Petro Rio SA

BOVESPA:PRIO3

Earnings Call Transcript

[Jose Costa, executive]

Good day, everyone. Welcome to Prio's Fourth Quarter 2024 Video Conference Call. I am Jose Gustavo, IR Manager, and will be a host in this event. [Operator Instructions]. The translation presentation is available on our Investor Relations website. The presentation and comments on the results will be presented by our CEO, Roberto Monteiro; our CFO, Milton Rangel; and our COO Francisco Francilmar. After the presentation, they will be available during the Q&A. [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 therefore, change. It should not be considered facts or be useful to basis for financial projections beyond the plans expressed by the company.

I'll turn the floor to Roberto Monteiro, our CEO.

[Roberto Monteiro, executive]

Good afternoon, and welcome to Prio's Fourth Quarter 2024 Earnings Results Call. In this earnings call, we are going to focus a little on the quarter, the fourth quarter of 2024 and also on the full year results. It was a challenging year. 2024 was a year of a lot of adjustment at Prio, but it was also a year of some significant achievements. We'll go through them, and we're going to list them one by one.

I'll start by talking about production, which was perhaps our biggest challenge. because as regards to production specifically, we had a lot of challenges related to the operating efficiency of Albacora field throughout the year. And also still talking about production, we had a significant delay with regard to the environmental licensing of a very important project for the company, which is the Wahoo project. This is a project that will add 40,000 barrels of oil to the company, so close to a 40% increase organic growth, a project that is already ready to be implemented, but which, unfortunately, we were unable to start implementing last year due to the environmental licensing. So this was the main focus of Prio's work throughout the year. And therefore, it was quite challenging.

In addition to this Wahoo issue, which was put on hold, so to speak, by IBAMA, we also had some TBMT wells, which we did not receive authorization to work on. They failed over the course of last year. We didn't receive authorization to do the repair work. So it also came under this same story of IBAMA, environmental licensing and so on. Things are getting better. We got the license to start drilling in the Wahoo field now in February. So things are turning around. But unfortunately, the year of 2024 fell short of our expectations, largely because of these issues. But we've had some positive achievements this year. We've had some very interesting things.

The first was Peregrino field, of which we acquired a 40% stake in December. We acquired the stake that belonged to a Chinese company called Sinochem. They carried out a sales process. We managed to buy 40% of this field. And today, we are partners in the Peregrino field, which produces close to 100,000 barrels daily and is operated by Equinor. We have 40% of that. So in December, we added 40,000 barrels of oil to our production.

We also had a favorable decision for Prio regarding the Wahoo project. We had a little more than a 60% working interest in that field, and there was an arbitration going on between a partner and Prio. This arbitration was exactly over a percentage of 30% or so of the field, and we had a decision that was favorable for Prio. So when this project starts production, the entire reserve, the entire production will be consolidated for Prio. So this was an interesting decision, an interesting verdict.

In addition, we repurchased 160 million shares over the course of the year. We published our annual sustainability report. We ran the third edition of Reação Offshore a program to recruit technicians for our offshore platforms.

And the financial result itself, we posted revenues of $2 billion. We had an EBITDA of $1.6 billion and a net income of $1.7 billion. As regards to net income, there was an extraordinary gain of net income, which was the transfer of our operations to Dommo. And when we made this transfer to Dommo, we activated tax credits that were lying dormant. So with that, we had a gain of almost $1 billion adjusted from this activation of tax credits.

One last point that was also very interesting during the year is that the two deals, the Peregrino deal plus the Wahoo project, these two deals meant that we managed even in this more difficult year to increase our reserves by almost 30%. We increased the reserves by 28% more or less, and Francilmar will explain a little later about this.

I'm going to move on to the next slide to show you some other important indicators throughout the year. So the first one here is the lifting cost. If we look at 2024, it was a worse year than 2023 in terms of the lifting cost. And if we look at the fourth quarter, it was the worst quarter of the year.

So to talk a little bit about the lifting cost over the course of the year, there are two things that played a role. We had a natural decline in production, and we were not able to have any project to offset that. The lifting cost is a function of our operating cost, which remains practically fixed divided by production. So the higher production, the lower the lifting cost. Since we were not able to put any new project in place last year, and we also had difficulty even putting some existing wells back into production due to IBAMA's licensing processes and so on, our production base decreased with the same cost. And this led our lifting cost to increase due to this production base, which is a little smaller and also considering that our costs are fairly fixed.

And when we look at the last quarter, the Peregrino field specifically began to be consolidated in December. And Peregrino field today operates at a lifting cost well above our average. Today, I would say that Prio's average is below $10 for sure. I would say $9, between $8 and $9. But Peregrino field operates at numbers closer to $17, $18 per barrel. So when Peregrino is consolidated in our Prio cost base, it brings the company as a whole to a lifting cost close to $11, $12 a barrel. We see in the fourth quarter of 2024, $11.1 per barrel. So that's the explanation for the lifting cost. Of course, now that the Wahoo project is coming on stream this year, -- we've already started the drilling campaign. And we think there is a high probability that we will achieve first oil still this year, 2025. And of course, this lifting cost will fall because then we'll be producing much more oil with the same cost base. We've already talked about production.

Cash, even after the deal with Sinochem, we still have a very solid cash position, almost $650 million of cash, $646 million of cash, and that's after the payment of the 40% stake of Peregrino. And our indebtedness has risen from almost $1 billion to $2.5 billion, and this is exactly -- let's put it this way. The increase in this leverage is exactly the purchase of the field. So today, we are at 1.2x net debt over EBITDA ratio. Of course, this field has already been integrated, bringing EBITDA as well, adding EBITDA to the company. But even so, our indicator has gone to 1.2x. This is totally controlled, totally healthy, nothing more to say here. And this is a natural process. Always after an M&A deal, we have an increase in our net debt, and then it gradually reduces.

When we look at the first quarter of 2023, we acquired Albacora, and it was the same. We reached 1.1x. And by the end of 2024, we were down to 2.5. Now we've acquired Peregrino, the ratio went up to 1.2x, and this business will start to deleverage. It's the normal cycle, the natural cycle that happens with the purchase of all assets very well.

Now I'll stop here. I'll hand over to Francilmar. He's going to talk a little about our operations. Milton will talk about the financials, and I'll come back at the end to talk about sustainability and the next steps. Thank you very much, Francilmar.

[Francilmar Fernandes, executive]

Hello, everyone. Thank you, Roberto. We are going to continue here on Slide #5 in the asset performance section with an update of the quarter ending 2024. It was a quarter in which we saw the natural decline of the fields. We hadn't yet managed to get back into the pace of drilling, executing the company's development and production. So we saw production decline at all the fields and some operating efficiency problems that ended up having a slight impact on production in most of the assets. And then we see Peregrino field coming on stream. We'll give you more detail on that.

