Panoro Energy ASA

Good morning, everybody, and thank you for participating in our third quarter results presentation. On the call with me today, joined by Kazi Kadir, our Chief Financial Officer, Nigel McKim, our Technical Director, and Andy Diamond, our Head of Corporate Development. Richard Morton, our Technical Director, is actually in Bata in Equatorial Guinea today, so he's not joining us. He's down there working on the start of the drilling program in Equatorial Guinea, which we'll touch on in a moment.

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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 that 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 and this presentation that we're going through were released this morning, which can be found on our website. Next slide, please. So when it comes to question time, you can either type in a question. As you can see in the left panel here, you type it in, and we will endeavor to answer the question as long as the question has not already been answered through a previous question. Or you can raise your hand, as you can see there in the top left, the little hand signal, and we will try to mute you to let you ask a verbal question on audio. And I'll remind you of these instructions at the end as well. Next slide, please. So it was a very strong quarter for us. It's even a new record quarter for us with revenues of well over $100 million, very strong EPA DA, almost $65 million, and a net profit of almost $28 million. We then have the year-to-date highlights, which show the progression of the business as we've gone through three quarters. We still have one quarter to go, obviously. And a balance sheet, which is still on a net debt basis, we believe quite strong, $35 billion net debt. In making those calculations, we're netting off the cash that we'd drawn on under the short-term advanced payment facilities, which help us manage working capital. But those numbers are a good reflection of the balance sheet position of the company, which is good. And today we've also announced a cash distribution of 40 million NOC. With a separate press release, you can find the details of that distribution there. It's important to note that this will be paid as a return of paid-in capital, which is not a dividend per se, but it's the same thing in the end. It's cash. But in returning it as paid-in capital, this may benefit certain shareholders from a tax perspective, and it's an efficient way for us to return cash to shareholders. And that equates to NOC 0.342 per share. The final cash dividend for 2023 will be declared at our fourth quarter results, which are in February. Next slide, please. We thought it was useful to maybe just take a step back and look at the context of what it is we're doing, whereas we are in our growth trajectory as a company and what that also means for shareholder distributions. We don't have to go so far back in time to see that Panora was a very small company producing about 1,300 barrels a day back in 2018. Deuces who started coming online in that period, we got to 2020, 2,200. And we're slowly climbing this ladder doing approximately 9,000 barrels a day this year. And as everybody knows, we're looking to produce greater than 13,000 barrels a day during the course of 2024. And we started really through our commitment to return cash to shareholders. We started that commitment six months earlier than originally guided. We started that in February of 2023, where we paid the very first one, 30 million kroners. And as you can see, we've been building that up. We've now moved to 40 million, and I'll talk about it shortly, but we've announced the 2024 framework as well, the policy for shareholder returns. So I think what we're trying to demonstrate here is that the company and its board are very, very dedicated and committed to being a very strong shareholder return focused company at the same time trying to run a business and manage our capital expenditure and our other financial stakeholders at the same time running a very prudent business. Another point to make here really is around where we see the free cash flow inflection point. We are still in a busy period. We're only about halfway through our massive drilling program. And we see the free cash flow, the real inflection point for the business happening somewhere halfway through the year, which is when most of the capex is behind us. And we will hopefully be producing a lot of barrels per day. And that really is where we're going. And that gives us scope really to really look at continuing to build on our shareholder return story from where we are, which we think is already in very good shape. Next slide, please. So what we've announced today is the framework for our 2024 share return policy. We're targeting between 4 to 500 million Norwegian kroner. The exact timing of that is depending on the de-risking of our production operations. We'll talk about it. We're about halfway through our extensive drilling program. It's probably the busiest period ever in Panora's history. We're about halfway through it now as we de-risk those production operations in Gabon and Equatorial Guinea in particular. And as we do that, the weighting will be towards the second half as production milestones are achieved. In terms of the core cash distribution, we see that paid on a quarterly basis, starting with our first quarter results, which we'll discuss in May. And those will be paid as a return of paid-in capital, again, which may have certain tax benefits to certain shareholders, an efficient way for us to do that. But we also want to keep a very substantial portion of that $400 to $500 million through special distributions and share buybacks. We recognize that at times we're trading at, most times, all times, we're trading at discount to our net asset value. And we think, depending on the circumstances inside periods and the share price in the prevailing market, that there are going to be opportunities for us to do meaningful share buybacks during the course of next year. The key factors and assumptions behind these, what we tried to do is take an oil price that represented where we felt the equity analysts on average had built their 2024 models on. And by our calculations, that's around $85 a barrel, current change rates around 10 to 1 on the kroner. The board will obviously continue to assess this upwards or potentially downwards, should oil prices be higher or lower, or if production de-risking occurs. So clearly there's some some upside, particularly as we get into the second half of next year, to consider further revisions. This is approximately a doubling of last year's, the 2023 return policy, so we really do feel we're continuing on to be on the ladder here of increasing shareholder returns. Next slide, please. What we tried to do here is encapsulate the busy program that we talked about. are really in the most active phase of drilling that this company has ever been in. It really is. It's remarkable. And through the support of our shareholders and through the support of the financial community that's on this phone call and our lenders, you know, we've really positioned the company well to get in a position where it can really undertake material capital programs. And as you can see, in 2023, we drilled the four hibiscus wells. We drilled at least halfway through the Ruche well. That will be completed only in 2024. And we've made the Hibiscus South discovery. And what we have now going on are a series of workovers in Hibiscus, which we'll come back to, related to the ESP issues that have been well flagged. And in Equatorial Guinea, we're also warming up the rig right now with a couple of the workovers before we spud the first well, probably around Christmas time. Then we still have next year three more production wells in Gabon, three production wells in Equatorial Guinea and two exploration wells. So I can't really think of a time in my time at Bonoro where the company's been busier. In the bottom part of this slide, we try and talk through a little bit some of the pros, some of the highlights and the lowlights of where we are to date. It's been excellent safety performance to date on the campaign, which is extremely important. The flow rates from the four hibiscus wells have exceeded expectations with production reaching almost 40,000 barrels a day. when four of those wells were online prior to some of the issues we've had with the ESPs. So we know that the reservoir is delivering at or beyond expectation at the moment. So it does show you some of the potential. On the negative, the ESP issues have caused production variability and those together with some of the earlier delays on the project have probably put us by our estimate three, maybe even four months behind the original schedule that we've been on. That is a negative, clearly, and that's been reflected in the market, I think, quite loudly. And then the right side, let's talk a little bit about the electrical issues we believe can and will be rectified. The reserves are unaffected, so this is deferred production, it's not lost production. We've now added an additional seventh production well to the Gabonese campaign, which should allow us to achieve higher rates, manage the reservoirs better, extend the plateau out, greater diversification of well stock. It really is a nice add-on for us. And these infill wells in Equatorial Guinea can add additional volumes to what we've seen so far. And then we have two very high-impact exploration catalysts, Bordeaux, which is the old prospect B for people who have been around for a while with Panora, and the Akeng Deep Well, which is the Cosmos-operated well in Equatorial Guinea.