Petro Rio SA

BOVESPA:PRIO3

Earnings Call Analysis

PRIO's Record Quarter with Robust Results

PRIO's third quarter in 2023 marked a milestone with record production and a daily average reaching 99,000 barrels, peaking over 100,000 in September. Operational efficiencies and successful campaigns in Albacora Leste, Frade, and Polvo contributed to a robust quarter with a historic low lifting cost of $7 per barrel. The company also achieved a notable reduction in their carbon footprint to 19 kg CO2e/barrel. This resulted in a record EBITDA of $633 million and net income of $348 million. PRIO ended the quarter with a cash position of $444 million and net debt to EBITDA ratio at 0.9, signaling strong financial health. Frade Field had significant operational successes, including the launch of well ODP 5 and notable progress in the revitalization plan, positioning the company well for future growth.

Strong Quarter Driven by Operational Efficiency and Production Growth

In PRIO's third quarter 2023 earnings call, CEO Roberto Monteiro kicked off the discussion with gratitude towards the company's employees for delivering a solid quarter. Highlighting their average daily production of 99,000 barrels, surpassing the 100,000-barrel mark in mid-September, Monteiro considered production as one of three key pillars underpinning the quarter's robust performance. They saw successful campaigns at the Frade and Polvo fields, further adding 1,000 barrels of oil, and operational efficiency at Albacora Leste leading to good results. These have translated into a record low lifting cost of $7 per barrel, with expectations to maintain these costs until new productions come online.

Commitment to Environmental Responsibility

Monteiro emphasized the importance of being not only profitable but also responsible, showcasing PRIO's reduction in carbon footprint to 19 kilos of CO2 equivalent per barrel. This steady improvement against previous quarters and years aligns with the company's ESG commitments and strategic sustainability goals.

Financial Strength and Cash Management

PRIO reported a record EBITDA of $633 million with a net income of $348 million. The strong financial results combined with increased operational efficiency led to a cash position of $444 million by the end of Q3, further growing past $500 million soon after. The company's net debt to EBITDA ratio, a key leverage metric, stood at 0.9, indicating a comfortably low level of indebtedness relative to earnings.

Upcoming Projects and Focus Areas

Attention now pivots towards the Wahoo field as a priority, with meticulous planning and engagement with environmental agencies for required assessments and licenses. PRIO is also in the process of detailing a new phase of revitalization for the Frade Field and managed efficiency at the Polvo and TBMT fields despite minor setbacks during the quarter. The effort led to enhanced operational performance and cost control at Albacora Leste, delivering results above expectations.

Record Revenue and Operational Excellence

The third quarter witnessed record revenue with 9.7 million barrels sold, accruing $791 million in FOB revenue and operating income of $433 million. The company also highlighted leverage reduction over consecutive quarters, underscoring its burgeoning operational cash generation despite elevated CapEx largely attributable to investments in the Wahoo campaign and Frade revitalization.

Investor Commitments and Future Outlook

Looking ahead, PRIO focuses intensely on employee health and safety as well as seeking new M&A opportunities. They expect to maintain operational discipline, leverage reduction, and clear communication with stakeholders, reiterating the firm's dedication to transparency and smart capital allocation.

Earnings Call Transcript 2023-Q3

[Jose Costa, executive]

Good day, everyone. Welcome to PRIO's Third Quarter 2023 Conference Call. I am Jose Gustavo, Treasury Manager, and I'll be the host in this event [indiscernible] on the bottom of your zoom screen. The translated presentation is available our Investor Relations website. The presentation and comments on the results will be presented by our CEO, Roberto Monteiro, our CFO, Milton; and our COO, Francisco Fernandes. After the presentation, it will be available during the Q&A session. [Operator Instructions] This event is being recorded and will be available on our Investor Relations website. This presentation contains information based on future estimates and forecasts based on assumptions adopted by the company, which can therefore, change and should not be considered fact will be used as the basis for financial projections beyond the plans expressed by the company. I'll give the floor now to Roberto Monteiro, our CEO.

[Roberto Monteiro, executive]

Good afternoon, everyone. We're going to start the earnings conference call to discuss results for the third quarter of 2023. I'd like to start by thanking all of PRIO's employees who made this quarter a very good one, a very solid, very robust quarter as we'll see in a minute. Well, to talk a little about this quarter, I would like to highlight 3 points, 3 very detailed points which I think are the pillars of this strong and robust quarter that we delivered ending in September.

The first point, obviously, is our production, which averaged a daily production of 99,000 barrels surpassing the 100,000 barrels per day mark in the middle of September. So that's one of the pillars. The second pillar that has a lot to do with production is operating efficiency Albacora Leste. And along with this, the successful campaign that we are already well into at Frade and the Polvo campaign, which also added another 1,000 barrels of oil. So with Albacora's operating efficiency, we are starting to see good results. We are starting to see the path ahead of us. We have a long way to go, but we're already starting to see the path ahead of us. And these campaigns to increase production have been very successful. This generates -- I mean these 2 things end up generating a lifting cost of $7 per barrel as we can see, which is super competitive, the best mark in the company's history, and it should stay more or less around this, [ 7%, 7.4% ] of the past quarter until [ Wahu ] goes into production, which we will see later on.

And along with this, the reduction of our carbon footprint. We always say that it's not enough to be a profitable company. We also have to be a responsible company. we contribute to the environment. One of the ways in which we contribute to the environment is by reducing our carbon footprint, we reduced our carbon footprint to 19 kilos of of CO2 equivalent per barrel equivalent. So this is a market that also improves a lot quarter-on-quarter and compared to previous years. while putting it all together from a results point of view, this gives rise to a record EBITDA for the company. We posted $633 million in EBITDA and a net income of $348 million. But the foundation for that is these 3 pillars that I've just mentioned.

Well, I'm going to move on to the next slide. And we see here reputation of lifting cost, production, there's no point in talking more about it. But these for these items of lifting cost, production, efficiency, which we are beginning to see at the end of the day, also gave rise to these 2 other indicators here at the bottom of the slide. One of them is our cash. Today, we already have a cash position. We ended the quarter with a cash position of $444 million. Our cash today is actually even higher. We've already passed the [ $500 million ] mark. But anyway, the cash there is at $444 million at the end of Q3. And also, our net debt over EBITDA ratio, which is the company's level of leverage is at [ 0.9 ]. So the company is doing very well with a very robust and strong quarter, very much supported by increased efficiency and the delivery of all of these projects that we've been talking about over the last few months in short, over the last 12, 18 months and so on.

I will now turn the floor to Francilmar, who will explain in detail on our operations, and we'll talk about each one of our fields, then Milton will present the financial part, and I will come back to talk a little bit about sustainability and social environmental responsibility and about our next steps. Thank you very much, Mr. Mar.

[Francilmar Fernandes, executive]

Thank you, Roberto. Hello, everyone. I'll start on Slide 5 with the performance of our assets. Well, this really wants a very good quarter for the company on the operations side. We delivered the best production in the company's history, reaching almost 100,000 barrels equivalent per day. The highlights, I'd say, are Frade Field to start, when we look here comparing quarter-on-quarter and year-on-year, it's a substantial increase, doubling the assets production. We'll discuss Albacore in more detail later, but we're already starting to see the first fruits of our revamp program for the unit and Polvo and TBMT, have been consistent with some deliveries during this quarter as well. The most important thing, I'll go into detail here on the next slide. is that we continue to make the same progress and focus on the controls of the operation, which give a good result in the cost of production in our lifting cost.

