Panoro Energy ASA

Morning, everyone. John Hamilton here, Chief Executive of Panora. On this call this morning, I'm also joined by Nigel McKim, our Projects Director, and Richard Morton, our Technical Director, Kazi Qadir, our CFO, here to talk to you today about our trading and financial update as at the end of the third quarter. As a reminder, today's conference call contains certain statements that are or may be deemed forward-looking statements, which include all statements other than statements of historical fact. Forward-looking statements involve making certain assumptions based on the company's experience and perception of historical trends, current conditions, expected future developments, and other factors we believe are appropriate under the circumstances. Expectations reflected in these forward-looking statements are reasonable. Actual events or results may differ materially from those projected or implied in such forward-looking statements due to known or unknown risks, uncertainties, and other factors. So as a reminder, you can ask questions either by raising your hand as you see the hand icon there or you can type in a question. We will take questions at the end and you can either raise your hand in which case we will unmute you and you can ask your question live or you can type in a question which we'll try and address as well. Next slide please. Great. So just as a reminder, I want to talk a little bit about our value creation model, our strategy as a company, because I think it's very relevant in this time. We have an energy transition going on. We have higher oil prices. We ourselves believe that we are into a long cycle of potentially volatile but certainly higher oil prices as oil demand continues to be present as we migrate towards the energy transition. And we are entirely focused, our strategy, on how to maximize the position over the coming number of years that we believe oil will continue to be an important commodity and one that's going to be high demand. We've seen, obviously, a significant underinvestment in oil and gas capital expenditure globally over the past few years, which we believe will continue to support high oil prices. In our positioning ourselves, we are looking from a capital allocation strategy towards a brownfield incremental production. So we're looking to grow our production base, which those of you who follow us know what we're doing. We have a huge contingent resource base, 33 million barrels, which we hope to bring into the proven and probable reserve category in due course. So we have a very, very good inventory of proven barrels, but also contingent resources for which to produce over the number of years coming forward. We're also looking at opportunistic acquisitions. We've done a couple, OMV and Tullow, and we position ourselves to be one of the very few credible buyers in the market for what we believe will continue to be opportunities as larger oil companies dispose of oil assets. Exploration, we're not an exploration company. However, exploration does have its part in terms of making sure that you continue to replace the barrels you produce by finding new ones. We are focused, where we do exploration, we're focused on things that are very, very short cycle back into production, preferably near where we're already producing. So again, looking at infrastructure-led exploration, short cycle exploration, which can be brought into production, not frontier exploration type of opportunities. And what that all means is that we have a plan to develop a shareholder returns policy. We've made a number of statements today that the board has decided on. where we're looking at the feasibility of bringing forward our very first cash dividend. We'd indicated at the time of the Telo acquisitions that we're looking at mid-2023. Why at 2023? That was when the Hibiscus Rouge development would come online. We will de-risk that. And at that point, we were prepared to start with a dividend payment, cash dividend. We're seeing higher oil prices now, and so the board has very much discussed what our dividend policy should be, and that dividend policy is very much about returning a significant portion of free cash flow back to shareholders. We'll be reinvesting some of that money back into the business, clearly, but a lot of it will be going back to shareholders. The timing of that first dividend is dependent still on a few things. We're looking at capital expenditure. We're looking at oil prices that they dropped off a little bit recently, but not too badly. operational performance of the assets, and critically, the timing of our liftings. The liftings is really what drives, you know, when we get our cash in the door and when we can pay that back out to shareholders. So hopefully the message has come through loud and clear today that we are looking potentially materially at bringing forward that first dividend date, and we will be communicating that in the next couple of months where we see that evolving. Next slide, please. So if you take our thesis as true, which is that oil prices will continue to be strong, perhaps even get stronger, we are exceptionally well positioned to take advantage of that. We have, as at the end of the third quarter, three and a half times more production than we had last year. At the same time, at the moment, you know, we're producing, you know, close to 8,500 barrels a day, which is four times higher. And we're on track through that. committed and agreed work programs to get in excess of 12,000 barrels a day during the course of 2023 over the next 18 months. So we're hoping to continue to ride the commodity cycle and delivering that organic production growth through our existing portfolio. So I think we're exceptionally well positioned. Next slide, please. So some numbers, I won't go through these in great detail. They're in the report. We're showing a few things here on a pro forma basis. Again, we completed the transactions with Tullo in March and May, respectively, although we had the economic benefit of those from the 1st of January. So when I say pro forma, it means assuming that we legally own them from the 1st of January. So you can see revenues of $107 million, net cash from operations $42 million. That's against the realized oil price of $67 a barrel. Now, we didn't have any liftings in the third quarter. That was well flagged. We have four liftings, however, in the fourth quarter. We have over a million barrels being sold in the fourth quarter. We've already lifted 130,000 barrels in Gabon. We have another Gabonese lifting. We have very large Equatorial Guinea lifting in early December. And we have a Tunisian lifting towards the end of this month. So what you're going to see is fourth quarter is going to be very, very different. In some ways, maybe almost equivalent, so not quite, perhaps, to the nine months leading up to that point. And that really emphasizes the point around lifting. Sometimes we have lifting, sometimes we don't. So you really need to judge us, I think, on a longer period of time other than the quarterly. Next slide, please. Again, this is a lot of detail. I'm not going to go through it, but it's trying to reconcile the IFRS reporting versus the pro forma basis. This