HRT Participacoes Em Petroleo's CEO Discusses Q4 2012 Results - Earnings Call Transcript

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HRT Participacoes Em Petroleo SA (OTC:HRTPY) Q4 2012 Earnings Call March 5, 2013 9:00 PM ET

Executives

Marcio Rocha Mello – Chief Executive Officer

Milton Romeu Franke – Engineering, Drilling and Production Officer

Wagner Elias Peres – Chief Executive Officer, HRT Americas

Analysts

Operator

Good morning, ladies and gentlemen. Welcome to the ideal conference call for the Fourth Quarter 2012 Results of HRT Participacoes. Thank you for your standing by. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session for analysts and investors and instructions to participate will be given at that time. (Operator Instructions) This event is also being broadcasted simultaneously over the Internet and can be accessed through HRT’s Investor Relations website at www.hrt.com.br/ir by clicking on the banner webcast Q4‘12.

As a reminder, this conference is being recorded and the presentation will be available to download shortly after its closure in the HRT Investor Relation’s website. Before proceedings let me mention about forward-looking statements under, belief, and assumption of our HRT’s management and information currently available to the conference. They involve risk, uncertainties and assumptions that can’t release to future events occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future release of HRT and results to differ materially from those expressed in such forward-looking statements. The teleconference is by Mr. Marcio Rocha Mello, CEO; Carlos Tersandro, the CFO and IR officer; Milton Franke, CEO of HRT O&G; and. Wagner Peres, CEO, HRT Americas.

I’d now like to turn the conference over to Mr. Marcio Rocha Mello of HRT. Please go ahead sir.

Marcio Rocha Mello

Ladies and gentlemen, good morning everyone and thank you for joining HRT’s fourth quarter 2012 earnings conference call. It is my great pleasure that on behalf of HRT’s board of officers, I’m here to present you with the fourth quarter results, and highlight the main achievements of the company for 2012. I would like all of you to look for number three, where we have the 2012 highlights, corporate streamline base and our median base. In 2012, we had experienced two important month. The year started with the need to promote that few objectives in our company. To the review of our provoke the few objectives in our company structure. This is the division of our cash flow and the plumbing of our territory campaigns in the media.

Talking to our natural gas is $40 million wells. Conclusion of the partnership. At the beginning of the year jointly working with Petraobras and so that you can see it was year of hard work and now we are achieving that. A year that we prepare ourselves we as we prepare ourselves for 2013. And these look very possible to dedication commitment (inaudible) Europe were come to EMEA. We have increased the pressure of our drilling rig, reducing considerably through our cost, the drilling time and cost. We are experiencing 40% improvement in the average drilling time meters per day. In HRT-9 and HRT-10 in relation to the 4 previous wells, HRT 5,6, 7 and 8.

The average timing now four our wells are roughly 2000 meters, if below 6 per day. We thought that the HRT-11 the discovery is speak for themselves from the five natural gas discovered in 2012, HRT-9, HRT-10 and the HRT-5 in advance of high gas flow rates, in case all the VSP, and natural of the first, the third and along all drilling rates among all wells after drilling in Brazil. A well in HRT-9, continued to that annualized of 0.5 million 50 meters per day. From to end, straight may not dropping out this quarter and not in Brazil to all times the most picture block and drilling. Oh, sorry.

As there are a still properties disqualified, HRT to monitories the natural gas this quarter and goes to monetize the natural gas discover and those to be (inaudible), this project is progressing and we expect that campaign studying the best alternative to our (inaudible) business and the results which can differed to Q1. Our recognition of HRT’s exploration effort and commitment to the certain line, any demographics in 2012 our transitional two year period extension for the second exploration period for nine blocks in the Solimões Basin located in the central and north portion. These results inherit a significant value to HRT portfolios. The increase in the short-term of pressure continued result, allow a sufficient time to carry out a near high resolution slightly campaign with the initial results have been outstanding. And of course, headquartering allows us the verification of maximum profit for the drilling campaign to occur in 2013 and 2014.

Talking about achieving results, net highlight of the Farm-Down agreement with GALP Energia, together we restarted the Namibia exploratory campaign in the GALP Energia drop, both situated PELs 23 followed by GALP dropping at PELs 24. It’s very important to remind all three of the data key was granted and interpretation of all our concession, by growth of Namibia, in respect of the first exploration rights over the 10 blocks that we operate. Until the 2015 we have also concluded the largest 3D seismic campaign and it’s in term of interpretation ever concern to the best region and that we are able to record with additional 0.5 billion BOE to HRT’s portfolio in Namibia reported in 2011, as well as an increase of 6.6% in previously estimated volume for HRT’s exploratory license. All of these we are going to use in the best of 3D results possible and the data is really outstanding. HRT now has a volume of net risked Pmean prospective resources in Namibia and in Solimões of approximately 7.8 billion BOE, in addition to the 3C net contingent resources of 0.5 billion BOE in Solimões. We have finalized now in the report about D&M regarding the Solimões, the results will be too announced further on.

