Enauta Participacoes SA

BOVESPA:ENAT3

Earnings Call Analysis

Strategic Acquisitions and Operational Synergies

The company has emphasized its long-term vision, detailing strategic acquisitions that deepen operational efficiencies and project synergies. The recent deals inked for expanding into the Atlanta cluster, which include the Atlanta Phase 2, Oliva Phase 1, and others, are poised to leverage shared technologies and infrastructures, capitalizing on proximity to existing operations like Uruguá and Tambau. This not only allows resource and logistical optimization but is expected to contribute significantly to advancing the company's efficiency agenda. The acquisitions are part of a broader strategy that also involves exploiting unique trading opportunities, like the Atlanta oil, which has a niche appeal in the international market, especially in Asia where it complements low sulfur sea fuel demands.

Elevated Production and Revenue Potential

The acquisition of Parque das Conchas and subsequent ownership of its cash flow from July 2023 positions the company to significantly enhance its daily production—potentially reaching around 65,000 barrels per day. Cost management remains diligent as the company navigates operational challenges, and efficiency is expected to improve as production ramps up to full capacity. Reserve volumes have been positively adjusted, particularly owing to newly certified resources in the Atlanta Northeast accumulation, promising greater economic value upon realization.

Financials and Investments Outlook

Concerning 2023's financial results, the company faced production interruptions in Atlanta, which impacted Q4 earnings as well as nonrecurring effects from strategic portfolio revisions. However, looking into the investment landscape, around $230 million is earmarked for Atlanta with the expected first oil delivery by Q3, followed by $95 million laid out over the subsequent two years. Debt profiles are long-term, factoring in the enhanced cash flows from current M&A activities, and the company debates more efficient capital allocation strategies for its assets, including the accelerated recuperation of $34 million in accumulated tax losses following the Parque das Conchas acquisition.

Project Development and Cost Optimization Strategy

The Atlanta project, deemed a key long-term venture, along with Oliva, falls within a strategic concession ring that hints at scratching just the surface of their combined potential. Developments are afoot to optimize costs and timelines, with efforts to bring forward the Oliva project from 2027 to 2026, ensuring minimal operating expenses until then. Shared logistics across fields, particularly with Uruguá-Tambaú, intimates notable OpEx savings without incurring significant costs from additional support vessels.

Earnings Call Transcript 2023-Q4

[Operator]

Good day, everyone, welcome to Enauta's video conference call to discuss fourth quarter and full year 2023 earnings.

[Operator Instructions]

The presentation is available for download at Enauta'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 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 our CEO, Decio Oddone; our Chief Financial and Investor Relations Officer, Pedro Medeiros; and our Chief Operating Officer, Carlos Mastrangelo. I would like to turn the floor now to Enauta's management to start the presentation.

[Decio Oddone, executive]

Good morning, everyone. Today, this is International Women's Day. So ladies and gentlemen, welcome to Enauta's 2023 earnings call. This was the year of transformation of Enauta. We brought Pedro as CFO. You probably saw the change in the way in which we communicate and relate with the market. Given the new dynamics, we have been going through a new shareholder -- shareholding restructuring in our Board, with new independent members. And we continue to deliver the full development system and we resumed the EPS at Atlanta for the use of new equipment.

In the end of the year, in December, we acquired new assets allowing for the start of the diversification of the company's portfolio. And we moved forward in creating a culture directed to value creation. We want to have a more and more effective, efficient, pragmatic, agile company where meritocracy will push us to have even better results. And so that our employees' interest will be in keeping with the interest of our shareholders. That's why we create an incentives program based on the valuation of the company.

In addition to this transformation that we saw in 2023, the year was also a year that brought results of many efforts we have been making. We joined ISC, the sustainability index of B3. We maintained B score, at CDP, we had a recertification of great place to work that we had obtained in the prior year. So for the second year, Enauta is certified by great places to work. And in 2024, we're already getting to the end of Q1, will be a year of delivery and consolidation of this transformation that has been going on at Enauta.

Enauta will be a very different company in a few months. The shareholding restring should be completed, the start of production in the full development system should happen in August. We are working hard to approve the investment for Oliva by year-end and to complete the deals of Uruguá, Tambaú and Parque das Conchas. Until then, we'll maintain the early production system up and running and generating cash.

At the same time, we continue to have our ears and eyes open to opportunities to increase the value of the company. There are some initiatives here, and we are reinforcing the team for the new company. We have attracted new talents for operations, M&A, oil trading, national gas business development restructuring or legal department. All of that without losing sight of operating and administrative costs management because that's something we have to keep an eye on when we are expanding. And we are focused on consolidating this new culture that we want to implement at the company in 2024 in full swing.

With this, I'll end my initial remarks. And I'll turn the floor to Mastrangelo. Next slide, please. And we'll speak a little about the deployment of Atlanta's Phase 1. Mastrangelo?

[Carlos Mastrangelo, executive]

Thank you, Decio. Well, the full development system of Atlanta continues on schedule since the beginning of the project, that schedule that we put together in 2022. So it's all on schedule, all unchanged. We have gone through most of the more difficult phases, with no changes in the delivery schedule. So we are on schedule and on budget. The large packages have been delivered. And the FPSO, which is in Dubai is in preparation for sale of its going through C tests, the final tests to sell away. The large subsea systems have also been delivered. The main one being the multiphase pump, that is in Niterói ready to go to sea. And in March, we are receiving all of the systems we can see here in the photos, we can see the FPSO, please, next slide, because we have more photos.

