Good day, ladies and gentlemen, and welcome to Seplat Energy PLC Investor Call. The presentation will commence shortly. After the presentation, we will conduct a Q&A session. If you wish to ask a question, you will be able to ask a question either through the Zoom webinar link provided separately or by submitting written questions using the Ask Question button on the Spark Live webcast page. If you have joined us via Zoom, please note this call is being livestreamed to a webcast for a wider audience and will be recorded. During the Q&A element of this call, if you wish to ask a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. If you already have a question, please do this now, ready for the Q&A when it begins.
I will introduce you, ask you to unmute your line to ask your question. I would now like to hand the call over to James Thompson, Head of Investor Relations, to open the presentation.
Good day, ladies and gentlemen. Thank you very much for joining today's call to discuss the completion of the acquisition of MPNU. Today's presentation will be given by our CEO, Roger Brown, CFO, Eleanor Adaralegbe , and our COO, Samson Ezugworie. I'm also delighted that joining us today for this call from MPNU is the MD, Mr. Dotun Isiaka, and the Director of Production, Eka Oghoghomeh. After the presentation, we will have plenty of time to answer your questions. I draw your attention to the disclaimer on the forward-looking statements, which is at the back of the presentation. And without further ado, I'll hand you over to our CEO, Mr. Roger Brown. Roger, please go ahead.
Hello, everyone, and good afternoon. I guess before we dive into the detail of the slide deck, I would like to start by saying how delighted we are to have this transaction complete. I want to thank the shareholders and all of them on this call for your patience waiting for this truly transformational transaction. I also want to thank Seplat staff who have worked tirelessly over the years to get this deal over the line. It's a very complex transaction, and I'm really proud that we were able to execute it, and the last one, I want to welcome the Mobil staff who have come across, obviously now becoming Seplat Energy staff as of today. You're very welcome to Seplat Group, and we're delighted to have you on board.
We turn now to the first slide, which is just setting the scene with regard to Nigeria's leading independent E&P. Look at the transaction, and it is a scalable transaction, and it complements our existing business, which is obviously an onshore business. This obviously brings the shallow water offshore, which is a closed-loop system, all the infrastructure we need, almost minimal reliance on third parties. And I think this is really going to transform our opportunity. So it's 40% working interest in four of the prolific blocks. In terms of what we paid Exxon in total, it's a cash consideration of $ 800 million. $128 million had already been paid, and therefore today we transferred $672 million in completion. We've added 409 million barrels of oil equivalent of high quality. And when I say high quality, this is world-class basin quality and reserves at a very attractive multiple.
EV/2P $ 2 a boe. In fact, if you add in the 2C as well, it's NGN 1.2 a boe. These are really very competitive multiples. It's a liquid-rich asset, and we add today 71,000 barrels of oil equivalent of liquids at a competitive cost of around NGN 11,000 per flowing barrel per day. If you then look at the balance sheet itself, and then Eleanor will go into some detail, the balance sheet has been prudently managed, as we always do at Seplat, and it really is not changing in terms of the EBITDA multiples around this. That's our net debt to EBITDA multiples. If you look on the right-hand side, you can see the scale here. It is moving revenue up by almost 200% and pre-tax operating cash flow by 210%.
This is a very big scalable leap for us as a company. Massive organic opportunities and potential to unlock greater than a billion barrels of resource space. If I turn to the next slide, we will just give you a snapshot of what we've bought. Wait for the slide to change. Okay. You can see here. Now Sam will run through this in his section, but we have now added four additional blocks. There are now 11 blocks in Nigeria, eight of which are operated, and a 2P and 2C of over 1.2 billion barrels for the group. Very much a big increase in producing oil and gas fields. We're bringing along additional gas processing facilities. Also we are bringing something new into the Seplat Group, which I think will be very much transformational. Sam will go through this in his section.
I will move on to the next slide, and let's look at the step change in scale. Look at the key metrics, so we're giving you four here in production, reserves, revenue, and cash generation, and you can see it's 2.6x in terms of production, 1.9 on reserves, and then 3x on revenue and cash generation. So it really is a scalable, and this is the existing business. This is not post-investment that we plan to make, which will grow it even further. If I go into the value proposition, and again, Eleanor will run through a lot of this in her section, so I'll just summarize it here, but looking at our 2P reserves, I think there's a slight delay in the slides. Apologies for this.
But if you look at then in terms of the 2P reserves with 2C upside, Seplat now is against the peer group. It's moved up quite significantly with the pro forma of 887 2P reserves. Looking at reserves per share itself, and this is very important for investors, you can see now that your 2P BOE per share has gone up almost 100%. It's almost gone from 0.81 to 1.51. If I look at the production levels, we're reporting in excess of 120,000 barrels of oil equivalent production. Looking at the production per share BOE per share, and again, it's gone from 0.03 to 0.08. It's an uplift of 167%. This is for the same; there's no equity here. This is adding these additional reserves and production to put a per share basis to the investors.
Into the next slide, the MPNU's strategic benefits. We've listed five. There are more than five. But let's just summarize them. Scale. Right. As we said before, this is a world-class basin, high-quality assets, and we're adding high-quality operated shallow water assets. So we operate this in a complete old infrastructure there. And this will, you can see, generate significant cash flow at the current production levels, which we expect to grow. Second one there is leadership. So Seplat always wants to lead in the front, and this is now a step up in terms of our position as the leading indigenous energy company. And in fact, what's going to happen in Nigeria is obviously the major oil companies are going to get smaller. The likes of Seplat will, you know, after this, it's got bigger. And so it'll be a dominant independent company within Nigeria.
