Panoro Energy ASA

The broadcast is now starting. All attendees are in family mode. Good morning, everyone.

Thank you for joining us. This is John Hamilton. I'm joined today with some colleagues and certain board members as well from Sunny Oslo today. Welcome, everybody. 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 that 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, given known or unknown risks, uncertainties, and other factors. And for reference, we've made a series of announcements this morning, which are available on our website, www.penuroenergy.com. Next slide, please. So for those of you who know our system here, this is how, if you'd like to ask a question at the end, we will take questions at the end. You can either type in questions. You can see on the left-hand side of this pane here, and we will endeavor to answer that question as long as it hasn't already been answered through a previous question. Or if you'd like to actually have your microphone unmuted, you can raise your hand, and we will try to answer your question as well. That would then be on the microphone verbally. I'll remind you of this mechanism as well at the end. Next slide, please. So today we've announced our first quarter results. I think most of the numbers are sort of within guidance and as expected and as recently announced through our trading update. So it was a good quarter for us in terms of liftings, revenue. EBITDA, cash flow, our balance sheet numbers are there as well. So I think this is largely as guided and it's good to see the production coming through, the liftings coming through, which look like, and we'll touch on the liftings a little bit more on an even pattern. I think most importantly this morning, we've also announced two things in line with our shareholder distribution framework, which is a launch of a up to 100 million kroner share buyback, which will be valid until the end of September, and also a cash distribution paid in the form of a return of paid-in capital of 50 million kroner. So continuing our strong trend of cash distribution, that we've started a little over a year ago now with a cumulative cash payout to date, including today's announcement of 240 million per owner. Next slide, please. So here is our quarterly production bar chart, which we show every time. You can see we had a quarter sort of within guidance, around 9,600 barrels a day. Second quarter will be a little lighter. We have three-week shutdown. That's a little bit longer than originally planned. It was two-week. Now it's a three-week shutdown, which is annual planned maintenance in Dusafu, which will affect quarterly production. Up until that time, we were producing in excess of 10,000 barrels a day, so everything seems to be going quite well. We do have a group target of 13,000 barrels a day when the current wells in the current campaign, which we'll touch on, are online. So that's unchanged. We're still targeting for greater than 13,000 barrels a day during the course of the year, with a range of between 10,000 barrels a day in terms of the group average. Next slide, please. We recently announced on our annual statement of reserves a 70% reserve replacement in 2023. This is an important part of our business. An important thing for us to continue where we can is to organically replace our reserves that we've produced during the course of the year through reserve revisions, which we do through a third-party auditor every year, another one, Sewell. And 70% is a good number. And the important point to note here is we've obviously made some recent announcements, some positive drilling results in Gabon. Obviously, those happened after the year end. So this is as of the 31st of December, 2023. So we can expect some further upward revisions, particularly in the case of Dusafu, this additional oil we found, which we will touch on. Next slide, please. So here's our lifting plan for the year. If we look back at last year, we lifted about 2.6 million barrels, averaged about $83 a barrel. This year, we're hoping to have a roughly 40% increase on that, 3.7 million barrels, with about 800,000 lifted in the first quarter already. Second quarter, around 900,000 barrels, slightly weaker. Third quarter, and then a strong fourth quarter, which should take us to approximately 3.7 million barrels. for the year, which again is reflecting the growth in production of the assets. Our average realized price to date is a little over $81 a barrel. What's very nice about the lifting program is that we are joint lifting in Gabon together with BW Energy, so the smoothness of the liftings It's quite different than last year. As you can see, we had almost no liftings in the second quarter last year. So hopefully we have now created a platform by which we can have smoother quarterly lifting patterns. And liftings equate to revenue recognition and they equate to cash flow. So these are important. This is an important development for the company. Next slide, please. We have a slide on debt. I won't dwell on it too much. We have our amortization program. I think the important point to make here is that we went through our annual determination process, which is a process where the bank lenders coordinate with the company and, using third-party reservoir consultants, determine the overall health of the business. Result of that is our RBL has been redetermined. We have substantial headroom within our banking facilities. It has allowed us to actually increase our bank facility by $10 million, which we used during the quarter. Post-period, we will have repaid during the second quarter $10 million. So this number will come right back down when you see our second quarter results. Our capital guidance remains at $75 million for the moment. We're obviously in a very heavy CapEx year. The CapEx is also very much weighted towards the first half of the year. And so for the moment, that number is still valid. We think that still is a strong number in terms of guidance. Next slide, please. Our cash flow reconciliation, again, we show this slide every time. Two things to note would be the investment in assets, $27 million. That's our CapEx. So, again, getting back to the point of our CapEx being weighted towards the first half of the year, this demonstrates it. I'll point out a couple other things