Enauta Participacoes SA

BOVESPA:ENAT3

Earnings Call Transcript 2020-Q1

[Operator]

Good morning, ladies and gentlemen. Thank you for waiting. At this time, we would like to welcome everyone to Enauta's First Quarter 2020 Earnings Conference Call.

Today, we have here with us Mr. Lincoln Rumenos Guardado, CEO; Ms. Paula da Costa Corte-Real, CFO and IRO; Mr. Danilo Oliveira, Production Director; and Mr. José Milton Mendes, Exploration Superintendent.

We would like to inform you that this event is being recorded and that all participants will be in listen-only mode during the company's presentation. [Operator Instructions]

Before proceeding, let me mention that forward-looking statements that might be made during the conference call relative to Enauta's business perspectives, projections and operating and financial goals are based on the beliefs and assumptions of Enauta's management and on information currently available to the company. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Enauta and could cause results to differ materially from those expressed in such forward-looking statements.

Now I'll turn the conference call over to Mr. Lincoln Rumenos Guardado, Enauta's CEO, who will start the presentation. Mr. Guardado, you may begin.

[Lincoln Rumenos Guardado, executive]

Thank you very much. Good morning, everyone, and thank you for joining us on this conference call to discuss first quarter 2020 results. This is a very unusual moment, but I believe that we will achieve our goal to be able to speak with you, talk with you during this very important moment for everyone for the future of Brazil and for our company. It is great to be back.

Before we begin, I'd like to thank the team for their support while I was out of the office, especially during such a challenging and volatile times. A special thanks to Paula Costa, our CFO, who replaced me while I was away and for leading the company in a very professional way during this very difficult time.

Well, let us begin on Slide 2. I'd like to say that I was out of the office in the beginning of -- in mid-March. Because of COVID, I spent some time away, but I was successful, I thought. And I have to tell you that this was the main reason why I was away. But undoubtedly, after my personal crisis was over, I came back to battle and to be side-by-side with my team to face this very different world that we are living and that will require different -- that will require changes and different behaviors on the part of everyone where we believe it's also an opportunity for us to optimize our processes and to optimize our costs.

Well, for starters, we are all working from home due to a pandemic that, in turn, deepened the crisis in oil supply and demand that have been going on actually since the beginning of the year with that split between producing countries, Russia and then the United States. And the pandemic came to further deepen the situation and we had to make changes.

Enauta responded fast to the COVID-19 pandemic. Our priorities are our people, for sure, and the continuity of our business. We immediately activated the crisis management team, which we've had in place for quite a while, which we have been training for quite a while. And the team was swiftly to implement measures to ensure the health and safety of our employees and contractors that work with us, including the transition of head office staff to a home office work plan.

Regarding our operations, particularly the FPSO platform on the field where we are the operators, Atlanta, we implemented a COVID-19 contingency plan, which, among other measures, reduced the onboard staff to a minimum. Of course, together with the operator of the vessel, Teekay, we are very aligned regarding all of these measures. Workers onboard must answer preboarding questionnaires and have their temperatures taken and medical history reviewed. We're also promoting awareness campaigns using our internal communication channels, among other measures, like I said, all according to the recommendations of the Ministry of Health and the World Health Organization.

Another immediate focus of the company, as could be expected, was to review our investments to accommodate the new business scenario. In Atlanta, we postponed the request for proposal process for equipment and logistics for the full development system. We are still able to manage this kind of thing. In addition, we postponed drilling the fourth well as a preventive measure given the fall in the commodity price. We also started negotiating with our providers and suppliers, especially those with material contracts that are more asset-intensive to the field economics. We tried to reduce our OpEx in the -- and reduce the operating costs in the early production system in the first round. I have to tell you then, we count on an agreement with the suppliers, so we achieved a reduction of over 10% of our operating costs. And we have further negotiations underway, aiming to deal with this very challenging moment. So we're helping each other and we want to maintain companies with their operations.

It is worth noting that from a CapEx point of view, Enauta has no significant commitments associated with contracted investments. And this is not because only of the moment that we are living right now, but we have a lot of discipline in allocating capital and managing our financials. We're very prudent in our management. So all of that, added to some hedging mechanism offered by the market, all of that allowed us to navigate this period without a significant stress in our cash.

Please go to Slide 3. Slide 3 shows a little bit of the crisis that we're currently experiencing in the oil and gas industry and that we can call a perfect storm, combining simultaneous shocks in supply and demand, the COVID pandemic, the broad and macroeconomic problem impacting our commodity. So we have this combination of shocks in supply and demand, low prices and lack of storage capacity. All of that caused an extra weight on our logistics operating costs.

We saw the Brent lose 66% of its value in the first quarter of 2020. Prices have been dropping, as you know, because of that -- the crisis between OPEC countries and Russia, et cetera. And with the coronavirus pandemic, the impact on global consumption was too strong and sudden, requiring immediate action, particularly in the transportation industry, which accounts for 44% of consumption of all crude oil produced in the world. If we think that urban mobility dropped, public transportation was restricted, so that consumption of crude oil plummeted.

Of course, the recent agreement signed by OPEC+ cutting production by 10 million barrels a day was helpful but insufficient. And we see some events probably as of July, increasing these cuts, particularly on the part of Saudi Arabia. They should cut another 1 million barrels a day. What I can tell you is that any cut in production by the major producers will hold.

Now in early May, the outlook seems to be starting to react with early signs of economies reopening in Europe, in particularly, and an increase in China's imports with activity picking up in this country in China. And we see the Brent with a pricing of $30 a barrel, and that allows us to have some forecasts and projections.

Still, we cannot lower our guard. We will continue to monitor this extremely volatile environment with a focus on the long-term commodity scenario, which is a characteristic of our company. And Brent pricing has to be taken into account in our decisions. But we should optimize and safeguard our cash. This has always underpinned our investment decisions.

Moving on to Slide 4. Here, we will discuss our producing assets, particularly Manati and Atlanta, which are the main focus right now. Production has been halted in Manati since February 2020. You saw in our earnings results that this was being reduced. And at the end of March, on the 20th or 21st of March, we were notified by Petrobras that, in their view, the current COVID-19 pandemic is a force majeure event that would affect Petrobras' natural gas offtake commitment for the field. As a result, Petrobras interrupted the payment of the minimum amount contracted in accordance to the take-or-pay clause. It is the first time that something like that happens. And of course, we do not agree with that decision by Petrobras.

However, as is the habit in our company, we have a good relationship with Petrobras and the operator of the field. So we are in contact with Petrobras to find an adequate solution to this problem and as soon as possible. Undoubtedly, we want to live by our contract provisions. And we -- in considering the moment that we are living, we have to find a solution which is compatible for all parties involved because we cannot give up on that revenue.