Growth, this would be short-term, medium-term, and long-term growth potential. So in the near term, we're looking at obviously short-term oil gains, etc., and looking at the gas solutions. Medium term is there's a massive gas potential here. We can build a very long-term gas business as we've done in Seplat. So the growth is very material. In terms of portfolio diversification, yes, it's shallow water offshore, which is diversification itself. But actually, there's 31 additional producing fields here. And Sam will run through the scale of that. But one of the things it does, it de-risks our business somewhat, not wholly relying on an onshore production base. We now have a shallow water offshore production base, which has higher uptime than the onshore. And the last one is the resilient infrastructure.
Having an ability to control pipelines, terminals, wellheads, all the bits of the chain really allows us to grow this in a very, very risk-controlled way. Next slide. Setting the scene in terms of the giant oil and gas accumulations, so since 1970, there's been about seven billion barrels produced, and this is a massive opportunity. I think it's comparable to the Forties, the North Sea, as the ramp in Norway. This is the sort of scale we're looking at here. We've got 12 of the 31 developed fields have produced over 250 million barrels. We can up it almost a million barrels, so lots of producing fields, lots of developed, all the infrastructure there, and again, will that lead to some investments, but actually, there's a potential upside, and we're probably halfway, we think, in terms of the real scale here.
If you look at it on the right-hand side, you can see that. So we have a CPR as part of the prospectus. That's a requirement. But we've picked up in what WoodMac is carrying here in terms of the estimates. And you can see that they're estimating on a JV basis of about four billion barrels of oil equivalent. 1.5 billion of that is liquids, and the 2.5 is gas. So a lot of massive accumulations, massive upside potential. If I go on to the next slide. And zeroing in, I think one area that Seplat has gotten itself known for is natural gas. And looking at what we have today, there's been somewhere between 80 to 120 million scf of gas sold here.
With these gas resources and the gas production on a daily basis capability, there are multiple gas solutions here, whether it be onshore, domestic, whether it be LNG, floating LNG, and other places. This is something we'll be working on. When you look at the CPR, which is looking at 3.2 TCF of 2C, we believe it's much, much bigger than that. Again, we reference what Woodmax carries, which are estimating over 14 TCF for gas. The gas play is something that we've been working with the Mobil team to really categorize that and actually look at the various gas monetization solutions. I'm going to hand across now to Sam, who's going to deal with the world-class asset space.
Thank you very much, Roger. Good morning, good afternoon, good evening, depending on where you're joining us from.
I will now cover the asset dimensions, imperatives, and implications for our business. And I will end with an outlook for peak production enhancement and growth opportunities as we plan them today. So on the next slide, please. I would like to share with you the scale of this asset. First of all, I would like to underscore that this is a world-class asset that we've acquired. And if I borrow the words from Eke and Dr. Ndungwu coming over from Exxon, the message is we've produced about seven billion barrels of oil to date. And the other message is that we still have as much in the ground as we have produced. So this is indeed a world-class asset. And with the operatorship of these four blocks, it comes with an integrated asset and infrastructure comprising of over 120 facilities, 200 plus producing wells.
And I will underscore the 200-plus producing wells because within the asset, we have over 600 wells drilled to date. And I'll come back to that. We have over 1,500 kilometers of pipeline. And production as of end of 2023, working interest is 76,000 barrels of oil equivalent, combined 2P2C of 270 million barrels. What is also coming and very important in this acquisition are the three terminals: the Qua Iboe Terminal, the Yoho FSO, and the Bonny River Terminal. And it's at this point that I would also like to underscore a very important point because Roger was alluding to it. This offers us a closed-loop infrastructure system and gives Seplat complete control from wellhead to the export. This in itself provides us some resilience and assurance of our products to the market.
If I go to the next slide, I would then at this point, given the operational imperative that we have now being the operator of the entire system end-to-end, we now have control of the end-to-end loop in the infrastructure system. There are a few points to highlight here. Qua Iboe Terminal, which is coming with this asset, is Nigeria's preeminent terminal with significant capacity of 600,000 barrels per day, which is sufficient to absorb future growth and loss of storage capacity. The storage capacity comes in handy as well in times of outages, such that it becomes very crucial to assurance and resilience of our production. Another very important point to note at this point is that this infrastructure is 23 miles offshore, which is another very important positive dynamic in terms of security and assurance of our production.
With this asset, you can then see why it becomes very important for Seplat going into the future, which is going to be much brighter. I will go to the next slide and then talk to you about the subsurface reservoir and fluid characteristics, and then the production performance. From here, you can see that the subsurface is great, world-class, operates along in terms of reservoir quality, porosity, permeabilities are very good. The crude quality is also light, fluid, with low metal content. And this makes it in high demand globally. Production in itself has also been very resilient since 2021 effective date, with only 6% decline. And this, I would like to underscore that this is despite the limited capital investment by Exxon over the transition period. Reserve replacement is at 63%.
