Welcome to the Ithaca Energy PLC Q1 2023 results webcast. Thank you for standing by. My name is Daisy. I'll be coordinating your call today. If you would like to register a question, please press Star followed by one on your telephone keypad. I would now like to hand the call over to your host, Gilad Myerson, Executive Chairman at Ithaca, to begin. Gilad, please go ahead.
Hello everyone, thank you for joining the call today. We're very pleased to walk through our results for Q1 and also answer any questions. The way we thought of managing this presentation is that I will walk through a few slides, just giving an overview of Q1 results. I'll hand over to Alan, who will walk through some safety, environmental aspects of the quarter, as well as production and an update on the developments. Iain Lewis will walk through the financials. With that, I'll start on slide three of the podcast. Operational highlights, we had a very strong production, 75.3 barrels produced in Q1. This is ahead of our guidance.
We had some operational issues in Captain and FPF1, which we resolved very rapidly. That's a very good result. I think we've discussed previously that we've had some issues in Captain and FPF1 earlier this year, but the fact that the assets are now running smoothly is a testament to the operational capabilities and organization to really resolve these issues. In terms of PS, we resumed production on PS. We're also spending a huge amount of time on Cambo and Rosebank. We're moving them both closer to final investment decision, working very constructively with the government, which I'll talk to shortly. We're also preparing for K2, which will be hopefully drilling in June this year.
We've finished a pre-FEED looking to electrify Captain, and we have a few options in front of us, and we're looking to progress. The project is very much supported by the NSTA. It's one of the first full electrification projects in the North Sea, and we're very keen to be in front of the rest of the competition when it comes to electrifying platforms. In terms of financial highlights, adjusted EBITDA of $518 million, so it's up from Q1 last year, also up from Q4 last year. It's a very significant EBITDA for BOE, and Iain will walk you through the numbers, and we continue to deleverage.
From a corporate standpoint, we paid the dividend of $133 million in March 2023, we have line of sight to continuing paying the $400 million commitment. We also have a significant milestone achieved in terms of Cambo, with Shell essentially beginning the marketing process for selling the share down of Cambo. We have an opportunity to buy the 30% share of Cambo. What it actually enables us to do is it enables us to further progress the project towards FID at the moment. Up until now, it's been relatively slow due to the fact that Shell weren't clear if they want to continue the project or not. Now it's clear that they do not, therefore, we'll be able to move faster.
In terms of the numbers, you can see on the right-hand side of the slide, 75,000 production, $28 per barrel of oil, $518 million EBITDA, and $132 million dividend. Moving on to the second slide four. EPL continues to be a major concern for Ithaca. We are looking to work constructively with the government to find ways to continue to develop the North Sea. The unintended consequences, and we spoke about them previously, is that the debt availability is limited, the RBL capacity has gone down quite considerably, and overall, the JV partner confidence has gone down.
If you look into most of our developments, they're all with partners who are having second thoughts about investing in the North Sea, the likes of Shell, as we mentioned on Cambo. We have Suncor on Rosebank, who have decided to sell. We have Hibiscus in Marigold, each of these partners are looking at the UK North Sea Energy Profits Levy and considering different options around how they mitigate the EPL impact, including not investing at all. With that, we are very focused on having constructive discussions with the government.
We've spoken to all levels of the government, both the treasury, the, the individuals who are actually writing the EPL, as well as senior ministers on both the on both the Conservative side as well as the Labour side, in order to understand where they stand in terms of EPL and its consequences. What we've heard is that people acknowledge that our investments do four things which are very good for the country. Number one, they increase UK energy security. Number two, they add thousands of jobs to Scotland and beyond. They reduce the greenhouse gas emissions in the North Sea. Finally, they lower energy costs.
It's very hard to argue against these four elements because they clearly are four elements that are important to both government, both sides of the government, Conservative as well as Labour, as well as environmentalists should see the opportunities that we have to reduce greenhouse gas emissions in the North Sea by developing fields with advanced technologies, and therefore, we are seeing a lot of support behind the scenes. It hasn't translates into changes into EPL. So, happy to answer any questions about that, but I think the engagement, both from ourselves and from other operators in the North Sea seems to be very constructive, and we hope that the government will make changes in the short term to accelerate developments.
With that, I'll hand over to Alan.
Thank you, Gilad. Starting with safety and environmental performance on page six. Our teams are focused on ensuring that we're always in control, and we have effective barriers in place to prevent hazards from materializing. That's a core focus for our operations every single day. We have a large program of work underway across the assets, which you'll hear a bit more about today from exploration drilling projects, daily operations, through to decommissioning work as well, and we're committed to ensuring that this is managed to the highest safety and environmental standards. Our focus issue has been on process safety, and I'm pleased to say that we're making good progress relative to our plan.