Let's move on to talk about the lifting cost here on Slide #6. We'll go into a little more color in detail. This is a very traditional slide. It's a mantra we have at the company. We focus every day on improving the lifting cost. after a long time in which we posted falling lifting costs, managing to control the lifting costs very well. Now we're seeing more of an upward pressure. And this is very much due to the limitation we had in executing our development plan of not being able to drill. We haven't drilled any new wells since September 2023. So we've been dealing with the decline of the fields, some more pronounced than others and some inflation costs, but that is much more controlled. However, what really weighs here is the decline of the field, a lower production.

And when one considers the relationship between production and cost, we have a higher lifting cost. And then there's also a big influence here of Peregrino field, which was added at the end of the year, big influence, but limited to the period of time it was considered due to the specific characteristics of the field, although it is very similar to Polvo and TBMT fields in terms of water depth and production system. And due to the characteristics of the oil, which is heavier with a lower API, it has a slightly higher production cost, which ends up pulling our lifting cost up a little. But even so, it's a focus of ours, and there's a lot of space, a lot of room for us to work in the coming months, the next few quarters ahead so that we can get this lifting cost back down.

Moving on to Slide 7. At Frade Field, this was a quarter of recovery. We still have some production issues here and there in the case of ODP3. We have requests to resume workovers in these wells and try to recover them. But while the environmental approval and licensing process is ongoing, we have been facing the decline of the field, a decline in production. It's a natural characteristic of the reservoir, which was a little more pronounced than we expected. These are natural characteristics that they happen.

From the point of view of operating efficiency, we saw a recovery in Q4 quarter-on-quarter with efficiency returning to a level that we work to have in this asset in Frade reaching almost 100%. So this is good. After the blow we took in the third quarter with that integrity problem, the field was shut down for a few days. So the field did well. And then the future plan for the field is to continue investing a lot in maintenance and improving efficiency of the field, investing in integrity, safety to prepare for developing Wahoo and then to continue with a project to work on increasing production at Frade.

Moving on to the next slide, Slide #8. We are going to give you an update on TBMT and Polvo Fields, the South cluster. Our efficiency was greatly affected by the production stoppage of TBMT wells, which are high production wells. So we had electric submersible pumps, ESPs failing in the middle of the year between the end of the second quarter and beginning of the third quarter with the pumps failing almost sequentially. TBMT 8 failed followed by TBMT 4 and then 10. We were able in August or so to resume the workover. We received approval towards the end of August. So we managed to recover well, but not the other two and have production, but with an impact on both production and diesel consumption because we lost the associated gas production, and this ends up affecting everything. When we see the 75% at the end of the year, it is the potential production of the whole field minus these two wells, which are out versus the actual production. So the actual impact of the field is this.

From the point of view of the production unit, both the platform and the FPSO are performing very well. Costs are under control with the exception of the increase in diesel price. So it's a momentary effect caused only by the failure of these wells. The plan is for us to receive the go-ahead from the agency. As we got the Wahoo license, IBAMA is now working on evaluating this request of ours. So we expect to receive a green light very soon to proceed with these workovers and return to production and then give the asset a little break. We can't set a date, but we hope that in the coming months, we'll be working on the workovers of these wells.

Moving on to Slide 9, Albacora Leste field. Let me give you a bit more of an update on this field. Q3 and Q4 were the most difficult quarters at the field. We've been working hard to recover the large pieces of equipment that have degraded in recent years, especially in the power generation system, the turbines that generate energy there as well as the compression system, which suffered a lot. We had already been carrying out major repairs to machinery on land. We had taken some equipment out to perform a general overhaul in onshore workshops by their manufacturers or companies with proven training, training and capabilities. And then while these machines were coming back, the machines that were at the field that have been working for a long time, started to fail as they were degrading and that ended up taking a strong bite of Q3 and Q4. And even now, we've been grappling with this. We solved the power generation system. We replaced two turbines at the end of the year -- at the beginning of the year. Then in January, we finished that.

Today, we have balanced the turbines issue. We have three systems. So there is a good redundancy that manages to give us reliability and resistance and bring us closer to our goal, what we currently seek, which is stability, which will give us the efficiency that we pursue. But we also suffered in addition to the turbines at the end of the year with the compression system. compressors stopped, broke, came back, and this is still a work in progress. We haven't managed to resolve it 100%. We're in the final stages. I believe that in the next few months, we'll be able to put a structure in place with a minimum of support to resolve it definitely. We are waiting a few more months because the other compressor is undergoing a retrofit of the new ones that we bought, two compressors won't arrive until year-end. So the goal here is to raise efficiency to a better level with the existing compression system and turbines.

The company has made a huge effort, putting a lot of focus, people and energy into recovering this asset, and we are going to keep it at that. I believe that 2025 is a turning point for Albacora Leste field. The whole company is well focused and dedicated to this.

Moving on to Slide 10. Let's talk a little about the company's youngest asset. Peregrino. We acquired a 40% working interest of Peregrino field at the end of last year. And this asset is now -- is not operated by Prio, but it is here. It's not operated by us, but it has a lot of synergies, a lot of similarities with assets we already have. So we started a very strong process of integration and information sharing and information exchange seeking improvement for both sites. This is indeed a win-win game.

We entered the partnership to add to the operators' efforts. It's been a good start. We have high expectations of being able to capture a lot of synergies to help a lot, to learn a lot, and that's how we are going to continue. There's still a year of a major drilling campaign on platform C into the newest region of development of the field. There's a lot of maintenance work being done to improve the integrity of the assets, both the FPSO and one platform. And this is work already underway. We are coming in to learn and help the asset a lot. So that's it. There's a lot coming up for Peregrino field.

Moving on, Slide 11 is an update on Wahoo Field. I think this is the big update we have this quarter. Together with Peregrino, we have an important step, a very important milestone for the company. Finally, at the end of February, we received the drilling license. So finally, we are making progress here, and we'll be updating the slide. We actually started drilling this week on March 12, we have the spud date, which is the actual startup drilling. And then we'll follow this drilling schedule. We'll drill four producer wells and two injector wells. These producer wells are pre-salt wells with a long time frame. We'll see how the schedule turns out, but it's something between 70 and 90 days. We are aiming for 80, 80 days for the completion of each well. It will take us the whole year plus a bit to do all this.

In parallel to this, we are working very hard to adapt FPSO Frade to receive the oil coming in, but the entire control system, the entire production and measurement and control systems are being done now, and we will be 100% ready in the next few months.

The next steps include the environmental licensing process for the installation system, the entire subsea system, the equipment flow, they will be installed as planned. All the resources are in place, just waiting for the installation license to be issued. All the materials are practically ready. We are just holding back to align it with the timetable. But there are no bottlenecks.