This is part of the subsea pump, the NPP that was delivered to Rio de Janeiro. So the whole system is on schedule. In April, we will start the campaign at sea to install the systems that have been delivered. In the end of April, the FPSO will be arriving. The installation system is ready to receive the FPSO. No more activities are needed. We just need to tie it to the FPSO. In June, we'll start installing the risers at the FPSO and the start schedule remains unchanged. It is expected for August of this year.

Parallel to that, Petrojarl continues in operation because it's located in a different position. Petrojarl now has a subsea pumping system, which is a lot more robust. So we will continue with Petrojarl until we get to the full development until we have to start off the full development. Only then will we start relocating Petrojarl or passing the Petrojarl wells to the old development. So the schedule remains unchanged.

Oliva, I will speak a little about Oliva. I have a slide on Oliva but it's okay. Let me speak a little about Oliva. With Oliva, we have the conceptual project kind of frozen following our schedule for the FID this year. Our main option for Oliva is to reutilize Petrojarl. We have signed a contract with Altera to do the engineering analysis to relocate Petrojarl. So this would be just a relocation of Petrojarl from 1 position to another 20 kilometers away. This study is being conducted. It will require another 2 months to be completed. And we signed just this week a memorandum of understanding with FOB and OneSubsea for integrated development of the subsea system, including drilling.

And with this, we are trying to come to the final schedule of the project. And it is possible that will even bring forward Oliva's first oil, which is expected for 2027. We are working to close the FID this year. In the coming months, we will finalize the Oliva schedule to confirm start of operations, most probably before 2027.

Uruguá, Tambaú. We are now in a transition phase, both with Petrobras and MODEC, which is the company that owns the FPSO. And in this field, both Tambaú, Uruguá and Oliva and Atlanta, all of these fields, all 3, on optimization of the logistics, which is our highest operating cost other than the FPSO, the highest operating cost vessels, helicopters, et cetera, can be optimized with no significant increase in maritime resources, to supply these 3 fields, and this would be a great benefit for our OpEx. Now I turn the floor to Pedro to address the next slide.

[Pedro Rodrigues de Medeiros, executive]

Wonderful. Thank you, Mastrangelo and Decio. To continue the presentation and in our strategy to create value, to have efficiency and expansion, as Decio mentioned in his introductory remarks for the 2024-25 agenda. In the end of 2023, we were fortunate to complete 3 very important deals for our transformation agenda and for the portfolio expansion of the company. Deals that the company have been working on for, in some cases, 2 years.

So trying to summarize the announcement made in the end of 2023. And now the committed to the acquisition of 23% of Parque das Conchas coming from Qatar in a nonoperated operation of Qatar. So for installments, annual installments to be paid part of the deal involves an interesting funding for Enauta in the next 3 to 4 years. In parallel, the acquisition of the Uruguá, Tambaú license, coming from Petrobras 100% of the license for a total amount of $10 million.

Anything above $10 million, another $25 million as earn-out. Earn-outs are conditioned by new expansions and future oil prices. So these are longer-term payments, they depend on a number of activities that the company is planning to invest in the expansion of these fields. In parallel to the acquisition of Uruguá and Tambaú, we also acquired production equipment from MODEC, FPSO Cidade de Santos just mentioned by Mastrangelo in a total of $48 million to be paid at the closing.

So these are very important acquisitions. When they were announced, they accounted for 25% of Enauta's market cap, and they will bring to the company a series of options for growth and value creation, one in a very short term, but they're very representative. We try to illustrate 4 main points here. In addition to cash flow diversification with growth options and new partnerships, both deals bring a lot of synergies.

Looking at the future phases and considering the whole investment made by the company at Atlanta cluster. So expansion campaigns as Atlanta's Phase 2, Oliva Phase 1, well these campaigns have a lot of synergy with the equipment and infrastructure sharing for Uruguá, Tambaú and for the planning of Parque das Conchas. So it's complementarity in terms of extraction, technologies, the way in which we engage our supply chain. Our suppliers have access to technologies and improve the recovery of oil during the lifespan of the field.

And lastly, as Mastrangelo mentioned, they will allow us to optimize part of the infrastructure investment that the company made over time to develop Atlanta. Uruguá, Tambaú are very close to Atlanta. So we can share sea logistics and air resources. And that is one of the interesting and attractive aspects of this deal. In addition, these deals will contribute for us to accelerate the efficiency agenda mentioned by Decio. The company is bringing some peripheral assets to these deals. One of them accumulated tax losses of about $34 million in assets that generate free cash flow. These assets in and out tend to have a cash flow post taxes that is even better.

And in the case of Parque das Conchas, we have great trading complementarity. I'd like to highlight that Atlanta's oil is a niche oil, it has reasonably differentiated characteristics in the international market. And it is one of the few molecules that is exported from Brazil, to a pool of low sulfur sea fuel in Asia. One of the few molecules that follow the same route and has access to the same market, which is the molecule exported from Parque das Conchas. So we're going to have access to a number of benefits and complementarity from the trading standpoint and quality and logistics standpoint.

