Seplat Energy Plc

Hello, everybody, and welcome to CEPLA Energy's financial results for the full year 2023. On the call today, we are joined by our CEO, Roger Brown, CFO Emeka Onwuka, and our COO, Samson Ezeghori. We'll first present our business and financial highlights, followed by the outlook, and after this, we'll move to Q&A. Before we start the presentation in detail, I encourage you to take note of the forward-looking statements on slide two. Now I'll pass over the call to Roger. Over to you Roger.

Thank you James and hello everyone. Welcome to the full year 2023 CEPLA Energy results. So you can see on the slide four we have set out our 2023 highlights and underpinning that is a strong operational and fiscal performance in what was a quite a challenging year for CEPLA but I'm glad to say that our policies, procedures, and very important, our staff really rose to the challenge in 2023. So I've set out five main highlights. First one there is on our 2P reserves. We just had an upgraded CPR, and we've seen a 9% increase in our reserves, both in gas and oil. And so they've moved up to 478 million barrels of oil equivalent, which is a very good increase year on year. The next one, looking at the daily production, and we were within guidance, we just slightly short of 48,000 barrels of oil equivalent. Roughly 60% of that was oil and 40% was gas. And that production's up 8% year on year Now, it's largely we saw reduced losses and lower deferments. And importantly, in terms of operation performance, we hit mechanical completion on a very important strategic gas plant. We'll talk about that in a couple of slides time. A third one there is our 2020 through revenue. And you can see that we've gone through the billion dollars of turnover, up 12% on last year, and very monumentally through that billion-dollar turnover milestone for us. And those two ones at the bottom there is looking at the year-end net debt. And that is obviously decreased. Cash flow has increased. Rupert Clayton- Through the year in a mecca when he goes through his slides will pick up on that, and then the final one, there is in terms of our commitments to dividends and we are continue our dividends pay out, so we have declared. A six cents a share dividend split between a three cents core dividend, which makes it 12 cents for the year. And then we're also declaring a three cents special dividend, which will be paid, assuming it's approved to the AGM shortly after May. So next slide. On the slide, we like to set out just some of our achievements. Obviously this year we're going through our 10 year anniversary of being on both the Nigerian Stock Exchange and the London Stock Exchange. And we look back through our perspectives. We looked back at what objectives we set for ourselves in 2014 and how we actually achieved that looking at achievements up to 2023. It's quite interesting sort of tasks to do this. And you can see it on the left hand side. I'm not going to go through every single one of them, but there are commitments on production, acquisition strategy, commercialising gas production, progressive dividend policy and maintain good relations and integrate with our host communities. And on the right hand side, we talk a little bit about what we've achieved. And you can see there that we exceeded our gross production targets which was 85 and it's it's we've at the end of 23 was 106 that's gross uh and obviously the working interest is is less than that our 2p reserves um have increased since inception a reserve replacement ratio very healthy for 2023, and then diversified evacuation routes. In terms of our acquisitions, we've been pretty active through the years. So we now have a portfolio of seven onshore blocks, We acquired Chevron's OML53 back in 2016, and that was a critical acquisition because this delivered the Anno gas opportunity. And we see the east of the country really giving massive potential for the country and obviously our partners and ourselves. In 2019, we acquired Elend, and we've been spending years betting that in. You can start to see the real improvement in results from Elend or Elbrest. And then the last one there, we signed the sale and purchase agreement for MP&U. That's gone through its two year anniversary. And we remain hopeful that the government will finally approve this and we can move ahead and grow those assets. And in terms of gas, which is a very big part of what we do. Our processing capacity really is leading in the market next to government when we bring on stream the Anno gas plants and the Sapley gas plant, which we're aiming to do this year. And then obviously gas revenues have increased quite dramatically there. We've paid back in terms of dividends. We've returned more than we raised at IPO. And I think that's quite critical. And we continue to return dividends to investors. The core dividend itself has increased and the special dividends. And look, over time, what we want to be able to do is increase our dividends subject to certain constraints around our lending and bond components, et cetera. And the final one there is really important is how we interact with our investors. our communities, our GMOU, which is a global memorandum of understanding, investment in host communities. That's approaching $60 million of investments over the years, and it's very critical that we continue that going forward. So on to the next slide, I will cover briefly just our sustainability dashboard. We put sustainability right at the heart of our strategy, in a three-pillar strategy. and obviously we'll be increasingly reporting on various metrics. We just put some up here in this dashboard for the first presentation. Looking at it, if you look in terms of the environment and climate, the big reduction of that is going to be our end of routine flaring. We have a number of projects underway at the minute and they'll largely be completed this year. And we'll be in terms of end of routine flaring, we're now guiding the second half of 2025. Then you'll start to see those carbon intensity reduce, the flaring emissions significantly reduce by over 80%. In the middle bit of dashboard, we look at what we're doing with our people, partners and communities and social spending is quite critical. It's 10 million in 23. It was 9 million in 22. And in terms of our employees, Every year we have the separate people voice, employment engagement, and we actually measure ourselves against a global index. And that's 77%. That's an improvement on last year. And then in terms of governance standards, the board independence, and we'll talk about that in a second. But, you know, obviously we are announcing today a new chair. and Senior INED, and you can see the independence of the board is set at 60%. And then we're obviously rated by various sustained, well, ASG ratings indexes, Sustain Analytics, MSCI, and other ones there below. So just before I leave this dashboard, in terms of the staff at CEPLAT, 27.5% of our scorecard for the entire company is related to ESG and safety. So that's how importantly we take it. Almost a third of comp is related to ESG metrics, et cetera. So I'm just going to stop now and pass over to Sam, who will cover our 2023 operational highlights. Thank you very much, Roger.