As for the boats, we have them both for the flexible lines, and they are already available even though we are using them for other things. And in terms of the rigid pipeline lines, we are in a good position to organize ourselves. Today, we are able to activate the rigid pipeline vessels from different schedule windows while we wait for the license. We will certainly then get a firm date. But today, I will say that the entire effort of the company is geared towards being able to deliver that this year so that we can deliver this dream oil, Wahoo's first oil.

Here on Slide 12, I am going to give you an update on the reserve certification. We released the update on our reserve certification. I'm just going to give you a very quick update. In 2024, we used up production. Production was slightly lower than what we had projected for the year once you put together Albacora Leste and TBMT. So for Frade, despite the lower production, there was a lower production. There was a natural decline in the field, lower than anticipated. That's why there was a drop of -- I mean, in fact, 8 million barrels less Therefore, we lost 4 million barrels in Frade. But on the other hand, we already have all the studies that are being carried out in Frade that is an infill well is approved or scheduled to be drilled. In other words, a well inside the reservoir that is already known, which adds a little over 12 million barrels.

There are several other studies, but at least one of them is already going on, all as a result of the work carried out in the development phases of Frade. This will bring new regions to fruition in what has already been approved. I mean we are seeing 1P alone. And before we had a vision of 1P and 1C for Frade because there was Wahoo, and now we are back to the traditional way of looking at it. The 1Cs that are mapped out are still 1Cs where -- which is Maracanã, 1C is contingent. Contingent means that we're waiting for some studies, some data for us to prove it and to put it into production. So both ODP6 and Maracanã 1, we think that everything is mapped out. And -- but at Frade, the delta added 8.8%. So Frade was up a bit.

The Wahoo part is basically the result we had in the process with IBV. So the reserve part has now been added to 100% of Wahoo, representing an increase of 42.9%, almost 43%. On the Polvo and TBMT side, we have a small increase here. I mean, the part of the well that we had program has been maintained of one producing well in the year. There is a small delta here resulting from the cost issue at the end of the lifespan, but it's basically zero. At Albacora Leste, we had a positive effect despite the lower efficiency, I mean, the reservoirs, when we look at the reservoirs, they had a positive performance. The decline was lower than expected. So when we look at the overall extension, there was a slight increase here in the field's total reserves.

And Peregrino, here, we had the -- that was the entry point at the end of this whole process. Therefore, this led us to a reserve of 687 million, almost 688 million barrels. And this results from our hard work, but there is a lot more being done and life goes on like this.

Thank you all very much. And now I will hand it over to Milton. All the best.

[Milton Rangel, executive]

Thank you, Francilmar. Good afternoon, everyone. Continuing with Slide #13 of our presentation. Here, we will talk about Prio's financial performance.

In terms of performance in the fourth quarter of '24, revenue amounted to $536 million, which refers to the sale of just over 7.1 million barrels in the quarter at a Brent reference price of $75.13, and a total FOB revenue, which we also highlight of $512 million. This takes into account the FOB equivalent price of almost $72, meaning $71.6. So with this, we also see the discount calculated in this fourth quarter, just over $3 per barrel, which is the result of our trading strategy. Also, our cost of goods sold stood at $81 million.

And as mentioned in previous slides, this reflects a slightly higher lifting cost due to the entry of the Peregrino field, which has started to be accounted for at the beginning of December. The closing of this transaction was on December 5. So this result already contemplates the results of Peregrino as of December.

If we were to exclude the effect of Peregrino, the lifting cost would have been very much in line with the company's last quarter. But as Peregrino brings the lifting cost in the order of $17 to $18 per barrel, previous consolidated lifting ends up going up a little as we saw in previous slides. As a result, our EBITDA amounted to just over $300 million in the quarter with a margin of 62%. And adjusted EBITDA after excluding noncash and nonrecurring events came to $322 million with a margin of 66%. It's worth noting that there was a loss of margin compared to the fourth quarter of '23 from 73% to 66%, mainly attributed to the entry of Peregrino, which is a slightly lower margin and also due to a fall in Brent once we compare the two periods, we see Brent at over $77 a barrel in 2023 in the fourth quarter compared to a slightly weaker Brent in the fourth quarter of '24.

Another relevant point is, I mean, when we look at the income tax and social contribution line, basically, the impact here of deferred tax, we successfully concluded a corporate restructuring in the company. And with that, we were able to recognize the tax credits from our subsidiaries.

Taking into account that we now have combined all the concessions under the company's main CNPJ or corporate tax number. It's an accounting impact, an impact without a cash effect in the immediate quarter, but nonetheless, it reinforces a relevant value. We can see that a positive $900 million in the income tax line. And with that, we come to a net income for the period of $1.74 billion in the quarter and $1.7 billion in the year-to-date. Total revenue for the year stood at USD 2.4 billion. FOB revenue was $2.3 billion. EBITDA was $1.675 billion and adjusted EBITDA stood at $1.662 billion with an average margin for the year of 73%.

Now moving on to Slide 14. Let's summarize Prio's funding situation. Starting with this central slide on the amortization schedule, the larger chart. We see in the lighter green color, first, an almost derisory maturity. In 2025, we don't have any relevant maturities. But in 2026 and '27, we have $800 million and $470 million in 2027 of bilateral debt, which we raised mainly throughout 2024 to fund the acquisition of Peregrino. These are bilateral instruments of 2 to 3 years maturity. That's why they will be due in '26 and '27. And we will accumulate the $800 million in 2026 with another $600 million from our international bond issued in 2021. It's a 5-year bond. Therefore, will mature in June of 2026.

Despite the company's total peace of mind in terms of cash generation and cash position to meet these maturities, it's natural for us to be attentive to the market that we are attentive to the possibility of doing some kind of liability management to move some of these maturities further into the long term as should be our goal. So in terms of duration and the average cost of debt, the duration of the company of our financial liabilities has fallen since the second quarter of 2024, third and fourth quarters, we raised these bilateral debts, for Peregrino funding. And therefore, by bringing in shorter-term debt is just natural that this duration will fall. The average cost of debt was 6.65% per year in dollar terms, which is a very reasonable level and competitive for a company of our size and with the payment terms that we have.

So moving on to the next slide, Slide 15. Here, we look at the variation of the company's net debt during the quarter. Well, we started the fourth quarter with $789 million of net debt. Our EBITDA stood at $322 million. And we see in this big column of $1.729 billion referring to the closing of Peregrino. Therefore, in fact, it's important to remember that we had already paid for the Peregrino signing in the previous quarter in September when we signed the deal. And this amount takes into account receivables and payables and price adjustments, which brings us to this $1.729 billion. So it's a relevant figure for the formation of net debt, which went up a lot as a result of that.

CapEx of $134 million and working capital impact of $184 million. That means that we continue to invest in the integrity of Albacora Leste. We continue to incur expenses related to the Wahoo campaign, and we also had some maintenance expenses in Tubarão cluster. And so that adds up to $134 million.

