Earnings Release

Market Cap
R$ 211 Million
Closing Price
May 14, 2014
HRTP3 R$ 0.71
1Q14 Conference call
May 15, 2014
Webcast: www.hrt.com.br/ir
Portuguese
11 a.m. (BRA)
10 a.m. (NYC)
Tel: +55 (11) 3193 1001
+55 (11) 2820 4001
Password: HRT
English
10 a.m. (NYC)
11 a.m. (BRA)
Tel: +1 (786) 924 6977
Toll Free (USA): +1 (888) 700 0802
Password: HRT
The teleconference will be in
Portuguese, with simultaneous
translation into English
Investor Relations
Contacts
www.hrt.com.br/ir
[email protected]
+55 21 2105 9700
Eduardo Larangeira Jácome
Organizational Management and
Investor Relations Officer
Sandra Calcado
IR Manager
Tainah Costa
IR Senior Analyst
1Q14
Earnings
Release
May 14,2014
1Q14
Earnings
Release
HRT – 1ST QUARTER 2014
EARNINGS RESULTS
Rio de Janeiro, May 14, 2014 – HRT Participações em Petróleo S.A. – “HRT”, “HRTP” or “Company”
(BM&FBovespa: HRTP3 and TSX-V: HRP.V) announces its results for the first quarter of 2014 (“1T14”).
Unless otherwise indicated, the financial and operational information below is presented on a consolidated
basis and stated in thousands of Brazilian Reais (R$) according to the International Financial Reporting
Standards (IFRS), including our direct subsidiaries: HRT O&G Exploração e Produção de Petróleo Ltda.
(“HRT O&G”), Integrated Petroleum Expertise Company – Serviços em Petróleo Ltda. (“IPEX”), HRT Africa
Petróleo S.A. (“HRT Africa”), HRT Netherlands B.V. (“Netherlands”), and HRT America Inc. (“HRT
America”), and their respective subsidiaries and branches.
1Q14 HIGHLIGHTS AND SUBSEQUENT PERIOD
■
First operating results of HRT since its foundation, with revenue, cash, EBITDA and net profit
generation;
■ SSM
and ASM with the election of new Board of Directors and Fiscal Council members and
establishment of new strategic guidelines for the Company;
■Restructuring of the Company and new governance structure;
■ Start of HRT’s activities as the operator in the Polvo Field, sale of two crude oil shipments in Q1 with
forecast of a new shipment for Q2;
■ Signing of a final agreement with Rosneft for the assignment of a 6% participating interest in the
Solimões Blocks, the sale of 4 drilling rigs, its capacity to take over operations, with a 51%participating
interest, and the grant of a loan facility to cover HRT`s future investments in the Solimões consortium
of up to US$ 40 million by a 12-month period;
■ New boost for efforts to farm down HRT`s licenses in Namibia;
■ Early full payment of the loan with Credit Suisse, turning HRT debt-free; and
■ Publication of Reserve and Resource reports issued by DeGolyer & MacNaughton (“D&M”) for
Namibia, Solimões and Polvo, with effective date on 12/31/2013.
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1Q14
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MANAGEMENT REPORT
To the shareholders of HRT,
HRT ended the first quarter of 2014 with a cash position and liquidity of R$308, almost the double of the
figure posted at the close of the previous quarter. With the completion of the purchase of a 60%
participating interest in the Polvo Field, which ANP approved in December 2013, HRT became the
operator of the field as from January 2014, and in the first quarter of the year produced a total of 480
thousand barrels (net HRT). The Company concluded two crude oil offtakes during the quarter, with the
sale of approximately 630 thousand barrels of oil (net HRT). With these two sales, HRT can announce, for
the first time, net operating revenues of R$143 million, EBITDA of R$36 million, and net income of R$1.7
million, all consolidated results. These financial results justify in quantitative terms our confidence that we
would obtain positive results, since we started talking to BP at the beginning of 2012, when we decided to
consider this opportunity. The commercial transaction with BP involved a long and complex process, and
we had a long wait for ANP’s approval for the transfer of the operatorship. However, as mentioned before,
we were always optimistic due to the certainty that this deal was a business opportunity for the Company
to generate value for shareholders. Moreover, since January 2014, we have started to reap the rewards of
the hard work and study that the HRT team has put into closing this deal.
The first quarter of 2014 and the months coming after have seen major adjustments in the Company’s
management structure. New Officers have been appointed, who will contribute to the soundness of our
Organizational Management, Corporate Governance and Business Development. New members have been
elected to the Board of Directors and the Fiscal Council, and overall compensation for 2014 has been cut
to R$9.8 million, some 78% less than the aggregate amount approved by the shareholders for the previous
year.
