

This shows that what we’re doing is a balance between investing in what’s conventional and investing in what we’re calling the future in a way that is financially possible, that is financially correct for the company, obviously, but maintaining the balance of not investing and only placing the production of these new horizons as a solution for the company. The equation of generation of the value of the company is made up of two things, and we were successful this year. We were able to have, we were very daring in the investment of this horizon in the future, but maintaining perforation and maintaining the drilling, sorry, and we were able to maintain a stable production and even with growth potential.

The wells that were perforated, there are two that we have a production for, and of course, it’s below the reservoirs and what they are able to produce, but they are in production, and this is what PetroReconcavo is definitely feeding, and this is what is being used. The horizon is much bigger considered to what we were able to do with these drills this year, with this drilling this year with these wells. Our work, the work of the whole team over here, is to exactly balance this equation of not losing the long-term view and not allowing this to be used. They built something that was absolutely unique in Brazil, and it’s the capacity of developing these reserves and inaccessible to any other operator here in the Brazilian market. The next question is from Gustavo from BTG Pactual.

Can you give us more details about the drilling of the first horizontal well? If it was in line with the company’s expectations, what are the lessons learned, and what can we say for the future? Thank you, Gustavo. It’s a little early to talk about this well now. What I can say is that what I defined is that we were able to not only build the geomechanics inside what we developed, we were also able to work on services in the industry. This was a technology for many years that was absolutely exclusive, and only the large services companies had, and we were able to internalize it, and we used it in our reservoir. That is something extraordinary in a company from Brazil. It’s not only a horizontal well, but we also put this well inside the reservoir, the horizontal reservoir.

That’s an extraordinary technique for us. We also have this built until the end. The interesting part is the technology. All of this technology is absolutely proven in the world. This was not horizontal. Just like the horizontal well, it depends a lot on how that reservoir, as we adapt the technology to that reservoir. In the short and long term, we also can see how this horizontal well will be stimulated in the best way and how it will be able to produce more. This is what we’re going to see over the next few months. In terms of stability, technological stability, and the use of what we did, I would say that this is typical successful work. 80% of the time was spent on planning and 20% in the execution.

The execution came out exactly the way we planned it. It was very successful. I do not like to talk about the success of wells until we have months of production and everything, but definitely success. It was built. It was success in terms of the development with this kind of technology at a lower cost. This is the equation that has to be validated over the next few months. The next question is from Mileni from JP Morgan. The water injection project, how is that going to affect the fourth quarter of production? Good morning, Mileni. It is a development. The injection of water, one of the most difficult things for you to foresee in the short term is how this is going to work in each of its wells.

It is absolutely well known, the modeling in the short and the medium and long term. We know about the projection, but we have no doubt that that injection, that that system that was designed is going to bring value, and we’re going to be able to maximize the recovery of this reservoir. However, it is very difficult to talk about how long it takes, what is going to happen, how much depressurization happens, what kind, and if it’s going to be harmonious, if it’s going to be different according to the reservoir. Our expectations are that obviously we’re going to be able to stabilize the decline of Chié, and we are not going to observe over the next few months any kind of negative surprise. This is within our expectations. There is the expectation that the production will go up again.

I can say if it’s going to happen this month, I can’t tell you if it’s going to be this month or next month, but based on the experience of how this sort of project works with water injection, the expectations are that stability will come back and there will be positive outcomes in the short term. We don’t know. That’s not the view of this project. The view is that in 2025, we started a process that did not exist in the field as soon as it began to be produced. The last decade in the production of Chié, we didn’t have this sort of production. We installed it now, and then it’s going to be a time of turnaround in the production with water injection. For the first time in the history, we’re going to repressurize.

The repressurization will bring a lot of value in the medium and long term. That is the design of Chié, and these are our expectations for Chié. The next question, I am going to change the topic. We are going to talk about the lifting cost now. The question is from Thasso. Even though the production, could you give more details about the costs from now on? The inflation of highest cost could take the lifting cost structurally to amounts that are above the historic amount in a scenario with lower production. I am going to ask Jaffeo to answer this just to bring his perspective for you to give more details. Our lifting cost and several trimesters. Then we are going to look at the stable cost over the last four quarters. Of course, in this quarter, there was a dollar variation and the lifting cost.

Today, and there’s a cost inflation. We made a strategic decision last year to improve resilience in the company, and we left the lifting cost. We invest a little more in the lifting cost, and this continues. If it has not been scaled up or it has not gone up and it varies, it’s within our expectations. Of course, with the dollar 4% in terms of sale, 4% above in sales, we had an increase of 12%. If we look at the cost of the company in BRL, it is very stable. Our expectations, especially for next year, it is a refocus in terms of lifting costs so that there will be a descending cost in BRL for the lifting costs. All of our investment that is necessary. Definitely, we’re going to start operating this next year with the expectations.