Good morning, good afternoon, good evening, everyone, depending on where you are joining us from. I would like to deepen on the operational highlights already presented by Roger, starting with our resource volume and our life going forward. On the bars, you will see the resource volume journey and evolution since 2013, and it demonstrates how healthy our funnel is. And coming to the end of 2023, where we ended with 478 million barrels of oil equivalent in terms of resource volumes. If you just reference this back to our end position in 2022, where we ended at 438 million barrels, this reflects a 9% growth in our resource base. The key areas where we experienced this growth around the drilling outcome in OML 40, where we had the Sibiri Wells outcome, and then also our farming into Abiala marginal fields. And last but not the least is the conversion of 2C to 2P in our OML 53. All these translates to a future life of about 25 years of production life for Surplat. If you then go to the next slide, That tries to present to you our core operational performance in the year. As already highlighted, we ended the year at nearly 48,000 barrels of oil equivalent working interest, which represents 8%, 8.3% growth relative to 2022. The production is again split around 60, 40%, 60 for liquids, 40% for gas. And our production performance is underscored and supported by our diversification of the export routes. Our AEP continues to come very strong into our operational performance, reducing the downtime in the Western asset. Our drilling performance also in OML40 really helps us to deliver a very strong production operational performance in the year. And our partner relationships, supply chain, security management, interface with our host communities continues to also drive higher performance in our operations. Also to highlight that our production unit OPEX went up by 1%, and this is essentially driven by higher crude handling charges. Overall, we continue to see and address the challenges that evacuation presents to our operations, especially in the eastern asset. But I'm also happy to say that our renewed effort working with the key stakeholders is yielding some good efforts and we see TMP Zone 6 being restated in the coming months. Going to the next slide. Our midstream business also continued to show some great resilience. Our gas revenue reached 12% of our underlying group revenue in 2023. And while our gas is sold into the domestic market, all our contracts are priced in USD and settled in Naira. And in line with our commitment to support the industry growth and foster economic growth in Nigeria, We recorded some improved performance in our gas supply out of urban, with 114 million scoffs of gas averaging for the whole year 2023. This is additional 2% increase year-on-year average, while our average gas price ended at $2.90 per thousand scoffs. This is also a 3% increase year-on-year. By end of last year, we reported the mechanical completion of our annual gas plant and all the four upstream wells been delivered as of quarter four, 2023. We continue to work with our government partners on the OB3 and Sporeline with an outlook for their completion by quarter one, 2024. Moving on to our accelerated gas plant in Adesaple, I would also like to report that three out of the four compressors are now commissioned, and the upgrade will increase our capacity to 90 million scopes per day export, and with a new export module for LPG, which will bring a new product into the market. So overall, we continue to see resilience in our midstream gas business while we continue to explore actively additional exploration and appraisal opportunities and third-party gas opportunities to ensure that we fully maximize installed capacities in our gas plants. Moving on to the next slide, just to spend the last moment and talk about our CAPEX program and CAPEX performance for 2024, I'm happy to say that We delivered on the 14-well program that we reported to you in a revised guidance as of quarter three last year. And our CAPEX outlook for 2024 is already underway. We have already commenced the drilling of our 2024 activity program, where we have a plan to deliver 13 wells in the course of the year. So this is where I would like to hand over to Emeka, our CFO, to give you further insight into the financial performance. Thank you very much. Thank you so much, Sam. I will now run you through our financial performance for full year 2023. On slide 13, we present the highlights of financial performance. We delivered a very strong financial results despite the prevailing oil price during the year falling by 18% with $3.4 per barrel. However, Arara gas price was 3% higher at $2.9 per scoff as we renegotiated commercial agreement with some of our off-takers while also signing on new customers during this period. Revenue performance was impressive and we caught the $1 billion mark in gross revenue, growing by 12% to $1.06 billion. were driven by a strong lifting program, which offset the weaknesses in oil prices, which I referred to earlier. This consequently drove higher profitability, as adjusted EBITDA grew by 7% to $4.8 million. Wide net income grew 18% to $124 million, further added by lower tax experts during the year. Car generation remained strong, In 2023, we had pre-tax cash flow from operations of $520 million and $445 million after tax, which more than funded our CAPES program, dividend, and debt repayment in the year. Our overall average position continues to improve, supported by ability to generate