Petro Rio SA

BOVESPA:PRIO3

Earnings Call Analysis

Prio's Q2 2024 Performance and Future Outlook

Prio faced significant environmental licensing delays in Q2 2024, affecting key projects like Wahoo and TBMT. Despite these challenges, Prio maintained strong operations with an average production of close to 90,000 barrels per day. Revenue touched almost $700 million, bolstered by 8.5 million barrels of oil sold at a competitive discount. The company's adjusted EBITDA reached $546 million, a 64% increase year-over-year, and net debt reduced to $740 million due to robust cash generation. Prio remains focused on securing environmental approvals and continuing its investment in future growth projects.

Steady Progress Despite Licensing Hurdles

The company faced significant challenges this quarter due to delays in environmental licensing from IBAMA, notably affecting the Wahoo project, which could add 40,000 barrels of daily production. This situation stopped production in several wells, leading to a focus on resolving these issues to resume growth.

Production and Costs

Despite these hurdles, production averaged around 90,000 barrels per day with a lifting cost of $76 per barrel. The company sold 8.5 million barrels, managing a competitive commercial discount of about $3.60 per barrel thanks to effective trading strategies.

Financial Strength and Debt Management

Prio reported an impressive adjusted EBITDA of $546 million, a 60-64% increase from the previous year, contributing to a reduction in net debt to $740 million by the end of the second quarter. The strong financial performance and cash generation, enhancing net debt to EBITDA ratio to 0.4x, position the company well for future challenges and growth opportunities.

Operational Efforts and Efficiency

The operations team faced a tough quarter with production drops due to halted wells. Nevertheless, they maintained lifting costs within the target range—$7.6 per barrel—even under pressure. Efforts to improve efficiency continue, particularly at the Albacora Leste field, with plans for ongoing maintenance and leveraging new seismic data to fine-tune drilling campaigns.

Future Growth and M&A Opportunities

Prio is actively pursuing M&A opportunities while addressing ongoing challenges. The company remains optimistic about seizing market opportunities, especially in the adaptation and implementation of the Wahoo project and other initiatives in the regulatory pipeline.

Focus on ESG and Employee Well-being

Prio highlights its commitment to environmental, social, and governance (ESG) goals and employee well-being. This quarter saw a 9% improvement in emission rates, down to 21.9 kilograms of CO2 per barrel of oil equivalent. The company also continues robust engagement activities to foster a supportive working environment.

Earnings Call Transcript 2024-Q2

[Jose Costa, executive]

Good afternoon. Welcome to Prio's Second Quarter 2024 Video Conference Call. I am Jose Gustavo, IR Manager and I will be here hosting this event.

[Operator Instructions] The translated presentation is available on our IR website. The comments on the results will be presented by our CEO, Roberto Monteiro; our CFO, Milton Rangel; and our COO, Francisco Francilmar. After the presentation, they will be available during the Q&A session. [Operator Instructions] This event is being recorded and will be available on our IR website.

This presentation contains information based on future estimates and forecasts based on assumptions adopted by the company. It can therefore change and should not be considered a fact or be used as the basis for financial projections beyond the claims expressed by the company.

I turn the floor now to Roberto Monteiro, our CEO.

[Roberto Monteiro, executive]

Thank you, Jose. Good afternoon, everyone. We're going to go through Prio's Second Quarter 2024 results. I'm going to start by talking a bit about the highlights of the quarter. then I'm going to talk about the environment, safety, our people. And then finally, I'm going to talk about our next steps.

But starting with the highlights of the period. We're going to begin with perhaps the biggest point of attention, which concerns [ Who's ] environmental license and the permits we are waiting for in order to resume production in some of our wells, in particular, to [ BaroMartel ], TBMT and [ Gradin ].

So this whole quarter, this has been the underlying issue. This issue that has been going on that has been going on within IBAMA since January has impacted us a lot. The Wahoo project has not received its environmental wise yet. And coupled with some other wells that have stopped producing. For these wells, we need [ abuse ] approval to start producing again. All of this has been held up. And we're monitoring at the solution to this stand still that has arisen between IBAMA and the government. We're monitoring this with a lot of attention so that we can resume our growth projects.

As a reminder, Wahoo, we're talking about 40,000 barrels a day, TBMT about 5,000 to 7,000 barrels a day. We have one more well, [ ODP ] at Frade, which means a little over 1,000, 1,500 barrels daily. So we have a lot of our production being impacted by the situation. I believe is the main point of attention for the quarter.

And it's something that had a bit of an impact in the second quarter. And now from Q3 onwards, it's going to have a bit more of an impact mainly on account of Wahoo. Well, even so, we had an average production of close to 90,000 barrels daily or lifting cost of $76 per barrel. We sold 8.5 million barrels.

I would like to highlight our Prio trading. We got a very competitive commercial discount on the average of our oil sold discount of around $3.56, if I'm not mistaken, $3.60 almost. So a good commercial discount. A large part of that is due to the work we put into delivering our oil to our customers. All of this together with both the lifting cost and the trading coupled with our costs. All of that led Prio to an adjusted EBITDA of $546 million up 60%, 64% compared to last year. This was the second highest EBITDA in our history, the highest quarterly EBITDA in our history was in the third quarter of 2023. Was a little higher than this one. So we posted a strong result despite the setback that we've had that we are still having with offering, especially in relation to environmental licensing.

Well, the consequence of this very strong EBITDA is a reduction in our net debt. Today, we have a cash position of almost $1.2 billion and net debt over EBITDA ratio of 0.4x. So this is an increasingly healthy company, generating cash. But yes, with this licensing issue still very [indiscernible].

Moving on to the next slide. I think it's worth pointing out. I mean, I've already mentioned it, but what I wanted to stress is our cash position at [ $1.16 ] billion, actually, [ $1.56 billion ], and our net debt over EBITDA ratio at 0.4. So the company is very solid and fully prepared for the challenges that lie ahead. The inflammation of Wahoo in the M&A opportunities that we've been pursuing more and more and that are starting to appear in some form or another. So the company is very well prepared.

I'll hand over to Francisco Francilmar. We will talk a bit about operations, and then Milton will speak about financial performance, and I'll be back to wrap up the presentation. Thank you.

[Francilmar Fernandes, executive]

Hello, everyone. Thank you, Roberto. I'm going to start on Slide 5, which our asset performance. This was another quarter of a Wahoo of struggle work, a lot of commitment from the entire operations division. It was not an easy quarter. We had some production losses due to wells that halted production. We didn't get the authorizations. We weren't able to carry out maintenance on these wells, which ended up having an impact on production. As a result, we have to work higher than cost management to keep the lifting cost at the acceptable levels that we fight so hard to achieve here. We ended the quarter at $7.6 per barrel. Other one field produced a little better, another a little less. Overall, we managed to deliver a number within the range we were looking for.

Going a little deeper into our lifting costs on Slide 6. We see that this quarter was a little higher than in the previous quarter, largely due to the loss of production from some wells. Was one well at Frade, the TBMT wells. So we ended the month of June this second quarter with a lifting cost of $7.6. We'll remain committed to it, which is the primary focus of the company. We repeat this mantra here all the time so that everyone works with a safe operation with the best possible efficiency, which will give us the best production cost. This is what is going to ensure that we have a perennial resilient company.

