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Tethys Oil AB (publ)
5/7/2024
Good morning, ladies and gentlemen, and thank you for joining us today at Tethys' earnings call for Q1 2024. It's quite an important call today, so let's go straight into the presentation. So what's going on at and with Tethys? Well, actually, quite a lot. Focus and activity levels on our operating blocks are gearing up for major transformative events. While our non-operated blocks three and four, the source of our production and cash flow for more than 10 years, after a continual drop in production, starting to show signs of stabilization, and we are starting to see the effects of the increased investments over years. So we are actually hopeful that we are seeing a more stable regime from three and four, and of course we are not changing any guidelines. There have been some weather events that have affected production in the near term, but the trend from the production side we believe to be stabilizing. But more importantly, I'd like to talk about our operating blocks. So block 56, just to remind you, we are on the eastern side of Oman. Main focus right now geologically is in the eastern flank of the southern Oman salt basin. We've been working as operator for this block for almost three years now. And we are focusing on a few discoveries that we are now trying to bring into development. And we are also working on the exploration potential of the block. Block 58, we are in the final preparations to drill the canoes well. We are targeting a large structure that, if it holds oil, could be quite significant. And block 49, we've actually entered the second exploration phase to be able to properly evaluate both our Thameen I well, but also the overall prospectivity of the Rub al-Khali Basin in this part of Amman. With all these activities and with the performance of III and IV in the background, we are reviewing our portfolio composition and have taken some advice from the eminent investment bank, Jefferies, to assist the board with a strategic review what should be the company's main focus going forward among all the projects we have to choose from. And we've also signed a heads of agreement with the state Algerian state oil company Sonatrac. We have agreed to work towards a signing in BSA over two areas in Algeria, which we believe could be an excellent second country entry for Tethys. It's been a couple of years since we talked about a second country entry, a second leg to stand on. We have a lot ongoing in Oman. We were looking at other places, not really finding something that was all that attractive. But now, having settled on Algeria, we see a lot of geological and technical upside, and we are in fruitful negotiations with SonarTrack. We see how far we can take it. And Box 3 and 4, of course, 8,000 barrels of oil per day for the quarter. revenue of $30 million and an EBITDA of 13. Down from last quarter both from the production perspective and oil price. Oil prices of course are higher in the second quarter and our CFO Petter will guide you through our financial results in detail. So let's move on then to Block 56 and the field development plan, which is in the final stages. So the block is right adjacent to Block 6 and the Medco-operated Careem small fields. Small fields is an internal and the description of the fields that are owned by PDO but operated by third parties. KSF has been in production for a good 10 years and what we are chasing and about to develop in block 56 is really the continuation of the Karim field. We have a number of discoveries on the block. We have the Altumd where we performed an extended well test, which is now at the core of the field development plan. We have the Sahar discovery, which we didn't make, which we have further appraised. And the Minna one well that we drilled earlier this year and continue to test with encouraging results. So the field development plan, we focus on bringing these three discoveries to production. We are looking at a very uncomplicated early production system initially with trucking. In effect, we are starting up again where we shut in the extended well test now about six months ago. In addition, we are busy interpreting seismic first over the eastern flank so as to support the development of Aljumd, Zahra, and Mena, with a number of additional prospects in, shall we say, near-field exploration mode. And then we are also looking at the Tertiary Basin, which is a completely different basin further to the east of the block, where we have a number of prospects, but this is a little bit further down the line on the exploration side. Interpretation is ongoing, but the main focus right now is to have a very clear inspiration strategy also within the field development plan. And we hope to finalize this within the next couple of weeks and submit it to the ministry for approval and for declaration of commerciality over block 56. Excuse me. I should say by far where we put most of our efforts at the moment. And I hope we will be able to share the details of the plan within the near future. Turning to 58, this