Good morning, everyone, and and thank you very much for joining us today for our results. So, you know, 2023 was a really very significant achievement. And as a result, today, Tullow has a very strong, very unique foundation to build from. So Richard and I are looking forward to updating you today on all of this. We'll do that alongside kind of just sharing kind of the successful delivery of our business plan, the delivery of free cash flow ahead of expectation, the acceleration of net debt reduction, and we'll also share some growth our growth expectations for 2024.
But before we do all of that, I just wanted to take a step back and, you know, really share our perspective on the industry, as well as what the opportunity set for Tullow is. You know, we're focused on Africa. The scale of the resource in Africa is immense. There's probably over 30 billion barrels of proven resources, and there's multiple opportunities across both mid to late life assets, as well as new production. And, you know, with only about 8% of global oil supply, which is currently from Africa, and there's over 40% of, you know, global new oil and gas discoveries in the last decade in Africa, I think there's a lot of room for growth.
Now, in the context of the energy transition, we believe that the nations in Africa, they have a right to benefit from their natural resources. We've been very vocal on this as well, and we were encouraged, really, that this was something that was recognized in the recent COP28 agreement in Dubai. I think the benefits from the development of natural resources, they're kind of far and wide. And I think something that differentiates Tullow, and we'll talk more about this, is our approach to shared prosperity, which is really where we ensure that we bring meaningful and long-lasting benefits to our host nations. So that commitment to shared prosperity, along with... We also remain committed to supporting a just transition, so that's part of that.
We're very much on track to achieving Net Zero by 2030. So again, I'll talk more about that. If I switch to our business and our portfolio, as you know, over the last few years, we've really pivoted our portfolio to focus predominantly on Africa. And organically, within our portfolio, there's a very big opportunity set. To give that some perspective, there's about 200 million barrels of 2P reserves in our portfolio and over 700 million barrels of 2C, and that's nearly 40 times our production last year. So that gives you, again, a sense of the scale of the organic opportunity.
Now, within the portfolio, we've got a number of really important organic catalysts, such as Kenya, the Uganda royalty, the TEN Plan of Development, the monetization of gas in Ghana, and each one of these has the potential to deliver very material value. So that's on the organic side. Now, importantly, again, as a responsible operator, we've now created a very unique, Pan-African platform and with trusted relationships, and that's key. Now, if you pause on that, and you say, at the same time, our industry is in flux, many IOCs, as you know, are planning to or divest mid- to late-life assets in Africa. So this platform that we've created, this Pan-African platform, that provides a very differentiated access to these inorganic opportunities in Africa.
So when I bring all this together, we've got a strong cash generation, there is lower debt levels, and with that, we have the opportunity to invest in growth from both organic and inorganic, and at the same time, post-2025, to consider returning capital to shareholders as well. So that really kind of sets us up for a pretty exciting future. Let me switch over then to a quick overview of strategy and plan. So you've heard me talk about this before. Our strategy really is underpinned by what I describe as a relentless focus on really three critical areas, and these are now very embedded across our business. So what are these? There's operational excellence, there is capital efficiency, and there's business growth.
What that focus has enabled us to do is to deliver the significant achievements that we did in 2023. But remember, these were built on a turnaround that's been underway since late 2020. Now, you're familiar with many of these achievements, but let me just kind of recap. So we, you know, the big one last year was the start-up of the Jubilee South East. Now, that delivered material production growth from our core operated field in Jubilee. What I'm pleased to share is that water injection is working well. We brought on stream this year one water injector, that was at the end of January, and then two producers, and production is now back around 100,000 barrels a day. So that's on Jubilee.
Now, in addition to that, we last year started a new revenue stream, which was established from the sale of the associated gas in Ghana. Other notable achievements last year were the reserve growth in Gabon, through license extensions. If I switch to cash, I mean, last year, we generated free cash flow of $170 million, and that was ahead of expectations. If I put that cash generation potential, you know, in context, since 2020, we have delivered about $1.1 billion, $1.1 billion of free cash flow, and that's despite the legacy hedging program that many of you are familiar with, that had outflows of about $600 million. So that gives you a sense of the underlying cash generation potential of the business.
So with that cash, last year, we reduced net debt by over $250 million, and with the cash generation that we've had, since 2020, we've taken the business from a peak gearing of, which is kind of net debt to EBITDAX, from 3x to about 1.4x, and that was at the end of last year. So it's a very substantial de-leveraging. In addition, we've demonstrated also our ability to access long-term capital. This was through the $400 million debt facility agreement we announced with Glencore last year. Now, as I talked about, our strategies are in line with that. We're continuing to focus relentlessly on operational excellence, on capital efficiency, and investments to drive the growth.