here. One is that we had some liftings at the back end of March, so reflected in revenue, but cash not received yet. So there would be cash receipts having been received in April, but not reflected, obviously, in the cash flow. reconciliation. And post-period end, so in April, we announced that the operator BWG had entered into a sale and lease back of our Bobomo production facility, and that has resulted in an inflow post-period of $26 million, not reflected in this current waterfall here. And again, those funds will be used to repay some debt and to facilitate shareholder distributions and our ongoing business development activities, working capital Next slide, please. So Gabon's been quite active recently. We've had a series of very good updates. I'll first touch on production. Production in the quarter averaged 29,000 barrels a day, almost 30,000 barrels a day. as we were able to bring some new wells online and replace a couple of ESPs in there. We still have the same status. We have three of the four wells in the main production hibiscus field on ESP 100 natural flow, and the fourth well will be worked over in the current campaign. We have drilled the Rouge well, and that will be put on stream with a conventional ESP rather than the retrievable ESPs that we've used in the past. The Tortue field continues very strongly, and we do have this three-week maintenance period currently where we are shut in. This is planned maintenance in May. Now, what's happened more recently is we first drilled what we call the Hibiscus South extension. You can see it on the left side of the screen there, the kind of shaded area. This was an area that had some 3P reserves in it, no 2P reserves, but 3P reserves in it. and we decided together with BW to drill into this structure that we could easily see on the seismic and found a 25-meter net oil column of gamba, so good quality gamba sands. Initial estimates around 14 million barrels in place. That translates to let's call it 6 million barrels recoverable, and we will be putting a production well into this structure as the very next operation. We also used a little bit of time prior to getting into the workovers and the development wells to put a well into where the star is there, the viscous northern flank, where we encountered, again, 24 meters net oil pay, a bigger column than that, 37-meter column, both gamba and dental sands. It looks like very good reservoir quality. It's a little bit early days to talk about volumes there, and the reason why is something that we can touch on perhaps a little later, and there perhaps will be some questions around it. But this opens up the area to the north here on the flank, and so there's quite a bit of more technical work done prior to determining volumes on it, but nonetheless a very, very positive result. So what's happening next in Gabon is we're going to be drilling the production well there in the Abiscus South extension area. That operation is now underway. We'll be performing a number of well workovers. And what well workovers means is we'll be replacing the retrievable ESPs with more conventional ESPs. It means we'll be putting conventional ESPs in place into the wells that we currently do not have a pump on. And so you're going to see a mixing and matching of development drilling, use of the rig time for development drilling, hibiscus south, the hibiscus northern flank where we found this new oil zone, together with well workovers to maximize production is the intention here. So we're sort of juggling logistics with maximizing production and using our rig time as we think most efficient to maximize production, give ourselves the best chance of of getting back to that 40,000 barrels a day that we very much believe is in sites through this activity. So in the end, we will have eight production wells on this asset, which is a very nice place to be. It's greater than the original six, which allows us to think about maintaining production plateaus for higher for longer over time. So really a fantastic set of results. I think this hibiscus area just keeps getting bigger, which is wonderful. The reservoir quality seems excellent. Lastly, there's the Bordeaux prospect, which is a prospect that both ourselves and BW Energy would very much like to drill as part of this campaign. So as long as we have some rig time left after the core production activities that we have with the rig, We'll put a well down. It's the last activity on this block before releasing the rig. So hopefully the stars and the moon align and we're able to get in and drill Bordeaux as part of this activity as well, which is a very, very nice looking structure with, you know, an estimated up to, you know, 29 million barrels of recoverable in the gamble, the dental. So that's something we'd very much like to drill as part of this campaign. Next slide, please. So we had a little bit of a delayed start in Equatorial Guinea. People who followed us, we had a rig that didn't work out and the rig left. We're very happy to announce that as we had hoped on our fourth quarter results call in February that we'd identified a rig that would be available, that would be suitable in the time period that we needed it to arrive. That has now happened. We have a rig contract award with Noble for the Venturers, a drill ship. currently active in Ghana, will be on its way to our fields shortly, and that is to recommence the development drilling campaign that we previously announced, so we're a few months behind on this one, but nonetheless it is back on track now, which is wonderful news from our perspective. And this rig will drill two development wells, so this is where the red circles are, that's one at Ceiba, and one in Ikume. These wells are targeting strong production wells where we can see that we have strong reserves that are developable. And once the rig is finished with the development wells, we'll move then to the star there, which is the Akan Deep Prospect, which I'll touch on in the next slide. This is a very exciting prospect. This is a Cosmos-operated exploration well that we believe is quite interesting. We also in Equatorial Guinea have the Panoro operated block EG01, which is the inboard block there in the light shaded blue, which is busy with seismic reprocessing. Cosmos have joined us on that block. And