Moving on to Slide 7. Let's take a look at the detailed performance of each asset. At Frade, this quarter, we had good efficiency, although we are still suffering from the loss of production from [ ODPI ], a well that had a problem and we still haven't managed carry out the maintenance and it is we need to get the rig in. But for that, we need to IBAMA's approval and there's this whole issue that most of you are following. The approval is taking too long. This is something that used to come in a very short time, and now it takes months and months as soon as we have a solution for this. Now that the other wells have stopped production, we're going to have a few of wells that we will have to manage but we have the resources and conditions to do this, and we are just awaiting a green light.

On Slide 8, we have TBMT and Polvo. Here, we had a tough quarter because we lost wells in production due to the failure of the submersible centrifugal pump or the ESP. Just the pump that pumps all the fluid oil, gas and water. They stopped due to electrical failures. And in this case, we need to do maintenance. We need to replace them. These are things that happen from time to time, which unfortunately have this unfortunate alignment when 3 wells stopped in a short period of time. The last well that stopped basically stopped at the end of June. And we're going to feel this even more now in July, the biggest impact on production should be felt in July. We should see now in the operating data for the month, and this puts further pressure on the lifting cost.

So we are trying to get around it one way or another. We're going to live with it as best we can until get the green light to go ahead with the necessary maintenance. But we've been doing this for a long time. We know how to do it. We just need a green light.

Moving on to Slide 9, we are going to talk about Albacora Leste [indiscernible]. It was a good quarter at Albacora Leste with a lot of operation at the field, a big effort to improve maintenance and liability. We saw improved efficiency at around 85%. We are following the plan. Over the next few months, we are going to deliver major pieces of equipment, we are servicing the power generation system, the compression system, which will improve the assets reliability.

There are some things that are still fragile, which need to improve. But with some redundancy and some muffle in the asset, we're going to aim to achieve 90% efficiency very soon. Also in this quarter, we delivered maintenance that was carried out in the subsea system when 2 new wells were put into production. So production has improved. Some wells are still in need of maintenance, and we're working on that, so that over the course of Q3, we can deliver something more. So we'll continue to look at ABL.

In July to give you a general update, we had a scheduled shutdown at the asset for major maintenance, which is why we expect to see an improvement in reliability in those wells that were fragile and issues related to chemical integrity and some maintenance. We stopped the asset. Was offline for a little over 2 days. This will have an impact on production. In other words, it had an impact on production in July, but it's back online. We're already producing normally some maintenance on some wells is taking a bit more work, but everything is moving towards stability and improvement of the asset in the coming days and months.

Well, on to Wahoo field. Just a quick update for Wahoo, we practically have all the materials, all the subsea and well materials already. For the topside part would slow down a bit in order to be able to do it in line with the drilling schedule with the subsea installation schedule. So it's under control. The only thing not under our control is environmental licensing. So we are still waiting, doing everything we can in our end. We're always available. It's a field that already had a drilling license has several wells drilled. It's a deepwater region. We're providing all the information.

I mean, we can't see any limitation to this. And we're really just waiting for the green light and we hope to get it over the next few weeks. We're ready for it with the rig, the vessel, even for the installation vessel, we have alternatives, A, B and C. We're ready for anything. We'll adapt. And will deliver as soon as possible.

That concludes my part. I'll turn the floor to my friend, Milton. Thank you.

[Milton Rangel, executive]

Thank you, Francilmar. We'll continue our presentation on Slide 11, to talk about Prio's financial performance in this period. While starting with offtakes. We sold 8.5 million barrels of oil. Considering that Brent -- Benchmark Brent was around $85.35 in the period in our equivalent selling price, FOB was $81.86 so we had an implicit discount of approximately $3.49, $3.50 per barrel, which reinforces how successful our trading strategy has been well executed. It has been as a result, we had total FOB revenue of almost $700 million.

In addition, it's worth noting that we had other revenues that fall to that line of nonrecurring items of almost $40 million. This is largely explained by the fact that we were successful in some lawsuits, some tax claims, fiscal claims from the time of [ Domo ], which we inherited after the acquisition. So in fact, these were possible losses that have been provisioned for were contingent on results. And because we were successful in these cases, they ended up being recurs in the result. But again, it's something that would have an impact on our EBITDA. However, we show adjusted EBITDA precisely to exclude this timeline impact. So with that, our adjusted EBITDA was around $546 million, more than $1 billion in the 6 months of the year, year-to-date. A super strong adjusted EBITDA margin of 78%.

Moreover, I would mention another highlight in the income tax and social contribution line is that we had a high negative figure, a small part of which around $40 million is actually related to current tax, which is the tact that is most present in our day-to-day operations. And the difference a little over USD 140 million is related to deferred tax. So this is an accounting figure rather than a cash one. And it basically relates to the way we present our results and the way we calculate taxes.

Our functional currency is denominated in U.S. dollars. Taxes are calculated in Brazilian reals and in this period, there was a sharp currency depreciation. So our projected taxes, our forecast for future tax payments had a negative adjustment due to this currency variation. But still, we were able to turn a profit of $272 million, a very significant result for our quarter.

Well, now on Slide #12, we talk about funding a summary or a picture of the company's funding. I think that the main highlight was that recently, in the last few quarters, we managed to increase the company's duration through a series of transactions, mainly in the local debentures market. But without significantly increasing the average cost of our debt. We went from a duration of 2.33 in the fourth quarter of last year to more than 3.5 in the second quarter '24. And in that period, we only increased by 16 or 17 basis points. So I think it's worth pointing out that we are very attentive to market opportunities, especially with regards to liability management, as we can see in the amortization schedule chart.

We have some bilateral debt mainly maturing in 2025 of $225 million. In the green bar, we see our international bond material in June 2026. Therefore, we are very comfortable with plenty of time to manage these liabilities. And we are also very well funded with very low leverage as we will see further on. Therefore, we are in a very comfortable situation, which allows us to see the best time to manage these liabilities.

On Slide 13, we see the variation of net debt, which is nothing more than a reflection of the cash flow from the first to the second quarter. We started with a net debt of $975 million and reached 740 million in the second quarter. meaning that we managed to reduce net debt to cash generation, which is basically explained by the strong EBITDA of $546 million. We had a refund of legal fees from the Wahoo arbitration so that there was a cash inflow. Working capital is quite negative at $131 million, which is largely explained by the fact that this EBITDA includes oil sales, but we haven't received any cash yet. So we increased our receivables in the purchase of inventory and items of this nature.

We continue to buy back shares opportunistically. And at certain interesting moments, we ended up investing, I mean, buying $90 million in shares. CapEx amounted to almost $100 million. That is life in the company goes on. And despite the challenges of environmental licensing, we continue to invest in Wahoo and we also made investments in Integrity in Albacora Leste, drilling in Polvo and items like that.

Financial results stood at 31 million plus payment of taxes, cash, $40 million which brings us to this net debt of 740 million at the end of the second quarter of '24.

Now moving on to the next slide. Here, we talk a bit about our capital structure, debt position. And this is an indicator that we monitor very closely. Net debt over adjusted EBITDA for the last 12 months which is also the main covenants of our loans. So we are currently at 0.4x net debt over EBITDA, which shows quarter after quarter this drop due to the company's cash generation, which has been able not only to fund our CapEx, but also reduce this net debt. The trajectory, therefore, is excellent. It points to a reduction in net debt and leaves the company super comfortable, funded and also prepared for new investments.