Next slide. Trying to illustrate these 2 acquisitions in more detail. Parque das Conchas currently produces about 32,000 barrels a day of oil. And this is a reflection of a production through 25 wells, the assets started producing a little over 10 years ago, it's operated by Shell. As partners, we have now Enauta and an Indian company called ONGC. And it produces -- well, it has a collection of fields, Argonauta, Ostra and Abalone fields. It's very close to Parque das Baleias, it is 100% operated by Petrobras with a substantial production.

And in our expectation, we see a number of opportunities for growth, along the trajectory to develop Parque das Conchas in the coming years. Changing now into Atlanta pole and the acquisition of Uruguá, Tambaú, this map shows where Uruguá, Tambaú is located and the proximity vis-a-vis Atlanta and Oliva and also how close this pole is to what is now between the largest oilfields in the world like Buzios, Mero, and also very close to the bulk of the infrastructure of gas offloading in Brazil. In other words, Uruguá, Tambaú does include a flow pipe that connects to the grid route 1 given access to the whole flow or outflow of gas from [indiscernible] into the state of Sao Paulo and very close to the gas infrastructure also connected with the state of Rio de Janeiro, which offloads part of gas from [indiscernible] into the state of Rio.

Next slide, please. Uruguá, Tambaú is also a mature asset. It started production about 10 years ago. Currently, production is slightly above 5,000 barrels per day, and it's been through significant maintenance stoppages over the last 2 years, delivering both oil and associated gas and non-associated gas. And the platform, Cidade de Santos has a significant production capacity and very versatile when it comes to type of oil, gas and storage which may be converted within our plan into the future development of the pole of Atlanta.

Next slide. Given more color on the potential development of Oliva, that's an organic expansion in Atlanta cluster. This was discovered many years prior to the acquisition of this asset by Enauta at a time it was run by Shell. At that time, Shell submitted a development plan to the regulatory bodies, and it involved arrangement of production of approximately 8 drilled wells. And this shows how material and also the potential resources identified in these places, around 15 to 20 kilometers from Atlanta Field.

And the development of the project right now with Enauta involves the construction of an early production system in Oliva similarly to what we had in Atlanta, like Mastrangelo mentioned before, we are now engaging suppliers and there is a very special opportunity in terms of potentially benefiting from the production equipment that the company invested and is aware of all the pros and cons of their use in Atlanta's production, which is Petrojarl's production platform and the design at first involves production via 2 production wells over the next few years. Next slide, please.

So trying to summarize and consider potential growth opportunities for the next 3 to 5 years for the company, here, we share 2 slides showing the level of material resources identified in this cluster. Considering Atlanta, Oliva, and Uruguá Tambaú fields, compared to current certification or reserve certification, which only considers Atlanta's Phases 1 and 2 and exclude Oliva and future phases and also Atlanta future phases and our expectations, potential expectations to develop as we have Uruguá-Tambaú acquisition.

In parallel to that, this shows the company has been delivering about 21 barrels of oil through Atlanta's early production system. But with the capacity by the end of 2024 of total production around 140,000 barrels per day. In these 3 equipment, FPSO Atlanta would start sail way to Brazil, the early production system of Atlanta Petrojarl 1, an acquisition of FPSO Cidade de Santos.

Please note of these 3 pieces of equipment, the level of flexibility, capacity and versatility to embrace the whole spectrum of opportunities shown by these resources is very high. The production of capacity is for light oil, natural gas, storage, different types of anchoring system and broad capacity to store water. So plenty of opportunities and potential expansion over time with the use of this capacity in our locations and the company is considering this and over time, we expect to share more detail, more concrete facts and guidance on our intentions as we complete these processes. Next slide, please. Now I'll turn the floor back to Mastrangelo and now will be addressing the highlights and the results for 2023.

[Carlos Mastrangelo, executive]

Thank you, Pedro. The slide shows the results of our assumption to run with safety coming first. It's no use performing projects if we are not confident assured of safety always coming first. We completed the full development system. This is data from the end of the year. And now we have 9 million hours in the shipyard with no fatal days accident. And the right-hand side image shows Petrojarl. And this is when we completed last year. Three years with no fatal accidents, which is a very important and significant milestone because in these 3 years, we had several moments in which the platform are subject to changes in the platform structure and also in the extension of the life span of the unit.

We also had activities during COVID, the pandemic and many people who are not used to be there had to be loading. So hard times and despite all that, we didn't have any fatal accident. So now coming back to Pedro. Next slide, please.

[Pedro Rodrigues de Medeiros, executive]

Now what about the results for 2023 and highlighting the financial aspects. Here, we have a table summarizing the main indicators of the company, including production, profitability, net income return, investments, liquidity. It's worth mentioning 2 main aspects. Number one, year 2023, as you all know, had a significant impact via a long production halt in Atlanta's early production system. The company identified very specific failures in the electrical components of the subsea pumping system, which require an upgrade and resumption of production started early November.

So this is not fully reflected in the earnings of Q4 2023. In parallel to that, some nonrecurring effects. The most important one is a review of our portfolio and the decision to return part of the exploration areas of Espírito Santo leading to accounting net income negative over 2023. Here, we highlight Q4 2023. The company had operating result as EBITDAX of BRL 265 million approximately. Like we said before, it does not fully reflect the potential production that the company delivered this quarter. Investment particularly dedicated to the development of Atlanta cluster, maintained flat constant align to our physical and financial move. And as for liquidity, the company continues to be very proactive in order to preserve and have the best way to use the company's balance sheet, be it to invest in Atlanta, or to expand our portfolio generating more value to shareholders.

Next slide. Moving now to a comparison and what it means in terms of production. And comparing this to the net operating income as EBITDAX, we highlight on this slide 2 main points. First point, the resumption in Q4 2023 and the average for the quarter was approximately 15,000 barrels per day when it comes to assets in Atlanta and Manati. And currently, the company is already delivering approximately 27,000 barrels per day, a potential increment coming from Atlanta at full capacity. And our results of BRL 265 million, we highlight the results in December.

Of the BRL 265 million, the result in December represents approximately BRL 168 million. So December already reflects a production level in Atlanta that is closer to what is being delivered as the current production rate in the field. The second highlight is that the acquisition of Parque das Conchas has an effective acquisition date, July 1, 2023. Once this deal becomes mature and is completed, this means that of that amount announced of $150 million to acquire this working interest, the company will own the cash flow as of July 2023.

As a result, the net production of this stake in the field would already be reflected in the company at these levels. So once it is completed, this means that in February 2024, Enauta, well, today has around 65,000 barrels per day. So next slide. Moving now to address profitability. This slide has 1 goal, 1 major goal. It is to show the level of diligence in cost management and productivity that the company manages to maintain as it develops Atlanta. Costs are very consistent over the quarter despite all the maintenance and upgrading activities in the early production system in Atlanta. And it should be converted into a very good operating leverage as we resume full capacity of production in the coming quarters.

Next slide. Among the topics that we presented as results in 2023, as we addressed before. Here, we show our update for reserves. Our reserves were increase volume-wise, particularly through the first certification of the resources tested last year, a new accumulation Atlanta Northeast. The bulk of additions already subtracted to production in 2023, stem from this increment in Atlanta Northeast. And parallel to that, a very significant increment in terms of the potential value for our certifiers to Atlanta's Reserve and Manati, a comparison vis-a-vis last year, this time, not only from the investment efficiency the company has delivered, but also as we get closer to reap the fruit and results of delivery of the first oil in this new facility.

Next slide, please. Moving to the end of our presentation. What about investments? We mentioned before, investments are pretty consistent with what was originally in the budget as we decided to invest in Atlanta. $230 million are still left in investment until delivery of the first oil expected for Q3 this year. And after delivery of the first oil we highlight investment of $95 million throughout 2 years after first oil in Atlanta and budget at first as the company speeds up in the decision to invest Oliva.

Next slide. Just to conclude this part about the search for efficiency, capital allocation. Here, we highlight that the company continues to have a debt amortization profile that is very extended long term, especially if we consider expected cash flow to be generated as we increase capacity and stemming from the M&As announced already. And with a very robust balance sheet, considering net financial assets added to cash and cash equivalents, credit stemming from financing to build FPSO Atlanta.

In a second moment, the company already considers the possibility to bring more efficient capital allocation for this asset. And in parallel, we highlight some of the items we intend to bring in more efficient balance sheet. Like I said before, accumulated losses as a recovery with the acquisition of Parque das Conchas. We also have other assets that are substantial in our asset base, and we expect to use them so they become more attractive to our key activity and the level of return that the company expects to deliver in the coming years. So now I give the floor to Decio, for their remarks, and then we can start the Q&A.

[Decio Oddone, executive]

Thank you, everyone. So you had a good overview of what happened over 2023 at Enauta and what's on our way in 2024. Before we open the Q&A section, I would like to invite you to check our sustainability, our annual report on sustainability, which shows a glimpse of our ESG, and this is available on our website.

Without further ado, I give the floor to those who are running the call so we can open the Q&A section.

[Operator]

We will now begin the Q&A session for investors and analysts.

[Operator Instructions]

Our first question comes from Mr. Gabriel Barra with Citi.

[Gabriel Coelho Barra, analyst]

Well, first, congratulations on everything you've delivered this year and the plans for 2024. It's quite interesting to see this process, this transformation of Enauta during this time I've been following it. We'd like you to get more color on capital allocation. We saw the company making some acquisitions as Pedro and Mastrangelo mentioned Parque das Conchas, Uruguá, Tambaú, and the potentials of Oliva and Atlanta. And you see that the company today is in a position that is quite comfortable for cash generation for 2024 and '25. And this is a theme that was mentioned in the Investor Day this year.

So I'd like to understand how should we think capital allocation looking forward. You spoke a lot about development potentials of Atlanta. But in a foreseeable future, what are the potential M&A opportunities? What have you been considering? And I remember that some time ago, we were talking about a farmout of Atlanta, a potential sale of a part of Atlanta to diversify the portfolio. I know that you are in a very important moment of development. What I'd like to know, is this still on the table? Does it make sense, not to have 100% stake of the asset, maybe have 60%, 70% continue to be the operator and have a certain farmout to diversify the portfolio of the company? That's my first point.

