Good morning! Welcome to the presentation of Seacrest Petroleo's third quarter 2023 results. We are an independent oil and gas production company with a uniquely integrated portfolio of producing fields and export infrastructure in Brazil, where we are the third-largest onshore operator. Please review our disclaimer prior to the presentation. Today's presentation will be held by myself, Scott Aitken, Director and President of the Executive Committee, and Torgeir Dagsleth, Chief Financial Officer. During Q3, we hit the milestone of 10,000 barrels of oil equivalent per day, improving our profitability with EBITDA at almost $10 million. We have also commenced our infill development drilling program, where we have excellent well log results from the first well. The effect of this drilling program is expected to impact production in the coming weeks and shall be the engine of growth towards 30,000 barrels of oil equivalent per day over the next four years. Our fourth quarter results will be impacted by an exceptional combination of off-taker force majeure, followed by very unusual weather events. We will come back to this later and its impact on production guidance for the year. Here we summarize some key metrics, which my colleague, Torgeir, will come back to later in the presentation. We'll now move on to our operational review. Total production at Cricaré increased 6% from the second quarter, driven solely by non-drilling activities. It is now 4 times higher than when we took over from the prior operator. At Norte Capixaba, the previously disclosed electrical issues in the quarter impacted production, but we still managed to raise it by 4% sequentially. We have experienced a temporary setback in the fourth quarter as a result of an exceptional combination of two independent weather events. First, the record drought in the Amazonas led to a force majeure cancellation of a major offtake in October, while the replacement offtake we arranged was delayed by extreme storms in the south of Brazil. While this offtake has now commenced, we have passed nine weeks between full offtakes, forcing us to temporarily reduce production to manage our oil storage capacity in November. We are already ramping production to normal levels and expect to see the effect of the Inhambu drilling program in the coming weeks. Nevertheless, we will be unable to reach our fourth quarter production target and are therefore lowering our full year 2023 production guidance by about 7% at the midpoint to a range of 7,400-7,600 barrels of oil per day. The range is primarily reflecting the normal rain season in Espírito Santo, where the impact on production is uncertain to forecast. The temporary offtake schedule interruption has not impacted our production development drilling program. Leveraging the advantages of the batch drilling approach, we have built 14 drilling locations, drilled five Top Hole locations, and reached TD in our first of 8-11 wells this quarter. Preliminary results are extremely encouraging and consistent with the reserves report, and we have secured three further drilling rigs under option for 2024, which provides access to capacity in excess of the CPR assumption. This is the driver of our growth to 30,000 barrels per day over the next four years. We are pleased to report that our peer-leading performance continues at Cricaré and has now been well established at Norte Capixaba. Our Cricaré fields continue to outperform the CPR. On the left chart, we show how production in the heavy oil Inhambu field is now 50% higher than the CPR forecast. On the right side, you can see that the light oil fields significantly exceed the benchmark assumptions of the previous operator as a result of our diligent production optimization protocols. Our total well count continued to grow, and while Cricaré productivity continued to improve, the electrical issues in Norte Capixaba impacted the productivity in Q3, as previously disclosed. Total production is consistent with the PDP plus PDNP CPR forecast, so we look forward to the impact of our drilling program to further grow production. Furthermore, continuous improving well reliability reflects the engineering design and daily monitoring in our operations. Since acquiring Norte Capixaba in Q2, we have been able to step change, reduce our production cost. However, some unaccrued Q2 costs slipped into Q3. Due to the offtake and production set back in the fourth quarter, we will be temporarily unable to reach our previous full year guidance of $20-$22 per BOE and have therefore revised it to $20-$24 per BOE. We continue to maintain our target of reaching $15 per BOE on a life of field basis. We have made systematic progress towards our premium product sales business model. Having reinstated the heating system to facilitate pumping fuel oil at 65 degrees Celsius, we expect to be able to nominate IMO 2020 on-spec fuel oil by the end of this quarter. Consequently, we will be less exposed to the same offtake problems that affected us in October and November, and we can access premium pricing. During Q3, we experienced our first lost time incident since starting operations, with a contractor employee experienced a minor injury that resulted in absence. The company follows the Heinrich safety pyramid theory and takes all such incidents as valuable learning that will strengthen the HSE performance going forward. I'll now pass over to my colleague, Torgeir Dagsleth, who will take you through the financial review. Thank you, Torgeir. Thank you, Scott. So our revenues declined slightly due to the fact that the planned late September offtake was delayed into early October. This was almost fully offset by improved pricing. EBITDA increased further from the second quarter, as there were no non-recurring expenses related to the Norte Capixaba transaction in the quarter. During the quarter, we transferred the Inhambu field from Cricaré to Norte Capixaba, which led to a lower depreciation and amortization, resulting in a positive operating profit. Net financials continued to be characterized by non-cash accounting items related to our hedge program, resulting in a pre-tax loss of $47 million. Regarding calculation of production cost per barrel, our previous method started with the production cost for volumes sold, which were then grossed up by a multiplier to take into account for over and underlift positions, to approximate the production costs based on volumes produced. We have now changed to the industry standard, which is based on actual production costs for volumes produced, which are corrected for an over and underlift. Details of this calculation are included in note 3 of the full third quarter report. Finally, cash flow from operations were positive for the quarter, and Capex in the quarter mainly reflects the planned ramp-up of the drilling campaign, while Q2 mainly reflected the Norte Capixaba acquisition. Realized oil prices improved further quarter-over-quarter. Total production of oil increased 4% from the second quarter. We went back to an underlift position for the reasons already mentioned. Our hedge program increased slightly quarter-over-quarter at more or less flat average prices. The fair value and the profit and loss developed negatively on account of a rising forward curve. The hedge program is, as mentioned before, a requirement under our $300 million credit facility. CapEx in the quarter mainly reflects ramp-up of the drilling campaign, while in the previous quarter it was almost entirely related to the Norte Capixaba acquisition. Our cash position was stable quarter-on-quarter. Our overall balance sheet declined quarter-on-quarter, primarily related to accounting changes due to foreign exchange and abandonment obligations. Our liabilities now make up a larger part of the balance sheet, of which, thirty-five million dollars reflect, non-cash revaluations of certain liabilities. Due to the net loss in the quarter, our equity ratio declined to 16% from 23% in the previous quarter. And finally, our guidance for production and production cost has been revised, as we have outlined earlier in the presentation. The other elements are unchanged. We will provide new guidance for 2024 when we report the fourth quarter results. Now over to, Scott, to wrap up. Thank you, Torgeir. In summary, during Q3, we hit the milestone of 10,000 barrels of oil equivalent per day, improving our profitability with EBITDA at almost $10 million. We have also commenced our infill development drilling program, where we have excellent well log results from the first well. The effect of this drilling program is expected to impact production in the coming weeks and shall be the engine of growth towards 30,000 barrels of oil equivalent over the next four years. Our fourth quarter results will be impacted by an exceptional combination of offtaker force majeure, followed by very unusual weather events. However, we maintain our midterm target of 21,000 barrels of oil per day by the end of 2025. Thank you for listening to our presentation on the Q3 results today, and we look forward to meeting you at the Q&A session.
Loading workspace