Panoro Energy ASA

Good morning, everyone, and thank you for joining our second quarter results presentation. This is John Hamilton, Chief Executive Officer of Panora Energy ASA. I'm joined today by a number of colleagues as well who will be available to assist with any questions that you might have following a short presentation. As a reminder, today's conference call contains certain statements that are or may be deemed to be 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. Although we believe the 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. And for your reference, our results announcement was released this morning and is available also on our website, www.panoraenergy.com. So as a reminder, for those of you who've been here before, for those of you who haven't, you have the ability to ask questions. You can either type in a question, as you can see on the left pane there, and we'll endeavor to answer that question if it hasn't already been asked. Or you can raise your hand, as you can see on the right panel there. We will unmute you and you can then ask a question and there'll be ample time after the presentation to do so. Next slide, please. So just some highlights. The second quarter was obviously a slow quarter for us. That was all well communicated in terms of liftings. We didn't really have any liftings in the second quarter. So we're kind of focusing on the things that we think matter here. We recently had record production rates. of up to 11,000 barrels a day. This is a record for Panora, so it has been a very, very good recent set of events for us, triggered largely by the increase in production in Dusafu, which we'll talk a little bit about. We have crude liftings of a little over 800,000 barrels in the first half of the year. The second half is going to be much more active, and we'll talk a little bit about that as well. Our CAPEX is trending online with guidance at the moment. On the financial highlights, again, revenue of $66 million, EBITDA of $39 million. Again, we'll see that increase in the second half of the year as our liftings increase during the course of the year. And then there's some balance sheet figures as well, as well as an inventory position as at the end of 30th of June of inventory of oil on the vessel to our entitlement. And today we also announced a second quarter cash dividend of a NOC 0.342 per share, which is approximately 40 million kroner, which is a material increase from our first quarter dividend of 31 million kroner. So all in all, we think a very credible performance and within guidance. Next slide, please. So again, just looking at the trajectory of the business, if I can put it that way, as we always show this slide with quarterly performance on the production side, where we are hoping to get to in 2023, and most importantly, where we think we're going to get to the peak rate of in excess of 13,000 barrels a day, once the all six Hibiscus developed Roche wells are online, which should be around the end of the year, perhaps slipping into the first bit of next year, but right around that period. And that is really what we're aiming for, is to try and get that momentum up to that 13,000 barrels a day. And we're well on track to do that. Next slide, please. This is our lifting schedule. Again, it's a slide we always show to try and show where our liftings are. As a reminder, we recognize revenue and cash flow, not based on a daily basis as we produce the oil, but only when we sell it, and that creates Quarters like the second quarter where we hardly had any liftings at all. Again, that was well communicated. The second half of the year is obviously where it's going to be much more active. The third quarter, in fact, looks like it's going to be an extremely big quarter for us with over 1.5 million barrels of oil being lifted, which you'll see coming through in the third quarter P&L. And obviously some of the cash that comes usually 30 days later after the lifting. So some of the cash may actually accumulate only into the fourth quarter. But nonetheless, it's going to be a very active third quarter for us and a very interesting fourth quarter for us as well. Next slide, please. I won't dwell on this slide much, but we always like to provide the detailed granular information around our balance sheet. debt amortizations we're paying something like 26 million dollars worth of debt back this year and our capex is trending as per guidance as per expectation around the 75 million dollar mark is where we expect to be by the end of the year next slide please and again a cash flow waterfall where you can see the movements in cash I don't think there's terribly much to point out here, but again, for avoidance of any confusion, we like to really lay out the exact pattern of cash flow during the first half of the year, ending with a cash balance of around $31 million. Next slide, please. So I want to talk about each of our three assets at the moment, our three production assets. Most in focus is going to be Gabon right now, given all the activity there. There was some grumpiness perhaps, some negativity in the news yesterday around Gabon in particular. So I do want to make sure that we address what we think is an extremely successful ongoing development in Gabon. I'm going to ask my colleague Richard Morton who, incidentally, discovered the Roosh and Tortue fields originally and has been involved with this asset for 15 years now to talk a little bit about what's going on in Gabon. Richard?

