Maha Energy AB
STO:MAHA A
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Maha Energy AB
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So let's see if we are connected. So let's see if we have Paulo Mendonca, a new CEO of Maha. Paulo, can you see and hear us?
Hello.
Excellent.
Good afternoon.
Good afternoon. And as promised in the press release on the 4th of November, the previous management will be available during the transition while we should be able to connect to Andres Modarelli, the previous CFO; and Alan Johnson, the previous Chief Operation Officer, I should say. So Andres, Alan, can you hear me?
Yes, very clear. And Alan is still the COO. I am still the COO.
You are the current COO, I do apologize. So the marvel of technology because you are in Canada, I take it and the rest are in Brazil. So let's see for the third time lucky, we should now be able to connect to Bernando Guterres, the new CFO of Maha. And also besides him, I believe we have Andre Naslaucky, who is Head of the Brazilian operations. Can you hear us?
Hello guys, good afternoon.
Right. So I'll turn it to you, Paulo. Maha not only delivered this Q3 today. Earlier, you announced changes to the structure of Maha. So please take us through the quarterly and the future of Maha.
Thank you very much, Paulo. After the study, it's a pleasure being here to introduce yourselves and tell a little bit about how do we see the next platform for Maha very glad and keen here to be in this call for the first time. And the next slide, please? Here, we're just making a quick summary here on the new corporate governance of the company, main work streams we intend here to [ work here for Maha ]. Next slide, please. So recently, [Audio Gap]Starboard a Brazilian private equity, third specialized oil and gas industry and as well as energy investments in Brazil, acquired a relevant stake in the company. It acquired around 10% and [indiscernible] remaining 2.2%, reaching a 12.2% pf outstanding shares in the market and becoming here the largest shareholder and standing here to be what we call a reference shareholder, a shareholder here to be present and active of the company. On November 3, there was an extraordinary general meeting. [indiscernible] of the Board. Our Board representatives such as [ Paboase ] with Chairman and then [ Enrique Peña ] became part toward Harold, Richard, [ Norwest ], Victor, the remaining 3. This moment also Jonas Lindvall, Nicolas, Walker and [ Koster ], who is new from a position. We thank a lot all the work and effort here in the company. On the same movement, a new management team stated. So the new Board appointed myself as the new CEO of the company; and Bernardo Guterres the new CFO of the company. Myself and Bernard, we are Starboard, and I'm very happy here to be here with you guys. We are creating here, as we mentioned, a very smooth position. We appreciate a lot here also the presence of Andres Modarelli helping [ vision ]. This new strategic position in for Maha really has its main focus creating value [ for the ] company. is very well positioned to benefit this energy industry, Latin America globally. It's a huge opportunity Maha has to come apart and to go get its production, cash flow trough. This is the main objective here to get a great value for [Audio Gap].Next step, please. Taking here the quick introduction of the new management on the Board. We have Fabio Vassel that is the new Chairman of the company. He has been working in the financial industry for almost 20 years. We have Enrique Peña as well that has an extensive experience in Europe also representative for Starboard. We have myself here. I worked in Starboard since the beginning [Audio Gap] partner there, and we are — we made a very relevant investment in the oil and gas industry. We are architect of this day, approximately $2 billion in market cap. Having this past experience also [ encourages ] is a lot to see this new Maha also having its space in this market. I'll pass the word here to Bernardo, taking introduction.
Okay. Thank you, Paulo. So guys, it's a pleasure in speaking with all of you. Very exciting in keeping up and even enhancing the good job that Andrew has been made as the previous CFO, Andrew, thank you a lot for all the support in this transition. So briefly speaking, on myself, I have a track record in the financial industry in Brazil and outside Brazil. I've been with important top-tier banks like Itau BBA, Deutsche Bank and [ Stifel ]. And previously, I also worked in the private equity industry before Starboard, I used to be a principal at opportunity Asset Management. And I do have a contact with the oil and gas industry as being a Board member -- a former Board member of PetroReconcavo, which is a listed company in Brazil with the same work that Maha does in terms of recurring production in major oil and gas field. So I'm very excited, and let's keep up the good job. Thanks, Paul.