We are convinced that, under the guidance of the Board of Directors and the current Executive Board, and
with the support of all our staff, we will continue the work of transforming HRT into a prominent Brazilian
producer of oil and gas, with continuous growth targets. In parallel, we continue to seek new opportunities
for investments in production assets, putting priority on finding new partners for our exploration assets.
The initiatives we introduced to cut costs and protect the Company’s cash led to a fall of approximately
83% in personnel expenses, 42% in recurring expenses, and we have not stopped there. Studies are
underway and measures are still to be taken to reduce even further the Company’s corporate costs and
the Polvo Field operating costs.
As of now, we are pleased to announce HRT’s first positive operating outcome from the oil production;
and we reiterate our commitment to go on developing HRT, strengthening its financial position, managing
properly its risks and constantly seeking new business opportunities.
Milton Romeu Franke
CEO of HRT
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1Q14
Earnings
Release
CORPORATE GOVERNANCE
At the beginning of the first quarter of 2014, the HRT’s management called a Special Shareholders’
Meeting (“SSM”) to fill rapidly the vacancies on the Fiscal Council and the Board of Directors.
Accordingly, in March 2014, the shareholders attending the SSM approved a reduction in the number of
members of the Board of Directors from eleven (11) to seven (7), the election of the Board members,
proposed by the HRT’s management, including the Chairman, Mr Helio Costa, and the Deputy Chairman,
Mr Vinicius Carrasco, as well as the election of new members of the Fiscal Council.
At a meeting held on March 27, 2014, the new Board of Directors appointed Mr Eduardo Larangeira
Jácome as the Organizational Management and Investor Relations Officer, and Mr José Carlos de Araújo
Pedrosa as the Chief Business Development Officer for the Company, to reinforce the Company`s
activities related to Organizational Management, Corporate Governance and Business Development.
On April 22, the Board of Directors decided to suppress the position of Chief Technical Officer of HRT. In
light of this resolution, the CEO of HRT, Milton Romeu Franke, accumulated the CTO functions and the
position of CEO of the subsidiary HRT O&G Exploração e Produção de Petróleo Ltda., with the supervision
of the Exploration and Production technical areas.
On April 30, 2014, the Company held its Annual Shareholders’ Meeting (“ASM”) and the following matters
on the agenda were approved by a majority of the shareholders in attendance:
i.
The Management accounts, Annual Management Report, Company Financial Statements and the
Opinion of the Independent Auditors for the fiscal year ended December 31, 2013;
ii.
The allocation of the loss for the fiscal year ended December 31, 2013, to the accumulated losses
account, as Management Proposal;
iii.
The establishment of the overall annual compensation of the Company’s senior managers at up to
R$9.8 million, to be distributed by the Board of Directors among all the members of the Company’s
management;
iv.
The installation of the Company’s Fiscal Council for the current fiscal year, to remain in operation
until the date of the Annual Shareholders’ Meeting to consider the accounts for the fiscal year ending
December 31, 2014;
v.
The election, with a term of office ending on the date of the Annual Shareholders’ Meeting to
consider the accounts for the fiscal year ending December 31, 2014, of Messrs Elias de Matos Brito,
Roberto Portella and Gilberto Braga, as sitting members of the Board of Directors, and Ronaldo dos
Santos Machado, Anderson dos Santos Amorim and Luiz Alberto Pereira de Matos as alternate members;
and
vi.
The establishment of the compensation of the Fiscal Council members at the minimum legal limit.
In 2014 to date, the Board of Directors and the Executive Board endeavored to seek solutions for issues
involving former members of the Fiscal Council and the Board of Directors of the Company, and
determined a set of agreements submitted to the necessary approvals at the Shareholders’ Meeting and
the Board of Directors’ Meeting. Thus, all lawsuits and arbitration proceedings have been or will be
suspended. HRT is thus free of conflicts in the scope of Corporate Governance, and we are confident that
the new Management, now that the newly elected members of the Board of Directors and the Fiscal
Council have taken office, is fully aligned with the aim of achieving all the targets set for this year and the
years to come.
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1Q14
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HRT GROUP COMPANIES – 1Q14 HIGHLIGHTS AND
SUBSEQUENT EVENTS
HRT OIL & GAS
SOLIMÕES
■ HIGHLIGHTS
On March 21, 2014, final agreements were signed for the assignment of a 6% participating interest in the
Solimões Blocks to Rosneft Brasil, in line with the preliminary agreement signed in November 2013.
At the beginning of April 2014, HRT initiated the process to obtain ANP’s approval in respect of the
mentioned transfer. Once ANP’s approval has been given, Rosneft will be the operator with 51%
participating interest, and HRT will be its partner with a 49% participating interest in the Solimões Basin
concessions.
