Negative Points

• First-half production declined due to planned FPSO and well workovers, with Bauna production lower than expected, partly due to SPS-92 delays.

• Who Dat production was negatively impacted by the E manifold riser issue, leading to a production shut-in and planned remediation in 2027.

• Revenue decreased by $63.4 million year-over-year, driven by lower sales volumes despite higher prices.

• Temporary Brazilian export tax of 12% (7.92% after tax) adds a headwind, with uncertainty over its extension beyond September.

• High first-half capital expenditures and investments led to a $125.8 million reduction in cash balance, though liquidity remains adequate.

• Neon project development is delayed as the company re-evaluates concepts and seeks a partner, with no data room open yet.

• Production guidance for 2026 was not upgraded despite strong FPSO efficiency, reflecting conservatism on reservoir response and well performance.

Q & A Highlights

Q: What is the current view on the Bauna FPSO's condition after the major maintenance campaign, and will another major campaign be needed next year? A: Carri Lockhart (CEO & Managing Director) stated that the company is happy with the FPSO's recent performance since completing the campaign. While integrity management remains a key task, she does not anticipate another maintenance campaign at the scale of this year's. The goal is to move to a typical industry-standard turnaround cycle of every two to three years.

Q: Given the strong 97% uptime achieved in the first half, is the 90%-95% uptime target too low, and what would it take to raise it? A: Carri Lockhart (CEO & Managing Director) explained that the 90%-95% target was set as a best-practice, achievable range consistent with the vessel's age. While exceeding 95% is the goal, she noted there is a break-over point between value creation and absolute value, as pushing to 99% or 100% would require significant capital that does not always translate into shareholder value.

Q: Can you provide details on the Who Dat East royalty suspension, specifically regarding any price or volume caps? A: Carri Lockhart (CEO & Managing Director) confirmed that the royalty relief has a cap. The current NRI interest for the Who Dat East FID is 40%, but once the royalty relief is exhausted, it will revert to 32%. She estimated this would occur on roughly a three-year basis.

Q: What happens when the temporary Brazilian export tax expires next month, and is it expected to continue indefinitely? A: Carri Lockhart (CEO & Managing Director) stated that the tax's future is yet to be defined, with market speculation about its continuation in early September. She emphasized that the company's marketing strategy is well-positioned to maintain flexibility on delivery destinations to minimize exposure, focusing on achieving the highest realized price net of taxes and transportation.

Q: Are there any expected production benefits from recommencing water injection at Bauna in the second half of the year? A: Carri Lockhart (CEO & Managing Director) confirmed that water injection had just recommenced. She highlighted that taking over the FPSO gives the company much more control over this process. Given the world-class, high-quality reservoirs, a fairly quick pressure response is expected, though the exact translation into crude production will be determined as consistent injection performance is achieved.

Q: Is it correct that you intend to farm down your entire exploration portfolio in Brazil, and are you targeting one partner or multiple? A: Carri Lockhart (CEO & Managing Director) confirmed the intention to farm down the exploration blocks. The segmentation of the portfolio will depend on the outcome of the data room and the level of interest companies show in specific blocks versus the entire package, with the goal of securing the highest return.

Q: Given the strong FPSO efficiency and reinstatement of wells, why wasn't production guidance upgraded at the midpoint? A: Carri Lockhart (CEO & Managing Director) explained that while SPS-92 was slightly late versus plan, guidance holds. The company is taking a wait-and-see approach to how the reservoir responds to the wells being online and the water injection. She noted production is currently in the lower half of the range, largely due to the tardiness of SPS-92.

Q: Is the data room for the Neon project open, and can you provide any comments on the FPSO market and CapEx intensity? A: Carri Lockhart (CEO & Managing Director) stated the data room is not open yet and will not be until the concept is fully baked, as it is difficult for third parties to value a project without a defined concept. Mark Mick (Chief Commercial & Technical Officer) added that the team has good intel on the FPSO market and is in discussions with a host facility's owner to secure an option, which will be the trigger to recommence the farm-down process.

Q: Should the second-half 2026 unit production cost guidance incorporate the FPSO savings target? A: Eric Williams (CFO) confirmed that the guidance includes the expected step-down in operating costs. While residual transition services will roll off into next year, the company expects the trend to continue improving into full-year 2027. He noted two levers: increasing asset productivity to benefit unit costs and applying the same cost-reduction efforts used on the FPSO to legacy-oriented costs.

Q: What work has been done on near-field exploration opportunities in Brazil, and have any prospects been identified? A: Carri Lockhart (CEO & Managing Director) stated that the exploration team is constantly reviewing areas adjacent to Bauna. She indicated that more color would be provided in the coming quarter as work continues, in conjunction with the other licenses in the portfolio, but declined to provide specific details at this time.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .