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Executives

Luiz Carneiro - CEO

Roberto Monteiro - CFO & IR Officer

Analysts

Bruno Varella - Bradesco BBI

Bruno Montanari - Morgan Stanley

Luiz Carvalho - HSBC

Andreas Bruderer - Credit Suisse

Pedro Medeiros - Citigroup

David Epstein - CRT Capital

OGX Petróleo E Adr (OTCPK:OGXPY) Q1 2013 Earnings Call May 10, 2013 12:00 PM ET

Operator

Good morning ladies and gentlemen and welcome to the Conference Call of OGX 2013 First Quarter Results. Thank you for standing by. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions to participate will be given at that time. (Operator Instructions) As a reminder this conference is being recorded and the presenters should follow the results presentation uploaded on the OGX Investor Relations website.

I would now like to turn the conference over to Mr. Luiz Carneiro. Please go ahead sir.

Luiz Carneiro

Hello everyone and thank you for joining us for our first quarter 2013 earnings conference call. I am Luiz Carneiro, CEO of OGX and joining me on today’s are Roberto Monteiro, our CFO and IR Officer; Paulo de Tarso, Chief Exploration Officer; José Faveret, Legal Concern and Eduardo Lucchesi, Investor Relations Manger.

I would like to make a few opening remarks, before I handing over to Roberto. We will run you through our presentation. I will begin with slide 3, with the key highlights of our performance. The first quarter was an eventful period for OGX marked by some important achievements and some going challenges, with net revenues of R$289 million and positive EBITDA for the first time, OGX delivered a sequential improvement in its financial performance.

From a production point of view, OGX also improved its performance with the beginning of commercial gas production at the Gavião Real Field in the Parnaíba Basin, where we reached a production of 4 million cubic meters per day equivalent to 25,000 barrels of oil equivalent per day and this production volume at the Tubarão Azul Field in Campos Basin risen by 5.1% over the previous quarter.

At the same time, we considered to make important advances in our exploration campaign. Four fields were declared commercial, Tubarão Tigre, Tubarão Gato, and Tubarão Areia in the Campos Basin and Gavião Branco in Parnaíba Basin. We have also submitted new discoveries evaluation plans for other accumulations in the Campos and Santos Basin’s and maybe further oil and gas coverage in the Campos and Parnaíba Basin’s.

Despite these positive achievements, the first quarter of 2013 was a challenging one for OGX as operational uses led to production stoppage at three wells in Tubarão Azul Field. We continue to analyze the reservoir behavior as well as the impact on total estimated recoverable value.

Finally, let me highlight a very important announcement this week of a strategic partnership with Petronas in Malaysia, oil major to jointly exploit two blocks in the Campos Basin which included Tubarão Martelo Field and the Peró and Ingá accumulations. Petronas will acquire 40% stake in two blocks, BM-C-39 and BM-C-40, for a total amount US$850 million. The partnership with Petronas demonstrates the quality and attractiveness of our asset segment, our cash flow and secures additional funding to continue developing of our portfolio and pursuing new growth opportunities. Together with Petronas, OGX will move forward with development of the Tubarão Martelo Field as well as the accumulations of their oil and gas.

Let's now look in greater detail at the first quarter financial and operational highlights. And with that I will now hand over to Roberto.

Roberto Monteiro

Thank you, Carneiro. Good morning to all of you. I would like to start the presentation here, start my part with the presentation on slide number five. I will go over the financial highlights, then production and finally exploration and upcoming events.

So if we start on slide number five, three things that we would like to highlight here in this tables with the numbers. First of all, of course its the positive EBITDA that we’ve reached in the first quarter of 2013 for the first time have posted a positive EBITDA of R$74 million, behind this EBITDA there was a net revenue of R$289 million, both in the first quarter due to cargo number five cargo number six that were delivered.

In the quarter, we have sold 1.2 million barrels and then the net profit was heavily impacted by dry well and area relinquishment as all of you remember, last results call we said and we mentioned that we were relinquishing areas in Campos and areas in Santos and impact of those relinquishments were as there is impact in our next profit. An important thing to understand in this impact is that it’s the non-cash impact; it’s a write off in one hand and in the other hand this write of the end will serve us well as tax use for the transaction that we have just announced. So we don't foresee any income taxes on the transaction, on the Petronas transaction at this point mainly due to this area relinquishment.