So as a result, operating efficiency is in the high 90s, and our cost base remains flat despite the inflationary pressure, and Richard will talk more about that as well. So the implications of the strategy is that it's delivering material cash flow generation, and again, we'll reiterate that we're very much on target- on track to deliver our target of $800 million of free cash flow. That's for the period from 2023 to 2025. As an aside, if you put that $800 million in perspective, that's 150% of our market cap. But with that cash flow, by the end of 2025, we'll achieve net debt of below $1 billion in absolute terms, with the gearing also of below 1x. So today, really, what we wanted to do is just start a very different conversation.
This is about the future, it's about growth, it's about how we unlock value from a very deep set of organic opportunities. How do we leverage our platform to deliver inorganic growth? So that is a kind of very exciting conversation, but we'll come to that. But before we do that, let me hand over to Richard. He'll take you through the financials and demonstrate kind of how we're well-placed to execute and to access these objectives. Thanks. So Richard, over to you.
Thank you, Rahul, and good morning. As Rahul has highlighted, 2023 has represented another year of strong performance, placing the company in a much firmer financial position. In terms of production, we've seen growth from 2022, primarily driven through the landmark Jubilee South East project, and the inclusion of a new revenue stream in the form of Jubilee gas sales. This theme repeats for 2024, as we guide a range of 62-68 thousand barrels of oil equivalent per day, driven by a further step up in Jubilee production. Ultimately, we lifted a similar volume of oil in 2023 to 2022, and therefore, the reduction that we saw in revenues is purely a function of a $10 reduction in realized oil prices.
This reduction in oil prices, combined with non-cash impairments of $408 million, which were primarily associated with a reserves reduction on TEN, has led to a loss for the year of $110 million. In terms of capital expenditure, 2023 represents our peak outlay, largely associated with the completion of the Jubilee South East project. With this project behind us, we are guiding a significant reduction in expenditure for 2024 at $250 million, and this is primarily focused on the completion of the Jubilee drilling campaign. In terms of decommissioning costs, these were lower than 2022 at $67 million, and lower than guided, due to the suspension of the campaign in Mauritania. We now expect this to complete in 2024, and it accounts for about $40 million of our $70 million 2024 guidance.
Following the financial inflection point reached with the Jubilee South East project and the associated uplift in production, the reduction in CapEx, we will see material free cash flow growth with an uplift from $170 million to $200-$300 million in 2024. The range we're guiding is purely driven by the timing of the Jubilee cargo towards the end of the year, where we expect cash to be either receipted just before year-end or just after. Our 2023 free cash flow of $170 million and an $86 million contribution from bond tenders led to a $256 million reduction in net debt during 2023, well ahead of our plan.
With our 2024 guided free cash flow, we expect this to materially reduce once again to less than $1.4 billion by the end of 2024. If we move on to costs, look, we've got a relentless focus on cost, and this will remain. We've worked really hard to keep OpEx flat in an inflationary environment, and a good example of this is with decreasing planned spend on both TEN and Gabon in 2024, while at the same time increasing maintenance and integrity spend on Jubilee to help underpin production performance. As you can see from the chart, net G&A tells a very similar story, with a 50% reduction since 2019, and G&A largely being flat since 2022, despite significant inflationary pressures.
This has been driven by our focus on continuous improvement and process efficiency, simplifying and removing activity and cost to offset inflation. We've also continued our laser focus on capital allocation, with over $1 billion invested in our business since 2021, and close to 90% of that in our producing asset base. These investments focus on a deep hopper of high return and short payback opportunities we have in the portfolio, the most notable of which has been Jubilee South East, which we are now starting to see the benefits from. Notwithstanding this, we've got a significant amount of flexibility within our CapEx program, with the ability to reduce our group CapEx to between $150 million and $200 million per year in a low oil price environment, whilst at the same time still sustaining gross production from Jubilee.... we start with hedging.
So, hedging continues to be a critical tool in protecting revenues and cash flows to ensure we can continue to allocate capital to Jubilee and sustain production in a low oil price environment. While at the same time, our policy is designed to provide material access to the upside in oil prices. Our legacy hedging program, implemented as part of the 2021 refinancing, will end in May this year. As you can see from the table, our program for the second half of the year provides greater downside protection at $60 a barrel, and increased upside access at higher active prices at $112 a barrel.
We currently have 3,500 barrels hedged for the first half of 2025, at an average floor of $55, and this will continue to be topped up on a ratable basis throughout the rest of the year. During 2023, we took proactive and significant steps that have materially improved the balance sheet. Firstly, we executed an opportunistic and highly value-accretive bond buyback of our 2025 notes, where we bought back $167 million worth of debt for $100 million cash consideration. Our next innovative step was to fully de-risk the 2025 note maturity with a $400 million facility provided by Glencore. This not only extends $400 million of debt maturity to 2028, but also provides a strong endorsement of our business plan. Finally, we executed fur...