We're also doing a lot of work on emissions reduction, and I'm going to touch on that a bit later in the presentation, in terms of the key priority for us, which is around the electrification of the Captain asset. Continued strong performance, but a big focus area for us in terms of safety and the environment. Moving to page seven, which is a production summary. There's a bit going on here, so I'll take some time just to try and unpack production for the quarter and then the outlook for the rest of the year. On page seven, as Gilad said, Q1 production came in at 75.3 thousand barrels of oil equivalent per day, which was above our guidance range. That was due to strong end to the quarter.
We mentioned at the time of full year results that we'd had some challenges in Q1, particularly early part of the quarter, due to equipment failure at FPF1. That was quickly rectified. In fact, the asset performance has been really strong since then. Since coming back online, FPF1, we've been at over 99.5% production efficiency for the past two months. Similarly, on Captain, challenging month in January and February due to equipment failure issues, but got that resolved, and Captain's gone over 100 days now without unplanned trips. We're continuing to progress there, and hoping to continue that. Our target is to reach 126 days, which is the field record for Captain. That's what we've got in our sights.
We're slightly ahead of expectations as well in the non-operated portfolio in the Q4. As we trued up the numbers, just had some benefits coming in to the Q1 there. Some of that's kind of timing issues that we offset in the Q2. A good, strong Q1. We do expect that particularly Q3 volumes will be down again. Q2, I think, should be broadly in line. Q2, we're expecting it to be significantly lower, just the impact of planned maintenance that's ongoing. In particular, we've got a large shutdown at Captain around the September timeframe to complete work, which is in support of the EOR-2 project.
We should expect that the Q3 volumes will be down, and of course, that's what will result in us being within the guidance range, 68-74 for the full year. Reiterating that guidance range, as I say, just the offset of having similar volumes in the first and Q2, a reduction in the Q3, and then kind of back to normal in the Q4. Beyond that, really, we're still on track to deliver the 70,000-90,000 barrels a day range. The key thing there really is things like the Captain EOR project, which is, you know, coming online in 2024, peak production in 2025. That offsets the natural decline in the portfolio.
That's something that is a bit unique to Ithaca, is having that project portfolio and particularly the Captain production increase that's coming through and helping us to keep volumes flat to growing over the next several years here. Moving on to page eight. A quick summary on Rosebank. Just as a reminder, Rosebank is the largest undeveloped discovery in the UK and RC, around 325 million barrels of gross recoverable resource. And as you'll know, the development concept involves the redeployment of an existing FPSO. That helps improve the environmental footprint of the project, and it results in favorable economics.
The FPSO will be modified to suit Rosebank conditions, so, that involves some process modifications and strengthening of the vessel, and modifications to make sure it's ready for future potential electrification. The emissions intensity of Rosebank is expected to be significantly lower than imports from overseas. While the UK is a net importer of hydrocarbons, which I think we all expect to be the case in any demand scenario, for the foreseeable future, and we believe that it's the best approach for all stakeholders, is to continue to develop our domestic resources, supporting the UK economy, and crucially, providing good quality, high-paying jobs. The project continues to progress towards a final investment decision.
The relevant documents have been submitted to the regulators, it's still expected that first production could be achieved in late 2026, which would result in around 50,000 barrels of oil equivalent per day net to Ithaca. Moving on to page nine, which is a summary on Cambo. Gilad touched on this earlier, and we announced, of course, that we've made some progress in terms of the commercial issues around the development. As a reminder, Cambo is the second largest undeveloped discovery in the U.K., so well-appraised field and with a mature development concept. Really, the key next step is continuing to progress the project by securing an aligned joint venture. The agreement that we signed earlier in the month, which supports marketing of the project, will help us to do that.
That process has now kicked off, and it's ongoing, expected to last the next up to six months. Of course, there is the option for Ithaca to obtain the working interest if that marketing process with Shell isn't successful. We'll work through that, and early stages provide updates accordingly as that progresses. I think the key point really for us is, as we said in our release, there's limited near-term cash impact, so any consideration would be payable on first oil. Moving to page 10, which is a summary of the other projects in the portfolio. These aren't quite as large as the likes of Rosebank and Cambo, but still highly valuable projects.
The things we're working on are all close to existing infrastructure and good strategic fit for the assets that we have in the portfolio. The two on the left, Fotla and Leverett, are both in the Greater Britannia area, where, of course, we have a 32% working interest in the host Britannia platform. As was mentioned earlier, the K-2 well rig is just mobilizing for that tomorrow, it will drill the prospect which was acquired as part of the Summit acquisition. It's a Forties target. Good data on that, we're as confident as you can be for an exploration prospect. Good prospect and a few different options in terms of potential tieback, either towards the MonArb Basin or Everest Lomond area.
