Enauta Participacoes SA

BOVESPA:ENAT3

Earnings Call Transcript 2018-Q4

[Operator]

Good day, ladies and gentlemen. Thank you for waiting. At this time, we would like to welcome everyone to Enauta's Fourth Quarter 2018 and Full Year '18 Earnings Conference Call. Today, we have here with us Mr. Lincoln Rumenos Guardado, CEO of the company; Ms. Paula Costa Corte-Real, CFO and Investor Relations Officer; and Mr. Danilo Oliveira, Production Director. We would like to inform you that this event is being recorded.

[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 because they relate to future events, and therefore it depends 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 will turn the conference call over to Mr. Lincoln Guardado, Enauta's CEO, who will start the presentation. Mr. Guardado, you may begin.

[Lincoln Rumenos Guardado, executive]

Good day, everyone, and thank you all for joining us today in this conference call to discuss our fourth quarter and full year '18 results. This conference call is full of novelties and good news for all of us. As you probably learned through the advisory released yesterday, QGEP is now Enauta. I will start giving you some color on our proposal to rebrand and change the company's name to Enauta, that you can see on Slide 2. This change happened after a long process for the company when we committed to evaluate our competitive strengths and to understand how the company is seen both by internal and external stakeholders. Our goal was to assess how to best ensure that our company would enjoy perennial and continued growth in the coming years and to have a brand which would facilitate communication and reflect our efficiency and boldness in identifying new business opportunities, which has been a trademark in our trajectory. We took into account our history as one of the first companies to enter the oil and gas sector in Brazil and we advanced quickly until today. We are now one of the few independent companies operating in the premium pre-salt area and in several deepwater blocks off the Brazilian coast. Additionally, we considered the significant investments that we made in these 20 years using state-of-the-art technologies to support safe operations as well as the collection and treatment of critical environmental data to ensure the ecological balance for our natural resources as an action to guarantee continued and responsible growth. Considering our strength, the amounts invested into our positioning as an independent operator, we chose to look into the future with a new name, Enauta, which reflects our growing ability to identify, locate and develop energy sources to meet the needs of society and of our investors.

Let us go to Slide 3, please, for the main highlights of our performance in 2018. The first is what can we effectively executed supported by our strategy defined in mid-2017. We focused on assets with moderate risk profiles and mid- to long-term opportunities. We managed our CapEx needs and we maintained a solid balance sheet and returned capital to our shareholders when appropriate, all the while maintaining financial flexibility to support our investments and the addition of assets to our portfolio, maintaining the same base of comparison, i.e., excluding the impact of nonrecurring events, which benefited both 2017 and 2018 results. This was another landmark year for our company and one which set the path for sustainable production growth in the periods ahead.

Revenue and net income -- record revenue and net income reflect our 2 producing assets for the 8 months of 2018, as Atlanta flowed first oil on May 2, 2018. We completed the acquisition of seismic data for our primary exploration asset, the Sergipe-Alagoas Basin, and initial data have been submitted to the consortium in the beginning of 2019 according to the schedule agreed with our partners, ExxonMobil and Murphy Oil. In the last months of 2018, as we communicated, the London Court of International Arbitration ruled in our favor and increased our interest in Block BS-4 where Atlanta Field is located to 50% from 30%. And last, but not least, our solid financial performance and future outlook allowed management to once again recommend an extraordinary dividend payout in the total amount of BRL 500 million to be distributed to our shareholders after approval at our annual shareholders meeting to be held on April the 18th of this year.

Please go to Slide 4 for a more detailed look at our fourth quarter results. We posted a record net income in Q4, excluding nonrecurring items. Thanks to a 34% increase in total production. In other words, 1.85 million barrels of oil equivalent. The financial contribution from Atlanta more than offset the decline in Manati production, which remained relatively stable even considering the projected natural decline of the field expected for 2024 or 2025. At year-end, we published a new reserve certification report by Gaffney, Cline & Associates confirming total 2P reserves net for the company of 130 million barrels of oil equivalent, an increase of 64% compared to the 2017 reserves. This increase represents the addition of Atlanta Field where, as we have said before, the reservoirs responded very well. Although production is still limited by the malfunction of the pumps inside the wells, the situation that will be taken care of in the next 6 months.

