Capricorn Energy PLC

Well, good morning, everyone, and welcome to Capricorn's full year 2022 results presentation and update on our ongoing strategic review process. I'm Craig van der Laan, Chairman, and with me are Claire Maudsley, our Acting Chief Financial Officer, and Nathan Piper, our Commercial Director. I'd firstly like to apologise on behalf of our interim CEO Chris Cox for not being able to speak at today's presentation due to a family medical emergency but we wish him and his family the very best. I want to stress that the board has been in place now for a mere 85 days but in that time we've accomplished a great deal. We've got stuck in, we've completely focused on understanding the business and we have achieved a lot in that time. We're very keen to share our initial thoughts with you today. Importantly, we remain very confident about the future of Capricorn and we believe there's a lot more we can do and optimise in the business to generate shareholder value. I'll begin our presentation today before handing to Nathan and Claire and we would of course be happy to take your questions at the end. As you know, I was appointed chair of Capricorn in February 2023 alongside five other new members of Capricorn's board following a public campaign by a number of shareholders for change within the business. The renewed board provides a strong and broad skill set of senior oil and gas and energy industry experience and knowledge, shareholder engagement and capital markets expertise. We recognise there is an expectation for change in the business and that we have a strong mandate from shareholders to bring this about. As we previously announced to the market, Catherine Krycek and Eric Dauberg will retire from the Board at our upcoming Annual General Meeting. Both Eric and Cathy continued as non-executive directors as the Board was renewed and have been an enormous support to me and the rest of the Board over the last months. They will retire from the Board with our tremendous gratitude. I'm particularly pleased to announce today that a permanent chief executive, Randy Neely, will be joining Capricorn from the 1st of June. Randy is a highly experienced oil and gas industry leader who, notably in his previous role as president and CEO of Transglobe Energy, ran a very successful low-cost Egypt-focused business, including assets in the Western Desert. Under Randy's leadership, Transglobe successfully engaged with EGPC in Egypt to deliver an amended, extended and consolidated production sharing contract. And Randy also has a strong track record of creating shareholder value, having overseen the recent merger between Transglobe and Valco Energy. Randy brings to Capricorn a background of successful strategic execution, knowledge of our host country and that track record I mentioned of effectively managing relationships to deliver results. He will, of course, benefit from a handover period with Chris, and I want to put on record my gratitude to Chris for the enormous amount of good work he's led during his period of interim leadership. Before highlighting the board's delivery of the strategic review priorities to date, let me remind you of the key moments for the business during 2022. The tax refund in February 2022 from the government of India of more than $1 billion enabled Capricorn to return $529 million of capital to shareholders in the form of a tender offer and buyback program. There then followed an intense period of corporate activity. A proposed recommended combination with Tullow Oil PLC was announced in June 2022, which was subsequently withdrawn by the board after shareholder concerns. Thereafter, the board recommended a reverse takeover with NewMed Energy, which was also met with opposition and a public campaign by a number of shareholders, including demands for fundamental board renewal and determination of the NewMed deal. As you know, this culminated in the resignation of the majority of the previous board and the appointment of six new board members at an extraordinary general meeting held on 1 February 2023. The business ended 2022 in a strong cash position which provided the backdrop for the strategic review process immediately launched by the new board on appointment. The guiding principle underpinning the priorities of our strategic review is the delivery of shareholder value. Nathan will break out the elements in more detail during his presentation, but at a high level, our focus in the first 85 days has been on four areas. First, significant cost reduction. We inherited a cost base that does not match the present or future activity set of the business. We've already taken decisive action to address this and will continue a process of assessing whether further cost savings can be achieved alongside embedding a culture of cost consciousness across our operations. Secondly, a refocused exploration strategy. We'll focus sharply on low-cost, short-cycle exploration in Egypt, which has the potential to provide attractive near-term returns. Elsewhere, we've put in place a plan to monetise, farm down or exit all exploration activities and are evaluating the best value outcomes accordingly. We will not be spending new material cash on exploration outside Egypt. Thirdly, maximising shareholder value from Egypt. We've taken the first steps in recalibrating the strategy of our Egypt business. We're developing a long-term plan now to grow value such that the Egypt business can provide sustainable, stronger, positive cash flows to the group. We'll have further detail on this and on our Egypt strategy generally and the longer-term outlook in our Capital Markets Day, which we'll be holding in Q4 of this year. Fourthly, shareholder returns. We are committing to return to shareholders all excess cash flow not required for our go-forward core operational focus. Cash will only be kept in the business for working capital or to be reinvested into Egypt, retaining sufficient funding to maximise value from the core business. Today, we've been pleased to announce a capital return via a special dividend of approximately $450 million today. which is proposed to be paid in May, a contingent second special dividend of $100 million in Q4 2023, and a buyback of at least $25 million over the next 12 months. Furthermore, we today make a commitment, as I've said, that all additional excess capital will be returned via special dividends or buybacks. Finally, the renewal of Capricorn provides an opportunity to reset and drive a culture change, to ensure that our behaviours as a business underpin what we seek to do every day. That is, maximise shareholder value. maintain a laser focus on costs and engage openly and with respect with all of our stakeholders. Taken together, we believe these priorities will significantly enhance shareholder value and create a stronger and more sustainable business focused on safe and effective execution of our operations in Egypt. I'm extremely pleased with the progress made in our first 85 days and the hands-on effort and collaboration from the whole board of directors has set the tone for our strategic priorities to enhance shareholder value. It's also important to highlight that the strategic review is an ongoing process with further updates planned as we look to tackle work streams. These include, but are not limited to, reducing our receivables position in Egypt, looking to extend and renegotiate our licence terms, addressing restricted cash within the business and thoroughly reviewing our Egyptian business plan, all things which our incoming CEO, Randy Neely, has had previous success tackling in Egypt. And we will be looking to update our stakeholders on this at a capital markets day, as I've said, planned for Q4 this year. With that, let me hand over to Claire and Nathan to take you through the 2022 performance and to provide more detail on our strategic review progress today.