Two further tenders of our '25 and '26 notes, buying back a total of $256 million of debt for $322 million. The impact of these steps, and our strengthened balance sheet position, can simply be demonstrated by the significant improvement in our bond prices. We have time before our 2026 maturity to allow the business to further de-lever, which I'll touch on on the next slide. As you can see from the chart, since the beginning of 2021, we've transformed the balance sheet, reducing net debt by almost $800 million, and gross debt by $1 billion. This has been achieved through a combination of organic free cash flow, asset divestments, and opportunistic bond buybacks, while at the same time significantly invested in our business.
The $600 million of free cash flow delivery over 2024 and 2025 will continue to accelerate our de-leveraging path, and it will position us to be a low-debt business with net debt of around $1 billion and gearing of less than 1x by 2025. Looking further ahead, we expect that with stable Jubilee production, a new income stream from Uganda contingent payments, and the completion of our decommissioning campaign in the U.K. and Mauritania, and lower debt levels, which will reduce finance costs, we will be able to sustain material free cash flow well beyond 2025. With this sustained free cash flow generation and leverage below 1x, we'll have the opportunity to consider accelerating investment in further growth opportunities, and also consider shareholder returns. This will be done with the same rigorous approach to capital allocation that we have today.
With that, I'll hand back to Rahul.
Okay, terrific. Thank you very much, Richard. I'm gonna start with a discussion on operational excellence, and this is really integral to how we work, and it really goes beyond our physical operations. Through performance-driven culture, we're really striving for excellence in everything that we do. And maybe best is let me share some examples that will provide more color on kind of how we work. If you take Jubilee South East, for example, right? So that was a very significant milestone for Tullow and for Ghana. I think that project is a real demonstration of strong project management and operating capability for Tullow.
And as I think Richard said, that was the start of a material de-leveraging, as we saw gross Jubilee production that grew by 30% in the second half of 2023 relative to the first half. If I look at the other focus we have is on facility upgrades, where we're starting to see the impact, the positive impact on production at Jubilee, of higher and more reliable water injection. And that's critical. That'll support the base production, it's gonna mitigate decline in 2024 and beyond. On TEN, we had a maintenance shutdown last year. We did work to improve not only the asset integrity, but also we did work to enhance production through improved liquid recovery from the gas.
Also, very importantly, we were able to then start reducing flaring almost by 50%, after the shutdown. You heard me talk a lot about drilling performance. I think that has been sustained. And as a consequence of that excellent drilling performance, we've seen the cost of the wells that were drilled in 2023. That was an average about 20% lower, and about nearly 40 days, or 38 days faster than in the previous campaign. So how are we achieving these cost savings and efficiencies? That's really been driven by reducing the non-productive time. We've got better planning, we've got improved well design, and there's more effective contracting.
So the consequence of all that is that we're gonna complete the current program that was supposed to finish next year, we're gonna complete that around the middle of this year, and that's about six months ahead of schedule. Now, what we have is a very deep inventory of drilling opportunities in Ghana, so really, we're gonna be back again drilling in 2025 once all of this opportunity set that we have is mature. If I move on to the FPSO performance, there's a good story. There is continued performance strengthening with average uptime across both Jubilee and the TEN FPSOs of 96%. What we're really doing is we're taking a very preemptive approach to maintenance that's then giving us confidence in reliable production operations.
Obviously, for us, that's a real focus on operating efficiency. That's on the operations. Let me switch over to really our commitment to building a better future through responsible oil and gas development. This is really core to our purpose. When we look at this commitment, really there is a focus on four critical areas. Let me walk you through that. Firstly, kind of safety. Really, for us, there's nothing more important than the safety of our people and everybody who's working at our sites or who visits our sites. I'm pleased to say that we've continued to have very strong safety performance in 2023.
As I move on to the other piece we really focus on is shared prosperity, which really, what it is about is creating economic opportunities for those, who really need it the most. To give you a sense of the nature and the scale of the impact, last year, our local supplier spend in Ghana that increased by nearly 30% to over $200 million. We have very active social programs. So these supported more than 10,000 students, and we had programs that impacted, 2,400—more than 2,400 businesses. On environmental stewardship, we've made a very tangible progress on our pathways to net zero on Scope 1, Scope 2 by 2030 on the emissions by 2030. We've completed modifications, and I talked about the reduction in flaring in TEN.
We're continuing to progress that to eliminate routine flaring across all our assets, operated assets by 2025. There's obviously, there'll be some hard-to-abate residuals, the residual emissions from the assets. For those, we're taking on a very hands-on approach to progress a nature-based solution, which is in partnership with the Ghana Forestry Commission. And what we are targeting is an FID on that project for in 2024. I think what's important is that we kind of need to broaden the conversation, where our, really, our commitment to environmental stewardship is not just about emissions. We look at all aspects of protecting our environment. And, you know, for example, we recognize the very critical importance of biodiversity to the planet's health and resilience, and we're committed to fostering biodiversity conservation in all aspects of our operations.
