PetroRio Acquires 80% Interest in Tubarao Martelo Field Offshore Brazil

Source: 2/3/2020, Location: South America

Petro Rio SA, following corporate governance and transparency best practices, informs its shareholders and the market in general that it has signed binding documents concerning (i) the acquisition of the OSX-3 vessel for US$ 140 million; and (ii) the farm-in of 80% in the Tubarao Martelo Field (“TBMT”), where the vessel is currently chartered.

The acquisition will allow for the tieback between TBMT and Polvo Field (“Polvo”), thus simplifying the production system and creating a private oilfield cluster, while enabling significant synergies, lifting cost reductions, and the extension of the useful life of both fields.

Once the tieback takes place, the Company estimates Polvo’s and TBMT’s combined Opex, which is currently over US$ 200 million per year (US$ 100 million for Polvo + US$ 100 million for TBMT), will be reduced to less than US$ 80 million per year, after having captured these synergies. Additionally, lifting cost could be reduced to under US$ 16 per barrel as result of air, sea, and land logistics synergies, and the decommissioning of the FPSO currently chartered to Polvo.

The cluster’s Opex reduction will allow for a longer-term operation, during which more oil can be recovered. PetroRio estimates the assets’ useful life could be extended to at least 2035 – a 10-year extension- and 40 million barrels added to Polvo’s current reserves.

The tieback between Polvo and TBMT has been thoroughly assessed by PetroRio’s technical and executive teams in the past years. Technologies developed for similar projects have been extensively employed by the industry in the past 5 years, primarily in the Gulf of Mexico and in the Noth Sea. The Company estimates the project’s Capex will range between US$ 50 to US$ 60 million, to be disbursed during the first half of 2021.

Leading up to the tieback’s completion, PetroRio will own rights to 80% of TBMT’s oil and will be responsible for 100% of the FPSO’s charter, the Field’s Opex, Capex and abandonment costs. During this phase, the Company will be reimbursed by Dommo at a monthly fee of US$ 840 thousand, equivalent to 20% of Dommo’s current Opex (ex-charter costs).

Once the tieback is completed (estimated for mid-2021), PetroRio will remain responsible for 100% of the abovementioned costs for the cluster, while Dommo will be relieved of the monthly fees. In this new phase, PetroRio will have the rights to 95% of the oil produced by the Cluster up to the first 30 million barrels produced post-tieback, and 96% thereafter.

From an environmental perspective, the captured synergies will reduce the combined emissions by approximately 35% after the tieback’s conclusion, as the result of a reduced number of operated assets in the cluster, therefore lowering the operations’ environmental impact.

PetroRio’s management believes that the 9km tieback between Polvo and TBMT will provide further opportunities to the teams working on the Company’s range of projects, realizing their potential and guiding their willingness to improve. These challenges are underlying components of the Company’s C.R.P.

management technology, which is responsible for its success to date, and consists of three core pillars: cost rationalization (C), meticulous reservoir management (R), and redevelopment plans aimed at increasing production (P) of its fields, thus increasing oil recovery rates and extending the useful life of the assets, while ensuring that safety and the environment remain as top priorities.

The acquisitions of the FPSO and TBMT Field are strongly aligned and fitted into the Company’s C.R.P. management technology and reinforce PetroRio's position as a pioneer and specialist in the acquisition and redevelopment of producing assets, seeking technical innovations and aiming to increase the recovery factor of its assets, increase margins, profitability and, consequently, extending the economic life of its operated assets.

TBMT Field reached its peak in 2014, producing 14,000 barrels of oil per day. Today, the asset produces approximately 5,800 bbl/d and is currently undergoing a Revitalization Campaign that, once concluded, could increase TBMT’s production to up to 10,000 bbl/d. From the start of production, Dommo has maintained high levels of operational efficiency, safety and resilience during periods of low Brent prices. The Company believes Dommo will be an important partner when the unified production system is installed and operated by PetroRio.

OSX-3, a world-class vessel, is a Floating, Production, Storage and Offloading (FPSO), built and delivered to the Tubarao Martelo Field in 2012. OSX-3 has state-of-the-art technology and has to this date presented safety and efficiency levels within PetroRio’s standards. The vessel has the capacity to process 100,000 barrels of oil per day and store 1.3 million barrels.

Prisma Capital had a key role in the acquisition of OSX-3 and acted as financial and business advisor throughout the process, which included a US$ 100 million loan.

Additionally, PetroRio informs that, in order to fulfil its short- and medium-term Capex schedule and maintain enough cash for new acquisitions, new funding possibilities are currently being considered and may opt to partially sell Company-held shares, in line with the Material Fact announced on November 6, 2017.

Updates on Polvo’s Drilling Campaign
PetroRio updates its shareholders regarding Polvo Field’s Phase 3 of its Revitalization Plan. The Company has confirmed, through the drilling of a pilot well, the presence of oil in two carbonate reservoirs (“Ipanema” and “Leblon” prospects) in the Quissama Formation, and a sandstone reservoir in the Emborê Formation of the Eocene Period.

Having observed that the permeability and area of the Ipanema carbonate reservoir satisfied initial estimates, the Company chose to complete the producing well in the Quissama Formation reservoir, which has a 76-meter vertical net pay and average porosity of 18%.

During the first days of production, the oil’s viscosity was higher than expected, and requires further laboratory analyses and tests with injection of chemical products in order to improve oilflow. Once results from tests provide more conclusive data, the Campaign’s initial results will be announced to the Market.

PetroRio also informs that once the aforementioned tests are concluded, the Company will decide on the completion of the second producing well, a sandstone in the Embore Formation, with 45-meter vertical net pay.

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Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

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