With that, I will hand over to Roberto, who will talk a bit more about ESG and Prio's next steps. Thank you, and have a good afternoon.

[Roberto Monteiro, executive]

Thank you, Milton. Well, talking a bit about environment, society and people. I would like to draw your attention to the first point, which relates to the rate of emissions. We were at almost 22 -- meaning 21.9 kilograms of CO2 per barrel of oil equivalent. This was a 9% improvement over the previous quarter. And there was a worsening, let's call it, a slight worsening compared to our last quarter, which was the third quarter last year, I mean the second quarter of last year, largely due to production volume. So the emissions rate is very much related to production. It's obvious that once we have the environmental license when we managed to implement the [ bona ] project and so on, this figure of 21 kilograms of CO2 per barrel of oil equivalent will drop, I would say, near something below 18 kilograms of CO2.

But again, we depend on the environmental license, which in addition to generating jobs, taxes, royalties and so on will also contribute to a reduction in the level of kilograms of CO2 per barrel of oil equivalent.

In regard to safety and well-being, we just had a safety month campaign throughout the quarter. So in addition to safety, which is also an always nonnegotiable for us. We continue with our Yoga, Volleyball, Martial Arts programs, Jujetsu, in particular, tracking and so on. And that always brings a great deal of engagement among our employees. And we will continue to sponsor some events to promote social inclusion, through sports, also to support culture and so on. We launched the third edition of [indiscernible] Offshore, which is an educational program and mainly at transforming the lives of young people who are not currently in the oil and gas sector today. We bring these young people together in partnership with [Foreign Language] and [Foreign Language]. We train these young technicians and non technicians to be able to work offshore.

And then we select some of these 180 young people. Those were those selected this year. And then they are ready to join our staff here at Prio. And the young people who don't get this opportunity can join in other years and can also join other companies in the industry. This is a program that helps us and also helps the society by training people to enter the oil and gas market.

Now I'll move on to the last part of the presentation. And I will talk now about our next steps. Some of them have been repeated here for a very long time. Obviously, the first one being the focus on the health and safety of our employees and third parties. And then the last point is also always repeated. But now, we are drilling wells. We intend to drill 2 wells at Polvo. So we'll see if we are successful. If we are successful, we'll put them into production. These are things that could bring 1,000 barrels or 1,500 barrels from each of these 2 wells. We are still very much focused on the environmental licensing of Wahoo and the permits for the workover, following very closely the possible outcome of this IBAMA situation. Also, we are working hard on the operating efficiency of Albacora Leste.

In the second quarter, we had the best operating efficiency of Albacora Leste to date. It was over 85%. The second best figure had been in the fourth quarter of last year with 84 in a bit. Albacora may not be moving at the speed we would like from the point of view of improving operating efficiency. But it's certainly moving in the direction we've set it to be. So we should recall that we started this field with Vision [ CEO ] of less than 70. And today, we already 85. And our goal is to reach something above 90% of operating efficiency.

In July, we had 13 days of downtime. In addition to these 13 days of downtime, you have to add the ramp down, something that doesn't happen overnight. We've been shutting down gradually. It takes at least 4 days to resume production, and that's what we call ramp up. The net of this is not 13 days, it's more than 13 days. But we went through many maintenance items, things that have been neglected in the past. And so we hope that this is another very important step towards improving our operating efficiency. July, obviously, production has been low mainly due to those shutdowns. But we understand that it's an important shutdown. And it's a very relevant one because it allows us to improve the integrity of the unit and improve the efficiency of the unit.

In the next quarters, we will focus on the Albacora realization campaign. We finally received in -- we've already received a large part of the Albacora Leste seismic. So now we already have a very good idea of the campaign. But now with the processed and improved seismic we've been able to do some fine-tuning and then be sure of what to drill, how to drill and so on. And this is what we are going to do now throughout the second half of the year. And so as soon as we have the opportunity, meaning get the environmental license for Albacora, we will be able to carry out a campaign very similar to what we did in Frade.

And finally, the last point, it always comes up is that we continue to be attentive and excited about M&A opportunities. We see some things starting to move in the market. And this makes us excited because as we know, Prio doesn't work with pure exploration of oil field. So [ NNA ] is always a super relevant and very important entry point for the company.

Well, thank you very much. I would like to thank the determination and discipline of all of our employees and all the people will somehow interact with Prio. We are always very well received by society, always very well received everywhere. And I would like to say that because of the Wahoo project, it hasn't been the year we had planned. However, the other items that surround us, such as operating efficiency, maintenance, et cetera, we've been able to move forward, and we've been able to improve even more.

Thank you very much, and with that.

[Jose Costa, executive]

And welcome to the Q&A session to discuss second quarter 2024 Prio's results. We'll start now with Pedro Soares with BTG.

[Pedro Soares, analyst]

Good afternoon to the whole team. I guess I'd like to ask two questions. The first is about Albacora Leste very clear, Roberto, Francilmar you spoke about the target of reaching 90% efficiency for the platform, especially after the maintenance. But perhaps you could tell us in terms of what you're expecting in terms of production from August onwards, if we go back to these levels of 27, 28, is that feasible now? Or business conservative. So that's number one.

Second question regarding product at Polvo,you mentioned drilling 2 new wells. When should we expect from what I understood, at least one of them is being finished. I'm not sure about the second one. So what would be the timing for these 2 new wells to go online? And expected production?

My second question is regarding as Wahoo's CapEx. Honestly, [indiscernible] the reasons mentioned over here, it is late, particularly the top side, you slowed down. That's what [indiscernible] said. So perhaps you could help us translate this into -- in our model, in addition to those portfolios linked to the CapEx. [indiscernible] easy to imagine. So for the 800 million, they were forecast in the beginning. What still left? We just want to understand what is the expected cash outflow in the coming quarters.

[Unknown Executive]

I mean the timing regarding approval by IBAMA. [indiscernible] today, we are producing 27 over [indiscernible]. Would you like to speak about operating efficiency. When do we think we'll get there?

The maintenance work we did will give us better conditions. We opened wells, we are working on some others. And our goal is to leave 27 and get close to 30 during this year. For Polvo, let Milton speak about Polvo.

[Milton Rangel, executive]

At Polvo, we had a first well, an appraisal well. We drilled in a region where we had a similar well, we confirmed that there is oil we found it. And now we are designing, producing well. There's a second well for us to research. So it's moving ahead. In terms of timing, should take about 1 or 2 months for the project to be complete.

In Wahoo. Well, as for Wahoo, every thinking that relates to equipment we are practically done. We have purchased everything. We paid for everything, it's all ready. I mean, pipe, [indiscernible], Christmas tree, I mean, everything pumps [indiscernible]. It's all there. Are they ready or close to be ready? So we spent everything that we needed for those. I would say that we probably spent close to $600 million. That order of magnitude, I haven't got the precise number. I can find the number and give it to you, Pedro, but it's around that at order of magnitude. And the installations will be the [indiscernible]. Installation means drilling rig time, time to drill all ancillary costs of the equipment involved, that's all taken care of.