is much more of an exploration block. No discoveries made, but exploration as exciting and interesting as it comes. This is really the proverbial company maker. Okay, we're a company already, but if this comes in, we will be an even much larger company. We have two areas here, the Fahad area and the South Lahan area. South Lahan has been the focus for additional seismic interpretation and volumetric interpretation. And we recently announced a quite high prospective resource number for the South Lohan area. We are looking at what is, in effect, an analog to the green fields you see to the right of South Lohan. The PDO operated our wheel cluster of fields, which is in production for the better part of 10 years. And South Lohan is a perspective for the same kind of play, carbonate stringers embedded in salt. But our first target is the Canoes I inspiration well. We expect it to spot in June. We are targeting 120 million barrels of unreleased prospective resources, which will make it by far the most high-profile well to be drilled in the mound this year. That preparation is completed, and a rig contract was signed a couple of months ago, and the rig is now being mobilized to the site. Again, we're looking at a carbonate structure. It's actually the same target that we produced from in Blocks 3 and 4, and that was one of the reasons why we took up an interest in Block 58. We see, here we are on the western flank of the Mount Salt Basin, and it's quite underexplored, but we see similarities with what we have on the western side, and the difference being that we have not found anything even remotely as large from a prospect perspective as we have here on Block 58. So clearly it will be quite an exciting wealth, If it doesn't come in, it's not going to change our perspective dramatically. But if it does come in, it's going to be a significant addition for future development. Turning to 49, we drilled this amine well three years ago now. Logs indicated 30 meters of hydrocarbons. We've done a number of studies. And we have planned to conduct a hydraulic frack of the tight sandstone to see if we can get anything to surface. But in parallel, we have also been looking at the overall prospectivity of Block 49, incorporating water data from adjacent Block 36, which was at the time held by EUG. of the United States, a company that was our partner in 1949. While we drill them, I mean well. We believe there are synergies between the blocks. And in particular, we believe there is a potentially very interesting geology in this part of Oman. It's a completely different basin from what's producing today in Oman. This is the Rub al-Khali Basin, which is really more to do with Saudi Arabia than with Oman. Our findings so far suggest there can be some quite interesting opportunities here, also outside of Thameen. So we've elected to enter into the second phase to be able to properly evaluate not only Thameen, but also the overall prospectivity of Block 49. We expect to see activity in the second half of the year And as we are now focusing, one, finalize the FTP for 56 and get that submitted to the ministry. Finalize preparations for canoes and spout that well in block 58. And then we will concentrate in the second half on resources on block 49.
Block three and four still.
all our financials and most of our balance sheet, although we are slowly transitioning away from that fact. A number of wells drilled, six development wells, oil producers, workovers, and water injectors. Appraisal wells within the greater Far South and Shahad areas. And exploration wells, near field exploration wells to be built in May. One in the far south targeting the quite prolific Barrick Formation. And two Shahad exploration wells targeting additional potential in the Hufai Formation to be built, expecting to start in July and November. And the large seismic acquisition program is nearing its end. We expect it to conclude in the third quarter this year, but of course interpretation primarily by the operator CCED has commenced. We remain positive to exploration potential within Blocks 3 and 4, both in the near field, which the operator is now targeting in the near term, but also in the far field, the JARI 1 discovery in Block 4, for example, warrants additional exploration. We'll also see what the new seismic is going to yield, both when it comes to gas potential in the northern part of Block 3. You see the purple dots there. And also additional opportunity around the JARI area in the southern parts of Block 4. On the infrastructure side, The gas to power project started up in Q4, is now being further implemented in Q1. And the purpose, of course, is to use associated gas to generate electricity, both to lower the carbon footprint from the associated gas, but also to limit the diesel consumption at substantial savings. for the production. Diesel is used primarily to fuel the pumps that are instrumental in bringing the production in Farha and Shahad to surface. Investment's ongoing, and the second phase is expected to be completed towards the end of this year.
Production. Stable above 8,000.