On the financial side, we are decreasing our 35% of our cash burn rate in the second half of 2012, compared to the first half of 2012. The cash burn rate in the Solimões Basin was dramatically decreased. Although our cash burn rate regarding Namibia has increased because as we’re trying to restart it’s perfectly well and the PELs 22 on the need of (inaudible) with respect to corporate governance we have consolidated our capital position, integrated transition as a whole, with the new structure to the Board of Director, including a member, now we had 11 members of which may are independent.

In addition to this strength for each committed structure which (inaudible) described line of operational education and support with the Board of Directors in the compound material market, which will set our procedures, we have signed a Term Sheet non-bind document with American company Erickson Air Crane for the transfer of (inaudible) this transaction is evolve transfer of four (inaudible) it’s anticipated the value to provide each of business with their (inaudible) we are closing to getting all the (inaudible) and very short to complete this transactions. Before we move to the detailed presentations of the office, we are going to end this conference call with that.

I would like to (inaudible) and we’re very confident toward on the right path to succeed. Farm-Out in Namibia is due in light, your Farm-Out reached time Italy in Q&A and that is after the document and finally, we’ll talk a little bit about that in this call. We are sure that we’re going to announce more also difficult in solid light facing. We are directing now our (inaudible) and in Namibia we will start what to consider well after the large exploration activity ever done at the same time in the same product line.

Now I’ll turn the call over to Mr. Milton Franke, the CEO in oil and gas to talk about the Solimões basin. Milton?

Milton Franke

Good morning, ladies and gentlemen and Marcio gave you the main headlines about Solimões and Namibia. I’ll start saying slide number four, that 2012 was really the best year in the Solimões profile for three good reasons, first due to the important gas discoveries smartly described, meaning well HRT-5, HRT-8, HRT-9, on the second and third quarters of 2012 and then HRT stands in the fourth quarter.

These four important gas produces allow HRT to sign even more important LOI with Petrobras and TNK, we have had the feasibility studies of the Jurua gas monetization.

Second again very important is that we were able to execute in one of the critical issues that Solimoes redesigned our drilling plan and we were able to conclude in 2012, three wells drilled in less than 60 days in sequence in the basins and third, we finally were able to start the mobilization of the QG-VIII rig to the Aruã cluster to build the prospects with mobilization is going on very well albeit with 14 of this well is expected for mid-March 2013.

Going to slide number six, this is the very important slide for you to see and finalize. On the left, you see outlined in orange, the gas area Brazil, our first well and add these results everybody know and like (inaudible) the area in red or purple where we plan to drill our next well, exploration well in the Solimoes. In the north, we have seen that our data process is our well HRT-11 as I just mentioned where we are mobilizing the rig to frac this well now in March, north of the south you will see three locations one is a key (inaudible) we are working on the seismic details of too much north of these three prospects, brought next trucks with Brazil and on the (inaudible) in the north is again one of the locations we had discussed into Brazil in 2013.

This new seismic we are working on is very important effort of expertise this area is very remote, we are now working with completely different process to acquire seismic in the Solimões, we drill the holes down to 15 million of depth we perforated and we are getting a much better signal from ratio with new fragments on the level of our potential to do all the four items. So we are really exciting and change in our exploration in the Solimões mines.

If we go to slide number 7, I just talked the 1-HRT-10 to give you fewer results we obtained on this well. Number one the results are significant well we separated and we captured around 2250 meters of depth and we are not able to produce almost 400.000 cubic meters a day in this past several with half inch choke and AOF, Absolute open flow with activated something like $1.6 million cubic meters per day. With again with one off the accident was we drilled in the solenoid. This well on the other hand you see that was the furthermost well it has to end so far. It is extended our frontier to the south and we plan to go even more south in the next it was we did, when we comeback to this areas in the future.

Please go to slide number eight. I’ll talk a little bit about our gas monetization plans and this is scheduled what we are doing and how we organize the project. We have project management team with key in committee with a free companies - we have a some certain group we have big responsible to evaluate of these success and the investor profile.

The excess report will come out at the beginning not much. We have an engineering group with engineering group we have all the engineering works and (inaudible) to each of technologies we have working on these entry for you got invite and safety service of the technologies with brand to applying these so remind. We have working on the cost estimate of each after technologies we are analyzing and the final report we come out in April, May this year.

We are doing in market study, we have a group working on these and group we estimate doing the economic model any more future guarantees to come up with visibility study. The final report is forecasted for July in mid 2013.

Before we go to slide nine, this is the last slide, I’ll conclude my presentation about (inaudible) emphasizing that HRT had a excellent year and they’ve ended the fourth quarter in a very positive way with its share return well and we have some excellent, in our view, outlook for 2013. The (inaudible) well has had enormous potential. We believe that we can have a lot of discovery in this well. The new prospect we are mapping with the new side mix will have a much better definition and again the new profits coming have enormous potential. The gas monetization project is working, is progressing very well and we’re starting to work on our firm down project in the $30 million which is a bit (inaudible).

Marcio Rocha Mello

Thank you, Milton. And now I would like to invite Wagner Peres, the CEO of HRT America to go with HRT’s highlights. Please Wagner.

