Panoro Energy ASA

Good morning, everyone. This is John Hamilton. Welcome to our first quarter results of Panora Energy. We have a presentation which we intend to go through. Just wait for that to fire up.

Next slide, please.

I won't read our disclaimer, but just to note our disclaimer regarding forward-looking statements. As usual, we'll be making certain statements, and this disclaimer is meant to cover off on some of those things. Next slide, please. As a reminder, this system that we use allows participation both by voice and by text. If you have any questions, we will endeavor to try and answer as many as we can. You can either raise your hand, as you see on the right side of the panel, and that will then allow us to open up your microphone. Or you can enter into a text, as you see on the left side, and we will try to answer those questions as well. There'll be a reminder of how to do this as the final slide as well. Next slide, please. Right, so here are our quarterly results and a few of the key things that we wanted to point out. I think this is more or less in line. We've guided on the production and on the lifting side. So I think that these are more or less in line with our guidance with the revenue of about $60 million in EBITDA and about $35 million. We ended the quarter with a net debt position of $25 million. I'll come back to that one when we talk about the balance sheet in one of the future slides because we had a rather large principal debt repayment in the period as well of about $13 million. I'll come back to that one as well. Next slide, please. We recently announced our annual statement of reserves, and we made a press release talking about our organic reserve replacement of 92% this year, which is quite formidable, we believe. And here's a reconciliation of that. I won't go through all the details, but I would like to just point out a few things, which again is that we replaced 92% of our reserves during the course of 2022. We only announced this recently. And if you look at our 2P and our 2C resources there on the right of 65 million barrels, And you look at the breakdown of where those reserves and resources are, you can see that we're a very well-diversified business, which is really what we've set out to do as Panora, is to create a diversified business with multiple production hubs. Next slide, please. So just a standard slide for us, just kind of showing where we've been and where we're going. Quarter one production was impacted as guided due to a rather extended shutdown of the FPSO in Gabon. in preparation for the tie-in of the Mabomo, the production facility of Abiscus. That was a planned shutdown. It was a little longer than expected, which resulted in probably lower production in the quarter than originally anticipated, but everything is up and running now, and we're maintaining our guidance between 9,500 and 11,500 barrels a day for the year. The range there is highly dependent really on the timing of when the new Ducevue wells come online. If they're quick, they'll be at the upper end of the range. If they're a little slower, it might then be towards the lower end of the range. At the moment, we're more or less on target. And we hope to get to about 13,000 barrels a day, in excess of 13,000 barrels a day, once all the six wells are online in Gabon, which is guided as around the year end. It could be into early January, but right around the year end, we should be targeting about 13,000 barrels a day. Current production has been quite strong, up to about 8,500 barrels a day, sometimes a little bit higher than that. We're just waiting now for the next well in Gabon to come up, and I think that during the course of June you're going to see another step change in that production from that 8,500 number up to quite a bit higher number as the new well comes online and a couple of other activities in Tunisia come back online as well. Next slide, please. So here's our lifting. This guidance on the lifting is more or less as we've had it before. I think we did have a slightly higher lifting in Q3 and some of that's moved down to Q4. But as you can see, we're again heavily weighted towards the second half of the year in terms of our lifting volumes with something like 75% of our volumes being lifted there in the third and fourth quarter. We're talking about 3 million barrels of sales this year. So, you know, comfortable number and very much in line with guidance. The second quarter, as previously guided, is going to be a very, very slow quarter for us in terms of sales with just some domestic sales in Tunisia really coming through. The big international liftings, the ones that really move the needle, are going to be in the third and fourth quarter. Next slide, please. I won't go through a great deal of detail here, but we do try every quarter to update the market in terms of our debt profile. Nothing really has majorly changed here, but I would like to point out one thing, which is the RBL facility, our gross debt at the time of the balance sheet close 31st of March was $68.4 million. You can see it there kind of in the top left. um what happened there we we we ended up uh acquiring the tunisian business uh and that closed in the um first part of april so effectively in the second quarter where we drew down 15 million dollars of rbl so what we actually ended up doing was we increased our debt by about nine million dollars but we repaid some debt uh to affect that transaction in the first quarter we'll see that come back a little bit so you would expect in the second quarter our gross debt number to go up to $83 million. So I just do want to point that out a little bit. It's a little bit of an anomaly. But, you know, entirely within what we had announced before, it's just the way that the quarter ended, it kind of fell between the two quarters. CapEx is still being guided around $75 million this year. We've spent some of that so far. So there's still quite a bit to go on the CapEx side. Next slide, please. Again, I won't go through this in great detail, but we do try every quarter to reconcile cash flow. You can see the net cash from operations, the capex, loan repayments, dividends paid, and the cash at the end of the period. We'll do this waterfall every quarter.