We made some share buybacks throughout the quarter, adding up to $122 million, a financial result of $34 million and taxes of $24 million, which brings us to this net debt of $2.326 billion.

Now moving to Slide #16. Now here, we will briefly talk about leverage. Well, we follow the net debt to adjusted EBITDA indicator very closely. Over the last few quarters, we've noticed a deleveraging of the company, very much as a result of the strong cash generation that we've been posting quarter after quarter. In this very specific case of the fourth quarter, there was an increase in leverage, which is natural because this is a result of the acquisition of 40% of Peregrino. We use a significant portion of our cash. And with that, net debt went up, and we went from 0.5x in the third quarter to 1.2x in the fourth quarter of 2024. As a reminder, our covenant is 2.5x. Therefore, we are very comfortable. We still have an unleveraged company with low leverage, very much under control despite the significant acquisition. We remain prepared, therefore, to reinforce the company's capital structure, if necessary, or to carry out some kind of liability management, while at the same time, we will continue to generate cash from our operations.

And with that, I will now hand the floor over to Roberto, who will give us more details about ESG, and he will talk about the company's next steps.

[Roberto Monteiro, executive]

Thank you very much. Thank you, Milton. Well, I'm coming back here to talk about the environment and society, and then we will talk a little bit about our next steps, our focus for the coming months.

I think that the first point to highlight here is that just as our lifting costs have risen, our emissions have also risen over the course of 2024. We went to 25 kilos of CO2 per barrel equivalent, which is an increase of 17% vis-a-vis the previous year. And here it's the same story that I told you before about lifting cost. You have a fixed asset base. And here, we have a fixed asset base that produces a certain amount of carbon. And we had decrease in production. Therefore, when you divide this asset base by a lower production level, you will get an increase in this indicator. And that's exactly what happened.

And what's behind this? The delay in implementing Wahoo the delay in Tubarão Martelo wells, which -- I mean, we need approval for TBMT 10 and 4. We need IBAMA's approval to be able to change the pumps. The pumps have failed, which is a normal thing. So we need IBAMA's approval. I mean these are also the biggest gas producers in the field, not only it produces more oil, but it also produces gas and reduces the amount of carbon because we would no longer burn diesel, but instead, we will burn gas to generate electricity for the field. So these are the main points regarding relative emissions. It's clear that now by implementing the Wahoo project, this number will drop significantly because once again, it's the same asset base. You will increase production, so emissions will drop.

With regard to safety, which is our mantra, I mean, it has been our mantra and so on, we -- we promoted the Internal Accident Prevention Week. And in short, we also did a lot of work on the regulatory and safety side throughout the fourth quarter of last year.

In terms of health and well-being, we continue moving forward with all of our quality of life programs. We also promoted a race, the Night Run, the XTerra in Búzios and other activities. As for sponsorships, we have our I Love Prio brand. We've done some new initiatives, including natal solidário or Solidarity Christmas, the musical Sound of Music and Tom Jobim and so on. So the company continues on this path of giving back to society and being as responsible as possible in terms of our emissions.

Now moving to the next slide, I'm going to talk about our next steps. I mean, in fact, this is the focus we are going to have. It doesn't mean that we are only going to look at this, but this is our main focus for the next coming months. Of course, I mean, the first and last ones, I always keep the same, which is health and safety and prospecting of new M&A opportunities. So these are always the same.

And then the three in the middle, meaning that we are now going to focus very strongly on the environmental installation license for the Wahoo project. Wahoo, in Wahoo, we have two licenses, the drilling license, which we got on February 28 and also the installation of the line, whereas one refers to making the wells or drilling the wells and the other is connecting these wells to the Frade FPSO. So this second one, which is the connection is still missing. And so are the approvals to be able to do the workover of TBMT 10 and 4 that we've talked about a lot in terms of lifting costs, carbon footprint and so on.

So IBAMA, a lot of work, implementation of the Wahoo project. We now started the implementation finally. The rig has started drilling. I mean, it's already drilling. Early this week, we had the spud. The spud is the time, meaning it's the moment when the rig starts drilling, and this has already happened early this week. We are now drilling.

Another major focus will be the operating efficiency of Albacora Leste. In December, we replaced two turbines on the FPSO. We had planned to replace a compressor in January, and this dragged on throughout January and February. And it's only now in March that we are managing to solve the compressor issue. Therefore, Albacora operation remains impacted by this delay. I think that with this new compressor, things will start to improve. But in short, I mean, the focus is very much on the operating efficiency of Albacora Leste.

Therefore, these are the main points that we are going to be working on during the next few months. And with that, I would like to open up for questions.

Thank you very much. And I would like also to thank our employees, our partners, our investors who have always supported us, especially this past year, which was a more difficult year for the company. Thank you very much.

[Operator]

Thank you for joining us in this fourth quarter earnings conference call. We will now start the question-and-answer session. Our first question is from Luiz Carvalho with BTG.

[Luiz Carvalho, analyst]

Good afternoon, everyone. Thank you for joining us three questions, perhaps a little bit more technical and the third one more related to M&A. The first one, perhaps to Francilmar. When we look at the reserves report, one thing that drew our attention is CapEx per well at Frade, which increased almost 70%. Could you explain it increased from 33% to 55%. So it's 65%, 66% increase. Could you give us more detail regarding the reasons leading to this increase of CapEx per well at Frade?

Secondly, Roberto, you talked about a higher lifting cost of Peregrino. If you could give us an update of the process to repair the line. When do you expect the OpEx to fall to a more, say, normalized level?

And my third question is kind of inevitable. I have to ask, given some news published this week. What can you comment regarding the additional stake of Peregrino? I know that you might be limited in your answer, but since there was some news, I feel kind of obliged to ask you to say something a little bit about it.

[Unknown Executive]

Thank you, Luiz. Well, I'd like to apologize. We never like to have a late earnings call, let alone on a Friday. But we had a lot of trips for the whole team, and that was the only time that we could get. So I apologize for a later call. All right. I answer all three questions.

The first one about the cost per well. Actually, we drilled wells at Frade at $30 million in the past. With the NORBE rig, so the first wells about $50 million, $55 million. I think the first one cost even more close to $60 million. Our guidance was $70 million. We invested $60 million. And with time, we came to the cheapest well drilled at $30 million. And this was a discussion I had with Francilmar. Are we going to consider $30 million? Or will we leave the expected price at $50 million because it was the midpoint.

And I'm answering your question because this was a discussion that we had. It was not such a technical discussion. we were thinking what is the forecast that we can give the market, something that we can be sure to deliver rather than just the best well that we drilled. And something else. This applies to the infill of the 570. If over there, there will be some piling, but these wells will cost a little more. And that is why we maintained $50 million or $55 million, okay?

And as regards Peregrino, do you want to speak about Peregrino?