So if you sum up all these parameters, you'll see that we have a very healthy resource base leading us into the future. I would like to spend some good time in the next slide, which is now looking at what are our future plans to quickly enhance production and grow this asset. And I would like to state upfront that we have two very competitive advantages that come with this asset and acquisition. First is the people, and second is the resources that will ensure that we boost production in the short to medium term. And if I start with the resources, as I mentioned earlier, we have well over 600 wells drilled in this asset. And currently, we have a bit of over 200 of these wells producing. This implies that we have hundreds, and I mean hundreds, of idle wells shutting at the moment.
So if I just hold it there, the second competitive advantage is the people. We have well over 900 Exxon staff coming across to Seplat as part of this deal. And these individuals have technically matured these opportunities, but could not execute them due to Exxon's capital allocation framework during the transition period. We have now run these opportunities in terms of the production impact and ease of execution in the short term. And we will be focusing our efforts in boosting our production through short-term rigless opportunities and bringing some of these idle wells that are still producible back into production. So in 2025, we will focus on these high-impact production restoration activities, which in itself are going to be very tax-efficient because they are going to be tax-efficient OpEx activities that we will be dealing with.
Eleanor will deal more and talk more about these tax benefits as our strategy in the short term in her presentation. In 2026, we will commence the execution of the CapEx drilling activities and field development activities. The timeframe is to offer us sufficient time for contracting of that company. At the same time, we will be focusing on gas development, as Roger earlier had likened. This is like Seplat's bread and butter because we have demonstrated over the years in history that we are able to transform gas business in Nigeria through our leading operations in domestic gas operations in the Western Assets at the moment, being able to produce about 30% of domestic gas need for the country, empowering the country. At this point, I hope I've given you some bit of flavor of the short-term plan that we have to boost production.
It's at this point that I will hand over to Eleanor to take us through the financial aspects of this transaction. Eleanor, over to you.
Yeah, thank you very much, Sam. Hello, everyone. Thank you for listening in on our call today. Actually, we're very pleased that we've now gotten to this point where we can actually speak to you about this very accretive opportunity that brings incremental growth to our company. Transformational and extremely exciting. I'm going to start with my first slide and talk about the transaction very briefly. We signed a sale and purchase agreement for the entire shallow water asset of MPNU for $1.283 billion, along with a contingent consideration of $300 million, with conditions that were premised on both production volumes and also oil price. Now, this transaction was backdated to the 1st of January of 2021.
Therefore, a lockbox arrangement was agreed to recognize certain adjustments and also provide for the net cash that we generated by the business until the completion. At the time that we signed the SPA, we did pay 10% of the purchase price of $128 million. We did that at signing. Today, we have now settled and paid to Exxon $672 million, bringing the total cash consideration at close to around $800 million. I'm going to speak a little bit about the contingent consideration. The effective date of that contingent consideration is the 1st of January 2022. Included in this final payment that we've made is $43 million out of the $300 million. The way to think about this is because it's premised on both production and oil price, it's going to be a function of that.
Now, we are going to be settling for 2024 year, in 2025, the third year. We don't expect that the value of the contingent consideration for that third year will be any more than what we've paid for year two, which is around $18 million, and it may be less. Now, we have two years left of the contingent consideration that may be payable in 2026 and 2027, depending again on the oil price. Now, of course, if the oil price is significantly above where it is today, then it's going to be a win-win because we benefit from positive oil price. I'll speak a little bit about the deferred amount. So if you look at the chart, we're showing that there's also a deferred amount of around $257 million. Again, that's one of the things we've agreed with Exxon, it's deferred to December 2025.
The way to think about this is these deferred payments are really costs that we've incurred in the normal course of business. So they are joint venture costs. The bulk of those costs are really tied to employee costs and also environmental costs. And therefore, they will be partially offset by the JV cash calls because the government is our 60% JV partner on this. So most of that will be partially offset by cash calls. The other bit, which will be the 40% working interest share of MPNU, which is 40%, if you consider the after-tax impact, potentially we expect, or we've estimated, that the after-tax impact will be around $25-$35 million. Now, before I get off this slide, I just want to highlight two other key points about the cash consideration and also the cost of this asset.
Now, the cash consideration of $800 million is really below the full-year EBITDA numbers of 2023, which was around $1.3 billion. Again, when you think about the cost of the deal and consider what the EBITDA numbers have been, that sort of gives you a sense of how positive or how competitive this transaction is. Another point to raise, and Roger mentioned that earlier, is really the EV to 2P at $2.9 per BOE from 2021 when we're considering the 2P reserves, so 445 million barrels of oil equivalent. But considering the cash consideration today, it's around $2 per BOE on an EV basis. Now, if I move to the next slide, I'll talk a little bit about the financing of the transaction. We secured a $300 million advance payment facility. It's a three-year advance payment facility with ExxonMobil Trading.
Now, what's really good about this is that the terms of that facility are very much in line with what we have on our RCF, which is SOFR plus 5%. We've now fully drawn and paid to Exxon the $350 million RCF that we had. Of course, the balance, which is around $22 million cash, we've taken that from our existing cash reserves. If you recall, when we closed our books for nine months, when we reported our results in October, we closed with around over $400 million in cash. So part of our cash, just $22 million of our cash, has then gone to complete the cash consideration for this transaction. I think important to highlight, and Roger mentioned that as well earlier, is that we did not have to issue any new equity for this transaction.