Wagner Peres

Thank you, Marcio. Ladies and gentlemen, good morning. I would like to before starting talking about our specifics for 2012 results, I would like to take this opportunity to thank everyone of you that have been supporting us during our long journey in our preparation to develop our exploration prospects and to get ready to restart our drilling program in the medium.

This will be the largest drilling campaign as we have implemented within the same year and by the same operator in this friendly distribution. Our excellent team of professional has done everything that’s while EBIT to put organization in this privileged situation and I want to assure you that we are ready.

The Transocean Marianas the semi-submersible rig, the long lead items in our personnel are already in the country and we showed a spread in our first throughout within the next two weeks. We are all very happy and excited about our future.

Our prospects looks great and even though we recognize that being rigorous risk associated with this strong tier exploration. We really like our chance and I hope that you all shared the same excitement with us. Once more, thank you so much for your support and also join our team members for their outstanding job that they have done through the year.

Now getting me back to our fourth quarter results. I’d like to ask you to (inaudible) operation to be slide number 10. Let go to the slide number 10, in large absorption the D&M certification of HRT’s prospective resources in our Namibian asset. The report was completed in the middle of the fourth quarter and the results were excellent. Our company and our shareholders. This is said we confirm the outstanding exploration potential of our exploration license that had been identified by HRT 2013 early in the year, and provided an increase of about 500 billion barrels over the 2011 certified volumes. In addition, represents about 7.2% increase over our Namibian assets, previous application. And overall in HRT resource is about 6.6% increase.

The next slide, the number 11, we would like to give you an update of our stage of preparation, for our drilling campaign. Our bench offshore in the export, you can see on the picture on this line on top one, there is an area of photo, which was taking about one year ago, in this picture, you’ll see outline in terms of range, but represents the areas that HRT is using for starting all the materials and for syllabus that you will be needed for us to run our drilling campaign.

Because of this play and the lower portion of the slide, they show the current stage of the base, that’s what taking about a months or so ago. And I can tell you (inaudible) that is coming very well organized and its policy follow each through from a HRT guideline, which matched our (inaudible) the best practice for the known oil and gas company. It took a lot of time, a lot of team work, a lot of the coordination and time executions for us to (inaudible) HRT find a lot of contract and we have committed to lot of financial resources for us to execute our drilling campaign. If we move to slide number 12 we would like to give you an update of where we are on our Farm-Down effort, HRT completed the Farm-Out of 14% participating interest in three PELs to GALP in last December.

The Namibian government of PEL’s already approved all paperwork on HRT in GALP completed inside all latest documentation inherent to the partnership such as joint operation agreement and also Farm-Out agreement. GALP is going to participate in the drilling of three wells in the past with Wingat and Murombe and license number 23 and Moosehead and license number 24. Before go to slide number 13, we are making here quick summary of the wells, that we are going to be drilled that we are committed to drill in Namibia as up to date and we are providing in this slide a little more detail that we have discussed in the past.

Our partnership is really, really happy with the potential that we have identified in this and also with the quality of this prospects. However we want once more to highlight how important - to save that we cannot share our often, is about the large that we are exploring carbon in a country that is not in this way our prop is still face that is associated with kind of exploration for hydrocarbon. The result of three prospects is really excellent and there 150 certified by [BNM] near $5.2 billion barrels of oil equivalent. We estimate the total dry hole cost, is going to surpass $260 million in gross. And the total time, that they’ve paid for us with delegated prospects is going to be around 185 days. Well as for we are excluding 185 days the 22 that took for us to mobilize.

I would like to large number of (inaudible) in which we are providing some new featuring in addition of sales in that prospects, which are going to be first well to be build in our campaign. In that well it was expected to be and data cell by end of this week and beginning of the next if the maintenance is completed as forecast up a bit.

The total debt of about 4100 million and I would like to is a beautiful picture and it was a pre dimensional display of the color that you see in red and in terms of green are the amplitude anomaly but we (inaudible) restructure our map and it represents our interpretation of the distribution of the Sol zone that we expect to find on this prospect. The (inaudible) and TNK resource potential that is currently estimated for the Wingat prospect surpassed 1 billion and 2.1 billion barrels of oil equivalent respectively. The IFS holds the large effect of the TNK number, as about 380 square kilometers and the trapping mechanism that we are expecting to launch before the hydrocarbon is the nominated as a combination track.

Just for solicitation, the combination track has been encased with a combination of five restructured and a five (inaudible). This is a very current inspire of trapping of hydrocarbon in South Atlanta gracefully in several of Petrobras fields in Brazil. In doing this, we full take in consideration all of this, the structural component of the track, which is about 40 square kilometers. We still find itself (inaudible) gas field down to 2 points, up over 350 million barrels, just only to have an idea of the significance of this prospect. And we filed 350 million barrels plus if we miss significantly inside of the (inaudible) the commercial part of the project.