As I said earlier, we're very encouraged by the commitment to a just and equitable energy transition that was articulated in the COP28 agreement. I think that's an important step, and I think we all have a part to play in that. Now, if I can finish up on this page in terms of looking at equality and transparency. So we've really built our reputation as a trusted partner by upholding very high standards of transparency, equality, and governance, and that's going to continue. When you look at social, the socioeconomic contribution that we bring, I mean, in our host countries, was about over $700 million in 2023, which, if you look over the last five years, is a total of over $3 billion. So very significant impact.
When it comes to, diversity and equality, I'm really pleased to share that, you know, today, over 20% of our senior management positions are led by our women colleagues, and over 40% of management roles at Tullow are led by African colleagues. So that's, that's quite, quite good. And we're also very committed to all our localization targets, and I'm pleased to say that we're very much on track, on that. If I move on to the kind of resource, and the reserves picture, and this, I really like this picture, and I think it's, it's a very important chart because it sets out our organic growth opportunity set.
What you can see from this is that there is a very rich and a very visible resource profile, which goes from, say, ILX and prospective resources at one end, through contingent resources, and to the 2P reserves at the other end, so that whole kind of life cycle. Now, we've identified a number of projects in Ghana and Gabon that are very attractive and they offer very attractive economics at relatively low development costs, so typically in the sort of $10-$20 per barrel of oil equivalent range. But let me give you kind of some specific sort of color. So Jubilee, really, the story is all about infill and license extension potential. So with the 2P reserves, really, we have 80 million barrels, which is already on production. There's another 40 million barrels that that's approved or justified for development.
Plus, there is another about 25 million barrels of oil equivalent of 2P gas reserves. Beyond this, we've got in Jubilee over 100 million barrels of 2C resources, of which about a quarter of that is gas. Jubilee also offers license extension potential, which is based on over 140 million barrels of 2C resources. That's beyond 2036. So you compare that to what the 2P is, and it gives you a sense of the potential there. TEN, really there is a story of, and I'll talk more about this, a significant gas resource and oil infill opportunity. That and the profile for TEN really highlights the significant sort of future opportunity here from the realization of this. The unlocking of, there's about 60 million barrels of gas resource at TEN.
A part of that is going to be approved, is going to be unlocked through the approval of the amended POD, and the agreement of the long-term gas sales agreement. In Gabon, really the story is driven by infill drilling and ILX. And the team's identified a number of low kind of development cost opportunities at Tchatamba, which is now emerging at our kind of new, as a new hub for us. But we also see opportunities in Echira and Ezanga. And I think with the addition of the low-risk ILX opportunities that you see on this chart, we can continue to replenish the profile. And frankly, kind of in our non-op and Gabon particularly, that's been the approach so far. And I think with that core area around Tchatamba, I think that becomes a lot more impactful.
In Côte d'Ivoire, we are maturing the prospect inventory, and you can see the scale of that on the licenses of CI-524 and CI-803. I think coming to Kenya, and this chart really gonna highlight the scale of the opportunity that Kenya presents to us. So not surprising, I think we're working hard to see, you know, how we can unlock value from this resource. As you know, we've got 100% equity on this. So what that does is it gives us the strategic flexibility to explore a lot of creative options. And so, while we're continuing to progress the FDP, we're also working with the government of Kenya to develop options that would, you know, potentially accelerate the production and cash flow and help unlock value from what is a very, very well-matured resource base.
So this is clearly kind of an area of focus for us. I just wanna kind of give you a heads up, at this time, that's all we're gonna share on Kenya. But what I can commit to you is that as soon as we have a tangible way forward, we'll be very sure to update the market. If I then move on to talk specifically about Jubilee. We worked hard to kind of create this graphic, I think, because it shows you, first of all, that the start-up of production from the Jubilee South East project in July, that was a real landmark event. It gives that step change in the field's production, which is roughly, kind of like I said, 30% higher in the second half versus the first half.
There's an orange line that kind of shows you kind of how significant that production increase was, at rates that, you know, kind of you had exceeding 100,000 barrels a day. What I'm pleased to share is that we've now returned back to those levels, and that's really been as a consequence of the resolution of the water injection issues. Also, we brought on, literally in the last few weeks, 3 new wells: so 1 water injector and 2 producers. I think what's interesting in this chart is you can clearly see the impact of the water injection on production. So you'll note last year, we had the steeper declines when we had the issues with water injection. Then there's a very clear flattening of the decline as the issues were resolved in the fourth quarter of 2023.
So we've now upgraded the water injection capacity that's delivering record water injection rates and there are observable pressure responses, sorry, in the reservoirs. So that will support production not just in 2024, but beyond, and is an integral part of our strategy to sustain production. I think what's also exciting in Jubilee is the next phase of development is already in progress. We've got a very significant untapped resource that's been identified, and the drilling targets are being matured, and that will help, you know, really increase the overall recovery of the field. And this will really form the basis of the new program, drilling program, that we plan to start in 2025. And that's again, you know, following the conclusion of the current program.