The total amount of the transaction was US$96 million, of which:
•
•
•
US$54 million were received in the fourth quarter of 2013;
US$18 million were received in the first quarter of 2014; and
The balance of US$24 million will be paid when ANP approves the transfer.
The total of US$96 million relates to the sale of a 6% participating interest, and the transfer of the
operation of the Joint Venture in the Solimões Sedimentary Basin to Rosneft, the sale of four helitransportable drilling rigs and the settlement of cash calls by Rosneft outstanding up to October 2013.
There was also an agreement for a loan of up to US$40 million to be granted by Rosneft to HRT to finance
its investments in Solimões, for a period of 12 months from the completion of the transaction with the
ANP’s approval.
The transition process between the teams of both companies has been started and HRT and Rosneft Brasil
are working on finalizing the process, with the transfer of HRT staff and operations to Rosneft Brasil. The
intention is that this will be a continuous and seamless process, observing the standards of safety,
efficiency and quality.
During the quarter, HRT submitted seven (7) discovery evaluation plans (PADs) regarding the natural gas
to ANP, including work plans and planned investments. These evaluation plans are now under discussion.
At the same period, HRT submitted to ANP a request for an extension of the exploration phase of blocks
SOL-T-195, SOL-T-148 and SOL-T-149. The regulatory agency is still analyzing such application.
■
NEXT STEPS
In respect of the natural gas monetization project, HRT and Rosneft are in discussions with companies
interested in a share in the business, and with the Federal Government about alternative uses for the
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1Q14
Earnings
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natural gas discovered in the Solimões Basin. These discussions are based on the results of studies carried
out jointly with Petrobras, giving priority to the options involving its conversion into LNG and electric
power generation, both of which are inputs deemed fundamental to the development of the region and
the country.
POLVO
■ HIGHLIGHTS
At the beginning of January 2014, HRT and BP Energy do Brasil Ltda (“BP”) completed the commercial
transaction for the acquisition of a 60% participating interest in the Polvo Field.
Payment was made by HRT, on the same date, in the amount of US$101 million (including the US$13.5
million paid at the time of signing the PSA in May 2013), which includes certain payments required under
the PSA. BP’s preliminary operating result from the field in 2013 was US$67 million (corresponding to the
60% stake). The parties are reviewing this result, the final price for the transaction must be determined by
the end of 2Q14, in accordance with the criteria and terms set forth in the PSA.
On that occasion, HRT took over the stocks of oil produced and not yet off taken, stored in the FPSO,
amounting to 270 thousand barrels, and the cash balance held by the Joint Venture. The field produced a
total of approximately 4.2 million barrels of oil in 2013.
In February 2014, HRT decided to make the early payment of the outstanding balance of the loan obtained
with Credit Suisse in May 2013, to acquire a 60% participating interest in the Polvo Field, in order to
release a set of guarantees and material liabilities linked to the financing agreement, mainly related to cash
and receivable ratios, which were directly affecting liquidity. The original amount of the loan was US$75
million. The first amortization, amounting to US$40 million, was made on October 15, 2013. Thus, in the
first quarter of 2014, HRT freed itself from all liabilities under loans and/or financing and guarantees that
restricted its liquidity.
The field produced a total of approximately 901 thousand barrels of oil (100%) in the first quarter of 2014,
producing 1,218 thousand barrels of oil (100%) until April 2014. The natural gas produced, amounting to 30
thousand cubic meters per day, is fully used as fuel for the field operations. HRT is currently the sixth
largest operator of oil fields in Brazil, or seventh if gas production is included.
In the first quarter of 2014, HRT also concluded two crude oil offtakes from the Polvo Field, with an
approximate total volume of 630 thousand barrels of oil (net HRT). The average discount on Brent prices
was about 10%, taking into account the market conditions and the type of oil from the Polvo Field.
HRT generated net operating revenues of R$141 million in 1Q14 from the sale of these crude oil shipments.