Thank you, Craig, and good morning, everyone. In the next few slides, I'll take you through 2022 financial performance and cash flows and the current balance sheet position. Looking at financial and operational performance, production for the full year for 2022 averaged 34,200 barrels of oil equivalent a day, in line with revised guidance presented at half-year. Prioritising higher margin liquids production has led to liquids representing 42% of total production. Revenue generated in the year was $229 million, 79% of which was generated from liquids production. Average realized prices were $98.8 a barrel for liquids and $2.90 MCF for gas. OPEX in the year averaged $5.7 per barrel of oil equivalent. Egypt development and production capex was $79 million and exploration capex was $83 million. Gross profits in Egypt, i.e. revenue less OPEX, were 158 million, whilst the operating cash inflows for the period were 129 million, due to an increase in the receivables position over the year of 34 million. Year-end receivables in Egypt were 97 million, of which 66 million were due for payments. That balance has increased since the year-end, which we'll see in the upcoming slides, but we've had good engagement with the Egyptian state oil company, EGPC, on the receivables issue. Looking at cash flows over the year, we started 2022 with net cash of $133 million. We received the India tax refund of just over a billion dollars in February, and around half that amount was subsequently returned to shareholders. Egypt cash flows netted to a cash inflow of $15 million after exploration and development capex, and a 25 million contingent consideration payment to Shell, which we'll see broken down further on the next slide. After working capital settlements, contingent consideration of $67 million was received in the first half in respect of the North Sea earnouts. Exploration capex outside Egypt was $67 million, predominantly in the UK North Sea, Mexico and Mauritania. Adjusting for admin, financing and other costs, this took us to a net cash position of $597 million at the end of December. Total gross G&A in 2022 totalled $70 million, which was spread across Admin, CapEx and OpEx. Since the year end, we've received a further $137 million from the North Sea earnouts. There was a net cash outflow of $40 million in respect of Egypt cash flows, which I'll talk more about on the next slide. $15 million was spent on international exploration since the start of the year, mainly in respect of the Mexico-Yatsel well, which is our final remaining commitment well outside of Egypt. After admin, financing and other costs, including the new Med deal fees, net cash at the end of March was $646 million. In addition to that, and as mentioned on the previous slide, the trade receivables balance has grown by around 40 million since the year end to a balance of 137 million at the end of March. That's partly a timing issue. A payment was received in early April. Looking now at Egypt, we saw in the last slide that Egypt cash flows netted to a cash inflow of $15 million for 2022. We can see here how that number is made up, with revenue of $229 million, cash collections of $198 million after the impact of the 2022 receivables movement, OpEx of 69 million, Deferred Consideration of 24 million, Development CapEx of 62 million and Exploration CapEx of 28 million. The net cash outflow in Egypt of 40 million for Q1 2023 is negative mainly due to a one-off deferred consideration payment for the year of 25 million, which was paid to Shell in January in respect of 2022, as well as the timing of cash collections and the increase in receivables over the course of the first quarter. A key opportunity and area of focus for us is optimising the receivables position going forward, and this is an area that our new CEO, Randy, has a lot of experience in. At the end of March, gross cash of $798 million includes restricted cash outside Egypt of $30 million and a $22 million cash balance in Egypt, which is restricted due to debt covenants. Restricted cash can't be freely distributed to the wider group unless distribution conditions in the Egypt debt facilities are satisfied. These conditions include a minimum debt service cover ratio and a 12-month forward-looking liquidity test. Restricted cash balances in Egypt can be used freely by Capcom Egypt for debt service, general running costs and CapEx and OpEx spend in respect of the Egypt producing assets. And with that, I'll hand over to Nathan to take you through guidance for 2023.