At this point, we'll turn the floor to Paula Costa, Chief Financial Officer, who will give you more details on our financial performance.

[Paula da Costa Corte-Real, executive]

Thank you, Lincoln, and good day, everyone. 2018 was indeed a year of significant progress for our strategic initiative, which strengthened our business model and positioned the company for future growth. We're very pleased with our performance, both in the quarter and in the full year. We posted solid growth in revenue, EBITDAX and net income. In my presentation, I will go over our financial results for the fourth quarter and full year '18 and I will update you on our balance sheet, cash flow and CapEx. And then, I will turn the floor back to Lincoln, who will speak more about our operational highlights and our business outlook.

Please go to Slide 5. Due to overall stable demand for our gas from Manati and a complete quarter of production at Atlanta Field, total production in the quarter reached 1.8 million barrels of oil equivalent. Atlanta Field accounted for approximately 1/3 of our total production in the quarter. To give you more color on each one of the fields, starting with Manati. Manati posted an average daily production of 4.8 million cubic meters in Q4 '18, down from 5.6 million cubic meters daily in the fourth quarter '17. In both quarters, drought conditions in Northeast Brazil increased the demand for natural gas from thermal power plants, but in the fourth quarter of '18, we started to see the effects of the field depletion. For 2018, production -- average production was 4.9 million cubic meters, similar level to 2017 and consistent with our prior projections. But for 2019, we expect production to average 4.1 million cubic meters a day, which is at the lower end of our initial forecast for the year.

Now moving on to Atlanta. You will remember that first oil flowed in May of 2018, and now we have 2 complete quarters of production. During the fourth quarter, production averaged 12,400 barrels of oil daily compared to 12,900 barrels of oil a day in the quarterly comparison. The slight reduction from 3Q '18 production reflects normal decline changes and we expect to continue to see this trend until the pumps are repaired. Average daily production at Atlanta for the 8 months in 2018 was 12,000 barrels of oil, including the stabilization phase. It is worth remembering that our net share corresponds to a 50% working interest, up from the prior 30%, already reflecting the ruling by the Court of Appeals forcing the exit of Dommo Energia from the consortium.

On Slide 6, you can see that we accelerated our revenue growth with a good balance between Manati and Atlanta. Revenue in the quarter totaling almost BRL 300 million, more than doubled, reflecting greater production at Atlanta Field and stable production at Manati. Atlanta contributed with approximately BRL 173 million or 58% of our total revenue for the quarter. Atlanta's contribution also benefited from our increased stake to 50%, fully realized in this fourth quarter. As regards to the full year, Atlanta accounted for 36% of Enauta's total revenue.

Please go to Slide 7 to speak about costs. This quarter, total operating costs of BRL 182 million more than tripled year-over-year. Approximately 92% of our total operating costs or $177 million (sic) [ BRL 177 million ] are associated with the ramping up of production at Atlanta Field, and also reflect our increased working interest of 50%, diluting the effect of the additional 20% stake along the operational months at Atlanta, operating costs in the quarter would be BRL 123 million. Manati Field operating costs were BRL 14.5 million, 74% lower than 4Q '17, when the company increased maintenance expenses in the fourth quarter of '17, they totaled BRL 6 million. In fourth quarter '18, we also reversed the provision for abandonment totaling BRL 33 million, reflecting a cost reduction projected for the future abandonment of Manati wells.

On Slide 8, general and administrative expenses were up 33% from the same period of the prior year, mainly due to personnel expenses and costs associated with employee profit sharing, which were partially offset by the higher allocation of expenses to partners.