So this month, we reached a lifting cost of around $7 per barrel, a really strong number. And this is obviously the result on the one hand of increased production. And on the other hand, of cost control. We've always made a big effort in that direction despite having obviously some of vendors in the supply chain inflation and so many other things. But we always set out to find alternatives and find ways of taming these costs because it's what we always say. There's no better protection. There's nothing better for us to do than to have a good lifting cost. It's our greatest protection, not only for the good times, but especially for those times when things get really tight. So we'll continue with this strategy. We should always continue [indiscernible] with some things putting some pressure on us, but we work to increase production to offset that.

So moving on to the details of the assets in general. We'll start with Frade. Frade had a strong quarter. We had 2 important deliveries, including well ODP 5, which started operating right at the beginning of the quarter, adding its production to Frade Field. And we had some other important works for the revitalization process. efficiency of the asset, both the FPSO and the subsea wells system has been performing very well. We repaired well [ UP3 ]. So it was an important deliverable but we haven't been able to put it into production yet on account of a problem we had with the Christmas stream. And we are repairing the equipment, which have been connected to it, and this repair should take place in the next few weeks. But the initial problem we had has already been solved. So there should be a little more help to Frade's production. The asset is fine. We're totally focused on helping it to get part of the top side of the FPSO, which is to receive oil from Wahoo field. So there's going to be a lot of focus on general improvement of the unit, i.e., efficiency, reliability of the equipment and the projects related to Wahoo on the FPSO at Frade Field.

Now about Frade Field on Slide 8. I'll go into a bit more detail about the revitalization plan. We've been through the phases, and here, we are already at the conclusion phase. We are at the third phase which we've started working on. We've brought forward the conclusion of well ODP5 and put it into production. During this quarter, between Q2 and Q3, I'm going to go into a little more detail about this part, this map on left of the slide, which shows a top view of Frade Field. These colored polygons are the prospects that we see as having potential. At least, it's where we are in the process of investigating, maturing and finding potential accumulations to make them commercially viable. The most mature area we worked on was [ Marikana ]. We drilled 2 wells to investigate this area, which is here in green on the lower part of the left-hand side of the slide, and we had good results.

We drilled 1 well at the top of the structure and 1 well to assess the extent of this reservoir. In the world itself, we made a detour to assess the extent of the reservoir. And we found -- we outlined the margin quite well. We already have preliminary information that, yes, it is commercially viable to put a well there. so that we can better assess the extent of this reservoir. We are now going to start delving into the detailed geological study and reservoir engineering studies to define the best strategy and the outflow itself, the subsea system to take this oil to Frade FPSO.

We can already see a reasonable potential volume. Of course, this will be detailed in the next certification process with something around [ 5 million to 15 million ], very preliminary numbers, indeed. But we can already see in terms of recoverable volume something that makes it feasible to start investigating this reservoir. We are still in the evaluation phase with the other prospects in order to understand when is the best time for us to find a window to investigate them. At the moment after the internal assessment and the interaction with the environmental agency, we're starting to focus our attention and priority mainly to Wahoo field. I'll go into a bit more detail later. But what I can tell you in these slides about Frade, it's that it's now a process of going deeper into defining and detailing the new phase of revitalization of Frade Field or a second wave that we are going to plan for the future. So there will be plenty of time for us to mature and define exactly what we're going to do. Over the next few quarters, we'll bring you updates on this.

Moving on to Slide 9, detailing here. The operations at [ Polvo ] and TBMT fields. The quarter was good in terms of efficiency, the FPSO, the platform, the wells operated with good efficiency. [indiscernible] well, failure at Polvo and EPS and electric submersible pump that failed, which is normal for the field. We did a workover on it. that had a little impact on our efficiency. And we also had a new well drilled and delivered at Polvo, which gives us a relatively small production. But for the field, it is important to increase its economics and efficiency. It's something that over time will become more organic and recurring poval field. every now and then, we'll find an opportunity. It is an operation that we've mastered. We can do it in-house. So it's something that we should see happening again in the future. So it's all -- it was a well behaved and good quarter for Polvo TBMT cluster.

Moving on to Albacora Leste on Slide 10. I think it's worth commenting here that in this quarter, we can already see or already are beginning to have good results from the whole revamp program, the revitalization and the strong recovery of the FPSO which we've been doing since we took over the field. We can see this in the improved operating efficiency. We can see this in the increased production. It was the best result we've had so far. And we are getting to the top or very close to the top production that the unit has ever had over the last few months. We've been seeing this and gaining more and more confidence with proper cost control. We can see that the cost has been behaving even better than we had initially expected. So it's a strong result for Albacora Leste.

In addition to improving reliability and integrity issues of the ship, we have been adding production. We put 2 wells that have been offline back into production. They were stocked due to problems with obstructions in the production lines, call them hydrates. These high rates have been removed over the last few months. These 2 wells are back online, adding almost 5,000 barrels to the unit's production. And we should have a few more operations of this [ stake ] to carry out. We are finishing 1 more now, and we should continue on the same pace at Albacora Leste improving efficiency. We have now achieved efficiency of over 90% on the vessel on the FPSO for the first time in the last 2 months, we've really been delivering reliability and a very good system. This encourages us. It strengthens the work of the entire team involved knowing that we are on the right track and that this should continue and will improve over the coming months because we have important deliveries in the system [ fair ], different systems linked to compression, power generation, water injection several different systems that will require a lot of work from us, the effort of many people to have them back in their best possible shape. And with that, we aim to have both good operating efficiency and redundancies that if there's any kind of failure, we won't have stoppages of any kind. So Albacora Leste has been performing well. We still have a lot to do, both in terms of the vessel improving confidence and in terms of increasing production and will continue.

Moving on to Wahoo. Well, at Wahoo, we are at the point of executing the project. So there's no big milestone at the moment to share with you. We're going through the manufacturing process. A lot is being delivered, a lot is being manufactured. We might have the impression of a delay here and there, but it's all part of the project, especially at the current market moment. We're working around it, and it's going to be a recurring process until delivery, and it's part of our daily routine here. The big issue is we have the rig, which is ready. [ Hunter Queen ] rig is already at Frade performing some other services, but arriving in the region so we received authorization from IBAMA, we'll relocate the rig and start operations at Wahoo.

Good day, what is agreed in our licensing process is that Wahoo is a top priority for the company. We are working closely with the environmental agency trying to resolve all the issues and provide the necessary clarification. Therefore, we believe that, yes, in the next few periods in the next weeks and months, we should receive this okay, and then we will start. What's important to mention here is that all the work that is being done happens in parallel. We have work related to the subsea operation involving the installation of all the equipment and everything you see in the chart to the right. So we do have to install a lot of things, many lines, several umbilical cables, many connections and all of that should start in the next few months. The big project that really ties things together is the tieback itself, which is the pipeline of 30 kilometers, which is rigid. So that's a special vessel coming in the second quarter of the year. We are just waiting for confirmation.

Currently, the window we have is between March and June. And then we will confirm exactly when the date will be. These vessels travel the world. They are finishing a project. And after that, they will confirm when they will arrive in Brazil. So everything is moving along. We do believe that we will be able to deliver the first and first oil from Wahoo at the beginning or the end of the second quarter of next year. So despite all the hurdles, the complications we are working as hard as our. Nothing is easy. We work very hard to deliver as the plan. We will update the market as we learn more over the coming months.