So with these pending issues, we are unable to predict at this point when production will resume at Manati. But of course, the take-or-pay clauses offer us reasonable protection. Manati is important for our revenues and we are very convinced that we will reach a consensus with Petrobras and the consortium regarding that point.

In Atlanta, year-over-year production with the 3 producing wells increased 88%. This is something we already expected. Since the beginning, we had good expectations for the reservoir. And despite the 20-day scheduled maintenance shutdown of the FPSO in March, production was high. When production resumed in the midst of the pandemic, we sold 2 cargoes of our oil to Asia at a discount of less than $5 per barrel. But as you may remember, this was a total discount, including the logistics.

And as you would probably remember, when we announced our fourth quarter 2019 results, we mentioned that we were selling our oil at a premium to Brent, and it is true. We had shipments in January. And these attest that there is a strong demand for high-quality, low-sulfur oil. This didn't happen only to us. We had record exports of Brazilian oil that is low sulfur, and we see that the market is accepting this commodity as a result of IMO 2020. These are the characteristics of the Atlanta oil, representing a major driver for demand in this more volatile environment because we already see maritime transportation increasing with the resumption of growth in Asia, in particular.

In that way, our lifting cost in the first quarter of 2020 was approximately $22, $21.8 per barrel, mainly due to the planned 20-day shutdown at Atlanta, which reduced the production of oil in the period. However, in April, lifting cost continued a downward trend and was approximately $17 per barrel. And we believe this will continue at least in this quarter.

On Slide 5, we have an update on our exploration assets, particularly those to which we are dedicating more attention, internally and together with our partners. We are maintaining our plans to drill one exploration well, at least one, by mid-2021 in Sergipe-Alagoas. ExxonMobil, the operator, submitted an environmental impact study to IBAMA last April. And of course, we expect, given these circumstances we had talked about the first quarter, that was the expectation. But with all of the difficulties that we're having, we are scheduling this to mid-2021 so that we can obtain the license to drill by IBAMA. But it is always good to highlight that we remain very optimistic regarding the potential of our assets in the Sergipe-Alagoas Basin.

In the Pará-Maranhão Basin, the farm-out process remains on hold due to uncertainties regarding the date when we'll obtain the drilling license. This process is moving faster now and it seems that we are very close to obtaining this license for the equatorial basins. And we believe that, even with the current difficulties that we're having now, we expect that this process will move forward. Importantly, we are still getting contacted by interested parties as the basin is very close to the French Guiana and to the Guianas, a region with many very successful discoveries by many international companies. So there is renewed interest in this area. So the farm-out process is expected to resume by next year. And if possible, we will continue to be in contact with IBAMA to get more visibility regarding the drilling licenses, which was undoubtedly the major trigger for us to continue.

This is a very general view. We tried to talk about the main assets of the company, those that generate cash in the very short term, Manati and Atlanta, particularly Atlanta, that is working very well from the operating and commercial standpoint. And we also talked about those projects that have potential in the mid to long term, particularly Sergipe-Alagoas drilling, that deserves full interest from the consortium. And by mid of next year, we expect to be drilling in that basin.

I will now turn the call over to Paula, who will comment in more detail our operating and financial results as well as the outlook of the future. Paula, over to you.

[Paula da Costa Corte-Real, executive]

Thank you, Lincoln. Good morning, everyone, and thank you again for joining us in our earnings conference call. After this scenario of the company and also our current scenario, now I'm going to go through our numbers and figures like Lincoln said.

Let me start on Slide 6, where we have a summary of our results, always compared to the same period of last year with increased production in Atlanta and a high demand for our oil due to the implementation of IMO 2020, which is a regulation to lower the percentage of sulfur content, particularly for vessels. Our revenues grew 40%, EBITDAX grew 55% and net income increased 54%. Since Manati has halted production since February, Atlanta accounted for roughly 80% of our revenue in the quarter.

Now on to Slide 7, where we present our cash and debt positions. As you know, Enauta has always been prudent in managing its cash, and that is still the case during these times. We are increasingly more cautious. We ended the first quarter with cash balance close to BRL 2 billion, BRL 1.9 billion. In April, we had a dividend payout of BRL 300 million related to 2019 results. The payment was on April 28 and ending with BRL 1.6 billion in cash, which we believe is enough to support our operations during this current global crisis. Our debt is BRL 241 million, is 100% denominated in Brazilian reals and is mostly comprised of long-term maturities. So we still have a net debt EBITDAX ratio negative, currently at 2.2x. So that's our net debt over EBITDA ratio. In addition to the strength of our balance sheet, like Lincoln said, we are negotiating with our main suppliers for further cost reductions in these contracts. And up to now, we amount to over 10% of our operating costs. And we keep on pursuing more relevant reductions.

On Slide 8, we show information on the hedging contracted for Atlanta's oil production. We contracted a Brent price hedge for around 17% of our share of production in the Atlanta Field, always based on a 12-month production curve. And the average amount is $56 per barrel. Please note that this hedge does not include the spread due to oil quality and logistics. It's specifically for Brent. Half of these agreements expired throughout the second quarter, reducing the breakeven in the field for the period of $7.5 per barrel. Above this Brent value, we have a positive cash flow, including the results from hedge. The other half of the contracts we have are due between July and September, reducing breakeven for Q3 to be reduced to $19 approximately per barrel. Now I'm speaking of breakeven to be positive cash flow from the operational standpoint. Another point that is important to mention vis-à-vis the hedge is that for this first quarter, the positive impact of this hedge on our revenue was close to BRL 10 million, very significant, and we expect to see even greater for the second quarter.

Now on Slide 9, we have our CapEx for 2020. CapEx for 2020 is estimated at $35 million. There was a decrease of $11 million when compared to the figures from the last earnings conference call. And reductions were approximately $2 million in Atlanta, $3 million in Sergipe-Alagoas and $6 million in the Blocks in the 11th Bidding Round.

For 2021, the company has an estimated total CapEx of $146 million, of which most of it is related to Atlanta, $87 million allocated to the full development system of Atlanta Field and $48 million to the blocks of the Sergipe-Alagoas Basin. As Lincoln said, we expect to start drilling one exploration well not necessarily in the first quarter, as we had been announced in the first half of the year. So maybe mid next year, we expect to have the first exploration well in Sergipe-Alagoas.

So to conclude, let us talk about our priorities and how we are getting ourselves ready for the post-crisis period on Slide 10. Our way of facing this crisis today involves tactical decisions for the short, mid and long term, focusing on cash preservation and value protection now, but also considering value generation in the long term.

In our industry, we have always adopted a prudent approach because it varies our cash flow possibly 3 years down the road. We have always adopted a prudent approach, like I said, and our market risk management policy supports that. As for the postponement of our investment schedule in Atlanta, we are right now reviewing the project's design in order to make it even more resilient in a more adverse commodity scenario and also for longer time frames.