Please go to Slide 9 to analyze our profitability. Over EBITDAX benefited from operational improvement, both higher production and greater operational leverage in addition to nonrecurring gains both in the fourth quarter '18 and in the fourth quarter '17. As reported, EBITDAX in the fourth quarter '18 was BRL 160 million, including the indemnification of BRL 46 million from Teekay for the delayed arrival of the FPSO. EBITDAX reported in the 4Q '17 included part of the gains obtained and reported from the sale of Block BM-S-8 of approximately BRL 115 million. Excluding these nonrecurring effects in both periods, EBITDAX was up 26% in the fourth quarter '18, and in the yearly comparison, EBITDAX increased 50%. Net income was BRL 125 million in the quarter, down from BRL 193 million in the same period of the prior year. Our profitability was impacted last year by the partial recognition of the sale of Block BM-S-8 reported in 2017. The full year net income increased to 19%, reflecting an increased production and revenue, better operating results. Our business has remained solid with very positive trends, and we will remain confident in our ability to continue to deliver the profitable growth that we have had so far.

Please go to Slide 10. On the slide, you can see our detailed CapEx in 2018 and what we are estimating for 2019 and 2020. In the fourth quarter, CapEx totaled $6.5 million with most of it or 72% being invested in Atlanta Field. CapEx for the year 2018 totaled $73 million, including $62 million allocated for the Atlanta Field, the remaining was used for exploration activities was about $10 million spent on seismic shooting for the Sergipe-Alagoas blocks and $5 million for seismic acquisition for the blocks acquired in the 11th ANP bidding round. We are -- for 2019, we are planning a slightly lower CapEx of $65 million, most of it, $48 million or 74% will be again used at the Atlanta Field, already including the drilling of the third well and pump repair in the first 2 wells. For 2020, we are projecting that our CapEx will more than double the 2019 CapEx or $133 million; 2/3 of this amount will be used for Atlanta's full development system. As -- provided that the consortium decides to move ahead in that direction. We're also planning to drill initial wells in the Sergipe-Alagoas and Ceará Basin. As you see, maintaining a solid balance sheet was always our top priority, we shall continue to have capital discipline and to invest in growth.

Lastly, a comment on our balance sheet and cash flow. It is important to note that we ended 2018 with a very strong cash position of BRL 1.9 billion and intend to keep that flexibility to fund our ongoing projects and to enjoy new opportunities that might arise. We have a significant operating cash generation and we have capital discipline, always seeking to maximize return to our shareholders. We manage our businesses with prudence and as a result, we're able to generate sufficient cash flow to fund our operations and to expand operations. In the full year, our operating cash flow was BRL 588 million, up from BRL 429 million in 2017.

I will now turn the floor back to Lincoln for strategic review of our businesses.

[Lincoln Rumenos Guardado, executive]

Thank you, Paula. Let us move now to Slide 11, which shows an overview of our portfolio. Beginning with Manati Field. As we announced before, the low rainfall that affected hydropower production remained the main driver for gas demand in the Manati Field in the fourth quarter of 2018, just as in most parts of 2018. The scenario rebounced in the first 2 months of 2019 when average production totaled only 3.5 million cubic meters per day due to the market's demand. Right now, we've been monitoring very closely the drivers of demand in the industry, which may go up in line with the economic upturn in the country as shown by other forecasts. As we speak, we're keeping our guidance for Manati's production in 2019 at the lower end of our initial forecast or approximately 4.1 million cubic meters per day owing to the lower production early this year and the scheduled maintenance of the plant for approximately 20 days in late March and early April this year. We are pleased to highlight that the latest certification of independent reserves by Gaffney and Cline for the field show 2P reserves of 6.3 billion cubic meters of natural gas and 700,000 cubic meters of barrels of condensed gas amounting to approximately 40 million barrels of oil equivalent, 100% or slightly above last year's certification. Out of this amount, Enauta held approximately 18 million barrels of oil equivalent, and that was by the end of year 2018.