Next slide, please.

So Gabon is really the main story driving the production growth this year, as those of you who follow us know. We are drilling six new production wells in the Hibiscus-Rouge area. The first well came online. It's doing extremely well, probably even a little bit better than expectation, and we're very, very happy with that well. The second well is currently drilling and running completion on that, so we should hopefully have in June some further announcement on that second well. Everything looks to be going to plan for the moment on that one. And then the crude is then transported from the Mabomo production platform back to the FPSO. So everything is on target so far. We're very happy with what we've been finding subsurface on these production wells, and we're very happy with the production rates that have been demonstrated so far. So everything is going to plan or perhaps slightly better than plan on this development so far. The gas lift compressor on the FPSO in the Tortue field is installed and currently in commissioning. It should be starting up in the next few days. And that will support production from the existing Tortue wells. Next slide, please. In Equatorial Guinea, we haven't talked so much about it, but the rig has been contracted. We have a three-wheel well infill drilling program. which should really boost production further that's not been really included in our guidance of our production that's principally a early 2024 event was when we start feeling the impact of that but it is nonetheless as we come out of the drilling program in Dusafu with the six wells there we have three more production wells coming online in the first part of 2024 which is quite exciting there's lots of work going on there as well And as we've announced recently, we've farmed into Block S, which is the big blue block on the left with the star in it. And we've also been awarded as operator with Cosmos joining us in EG01, which is an inboard block. And I've got one more slide, the next slide, please, which talks a little bit about what that is all about. What we are chasing here with Cosmos operating as well is something called Aking Deep. And Aking Deep is a large four-way structure that we can see on the seismic. It looked to be about 180 million barrel prospect. Now, to put that in the context of that, we've got 12% of this asset. So it's extremely material if we find reserves here through a successful exploration drilling campaign. Perponoro would be a really significant discovery. And the beauty of this one is it's infrastructure-led exploration. discovery here can be tied right back into the SEBA field where we have an existing FPSO, existing production facilities. So while Panora is not really an exploration story this year, next year you're going to see us drilling what many people are calling one of the most exciting exploration drilling prospects in the world. That is being talked about by many people now. Suddenly people are waking up to the possibilities here. This comes in, it's about a 20 or 25% chance of success, so it is exploration, but if it comes in, it's a bit of a game changer in the area because it de-risks a whole bunch of those other yellow prospects that you can see in both of our exploration blocks. So you'll see us increasingly talk about this asset, this prospect. Again, it won't be drilled probably until the second quarter of next year, so about a year from now, let's call it. But this is potentially a very, very interesting development for Panora and its shareholders. Next slide, please. In Tunisia, we are constantly doing work here. We have recently, as well, completed the acquisition of our minority interest in there, which you probably followed. Let's add about 3 million barrels of 2p reserves into our reserve bucket for 2023, so you won't see that until the ASR next year. But nonetheless, it's adding reserves and production. We acquired it, we think quite cleverly, at around $6 a 2p barrel, which I think is a very accretive transaction for us. It's really helped simplify our corporate structure too. We own the asset 100% now, and it really has been an easy acquisition for us. We haven't had to really change much at all in terms of the company, in terms of accommodating that acquisition. We still see a lot of potential in this asset, and we really still have an aspiration, although it's not baked into our production guidance. We do have an aspiration to try and get this to approximately 6,000 barrels a day if we can, and we're working hard at that. We see a number of opportunities we're working on as we speak that may get us there. So this asset, we believe, still has a great future and potentially quite a bit of upside as well.