[Unknown Executive]

Well, let me handle that. For Peregrino, Equinor's expectation of resuming gas in the first half of next year. That's the conversation we are having with Equinor. What we are doing in terms of helping is try to see whether we can help in the project. As you know, we are a very verticalized company. We have rigs. We have support vessels. We have light construction vessel, GENESIS and so on and so forth. So perhaps we can use some of our equipment and a little bit of the material because we have a lot of material in the inventory. We have a strategic inventory of the company that allows us to be very agile in our development. Perhaps we could use a little bit of our strategic inventory to have that connection beforehand, bring it forward.

I don't know whether this is going to play out. We suggested this to Equinor. This is being evaluated. There are a lot of technical discussions going on. So the discussion is between first half of next year or by year-end, by the end of this year, if we can work together with Equinor, supplying our equipment, providing some kind of service and so on and so forth. But we are talking about first half of next year or perhaps try to bring it forward to the end of 2025.

The latest news about Peregrino, a number of people raised that hypothesis of Equinor selling a stake, so on and so forth. But our point is, if a deal possibility arises, what we've had that in the past, that PetroRio, we heard that PetroRio was buying and we said that, that was not true. But here, the news published is kind of based on the other news that they published. So there's nothing really in the radar. But of course, we are interested. We've always said we are interested. If Equinor eventually wants to sell a working interest of the asset, we'll be fully interested in considering the possibility because I think that this is a very synergic business, totally complementary to our shallow water operation.

[Operator]

Thank you, Luiz. Next question from Gabriel Barra with Citi.

[Gabriel Coelho Barra, analyst]

I have two questions. The first is a question that we kind of feel like we have to do regarding the license for the tieback. The latest update we had was that you had submitted a document to IBAMA. There were 100 points to be discussed. And I would like to hear from you about this discussion regarding the tieback. When do you expect this to come through? Is there a time line for Prio to receive the license? And possible and probable scenarios? Which would be plan B, plan C? I mean, whatever you can share with us is helpful regarding the possible scenarios.

Second question is about the buyback. Regarding capital allocation, the company has been performing a lot of buybacks before the result. There was some deceleration in the fourth quarter of the company, but I would like to hear a bit about the strategy after the earnings. Should we expect a share buyback coming strong given the price of the share, if there are no M&A deals on the table, is this how you intend to use the company's cash?

[Roberto Monteiro, executive]

Well, Gabriel, I will speak about the license and Francilmar will speak about the options we have regarding installation.

We submitted to IBAMA. Actually, IBAMA suggested and asked for a number of adjustments in our EIA document, and we submitted the EIA document in January to IBAMA, and we are waiting for their feedback on this. There were more than 100 points they wanted clarification for. We're expecting a feedback from them in March. I'm not sure they're going to accept everything immediately. There might be some more interaction with the agency. And if we hear from them in March, perhaps we can respond quickly still in March or perhaps in April.

I talked about having the production license or the installation license in April. But I think that we have everything on the table by midyear. And with this, we'll still get first oil this year. I'll let Francilmar speak about the situation of the vessels.

[Francilmar Fernandes, executive]

The EIA document is the environmental impact study. Well, Gabriel, Roberto spoke a little bit about the scenario, and we are getting prepared. We are trying to have everything prepared so that we can just kick the ball to the goal. We have the flexible line vessels being used in other installations. So we have two fronts, rigid line laying vessels and flexible line laying vessels. So we can use some of them in August and the rest a little bit further out. So there's an initial phase before launching the rigid pipes. We -- or the rigid lines, we launched the flexible lines. So we can kind of play around with this, doing it a little earlier or a little later to accommodate the need. If necessary, we'll compress the pipe lane as much as possible so that we can have first oil by year-end.

The new part is the vessels. We have two lines to be laid, line to be laid by Sapura and one line to be laid by the Amazon vessel by McDermott. The Amazon vessel now was shown to be available in the second half of the year. In Sapura, has some work in the middle of the second half. So we might inverse that to do the first line with McDermott and the second pipe line lane with Sapura. So regarding the shortage of vessels, it seems that we were able to find a good solution. We currently have two vessels hired for pipeline. And I don't think that the company will be sitting still waiting for a boat.

The big point is we are not going to be waiting for a time window to lay the pipes and the lines. This is something great we achieved in the last 3 months regarding the assets. So once we get the license, just like we started drilling straight away, we'll start the installation straightaway. So for the installation license, LI, we will have more visibility when we get a return response from IBAMA, which is expected still in March. We expect some response from them in March regarding the approval. Actually, some feedback regarding the EIA, the environmental impact study.

And regarding share buyback, Gabriel, our expectation is to go back to repurchasing shares, of course, respecting the restrictions we have in terms of inside information and so on and so forth. We always have to keep an eye on that.

But our idea is to continue the buyback, particularly considering the current prices. There is very little left for program to be completed, just $70 million. So a little less now with the share price. So yes, as soon as we can, we'll resume the buyback. And then we'll go to the Board. So the Board will decide what to do with the 10% and perhaps open a new buyback program. So business as usual, nothing has changed. We always have to pay attention to the legal aspects regarding a share buyback.

[Operator]

Our next question comes from Caio Ribeiro with Bank of America.

[Caio Ribeiro, analyst]

First of all, my question relates to individual licenses that I think you still need to obtain for the other fields except Wahoo. And the alternative would be to ask for a global license, which would allow the company to do some workovers and some other interventions. I mean, what would be your preferred option once you consider both alternatives? And whether you already made a decision about what would be the preferred alternative?

And my second question, referring to capital allocation. Once an acquisition is not possible, I mean, in terms of the remaining stake from Equinor for Peregrino this year, would the company try to look at other options in the Gulf of Mexico as you discussed in the past? Or would you consider other alternatives?

[Unknown Executive]

Well, in terms of the environmental license. Our -- I mean, of course, our desire would be to start with the drilling at Albacora as soon as possible. However, IBAMA calls the global licensing something like geographic area, which would encompass a license for the entire campus bases. This is a very lengthy process. And we know that we are aware of that in our conversation with IBAMA today, it's the following. If this process takes too long. And this debate is occurring as we speak with IBAMA. If this process takes longer than the rig time I have, I mean, the compromised rig, which is today Wahoo and soon TBMT, we are talking about a little over 1.5 years in terms of the rig. If the process takes longer than 1.5 years, what we are trying to do with IBAMA, of course, I mean, that also takes the fact that there has to be goodwill on their side. We will try to put more projects between Wahoo and Albacora or the daily license.

And what are these projects? The main one would be Frade. Today, for technical reasons at IBAMA, Frade licensing has been -- its majority approved with [ Yahimá ], which is all of the environmental licenses and impact licenses. It will be just an extension. If you look at our reserve certification, we already included a few items in that reserve certification because of that.