Please go now to Slide 12. It gives us an update of the Atlanta Field. Average production in the field -- in both fields were 12,400 barrels of oil per day in the fourth quarter of 2018. Like Paula said before, this is in line with our expectations. The great news is the favorable Court of Appeals ruling, according to which, the original 40% increase of Dommo Energia in Block BS-4 should be split between Enauta and our partner, Barra Energia, and obviously this is owing to that company's inability to bare its share of operating costs. Barra and ourselves jointly requested the ANP or National Agency of Oil, Natural Gas and Biofuels to perform the formal transfer of interest in compliance with the consortium agreement and as fully stated in the arbitration process. In the fourth quarter, heavy oil prices remained favorable vis-à-vis Brent oil, therefore reflecting the global imbalance between supply and demand, which led mainly to the lower supply of this type of oil from Venezuela and Saudi Arabia. Please bear in mind that we're producing heavy oil in Atlanta with a very low sulfur content, pretty much reduced, putting it in compliance with our new regulations for bunker fuel that will go into effect in 2020, therefore increasing the price. This slide shows the timeline for Atlanta. We started the drilling work of this third well in the field and it is expected to deliver in late May, and approximately with the completion and getting ready for production, which is expected to deliver approximately 10,000 barrels of oil per day. After the completion of the third well, the drillship will start the work over of the first production well, which will take approximately 45 days followed by the second production well. This will entail the exchange of the pumps outside the well. Therefore, we expect to have 3 production wells in Atlanta by the end of Q3, with average production between 25,000 and 27,000 barrels per day. In the current year, we'll decide with our partner, Barra Energia, whether we move forward with a full development system of the Atlanta Field, which would entail in its original design the drilling of up to 9 additional wells, finally reaching production of up to 70,000 barrels per day. However, we keep on assessing what is the most appropriate system for the field based on the data that we'll get from the 3 wells in production, starting the end of August this year. We already earmarked BRL 90 million of our 2020 investment budget for that purpose in case the ruling turns out to be positive by the consortium in terms of continuing production and also the best means and way to produce always obviously keeping an eye on the best economic return and only the physical volume of production.

Slide 13 shows an update of our exploration portfolio. As you know, the foundation of our exploration program is our 30% stake in the 6 blocks of Sergipe-Alagoas Basin, jointly owned by our partners ExxonMobil, the operator, with a 50% stake; and Murphy Oil with a 20% interest. These blocks are adjacent to the 6 most important discoveries by Petrobras, and we're looking forward to seeing the results of the extended drill test in Farfan discovery expected to be provided early this quarter. All activities are, as expected, seismic data have already been concluded and all early readings are encouraging. This year, we will read the data and develop a drilling program, which is scheduled to start in mid-2020. It's always good to bear in mind that we acquired the 6 blocks in the last 3 bidding processes that occurred in Brazil. As we said before, the first phase of the final process of our 2 blocks with 100% interest in Pará-Maranhão Basin was completed and really attracted potential partners. We expect the process to be concluded by year-end, and we're trying to predict the time required to receive the environmental license, a key item in this formal process as well as our block in Foz do Amazonas Basin, in which we hold 100% interest.

Moving now to Slide 14. To summarize, Enauta started year 2019 positioned for continued improvement. The Atlanta Field will contribute all year round owing to the increase in our stake. We also expect this year progressive increase in Atlanta's production indexes as of the end of Q2 when the third well will increase the field production from 25,000 to 27,000 barrels per day with the work over in these 2 production wells. In addition, price conditions for our crude oil production remain favorable. Thanks to the limited supply of heavy low sulfur content oil. On top of that, Atlanta's production offers a natural hedge against fluctuations of the Brazilian currency. Although, Manati's production is below 2018 levels, it is expected to remain relatively stable. Please bear in mind that the field is profitable, thanks to the infrastructure available, and we will benefit from an increase in the contract price that became effective on January 1, 2019, according to the terms of the agreement. We've renewed our trust in the prospect of Sergipe-Alagoas Basin, and we're confident that we have a great opportunity to leverage the company's reserves in the near future.