If you think about, then what's really the balance sheet looking like, so this transaction further strengthens our statement of financial position. On a pro forma basis, we're still well within our net debt to EBITDA numbers. If you look at the table on the bottom right of the slide, you'll see that on a pro forma basis, as of six months 2024, and this information we included in our prospectus, which we've shared just two days ago, we are around 0.7 times net debt to EBITDA. On our bond covenants, we have the ability to get up to three times net debt to EBITDA. Again, we're well within the range of our bond covenants. I think the next steps will really be that we are considering the bond refinancing. Our bond will become current in April of 2025. Again, it expires in 2026.
It will become current in 2025, and so we'll have an opportunity again to enhance the flexibility and then provide more information around our future capital, how we're going to deploy our capital for the business. Now, I think this slide is really important because when you look at our debt structure, our debt structure is still, it sort of gives a sense that we're still in a low leverage space, and we do have the opportunities to still grow that. Now, moving on to the next slide, I really like this slide, and some of the comments on the next slide, Roger sort of spoke a little bit around that. It's about the multiples from the existing business that Seplat has to what the pro forma business is looking like.
Revenue times three, pre-tax cash flow, cash flow from operations times three, adjusted EBITDA more than four times. This is both when we're looking at the numbers in 2023, and it's very similar to the numbers as of six months. Now, when you look at the post-tax cash flow from operations, we do observe that on a pro forma basis, we're seeing the growth at just 1.3 times. Obviously, this speaks to the fact that there's been huge tax payments or fairly huge tax payments on the MPNU side. That's really arising from the fact that there's been minimal investment in the past years. So without building capital allowances, there hasn't really been much of a tax shield. This is really where the opportunity lies. I'm going to pull two levers here.
The first one is picking up from what Sam was describing about the high-impact intervention, the short-term oil opportunities, the rigless opportunities, a lot of low-risk opportunities that are available here from a very high cash-generated business. Means that Seplat wants to come into this and invest quite quickly. When you think about what we're doing in our existing business, and if you look at, I'm going to be showing you some details around the CapEx investments over the past few years. But we've been doing around $160 million annually in CapEx investments in 2024. We have an opportunity to invest almost $200 million.
And if we're doing that in our existing business, and if the scale, if you consider the scale of this business that we've just acquired is more than two times what we have, then that tells you that we plan to scale up those investments, not just in CapEx, but also in OpEx, because there are opportunities for workovers. And there have been some capital, sorry, operating expenditures that have occurred in this business. I think another thing to sort of build out very quickly is if you follow the Seplat story, you'll see that we've been sharing effective tax rates. But on a cash basis, our taxes have been around 27%, while on the MPNU side, it's been very close to the 85% tax because it's under the PPT regime. Again, just to emphasize, we do operate with the same fiscals.
We haven't yet converted to PIA, but we are in a very good place. We've made a lot of progress along with our JV partners. At least last year, we executed a PIA conversion contract. We're now in the final stages with the support from NUPRC. We've reached an alignment, which is really the last piece on the FH delineation. For MPNU, the intention is to actually work with the government to try and do that conversion to PIA. In spite of that, or even with that, because like Sam had said, in 2025, there's some really exciting opportunities, and some of these are going to help with the tax shield in 2025. I'm going to the next slide very quickly because I spent quite a bit of time on that slide.
It's just to reiterate the value of this asset being very competitive. That slide shows how we compare with our peers. We've taken some acquisitions that have been over $1 billion. You can see where Seplat sits, very positive, very good rates at the $2 per BOE. I'm going to jump to the next slide, and this slide I'll end with. I think what's most exciting about this field, I mean, Sam talked about the production for the business. If you look at the last three years, you'll see that there has been a decline. When you think about the minimal CapEx that's been incurred, despite that, the production has been fairly strong.
Obviously, there's been production OpEx that's been sustained to preserve value and also maintain the assets, considering that this is an international oil company that's very focused on safety, very focused on asset integrity. So we are going to build on that. Maybe the final thing to say, just on this slide, is three key things. Sam talked about the quality of the crude. That quality of crude is what's allowing the sale at a premium to happen. This asset is selling the crude at a premium today to Brent, which is positive. I talked about the fact that production OpEx is stable. More than anything, even though you look at the CapEx and you see that compared to what Seplat's been doing, it's very minimal. That's now about to change. It's to focus on the future. We're very excited about this transaction.
In the same way that we've approached asset investments in Nigeria, we plan to continue with that model with this transaction. So on that note, I'll hand back to Roger to summarize. Thank you.
Okay. Thank you. Next slide, please. The next one. Okay. So let me just wrap up here for the slide deck. So the point I want to make here is it's what makes Seplat what it is today. It's track record of success. It's model built off buying assets from international oil companies and really working them. And it's been very successful. We have maximized the value of resources. We've been very conservative with the balance sheet and managing that, focusing on cash flow and growth around that, and then rewarding shareholders. And you can see it summarized in this page in terms of the dividends. There's no difference here.
And what we have here is an even bigger opportunity for us to do all of this. And a very motivated workforce that's come across that's been sitting with these blocks for quite a number of years, but with a shareholder that is fighting for capital around the world and doesn't value these reserves as much as a company like Seplat does. So this is how we've been successful today, and it's not going to change. We will continue to do that. And the next slide. And you can see what we've done with our existing assets. We've grown in terms of we've invested CapEx. That's why we have a 27% effective tax rate. We've grown production. We've been active with the drill bit. And we've been maximizing the importance here, which is in Nigerian supply chain. Very critical working with the Nigerian suppliers around that.