Now I'll move on to slide number six and I would like to focus here on the right hand side of the slide, I think it’s an interesting chart, because it shows our continued cash discipline, our management is focusing on every single opportunity to reduce the cash burning of the company and cash spending of the company; as we can see as we can appreciate here there is already, there is a one step down if you would in the first quarter 2013, as you can see we have spent 47% less than the previous quarter. And I would attribute that to optimization in our structure regarding mainly SG&A and seismic and of course the greater impact, the reduction comes from the reduction of our rig fleet. As you all know, we are adjusting our rig fleet to our new exploration campaign and to our development plan.

Now I would like to move on to page number 7. I will go over some highlights of the 1Q production. First of all I will talk about Campos Basin. As you know, we showed average daily production of 10.9 thousand barrels per day of oil equivalent and we have delivered two cargos and have delivered 1.2 million barrels of oil in two different cargoes. Our average daily cost for the OSX-1 operation remained stable, actually it decreased somewhat but I would say it's a stable outlook in $531,000 per day. And then in March and April, as you all aware as well, our production was heavily affected by operational issues. We had stoppages in all three wells. I will go over that with more details in a little bit.

In the Parnaiba Basin, we have been ramping up our production and we're very positive in that basin. Results are very good, completely in line with our expectation. We see the government dispatching a lot thermal power plants in Brazil throughout the rest of the year, and we have reached production of 12.1 thousand barrels of equivalent volume per day in April 2013 after synchronizing the fourth turbine. The figure that I gave 12.1 thousand barrels per day is the net portion of OGX, if we take in to consideration, the total production of Parnaíba basin is around 25,000 barrels of equivalent oil per day. So we are satisfied with the ramp-up of the production, and as I mentioned to you as of today we are producing this, we are in the range of 25,000 barrels per day total production in the field.

Now I will move on to page number eight. Over the Tubarão Azul production highlights. As we can see here March and April two months with impacts on oil production. On the right hand side we can see here in well 68 we had 15 day stoppage during March. This well demands a work-over, we have already started the work-over in mid April and the conclusion of this work over should happen in the coming weeks. So by mid May we should OGX-86 producing again. The TBAZ-1 that was third well that was connected to the platform had 11 days stoppage during the month of March, again due to unstable electrical generation and repairs of this well will start right after the repair of the well 68. The well 68 was second well to be connected and then well 26 that was the first well connected to the platform. We had two day stoppage during the month of March and during the month of April it has been producing on and off, and so we had some stoppage during April as well. That’s exactly what brought us this 1.8 thousand barrels average production, production as of today is been monitored. As of today the well is producing and it’s producing of volumes slightly higher than what it produced on average last month.

If we go over to next page, I would like to point some highlights on Tubarao Martelo field. This is actually the Tubarao Martelo field is included in the two blocks where we have just finalized the [farm-out] transaction with Petronas. We have concluded the drilling and the lower completion of six horizontal wells, that is also schedule to arrive within the third quarter of 2013 and our first volume is schedule for year end 2013. So everything here is on track no deviations whatsoever, and I would like to go over those strategic partnerships with Petronas. I think it was a very interesting transaction we have I think besides the quality of our assets and the quality of our people that was definitely underscored by, underpinned by this transaction. There is one more issue that I believe is very relevant which is our only monetization strategy that we have been talking a lot.

I think this proves the theory and this proves that OGX is also capable of early monetization of the assets as any other E&P company is capable of. So this really is a very interesting transaction from that point of view as well and besides the transaction itself its very important to remember that Petronas has also an option to acquire a 5% of OGX capital at a price of 630 reais per share and they have this option, they have this right to acquire directly from Mr. Eike Batista our controlling shareholders. So this does not imply any dilution or issuance of new shares or again dilution to the minority shareholders.

Moving on to page number 10, we have here the operational highlights of the GaviãoReal field. As you can appreciate here in the left hand side chart, we started January with this production is all net OGX. We have started the month of January with 3.2 thousand barrels a day of oil equivalent and in April we are producing 12.1 thousand barrels per day after the synchronization of the first turbine there and as of today we have an EBITDA margin on this project of 73%. And even with this very high EBITDA margin we still see space, we still see room for growth and profitability has increased production in the future.

