This article first appeared on GuruFocus .
Release Date: August 05, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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PRIO SA ( PTRRY ) achieved record quarterly production of 172,000 barrels per day and record sales of 15.2 million barrels, driven by strong operational performance at the Wahoo and Peregrino fields.
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The company successfully brought the Wahoo field to its target production of 40,000 barrels per day, with the FPSO operating at high efficiency and the reservoir performing as expected.
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PRIO SA ( PTRRY ) significantly reduced its lifting costs to $8.90 per barrel and expects further reductions to $7-$8 per barrel in Q3 2026, driven by increased production and the switch from diesel to natural gas at Peregrino.
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The company's leverage decreased substantially to 1.5 times net debt/EBITDA, with a strong cash position of over $700 million, even after repurchasing 9.3 million shares.
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PRIO SA ( PTRRY ) is on track to exceed 200,000 barrels per day in production by year-end, supported by new wells at Peregrino and Fraji, and expects to close the acquisition of the remaining 20% stake in Peregrino in Q4 2026.
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The company's carbon footprint continued to improve, reaching 21 kg of CO2 per barrel equivalent, a 44% reduction from Q4 2025, with expectations to drop below 20 kg in Q3 2026.
Negative Points
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PRIO SA ( PTRRY ) faced operational disruptions, including a failed charter vessel (NO102) that delayed the connection of the fourth Wahoo well and a gas lift line failure at the Frade field, which temporarily reduced production by 7,000 barrels per day.
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The company was negatively impacted by new export taxes, which totaled $111 million in Q2 2026, a significant and unexpected cost that could persist if geopolitical tensions continue.
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Production at the Albacora Leste field was hampered by a hydrate formation in well AVL-68, leading to a shutdown from April to July and a drop in operational efficiency to 85.9% for the quarter.
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The company's average sales discount to Brent widened to $6.90 per barrel, partly due to market volatility and China's reduced buying, which could pressure future revenue if the trend continues.
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PRIO SA ( PTRRY ) has delayed the announcement of its shareholder remuneration policy due to geopolitical and macroeconomic uncertainty, which may disappoint investors seeking clarity on capital returns.
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The company's CapEx guidance has increased to approximately $600 million (excluding reclassifications), driven by accelerated drilling at Peregrino and Frade, which could limit near-term free cash flow.
Q & A Highlights
Q: Can you break down the factors behind the improved trading discounts, separating external geopolitical factors from structural commercial strategy elements like VLCC usage and blending? A: Roberto Monteiro (CEO) explained that the improved discount was primarily driven by the company's strategic exposure to Dated Brent rather than ICE Brent, which benefited from a tighter physical market during the Middle East conflict. He highlighted that the company prioritized Dated Brent contracts since the war began. Additionally, structural gains came from loading Peregrino oil directly onto VLCCs (a first for the field) and blending heavy grades with lighter ones (ABL and Merrell), which saved approximately $2 per barrel. However, he cautioned that the Q2 discount of $6.90 per barrel will likely widen to around $9 in Q3 due to China's reduced buying and the partial reopening of the Strait.
Q: Regarding the Peregrino field, how much of the targeted $300 million in cost synergies has been captured, and does the switch from diesel to gas still make sense given rising diesel prices? Also, what is your base case and strategy regarding the new export tax? A: Roberto Monteiro (CEO) stated that Peregrino's annual operating cost has already been reduced from $550 million to $260 million, capturing nearly all of the $300 million synergy target. The upcoming switch from diesel to gas will be a "bonus" that pushes savings beyond the original target, potentially reaching $100 million in additional reductions. Regarding the export tax, the company was caught by surprise and is pursuing a legal challenge. The CEO argued the tax is misguided because Brazil cannot refine all its oil domestically and the high refining margins, not crude prices, are driving inflation. He noted the tax may be temporary, potentially disappearing within 60 days if geopolitical tensions ease.
Q: Can you provide more details on the Albacora Leste project, including the timeline for first oil from the tieback, the 2027 drilling campaign, and the expected CapEx? A: Roberto Monteiro (CEO) confirmed that the rigid pipeline has been laid and the company is awaiting final licenses from IBAMA and ANP to complete the well connection. First oil is targeted for December, with the hardest part of the project (laying the rigid duct) already complete. For 2027, the plan involves drilling five deep-water wells (split between Albacora and Frade depending on licensing) and five shallow-water wells, with a total CapEx of approximately $450-500 million. The company has already identified seven wells at Albacora Leste, and the project is well-defined using new seismic data.
Q: What is the current performance of the Wahoo field, and what are your expectations for reservoir depletion and future water injection? A: Roberto Monteiro (CEO) stated that Wahoo is performing in line with expectations, with wells showing slightly better productivity than initially envisioned. Production is stable at 40,000 barrels per day and is expected to remain at this level for a few more months before beginning a natural decline towards the end of 2025 or early 2026. Water injection is planned for the first half of next year. The CEO noted that the project was executed conservatively with extra margins, which proved beneficial given the field's strong performance.
Q: Given the strong cash generation, what are the main metrics and thresholds used for capital allocation decisions on new organic projects versus share buybacks? A: Roberto Monteiro (CEO) explained that the company evaluates projects based on three key criteria: return on asset, NPV, and payback period. Most projects have very high IRRs (around 60%) and extremely quick paybacks of three to four months, making them "no-brainers." The CEO emphasized that organic projects are always prioritized over buybacks because they are more economical, and the company has sufficient cash flow to pursue both simultaneously. He noted that the only time organic projects were paused was for the large $3 billion Peregrino acquisition.
Q: Why is the company waiting to formally announce its shareholder remuneration policy, and will a sustained high oil price change the policy's parameters? A: Roberto Monteiro (CEO) clarified that the policy will not change based on oil prices. The company is waiting for the volatile geopolitical and macroeconomic situation to settle before formally announcing it, but the policy is already being executed through share buybacks. The CEO stated that the company is on track to reach a net debt-to-EBITDA ratio of 0.8x with oil at $80 (equivalent to 1.0x at $60) by the end of next year. He emphasized that management's interests are aligned with shareholders, as they collectively own a significant stake in the company.
Q: What were the main challenges encountered at the Wahoo field that were not initially expected, and can you provide more details on the depletion rate? A: Roberto Monteiro (CEO) noted that the only significant hiccup was the failure of the charter vessel NO102, which delayed the connection of the fourth well. The company successfully used its own vessel, Genesis, to complete the work, validating its verticalization strategy. Regarding depletion, the CEO stated that the reservoir is performing according to certification data, and while wells have higher productivity than expected, production will be capped at 40,000 barrels per day. He used an analogy of a car with a higher speed limit than the road allows, emphasizing that the company will not push beyond the certified production rate.
Q: With CapEx expected to slow down in the second half, what is the updated full-year CapEx guidance, and is there any upside to Peregrino production beyond 100,000 barrels per day? A: Milton (CFO) clarified that the CapEx calculation should exclude the reimbursement for gas import, which would bring the second-half spend to around $80 million. The initial budget of $500 million has increased to approximately $600 million due to accelerated drilling at Peregrino (well A13) and two additional wells at Frade. Regarding Peregrino, Jean (Operations) stated that the field's FPSO has a maximum capacity of 100,000 barrels per day, and while production may occasionally reach 103,000-104,000 barrels, it will not significantly exceed this level. The new wells in the Isolado reservoir will help maintain production closer to 100,000 barrels for a longer period.
Q: How do you see the M&A market evolving given the current geopolitical conflicts, and are there any structural changes expected? A: Roberto Monteiro (CEO) observed that extreme events typically freeze the M&A market due
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