And the second point, give us some detail regarding Uruguá and Tambaú and Parque das Conchas. And 2 quick points. One regarding Uruguá and Tambaú, regarding the earn-out, perhaps you could give us more detail on the earn-out. What are the triggers for the earnout in terms of cost of oil, productivity, yield, et cetera? And Parque das Conchas, would it be absurd to think that you would get money when you close the deal?

As Pedro mentioned production of Parque das Conchas, which is already a relevant production for the company. And looking at the effective date, there's generation of cash until the closing. So perhaps you could give some color regarding cash when you get to the closing of the deal, that would be interesting.

[Decio Oddone, executive]

Well, I had to write it down because you raised many points. But regarding capital allocation. Well, by all means, this is a year of deliveries. Like I said, we are focused on delivering the full development system, maintain the EPS, operating and generating cash. We want to complete the deals of Uruguá-Tambaú and integrate Uruguá-Tambaú in Enauta's portfolio. And we're also looking at opportunities for capital allocation because as you said it yourself, we expect to have more cash available and firing power when we close these events during the year.

So it's all in our radar. We continue to look at opportunities. And if we find an opportunity that we believe can add value to the company. where we have potential to close the deal that can add more to the company or we are willing to do it. Or you talked about the farmout. Since 2021 and especially since 2022 at Atlanta, when we approved the full development, that was in February 21, 2022. I always remember the date because it's Mastrangelo's birthday. So his birthday is together with the data of approval of the project. So it's always good to be putting pressure on him regarding delivery deadlines. Well, anyway, what we have seen is that -- and something we mentioned in our Investor Day, there's a lot of derisking in the Atlanta project when we approved the investment in 2022 in February '22, and we set a target of mid-2024, as the deadline for first oil.

That was a huge challenge. If we look at the track record of project delivery, and then delivery of projects this big in the world, most of the projects, more than 98% of the projects, which are mega projects above $500 million that are developed around the world, not just FPSO. 98% of the projects are delayed or over budget or both.

If we consider production platform, FPSOs, Mastrangelo knows more than me, the numbers are even more negative. So people do not believe that Enauta had the capacity to deliver project as big as Atlanta on time and on budget, and we are almost there. So we talk on some risk. But there's some derisking and we can see the value of the project. We can see that in the certification that we included in the presentation.

Now having said that, and considering all of these assumptions, if at any time, an opportunity arises fitting our assumptions, i.e., something that creates value, reduces the risk and contribute to the future of the company, both regarding the project and portfolio diversification. Fine. Atlanta project, I'd like to remind you, is a long-term project. We have 20 years ahead of us having Atlanta and Oliva in our portfolio. They are both in the same concession ring of contract, we call it a ring fence. So you're just kind of scratching the potential.

We will complete Atlanta Phase 1 now, then there's Phase 2, there might be others. There are other reservoirs in Oliva, for example. So if there is an opportunity for us to do something, they will match these assumptions. Asset appreciation, risk reduction and adding value, creating value to our shareholders, we are willing to look into it.

And there are other questions. I had forgotten. Uruguá-Tambaú earn-out and cash flow. Earn-out in , Uruguá-Tambaú and cash flow regarding [indiscernible]. Well, if you allow me, we haven't closed these deals yet. So I won't disclose too much. What I can say is that we have an expectation of doing additional things in Uruguá-Tambaú, drilling at least 1 well is in our radar to increase production. But this is linked to the earn-outs we negotiated with Petrobras.

As regards Parque das Conchas [indiscernible], we paid an initial installment in the signing, will make more payments during the closing that will be depending on the cash that is generated, and we have future installments to be paid in part with the cash flow, which is generated by the project. I prefer not to get into more details, and until we have more clarity regarding the closing date for the deal. We're expecting it for the second half of the year.

[Operator]

Next question from Luiz Carvalho with UBS.

[Luiz Carvalho, analyst]

I would second Barra's comments regarding the recent trajectory of the company, you ought to be congratulated. I have perhaps 3 questions. The first perhaps, you could give us more color on the process of finalizing the shareholding restructuring, what still needs to be done, what are the next steps so we can monitor that. Secondly, you mentioned in the presentation and optimization of some tax assets. Pedro, I don't know, but perhaps you can give us some more visibility regarding the size and the timing of that.

And thirdly, not sure if this goes to Decio or Mastrangelo. You had some capital allocations now, as mentioned in the last question. And you speak about new projects. Of course, that will have some CapEx required. So I'd like to understand the appetite of the company for new acquisitions and perhaps how you're thinking to fund all that. Perhaps through a follow-on deal or waiting for cash to be generated by the company? How should we look at that?

[Decio Oddone, executive]

Shareholding structure, like to remind you what happened with the company in 2019, Queiroz Galvão S.A., which was the controlling shareholder of Enauta, put their shares 63% in guarantee as a collateral for a set of banks to support the debt that they had with these institutions. During 2023, this negotiation process of the rights that the banks had to convert these collaterals into shares advanced, and we saw a number of moves happening in the company's shareholding structure.

Some banks sold their shares to other investors. And in May of 2023 we had a change in our Board of Directors. And then a new Board of Directors with independent Board members as a result of this restructuring. So this has happened. And as far as we know, what is lacking now, is Bradesco. Bradesco is the last of the banks that have negotiated with Queiroz Galvão, this kind of conversion. And eventually, they should take some action regarding that. And with that, and now this shareholding restructuring would be complete.