Thank you, Claire, and good morning. So for 2023, we expect production to be between 32,000 and 36,000 barrels of oil equivalent per day, with a mid-case similar to last year. Production is expected to grow through the year, from year-end to year-end, by about 20%. And again, there'll be a focus on higher-value oil wells in particular, so the percentage of liquids is expected to grow. Operating costs per barrel are expected to be the same as last year, and total development and production capex will be between $100 to $120 million, funding five drilling wells operating throughout the year, plus well tie-ins and completion of the team pilot project. We have a sixth rig now drilling exploration wells through the rest of the year, with total exploration capex in Egypt of $25 million. All of the wells represent commitment wells associated with the three operated exploration licences. Our legacy international exploration capex will be up to $30 million worldwide, mostly associated with the Mexico costs, including the Yat-Sol exploration well that's already drilled in Mexico. That's the final international commitment outside Egypt, and there are no plans for further international exploration capex outside Egypt, and we have no committed spending, to be clear, in 2024. So let's move on now to look at the progress of the strategic review so far. And we expect to see more, as previously mentioned, at our capital markets day in Q4 of this year. First of all, on cost reduction. The renewed Capricorn is a company focused on Egypt with a primarily non-operated business. And we will have an organisation and a cost base to match. We're designing a UK organisation which has the minimum costs necessary to safely and effectively support our Egyptian operations, with ongoing cost controls to make sure it stays this way. This includes an approximately 70% reduction in UK headcount and office costs to reflect this. We anticipate the 2024 G&A costs to be less than half of those of 2022. Further reductions will be achieved as we switch a handful of roles from the UK to Egypt in the coming period. Overall UK headcount was 160 in February 2023 and this will be approximately 40 by the end of the year. As previously announced we will not be moving into the planned new head office and we are currently looking for an alternative office accommodation in Edinburgh which will be sized for the new organisation with a flexible term. In 2023 we will have substantial one-off restructuring costs due to redundancy payments but we expect savings within the year to offset these. We are working hard to develop a new corporate culture of cost consciousness. We will have a small office with a tight-knit group of employees who have made a positive decision to remain with the business. The group will also benefit from the clarity of purpose in supporting an Egypt business and making sure we generate sustainable and positive cash flow. On to G&A savings, and we've provided more detail on the impact of the cost reductions that we're implementing on this slide. And rather than focus on individual numbers, we are confident that the ultimate output of the process will be an organisation that is set up to deliver greater value from Egypt, operate safely and performs. A much leaner head office organisation will support a team in Cairo, reflecting the very clear strategic focus on Egypt, with central costs minimised to ensure we focus every dollar on driving value from our western desert assets. This will be an ongoing process as changes are implemented in the business. And moving on to exploration, the company is moving rapidly to reprioritise its exploration efforts in support of the Egyptian business and its intent on monetising, farming down or exiting the rest of its exploration portfolio with no international exploration spend plan going forward. The strategic focus on Egypt reflects the failure of frontier exploration to deliver material discoveries or a return on capital. The priority is near-field, short-cycle exploration and appraisal drilling in Egypt to add reserves and grow production. The portfolio will adjust to align with the strategy, with the priority to reduce exploration capital spend and associated G&A costs. Elsewhere, Capricorn does hold one deep water block in Mauritania and one in Suriname. These blocks lie in two of the most successful new exploration provinces of the past decade, Senegal-Mauritania, where Capricorn's divested Sangomar Field and the giant Tortui gas development are located, and the Guyana-Suriname basin. where over 12 billion barrels in oil equivalent basis has been discovered since 2015. With renewed wider industry interest in exploration, these projects Capricorn is seeking to find partners to carry the company in the next phase of exploration costs and maintainer optionality. In Mexico, however, Capricorn has completed its commitments and, having evaluated, believes there is little benefit in maintaining our participation and are now in withdrawal or relinquishment processes for all of our Mexico licences. As you have seen from our announcement today, we are also commencing a process for the potential sale of our UK assets. We've taken a clear view of our Egypt asset base and are encouraged by the nature of the fast return low cost onshore liquids rich value within it. Egypt is a jurisdiction which is supported for oil and gas development and which is currently a net importer of both oil and gas and keen to address this imbalance. Our assets are in a low cost area with significant growth potential for both liquids and gas and our existing production licences. There is real potential to grow the value of the existing business through improvement of operational performance in both production and drilling. We currently have five operational rigs which allows us to grow production in the short term with an ongoing focus on higher value liquids. We also have substantial volumes of contingent resources which have the potential to double our 2P reserves and increase production through a combination of appraisal and development drilling as well as improved PSC terms. The next steps are to address the receivables and restricted cash, better build relationships and optimise cash consumption and returns where our incoming CEO can help. We are very confident about the medium-term future for Egypt, although there are undoubtedly a number of challenges to address. For Egypt production, our plan for 2023 is a simple one, to grow production. Production decreased through 2022 as our plans to ramp up from two rigs at the start of the year to five much earlier in the year were frustrated by rig delays and logistical challenges. On average, we had 3.7 rigs per month during the year, which is not enough to halt decline. However, we have already observed that we can grow production in the short term with five rigs. We expect 2023 to be a mirror image of 2022, increasing production from year-end to year-end by 20%. In the years so far, we have seen encouraging results with near-field extension and appraisal drilling on the edges of existing producing fields. We'll be more on that later. As mentioned in the release, we have seen a reduction in reserves in 2022, mainly as a result of poor performance in some of the gas fields. This was partially offset by a small increase in ultimate recovery expectations from oil fields. The NPV impact of these changes is not as negative as expected, as the average value of a barrel of oil in our assets is about three and a half times higher than the value of an equivalent barrel of gas. There is also material upside in an asset base through the conversion of contingent resources into potentially doubling R2P reserves and ultimately increasing production. A lot of this is either in tight gas reservoirs or in existing assets beyond the current licence expiries, so will require improved gas prices or licence extensions to unlock, which we are confident in doing. To give an example of the rapid high value return opportunities in our portfolio, in 2022 we had particular success with drilling down dip in the bed area and finding oil in a well which is designed to be a water injector, which is a nice problem to have. Encouraged by this outcome, we have drilled more down dip wells already in 2023 and four of these wells have returned results much better than anticipated. Not only have we extended reservoirs into lower parts of the reservoir, we have also been at original reservoir pressure, indicating that the areas are untapped by existing wells. There is a potential for several more wells like this, which can be tied into production facilities very quickly and provide rapid returns. So in a short space of time, we have identified the areas we need to focus on in 2023 in order to grow the value of our Egyptian businesses. This is all with a view to ensure that we have a business that is sustainably free cash flow positive, able to fund its future growth internally and be able to provide regular returns to shareholders. We have established that we can grow production in the short term with five rigs and we need to decide the optimum number of rigs to use over the next several years. More importantly, we need to make sure we are drilling the most valuable wells in the right order, which means having life of field development plans for all our assets and focusing on oil production when oil prices are high. In the short term, we have some operational challenges where we can assist Chiron and Bepeco. We have a very important pilot project at the team field to bring online, and we'll be looking to improve operational performance of some of the rigs and some production wells that have been offline due to pump failures. All of these areas where short-term improvements can be made by interventions from experienced operators, and we will have focus from Capricorn's technical team through the rest of the year in this area. Finally, we have already started discussions with Chiron to explore options to optimise and extend our current concessions in a win-win agreement with our Egyptian authorities, which would enable the unlocking of some of the potential in our base of contingent resources. And with that, let me hand you back to Craig.

