Enauta Participacoes SA

BOVESPA:ENAT3

Earnings Call Analysis

Enauta Targets Robust Growth and Efficiency

Enauta’s third-quarter earnings call illuminated strong performance, notably the significant progress in the Atlanta project, including six completed production wells, a 15-year chartering contract for FPSO Atlanta, and the issuance of environmental licenses. Governance restructuring led to a mostly independent Board. Capital allocation was bolstered by BRL 1.1 billion from a second debenture issuance. With over $400 million in liquidity, the company positioned itself for both organic and inorganic growth, eyeing potential acquisitions. Oil production resumed early November at pre-existing levels with upgraded technology. Enauta remains focused on delivering a fully developed Atlanta field by mid-2024 and is also exploring the development of Oliva, a potential Atlanta phase, with budget considerations set for the second half of the next year. While managing supply chain and equipment challenges, the company reported robust reserves, a strong balance sheet with $732 million net assets, and is preparing for mid- to long-term financing efficiencies.

Steady Progress and Solid Capital Position

The company has maintained a robust budget with over $400 million in cash and cash equivalents as reported in the third quarter of 2023. This financial strength is underscored by the successful beginning of credit receivables related to the FPSO Atlanta, reflecting prudent capital allocation. Furthermore, the balance sheet shows a healthy net asset base of $732 million. Management emphasized this robust financial position in the context of both organic growth and the potential for inorganic activities within Brazil's oil and gas market and other regions.

Sailing Smoothly on Schedule

Signaling confidence in its flagship Atlanta project, the company reassured investors that all key project milestones, including drilling, engineering, early construction, licensing, and financing are on track. The Board of Directors remains committed to the first oil from Atlanta by August 2024, as initially scheduled back in February 2022. The reported advancements hint at a well-structured and rigorously observed project timeline that bodes well for future production. Additionally, the slated budgetary provisions for the subsequent year suggest detailed planning for the assessment and possible development models for the adjacent Oliva field.

Aligning Interests with Long-Term Incentive Plan

A consistent theme in the call was the formulation of a long-term incentive plan, pivotal for aligning the company's leadership and wider team with its strategic objectives. This plan, which is expected to be endorsed in the coming quarter, aims at retaining talent and incentivizing the team through a blend of restricted stock and stock options. Such measures would presumably align the fortunes of the company's personnel with its stock performance, reflecting a compelling proposal for ongoing and prospective team members.

Maintaining Confidence and Control in Operations

Drawing lessons from the early production system at Atlanta, the company has transitioned to a comprehensive development system capable of managing significant water production volumes throughout the field's lifecycle. A substantial boost in project confidence has been realized from the pilot operations, reducing the overall risk profile for the fully developed system. Moreover, steady progress is seen in the Oliva field development, with the potential for a straightforward stand-alone system which could be approved by the end of the next year.

Market Positioning and Product Monetization

Confronted with questions about Enauta's next strategic steps post-Atlanta and the evolving landscape of Brazil's oil and gas sector, executives elucidated their active engagement in portfolio management. They appeared keen on exploring how market consolidation and the entry of new competitors might influence future directions. The upcoming milestone of Atlanta's first oil also prompted discussions on commercialization strategies, highlighting the need for effective monetization given the heavy but low-sulfur quality of the oil extracted, which holds a high market value.

Earnings Call Transcript 2023-Q3

[Operator]

[Interpreted] Good day, everyone. Welcome to Enauta's video conference call to discuss Third Quarter 2023 Earnings. Before we begin the presentation, I would like to make some important announcements. This event is being broadcast live with simultaneous translation into English. The presentation is available for downloaded Enauta's IR website as well as here on the webcast platform. After the presentation, and 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 performance. They involve risks, uncertainties and assumptions as 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 the company's CEO, Decio Odoni, the Chief Financial and Investor Relations Officer, Pedro Medeiros and the Chief Operating Officer, Carlos Mastrangelo, who is connected from Dubai. I would now like to turn the floor to Mr. Pedro Medeiros. You may begin, sir.