Excited to see the results of that one. On the other one we mentioned in the Greater Britannia Area, Leverett, that's another well, appraisal well, that's going to be drilled over the coming months here, well operated by Neo, but also a potential tieback to Britannia. Again, a couple of good opportunities to provide low cost advantage barrels, and with us obviously benefiting, being a partner in the host infrastructure as well. Moving on to page 11. I've just got three slides on the Captain asset, and then I'll hand over to Iain to talk about financials. Just a bit of a summary here on Captain, and this slide speaks to the first phase of polymer injection on the asset.
As a reminder for everyone, Captain, it's a large oil field with around one billion barrels initially in place. Area A came online in 1997, and then Area B and C, which were both subsea developments, were added in 2002 and 2006 respectively. The first phase of enhanced oil recovery is targeting Area A, and it came online with polymer injection starting in 2016. Over the past eight years, we've been developing significant learnings in terms of the subsurface performance of the polymer flood, but also how to manage the offshore operations of polymer recovery. We're now actually into the fifth and sixth major revision of the polymer formulation. We've been working to continue to improve the yield with every revision that we've made.
The previous iterations have seen about a 10% reduction in polymer dosage required for the same amount of oil production. The fifth generation is finishing up lab development, and that's moving towards commercial scale production. We're hoping to have first injection from the fifth generation of the polymer in the H1 of next year. We're still going ahead with a sixth generation, which is actually a fundamental change to the polymer formulation, and we've kicked off lab testing on that one earlier this year, working towards full field scale implementation in 2025. Continued development to optimize the asset. Good performance from the existing polymer flood, and as you can see from the chart on the slide, the cumulative recovery there, we've already recovered over 10 million barrels of oil as a result of polymer flood with 5 patterns online.
That predictable performance really has helped de-risk phase two of the project, which is targeting area B and C of the field. Moving on to page 11, just giving a quick summary on where we are in terms of EOR2 project progress itself. Still on track, the project is on schedule and on budget. Most of the brownfield construction, some of the more challenging tasks were completed last year. The big scope for this year is continuing to press drilling the wells. The rig returned in the Q1, and we're making good progress with drilling the injector wells.
We're expecting first production and first polymer injection towards the end of this year into next year, with really the impact of that being seen in 2024 in terms of the polymer making its way through to the production wells, and peak production expected in 2025. This is a real differentiator for us as a company, both in terms of the deployment of the technology and where that could be potentially applicable elsewhere, continuing to improve that and add value to the asset through our technological know-how.
Also just the fact that it does provide that growth, increase in Captain production from around 20,000-40,000 barrels a day, and really offsetting the natural decline in the portfolio to support a stable outlook in the 70,000-80,000 barrels a day range for the next several years before we invest and bring online the larger greenfield and brownfield developments in the portfolio. Last slide here, turning to page 13, which is a quick summary on the decarbonization efforts we've got ongoing at Captain. Obviously, with it being a long life asset, we're working to do everything we can to drive down the emissions intensity. We have a couple of projects where we're looking to recapture and reuse low-pressure flare gas, and those are in engineering just now. The larger project is around electrification.
Pre-FEED studies for that being completed and pleased to say that the concept is technically viable, giving us confidence to move the project into Front-End Engineering and Design. Project itself has the potential to save over 100,000 tons of CO2 equivalent per year, which depending on which country, and it could be, you know, in this country, up to 65,000 cars equivalent. Really good project, helps support the general industry push towards decarbonization and will drive the asset emissions intensity down into the single digits. In summary, continuing to progress the project, a good quarter for us from an operational perspective.
You know, we had to manage the challenges thrown at us of operating mature offshore assets early in the quarter, but we've dealt with that well, and we remain on track to deliver on our commitments for the remainder of the year. Handing over to Iain now, he's going to cover the financial highlights for the quarter.
Okay, good morning, everyone. I believe there's been a couple of issues with the webcast. People have been looking at the financial statements, I think, which will give some of you great joy and some of you less joy, but hopefully, you can see the presentation now. We're in slide 15, and some of the key financial highlights for the quarter. Overall, a strong and robust set of numbers for the quarter. Production, as Alan's gone through, of 75.3 thousand barrels a day. Unit operating costs maintained at around the $20 per barrel range.
You'll have seen across the industry, continued cost pressure, we're glad to see only a moderate increase in cost per barrel, even with some of the production issues that were faced during Q1. That all results in an EBITDAX of over $518 million delivered in the quarter, and adjusted net income of $158 million with operating cash flows of $251 million. Really seeing in the cash net income and EBITDAX the strong performance for the quarter. Debt down to below $900 million. Very glad to see that come through, giving us a 0.46 times net debt to EBITDAX ratio.