As for our cost structure, we have always been very disciplined and attentive. We made no changes to our payment terms to suppliers because we care for all of our stakeholders along the chain. And this is maybe one of the reasons why we've been very successful in our negotiations and cost reductions during the crisis.

Decisions to invest in oil exploration and production, like I said in the beginning, require a longer-term vision. We are making decisions for the full development system in Atlanta, the drilling of the Sergipe-Alagoas Basin today so that we can reap the benefits as from 2023. So it becomes even more challenging for us because it's not enough to only focus on the short term and the current scenario. We also have to be very assured of what we believe about the future market and where we believe prices will be flat and how we believe the oil and gas market will be by 2023. So this is the big variable for us.

Actually, this is a crisis very different from anything we have ever seen. We do not believe in a permanent reduction in consumption. However, we are preparing for a slow recovery. So in our favor, particularly at Atlanta, we have a high-demand oil, which is low-sulfur oil. So aligned or in line with our balance sheet and our very prudent decision-making process, I believe if we put it all together, we stand at a more comfortable position in order to challenge turbulent times.

So this ends our prepared remarks. We will now take your questions.

[Operator]

[Operator Instructions] First question comes from Leonardo Marcondes with Itaú BBA.

[Leonardo Marcondes, analyst]

I hope everything is well with all of you. First, I'd like to understand the reassessment of the full development system. Could you give us more color on that? In other words, what can you improve in the project?

My second question has to do with Atlanta and where the cuts are coming from and how much more do you expect to cut your costs at Atlanta.

[Lincoln Rumenos Guardado, executive]

Thank you for the question. It was a little difficult to understand, but I think you want to know what are the potential optimizations that we can have at Atlanta -- in the Atlanta project. And I think that Danilo can give you more color on that because we are conducting some studies. And your second question was regarding operating costs and so I will ask Paula to answer this question. And I'll see -- you talked about breakeven maybe, but I understood that your question was more related to cost. So Danilo can give you more color on the studies that we are conducting so that we can have more options in Atlanta's full development considering the current scenario, but always remembering that we are looking at the future. We have our short-term forecast of the Brent price and also the long-term forecast. So I would like to ask Danilo -- and please confirm whether the question was on cost reductions because if that is the case, Paula can answer the question and then Danilo.

[Danilo Oliveira, executive]

This is Danilo. Good morning. I will answer the first question, which is what we are doing regarding the Atlanta project to make it more resilient and then I will ask you to repeat the second question because it wasn't quite clear, the sound.

Well, the full development system at Atlanta, if you will remember, it was conceived to have, in total, 12 wells, but considering a Brent of $80. With the 2016, 2017 crisis, there was a reduction in the Brent price from $50 to $60 with peaks here and there. So we adjusted the Atlanta design and submitted this adjustment or the development plan to ANP, no longer with 12 wells, but now with 8 wells. And then was 4 and not 12 wells in total, and that reduced our CapEx since the beginning. And then we could self-leverage us for the 4 next wells.

And now we are considering the same thing with this crisis. What happened? The oil price plummeted. So we are trying to reduce our CapEx as much as possible. So we are redesigning the project to drill the wells, but with a greater interval between them. So we would have 4 wells in the beginning, plus 4 or 5 wells, plus 3, and so on and so forth. But the decision will only be made after we have the FPSO bid for the full development system, unless we determine when the FPSO will arrive. And the decision to drill the wells will be made following the behavior of the Brent. So now we have variations of the same theme. Atlanta can handle up to 12 wells with the FPSO we intend to charter, we can cope with 12 wells. What will change is the moment when we will be using the CapEx.

Now could you repeat that second question addressed to me?

[Leonardo Marcondes, analyst]

My second question was regarding cuts in OpEx at Atlanta. You mentioned you were able to cut costs by 10% to date. Could you give us more detail on this? Where are the cuts coming from more specifically? And I would like to know how much more you intend to cut in terms of operating costs?

[Danilo Oliveira, executive]

Okay, okay. You will remember that we said that operating costs of the FPSO had tranches related to the Brent price. So the first automatic cost, which is this 10%, came from these tranches. Approximately 10%, might be 8%, might be 12%, but -- so that is the first cut. We negotiated with all of our service providers and suppliers and we're expecting to have, at a minimum, another 10% of cuts minimum. It could get to 20% cost reduction. Our goal is to get to $380,000 a day or less of OpEx, operating costs. Of course, we're not considering royalties and other things, only operating costs. In other words, support vessels, base, helicopters, consumables. And our goal is to be under $400,000 a day.

[Operator]

Our next question comes from Guilherme Levy with Morgan Stanley.

[Guilherme Levy, analyst]

I hope you're all well. My first question has to do with Atlanta. Have you received preliminary proposals that you thought were perhaps too high for the project in the current oil outlook? Because perhaps you could use this moment of low prices to get a better deal for the long term.

My second question is still in Atlanta. You mentioned the oil discount dynamic along the first quarter. Could you give us more color on the dynamics and how it is behaving in April and May?

[Lincoln Rumenos Guardado, executive]

Thank you for the questions. Could you please repeat the last piece about Atlanta? Proposals regarding what, Guilherme? What kind of proposals do you mean?

[Guilherme Levy, analyst]

My second question -- the end of the question is I want to understand the oil discount dynamics of the Atlanta oil along the second quarter in April and May.

[Lincoln Rumenos Guardado, executive]

Okay. I will ask Paula to answer the second question and the dynamics, what we've done. We can start with the second question.

Your first question, the sound was not very clear. And you talked about proposals. I don't know what proposals you were referring to.

[Guilherme Levy, analyst]

I mean the request for proposals for the definitive FPSO. I would like to understand whether -- before the decision to postpone the pricing and the request for proposal, whether you had received preliminary proposals that perhaps would not work in the current oil environment. And perhaps given what we are living right now, the challenging moments, perhaps it wouldn't make sense to accelerate the decision-making or perhaps you could make decisions now to benefit from greater discounts.

[Lincoln Rumenos Guardado, executive]

Oh, okay. Now I got it. For the first question, and perhaps Danilo can add to that. The second question will be up to Paula to talk about hedging and discounts.

For the first question, we were in contact with some potential interested parties. And the potential value in these proposals would come in a bidding process. Of course, we were in contact with some companies, but they would have to submit their bids. But as you know, the decision about the FPSO is made some years in advance and the crisis did not affect that because some companies like ours delayed their decisions.

Like Danilo said, we want to have options in case the Brent oil remains low for longer because we believe that the price is recovering. And we believe that, in the long term, Brent will be between $40 and $60, so a median of $48 maybe. And like Danilo said, we started considering a Brent price at $80 and then $60 and then had a breakeven at a certain value. So we decided to step on the brakes.

