Enauta Participacoes SA

BOVESPA:ENAT3

Earnings Call Transcript 2022-Q2

[Renata de Andrade, executive]

Good day, everyone. Welcome to Enauta's Second Quarter 2022 Earnings Video Conference. My name is Renata Amarante, and I'm the Investor Relations Manager, and I will be the moderator of this event.

Before we begin the presentation, I would like to make some important announcements. This event will be broadcast live with simultaneous translation into English. And the presentation will be available at the company's IR website as well as here on the webcast platform. After the presentation, we will begin the Q&A session. [Operator Instructions]

Before proceeding, let me mention that forward-looking statements that might be made during this 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 success. 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 can significantly affect the future performance of Enauta and can cause results to differ materially from those expressed in such forward-looking statements.

Today with us, we have our CEO, Decio Oddone; Carlos Mastrangelo, Chief Operating Officer; and Paula Costa, our CFO and IRO.

I would like to turn the floor now to Paula, who will make the presentation. Please, Paula, go ahead.

[Paula da Costa Corte-Real, executive]

Hello. Good day, everyone, and thank you for joining us in Enauta's video conference to discuss our second quarter earnings. I will start this conference call focusing on the highlights of Q2, the main events of the company during Q2. Our EBITDAX was BRL 490 million and operating cash generation of more than BRL 200 million. And with that, we ended the quarter with $313 million in cash. So again, we bring a very robust balance sheet from the financial standpoint to continue the projects that are underway at Enauta. In addition to these projects that are ongoing, I'd like to comment on the progress of the full development system. We have invested more than $200 million. This is the major project being developed at Enauta.

We continue on budget and on schedule according to the schedule established when the project was approved. Also from the operating standpoint, I'd like to mention the reduction in the logistics cost as we had the opportunity to mention in previous calls, operating efficiency is one of the pillars of our company. In Q2 '22, we bring a reduction as of May of this year of about $20,000 daily in the logistics costs of Atlanta. We also expect an additional reduction in operating costs by year-end in Q4 of this year of about 30%. Because of the FPSO chartering contract, in the contract structure there is a payment of an additional installment related to the Brent, and this payment has a cap. It will probably be attained sometime in Q3 of this year. And in Q4, we would no longer incur in this payment of this additional installment. And with that, we will enjoy an additional reduction of about 30% in the operating cost of Atlanta.

Lastly, I would like to mention something that we communicated to the market recently of the reserve certification report. We had a 50% increase in 2P reserves of Atlanta. This basically reflects the contract extension that we were granted by ANP. We used to have a concession until 2033. It was extended for another 11 years. So it stretches now until 2044. So we have an additional production, which increased substantially to reserves of Atlanta.

I will now move to Slide 4 and speak a little about our operating performance and the results of the company. From the standpoint of revenues, if we compare with the same period of last year, we had more than 100% revenue increase. Revenue more than doubled compared to the same period of last year. What contributed to that? First, we have a favorable environment. The oil and gas market is booming. The Brent price is way higher year-over-year.

We also had an increase in the working interest of the company at Atlanta. So when we look at the production of the company as a whole, today, we have 100% working interest of Atlanta. A year ago, in the end of Q2 2021, we had a working interest of 50% of Atlanta. In addition, we have the appreciation of the oil from Atlanta, which today enjoys a superior value in the market than last year. These factors combined result in a revenue increase when we compare to the same period of last year.

Talking about costs now on Slide 5. We have a reduction of lifting cost in this quarter. I had an opportunity to mention in the first slide that this is a constant effort by the company. We pursue operating efficiency. The reduction in logistics costs, although it hasn't impacted the whole to started in May. It already has an impact, driving down the lifting cost of the company. And this effect will continue in the upcoming quarters. I also mentioned that towards the end of the year, in Q4, we expect an additional reduction of 30% in our operating costs, again reflecting the company's pursuit for operating efficiency. In terms of sales revenue, we can clearly see in the graph an appreciation of the oil from Atlanta, reflecting mainly Brent prices in the international market.