Seeing debt continuing to fall, as we were able to pay down debt, regardless of the interim dividend payment of GBP 133 million, that was cash paid during the quarter. We ended the quarter with GBP 650 million of liquidity in our RBL position and available cash, giving us the strong optionality forward in terms of our investment strategy and optionality. In terms of the next slide 16, kind of summarizing where the EBITDAX story for the quarter lies. You can see that production's up against the full year 2022, from 71 to 75.
We've seen a reasonable reduction in softening oil price and gas price during the period, so down to $83 realized in Q1 for oil and $101 per barrel equivalent for gas. But this is where the EBITDAX support of our hedging program really is seen to come through in the quarter. So we had substantial hedge gains in gas particularly, our strong gas hedge book really supported the EBITDAX position. So with the supported price realizations and then modest increase in unit operating expenditure, really glad to see our adjusted EBITDAX per barrel increase from $73 in 2022 full year to $76 for Q1. So solid set of results
Given more detail there on slide 17, we try and share this analysis so that we are open in terms of the calculation through of our EBITDAX, and you can see the numbers. I would just call out in this, in the middle of that slide, the green highlighted column, you can see that about halfway down, the oil and gas hedging gains of $77 million in the quarter. That compared to $500 million for the full year of 2022 of negative hedge loss positions, as prices were high.
That balancing effect means that as you drive down through the calculation of EBITDAX, the protected value realization from production, and the total operating cash costs, it gets us to $518 million of EBITDAX and $76 per barrel. Strong results as supported by hedging, our hedging position. The next slide 18, just to double-click a bit on the protection element of our financial framework. You can see the reduction in our debt position, continuing to pay down our RBL, and use cash. You can see the ability to draw on that RBL, $650 million available in terms of liquidity, cash and RBL capacity at the end of the quarter.
That 0.46 times net debt to EBITDAX, giving our investors confidence in our ability to meet the options that lie ahead of us. Hedging book is in slide 19, and again, you will see the strong hedge book for the remainder of this year, particularly. We've had some thoughtful execution of hedge positions for through the end of this year, apparently into 2024, and for gas out through 2025, we started to build the position as well. Draw your attention to the middle green highlighted bar in the tables at the bottom there, the weighted average $ per barrel and pence per therm.
You can see that is a weighted average of the swap swaps and the collar floors. You see that we're in the $70 rising through for oil through for the next several quarters. You see our gas position particularly is a strong floor of above 200 pence a therm for the next two quarters. Now, the gas price has softened early in the market, in the past few weeks. This floor position that we have on a substantial gas production base through Q2, Q3, the summer months, really protects the business and protects the cash flow through that period.
Volatility in gas with the weakness this summer and expectation of higher prices in the winter, we're supported in our gas hedging portfolio to protect the business and protect the cash flows of the company. Just the final slide from me is slide 20. Just an overview of our capital allocations framework. We're sure you're well familiar with this. We keep coming back to it, but it is a unique factor for us in the market, and something that our investors take great confidence in. We are continuing to invest, you can see the commitment to the projects as has been taken through by Gilad and Alan. We continue to invest in Captain and the EOR-2 project, and the development of those sustaining barrels.
First of all, the first cut of CapEx out of cashflow protecting the balance sheet through the leverage position and the hedge book and then commitment to the dividend, at which we announced the IPO and reiterate today our commitment to the $400 million target for the year. Growth beyond, and the ability to execute through our liquidity position and our portfolio of projects. I'll just close out by looking at the guidance for 2023, which is slide 22. Really no change here.
We are glad to be able to reconfirm the guidance for 2023, and with strong Q1, and having gone through a strong April and through into May, looking to reiterate that guidance and confirm our ability to get into those ranges. I'll pass it to Alan for the last slide, just to close out.
Thanks, Iain. Page 23, just a real quick summary before we open up to questions. Just reiterating, really no change to our buy, build, and boost strategy that we described at the IPO and the full year results. Continuing to evaluate potential value accretive acquisitions, and we've widened the aperture, but we don't need to do anything. Again, being very disciplined and thoughtful in our approach there. On the build assets, the key point is that we have a really strong portfolio and lots of optionality in the portfolio. We'll continue to progress those in a disciplined manner, looking at the economics of projects and making sure it fits within our capital allocation framework.
continue to work to boost assets and run the operations well, as you've seen in the Q1 here. Like, that's a kind of a good summary of the quarter. Gilad, I just wanted to make some closing comments and just reiterate some of the points on slide 3, and then we'll close it out.
Yeah. Thanks. I realized that the initial slide wasn't shown in the beginning of the presentation, so it's worth just flashing it back up. If you put slide 3 back up on the on the presentation. Really, this is the essence of what we've delivered in Q1. I just wanted to say that we are very focused on delivering our commitments and if possible, over-delivering, and that's essentially what we managed to do in Q1 with these, with these results. With that, I'd be happy to open to Q&A.