cash as net debt dropped by 60% to $306 million. For year 2023, total dividend, including special dividend is maintained at 15 cents per share. More details on dividend, I'll talk about in the following slides. I'll take you to the next slide. We recorded growth in both gas and oil revenues on the prior year. As you can see, the cost of sales rose with high operating costs following our investment in alternative evacuation routes. GAA has a number of one-off items, When you exclude these items, we'll be closer to $1.5 million, but we'll still work in 2024 to reduce that G&A on a unit basis. Now that the valuation is a majority between 2003, I will continue to be a focus in Nigeria. It drove a non-cash impact of $27.5 million during this period. Net finance costs improved as we paid off $22 million of debt principal in the year, given a profit before tax of $191 million, down 6% in 2022. Black chart for the year benefit from deferred tax credits, given an effective tax rate of 37%, and leading to a reported net income of $124 million, more than covering our card dividend during this period. I'll take you to slide 15. On slide 15, we're looking at our cash generation, which we started in 2020 with a cash balance of $404 million and ended with $450 million and 11% growth in cash. We generated $520 million in pre-tax operating cash flow. These were down 10% on prior period. After-tax and other operating cash flow items made capital appropriations of $445 million. also down about 10% on 2022 figures. But benefiting from the strong leaf is achieved across the year. Cash flow more than covered $184 million of carpets. We're currently generating about $281 million, 261 million that feed cash flow during this year. Product cash benefit came from the Obamacare disposal process which continued during the year. On financial activity, we paid about $99 million in cash dividend during this calendar year, while we also paid $22 million in debt principal repayment during this period on the outstanding Westport RBL facility. We also paid $69 million in interest on loans and borrowing. Due to the values of the NARA, which I referenced earlier, We recorded an FAS loss of $40 million in converting our NARA balances at a prevailing exchange rate. This movement led to a net increase in cash balance of $45 million during the year, bringing our year-end 2023 cash balance to $450 million. I'll take it to the next slide. Our balance sheet continued to strengthen through 2023, despite weak hourly prices. following a principal repayment on the facility, which I referenced earlier, broad debt included amortized interest, fell by 2% to $756 million. Part of the growth, the great cash balance of $450 million, and net debt position fell by 16% to $306 million at year end. This balance sheet strength is reflected in our key leverage ratios. Our net debt to EBITDA fell by 0.7 times in 2023, staying well above our day coverage of 33.0 times and our business plan benchmark of 2.0 times. Our debt-to-capital ratio was 22% at the end of 2023. We continue to implement a robust hedging program derived solely of deferred premium puts For the first half of 2024 already, we have had 3 million barrels at an average price of $60 per barrel. We'll continue to add more barrels for the many parts of 2024. On slide 17, I'm focusing on liquidity and debt profile. Expanding on the balance sheet, we extend adequate duration on our debt facilities with our $650 million euro bond maturity in 2026. We repaired the first $22 million of the West Point Loan I referenced earlier during the year in line with the parties' dramatization and leaving a balance of $18 million as at the end of the year, and a further $19.25 million will be repaired this March. We also have a fully undrawn average sale for $250 million We begin to amortize later on in 2024. If you combine the RCF and our cash balance, we have a valuable liquidity at the end of 2023 of $800 million. The primary plan usage of this strong position is to support our M&A ambition, principally in the near term, because this will be used for the MPAU acquisition. We manage our balance sheet with a conservative eye, reflected in our historic leverage chart, At the end, the balance sheet was at its strongest level in recent years. Also, though not shown here, at the cost of the year, aircrafts committed to payment of the shelter loan between them and Westport. The 2003 loan, they repaid about $28.4 million. I'll take you to the next slide. This slide focuses on the award to shelters. In 2022, we sustained our traditional awarding our shelter by returning more cash via dividends. We paid out a record net $9 million in dividend in 2023, a combination of the timing of the 2022 special dividend and increased quarter dividend, quarter dividend wrong rates in 2022, which will raise to 3 cents per quarter and the altogether about 12 cents of core dividend for 2023. Of note, in 2003 distribution, brought cumulative card dividend pay to shareholders to $5.5 million, which is about 1.7% above the fact that $5 million we raised during the IPO in 2014. I would like to add to the fact that this year we'll be celebrating our 10 years of listing of both the Nigerian and the London Stock Exchange. For the quarter of 2023, the board approved the dividend payment of $0.06 per share, we're going to call them up three cents per share, leading the total payouts, as mentioned earlier, to 15 cents per share for 2023. I'll now hand over to Roger to summarize and take you through our outlook for 2024.