So that's my part, and I'll turn the floor over to Milton.

[Milton Rangel, executive]

Thank you. Thank you, Francilmar. Good afternoon, everyone. Continuing our presentation, we are now going to talk about Brio's financial performance in the quarter. On Slide 12, we see the company's income statement denominated in U.S. dollars. That's the company's functional currency. So I think an important highlight is the number of barrels sold. We reached 9.7 million barrels in the third quarter of 2023, which is a record in our history. Also, in our favor, we saw a higher brand when compared to the first -- or second quarter, for example. The average Brent for the third quarter was around $86 a barrel. And this allowed us to achieve record revenue. we are talking about total revenue of $835 million. We also had domestic sales tax. We had cargo shipped within Brazil and that means that we have the payment of indirect taxes as well as trading expenses, logistics, freight for the barrels that we take to the end wire.

And with this, we arrived at FOB revenue of USD 791 million in the quarter. COGS is in line with lifting costs as it should be and EBITDA of and reflecting an adjusted EBITDA of $633 million in the third quarter alone, and this is a record. This is an where we eliminate nonrecurring effects, basically, that line of other operating income or expenses. It's also important to highlight that this adjusted EBITDA in the 9 months of 2023. We are talking about a level of more than $1.3 billion, which can also be seen in the generation of operating cash in our cash flow statement, which really shows another level of performance of cash generation from our operations from the day-to-day running of the company. Therefore, this was another very strong result that shows how solidly we've been building this company.

The next slide. Slide 13. We are going to talk very briefly about funding. We look at the amortization schedule that we have ahead of us. [ 386 million ] in 2024, [ 250 million ] in 2025 and then comes the bond that matures in 2026 and our debentures swapped to the BRL in 2027 and from 2027 onwards. And I think the point here is to highlight that we have a lot of peace of mind and a lot of liquidity to honor these maturities. Today, as of today, we already have a cash balance of more than [ USD 120 million ]. So I would say that we could think about rolling over a part of this financing, depending on the cost and doing it in a very opportunistic way. Otherwise, we could let these maturities occur naturally. As was the case this quarter in August, for instance, we chose not to roll over a debt of USD 70 million due to the strong cash generation we have in our operations. So we can see in the top left-hand chart, the company's duration 2.36 years.

Basically reflected in the composition of our debt portfolio. It's been falling because the debts are getting closer together. So it's natural. While we don't do any move or any liability management initiative to expand or to lengthen this duration. And the average cost of the debt which we can see in the chart on the left, on the bottom side of 6.18% per year. This is an extremely competitive cost for a company of our size, especially in a world. With this current level of stress, we've seen sulfur rising a lot in recent months.

So I would say that we should maintain the strategy of just observing the market and eventually doing something opportunistic, if it makes sense. And if it has an interesting cost without any pressure to work on these maturities at us that is not interesting to us. I would also like to point out that we were recently upgraded to BB rating by the Fitch agency. We came from a BB minus and we were upgraded to BB which reflects the recognition of the improvement in the company's credit fundamentals. The result of all this operating efforts and various achievements that we have been presenting.

So moving on to the next slide, #14. Here, we show the variation of the company's net debt. We went from [ 1.5 billion ] to just over [ 1.2 billion ], which was basically reflected in the EBITDA of over $600 million. We had a very significant CapEx of $220 million, largely explained by the disbursement of the Wahoo campaign, the Wahoo development plan and also the trade revitalization campaign. There are still some invoicing some payments coming in. Throughout the quarter, we had a series of payments and also some investments related to Albacora Leste and CapEx for the day-to-day maintenance of the company. The combination of all of these amounts brings us to a net debt of just over $1.2 billion.

Moving now to Slide 15. Talking about leverage. We reached a level of 0.9x net debt to adjusted EBITDA. This is the covenant. It's an indicator that is a covenant of our main debt. So it is the one that we monitor very closely. And it shows in short, I mean, the evolution of the reduction of the company's indebtedness as a result of this very strong operating cash generation despite the increase in CapEx. So I think it's nice to show that quarter-on-quarter, we've been presenting a company that is deleveraging. And with a balance sheet that is quite light ready for a possible investment opportunity. So it's important to make it clear that we have room for new funding, either for liability management or for some funding aimed at an important investment for the company to promote company growth and so on.

With that, I turn the floor over to Roberto, who will talk about the environment and our next steps. Thank you, and have a good afternoon.

[Roberto Monteiro, executive]

Thanks, Milton. Well, let's talk a bit about the environment and society, the responsibility we have towards the environment and towards the society. I talked a little bit about that in the beginning of the presentation, when I referred to our carbon footprint. We had an improvement of approximately 10% when compared to the second quarter of 2023. We had a carbon footprint of 21 kilograms. We've gone down to 19. But that's just one of the aspects that I think is important to highlight. But we did some other interesting things that we're also very proud of this quarter. We started a new campaign, a new [ heason ] offshore.

[ Heason ] offshore for those who are not familiar with, it's an educational program through which we try to change the lives of some young people, bringing them into the oil and gas industry. This program had 1,700 applications for technicians together with the [ heason ] institute, we provide cultural and social emotional content with the aim of introducing these people to the PRIO culture to have a fit with the culture and so on. they also learn about offshore work, what is it like, what the rules are, safety and everything else. And when they finish this training, they are able to work at PRIO, and they are also able to work at any other company in the industry. Therefore, we think that with this, we can help to improve or to change the lives of these youngsters. We also ran a safety campaign throughout the quarter. We had an internal safety week aimed at preventing accidents, including the participation of the A&P here of the company.

We also ran Yellow September campaign with the health and well-being of our employees in mind, reinforcing the importance of mental health care. Yellow September was also a success. And on the sponsorship side, we continue to support social inclusion through sports and events, we sponsor events and so on. This quarter, in particular. PRIO sponsored the winter Festival, which took place here in Rio de Janeiro. We inaugurated the I love PRIO theater. And we've been hosting various orders from the theory space, comedy, music and so on. So that was more or less the agenda that we worked on throughout the quarter and it gives us a lot of pride to see that we managed to get back to society, all the affection that we received from it from society.

Well, I'm going to move on to the next step. Here, it's quite simple what we have in terms of next steps. The first one will always be the health and safety of our employees and third parties. And the last item will always be to keep an eye out for new M&A opportunities. What's in the middle of the road is what changes over the course of the quarter. The very specific thing we have this quarter is that we are finally going to be able to finish the workover of the [ MUP3A ] well. This is a delivery that is in the pipeline for quite some time. We had a problem with the drilling rig, the licensing of the rig, so that we could carry out this operation. We've been working with IBAMA, the environmental agency, and we reached an agreement to be able to do the workover of the well in the [ phrage ] deal. Therefore, this is something we are doing. It should be finished now. It should finally be finished in November. The operation turned out to be more complex than we thought at first. but we are getting there. This well is important for maintaining this production level of 100,000 barrels, a little over 100,000 barrels a day until Wahoo ramps up.