We're excited with the first reading of the seismic data and are awaiting further information once the data is interpreted by the consortium, which is expected to happen over the year. Enauta is very well positioned with world-class operators, ExxonMobil and Murphy among others, enhancing our reliable position in the delivery of our results, and now as Enauta.

Operator, we are ready to start the Q&A session.

[Operator]

[Operator Instructions] The first question is from Luiz Carvalho, UBS.

[Luiz Carvalho, analyst]

I apologize for the noise, the background sound. I have 2 questions. My first question has to do with Atlanta. You naturally mentioned the drilling of the well this year and average production slightly above what we had on the slide. So I'd like to understand what is the visibility considering the current production and what about -- since the very beginning, what should we expect in terms of contribution from the third well? Is something too different from what we see, vis-à-vis the first 2 wells. The second question is about Manati. I can see you have a guidance for 2019 that is lower than we expect for 2018. I'd like to understand if there is anything related to a reservoir or is actually just expected lower demand considering that we're early in the year? And the third question, just out of curiosity, where does Enauta's name come from?

[Lincoln Rumenos Guardado, executive]

Did you hear me?

[Luiz Carvalho, analyst]

Yes.

[Lincoln Rumenos Guardado, executive]

Luiz, thank you for your question. Danilo is going to give you some details and some of the fundamentals that we used today -- that we used to this projection from 25,000 to 27,000 barrels of oil per day.

[Danilo Oliveira, executive]

Okay, Luiz. Danilo, speaking. Good morning. Manati Field, considering its current production, it is behaving exactly as expected. The reservoir is doing great. Our early projection was 10,000 barrels for each well. So the first 2 should produce 20,000. The current production is 1,200, only owing to the problem that we had in the pump in these wells. Our forecast is that by drilling the third well with another 10,000 barrels per day, the current well, which is about 7,000, might increase to 9,000 and the well which is delivering about 4,000, should go to 8,000. So by the end, we expect to have between 25,000 to 27,000 barrels per day. The reservoir is performing precisely as expected, and the only reason why we lower production today is this problem, there's malfunction of the pump. As for Manati, our forecast last year was 5.2 million cubic meters per day, we met 4.9 million cubic meters. The forecast for this year, according to the guidance, 4.3 million cubic meters, which is pretty much in line with the drop of approximately 15% year-over-year until we depleted the reservoir. What happened early this year was that demand went down dramatically and even took us some days because Manati was fully shut down. Average production was about 2.5 million cubic meters per day in January and we are in the recovery phase. Right now, the average for the year is around 3.75 million cubic meters. But due to the shut down for maintenance purposes, which was mandatory for 5 years of the process planned for 20 days, we understood that we may not recover this production for 4.3 million cubic meters. So our current guidance is 4.1 million cubic meters, still within this guidance of 4.3 million cubic meters minus 5%, okay?

[Luiz Carvalho, analyst]

Okay. Just a follow-up question, if I may, Danilo. What about this drop in demand. Could you give us more color on this. Is it a structural problem or a one-off event related to a contract, for instance?

[Danilo Oliveira, executive]

Okay. First of all, there was very heavy rainfall. Thermal plants are all shut down right now. Second point, fertilizer plants also shut down almost 1 million cubic meters per day and the industrial demand is not growing yet. In addition, we also have the pre-salt very strongly, Southeast hasn't recovered yet. So there is excess gas in the Southeast, which goes up to the Northeast, and Petrobras' option was for a while to shut down Manati's field. Please bear in mind that regardless of what they make, we have a take-or-pay to perform.

[Luiz Carvalho, analyst]

My last question about Enauta.