Okay, thanks Emeka. Let me just conclude here by looking at the outlook and growth potential for the business. So we highlight five specific growth opportunities for 2024 on this quite busy slide. But we start with obviously the acquisition of NPNU. We just highlighted some of the metrics around it. Obviously, this is back on the 2020 basis, and it's going to be important for us just to get an update on NPNU. when the government approves the transaction to move forward. We have a high confidence of completion this year, and we're encouraged by the public statements, the Honourable Minister of State for Petroleum Resources, oil made at the start of this year. So we are confident we can get this game-changing acquisition over the line. The other four we've highlighted here is obviously the Anugas project. So it was a monumental achievement to hit mechanical completion on that project at the end of the year. It's been very challenging in the East with security, et cetera, but the team has done an extremely good job in delivering it. Now we are working with our government partner. They're delivering two very critical gas pipelines, the OB3 and the Spurline, and our work is very much underway on both of those. We've maintained that 323-2024 for first gas, just to build some buffer. into the estimates there, but our government partner is certainly working at an earlier completion of those projects. The project will obviously then deliver two streams of revenue. One is back to the upstream and the wet gas sales. We're gonna get a higher price than we would normally get for just dry gas. And then we're then obviously gonna receive dividends from AGPC. The next two, Abiala and Siberia, relate to OML40. Abiala is an extension of the Betty Oaken development in OML40. This is a marginal field. We farmed into it with a 95% equity interest. The government is not actually in this development. And we're looking at first oil Q3 this year. And it's reasonably straightforward to tie that oil back into the better open development where we have a have a export route for it. And then in Siberia, which is an extension of Oklahoma development, a normal 40. And again, we drilled an exploration well a couple of years ago. Now we're announcing the FTB approval. um in q1 i think that's faster than we expected and and now we'll go into into developing sabiri and again we can tie that back to opahama and and actually monetize that oil through pipelines and the final one there is uh sam covered anyway which is simply gas plants um and this is a this is a quite a critical plant for us uh 90 million scuff um and we can supply in the subway area but also it can tie back up into urban and an increase in our gas exports. So that completion is expected in the second half of 2024 and critically it's going to bring LPG modules which allow us to come in and supply into the LPG market. Similarly, ANU will also deliver LPG which is obviously critical for getting Nigeria off using firewood for cooking and you can use bottled gas. So on to the final slide, just setting out some guidance and our priorities for 2024. The key guidance items here is on production and we're guiding 44 to 52 ball of oil equivalent. And you can see the midpoint of that is similar to the 2023 actuals. CapEx, again, 170 million to 200 million. And again, the CapEx midpoints look similar to 2023. And then operating costs, we're expecting them to reduce. And therefore, we're good at 9.5 to 10.5 guidance on that. In terms of wells, again, Sam covered this, but it's 13 new wells to deliver production and maintain output. And it's quite a heavy, heavy activity in the West around that. And in terms of fiscal strength, you know, Ameca again highlighted this in terms of strengthening our balance sheet, which is looking very strong, optimising our G&A costs and reducing those and continue to prioritise the shareholders dividend for the core dividend of 12 cents a share. The third one is around strategic growth, which is delivering the upstream and the midstream growth opportunities, mature new energy project evaluation, so our pillar three business, in towards an FID in the power sector later this year. Reducing our flaring projects at Oban, Amookby, Saple and Gisike and eliminating routine flaring, which is quite critical to us. And then, you know, at the minute, we're deploying renewable energy across a lot of the sites and actually into a lot of our communities. That's a commitment we've made and we'll continue to do that. And finally, before I hand back to the operator for Q&A, I just want to talk about our board changes. And we had our board meeting yesterday, and after that board meeting, we had a vote for the incoming chairman. I'm delighted to announce that Udo Adoma has been elected as chairman unanimously. And we also then voted for Mr. Bela Rabu to be the Both will assume office on the 1st of April this year after Mr. Fasolmi and Mr. Charles Walker-Howard step down from the board at the end of March. So that concludes our presentation. I want to hand it back to the operator for Q&A.