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The charts below show the average daily and monthly oil production in 2013 and the first months of 2014,
taking 100% of the Polvo Field output:
POLVO FIELD (100%) MONTHLY OIL PRODUCTION (bbl/d)
Source: Monthly Report of Oil and Natural Gas ANP and HRT
POLVO FIELD (100%) DAILY OIL PRODUCTION (bbl/d)
14,000
Accumulated Volume
(bbl)
1,400,000
12,000
1,200,000
10,000
1,000,000
Daily Volume (bbl)
8,000
800,000
6,000
600,000
4,000
400,000
2,000
200,000
0
1/1
8/1
15/1
22/1
29/1
5/2
12/2
19/2
26/2
Produced Oil (bbl)
5/3
12/3
19/3 26/3
2/4
9/4
0
16/4 23/4 30/4
Accumulated Oil (bbl)
In mid-February 2014, HRT carried out a preventive stoppage of wells POL-001, POL-002 and POL-004,
due to the low efficiency of the wellstream cooler. At the end of February, HRT suspended production in
the field to repair the wellstream cooler located on the outside of the platform. Production was resumed
after 8 days, once the referred equipment had been repaired. At the end of March, the seawater lift pump
in well POL-011 failed and had to be repaired. Operations at this well were resumed at the beginning of
April. This was the first intervention conducted by HRT in a well that had ceased production. The rig on
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1Q14
Earnings
Release
board the Polvo platform was used, and the operation, which was a total success, took only 11 days from
start to finish, without incidents nor indirect costs.
HRT thus entered the second quarter of 2014 with all 10 productive wells in the Polvo Field working
normally, with average production of between 10.5 and 11 thousand barrels per day.
■
NEXT STEPS
HRT anticipates that the third shipment, of approximately 600 thousand barrels, will be completed late
May or early June 2014.
The increase in the frequency of oil sales and the corresponding increase in the volume of shipments sold
is the result of optimization of the sale process, which has been introduced by HRT. Larger shipments
mean lower costs and better usage of the FPSO to store the oil produced. In addition, we are expecting
better final prices for oil sales, with lower discounts on the Brent price, partly as a result of the increase in
volumes.
HRT AFRICA
NAMIBIA
■ HIGHLIGHTS
In September 2013, Tullow Oil, a European E&P company, farmed in a 65% stake of Pancontinental, located
in Walvis Basin, in a block adjacent to the Petroleum Exploration License (“PEL”) where HRT drilled the
Wingat-1 well. Tullow Oil announced that it estimates an investment of up to US$130 million in 2D and 3D
seismic acquisition, and in the identification of a prospect to be drilled. The weekly magazine Upstream
also reported that Tullow Oil intends to start developing the Kudu Field, of which it is the operator.
At the end of April 2014, the Spanish company Repsol started drilling the Welwitschia-1 well, in Walvis
Basin, at a distance of about 200 km to the north of HRT’s Wingat-1 well. Welwitschia-1 will intercept up to
five target reservoirs ranging from the Paleocene-Maastrichtian to the Albian Carbonate, with a total
depth (TD) estimated at 3000 m. Repsol estimates that it will take up to 46 days to complete the drilling.
The government of Namibia has given permission to the US company Murphy Oil to explore two blocks in
the Lüderitz Basin. Murphy Oil plans to start drilling in 2015 or 2016.
Finally, Shell has signed a concession agreement with the South African government for the block
immediately to the south of HRT PEL-28.
All these activities demonstrate the industry growing interest in the region where HRT owns 10 blocks
over an area that exceeds 53,000 km2.
■
NEXT STEPS
In view of the interest of oil companies in the Namibian assets, three international oil conventions are to be
held in Windhoek, the country’s capital, in 2014. Representatives of HRT will take part in these events, with
a view to initiating negotiations for future operations in its license areas, and to pursue the data room
process in HRT America’s office in Houston, in the USA, where information related to seismic surveys and
drillings carried out so far is kept.
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Earnings
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DIVESTMENT PROGRAM
During the quarter, HRT was negotiating the sale of two large helicopters and an Embraer plane, and these
negotiations near completion. Income during the quarter included the sale of one medium helicopter (Bell
212) and an advance on the deal with Rosneft, which includes the sale of 4 onshore rigs.
HEADCOUNT
We show below changes in HRT’s headcount, showing consistent progress in line with the initiatives
implemented since early 2013, and the current allocation by project:
CONSOLIDATED STAFF
700
600
600
500
400
383
300
200
100
214
197
192
4Q13
1Q14
0
4Q10
4Q11
4Q12
BREAKDOWN OF CONSOLIDATED
STAFF - 1Q14
IPEX
13%
Corporate
24%
Namibia
10%
Solimoes
37%
Polvo
16%
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FINANCIAL RESULTS – 1Q14
At the beginning of 1Q14, HRT settled the transfer of BP’s 60% participating interest in the Polvo Field,
effectively becoming an oil producing Company with cash and revenues generation.