As regards to tax assets, I will turn the floor to Pedro to comment, and then I'll come back to speak about capital allocation. Pedro?

[Pedro Rodrigues de Medeiros, executive]

Sure, thank you, Decio. So as we showed in the presentation, we have $34 million of accumulated tax losses. These tax losses were accumulated through 1 of the acquisitions made by Enauta in the past, it is in 1 of our independent subsidiaries, preoperational, and we cannot accelerate the monetization of these tax credits. And the acquisition of the working interest of Parque das Conchas, which has a significant cash generation is happening through this subsidiary. As a consequence, we have an expectation of recovering this $34 million in an accelerated way once the deal is closed.

In addition, we have what we call a precatórios, government debt, that has been approved to full payment by the federal government amounting to $15 million. And part of my goals is to find a way to accelerate the recovery of this amount and invest it in a more adequate way already in 2024. Parallel to that, the company recently won some legal suits that created tax credits of PIS COFINS of about BRL 100 million, about $20 million and they were recorded in the results of 2023. We have an expectation that these lawsuits, these claims will generate new tax assets for the company in 2024 and of course we're looking for ways to monetize them.

I think that your question is really good, Luiz, because if we add off these tax assets, we are talking about an order of magnitude of about $75 million or more, quite a substantial number if we compare to company's net debt. And if we compare it to the company's market cap. All of these funds are in our hands to recover and in terms of better invest them when compared to what is in our balance sheet. And going back to capital allocation, Luiz. We expect to be generating a lot more cash for the company looking forward. That will allow us to have the CapEx for our project. Oliva, and the next phases of Atlanta and some CapEx in our other assets.

Now this new situation of -- the new position of the company gives us more flexibility. If there is an interesting M&A opportunity we can use, we can use shares or other ways to have access to capital. There's nothing in the radar to this point.

[Operator]

Next question, Mr. Rodrigo Almeida with Santander.

[Rodrigo Reis de Almeida, analyst]

A couple of questions. Maybe I would like to begin about reserve. And I'd also like to better understand if there is an update of any brand assumption or any other point you mentioned about Atlanta, but I would like to understand if there was any change from 2022 to '23. And considering oil coming forward. What about the next reserve reports? Can we consider contingent reserves? Any information will be useful? Second point, capital allocation. You talked about tax credits and Decio also mentioned the opportunity to -- for funding. So you also have some relevant amounts from [indiscernible]. So what about the moves you're doing. Would you consider any -- to anticipate the receivables because that's quite a significant amount? And lastly, I wonder if you could give us more color on the cost of drilling in Oliva, there is a preliminary expectation. And as for Petrojarl about the initial plan, and what about the platform would you acquire? Or does it come to you with a symbolic amount? So what can we assume in Petrojarl in terms of having it used for Oliva and cost-wise as well?

[Unknown Executive]

Reserves. As you know, the certification process of reserves is also very economic. It considers the geological production aspects, but it also includes capital cost, economicity and project assumptions. So year-over-year, economic assessments stem from all these drivers. This year, we had a different economic evaluation considering changes over several or considering several parameters used for certain purposes. And it happens every year. The most important thing is that when it comes to geologic reserves, underground, we had good news. No significant changes in addition to the inclusion of the new reservoir in Atlanta.

Oftentimes, you can see economic parameters affecting the calculation. For instance, we used to have a vessel last year. Our own vessel. This year, we sold it to [indiscernible] and that involved chartering, which affects operating cost. So at the end of the life cycle of the project down the road, it might lead to a reduction in the production time, economic production time, which will not -- should not happen into practice or any other parameters might affect this calculation.

So this is how we address certification. We see certification this year as positive and confirming what we've been seeing and delivering in recent years. As for Oliva, we imagine that after we make the decision to invest or FID in the field, we expect to go for certification as well. And the capital allocation that you mentioned, Pedro, is going to give you more color.

When it comes to receivable credit, combined with FPSO Atlanta, that's a great question. That's quite a significant amount. One of the contract assumptions, very well designed by the company in light of the constraints and the market context at that time in order to be on the same line in terms of risk, return, interest to construct and convert the FPSO with a top quality partner like [indiscernible]. So our expectation is to pursue a way to better allocate this capital and more in line with our upstream and commercialization of oil and also development of opportunities for oil and natural gas.

So our goal is not to invest in long-term financial assets associated to financing of a platform. When this credit was set and the arrangement was performed, it was already designed in light of a typical financing bond for an FPSO just as we see in several things found in the market, existing ones. So considering the opportunities to better use this capital, we envisage the capacity to monetize -- to fully monetize the asset or partially over time. That's a dynamic strategy. And as the FPSO begins to deliver, this credit will begin to be performed. We expect it to happen over 2024.

We've already been fully dedicated to this agenda. And as a result, this capital in our mindset may be earmarked for more interesting purposes when it comes to growth or even return to shareholders. And there is a question about the cost -- drilling costs in Oliva and the contract with Petrojarl. Mastrangelo?