Thank you, Nathan. What we've outlined today are the initial conclusions and actions delivered by the board as Capricorn gets a fresh start and I'm very pleased with what we've accomplished in these first 85 days. As a new board we've examined the costs of the business with rigor on a bottom-up basis to reset our cost base which we believe is a better match for what we have to deliver as a sustainable and profitable business. We have a clear operational plan to execute alongside our partners in Egypt to maximise value from our producing and exploration assets, continuing our focus on higher value liquids targets and refocusing exploration activity from capital intensive and high risk frontier activities to Egypt's short cycle lower capital opportunities. This is a business that will have a very clear identity, Egypt-focused, lean and positioned to deliver sustainable and strong cash flows and returns for our investors. Finally, we're committed to returning all excess capital to shareholders as effectively and efficiently as possible. and we're very pleased to announce a significant capital return this morning. I want to emphasise that we're very excited about the future and our investment in Egypt. We have a lot of work to do, but we are optimistic that we can continue to optimise the business and generate value for our shareholders. In closing, I wanted to repeat our plans for an immediate one-off special dividend of an initial $450 million, a further $100 million special dividend later in the year contingent on a number of factors, including addressing our receivables position in Egypt. the outcome of conversations with stakeholders in Egypt around licence extension and the renegotiation of terms, actual oil and gas prices, outcomes for the remainder of 2023, and the conclusions of our strategic review as it relates to further cost actions and future investment. In addition, we also announced today an ongoing share buyback of at least $25 million over the next 12 months. To be absolutely clear, We're committed to returning all additional excess capital via buybacks or special dividends over time. Thank you very much for listening. And with that, we'll now take any questions you may have. We'll start by taking analyst questions from the room before we hand to the operator to open up to questions from the conference line. And for my benefit in particular, I'd be grateful if you could state your name and organisation as you ask your question. Thank you.