is something we continue to do this year post the acquisitions because a lot of things were moving around on the P&L and on the balance sheet as a result of those transactions we did that I think, confuse the financial picture a little bit. So in this slide, we simply try to break out exactly what's happening on an IFRS versus pro forma basis and try to explain some of the larger movements. I don't propose to go into those because these have been well flagged, and there's nothing new here in this particular slide that I think anybody will find surprising. But nonetheless, for full transparency, we will continue with this presentation all the way through the fourth quarter of this year. For next year's financials, it'll just be IFRS. Next slide, please. And again, just to provide as much transparency to our business as possible, we will continue to show a reconciliation of cash flow. This is a cash flow from the start of the period in the beginning of January. all the way through the year so everybody can see how cash ends up, where cash from operations is, which is obviously for us the key aspect here. Again, this is a chart that we'll continue to show to provide full transparency to our business. Next slide, please. CapEx, again, CapEx guidance is about $23 million left to spend in the fourth quarter. You know, as everybody knows, we had active campaigns in EG and in Gabon, some smaller things happening in Tunisia as well. The Hibiscus Rouge Phase 1 is developing on schedule and within budget so far. And the Gazania Well in South Africa we'll touch on a little bit. That's been deferred to 2023. So this is our CapEx guidance for the remainder of the year. Next slide, please. So an operations update. In Equatorial Guinea, we drilled our first new infill well since 2015 at the Kume Complex. We had excellent quality oil, saturated sands. That well is now on stream. It's performing way ahead of expectation. So that's the very, very good news. The second infill way is underway, and we expect that to be on stream probably in Q4, probably in the next few weeks to a month. We have a new gas lift distribution unit installed in the SEBA field. The partners are now very actively focused on further production growth activities in 2022. and beyond them comprising additional work over activity and potential development drilling. So Equatorial Guinea is going extremely well, perhaps a little bit slower in terms of that production growth than we expected, but that is now starting to come online in November and December, and we're very, very pleased with what's happening there. In Gabon, the final two production wells were drilled as part of the Tour 2 Phase 2. Those are the final wells for Tour 2. Those are now on stream. Production at the moment is being optimized with the previously communicated shortage of gas lift capacity affecting the abilities for all the wells to simultaneously produce at their potential. So BW is very, very much focused on trying to get these wells to hit their full stride at the moment. They're working hard on that. Hibiscus Rouge phase one development, as I previously mentioned, remains on schedule and within budget for first oil anticipated in Q4 2022. So within a year from now, we should have the first of the new wells, six new wells, the first of those coming online in the fourth quarter of next year. Hibiscus North was a discovery in the quarter that will be incorporated into future development planning. In Tunisia, Tunisia has been rock solid. We have a number of well operating activities going on, upgrades at various facilities. We've had some really good success with some workovers there showing that stimulation of the wells in conjunction with the use of ESP replacements can really boost production materially and well. So we're looking at our entire well inventory now to see where else we might be able to apply this stimulation technology. And we're looking at a lot of different things together with our partner on subsurface remodeling. One of the things about this slide that I like is that whereas perhaps a year ago or two years ago, we might have had one or two assets in which to talk about. And we're fully seeing the benefits here of a diversified portfolio, diversified by country, by operator. And that's really providing for us a really good stability, I think. And it's exactly where we want to be is having diversity. having a very, very diversified production portfolio, and that's showing its strengths right now. Next slide, please. We announced in the quarter as well a provisional license award in Gabon. So getting back to our exploration strategy, we are not frontier explorers. That's not our strategy. Our strategy is to continue to try and find oil that is near existing infrastructure, again, to try and tie back short cycle production exploration, where if you make a discovery, you can tie it back into infrastructure, not in 10 years from now, but in a couple of years from now. And with that in mind, we have been spending two years now working on these exploration blocks, which surround the Dusafu acreage and nearby to the Itame complex, which is operated by Valco. We were able to bring in BW and able to bring in Valco to join our group. And we, between the three of us, effectively know this area better than anybody else. We have a provisional award. That doesn't mean what it's awarded. We still have some negotiations with the government to do. But this is exactly the kind of thing you would like to see us do, we would like to see us do on the exploration portfolio, is doing smart things in and around places where we know that if we make a discovery, we can produce the oil pretty quickly. Next slide, please. So I'll just finalize before questions. So we have a very, very busy Q4. We have about a million barrels, over a million barrels being lifted against the current strong oil price environment. We have new wells on stream in EG and Gabon. We're moving towards, let's say, 8,500. Perhaps can get a little bit higher than that by the end of the year, but let's see. But it's a good, strong production that's a good 10%, 15% higher than the year-to-date average. So we're very, very pleased with that. We've expanded our footprint in Gabon, hopefully provisionally, which is consistent with our strategy. Strong financial position, $45 million cash in the bank at the end of the quarter and net debt of approximately $52 million. It's our intention to pay a sustainable quarterly dividend payout and return a significant portion of free cash flow to shareholders with buybacks as a complementary mechanism. And we are assessing the feasibility of bringing forward that latent cash dividend to bring that forward as soon as possible. Our growth prospects remain strong. So with that, I'll flip to the next slide just to remind you how to ask a question. And we will open up a question. You can either raise your hand with the hand icon. or you can type in a question. My colleague, Kazi, is going to flag up any questions to me, and I'll either answer them myself or allocate them to the team.

Thank you, John. Good morning, everyone. We have the first question from Sigurd Skardsheim. I'm going to open your line, Sigurd.

You may speak now, please.