[Carlos Mastrangelo, executive]

The current phase, we include the analysis of the cost of this transfer, rearranging one allocation to another. The advantage is that there is no change to be made in Petrojarl. It was previously assessed and it will be used as is right now. The only investment to be made is to extend the life span of the unit. We have only 2 wells. This is more than enough, no additional investment is required to change the design of the vessel. As for drilling, like I said before, we have -- we're working on MOU which encompasses not only drilling but also subsea equipment.

So it's not going to be a unit cost, we'll try to have it fully including the analysis of the reservoir, which is the partnership that we have right now. In this partnership, we are working considering the possibility to defer any investment after first oil. That's the current strategy right now. That's what we're doing with our partnering companies, which offer strategy, supply strategies to develop.

[Rodrigo Reis de Almeida, analyst]

If I may, just a brief follow-up questions about reserve. Just to confirm. So there were no changes to brand and the brand used vis-a-vis the current one, right?

[Unknown Executive]

No, not for brand.

[Rodrigo Reis de Almeida, analyst]

Second point, in Oliva, Mastrangelo, could we consider a bumping or a subsea system more similar to ESP in Atlanta compared to the full development system?

[Carlos Mastrangelo, executive]

Similar to the most robust. So the last one that we see in operation in the current early production system, that's the proposal. The difference being that there will be -- well, we have 3 systems available today. For Oliva, we will need only 2. So there will be an extra one, a spare one.

[Operator]

Next question, Leonardo Marcondes with Bank of America.

[Leonardo Marcondes, analyst]

My first question is about certification. Pedro already made some comments, but more specifically, I want to know about Atlanta Northeast. Maybe I lost this part, well, but I don't know if you mention what do you expect to drill with a new reservoir? My second question is broader, not focusing specifically on Parque das Conchas, but more about contracts between oil and gas companies within a consortium. I wonder if you could explain what are the rights that nonoperating companies have in a consortium? Maybe you can share an example as preemptive rights, for instance, or any reservoir independently. So I wonder if you could tell us more about it.

And if I may extend my third question, more about Parque das Conchas. I know you cannot disclose a lot, but it's very interesting to see the map that you shared about the field. And it seems to me Argonauta has some reservoirs. Is there any reservoir that has not been explored or developed yet? And apparently, there is an additional reservoir to the south [indiscernible] 1 or 2 south of Argonauts. So I'd like to know if there is any asset that has already been explored or developed?

[Decio Oddone, executive]

Thank you, Leonardo. With regards to Atlanta Northeast, yes, this will be priority in our portfolio as we move into Phase 2 in Atlanta or Oliva. So we're going to select projects. And I believe that with the drilling of Atlanta's Phase 2, maybe we can start doing something in Atlanta Northeast with Oliva. I guess we will gain scale at Enauta once we have a set of opportunities in the same region or in Atlanta's cluster, which will also bring us more competitiveness, I believe. When it comes to our suppliers and also bringing in CapEx cost reduction. As for certification, this is after Phase 2, right in certification, Pedro's reading this. This comes after Phase 2. And now we will prioritize our portfolio so we can define our next steps.

So we have 2 wells in Atlanta's Phase 2 and then another 2 in Oliva, maybe Tambaú, Atlanta, Northeast or exploratory also in the ring fence. This is all to be analyzed. Your question is interesting about rise in consortiums. Consortium of production companies are run by a joint operating agreement, and this document set up rules to set the rights and duties of each 1 of the partners in a consortium. The operator is there, but the partners have some rights. Typically, in a consortium of 3 companies, there are rules to approve investment from 50% to 60%, with 50% or 60% of the interest, you can approve a process.

Sometimes, 1 partner is against it and has to move forward. And if he refuses to do that and the project that is successful by 1 or 2 partners, it has the right to come back but with a very high penalty. On the other hand, you also mentioned something about doing independent projects. Typically, there is an assumption. So risk, 1 of the consortium members can take the risk to work individually even against the will of others. And at the end, this will come to the deal and if 1 or more consortium members after the result is achieved, if he wants to go back to that result, it also takes high penalties.

So nearly all contracts have these provisions. And all contracts, typically, generally speaking, typically, they have provisions for preemptive rises or first offer rights or allowing the consortium members to have some benefit should they decide -- 1 of the consortium members decide to leave. As for Parque das Conchas, in Parque das Conchas, there is a number of reservoirs that can be studied that deserve an in-depth study for potential investments, but we haven't talked about it, so we can't disclose anything.

[Operator]

Next question is from Ms. Monique Greco with Itau.

[Monique Greco, analyst]

I'm going to ask 2 questions. One is a follow-up of something that Rodrigo started talking about regarding Oliva. He asked some questions about CapEx, investments. But I'd like to address more of the side of the OpEx. CCFID is considering using Petrojarl at Oliva, but the project as expected start in only 2027. What are you planning to do with the plant until then? Will the company continue to have that kind of OpEx? Is there any way to mitigate that until we have the startup of Oliva? And so that's number one.

My second question also to help us deepen our critical math regarding the value of the acquisitions. Mastrangelo spoke about the potential of optimizing the logistics and using sea resources with Uruguá-Tambaú. Could you give us an idea of the size of that benefit? How much do you estimate to have in savings or optimizing the OpEx after Uruguá-Tambaú integration by reducing logistics costs?