We are working very hard in terms of the environmental license to drill Wahoo. We are working with the agency to meet all of the recommendations and all the conditions set by the environmental licensing body, IBAMA and in parallel to this, on the more operating side, the main point that is still pending, although we've made a lot of progress in the quarter is Albacora Leste. When we started the operation, our operating efficiency was less than 70%, and I'm talking about February. We had a few months to adapt and get to know the asset. And this quarter now, the third quarter we have already managed to deliver an operating efficiency of 80%, even slightly above 80%. And we think that in the last quarter of the year, we should be able to get efficiency close to 90% or maybe something between 85% and 90%, which is -- or which has been our goal since the beginning of the year. We already know how to get there. the critical points of the FPSO in terms of power generation, water injection and gas compression are all being well addressed we see progress on these points every single day, and we have a very clear path ahead of us. So this was the quarter that just ended, and we reported strong but results. It was a robust quarter no matter where -- which way you look. And I would like to end here by thanking society as a whole, our investors, our employees for their attention, the attention they give us.

And on that note, I would like to open for questions from investors regarding the performance in the quarter. Thank you very much.

[Jose Costa, executive]

Good afternoon, everyone. Thank you for joining our Q3 conference call. We will now begin the question-and-answer session. I have Roberto Monteiro, CEO, and Milton, our CFO. Our first question will come from Monique Greco with Itau BBA.

[Monique Greco, analyst]

My first question is, perhaps you could elaborate on the Hunter Queen schedule, which is going after it completes NUP3. We understand that the prospects of NUP3 need licensing. It's a long process. But perhaps you can confirm whether Maracana outline also requires a license. That would be nice. Another question. You have a leverage, a level which is below 1. What you have signaled to the market has been ideal. In this context, does it make sense to expect an acceleration of buybacks in the near future while M&A opportunities do not materialize.

[Roberto Monteiro, executive]

Thank you, Monique, for the question. I'm sorry, Francilmar is not here with us this week. This week, he's away from the company. Next week, he'll be back. So I'll try to answer your operational questions. As regards to Hunter Queen, this is what's happening. The first [ Maracana ] outlining well, is drilled. If you look at the presentation, Francilmar spoke about reserves level for one well. It is around 15 million barrels. Francilmar mentioned, [ 5 to 15 ] kind of a crocodile's mouth. But the first the limitation or on outlining well has been drilled. We found encouraging results. In terms of, yes -- it fits 1 well. The second well Maracana was not drilled. In Amuri in Peru, we haven't done that yet. The big point here is regarding the environmental licensing. I said during the earnings call that we had a few more difficulties to put MUP3A into production. MUP3A now requires 15 days of rigs work so that we can finish the Christmas tree work and the tube hanging work at the well. In the line connecting this well to the FPSO. So can go in 2 directions. One direction is to MUP5, which is posting high production. And the other line has hydrate. Hydrate is ice. We expect it to break down this high grade. And so far, we haven't been able to do so. So this well to be able to flow well without crossing the path of MUP5 and in we reduced the production capacity of this well. We have to break down the high trade on the side of the FPSO and hydrate braking requires a piece of equipment that was at Albacora. It has just opened 3 wells at Albacora. We broke the high rate, the paradigm equipment was very successful. But for us to install this piece of equipment at the FPSO will also need the Hunter Queen rig given its lifting capability and so on and so forth. So in practice, we're not going to have a rig to perform this operation to drill this additional well at Maracana, Peru and [ Annori ]

And that's why I said in the beginning that the operation of had been and is being more complex than expected. We finally have now a way to deliver it. To us, it is important to deliver this well because it's the one that is going to give a stable production until the startup of a what we agreed on with IBAMA that will focus all efforts possible on the licensing of Oahu. So what's probably going to happen to Hunter Queens. We know that Maracana, we can have a well drilled. So we'll start conducting studies to learn how to connect this to the FPSO. And then we'll increase the limitation, the [ whining ] and will increase the reserves. But we work first with the Hunter Queen at MUP3A. And then immediately after that, we'll try to go to Wahoo.

IBAMA put some technicians working in our processes, Francilmar had some meetings with the IBAMA team, we had some meetings with the IBAMA team. and we agreed on this road map. And this is what's going to happen with the Hunter Queen brick most likely work along the month of November, perhaps by the end of November, beginning of December. And if everything works out by I think there's a big chance that will move to Wahoo. If the Wahoo license is delayed, then we'll see what we'll do with the prospects. You had a second question, Monique. Oh, the buyback. Buybacks. It is true we have a leverage dropping. We are net debt over EBITDA ratio. We're super comfortable. I normally say that with a high price of the oil, something close to [ 0.7 ] is kind of easy to get to. If we don't anything by the end of next year, will our net debt over EBITDA ratio. If we don't have any M&A activity, if we don't distribute income will probably [ 0 ], our net debt over EBITDA ratio. So we are looking to do something in our business.

We cannot really talk about M&A, but 2 things can happen. We can allocate capital to M&A deals or to share buybacks, dividend payout and this sort of thing. I have focused a good deal of my time to possible M&A activities. We're trying to originate things. I'm not saying that there is anything underway, nothing of that sort, but this has been good deal of our efforts originating M&A deals considering return on investment, location, et cetera. But this is something we're focusing on. It's way too early to start talking about that. But it is important that investors have this clear understanding. Ideally, we would like to redeploy this capital in the business with adequate returns, 20% return in deleverage dollars and so on and so forth. We still have some time, a few months for us to see how this work that the whole company is doing. Myself and Nelson, Nelson has also been participating a lot in the work to originate M&A. So please give us some time so that we can see what the decision will be. I don't want to get ahead of myself.

[Jose Costa, executive]

Next question by Andrea Vidal with XP.

[Andre Vidal, analyst]

My first question is, I'd like to understand about Albacora Leste. How do you see production evolution and performance over the next year? What is the main bottleneck you have to overcome? Is there any milestones that we should follow to follow the evolution. And I'd like to have a follow-up question regarding. The reserve of the Markman well. You mentioned 5 million to 15 million barrels. I don't know whether this is 1P reserve. What is this?

[Roberto Monteiro, executive]

Andre, this is a reserve, not sure it's 1P or 1C. It's a technical thing. I don't want to give you a guidance on reserves at this point because the reserves need to be certified. But this number would be either 1P or 1C reserve. It could be 1C because we still don't have a development plan for that region. At this point, we are still designing a development plan that needs to be submitted to ANP when we submitted to ANP then 1C would become 1P. There's a contingency, which is the development plan. I mentioned that this is the case above remember, Wahoo when we acquired it, we didn't have the commerciality declaration. It was contingent. When we submitted the development plan to ANP, it became 1P reserves. So it's kind of the same mechanism, but the number that we are talking about here, its P90, C90. It's either 1P or 1C. We are being a little more conservative. I know that saying 5 to 15 doesn't really help anyone. But I don't think that you should write these numbers in stone, but what matters is this our reservoir engineering team is confident is comfortable that at least 1 well, we have the ability to drill. And this is already good because we will open up a new work front. We have another prospect that we had more expectations for it that we ended up not ruling. The second part is the limitation of the second prospect. So the good thing here is that we already have an anchor there. A base that will sustain the development of that region. And this is quite encouraging and exciting for us. But don't take these numbers don't write them in stone, but it would be either other 1P or 1C reserves.

