Panoro Energy ASA

Good morning, everybody, and welcome to Panora Energy Q4 2023 Trading and Financial Update. I'm joined today by a number of colleagues who are available to assist on Q&A. And today I will just take you through our fourth quarter results and update you on some of our key operations. 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 announcement was released this morning and a copy of the press release and the presentation. are available on our website, www.neuroenergy.com. We will have some Q&A at the end of the call, and you can submit your questions in two ways. You can raise your hand using the hand icon, as you can see here on the left side of the screen. Or you can type in your question here, and we will endeavor to answer it to the extent it has not already been answered from a previous question. Here are our financial highlights for the year. This is a record year for Panora. We had a record revenue, a record EBITDA, and a record profit before tax, so very, very much a very, very good banner year for the company. We're very proud of that, and I think it's reflecting the trajectory that the company is on. We have also today announced a dividend of 50 million kroner, which is our highest dividend to date. We're also very, very proud of our dividend track record to date. It's a cash distribution rather than a dividend. We started dividends, cash distributions, about a year ago. And this was about six months before the guidance that we provided to the market in terms of when to expect such cash distributions. And in that time, we've grown our distributions by almost 60% to today's announcement of 50 million kroner. And the board and the management of the company are very much focused on cash distributions and shareholder distributions and shareholder returns. It's a very key focus for the company. We're very proud today to have announced our highest dividend to date. This is a repeat slide from our announcements in November, which we talk a little bit about the way we see 2024. The 50 million Kroner dividend that we just announced today concludes our 2023 dividend cycle, our Q4 dividend. And we're now officially, as of today, into our 2024 cycle. And this is the framework that we set out in November and which we're sticking by now, which talks a little bit about our aspirations to pay a core cash distribution dividend which we've announced today and will continue to do those, and that we also want to supplement those with special distributions and share buybacks. Share buybacks are obviously something very much in focus, particularly given the share price of the company recently, so there will certainly be some strong attention paid to share buybacks as part of this distribution. We've set out the parameters of where we see the levels here, between 400 and 500 million NOC during the 2024 distribution. And we're very much sticking by this, and this is very much a key focus for the board of the company. So a little bit of an operational update now in terms of where we are on the various things we have going on. From top to bottom, we have Hibiscus, the Hibiscus field, where we've been performing some workovers in the back end of 2023. The most recent activity, which I'll talk about, is the Hibiscus South development well. This was a discovery we made back here in 2023, and we've now drilled – this well, and it should be coming along quite soon. We will then be moving on to Roosh to drill the Roosh discovery that we've made, to turn that into a production well. And we'll also be continuing with workovers dealing with the ESP issues, which I'll touch on again a little bit more. And that will finally see us coming back to drill a final well in Hibiscus. So we still really have three full new wells coming online, plus a workover or two. And then we have the Bordeaux prospect, which, subject to timing, is a well that we very much would like to be drilling this summer. In Block G, we recently had to announce that the rig contract had been terminated, so it's pushed out the drilling icons there. We have them notionally here into the second half of the year. I'll touch again on the situation with the rig, but that looks like it's now a second-half activity rather than a first-half activity, which it was originally. So we still have plenty going on in the company and lots of production growth, lots of catalysts this year on the operational side. This is a slide sort of reconciling our production for the past year and a half or so together with our guidance for the year. We last year produced 8,500 barrels a day approximately, which was a record year for us. This year we're guiding between 11,000 and 13,000 barrels a day, having taken The top end of that, the 14,000 barrels a day off due solely to the rig termination in Equatorial Guinea. Again, those wells were meant to have been coming online in the first half and now are estimated to come on in the second half. But it still should be approximately a 40% increase in our production from last year. So, again, another year of growth ahead of us. Liftings. Liftings are very important for the company, as everybody that follows the company knows. We recognize revenue and cash when we sell barrels, not as we produce them. And of course, historically, we've had very lumpy liftings, which have created some volatility in our quarterly earnings, quarterly P&L, and of course, our cash flow as well. And I'm happy to say that the yellow graphs you can see here show a much steadier development this year. That's down to a few things. That's down to obviously growing production, but it's also down to actually getting into some joint lifting arrangements with one of our operators, which makes this much smoother. We're lifting smaller volumes more frequently, if I can put it that way. So that's been a very, very good development for the company