We see the continued downward trend but now at a slower pace and production in Q1 was affected both by planned shutdowns for maintenance purposes in February and also weather-related shut-ins because of the rains in March. So we stand by the guidance for the year. And we notice a clear trend of improvement from the operator side when it comes to forecasting and delivering production. That said, we announced in February a strategic portfolio review. And if you look at our portfolio here, we have blocks three and four. We have 56, 58, and 49. Three and Four, of course, are our main producing area in Oman. We have been active here in production since 2000, in commercial production since 2012. It's been 14 very good years. Based on the knowledge we had from Three and Four, we got interested in other parts of the salt basin, the eastern and western flanks in 56 and 58, and for something completely different, Rub al-Khali in 49. With Greenfall in the situation where it's at and with 56 approaching field development plan and thereafter pending declaration of commerciality, we decided to take a close look at our portfolio mix and also to review our strategy going forward. We have come from a period of great harvest, having distributed large amounts of cash to shareholders while building our portfolio of restoration assets and appraisal assets in 1956 in Oman. We may have come to a point where we have to refocus more on growth to be able to harvest even more in the future and to make sure we have a good base for decisions. The board has mandated Jefferies Financial Group Incorporated, an eminent investment bank where we work with the oil and gas team out of London, to assist the board in assessing strategic options and come up with the best strategy for Tethys going on. in the future. It could entail divesting all apart of three and four, increasing our stake maybe in 56 where we are nearing commercial production with the field development plan, and also realigning various parts in 58 and 49, not least depending, of course, on the outcome of the ongoing exploration program. This is a review that we expect will continue for a little while longer, and we will of course keep you, shareholders in the market, aware of any interesting developments as they materialize. To complement heads of agreement with Sonatrac, this is not a license yet, it's just an agreement to negotiate for PSA. We are particularly focusing on two areas, the Al-Hijra, Al-Hayat II. We've been through the data rooms, and we are discussing now details of work program and commercial terms. If successful, we would hope to sign a PSA later this year. And we also are keeping the door open for other opportunities in Algeria which we believe could be an interesting complement to what we have in Oman. And as you've understood, we are very much an oil company. We are focusing on bringing new production in Oman. We are reviewing the optional mix of our oil and gas assets. But we are, of course, also aware that we need to support the energy transition. Our primary focus and primary way of doing that is, of course, to do what we do best, supply the world with oil and natural gas for as long as the world needs these products for its energy consumption. But we are also looking at contributing to that transition outside of producing oil and gas where our expertise And our knowledge of geology and the subsurface, the underground, can be of assistance. For example, we are looking at carbon capturing and storage, which we believe is a very important part of the energy transition. To remove carbon from the atmosphere or to prevent carbon from entering the atmosphere, and instead sequestering it in, for example, depleted oil fields and depleted gas fields are projects that we believe can be quite important for the transition, but also can add an interesting source of revenue for companies with an expertise in the area as the demand for these kind of services increases. So we are keeping a small eye on this and we are looking in particular at what we can do in areas where we are already present. With that we have reached the financial highlights and I will turn the microphone over to our CFO Petter.
Please. Thank you Magnus and good morning everyone. The first quarter of 2024 is largely in line with the expectations we had and the guidance we provided in the fourth quarter report earlier this year. However, it was a financially unimpressive quarter with a low oil price, low production, and high aerobics combining to give us a lower result and weaker cash flows than we've seen for quite some time. On revenues, we had $30 million. compared to $36.5 million for the previous quarter, and EBITDA of only $13 million compared to over $21 million the quarter before. However, we do see some signs of improvement, and hopefully this should be one of the low points of the year. So if we look at the oil sales in the quarter, which of course was a key factor in this, It was down somewhat compared to the previous quarter, but with a big step down in oil prices, that had a big impact on the revenue side. Worth noting, though, is that we have 20,000 barrels of underlift, which will be lifted hopefully at higher oil prices later in the year. Net entitlement on block three and four remains at the maximum 52%. and largely follows the production trend when it comes to volumes. And in value, it follows the oil price, as you can see from the graph to the right. OPEX, a key factor in this quarter was, as we guided for in the Q4 report, higher than the full year guidance. And this is largely due to the higher cost at the start of the year as a result of the implementation of the gas to power project at the same time as we do have the usual slightly higher annual benefits cost at the start of the year. But we remain with our guidance of 17 and a half for the full year and we expect this to trend wise improve as the year proceeds. Cash flow from operations. Well, that's largely a result of all the aforementioned factors of lower revenues and higher costs in combination with an unusually large negative working capital movement. That is largely due to a reduction of payables to our joint operations, which does happen from time to time, as you can see from the graph. Investments in oil and gas properties have been trending down for a few quarters now, and we do expect that to improve throughout the year trend-wise. However, the investments on 56 and 58, we would expect to be recognized towards the latter half of the year. And that should, of course, impact the free cash flow in a positive way, In this quarter, we had almost minus $11 million of negative free cash flow as a result. And that is particularly that negative working capital movement making a big difference. And that gives us a cash position at the end of the quarter of about $15 million. And I'd like to remind you that we do have a credit facility that will be available before the end of the second quarter. ensuring that we are fully financed for all our operations with ample room to manage any fluctuations in oil price or production if that were to happen. At the same time, we also have seen a buildup of cost pool on blocks three and four that was almost $29 million at the end of the quarter, and that is essentially deferred cash flow that we will get back in the future as profitability in the project improves. And with that, I would like to take us through our production and financial guidance, which is unchanged from the previous quarter. We still expect production to be in the range of 8,200 barrels per day plus minus 400 barrels. And as mentioned previously, operating expenditure for the full year is expected to be around $17.50 per barrel, thus seeing an improvement on the level we saw in the first quarter. And with investments in oil and gas assets expected to improve, as the year proceeds, but with the exception of the expiration expenditure, which will be focused to one or two courses only. And we expect to finance that with our own cash flows, as well as the cash we have on hand and any external debt that we are making available. And with that, I'd like to hand it back to Magnus.