Morning. Thanks for taking my question. Rachel Fletcher, Morgan Stanley. I wanted to focus on the distributions that you've announced this morning. So why is five hundred and seventy five million dollars of distributions the correct level? And what underpins that that first special dividend, that four hundred and fifty million? And then also how did you decide on the split between the dividend and the buyback? And finally, if I may, how should we think about distributions going forward? Thank you.

I'll make some initial comments, Rachel, and I might pass the clear for any top-up. As you can imagine, in the last 85 days, we've done an enormous amount of work around the cash flow forecasting for the group. And as you would have seen from the first three months that we've reported, cash flow can be very lumpy in this organisation. And we need to reflect on that as we contemplate payments at a particular point in the cycle. We're very confident about the $575 million being available, but as a first step and conscious that shareholders are keen to receive as much as they can as early as possible, our clear decision is to distribute $450 million immediately. Obviously, we have to go through a shareholder approval process, which will happen very quickly. But we're also very positive about the additional $100 million being available. So I want to emphasise we're very clear and positive about the TOEFL being available. It reflects our assessment of free cash flow. It's not about... I want to emphasise this very much. Capricorn's focus going forward is about ensuring an appropriate level of working capital, not about building war chests, not about retaining capital for the longer term. we will be lean. So what you can see here is our estimate at least over the next 12 months of the amount which under any circumstances is going to be available for distribution. The commitment around the buybacks reflects I think a desire for us to give shareholders some optionality around the way in which they receive their return. There are certainly some people who I think would appreciate a buyback component. We've positioned that, obviously, as being a minimum, at least $25 million, and clearly there are some things that can happen going forward that would potentially increase that amount. So we'll be looking forward to, obviously, updating our expectations on capital as we communicate openly and frankly with the market going forward. Claire, is there anything you'd like to add to that?