Yeah, thank you. Thank you, John. Good morning, everyone. I'm the technical director for Panoros. John says I've been working on this project for a number of years. So it's great to see this go from an exploration project in the early days of Panoros history to a real core of the company and a production asset that's performing extremely well now. So we had a lot of activity in this asset the first part of the year. The first activities were the installation of the new platform at Mabomo at the Haviscus field and the installation of the pipeline down to the FPSO. So brand new facilities installed according to plan. The rig arrived and drilled three wells in hibiscus. They were all extremely good results in terms of reservoir quality. We've got long horizontal section in very good quality sandstone and very productive wells for the first three wells, hibiscus three, four, and five. And those wells kick off at a gross rate of around 6,000 barrels a day, which is well within our In fact, it seeds our expectations for the reservoir. So we're very happy with that. The fourth well, number six, is currently completing. We'll have that on production shortly. Then the rig will move to drill the first two wells in the Ruche field to the northeast, to the east of the platform, to tie that back in. So we've got plenty of activity upcoming and news flow for Hibiscus and Ruche. The rig still has a couple of options available. We're showing a couple more wells, possibly in 2024. We may have another production well to add to that. That's an optional thing. The joint venture needs to agree on that. And then there's an opportunity for some more exciting exploration in the area as well, which we're discussing. Down at Tour 2, we've put on a new gas lift compressor to increase the capacity there. And that means we can run all of the six tortue wells concurrently. So we're looking forward to, once these new hibiscus wells are all on, looking forward to some real gains in production towards the end of this year and the tortue contributing as well with the new gas lift. So I'll go to the next slide and talk a little bit about the project in EG. So we've got plenty of activity happening in EG as well. We have some ongoing work on the field, ESP conversions and some life extension projects which are currently underway, being carried out by Trident, the operator. There's also a gas compression project at Akume which is being started and that will help utilize gas injection to reduce flaring on the asset. The exciting news coming up here is we have a rig coming. That rig will drill three infra wells at Sabre first, and then two wells at, if you may have a title, three wells. And then the rig will move down to drill an exploration well in Block S. So Block S is a new project for us. We farmed into this asset at the end of last year, alongside Cosmos and Trident, who also are in our Block G fields. And we have 12% of the project. It's a new play we're testing that is very, very close to the FPSO, so about 10 kilometers from the FPSO, which means it's quite an easy tieback should we be successful. We also have acquired the block EG1, which you see on the map to the right. And that one is operated by ourselves with a partner, Cosmos. there we don't have a well commitment but we see some very interesting prospectivity which extends east from block s into this asset as well so we'll go to the next one please here's a little geoseismic cross section on the left hand side showing the king deep target so basically it's a very large four-way which we've identified 10 kilometers away from the fps so we've got a gross mean prospective resource in this of 180 million barrels. So it is potentially, if it comes in, potentially a significant game changer for the area and easily tied back into the production facilities in Equatorial Guinea. So thanks. I'll hand back to John now.

Thanks, Richard. We're very excited with this exploration prospect, and we can probably talk about it a little bit more in due course. Next slide, please. Tunisia, there's quite a bit going on in Tunisia as well. We, as everybody knows, bought this asset when it was doing about 3,500 barrels a day. We have recently been producing in excess of 5,000 barrels a day. So we see this as a great success where we are joint operator together with the state on this one. We still have an ambition to get to 6,000 barrels a day. It's hard work every day to do it, but we have definitely been showing some positive movements to get towards those levels. The big news in the quarter here was that we acquired our minority interest that we held in this asset, so we consolidated our position here. I think we announced that back in April. Most people would have followed it, but that happened in the quarter, which added another 3 million barrels roughly of net 2p to us and around 800 or 900 barrels a day of production at the time of the acquisition. So we're very, very happy with developments in Tunisia as well. Next slide, please. It's the final slide, and we're repeating the messages that we have here. We have a very, very active work program ongoing in Panoro. We have at least 10 wells drilling, with three, admittedly, have already been completed to date, but we're sort of just still in the beginning of a very, very active period for the company. and we have options over additional rig slots. Excellent results from the first new production wells, the first three. Richard touched on it, and again, we're extremely pleased. The timing of those three wells admittedly is a month or two behind the original schedule, which of course skews things. But again, there was a little bit of negativity in the market yesterday. We would counter that very strongly and say that we're extremely pleased with the progress and the development of these three wells to date and the overall hibiscus rouge development Kicking off right as we're finishing off in Gabon, we're moving into a three-well infill drilling program in Equatorial Guinea, so it's going to be much more news flow as we come into 2024. The rig is contracted. It's due to arrive in early Q4, and we'll start drilling this well probably towards the end of the fourth quarter. The next exciting thing is that there are up to three exploration wells. that we're going to be drilling in the next 12 months. So the Akheng Deep one, which Richard touched on, is firm and planned. But we have these two additional slots in Gabon as well. And there is debate within the joint venture about what to do with those two slots. It's too early to say what the decisions on those are. However, there is very much a positive sentiment towards drilling at least one exploration well. We'd like to see that happen as Panora. Our consolidated Tunisian business has really given us extra momentum in the country, and that's really helped solidify the company even further. And we've made a very, very clear framework, clear shareholder returns policy for 2023. Our 2024 shareholder policy will obviously come out in due course in November when we announce our third quarter results. We'll give some more information about 2024. we've been very clear in today's announcement around the dividend i think is a very positive indication in terms of the board's sentiment towards shareholder returns so with that i'll conclude uh and uh open the uh mic or the panel on the left you can see to type any questions if you don't want to speak um andy my colleague andy's going to um officiate here um