Moving on to page 11, we have some highlights on the exploration contain that we are conducting here in OGX. In the Campos Basin I think we have few important things here to mention at this time. The declaration of commerciality of TubaraoTigre, Gato and Areia. These are the fields where we will have OSX-2 operating at and another important thing here is that we decided not to continue the exploration of Cozumel, Cancun, Tamboraand and Tupungato area. We decided that these are not going to be economically viable areas. In the Parnaiba we have declared commerciality of Bom Jesus accumulation accumulation. It’s named now is Gaviao Branco field, and we are very positive with three new discoveries in the basin, one of them is called FazendaChicote, the other one is called Fazenda Santa Isabel and the last one is called São Raimundo. So, three accumulations. The first one, the Fazenda Chicote is a very interesting well, very interesting accumulation as far as we know today, 66 meters of net play and 3.2 million cubic meters of gas per day Absolute Open Flow.

Besides that, we've started the drilling on Espírito Santo at the Caju prospect together with PERN-3 and that's the Block BM-ES-39. The Santos Basin in a few days more will start a test in the Curitiba accumulation according to our development plan that was submitted to ANP.

With that, turn to page 13, the upcoming events. If we list our events by basin, in the Campos Basin, our priority here is to continue the development of Tubarão Martelo Field on a timely fashion and also get prepared for the arrival of OSX-2. So finalize the reservoir engineering for OSX-2 and also finalize the reservoir studies for OSX-1 that were demanded by these less news on the production site.

In the Parnaíba Basin, again it's continued exploration with mainly wildcat wells. As you see we were very successful in the Parnaíba Basin this last quarter.

In Santos Basin, all we are going to do is the test on Curitiba, on Curitiba accumulation and in Espírito Santo, we have those well at the Caju prospect, we should get results for this well, within the next week.

So after the results of this well, we are going to see the next step in the basin. Actually we have -- we are going to drill the prospect of Caju and then there is another prospect after the second prospect that will be drilled for sure, we will see what's going to be our plan for Espírito Santo Basin.

If we look at the company consolidated, we have few events, few important events that will take place in the coming months as well. First of all, we are updating our resource evaluation report. Second, we are getting prepared for the arrival of both OSX-2 and OSX-3, they will arrive in the third quarter of 2013 and the production is expected for year-end.

And finally, we’re going to start -- actually (inaudible) we will start drilling of the first development well in the Atlanta Field located in the BS-4 Block in the Campos Basin, that’s going to happen in the second semester of 2013, okay.

With that, I would like to open for questions both myself, Paulo de Tarso, our Chief Exploration Officer and Mr. Carneiro are here to entertain any potential questions. Thank you very much.

Question-and-Answer Session

Operator

(Operator Instructions) And our first question comes from Mr. Bruno Varella with Bradesco BBI.

Bruno Varella - Bradesco BBI

I have two questions. The first one, can you give additional color on the 400 million payments to suppliers that was mentioned that affect the cash position? And second one is related to the first well in Tubarão Azul, what is the status of the well to indeed be connected or is it still under study?

Roberto Monteiro

Regarding the payments to suppliers, what happened here is we had two events that took place exactly at the end of March, one of them was as you maybe -- as you are aware being terminating the contracts of the rigs. So we had all this -- we have to reduce the suppliers account because we now have less rigs, so we have less things to play in a certain rig, and that's why you see a big reduction in suppliers.

And then there was another one that typical -- it’s a very technical issue, but typically we do payments up to the end of the month, but we have -- in April 1 we had an implementation of the SAP system in the company and in order to do an implementation in a smooth way, we ended up cutting the payments in around the day 20th of March and so we had to advance some payments that was going to happen from the 20th to the end of March and some payments that were going to happen in the beginning of April as well, so that these two events really created this reduction in a certain way of accounts payable, okay. We don't see that as something going into the future. We see that as getting back to the original levels, okay.

Regarding the fourth well on Tubarão Azul Field, as I have mentioned during the call the production events that we had during the last 60 days demanded us some more studies on the field and so one thing that we are currently looking at is the economic viability of the fourth well and also the water injection, okay. So at this point, we don't have a final decision, a final investment decision of going ahead with the fourth well. And at this point, we also don't have a final investment decision of going ahead with the water injection.

I think the work over that we are currently doing in the second well is going to be a very important piece of information in order to go ahead or not with the well and also the work over that we are going to do in the fourth well. So I'd say it’s a little premature to tell you anything about the well other than we are reevaluating.

Operator

Our next question comes from Mr. Bruno Montanari, Morgan Stanley.

Bruno Montanari - Morgan Stanley

I have a couple of questions. First, on the cash burn rate that we saw in the first quarter at $322 million, is that a sustainable level or is there still space to reduce this in the coming quarters? And what would be your minimum cash level to run the business on a day to day basis?