This is exactly what we will continue to do with a much, much bigger portfolio and a very capable staff. If I look into the next slide, what are the priorities for 2024 is pretty much over. What are priorities for 2025 and onwards? Again, obviously, there's staff coming across. We've committed to no job losses around that. It's very important. And really, our expenditure is going to be in a number of areas. One is, of course, we're going to have to do maintenance integrity work in a very systematic measured way for these assets. At the same time, we're looking at the short-term oil gains, what you call the low-hanging fruits, which are a lot of it. And if you look at your cash taxes we've been paying, there's plenty of cash here, okay?
We will get, as Eleanor said, we will get a tax shield around that. So when you start investing, that 85% effective tax rate, which we have today, with Exxon assets coming across, that will trend down towards where Seplat is over time under the PIA regime. And of course, we're going to work towards trying to get this under PIA terms as well, and a government that is very much supportive of the PIA. So I think we can make some headway there. But in the meantime, the short-term oil gains can be offset against tax. We're going to look at ESG and look at the getting rid of routine flares, which we will do here. And then look at sort of longer-term growth, whether it be into the drilling, monetizing the gas, and exploration is a potential well into the future.
In the outlook, obviously, our next reporting is going to be in the annual results at the end of February, and then we'll be doing a capital markets day where we'll be able to go into a lot more detail here, so if I go to the last slide just to wrap up in a summary before we go to questions. So it's value enhancing day one, a whole range of ways we can ramp up, and you can look at all the metrics. They're all very compelling. A number of organic growth opportunities to unlock this top-quality, world-class basin. High uptime, so we're confident that when we get up production, we can then monetize it, and it closes a loop system, a loop system where we control the terminal. We've got an FPSO. We've got control on the liftings.
And one of the things that's attractive, of course, is having Exxon continue to lift the oil. The multiples on, you'll figure out yourselves, but in terms of the acquisition cost, we believe this is the lowest, sort of lowest in the world on multiple basis. Cash generation, I think we're clear here. And the tax efficiency will return that cash to the bottom line and allow us to then sort of increase dividends, etc. Balance sheet is very conservative post-transaction. The net debt-to-debt ratio is low. And then leadership. It's important to continue to lead from the front. And this will really cement Seplat as being a key player within Nigeria. It's scalable, as you see on London, the size we will be in London, and an opportunity to grow well into the future. So thank you very much for listening.
Now I'm going to hand it back to the operator for Q&A. Thank you.
Ladies and gentlemen, we will now begin the question and answer session. Participants can submit questions in written format by the webcast page by clicking the Ask a Question button. If you are dialed into the call and wish to ask a question, please use the raise hand function at the bottom of your Zoom screen. If you are dialing in via phone, you can raise your hand using Star 9 and unmute yourself by pressing Star 6. We will pause for a moment to assemble the queue. We'll take our first question from Nicholas Stefano from REDD. Please unmute yourself and ask your question.
Hi there. Can you hear me?
Yes. Well, can we hear you?
All right. Brilliant. Congratulations on the transaction. That's quite a milestone.
It took a bit of time, but your persistence was sorted at the end of the day. I've got three questions to ask. I guess all of them are difficult. Roger, I mean, one thing I was kind of taken aback was that I looked at the CPR valuation. What I noticed is that the 2C reserves are valued just kind of like over $500 million. I'm just wondering, I mean, how can you justify paying such a high premium compared to that number? I presume part of it is maybe the 2C resources, but we can talk a bit about that. That's the first question. Then the second one, I just want to get an understanding basically on what is the process and maybe kind of like unexpected timing for a license to convert to PIA terms.
I mean, this PIA became law, I think it was like three years ago, and it's just maybe a couple of licenses that have been converted so far. So I just want to understand the steps towards reaching those fiscal terms because they're going to be quite more attractive than current terms. And then the final question is, I think in the past, you had said that this would be a self-funded development in terms of future investment within MPNU. I looked at the CPR, and it seems that just for the two key reserves, gross capital of the 10 years will be around $3 billion. I mean, that's not really kind of like a number that I believe can just be paid without maybe further contributions from the rest of the business.
So is that still the case, or are you kind of thinking of maybe having other sort of sources of funding there? Thank you.
Okay. Thanks, Nicholas. I'll do one and three, and then Eleanor, you can deal with the PIA. So in terms of the CPR itself, part of the restrictions on acquisition of this nature is CPR. So our view of CPR has been it's obviously an independent report. Our view is, first of all, it has quite a lot of CapEx through there, but the effective tax rate through the life of it is about 85%. So there's a spending CapEx, but there's no corresponding reduction in effective tax rate. And we don't believe that's the case. And if you look at Seplat, obviously, you get capital allowances. Your workover activity can be expensed in the year.
So I think what will happen is once we get an opportunity to come out subsequently and show that tax shield and the development plans, I think the starting point in terms of production was as-is, right? And I think even today, the production is higher than projected, and it's declined. So I think it's a combination of all that. We don't think it reflects all the reserves here. So unfortunately, when you look at then on a valuation basis, if you're running 85% tax around this on a valuation, then you're going to see these numbers. We don't see it that way at all. And I think also the decommissioning abandonment number was almost 2x over what NNPC and Exxon were assuming through a quite detailed study. There's limitations. I won't make any more apologies than that. There's limitations to that, but we don't see it the same way.