CONSOLIDATED FINANCIAL STATEMENT
1T13
1T14
∆
Net Revenues
2.1
143.3
141.2
Gross Income
Operational Expenses
Dry well write off and Impairment
EBITDA
EBITDAX
1.6
46.0
44.4
-99.2
-10.2
89.0
0.0
0.0
-97.6
35.8
133.4
-97.6
35.8
-4554%
25%
Depreciation & Amortization
-6.4
-25.4
-19.0
Financial Results
4.8
-7.1
-11.9
Margin EBITDAX
Income Taxes
Net Income
Net Profit Margin
(in millions of R$)
CONSOLIDATED FINANCIAL STATEMENT
0.0
-1.5
-1.5
-99.2
1.7
100.9
-4628%
1%
1T13
4T13
1T14
∆
Total Cash
828.8
427.5
308.3
-119.3
Available Cash
687.3
154.5
308.3
153.73
2.6
81.5
0.0
-81.543
Gross Debit
(in millions of R$)
The main facts with financial impact during the period were:
•
•
•
•
•
•
•
Net disbursement of R$160.9 million resulting from the acquisition of a BP’s 60% participating interest
in the Polvo Field;
Early settlement of the debit balance, of approximately R$95.6 million, of the loan with Credit Suisse
Bank to acquire the interests in the Polvo Fild;
Revenues of R$134.7 million from sales of oil, about 630 thousand barrels produced in the Polvo Field;
R$59.5 million received from partners relating to Cash Calls from Exploration and Production (E&P) Oil
Campaigns;
Inflow of R$40.7 million related to the second instalment of the sale of a 6% participating interest in
the Solimões Blocks and 4 onshore drilling rigs to Rosneft Brasil, totalling US$96 million;
R$6.5 million received from the sale of a Bell 212 helicopter, as part of the Company’s divestment
program; and
R$2.5 million received regarding third-party services provided by the subsidiary IPEX(Laboratory).
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1Q14
Earnings
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The following table presents the consolidated results of the Company, including its direct subsidiaries HRT
O&G, HRT Africa, HRT America, IPEX, and their respective subsidiaries and branches:
1Q14
1Q13
1Q14/
1Q13
143,303
2,143
6587%
Cost of Production
(85,636)
(499)
17061%
Royalties
(11,658)
-
-
Gross Profit
46,009
1,644
2699%
Total Expenses
(10,221)
(99,233)
-90%
(5,012)
(11,230)
-55%
Personnel
(10,773)
(63,127)
-83%
General and administrative expenses
(13,659)
(6,832)
100%
Third-party services
(2,793)
(16,847)
-83%
(638)
(3,599)
-82%
Dry well write-offs
-
-
-
Impairment
-
-
-
22,654
2,402
843%
35,788
(97,589)
-137%
(25,434)
(6,419)
296%
10,354
(104,008)
-110%
Financial Revenues
10,710
17,718
-40%
Financial Expenses
(17,820)
(12,891)
38%
3,244
(99,181)
-103%
Income Taxes
(1,545)
-
-
Net results (loss)
1,699
(99,181)
-102%
INCOME STATEMENT
Net Revenues
Geology and Geophysics
Taxes and Fees
Other operating income
EBITDA
Depreciation/Amortization
EBIT
Income before taxes
(In thousands of R$)
The EBITDA for 1Q14 was positive at R$35.8 million, an increase of R$133.4 million, when compared to the
same period of last year, representing a consolidated EBITDA margin of 25%. The positive impact is mainly
explained by the oil sale margin during the period, representing a Gross Profit of R$46 million and a
change of R$89 million in Operating Expenses, representing a decrease of 90%, against the previous
period.
The Personnel Expenses had a decrease of 83%, due to a significant reduction in the Company’s
headcount in approximately 50%. It is also worth mentioning that, in 1Q13, 100% of Personnel expenses
were allocated to HRT, due to the cash calls, provide for the Joint Operating Agreement (JOA) with
Rosneft. Personnel expenses for 1Q14 are net of the amount allocated to the Polvo and Solimões projects,
different from what happened in the same period of the last year. Moreover, it is worth mentioning the
recognition made, in 1Q13, of expenses relating to share-based bonuses granted to employees in January
2013, in the amount of R$20 million, nonrecurring in 2014. Under the international financial reporting
standards, any difference between acquisition cost and market value must be recognized on the grant
date, although only 3% of the shares have been exercised.
In light of the nonexistence of well drillings in 2014, general and administrative expenses were not
capitalized, which explains the negative change in this line item, particularly to expenses arising from
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maintenance of the structure of Solimões. The focus on cost reduction had a positive effect on third-party
services, which together with the cash calls from partners in the project, represented a decrease of 83%.
Depreciation/Amortization line was impacted by the start of HRT operations in the Polvo Field. Of the
total of R$25 million in consolidated depreciation and amortization, R$22 million relate to amortization of
amounts preliminarily allocated as bonus and Polvo abandonment costs.
The financial result of 2014 was impacted by finance charges regarding the loan taken from Credit Suisse
in May 2013 for the acquisition of a 60% participating interest from BP in the Polvo Field. Such loan was
settled on February 21, 2014, and costs related to the early full payment were recognized in the quarter.