Thank you, John. Stefan, I think you have to unmute.

Sorry, the first question is from Stefan Foucault. Stefan, you're unmuted. Please go ahead.

Hi, guys. Hope you're okay. Thank you for my questions. I have a few. The first one is around what is the current prediction than the gas leaf, the recent well result and so forth. I know that you reach 30,000 a day at the end of July, but what's the situation now? That's my first question. Second question, if we look at 2024 and we look at the second phase of development for Ruchibiscus, what sort of capex are you expecting for that? And I'm not talking about the ongoing drilling program, but more what we should expect for this phase two. And perhaps, lastly, the production in Q2 in Tunisia was really, really good. Could you perhaps comment on that, on how the work of the AFPA Forum, what perhaps it means for reserve, what it means for perhaps 2024 production? How do you feel about what you have achieved so far? Thank you.

Thanks, Stefan. So our partner BW Energy announced yesterday, and they mentioned current production of DUSA for around 27,500 barrels a day. The field had achieved 30, or in fact even in excess of 30, when the gas lift compressor was working. The operator also announced yesterday that the ESP, the electrical submersible pump, on one of the new hibiscus wells was down, so that's the delta, as it were. That is something that the operator is busy trying to figure out, just how to replace it. These ESPs are reasonably straightforward to replace, so I think it's a temporary thing, but that was disclosed by the operator yesterday. So it's around 27 and a half. The field really should be doing 30 or perhaps even slightly in excess of 30. And then we have a new well, as Richard touched on, coming online, we hope, in the next couple of weeks. So I think you'll see us comfortably into the thirties, as long as everything's working fine, which at the moment it is, in the next couple of weeks. Your second question around phase two CapEx, I don't have that number to hand. I'm just looking at my colleagues to see if anybody knows the number offhand, but will be consistent, we believe, with the numbers that you have in your models, and most of the analysts do, because those have all come out of previous guidance. At the moment, obviously, we're seeing cost inflation across the sector, but at the moment, we don't have a newer number than the one that you probably already have. Stefan, I'm not sure if that's helpful in answering your question. I just don't have the exact number at hand, but we can circle back with you offline and validate that separately. Tunisia, yeah. So Tunisia, we had a, you know, first quarter, as already disclosed, our first quarter production pretty much across all the assets for various reasons was a little bit down on budget. But Tunisia really kind of came into a great swing of things in the second quarter. We had a very successful work over a couple, which really sort of got production, you know, uh 4 500 5 000 barrels a day gross sometimes in excess of 5 000 barrels a day uh you know we have a number of wells in production at any given time uh working on how many not 15 wells at any given time that's right up to 15 up to 15 wells so you know sometimes one will you know need an esp replacement or something like that but we've had some uh some very good success around that is there anything you'd like to add to that nigel no i mean

As in some of the other assets that we're involved with, we're continuing to optimize production, particularly around the ESPs. And so in the last couple of months, we've put particular focus on that in Tunisia. We brought in an expert on the ESP operations, and we're fine tuning the setting of the pumps and the operational procedures in Tunisia. We see further potential. But this is a case that we're working through well by well and looking at how we can optimize each well setting, pump setting. So we're currently very pleased with performance, but we still believe there's further to go.

As a firm that would be given this performance, you're achieving some positive read-through for reserves or is it too early to say?