[Pedro Rodrigues de Medeiros, executive]

[Interpreted] Thank you, operator. I'd like to thank you for joining us in this video conference call to discuss third quarter earnings results. We prepared a summarized material of our plans that we expect to execute and then now -- and talk about the performance of the quarter, both from the financial and operational standpoint. I'd like to discuss the evolution of our main project, the delivery of FPSO Atlanta and the conclusion of Atlanta Phase 1. And I'd like to discuss with you the capital allocation strategy of the company. So this quarter, we'll start with the highlights, moving straight to the point. Third quarter was a very event-rich quarter and also in terms of performance, and these highlights are divided into many aspects. First, regarding the Atlanta project. We crossed some milestones and status of high risk in the execution of the project. I highlight the completion of the 6 production wells at Atlanta Phase I. The transfer of FPSO Atlanta to instant after exercising a purchase option of the equipment. And then started a 15-year chartering contract. Number three, the issuance of environmental licenses associated with Phase 1 of Atlanta. And therefore, the start of the entry campaign of the platform. We installed a number of Torpedo anchors that will handle the platform and part of the subsea equipment to connect the wells to the equipment. In parallel, the company also went through a number of changes. Among them, the consolidation of an independent governance, the company changed its ownership structure, which determined a broad review and restructuring of our Board of Directors, which became basically mostly independent. Regarding our capital allocation in this quarter, we concluded the issuance of our second debentures reinforcing the balance sheet of the company by BRL 1.1 billion. More than that, looking forward, we have a wide map of deliverables, and we are working hard and we are very much focused on these deliveries. In Q4, we can already return or resume production at the Atlanta pilot system. This resumption occurred now on November 5, and we are returning production to levels very similar to the best moments of the pilot system and already counting on technology, which is slightly better than what we previously talked about. In the short term, we also have some events associated with governance and the company's transition to a company closer to a corporation. Among them, the Board of Directors discussed a long-term incentive plan associating compensation of a good part of the company's team to the company's appreciation in the long term, very soon will you will be invited to the first [ day ] of Investor Day to take place in December. Next slide, please. In this case now, I will turn the floor to our COO, Carlos Mastrangelo, who is in Dubai at this point, and he will speak more about Phase 1 of Atlanta and how the project is evolving.

[Carlos Mastrangelo, executive]

[Interpreted] Thank you, Pedro. Now to continue the Atlanta project, I am now in Dubai arranging the details for the FPSO relocation next year. We finished the second dry docking. We'll have the last one in the beginning of January. It is the last one so that we can do the maritime tests and relocate the unit to Brazil. As mentioned by Pedro, this FPSO will go directly to location to be connected with the system of ties and anchoring that is being installed now during the campaign to install the system that will allow for a direct interconnection with the FPSO, anchoring the FPSO instance. We already have the license for installation, soon after that we'll connect the risers, the flexible risers. And the schedule is going on budget and on schedule. First oil is expected for August, this is a robust date for our project. On the next slide, please. Here, I have a couple of pictures of the subsea pumping equipment. They are also a critical part, and this equipment will be delivered by year-end. We have 3 pumping modules. The first one has been completed, it will be completed by year-end and after that, it will be transported to Brazil. Should be arriving by February or March, but everything is moving ahead as planned, no deviations, all as planned and on budget. The risers are also being delivered and will be all delivered by year-end in the beginning of next year, they should be going to Brazil. So it's all on schedule, on budget as approved last year. So I'll turn the floor back to Pedro.

[Pedro Rodrigues de Medeiros, executive]