Going to the slide 15, I want to give you an update on (inaudible) and what we’re doing with our semi-submersible Mariana that is already in the Namibian office. I took possession of this rig on January 15, in the first hours of January 15, and we mobilized her so that the Namibian office within the 22 base that we’ve acquired and we’ve informed you in the past. (inaudible) the red circles that you see there displays the loss but volumes going forward in railway to Namibia. She arrived there in February 7, and she was completely prepared to come into the shallow water of the bay and right now, she is undergoing a final stage of her mandatory inspection and maintenance of the key items before she gets the move or best for us to our in-depth well location.

And just for the assurance of the performance, HRT hired a highly qualified team of professionals (inaudible) consultant to perform a very good way of inspection in all the function, relative to the equipment in spite of the Mariana. This inspection was initiated back in November, when the rig was still in operation offshore again, and because we want to see her in full function for us to see (inaudible) requirements and that inspection will continue until the day before (inaudible) of the rig after completion of her maintenance and mandatory instruction in and again.

So once we are short that is really the perfect condition to operate for us then really stock paying that daily rates and restock the mobilization of the rigs from the (inaudible) day to the license number 23 where the thin gas well will be drilled then you see small peak around the lower portion of these like we did, as we stick the room, that is a picture that we took about a two weeks ago of the Marianas inside, of the (inaudible) so and you see actually there and it is as far the very good situation for us to expect our program out there. So with this offset, we completed the earning formation that we would like to provide you on the Namibia and for this formation and I would like to pass the microphone back to our CEO Marcio Mello

Marcio Rocha Mello

Thank you. (inaudible) as I determine to job that we have seen (inaudible) and you guys could notice everything is ready and in the next two or three start what we had been prepared for the last three years. Now I would like to ask a collective service, for HRT positive of our HRT finance disclose, and (inaudible) as that point of view there most important reason in 2012 was the Permian promote transaction, involving HRT-11 (inaudible) in Q2.

The impact of such transactions can be seen in the results in our cash position and then please look for so assets in what we understand and you can explain the lot of items in our financials. Adversely if you look into business where we compare the greater with prior quarters or even prior year figures.

As we stated in last quarters this transactions along with discuss of receivables from our with Citibank our allowed results each write off all laid into our and improve our cash position in for 193 million Reais in comparison with the gas congestion from previous years.

And it is how that 36 million reais basically that is a first assortment as compared to in December 2011. Between move and transfer in June and we can see financial revenues went down do work through our ability work of our markets in the domestic market. Along with the consistent reduction in domestic interest rates that during the year end particularly in the second semester.

Financial results for the better year shows a loss of 270 million reais compared with the loss of $304 million in 2011. The both given effect of the transaction amount of HRT-11 the gain registered in 2012 was $186 million inducing (inaudible) to note that we’re comparing two year expenses in currents of 2012. Risks both in 2011 remember Solimões combined just fully start of second semester. In addition the capitalize cost of R$837 around R$44 million what kind of EBIT on the region expenses in 4Q 2012. Is this (inaudible) well production capacity. Our 36% (inaudible) that impact of R$44 million and now recurring personal expenses as a result of highly fashion and performs bonus our actually amount us 6 million that interest in second option involved in 2012.

In this slide 19, you can see that the company and at the year with the consolidate cash position of R$1.05 due to utilize of which around 80% available and the remaining guarantee of business. In front in the domestic market segregate and to liable when places abroad on the right important to check the graph with your specification by the next all of them on consider investment rate.

Slide 20, presents evaluation in cash flow will change it in the cash balance with emphasis on the recurring and non-recurring disbursements inflows from revenue, most of them financial revenue, inflow from receivables from the (inaudible) and from cash flow by the exercise of warrants and loans.

Moving to slide 21, we can see disbursement by quarters for the whole year by capital expenditure as well as by quarter. I want to draw our financial through the consistent decrease in the exploratory campaign at Solimões due to the release of two lease to the improvement in the three average time of around 40% and the reduction of headcount around 36%.

Non-recurring this divestment for fixed assets in the amount of refers to the payments to the purchase of two helicopters in the first quarter and final payment for the transition of the four Chinese rigs.

Moving to slide 22, which shows the cash burn rates will grow us h flow run rates, both grow on net concepts by projects, in which we can see that consistently consuming less cash quarter-by-quarter. At the end of year with rate of 1.5 million is conversely as a (inaudible) approach, it increases cash on rate for this statistical quarters.

And on slide 23, with respect to the 2013 CapEx, OpEx drilling our three onshore wells (inaudible) the acquisition of around 1,700 kilometer seismic and the drilling of three offshore wells we are also mentioning this level is net of inflows from KVP gain off start our remain and there is of the mines and.On the right side of the slide our forecast has been consolidated cash generated for 2013 in the case of certain mines there is a direction from 1.5 million to 0.7 million a day to in second 2013, when the HRT oil and gas we will start the cash flow for various participation that’s 45% in the consortium. In the last slide that HRT in a three year period and should be seen as a complementary of the OpEx, CapEx forecast show in the business strategy, as you know the majority of the upside provisional and there is cannot disclosed into spot. But the management it is difficult some of the in 2013.

With that I pass back to Marcio to his final remarks.