Our expectations are that in the first phase that we consider to be correct in terms of a moment of resilience, and it has been well complied with. Now, over the next quarters, we’re going to have an adjustment of the lifting cost that will be seasonal for us to continue to reduce the lifting cost over the next year. Just adding on to what the other companies in the sector, in the short term, this is, and then this is the absolute cost in BRL. There was a stability of 5% plus the investments that Firmo talked about, which are about integrity and resilience, and also for the company and considering the context of Brazil as a whole.

We also have a seasonal peak in terms of the repairing of the wells because it is a rainy period in Bahia, so the frequency is higher, and this has been increasing during the period, and this allowed us to do a lot of backlog. Looking at the fourth quarter, we have seen in October and now in November, the trend going down. Talking about midstream, there was a reduction of cost because of the UPGN Guamaré, and we see the fourth quarter as a lowered cost expectation. The next question from Gabriel from Citi, considering the scenario of lower oil prices, I’d like to get an update from you. How much more efficiency does the company have to make the lower prices lower? What is going to happen in 2026?

Should we have a reduction, how can that impact production? Definitely, 2025 was a year of using a lot of investment. The balance that I talked about in the beginning between the Capex that is necessary to continue developing the conventional outcomes of the company, the conventional reserves of the company, and the Capex to develop the future of the company, different future in terms of reserves for the company. My expectation is that everything this year, there was within the time of 18 months, and there is a lot of work that we have over the next 18 months and being able to invest in a deeper manner in terms of this kind of solution. It is a year of going back to the basics in terms of Capex, going back to the Capex that we were doing the years before.

There is the expectation of increase, but next year will be conservative, and it will be smaller than what we have had this year. This was a year of investment. It was a year of setting priorities in terms of the strategy. Next year, I do not see the need to do it because it is very relevant for us to develop these projects with all of the data as we have today, in terms of cost and reservoirs and needs and technology and development for these projects. My expectations, of course, I do not know. We are still discussing this project. We are talking to the board now, and we are going to have greater understanding of the commitments the company has for next year and when the budget is approved and everything.

I can say clearly that this is Capex, and this is where we’re going to develop the maturities of the project this year. There’s less Capex for next year. In a smaller Capex in terms of the quarter, this quarter now, the fourth quarter, we basically eliminated the drilling, and we have gone down in terms of drilling from one quarter to the next, and the last one will be better. The next question is from Georgie from Scotiabank. The company gave back three third-party probes. What is the limit for this program to accelerate? Is there a sensitivity curve? You’re monitoring the market well. I’m only going to correct something that, in my perspective, we did not return three probes because of the debenture.

For us, one of the strategies that we have was that PetroReconcavo will be able to do it. In terms of verticalization, it should develop better in the hiring of probes to be able to have the variability capacity inside its needs. Today, we were able to develop the capacity to do more execution compared to last year. We wanted to, and we reached an execution standard that we would like to reach this year. However, this level, as Jaffeo said, is seasonal. There is a backlog of activities, and sometimes I have a backlog of repairing of the wells to do. There is a certain modulation that I have to do to look at my probe capacity. That is what we do. We hired these external probes, and then we returned them as the projects were distributed, let’s say it like that.

In terms of reduction of probes, especially now in this quarter, it has to do with what Jaffeo said. There is a reduction in our portfolio of services. It has to do with the restructuring of the method that is going to be used in workover and especially analyzing our portfolio. PetroReconcavo today, this is in the beginning of last year. We had situations where we were not able to do everything that needed to be done in terms of workover and services. The cost was very high for our delivery of production. We have stabilized this very well, and this variation is going to continue existing. I believe in this strategy of having your own probes, but also hiring those from third parties as the projects vary. Okay, I am going to bring two questions from Rodrigo and Gustavo Goldman.

We have to think about how the discount of Potiguar can improve with the partnership with Gislube, and what volume of the basin do you think you can redirect to new customers, and what is the improvement expected in terms of prices versus the contract. I’m going to take advantage of the fact that João is listening to us. The strategy of enabling Potiguar was definitely a victory that we are very happy about. I remember that I came to the company, and all of our fields in Potiguar were closed. For the first time in the history of the company, what we needed was the secondary strategy, and it would have to produce resilience for the company. It was a very well-done job.

There was a lot of creativity, and João’s team, together with the whole company, tried to find alternatives, innovation and alternatives in logistics, for us to be able to say, "Okay, today we have a project that is going to lead us to have a lot more resilience." In the short term, our focus was to have alternatives for the flow and not only improving things as soon as we finished or started the production. I believe in the project that was developed by João and Laís, and we have the possibility of increasing the efficiency and all of the aspects when we’re talking about international logistics as well as modal logistics, for us to be able to improve our condition for discounts. This is not the focus for 2026. It’s not the focus of the end of the operation.