Next slide, please.

So we also came out with our first sustainability report, which is a big landmark for Panora. extremely committed to putting out a sustainability report which supports shareholders and analysis of our commitment to ESG and it supports our wider stakeholder groups whether those be banks or insurance companies or joint venture partners or host governments. This sustainability transparency is extremely critical for companies like Panoro and our commitment to publishing real data and real information regarding our operations. And it's been very, very well received, our sustainability report. We're quite proud of it. I'm not sure anybody's read it. A lot of work's gone into it, and we feel very happy with this. And if you do have any questions on those, we'd be happy to answer those as well.

Next slide, please.

So, in summary, We have 10 wells we're drilling in the next 12 months. We have options over additional rig slots. So what we're really seeing with Panoro now is a huge growth in the production with our stated targets that we've already put in the market. We believe there's upside beyond those as well as we get into 2024 with our Equatorial Guinea drilling. But there's really a lot of catalysts, a lot of production-led catalysts in this company over the next 12 months. including the exploration well at Akhang Deep. The birth of the wells has gone extremely well, so that doesn't necessarily mean the rest are going to go perfectly as well, but we hope it does. We've started off certainly with a bang. Our three-well campaign in Equatorial Guinea is going to commence probably in the back end of Q4, and the rig is contracted and hopefully will be there on time. We've already touched on our acquisition of our Tunisian business, so we demonstrate we can still do clever and accretive transactions, whether it be small or big. In this case, quite a small one, but nonetheless very accretive to the company. We've completed farming to block S and block EG01, so we continue to refresh our exploration, our infrastructure-led exploration portfolio, which is, of course, critical for the medium-term business prospects as well. So we're committed to continuing to try and find the right kind of exploration asset for this company. The Aking Deep Well is planned to drill in 2024, which is really quite a major catalyst potentially in about a year's time, but it's an exciting one. And we've, of course, announced today as well our commitment to a quarterly cash dividend. We've announced a dividend today as well as part of our results. So we still have a very clear framework, we believe, in terms of the shareholder return policy. And that is the conclusion of my presentation. We have one slide which reminds you on how to ask questions. I think, or we do at least. But if you do want to ask a question, you can raise your hand and we'll try and unmute you, or you can type in questions into the question pane.

Perfect. My colleague Andy will try and identify the questions.

Thank you, John. The first question is from Stefan Foucault. Stefan.

Good morning, James. Thanks for taking my questions. I've got three actually, probably quite straightforward. First, when the future new hibiscus well will come on stream, so 2, 3, 4, 5, 6, should we also expect the platform or production to be restricted for a certain amount of time? That's my first question. Second question, you talk about, I think, $8,500 per day current production. Could you give us a sense of splits across the asset? And lastly, an accounting question. I was looking at the cash flow statement, and it seems that this quarter, for some reason, the depreciation interest is not added back. So I was wondering what was happening. Perhaps it's in this working capital adjustment. Really appreciate some color. Thank you.