We didn't start the request for proposals from the market. We believe that the market for new constructions or for something that is an opportunity, well, the prices can drop a little. The FPSOs that are being built will continue to be built, but it wasn't enough for us to launch a bidding process. There was a lot of volatility in the oil prices. There is a macroeconomic crisis. So we prefer to wait so much so that we also halted the drilling of the fourth well because we need to have a production horizon so that it can pay for itself.

So we wanted to revisit the options that we would have. It's not substantial, but it's like postponing the drilling. This is what our production team is working on. We did not expect that just because of this crisis, the prices would be so depleted for this kind of equipment. So we preferred to wait and have a bidding process when we will provide the information in the right elements so that companies can bid more accurately. So in the bidding process, we'll inform the number of wells, when they will enter operation, subsea, et cetera. So we didn't receive any proposals yet, although we remain in contact with these companies. We go to them. We tell them that the plans are maintained, but that we just need a little more certainty, a little more visibility regarding the future oil price, which I underscore has started to recover. So we expect that as soon as we have more predictability and we analyze oil trends, then we will be able to include this evaluation and have a more resilient project in case the crisis persists, the oil demand and supply shock, if it persists for a little longer.

So we are not yet asking for proposals. But as soon as we have this kind of visibility, we'll return to the market. Still, I want to say then, the FPSO crisis are much more filtered than what happens with drilling rigs, et cetera, because FPSO entails a large, long-term investment and it is not easy to change overnight. But undoubtedly, if things remain, well, we'll try to find the best option possible to have a proposal which is compatible with what we can expect from the project.

I now turn the floor to Paula, who will speak a little bit about what's happening in the forecast for the second quarter regarding hedging and breakeven. Paula?

[Paula da Costa Corte-Real, executive]

Okay, Guilherme. To answer your question, I think you asked about the Atlanta oil discount for April and May. As we mentioned in the presentation, I think that the good news is that our oil is in high demand. It is a low-sulfur oil. And according to the new IMO 2020 regulation, there is high demand for this oil in the market.

With that, the latest shipments also have that discount close to $5, perhaps a little over $5 to $6. When I talk about a Brent discount, it includes the quality of the oil because it is a heavy oil as well as demurrage and logistics costs. And these costs, demurrage costs and logistics costs, I believe that there might be some volatility there in the coming months perhaps. As long as they use tankers for warehouses, some companies are storing oil, considering the lower Brent price, expecting the prices to increase in the future. We see this reflected in all curves of the future oil market.

So the use of these tankers reduce the supply of vessels for freight and demurrage. So with that, we might see increasing costs there for the next cargoes, but not related specifically to the quality of the Atlanta oil. I think in that regard, what we have seen is a significant demand given the characteristics of the Atlanta oil, which is practically free of sulfur. Now we believe that this is a tangent effect as long as they continue to use the tankers for storage, and then we will go back to normal costs. But to answer your question, for April and May, the discount vis-à-vis the Brent was very close to what we observed and reported in the previous quarter.

[Operator]

The next question is from Vinicius Carvalho, UBS.

[Luiz Carvalho, analyst]

Actually, this is Luiz Carvalho. Firstly, Lincoln, keep safe. I hope everything is fine now. I have 2 questions. The first question, I would like to go back in time. Paula, as you said before, Enauta has a very conservative approach when it comes to cash preservation in the latest years, I would say starting with the IPO. And naturally, when we check the company's asset portfolio, I have some concern when I think about the long term. Manati, by the end of its life cycle and now more specifically with force majeure by Petrobras, so delivering less. Atlanta, at least in the oil scenario which we envisage, the profitability is questionable, arguable, particularly for new investments, not for old investments, but for new ones. If I have $40, $45 oil, the return naturally is much lower than when it was envisaged, $80. So what about capital allocation right now if you think about all the projects you have? And in many of these projects, you're not really the operator. Maybe you have partners with a higher capital possibility like Exxon and Murphy. So what about the capital allocation strategy of the company in the future, considering a possible disposal of assets?

The second question is about Manati, which is related to the first one maybe. If I'm not mistaken, you don't have the actual rights when it comes to Manati stake. But is there any conversation with other consortium members of Petrobras to buy the share of the company? There was a recent news saying that one of your partners would be interested, so I'd like to better understand it.

And the last question, just a quick question. When do you expect to see or to have the individualization agreement of BM-S-8 if would have the remaining $144 million? Because with the foreign exchange as it is, would be quite significant to you. So these are my 3 questions.

[Lincoln Rumenos Guardado, executive]

Thank you, Luiz. Thank you, Luiz, for good wishes for my health. I have several challenges to tackle and the body -- our bodies are very tense. Anyway, I'm going to give the floor to Paula, so she can tell you more about the company's capital allocation.

But prior to that, I would like to say right off the bat that we are constantly keeping an eye on the short, mid and long time frame. There is no doubt we'll be keeping an eye on this. And as you said, there are people with strong muscles in projects like ours. So we cannot disregard anything.

But now I turn it over to Paula, and Paula is going to give you more detail. And then I'm just going to also tell us more, and Danilo can also support us. And as for the prepayment of Equinor, still with regards to the current field of Bacalhau, the old Carcará field. So now I turn it over to Paula so she can give you more comments about the financial aspects and also the challenges ahead and also capital allocation in the short, mid-term.

And actually, considering Manati's end of life, you're right, but we have a broader visibility to share vis-à-vis what's happening right now at Atlanta. So first, I give the floor to Paula and then I come back, and Danilo can also help us. Over to you, Paula.

[Paula da Costa Corte-Real, executive]

Luiz, good morning. Thank you for your question. What you said is true. The company has always been very prudent when it comes to cash use. Our cash balance is significant, quite robust over the years. And I believe that during this crisis, it is one of the main assets of the company.

Now we can see a portfolio in which Manati is getting to the final phase of production. We also have alternatives to use the field. I think we mentioned that in previous calls that we are studying other alternatives to use Manati's reservoir, but that -- this is only a study. We still have 3 years of Manati's cash, 3 or 4 years of cash generation in Manati.

As for Atlanta, like we said in the presentation, we are precisely in the moment to make decisions about the full development system and also the design of the system, and I believe we can do that. Maybe we will benefit from the contract of services when we have lower prices in the market. So I believe this is also going to help the project in the long term.

Like we said, we expect to have a slow recovery in the market, but the slow or low consumption of oil is not permanent. We believe that. And in our market analysis, we think about the future oil curve. The big question is how long would it take for the market to resume? An important thing is that our current decisions are proved to be reaped in 3 years down the road. So it's no use just checking on spot oil prices. We also have to keep an eye on the outlook for future prices or the future price curve. So this is the design we envisage. And like I said in the beginning, having cash during a market stress is a highly important asset. We believe there will be very good investment opportunities. The company is ready for that. The company is prepared in terms of technical team capitalization. So we're keeping our eyes open to opportunities to go for -- or to bring good assets to the company.