Thank you. If anyone would like to register a question, please press star followed by one on your telephone keypad, and please ensure you are unmuted locally. If you would like to withdraw your question, please press star followed by two. That's star followed by one on your telephone keypad to register a question. Our first question today comes from Sasikanth Chilukuru from Morgan Stanley. Sasikanth, please go ahead. Your line is open.
Hi, thanks for taking my questions. I had 3, please. The first was related to the Marigold project. You have highlighted that the unitization process was currently ongoing, and that initially, you mentioned that Hibiscus was having some concerns in investing into the projects. I was just wondering, with that context, when is the earliest we can expect an FID on that now project? Any indication of expected startup timeline will also be helpful. The second was related to development CapEx. Of course, you have the guidance for producing assets CapEx.
Given that we are closer to mid-year now, I was just wondering if there was any guidance range for the expected CapEx for the pre-FID projects or the non-producing assets for 2023. Any range would be helpful. Like, you also highlighted Fotla FID by end or late this year. Finally, if you could provide any guidance on the exploration and the decommissioning spend in 2023, that would be helpful as well. Thanks.
All right. Thanks for your questions, Sasi. I'll grab the first one, and then I'll let Iain jump in on the other two. On Marigold, the stage that the project is at, is we've completed a bunch of the pre-FEED work in terms of the concept selection and then development studies, and host tie-back. The next step there is entering into the full FEED, working through the arrangements with potential host, and then we'd be looking to and then completing the environmental statement. We've done some surveys, but got the environmental statement to complete, and then that would go out for public consultation. It's difficult to be precise. That environmental consultation process across the industry's taken longer than it has been in the past.
Normally, that was sort of a 6-month turnaround, and some of our peers are seeing, of the order of 12+ months for that. We're probably, you know, into 2024 for final investment decision, because it will have to complete that environmental statement process and probably looking at 2027, I think, for first production. Iain?
Yeah, sure. To pick up the other two questions. In terms of the guidance for development projects, we haven't given guidance on those previously. I think the pre-FID costs are in the low tens of millions of dollars, as we move through. Obviously, when the projects get to FID, we'll give more detail on those. Yeah, low tens of millions of dollars for the pre-FID costs is the key message. The other question was on exploration, on decommissioning. You know, we've historically given guidance on that. In terms of exploration, we tend to be looking at 1 or 1 and a bit exploration wells a year, and really, we're looking at some $50 million on that kind of spend per annum.
In terms of decommissioning, again, relatively low spend, sub GBP 70 million. Expect that to be a bit lower than that this year, as well, as we're closing out some particular scopes, and then a bit lower for the next couple of years. Hopefully that will give you some ranges around the GBP 50 million+ mark for both of those.
Thank you. Very helpful.
Thank you. Our next question today comes from James Carmichael from Berenberg. James, please go ahead. Your line is open.
Hi, good morning, guys. Just coming, I guess, to Cambo, and just the process there. I was just wondering, if you could indicate, you know, if there's been much interest in that so far, as far as you know, and whether you'd be happy at that 70% level, taking it to the development? Whether you'd sort of rather reduce your interest down towards the 50% level that you referenced in the statement. Just on the production for the year, obviously outlined a really strong Q1 above guidance. It seems like the quarter ended very strongly there as well. Can you just sort of give us an idea of where you are, currently, and when you might have to start to thinking about full year guidance? I've got.
Sorry, just one more for Cam. You talked about the difficult political backdrop in the UK, obviously. Just wondering if, there's any thoughts you've got around sort of looking outside the UK, to grow the portfolio over time? Thanks.
All right, very good. Why don't I have a go at those, and then I can ask either Gilad or Iain, if they have anything to add. Yeah, first question on Cambo. I think, you know, it's early days really in terms of the marketing process kicking off. There has been a degree of interest, and sort of just working through. Some parties have some knowledge of the project already, and others are new to the process. Just a case of working that through and as we've got more information to share, we'll definitely be able to do that. Your question on production guidance, kind of where are we just now? On a sort of daily basis, we've been up in the sort of 70-75 range.
You know, expect that to be the case kind of through this month. There's some asset downtime as you get into June, July, across the non-operated portfolio and a couple of the operated assets, just as always the case in the summer with some of the infrastructure shutdowns. We'll expect to see lower volumes, particularly in the early part of the Q3. I touched on the Captain shutdown, which will bring us down a good bit through the back end of the Q3, and then coming back up again in the Q4. I think, you know, look, Once we're at the point of kind of releasing our Q2 results, we'll have a better sense of where we are on the full year.