So we have two 570 wells. One is 1P, the other is 1C. We have [indiscernible], we have Maracanã. So if we obtain an extension of the Frade license, we would have at least 1 year of rigs in the Frade field. I mean, we wouldn't be doing Albacora yet, but the rig would be operational, and we would be putting oil in the system. And this is quite important. We want to do Albacora, but we also have to understand what are the limitations in terms of the licensing aspect. So this is Plan A and Plan B. The ideal, the perfect world would be Albacora. But if we cannot go straight Albacora, our conversation now with [indiscernible] is to -- is around putting Frade in the intermediary time frame.

And then other things that we don't need licenses, [indiscernible] license, the [ pre-salt ] in the Albacora field that could be connected with no need of environmental license because it could be drilled by Petrobras. So these are things that we could put along the way. We are looking at it. So most likely, this could be a solution.

Now in regards to capital allocation, our focus still remains in Brazil. Gulf of Mexico, I'm not saying that this is a long shot. But in previous calls, I think I talked -- I mean, I talked more about it. I mean we are curious about the Gulf of Mexico. But in order for us to go to the Gulf of Mexico, a series of things would have to happen. First of all, we have to look at a project that can give us adequate returns, et cetera. So maybe in the past, I talked more about it than I should. So I would like to take that from the agenda right now. We remain focused in Brazil. I think that Gulf of Mexico is a possibility for the future.

But it doesn't mean that, okay, if we don't buy anything now, by the end of the year, we will be at the Gulf of Mexico. No. I think we have to look at it very carefully, and it has to be based on data. I was also referring to [indiscernible], which is the new basin or the new field that was discovered. Chevron just put a field there for their own production, and it is moving quite well and it's progressing well. So the majors can start migrating. This will certainly take time until the majors migrate completely. I mean there is also the fact that they need to do capital allocation, and this could open new possibilities.

I mean we are not saying, okay, if things don't work in Brazil, we'll go to Gulf of Mexico. No. We will continue to buy shares if nothing happens in Brazil. And depending on the amount of the money generated, maybe we can think in terms of dividends or not. We are not desperate to grow because the important is not to produce more, but it's to create more value. And that's why I want to demystify the thing about Gulf of Mexico. So let's focus on business opportunities, et cetera.

[Operator]

Our next question is from Tasso Vasconcellos with UBS.

[Tasso Vasconcellos, analyst]

I have two questions. My first question, Roberto, maybe it's just a follow-up on the capital allocation issue. The company reached a level that maybe would make more sense for you to access a new asset level. In terms of M&A like you did with Peregrino that maybe 4 or 5 years ago, this wouldn't be feasible given the number that you would have to pay for it. But now a larger company with more assets also bring about higher complexities. I'm not referring to a loss of focus, but now you have a greater challenge because you're focusing on many things.

In this regard, how would you balance this equation? How big or -- I mean, excluding the Gulf of Mexico, what are you looking at? And what is your view going forward? And how can you conciliate your production? I mean, how can you move the needle of a company that produces 160,000 barrels a day? And how can you combine that with the focus in the assets you already have in your portfolio?

And my second question is how do you see the oil market on the sales side after this greater volatility that we've experienced in the past few months?

[Unknown Executive]

Well, thank you. These are very relevant questions. The first question relates to something very strategic. We talk a lot about it. Nelson is not here, but he is an individual that usually talks about that.

I mean, what does -- what would make sense for Prio today? Today, I can even tell you there's a very, very low likelihood that we would participate in any kind of consolidation in the Brazilian market with small field. Onshore has always been a big know for us. It continues to be a big no. But this is exactly the point. I mean, we would deviate the focus to something where you would allocate a little bit of capital.

But on the other hand, you would have a huge headache. Therefore, today, I mean, with the due respect to the capital or to money, I think we have to look at assets at around $2 billion or more. $1.5 billion, $2 billion, something in that vicinity. It could be even higher. But in the past, we were looking at assets at around $500,000 or $300,000 or $1 million. But unfortunately, even though these assets still exist in Brazil, these assets will not give us the necessary returns.

To operate an FPSO in Peregrino, it's the same as operating an FPSO at TBMT. You increase the company's complexity, but your return I mean, TBMT produces 15,000. Therefore, obviously, you have to balance that, and we keep that in mind all the time. Therefore, our mindset is that we still have some large things in Brazil that we like, and we think that maybe in the future, we could move on with that. But if that doesn't happen, we are not that desperate to just to add a lot of small operations that would allow us to lose focus and lose efficiency.

Albacora, it's complicated enough. It's complicated enough. We are finally able to reverse the situation, but there has not been an easy journey, the one of Albacora last. And that's why I say that we have to be very mindful of operating efficiency, our capacity to operate because we are very verticalized. This is not an operation that you could do 10 things at the same time. You have to do one, solve it and then if you can, you do another one.

So this is a very valid point and very important, but we will look for big things. If there are no big things, we will probably do some share buyback or distribute dividends or maybe wait for some big opportunities in the market because they will come up at a given time.

The second question, oh, you talked about the oil market. Well, we see all of the volatility. I mean, volatility we see today does not correspond to the physical market. In the fourth quarter, we had 3.17 of discount. I mean Bruno is in charge of the trading part of the company. I think physical market was 3.17. This month is very strong again in the physical market. And what we see in terms of this volatility has to do with the tariffs, U.S. recession, et cetera. I mean, the financial market, not physical. But the physical remains very strong and robust.

And it's even funny because you see that there is a mismatch between these two things. On the one hand, you have the rhetoric of what is being said. I mean there are rumors that there might be a recession in the U.S., so oil prices tend to go down. But in practical terms, when you look at it, the discounts are good.

[Operator]

Next question from Bruno Montanari with Morgan Stanley.

[Bruno Montanari, analyst]

Still on the M&A topic, I just want to understand whether these big opportunities are net. Are we talking about one big opportunity or several opportunities? And is this something you wish for? Or do you think that the sellers have a game for you to join in 2025? I imagine that you are not going to take too long to make a decision regarding capital allocation.

And my second question, you have been spoken about a potential upside of gas. So I'd like to understand if we can quantify what we can expect in terms of volume, how you intend to monetize that? What kind of return the company will have, so we can do the math here.

[Unknown Executive]

I will let Bruno speak about Wahoo gas. We are trading our gas. So there is already some gain there. But I'll let Bruno explain that. Wahoo gas.

[Bruno Menezes, executive]

And as regards M&A activities, no M&A deal we've finished today, except for Albacora was a public process. All of them were provoked, including the Sinochem one. They were all provoked by us. Sinochem decided to have a public process, an open process in the end, but we had been talking with Sinochem for a long time, many years. So it's not like the asset is up for sale. No. And normally, good assets are never for sale. So it was always our work of approaching the current operator of the asset and tell them, look, we can do this, we can do that, and this could be a good plan for you, the operator, for your -- to monetize and for us to buy. under those conditions. I mean, no assets are available for sale for everyone to consider. We approach the sellers. It's not going to be different this time.