In addition, in our exploration portfolio, we also have assets with a huge potential of discovery like Sergipe-Alagoas. The drilling of the first exploration well is scheduled for next year; participation of working interest in 9 blocks in the region; partnering with big companies, having capitalized companies. So we believe exploration success in the area will bring an important CapEx pipeline, and we should be ready for that. So right now, it is largely cloudy, the boat is slower -- at a slower speed right now, but we have all the tools required in order to stand out in this time frame. The company is very well established. We have a qualified technical team. And mostly, today, we have the right and necessary financial resources to navigate well and bring good opportunities to the company. And certainly, this is when we have big opportunities to invest. So that's about it. We're keeping ours open to the market, and I believe we'll manage to move away even stronger.

[Lincoln Rumenos Guardado, executive]

Thank you, Paula. Luiz, you're right. Manati is an asset and despite being very important -- it's still very important to us, by the way, when it comes to cash generation and predictability. The small short-circuit owing to everything that is happening, and particularly the speed of the circumstance. And we feel operations want to -- have to make decisions everywhere. So that's why now we open a communication channel, a high-level channel with Petrobras to solve the problem. So today, we're focused, and we believe the consortium, particularly Petrobras's partners, are pretty much focused on solving the problem, either of a resumption of production or the segment or the following of the take-or-pay clause in the contract. We believe that all of us are involved. We cannot only focus on the contract without understanding the real picture. So we open a communication channel in order to try to balance the problem and solve the problem during the pandemic. So this is what's driving our efforts today. And naturally, we have several meetings scheduled, including one with Petrobras about this topic.

But if your question focuses on a broader view, owing to the fact that the operator is announcing a divestment in this area, we don't have any approach in this direction. I think it put it well, the fundamental. The asset is coming to the last days, even though the gas volume is still big. We even considered the possibility of having this outstanding asset, owing to its position, to the structure, to store gas. But that's too new, too recent and we don't have full support when it comes to the economics and something far more connected to transporters than oil or gas producers. So owing to the time frame required for production, at first, we don't have any interest. Well, at first, we don't have any intention of becoming an operator because the asset still has another 4 or 5 years of production down the road. And above all, we have this statement that some people might argue there was no change in our production assets. But we keep on pursuing or trying to diversify our forces of revenue, not only gas, not only Atlanta Oil. We want assets to have a mix in our portfolio. Actually, providing us with the revenue, not only in the short term, but revenues that are compatible with the returns that we expect to see. And although I saw many things, at first, Manati is not on our radar in this line. It would increase our short-term exposure, which actually is not in our interest yet. But we are attentive to what is happening considering the emergency of all. And even Petrobras' advisory, the Board was not involved. But at first, I don't see any chances of making it happen.

Answering your third question now, if we consider the moves, actually, we have no control on it. In the operations case, the field of Carcará and now, Bacalhau at the agency. What we know, as announced by the industry, Equinor already has a plan, the development plan, submitted to the agency. And that's a condition for the plan to be approved and, therefore, approved in all the unitization criteria. And I'll tell you that in-house, if we consider the time frame it usually takes, we believe that this year, we expect to have this payment taking place. It happened late last year, early this year, and there's always some times some questions about the plans, but this is also part of

Enauta Participações, the past. So we expect that for this year, or maybe in the fourth quarter of 2020, the plan will be approved, and then we would have concrete terms of payment of USD 144 million by Equinor. And obviously -- and that's the only reason why we are monitoring the market. In order to check any opportunities that may arise, so we can use part of this event or any possible acquisition.

[Operator]

[Operator Instructions] The next question is via webcast, [ Ivan Ospina ].

[Unknown Analyst]

We would like to know about the dividend payout policy for the coming months.

[Lincoln Rumenos Guardado, executive]

Okay. As the topic involves money, and it's hard to say anything about the coming months, I would like to turn it over to Paula so she can share more detail about what happened in the recent past in our distribution, and also how we foresee the short term, which is really, really short, short term. So I'll ask Paula to give you more detail, particularly about the fundamentals that we've been using in dividend payout, always keeping an eye on our cash and our future commitments. So Paula, over to you, please.

[Paula da Costa Corte-Real, executive]

Thank you, Lincoln. With regards to dividends, recently, we had a payout of BRL 300 million of dividends paid on April 28, and it was related to the result of 2019. Usually, we maintain a dividend payout on an annual base, so when you ask about the coming months, I don't have on the radar any additional dividend payout for the coming months. Like we said, the one we had was about the result for 2019. And in parallel, what we have is our dividend payout policy of $0.15 per share. Around BRL 40 million. That's the total for the company. The last 3 years, the dividend payout, we had extraordinary payout which doesn't mean this will be repeated in the coming years, but these were times in which the company found excess or surplus cash and understood it would be more valuable to share it with shareholders rather than keeping it as a company. It might impair feasibility. And now we have more flexibility to work on our business plan and check for opportunities, like I said before. So that's about it. We have our policy, $0.15 per share, BRL 40 million annually. The last 3 years, actually, we had extraordinary dividend payout, which may happen sometimes whenever the company believes there is surplus cash and value behind distribution or payout to shareholders.

In general, the payout happens on an annual base. So actually, there's nothing in the radar for next month.

[Operator]

We have another webcast question by [ Mark Sauerman ].

[Unknown Analyst]

First question. What is the breakeven for operational cash generation of the respective fields without considering the hedge? Second question. The company -- the company got signals that neighboring fields can come to the market because of the situation. Is that a fair statement?

[Lincoln Rumenos Guardado, executive]

The question regarding hedge. Well, I think Paula has explained it and everything we've done. And I think that Danilo has mentioned some elements adding to that. So I'll ask Paula to speak about the numbers that we are expecting to have based on those reductions that Danilo mentioned. And if you want to have more detail on that, then you look and clarify. So Paula, you can answer the first part, please, regarding the breakeven. Please, Paula.

[Paula da Costa Corte-Real, executive]

Well, if we consider our original costs for the field, excluding reductions, it would -- I will speak about breakeven? Between $20 and $25 -- $22 to $25 per barrel for the coming quarters. Every oil field has a curve, which declines over time. In the case of Atlanta, most of our costs are fixed costs. U.S. production starts to decline a little vis-à-vis the prior quarter. The breakeven per barrel ends up increasing a little because most of the costs are fixed. So I would say between $22 and $25 per barrel for the coming quarters. That does not include reductions. Cost reductions are ongoing. To date, we got 10% reduction, so that reduces the breakeven by 10%. But we expect to achieve additional reductions, as Danilo mentioned. And this does not consider the hedging. This is just the operation of the field. I'll turn the floor back to Lincoln to answer the second part of your question.

