Efficiency: The name of the game for independent producers

Monday, November 14, 2016

PetroRio, formely HRT, is an independent oil producer based in Rio de Janeiro, best known for operating the Polvo field in Brazil's Campos basin. In this interview, the company's director of corporate projects, Nelson Tanure, explained to BNamericas how, in less than two years, PetroRio was able to reduce the field's operating costs from US$240mn to US$90mn a year.

On possible acquisitions, Tanure said "the company is definitely interested in some of [federal oil giant Petrobras'] assets.... We do have an appetite for more."

The Polvo field produces around 9,000b/d.​

BNamericas: In its early years, HRT [which later became PetroRio] operated exploratory fields and new discoveries. After changing to PetroRio, the company's profile has shifted and it's now focused on production assets. How does the company stand today in Brazil?

Tanure: When the company first started as PetroRio, in 2015, the portfolio was composed of some exploratory assets and just one production field. So we decided that it was the right time to leave the exploratory market, which usually requires a large amount of money for a future return.

Therefore, PetroRio returned the Namíbia field to the Brazilian government and also sold the Solimões field to Russian company Rosneft. After that, we bought 40% of the Polvo field, as the other 60% was already owned by PetroRio. In addition to giving the company the full autonomy that it wanted in a production field, the transaction was also interesting for Maersk, the field's seller, which already had plans to leave Brazil's oil and gas market.

BNamericas: Considering PetroRio's plan for the Polvo field, which was already in production at the time of the sale, what has changed in terms of operations on site?

Tanure: Our main goal was to increase speed and efficiency. In 2014, when the Polvo field was still operated by BP, the operation cost about US$240mn. Last year, we reduced this figure to something between US$100mn and US$110mn. Now, in 2016, it may be even lower than that. Our expectation is to spend no more than US$90mn by the end of this year. We've done that by cutting costs, improving the field's efficiency, but maintaining operational safety.

Other production companies, especially independent ones, are not in the same position. Why? Because PetroRio is completely focused on management, both operational and financial, which leads to balance. Today, PetroRio has a solid cash position of more than 500mn reais [US$15.5mn], and it doesn't have any debt.

BNamericas: Regarding the company's strategy for the future, does the plan include the acquisition of new production areas?

Tanure: PetroRio's strategy is to grow mainly by acquisitions. We also intend to invest more in the development of Polvo. Our cash position is strong enough for that. Many of the oil companies, including PetroRio, have been struggling to maintain results in such a difficult period. Because of that, some of these companies have chosen to sell a part of their assets, including Petrobras. We've taken part in many of these divestment processes, some of them were Petrobras', but some were conducted by other private companies in and outside Brazil. The Gulf of Mexico and Latin America as a whole have some good opportunities, but our main goal is buying assets in Brazil, on account of synergies and efficiency.

BNamericas: What about the oil fields that Petrobras is selling? Is the company interested in any?

Tanure: Yes. Petrobras has a divestment project, called Ártico, that includes some interesting areas. PetroRio was invited to attend this process. Now, we're studying the areas. The company is definitely interested in some of these assets, but now we're evaluating possibilities. We do have an appetite for more.

BNamericas: Does PetroRio consider participating in Brazil's next federal auction for oil exploration and production assets, which will likely happen in 2017?

Tanure: I don't think so. The auction is not a likely possibility for us, because usually they're focused on exploration of new areas and our focus is on production. Perhaps, if there is something very specific... But our attention will always be turned to oil production.

About Nelson Tanure

Nelson de Queiroz Sequeiros​ Tanure has a degree in economics from IBMEC/Boston College.