and I think should make the quarterly P&L a little bit more stable. What's important to note here, I think, as well is we have quite a few liftings coming up. So in Q1, we are showing 750,000 barrels here. We've only lifted 250,000 barrels of that. So still in Q1, in March, we have about half a million barrels being lifted. And then in early Q2, in April, we have about 650,000 barrels being lifted. So you can see that we have roughly one-third of our crude liftings for the year happening from March until late April. So it gives people, I think, a little bit of idea that we're also hopefully catching a little bit of the higher oil price now, if those oil prices maintain above 80, whereas they've been in the mid-70s earlier this year. So I think you'll see quite a bit of P&L and cash flow activity as we get into March and April, early May. That's when we start really kind of getting the cash in the door and as we're starting to get our capital expenditure behind us. Total liftings for the year estimated around 3.7 million barrels, which is a 40% increase on what we did last year. So, again, I think, you know, depending on the oil price, of course, I think you should see our financials also potentially looking like a record year again. I won't dwell on the slide. We always produce it to show you. where our debt outstandings are, and what our CapEx guidance for the year is. None of this has changed. There's no new information here, particularly with the exception of the breakdown of where the capital expenditure is on a per-country basis. But the guidance remains the same at $75 million of capital expenditure this year. And, you know, we'll continue in our regular updates to update this slide as we go. Similarly, I won't dwell too much on our cash flow waterfall here, but again, we'd like to show this slide every time to kind of break down what's happening. Obviously, we're very happy to have, again, paid now with today's dividend, $18 million of cash distributions to our shareholders during a year in which we were spending lots of money on our investments and our assets. So again, showing that we're willing to dedicate a large portion of our free cash flow towards shareholder distributions. And that will continue. Right. In Gabon, I'll start first with Hibiscus South because that is the most recent thing that's happened. People will remember back in the fourth quarter last year, we drilled an exploration well called Hibiscus South. It's just to the south of the main hibiscus field. And we made a discovery there. We announced that. And we announced around 67 million barrels gross. These are very, very high value barrels because we already have the production platform there. So the cost of operating these reserves is extremely, and producing these reserves is extremely low. Very high margin barrels to bring back into the hibiscus structure. And then we have now completed drilling the production well there. So we've come in and drilled a horizontal well That well is completed drilling now. It's busy in the final completion stages of that well, and that well should be online within the next few weeks. And it just goes to show that you can, in this area, again, shallow water, lots of objects to drill here in the future, that you can make a discovery and have it online within five months. So infrastructure-led exploration very much works in this area, and we have had a great success there. The drilling of the production well has also given us a new data point on the structure, and the structure now appears to be considerably bigger than we had previously guided. So it's a very, very nice additional data point for us. We don't have a perfect number right now in terms of the quantity, but it is a significantly bigger field than initially estimated. We're very happy with the reservoir performance. Again, as we talk about ESPs and some of the issues we've had here, One thing that certainly keeps delivering here on the upside is the reservoir and finding additional oil reserves here. And Hibiscus South has been a great success. So, again, that should come online in the next few weeks. So Hibiscus Reef Phase 1, we've had the ESPs, which have been well flagged. We've had some electrical integrity issues there, which resulted in November and December having to, literally pull out the ESPs, ship them back to the manufacturer, and then what we've done is we've reinstalled two new ESPs into two of the wells there, and we're free-flowing one of the wells. So at the moment we have three out of four wells that Abiscus is producing. The ESPs that we've reinstalled in the two wells are operating under slightly modified operating parameters, so we're using different frequencies and things like that. trying to operate the wells in a different manner than we had before while we're waiting for the final reports in terms of what the ultimate failure on the previous pumps was. And so far we've been very encouraged with the performance of those two new pumps. They are very, very steady. Production is very steady, around 25,000 barrels a day. That's prior to obviously bringing Hibiscus South online in the next few weeks. So we've been very encouraged with the new operating parameters. We should hopefully know what the final prognosis is or the final reasons for the difficulties we've had should be known in the next few weeks or so. But at the moment, we're very encouraged with what we're seeing in terms of the UL performance. And on the Tortue field, things are very, very steady there. The gas lift compressor is working just fine. very steady production on the Tortue field. So again, on Gabon, we see production around 25,000 barrels a day, but we see that growing. We will be completing the Hibiscus South discovery into production in the next few weeks. We'll then be installing a pump into the fourth well in Hibiscus. So