Thank you. And the floor is now open for questions. Participants can submit questions in written format via the webcast page by clicking the Ask a Question button. If you are dialled into the call and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. Again, that is star 1 on your telephone keypad to raise your hand and join the queue. And there are no questions on the conference line. I will now hand over to James Thompson, Head of Investor Relations, to read out the written questions.

Great, thank you very much, operator. We do have a few written questions, but for those that are dialing in, you've got some time now to raise your hand if you want to ask a question. You know, I'll group them together a little bit. Roger, maybe there's a few questions here on NPNU. First one, obviously, this is essentially the big event for the year. It's been some time now. Could you perhaps just revisit the key elements of the deal here? the consideration, the effective date, and there was a lockbox, you know, is that still valid? And how much of an amount do you think will be in that lockbox to lower the final consideration given the time that's passed?

Okay, thanks, James. So just to recap on MPNU, obviously we've signed this sale and purchase agreement in February 2022, so we've gone through the two-year anniversary. In terms of the transaction itself, the headline consideration is 1.283 billion for the four, well, actually we're buying the entire company, so just four blocks and a terminal and a lot of infrastructure. So as part of the purchase consideration, there's also a $300 million contingent payment, and that's only linked to oil prices. And there's an effective date on the 1st of January, 2021. And obviously the purchase agreement was extended last May in 2023. So in terms of the effective data adjustment lockbox, and of course the lockbox will reduce the final payment. We put a $128.3 million deposit And so the balancing payment obviously will have to be reduced because of the lockbox adjustment. It's too early to say at this stage what the quantum of that's going to be. Obviously, there's been three years of production coming out of it. But Everyone be aware, hopefully, that in 2022, through the dispute, NNPC took Exxon to court and also went into arbitration proceedings. And when that happened in Q3 2022, then obviously we have to stop all communication with Exxon around the technical details of the assets. It's a bit early to say around that, we'd be able to communicate that in due course. But anyway, we remain hopeful of the transaction closing, given the statements that have been made, and I think it's in everyone's best interest to get the stable of the line. They're very prolific assets, but we do need to arrest the decline in those assets blocks and then actually develop the oil. And there's quite significant gas reserves there, contingent resources there, which we can then link into domestic gas plates and LNG export plates as well.

Thanks, Roger. There's a couple more here following up on that on NPNU. Is there any update to the legal challenge, the arbitration related to the SPA for MPNU?

Yeah, I mean, and again, we're not part of, we're not joined into this, we're not joined into the court case, nor are we joined into the arbitration. The arbitration proceedings are, well, The pre-arbitration proceedings have gone through and underway around that, and the various three judges have all been appointed. They were due to start earlier this year. I think they've been slightly delayed, but we're not really privy to the exact timetable. We're not part of that overall process, but certainly I think they're scheduled for this year.

Okay, just that.

We've got a caller on the line. We do. We've got a question from Nikhil Bhatt from JP Morgan. Your line is open.

Morning and afternoon. Thank you for taking my question. I just have two. One on your Euro bond. I know it's still some way away, but just wondering if you have, what are your initial thoughts on refinancing it, especially given the potential sort of NPNU acquisition closing. And on a similar note, sorry, part 1A, I guess, is given the healthy cash balance and liquidity that you have, are you considering buying back some of your bonds given the yields they are currently at? And then the second question was on your cash policy. I think in one of the previous conference calls, there was some mention of sort of re-evaluating your the currency you keep your cash in, or the split of currency you keep your cash in, given the Naira devaluation. I was wondering if there's any update on that. Thank you.

Thank you. I'm going to hand both of those questions over to Mecca and Wilker, our CFO. And we also have Eleanor, who will be in the room in Lagos, who will be taking over from Mecca later this year. Mecca?

Yeah, thank you so much, Roger, and thank you for the question. The euro bond will continue to watch the price of where it's trading at currently, even in the majority of 2026. Our major focus currently is to conclude the MPAE transaction, use our cash, and then we'll rebalance our financing. So we're looking at revaluing the situation toward the end of the year. Also watching the market. That's on the euro bond. I'll take a tour later to that. That's on the cash balance we're holding correctly. our focus is to complete the transaction. Roger gave a view already about the pricing of that transaction and the nature of the fact that we don't know ultimately how much that's going to cost by the end of, by the time we complete that transaction. So we're keeping all this in view. We definitely want to balance, you know, the funding structure of the company after that MPAU, MPAU transactions. So we're holding on to that, and that affects a lot of our position on that. The good thing is that we still have time, and we'll watch how the markets are trading. Our country, as we communicated previously, is still holding. We normally keep 70% of our liquidity offshore, and 30% on-country. And as of the end of 2023, the offshore peak to look at is 76-24, about 76% of ability with foreign currency in health outside the country. Specifically, our Naira balance at the end of 2023 was about 48 billion Naira, which in functional dollars was about 58 million dollars. So our policy is still holding and we continue to watch the market in terms of the foreign constitution of the country and how the policies are changing. I will give the assurance to respond to this question to say, there's nothing in terms of the policy that is seen from CBN that threaten our position in terms of the . We'll continue to watch it, and I believe they're in a good position on that.

Thanks.

Thank you.

We will now hand back to James for further written questions.

OK, thank you. And thank you very much, everyone, for the questions. They keep flying in, which is great. So I'll just stick with NPNU for the minute. Roger here, could you maybe talk about what we can say or anything we can say about the performance of the assets and link to that a couple of questions linked to this, you know, something around our confidence here, timing of the transaction and urgency, perhaps of the of the government given the statements that were made earlier this year.

Yeah, okay, thanks, James. It's hard for us to give any level of accuracy on the performance. When we announce the transaction, we give some working interest volumes there. I think they'll have softened from that. They'll actually get a decline, probably 5% decline in these assets. And so you've got to really drill the standstill here And there hasn't been a well drill for a number of years. So we expect some decline on it. We don't see that material decline, we don't think. But we're pretty confident we can get in quickly and arrest that and actually grow production in terms of it. You know, I did say that we, you know, in the oil side of it, you know, we have quite an extensive development plan in the next five years, which is a mixture of infill wells and new drills. And the resource is extremely good. And then on the gas side of things, you know, it is primed for, you know, really a gas solution, domestic and international. Exxon currently dry that gas and we inject it. And actually we see a real opportunity alongside the government partners to actually then monetize that gas. In terms of then certainly around the... getting the deal over the line. I think there's a genuine commitment from the government to resolve this. There has been a lot of statements from the Minister around it, and I think that lines right back up to the President, who is the Minister of Petroleum. We did have a, well, NNPC, there was a disagreement at NNPC with Exxon, I guess us, by inference, because we're coming in to buy this. We believe there's a lot of work has been done over the last six to 12 months to align more in that. And that's why we're giving us confidence here to get the deal closed out. So we can't give an exact day, month, but I think we're getting pretty close on this transaction.