[Lincoln Rumenos Guardado, executive]

Thank you, Paula. The question was whether we got any signaling from the market and if there are offerings of neighboring fields. I think you're referring to Atlanta Field because it is in the region that is well-known to have many producing wells, either in the Campos Basin or in the Santos basin. Well, we did not get any direct communication about new divestments in this area. There has been some action happening in some fields that were renegotiated in the recent past. But these were fields that had either a residual volume to be produced in the short-term, or these were fields that are in the same condition as Manati or fields that were not so close to the areas where we operate. But these are always points to consider. But until today, we haven't received any official communication of new fields that are being put for divestment. Although we believe that this will happen because this is a process that depending on the timing and on the macroeconomic condition, it is possible that parts of a field will be put into production or perhaps the whole field and can be put to the market. But I believe that in a very short term, we did not have -- I can tell you that to date, we did not receive any offering of fields that the players would intend to divest from. Particularly in the Atlanta area because in that area, producing wells or producing fields or fields to be developed, they are looking at the mid to long term. These are basically pre-salt fields. But undoubtedly, we are open. If there are things on the table, we will consider that. Again, I was thinking about having a reservoir to maintain the operating revenue for the company because this is one of our fundamental pillars, and we have to think about the long-term and not only about the short term.

[Operator]

Next question from [ Caio Palma ] with [ Spartan ].

[Unknown Analyst]

Good morning. I'd like to know, what is the total CapEx expectation for Atlanta? And what lifting cost do you expect to have when you implement the full development system?

[Lincoln Rumenos Guardado, executive]

Thank you, [ Caio ]. Indeed, this is ongoing. It's underway. There are many variables that are being studied. And building on what Danilo said in the beginning -- I actually can turn the floor to Danilo that can explain the history and what we are going to do from now. We have a track record. And you can talk about what we are doing now. So Danilo can speak about the CapEx. And can you even touch on the lifting cost because we're still very much reliant on the FPSO and on the system that we will adopt. But I think that Danilo can give you a lot more color on this. Danilo, over to you.

[Danilo Oliveira, executive]

Okay. Like I said before, the development plan for Atlanta submitted to A&P with 12 wells, 8 plus 4, has a configuration for 8 wells, 1 billion of CapEx, and for the total of 12 wells, 1.5 billion. And like I said, we are considering different designs. In other words, we are considering to adapt the CapEx to be extended, considering the oil price. So instead of drilling 12 wells, we can drill only 8 and in stages. And this can reduce the CapEx. We are not considering the market changing, considering low Brent prices in the original design. 1 billion plus 500,000 for the total of 12 wells, but this CapEx can be reduced as we reduce the number of wells that we decide to drill, depending on the Brent oil price. So I cannot give you a firm answer at this point. Regarding the lifting cost, that will depend on the bidding process of the FPSO. The daily rate of the FPSO is 60% or more, or accounts for 60% or more of the operating cost. So if we give you a guidance of the CapEx for the full development system, that will take into account the FPSO daily rate. And at this point, we cannot give you this kind of information.

[Operator]

Okay. The next question is from [ Vinicius ].

[Unknown Analyst]

What are the new hedge instruments?

[Lincoln Rumenos Guardado, executive]

Thank you. I'll turn it immediately over to Paula. She has been studying this topic. We didn't start working with hedge today, and Paula has a very good history on this, and she can give you more color on this. Over to you, Paula.

[Paula da Costa Corte-Real, executive]

Thank you for the question. With regards to the hedging instruments, to date, we've been using the put option. This is where we set a minimum price. We pay a premium at the beginning, and we set a minimum price with which we would sell the oil. It's a financial adjustment vis-à-vis the minimum price and the spot market of the oil at the moment of the sale. So we've been using this instrument, to date. However, early this year, the market dramatically changed the dynamics. Actually, the spot price went down dramatically, and there was a great increase in volatility. Usually, we check a 12-month horizon. And the put option became too expensive because volatility has a direct impact on the price of options. So the more volatile the market, the more expensive the options will be. So the put option became too burdensome to the company. So ever since then, we've been studying and considering other instruments like a swap, or a forward market when you preset a price for which you're selling the cargo, the oil shipment or the volume of oil for the coming months, or even slightly more complex structures. Others where you set a floor and a cap, and between these limits, you follow-up the market. So we've been considering ordinant swaps and also a couple of other compositions of options, which may assure a more reasonable cost to the company and more certainty when volatility is too high, like it's happening right now. I believe today, we benefit from decisions made in the past. So we also want to be hedged in the future when we have volatility higher. Naturally, now we have a different oil price level, but if we have volatility in the future, we also want to be comfortable. So that's the rationale. But the same instruments would be too expensive. That's why we are considering more efficient, more cost-effective instruments to the company.

[Operator]

The next question is from [ Paulo Afonso Artal ].

[Unknown Analyst]

Does ENAT intend to share the results of the 3D appraisal data for Sergipe-Alagoas basin?

[Lincoln Rumenos Guardado, executive]

Thank you, [ Paulo ]. That's a very interesting question. Undoubtedly, we trust our operations. But I'll kindly ask Mendes to tell you more about the current status and particularly, any type of embarrassment that we sometimes face until we drill and bring concrete data. So Mendes, could you tell us more about it, please, so you can answer [ Paulo's ] question adequately? Over to you, Mendes.

[Jose Mendes, executive]

Thank you for your question. In Sergipe, we keep on receiving and getting the seismic process data in the area. In the coming weeks, we expect to have the latest version of the 3D data. And our work pace is very intense, many meetings, many technical discussions with our partners. And like we said before, owing to some delays and also owing to the current crisis, our schedule to start drilling early next year -- well, certainly, we have many things already mapped, many opportunities with significant volumes, material volumes. It couldn't be otherwise because that's quite a challenging area. The water depth is really deep, so we need big volumes, material volumes in order to have economic feasibility of any discovery in the water depth of this region, 2,000 to 3,000 meters in the water depth. So I can say that up to date, we are very happy with how things are unfolding, and we have a drilling plan that is moving forward, prioritizing opportunities that were fully mapped by our partners. So we're very much in sync in our joint venture with these companies. So when it comes to disclosing information about 3D data, as we speak, this is confidential, only for consortium members. We don't have any intention to disclose Sergipe as a farmout area in the near future. Like we do in -- because the farmout process, the companies have access to information and interpretation of data, but it doesn't apply to Sergipe yet. So that's the message. We are in the final phase to have the 3D data. We are very bullish, very high expectations, so we can start drilling in Sergipe-Alagoas area.

[Operator]

Next question from [ Leandro Piva ] with Condor Insider.

[Unknown Analyst]

How would you be affected by a prolonged scenario of low demand for oil and oil products? Do you see any possibility of changing the strategy of the company?