The following charts present the quarterly variation of the main group of accounts in HRT Consolidated
Financial Statement for the past two years, in millions of Reais:
OPERATIONAL EXPENSES*
NET REVENUES
150
0
130
110
-50
90
-99
- 87
-6
-8
-26
50
-100
1Q13
2Q13
30
10
2
1
2
-1
1Q13
2Q13
3Q13
4Q13
EBITDAX**
1Q14
Operational Expenses
Termination Expenses
1Q14
Depreciation/Amortization
2
-99
-500
-546
-700
-113
-900
3Q13
4Q13
-300
-68
2Q13
3Q13
NET RESULTS (LOSS)
-25
1Q13
-25
36
-100
-98
-10
-150
-10
60
40
20
0
-20
-40
-60
-80
-100
-120
-140
-10
-1
143
70
- 69
-24
4Q13
1Q14
1T13
2T13
-724
- 868
3T13
4T13
1T14
(in millions of Reais)
*Does not include write-off and impairment
** EBITDAX is an operating measure commonly used in the oil and gas industry, calculated as follows:
EBITDA + Return on Expenses with dry well write-off and impairment
TOTAL CASH, CASH EQUIVALENTS AND INVESTMENTS
The Company ended 1Q14 with a total consolidated cash position of R$308 million, an increase of 99% in
the available cash. As for the existing funds in escrow accounts on December 31, 2013, they were used to
pay the acquisition of the Polvo Field and the early full payment of the debt with Credit Suisse.
The change in total cash position was primarily impacted by the following factors, as mentioned above: (i)
Disbursement of R$161 million resulting from the acquisition of BP’s 60% participating interest in the Polvo
Field; (ii) early settlement of the debit balance, approximately R$96 million, for the loan with the Credit
Suisse Bank to acquire the interests in the Polvo Filed; (iii) revenues of R$135 million from sales of oil
produced in the Polvo Field; (iv) R$60 million received from partners relating to Cash Calls from
Exploration and Production (E&P) Oil Campaigns; (v) revenues of R$41 million related to the second
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instalment of the sale of a 6% participating interest in the Solimões Blocks and 4 onshore drilling rigs to
Rosneft Brasil, totalling US$96 million, remaining US$24 million to be received; and (vi) R$6.5 million
received from the sale of a Bell 212 helicopter.
The chart below presents the evolution of the Company’s consolidated cash and cash equivalents as from
4Q12 and the amounts held in an escrow account during this period. The Company has no debts or cash
collaterals:
EVOLUTION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
1,200
1,000
908
800
687
600
449
451
400
273
200
365
157
155
3Q13
4Q13
308
141
144
4Q12
1Q13
2Q13
Cash, Cash Equivalents and Marketable Securities
1Q14
Restricted Cash
(in millions of Reais)
The chart below presents the cash flow stating its main inflows and outflows, highlighting disbursements,
inflow from revenues and receivables due to loans:
SUMMARIZED CASH FLOW
700
600
47
96
140
500
161
400
50
300
200
428
308
100
Beginning Cash4Q13
Inflow from
revenues
Inflow from
Divestment
Program
Warrants &
Loans
Nonrecurring
Recurring
Final Cash - 1Q14
Disbursements Disbursements
| Page 13 |
1Q14
Earnings
Release
(in millions of Reais)
The table below presents the breakdown of disbursements recorded in the periods ended March 31, 2014
and March 31, 2013, by project, and grouped into recurring and nonrecurring disbursements:
CONSOLIDATED DISBURSEMENTS
Breakdown
Recurring
E&P Operations
Seismic (G&G)
Solimões Namíbia Polvo Corporate 1Q14
29
5
5
43
7
3
1
50
86
42
92
174
-47.1%
3
7
34
-79.4%
11
11
25
-56.0%
G&A, Taxes & Financial Expenses
(-) Cash Calls from Partners
Non-Recurring
Fixed Assets
-41.9%
(17)
(3)
(40)
-
(60)
(147)
-59.2%
-
-
257
-
257
4
6325.0%
-
-
-
-
4
-100.0%
161
161
-
Exploration Rights and Acquisitions
Loans
Total
11
1Q13 1Q14/1Q13
96
29
5
262
11
96
-
-
307
90
241.1%
(In millions of R$)
Operating costs of R$92 million as of March 31, 2014 , which represents a 47% decrease against 2013, refer
to disbursements for exploration, production and logistics activities (air, fluvial and land), as well as
personnel expenses and third-party services, directly related to the project.