Marcio Rocha Mello

Carlos, many thanks. Ladies and gentlemen, our 2013 will be a very special year for HRT and for our shareholder, we had worked very hard prepare ourselves in all details regarding to 2013. After this wonderful result into get, and we would imply with the all requirements for paying regarding to that block. We focused 2013 for Solimões and with the results of the new seismic we are able to rigs and to what that is certainly facing all the cost with HPT 11 because there is well after we plan to inspiring around the needle of this month.

Very important to say that the nearly seismic to can not that will applying this 41 stages with increasing the noise to signal ratio for our site. And we are confident that the success of our campaign they are could expected the discover you probably that we are looking for. And we decided this year to focus in seismic. In order to prepare the 2014 campaigns rate not only the property relate to the (inaudible) would be achieved

After the reality for page 18 is focusing now into our Namibian exploration campaign. And you could see and noted by violent speech, everything is in placed. everything can be planned and worked. We’re really well. We aimed to (inaudible) by March 10, and March 15. And we are looking at a potential might figure on possible to reduce exploration risks. It drive me (inaudible) all the geological, geochemical data, have putting together, our campaign in which we feel very confident.

This will be a critical year. Our financial are under control. We lowered our cash burn rate volume tremendously. We expect to add this year with their reasonable cash mining in our account. We are looking for 2014 where we have several upsides that will allow us to confident that we have enough cash for the next two years.

Then I would like to finish this call by our view that HRT, All employees are collaborators are very confident that everything that we plan, when we did our IPO focusing with the very high potential of oil and the media, and the potential for oil cluster of the Solimões will be fulfilled. Then I would like to thank all of you for your presence. And we are going to open for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from (inaudible). Sir, you may proceed.

Unidentified Analyst

This is actually (inaudible). I have two questions for you. One is related from the oil proof, let’s talking the proof that’s presented in the slide number six. I have a couple of questions for you, I try to summarize, first of them, I want to understand if you expect to have the two weeks of this prospects or if you want to have one week compared to the oil proof that the other week deviating the natural gas equivalent. And also I would like note on these seven prospects (inaudible) how many of them like a standalone prospects and how many of them are contingent to really of order close that pretty much. On the next one on the same topic is in terms of geological horizon what are the main target here, what are the main prospect (inaudible) and as well, I mean this wells also we also target the (inaudible) layer as well are given the effect that they are located in the Eastern portion of the (inaudible) you value up both intend to grow as deepest enrollment and these are my questions on the seven month rating, on the media from the direct and people cost is pretty much are any of those three wells contingent to the successful models of the remaining 26% or not and these are my questions. Thank you very much.

Unidentified Company Representative

Okay. Thank you very much. And I pass to (inaudible) to take your questions.

Unidentified Company Representative

Thank you for questions. Number one these process are convertible wise assets, the second one we are optimistic with respect to contingent well where such data well looks another say complete success the next also quite contingent of seismic acquisition. And the other one are independents and no contingent wells. The main target are always our main reservoirs in the Solimões, where in terms of formation, that good work in our method to develop well accept where we do rig is a bit produce.

But in market that we growing in if second target mainly the key have a very fixed sections of rocks. And part of that could be good reservoirs and wells like, we still don’t have so many wells reopened within other but again you may have Africa the middle section that could be of interest. I’ll pass to (inaudible) to give you valuable informations about the wells. The question that you have is the that we’re going to drill if we are depended on a guessing additional partners for the project the answer is no, everything you set for us with respect that driven campaign as I mentioned to you the regional head in the media, and we will do both pretty well with the partnership results, we are still in the search for the partners, we still have a few business ongoing on that, and as long as, we have not reached the objective in Mexican well, large than we are still open to discuss the official partnership with competitor, times we are driven and we are proceeding ahead with the partnership that we have.

Unidentified Company Representative

Okay, thank you very much if you allow difficult we expect to have one on your strategy for weak management. Are you going to have one rig audio project and other rig that we made the metro gas discovery or you are going to have both rigs.

Unidentified Company Representative

One rig during the year we’re second rig to some of the new process

Unidentified Analyst

Thank you very much.

Operator

Our next question comes from (inaudible) you may proceed.

Unidentified Analyst

Hi, guys thank you for color, just a follow on the (inaudible) even after the completion of trialing to wind gas (inaudible) I am not firmed out quickly please. Thank you

Unidentified Company Representative

Thank you very much for your question. The form out in one of our medium asset is still going on. As most of you it’s no discussions about GUA, discussion about SOA and big time we’ve number of (inaudible) still talking and we hope very soon to compute some of this talking and then we can inform (inaudible) with the results through the publically. But I still for several companies and we’re expecting that we’ll bring I’m not (inaudible) to be very important to say that of course the results of being that will change a lot the perceptions that we’ve doubt, but it’s important to say, we’ll talk about this several times that all the three prospect being that (inaudible) independence prospect they’re (inaudible) independence (inaudible) independent to reach (inaudible) not dependent the success of being is not that I’m relying to do success of (inaudible) of core to be wonderful or everything but not, we’re independent prospects and this is why will choose to build independent large profits to be dropped.

Unidentified Analyst

Thank you very much.

Operator

Our next question comes from (inaudible). You may proceed.

