Petroreconcavo (RECV3) Q2 2024 earnings summary

Executive summary

• Net revenue reached R$826 million in 2Q24, up 11% from 1Q24, with EBITDA of R$447 million, a 27% increase, and net profit of R$136 million, up 24% sequentially.

• Record results were driven by higher commodity prices, favorable exchange rates, cost reductions, and operational improvements.

• Free cash flow reached R$392 million in 2Q24, up 69% from 1Q24, supporting significant shareholder returns through R$410 million in interest on equity and R$17 million in dividends.

• Operational highlights include the successful sidetrack of well TA-5 (now TA-11/TIE-11), commissioning of the PR-14 rig, and expansion of drilling capacity.

• Production grew 5% between March and June, with stable average output at 26.3 kboe/day and ongoing resilience projects.

Financial highlights

• Net revenue rose 11% quarter-over-quarter and 26% year-over-year; 1H24 net revenue up 14% from 1H23.

• EBITDA margin improved to 54.1% in 2Q24 from 47.4% in 1Q24; adjusted EBITDA margin reached 55.9%.

• Lifting costs reduced to US$12.62/boe, down 5% from 1Q24; SG&A, royalties, and midstream costs also declined.

• Free cash flow of R$392 million in 2Q24, up 69% from 1Q24.

• Net profit increased 24% sequentially but fell 23% year-over-year; 1H24 net profit down 35% from 1H23.

Outlook and guidance

• Production is expected to increase in the second semester, with operational costs per barrel targeted to decline further as scale efficiencies are realized.

• Focus on reserve development, ongoing workover campaigns, and inventory optimization.

• New drilling rig PR-14 expands technical capacity, supporting future reserve development.

• Expansion of processing capacity and gas monetization in Bahia, with cost reduction initiatives in midstream operations.

• Free cash flow generation is expected to continue, supporting future capital allocation and potential dividend payments.