Now moving to our financial results on Slide 6. It is important to mention the evolution of the company's EBITDAX. We reported an EBITDAX of BRL 490 million. And here, we bring you a series of 5 EBITDAX quarters. It is important to kind of equalize this series. In some quarters, we had nonrecurring events that need to be excluded for comparison's sake. So when we look at the second quarter of 2021, we had the result of the business combination. That's when we took over the additional 50% stake of Atlanta Field. And in Q4 last year, we had the impact of -- or the accounting of the last installment of the sale of the [ MS8 ].

So these are 2 effects, which are very relevant in terms of the results of the company. But there are actually one-off events. They are specific to these quarters. On the comparative base, they should be excluded. And then we can clearly see the evolution and the increase in the company's EBITDAX over the -- along the year. On the other chart, we see net income. Net income after the business combination. So it reflects both the operating factors that I had an opportunity to mention, but also the financial part and particularly exchange variation. Since part of the hedge policy of the company is having dollarized cash. And as we report our financials in Brazilian currency, exchange volatility ends up having a direct impact on the company's results. The fact that we have our cash in dollars is a company strategy to protect our ability to invest.

Given that almost 100% of our future investments will be dollarized as well. So in order to ensure the capacity to invest, we chose to dollarize the company's cash. So that has an impact on net income, which in this quarter totaled BRL 281 million.

On Slide 7, we can see the company's cash position and how the cash varied along the second quarter. We started the second quarter with a cash of BRL 2.4 billion, and we ended with BRL 1.6 billion. That's the quarter when we made relevant investments. In addition to the operational generation that we had on account of the production from Atlanta and Manati, an important part of the cash was used to invest both in the full development system of Atlanta, which we will mention in more detail later on in the presentation, but also in the early production system. And the work that is being finalized in vessel Petrojarl, the FPSO now in production at Atlanta. The Petrojarl work required about BRL 65 million invested, and we invested in the full development about BRL 440 million in Q2. In addition, as cash consumption, we had a dividend payout, which was quite relevant, BRL 450 million that happened in May of this year.

So now I'll turn the floor to s Mastrangelo, and we are going to get to the more operational part of the presentation. And I believe that he will have an opportunity to explain the evolution of the early production system at Atlanta, where we have pursued the extension of the chartering agreement of the FPSO to make continuity of production feasible until we have the full development in place so that we can start operating in the full development system. And he's going to update us on the progress of the implementation of the full development system of Atlanta. These are the 2 major projects underway at the company. And he will speak a little about the stratification recently disclosed by Enauta.

Mastrangelo, over to you.

[Carlos Mastrangelo, executive]

Thank you, Paula. Good day, everyone. On Slide 8, we give you more detail regarding the scheduled downtime of Atlanta Field. The downtime aimed -- have made the normative requirements of the Ministry of Labor and to prepare the FPSO for a recertification by DNV, the certifying body. This ratification will allow us to extend the FPSO on location beyond 5 years until we have the full development in place. We took advantage of the downtime to upgrade our ability to treat water. We have graded -- we increased the capacity by around 35% over the original capacity of water processing. We turned a separator from 2 phases to 3 phase, and that will allow us to separate oil, gas and water. We also installed a new water processing plant.

We took advantage of the time to reuse some equipment to replace some pipeline in addition to some general maintenance at the FPSO. Now we are at its final stage of the downtime. We are testing some lines. It's what we call final commissioning, so that we can have the start-up test, which should happen in the next few days. This kind of workover requires a start-up procedure that is very similar to a unit recently arriving at the shipyard. We need to test every flange. We need to have to start up system by system. So August will be a test month in gradual return of production. We expect to normalize production in September. We also try to bring forward the start-up of the third well that depended on a repair of the ESP, the pump, but it was not possible. We identified one extra problem that prevented us from bringing this repair forward, and we needed to keep to the original schedule.

So the third well will start operating by September end as we said before. We had an opportunity to mention that subsea pumps, ESPs, they require maintenance. And one of these 2 wells is already operating with a pump that has been working for longer than the usual average time for this type of equipment, which is usually 2 to 2.5 years. But if everything goes well, we'll have 3 wells producing by the end of September, achieving around 15,500 barrels produced daily.