Sure. So on the Hibiscus Mill, the shutdown that we had on the FPSO in the first quarter, which we flagged reasonably well, was for the initial connection of the production facility at Mobomo to the FPSO. That is all hooked up now, and that's fine. So we will not have shutdowns related to that. We typically will have a couple of smaller shutdowns in the course of the year where certain maintenance is done, but that's all planned, and that's all built into production assumptions and guidance, but there will not be another certainly planned shutdown of the FPSO to deal with the new wells, you know, two, three, four, five, six coming online. So you won't see big interruptions due to that. Breakdown of the production. Let me come back to you on that one. I don't have it right to hand, Stefan. But generally speaking, you know, Equatorial Guinea is still our largest producer with DUSFU then coming in second and Tunisia in third. But that's obviously going to change once we get a few of these Ducifu wells online, where Ducifu will probably contribute the largest of the production in due course. But I'll have to come back to you in terms of the exact breakdown. We do have on the slides the quarterly production from the first quarter. I appreciate that's not exactly where we are at the moment with the new well online and with the acquisition of the Tunisian business. So we'll have to come back to you for a breakdown on that. And Qazi, a question on depreciation.

Qazi Qazi Qazi Qazi Yes, John. I think it's been mapped to the working capital line. I've just checked. I think it's a typo, which we can confirm that it belongs in the operating activities.

It's what I thought that everything has been perhaps combined. Okay.

Okay. Thank you. Thank you. Thank you. The next question is from Stefan Evian.

Morning, Stefan. Yes. Good morning, guys. Thank you. Thank you for the presentation. I have two questions. The first one is on cash flow. Looking at Q2, you have very few liftings and it seems like your capex is is being more tilted towards the second half of this year as well. Just wondered whether we should expect a significant cash outflow in Q2 given those two elements. That's my first question. And my second question really in relation to this, given the oil price now being below $80 per barrel and you having a very solid lifting schedule for the second half. How should we view your dividend policy and whether you'll reach the $20 million mark you've set? Thank you.

Sure. Very good questions. Yes. So I think the second quarter is going to be definitely a cash outflow quarter. We don't have significant revenue coming through. We still have capital expenditure and normal taxes and the normal outgoings. So you should expect that the second quarter will be a quarter of cash outflow. So our balance sheet will probably change, certain net debt position will change during the quarter, and then it will, of course, reverse itself back out in the third and fourth quarters when things get – the liftings start coming through. Yes, unfortunately, the second quarter is going to be a tricky quarter in that respect. But again, it's as expected from our side. There's nothing that's changed there. I think we've always guided the second quarter is going to be a little bit funny. How do we see dividends? We set out what we think was a pretty clear dividend policy that was basically saying as long as operations were going to plan, as long as oil was around $80 a barrel, that we were targeting $20 million dividend this year, and that dividend would be second half weighted, and nothing at all has changed there. Oil has been a little bit lower, as we've all seen, than that $80 target, but the company is still very much committed to, and the board have recently confirmed that in our meetings yesterday, confirmed that they want to continue to be a regular dividend payer as long as the oil price is sensible. Our 2023 is, of course, a cautious year for us because of the delivery of all these new wells and the capital expenditure we have this year, which is why we've kind of kept this year a little bit on the conservative side. But we've always got it. It's going to be weighted towards the second half when we knew that we had the heavier lifting program, but also when some of these ducifu wells were being de-risked. So we've got the first one online, the second one hopefully online soon. So I think you're going to see that de-risking happening also in this period, coinciding then with the bigger lifting. All eyes for us are really on the oil price. The oil price is fine where it is now. I wish it was a little bit higher, but it's fine. And that's why you've also seen us maintain the dividend despite oil being and the realizations from our liftings being less than $80 year to date. But we're still committed to pay that dividend. So hopefully that answers your question. Thank you, John. Very clear. I'll hand it over to you guys. Thanks.

Thank you. Thank you. The next question is from Chris Aristidou.

Hi. Thanks for taking my question. So I was wondering if you can give the timeline of the Hibiscus rush whales three to six. You mentioned that the second one should be coming on stream. in June? How about three, four, five and six? Can you give a bit of indication how those wells will come on stream?