Yeah, on the reserves, I mean, one of the main fields that's in focus currently is the Gubiba field, and that's where a lot of the work over activity has been just recently. And we recompleted the Gubiba 10 well on the Duleb reservoir for the first time earlier this year. And there we would expect to see some additional reserves coming through, but we're in the process of updating the firstly the static model for the field and secondly the dynamic simulation model and that's work that we're in the thick of right now what we hope is that out of that exercise come recommendations for further drilling probably injection wells in the northern part of the field but also potentially producers now if we're successful in identifying such opportunities clearly additional reserves could come but we're not there yet we're doing that work Great. Fantastic. Thank you very much.

Thank you. The next question is from Theodore Sven Nielsen. Theodore, you're unmuted. Please go ahead with your question.

Good morning, guys, and thanks for taking my questions. First, a question more in the long term, looking ahead like the next three to four or five years, How much approach would you give to M&A versus harvesting from your current portfolio and which areas in particular do you think are attractive? Second question is all on CapEx next year. I understand that you don't have a precise estimate yet, but could you just directionally indicate where CapEx should go next year? And third and last question is on revenue recognition for third quarter. John, you said that some of the listings may slip into, or payment for the listings may slip into fourth quarter. Would that also impact revenue recognition? Meaning that we should expect some of the listings for third quarter to actually be recognized as revenue in fourth quarter. Thank you.

Sure. I'll do them in reverse order. The revenue recognition is at the time of loading of the bill of lading of the loading of the crude. So those will all happen in the third quarter. So in terms of P&L, it will all be third quarter activity unless for some reason one of the liftings for operational reasons slips into the fourth quarter, which we don't at the moment anticipate. So, this will all be third quarter P&L activity. My only point around the cash was that the cash usually comes 30 days after that. So, you may not see it come through the cash flow until the fourth quarter because a couple of the liftings are in the second half of September, actually. So, again, based on what we know now, all that activity will happen in the third quarter and be in the third quarter P&L activity. CapEx in 2024, what we've generally said, as you point out, we haven't gone through all the JV meetings, which is when the budgets get set for the next year. That typically happens in September, maybe October. So we'll give a little bit more clarity in the third quarter results, and then obviously we'll do a trading update early in the new year, which will give very firm numbers. But I would expect it to be – I think we've got it around $50 million or in that range. It could be a little bit more than that, but $50, $60 million would probably be good guidance for the moment, but that's a little bit early and that's just a guess, but we'll come back with more specific numbers in due course. In terms of M&A versus organic, I mean, what we've obviously positioned the company through these developments in Gabon, Equatorial Guinea, the acquisitions we've made in the past, the recent acquisition we made in Tunisia as well, is really focusing on organic. We believe that, as you say, the next two, three years, we've got a great trajectory of production. Oil prices stay sensible. It'll be a great time of harvest for the company with a lot of the capex behind us. New projects will always emerge through the organic portfolio. If any of this exploration activity in Dusafu or in Equatorial Guinea yields results, those are infrastructure-led exploration opportunities that will be easy and much cheaper than going off and buying new assets, much cheaper just to develop and put right into our existing infrastructure. So I think you'll see perhaps a bias towards organic growth in the case of exploration success but you know a company like menorah we always need to remain opportunistic and so we're always looking at M&A opportunities you know assets are coming for sale on a regular basis you asked about areas of interest you know I would think the current areas were in so selectively in North Africa Tunisia and West Africa are key areas of focus there so I think We're a growing company. We've gotten to a certain size. I think there's always opportunity to do more, but we really are focusing at the moment on delivering what we've set out in front of us here. But nonetheless, it's our duty towards ourselves and our stakeholders and our shareholders to try and continue to grow the business, and we'll always do that.

Okay, that's clear. Thank you.

Thank you.

Thank you. The next question is from Alex Smith. Alex. Yep.

Morning, guys. Go ahead. Yes. Hi. So just a question on Tunisia. Maybe a bit more detail on the expected synergies and incremental value from the recent acquisition. And additionally, can you provide some detail on the receivable increase? And is this relatively normal levels? And if so, how do you plan to manage that? If it's not just a bit more clarity, that would be great. Thank you.