Thank you, Bernardo. I can go to the next slide, please. So here, new strategic positioning and I think we need to mute somebody. Thank you very much. So here, this new Maha strategic positioning is really part of transparency, part of humility and hard work. We want to give here Maha a new phase, a new growth phase and 2 direction also comes with new work streams too much [ relies ] just like the improvement of Maha's current capital structure and its balance sheet, the optimization of CapEx and OpEx, this banish rent prices, track allocation of capital in the most attractive return projects is something that we want to be very assertive on. There is a tremendous opportunity to follow optimizations such as divestments and new developments and acquisitions. We do want here to assess the reserves and resources of the company. We are appointing a new independent company. SaaS these reserves and resources of all the assets, not only the contingent sources but also the reserves of Brazil and U.S., sources in Oman. And we also want here to be -- have a very dynamic and agile work plan for drilling and work over here is brand levels, agility herein using a good lifting cost, a good return, one of the foreign pillars. Having said that, I think a lot here -- all the shareholders and stakeholders here from Maha available for the questions. I will pass you the word for Andres to take the financial update of the results. Thank you very much, Andres.
Thanks, Paulo. Thanks Bernando for your pant works. And thank you, Kaarlo, for having us. Good afternoon to all of our viewers. I'm just going to go through our Q3 financial highlights. As you will see, our results were mainly driven by the lower production this quarter, just shy of 2,400 BOEPD as a result of certain wells being down at the field, and that translated production being down 27% from the most recent quarter and 34% versus a quarter or a year ago. Brent prices remained strong, just above $100 per barrel during the quarter, down 7% from the most recent quarter and up 37% from the quarter a year ago. All this contributed to revenues of just over $17.6 million were for plan, 27% from the most recent quarter and down 9.4% versus the quarter a year ago. Prices also contributed to operating netbacks remaining high, over $50 per BOE and also affecting the netback this quarter has been the higher OpEx per barrel. EBITDA, just over $9.6 million for the quarter was down 34% versus the most recent quarter and down 25% versus the quarter a year ago. Net result was just under EUR 2.6 million, down 68% and 57%, respectively. Despite this, not being the strongest quarter for Maha in comprising to the most recent quarters, if we look at our figures on a year-to-date basis, so comparing the 9 months, we can see that production has remained pretty much in line versus the 9 months for 2021. And the strong brand prices have supported revenues of $72.5 million, up 44% versus the same period a year ago. Same for EBITDA of $46.3 million, up also 44% versus the comparable period. And also you can see here that the EBITDA margin just under 64% has remained consistent. Lastly, year-to-date, net income of just under $23 million, a 60% over the 9 months from a year ago. Next slide, please. So on this slide, we're focusing on certain balance sheet items and specifically cash. The cash at the end of the quarter was $11.3 million, and that was down 52% from the ending cash a quarter ago. This is mainly driven by the lower cash flow from operations this quarter as a result of the lower production that we discussed and also the higher OpEx from workovers at the Tie. You can see this in this very intestrative chart at the right of the slide. And also CapEx was a big contributor to this. We spent just under $18 million this quarter, mainly in our development and exploration activities. These also contributed to our working capital deficit of just under $15 million. And we have started this year retaining our principal. We paid $7.5 million of our loan principal to date. Next slide. So on this slide, we show certain key financial figures. And as you can see, production has been trending lower since the record Q1 production for this year. But certain other metrics such as operating netback for BOE, EBITDA margin remained very healthy and which will allow for strong performance once production continues to resume. And on all this, while remaining conservatively leveraged, as you can see in the bottom line with net debt-to-EBITDA under one time. I think the other takeaway from this slide, just to wrap it up is, if we look at the 9 months of this year, for some of these metrics, it has already surpassed the results for the full year 2021. And you can see that in the revenue of $72.5 million. You can see that at also in the net result of just under $23 million so far. And on EBITDA of $46 million, just under $47 million for the full year of 2021. So with that, I'll conclude my section. I want to thank everyone for the support over these 5 years. And I want to pass it to Alan Johnson.