Okay, so I'll move off MPNU onto Anno. A few questions here. The river crossing has been pretty problematic but appears to be some genuine progress there. Could you maybe give us a bit more detail on progress towards completion and your kind of confidence in 3Q 2024 and then Alongside that, maybe around the guidance, you've included Anno in production guidance. Could you give us some colour on the ramp up, how long that might be? And a third one there is gas revenues made up about 12% of group in 2023. With Anno, where do we see that moving to as a percentage?

Yeah, I think that's a real question for Sam. Sam, you want to come in on this one?

Yeah, thank you. And thank you very much for that question. On the river crossing of OB3, the river crossing has been very, very problematic.

But I think it's important for us to now report back that the grouting process, which our partners, government partners, brought in some experts from the London, that built the London Underground, actually completed. And now tunneling has commenced. For some of you who follow Nigerian news, there was a release from NNPC two days ago just announcing the commencement of the tunneling, which is the last phase of it. So that in itself, making sure that we completed the grouting across the river crossing and to the end of the line is a major milestone. Now that we are in tunneling, That is the confident booster that end of completion of that process is in sight. So that's really, really major milestone achieved. And that kind of reinforces our confidence in the on stream day for ANO in quarter three this year. Ramp up especially is expected to take three to six months period So in terms of full blast impact of ANO, you will see that in 2025. But in terms of guidance and what we envisage as an exit rate, we will exit. Hopefully, we have quite a number of opportunities in the middle, including ANO, including the statement of TMP06 and supply to Edo Refinery, among other things. production boosting opportunities. And if all of them come in place, we see ourselves closing, ending at the upper end of our guidance. So that's my long response to this question. Thank you very much. Back to you James.

Thank you very much, Sam. We can go to the operator, I think, for another question on the line.

We do. We have a question from Alex Sachev from GSAM. Your line is open.

Hi, gentlemen. Thank you for the presentation. I have a few questions. First is a follow-up to Nihil's question. I'm afraid my line wasn't really good, so I didn't hear the number you had in Naira at the end of the year, and to expand on that a bit. With recent changes in cash repatriation rules from Nigeria, would it be safe to assume that going forward we should see the balance of cash you're keeping onshore grow? Or maybe you could share how you're going to deal with it? And my second question, just going through the press release, I noticed that you're talking about a new energy business again, and that the gas-to-power development project may go into FID this year. So I presume you should have rough numbers handy, and I'm just wondering what would be the ballpark CapEx estimate for this project, and how long it may take you to get it done. Thank you.

Okay, thank you. Can I bring in Emeka for the first two questions there? And then I'll deal with New Energy.

Yeah, thank you so much, Roger. I mentioned that as a year end, our splits between dollars and Naira in line with our policy of 70-30 was 76% offshore in dollars and 24% in Naira. Specifically, Naira was worth 8 billion Naira. If you do, using our year-end conversion rate, that would give you a functional dollars of 58 billion dollars. Now, we've always operated based on the CBS circulars, referring to how oil and gas companies utilize their export process. And under the existing circular, we are allowed to make multiple payments in terms of interest, in terms of debt obligations, in terms of also contractors. And up to about 10 categories of payment, we currently offer our requirement for foreign currency correctly. And that circular is still in force. And also important that circular will be in force the oil and gas companies are likely to operate freely if that circular in any way is compromised. Now, outside of this circular, sometime in 2015, the IOCs had an understanding with the central bank because of pulling off cash for the head office cash management. Outside of this, they can pull some cash to the head office outside of this designated or allowable expenses. you know, for oil and gas companies. Now, that is the arrangement that has been affected by the recent circular from CDN in terms of trying to bring that arrangement into some kind of control. So it does affect our current operation. That said, we are aware that foreign currency becomes a major issue for the government and for the central bank, and they continue to look at the guidelines to be able to streamline the market. We do not believe that we don't believe that we have any new sector that can conduct with respect to our pressure. So we are confident ability to meet our foreign currency obligation based on foreign currency and it will not be impeded in any way by even future regulation changes by the central government. So those are our hands over on the capital and the capital designation for the new energy. Yes, thank you.