Considering the early production system, we have to live with bumps that require frequent maintenance. So we want to have a reserve pumping system, but that will only be possible when we have the next well producing. We have contracted the rig, and it will start drilling in the last quarter of this year to have production starting in Q1 2023. And after that, then we are going to have a reserve bump, which will make the production system more resilient, was susceptible to pump down time until we deploy the full development system.

Now moving to the next slide, let's speak about the full development of Atlanta. In a nutshell, the project is on time and on budget. Since we approved the project, we have disbursed a little over $200 million, $84 million in this Q2 alone. But as much as possible, we wanted to anticipate our procurement to avoid market risks to reduce the risk of material supply to ensure procurement and commissioning of materials and critical items. And we did that before the turbulence in the global market. So going back to the past, just to show what has been done in February last year, we took on the commitment to approve in 1 year, our full development system. So we commissioned the full development system aiming to start producing in mid-2024. And we are on schedule.

On the slide, in this time line, we see the start of the bid in 2021, and there are some relevant cornerstones such as the extension of the chartering agreement of the Petrojarl, the commissioning and delivery of the Atlanta FPSO, which was just delivered last March at the shipyard in Dubai. We approved the development plan of Atlanta by ANP. And financially, we procured and commissioned all of the equipment, as I mentioned before. We are now receiving in August some subsea equipment that will be used in drilling the next well. We'll start drilling in Q4. In the photo, we can see the subsea Christmas tree that is being delivered now in August. As for the full development, all the technical procedural management is in place. The stakeholders committee, the steering committee, everyone is engaged -- everyone is involved in the project all aiming first oil in mid-2024.

On the next slide, I'd like to speak about the recertification of our reserves on Slide 10, please. For Atlanta, we had a 50% increase compared to the last reserves reported in December of last year in Q4 '21. This increase was driven mainly by the extension of the concession contract with 11 more years for Atlanta, the contract, the concession was extended until 2044. So reserves that were contingent were now considered to be. We also have the approval of another 4 wells by the end of the decade in addition to the 6 that will start producing in 2024. With this update, including Manati, which had its reserves recertified by 50% last year, we now have a total of BRL 166 million p.p. reserves.

I will

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about the strategic positioning of the company. I think the second

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the progress we made in the implementation of projects, as Mastrangelo mentioned. And I believe that this is exactly what we have been communicating to the market in the last few years. We want to strengthen the company's cash position in the short term. We want to be as efficient as possible in the operation of Atlanta, coupled with cash generation from Manati. We want to advance diligently in the implementation of the full development of Atlanta. Starting in mid-2024 once the system is implemented, the company will have a different production capacity and different capacity to generate cash. In the long term, eventually, we will explore other assets that will also bring value to the company.

In parallel, we have been working to optimize our capital structure of Enauta. We have a rather robust and deleveraged balance sheet. So we have space and we are a cash-generating company. So we have room to improve the capital structure to have another opportunity to create value for our shareholders. I will end the presentation here. I'll turn the floor to Decio, and I think he will comment more about the strategy of the company, our positioning and the next steps. And then we are going to open the Q&A session. Again, thank you very much for joining us today in our video conference.

[Decio Oddone, executive]

Good morning, everyone. It's a pleasure to be here again for another earnings conference call, particularly a call in which for another quarter Enauta delivers consistent and good results. Paula and Mastrangelo already made comments on it, but I would like to make some highlights about what's happening to the company right now. The most important thing this quarter is that we had strong cash generation. This is the most relevant to a company, particularly a company that has an aspiration to grow and investments already contracted as it happens with Atlanta's full development system to be completed. Against what we're living as a company right now is a concrete strategy that was implemented a while ago.