Unidentified Analyst

Hi good morning everyone. I also have two questions beginning on the internal side. First, you guys can breakdown the 360 million this year. Second, what is the cash position you expect for year-end 2013 roughly $600 million, just to confirm that.

Unidentified Company Representative

I didn’t understand your last question, can you repeat please?

Unidentified Analyst

Yeah sure. I would like to confirm the cash position you guys expect for year-end ’13.

Unidentified Company Representative

Okay I’ll start with that we can if you look all that we’re doing and so we can give them estimate of a worst case, on target and the best case but we can say that the worst case is relevant to an throughout the upside (inaudible). We’ll be around $400 and $460 million And the other point that you ask is about the CapEx correct?.

Unidentified Analyst

Yes that’s, the breakdown between CapEx and OpEx for Solimoes.

Unidentified Company Representative

The full investments. the full cost of Solimoes in 2013 is $265 million, this is 100% base to HRT, its something like 150, and we want at this time separate between CapEx and OpEx because with other thing is exploration, one normally, we really make clear the OpEx when we come to reduction costs (inaudible) adjusted to conclude your questions. I just want to say that for the end of the year, HRT are very confident with some of the investments that are doing now. And we hope that we can show to our shareholder a much better cash result for the end of 2015. Is this investments point out around we hope to get done, you will see that number starting of 2013.

Unidentified Analyst

Okay, thanks. And follow-up me, third question up to seal of the potential figure or (inaudible). What did you incremental with these expanses? It is a relevant?

Unidentified Company Representative

Not relevant, it’s (inaudible).

Unidentified Analyst

No, no we didn’t expect any increase in the (inaudible) on the other hand, we expect introduction because of the mark efficient control of operation for [OpEx].

Unidentified Company Representative

Very important to say (inaudible) at that time (inaudible) one of the big success, actually recalls we needs to put at these component we manage to operate for almost two year (inaudible) partnership Ericsson which was finalizing all the (inaudible) will allow us to reduce very much on the operation cost, HRT with very, very concentrating our focus and now and the excellence of actually maintain that folks also one will allow us to increase, secure our operation, and on concept, okay.

Unidentified Analyst

Okay, Thanks guys.

Operator

Our next question comes from (inaudible)

Unidentified Analyst

Hi good morning everyone. I have two questions. One cut off the after which you were decided to stop the process and then consider anymore? Or would you like to get open and so you keep drilling the wells? And the second question farm out, the farm out in Solimões, what’s today would you like to keep operator shift or not? Do you think that with the interest of that and just add colors on how you’re thinking about it? Thanks very much.

Unidentified Company Representative

(Inaudible) Yes, yes good morning. Your question of (inaudible) the search for our partner in the media, the answer is no. Today they limit for us is, until we hit the main objectives of the well and in our industry it’s a common practice, when you are searching for partner, as long as your wells does not have a foreclosures results in terms of testing any objectives.

The possibility for partnering to somebody is always open. In my previous current year, we had seen, I have seen [paints] at the opening post. We think in the last week, after bring out all the four wells is the main objective.

So we in HRT, as you know, we are in the search for another partner. We keep best as (inaudible) we will like to close another deal soon, but it will be open and to the moment that we last entering of the outcome of the results of the well into the circle.

Unidentified Analyst

We are talking about the Solimões fleet.

Marcio Rocha Mello

All right [Andrea] the turnout in the Solimões is having in 148, 172 in the Aruã cluster, and we are already analyzing that they are still not concerned to turndown some of our shares and some other area of the basin. As you know, we will have already intense seismic acquisition plants and this is something that we may look for partnership. We are having with our Brazil plant in the gas monetization area, and again on the southern block where Brazil take [defense] and we will be looking in the future, but this is still not decided for new partners to help us in the investments we have to make in the Solimões.

Operator

Our next question comes from (inaudible). Please go ahead sir

Unidentified Analyst

Hi, guys. Thanks for the call just three quick questions first follow just clean out question on Solimões. Can you give us a brief update on how the licenses are on the expiration and then couple due to expire in March and you try to tend those licenses. The second question was just on your budget for 2013, we saw that G&A was around $216 million. So I just wanted for 2012 what is your estimates look for 2013 during the few non-recurring in 2012, thanks.

Unidentified Company Representative

Regarding the question, the license last September we start to process input of expansion initial expansion of the block in the South and the East part. We have been talking about perforating deep about two weeks ago, we granted an expansion to ask for 30 days marked and while the board, we hold to where positive still in March, then HRT don’t see a problem regarding to that and this will give us a lot of times (inaudible) almost 5,000 kilometer outside and should be in that block and we are very confident, that this will come positive to us. Regarding the CapEx and OpEx for G&A, I am not sure if I understood in Brazil you are asking for the 2013 CapEx, OpEx will be brought by projects and we have a 44 million for the corporate, we thus have the disclosure of G&A by project

Unidentified Analyst

No not by project, just for G&A in general because is that comprise within the 44 million and if sure I mean it ran significantly higher this year, so I just wanted to understand, how you guys want to curve that keep that within the 44 million. So that question was the G&A was within those 44 million you are putting on your budget, 44 million so how you get there

Unidentified Company Representative

Okay, still now its reais this is not a dollar Fernando if you see that.