So [indiscernible] also the pipeline, [indiscernible] vessel. So something between 500 and 600 progress particularly after the environmental license. After we get the environmental license. We'll spend about 2 months, 70 days for the well, about 8 months. And we just have to distribute that along 8 months after we get the environmental license. I think that this is a good estimate for us to give you.

[Pedro Soares, analyst]

Clear. That's what I had.

[Milton Rangel, executive]

It's more linked to the drilling. The rest is basically done.

[Jose Costa, executive]

Our second question comes from Caio Ribeiro with Bank of America.

[Caio Ribeiro, analyst]

Good afternoon, everyone. Thank you for the opportunity. My first question is [indiscernible] mentioned that the company will be involved in evaluating the asset, possibly acquiring the [indiscernible] working interest. Could you give us some color on how this process is evolving? When do you expect a decision, a completion of this process that would be helpful.

Secondly, still linked, I understand that the process is competitive. There are other players [indiscernible] if the company doesn't go through even the [indiscernible] How did you do about capital allocation? Would you be considering other assets for this year? Or would you choose to distribute part of the cash generation this year to the shareholders?

[Unknown Executive]

There has been news in the papers that [ Seneca ] is moving or thinking about moving that in the past. This was our understanding. So there's not much news here. It is obvious that if this happens, If they move, we are interested. It can be an interesting opportunity for us. We know that today could be an non-opt part. And then we might have a deal of the Equinor stake. So of course, it's an asset that is interesting to us. We'll look at it up close and carefully if the process moves forward. If the process becomes hot as regards dividends.

And of course, we're always very vocal about first M&A since the returns that we always pursue. And if we don't find M&A opportunities, then we would consider other ways of remunerating our shareholders through share buyback or dividends. We already said it in the past that we like the Gulf of Mexico, American part of the Gulf of Mexico. So today, we are looking into some opportunities in that area. And every 3 months we have a meeting about the results. And that's when we discuss these M&A opportunities in more detail. We try to gauge is whether we have visibility of things that materialize in the next 12 months. If there are no possibilities of materializing in the next 12 months, then we would adopt a more aggressive share buyback policy or think about dividends. But if we have something more tangible, more palpable for the next 12 months, our decision is always to keep the cash to go through the deal.

[Unknown Executive]

That's how it works, how the business work. Right now, we are clearly focusing more on M&A deals. And so from the standpoint of remunerating shareholders by dividends or share buyback. What we will do is opportunistic buyback of shares by $19 million this quarter in Q2. That's not very relevant for our cash position.

I mean it really depends on we don't think that our share price is adequate, but there's the IBAMA issue. I mean the price. The market will price our shares in any way they want. But when there are some share prices that we don't agree with, we'll buy the shares back because we want to bring serenity to the market. That's how we work.

[Milton Rangel, executive]

Today, there is a greater bias towards M&A opportunities. And that's why we haven't been speaking much about share buyback and dividends. I'm not saying there's anything imminent. But yes, we have a constructive approach about M&A in the next 12 months.

[Jose Costa, executive]

Our next question is from Monique Greco with Itau. Go ahead, Monique.

[Monique Greco, analyst]

Thank you for the opportunity to ask a question. My question is about Wahoo, and maybe this adds up to Pedro's question. And then I have another question. About Wahoo you gave us a little light in terms of CapEx. Could you elaborate a bit more about Wahoo's critical path once all the licenses are in hand. Particularly in terms of topside works, the pipeline because it's important that we understand where the bottleneck is?

My second question is the second quarter experienced a strong exchange appreciation and the trend remains. So how do you think we should see this exposure giving it an overdepreciated exchange rate and the lifting costs going forward. Thank you.

[Unknown Executive]

Okay. First of all, Wahoo. Environmental license, basically here, we have two avenues of work. One is drilling and the other one is the installation. Drilling and I do apologize on behalf of the drilling people. It will take 60 days for the Wahoo. I know it's a lot more complex than that. But roughly speaking, every 70 days or maybe over take a bit more or less, there will be well ready to be connected.

In parallel, there is another license, which is the installation license. This license and I mean, subset people will say that is much more complex, but you have to lay a pipe from Frade to Wahoo to [indiscernible] the wells. And this process may be after the license to take about 2 to 3 months. So after the license after the vessel arrives, et cetera. So this is the process. And depending on when the licenses are issued, things will be connected. So after the connection after 2, 3 months, you get the first oil. And the first oil will happen -- with 1 well, connected to 3 or 4, but it will certainly depend on when you start one and one, you start the other.

In a very simple way of speaking. I mean people did some excellent work in relation to the vessel. There was a matter bottleneck. We removed that bottleneck. And with that, we got another vessel as [ Sakura ]. We got a second vessel from [ Sapura ] it would be ready in September of this year, so starting next month. So the window for pipeline will be up until December. So we need the environment license from now until the end of the year. Well, if that license is not available, we will continue negotiations with Sapura. But this time, I mean, Sapura could sell windows in the vessel starting in January from January onwards. And we have an agreement that for every window, they sell us. We always look at the next available window. If -- and we say whether we want to keep it or not, otherwise, they will just keep on going with their negotiations.

And I think in terms of the vessels, things are much better now. The major issue here is the environmental license and because that's what it takes to start as soon as possible, Everything is right. We had to demobilize some people because a lot of the things that we hire, we hire from third parties from other companies. I'm not going to hire somebody to do drilling. We're not drilling right now. So in the second quarter, had a lot of these dynamics.

And today, I would say like we are a [ hybernating ] or this is a period of low consumption of expenses, just waiting for things to go back to normal. Foreign exchange, we always say that our lifting cost, at least half of it denominated in BRL and the other half in USD. I think today, we would be more into U.S. dollars and BRL. But with the depreciation of BRL, we have a better lifting cost. But we haven't seen large differences this quarter because the depreciation of the BRL occurred mostly in the last 45, 30 days. So it didn't cover the entire quarter. But certainly, it helps us because part of that 7.6 that we maintain in terms of lifting cost stems from our cost structure.

I'll give you a personal example. I mean, personal in my areas, not in U.S. dollars. Personnel, personnel is not just half of our lifting costs, of course. But there are many other things involved that in the short term, doesn't move the needle but in the long run, many of these things get adjusted. That's why I was saying that in the long run, our BRL percentage would be closer to 40%, maybe or maybe 35%. But in the ship run, half of it is denominated in BRL.

[Monique Greco, analyst]

Thank you for this clarification. Have a nice afternoon.

[Operator]

Our next question comes from Luiz Carvalho with UBS. Luiz, the floor is yours.

[Luiz Carvalho, analyst]

I have two questions, and I would like to revisit the issue of M&As and the industry's consolidation. I think you were the first players to be intermediaries, intermediary companies in terms of Petrobras' size in Brazil. I don't like that term, but it would be like a junior company compared to Petrobras. Now we see be it for market share, production volume and the size of your P&L, there is now another player that theoretically could probably get closer to [ PetroPrio ] when it comes to competing for potential acquisitions and M&As. Do you think that this could bring higher competition to you? This could mean a higher competition? Do you see room or other similar moves of acquisitions of assets or even companies as a whole. So how do you see the landscape of industry consolidation?