[Decio Oddone, executive]

Well, I'll let Mastrangelo answer your questions.

[Carlos Mastrangelo, executive]

Well, Monique, we are exactly working on the strategy. But in a nutshell, the chartering contract of Petrojarl will end and we'll stop paying the lease rate from that moment on, that will be Oliva's cost. So what we are discussing now is exactly that interval. I'm trying to do it as quickly as possible. Want to extend the lifespan the least possible, but I want to do the drilling campaign of the 2 wells and the delivery of the 2 subsea systems.

So you see, that's why I said, Monique, at the very beginning, that I'm working with the expectation of bringing forward the deadline from 2027 to 2026, that will optimize the project quite a lot and deferring as much as possible the investment in a partnership agreement with the companies that are participating. I cannot give you any numbers yet, but this is the strategy that we will be confirming in the coming months. And there was another question about the logistics. Just to give you an idea, we have 2 vessels currently, 2 dedicated vessels for Atlanta.

To include Oliva, we don't need any additional vessel. The 2 we have are sufficient. And that's the highest cost, the highest cost other than the FPSO is the sea logistics, not so much of the air logistics, that is important, but not as important as. Now having the tow boats, the maritime support, perhaps Decio can talk about this. There is also a regulation that requires that the company has a support system for -- to deal with the potential oil leak in the sea. That requirement allows the company to share maritime resources with more than 1 operator. So we can share the kind of structure with our portfolio.

So having these fields close together or near one another, we can share these vessels. We have these 2 vessels dedicated only to Atlanta, but we can use the vessels to serve the nearby fields. So there will not be a significant increase in logistics costs. And with that, we dilute our operating costs.

[Operator]

Next question from Mr. Thiago Casqueiro with Morgan Stanley.

[Thiago Casqueiro, analyst]

Going back to the OpEx. The OpEx with chartering costs are close to 450,000 daily. The expectation is that this number will remain during the first half of the year. Could we think about a 50%, 60% increase in Q3 or Q4 given the arrival of the full development system? I just want to get a sense of how we can expect OpEx, including chartering in 2024. Secondly, going back to the M&A opportunities and thinking about the long-term strategy. Is the company considering all possibilities? Or are you more focused on assets where you can have the operatorship or perhaps you can buy a stake from a company as was the case of Parque das Conchas. So I just want to get a sense of what you're thinking for M&A deals?

[Decio Oddone, executive]

I think that Mastrangelo can tell you what we are planning in terms of the schedule for the second half of the year.

[Carlos Mastrangelo, executive]

We kind of touched on this regarding the arrival of Atlanta and -- the FPSO Atlanta and the exit of Petrojarl. So regarding an increase in OpEx because we would have 2 units operating for some months operating together. Today, we have the SPA with our OpEx. And usually, we remove the SPA and replace it by another. But in case, we'll maintain the SPA production -- or the EPS production actually. And during this period that should continue for a couple of months, we're going to have the cost of the FPSO. FPSO Atlanta in the North and FPSO Petrojarl in the South, that's what we expect. But again, production will be unchanged. And Pedro can give us more color regarding the costs of all that.

[Pedro Rodrigues de Medeiros, executive]

I think it is what Mastrangelo mentioned. It will be for a short period of time, we are going to have a cost increment. 50% in terms of order of magnitude seems adequate on a monthly -- from a monthly standpoint. But that is associated with increased production, given that both platforms will be producing during the period when the cost will increase. So the lifting cost per barrel as a higher likelihood of improving and posing a productivity gain even during that period. And just to try to translate this into accounting results and perhaps characterize the guidance. As Mastrangelo mentioned, during -- well, we are accelerating the progress of the studies of organic expansion associated with Oliva that can have a very relevant interaction with Petrojarl decommissioning.

So from the accounting standpoint and evolution of operating costs, this will depend a lot on the economic arrangement on the decision the company is making, the engagement the company has with many suppliers. We kind of gave you an expectation that this decision will be made in the second half of the year. And going back to M&As. I think the recent track record of Enauta answers your question. We had an acquisition of Uruguá-Tambaú, where we are the operator, and we also had an acquisition when we got a stake in a consortium where we are not going to be the operator.

So it's all about evaluating the opportunities and identifying our ability to add value over time with any deal, that's what we are looking for. And if I may add something, Decio, to your point, we have to recall some important concepts that we presented in our presentation here. The fact of being the operator or not involves a myriad of other aspects such as governance rights, vision regarding access to resources, sharing of resources for future campaigns, drilling investments, access to technologies, engagement with the suppliers, trading and the ability to generate gains in our portfolio in terms of oil or natural gas trading. So see, it's a wide array of opportunities, especially because with Enauta's portfolio, our talents, our technical capabilities, everything that the company has can translate into opportunities. So I just wanted to highlight that.

[Operator]

This concludes the Q&A session, would like to give the floor back to Mr. Decio Oddone for the final remarks.

[Decio Oddone, executive]

Thank you, everyone. It was a pleasure to be with you to share the earnings for 2023. And now I invite you all to be back in May for our next earnings conference call with the first quarter, those of you who follow the company and our website. We've been for 2 months ahead. So we have a lot of good ideas about what comes around until the end of the month. Thank you very much. See you next time.

[Operator]

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

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