[Lincoln Rumenos Guardado, executive]

This is Lincoln. Well, what I can tell you is that what's happening in the world always brings about some changes in processes, et cetera. No doubt this happens, but looking not so much at the long term -- looking not so much at the short term, there is no replacement for oil. And the major OPEC producers have very high internal costs, and they need their own domestic economies to survive. Other producers like Russia have the same problems, they do rely on their oil production. So we don't envision any dramatic change in this demand for oil in the short or even in the very long-term, until 2040. It is very hard to overcome the amount of energy generated by oil. Of course, alternative power generations will grow. And for them to grow and for economies to grow, oil and gas are complementary. But even if we don't see major changes happening, it doesn't mean that our cash management or CapEx management will not take into account different recovery scenarios. We're observing the price trends, and regarding supply, all the major producers are working together.

The United States are reducing dramatically their shale oil production because of the demand. And although that can return very quickly, we see that even if they do return, if it's not a sweet spot, Texas, it would be very hard to maintain the kind of production level that they had. So there will be some retraction by the major oil productions -- or producers to match the supply to the demand. But of course, we are looking at the short and medium term. It is for this reason that we postponed drilling the fourth well, that we are looking at some alternatives for Atlanta that might optimize the cash, and perhaps prepare us for an extremely low price of the oil. All of that from the technical and technological point of view. In Atlanta, we'll have the financial mechanisms to help us make decisions. This has been documented by Danilo and Paula, and it's all part of that, of protecting the company. This is not new to us. We do that all the time. And particularly now, we're considering what's coming up, particularly with Sergipe that has a potential and that can demand cash. We have been very mindful of what is happening. We've been careful. Although we believe that recovery, albeit slow, should be continuous as the coronavirus outbreak is contained. This will take us to Brent prices and to oil demands. Because you see there's a pent up demand by the economy, but the recovery will happen. How will it happen? It should happen as it has happened in other occasions. This is perhaps the biggest crisis the world has ever lived. But recovery will come and everyone will grow. Everyone try to grow here, in Asia, in India and even in Africa, which apparently has been very little affected by the coronavirus. And -- but they have an expectation of growth in the future. So we believe that there will be a recovery, perhaps slowly, perhaps more gradual, but the recovery will come. And yes, we are focused on managing our cash to deal with this perhaps longer crisis.

[Operator]

Next question from [ Carlos ].

[Unknown Analyst]

Regarding the next drillings in exploratory assets, could you detail the time line? Which assets can become producing assets? What are the priorities and dates to assess the commercialization?

[Lincoln Rumenos Guardado, executive]

Yes. Thank you. Thank you for the question. Exploration assets, they have some elasticity in their drilling schedule. What I can tell you is that basically, we are extremely dependent on environmental licenses to drill. Even with the current crisis that we are experiencing for some of these assets, we should look for some elasticity. Mendes can mention more things about this. The agency has understood that. But some assets haven't changed the priority, which is the case of Sergipe. Mendes can give you more detail. Some assets continue with the same priority. But Mendes can speak more about Sergipe and Pará-Maranhão. Mendes, please?

[Jose Mendes, executive]

Thank you for the question. Regarding drilling in exploration assets, like Lincoln said, it is very much related to environmental licenses to drill and the equatorial margin. The whole equatorial margin, we practically do not have licenses to drill. We're committed to drill 1 well in Foz, one in block 337 of PAMA, 1 well in Ceará and 1 who will in the Espiritu Santo basin. All of the Sergipe blocks, well, we have no commitment to have a minimum exploration activity. Sergipe, of course, is the priority. After Sergipe, our priority is Pará-Maranhão, PAMA. We see us -- it's there, they have a lot of merits, Block 337, 265 offering many opportunities. The prospect has been mapped. We are finalizing the data interpretation of these blocks in the East Bank and in the Equatorial margin areas. Of course, not all of these wells will be drilled. Again, this has to be decided by the consortium. We have to analyze the technical and economic merit of the prospects to proceed with drilling. We also have the letter of guarantee when sometimes they commit not to drill. But there are many assets with the same exploration player that we have in Sergipe-Alagoas There are some important discoveries in Sergipe-Alagoas, in Espírito Santo, Ceará, Pará-Maranhão, Foz do Amazonas. We want to have the same kind of play. We want to have the same kind of generator, the same kind of operator, the same type of reservoir. So it's a prospect with excellent technical quality. The priority is Sergipe and in the equatorial margin, Pará-Maranhão. The Pará-Maranhão blocks and Foz blocks are at the moment, at a standstill. The clock has stopped ticking and the agency agreed with that. And we still have to wait for the environmental licenses to drill. But we're sparing no effort, not only to advance, to obtain the license, particularly for PAMA. Because we've had some possible potential partners for that area, showing a lot of interest.

[Operator]

The next question is from [ Eric ] Bahia Asset.

[Unknown Analyst]

Considering the current proposal with a step-up approach for Atlanta's full development system, what is the life cycle expected for the field?

[Lincoln Rumenos Guardado, executive]

Thank you, Eric. Danilo is going to answer your question about the technical aspects and also the economic aspects, depending on the decision. So I turn it over to Danilo so he can share the current view we have today, even though we still are reassessing, checking several scenarios. So I give the floor to Danilo now. Over to you, Danilo.

[Danilo Oliveira, executive]

[ Eric ], thank you for your question. Atlanta Field design in the model 8 plus 4, has the life cycle expected to 2044. And when we go down in the number of wells, there is a slight drop in the total recovered volume. And production will be approximately for 17 year, up to 2040. So that's our current modeling. So it could be from 2023, plus 17 years or plus 20 years.

[Operator]

The next question is from [ Pedro De Marco ].

[Unknown Analyst]

Could you tell us more about the use of Manati as a reservoir? Do you consider to hedge part of the cash into dollars, owing to the CapEx of the full development system?

[Lincoln Rumenos Guardado, executive]

I'm going to turn it over to Paula to answer the question about the hedge. But I can start by saying that we thought a lot about the EPS in hedge, owing to this time line or the effect of the supply and demand. So the hedge policy didn't start today, but we are studying, and Paula can give you more color about how we've been working on this and also the most proper mechanisms. But the hedge policy, first, it was the currency and then commodities. And today, we can think about other mechanisms. So Paula is going to give you more information about the theory of CapEx of the -- considering our internal hedge policy.

[Paula da Costa Corte-Real, executive]

With regards to our policy, it is a market risk management policy. Like Lincoln said, we started hedging the currency, which was the exposure at the company at that time. And with the early production at Atlanta, we had a combined policy considering oil hedge and foreign exchange hedge. Although the pricing of Atlanta oil is dollar-denominated as well as Brent and discount are denominated in dollars, at the end of the day, there is a negative correlation with the dollar rate. It becomes even more flat in reals than in dollars. So we only consider this revenue flow as pegged to the dollar effectively in our policy from the moment we contract some kind of hedge to this flow. And the nonhedge part, percentage wise, it is pegged to dollar and another percentage is pegged to BRL.

So what do you do at the end of the day?