And my second question related to the U.S. election. We talked a lot about going to the Gulf of Mexico but in terms of the election or what candidate wins, whether that could have an impact on [indiscernible]. Now going back to capital allocation, this is a question that has been already mentioned. I understand that your priority is still to focus on possible acquisitions. But your deleveraging level would allow you to do that, even if you do some basic math, you could do that without having to put your balance sheet at risk and you still would have some room for dividend payout. So what will be the limit? Very soon, you may be cash net. So what about the acquisition process? I just want to have a feeling about the timing. Thank you.

[Unknown Executive]

Okay. I'll start backwards. Now speaking about this limit. You like the company having onetime net debt over EBITDA. And we do that considering our M&A expectation. We look at the size of things that are around, and we try to prepare the company because it's been successful. Maybe we could at least get to 1.1. Like we did with Albacora. We got to 1.1, 1.2 of leverage level. And then we start deleveraging. This is pretty much what it's on our minds.

Well, if we say, okay, we're not going to buy anything. There is nothing else. There are no more opportunities. So maybe we could pay out $1 billion and nothing would happen. I don't even know that with that, we would reach 0.6, maybe at the most 0.8. And even then, it would be a low level of leverage. For us, the most important thing is to have M&A visibility. Having it or not having it [indiscernible], we want to reach that level of 1.1.

Today, there is a mismatch because we are super leveraged. I mean I know that the current level, we're very comfortable, but I don't like it. It's obviously is not optimal. It's below that. And I hope that we can change that situation soon enough. We do have visibility in terms of doing something in the next 12 months. But it's very important that we move very carefully because processes could happen or could not. I don't like disposition of 0.4. I don't think it's fun.

And now in terms of the U.S. election. One of the important things about the U.S. And we like the U.S. because their regulation is stable. Of course, there are candidates that lean towards one or the other side. But the bulk of the rules, they remain. Of course, there are changes, developments. I mean there are lots of changes in terms of security. Now in the recent past, there was a company. I can't recall the name. I won't remember the name now, but there was a company that acquired assets from a major and they got into Chapter 11, then that major was forced to comply with some relinquishment rules and this changed a little bit the way majors look at things. Of course, these things can happen. But we think that these things happen regardless of who is in charge, who is the President. We believe that the U.S. President talks more about new lease -- new leases. So maybe there is a more relevant role in the price of oil related to our capacity to go or not go to the Gulf of Mexico. I mean it's limited. It's not just like you can say, I'm going to open more licenses for people who go into the U.S. and then this will increase drastically. No that's not going to happen. These moves are more limited.

Today, we are not seeing any impediment, any major impediment. Certainly, we're going to look at it very carefully. We will monitor the electrode campaign very carefully. But we think that there is less volatility in the U.S. regulation. And that's why we like that environment. The last question, what was the first question?

[Luiz Carvalho, analyst]

Is about competition.

[Unknown Executive]

Consolidation. We saw that move that recent move. I can't say if this new company that was created, like you mentioned, would impact our financial capacity or our P&L or our execution capacity in terms of other projects, I don't know. I particularly believe that this combination of onshore and offshore will increase complexity. I know that there are some people who think exactly the opposite. But I believe that this integration between onshore and offshore increases complexity because the way to operate onshore and offshore is different.

One is labor intensive and the other is not as much. In one case, you have lower margins, and you have more difficulties in terms of offtake, et cetera. And on the other hand, the other case, you have more relevant CapEx because of well prices. So the similarity is oil production, but the way to operate onshore and offshore is different. So I'm very skeptical to combine -- to doing onshore to Prio because I think this will mean a deviation of our focus. And I believe on the story of one trick pony. You have to do one thing, operate, offshore, and we are not even doing expirations very well. So that's a no go for us.

And I think that operations in Brazil, in our case, I don't see that coming for us. I think, as I said in the past, there is that pilgrim thing. There might be a transaction here or there. Maybe another offshore field in addition to [ Peregrino ] field that we may find. But today, I think that this will be a no go for us in terms of participating in any kind of consolidation in the market. Bear in mind that particular characteristic of onshore versus offshore.

[Luiz Carvalho, analyst]

Perfect. Very clear. Thank you.

[Jose Costa, executive]

Next question from Gabriel Barra with Citi. Go ahead.

[Gabriel Coelho Barra, analyst]

Some points I'd like to clarify. When we look at the assets. You may --you have the [ Hunter ] Queen and thinking about [indiscernible] scenario. So because of the [indiscernible]. In some previous conference calls, I actually asked whether you could use this [ drug ] understand that there is a difficulty in terms of [indiscernible] when you'll get the license. It's hard to get organized around that. What are you thinking about doing that? Do you have any possibility of putting these assets to use while you're waiting for the license? And perhaps if you look at from other quarter, some overlapping licenses, could we think have about having 2 rigs operating at the same time. I remember that the plan was to do it in Phase 1 at a time. But I'm wondering what there would be a possibility to do something concomitant to accelerate production cost both wards 2025, 2026.

The second point is a [ molsophical ] discussion. I spoke a lot about capital allocation. What to buy, where to go. And perhaps my question is, I don't know whether there is any answer, but what would be the ideal company size for Prio? What Would be the ideal size for you to balance the synergies that you have in the operations to do well and mature offshore field? And also putting into perspective the internationalization to the United States to the Gulf of Mexico perhaps could be a future cost for the company? So if you could speak a little about the philosophical point. We just want to understand what would be the very long, long run of [ PetroPrio ].

[Unknown Executive]

All right. As regards the rig, yes, we could provide services. We are constantly approached to provide estimates. The truth is no one is getting the environmental licenses. As we are approached, and we have chosen not to go ahead with that. We have used the rigs for a number of things. We rig the beginning of the year for an important maintenance at FPSO of Frade, we used it as a heavy lift. This rig is a big goal score. We used it as a heavy lift to take some cargo to Frade instead of going to the market to get some heavy lifting, we use the rig with 150% safety.

Today, we have the TBMT wells waiting for permits. Perhaps that will arrive before Wahoo. So getting the rig being used by other companies would be bad because we are going to have some work for the rate to do very soon. And just last week, we have just installed the certification system in Albacora, since we reinject 100% of the water we need to rectify the wells from time to time to improve the injectability index of these wells. The amount of water the well get.

A certification is more like cleaning the well. And traditionally, Petrobras used to do it using a certification vessel, which is a scarce asset. Petrobras has it in their portfolio. We don't have it. Whenever we needed it, we would try to look for a window of opportunity to use some. So we did a scheduled shutdown of Albacora, and we did it with the rig. We installed in the certification plant at the rig and we certified the wells. So we did it with the same efficiency in a matter of 1 week, 1 week, right?

[Unknown Executive]

A certified Albacora wells. So the rig shall to be great, although it's not actually drilling. It has shown to be a great investment. So we're willing to keep it. There's no constraint in providing another service. But today, we prefer to keep the rig in our portfolio under our full control. Well, you see the rig is a strategic asset. It was purchased. It was designed to be [indiscernible] as we talk around here. Depending on the market, well, the rig, we would pay $150,000 to $200,000 daily, not to more than 500,000 in some places, more than $1 million. So having it is already a big plus for the business. Now we have to look for market opportunities. If you get something that makes sense and if we can do it, yes, we'll use the rig.