And my second question is regarding the Cargo No. 7, if you could give us some color on the type of margins that were made in that specific cargo which was not included in the release? Thank you very much.

Roberto Monteiro

Well regarding the cash burned, I think yes this is probably our running rate today with the rig fleets and with SG&A already adjusted this reality, so this is number one. Is there any room to decrease more? I think so, yes and this room will basically come from further reductions on the rig fleet, as we have always been saying, okay. So this is number one. Number two, the minimal cash level to run our company operations. It should be something in the range of $100 million, more or less. If you ask me from a technical standpoint, this is what we see. And then regarding -- was there a last question as well, Bruno, I am sorry?

Bruno Montanari - Morgan Stanley

Yes, about cargo number seven, because the details were not in the release. I was just looking for the type of margins that you are making on that cargo, now that you have only one well running?

Roberto Monteiro

Yeah. As I mentioned in the last question, due to the change in our system, in the SAP platform, we could not and the cargo delivery happened a few weeks ago. We could not get to the same levels of the pay of that time. So that’s why, we decided not to make it to the report, but again it's going to be probably it's slightly lower than what you have seen in cargo number five and cargo number six, regarding profitability and this is mainly because the fixed, the cost of operating FPSO is fixed. It's very stable in 530 and the production was lower, and unfortunately, at this time I don’t have these numbers to share with you and I wouldn't like to make a guess or estimate because it's a very sensitive thing.

Operator

Our next question comes from Mr. Luiz Carvalho, HSBC.

Luiz Carvalho - HSBC

Just two quick questions here, and the first one, I want to understand first, what's knitting to define the (inaudible) location, I mean is there any technical problem; is there any geological issues that you are facing now? And a follow-up on the same question, how long does it take WHP to arrive and based on after I’ll say this definition? And second question, I mean you already received the approval from ANP for Peró and Ingá; could you give us any color on expectation for those accumulations as well, any volumes or something like that? Thank you.

Roberto Monteiro

Yeah. Well thank you Luiz, the first one was regarding OSX-2 your first question. We have, as I have been saying, as I have said in this call and have been saying last call as well, our reservoir team is finalizing the define the reservoir engineering for FPSO; we expect to have that by beginning of June or first weeks of June to get that final report, the final engineering plan. The OSX-2 designed to go to this three sharks, Tubarão Gato, Tubarão Tigre and Tubarão Areia that won and that we declared commercial in March, okay. So this is all we have as of today in terms of OSX-2 location.

We still have time, if we get the report, if we get the engineering project by sometime in June, we still have time to drill at least one well to connect the FPSO, the OSX-2 and then meanwhile the FPSO produces on one well, we will be drilling the second and then the third well, the same procedure that we did with OSX-1 so it’s completely feasible.

Regarding the [well-head] platform, I will say that is to after the June we will have something between 22 to 26 months to get the well-head platform delivered, so we would be looking into sometime in 2015 ready to get the well-head platform delivered, but these are very, I would say almost estimates because we don't have the platform being built yet. So that will probably lay in the range of best estimate at this point in time.

Then regarding the Peró and Ingá accumulations, we have yes the ANP has approved, but we would like to talk about volumes of these accumulations; we will not talk about volume soon, but we would like to talk about volumes after we get certification report; we are trying not to give any type of expectations in terms of volumes, just because we know that we are going to update this report very soon.

Luiz Carvalho - HSBC

Thank you. And just for Roberto, any data on the formation capacity performance, when you said in the report that it is pretty much in line with your previous I would say confidence; any color on that? Thank you.

Roberto Monteiro

The tests that we have run they just confirm our project. We have our initial project, we have the 13 wells to be drilled and some of them directly to the FPSO, some of them directly to the well head platform. And all I can tell you is that the productivity index of these wells, they are fine, of these six wells they are fine and they do not suggest any, let's say increase in terms of number of wells in order to produce the volumes that we were thinking of. So everything is fine on that end. We would not like to enter into too many technical details with things like productivity index and things like that, because these things they are proving to be somewhat misleading sometimes when people get that information and start to extrapolate data from that as we have seen happening in the first well at Tubarao Azul. But all we want to say is its online with our original expectations.

Operator

Our next question comes from Andreas Bruderer, Credit Suisse.

