International demand for oil was unchanged compared to 2012, with the price per barrel showing low volatility for the period. However, the oil and gas sector continues to show limited sensitivity to developments in the broader macro economy, since it is characterized by a medium and long term feature. In Brazil, the decrease in rainfall has once again required the activation of thermoelectric plants, increasing domestic demand for natural gas produced at the Manati Field. This contributed to QGEP’s net revenues of BRL486.1 million and EBITDAX of BRL271.4 million in 2013. Net earnings reached BRL192.2 million and we also ended 2013 with a balanced of BRL1.0 billion in cash, which provided us with a comfortable financial position to guarantee the continuity of our projects and the flexibility to take advantage of any opportunities to expand our portfolio.

We resumed drilling of BM-J-2 in 2013. In this operation, as in all our operations, we complied with all the relevant social and environmental requirements, including the Brazilian Institute of the Environment and Renewable Natural Resources (Ibama) – mandated operation period, so that our activity does not generate negative impacts for communities and the environment. Our social and environmental initiatives in this area include the implementation of the Fishing Activity Compensation Plan; the Plan was carried out in a dedicated and effective manner and within the context of socio-environmental licensing of the sector.

We notified ANP of a discovery in this Block and a proposed assessment plan of the discovery is currently being analyzed by the regulatory agency. We also began drilling in the Atlanta Field, in Block BS-4, efficiently achieving the goals established. We applied successful market technologies that had not previously been combined in Brazil. And the result was a success: we overcame significant operational challenges in ultra-deep waters. This technological advancement was recognized by the Funding Authority for Studies and Projects (Financiadora de Estudos e Projetos – Finep), which provided BRL266 million credit line.

We diversified our portfolio by participating in the 11th Round of ANP Bidding and we expanded our presence by acquiring Blocks in five new basins on the Brazilian coastline. We obtained eight Blocks in these basins and will be the operators in five of these. This movement is very important for us to continue our trajectory of growth, with assets at different levels of maturity, looking to our horizon of long term growth.

The result of the ANP bids, asset development activities and exploration activities all created a need for an expanded workforce. We therefore brought in many professionals to work with us – and this team will have new challenges with the development of operations. We are continuing our knowledge exchange model among more experienced professionals and young talent, which has proven to be a successful strategy.

Above all, we are conducting each of these efforts under QGEP’s core principles, which shape our culture. We are looking to contribute to local development, especially in the region of influence of BM-J-2, generate returns for our shareholders, mitigate business risks and guarantee the safety of operations and our employees. This responsible mode of operation reinforces our commitment to the development of Brazil and our alignment with the principles of the Global Compact, of which we are a signatory.

As always, QGEP focuses on collaboration to share challenges and identify the best approach to find the optimal solutions to the benefit of all. In this respect, in there was another notable development 2013, one which will contribute to the entire industry over the coming years. With the coordination of the Brazilian Institute of Oil, Gas and Biofuels (IBP) (Instituto Brasileiro de Petróleo – IBP), we took part in a pioneering initiative to exchange primary knowledge on the Brazilian coastline, aimed at building a coastal protection plan that is integrated and shared among the operators in our industry. This will lower the costs of creating studies and obtaining licenses and plays a fundamental role in strengthening the partnership between companies, which will help elevate Brazil’s status within the international oil and gas industry.

Although it is a young company, QGEP has already defined the basis for growth and the horizon for new challenges and opportunities is vast. Once again, in 2013 we made further progress, in line with our strategy. We achieved this through discipline, planning, courage and partnership. For this reason, I would like to thank everyone that participated in yet another historic moment at QGEP and invite them to move forward with us in the journey that lies ahead.

Lincoln Rumenos Guardado
Chief Executive Officer