If we speak about a $2 billion opportunity in Brazil, more than $2 billion, there are many opportunities? Yes. If we exclude Petrobras from the equation, there's not a lot. So we have to do hard work. We have to put in some legwork. And we have to meet with a lot of people hold a lot of meetings with the major players outside Brazil. And little by little, we unlock possibilities. So nothing changes here. The strategy is exactly the same.

Do we have like 10 assets available for sale? Well, they are out there. So we choose one. We say this is the time to focus on A, and we focus on A, we pursue A. This is what we did with Peregrino and TBMT and Frade. Same thing, Wahoo. Albacora was the only one which was a process everyone knew about and participated. And before we hear about the Wahoo Gas.

As regards M&A deals, I forgot what I was going to say.

[Bruno Montanari, analyst]

Sorry for that. So let's hear about Wahoo Gas, and I'll ask a follow-up.

[Unknown Executive]

All right, Bruno. In the first quarter, we were selling the whole gas to Petrobras in an agreement we had with them. We started accessing the flow -- the outflow system of the Campos Basin. We have a processing station at [indiscernible]. So as of January, we have a surplus 200,000 to 250,000 cubic meters daily, and we can access better prices after processing. When Wahoo comes online, that's a pre-salt reservoir with a lot of gas. That's going to get to 800,000 to 1 million cubic meters of gas. And we'll use the same system we use for what we currently have for this additional gas. So we can increase revenue. and reduce a little bit of the cost because we won't need to buy gas from Petrobras. So that's kind of how it will play out. We'll start in the first quarter, and then we'll multiply it by 4 quarters when we have Wahoo.

[Bruno Montanari, analyst]

And what I was going to ask about M&A regarding these potential new opportunities. Would you consider using the same path you used for Peregrino, in other words, having a stake and not having operatorship being a member of the consortium or perhaps they are not convinced that Prio is the best partner, so you'll buy a stake and then show your worth. What are you thinking?

[Unknown Executive]

Well, Bruno, we haven't got a firm yes nor a firm no for that. It's all about will this stake improve the opportunities for us better than being the operator? If the answer is yes, that's something to consider. If it's about buying a non-op field just because we are not the operators, we wouldn't go ahead with it because we like to operate. We like to be the operators. That's where our synergies come from. In the specific case of Sinochem, we acquired a non-op portion or stake because we envisioned a good commercial synergy. We were able to reduce the discount of $16 per barrel to $10.5. And in this quarter, for Q2, it's -- the discount is 9.8. So we found operational and commercial synergy.

Bruno is exploring this, is running this, and it's doing quite well. And we also have a preemptive right if Equinor wants to sell the asset. These two elements together combined led to a yes on our part. You will remember that we were partner some time ago of Manati Field. We had a 10% working interest of Manati. We didn't have any expectation of becoming operators of Manati Field. It actually didn't really fit our business line, some gas in the North, et cetera, though the field was interesting. But we had acquired it at a low price. So we divested. So I gave you two extreme examples. We don't have any firm yes nor a firm no. We'll look into possibilities. If there is a clear value generation possibility, it's a yes.

[Operator]

Next question from Regis Cardoso with XP.

[Regis Cardoso, analyst]

I have follow-up questions and one different question. The different question is about the production curve this year. I understand there is a maintenance stoppage expected now in March. So that's something we should know about.

And the other is a follow-up question when we were discussing the size of the assets. Would it make sense for you to think about recycling capital from lower clusters, TBMT, for example?

And another follow-up question of prior topics when you were discussing the size of the buyback program. Do you expect a maximum volume of money that you can make? And I was going to ask you to repeat the explanation about the Wahoo line because we went through that very fast. And I would like to get more detail. If I ask too many questions, I can repeat them.

[Unknown Executive]

I'll speak about Wahoo. Production curve for the year. To give you more detail regarding the schedule. We have one scheduled maintenance at Frade scheduled for March, and it was postponed for April. That should stop for 12 days. It's primarily for some works to couple Wahoo. So that's what we are planning. And more towards the middle of the year, there will be a quick stoppage at Albacora Leste, 3 to 4 days. Regarding production, that's it. The rest is about efficiency. We try to see the scheduled and unscheduled downtime, and we plan for that.

To speak about production lines at Wahoo, the initial project are two lines. One primary pipe, a secondary one, we divide the project. We had contracted a first boat earlier for first oil and the second line was not necessary immediately. So it was left for later. Then we contracted another boat when there was a delay. Now there was another delay. And now we have two lines with two boats available. Two pipe laying projects. And so we have to match one boat comes first and then the other boat. There is also an extension window, which is interesting.

So this is just to give you some visibility and comfort regarding the availability of materials and pipeline boats and vessels. Well, the vessels were always a bottleneck for Wahoo and the Wahoo project. What is important that you understand is that the bottleneck for the second half, we were kind of envisioning a big bottleneck because Sapura, the pipeline support vessel will be working Trinidad and Tobago. So we thought there might be a bottleneck. But Francisco and the team were able to bring back Amazon vessel for the second half. So where Sapura was shown to be unfeasible for us because they have another work outside of Brazil, Amazon came along. So we're ready to start at any time in the second half. From now to any time in the second half, we are prepared to start pipeline. And this was the reason why we spoke a little about the Wahoo vessels.

[Regis Cardoso, analyst]

May I ask a follow-up on that? I don't know whether this is related to $20 million additional CapEx in the certification. Did you use that? And the timing, Francilmar, I think, mentioned December. I'd like to understand is this as early as possible, the earliest possible.

[Unknown Executive]

It will really depend on the license. I don't want to be very precise regarding setting a date because here's what I can say. We have everything to have first oil still this year. But I don't want to set a date, a precise date. I can promise you the day we get the environmental license, soon after we get the environmental license, we will communicate the schedule, and we'll say we'll have first oil on such a date. We'll tell you which fortnight of which month we'll have first oil, okay? But for now, let's leave it at that.

As for the $20 million, no, the $20 million had nothing to do with the vessel. Actually, a little bit with the vessel, but a little bit with everything. the rig was stopped, we had a lot of to and fro in the project. So the project ended up absorbing a little bit more cost, $850 million. We revised it, revisited for $850 million. When we get the environmental license, we'll tell you it is exactly $850 million, $860 million, $830 million. We'll give you a number.

There will be no material change in the numbers, nothing of the sort, but we will communicate this to you when we get the license. We'll see. First oil is expected for such a date and total CapEx will have been so many millions. But there are still a lot of things happening, and that brings a little bit of uncertainty. We revisited the number to $850 million. But this is just to have a number that matches the reality more, but there's nothing 100% finished or 100% set, the project still has a certain level of uncertainty.