Andreas Bruderer - Credit Suisse

I would like to ask a couple of questions, first Roberto just to get back on the OSX-2 point with what you know today you know you already have a commercial field or is that still up, is that still a question mark as well. That's the first question. On the OSX-3 FPSO for Tubarao Martelo are you concerned with OSX ability to finance that vessel? And the third question would be just to try to understand how management is thinking about the exercise of the port at what cash levels does OGX needs to be for you to see the need to call the port or do you already feel the need to call the port given you did a farm-out in the port as may be or that has been may be a better financing option, just trying to understand how you are thinking about it.

Roberto Monteiro

Regarding OSX-2 we have a commercial field which is Tubarao Gato, Tubarao Tigre and Tubarao Areia. OSX-2 is being built in order to operate in these fields, so at this point we don't have, its not a question mark, for us it’s a commercial field. Of course it’s a commercial field with challenges and that's why we have all our reservoir engineering team going over and over the specifics of these fields in order to determine the best project for OSX-2. Regarding OSX-3 I think the financing of OSX-3 would be helped a lot by the farm-out transaction. If I am a financial institution or someone to invest in OSX-3 I'll definitely like and appreciate the fact that an oil major is also binding to the project and that's is actually the case of Petronas. Petronas is a major oil player, very technical team with a lot of knowledge. So that will definitely be a help.

So at this point, I am not foreseeing problems in terms of financing the OSX-2. Then again, the OSX-3 and again it's very close to completion as well. The completion should happen by September this year more or less or even before September. So everything is so close that they are foreseeing many risk in finance. We are not going to have construction risk anymore, almost and you have a major partner in the field. Your last question was the production. As they have mentioned to you, probably our minimal cash balance will be around a $100 million or something around that. So, of course the farm-out transaction, it gives us a lot of room on our cash flow and so it helps other cash flow for years, but this is it. We still have to [put] outstanding. We understand that the pre-monetization of the field is something like every day business. The same as selling oil for us is also selling part of a field. That’s a normal practice in the industry. So, yes we would rather do these things before exercising the (inaudible), but it's always nice to know and good to know that we have this makeup there of $1 billion facility, not facility, but we have $1 billion option to get from Mr. Eieke Batista our controlling shareholder.

Operator

Our next question comes from Pedro Medeiros with Citigroup.

Pedro Medeiros - Citigroup

I actually have three quick question; first one is on the operational side, for OSX-1. Do you mind to explain a little bit, is there are any concerns about the drivers for the problems with the first well, and I think you mentioned that there was an increase on the relationship on the production side for gas and oil, is there any implication for that for the future production from this well and for the project as a whole. I think I can do the other questions afterwards.

Roberto Monteiro

Regarding the gas, oil ratio, we have is, let’s remember and take it from a more macro perspective. If you remember those reservoirs the carbonate reservoir, so you have different types of permeability horizontal, vertical and different regions of permeability within the reservoir. When you start producing you remove oil from the reservoir so you promote a lower pressure in area in the reservoir nearby the well in a certain rate okay. And then you may get gas disassociation at that point and then the reservoir starts to work in a different way and starts to feed the well again, and this is actually what we are seeing because as I mentioned to you as I said during the call, during the month of March and April we had some stoppages in the well number one, these stoppages were due to higher gas and oil ratio and then you refrigerate less the bump, so we had to stop and over the last week we got more oil coming from the reservoir.

So something has definitely changed in the reservoir and the well is been fed again with more oil and less gas, and this is exactly what our reservoir engineers they are studying. So I think it’s just too early to say anything about the life of a reservoir or anything drastic to the reservoir. All we know at this point is we had more gas and the best two weeks or in the best three weeks, then the last two weeks we ended up getting more oil again showing that the reservoir started to feed the well again.

Pedro Medeiros - Citigroup

Okay, that’s very useful. And just as a follow up on that, can I assume that the well has restarted working through this way properly now back and forth as you mentioned on the call?

Roberto Monteiro

As of today we are already -- yeah we are 10 days producing non-stop, okay. So I think this is a good -- at least we will read it as a good sign, but again our reservoir engineering department is actually running some analysis and adjusting geological models and things like that.

Pedro Medeiros - Citigroup

My second question is related to the deal with Petronas, and since you are buying a piece of two blocks where Tubarão Martelo project is located and is expected to receive OSX-3 and will have Platform Number 2, do you have today or under the negotiation with Petronas a specific cost for the leasing of the equipments, OSX-3 and low head Platform 2 and is there any chance that the cost already negotiated with Petronas will be different than the cost negotiated with OSX?