Thank you, Petter. Well, three and four continues on its course. And as Peter pointed out, we stand by the guidances. And we believe that the operator is going to deliver a robust second quarter. While we focus on block 56, field development plan and declaration of commerciality for a second commercial production stream from Oman. The spread of the high-profile canoes won well. And of course, the successful conclusion of the strategic review. All of these we expect to be able to shed information and additional move forward on in the second quarter. I think on that note, we are ready to take questions.
Thank you. As a reminder, to ask a question you will need to press star 1 1 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. This will only take a moment. We will now take our first question. Please stand by. And the first question comes from the line of Stefan Foucault from Actis Advisors. Please go ahead. Your line is now open.
Good morning, Maddy Jensen. Good morning, Peter. Thanks for taking my question. I've got a lot, but I would like to focus on just three to start with. So first on block 56, what is the... can say the size of the reserve you have submitted in the FDP for the EPF development and when would you announce the next step or the start of the development or at least what would be the next announcement? Is it at the time you submit the FDP? Is it afterwards once you have the approval? I'd be interested to have a sense on that. You indicated that it's coming soon. Could you give a sense of the sort of timing? Are we talking weeks? Are we talking months? And related to that, I remember you were in discussion with a potential farmhouse partner. Is it still ongoing? Is it part of it? Great to hear about that. And lastly, for Algeria. Again, some colors. Was it a competitive process? With the background, did you approach on a track? Did you initiate from status? What sort of stuff are you looking for? Is it exploration? Is it oil? Is it gas? And when could we expect the next step to be announced? Thank you. I appreciate this quite a lot.
Thank you, Stéphane. Rather comprehensive questions, actually, yes. So shall we start with 56? We would expect, I'm currently not able to comment on any details of the FTP. We would expect to announce when the FTP has been submitted, and of course, we will announce when and if it is approved. We expect also to have a third party resource reports in connection with filing the FTP, which we should then be able to share with the greater community. And as we are saying in the report, and as I said earlier today, we expect to file the FTP with the Ministry before the end of this month. Thank you. That's one. And your second one was, sorry?
The second one is around the strategic review process, the timing.
Yeah, it is ongoing, and obviously there has been a lot of brain-racking within the board, and we have looked at several scenarios. Jefferies has been mandated with their input, and it will take, of course, the time it takes, and we continue focusing on our focus area while this is ongoing. But I think it's fair to say we would expect to have more input on the strategic view, how it is moving forward during this quarter.
And the farmhouse potential partner that I think you had talked about at some point, is it still ongoing? Is it part of the process? Are they gone?
We are looking at several alternatives for all our blocks. Obviously, with 100% in 1958 and 1949, we would welcome a partner at the right terms, of course. And now, nearing the drilling of canoes, maybe we would prefer to see the result of the well before we do a farmer. But as I say, that, as everything else, is subject to the terms that can be agreed, and everything, including percentages, are always to say at the right price.
Thank you.
So turning then to Algeria, let's say we have been in discussions with Sonnetvac for some time off and on. As you may recall, a couple of years ago, we were actively talking about sourcing a second country entry, a second leg for Tethys to stand on. And as this process has been going on, we've reached the point where we have signed a heads of agreement to enter into final negotiations over these blocks. We are looking at both appraisal and exploration opportunities, and both for oil and for gas. But as I say, nothing has been concluded. We are, of course, encouraged by having all the process this far, and we are hopeful we will be able to continue it towards an ultimate goal. But we will, of course, keep you all posted as the process proceeds.
And would you have a sense on if we are talking months, weeks, next year?
Let's say we are looking at over the next couple of months.
Okay. Thank you.
Thank you. We will now take our next question. Please stand by. The next question comes from the line of Knut Martin Karlsson from Commendier Capital. Please go ahead. Your line is now open.
Good morning, Petra and Magnus. I would like to start with a question on the Sonotrack transaction in Algeria. Please correct me if I'm wrong, but similar to Oman, it's the Ministry of Energy and Mining that grants the PSA which means that you are discussing a farm with Sonatrack on the two fields. Are those correct?
We are discussing with Sonatrack the terms of the PSA, but it's correct that Sonatrack would certainly be partner in that PSA, yes.
Okay, so the PSA is already granted by the Ministry of Energy and Mining to Sonatrack.