By moving on with certification of Petrojarl, we don't have the confirmation yet, whether we'll be able to have the certification to have Atlanta's FDS, but this is underway. And with the headway with the works of FDS, we are having the operating strategy that was designed a while ago and more recently implemented. This is very important. We have to bear in mind that if we hadn't had worked a lot to extend Petrojarl and approve the full development system, Enauta will be moving to stop production in Atlanta, expecting to have a full development system only in the future. I'd like to recall that until earlier this year, we did not expect to extend production in the early production system. And we have no definition about the full development system, no clarity about FDS.

In the best circumstances, we would stop Atlanta by 2023 and resume in 2024. But now we have a clear picture. We are closer to extend Petrojarl and have continuous production and to have the startup of FDS. And now we have FDS with contracts signed and works underway as Paula and Mastrangelo mentioned. So everything is on schedule and on budget. It's important to give this clarity to our investors, the company is following its path, and things are going on as expected.

So we are delivering operating results. I acknowledge we have to diversify our portfolio and optimize the capital structure like Paul said, should we have M&A or asset acquisition. We never like to speak of a specific project, but we keep on being very active. We had some initiatives that didn't work in the past. We are working on other initiatives and expect that in the future, I can share news about it to our investors. With the extension of Petrojarl and the possibility to continue production ongoing in Atlanta, what makes it easier and really benefits our cash generation, which is the most important at the end of the day, we work on efficiencies

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cost. And right now, like we said before, we'll significantly reduce operating costs with the FPSO. So this is very positive. And this will be reflected in our future balance sheet in a more straightforward manner, oil prices and gains of efficiency. We also mentioned before that the early production system was scheduled in the past to be shorter for a shorter time frame. As a result, the pumps that were installed in the wells or pumps with an expected life cycle of 2.5 years and because the project was designed to collect information rather to optimize production. By extending the life cycle of the system, we began to see problems with the pumps because we didn't have a scheduled backup up to then. Remember that when the project was approved, the consortium involved Enauta 30%, OGX 40%; and Barra Energia 30%. And next, OGX was in defo, so the consortium could not afford to approve redundant investments in Atlanta, and that's why we didn't have this planning at that time. But right now, with the extension of Petrojarl, the possible extension of Petrojarl and in a longer time frame, we've been managing to do though.

The third well is coming back, Mastrangelo said that we had a problem. And the problem was the following. We were bringing forward the start-up of the well to August. The pump was ready. However, there was a problem in the bench test before delivery last week -- actually, this week -- early this week. As a result, we expect it to bring forward early production in the third well to August, and we went back to the original time frame of September. And this is part of the game. We have to learn to live with it. And we expect that from the third quarter on, late third quarter, we have 3 wells producing. So let's place our bets that all the pumps that are there, keep on working. Mastrangelo said that there are some pumps that have been there for a while.

But starting early next year, I highlight the picture will change because then we have the fourth well. We'll be installing 2 pumps, 1 in the pump, another on the sea surface, and then our performance will be better. And because we have 3 wells and now we have 4, we're going to have a reserve pump. So our resilience, production problems next year will be improved and the vessel owing to -- because of the downtime that we just had for recertification and the Ministry of Labor requirement purposes, we had huge work exchanging the line, many equipment -- pieces of equipment, and that will bring better operational efficiency in the vessel from now on.

Like Mastrangelo said, it's not going to be something immediate. With this magnitude of work in Petrojarl, for instance, this is very complex. The downtime has been very successful. We had no safety problem. It's so hard to work with more than 100 people who are not used to working in such an offshore platform simultaneously. This is very positive. The downtime should have been completed already. However, July is the worst time, July and August is the worst sea condition in compass facing, if you were familiar with it. But that's the time we needed the downtime. It's not the best time of the year, but that's what we needed.

And that's why we had a lot of downtime owing poor weather, especially right now, when we're just about to stop, we had this typhoon. This tropical winds, strong winds in January, Rio de Janeiro and Sao Paulo, and we could not send more equipment, and we lost a couple of days, but the downtime is expected to end soon, and we'll come back with 2 wells. And until August, we'll be commissioning all these pieces of equipment. So it's a new unit that is coming along and will be up and running and it comes more robust, and I hope we can have certification to keep on working with Petrojarl by 2024 and '25. We expect conditions to be much better.