[Lincoln Rumenos Guardado, executive]

That's a very recurrent question. What I'd like to say that the meaning behind Enauta's name is not only a name, it tries to reflect in our universe. It is those who navigate through energy paths. So we're trying to include that into our process. We want to have this broader view of energy, which will come over time, energy, [indiscernible] et cetera. But above all, we firmly believe that we are adding through this name a brand that reflects the company, a company that anticipates the things about the future, a perspective company, which is part of our history. And we tried to translate what happened over the last 20 years. Obviously, we managed to anticipate ourselves, we were the first company to be in bids and then we went on-shore, we did not go through the off-shore phase. So this is our focus. And that's what we did when we went into deep waters as well. During the IPO phase, we decided our goal would be in deep waters because that's what would help us to translate our process and deliver returns, which is what's happening to Brazil today. So this is a company's brand. It is not even better, nor worse. It's just a brand that we consider to reflect anticipation, our strategy and we want to be independent. A short, easy to communicate name, but which brought the root of our thinking process, our operations, including operations in deep waters. We are the only Brazilian company in deep waters. So all of that brought by this name. So this is our current vision, but we always want to expand our horizons in energy. At the end of the day, this will be a need in our society.

[Operator]

Next question from Bruno Montanari with Morgan Stanley.

[Bruno Montanari, analyst]

My first question has to do with the arbitration process. I would like to understand if all of these steps have happened or if there is any possibility, albeit remote that Dommo could fully or partially reverse the ruling, particularly regarding the additional stack? My second has to do with G&A. Perhaps you could mention what would be a sustainable level for general and administrative expenses for the coming quarters because there are some items that are more concentrated in the fourth quarter? And my final question, could you elaborate on Barra's appetite to invest in the full development system, assuming that the third well responds well, that the reservoir responds as expected. QGEP and Barra, would you say have an appetite to commit capital 50% each for the full development system?

[Lincoln Rumenos Guardado, executive]

Well, very well. Thank you, Bruno for the questions. So yes, Bruno, the Court of Appeals has released a number of rulings, the most well-known one was the ruling that gave additional 20% to QGEP and to Barra, based on the Court of Appeals rulings. But there were 4 or 5 decisions on the topic. But, of course, this one is the most well-known. However, there is a third phase, which was subdivided in the process. There is a petition that accuses us of being lenient with Teekay, QGEP and Barra, and a possible collusion that would lead to the situation where Dommo is. Actually, Dommo was in this situation way before the FPSO arrived. But this is going to be evaluated along this year. It's still in the evidence discovery phase, and this is all I can tell you about this for now. However, I can tell you that the ruling based on the joint operational agreement, JOA's decision, that will not be reversed. And that is why we submitted a request to ANP so that they will transfer Dommo's rights to us and Barra. During 2019, there will be this other discussion regarding the claims by Dommo regarding what we did. But based on everything that we have discussed, we believe that we have a very strong case here. Even Dommo signed all of the documents that we had with the FPSO provider. They were always with us, although they were not contributing with the cash cows and thus we fully believe that we have a very strong case, just like the first ruling was. And undoubtedly, we are following this, but this is not keeping us awake us at night. Regarding general and administrative expenses, I will turn the floor to Paula, and then I will come back to talk about Barra and Enauta's appetite.

[Paula da Costa Corte-Real, executive]

This is Paula. Hello, Bruno. Thank you for the question. Regarding G&A, our annual G&A cost hasn't really varied much during the years. So a good assumption would be to keep it around BRL 60 million for the year. This is what we envision for the future as well. And being the operator of the projects, part of it is allocated to the projects, part is best to flow to the partners. So we think that we should remain at a level of around BRL 60 million per year. And I think there was a third question regarding Barra and our company's appetite.