So the new energy business, obviously it's a new sector for us, the gas to power, and we're being extremely careful how we think about it, the risk profile around it, et cetera, the currency mismatch between likely capex, probably all of it's going to be in USD, and obviously in the power sector it's a narrow gap. in our base there. So it's something that we are taking our time over. We have set that target for the end of the year for FID. A little bit premature, this call to come out and set out, you know, quantum capex, et cetera. You know, we're looking, we have a couple of projects in mind, but it's likely the FID will be one particular one. So I think it's a little bit early for it. We certainly will be coming up, maybe,

um later this half or maybe into the slightly in the second half with some of the information thanks roger um so we've still got quite a few questions to get through i will try and group them uh we've got a few more on the assets then we've got some uh sort of more detailed financial uh and guidance questions and then we can wrap up on a couple of macro questions um so just closing out on the assets tmp we talk about um resolving that in the third quarter. Could we perhaps give an update on progress to get the TMP back up and running?

Yes, Sam. Okay, thank you very much for that question.

TMP06, we have actually advanced the reinstatement of the line and we are currently doing hydro testing of the line to ensure it holds pressure with water before we introduce hydrocarbon. So, knock wood, we are looking at reinstating that line in a short period of time, maybe a matter of weeks, months maximum.

Okay, thank you very much, Sam. And then just on Zafiri, We talk about the in-place resource in our update today. Could you just give the caller an indication about whether we included any of Sabiri in our 2P reserves number and potential on the timing of first oil for the field?

Sam, that's you again. All right. Thank you very much.

Yes, indeed. The answer is yes, yes, yes. We included Sibiri in the results numbers, and we are quickly transiting and trying to convert the appraisal well objectives into production. So the Sibiri One will bring in somewhere close to 2,000 barrels of oil per day potential before the end of the year. Target is to bring in the Sibiri One in the coming months, and then the Sibiri 2 that requires a well-heard maybe a month after. So we are aggressively pursuing bringing in those opportunities, and the range from Sibiri 1 and then Sibiri 2 is 800 barrels to 2,000 barrels, and then they will be coming in stages in the course of the year.

Thank you. I'll move to a couple of more detailed financial questions. We've reported an over lift through most of the year. Could we please give an update on where we were at the year end and anything we're doing to address the over lift in 2024? Michael?

Okay, I'll take that. Most of the over lift. Well, the fact that we have an arrangement where we are selling crude from Eastern Icet to Erefanare, water smiths. Now, part of the arrangement that we have is that if the percussion route is compromised and not being used, then we can supply JV crude to water smiths. And because the TNP has been off for a very long time, for most part of last year, we are supplying JV Group to Water Speed and receiving the money on behalf of our partner, NUIN. So we are holding that balance. We are currently discussing with them and if we will violate their arrangement, we are going to to move some of this liquidity back to them, and that will slowly reduce the over-lift. That's the middle part of the over-lift that you have. The rest, use your routine scheduling in terms of lifting that you have.

And obviously with the TNP opening up, you know, obviously then they'll be able to... The partner doesn't have a supply agreement to HolderSmith, and then we'll be able to export down into Bonnie, to the TNP.

Thank you. Tax on tax, tax expense was a little lower than expected in 2023. Do we have more tax assets, deferred tax assets for 2024? Can we give any guidance on tax expense in the year ahead?

I'm not in a position, we're not able to give any guidance. However, I will check and send specific Right up on that, yeah.

Okay, thank you. So just moving to the guidance that we've given to the market today, really around production. Question here from the call. The guidance here was, you know, the midpoint is similar to 2023's outturn. There was some disruptions in 2023, particularly in the middle of the year. Could we maybe talk about how much deferment we're factoring in across the assets? in 2024? And I'll carry on as another very similar question, but could we provide a little bit more guidance on the asset by asset build up in production guidance, the expectations that underpin it there? Okay, Sam?

Yeah, okay, thanks. I think, thanks for that. The deferment that we've applied in 2024 is similar to 2023. What I try to allude to initially is that there are a lot of opportunities that are coming in and they're coming in towards the later part of 2024. And if you look at that, that would mean that we will have a closure on the year was in the upper end of our guidance and then actually a much more improved exit rate, higher, far higher than what we will have in 2024. The direct translation of that is that we will have a much higher guidance effective in 2025 because that is when all these opportunities, including ANO, with the full benefit of ANO coming on stream, will be seen and felt in our business.

Thank you very much. I think we've got one question coming in from the call for the lines here now. Operator, do you think we could go to the Caller, please.

Yes, this call is from Nicholas Stefano from Red. Your line is open.

Hi, guys. It's Nick from Red. Thank you for taking my questions. I have a couple to ask, if I may. I just want to go back to the production guidance for the year. And I would say that this time it kind of looks a bit more conservative than other years. And I just want to understand especially and what is going on at the waste assets because if you're going to drill nine wells at almost for 1341 and it looks like it looks production is going to kind of like be the same there so I don't understand what am I missing or if there are like any sort of like the classes were in the portfolio and then then another one production that's for that's um on the tmp so i'm looking at the um and um npc's uh numbers there it looks like a from the bonnie from the bonnie terminal and the output has pretty much like tripled since maybe six months ago um so i'm so what is going on with with your side of um of the operations there because To a large extent, it seems that a large part of the TMP is actually operational. So what exactly is the problem there? And then a final question on the leverage and the NPNU deal. Can you confirm whether you consolidate NPNU after the transaction and how the covenants will be calculating, will be including or excluding, you know, NPNU and production and pharmacies, et cetera. So thank you.