I would also like to comment that we've seen a big change in analysis profile. And this is an impact of having 100% Atlanta working interest. We've doubled it. And by doubling the production, we double cash generation. And if oil goes up, this impact is even greater. However, we've seen as well that this comparison of net income in a company like ours with business denominated in dollar and cash in dollars to face investments in Atlanta's full development system. Please bear in mind that this project requires more than $1 billion investment. So net income is not the best comparison parameter. The best parameter is operating cash generation. So if we had a balance sheet denominated in dollars, if the functional currency were dollars, then it wouldn't be an issue, and we are assessing this.

However, net income is not the best parameter like I said. If you have high cash as we have denominated in dollars, when dollar rates are higher compared to BRL, we have a depreciation. And when dollar rates go down, our cash goes down, it has an impact on net income. The first quarter net income was negative, even though cash generation was very good, that's a reflex of exchange rates. This quarter, our net income was high, stemming from cash generation plus the appreciation of the U.S. dollar. If I'm not mistaken, the U.S. dollar was BRL 4.75 or BRL 5.24 or BRL 5.25 by year-end and now BRL 4.75, BRL 4.74 by the end of the first quarter and now BRL 5 point something by the end of the first quarter and now coming back again. So this volatility is just an illusion. What really matters is our cash generation. The company cash is in dollars and will be used to grow the company. We focus more heavily on cash generation.

Another highlight and something that impacted this quarter was that Sergipe well. Unfortunately, it was a dry hole with a massive investment. However, it's nonrecurring. So we don't see a visible horizon with another exploration well that might bring the same kind of result. So we still have our commitments with ANP, the minimum requirements that will be managed in the coming years and months.

Another comparison that is not the best, in my opinion, is to compare cash generation at Enauta and net income at Enauta comparing the first half or particularly the second quarter of 2022, with what happened in 2021. Paula said, and I want to highlight, we had 2 events that were very important, and they will not be repeated in a company. The first event was at the end of the second quarter when we took over Barra Energia's working interest in Atlanta. This generated increase in our EBITDA. We included more than BRL 1.1 billion in this business combination, which was a nonrecurring event. It is not going to be repeated. So it cannot be comparable comparing Enauta's cash generation between the first and second quarter of 2022, with 2021. We would have to exclude this nonrecurring event. And then cash generation will be greater. And the same goes for the last 12 months. We also had the event of Carcara sale many years ago, but it was a remaining portion, which was relevant, BRL 781 million, and we accounted for at the end of the year.

So when we check cash generation and EBITDA and Enauta's income in 2021, which was BRL 1.4 billion. This result, although in the operating numbers it was very good, it was extraordinary with a nonrecurring event. So if we want to compare what's happening at the company right now, we have to consider the operating aspects and the behavior is very good, and it stems from the strategy and the company's operation, and we're very happy to deliver this, and we thank our employees for delivering these results.

We've also been working in efficiency, not only in our operations and production, but also in the company as a whole. We've just implemented a new management system, SAP, and it greatly improves the efficiency of the company. You may have noticed as well something that I've been discussing with our team, an increase in our reporting efficiency. Now we have more agility, and we can post our results earlier, which is good to our investors and for anyone who follows the company. This stands for improved efficiency that Enauta reflected in several areas of the company.

Enauta is a company pursuing to have a balanced portfolio. Paula said it already, but I want to underscore it. We want to take assets from production, improving reserves in Manati, in Atlanta. We're also improving production in Atlanta. No other independent companies has such a growth or short-term production growth plan as we have in Atlanta. This is very positive. And I'm confident this is going to reflect appreciation in the company in the coming quarters. But we keep our eyes open to optimize our capital structure, like Paula said, and to diversify the portfolio. Like I said, we keep on working in this direction, and I'd rather not give any guidance right now. I see other companies talking about targets and acquisition, we want to be more modest here. And unfortunately, we've been very cautious with that because oil prices really increased very much. So we want to bring more efficiency to our company, but rest assure investors that we're keeping our eyes open.