Next slide, please. Now talking about the results of Q3. In a very summarized way, we present this slide to practically underscore that this quarter was deeply impacted by the Atlanta production stoppage and some events that occurred at Manati Field, particularly it will production in the month of September, and this production has already fully recovered. And this was due to a specific seasonality in the natural gas market of that region. Secondly, this quarter was also marked by some important reviews in the company's capital allocation strategy. Among them, the choice made by Enauta to assign its stake in the Espirito Santo Block that led to an accounting write-off impacting our results, but this has no direct impact on the cash, but impacting the accounting results of the quarter. Next slide, please. Having said that, I think it is worthwhile highlighting that resumption of production at Atlanta makes us now focus on the future results of the company. Q4 results should already post a recovery and a full recovery of our production expectations at Atlanta by year-end. In the beginning of November, the company was capable to return production of the first well. Well, Number 5 with production stabilized at around 12,000 barrels a day. We have a schedule of implementation and return of production of the next wells at Atlanta Field. And this will return the production rate at the end of December, close to the levels presented in the pilot project, historically speaking. In parallel, also in the natural gas market, as I mentioned before, Q3 was impacted specifically by an exceptional market event that occurred in September. October data already show productivity returning to what is expected from Manati Field, still below the operating capacity of the field. But along Q4, our expectation is that we'll return production fully to what is expected along the month of December. Consequently, Q4 results and future results of the company will be a better reflection of the potential financial results that these 2 fields provide to the company. On the next slide, trying to translate this into the financial aspects. We have these 2 charts that show the potential net revenue of the fields linked to production levels. And in parallel, the performance of operating costs, cash of the main projects in terms of oil and natural gas. If we look at historical levels, we can see the level of operating leverage and consequently, the expected margins for the project, given that production will be returned to regular levels. Second point, operating cost and cash are presented in local currency. In foreign currency, these costs are relatively stable with a strong discipline by the company in terms of operating costs of the company's main projects. I just want to underscore the potential margins at the moment that we return production to expected levels. Next slide. Talking about capital allocation. The company recently had the approval of the budget for 2024. We have some new facts to show. On the left-hand side, we show a historical evolution of CapEx of 2023, and we underscore here the recent performance and mostly the completion of risk steps that were very deep and also very significant in the execution of Phase 1 in Atlanta. They were overcome allowing us to optimize our CapEx for 2024 and also the end of the completion of this project. Going forward, it's worth mentioning that our expected total investment until first oil of $285 million, will be added to investment of $95 million approximately to conclude Phase 1 in Atlanta, however, expected to happen after delivery of first oil, also considering the cash flow for the first wells coming from this project. The second highlight is a budget approval, specific approval to move forward and speed up potential development in Oliva Field. Oliva Field is an oil field which share several characteristics with Atlanta's, 15 to 20 kilometers away from Atlanta Field. Very special characteristics associated to Oliva's development. Right now, Oliva is a project that is expected to be part of one of the future phases of Atlanta and we're already earmarking a specific budget to try to speed up the development and monetization of the field. This decision, as we saw on the previous map is expected to happen over the second half of next year. Next slide, please. Last but not least, capital allocation, we highlight the robust budget of the company. We have more than $400 million cash and cash equivalent posted in third quarter 2023. This quarter was also highlighted by the beginning of entering into credit receivables, which are long term associated to FPSO Atlanta. This is one of the assets that were created owing to the option exercise to purchase the equipment. This was exercised by our contractor [ Insoo ]. And here, we show the balance sheet with net assets a very robust base, $732 million, which is comparable to a long-term schedule of debt amortization, which allows the company to have a special look not only in organic growth steps but also potential resumption of inorganic activities in the oil and gas market in Brazil and in other regions as well. Next slide. Now I give the floor to our CEO, Decio Odoni, so he can make more comments on partnerships and portfolio management.

[Decio Oddone, executive]

[Interpreted] Good morning, everyone. Thank you for joining us in this call about the earnings of the third quarter. Pedro and Mastrangelo already shared the operational aspects. As a reminder, this quarter was affected by the production downtime that was scheduled to resume in September. But because we have logistical challenges to have access to the equipment to be installed in the pilot wells in Atlanta, we expect it to come back with 2 wells as we previously mentioned. And this gives us an expected leverage in our production for the future. In Atlanta, like Mastrangelo said, we're moving forward on time, on budget, and we have a license for installation, launching debentures, which gives some confidence in capital structure and Atlanta Phase 2 is very well aligned with Oliva. Oliva is an opportunity that is part of the ring fence, which is Atlanta's Field, it's an opportunity that combined with the development of Phase II in Atlanta, another potential area in the same region inside and on sale block may bring a production cluster to Enauta. And in the future, we may capture a lot of logistical and operational advantage, creating an area that can bring good results for us. This portfolio management that we've been ongoing working on, and we are enhancing right now has an assumption of some risk criteria, investments and return terms. Based on that, this quarter, we decided to move away from Espirito Santo. Owing to this precise parameter, this is a high-risk project, high investment rate and long term of potential, which does not fit in the projection or project portfolio that Enauta is pursuing. So we keep on working on portfolio management both in terms of our current portfolio and also other potential opportunities to expand the company, always respecting this criteria of risk investment, return time and level of return. With that, I close our presentation that we had for today, and now we'll be here to take questions that you may have. Thank you.