Okay. Thanks, Andres. So I'll run through some of the operational highlights from the quarter. So next slide, please. As Andre said, it was a strong quarter in terms of pricing over $100 brand. There's quite a lot of volatility during Q3 on pricing. But overall, we benefited from strong prices. As we've said, production was down in the quarter. It wasn't an easy quarter, but we've worked through a number of issues that I'll talk about in a later slide. So next slide, please. So here, we can see that the pricing is strong $100. Our netbacks continue to be strong, over $50 netback in the quarter. Royalty is very similar. But the key point on this slide is that the OpEx was higher in Q3. We were in the order of $21 per barrel of OpEx, and that's driven by 2 things. We had a significant workover program going on in Tie, which is now concluded for the year. And then due to the lower production rates and lower gas production, we were paying some penalties for underdelivered on our gas. So both of those scenarios will go away in future quarters. Move to the next slide, please. So again, you can see Andres has already alluded to the cash balance drop and as we paid down our debt and had fairly significant CapEx and operating expenses, and that passes through to a direct impact on our net result for the quarter. Next slide, please. So just to talk about the assets, obviously, Tie has been the one that has impacted us most in this quarter, and it's also the most influential for the company as a whole. We had a very active quarter in Tie. We completed the TIE-5 horizontal well in the quarter, Solta on stream, and it continues to produce with minor -- with basically no issues. TIE-6 was drilled. This is a water injection well in the south of the field. We saw good results there, and that well will be prepared and set up as a water injector in the near future. And then we basically worked methodically through 4 workovers this quarter to bring wells back on stream leaning done. They had pump issues or downhole tubing issues. So you can see a list here GTE-3 for TIE-1 and TIE-2 was an extensive campaign. The operating team in Brazil did a great job methodically working through those wells. And I'm happy to say that all those wells are now on stream and our production has returned to where it should be. So a lot of those issues, we believe are behind us for Tie. Next slide, please. In our other fields, it's been very much business as usual. Tartaruga has been steady production. No issues there. It's very low decline field. The Petrobras divestment process is ongoing, and we previously said we are part of that process. In the Illinois Basin, our production has been around about 300 barrels per day and has been very steady, no issues to report there. And then finally, the LAK Ranch in Wyoming in the U.S. We have initiated a strategic process there that's been ongoing for a number of months, and that continues to proceed. No updates at this point. Next slide. And with that, I'm going to hand it over to Bernardo, who will pick up on the next slide here. Thank you very much.
See you guys. This just our financial calendar. I'm very happy and excited to thank you guys here, and we're now -- we're ready to our Q&A. I will come back with you, Kaarlo.
Always, we have received a lot of questions ahead of this broadcast. And as I can see, there are a lot of questions coming in here. And I will try to -- in order to have some red thread here try with the strategic and then we can go to more technological questions and feed questions. So I'll kick off by turning to you, Paulo, and as a Managing Director of Starboard, why invest in Maha?
Thank you very much, Kaarlo. I thought it was having a [ group ]. One of the main plant industries here in Brazil is in fact the oil and gas industry, we have a few sponsors testing in the oil and gas, a few equity players. So when we look at Maha, it's a company that has a very good technical capability, has a good reduction of history. And in fact, when you compare Maha, the other junior oil companies in Brazil, Maha is discounted to multiples you look at serves,[indiscernible]. So the market seen Maha as a good pricing opportunity in terms of multiples. And as well, the most -- maybe the best answer for you to Kaarlo is that Maha needs to be seen as a classroom of growth. Maha has already assets in Brazil, has assets in U.S. as assets in Oman and has all the structure to be able to grow in an environment where oil is at good prices, and there are lots of opportunistic acquisitions to be made in Latin America and also globally. So the answer on this question is really a combination of good opportunity plus a correct platform to grow, to have new assets and a larger and more robust company.
Thank you for that. And that leads me to the next question, and I will combine that with a question that I just received via the view here, and that is future investment plans, Bernardo, where and in what?