together we are reprocessing and interpreting that seismic, which could yield some very interesting drillable prospects, both in the sort of Akume complex type of target, but also the deeper Albion, which is what Akeng Deep is targeting. So it's a very prospective block that we're in the early stages of getting to know a little bit better. Next slide, please. So we've got two panels here. The left panel is the recent announcement. We signed a memorandum of understanding with the Ministry in Equatorial Guinea, together with G-Patrol, the state-owned oil company, to go after Block EG23. We do not yet have this production sharing contract. It's in negotiation with government, but we have a period of exclusivity into which to complete that production sharing contract. The reason we like this asset is that it's in a very, very good neighborhood to the Southwest, you have the Zephyro field, which is today Exxon operated, over a billion barrels already recovered. And just to the south of us, we have the Marathon operated Alba field, which has produced in excess of 1.2 billion barrels equivalent. So these are giant world-class fields. And we have a block that sits right in that same neighborhood and benefits from both petroleum systems that both Zephyro and Alba have. Again, if there are any questions in the Q&A, we'd be glad to have them. And Richard, I think, can give you a little bit more detail on that. But what we feel is this is a very, very good neighborhood. There are existing discoveries on the block. And we look forward to updating people as we get into the PSC negotiations there. The panel on the right is the acting deep prospect that I touched on earlier, just outboard of the SEBA, the FPSO. It's quite near the existing infrastructure. The play here is to go for a deeper objective, the Albion, which is not drilled in this area. But the seismic suggests that there is an interesting structure there. We know a lot of oil has been generated in this area. The source rock here, the Sabin Akume, have already produced almost half a billion barrels of oil. So we know there's a lot of oil generated in this area. And the question then is whether it's accumulated and whether we have good quality reservoir here. So this is about a 25% chance of success. So it is pure exploration. But if it is successful, it opens up a new play fairway in the area. and it's quite close to infrastructure. So this would be a very, very nice outcome. And the plan is to drill this well as soon as the two development wells have been completed on Block G. So think about late third quarter, early fourth quarter probably in terms of the spot of that well. Next slide, please. Tunisia is not as catalyst rich as the other two assets in terms of drilling activity, in terms of exploration activity. but continues to provide us with very strong reserves, good production, plenty of long-life activity here on the block. At the moment, it doesn't have very much newsworthiness to it, but continues to be a very important asset for the company. We're also busy there with some field extension processes. So in Remora and Susina, we have applications to extend out the field lives of these assets, and those processes are going very well. This is a normal process, but a very positive momentum in terms of those activities. And the final slide, please. So just as a summary, we are still on the production growth ladder here, going from, you know, the 9,000s and 10,000s, hopefully up to the 11,000 to 13,000s during the course of the year. Very strong growth. reserve and resource positions, so this business will be around for a long time, 63 million barrels at 2p and 2c, which gives a very, very long reserve life to the company. We have continued development activity in all three of our core assets, so we have a very, very strong organic development pipeline within all three of our assets. We also, in the middle section, we have something we're quite proud of is continuing to organically have interesting exploration activity in the company. Further exploration is a very important lifeblood for the company. It replaces, hopefully, reserves and resources that we're producing and replaces them. We've had some very good success, as people have seen, both in Hibiscus South and in Hibiscus Northern flank. These are discoveries that can be brought back into production quite quickly, easily monetizable, high-value barrels coming across an existing fixed-cost infrastructure. So we're very, very happy with those kind of developments. And then we also have the high-impact wells, both in Equatorial Guinea and Gabon, second deep in Bordeaux. Maybe not all of these will work. Hopefully, most of them will. And this is a very important pillar to our company's success going forward, we believe. And on the final column, we believe this is all set up in a company that has what we believe to be a very sustainable shareholder return base, well-governed company, strong board, good governance practices, sustainability report, and with a real focus on targeted distribution of shareholders through quarterly sustainable dividend and topped up through shareholder distributions. We've announced the share buyback this morning and opportunistically, obviously looking always at business development. How do we grow this business in a creative way to continue to be able to deliver this platform for many years to come? So that concludes my slide presentation. Next slide, please. As a reminder on how to ask questions. You can type a question into the panel, which we'll endeavor to answer, or you can raise your hand. My only caution is that we have our annual general meeting of shareholders starting shortly, so depending on how many and how long the questions go, we may need to cut it off. And if your question has not been answered, please do send us an email, and we will hopefully be able to get back to you. Time is just a little bit short this morning with the annual general meeting. Right, so my colleague Andy will survey for questions.

Thank you, John. The first question is from Alex Smith. Alex, you're self-muted. If you could please unmute yourself, we'll go ahead with your question. Okay, we will move on to a question from Christopher Batt. Christopher, you're self-muted also. If you could unmute yourself and go ahead, please.