And lastly, I just want to underscore that everything that we said and how happy we are with the results delivered is an impact brought by the whole Enauta team, and we want to appreciate it. It's the only independent company in Brazil, which managed to implement such a project of oil production in deepwaters, greenfield without needing to acquire another installation or facility of a bigger company. So our technical expertise and our team is being reflected in our results, and I want to congratulate our team.

So this is my remarks. And now I turn it over to Renata. So she can manage the Q&A session. Thank you very much for your attention, and I'm sorry, I took so long.

[Renata de Andrade, executive]

Thank you, Decio. We will be starting now the Q&A session. [Operator Instructions]

The first question comes with Tacio Vasconcelos with USB.

[Tacio Vasconcelos, analyst]

I'd like to ask few questions. Decio, the first question maybe thinking about Atlanta conversations, I just want to confirm if there is any conversation ongoing with a potential partner or you just want to be on your own, and this is a 100% decision, and this is the scenario expected down the road.

Second question maybe directed to Paula about cash position. We've seen a reduction in the quarter with investments in Atlanta and also dividends in the third quarter. Maybe there is also an impact with a scheduled downtime and continue with investments. So I'd like to better understand your mindset for future disbursement, timing or perhaps additional funding. I know you already mentioned this, Paula, but I'd just like to insist in this topic with more detail. These are my questions.

[Decio Oddone, executive]

Thank you for the questions. First, about Atlanta. Like we said before, we made the decision to continue 100% with the project. This is the best destination we have to our cash and also for the company's cash generation in the coming months. Today, Atlanta is 100% Enauta. We are 100% focused on it. No open discussion in terms of divestment in Atlanta. We believe the potential value to our investors in the new scenario of oil prices is very big. And it's hard to see or find opportunities that generate so much value as investments in Atlanta.

As for cash, like I said, I turn it over to Paula to answer the question.

[Paula da Costa Corte-Real, executive]

I apologize. Maybe I have a problem with my audio. And I didn't hear -- I didn't listen your question. So I ask Renata to ask the question again, so I can answer it.

[Renata de Andrade, executive]

Tacio, would you mind asking your question again?

[Tacio Vasconcelos, analyst]

Sure. Can you hear me now, Paula?

[Paula da Costa Corte-Real, executive]

Yes, I can hear you now, Tacio.

[Tacio Vasconcelos, analyst]

The question has to do with cash position. There was a reduction this quarter with investments in Atlanta and also dividends. We all know that in the second quarter and including the scheduled downtime and continued investments, maybe we'll see another impact on cash. I know you made comments in your presentation, Paula, but I wonder if you could have more color on your mindset about future disbursements and timing and perhaps additional funding to move forward with these investments. This is my question.

[Paula da Costa Corte-Real, executive]

Okay. So we closed the quarter with approximately $300 million in our cash. Actually, we have significant CapEx for the coming months to implement Atlanta and also cash generation over this time frame. One of the points that we also mentioned is the opportunity we have to improve our capital structure. Today, Enauta is a cash generation company. Our balance sheet is nearly deleveraged. So it makes sense to the company with 2 projects in production to pursue this optimization of the capital structure. Having said that, I believe today, our balance sheet is robust. Our cash position is also robust. And combined with all that, we expect to finance this investment.

As for dividends, the company has a dividend policy, BRL 0.15 per share, so about BRL 48 million in the year. And in the past, we had additional payout of extraordinary dividends. And overall speaking, when we identified cash access, it made more sense to pay out and bring liquidity to shareholders rather than keep on having this robust position. So Enauta has a history for the last decade of having a very significant cash position. So I believe the priority of the cash is to invest it in activities in Atlanta's project and added to that, also the possibility to optimize the capital structure. So I guess that's the dynamics for the future, in my opinion.

[Renata de Andrade, executive]

Our next question comes from Leonardo Marcondes with Bank of America.

[Leonardo Marcondes, analyst]

Can you hear me?

[Renata de Andrade, executive]

Yes. Perfectly.