It’s more resilience in production. João, your comments? Good morning. Yeah, exactly, Friedman. I think the main point here. So we’re trying to find operational resilience, and the relation with Gislube is logistics. So we’re going to have a tanking system that is being built by the company, and it’s up to date and in line with what we signed recently. It will be able to move this to the terminal until the pier of liquids in Pecém. We also have the freedom to sell this oil and with cabotage or something local or for us to be able to export this so that we can commercialize this. We believe in the quality of PetroReconcavo and in Rio Grande do Norte, we have the best quality that can be found. The great proportion of our production is 37.

The other part, which is from Alagamar and Baru Sabiá, is a little heavier, but there is very little sulfur in the oil. We have oil that is similar to the oil from Tupi in the pre-salt area that is sold at very positive prices. In terms of volume, we have the option of taking a piece of the production and up to 100% of PetroReconcavo as we have this available. What we are doing for 2026 and the beginning of 2027 is to create this option and start taking everything, all the flow, the production flow. It is to open up these new markets and to have the logistic flows and optimize them and maximize the value of this excellent quality oil that we produce.

I think that although I’m not going to add anything to that, if you have any additional questions about it, I think it cut off a little bit from your internet, right? I think you understood. Next question. It’s to give a little more detail about the first month in terms of working together in UPGN Guamaré in terms of reduction of costs. Two-thirds, and this validates our expectations, right? I think both companies are very happy with what we designed strategically, and it’s bringing together these two companies. They are able to not only coordinate production better, but also reduce costs. We saw in the first month, the cost of execution of Guamaré suffered good interventions in terms of the people who are trying to reduce the cost. It’s very early to say.

The first weeks have already shown that we had a theory that was validated in the first month, which was the two companies together, both teams working, and they will have to optimize this very well and bring back both companies working together. In the first few weeks, I can say that these discussions brought solutions, good solutions, but this is only the beginning. We still have a lot to go through in terms of engineering, in terms of new processes, optimization of processes. There’s still a lot to be done. There’s a great capacity to capture synergy over the next few months. The first month was very positive, and it has already shown that our design was right. Okay. To conclude, I have received several questions, but I’m going to read the question from Victor Alvos, which is about dividends.

The perspective of distributing dividends, is that part of what you’re going to do in the Congress? The policy of dividends, is that going to be reviewed so that there’s greater predictability? For example, periodic quarterly announcements, even if that’s the minimum required by law. I’m going to start, and then I will hand it over to you. In terms of philosophical structure and strategy, we have shared with you our discussions with the board, which is a perennial process where we always discuss with the board the generation of cash until that moment, the perspectives for the future cash flow, and the different alternatives that the company has. Our duty as the board, as the management, is always to bring to the board these views, and this will help us define where it exists.

Definitely, this choice in the last quarter was of investing in the seeds of the future of the company and doing the allocation of capital. This is what we discussed in terms of the development of the reserve. As I said, my expectation is that this was an investment, and you have the use of CapEx, which is smaller over the next year. This brings the possibility of generating cash that can be applied in M&A. It can be replicated in buybacks or in new acquisitions, mainly in terms of articles or in the payment of dividends. This is our policy. I had said before, and I think we have maintained this decision of flexibility of use of capital, and this is one of the great winning strategies from now on.

I really do not see a lot of opening for prescriptive policy of the future in the payment of dividends. What I can tell the market is that I can be very prescriptive in the process. This is the process that we implemented, and I continue to believe that the flexibility, especially with the market noise, that a possible problem can occur in the future. This is very good because of everything that we always talk about in terms of the capital structure and the execution capacity. You explained the allocation of capital process very well. This is what we do. I can talk a little bit more about the taxing of dividends. We have a lot of the market with us following all of this. It is a company that has a profit reserve that is quite significant.

There is this possibility of eventually choosing to accelerate this payment to avoid taxing. We are also monitoring closely with our legal department. We are trying to understand what alternatives we have. The process has been approved by the Senate this week, and there are technical details that still have to be cleared up on how this would work, declaration of dividends, and how you make these payments, and in an SA company like ours, what’s going to happen. We are going to continue analyzing this until the end of the year. We are going to discuss if it’s the case of accelerating some sort of distribution because of this eventual taxing that seems to—it seems it’s going to be bigger for next year for some investors. It changes more for individuals and external investors.

Because of the time, we’re going to close now the Q&A, and I’d like to thank you for the questions. Some of the questions were not answered here, but the RI team is available to help them later on. Thank you very much. Thank you for the questions, and see you next time. Thank you.

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