Second thing, regarding Albacora, we're currently producing 30,000 barrels at Albacora [ 1,000, 2,000 ], 30,000. And I'm talking about PetroRio net numbers. Our intent is to end the year with something close to 35,000 barrels daily. I have been saying this to people. This is our target. In order to do that, well, today, Albacore is quite stable. It's around well oiled operation, but we still need some fragilities. We have 2 good turbines running. We want to have 3 good turbines running. We just got another turbine that we did the upper hole on to with in November so that we can have more robustness with more robustness in power generation, then we'll be able to force water injection a little more, fourth water injection system, not the wells. We can force a little more gas compression. And with that, we can perhaps open up some more wells, which are currently kind of restricted. So this is what is going to help us get to 35,000 barrels. For next year, we have 2 wells that we can work with without the need for new drilling.

We'll have to see when we can do that perhaps the first half of next year or 2 wells. One of them depends on a valve. The other one depends on lines and cables. Well, these are things that we can do with no difficulties. We just need the equipment. And we can try to get to perhaps 40,000 barrels daily or something close to that for Albacora. And then in the second half of the year, we'll start drilling. This is our plan. It depends on the environmental license. Of course, we are still working on this with IBAMA. And as of the second half of the year, we'll start the production ramp up at Albacora, resulting from new oils drilled. We intend to connect [ rapalso ] sometime in the second half. The PetroRio depends on Wahoo because some of the work will require a rig. So we'll work on [ arapusa ] and then start the drilling of new wells. In the second half, we'll have the ramp-up of Albacora. In 2025, we expect to get to 65,000 barrels around that. My expectation regarding Albacora that we'll have something close to Frade. It's a very similar field to Frade geologically speaking. So [indiscernible] we'll start drilling the wells in the second half of next year. And as the example of Frade, we'll start drilling here. We'll find oil here and there. by analogy, we'll drill one other well in these, we'll have the small virtuous cycle we had in Frade will likely to happen at some scale at Albacora.

[Jose Costa, executive]

Our next question from Caio Ribeiro from Bank of America.

[Caio Ribeiro, analyst]

my first question is about Wahoo. Given the fact that there was a delay in obtaining all the necessary licenses and also given the fact that during the presentation, you mentioned that so far, you are still keeping up on schedule in terms of drilling. Maybe do you think that you will -- you intend to drill more wells in Frade, if it takes too long to get all the longer licenses? And the second question relates to dividends. Next year, during that M&A, I think that the company generated a lot of cash. You were in the process of deleveraging. And Roberto, you said that this should be close to [ 0 ], maybe next year. And this opens up some space for dividend payout. So the question is about timing about the decision, whether you would pay or not the dividends if you do not announce an M&A next year. So maybe the dividend payout would be more likely for the fourth quarter or if there is any other timing that you have in mind.

[Roberto Monteiro, executive]

Well, regarding Wahoo, ago, I think you should split the work there in 2 major working lines. One word line refers to the installation of the line itself. This line installation is what will mandate the first oil. And the second line of work is the drilling of the 4 wells in Wahoo. And the second front of work is what will dictate the initial volume once we start up today, what we are working hard with IBAMA, which is the first license we need is the license to drill the wells. The other license is -- I mean, IBAMA has worked on the production and exploration area. The production is a bit easier because it has to do -- I mean it's just an endorsement for the pipeline. So it's a much easier life. And that's why we put the first oil in Wahoo for the first half of next year because it's a license that depends on a vessel that will come to Brazil that we do the pipeline. So it's a different process. But now this other process that involves drilling we could arrive the conclusion that instead of starting with 4 wells, we could start with 3 or 2. That will depend on IBAMA. But there shouldn't be any delay regarding the first oil.

So -- this is the way we see it. Now our attempt and the work we are doing and what we would like to see and what we desire, of course, the environmental agency has to run all the analysis and they take their time. But anyway, we hope that enter concludes the MP3 process. And instead of sitting idle there, we still have a very good visibility regarding the beginning of the drilling of the 3 wells. I mean this is also dependable on the views of IBAMA but we have to wait. But things are moving on Okay, there is nothing out of control. Things are moving along, no [ lies ] -- environmental licensing process is simple. So we have just to wait and allow things to move their course.

Now regarding dividends, it's everything, like I said before. What are we going to do? Well, we're going to do we either do M&A or we will think about something along the same light. We are not going to apply any kind of dividend payout policies. Of course, sometimes we have to have some flexibility in order to buy assets. So this is not in the schedule. So as we said before, we are working more towards the origination of M&As. These are things that do not happen overnight. But we are certainly working very hard in this direction. So until we have a very clear visibility about everything we are doing and everything we're doing in terms of M&A origination, I don't think it makes a lot of sense to discuss about -- to talk about share buyback or whatever name you want to give it to that. So once again, the company will still have a very strong cash generation. Nobody is going to do anything crazy. I think our track record is very good in terms of capital allocation.

Anyway, so let's give us some time. We need to look at all the options on the table. Probably maybe in the next 4, 5 or 3 months. I don't know. I can't tell you. There is no deadline. But we talk to people in the Board, and we make our decisions. But today, I can tell you that we cannot make a decision because there is the issue of M&A origination. And this is something that needs to mature. We need to mature that idea a lot more so that we can become more informed to make more informed decisions.

[Jose Costa, executive]

Our next question is with Gabriel Barra from Citi.

[Gabriel Coelho Barra, analyst]

Milton and Roberto, can you hear me well?

[Roberto Monteiro, executive]

Yes, yes.

[Gabriel Coelho Barra, analyst]

I have 2 questions. My first question is that I remember some time ago when we talked to Roberto, one of the major concerns of the company at the time. I think it was right after Albacora, the issue was trading, I think. You were just structuring this new area of the company. And there was a concern about the sale process because the scale of the company was changing a lot in this new geopolitical contacts and the war, there were some changes in the sales flow of the oil. And this quarter, there was a reasonable premium even in regards to Brent. I think in that regard, things improved a lot. So I would like to hear from you what is your feeling about it? And even before that, when you got things in the Virgin Islands, and when you had a more stressful scenario when you took more capacity, how are you looking at that issue? And the second point is about Wahoo, but referring to arbitration. You didn't say anything, but it has been a while since this discussion has taken place. So according to my calculations, I think this should be approaching a solution Therefore, I would like to hear from you what do you think we should expect in terms that arbitration with TPV. What could be the future of that field? So these are the 2 points.

[Roberto Monteiro, executive]

Thank you, Gabriel. Well, I will first talk about trading. I am pleased with the direction that we are giving to this area. This year, we created -- we established PRIO Trading. PRIO Trading is a company that trades on PRIO's oil only. But we managed to deliver more than half of our volume, delivering straight to the customer. And this was the target of the company. We wanted to have access to the end user, to the end customer. and be able to offer oils to the [ fine ] customer, to refineries, et cetera. We managed to sell more than half of our production through the trading. Things are moving along very well. Today, I don't know about today, but we have between 8 to 10 vessels that are frills, vessels moving around and delivering things to customers. So there is an operation in place. And we are very pleased with that. Probably regarding inventories in the Caribbean, we may return the capacity. We already returned part of it. And everything indicates that we will return the rest of that volume or that storage capacity because now we are more robust to do our own trading. We have access to vessels. Therefore, we do not need that business anymore. That was something out of an emergency.