We have capacity to operate both rigs. If we find a second rig that makes economic sense for us. We're renting a rig at $300,000, $400,000 a day, we are not going to do it. And we won't even find a rig even if we had, it wouldn't make sense. We paid 170,000 to 200,000 for a rig was more expensive than our. But it could make sense. I mean -- so that's what we are thinking, Gabriel.

Regarding the deal optimal size of the company. We have a lot of room. As long as we don't go work in something very different, for example, onshore, which would be totally different than our focus of attention, I think they will have a lot of room to grow. It's just a matter of having the projects. For example, that [indiscernible] on the market and the [ SinoCandeal ] [indiscernible] barrels. Well, we have to put an operating effort. I don't think that there is a limit to growing. It's a matter of what we can do within our mandate, i.e. the return on the investment that we always pursue.

And as for the Gulf of Mexico, to me, either we go there, we put together under the cluster together a big company in the Gulf of Mexico to go there to a non-opt 5,000 barrels daily production, it doesn't make sense that we go there. Firmly, and we are monitoring -- [indiscernible] COGS [ 20K], the higher pressure area but it's going to give us a result or not. And if there's migration of the majors to that area, if we can go there and do very what we can do in Brazil, either this is the game play or things will make a lot of sense. Won't make so much sense for us.

But I don't know that there is a limit in terms of barrels. I may give my opinion. It's a matter of the game philosophy. Have a strong belief in defining onshore, offshore [indiscernible] from offshore. I know that reality. And we have work philosophy. We have the Prio method of working. The more specialized we are in our business, the biggest -- the potential to create value. So it's all about replicating the same working model execution or the near-field exploration and maximizing the effort. This is reproducible. We'll only put our field in the field where it makes sense. But there's water in the field in the right conditions, it would be interesting for us.

So we have to take into account legal shares and the business dynamic. I mean we can all just say that, that would be the size of the company. In the past when we started producing, we spoke about 100,000 barrels daily to become a junior size. We got to 100,000 today within produce 100,000, but this is momentary. I spoke about 100,000 barrels to become a company that is taking off, and that is flying full speed. So that was the mark. But if you look at the rest of the world, there are a few examples. If we look at the super independent companies, they produce 400, 000, 500,000 barrels. Some companies do get there, it's not the end of the world.

I mean, we don't think that we have to get to a certain number of barrels day. But our focus is not just the oil barrel. It's the oil barrel with the right return we should have. But I think that this is totally feasible. We want to continue to be an independent company if we become a super independent company. Great. Other examples in the world of companies producing 300, 400, 500,000 barrels daily and they remain independent. I don't think we are actually close, not even close to that limit.

[Jose Costa, executive]

Next question from Bruno Montanari with Morgan Stanley.

[Bruno Montanari, analyst]

You could give us an update on the current level of production at Frade and TBMT within the current situation, what would be the end of the year like It would be interesting. Second question is there any extra cost that you incur when you mobilize all the equipment for Wahoo until you get the license and you actually start working there? Is there any maintenance risk involved. Because it's [indiscernible] sitting there, mobilized. And thirdly, out of curiosity, is there an alternative solution for this setback with IBAMA so that you can carry out the work over. That is not a license for totally new project. Is there any legal path, any yellow break growth in case, mobilization of the equipment continues indefinitely.

[Unknown Executive]

[indiscernible] as the second question, and then you can speak about production.

[Unknown Executive]

No, getting a permit is easier than license. There is a philosophical discussion that we have with IBAMA. Discussion with them is whether it makes sense to get a license. And after the license, we have to get a permit for everything we're going to do. If they tell us what we need to do and how we shouldn't be able to go to the agency again to say, look, I got to do this now in this way. This assumption is that we are going to do it wrong. So we need to get a permit to do it right. In other jurisdictions in the world, we don't have that. Once you get a license, you execute things according to those. If you do something wrong, you are going to start with the penalties of the lie. Because you did something wrong.

But again, this is a philosophical discussion with it, but nothing to be changed. So I think that the permits well. That's something we need to get.

And as for a legal discussion, we try to avoid this as much as possible. No use creating this [indiscernible] or start fighting IBAMA. If we take this to courts, it will be very hard for a judge to analyze the project from the environmental standpoint and just overrule, IBAMA. The judge would always say, IBAMA, this is it, please give us your opinion. If that is the case, we prefer to just sit with IBAMA, I have a conversation with them which is what we've been trying to do since the beginning of the year. But that's the path we continue to follow.

And Francilmar, we'll talk about production.

[Francilmar Fernandes, executive]

For Wahoo, we didn't mobilize anything relevant. We commissioned all of the items. The rig was conceived to replace the rig we before. So it's not for Wahoo, it's for the whole company. It worked at Frade at TBMT now at ABL. So the rig is like a safe margin. One of the work for the rig is Wahoo. Until then, I mean, there's nothing specific for Wahoo. So there's a rig, a rig that works for the whole company. The things we're going to mobilize for Wahoo when we're going to drill, those things are more specific. They are not mobile lines don't generate any maintenance. And the new materials are with the suppliers. So we have to pay for storage, but it's not a big cost, nothing that could hurt us just to give you some peace of mind. How much does the rig cost per month? The rig cost the $3 million are we going to allocate the rent to Wahoo or the rest. This is what it costs for the company, $3 million, and we apportionate, accordingly.

And as for production. Was about Frade and TBMD ind. Are going to go to the field for the project? Something being studied? This will be more towards the end of the Q. This field will see a decline. We had a more marked decline in the beginning of the year because we had a rival of water in the new aisles. To give you an idea, Frade production is kind of 50% from the old wells and 50% of production from the wells we drilled in the last 2 years. So the new Frade production accounts for a little over 50% of the field's production. Is the wells for a pattern. They start producing tenders a decline. So we are past that phase now, and we can see a change in the shape of the curve. A curve that is now stabilizing. So we'll wait the end of the year or a little more decline.

The only certainty we have is that the well will produce tomorrow less then it produces today. And we believe that there will be some decline. And we'll see 43, 42, we'll manage that. We are all here for the long run of the company. So sometimes, we try to accelerate to bring the cut forward, but that can make us pay a higher price later. So we are managing this in the best way to ensure the best recovery factor. [indiscernible] the average per year for 2024 was 46,000 barrels [indiscernible]. Net of [ ODI ] would be almost 46,000. We should deliver 2,000 barrels [indiscernible] than that average, something around 44,000 as the average for the year. And this is the effect of water that arrived earlier in the reservoir. It's very hard to get this precisely, particularly when we have reservoirs like in Frade, where there are fractures, we don't know whether the fractures are connected to the aquifer or not. So there is a difficulty in modeling this business, but we believe that this is business as usual. [indiscernible] 2023, was here in January '24, we brought it up one being realized [indiscernible] here now. It's much better than it was before, perhaps not as great as we had in the past, but still a much relevant improvement. And it's what he said to be cautious, we give freedom to the reservoir team. Because our mandate here is not to produce oil.

I mean, of course, it is to produce Oil-Dri. But not to produce oil today, but rather to maximize the recovery factor of the reservoir. There are cases where we start producing water, and we stop production at back the well for a while. So that we won't have a great deterioration in the business, and that's how we work.