[Operator]

We will begin now the question-and-answer session for investors and analysts. [Operator Instructions] First question, Luiz Carvalho with UBS. Please is you may begin.

[Luiz Carvalho, analyst]

[Interpreted] I have a couple of questions, but perhaps I'd like to address 2 or 3 questions, and if there is time, I can come back for a follow-up. Firstly, just to have an update, a more qualitative update about Atlanta side. Is there anything specific, not only the start-up of the FPSO like Mastrangelo said, but anything new about your confidence in the project? It would be interesting to know. And concerning this, what about the potential development of Oliva considering the distance between both fields? Just to confirm, this involves a tieback with the same unit, right? Second question, this is about the long-term incentive plan. Pedro, that's something that we discussed a while ago. I wonder if you give us more color on what is being designed. You already said that naturally, there is a big correlation with the price of stock. It would be interesting to have more color. And last but not least, is there any additional thing about what you expect to see about reserve certification for early next year?

[Decio Oddone, executive]

[Interpreted] Thank you, Luis. I had to write down 3 questions, right? So when it comes to Atlanta, Mastrangelo can add more details later on if necessary. But this is on schedule, on time, on budget. We managed to overcome some critical activities of the project, like drilling, engineering, early construction, not to mention licensing and financing as well. So we keep on working on that schedule, August 2024, which was always the deadline established back in February 2022 when we approved it with the Board of Directors as a date for first oil Atlanta, and it containers as such. As for Oliva, we've just approved the budget that is more concentrated by the end of next year to evaluate and assess the potential and also the model of development of the field. Please bear in mind this field was developed a while ago by another consortium. Shell introduced to ANP development plan, which consider drilling of 8.8 wells in Oliva and 3 injector wells. It never happened so we are revisiting this work and by the end of next year, we expect to have our definition, our decision on how to work on this operation. If it's via tieback or maybe including a stand-alone unit, that's a project that may open the door to other fronts for Enauta in the region. I said a lot about the incentive plan. So Pedro, maybe you can tell us more about this and then Mastrangelo can talk about certification.

[Pedro Rodrigues de Medeiros, executive]

So just let me add to the comments about the long-term incentive plan, and then I turn it over to Mastrangelo to talk about Oliva. Like we said before, this is ongoing at the Board. The Board's priority -- and by the way this discussion is becoming more mature in recent months. The focus of the program is a program that aligns to have a long-term alignment between the officers of the company, all the teams at the company and the idea is to be a far-reaching program, including the whole company. In a very competitive manner, we want to retain our professionals and bring more on board for Enauta's growth journey. We expect this plan to be approved over Q4, and it should include both restricted stocks and also auctions in order to appreciate the share and the stocks via certification of different signs of appreciation of the company. So this is all I can say for the moment. But by and large, we expect this negotiation to migrate to a potential decision in Q4.So just adding to the question, Luis, about our confidence in Atlanta, we learned a lot with the early production system. The problem we had with water production, with higher outflow. So we moved into the full development system, which is able to process a lot of water until the life cycle of the field. So when it comes to confidence, we learned a lot. The pilot study played its role to teach us more about this project to lower the risk in the full development system. As for Oliva, I think as you talked about it already, we're moving to a simpler stand-alone system. We do well trying to have the project approved by the end of next year. And the last question was about certification, right? We don't expect to see any changes. Everything is in line with the previous certifications.

[Operator]

The next question is from Mr. Gabriel Barra with Citi.

[Gabriel Coelho Barra, analyst]

[Interpreted] Hello Decio, Pedro and Mastrangelo, I'd like to ask 2 questions and perhaps a follow-up. In terms of capital allocation, I think that there is not much doubt regarding the short term of the company and the focus on Atlanta. But one of the questions I get frequently is what is the next step? Something that there has been a lot of discussion about the consolidation in the oil and gas market in Brazil, the arrival of new players, how this is going to play out. So how do you see Enauta in this process? I know this is a recurring question in the calls, we're now getting close to Atlanta's first oil. This becomes a more important point when we look at the midterm of the company. So if you could elaborate on that and perhaps put into context your portfolio of exploratory assets in Brazil, a broad farm out of Atlanta, if we can think about that. My second question is about commercialization. We're getting closer to Atlanta's first oil. How are you going to be thinking the selling, the commercialization of Atlanta's oil? It's a heavy oil, but it has high value given the low sulfur content. So how can you monetize this oil in the best way possible? And last question, a follow performance Mastrangelo on Oliva, could give us the time line just so we have a clear time line in terms of what to expect of CapEx? I know CapEx is approved for 2024 but what are you planning of total CapEx for 2025? How should we think the time line? Thank you very much.