Okay. Thank you, Kaarlo. I think Paulo started to answer this question. So our objective here in Maha is to make the company even bigger than it is right now. And basically, we'll be -- we are very open and very keen to analyze global opportunities. Following myself, we have best experience in the Brazilian oil and gas market. obviously, the market here is very, very hot right now, where we had -- we just had a divestment program from Petrobras and we certainly will chase for opportunities here, but also in LatAm and globally. So I think the objective answer here is that we are open-minded to invest, very keen to invest. Having said that, we have obviously best experience in Latin America and in Brazil. So I think this would be our folks in other words, to grow. We have -- we will be chasing opportunities where we know where they are. But globally, speaking, we're open-minded to analyze any opportunity.
And then I'll just read to the question online here. And what would be the keynotes looking 5 years ahead? I know 5 years is a long time, but will Maha listed on the Brazilian stock exchange? So let's start with Paulo. What do you think?
I think 5 years from now, we really see Maha being with target production with a diversification on its assets. Today, Maha’s production is concentrated in a few assets. And the idea here is to diversificate not concentrate the risk and also having cash flow streams also from gas assets, this can provide more reliability, more stable revenues and more predictably in cash flows and dividends. So maybe 5 years from now, with hard work and transparency, very keen on seeing Maha with more assets or proper production and with a more stable cash flow not only depending on oil prices, but also in gas, which some of the contracts are inflation adjusted. So this is something that is quite interesting to the company.
And could I just quote you Paulo here. You have the ambition to put Maha ahead of the queue. And if we look at in the near-time future, any immediate actions?
I think Maha has already -- Brazil is a very small community, even though we have EUR 120 million, but it's a moral community. And I think the results starting to appear. I'd like to congratulate Alan and Andre for having completed this first phase of the workovers. So this was a very nice job and a very nice is a very -- getting close to the suppliers because Brazil is, in fact, facing an inflection point in the supplier. So this was -- this has already been started. And the idea here, yes, for the next quarters, really to be in a position to speed up the activities that need to be done in the field. So I think these results are already appeared.
Thank you for that. And I will turn to you, Andres, because this is a financial question, and then we can let Paulo in here. But cash is right now, and I'm quoting, cash is right now at $11.3 million. Will this cash balance be enough for the future investments? Or will there be an additional capital increase?
So we have production after these workovers, production is resuming that will bring cash flows to more normalized levels. And at least -- there's a lot of variables involved. But at these pricing levels or forecasting so that we would meet these obligations. And -- but while there's CapEx involved. There's a lot of variables here that will affect the future cash flows and then it's going to be up to the new management also to look at this closely.
I would like to complement maybe the answer, but one of the most important work [ practice ] is to strengthen balance sheet. The company, in fact, is looking for possible alternatives which, as we mentioned, optimization of portfolio and as well evaluating options here to enhance the cash position, but something that is one of the most important mainstream the management.
Thank you. And we received a lot of questions here on one of the production areas, which hasn't been mentioned, and that's Oman. Can we say anything about Oman?
Regarding Oman, we don't have any news. The activities are being done. As soon as we have any, we will update the market.
Okay, cool. And also, I will jump into a couple of production questions here. So I'll take it that Alan will be the main recipient of these questions. But any work over has been completed on the TIE-5. And is there any increased production? I know you mentioned a lot of Tie, but just to get the question out of the way, please, Alan.
Yes. We haven't completed a workover on TIE-5 so far, but we are working on a plan to work over TIE-5. Most likely, that would happen early in 2023. So we're just working around order and materials and logistics to execute that.
Right. And also the million dollar question, current production volume per day and what do you expect it to be the end of the year. It's an easy question to ask, but I will take it. It's not that easy to answer. But Alan, please go ahead.
Yes, we issued revised guidance very recently. So far, with everything we've achieved in terms of workovers, I don't see any risk for us meeting the guidance range that we put out there for midway through the quarter. And obviously, we'll update at the end of the quarter. But so far, things look reasonable with the revised guidance. Thank you for that. And I will continue on here with the next step in Tartaruga with the remaining 25%. So maybe that's a Paulo question? Or shall we start with you, Alan?
I think I can answer it. The process of divestment of the -- so it's still ongoing. Because the company has any feedbacks from the process will be done to the market. So the main update, I think the divestment [ pros ] will take long. So it is a normal here, path here this timing.