Eleanor, do you want to do? Yeah.
Very quickly, just thanks, Nick, for the question. So you're right. There has been a process because the opportunity for PIA conversion came up when the act came out back in 2021, but we have now gone through a conversion process. Along with our JV partners, we have completed the application and indicated that we obviously wanted to convert. There've been a number of engagements with NUPRC, and we've actually started to implement some of the PIA rules, especially around the host community development fund, having decent conversations around decommissioning and abandonment. Just last year, we actually signed a conversion contract with NUPRC. Then what that does is that preserves the rights for us to actually convert.
Now, yeah, notwithstanding, there's been obviously times since this has happened. We've actually put in place various conditions precedent for this conversion and to the point around DD&A and HCDF. Now, I think the most important thing to take away is that we're literally almost there. It was really around how much of the acreage we were keeping. And we still want to keep quite a bit because we have very huge interest in continuing to develop and grow those assets. And I think subject to NUPRC's approval, we expect to sort of close this very quickly. So we imagine that in the early part of next year, we'll have this approval. So just to highlight that we do need the approval, and NUPRC has been very, very supportive to us.
And so we also expect that when we come with this asset in MPNU to look at a conversion, we'll get that same level of support. So hopefully, that answers your question.
So let me deal with the CapEx one. And again, go on, Nicholas.
So just in terms of timing then, from what you said to Eleanor, it sounds that this conversion could happen in 25?
Yes. That's the answer. Yes. Welcome.
In terms of the CapEx spend, I think your question really about is, do we have to put more money in from the group into this, or can it self-fund the development? I'll go back to Sam's point, which is you've got 600-plus wells, around 400-plus shut-in wells.
Okay? Now, even if you took a conservative 25%, one in four of those wells, that's over 100 wells. And so that will be it'd be rigless.
There'll be a barge going from platform to platform. There'll be de-bottlenecking. A QIT needs to de-bottleneck the water handling there. There's other short-term actions we can take to bring up the production quite materially. And again, if you look at cash taxes in 2023, and it's in the prospectus, there's almost $1 billion of payments in 2023, $1.25 billion in 2022, and even almost $600 million in 2021. So what we'll see is you'll be able to offset that expenditure against your tax, get the tax shield there. While you work out what we're going to do longer term in the drilling, and we're going to be very measured, we're looking at on the gas development side, and there are many options around that. And again, it's too early to talk about it, but hopefully, the capital markets day, we will relay that out to you.
We don't necessarily believe those sort of numbers in our view. I think there's more short-term activities we can do to really get up production at a very affordable manner. Thank you. Can I ask a quick follow-up? On the refinancing, what's the current thinking there? I presume you're also going to refinance the RCF. Are you going to, I mean, is the current thinking maybe one big bond of maybe around $1 billion, or are you thinking of different sources of refinancing? Yeah. Thanks, Nick. I mean, we'll share more on that, but obviously, we are looking at the refinancing of the bond. And I mentioned that earlier. Again, it goes current. The whole capital structure and the balance sheet will be revisited. When we release our results in the first quarter of next year, we'll be giving some more information.
I mean, Roger talked about a capital markets day that we're looking at next year as well. Potentially, we'll be looking at a dividend policy. So all of what we're going to end up doing, we will share that in more detail very soon. Thank you.
Thank you so much.
As a reminder, if you would like to ask a question, please use the raise hand feature at the bottom of your Zoom screen. Our next question comes from Colin Smith from Capital Access Group. Please unmute yourself and ask your question.
Hi, everybody. I just like to also congratulate you on getting the deal done. I've got a few questions as well. Just starting with the CPR, just to clarify what you're suggesting, is it the case that you think that the CPR has not modeled the tax shield on a corporate-level basis?
I'll leave it at that on that one. Then just thinking about how the deal may come through into the results themselves, are you expecting that the net assets as disclosed for MPNU, so the fixed assets disclosed for MPNU in the prospectus, that they will come through pretty much straight into your balance sheet? And then if I apply the $4.09 value for 2C reserves, that's also a question, is that the number that you would use? You would end up with DD&A somewhere between $6-$6.50 a barrel for the new production versus a sort of $8-$9 a barrel that Seplat currently reports.
In a similar vein, if I look at the disclosed values for cost of sales and strip out the royalty and the DD&A, and again, divide through by production numbers, I end up with about $10.30 for FY23, which isn't dissimilar to the number that you're currently reporting. Is that the kind of number that you would expect to see? The next question would be just on the dividends. Is there anything in the Exxon facility that would limit dividend payment? And more broadly, within the Exxon facility, does that come with any additional strings attached? I mean, obviously, you may want ExxonMobil to continue lifting, but would you have the option of going elsewhere, or are there certain limitations within that facility that apply to the way you'd be able to run it and indeed to refinance it?
I'll leave it at that at the moment.
Okay. Thank you very much for these questions. With regards to the CPR that we have, again, that CPR was prepared on an as-is basis. We would have an opportunity to revisit that as a business. To the point that Roger made earlier, it appears that the effective tax rate in that model sort of assumes 85%, and there hasn't been an opportunity, for instance, to take the tax benefits of the cash decommissioning and abandonment payments that will be made year on year. I mean, I can't speak to the correctness, but our view is that we would look at this very differently. We expect that there's more value to this than has been reported. Now, with regards to the net assets, we will be consolidating the business.