Today, I mean, in the third quarter, we traded about I mean, last in $4.5 per barrel in the fourth quarter, the discount is even better. So I'm very pleased. We are very satisfied. And I think we are in the right direction. I think that was a very assertive move. It is just normal to sell our oil with a $3 discount or something close to that on average. This is pre-Wahoo, after Wahoo, things may change because the Frade oil may change. So pricing should improve. But let's wait and see what happens.

I think your second question was -- I think BV, that was IBV, arbitration. I don't want to get too deep into that issue. The arbitration is taking place started yesterday and then today and tomorrow, the people involved, they are in London now. In this arbitration, they are the witnesses. They are doing their depositions and they are following all of the legal procedures. Therefore, I think this week, the arbitration will be concluded. I mean the interviews with the witnesses will be concluded. And then it will be up to the arbitrators to give their arbitration sentence. I think the maximum time will be 6 months. But everything is within schedule. For some time, I've been saying that the positions would take place in the last week of October, and that was a fact. So now all we have to do is wait for the arbitration court, arbitration tribunal to exercise the sentence. I don't want to get too deep into that subject. But we see it with good eyes. We think that we are in a very good position, but I do not want to say more because things are happening as we speak.

[Jose Costa, executive]

Our next question from Bruno Montanari, Morgan Stanley.

[Bruno Montanari, analyst]

I have 2 follow-up questions. Regarding Wahoo license. Is there any pending items in terms of information, IBAMA requirements? Is it a problem of their lacking staff to do the analysis and talking about deadlines. When will these delays start wording you to perhaps push first oil to later, and that can perhaps impact the availability of the PSLV And also regarding M&A origination. There's the discussion more related to identifying possible assets or is it about the will of the seller to divest from the asset? Is it the level of price we see oil prices being very volatile. So perhaps a seller might want to increase their price. So I'd like to understand the thought process of the company regarding M&A.

[Roberto Monteiro, executive]

Thank you for the questions. Let's start about M&A -- let's talk about Wahoo first. The PSV, the pipe lane vessel according to contracts, we're going to have a meeting more towards the end of November to define when the vessel will be in Brazil. The vessel is performing other works. I think that they are doing some work for Shell at the Gulf of Mexico. But eventually, this vessel will come to Brazil. So we're going to have a meeting more towards the end of the month. By contract, we have something called collapsing window. When we signed the contract, it was 6 months, and then the window shortened to April, May or June, one of these 3 months and now in November, we'll have to choose between April, May or June when will start to work. This is not an option of ours or McDermott's option. It is a meeting among the companies and those shows the schedule where they have for installations and so on and so forth, and we'll choose a window that will work for us. So this is still a pending item. It is totally normal. That's how the contract works is regular stuff for the industry.

In the best case scenario, we should start laying the pipes in March. April, March or April around that time frame. We would need to have the pipeline license by February. We need the approval for pipeline. As regards to wells, it doesn't really change first oil expectation, what changes is the number of barrels, we'll say, 1,000 barrels per day. So depending on how many wells we have, that's the amount that we will have initially. And as regards IBAMA, in our opinion, there is no pending items there. But this is how this business works. We gather certain amount of information that we submit to IBAMA. They analyze the information and they ask for clarification. This clarification may translate into things that we need to do. Today, we are waiting for IBAMA to return to us the first analysis of the process. Actually, it's going to be a second round because we had 1 round, they got back to us. And we are almost in a second interaction with them because the ring fence area increased a little. So we don't see anything different, candidly speaking. Is actually -- is there any extraordinary things happening? No, but the environmental license or actually, the environmental licensing is a different process. So less with for IBAMA feedback, nothing -- and it's nothing out of the blue. We just wait for the agency will analyze their request. They might ask for clarification, all sort conditions may be. So we are at this stage, and I don't foresee any mountable difficult or difficulty that would be easy to overcome. Candidly speaking, I don't see any of that. So this is for Wahoo.

Regarding M&A, it's hard to say the problem is [ France ]. The problem is fee [indiscernible]M&A origination is not so Cartesian. You may think it is if we go to somebody and say, do you want to sell yes or no. It's not like that. In all of our processes throughout the life of the company. We provoke companies. We approach them like to address this opportunity may be of acquiring an asset, acquiring a stake of the asset and no one says okay at first. No one says, of course, I'm selling and no 1 says, no, I'm not selling. Sometimes it won't play anything. Let's say give me a solicited offer the information that you have and will look into it. Every process is different. Every company works in a different way. It's hard to say the problem is priced. The problem is A or B. No, it's -- It is a process which is much more [indiscernible] than technique. It's not about price only. We have tools to address any of the issues raised. The price is not a problem price because of the [ ice of the ] oil barrel, that's never a problem. We have mechanisms to address that. in Albacora, we offered the fixed price and then we changed the price. If the oil price increased and now we're going to pay that earn-out because the price is higher than we had expected. So every process is different. Bruno, it's really hard to tell you what's in the way. And that's the kind of work that we do. M&A origination is all about that.

[Jose Costa, executive]

Next question by Pedro Soares with BTG.

[Pedro Soares, analyst]

Can you hear me now?

[Roberto Monteiro, executive]

Yes, we can hear you.

[Pedro Soares, analyst]

I apologize. I have 2 questions. One is a follow-up on Albacora [indiscernible] to get some additional details regarding well productivity. But I don't know if from mistaken, but you said that the next 2 wells will not be drilled just in terms of workovers, they would add something between [ 2,500 ] barrels, totaling those 5,000 barrels, something similar to recently connected wells September and October. But I would like to know about the productivity of the wells to be drilled in the second half of next year. What kind of productivity could we expect per well once the drilling begins. And my second question is not so much operational. Operations have been very much discussed. I'd like to discuss the tax reform. I'd like to hear from discussions on selective tax. Could you share with us how -- this is being discussed at Congress and with the responsible entities, what efforts have been made by prerecording that. And what scenario are you working with has been. Are you working with us the most probable.

[Roberto Monteiro, executive]

Well, this last question is the hard one. Let's talk about the wells. That's easier. I think that's for Arapuca, we are estimating 8,000 barrels per day initially. And I believe that for the other wells, we see things faring between 5,000 to 7,000. We can have we can be optimistic. Let's think that we'll have there, what happened at Frade. Well, producing 10,000 barrels. But that would be the upper case. We're getting to that virtuous cycle that we have ,we could expect something like that. But our base case is something between 5,000 and 7,000 per well. We'll have many infill wells, which we are going to drill. So for Arapuca, 8,000. I think 3 wells that Arapuca that is drilled plus 2. And then we have in the post-salt something between 5,000 and 7,000, something around that. As regards to tax reform. Now to us, of course, we try one way or another to take our opinion to Congress. The upper house, Senate house. But today, what we see -- according to the report, what we see is the possibility of a 1% taxation on revenue, almost like as if we got the royalties and increased it from [ 10 to 11 ] So 1% tax of our revenue.

What was the asset that you mentioned. That it's something we -- yes that one. This is what we see, but that's the impact that we could identify related to the tax reform. This is a discussion this tax, the selective tax is overlapping with the Royal team. There's something technical. It's not up to me to discuss this. When technically, we believe that this has a certain overlapping with royalties. Well, this is a discussion that is going to happen. But today, the impact we see for the company is a 1% tax on our revenue.

[Jose Costa, executive]

Our next question is with Luiz Carvalho with UBS.