[Leonardo Marcondes, analyst]

That's great. To start, I would like to understand a little better this cost reduction at Atlanta. Could you please give us more color on these reductions that you announced? What exactly was done to optimize the logistics cost? And how is this Petrojarl contract linked to the price of brand? And I would also like to know about the lifting cost. What could be the lifting cost that the company could achieve once all of these measures have been implemented?

Second question about M&A. I know that you don't like to talk about that a lot. But I just want to get a little more color on that and thinking that the Petrobras divestment program, at least for upstream is practically coming to an end. Could you give us some color regarding the company's strategy to grow inorganically? Are you still considering onshore assets? Are you willing to focus on this kind of asset? Or can we start thinking about Enauta investing abroad?

[Decio Oddone, executive]

Well, I'll start with the last question, and then I'll turn the floor to Mastrangelo to speak about logistics costs. We have no prejudice. We want to create value. That's all. It could be onshore, it could be offshore. Whenever we have an expectation of generating value at the right price with the right conditions, preferably in Brazil because that's where we have our expertise, but it doesn't mean that we cannot invest abroad. The conditions will need to be a little different in terms of structure and size of the opportunity. But we keep our eyes open to this kind of situation. We acknowledge that with the Brent price over $100, it is more difficult to buy an asset.

But I mean, there is nothing that I can say clearly right now because we don't have anything at a completion stage, but we are attentive, and we prioritize opportunities where we see the right conditions to create value for our shareholders. We don't make acquisitions for the sake of making acquisitions. We have growth with Atlanta, what we are seeking is diversification. Increasing production, yes, but increasing our cash position by diversifying our revenue and cash streams.

As for operating improvement, we have been gradually increasing efficiency at Atlanta. We have improved a lot our logistics costs, we reduced the number of vessels. We reduced one more vessel recently. That's why we have this announced reduction of $20,000 daily. We had a negative impact in terms of logistics costs, but it was positive for the company as a whole, which is Brent price increasing when oil price increases, diesel price increases, and diesels are major cost item for the FPSO.

So there was a connection with the diesel price that increase. But on the other hand, we had the oil price increasing. And then Mastrangelo can speak more about that. But regarding the FPSO, so in the past, we negotiated with [ Opera ], the FPSO operator. Regarding some costs that they incurred to convert Petrojarl for the Atlanta conditions. This was translated into a kind of additional daily rate that is going to be paid in function of the oil price.

With the increasing oil price, the payment of these installments also accelerated. So now you're honoring these payments in the coming weeks. And after that, we are going to have a significant reduction in the cost to operate Petrojarl, and this is going to have a reflection in our lifting cost. And with the expected extension of the Petrojarl contract, until 2024, we will have the vessel operating at a much lower daily rate than we were experiencing in recent months. And Mastrangelo can give you more information on that. Mastrangelo, over to you.

[Carlos Mastrangelo, executive]

Thank you, Decio. Leonardo, to summarize what Decio mentioned, I think that the project changed phases. Initially, our goal was to understand the reservoir, what we were going to need. And we established a certain number of support vessels for that production system still in the initial phase. Now once we achieved a certain maturity that we already knew exactly what we needed to have production at the field. The number of support vessels needed, which is the logistics, the highest cost, except the FPSO. It's all the air and the support that we have.

So we optimize everything. We released 1 vessel that was at our disposal full time for subsea operations. We now knew the real need, so we decided to exclude this vessel and higher it only when necessary. So that brought a significant reduction in costs last year. And then we move to another phase, which is to have an emergency support system that would meet the needs of the field. So now in May, we excluded one more vessel. The impact could have been greater, and it wasn't because of the diesel impact, which is a significant logistics cost for us. But still, we gained on the other side with the sale of the oil. So another consequence. So these were the main reasons explaining the logistics cost reduction. In the case of the FPSO contract, we prepaid this "amortization" of this investment during the implementation phase of the FPSO Petrojarl. With this effect, there will be a significant reduction in our daily rate. So in a nutshell, these were the reasons explaining the optimization and reduction of our operating and logistics costs of Atlanta.

[Renata de Andrade, executive]

Next question by [ Luiz Eduardo with Cuatro Investments ].

