Petroreconcavo (RECV3) Q2 2025 earnings summary

Executive summary

• Net revenue for 2Q25 was R$806 million, down 6% sequentially, while 1H25 revenue rose 6% year-over-year to R$1.67 billion, driven by higher oil and gas sales despite increased costs.

• EBITDA for 2Q25 was R$374 million, down 12% sequentially and 16% year-over-year; 1H25 EBITDA was R$798 million, stable year-over-year.

• Net income in 2Q25 was R$238 million, up 5% sequentially; 1H25 net income surged 89% year-over-year to R$466 million.

• Production averaged 27.4 thousand boe/day in 2Q25, stable sequentially and up 4% year-over-year.

• Strategic advances included completion of three deep wells, acquisition of 50% of Brava's gas assets, and a R$500 million debenture issuance.

Financial highlights

• Gross profit for 1H25 was R$573.1 million, with gross margin impacted by higher costs.

• EBITDA margin in 2Q25 was 46.4%, down 2.9 p.p. sequentially and 7.8 p.p. year-over-year.

• Free cash flow was negative R$100 million in 2Q25, with 1H25 free cash flow at R$107 million, down 83% year-over-year.

• Net debt as of June 30, 2025, was R$1.28 billion, with a net debt/EBITDA ratio of 0.78x.

• CapEx in 2Q25 totaled R$367 million, up 47% sequentially, mainly for reserve development and midstream investments.

Outlook and guidance

• CapEx for the second semester is expected to be much lower, focusing on workover and maintenance, with full-year CapEx projected to match last year's R$950 million (excluding midstream investments).

• Production growth expectations for the year have been revised down from 10% to around 4%, with a focus on maintaining current production levels.

• Final phase of 2025 drilling program to include two horizontal wells, aiming to maximize asset value and recovery efficiency.

• New oil hedges using zero-cost collars set a floor of US$60/bbl and cap of US$70/bbl through 2026, covering about 50% of production.

• Gas sales contracts feature fixed or Brent-linked pricing with floor clauses, enhancing revenue predictability.