It's a wholly owned subsidiary, so we'll be consolidating the business. On the net asset side, yes, we'll be bringing that through, but we'll be consolidating it on each of the line items on the statement of financial position. And I think the numbers you presented are correct with regards to the DD&A and also the cost per barrel at about sub $10 per barrel, very similar to the numbers that Seplat's operating. So again, the businesses are very similar. I think one advantage that MPNU comes with is that we don't have crude handling charges the way we have them in the onshore assets. We also have better uptime because it's in a closed unit, and what we have in the onshore space is slightly different. So again, one of the things we've said is that it further diversifies our route to market.
Those costs are correct, as you said. Now, with regards to the payment facility that we have, now, maybe I'll start with the dividend one. We do have limitations on our existing bond with dividend, and there's a max that can be done. It's not more than $0.15 per share on the bond. And so when we refinance that bond, we will obviously be looking at that. Now, with the Exxon facility, that's a prepay facility. And I mentioned earlier that the terms are very good terms. So no limitations outside the fact that it's a prepay, and we have an opportunity to pay down sooner if we want, and we also have an opportunity to roll it over. So I think we've got very, very positive and competitive terms on the trade agreement.
And so obviously, we'll be sharing more in the coming year as we continue to run that contract with Exxon. Thank you.
Yeah. Colin, maybe it's to add to that, just so be clear, there are no dividend restrictions at all on that facility. There is a de minimis volume that needs to be delivered. And once that's done, then the facility will, then the requirement to have them as off-takers will release. And that's about, I think, 91 million barrels. Okay? But in a way, the pricing is very good. When we obviously tender a lot of these things, there's a marketing nature to it. So we can actually see through marketing, which allows us to develop. And actually, very importantly for us, it's the status quo. So this has been lifting for Exxon. Exxon's been lifting for 60-odd years.
There's a real benefit of having them continue to lift. So for all those reasons, we're very comfortable with it. Okay. That makes sense. And then just a last follow-up on the PIA. Just to be clear, did ExxonMobil actually apply to transfer to PIA status for the MPNU assets? And if not, could you just elucidate a little bit more about how that process might work for the MPNU assets? Since my understanding was there was a deadline to elect for transfer, which I'm just not entirely clear whether ExxonMobil did that or not. Yeah. You're right. I mean, in short, Exxon and quite a number of the IOCs didn't elect to go into PIA. Okay? Whereas actually, almost all of the indigenous companies did elect. And I think Chevron elected as well.
So I think the way to think about it is, so under the strict terms, if you've missed your deadline, you can't obviously apply. But the government is really trying to ensure that the PIA is followed. And so that's why our counsel says there's an openness to look at this. When we got the whole transaction approved, it was actually approved under PIA guidelines with the regulator and everything else. So they're applying the guidelines. And post this deal, and as of today, going into next year, we will actually be looking at this and talking to the regulator and the government about the conversion. But that's why specifically the majors just viewed it a slightly different way and didn't opt to convert, whereas the indigenous companies did.
Okay. That's very clear. Thank you.
There are no further questions on the Zoom webinar.
We will now address the questions submitted via the webcast page. I will now hand over to James Thompson to read out the written questions.
Thank you, Operator. Please do, just if you do have questions to ask on the phone, do. We're already at the hour. We've had a lot of questions come in, written questions. So we may not be able to answer these in time, but we'll try to do that. Obviously, firstly, Roger, there's been a number of questions already on PIA, and a lot of the written questions have been there too.
Maybe broadly, could we just talk about the advantages, disadvantages for Seplat under the PIA and associated with that and linked questions here coming in in terms of our CapEx plans, OpEx plans in the near term, and how these might be able to shield from the high cash taxes that have been paid for the last couple of years? Okay. Eleanor, do you want to pick up that specifically?
Okay. All right. Thanks, James. So yes, when we looked at our business, our existing business before obviously the MPNU deal, we had better economics moving to PIA. Obviously, the royalties will be lower, and the tax rates as well are better. So we have a 60% tax compared to 85%. And so when we modeled this, obviously, this was better.
Then, of course, we're in a JV, a joint venture partnership, and we worked together with our partner and agreed that this was sort of the way to move forward. I think with regards to the acreage delineation and determining what we wanted to keep, it was very important to us to look at that in detail and sort of demonstrate that we wanted to do a lot more in that space. So yeah, it's a lot of positives there. Now, with regards to the taxes, how are we going to reduce the taxes in the near to medium term? I think we've talked about that already. Maybe specifically, try and help the audience with this. Now, we talked about the fact that this business is highly cash generative.
What we want to do is put a lot of that cash into the business via workovers, and so immediately, if you do some workovers, depending on the type of workovers it is, it could be either in OpEx or CapEx. Under the PPT regime, even with CapEx, you can make some claims much sooner. You can make some significant claims in the first year, depending on the type of CapEx it is, and that can reduce whatever your assessable profits are, so again, for us, we're still very interested in growing taxes because the more we can inject value into the business, the more we can increase production, and taxes can still be mortgaged, you can get that in royalties, and you can still get that with the hydrocarbon taxes that we will be using in the business.