we'll then have an additional well online there. All four wells should be online then by April. And then we will continue to go drill Roosh, the Roosh field, and another well back into the Biscuits. So I think that we are now climbing back up the production ladder, getting this asset back to where it needs to be, which is towards 40,000 barrels a day. And so progress is very good on that front. Equatorial Guinea, just to remind people, we have three assets effectively here in Equatorial Guinea. We have the Sib and Akuma complex, which is the production asset. Fryden uh, as the operator and Cosmos are our partners there together with the state. And then we also have a stake in the exploration blocks, block S operated by Cosmos and block EG01 operated by Noro and partnered with Cosmos. So we kind of have a, have cornered this, uh, this, this area, uh, of Equatorial Guinea, uh, where we see a lot of remaining prospectivity and obviously a lot of remaining reserves and contingent resources to produce. Um, We had to announce recently the termination of the rig contract. So we had a rig work in the field here with the infill drilling program, three infill wells plus the drilling of the Akeng Deep prospect, the exploration prospect in Block S. And unfortunately, the rig contract was terminated. This is a decision that was not easily taken, but it was the right decision. It's a decision that was endorsed by the KV partners and by the government. in terms of letting this rig go. The partnership is very actively looking now for an alternative rig to come in and complete this program. That could happen as early as the late second quarter. We don't have a rig contract in hand yet, but we are very desperately working on trying to get a good rig to come in and drill out these wells, including the Akhang Deep prospect, and we'll certainly update the market as soon as we have any news on that. But the partnership is very focused on getting it rigged back out here. It's a very important well for us to drill. There's also a tax update. We mentioned this, I think, once before, but it's good to remind people that in an environment where tax regimes are changing for the worse in many countries in which the industry operates, in Equatorial Guinea, they are actually dropping taxes. the profit tax rate from 35 to 25%. So again, trying to encourage investment in Equatorial Guinea in the oil and gas space. Tunisia, we obviously during the course of the year, we consolidated our position there and took a bigger position. We have 49% of these assets now, which are a series of onshore and shallow water offshore production assets. And these continue to be very good, strong, solid reserves for us, good, solid production. The number of activities during the course of the year, which may be less visible to the market than some of our other activities in Gabon and Equatorial Guinea, but nonetheless are quite important in the context of the asset we have here. Again, we have had success here as an operator in increasing production. and we continue to see lots of upside here, and we will be going after some of that in the second half of this year. So a summary slide before we turn over to Q&A. The key messages to leave behind are the visible production growth. Again, we are looking at a significant uptick in production this year, targeting between 11,000 and 13,000 barrels a day of working interest production. during the course of the year. Obviously, we'd hope to get above 13,000 barrels a day at the peak, but this is an annualized rate. To remind people of our reserve and our contingent resource position, 65 million barrels. This is a very, very long life, more than 10 years of reserve production replacements. So we have a long-term business here that should continue to develop production growth, and we have lots of development opportunities within our organic portfolio. On the middle column, infrastructure-led E&A, Hibiscus South is a perfect example of how we can take just five months from finding oil to producing oil. It's the model that we seek, not trying to find oil in strange places that are going to take years to develop, but these are things that we can turn around quite quickly. And we do have high-impact wells at Cane Deep and the Bourdon Prospect in Gabon, which we hope to build this year as well. And then all of that set up in what we think is a very, very healthy, well-governed company with very strong commitment towards shareholder distributions, targeting $400 million to $500 million this year. I don't know, knock this year, through a quarterly cash dividend supplemented by special dividends and, of course, share buybacks. We continue to look at opportunistic approach to new ventures. That's been part of what we've done as a company and done so successfully. John Guinea was a great example that we bought that and we received payback within 18 months. And we're continuing to look at opportunities as they come in a combination, of course, with our shareholder distribution framework. So that concludes my presentation. As a reminder, you can raise your hand. and we will unmute you, or you can type a question in, and my colleague Andy will be managing the questions as they come in, and we'll endeavor to answer all questions unless we've already answered them in a previous response. So, Andy, I'd like to turn it over to questions now.

Thank you, John. The first question comes from Stéphane Foucault. Stéphane, you're self-muted. Can you please unmute yourself and proceed with your question? Thank you.

Good morning, guys. Thanks for taking my question. My question mostly is around South Hibiscus. So you talk about the South Hibiscus being potentially materially much larger than expected. And I was wondering whether if you could give an order of magnitude. Is it double the size? Is it triple the size? Or what is it?