Well, let's say that... not to get too technical, but we are in discussions over a PSA with Sonatrack. And then, of course, Sonatrack has a license over this area that they are able to negotiate over, in this case, with us.
OK, great. The second question is related to asset pricing on producing field versus exploration in today's climate. And in previous interviews, you've been quoted to have said that everything's for sale at two times book. And our view is that the current market is very unfavorable for exploration activity and more favorable for producing assets that will generate cash in the short term. Could you please share some of your views on that point?
We are focused primarily on bringing oil and gas to the surface and to sell the product. We recognize a need for investment in exploration and appraisal as well as an ongoing need to produce and this is exactly what the strategic review is all about, to optimize that exposure for ultimate, optimal shareholder value creation. Is our mix between producing assets and appraisal development asset the best one, the current one? Should we maybe, realign a bit, should we focus on more growth for a period of time, as suggested in the management letter today. We come from a period of strong harvest. We have seen production from three and four diminish. Maybe it is time to focus more on growth again, so as to be able to return to substantial harvest again in the not too distant future. And the various means for that mixture is exactly what the strategic review is all about. And where we will end up I think is a little bit, is still of course too early to say, but we have a number of options on the table and they will be communicated as soon as they are there.
Thank you. And then a follow-up on the strategic review and the timeline. When the Bloomberg rumors entered on the 9th of April, you commented that the 15th of May with the AGM would be...
date for an update on the strategic review but it's that perhaps moved further out or I think the there is an element of update in this report and the next update will be when available and as I said earlier we certainly expect something during the course of the second quarter and the the a little bit more light in the report and we'll communicate again as soon as we have something concrete that we can communicate.
Great, great. And then just a short question on the cost pool. It's nearing $28 million. Is that an off-balance sheet item or is it included in the book value?
Yes, that's right. You can't, well, it doesn't actually, it's not visible on the balance sheet, essentially. However, in the valuation of the oil and gas assets, we will be taking into account factors such as the cost pool, but you will not, from a quarter to quarter, be able to track the cost pool in the balance sheet. It is off balance sheet to that extent. But it was a factor that influenced this. say the valuation when we did the impairment on Box 3 and 4. So it certainly was accounted for in that.
Yeah, okay, okay. So I guess that was a positive input on the impairment.
Yes, I mean, as I say, it's essentially deferred cash flow. So instead of receiving that money through cost oil now, we will receive it in the future.
Okay, thanks. And then just a final one on the fracking operations on block 3 and 4. And given the complicated tender offer on block 49, is it more complex with regard to the wells or is it just further away from infrastructure that makes the fracking on block 3 and 4, should we say, easier?
Sorry, you're referring to 49, the frack on 49?
Yes. Yeah, I'm referring to the fracking operations on block three and four that was commented in the report and comparing that to the... Okay, yeah.
I think it's a combination both of design and execution, but also that it is reasonably far away from current infrastructure. So it's a reasonably complicated operation. I mean, the jarry well was successfully fracked with oil to surface, but the reservoir is not fully understood, and evaluation is still ongoing on that.
Okay. Great. I think I'm just going to end by saying that we're very happy that you're here. not doing the short-term financial management in a long-term industry, which seems to be prevalent with some of the companies. And we wish you all the best of luck in 2024. Thanks.
Thank you very much. We will do our absolute best.
Thank you. We will now take our next question. Please stand by. The next question comes from the line of Martin Moseth from ABG Sundell Collier. Please go ahead. Your line is now open.
Yes, thank you. Good morning, Magnus and Petter. Thanks for taking my questions. Firstly, on the Q1 numbers, could you comment on what caused the increase in OPEX and the negative working capital moments in the quarter? Then secondly, you reiterated your production guidance, but given the kind of performance so far this year, Could you comment on how you expect the production to develop for the remainder of the year? And then thirdly, on the agreement with Svoboda, could you please elaborate on what kind of opportunities you are preferring or looking at? What kind of assets? Early phase exploration or more mature producing assets?
Should we start with OPEX? Petter, do you want to take the OPEX one?