[Decio Oddone, executive]

Thank you and welcome to the call, Gabriel. The question on commercialization will be answered by Pedro. And the update of Oliva will be answered by Mastrangelo speak about the next steps of in Enauta. We are focused on delivery Atlanta, on budget, on schedule. But we are already seeing that this moment is coming soon. places an Alta in a different position. We continue to assess opportunities, as I mentioned before. Opportunities to expand our portfolio and to diversify our portfolio that is important for a concentrated company like ours, but always respecting the criteria we use to manage our assets. I'd like to remind you that in exploration, we've been doing this kind of work. We still have a position in the equatorial margin for Amazonas, Parana [Indiscernible]. We continue to evaluate those prospects but no decision has been made to fully invest in these assets. We have a position in Parana, which is very promising in the gas area in the region close to a consumption area with low CapEx, high risk, low risk CapEx. If we are successful, this can be very interesting. And we continue to look at assets and other opportunities which are not in our portfolio. But any move we make needs to respect the criteria we have in terms of risk, cash generation, time to return on investment. The assets need to add something so as to create value for our shareholders. These are the criteria we continue to take into account to manage our portfolio and when we evaluate future opportunities, when we start living this new moment for the company. I'll turn the floor to Pedro to speak about commercialization, and then Mastrangelo will speak more about Oliva.

[Pedro Rodrigues de Medeiros, executive]

Thank you, Gabriel, for the question. This is one of the items that we also present in the expected map of events for 2024. As you well noted, today, we have a commercialization contract with Shell, where Shell forms some offloads, the logistics and commercialization of our oil directly at the pilot platform. And a good part of this oil is exported, it is sold in markets that fulfill the particularities. One of them you mentioned, i.e., the very, very low sulfur content, which makes oil from Atlanta and oil that supplies a specific market niche. Today, the commercial condition designed, given this contract with Shell is is a condition that allows the company to capture a premium related to the quality of the oil. This premium is not only visible because it includes idleness cost and the whole logistics apparatus associated to transport and offload of the oil in the pilot system. When we have the level of the new FPSO, the expectation is that the logistics operation will go through a significant change. I'd like to remind you, the new FPSO is designed based on a different hole, it has a much greater capacity of storage compared to the pilot platform. It can do maneuvers and provide logistics support in terms of the offload and transport of the oil. At this point, we are developing a commercialization solution that aims to maximize value for the company and the value of this niche oil. We want to maximize the value that this oil can have and can derive in a different development stages of a plant and also supporting our strategy of capital allocation and organic and inorganic growth in the future. And now I'll turn the floor to Carlos Mastrangelo to speak about Atlanta and Oliva.

[Carlos Mastrangelo, executive]

Thank you, Gabriel. Let me give you a little more color about Oliva. Oliva is about 20 kilometers away from Atlanta to simplify and to reduce the risks. We are going to have a pilot system implemented, an early production system of a pilot project with 2 wells. It's going to be as simple as possible. So we can move ahead fast. Success will depend on the strategy. So we'll have a strategy just like we did with Atlanta strategy that will be a little different than usual. And the strategy will provide us with more safety in terms of fulfilling the deadlines. We normally don't make mistakes in our deadlines, but if everything runs as expected by the end of 2024, with the approval of the project, we have an estimation of first oil for the beginning of 2027. It is way too early to speak about CapEx. Of course, we have our own in-house CapEx evaluation for the project once it is approved but since we are already having some interaction with the market, it is too early to disclose CapEx for the Oliva project.