I mean, I think just now we're feeling fairly good about the range, but, of course, just kind of need to get through the shutdowns in particular. The last question was.
Let's go back.
Yeah, sure. I mean, look, it's obviously been a bit of a hot potato at the moment, just in terms of where we are on energy policy. I think, you know, what we would say is that really we need in this country to have, you know, energy security, energy affordability, and then energy sustainability. You know, we think that those dimensions are important really for the country to be focused on. I think sometimes we've been maybe been focused on some of those legs of the stool more than others. You know, we believe that our contribution is across all of those in terms of security, affordability, and sustainability. And that's what we're focused on, is being a company that can address each of those priorities.
You know, ultimately, as much as, it's always the case that, you know, politicians will have a certain agenda to drive. We think if we're able to do the right thing as far as, those different dimensions, then, you know, we're doing the right thing for all of our stakeholders. That's our focus area. I think it's very difficult. You know, we're continuing to have good engagement across the political spectrum. It's difficult for us to make any forecasts on what might or might not happen.
Understood. Very clear. Thanks a lot.
Thank you. Our next question is from Chris Wheaton, from Stifel. Chris, please go ahead. Your line is open.
Great. Thank you very much indeed. Good morning, gentlemen. Two questions, if I may. Firstly, on your OpEx. If you look at OpEx per unit, per unit BOE, you showed some pretty good cost control, I think, in Q1. You're up about 7%, Q1- on- Q1, and that's despite currency adverse FX versus dollar, you know, sterling versus dollar, about 10% in that same period. Could you perhaps break down for me better some of the moving parts there? Because it seems like you're holding underlying costs, FX, about flat, which seems to be a pretty good outcome, considering how inflation is rampant at the moment, particularly everywhere. I also had a question for Iain on the RBL, but, I'll ask them in order. Thank you.
Yeah, sure. Well, Iain, may be best placed to speak to the OpEx one as well, but just real quick, Chris, you know, thank you for acknowledging the hard work that goes on sort of every day in our teams on controlling OpEx. It does just take that sort of culture in the organization, and everyone really being very thoughtful about everything that they're spending. We're really pushing to try and drive efficiency improvements across the portfolio, and both in terms of being very value driven, focused on improving the BOE side of things as well as the OpEx side of things.
Being very thoughtful about the contracts that we've got in place, having put some good long-term contracts in place that are coming to bear now in terms of continuing to hold costs where they are. Iain, maybe you can just double-click anything you want to add on that one, and then take the RBL question.
Yeah, sure. No, thanks, Chris. I think you're right. Obviously, there are a number of key moving parts. One is FX, which fully plays into this with a large portion of our costs in GBP. We also have higher carbon pricing coming through in terms of fuel, gas, and diesel. As Alan says, we see cost control really as it's about the hard yards of the detail every day, you know? I sign off on all of the contracts that we execute. You know, we have a detailed tender board process where everything gets scrutinized and tendered.
You know, usage, is tracked and is scrutinized across the business, and there's a need to keep the cost-conscious focus throughout the business. We don't run heavy on areas where we believe we can be efficient. I guess there's no silver bullet here. It's just lots of hard yards of cost control.
Excellent. Thank you. If you had to guess what the underlying inflation rate in the North Sea was at the moment, ex FX, what do you think that would be, Iain?
Right now? I mean, I think we're seeing most people reporting kind of 10% plus. I think in some of the some of the capital... Well, I mean, yeah, it's very dependent on the on supplier. We just had anchor handlers, you know, that we secured three different rates that were massively different, depending on the on the timing of the market. I think it's partly timing and ability to be flexible with some of the, some of the resources that are scarce, as well, because I think obviously some suppliers are facing different demand cycles.
I think 10% is what people generally are seeing, if you kind of take out the FX and hydrocarbon pricing noise.
Okay, that's really helpful. Thank you. Second question, please, on the RBL. One of the most pernicious effects of this windfall tax fiasco is that the lack of the price floor in the second iteration of the EPL has meant that RBL capacity is being cut substantially across the industry. You know, withdrawal of capital, therefore, follows. Could you perhaps talk about how much you expect your RBL facility to be cut later in the year? I look at Neptune, for example, their RBL has been cut, not quite 50%, around 40%-45%, as they reported in their 1Q numbers. Therefore, the effect that has on your liquidity and therefore, your sort of, your plans therefore for financing, you know, the future projects as a consequence of that withdrawal of capital availability.
Sure. Just a quick recap on our facility, which is there's $300 million of letter of credit, part of the RBL, and there's a $95 million loan tranche, of which, as you see in slide 18 of the presentation, you're $575 million undrawn at the end of the quarter. The key thing here, I guess, from our perspective, is that the facility amount that we have was historically significantly lower than the borrowing base. Really what determines the impact of EPL, there's a number of elements to it, but the key one is the borrowing base relative to the facility amount.