Sure. What we've got in the market and what we actually think about internally is roughly two months between wells. That's kind of the way that the work program has been set up. So I would expect that every two months we should have a new well online. It could be a little bit faster in some cases, it could be a little bit slower in others. It all really depends on drilling operations and what we encounter along the way. Again, we're drilling into reservoirs that are very well understood. It's prolific Canberra Reservoir. We're drilling in reasonably shallow water in reasonably good conditions. There are always things that can throw you off the scent a little bit, or you can lose some time, or you can gain it if things are going particularly well. But Roughly every two months is what you should expect. So when the next well in June comes online, I don't have a precise date for you right this moment, but hopefully it's reasonably soon into June. You can then add two months to that, and then add two months to that, and then add two months to that, and that should probably get you to where you need to get.

Thanks. And on the gas compressor, um maybe it's just uh maybe i'm wrong but i thought that would come online a bit sooner is that is that uh is that fair and if it is then uh can you say what was the issue that related logistics the operations or i've got any color there thank you

Yeah, your voice came in and out, but I think I got the question around the gas compressor and the timing of it. So I think in our trading update and also that of the operator, VW, recently we indicated that it should be online during the course of this month imminently. We're almost at the end of the month, so hopefully it'll be online in the very near future. There have been delays on that. The principal delay more recently has been a little bit deliberate, which is that the With the timing of the new production facilities, I think they didn't want to do too many simultaneous operations at the same time, hooking in the new production facility, receiving that first new oil, at the same time commissioning what may sound like a small piece of kit, but it's indeed a very large piece of kit on the FPSO. So it's very deliberately that they weren't trying to rush that at the same time as trying to rush first oil and end up jeopardizing one or the other. We prioritized the first oil from the new well. But nonetheless, it's probably been a little bit slower than we would have hoped. But it should be online imminently, I think is the word we use. VW have got it this morning in May.

So hopefully it'll be soon. Thank you very much for that. Thanks for taking my questions. Sure.

John, just a question submitted online. We mentioned the options over additional rig slots that we have at DSAFU in particular. Can you please elaborate a bit on the thinking around those additional options over rig slots and how that might add on to the work programme?

Sure. So indeed, we have up to eight slots on the borne over rig. We've discussed openly as a BW, the operator, six production wells, which we've covered in this presentation in the questions. So that's all going to plan. So we have two additional slots that we could activate. We have some time in which to make that option decision. And I think you'll see that the joint venture is now concentrating obviously on the production wells and that. But as we get into probably the third quarter and into that period, we'll probably start debating it a little bit more. There are a lot of ideas within the group of both Panoro and BW about what might be interesting to drill. My personal view is that we would like to see at least one exploration well drilled in Dusafu, as you'll remember. You're effectively drilling for free exploration wells in this block because of the way that the cost recovery works on the production sharing contract and the tax make-up. So, you know, there's so much more to go for in the Dusufu block than just Abiscus Russian Tortue. And it'd be nice to, every time we have a rig there, to try and find another oil field. We know that there are lots more there. We have to find them. And we would really like to see an exploration well drilled. The way that you need to think about it at the moment is it's probably too early for us to commit to anything, but I think that you would find that both ourselves and BW, as long as things were stable in terms of oil price and sentiment and all that kind of stuff, that we would see us exercising those options and either drilling an exploration well or two or maybe an exploration well and perhaps, who knows, another production well. We need to gather the data from the six wells we're drilling to figure out whether we're looking at – you know, other undrained areas that we think might be interesting to drill in a seventh production well to create some additional capacity through that production. But I'd say that the glass is half full at the moment in terms of exercising those options, but it's a little early for us to talk about. But I would expect that we would probably exercise them and drill an exploration well would be my personal feeling at this moment. But things may change and, you know, Panara is not the only voice in the joint venture. We'll have to see how that goes, but it's nice to have these options. It provides a great platform for us if everything is going well to come in and retain that rig as we get into 2024.

Thank you, John.

And that concludes today's Q&A.

Perfect. Well, thanks, everybody. And we look forward to continuing to update you. I think the next updates for the company will probably be as we get the second well in Gabon online, hopefully in the near future. And we can update further on production at that time as well. Thank you very much.