Nothing further to add. No, I think you've covered everything, Greg. Thank you.

Thank you, Rachel. Are there any other questions from the room? With that, then, I might turn it over to calls from the line.

Just a reminder, to ask a question over the phone, please signal by pressing star 1. Our last question comes from Matt Smith from Bank of America.

Please go ahead. Hi, Monica. Hopefully you can hear me. Thanks for taking my questions. The first one would be just to stick on the topic of the distributions, if I could, specifically on the special dividend, the $100 million targeted for 4Q. And I guess there's various conditions sort of listed that's linked to that. I guess I just wanted to get a sense of are you able to put any probability on your sort of confidence in being able to pay that? And I guess I note, you know, there's – mention of the receivables position in Egypt, the outcome of conversations around fiscal terms. Therefore, is the $100 million dividend dependent on good news in that regard, or should we expect it if the business continues at its status quo?

Thanks very much for that, Matt. I want to really highlight an important distinction in what we've said, and maybe it hasn't come through clearly enough, and that is that the $100 million is conditional. but there are a number of factors that go into releasing that condition. So the items that we've listed are not items all of which have to be ticked in order for that $100 million to be released. They are simply factors that go to our ability to confirm that $100 million payment. As I mentioned earlier, and as you've seen from the first three months, it's a very lumpy cash flow business. and any one of these factors can have a significant impact on cash position at any point in time. So we will be monitoring these cash flow forecasts constantly to ensure that we are in a position to release the $100 million at the earliest possible moment. We've indicated Q4 2023, and we're very confident about that.

Perfect. OK, very clear. One more for me, if that's OK, and that would be around the... I guess, receivables position and also the sort of fiscal situation in Egypt. I guess that's sort of, you know, very much work in progress or work to be done. I guess that's really my question. Is that work in progress? Have you had any sort of positive indications on outcomes here or is this sort of work that still needs to commence? And I suppose linked to that, I know that the CMV is targeted for the fourth quarter. So I'm just sort of wondering, is it the case that you have expectations that some of these issues might have been resolved by then. Thanks.

I think it's very clear to say that we've been working conscientiously on trying to find a solution for the receivables position since the new board took over. It is a constant feature of working in Egypt and has been for some years and we're not alone in this respect. Obviously the receivables went up in the first quarter but as you would have seen from or heard from what Claire had to say there was a payment received in early April which reduced that balance. So we would expect that receivables position in any event in the normal course to stabilise but it's not something that we're comfortable with and we'll be working assiduously with our partners and through our relationships in Egypt to try and find a solution to this. We're very fortunate at the board level to have Hesham Makaoui, a very experienced oil and gas industry executive, able to assist us in developing our strategy for engagement with the relevant parties and of course now we've announced a terrific appointment in Randy Neely as our CEO who has spent years grappling with these issues. So I think we've got the best, we've got the A team on this and it is clearly for us a way in which significant value and cash can be delivered potentially to the organisation and we'll have a lot of focus. As for the timing, of the investor day later in the year in Q4. To be frank, that's a lot about letting Randy get his feet under the desk and we've only had 85 days. Randy hasn't even started yet, so I would have hesitated to give him an earlier date than that. He needs to be able to reflect on this and we will certainly be providing an update on the strategy around that. at the Capital Markets Day at that time, and we'll be confirming an absolute date for that very shortly after Randy is appointed and joins us.

Perfect. Okay, thanks for calling. Much appreciated, and I'll pass it over.

Thank you.

Sorry, could you repeat who you were asking to say this to ask their question because you were quite faint in the call there.

I'm sorry, were there any more questions?

We will take our next question from Chris Wheaton from Stiefel. Chris, your line is open. Please go ahead.

Marlis, thanks very much indeed. A number of questions from me, please, this morning. Firstly, are you able to detail how much the return of capital, sorry, the return of receivables was from Egypt paid, that Claire referred to, paid just after the beginning of April.