Unidentified Analyst

Sorry, sorry my mistake.

Unidentified Company Representative

That reais okay, very important to say also Fernando that we are today that (inaudible) and with 554 will we need the company, and isn’t important that we reduced the number to be the low 260 people these are being good results.

Unidentified Analyst

Okay, thank you.

Operator

Our next question comes from (inaudible) with Merrill Lynch. Please go ahead.

Unidentified Analyst

Okay, good afternoon just a one question in terms of timing of results, if we have to take 60 days that would suggest if you start within the next several weeks, sometimes it obviously May or June you would have the results I was just wondering you would thinking that was probably when results would be available and then how quickly can you move the rig and I am just wondering there is a risk 280 days is going to be a little bit, which you start if there are some delays so I was wondering what exactly, what the expected return date would be for the rig.

Unidentified Company Representative

It’s a important question, everything has been under control, everything has been on time we have our target, we expect those wells will start even same time, you know that when you do our short, even if you run with all the controls possible you always have a contingent (inaudible) to conclude that (inaudible) and ever ready we are sure that we will not expected and any kind of delayed and we don’t see any problem to fulfill our problem in the media related time that we have. Okay.

Unidentified Analyst

Okay, in terms of results when do you think you might have results from the where would likely be so the end of May or June.

Unidentified Company Representative

Now, I am certainly this is difficult to have an idea about but the results all will be announced as early completely the amount and for that then lets say next week March down then you can average 60 basis that.

Unidentified Analyst

Okay thank you very much.

Operator

Our next question comes from Mr. (inaudible). Please go ahead sir.

Unidentified Analyst

Hi, good afternoon I have two questions the first with regards to the drillings in that this time you have good quality seismic this and that allow you to be sure about what you are done expect this ratings and the other one is with regards to the CapEx plan you see that in the media you done 320 million reais in 2013, but the three first reais through cost $300 million. So, my question is do you except to drill all the cash of the three wells in the mid of this year that is it for the moment,

Unidentified Company Representative

Back to question about (inaudible) have for now data control for seismic quality and eventful results of the well. We have nice days in the modelling and when they found that kind of really expect in this area. But there is always an exploration rigs in these wells not which change as enable around 25% and such as been well. So we expect the nine wells, but there is exploration rig of course to the event.

Unidentified Analyst

(inaudible)

Unidentified Company Representative

Your question is quite interesting first, we are not going to stop the rigs. As far as we have really took for objective there and ends up rather CapEx for the wells. And what we had in our object to be. It’s very important that you talk with a lot your really about, we are not finishing now our projects for us we stand there enough its $116 million for us to drill (inaudible). Okay, remember we have out there

Unidentified Analyst

Yeah, but all 14% fixed

Unidentified Company Representative

Well, but what are you realize, the important 14%, but we are not saying 14%

Unidentified Analyst

Okay.

Unidentified Company Representative

Okay

Unidentified Analyst

Do you have the breakdown between yourselves and got

Unidentified Company Representative

What’s important, we have an agreement, we can not talk about numbers, what would be our responsible talk about. If you find the numbers out there, you can come up with the conclusion what with their contributions on the beginning process.

Unidentified Analyst

All right, thank you.

Unidentified Company Representative

Thank you.

Operator

Our next question comes from (inaudible). Please go ahead.

Unidentified Analyst

For the second call up on the Namibia timing question, someone was taking down as mentioned that it will take 90 basis points. So I am wondering if there was any discretionary in the discretion between the partners totally 60 and those 90 basis this is the first question. Second question is just double tack the amount of market for dry holes in Namibia if they got that right. And how the company comes up for that number, thank you very much

Unidentified Company Representative

It is important that we presently the characters somebody else to making statements about modeling cost. It’s very important to making full year debt well its have not been with the press release from the earnings that we have mentioned about drill. And just internally operator, we got to clear the drilling program and we have engaged in a very detailed design for the well. We also include in these wells are contingent for non-protective times definitely when reached reason. So that is a standard and the industry. we showed today in our in our slide.

There’s an information that the Wingat well will take 66 days in between the spread is starting as managed starting the rig, the drill bits to the right, and when we require our (inaudible) in that wells that was the 66 days time for us to drill the well, in case of no success, if we find hydrocarbon as we expect there with main state on location, one week more or 10 days more sometime in that range for us to collect the proper information about the fruits that we have encountered. So if you look at the 56 days that’s the dry hole case, it will find hydrocarbons, it will have 10 mortgages there, if we get around 66 days that was our forecast at the moment. If these numbers are associated to a normal and smooth operations just taking into consideration, 15% of number that is the value of HRT includes in each wells.

Unidentified Analyst

Perfect. Yeah that’s very good. Thanks a lot. And then on the dry hole costs, just to double check that figure, if I got it right?

Unidentified Company Representative

Yes, on the dry hole costs, at the same thing, the same slides that we provide you there. We are estimating the dry hole costs based on the time of operation that you have therefore 56 days or around 60 days of drilling time. You’re going to get staying about $78 million to accomplish that for drilling.

