Petro Rio S.A. ADR fka HRPTY

[DrillaHill]

2Q15 Final Cash & Oil in store R$421MM

Q2 15 Earnings Release

Polvo Field

Polvo field produced 812,700 barrels (100% of the field), operational efficiency averaged 98.5%. Polvo’s lifting costs allocated to PetroRio’s share stood at US$ 16.1 million in 2Q15, corresponding to US$ 33.11 per barrel, 18.2% down on 2Q14 (US$ 40.49 per barrel). This positive result was recorded despite the natural decline in the field's production.

At the close of 1Q15, the volume of oil in inventory related to PetroRio totaled 562,900 barrels, equivalent to R$ 82.3 million. Oil sales in April resulted in cash inflow of R$ 90.8 million.
In the end of June, oil in inventory (Company’s share) totaled 424 thousand barrels, equivalent to R$ 63 million.

In July, the energy-generating boiler of FPSO Polvo encountered problems as a result of natural wear-and-tear of material, leading to a seven-day unscheduled stoppage, which interrupted the field’s production.

MAERSK TRANSACTION – 40% POLVO FIELD

PetroRio has been actively discussing with the ANP the constitution of a provision for the future abandonment of the Polvo field. These discussions have evolved and the Company believes in a positive outcome during the second half of 2015.

SALEMA AND BIJUPIRÁ (BJSA) FIELDS

In addition to the transaction announced in the beginning of the year, when PetroRio entered into a sale and purchase agreement for the acquisition of 80% of the rights and obligations of BJSA concession agreements with Shell Brasil Petróleo Ltda., in July the Company announced the acquisition of the remaining interest, previously held by Petróleo Brasileiro S.A. - Petrobras.
The conclusion of both transactions for the acquisition of the BJSA fields is still pending certain conditions precedent, including the approval of the assignment of rights by the Brazilian National Petroleum, Natural Gas and Biofuel Agency - ANP. After said approvals are obtained, PetroRio will become 100% BJSA’s operator, with effective date from January 01, 2015, and also the owner of the FPSO Fluminense, with storage capacity to 1.2 million barrels of oil.

NAMIBIA

PetroRio continues to be engaged in conversations with the government of Namibia in order to extend or renew certain exploratory licenses in that country. Despite Namibia being a new frontier, with inherent exploration risks, the Company still believes there is great potential for oil production in these blocks. However, PetroRio considers that the development of any future project will require the participation of one or more partners.

SEDIMENTARY BASIN OF SOLIMÕES

In line with its strategy to focus on production assets and minimize the exposure to exploration risks, PetroRio concluded in 2Q15 the divestment of Solimões which had begun in 2014. The transaction with Rosneft Brasil E&P Ltda. (“Rosneft”), approved by the ANP in July, totaled US$ 55 million, and will contribute to strengthen the Company's cash position.

TOTAL CASH, CASH EQUIVALENTS AND INVESTMENTS

The Company ended 2Q15 with a consolidated cash position of R$ 356 million, most of which allocated in U.S. dollars. The reduction by R$ 6.1 million over 1Q15 was influenced by the following reasons:
? Receipt of R$ 90.8 million from oil sales in April;
? Production costs, operating expenses and the payment of royalties (net of cash calls) totaling R$ 85.5 million;
? Reduction by R$ 8.4 million from the effect of the foreign exchange variation on the Company's cash in foreign currency;
? Financial expenses of R$ 9.9 million;
? Receipt of R$ 4.7 million related to the complement of the sale of three aircraft in 1Q15;
? Inflow of R$ 1.6 million from the sale of assets related to the activities in Namibia.

Subsequent events

2Q15 Financial Results

Sale of assets and termination of the Solimões Operation

On May 18, 2015, the Company executed definitive agreements for the sale and transfer of the total participation and the respective rights and obligations in the Concession Agreements of the oil and gas blocks located in the Solmões Sedimentary Basin in the State of Amazonas to Rosneft Brasil E&P Ltda, (a subsidiary of the Rosneft Oil Company). The total amount of the transaction was US$ 58 million (R$ 179 million) and did not include the four heli-transportable rigs.
The National Agency for Petroleum, Natural Gas and Biofuels (ANP) approved the transaction on July 1, 2015, through Official Letters 560/2015/SEP and 561/2015/SEP (note 6).

Purchase of the Petrobras participation in the Bijupirá and Salema Fields

On July 1, 2015, Petro Rio announced it had entered into a purchase agreement with Petrobras to acquire the rights and obligations of the concession agreements for the Bijupirá and Salema fields (BJSA). As a result, the Company will hold 100% participation and will be the operator for the BJSA fields as from January 1, 2015.
The total amount of the transaction with Petrobras is US$ 25 million (R$ 78 million), subject to adjustment and payable in cash, with 20% paid using own funds, and 80% via a structured finance transaction. This transaction is subject to approval by the National Agency of Petroleum, Natural gas and Biofuels - ANP.

Oil sale

On July 13, 2015, Company has sold approximately 178 thousand barrels of oil (information not reviewed by the independent auditors) to Glencore Ltd., corresponding to the amount of R$ 26.5 million. Cost of sales relating to this transaction amounts to R$ 35.1 million.