So again, what we've done in Seplat is what we've just described, which is we've invested. We have about $1 billion in capital allowances that we've accumulated over the years, and we use that in our existing business to shield from excess taxes. And so as we begin to do the same in this business, we'll continue to then build the CapEx and then use that as a shield in the medium term. I think the focus is on going forward. We will have a capital markets day next year and give a lot more detail. Again, we're just coming into this. I mean, we do have the MPNU leadership in the room as well, and we've had some really exciting conversations about what is available to do some low-risk opportunities to attack very quickly. And so there's not. There's going to be a focus on the asset.
There's no competition around what we're going to use the money for. We're going to be putting the money into the business and creating whatever investments need to be created to grow the asset above where it is today, which we talked about the fact it's around 170,000 on a gross basis barrel of oil equivalent per day, and that potentially can grow even further. So yeah.
I think it answers that. I mean, again, we've said it before. The tax regime today is the same as Seplat's tax regime. It's exactly the same. Okay? So if you look at what we've been able to achieve at Seplat, we've actually reduced. So obviously, when we bought our first assets from Shell, they were paying an 85% tax rate. And we've shown that we can get the tax shield by investment.
Whether it be workover, which OpEx, or whether it be building the capital allowances. So even without a PIA conversion, you can actually get this much, much, much more efficient, and there's plenty of cash generation to fund it. Okay? Obviously, who wants to go to the PIA conversion? And again, we can take our time, but Eleanor's point is very clear. You have to then delineate your assets, and you have to be very clear what you're going to give up and put back in the basket. Okay? And admit it is quite fortuitous for us that we can take our time to work out what we're going to develop and what we're prepared to give back to the basket. James.
Thank you, Roger. I'll just do one more question that we've had written, and then we'll pass back because I think we've got another caller on the line.
So we've had another question really around, can we get any kind of high-level guidance plans in terms of gas monetization and thoughts around flared gas and what we might be doing there? So maybe on the gas side of things, can we talk about what the opportunity might be first, and then we'll go back to the line?
Yeah. Yeah. I think it's too soon to be able to put some numbers to it exactly. What we can lay out is, first of all, depending on which block you're in, there is particularly OML 70, probably the most active is ready for blowdown of the gas cap, right? So we can start to ramp that up. We are supplying gas into Agip, which is going into Nigerian LNG. And again, we've got some de-bottlenecking, but we can increase that in itself.
But actually, if you look at the sort of scale of gas that we can get out of the blocks, it serves a number of different projects. Okay? It's too early for us to sort of say, "Okay, here's the ranking of these projects." There's been conversations over the years with Exxon and players in the market. And we at Seplat have obviously been contacted by quite a number of players. You'll see some of the market will be floating LNG. There's plans for domestic gas plays in methanol and everything else. Nigeria LNG is under capacity at the minute because it's six trains, and there's another one coming.
And I think the answer is that it's going to be a mixture of domestic gas because it's very important you do domestic gas, as well as a mixture of LNG, whether it be floating LNG or fixed LNG in terms of Nigeria LNG or combination of the two. But it's too early to give sort of volumes. We indicatively said that I think at full production levels, we could be anywhere between probably 500 million scf to BCF a day. So that's the sort of scale here, which if you then augment what we're doing at the Seplat group with our three gas plants, we're going to be as a group dominant, next to government, the dominant gas player both domestically and the exporters' one. Great.
Thank you very much, Roger. Operator, we'll go back to the line for a question.
Our next question is from Oliver Connor from Citi. Please unmute your line and ask your question.
Thanks for taking my question, and congratulations again on getting the transaction done. I actually had a question on the gas side, which I think you've answered more broadly, but perhaps, I guess, thinking about some of the barriers to get the gas growth in Nigeria to the next level. I mean, do you think it's a combination of infrastructure? Is it more on the fiscal side? I'm just trying to get a sense because clearly the resources are there. What the sort of the key hurdle you think is to monetizing the deep resources that you're going to have? Thank you.
Yeah. Thanks for that. I think when we're looking at the gas here, there are plenty of gas plays in and around that region.
So we're not looking to get gas from Akwa Ibom State up in through the rest of Nigeria because I think that would just be a tall order in terms of the infrastructure restrictions there. And if you look at where it's located, it is very located very close to Nigerian LNG. It is not far to the shoreline, obviously, in Akwa Ibom State, and there's a lot of projects planned there. So it'll be infrastructure taken from the shallow water offshore to the onshore. There's already gas pipelines that are going into Agip, which is then flowing back into LNG. So those can be de-bottlenecked. They can also be expanded. So I think what we're saying is that all the infrastructure to monetize this gas will be in a very small radius and kind of adjacent to where these blocks are.
That's clear. Thank you.
We'll now hand back to management for closing remarks.
Roger, do you want to wrap up the call? I think we're pretty much out of time now here. So maybe we can close just from my side before handing back to you. Thank you very much, everybody, for the questions. We have a lot there. We couldn't address them all on the call today, but we've made a note of those, so we will come back to you. Thank you very much for listening. And Roger, I'll pass you back to you to close.
Okay. Thanks, everyone. We're obviously very excited today. It's a lot to chew, particularly for the investor base. There's a chunky 500-page prospectus to digest through the Christmas period, but we will be coming out, obviously, with the full year results in the end of February.
Again, we'll just try to be as clear as possible of how we're going to develop it. It's a very exciting time to be at Seplat Energy Group. There's a lot of excitement here, and we'll start to see the real benefit of this. This is a sleeping giant in our view, and it's going to be really transformational for the Seplat group. Thanks very much. Good questions today, and I'll hand it back to close the call. Thank you.