If I move on to TEN, and I think it's important to just talk about what is the approach that we're following in TEN, and I'd say we're following kind of a dual-pronged strategy for TEN. In the near term, the focus is really about optimizing production, about investments, and cash flows. I think what we've seen is there has been an improved a real focus on reservoir management, so you've seen an improved pressure support from existing injection wells, and that's really led to a very notable production stabilization. As a result of that, the underlying natural decline in the field has been reduced to about 10%.
I think, as what we did in the 2023, we had a planned maintenance and shutdown I talked about, that resulted in, over about a 50% reduction in flaring, but it also, gave us, you know, additional, focus on asset integrity, which is important from sustaining the operating efficiency, but it also allowed us to increase production through improved recovery of liquids. I think what's important in TEN is the longer-term potential of the field is still significant, and that's visible in the 133 billion barrel kind of 2C resource, and that includes about 300 Bcf of gas. So the way we think about that part is that it's really think about TEN as a development asset. It's got gas resource, it's got a number of additional oil projects, which include things like infill drilling on Ntomme.
There is a pretty quick return, low-risk project in terms of with Enyenra extension. There are projects to optimize existing well recovery. Also there is, you know, some pretty decent prospectivity, which is kind of ILX stuff, which we can tie into existing infrastructure, so that's like Tweneboa West. So what we've done was we packaged all of these that were included in the TEN, the TAPD, which is the TEN Amended Plan of Development. Now, we do have the flexibility. We can disaggregate the oil opportunities and deliver them ahead of gas projects, which is dependent on the gas sales. We'll see kind of how the discussions go with the government, and we'll come up with our kind of prioritization accordingly.
As I move on to Gabon, I think the story really there is about a self-funding kind of cash generative asset base. I think, to give you a sense, kind of, there is the CapEx range in Gabon kind of goes between somewhere between $30-$70 million a year that underpins kind of stable production. At those levels, we can deliver, on average, kind of cash flow of about $90 million, I would say, across kind of a multi-year horizon. In 2023, as you know, we did the asset swap with Perenco that placed Tchatamba as a core hub for Tullow. And what that allowed us to do is to take a material position in all the key fields that are around Tchatamba, and then we really focus, kind of leverage our technical skills in this area.
Now, along with that, the extension we had of the licenses to 2046, that really is a reflection of the longevity on the resource potential, as well as the longevity of the facilities. So as a result of all of these actions, we recorded approximately 6 million barrels of addition of 2P Reserves, plus a further 3 million barrels of positive revision from asset performance in Gabon. Now, in 2024, the focus will be on infill drilling to sustain the stable production. And as we look kind of further ahead, we have the potential from to see in prospective resources, which will give us low risk and relatively low-cost opportunities to tie backs to the existing infrastructure.
So if I move on, I think really just when you look at the sort of outlook, we, as we outlined today, you know, 2023 is a really important year for Tullow, and I think it's put us in a really, on a strong footing, for future growth. We've had reliable performance. There's been consistent delivery year on year, and all of that continues to support what we believe is a very compelling, a very unique value proposition at Tullow. We're generating, material cash flow, and we're paying down debt. That's gonna unlock very material equity value increase. At the same time, we're maintaining our discipline on costs and capital allocation, and that's really, really integral to how we run the business.
We have a portfolio, and the work program that we have will deliver sustainable free cash flow generation for years to come, and Richard talked a little bit specifically of how that is. In addition to all of that, we've got several catalysts within the business. I'll just reiterate that. We got Kenya, we got the TEN Plan of Development, we got gas monetization, there's, you know, Uganda royalty. Each one of these has the potential to deliver very material value for Tullow. I think also what we've built over the years is a very unique Pan-African platform. I think what that does is it provides us very differentiated access to inorganic opportunities.
So really, with a strong balance sheet and with the sustainable Free Cash Flow outlook, you know, our business is very well-placed to deliver value to our shareholders through both organic and inorganic growth, as well as we start to contemplate capital returns post 2025. So let me stop there. Richard and I are happy to take your questions.
Thank you very much, Rahul and Richard. As a reminder for those on the telephone, if you would like to ask a question, please press star one, and you'll be added to the question queue. Our first question comes from Alex Smith, from Investec. Go ahead, Alex.
Good morning, guys. Thanks for the call. Just a couple of questions on Jubilee, really. Just given the drilling program completes, you say, in the middle of the year, I guess, does that give you comfort that you can stay in high levels in H2 before kind of drilling again in 25? And just looking at the free cash flow profile, is it going to be H2 weighted, just given that phasing of CapEx? And then secondly, just still on Jubilee again, you mentioned you can sustain 90-110,000 barrels per day towards the end of the decade. So the reserve base must give you confidence, and the hopper looks kind of good.