[indiscernible], just to add. When we complete these maintenances in the field, we'll go back to a level of 15,000, 16,000, and we'll see the behavior of these wells. We're drilling again at Polvo and there's a margin we might get better news, produce a little bit more. We'll see how the field will behave. An exit point for TBMT would be 17. Ideally, it would be 20 but let's think about 17 or maybe a little bit more, but I guess that this would be a great number.

Did we leave anything else?

[Bruno Montanari, analyst]

No, perfect. Just a quick follow-up question. During the discussions that have with IBAMA, do you think that they're more willing to look at your requests for permit versus the one who license? How do you feel?

[Unknown Executive]

It's kind of a complicated situation. Things that have deteriorated a lot, none can spend this anymore, not even [indiscernible]. But there is an open dialogue that we have with them. We sit with them, we exchange ideas. We have a very long-term relationship. Our operation then does mixes without them. So it's a partnership and we are trying to work with them in a productive way.

What they're telling us is that the permits will be granted. It's just maintenance. It has very low impact. There's no reason for this to take too long. If it weren't for this issue, we would get the permits in no time. So we should be getting it very soon.

[Jose Costa, executive]

Our next question from Vicente Falanga with Bradesco [indiscernible].

[Vicente Falanga Neto, analyst]

I have two questions. First about your Gulf of Mexico's M&A.

[Unknown Executive]

Vicente I think we lost you.

[Jose Costa, executive]

Let's jump to the next question, then we go back to Vicente Next question then, while we wait for Vicente's audio. Our next question, while we wait for Vicente comes from [ Regus Cardoso ] from [ XP ].

[Unknown Analyst]

Thank you all. Congrats on your results. Can you here me?

[Unknown Executive]

[indiscernible]

[Unknown Analyst]

Okay. Okay. I was saying good afternoon to you all. And congratulations on your results. I have two questions. I would just like to get some more details about how things happen in practical terms. We're thinking about implications not only from IBAMA and also from MP, would there be any risk of IBAMA giving you the go ahead and then you stumble into the temporary measure or if they are -- if ANP is is working very slowly or half on strike. Do you think that this would be any impact to -- there will be impact in Polvo, the pipeline or Wahoo and even later on Albacora Leste. Which one of those could be impacted by ANP.

And in terms of IBAMA, I would just like to understand whether there are two separate projects. Pipeline and so that part of the activities would be released and the other part will still be pending. And this leads me to my second question on the operating side, what format you could have in Wahoo because you said that you have the window for the vessel until December. Do you believe that this could link for longer and whether you would have enough time to fulfill the entire operation by the end of December.

With this scenario in mind, would there be the possibility of any given [indiscernible] of wells, meaning 1, 2 or 3 being drilled before the pipeline and whether it would be possible to start production with any combination. I think that's it.

[Unknown Executive]

Okay. ANP certainly, that if they -- they're getting to this model of standard operation, that may hurt us. In terms of any authorization that we may need. But for these specific projects for permits, for TBMT, et cetera, we don't see any problems. But looking forward, things are more fluid. I mean if we want to work on a well that is not in our development plan for Albacora and let's say that requires an amendment or something if they are still in that standard or half strike mode that will be a problem.

But today, it's probably too early to think about that because it's far-fetched. If we get IBAMA's license and if we get the permit for some other further operations, this can be very helpful. That means that -- we have 1 year of work without needing any major things from the agency. So this will give us time for things to be settled.

In terms of Wahoo, in fact, it's just the beginning of the work. We could start doing the pipeline in December. And obviously, this will be on December. But this does not involve a very long work. It's just the beginning. So we think that there is a reasonable chance that this window. Will be covered with no problem. We could start with anything. The issue is that the line or the pipe has to be laid. It has to be connected to the FPSO. And these are two parallel process. I mean drilling and pipeline, I mean, we need the vessel to lay the pipes. And once that is connected to Wahoo, we conclude with 1, 2, 3, 4 wells regardless of when it's ready and production could start at 4,000 or started 10 until we reach is 40,000. And it goes on like this.

[Unknown Analyst]

Perfect. If you allow me another question related to an earlier comment about Albacora Leste and the seismic information. How much of that could change in terms of the resource certification that we are familiar with in your development plan?

[Unknown Executive]

That's a good point. I don't know whether the reserve certification would be so sensitive to this new seismic. What we see there is just a better definition of what we've seen in the past. It's not that we didn't have any seismic and now we do. But we look at 1P. In fact, to have changes in 1P or what makes that happen is mostly drilling than anything else. Maybe you could have a change in 2P prior 3P. Who knows.

But we look at 1P. So that shouldn't bring about major changes because of the seismic. It could happen if this size men indicates new wells and then these new wells, we get into our certification. Yes, that's what happened with [indiscernible] but not seismic itself impacting the reserve certification.

Let me give you some more color. Seismic, we call it 4G. Not only we have a 3D image, it also has a part related to flu rate movements. Therefore, this allows us to identify oil that was not produced. So once the flow is determined, you put more effort here or there, you task here or there, but nothing in the short run.

[Jose Costa, executive]

Our next question comes from Vicente Falanga from [indiscernible].

[Vicente Falanga Neto, analyst]

Thank you. I just have one question about the M&A in the Gulf of Mexico. How do you see the challenge from other competitors? Who are also looking for other assets and they probably have more capital than Prio? And how would you like to move in terms of a possible bid? And that leverage denominated in U.S. dollars, whether that is also possible in that region?

[Unknown Executive]

I think that our expectation. I mean everything we say about the Gulf of Mexico takes into account that we -- our IRR is not going to change sometimes to say, $60 in the long run. This is one part of it. But on the other side, we look at the production volume and we look at all of the opportunities to connect wealth, synergies and so on. So our hurdle rate will be stronger or higher. But on the other hand, we take into account our operating capacity to implement projects, and this is what will happen in the Gulf of Mexico.

Therefore, we believe that the answer would be affirmative, and nobody is going to do anything if it's not an affirmative answer. But it's too soon to say whether it is or it's not. Companies today are putting some Wilcox projects in operation. Chevron is putting anchor, shell, bail, we can report [indiscernible] and so on. So we have to see whether this will really happen if there will be a migration. But the thing is a major whenever they go to a new area that is more interesting in terms of return, they leave behind an area where they had projects, but projects that were not so attractive.

I'm not saying that they are not knowledgeable about their project, but simply, they don't want to allocate any more capital to their projects. So they no longer sell PDP production, not PDP, but the one development they can sell with a high rate of return. And that's why we can do these transactions because we look at the developed or what has been proven but not developed, we can put that in our pricing because this is what we do. This is what we will do and the major cannot include that in their pricing going forward because they won't be able to allocate any more capital to that asset. This is the difference. And that's why traditionally, we can close good deals. And so we just expect this to be true for the Gulf of Mexico, but it's due to [indiscernible]. I cannot tell you yes. Yes, we don't even any projects. We have only an expectation that this may materialize. So let's wait and see.

[Jose Costa, executive]

Next question from [ Bruno ] [indiscernible] with Goldman Sachs.

[Unknown Analyst]

Would you please comment a little more on double production at [indiscernible], assuming IBAMA will go back to working at normal pace. Please correct me if I'm wrong, but the reserve certification implies that production would double in 2 years. So what is the game plan to get there in terms of drilling or reopening of wells, that would be interesting.