Sure. Well, OPEX, there are a couple of factors at play this quarter. In part, we have the normal seasonal costs where the annual benefits are paid to all the employees in the operators' organization. That's recognized through our OPEX. That's year-end bonuses and other disbursements. So we see that pattern every year with Q1 having a bit of bump in costs. We also, on top of that this year, have some small amount of cost from the extended well test that came in late and had been recognized late. That's on the extended well test on block 56. But in particular this quarter, it is in fact the cost of the startup of a gas to power. The gas to power project was kicked off at the very end of 2023. And as the first phase is being rolled out, We are seeing the cost of that project being taken at the same time as we still have the diesel generators in place and consuming diesel. So there's a bit of a double energy and power cost for the first quarter. We will see some of that as well into the second quarter. But at that point, I think we should see, particularly in the second half of the year, improvement on OPEX as a result. So this was expected that we would have this sort of bump in the first quarter in particular, but also slightly elevated in the first half of the year. Your second question was on the working capital. On working capital, there are some of the main factors in that, and this quarter is that with the slowdown of CapEx in the past few quarters, payables are in fact catching up with expenditures. So while we recognize expenditure in the quarter, it's been spent. It's usually paid one to two quarters later. So we see the cash flow effect when that slows down. When you have an increase in capex, you see a buildup of these payables. And when it slows down, you see that those payables reduce. And it was largely that effect that we saw in play in this quarter. Your next question was on production.
Yes.
I mean, the closest production was aside from, well, we did have one planned event that was the maintenance of the Saiwan facility in February. It was closed for about 11 days, and we saw that the other days when it wasn't closed, we had stable production versus the previous months. Thereafter, in March, we had some adverse weather, which is common for this time of year, but it was a bit more extreme than usual and had slightly more impact with us having to suspend production from certain wells for a certain number of days. However, those wells will be able to produce that oil in the future. Same thing happened in April, as I'm sure many have seen, with a quite extensive flooding across the Gulf, and particularly in Dubai, which is some of the most extreme weather we've seen in modern memory, so to speak. So we have had some impact, both in March and April, which are not, let's say, they will not impact the actual amount of oil we are able to produce, simply the timing. So we do believe we will be able to see that produced later in the year, and thus we are sticking to our guidance for the moment, and do expect, I think as Magnus mentioned, that the underlying trend is actually quite stable, but obscured by those one-off effects. And your final question or your next question?
I think it was in Algeria, yes. Okay, so I mean what we would be looking for and what we are currently negotiating for is both an exploration but in particular we are interested in appraisal and recently early development situations. Ideally we would go for something with what an early production system could be put in place quite quickly. to generate under an appraisal program, generate production and also income. And coupled, of course, with a strong expiration upside. Which, of course, is what everyone is looking for, an appraisal in close to pre-development with expiration upside. But Algeria is very rich in technical and geological opportunity, and that's partly why we settled on Algeria as a strong possibility for a second country for Tethys to operate in. And having now mutually got to know each other between Sonafrak and Tethys, we are at a stage where we are in, shall we say, final negotiations Still, there are no guarantees that we're going to successfully conclude. But as we say in the report, both sides are eager to reach an agreement and to bring these particular areas forward towards, of course, commercial production as the endgame. That somewhat gives a little bit more color on what we're doing.
Yeah, yeah. That was clear. I think that was it from my side. Thank you. Thank you.
Thank you. We will now take our next question. Please stand by. The next question comes from the line of Stefan Foucault from Actors Advisors. Please go ahead. Your line is now open.
Hi again, guys. As a follow-on, I was looking, so you talk about increasing appraisal activity at Block 3 and 4 in 2024, and there have been quite a few well, appraisal wells drilled in Q1. It seems that most of them have been put in production, I think five out of six. So I was wondering how you feel about the appraisal at Block 3 and 4 so far and what it might mean for reserve given that five out of six seems to have been put in production. Thank you.
I think it's fair to say that I mean the program for the first quarter has been not 100% success but has certainly underscored and is well within the risking of the wells. So I think it's fair to say that the the reservoirs are quite well understood. And the spacing and well program and the placing of the wells is also quite well understood. So I think the result is quite within expectations. And as Petri noted, I mean, apart from the adverse weather effects and the for maintenance, we would have expected production to be higher and thoroughly in line with expectations. I think it's still a little bit early to say what impact it would have on reserves, but certainly it will have a positive impact on the reserve replacement in that this is on the appraisal side. In the development, we are moving undeveloped to developed. But on the appraisal side, we are moving new barrels into the reserve categories. But a little bit too early to quantify at this stage.
But the direction you feel it's positive?
It's certainly going in the right direction, yes. And as I say, I think the overall assessment is that first quarter wells on balance were as expected, possibly even slightly better.
Thank you very much.
Thank you. As there are no further questions, I would now like to hand back to Martin Magnus to close.
Thank you very much. So first, thank you for listening in today. It's an important call. It's an