Disbursements for seismic (G&G) activities, totalling R$7 million, are related to exploration activities in
Solimões, Namibia and Polvo, and include seismic data survey, processing and acquisition services, and
showed a 79% decrease, against the amount of R$34 million for the same period in 2013, mainly reflecting
a reduced work program for the Solimões and Namibia projects.
General and administrative expenses, in the total amount of R$11 million at the end of the period 2014,
decreased 56%, against the same period in 2013. They include financial expenses and exchange rate
variations, and are related to personnel expenses, third-party services and general and administrative
expenses not directly allocated to the exploratory campaign, but incurred to support the development of
the Group’s operational activities.
Nonrecurring disbursements amounting to R$257 million at the end of 1Q14 increased significantly in
relation to the amount of R$4 million in 2013, as they take into account disbursements related to the
acquisition of the Polvo Field, and the early full payment of the loan with Credit Suisse.
| Page 14 |
1Q14
Earnings
Release
ABOUT HRT
The HRT Group consists of companies operating in the oil and natural gas exploration and production
sector in Brazil and overseas. HRT Participações, the main company of the group, has six main
subsidiaries: IPEX (Integrated Petroleum Expertise Company Serviços em Petróleo Ltda.), HRT O&G
Exploração e Produção de Petróleo Ltda., HRT Netherlands B.V., HRT Africa Petróleo S.A., a HRT America
Inc. and HRT Canada Inc. In Brazil, the Company holds a 55% stake in 19 exploration blocks in the Solimões
Basin and a 60% stake in the Polvo Field, located in the southern part of the Campos Basin, where it acts
as an oil and natural gas production operator. HRT is also the operator of ten exploration blocks off the
coast of Namibia: eight blocks in the Orange Sub-Basin and two others in the Walvis Sub-Basin. HRT’s
team is made up of masters and PhDs in geology, geochemistry, geophysics and oil engineering, most of
them former employees of Petrobras and ANP. HRT is committed to minimizing possible environmental
impacts on locations where it works. Our commitment to the local communities consists of reducing the
impact of operations on health, safety and quality of life. For further information, visit our website:
www.hrt.com.br/ri
Legal Notice
This document contains statements about future events. All statements contained in this document, except those relating to historic facts, refer to future
events, including, without limitation, statements about drilling plans and seismic acquisitions, operating costs, equipment purchases, expectations of oil
finds, the quality of the oil we expect to produce and our other plans and objectives. Readers may identify a number of these statements from the use of
words such as “estimate”, “believe”, “expect” and “intend”, and similar words or their negatives. Although management believes that the expectations
indicated in these statements are reasonable, we cannot give any assurance that such expectations will be fulfilled. By their nature, statements about
future events require us to make suppositions and so such statements are subject to inherent risks and uncertainties. We warn readers of this document
not to place undue trust in our statements about future events, since various factors can lead to future circumstances, results, conditions, actions or
events that may differ substantially from the plans, expectations, estimates and intentions expressed in these statements about future events and their
underlying assumptions. The following risk factors could affect our operations: assessment reports on contingent or prospective resources involving a
significant degree of uncertainty, and based on projections that may not be accurate; risks inherent to the exploration and production of oil and natural
gas; limited history of operating as an oil and natural gas exploration and production company; drilling and other operating problems; breakdown or
failure in equipment or processes; mistakes made in agreements or by operators; failure of contractors to perform; labor disputes, interruptions or loss of
productivity; increase in material or personnel costs; inability to attract sufficient personnel; intensive capital requirements for investment and
maintenance expenses that HRT may not be able to finance; costs caused by delays; exposure to fluctuations in exchange rates and commodity prices;
economic conditions in Namibia and Brazil; complex laws that may affect costs or the means of carrying on the business; regulations in respect of the
environment, health and safety that may become stricter in future and lead to an increase in liabilities and capital costs, including indemnities and
penalties for damage to the environment; the early cancellation, non-renewal or other similar factors affecting the concession agreements; and
competition. We warn you that this list of factors is incomplete, and that investors and others basing their decisions on statements about future events
should carefully consider other uncertainties and potential occurrences. The statements about future events contained herein are based on the
assumption that our plans and operations will not be affected by these risks. If our plans and operations are so affected, our statements about future
events may prove to be inaccurate.
This legal notice applies expressly to all statements about future events contained in this document.