Is there anything kind of in line with Jubilee South East in terms of economics that you can kind of get excited about in the medium term that can, can drive that? It'd be good to kind of get some clarity on, on what you have in, in, kind of in that hopper that you talk about. Yeah. Thank you.
Okay. No, thanks, Alex. So let me do this. I'm gonna talk about kind of Jubilee, the kind of, you know, production and resource picture, and then, you know, Richard, maybe you can comment about the kind of timing of the cash flows, if that's okay. So I think the story with sustaining production in Jubilee is really driven through a combination of reservoir management and through addition of new wells in the short term. So I think if you look at the slide 17, and we included this very much kind of on purpose, there is a-- there's a piece where towards the back end of 2020 of last year, where you see a very significant flattening of the decline. And the magic there, Alex, was simply water injection.
So what we've seen kind of before we put new wells on stream this year, so over a two-month period, we saw kind of production decline, absolutely kind of flat. And that was really a direct consequence of really sustainable water injection and reservoir management. So as we look forward, the idea is very simple, and that's what we try to communicate in this, in that slide 17, was that you're gonna see with the new wells coming on stream, you're gonna see production kind of go above 100. We're gonna then see, you know, a gradual decline. We're gonna work hard to mitigate that.
And then we have, coming back to the second part of your question, there is a resource base, both kind of within the main field in Jubilee South, with infill opportunities, which then we have visibility on, which then underpins the next phase of the drilling program, right? And the idea of what we're doing right now is exactly what we did back in 2021, which is that we had developed a multi-year, kind of, multi-well, drilling opportunity set, and then the well engineering team came on the back of that and just executed. And I think we wanna make sure that we put them in that same position again, starting in 2025. So that's on the, kind of, production, kind of, resource stuff. Richard, maybe just talk about cash flows.
Yeah, Alex, you're, you're exactly right. So driven really by two things. Firstly, obviously CapEx with our drilling expenditure is very much first half weighted, but also sort of as we see in sort of, I suppose in, in history as well, all our tax payments tend to be very first half weighted, and particularly in Ghana. So we will see the, the cashflow profile very much second half weighted.
Thank you. Very clear. Cheers.
Thank you, Alex. Our next question comes from Matt Cooper at Peel Hunt. Go ahead, Matt.
Thank you, and I appreciate the presentation. So firstly, I've actually just got a follow-up to Alex's question, around the work plan required to maintain Jubilee, 100,000 barrels a day until the end of the decade. So in order to achieve that, how many new wells would you be looking at drilling per year on average, from 25 onwards?
I think roughly, Matt, 3-4 wells is the kind of... is our sense. But the program that we see as we go forward is a combination of the wells, it's facility upgrades, it's optimizing water injection. So you're gonna see a mix of facilities and, kind of, wells in the, kind of, future. But I would say specific to your question, is probably in that 3-4 well range.
Got it. Thank you. And then I just kind of wondered, given, you know, the progress on balance sheet and the production growth in the last few years, how actively are you currently exploring M&A opportunities? Is that something, you know, we could maybe hear an announcement on this year, or is that more likely to hear something material kind of at 2026 onwards?
So the, look, I think I can, I can answer one question, which is within our control. I can't answer the other question. So, I think we feel that there is a structural shift, Matt, in the industry with a lot of the majors looking to exit mid- to late-life assets. I mean, that's just a fact. I think the other fact is that there are not many credible counterparts, people who have the trust of the host governments and communities, people who have the operating sort of capability. And to, you know, put that in perspective, you know, Tullow, over the last three and a half years, has secured six approvals on various kind of, you know, M&A sort of deals across East and West Africa, right?
So, I mean, there is—that's a real testament, I think, to the trust that we enjoy among our host governments. So I think we do have a differentiated access to that, and we'll work hard to leverage that in a very disciplined way, right? So one thing that I want to keep emphasizing is that, you know, the capital discipline very much is kind of part of our DNA. And the way we look at it is that we will spend a certain amount of capital to grow the business, right? Now, everything organic, inorganic, should compete for that capital, right? And if I put the inorganic stuff in the mix, then hopefully the bar becomes higher. So from a shareholder point of view, that's a better thing, right? So it's not...
That's the discipline we're gonna take, and we'll kind of, we're working hard on that. I cannot predict timing on that. I just have been around for too long to say... You know, I can tell you we're working hard. I can tell you, I can assure you that we're gonna be super capital disciplined, which that means simply that you should see the returns on our capital allocation should go up. But I cannot tell you timing-wise. The important thing, Alex, is, sorry, you know, Matt, is that we're not, we're not in a position because we have a deep organic portfolio, we're not in a position where we have to do something, but we're, we're gonna do it because we choose to do something.