[Luiz Carvalho, analyst]

Can you hear me now?

[Roberto Monteiro, executive]

Yes, yes.

[Luiz Carvalho, analyst]

Now first of all, I must congratulate you for your very clean and very good operating results. It's very difficult to see any other company operating so well as you are. I have 2 questions and then maybe a follow-up question. But if I could, I would like to start with my follow-up question. One of the things that concerns us the most is not even related to the tax reform. But we see some debate about the fiscal side. And the government's plan is very tight for next year. And we fear as it happened at the beginning of the year when they talked about the export tariff we fear something that wasn't expected. I mean we were not expecting anything and all of a sudden, you come up with an info tax or something of that sort. Given the fact that you're very close to the organizations that represent the industry. How do you see that risk? Because mining and oil industries now have an impact on the environmental agenda. And the second question is about hedging. Of course, we've seen that the oil price has been quite resilient.

Our reading shows like an additional capacity that has been more limited given to all of the ESG pressures and cost of debt, et cetera. So I would just like to understand how do you see that? I know that you already talked about the trading aspect. But what is your view about hedging? And my last question, if I may, is about whether you can give me any idea about the next reserves report or to give me an update on the 2, 3 or 4 quarters? And what do you expect. Without giving any guidance, but what do you expect for the next coming report?

[Roberto Monteiro, executive]

Thank you, Luiz. Well, I will start in the order of your questions. Well, starting with taxes, new taxes to be created. Currently, this is a very delicate issue that concerns us, of course. I think -- I mean, our task now is an attempt to create awareness, at least to show our sights to the government because some type of tax are very harmful to the competitiveness of the industry. I mean, the export tax was a mistake. That's why it was temporary. The government itself let that thing fade away by itself. Of course, because they realize that for 4 months, of course, that this was harmful to the industry, but it didn't cause competitiveness harm. But at a given time, you would remove competitiveness to the sector. And I think it has to start from becoming more aware of the damages. And you are referring to the environment. If you start talking about the environment, you have oil and gas -- it's not even the villa because you have oil, gas and mining. But not only that, you have agriculture that has a big impact to the environment, Beef impacts the environment, steel, cement, many industries could be listed here. So if we start with that level of taxes and you begin to say, okay, let's try to charge more taxes that has an impact on competitiveness.

So today, I have nothing to say. Well, in the past, we did some work to set up a dialogue with authorities. But we're like passengers We could talk maybe as an industry, but the fact is that the government is above all of that. In terms of your question on hedging. What we are seeing now is a lot of volatility in the market. Prices go up. And then you have another serious issue that is happening now, which is this new war in the Middle East. I don't even -- I don't want to express my opinion about it. And oil goes up a lot. And alongside those volatility, it's very difficult to hedge it. because we buy puts. So one of the very important things about volatility when prices go up, good is like an insurance and insurance becomes more expensive, so we end up not doing. Opportunistically, we are trying to do some hedging. I mean, we -- great part of what we do was hedge. In October, we may get something from hedging. We priced [ 3 million ] and something. We have hedged [ 2 million ]. In December, there will be another major pricing. But we don't have anything hedged for December. Opportunistically, if we see this volatility mix of prices in December going up. And if it hits a number that it would make sense to hedge, we will hedge it. But that's it. It has been more difficult to hedge using the way that we usually work with, which is put. And the third question was the reserves. When you look at the reserve reports, if you look at the reserve report of December 31, and you look at the one for this year and if you take the production of the company, you would have then the reserve with no type of addition or subtraction by new things. You only produce during that period.

I believe that we would have something positive, be it in terms of Maracana or be it in terms of [ MP5P2 ] or all the other wells that we drilled at Frade. We should have something positive. But if this positive will be enough to offset production. I don't know. I can tell you that today. I cannot tell you that the day, Maracana instance, we refer to a reserve of almost between [ 5 to 15 ]. If we get into the middle of that, let's say, [ 10 ] or naturally slightly above that, you would have a good way towards your production that is offset it. I cannot give you a guidance, but I'm sure that there will be some reviews that will be positive, but there was no major upset or hiccup this year or something that we drilled that should have been a lot higher. That didn't happen. And because of that, I don't see any reductions in their reserves. I mean, maybe this could generate additional reserves. And I don't know whether that additional reserve will allow us to have a good reserve even though production is still in the middle of the way.

[Luiz Carvalho, analyst]

Congrats.

[Jose Costa, executive]

Our next question comes from Bruno Amorim from Goldman Sachs.

[Bruno Amorim, analyst]

I have 2 questions. My first question is follow-up related to the trade-off in M&A versus buyback. Can you tell me how are you thinking about this trade-off? What are the metrics? And Robert said that the return for M&A is something close to 20%. Does that mean that you don't see a return of 20% of your shares? Or are you looking at it with different glasses. And Wahoo, if you could tell me about the duration of some stages of the process, for instance, once you have the license to drill, how many days it takes for you to start drilling? And how long does it take to drill every well. And finally, I just want to confirm because Roberto said that you could start with 4, 3 or 2 wells. So can you start with 1 well or 2 is the minimum.

[Roberto Monteiro, executive]

Let me say something about the return. We see a return higher than 20% even because we acquired something, we bought something, I mean, last month, not very much, but we did buy, but that's not the point. we see a return in our shares. But the thing is, we look for M&As with a minimum return of 20%. In terms of M&A and the reason why we prioritize M&As because they are opportunistic. I mean, the shares are there for us to buy. Of course, the prices could go up. And the reason why we see more returns with M&A is very simple. We know the plan, we have more details. And today, when you look at it in terms of capital allocation, but we look at all the reports and everything looks normal and time. But everybody do the math as nobody is going to do any more M&A ever, and that's not the case. Therefore, we have an expectation when we look at our M&A expectation. I mean we could be at a lower pace. But together with the plans that we already know about the company, and you know that we tend to be more conservative. It's very easy to find a return above 20% in that share, and this has been proven right. We end up by prioritizing M&A because M&A is opportunistic. It's there today, but it may not be there tomorrow. Most part of our work involves making deals like that work. We are keeping conversations with companies that own assets and we try to make companies be more interested in divesting or selling the asset. We show them our credentials and our point of view regarding carbon footprint, et cetera. This is important.

There is the side of responsibility, and that is something quite important. We talk about that. We talked about our technical capacity. And the majors do not want to sell to companies that they turn that back on you. And after 6 months, they would knock your door against saying that there are problems with the asset. That's not what they want. That's why we have negotiation involves a convincing pace. Sometimes the owner of the company decides to sell, and we have to be there when that happens. That's why M&A is a priority. It's not because I see better returns with M&As, and I don't see the same returns with the shares. So we do see high returns in both, but we have to take advantage of M&As because it's related to opportunities. There was another subject. And what was there.

[Bruno Amorim, analyst]

Wahoo.