These statements are made as of the date of this document. We do not undertake to update these statements about future events, except when
required to do so by the applicable securities legislation.
| Page 15 |
1Q14
Earnings
Release
BALANCE SHEET
(in thousands of R$)
ASSETS
Current assets
Cash and cash equivalents
31-Dec-2013
31-Mar-2014
33,582
186,937
Marketable securities
120,957
121,332
Accounts receivable
989
15,048
Assets held for sale
155,540
145,090
Taxes recoverable
42,523
40,949
Advances to suppliers
33,008
53,413
3,057
9,300
Prepaid expenses
Deposit given in guarantee
Inventories
Other receivables
Total Current assets
273,001
-
-
25,856
10,593
3,436
673,250
601,361
Noncurrent assets
Noncurrent assets
Deposit given in guarantee
Total Noncurrent assets
Fixed assets
31-Dec-2013
31-Mar-2014
4,590
4,724
4,590
4,724
31-Dec-2013
31-Mar-2014
Property, plant and equipment
139,124
135,211
Intangible
988,315
1,200,929
Total Fixed assets
1,127,439
1,336,140
Total Noncurrent assets
1,132,029
1,340,864
1,805,279
1,942,225
Total Assets
| Page 16 |
1Q14
Earnings
Release
BALANCE SHEET
(in thousands of R$)
LIABILITIES
Current liability
31-Dec-2013
31-Mar-2014
Trade accounts payable
63,362
175,686
Loans
70,380
-
Advances to suppliers
25,896
630
Labor charges
17,669
12,451
Taxes and social contribution
26,301
30,636
65
1,602
Income tax and social contribution
Financial instruments
Other liabilities
Total Current liability
Noncurrent
Asset retirement obligation (ARO)
Deferred income tax and social contribution
Total Non current
Shareholders' equity
11,163
-
8,968
3,011
223,804
224,016
31-Dec-2013
31-Mar-2014
-
114,139
126,877
133,972
126,877
248,111
31-Dec-2013
31-Mar-2014
3,821,205
3,821,205
Capital Reserve
416,914
416,914
Adjustments on equity valuation
190,955
204,756
Share Capital
Accumulated loss
Current accumulated gain/loss
Total liability and shareholders' equity
(736,606)
(2,237,870)
(2,974,476)
1,699
1,454,598
1,470,098
1,805,279
1,942,225
| Page 17 |
1Q14
Earnings
Release
STATEMENT OF INCOME
(in thousands of R$)
1Q13
Net operating revenue
Cost of production
1Q14
2,143
143,303
(499)
(85,636)
Royalties
-
Gross profit
1,644
(11,658)
46,009
Operation revenues (expenses)
Geophysics and geology
(11,230)
(5,012)
Personnel expenses
(63,127)
(10,773)
General & Administrative expenses
(6,832)
(13,659)
Expenses with third-party services
(16,847)
(2,793)
Taxes and fees
Other operation revenues (expenses)
EBITDA
Depreciation and amortization
Financial revenue (expenses)
(3,599)
(638)
2,402
22,654
(99,233)
(10,221)
(97,589)
35,788
(6,419)
(25,434)
4,827
(7,110)
(99,181)
3,244
Current
-
(1,545)
Deferred
-
Profit/(loss) before income taxes and social contribution
Income tax and social contribution
Profit/(loss) for the period
-
-
(1,545)
(99,181)
1,699
| Page 18 |
1Q14
Earnings
Release
CASH FLOW STATEMENTS
(in thousands of R$)
1Q13
(99,181)
1Q14
3,244
Profit/(loss) for the period before taxes
Adjustments for
Depreciation and amortization
Financial result, net
Share-based compensations
Subtotal
6,419
(4,827)
23,076
(74,513)
25,434
7,110
35,788
Increase (decrease) in assets
Accounts receivable
Taxes recoverable
Prepaid Expenses
Advances to suppliers
Inventories
Other assets
Subtotal
1,320
(1,081)
(2,274)
(7,411)
(3,754)
(13,200)
(14,059)
1,574
(6,243)
(3,203)
23,271
19,995
21,335
Increase (decrease) in liabilities
Trade accounts payable
Labor charges
Taxes and social contribution
Advances to partners in oil and gas operations
Other liabilities
Subtotal
19,178
(6,544)
(14,825)
(16,442)
(18,633)
112,324
(5,218)
5,872
(25,266)
10,862
98,574
Net cash used in operating activities
Cash flow from investing activities
Application of capital in Bonds and Securities
Deposit given in guarantee
Acquisition of fixed assets and intangible
Acquisition of Polvo assets
Net cash used in investing activities
Cash flow from financing activities
Loans
Capital contribution
Derivative transactions
Net cash from financing activities
Net increase in cash and cash equivalents
Beginning balance
Ending balance
Net increase/(decrease) in cash and cash equivalents
(106,346)
155,697
242,442
(122,415)
120,027
10,335
272,867
3,613
(207,614)
79,201
(630)
1,535
(2,785)
(1,880)
(70,380)
(11,163)
(81,543)
37,608
49,409
11,801
33,582
186,937
153,355
| Page 19 |