Unidentified Analyst

So essentially it just the day rate of the rig, is that correct?

Unidentified Company Representative

What, can you say again?

Unidentified Analyst

That’s just the day rate of operating the rig.

Unidentified Company Representative

Well, it’s not only rigs. If you get the number of rigs or you have to get (inaudible) the price, the amount of money for us to drill it, and the number of days, you are going to find there roughly 12 days spread rate, all other costs associated with the rate. So far, on the market campaign five everything else. So that needs corporate costs that is publicly spread with driven. So roughly, good everything this.

Unidentified Analyst

Okay, perfect. Thanks very much.

Unidentified Company Representative

Thank you.

Operator

Our next question comes from (inaudible). Your may proceed sir.

Unidentified Analyst

I guys two quick question for you the first one I just want time to spend from slowed just backing was on slowed number 23, for and not really has to do with the cash plan rate from the mid year. Looking at slide 22, and slide 23 were actually see that the cash burn rate that you guys are looking at the same in the fourth quarter and then the first quarter. I just wanted to understand whether not that is consistent given that effectively have the possibility over come of course the next week so that’s question the second question that I just want to understand how many thinking about the bit around for Brazil may in cash already certified for that operation is it something that’s you guys are going to early condition how you thinking about I know you probably I don’t give, but remind that really today.

Unidentified Company Representative

Thank you very much we can see always continue its special you report the last and we are very glad that to you put the so on, but the answer to you that regarding to be around, as you know we still have very good about the hydrocarbon potential for the Brazilian margin operations.

Our group are studying for more than 8 months we have we have been looking several areas or blocks that we think about is potential and we are compelling down (inaudible) we don’t want to comprise and today mainly of our budget, that we have kept for Namibia and Solimões for their revenue, we have talk with a lot of other companies and trying to use and leverage our knowledge in our way that partners will carry HRT in campaign, and also all other operation that we are doing in we are successful. good participate and actively in revenue regarding the cash burn rate, HRT have done a tremendous effort and that we know, that we have been - active regarding to us if you are seeing I have to put my operational managers tolerance in cash we drop the cash burn rate we then further, I would see that we have increase in Namibian operations, because Namibian our great survey, great campaign for 2013 and I will pass it to (inaudible) to give some detail.

Unidentified Company Representative

Thanks. I think that it’s quite normal that control (inaudible) that we will hear little bit of cash burn rate for that project. It’s important to move that this for cash does not, cash burn rate that we would not consider any financial revenues. And it’s what consider any that we representing the number of slides on Q4. So this is what I have second quarter will be the most expensive to us and rework was there to prior quarter. So you’re right, it’s the only settlement only in the, to similar very probably from 2.8 in the first quarter to 1.5 in last quarter. And there is our presence you have (inaudible)

Unidentified Analyst

Okay. Just that what I understand, the drop the way I read it is you guys are cutting costs and you’re going to start sharing costs throughout PMK, so that looks very attach rate. What I was just wondering about in the first quarter of 2013 you guys probably didn’t budget than any of the well drilling cost. Is that a fair assessment? Or is this just a component of let’s (inaudible) payment that actually reduces at the impact on the first quarter.

Unidentified Company Representative

Yeah, in the first quarter we’ve still have support in a 100% of Solimões, as you know you have (inaudible) million substantially the Brazil and we instruct (inaudible) so first quarter, second quarter we are going through cash flow to be cash equivalent (inaudible) for their participation. That’s why we have at this stage decline in [1.4 to 1.7]. These are correspond of the cash flow of the ANP Brazil.

If you have a look, in terms of we are declining 3.6 and we have learned up to 3.6 and even in the second quarter of 2013 that was the worst case scenario we are declining from 3.6 to 2.9 that is the dividend with the full comparing in Namibia. We are still having (inaudible) so this is a very, very positive in a console of experiences.

Unidentified Analyst

(Inaudible) as you know, we put of these truckage and we think accommodate very well because we will reduce Solimões. We put our interest in the new side with exchanging (inaudible) there. And we accommodate for you have an idea behalf of Solimões, we are definitely Solimões and increase (inaudible) part of Namibia in which the differential of gas frac is unbelievable. You will see What we are looking from one well at the result one well can be bring. This is the year, I think our (inaudible) but ultimately, the difference between the Namibian upside and the pretty much upside are incredible and this is quite prepare ourselves so hard for 2013

Unidentified Analyst

Okay. Well looking let’s get a good well

Unidentified Company Representative

Thank you my friend.

Operator

This concludes today’s question-and-answer session. I would like to invite (inaudible) with closing remarks. Please go ahead sir.

Unidentified Company Representative

Okay. Ladies and gentlemen I would like to thank all of you for participating in this call. We’d like to thank all of you for the support that you guys keep watching 2012. And we have been working very hard the most important point that what we pursue that for 2013 in such a way. That we are confident that our campaign in mid earnings for our shareholders and you can really some in that performance our expectations and have very good day and thank you very much for all of you

Operator

That concludes the conference for today. Thank you for your participation and have a good day.

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