Yeah, no, that makes sense. It's very clear. Thanks. And just final question, probably one for Rich, I guess. I don't know if you're able to to comment on the sort of business metrics you're looking to achieve ahead of potentially restarting shareholder returns.
Yeah, thanks, Matt. I think the, you know, the key thing, and Rahul outlined earlier, is, you know, we want to get to that sustainable debt position. So, sort of, net debt below $1 billion and gearing below 1x. And I suppose the positive thing is with the cash flow generation of the next two years, you know, that's very much in the near term. In terms of the detailed policy, you know, that will be something that we'll work on over the coming months.
I think the one thing that Richard and I were reflecting on, Matt, was that if you think about the... So take the operating cash flow as business kind of stay sustainable, right? Last year, we spent $250 million in reducing debt and roughly the same amount in interest costs. So we spent $500 million on debt service and debt repayment, right? Now, if you get to what Richard describes as a steady state, that means you, A, eliminate money going into debt reduction, right? And B, you get to a level where our absolute debt levels are a lot higher. That means you reduce the amount of money that goes into servicing the debt, right? That's a very significant amount of capital that we have available then to deploy, both in terms of growth and looking at returning capital, right?
The math, I think, on that is super clear.
Yeah. No, that's, that's great. Thank you. Appreciate it. Hand over.
Thanks, Matt. Our next question comes from Matt Smith, Bank of America. Go ahead, Matt.
Hey, morning, guys. Thanks for taking my questions. I got a question along on the same lines, really, so forgive me. On the M&A side of things, you know, I suppose framing the comments that you made on shareholder distributions, you know, likely coming post 2025, just, I think, in light of the further deleveraging to take place before then. I guess, how do you sort of frame that versus M&A potentially coming before that timeline? I know you sort of didn't commit to a timeline either way, but it seems to be the suggestion that there's a possibility that we could see you execute on M&A before we get into 2026.
So, I mean, I just wonder, is that any indication or clue, perhaps, how you sort of see a potential deal, you know, how it would be funded? Or I guess, what else could you sort of say to us, which sort of give us confidence that any M&A wouldn't conflict with the deleveraging goals that you've laid out?
So I think, Matt, look, you know, we're pretty religious about many things. Two things in particular, I would say. One is capital discipline, and the second is deleveraging, right? So Tullow we've gotten to a steady state of debt levels, right, everything else is secondary. Okay, we need... You know, this is, this is kind of like a religious thing. Now, if we can find a deal where we structure it in an intelligent way that allows us to maintain the capital discipline, that allows us to maintain the commitment on the deleveraging, we will do it, right? But those are the boundary conditions.
Sure. Okay, understood. Thank you very much.
Thanks, Matt. Next question comes from Mark Wilson, Jefferies. Go ahead, Mark.
Hi, good morning. Thanks for the question. My question is, you showed how CapEx has come down quite materially, in the last few years, and, and we know the rig, the Jubilee rig, goes off contract in the middle of the year, but likely returns in 2025. My question is, as we look forward there, on the subsea equipment, the manifolds and, and, and slots you have down there on the seabed, I just wondered how many drilling slots you have before you have to acquire a new piece of subsea equipment for the next, set of wells? That would be my first question. Thank you.
So it's a good, good question, Mark. I think there is enough subsea capacity for the next kind of, I'd say, foreseeable future. I think as we step into newer parts of the field, we will look and see, you know, what additional capacity we need. But at least for the foreseeable future, we're not looking to add kinda new manifolds. We may do some, you know, water injection optimization and have, you know, crossover links and things like that, but, but we're not looking to see, at least in the foreseeable future, another kind of Jubilee South East type of project.
Got it. Okay. And then secondly, on the commentary in the results regarding the tax arbitration, so it looks like, you know, there's quite a large part of that comes up for decision later this year, about $300 million. How should investors be looking at that and the risk around such a decision? Thank you.
So I think... Well, I'll tell you how we're looking at it, so you can then help investors, Mark, to think about it. But firstly, timing-wise, I think it's gonna be sometime in the kind of, you know, mid to second half of the year. I couldn't give you a more precise timeframe on that. I think you said rightly, it's a quite a landmark thing because it's roughly half of the kind of Ghana contingent sort of tax, you know, liability. We're pretty confident about what, you know, we're confident about the position that we have, and hopefully the outcome. You know, the way we see it is that a good outcome on that certainly kinda helps kinda de-risk that whole kinda contingent liability.
I think it gives a good platform, certainly for us to continue to engage with the government to address what is left. That's kind of what the way I would think about it.
Okay. Thank you very much. I shall hand it over.
Thanks, Mark. Our next question is from Kate Somerville at J.P. Morgan. Go ahead, Kate.
