Earnings Release of 3rd Quarter 2019


Enauta’s third quarter results reflect the transformation the company has been undergoing over the past few quarters, since oil production began at the Atlanta Field in May 2018. We doubled our oil production in just over a year, and are now preparing to achieve even greater production after implementing the Full Development System in the Field. The Consortium has already approved the review process for chartering an FPSO with capacity
of 50 to 70,000 barrels of oil.


This transformation is in line with the major developments seen in the Brazilian oil and gas industry, both in downstream as well as midstream and upstream. Many changes were recently implemented in the country, including a reduction in local content requirements, which were very positive for the industry as a whole. New auctions took place with record registrations, new rules and attracting new global players, bringing investments and jobs to Brazil. This happened in parallel with declining production in Saudi Arabia, Iran and Venezuela, countries that last year reduced the volumes of heavy oil available in the market.


In this context, we are encouraged by the prospects of our exploration portfolio, particularly in the Sergipe-Alagoas Basin. This quarter we expanded our presence in this Basin by acquiring working interests in three new blocks, together with our Consortium partners ExxonMobil and Murphy Oil, in ANP’s Permanent Offer.


With regard to our operating assets, when we commenced production at the Atlanta Field, the discount applied to Brent, including transportation, logistics and oil quality costs, was US$18 to US$20 per barrel. In the third quarter, it stood between US$10 and US$12 and remains on a downward trend, which is excellent news for the Company.


From a financial standpoint, Atlanta already accounts for 66% of our revenue in the quarter, and growth in oil production has more than offset the lower gas production in Manati Field. Gas demand in the northeast region of the country recovered in the quarter, mainly due to the resumption of operation at the thermal power plants. Note that this market is also undergoing significant changes with the launch of the New Gas Market, bringing new players, especially in the midstream, and making the market more competitive and efficient.


The increase in revenue in both the annual and quarterly comparisons mainly reflect the combination of an increase in production and a reduction in the Atlanta oil discount. It also positively impacted our profitability – EBITDAX remained stable between 9M18 and 9M19, while 2018 EBITDAX benefited from the sale of our interest in Block BM-S-8. Net revenue in 9M19 stood at R$707 million, of which R$316 million was recorded in the third quarter of 2019, with EBITDAX reaching R$417 million. When comparing 3Q19 to 3Q18, EBITDAX margin expanded 6.3 p.p. to 59.6%.


Enauta is well positioned to continue growing in this scenario. We are experts in Brazil and have a successful track record in establishing business partnerships with global companies entering the country.


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