[Regis Cardoso, analyst]

I don't want to take much of your time. The rest was about capital recycling and maximum size of the buyback.

[Unknown Executive]

Regarding capital recycling, Regis, no. In the case of Manati, it made sense because we had nothing else to do with Manati. In the case of Polvo and TBMT, which would be the natural candidate for recycling, it is not really the case because our business strategy, if we are successful with Peregrino, and we said that we are interested in buying the rest. It's nothing happening today. But if the moment comes, the opportunity arises to become an operator of Peregrino it would be interesting to have Polvo and to TBMT because it is the full shallow water cluster that we need to get part of the synergy. We cannot do away with that potential synergy. And this is why capital recycling through this wouldn't make sense.

Now for the other fields, when we like an asset, we like to have a lot of that asset. We might sell a piece of Frade, a stake of Albacora, possibly, but it's not what we're thinking. The operating effort is all ours. Maintenance, maintenance plan, everything is up to us. It's all our effort. So we should concentrate. That's always our strategy.

And as for the size of buyback, we do buyback according to the regulation of up to 10% of our capital. So the whole buyback program that we approved will be 10% of capital. The question is how much time it will take to buy 10% of the capital. If we do it in 1 month, it might be too much, but buying 10% of capital along 8 months, 12 months, I don't see any problem in executing that. But every time we do it, we have to submit it to the Board of Directors. We have to come up with a new plan.

[Operator]

Our next question comes from Vicente Falanga with Bradesco.

[Vicente Falanga Neto, analyst]

I also have two questions. Chevron lost their license to export oil to Venezuela, heavy oil. API of 10 to 13 degrees. And they are around the range of your fields. And even they said that they would replace that oil from Brazil oil, the Middle East and Gulf of Mexico. Do you see that as a commercial opportunity for you or maybe depending on the sale price?

And my second question is, I would like to address Francilmar. You said that you think about participating at some other prospects of current fields, maybe doing some more seismics. I would like to check with Francilmar, whether you already have any target that excites you.

[Unknown Executive]

Vicente, well, yes, we see Well, we are interested and this is gaining momentum. And as Roberto was saying, in the second quarter, we will have Peregrino's oil, and we already improved our discount by almost $1. Therefore, we see that happening. And I think that's it. I mean, in a simplified way, we see that happening. This already had an impact on Peregrino in the second quarter and the demand for Brazil is quite strong because Brazil is in a very good position because we have oil in the Atlantic.

And in terms of oil, we are not restricted in terms of oil sales to the world. Therefore, our oil has high demand, and we are working with our teams to minimize or maximize the discount. And the Venezuelan oil would traditionally go to the Gulf of Mexico. I mean, heavy oil close to the Gulf of Mexico is Brazil. I mean, there is no other alternative. So we are seeing a little bit of that already happening. I mean, I would say this is a normal process in the company.

As the company grows, we have a stronger balance sheet, and then we pursued the strategy to expand our search area. We are already doing some exploitation in our own block looking for other opportunities. I mean we increased production, reserves, et cetera. The next step would be almost like increasing the area of research. And everything that is in the vicinity of the objective today is to increase the number of people putting oil and working harder. I don't have any name for you.

All I can say is that we are working diligently to see if we find something interesting when it comes to exploiting areas to maximize our operation. I mean, we would increase production using the same assets, same infrastructure and life goes on.

What I said is that as the years come by, we will gradually increase or grow. We started with the first tieback, I mean, 10 kilometers and then we grew to 30 kilometers. It's almost like I would get a compass, and I will cover an area of 30 kilometers. And that's what the Americans do. We are not reinventing the wheel. We are just implementing what it's already there.

[Operator]

Our next question from Bruno Amorim from Goldman.

[Bruno Amorim, analyst]

I have a very quick follow-up in regards to the decline of the assets that you've been operating for quite some time. At some point, at the end of '23, you reached 100,000 barrels a day with some volatility, the company is running close to 75,000. So there was a decline of about 25% in 1.5 years. I mean, so this would be like on an annual basis, 15%. So I think this is pretty much in line with what you expected, around 10%. A good part of this performance may be attributed to the lack of licenses. Can you please elaborate on that? Do you think that you could attribute this delta to lack of license or the asset is a bit more difficult to operate when compared to what you expected originally? Maybe you can let us -- you can give us an idea of the underlying trend from now on.

[Unknown Executive]

Bruno, we have to make a distinction. Last year's delta included the failure of TBMT 10, 4 and DPD 3. And this about 100,000 barrels. Out of this number, 7,000 barrels, I mean, stopped because of a lack of license. It's not a natural decline. And there is another issue in Albacora, it depends pretty much. If you look at the average of 1 year versus the other year, it may not hold to be true. But if you look at the last quarter of 2023 vis-a-vis 2024, Albacora's operating efficiency was 10 basis points higher. We had 75 efficiency points in the last quarter of '23, and the average was 75% in 2024.

I mean, if you draw the average for the year in this should be equivalent to 2,500 barrels a day. And the actual difference here is Frade. In Frade, we expected a decline -- a decline of X with a certain decline coming from the new wells. And these new wells, in fact, the two new wells drilled in 2024 had a higher decline when compared to our expectation. And this is what led us to that loss of 4 million barrels in terms of the reserve certification.

Today, this reserve curve, when you look at it, I mean, Frade, PDP of Frade already takes into account this new interpretation of the wells and of that decline. And so that's what happened. I believe that the best way, instead of saying there was a drop of X percent year-on-year, I mean today, the best information we have best view we have of our production is what is posted is in is what is posted in our reserve certification. You have PDP. PDP is what is in production, what has been drilled and is already in production, and you have some new CapEx. You have TBMT that we think it will be resumed. I mean it's just a matter of when. I mean, if you agree with us that it will be resumed in the date that appears in the certification of not. But on top of that PDP, you already see a base, which is our best estimate regarding the existing assets, the way they are producing and they are installed. Our exit of this year should be around 110,000 barrels a day.

You should remember that we produced 115,000 in January, minus 108,000, mostly because of Albacora and there is Peregrino [indiscernible] that they tested in February, polymer that I don't know if our production, I mean, should be running around 115,000. I think that we will have TBMT and even then, it will go down to 110,000. And then we have Wahoo on top with 40,000. So our expectation is to come by year-end with 150,000. So this is pretty much it.

[Jose Costa, executive]

Well, with this question, we are closing the Q&A session. I'll turn the floor to Roberto for his final statements.

[Roberto Monteiro, executive]

Well, thank you, Jose. Thank you to all who remained with us in this earnings call referring to the year 2024. I would like to thank our employees. I would like to thank society as a whole. And I'd like to thank you, investors, who have always supported us along this journey. I'll see you soon for the first Q 2025.