Hi, good morning, everyone. Thanks for taking the questions. I've got two, and one—the first one is a follow-up on the question on the arbitration case. Just wondering, when you get that decision sort of mid to sort of halfway through this year, what do you think that sort of implies for the other half? And can you remind us the likely timeline on that sort of second part of that case? And then, obviously, you've done a lot of great work on sorting out your balance sheet this year. It'd just be great to understand what your plans are for the 2026 notes. Yeah, that'd be great. Thanks.
Okay. So, I think, look, it's I mean, each one of the arbitrations, Kate, is independent, first of all. But the linkage, I would say, is a more, I would say, kind of psychological one, insofar as, you know, we've been always of the view that with the government, that we would like to kind of find an amicable way to resolve these. I think it's hard for people to resolve something, especially as government officials, to resolve something that's already in arbitration. But I feel that a positive outcome of that would certainly give people the platform, vis-a-vis their own stakeholders, to then have, kind of be empowered to have a constructive kind of conversation. So that's the kind of linkage.
I think it's a more psychological linkage as opposed to a legal linkage on the other two. But it's a very important linkage. I think the timing-wise, I think on we have hearings scheduled in the middle of 2025 on one of those, and then I think around September of 2025 in the third one. So they're sort of from memory, I think that's right. It's the second half of 2025 for both. So that gives us enough time, I think, whether with this administration or as you know, there's elections in Ghana, so you'd have a new administration coming in 2025, to try and resolve it amicably before we kick off arbitration in those. So that's on the GRA. I think let me hand over to Richard on the-
Yeah
... on the balance sheet, please.
Yeah, thanks, Kate. So, in terms of the '26 notes, I think, as you highlighted, with, with the steps that we took last year, the key thing that's given us is time. So we've now got a really good runway, to, sort of assess, all of the options that are available to us, and I think the other thing that the Glencore facility has done is it's given us options. So we'll, we'll be working hard throughout the course of this year in terms of, you know, what the best mechanism to refinance those is. But, you know, fundamentally, the key thing for us is that continued de-leveraging, so the amount that we'll need to refinance is a lot smaller than where we're sitting today. So I suppose the, the message is, we've got time, we're working up our options.
You know, if there's an opportunistic window to do something, we may look to do it sooner rather than later, or it could be, we let the business de-lever, and then do it in a sort of 2025 time horizon.
Very clear. Thank you so much.
Thanks, Kate. We've got a chance for one more question, so I'll hand over to Lydia Rainforth from Barclays. Go ahead, Lydia.
Thanks, Matt, and good morning, everybody. Two questions, if I could. One, just on Uganda, it's something that often forgotten about, but I do think of it as a valuable new stream, and I appreciate the project's not started yet, but is that something that you would look to monetize eventually? And then secondly, Rahul, if, and this is probably for you both, if I come back to the debt side, look, over $1.2 billion of gross debt for 2026 still seems like a big number to have to repay, and yet, Rahul, you talked about this being a new phase for Tullow, with the ability to grow and to look at things. Do you feel limited in what you can do until you've addressed that 2026 refi?
I just want to make sure that I'm completely clear in terms of this being a new, I say, a new stage of refi Tullow.
Okay.
Thanks.
Let me... I'll come to the debt question. Let me turn over on the Uganda to Richard.
Yeah, so look, I mean, you know, depending, it's obviously oil price dependent, but, you know, it could be worth, you know, anywhere between, you know, $20 million, $30 million, $50 million, depending on oil price a year. So it's quite a sizable incremental revenue stream to us, and, you know, look, depending on when first oil is, whether it's 2025, 2026, that adds a significant amount of Free Cash Flow. Obviously, you know, royalties elsewhere in the world are worth a lot of money and very tradable. I don't, you know, I'm not aware of a market for one in East Africa, but look, it's something that we can consider going forward. But, you know, in terms of our plans at the moment, we think it's worth a lot of money.
It adds an additional revenue stream to the group at zero cost. So, you know, we'd only consider something if we got fair value.
So on your question on the acquisitions up front, Lydia, I think that the way I would describe it is that we have a disciplined approach to capital allocation. Okay, that's independent of what debt levels we have. I think we will also look to be creative and thoughtful in how we structure deals. And candidly, that's independent of the debt levels we have as well. So I think those two things would be the guiding principle of whether we have refinanced the 26s or not. And I think as I said earlier, that you know, the idea of what a good deal looks like, which is, I think to me, it remains kind of unchanged.
I just think that we're at a stage now where having kind of put the kind of critical refinancing questions behind us, we can be much more proactive on that, and recognizing that these things don't happen overnight, it's important for us to start working and engaging today, but the discipline, I think, doesn't change.
Great, thank you.
Thank you, Lydia, and with that, that brings our presentation and Q&A to a close today.
Thank you. Thank you, everybody, and we look forward to then engaging with, with hopefully all of you or, or many of you in person in the coming days.