Okay, maybe I just start with that and then Sam, you can kick in. So in terms of like, because the production, I think the way you think about it, yeah, we are pretty active in the West. It's a time when we're going to bring all those wells in and you're going to see them coming back in sort of, second half of the year. So you're not really getting the benefit in the productions. If you look at the sort of exit volumes, we're going to see they will grow to the back end of the year. But it's just the timing of those wells coming in. With regard to the question you had, Nick, on the TMP, and you're right, the lower sections of the TMP have been fixed, so you're starting to see these those injectors really getting that volume down into bonnet, which is very, very encouraging. The upper section, zones six to nine, and we inject in zone six, they've been a lot more problematic and they've taken longer. But as Simon said, we're hydrotesting zone six at the minute. Well, we are not. Obviously, the operator is at the minute. But as soon as that's successful, then we're then going to start to inject into zone six. And we're very encouraged by the lower end of the line, which looks to be working quite well. So it's the timing of when we can get the TMP up and running. You know, we've had to build a lot of conservatism into those sort of estimates. And with regard to NPNU and consolidation, yes, it will be consolidated. You know, we will earn 100% off of the shares of the NPNU and see if it'd be consolidated into our numbers. And therefore we'll have implications. I mean, it doesn't have implications on existing funding arrangements because obviously they won't be part of it, they'll be set to be funded, but obviously we'll have to consolidate up around that. And it's a bit early for us to be able to communicate that because we have not had access to information And as soon as we can get clarity from the government, get the court cases dropped and the arbitration dropped, then we are confident we can get information very quickly on it and update all our models and see what the consolidation looks like.

Okay, thank you.

Okay, great. Thank you very much. Roger, Nate, did that answer your questions? Yes. Okay, great. So, Roger, we've got just a couple more here, written questions, and then we're nearly out of time there. Firstly, you know, we've seen a big improvement, or SEPA has seen a big improvement in the loss factor in 2023. We talked to a security improvement on the Delta. Could you maybe give a little bit more colour around both our and our partner and the government's efforts to improve security and production and the potential durability of those efforts in restoring production on the Niger Delta.

Yes, I mean, Sam, do you want to come in?

Yeah, thank you. Yeah, thank you.

I think what the major change here is the government has a good number of security architecture on the pipeline export routes. between the east and the west and this is holy um we've seen reduced theft and losses on the lines since this security architecture has been put in place um and i would say bring coming forward to january we've actually seen even a further improvement in the losses along those lines especially our AEP, for instance, where we've seen losses in the range of one to two percent, which is really a big improvement from what we used to see. So overall, there is security architecture on the lines, and we see consistent improvement going forward. It's just to continue to work with the government agencies so that they can sustain their efforts along those lines. So that is what we do. We continue to influence because again, this ties back to the revenue to the country. Thank you very much.

Thanks, Sam. So we'll take one more question and then I think we'll hand it back to Roger to close after that. If we haven't addressed your questions or if you have more, please do not hesitate to get in touch with me. in IR. So final question, Roger. You know, there's been several transactions announced with the IOCs selling to indigenous partners, and now all in the public domain. Could you maybe talk a little bit about how that might give us confidence that our deal may reach a conclusion, is the final question, or how does that sort of change things from your perspective?

Okay, well... First of all, I think certainly our deal is certainly the first one to be announced in the sale and purchase agreement two years ago. It's a very critical transaction for the country. You know, it's not been a secret that the IOCs were really looking to focus their efforts in the deep water in Nigeria and certain aspects of some of the shallow water and some of the IOCs obviously will remain in Onshore, particularly around gas going into LNG, etc. So it's not a surprise that divestments are coming. These five really have come to the forefront. I don't think it really changes our transaction necessarily, because each transaction is very specific. I think you can take confidence in the statements from the ministers and everything else that that because he's not leaving, they're focusing on the deep water. There's a definite acceptance within government that these deals need to happen and they need to happen quickly because, you know, when you're divesting, you're not investing. Right. So you're not spending money. and oil wells decline and gas wells decline if you're not continually working on them. So I think it's now got to the stage that these things need to clear, the government understands that, and there needs to be a lot of investment in on the onshore. So does it make it any more likely? I don't think it does necessarily make it any more likely than, than before. Um, other than, um, there's a lot of focus on it and, uh, we remain in conflict with ours specifically that I think we are, we are ready to go to a government, what we're going to do with the, uh, with the blocks. So we're very keen to start investing. Okay. So, um, I think that wraps up, that wraps up the, um, the presentation for today. I think 2024, we've laid out some of the stuff we're really looking at. I think there's a lot of catalysts here. I think it'll be an exciting year for the company. Real value, creative. A lot of projects we've been working on for years. We're very keen and looking forward to getting them complete. And I think CEPA will exit 2024 in a much stronger and better position so thanks everyone for listening today and i look forward to talking to you at the next presentation