[Roberto Monteiro, executive]

Oh, the phases of the process. There are 2 important things that you should know. We should start with 1, 2, 3 or 4 wells. It's not a problem. The issue with Wahoo is that to drill every well, it could take more or less 60 days. That's it. That's what you should have in mind. So once the license is granted, it takes a few days until you mobilize things. It takes about 30 to 60 days until you mobilize the rig, the rig can navigate very quickly. That's not a problem. And then after that, it takes about 60 days to start the well, maybe a little bit more or less. The smaller ones may take longer. But on average, it's not too long. That's 1 point. The other point has to do with the pipeline. Once we start that process. It takes about 45 [ days ] The vessel comes. There is a period until we get there. But once it starts deploying the line, it takes approximately 45 days. So and after these 45 days, you have to connect all the wells, you have to connect the wells to the manifolds. It's not a manifold but at the beginning and at the end, we have to connect the wells to the manifold and then we start producing. So pretty much, this is the time frame of the business. You would say, oh, it takes 45 days for the pipeline and then another 45 days. So let's say 20 more days for the assembly of all of the connections nothing too distant from that.

[Bruno Amorim, analyst]

Perfect. It's very clear. I just want to make sure I understand. So let's say you get a license in March. So you should be able to start producing in June Yes. And it takes 2 months to drill. So March will be the deadline to get the license and then you will get the first oil in the second quarter. Does it make sense? You're talking about drilling. Yes. That reasonably well. We never thought that it could be in March because that would mean a huge delay. The license that matters for the first oil is not the drilling license. It's just a license to lay the pipes. And that would be for February or March next year so that you could have some lead time to wait for the vessel to get there because the most important thing is to do the pipeline that will connect the wells. And then the drilling of the wells, you will start doing once we get the license. And honestly, I don't see that deadline being March -- so between the license for the pipeline and the first oil, how long do you need for that given the fact that, that is a bottleneck.

[Roberto Monteiro, executive]

I think between the license and everything, the ideal timing would be to 3 months.

[Jose Costa, executive]

Our next question is from Gustavo Sadka, Bradesco.

[Gustavo Sadka, analyst]

I'm sorry to continue to talk about M&A. Relatively, we saw 2 big deals, 1 with Chevron, 1 by Exxon with multiple secretly quite large in the minds of Brazilian investors. -- and they had a negative impact on their performance share. When you look at these deals, I know every case is different. But perhaps this would indicate a not so favorable timing for M&A. And my second question is about Albacora Leste. What about the individualization losses of Arapuca with [indiscernible]

[Roberto Monteiro, executive]

Well, I guess the 2 deals we mentioned of care very different than anything you're looking for here. So no, I don't think that there is any similarity or interference with what we are looking for here. To [indiscernible] it with you, I don't even know what the multiples were. It's not something we are working at. And this happened, I believe, most of it onshore. One of the deals I think includes midstream, downstream and Ostrom. So this is a totally different thing than what we do. It has nothing -- absolutely nothing to do with us. the deals in the United States and normally a lot more arbitrated traded. So again, this has nothing to do with us, I believe. It has nothing to do with what you're looking for. So you know what we're looking for. Offshore, Brazil, [indiscernible] basin around that.

Your second question, what was it

[Gustavo Sadka, analyst]

Regarding the individualization of [ Rapusin Roncador ].

[Roberto Monteiro, executive]

We have progressed a lot in the unitization process. It's a long negotiation process. So we progressed quite well. We were able to show our suggestion for a development plan and so on and so forth. We had some good important discussions regarding the size of the reservoir, The Roncador consortium. So a reservoir that was actually a little bigger than our initial assessment. So I would say that things are unfolding well. We are moving forward. we are able to have a good relationship, a good partnership with the [ Roncador ] consortium. And I think that things will happen at the right time. We should put Arapuca into production if all goes well next year, according to our expectation. I don't see any big hurdles for this business.

I cannot talk about DPs and volumes and such things. This will be for the reservoir ratification, but I don't see any hurdles.

[Jose Costa, executive]

Our next question from Almeida from Santander.

[Rodrigo Reis de Almeida, analyst]

Just want to ask some additional questions. On the financial side and strategy. Just so that we can analyze the balance sheet for the quarter in the effect of receivables and inventory. So how should we look at these mismatches between target revenue. If I look at this quarter you received a relevant amount. I think that we all should be on the same page regarding these shorter periods of time, how should we analyze the balance sheet as a whole and cash generation. And my second question, I want to confirm some things about Wahoo in terms of OpEx and absolute value expectation. Any changes regarding that regarding the FPSO and also CapEx. We still talk about [ 800 ], [ 830 ]. I just want to confirm that. And the third point first to try and underspend compensation for fiscal losses. Do you have any strategy to accelerate monetization? And perhaps the prior trading might help you monetize these gains faster. So these are the 3 points I'd like you to address, please.

[Roberto Monteiro, executive]

Regarding PRIO trading, this is kind of hard. And I know it is complicated for everyone to understand. We sell oil to customers, we sell oil at the FPSO and so on and so forth. The normal scenario to consider about 45 days from the offloading from the FPSO. That would be the normal scenario. So 45 days of payment by the trading company that acquired the oil, if it's a modality of FPSO, FOB, 30 to 45 days. If we sell directly to a refinery, now that varies a lot. Could be 30 days for transportation or 45 days for transportation, really depends on the destination of the oil. So is the arrival of the oil plus 15 days. So an average would be like 45 days. Let's use 45 days. Let's be conservative, let's say, 60 days. from the moment the oil is offloaded from the FPSO. But I think that there will be variability, plus or minus given the modality that we use. But unfortunately, this is what it is. We cannot increase a lot of efficiency here also will block our sales modalities, and we don't want to do that.

As regards to Wahoo, our CapEx $830 million, and it's almost all already applied. This is a, we haven't got big changes regarding that. This continues to be our guidance. A little over [ 600 ] until first oil and then the delta would be water injection for a subsequent step or subsequent stage I think we have deployed what [ 400 million ] in Wahoo, a little over [ 400 million ] have already spent a little over [ 400 million ] at Wahoo this year. We have about [ 200 million ] to spend until first oil. OpEx doesn't change. Wahoo OpEx considering us well will not be changing much. And this is oil that will be produced by the Frade FPSO. So there will be no big increases in Friday. There will be a dilution of costs of Frade.

And that's a potential handling fee. If the partner IBV, decides to return to the asset. It really depends on the result of the arbitration process. The handling fee depends more on the Frade FPSO working. But the additional cost is low, it's practically 0 actually. So everything remains unchanged. Rodrigo. Was there anything else.

[Rodrigo Reis de Almeida, analyst]

Compensation of tax losses -- offsetting tax losses

[Roberto Monteiro, executive]

I [ didn't ] speak about that. We maintain Rodrigo's schedule. We follow up close the tax losses of each one of our subsidiaries. We had a recent purchase of a Unity that came with some tax loss. But net of that, we would end that fiscal loss of the company by mid of next year. And then with working trying to optimize things with this acquisition, I believe that we'll still have a fiscal loss for the company in the next few years in the next 5 years, maybe considering the current portfolio of assets. we are always attentive to new opportunities. We have distribution of IOC -- company IOC, but all according to the normal procedures of a company of our size. Well, you may said 5 years you were aggressive. But yes. Considering the accumulated loss, we acquired this operation. So we have some accumulated loss. So for 5 to 7 years, we should have a tax rate of 24%, 27%.

[Jose Costa, executive]

All right. I think that because of a time limitation related to our Q3 earnings conference call. I'd like to thank everyone for participating all your question, and I'll turn the floor to Roberto for his final statements.

[Roberto Monteiro, executive]

Thank you. Thank you very much to all of you for being so receptive to us, and I hope to see you in the next conference call that should happen in the end of February or beginning of March. Thank you very much.

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