QGEP ENDED THE YEAR WITH A CASH BALANCE OF BRL1.0 BILLION, GUARANTEEING IT A COMFORTABLE FINANCIAL POSITION FOR MAKING FUTURE INVESTMENTS. THE PERFORMANCE OF THE MANATI FIELD AND NEW FINANCING OBTAINED THROUGH FINEP MADE NOTABLE CONTRIBUTIONS TO THIS FINANCIAL POSITION.
In 2013, the Brazilian economy was characterized by faster growth in Gross Domestic Product (GDP), by inflation in line with the average seen in the last three years, and by low rates of unemployment. GDP grew 2.5%, compared to 0.9% in 2012, and within forecasts made by the International Monetary Fund (IMF) report. Inflation, measured by the Extended Consumer Price Index (IPCA), was at 5.9% for the year, within the range of the target stipulated by Brazil’s Central Bank (Bacen). However, to contain inflationary pressure, the Central Bank began a new cycle of increases to the benchmark Selic interest rate .which ended the year at 10.0%, following 2.75% increase in the course of 2013. In 2013, Brazilian unemployment fell to a historic low. The average unemployment rate was 5.4% in 2013, which can be considered to be full employment.
Brazil was also impacted by movements in global exchange rates, which at least in part were a result of a gradual reduction in the US Federal Reserve’s asset purchase program. This caused the Brazilian real to depreciate somewhat in the period, going from BRL2.05/US$ in early 2013 to BRL2.36/US$ at the end of the year. In order to contain this depreciation, Brazil’s Central Bank created a daily bid program of dollar swaps in 2013, which was extended to the first half of 2014, in addition to intervening directly in the exchange market. International demand for oil was 91 million barrels per day, in line with demand in 2012, according to the Energy Information Administration (EIA).
Brent ended the year at US$110.80 per barrel, compared to US$111.11 per barrel in 2012, with little volatility during the period. This trend in the industry is evidence of its medium and long term nature, with only temporary impacts from the year’s macroeconomic conditions.
For QGEP, it is Important to maintain comfortable financial capacity to make investments, especially consider the outlook for Atlanta and Carcará. The Company ended the year with a balance of BRL1.0 billion in cash, including BRL169.3 million disbursed by Brazil’s Funding Authority for Studies and Projects (Finep). QGEP was able to obtain these resources because of the integration of state of the art technologies used in the first two horizontal wells in the Atlanta Field. Financing of BRL266 million gained from Finep will allow for development of the Anticipated Production System for the Atlanta Field. The company will structure new financing to invest in the Definitive System.
QGEP plans to grow consistently and gradually throughout the coming years. The Company’s share in the Manati Field provides it with a comfortable financial position, since this source is responsible for all of its operating revenue and provides a stable and predictable cash flow. Once it is in production, Atlanta will also contribute to the bottom line at QGEP, with a differential in generating USD-denominated revenues. In the long term, production at Carcará will also increase cash generation at the Company.