[Unknown Analyst]

Can you hear me?

[Renata de Andrade, executive]

Yes, perfectly.

[Unknown Analyst]

I just want to get more detail regarding the nonrecurring EBITDAX event. Could you explain what happened in Q2 2021? Could you refresh my memory, please?

[Decio Oddone, executive]

I'm going to start answering, and then I'll turn the floor to Paula. In Q2 2021, we had 50% working interest of Atlanta. So Enauta's production was half of what it is today, and the oil price was lower. So if we compare the EBITDAX of that quarter with the equivalent quarter, we did a lot better. But in the end of the quarter, we also took over at no cost, the remaining 50% working interest of the field that belong to Barra Energia, BRL 1 billion in EBITDAX, if I'm not mistaken. And this was reflected in the EBITDAX of that quarter. But that is a nonrecurring event and extremely favorable for Enauta because we had the additional 50% working interest of the field, and this will translate in half of the production belonging to the company at no cost whatsoever.

So to compare EBITDAX, in Q2 2022, with EBITDAX of the equivalent quarter in 2021, if we look at the numbers, it is an unfair comparison because this is nonrecurring effect of 2021. Anything else to add, Paul.

[Paula da Costa Corte-Real, executive]

Decio, it is exactly that. Actually, what happened was that in the end of June of last year, we had the approval by ANP to transfer the 50% stake of Atlanta that belonged to Barra Energia. And the way to reflect that in our accounting figures is through a business combination. For that, we have to have a fair value of the field and the impact of lease 50%, about corresponding to BRL 800 million of EBITDAX in Q2. But that is a one-off effect. It is just the accounting effect that we took over the additional 50% working interest of Atlanta from Barra at no cost. And as you mentioned, the financial effect of that will happen along the life span of the project. But when we look at EBITDAX, specifically of Q2 2021. When we compare with Q2 '22, we need to exclude this nonrecurring event so that we can work with comparable basis. And then we can see that production really increased now that Enauta holds 100% of the field and the result of the Brent price.

[Decio Oddone, executive]

I said BRL 1 billion, but it was BRL 1.1 billion, but the effect on the EBITDAX was different, around BRL 700 million. So Paula, what is really the number, the effect was BRL 820 million on the EBITDAX. I said BRL 1 billion, but there are other effects that also need to be taken into account. So I just wanted to correct BRL 820 million.

[Paula da Costa Corte-Real, executive]

Thank you very much. It's very clear.

[Renata de Andrade, executive]

The next question comes from [ Luiz Fabio ]. I'll read the question. Considering the end of oil -- Atlanta's oil contract to Shell in 2022 in December, and it may be used as bunker and fuel oil without refining purposes. Is it possible to sell it as a premium vis-a-vis Brent price?

[Decio Oddone, executive]

Our expectation is to extend the life cycle of Petrojarl, and we're also discussing the extension of the contract. We expected to stop production in Atlanta early next year. And therefore, this oil sale contract had the same duration. And now we're just about to conclude conversations on signing a new agreement, a new contract, sales contract of this oil that would cover this additional time of Atlanta's life. And as soon as we come to a decision, we will be making it public.

[Renata de Andrade, executive]

Thank you, Decio. This concludes the Q&A session. I'd like to give the floor once again to Decio for the final remarks.

[Decio Oddone, executive]

Thank you all for your attention, for your time. Once again, we want to highlight that Enauta is operating results, have been growing substantially. They don't only stem from oil prices, but they also come from the company's operation, operating efficiency, production to benefit from good times, and we are getting ready more and more to benefit from this good moment that we have in the oil market, which is expected to continue for a while. So we're doing the right operations and keep them working to diversify our portfolio and find opportunities of inorganic growth through M&A, and we expect to have news to share as soon as possible.

And I thank again all the results achieved and delivered by Enauta's team and the support from our investors and shareholders. Thank you very much. See you next time.

[Renata de Andrade, executive]

This concludes Enauta's earnings conference call. Thank you all for joining us today. Have a great day.

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