What that means, without going into the number, we obviously don't disclose the details of our BBA. The basics are is that the BBA was higher than the facility amount, such that with the full inclusion of EPL, we are not expecting a significant, a material reduction in our loan tranche when that comes fully through. We're in redetermination at the moment, standard process, which is going well. We're not expecting a material reduction.
I would say there will be a reduction, and we will be impacted, but I think it plays into the wider context that we're well placed relative to many in the industry around the credit and access to capital. The EPL has basin-wide implications, which means that, you know, partners and partnering for projects, et cetera, is more complex.
Okay, that's great. Thank you very much indeed.
Great.
Thank you. Our next question is from Mark Wilson, from Jefferies. Mark, please go ahead. Your line is open.
Thank you. Good morning, gentlemen. A few questions from me. I'm gonna start with Rosebank. You've answered questions on Marigold and Cambo, but I think Rosebank would be the most material catalyst for you, this year, potentially. Can we talk, what are the specific next steps you're looking for at Rosebank to move forward that towards FID? Can I also ask if the environmental statement has been approved yet? You mentioned that as going slower, generally for some others. Yeah, where do we stand on Rosebank, please?
Yeah, sure. Thanks, Mark. I'll take that one. The environmental statement, gotten to the point where no more questions, but it's still with OPRED as part of their approval process. What needs to happen is within OPRED, that will have to be approved, and then it comes back to the NSTA after that. Still working through the regulatory approval process there. You know, project is in good shape, really, in terms of the maturity of engineering and all the physical work to be able to take final investment decisions. That's where we are on that one. Yeah, do you have a second question?
I do, yeah. The second question is, regarding one area of guidance that we don't have, is actually regarding cash tax. Certainly versus our numbers, a lot lower cash tax in the Q1, that may just be timing. At the end of 2022, there was an EPL deferred tax of $766 million. Could you speak to how that EPL, what are the cash tax EPL payments this year, and how you expect them to be phased, please?
Yeah, sure. Yeah, so the GBP 76 million, the deferred tax position, I guess is the balance sheet position on the PP&E balance. That'll unwind through March 2028. I guess some of that came through the income statement this quarter, 'cause it kind of goes with depreciation. In terms of cash tax, so we guide on corporate taxes that we expect to be in the single-digit % of cash tax for the corporate tax position. I think we're looking at being in the low single-digits on cash tax for this year for corporate tax.
EPL is, I guess, pretty open to be calculated, all things said, given the guidance that we give. We did pay some EPL in Q1. There's GBP 30 million paid in Q1, but there's more to come later in the year. We haven't been giving specific guidance on that, other than helping people with the calculation, but it's fairly straightforward and that it's pretty much EBITDAX less the 129% on the CapEx. Does that help, Mark? You probably want exact cash numbers by month. We haven't been giving those as direct guides.
Okay. Well, it just sounds a lot lower than I would have expected. We will have to come back to that. I didn't realize EPL could be deferred over such a long period of time that you spoke to.
I know the balance sheet amount that was recognized. The $766 was recognized as the. Essentially, it's deferred tax. It's not actual, it's not cash tax, it's deferred tax on the Property, Plant, and Equipment balance on the balance sheet.
Oh, I see. I see where you're coming at from that. Yeah. Okay. We'll come back on that. The final point was regarding the Captain drilling process from here. Could you just remind us, Alan, how many of those injectors and producers you're actually drilling through this year? How they come on stream. You mentioned, you know, first polymer is introduced, should see the impact in 2024. How many of those are coming through, are being drilled, so we could follow that?
Yeah, yeah. Sure. We actually have been doing a bit of batch drilling in the top hole sections here. We've got a variety of wells that are conversions versus new wells. Yeah, we've basically got 6 wells that we're working through, drilling now on the COSLPioneer. The expectation is that will kind of take us through back into this year, into early next year. Yeah, I guess we can provide updates as those come on. We'll be able to bring them on in a series manner.
Actually, we're doing some work just now on the subsea tie-ins on the B-28 well, which will actually, once we've got that completed here, we'll be able to get first polymer injection into that one. Then bring the other ones on sequentially after that, as they're drilled and completed. It will be a bit phased, but of course, like, you know, it just takes a little bit of time to see the polymer response. We're not expecting to sort of see first production, as a result of the polymer, until sometime in 2024, with that ramping up through 2025. Yeah, so we can double click a bit more on that, but that's what we expect to see over the next 2 years.
Okay, thank you. I'll hand it over.
Thanks, Mark.
Thank you. Our next question is from James McCormack from Canaccord Genuity. James, please go ahead. Your line is open.