[Unknown Executive]

Bruno. In a [indiscernible], we have 8 producing wells and 3 injectors, that's it. These 8 producing wells, a little over half would be new wells, perhaps 5 new wells and 3 infill drilling. So the new ones will come on online with about 1,000 [indiscernible] drilling a little lower, about 3,000 barrels daily into water injectors so that we can continue to inject all the water produced. I mean, if you put it all together, 5 wells versus 5,000 barrels daily that would give us 25,000 plus the 3, and we would have to consider a decline in the reservoir as a whole. At Frade, we started adding wells with an oil production versus water production that was much higher. And we ended up turning up some wells that produce a lot of water. And the same would happen with ABL. It's about managing the reservoir. A great upside we can have there. It's the seismic because the seismic make show us new things. This was something very incipient.

And something we could think about is today, Albacora, the water produced at Albacora already is compliance with the Brazilian legislation for 2 months now. So the water produced. We are injecting 100% of the water produced as we have always done. But today technically, this water already complies just like all other fields of Brazil, have the water compliance and the water is discarded out in the sea. So like all the other fields in Brazil do given that we abide by the same loss, the same regulation, the same parameters. This could change the need for injectors [indiscernible] number of injection wells. This would give us more flexibility in the [indiscernible].

[Unknown Analyst]

Could you give us some color on the time line for the execution of the plan? I mean, obviously, assuming that IBAMA goes back to working at regular pace. Would it be a linear curve ramp-up?

[Unknown Executive]

It's a linear curve for every step for very well. It should take about 70 days well to put the well online and we'll drill one after the other. We could have a producer, 1 injector, 1 producer, 1 injector. And after the 3 injectors are drilled, we would have only producing wells to be more conservative. I mean, we can do it in any way we want, but it's kind of what it takes to drill every well that is to start just after Wahoo today, our work plan is perhaps TBMT because perhaps that's what we are going to get first in terms of permits or the possibility to put the rig into work. Then to TBMT and then Wahoo drilling the 4 wells at Wahoo, and then we would move the rig to Albacora.

So net of the IBAMA issue because it's something to be considered net of IBAMA, we should be delivered in Wahoo, mid of the first half of next year, End of the first quarter maybe, and then we'll start drilling at Albacora. We want to be more conservative. You can say we'll start drilling it Albacora to the second half of next year. And then the program for Albacora will last 12 to 18 months to drill. There will be a ramp-up to get to a maximum production most likely sometime in 2026.

[Jose Costa, executive]

Next question [ Meat Santander ].

[Unknown Analyst]

Some follow-up questions. My question was exactly about Albacora or water disposal you answered. Just want to clarify, if you get permit from IBAMA, do you need any ANP approval for what [indiscernible]. I think at the Investor Day, this would be in 2025. So I guess that you are on schedule. And for Albacora, another point I'd like to confront [indiscernible] if I'm not mistaken, the third license from IBAMA. I just want to confirm that point.

And lastly, I'd like to go back to Milton's point, regarding the taxes effect on this quarter [indiscernible] and I want to try to understand with you what would be the effect of deferred taxes for the next quarters, if there will be any effect. Those are my questions, please. Thank you.

[Unknown Executive]

As regards water produced. It's approval [indiscernible]. It's not something very normal. IBAMA just got into this process because in the past, when what it was not compliant, Petrobras signed a term of adjustment with IBAMA. So they decided to use this as a condition precedent for the environmental license from IBAMA. So with this, now we necessarily need IBAMA. We need the agency. And this is the only hurdle that we see. It is the agency that is supposed to give us the authorization IBAMA.

We cannot have 2 economic agents, for example, [ PetroRio ] or another company. One cannot dispose water and the other one can. I mean if there's something conceptual their and IBAMA needs to be comfortable with the quality of water treatment and so on and so forth, but that's more conceptual. But is basically this, you cannot have different rules for equal results. You cannot have two different approaches. So this is what we can say about water injection. You had asked about the taxes? What was the question?

[Unknown Analyst]

[indiscernible] still on [indiscernible] regarding the license you use. A global license. I imagine that it includes the 8 producing wells and the injectors. And then what can we think about in the future?

[Unknown Executive]

At IBAMA, we request what we call a regional license in authorization to drill an [indiscernible] amount of wells per year in the [indiscernible] and because that's where we operate now. We have what we [indiscernible] emergency plan. Contributing [indiscernible] have is in the [ Campos ] Basin. And we use the global license to say we can drill so many wells in the basin. It's similar to what Petrobras has, we are trying to migrate to this new model because you would remove pressure.

On the agency [indiscernible] because, I mean, we are going to be doing the same [indiscernible] with the same rate, all things equal. So that's what we're trying to do. An alternative path is to ask for an Albacora license. If IBAMA concludes that they preferred to grant the license for Albacora, okay. We'll get a license specifically for Albacora, but our request today is for a regional license.

As regards to taxes, I'll let Milton speak about this. I just want to remind you that what happened our results to simply put is we have tax credits due to losses we had in the past, so tax law carried forward. So this generates a tax credit. This tax credit is denominated in BRL in real. We are forced to make an adjustment in the balance sheet if the exchange changes. If the bureau appreciates as we report in dollars, in dollars, the credit is worth less. What can change is for whatever reason, we can produce more oil or less oil, we can use more or less credits. The speed in which we use these credits and the amount of credit counts. So what happened there is we have tax credit which are BRL denominated, and we report a balance sheet in dollars. The credit in dollars is worth less with the same amount of BRL. But in dollars, it's less as we had to make an adjustment because of the depreciation. This is just a simple explanation. I'm not an accounting.

But that's how I understood the process. It's easier to understand the Milton.

[Milton Rangel, executive]

To be to say [indiscernible]. And the follow way for the [indiscernible] of the company. Let's say, we buy equipment. Give a conceptual number $200,000 at a foreign exchange of 5, that corresponds to [ BRL 1 million ]. Our functional currency is the dollar. So we pay taxes in BRL because we have resilient companies. So for taxation, purposes, we have [ BRL 1 million ]. Then we project our depreciation with our calculation with the IRS based on [ BRL 1 million ]. But suppose exchange rate increases to 6 in the following quarter. $200,000 appear is 1.2 million. So this 200,000 difference. You cannot increase your depreciation for fiscal purposes. It's [ BRL 1 million ]. So 200,000 is a negative adjustment because of the exchange rate depreciation. What counts is the exchange rate at the acquisition of the PPE. So I think we have a huge base of assets. We bought at rates of 4.5, 5% and now the exchange rate is 5.5 at the end of this quarter. So this requires an adjustment because if you look at the result in BRL, which we are forced to disclose according to CBM, you will see a higher asset and the depreciation can be done wrongly. So this is an adjustment based on the exchange rate.

[Unknown Analyst]

No, I can understand now. Thank you.

[Unknown Executive]

With that question, I think we conclude this our earnings release video call, and I would like to turn the floor back to Roberto for his final remarks.

[Roberto Monteiro, executive]

Thank you very much for joining us today. It's always a pleasure to share our results with you. And I'll see you again next quarter. Thank you very much.