Petro Rio S A : EARNINGS RELEASE - 2Q20

EARNINGS

RELEASE

3Q20

Conference Call 3Q20

November 4, 2020

Webcast: ri.petroriosa.com.br

Portuguese

15h00 (BRA)

Phone: [phone] [phone]

Password: PetroRio

English

13h00 (NYC)

Phone: [phone]

Toll Free (USA): [phone]

Password: PetroRio

The conference call will be

in Portuguese with simultaneous translation to English.

Investor Relations

www.petroriosa.com.br

[e-mail] [phone]

Production (bbl/d)

Net Debt/Adjusted EBITDA (R$ Bi)

3T18

Rio de Janeiro, November 3, 2020 - The Petro Rio S.A. ("PetroRio" or "Company") (B3: PRIO3) presents its results for the third quarter of 2020 ("3Q20"). The financial and operational information described below, except where indicated otherwise, is presented on a consolidated basis and in Brazilian Reais (R$) in accordance with International Financial Reporting Standards (IFRS) and includes the Company's direct subsidiaries: Petro Rio O&G Exploração e Produção de Petroleo Ltda., Petro Rio Internacional SA, PetroRio USA Inc., and its respective subsidiaries and affiliates.

HIGHLIGHTS FOR THE QUARTER

Net revenue of R$ 489MM for the third quarter, 22% higher than the same period in 2019.

Lifting cost reduction to US$ 12,8/ bbl for the quarter, a decline for the seventh consecutive quarter.

Production reached 33 Mbbl/d in September with TBMT incorporation (still w/o 30% stake in Frade). Adjusted EBITDA (ex-IFRS 16) of R$ 204 MM for the quarter (vs. R$ 186MM in 3Q19), with margin of 42%.

Cash position of US$ 136MM (R$ 761MM), and US$ 98MM (R$ 550MM) in oil inventory.

Continuous reduction of Net debt/Adjusted EBITDA (3Q20 = 1.9x).

Net debt reduction from US$ 270MM to US$ 239MM.

Lifting Cost (US$/bbl)

Cash Position (R$ MM)

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3T18

MESSAGE FROM THE MANAGEMENT

"In this quarter, we continued to focus on keeping our operations safe and reliable, protecting the health of our employees and contractors on board, reducing the risk of Covid-19 spreading in our operations and minimizing the impact on our business.

At the same time, we delivered the review and adjustment of costs as planned, and we are overcoming this challenging moment with greater production volumes, a smaller structure and better capitalization.

These achievements are the result of the resilience of our business model, of the agility of our teams, and also a consequence of the ability to integrate our assets (Frade, Polvo and Tubarão Martelo), and the high potential to generate value that this integration brings. Thus, we present in this quarter greater reduction in costs per barrel, in increase in liquidity, and further deleveraging.

Among these achievements, we integrated the operation of the recently acquired Tubarão Martelo Field. Like Frade in 2019, the successful incorporation was carried out in an agile, safe and incident-free manner.

These achievements were also reflected in the Company's visibility in the capital market, which enshrined PetroRio's shares among the most traded on the stock exchange, through its listing on the BOVESPA index on September 2020.

On the operational front, we produced a record volume of 2.5 million bbl in the quarter, reaching a production of 33 thousand bbl per day in September, and we had offtakes totaling 2.4 million bbl. The volume sold offset the strong 34% drop in the brent price, year over year. Accordingly, the Company recorded revenues of R$ 488 million and an adjusted EBITDA margin (ex-IFRS) of 42%, even with the strong volatility of the commodity verified during the period.

As for the financial performance, as well as in the first two quarters of 2020, the devaluation of the local currency generated a negative non-cash impact on the financial results of 3Q20. In the nine months to September 2020, the negative impact of this exchange variation on the Company's net income accounted for R$ 697 million (R$ 557 million ex-IFRS 16).

It is important to note, however, that Companies like PetroRio, with 96% of its revenue is expressed in U.S. Dollars and around 50% of costs in local currency, find in this scenario a favorable environment for cash generation.

Also, in the third quarter, we started Polvo and Tubarão Martelo's tieback project and the connection project for the new TBMT-10 well. By the end of September, we had invested approximately US$ 8.7MM and purchased the vast majority of equipment with long delivery times. Both projects are expected to be completed in mid-2021.

Over the next few months, we expect to close the acquisition of Frade's remaining 30% interest. The incorporation of the asset shall add 5.5 thousand barrels to the production and 18 million barrels of 1P reserves, contributing to the reduction of the cost per barrel of the Company.

Also, in the 4th quarter, we have already contracted the sale of approximately four million barrels, with hedges locking the minimum price at US$ 43.46 per barrel.

Finally, we continue to study both new acquisition opportunities and opportunities for revitalization in Frade, Polvo and Tubarão Martelo, with the purpose of continuing to make high-value investments.

We thank our employees and key business partners for their efforts and commitment amid the unprecedented challenges faced throughout this year."

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3T18

OPERATING PERFORMANCE FOR THE QUARTER

As the main highlight for the quarter, the Company's total production increased by 44% when compared to the same period in 2019 (+ 25% compared to 2Q20). The increase is the result of the 80% acquisition of Tubarão Martelo Field, completed on August 03, 2020, and the successful Polvo drilling campaign, which increased the Field's production by 2.500 barrels since its completion in March 2020.

Another important highlight, the Company's lifting cost per barrel improved for the seventh consecutive quarter in 3Q20. In the period, the indicator showed a reduction of 44% against 3Q19 and 6% compared to 2Q20. The year- over-year improvement is mainly due to (i) the rationalization of operating costs in Frade and Polvo, where continuous initiatives to review contracts were carried out over the last 12 months, (ii) the increase in production at Polvo Field to the level of 11.000 bbl/d, also in March, without causing an increase in costs in the Field, and (iii) the devaluation of the Brazilian Real, benefiting the Company's costs when exchanged into U.S. Dollars, since about 50% of the costs are denominated in local currency.

The reduction in the lifting cost was decisive for the Company to continue generating positive operating cash throughout 2020, since the average brent of US$ 42.52 was 34% lower than the brent of 9M19 (US$ 64.78). PetroRio will continue with its lifting cost reduction strategy over the next few months, with the incorporation of 30% of Frade and the tieback of Tubarão Martelo Field with Polvo.

Note: Between April and September 2019, PetroRio held 52% of the Field Operation. After the completion of the acquisition of Inpex in 4Q19, this percentage increased to 70%.

The volume produced in Frade in the quarter increased by 30.1% compared to 3Q19, mainly due to the increase in participation in the concession, after the completion of the 18.26% acquisition in the Filed. At Polvo Field, quarterly production was 23.5% higher than the 3Q19, as a direct result of the successful 2019/2020 Drilling Campaign, which brought an increase of approximately 2.500 bbl/d in the Field production, through a new production well, as of March 2020.

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