[Lincoln Rumenos Guardado, executive]

This is Lincoln. Regarding Barra and Enauta, what I can tell you is, well, until the arrival of the FPSO, we were running a lot of risks that we wanted to eliminate. And this is why we used the early production system. The knowledge we have of the reservoir -- the producing reservoir, which is dynamic. We have already close to 4 million barrels of oil produced. And undoubtedly with those kind of production, we have offset other risks, but the major risk that we had regarding behavior of the reservoir and assurance of our actions, all of that has given us more and more confidence to make decision. So not only Barra Energia and Enauta, but we want to have this production. We want to have the track record that will come with the drilling of the -- and the production of the third well when we will reach the production levels that we have set initially before the poor performance of the wells inside the -- the pumps inside the wells. Barra and Enauta are together and we think that this decision will be made incorporating the data from the new production that we are waiting for. This will give us a lot more surety regarding the model and the model of development that we will adopt. Whether we have 3 wells, 10 wells, what is the best economic model, no not just the technical knowledge, but to the production will be the foundation for our decisions at Atlanta. So we expect to make this decision by the end of 2019 already with a track record reaching the highest level that we expect for Atlanta.

[Operator]

Next question coming from Leonardo Marcondes with Itaú BBA.

[Leonardo Marcondes, analyst]

My question is a follow-up regarding the fourth quarter. When I asked whether you would consider a farmout of this 20% additional stake at Atlanta because you want to -- you obviously want to diversify your sources of revenue, so I'm wanting to understand what are you thinking about this, and -- given that now you have consolidated or incorporated these -- this additional 20% stake. So my second question, Lincoln said that he would be interested in investing in pre-salt assets. Could you give us more color on that?

[Lincoln Rumenos Guardado, executive]

Well, thank you, Leonardo. We're here to make money and to return capital to our shareholders, to return the confidence of our shareholders, and at the same time to make the company grow, if not vegetatively, sometimes through some onetime actions, but a part of our activity, looking at the market and everything else. So of course, we are not disclosing -- we're not making any moves considering the sale of the additional 20% stake that we have in Atlanta coming from Dommo's share. But if it is something that can help us to invest in other assets, well, this is always in our radar. The company has followed and continues to follow our corporate approach to try to diversify our revenue stream undoubtedly, and we continue to pursue this through many actions, but we continue with this metric of having diversified revenues. If some company approaches us for a possible divestment of these additional 20% stake that will allow us to have other leverage in other areas, we will definitely consider. We are always considering divestment, just like the farmout of some of our blocks, and we will try to see what fits our portfolio, and what fits our cash flow in terms of farm-ins, things that might come up in the market. It is possible. So we want to implement this dynamic in our company. As for the pre-salt, the pre-salt is something that will always be in our radar. It is undoubtedly the main player in Brazil. Deep water is in the Campos Basin, started this and the pre-salt in Santos also was very much broadened, and in other deep water areas in Brazil that are just at their infancy, even Sergipe-Alagoas discovery is at its infancy. And with technical support from our technical teams in mind be it the third area with the largest prospect in activity in Brazil. So the pre-salt is something that fits our portfolio. But it fits our portfolio in a very particular way. We could be in 10% to 20% in areas that do not demand a lot of bonus usage. But, of course, we always look at what's coming in, in our CapEx. So we have some assumptions that are fundamental in terms of how to get into such an area in the pre-salt. We would like to do it. I think that the pre-salt compliments our short, mid- and long-term portfolio. In addition, pre-salt produces a very good quality oil, and it will be the future gas producer in Brazil, and we are gas producers. We like gas production. And we want and we understand that gas will be the transition energy. And being in the gas market is not in the short term, perhaps in the mid- to long-term. In the short term, we are already in the gas business with Manati. So the pre-salt remains in our radar, but again always respecting our possibilities, particularly our financial possibilities.

[Operator]

We also have questions via webcast. The first question is from Jefferson [indiscernible].

[Unknown Analyst]

What is the time expectation in the activity of Manati Field with a current production of 4.8 million?

[Lincoln Rumenos Guardado, executive]

Jeff, it's -- just a correction, current production is 4.5 or 4.6, and the expected fall is 15% per year with economic projection until 2023, by the end of 2023 and early 2024.