Claire? It was a relatively significant payment. It wasn't a massive payment. I don't have the number in front of me right now, I'm afraid. But we, as Craig alluded to, we hope to see more similar payments and to see the position stabilise as quickly as possible.

Presumably it wasn't as big as the entire 40 million build in the first quarter, but it was... No, it was less than that.

It was probably around half of that or just under.

Okay. Brilliant, Clint. Thanks very much indeed. Second question on EBIT production. Nathan referred to a 20% growth in the year 2020. If you're going to average around 33, 34 for the year, that implies, and you start at a 20% growth entry to exit, that implies current production is around 30 to 31,000 a day. Is that correct? And if so, are there particular fields or particular issues that mean it's declined that much? Because that's quite a significant drop from previous levels.

Morning, Chris. You can see the slide on page 21. We've detailed the trajectory of production through 2022. It's definitely stabilised through the first part of this year. And I guess the point is, if we're drilling... Over 40 wells through the course of 2023 would anticipate a steady growth in production. So we're not normally expecting to give exit production rate guidance, but what we're trying to show is a trajectory and a direction of travel. Because of the late arrival of rigs through 2022, production, and that meant that not enough wells were drilled, production naturally declined. And so in order to arrest that and then begin to catch up, we now have five rigs working, but that obviously takes time. So the investments going in through the course of this year, we will leave 2023 at a production rate which is around 20% higher than we left 2022. So giving the direction of travel and that's why we talk about a mirror image. But you're right to highlight that at the end of 22 production was dropping.

Great, thank you. Two more questions if I may. Firstly on the conditionality around the $100 million of additional special dividend. Interestingly Senegal isn't mentioned as one of the conditions. but yet renegotiation of Egypt licenses is, I would think it's extremely challenging to expect with a new chief executive in place, renegotiation of the licenses by year end. I just wonder how realistic it is to expect that license renegotiation process to take place. I wonder if Craig, you could perhaps expand on that point.

Yeah, absolutely. It is a point that I made in response to an earlier question, and that is that these are not individual conditions. These are factors which go towards the conditionality of the $100 million being released. Now, any one of these can contribute positively or, of course, negatively towards that being released. So the condition is the commitment to make the payment. the factors which go towards releasing it are about the confidence of certainty on cash flow at the back end of the year. And that can be achieved in a number of different ways, given the lumpiness of our business. We certainly would not expect, as you rightly point out, necessarily complex renegotiations to have been achieved in a very short period of time after a CEO is appointed. But obviously trajectory is important as to the confidence it gives on cash flow. And, you know, we see a lot of positive signs there, but our role as a board is to be very careful in our stewardship of the cash of this business, and that's what we're telegraphing here. So that's the conditionality. Please do not regard the factors as themselves individual conditions that need to be ticked off.

Right. Craig, that's very clear. Thank you very much indeed. And I promise my last question coming up. 35 million targeted G&A cost ongoing. If you look back at 2022 performance, first half 2022 G&A cost annualized is $42 million. Your 35 million is about 10% to 12% below that number. Have you looked at ways of being more aggressive on cutting G&A costs because this seems to be taking you back to a position that isn't that much better than first half 22 levels when you've got quite a substantially different business that you intend to deliver in the future?

I'll make some initial comments and I'll ask Claire to respond in more detail on some of the numbers. But I think what's very clear is that, as you would have heard, there are a lot of things that we have to run off here. There are activities that still need to be carried out by people who are in role in order to deliver value for shareholders. We've talked about exiting, we've talked about realising value. So there are clearly, there's a level of overhead that we need to keep for some period within the business to service that value generation for shareholders. We've also highlighted in our presentation in the announcement that this represents our initial pass based on our view of where we think we can get to. We intend to be sharply focused on cost going forward. We have a CEO being appointed today who ran an extremely lean operation historically and we hope that sends a very strong message about where we might get to. But at the same time, we have to be sensible. We don't want to put ourselves in a position where the lack of resources challenges our ability to liberate value. So we're going to ask shareholders to bear with us through this transition period. Conscious that we are absolutely laser-focused on reducing costs. We've taken a first step in that, which is the numbers that you've seen. But I'm confident that there is more to come. And with that, I'll ask Claire to make some comments about the detailed numbers that you mentioned.