Roberto Monteiro

No, as of today we have a contract with OSX and the cost should be the same.

Pedro Medeiros - Citigroup

Is there already guidance for the cost there?

Roberto Monteiro

No, it’s the same cost, the same guidance that we have been, that we have been giving in the market, I can give you the average later on, but I think we have been saying that today and I have the numbers here with me at this point, but no, all I want to say is there's no change in what we have been saying.

Pedro Medeiros - Citigroup

And just one last question about the evaluation program on Campos, do you mind to provide what will be plans or what are the next steps on that evaluation program, what are the next locations for drilling?

Roberto Monteiro

We are going to start drilling the Tulum area, just finishing the (inaudible) there. We just received new data, newly processed data and the next well to be drilled is in evaluation well for the Tulum accumulation. This is expected to be drilled in July, next July.

Operator

Our next question comes from (inaudible) Espirito Santo Securities.

Unidentified Analyst

First, return of production in of the wells that you have, the three wells into production, when do you expect them to return to normal levels, do you expect them to return to the something near 15,000 barrels per day and when well number four should be started and that's one question? The other one you mentioned, the new certification and I wanted to know if you have already a date set for new certification of your oil reserves?

Roberto Monteiro

Thank you for the question. As we have said before, the work over is currently taking place in the second well. So as of today, we have one well producing. Second well is under work over. The work over should be finalized within the next week, okay, so we're closed. We've guided mid-May so that should be around mid-May, the end of the work over in the second well and then we start to work over in the third well and the work over in the third well is going to take other 30 to 45 days, okay. So we're going to have the three wells again 30 to 45 days after mid-May, okay.

And production levels, we would have to, as I have mentioned, as I have said in the previous question, we will have to see how the reservoir will behave after all these interventions, okay. So we will not guide a number of 5, 10, 15, whatever volume at this point. We're going to do the work over and then we're going to see how the reservoir is going to respond. All we can say at this time is we have one well that is producing for less than 10 days and we have second well that should enter by the coming weeks, okay.

Regarding well number four, as I have mentioned during this call as well, I think after all these issues in the Tubarão Azul Field, we decided to put the fourth well on a hold for a while in order to study the reservoir again. And so as of today, we don't have the final investment decision neither for the fourth well nor for the water injection well. So we still need some time to evaluate that or leave it further, okay.

Regarding the certification, as we have said we will run a certification record. And I have said in the past calls that we would start the certification procedure by first half 2013 and we confirm that. We will start the certification process still within this first half of the year.

Unidentified Analyst

Finishing…

Roberto Monteiro

It's going to be a matter of, I can't predict at this time because it's a matter of the amount of work that to certify is going to have and it's very difficult to quantify exactly the number of days sold. All I can say at this point is it won’t start within the first semester.

Unidentified Analyst

You get even say if it's going to be this year?

Roberto Monteiro

I think it's going to get this year, yes. There is no reason for us at this point during to understand that it's not going to be this year, it's going to be this year. I just don't know exactly how long it's going to take for the company that we will hire to come up with the final certification.

Operator

Our next question comes from David Epstein with CRT Capital.

David Epstein - CRT Capital

I might have missed it. There was an earlier question, but can you tell us, are they any major wells in conditions to the Petronas transaction, closing conditions or contingencies?

Roberto Monteiro

David, no, there is not. The important thing here is the approvals from ANP in Caju, okay. And there is a series of thing that we need to approve in ANP. We need to approve the transaction itself and we need to approve the development plan and we need to approve the evaluation plan, but everything is related to approvals from ANP, regular approvals, normal course of business and approval from CAju and it was not -- the Caju is not -- it shouldn't be an issue here for this transaction as well, but well this is how it is. Again everything is related to approval from these entities. So normal course of business okay, it’s a standard things.

David Epstein - CRT Capital

Right, that’s good, nothing to do with geology or anything like that, okay.

Roberto Monteiro

No, not at all. The project is running smoothly, nothing to do with the geology, nothing to do with anything other than ANP and Caju.

Operator

That concludes today's question-and-answer session. I would like to invite Mr. Luiz Carneiro to proceed with his closing statements. Please go ahead.

Luiz Carneiro

Thank you very much for your presence and attention here today. Have a great day.

Operator

That does conclude the OGX audio conference for today. Thank you very much for your participation and have a good day.

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Source: OGX Petróleo's CEO Discusses Q1 2013 Results - Earnings Call Transcript

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