Hi, yeah. Thanks, thanks for the update, guys. Really, really useful. Just one quick question from me. We saw the announcement at the weekend from Keir Starmer regarding the new developments in the North Sea. I just wondered, the conversations that you've been having with the, with the opposition, are what you're seeing in private, in talking to, to the Labour Party, the same as kind of what's been announced this week? Is it a very different message when you're talking to them, to what's been announced publicly?
Yeah, I'll have a go at that. Maybe if Gilad wants to jump in, of course he can. I think what I would say is, I mean, David Whitehouse said this on TV yesterday, it's not actually clear at the moment, you know, exactly what the Labour policy is in terms of, you know, various statements have been made in the public or interpreted by the press in terms of no new developments, no drilling, no licenses. I think, you know, a bit of uncertainty there, and I think they're not really sure exactly what they mean yet. Perhaps, I think worth sort of moving back to, well, you know, where are there areas of alignment?
I mean, I think alignment on, you know, being open for business in this country and supporting economic growth and enterprise and, of course, supporting jobs. I think, you know, that's where we've been working to start, is where we're aligned on that, continued support for the economy, continued support for the northeast of Scotland, continued support for all the people working in the industry. Good, strong alignment there. I think it's a case of just spending a bit more time together, understanding the ramifications of various different policies and how they fit into the overall sort of, aspirations from a climate perspective.
I think, you know, we are having engagement there, both as Ithaca and then also, with the industry collectively, and expect that to continue to be the case over, you know, the next number of months here. Still a long way off any general election at this point. Continuing to work collaboratively, just to try and make sure that we've got a consistent understanding of the implications of different policies.
Yeah. Thanks, Alan. Maybe I'll just add to that. We are hearing many politicians making statements, but unclear what is driving a lot of the statements. The discussions that we're having with the politicians, and we're speaking to the full spectrum, there's clearly a need, and it's recognized by most politicians, for energy security in the UK, for job creation, for emission reduction, and for low energy costs. The order of those four, by the way, if it's energy security before jobs or emissions before costs or emissions before energy security, I think really it's the flavor of the different parties and the politicians. I think we've heard unanimously that those four elements are definitely priority from any government that will come into play.
In terms of delivering against those objectives, it's very clear that the UK will be using hydrocarbons in the next 10-20, potentially 30, 40 years, going forward. Really the question then becomes: Are we producing those hydrocarbons on our doorstep or are we importing those hydrocarbons from abroad? That's really the focus of the discussions. We're spending a lot of time educating a lot of the decision makers on the implications of different policies, of drilling or not drilling or developing this type of asset or that type of asset. When you boil it down to the basic arithmetic, if you look at a project, for instance, Rosebank or Cambo, ultimately they provide energy security, they provide jobs, they lower the net UK emissions, and they provide low energy costs.
Most people, when they understand the math behind the developments, they often will say to us, "Actually, that makes a lot of sense. Let us go back and speak to people in the party who are developing the manifesto and realign our messaging accordingly." Essentially what we are trying to do now, work constructively with. We're trying to speak to as many individuals as we can in order to help understand the merits of the projects that we have at hand.
Perfect. Thank you very much.
Thank you. Our next question is from Kim Fustier from HSBC. Kim, please go ahead. Your line is open.
Hi. Good morning. I have two quick questions, please. Firstly, on CapEx, just following up on an earlier question around OpEx. You came in right at the bottom end of your guidance on producing asset CapEx this quarter, I wondered if you could give us some more color on the reasons why. Secondly, going back to Rosebank. Equinor has made some really positive noises about Rosebank in recent weeks. You might not be able to answer this, do you think that they will want to farm down from their current 80% stake before taking FID? Will they wait until after FID is taken? Thank you.
Yeah, super. Thanks, Kim. Well, let me take the second one first, then I'll hand over to you on the first one. I think the second one really is probably a question for Equinor, unfortunately, that not for us to speak on their behalf. Iain, do you want to cover the CapEx question?
Sure, yeah. I mean, it's mainly about phasing, Kim. As, yes, as I'm sure you're aware, in terms of capital projects, it's the timing of execution and what falls into different quarters. We came in on the lower end, but, you know, a few things happened in terms of the Selce well completed, costs completed earlier than expected. The, yeah, the phasing of some of the CapEx EOR2 spend as well in the quarter. Relatively unexciting, I'm afraid, in terms of where we came in, but we're holding the guidance for the full year.
Okay. We're right at the top of the hour here. If there's no further questions, I think just a case of thanking everyone for their interest in the company and continued engagement. We really are very thankful for your questions today, for listening in on the call, and look forward to continuing to work with you all.
Thank you, everyone, for joining today's call. You may now disconnect your lines and have a lovely day.
Thanks, everyone. Bye.