So we should watch that space. Fair enough. Paulo, could you give us a feel for the current labor situation and the market equipment if we start in Brazil? Are there any bottlenecks? There's been some problem previously with handling the COVID then obviously, we see a massive price inflation in the sector.
I think it's a good question. In fact, the company has a fantastic technical capability to not only in Brazil, but also in Calgary, but also in the Oman, we were very surprised with that, positively surprised. I think here, the main bottleneck is really the company having the agility from these workovers and financial capability to this on a very quick pace. And of course, we're really negotiating with the suppliers in a very agile way, be able to be prioritized in their lines. So we do believe here Maha is now in a good position for [ COVID ] were -- for example of that, for the next year, we are not very concerned on this bottleneck of equipment. I think this could be manageable, membering always the financial capability here of the company. This is an important piece of disposal for the suppliers. They want to see companies who are capable of honoring their obligations. And in terms of labor, I think we have a fantastic team in Canada and Brazil. I think they're very, very happy and positive supplier here.
Excellent. Thank you for that. And Bernando any additional comments from your neck of the wood?
I think, Paul basically summarized very -- what the real future is. I make his words mine, too. We have an excellent team here. We're currently -- we have a current capital structure very -- we're in a good position to address most of these implementations that we need to have in our business plan. We have very low leverage. So I think, as Paulo said, we need to be -- the key thing here is to have the agility to put in practice what our team knows what to do, which is to enhance the production in an organic side and change for good opportunities in inorganic view. So basically, this.
Thank you. And I will continue here with 2 questions. And the first would be to Alan, is the plan for LAK Ranch. Will it be sold? First, let's start with production. And then will it be sold? And then so Paulo will probably have the last word here.
Yes, we had the field producing through the summer for some data-gathering reasons. The field is closed in again as with the winter aprotinin Wyoming. And in terms of divestment, it is progressing. We do have some discussions that are ongoing, and we'll update further once those become more material for it to become more material.
Excellent. Pablo, anything to add to that or...
I think exactly [Audio Gap]. And also, although we have touched upon it, there's a lot of questions coming in, which is quite natural here because the focus would be in Brazil, you ownership is Brazilian. You listed on the stock exchange. Will there be a delisting from NASDAQ? Or will it be a dual listing, NASDAQ and Brazil? And it's also an easy question to ask but perhaps not so easy to answer, particularly not at this moment. But we'll start with you, Paulo, please go ahead.
Yes. No, I think it's an excellent question. Like there is no movements today to change anything. The only thing we see is that, in fact, the same companies, the same sectors, Brazil, they negotiated at higher multiples and have more liquidity. So this is a fact that we see, but it's something to be studied. It's something that no movement is being done at the moment. But in fact, I think our IR team here has been receiving lots of Brazilian funds time to look at Maha, maybe after Starboard [ anthem ]. I think this is a good indicative that want to bring here also to Maha, new investors, but this is a path to be worked in time that definitely is the fact that the junior players in Latin America have more liquidity, you have more premiums compared to Maha.
If I can add and here, Paulo, we are all the time we're looking to the shareholders and to give them to return them the best value possible. So we are all the time analyzing. It's not because we have a fast track record in Brazil that it means that we're going to list here, which doesn't -- also doesn't need to it. We can study this. So my mandate here and Paul's mandate, Andrew, Alan, is to provide the conditions for us to return the best value possible to our shareholders. So what we can guarantee to you that we're going to analyze every day, all the possibilities might end here in the financial side and obviously addressing your question, this would be one of our studies, where to position the company so as to extract the most value of it.
Excellent. Thank you for that, gentlemen. And I think that could be the final question and the conclusion of this. It's been an honor and a pleasure, and it's been very interesting to get to know you. And we'll have the fourth quarter here on the 28th of February and then the first quarter ‘23, 15th of May. So I will suggest that people will take -- keep an eye on that. And obviously, if there is any additional questions, then as always, we refer to the IR information on Maha’s website. So with that, thank you very much, gentlemen, for participating.
Thank you very much.
Thank you.
Thank you.