[Decio Oddone, executive]

If I may add something to what Mastrangelo said because I think this is an important topic. Atlanta counts on several stages. Phase 2 is very close to the design associated with the development of the Oliva project, as Mastrangelo mentioned, because there's great synergy in usage of equipment, in contracting critical equipment. And as we said before, Oliva originally, was expected for a [Indiscernible] of Atlanta, but we have a possibility of bringing forward different oil of Oliva. That's a possibility we are evaluating, it potentially can create a lot of value for the company.

[Operator]

Another question is from Rodrigo Almeida with Santander. Mr. Almeida, you may begin.

[Rodrigo Reis de Almeida, analyst]

[Interpreted] I'd like to ask some follow-up questions. The first one is actually related to FPSO Petrojarl that you currently have. I'd like to connect that perhaps with Oliva and understand your strategy. You have this FPSO not mistaken, it was renewal until mid-2025. Does it make sense to keep it with Enauta for another pilot system in the future or something like that? Does it make sense or this is totally out of the game? That's number one. My second question is about FPSO Atlanta. If we could have some more color regarding the timing of the arrival of the FPSO, how long it will take for it to get to location and 4 wells connection in months so that we can map and follow the time line? We'd like to have some more detail regarding the FPSO Atlanta. And my third point, I'd like to understand along the next weeks and months, what can we expect regarding the new wells being connected in the Atlanta's pilot system? What are the characteristics of these wells? Are they very similar to what we saw in well Number 5? It would be nice, so we can have an idea of cash generation until Atlanta's first oil. That could be very helpful. Thank you.

[Decio Oddone, executive]

Good morning, Rodrigo. I had to write down your questions. So I wouldn't leave anything out. Petrojarl went through a renewal of its license to operate, what we call certification and that happened in one of the stoppages we had. And it is enabled for 5 years starting in December of 2022, and it is always an alternative for us at Oliva or some other development we might have. As for the Atlanta timing, Mastrangelo will answer that in a moment. And regarding the new wells, what we did was we had some downtime to adapt the equipment at Atlanta. That stoppage was expected to end in September. But at that moment, we didn't have access to the new equipment available for logistics reasons. The supply chain suffered a lot in recent years globally. And we did not have as to state-of-the-art equipment to use in the pumping system that we currently have linked to Petrojarl. We had access to this new equipment for the first time now in this pumping system on November 5. We going to use the same type of equipment in the next pumping system to be installed 30 days after the first one, and we need to develop some supply alternatives with a different supplier for 30 days later. So 60 days after the first pumping system so we'll be able to reconnect the third well of Atlanta in that we expect production to increase and to achieve stability at the field starting now. So I'll turn now the floor to Mastrangelo to speak more about timing for Atlanta because he's in Dubai right now exactly discussing this with the FPSO team, he's discussing the next steps regarding the end of the works, start of the commissioning and the migration to Brazil.

[Carlos Mastrangelo, executive]

Thank you, Decio. Well, Rodrigo just to add to what Decio said about the use of Petrojarl after Atlanta. And the answer is yes, it is an option for Oliva. Among other alternatives, we are looking into more options. We are not closing any doors to any options in the market, there are some options for us as well. Regarding Atlanta, the deadline will depend between the deadline for arrival in Brazil and first oil, which is what you're asking about. I think we won't be able to answer your question directly because it will depend on when the FPSO will leave to Dubai. For example, we are going to have visited from the marine, the navy. And we'll have a helipad ready so that we can make arrangements for logistics and flights. So we will depend on when the FPSO leaves here. There's also an inspection by the regulator, so here's what I can tell you, the deadline we have for the project of the deadline of August still remains. And we also await approval of the project. And you also ask about the new wells. We drilled 2 new wells. We didn't expect any change. They are similar to the other wells. So no adjustments were required, nothing to be fixed, nothing different than expected. Atlanta feels this quite uniform. It's a well-behaved field.

[Operator]

Next question, Bruno Montanari with Morgan Stanley.

[Bruno Montanari, analyst]

[Interpreted] Some follow-up questions. Coming back to Oliva. Maybe the idea is to maintain the production plateau at Atlanta or would you really want to bring more volume on a consolidated basis? I know it's in the same ring fence, but what about specificity of the oil? Are they the same characteristics as you find in Atlanta's current, maybe a premium in the current current? And secondly, did you manage to demobilize FPSO Atlanta, you have the receivable structure or are you happy with this structure? Or would you consider something else in terms of securitization in order to work better on the cash and also have mid-to long-term CapEx funding.