We have a combination of our revenue flow, cost and CapEx in dollars, and also how much I need of foreign exchange hedge on top of what already comes from the natural hedge from Atlanta's revenue. Our policy has a 3-year horizon. And it has decreasing percentage. Like Lincoln said, the stronger impact on our hedge position, be it then foreign exchange-related or commodity related, this is more in the short term. So we have a higher percentage in the first 6 months, and then it goes down in 7 to 12 and then 3 point 18 and then 33 months. For oil, we only have contracted for 12 months. With foreign exchange, it's a 36-month horizon. So today, all the next 3 years, and my commitments taken of CapEx and OpEx at a company, they are all embedded in this policy, and they're either hedged by the revenue of Atlanta Field or hedged by their own foreign exchange instruments. So we have some ranges that are allowed in the policy to build up this hedge. And this report happens on a quarterly basis for the Board of Directors, which is always following up the foreign exchange risk policy. But that's what we do. So full development system, once contracted, is embedded in the step-by-step policy, and we have hedge percentage of currencies that become higher. So I'll give the floor back to Lincoln. I think there was another part of the question related to Manati field as a reservoir.

[Lincoln Rumenos Guardado, executive]

I understood the question was about a reservoir for storage purposes. And undoubtedly, that's a possibility. Any field that is becoming depleted, it's natural. It's a naturally producing -- gas-producing field with installation for gas production. So it is a field that can be considered for future gas storage. However, we should always highlight that that's a very new activity in Brazil. And it will take a specific legislation. For instance, a producer cannot be a transporter. Theoretically, a transporter cannot be in the commercial aspect. So we still have a lot of progress to happen in the rules and commercialization to make it happen. But actually, it is a field that can apply, so to speak, is applicable to be used as a potential reservoir to build up gas. We started to check it out. Last year, we talked to partners, the operator, but I believe there was not an evolution precisely, owing to what I said before. It's something too new. We still -- it still entails some commercial risks, and that's something made by transporters. That's something we learn. We learned some techniques that supported us. Well, this is done by the transporter. And it just started to happen in Brazil, midstream. It started to unfold in Brazil right now. So there was no agreement to pursuing it more strongly because it doesn't happen in Brazil yet. But focusing on the technical and strategic standpoint and the position of the field in the Northeast shallow water with the right infrastructure, the answer may be yes. But we are postponing these efforts because in the short term, we don't believe we could dive into this scenario. At least for now.

[Operator]

Next question by Carlos de Jesus with CaixaBI.

[Carlos de Jesus, analyst]

The breakeven referred to Atlanta, is it Brent equivalent, or is it the final value?

[Lincoln Rumenos Guardado, executive]

I'll ask Paula and Danilo to be prepared to answer that. But the breakeven that we're talking about is normally the operating breakeven. It is what we need to practice when we're running the field, and that is under our control. There are other breakevens that consider amortization and a number of other elements but they are also very corporate. In other words, we can have offsetting in all of these areas. But the breakeven that we are considering, and the discounts linked to that are always related to the lifting costs, which are the costs that I pay to bring the oil from the reservoir to the FPSO and to treat the oil in the FPSO. This is what we use worldwide. Because the other breakevens depend on the business structure, the financial structure of each oil company.

[Operator]

Next question from [ Gustavo Lira ] of UFRN .

[Unknown Analyst]

Petrobras mentioned opportunity to sell their working interest of Manati. Does Enauta see any threats to its revenue with this possible sale? And for Atlanta, how does Enauta see the production performance of the existing wells in terms of production depletion? Are you planning any workovers in the wells for 2020 or 2021?

[Lincoln Rumenos Guardado, executive]

Thank you for the questions. I think that the first question has been partially answered, but Danilo can complement. We have a contract from Manati to take-or-pay contract. There are some duties from us and from the operator. And of course, we are -- we're having this conversation with the operator to mitigate problems. We understand that what happened was very, very much related to the moment, and Petrobras had to react. We understand. We understand the reaction, but we don't understand their claim that this is force majeure. We understand this is a temporary issue. But I believe that Danilo can add more to that, and he can answer your part of the question regarding operating behavior of the Atlanta Field. Perhaps Danilo can add to what I've answered, and then he can talk about Atlanta regarding the producing wells.

[Danilo Oliveira, executive]

This is Danilo. Okay, regarding Manati. Petrobras is putting for sale, their working interest of 35% of the concession. This is Petrobras, the operator. The gas contract is signed with "another Petrobras." It is a gas contract, and Petrobras buys the Manati gas regardless of who is going to be buying their 35% stake of the concession, the take-or-pay contract continues. Petrobras -- we continue with the obligation to sell only to Petrobras, and Petrobras continues with the obligation and the commitment to get the offtakes. So there is no relationship between the sale of the asset and the gas contract. As regards Atlanta Field. Since September, we've had all 3 wells producing. And they are producing according to our expectations and forecasts. In the last quarter, on average, we produced 29,000 barrels per day. In April, we continued the 29,000 barrels per day, and we expect and we'll definitely deliver to the guidance we gave you for 2020 of an average of 28,000 barrels a day, more or less 10%. I would just like to remind you that we are monitoring the behavior of the wells, pressure, volume of accumulated oil, and it is matching our forecast. So everything is all good, up and running at Atlanta.

Regarding workovers, we do not have any scheduled workovers for 2020 or 2021 or even for the future beyond that. As you will remember, the only workover that was expected for Atlanta would be to exchange the pumps, the ESP pumps. But since we have other pumps out of the well, if these fail, then we can use the bottom of the C pumps. So we don't expect any interventions or workovers at Atlanta Field.

[Operator]

We are now ending the Q&A session. I would like to turn the floor to Mr. Lincoln Rumenos Guardado for his closing statements. Go ahead, sir.

[Lincoln Rumenos Guardado, executive]

I would like to thank everyone for the effort to joining us today. I think that the dialogue we had here today was very rich. We tried to convey to you all of the challenges that we are facing, and I believe that you're also facing at the personal level, at the professional level, and I truly thank you all for joining us. I want to renew our belief that we'll overcome this and that we are making -- adopting all precautions to safeguard the health of our employees, of our people and for the continuity of the business and so that we can contribute to society. I thank you very much again, and I'd like to underscore that our Investor Relations department is always available. If you have any further questions, any further needs that perhaps we did not address here because of the limited time, we are available. We are all at your disposal for whatever you need using this technology.

And I would like to thank you very much for your questions, for your time. And again, I would like to thank all of our staff, our employees, to work from home, just like you, and to keep the company going, keep the company growing and particularly to be able to provide return to our shareholders. Thank you very much, and I hope to see you on board next time. Thank you very much, and thank you for the support of many of you, and the support that you gave to me and to Paula in these very challenging moments that we are living. Thank you very much. God bless.

[Operator]

That does conclude Enauta's conference call for today. Thank you very much for your participation, and have a good day.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]