Yeah, so I guess just to add, obviously Craig said it's a first pass. It's also a minimum, the 35 million or the 50% on the total cost base of 70 is a minimum cash saving target and we do expect to exceed that. Another point is this is gross G&A that we're talking about. So the 70 million dollar figure for 2022 is gross G&A, i.e. our total cost base for the business. That is not the same as net admin or admin in a cash flow waterfall that we've presented previously, which is after allocations to things like CapEx and OpEx. and we'll provide more information in further updates and results announcements around the impact on net admin of these cost-saving initiatives.

Okay, that's great, Claire. Thank you very much indeed.

Thank you, Chris. Are there any more questions on the line?

We have no additional questions, so I'd like to hand back for closing remarks. We have an additional question in the room.

Hi there. It's Dan Slater from Zeus. I just want to ask a little bit more about the receivables. Obviously, it's 97 million at the end of last year. It's probably gone up since then. And we're talking quite a bit about that stabilizing as opposed to necessarily reducing. So is that where we sort of think it is? Are we hoping it's going to kind of stop at 110 and just and then you start getting paid? Or do you think there's hopefully some sort of potential to actually sort of reduce that? And where do we think that might get to? And the other thought I had was slightly more widely in the context of your other peers in Egypt. I'm sure there's a bit of a hierarchy of who gets paid the dollars and who has to sort of get in line. And do you have much of a feeling for where you fall in that queue? Obviously, it's going to be below some of the much larger companies, but where are you in terms of that queue, if you see what I mean?

If you'll allow me to answer the second question first. Part of our commitment to Egypt is around having the right team in place, as I've said, having the right people, building the right relationships. That to us is key to the resolution of the receivables position, being front of mind and ensuring that it's well understood that this is an issue that we need to address, but dealing respectfully and appropriately with the relevant counterparties and working with our partners in this. So we think bringing the right team to bear will certainly assist in accelerating the resolution of this issue. It is a common feature, as we've highlighted, of doing business in Egypt, but we're very keen to ensure that we do something to address it and we're bringing everything to bear on it. So I'm confident that we will do the best we can to be at the front of the queue. Of course, always, as I said, being respectful of the context in which we find ourselves and the cultural context and the commercial context of our relationships. in Egypt. We talked a lot about our enthusiasm for the market and that is very real. We see a significant opportunity. It is Capricorn going forward. So that's something I think that we'll come across to our counterparties, to the relevant government agencies very clearly. It's already been communicated effectively through our Egypt team but through Hisham Makaoui, our board members I've mentioned and of course Randy will we'll bring that to bear. So I think we've got the right team, the right strategy in place to deal with this. In terms of the numbers, Claire, you've already addressed the fact that the number came down at the end of March, in early April. Stabilise is a difficult term. I think what we're wanting to send you a signal is we're not seeing any special adverse treatment of us in this. It does jump around a lot. We've given you a different level of disclosure, we hope, which is appreciated, which is the receivables position at the end of March, precisely because we want to show that to you, that it does jump around a bit. It is the issue, the sort of thing that we grapple with on a daily basis. That's part of the challenge. But our efforts will be directed solely at bringing that down as rapidly as possible through the new team. Claire, do you want to add anything else to that?

No, I think you've covered everything correctly.

Terrific. Thanks very much.

Thanks very much, Dan. Any more questions? I confirm there are no further questions in the room. So I'd like to hand back for any additional or closing remarks.

Well, thank you very much, everyone, for your attention, for your questions today. I want to pay tribute at this point to my board colleagues and the non-executive directors who were appointed today. just 85 days ago and the two continuing directors who remained on the board during that period. We have been completely hands-on with this business for the last 85 days. You can't get to this sort of position in such a brief period of time without being completely dedicated to understanding the business and its challenges and I'm very proud of the amount of effort that's gone into it. But I want to say that universally we are enthusiastic about the opportunities we see in Egypt. There are clearly challenges. Every business has challenges. But we're up for it. We've put the right team in place, and I think we're very well positioned to generate value for our shareholders going forward. And I very much look forward to the next opportunity to update you on where we've headed. Thank you very much for your involvement today.