[Unknown Analyst]

Okay. The problem or malfunction in pumps in Atlanta, is it related to cost coverage of the operator or is it a problem of the total cost by the company?

[Lincoln Rumenos Guardado, executive]

This is only the company's responsibility. No manufacturer is going to be responsible for malfunction. We don't even know what caused the malfunction of the pumps. We don't know if it was the engine, the motor, transmission of energy from the FPSO to the pumps, but the manufacturer is not liable for this, so to speak, damage or any fixed cost. This is up to the consortium to pay.

[Unknown Analyst]

[Jefferson asked] what is the time expectation for the startup in another field?

[Lincoln Rumenos Guardado, executive]

Our next expectation should we have the approval of the EPS is the full development in Atlanta by 2022. This is the closest field in production at Enauta.

[Unknown Analyst]

Is there an expectation to relinquish any other field, what is the real impact of the decisions made in 2018?

[Lincoln Rumenos Guardado, executive]

The fields that we expect to relinquish are already considered in the balance sheet for 2018 in our assets in the exploration phase and then we can to additional tests or we already have a decision to maintain the field. The impact of assets relinquished in 2018 were approximately BRL 25 million.

[Operator]

The next question from webcast is [ Claudia Miller. ]

[Unknown Analyst]

CapEx for [ S-Al ] already includes exploration wells that [will be on lines] that's the question by the way, Sergipe-Alagoas Basin.

[Lincoln Rumenos Guardado, executive]

The answer is no. In reality, we don't have 11 exploratory wells in the pipeline. We expect it to happen anyway, but what the operator did was to ask for approval for drilling purposes. This was the [indiscernible] they want to be ready, that's a very consistent measure, ensure that via discovery they want to have a fast drilling process. Should there be a discovery, they would be ready to go and have several areas that were requested. So we can have this drilling release approved. Another thing that always happens and it's only natural that because we don't know for sure where the first or second well will be, we request several areas based on the data available and only later on we do some fine-tuning in the interpretation and that's when we decide which one of those sites or locations the well would be drilled. So it's important to have it, but it doesn't mean that right off the bat we're going to drill 11 wells.

That's not exactly so.

[Operator]

[indiscernible] Manager of Foundation Capital [ Rights ]

[Unknown Analyst]

I would like to know if there is any forecast, or BRL 144 million related to the last portion of BM-S-8 sale for Equinor?

[Lincoln Rumenos Guardado, executive]

Yes, but this is something that does not depend on us. This receipt is linked to a unitization negotiation that should be done at Atlanta Field by the 2 -- actually, not Atlanta, Carcará, BM-S-8. So the advantage of that is that on both sides of the field's distribution have the same consortium, the same consortium, the same partnering companies, and that makes the unitization discussion easier, that should happen with PPSA and accepted by ANP. Our best prognosis for this considering the level of activity that the operator has had, particularly in Carcará and on the upside of the field as well is that by the end of 2020, we could have the unitization agreement accepted by ANP. In that way, we would receive the remaining amount. But this is just our prognosis. Of course, we have no control over that.

[Operator]

[Operator Instructions] This concludes today's question-and-answer session. I would like to invite Mr. Lincoln Guardado to proceed with his closing statements. Please go ahead, sir.

[Lincoln Rumenos Guardado, executive]

All right. Well, I would like to thank all of you for joining us in this conference call for your questions and for sharing this new moment of the company, now called Enauta. And with very promising results, we believe that for the second consecutive year, we have delivered what we promised and with results, which are in our opinion, exceeding what we expected and we are recognizing the trust of our investors, while we prepare the company for the foreseeable future. We continue with a strict management and governance. Again, I would like to stress that our investor relations department is always available for any questions you might have, either regarding our next steps, regarding dividend payout, our amortization, to change the company's name. And we expect to see you in our next conference call with results that will be just as robust as the ones that we delivered in this conference call. Thank you very much, and have a good day.

[Operator]

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