[Decio Oddone, executive]

Thank you, Bruno. When it comes to Oliva, this oil is slightly lighter than Atlanta's oil. In terms of our operations, firstly, there is great logistics gain and secondly, very high synergy between these operations in Oliva and the following phases in Atlanta. We still have additional wells to drill in Atlanta and also to drill in Oliva. Our strategy is to bring these campaigns together. It brings a lot of gains, both in terms of contract costs and also bringing more efficiency to our operations. Possibly, this will happen together anticipating Oliva's production, which would be a little bit further away. When it comes to our plan about the financial aspects of the transaction, I would like to ask Pedro to make comments on this.

[Pedro Rodrigues de Medeiros, executive]

So just adding to what he said, the oil we expected what we're working in Oliva is additional to the forecast of Atlanta's Field in Phases 1 and 2. This is additional oil trying to, like you said, try to reach the production plateau at Atlanta, this is additional. Your question is great, Bruno. You put it well because this is the first quarter in which we posted this long-term receivable credit. And it was designed in order to be able to be transferred to the market capital wise to be sold to market or securitized. There are several ways to do that. We're working together with [indiscernible] and actually, it is an alternative by the company to have a mid- to long-term financing. Our key activity and the kind of return on employed capital that the company pursues, this is beyond the condition return shown in this credit. And our expectation is that this becomes one of the alternatives to bring more efficiency to the company's capital allocation program over the coming months and years. So nothing new to add about this topic. And naturally, here is an asset, which is associated to our FPSO in the final step of commissioning and construction. So for the moment, we have this asset perform the risk nature will also change very significantly. And I believe this will allow us to bring more efficiency in capital allocation.

[Operator]

The next question, Monique Greco with Itau BBA. Please go ahead, Monique.

[Monique Greco, analyst]

[Interpreted] I have 2 questions. My first question, can you give us color on the reserve certificates? I think we already had many questions about Oliva. I'd like to know if we have some expectation of reserve certificates, something more specific about Oliva. And my second question is more about the regulatory context of the sector. Decio is very much involved in these issues. Earlier this year, we had an import on exports it took everybody by surprise. And in your case, considering FPSO Atlanta, what about discussions about Red Petrol, they could also have an impact. So I'd like to know what do you expect to see in this regard? Do you consider any changes in the taxation of the project, something that might affect the investment parameters that are being negotiated to complete the project? These are my questions.

[Decio Oddone, executive]

First, I'm going to answer your second question, Monique. And then Mastrangelo is going to give you more color on reserves and potential resources in Oliva. We don't see any impact on Atlanta's investment stemming from any tax reform so much so that Red Petrol is preserved as it was in the Senate and the House of Representatives as far as I know. So that's not a point of concern for us today. As for export tax, 9.2%, and it was enforced on a temporary basis. It no longer applies. What we have to do now is special tax up to 1%, which is being discussed and included at the senate level in the tax reform negotiation, and it's being addressed by associations in the industry. And please bear in mind that the Brazilian tax system already has a high burden on oil production. The tax burden is going downwards about oil production and which is bad because investments are not so competitive in Brazil. So this is a point to be considered in future negotiations about the tax reform. Mastrangelo, could you tell us more about reserves and resources at Oliva?

[Carlos Mastrangelo, executive]

Monique, about Atlanta, I think I answered Luis' question. For Atlanta, we don't expect to see any changes. This is very much in line with previous certifications. Oliva, it's too early to talk about reserves. Probably, we'll focus on resources, we are still on the concept phase of the project so I believe it's too early to talk about volumes.

[Operator]

The question-and-answer session is ended. I'd like to turn the floor to Mr. Decio Odoni for his final statements. Go ahead, sir.

[Decio Oddone, executive]

I think that this quarter has shown that Enauta continues to move forward pursuing its objective of delivering Atlanta's full development system by mid of 2024 with robust conditions on schedule, on budget. In the short term, we continue to work to resume production in the pilot system of the field and we continue to pay attention to possible moves in the market. I'd like to thank all of you who honored us with your attendance at this video conference call and I hope to have you on board again in the beginning of next year. Thank you very much. And I'd like to wish everyone a good day.

[Operator]

Enauta's video conference call is closed. Thank you for your participation, and have a great day.