Alex, I think it's a good question. I think the main synergy for us, other than just looking at pure M&A metrics, you know, dollar per barrel that we acquired the reserves and the production out, which we believe were attractive and accretive to the business, the real synergy for us came from, it's a little more mundane, I would say, a little more internal focus than the market focused synergies in the sense that we had a 40% shareholder. So we had separate board meetings, separate technical sessions with that partner. We now have the ability basically to keep the exact same overheads that we have that support that business, both in London and in Tunis, where we have a team with the technical and financial and the country management team. that is now entirely focused on Panora. We can do exactly what we like with that team, with that support. We can make decisions on our own and we're not really spending any more money to do it. So we've kind of acquired assets without having to have an overlay, an additional overlay of management of those new assets. If those assets have been bought in an entirely new concession in any country, we would have to have the full infrastructure organizational infrastructural support of that we don't have that here so that's the key synergy on that one the receivable in Tunisia yeah there's always kind of a receivable position in Tunisia where this arises from our domestic sales obligations which are formed part of the taxation regime in many many countries including Tunisia where the state oil company sells some of our crude and then they pay us in due course. That due course can sometimes be a little bit drawn out. And when we made the acquisition in Tunisia, obviously we acquired 40% of the share of the receivables as part of that acquisition. So the receivable went up and we just felt it was prudent to highlight that because the number had gone up. We are seeing in Tunisia a slowing of payment of those receivables. uh so it it does happen occasionally um in other countries as well and as well in tunisia sometimes they're a little slower sometimes they uh much faster and we're just in a period of time where there's been a little bit of a slowdown in terms of the payment of those receivables so we just felt it was prudent to point it out we do fully expect to be paid for those um but uh it also helps because the number $16 million, you know, we're waiting to see that come through the cash flow statement. So we felt it was prudent to mention it.

Great. Very good. Thank you.

Thank you. The next question is from Chris Aristoudou. Please go ahead. You're unmuted.

Thank you. I've got a couple of questions. The first one is on hibiscus rouge drilling. Can you please tell us when are you thinking of doing the hibiscus rouge drilling?

We don't have any particular firm news on that one at the moment. I think we are looking at that next phase and obviously the results of this first phase are going to inform both our technical and our operational assessment of that next phase and when it's best to do it and how best to do it. We have these additional well slots now. Are we going to use them? Are we not going to use them? So there's still some uncertainty there in terms of exactly when we might sanction the next phase so it's a little premature to give you much additional guidance on that other than to say that clearly there are the six wells that we're drilling now in Hibiscus Rouge area are not sufficient at all to drain the considerable reserves that are there so there is certainly the room for a second phase obviously if we have success through the If we're going to drill exploration wells here, that might also change the configuration of any phase two. So it's a little bit early on it, but there is plenty of reserve left there to do, but it's a little early in terms of the timing. We have a total of 12 well slots on the platform, the Mabomo, and we fully intend to fill all 12 of those in due course.

Okay, and my second question is on cash. Would it be fair to say that Q2 is kind of a trough given your liftings in the second half and if you can give a bit of color on how you think cash outlook given the 17 million of all your revenues in advance, how does that affect Q3 cash and Q4 cash, whether that's from Q3, whether that's from Q4, a bit of that would help.

Sure. I think we've got all the elements in our presentation and our disclosures to try and build it. The uncertainties that we have are simply around exactly when we're lifting oil, exactly when the cash calls on the capital expenditure come. Do some of them leak into next year or some of them accelerated this year? So there are always a lot of moving parts. So I wouldn't want to give you an extremely specific answer other than to say that I think we've got all the elements in our disclosures that you should be able to pick it out. I would say that obviously, People who follow us know 2023 is very much a year of investment. So while we are starting to produce more, we're starting to sell a little bit more. We're also in a heavy spending phase, and that will continue. A lot of this depends on oil price as well. I mean, oil is at about $80 a barrel now, which is a good level for us. We like this level. Obviously, it'd be nice if it's higher. But a lot of it's also dependent on the oil price as and when we lift these barrels. So I don't think I can give you a more specific answer than that.

Chris? Okay.

All right. Thank you for taking my questions. Thank you. Good luck. Thank you.

And the next question is from Leonard Hauger. Leonard, you're unmuted.

Please go ahead. Leonard, are you there? You might need to unmute yourself.

Okay. Okay. That concludes the Q&A for today.

Thank you very much, John. Thanks, everybody. Thank you for sharing this time with us, and we look forward to updating you further. Again, I think it's going to be an active nine months for us, so hopefully we'll be reporting good things back to you in that period. Thank you very much.