Good morning, ladies and gentlemen. It's 11 A.M. A quorum is present, and so I'd like to welcome you all to the 2024 annual general meeting of Tullow Oil plc. Before turning to the formal part of the meeting, I would just like to mention a few housekeeping points. The fire exit is located on the immediate left as you exit the room. Of course, we do not expect any fire alarm tests during this meeting. I should begin firstly by introducing myself. I'm Phuthuma Nhleko, the Non-executive Chairman of the Board of Tullow Oil plc. I'm at the location of today's meeting and will be acting as the formal chair of the meeting. I would also like to introduce my fellow colleagues and directors on this table. Martin Greenslade, he's the senior independent non-executive director.
He's also chairman of the audit committee. Mitchell Ingram, on my right, he's the director and chair of the Safety and Sustainability Committee. Sheila Khama, on my left, is the non-executive director. Genevieve Sangudi is the non-executive director and also chair of the Remuneration Committee. Rahul Dhir on my right, he's the non-executive director. Rebecca Wiles, who recently joined us, on my right, is the non-executive director. And Rahul, of course, everybody knows, is the Chief Executive Officer. Richard Miller is the Chief Financial Officer, and Adam Holland, on my right, is the Company Secretary. We also have with us, representatives from our auditing firm, Ernst & Young, and our solicitors, Dickson Minto, are also present. So thank you very much for joining us today at this Tullow's AGM.
I'm quite delighted to welcome the shareholders in this room with us and, of course, very pleased to report that we have continued to make use of technology to allow our shareholders to also participate in the meeting via video and webcast, and also be able to vote on the resolutions online. So we will do our utmost to make this a worthwhile experience for our shareholders. The format for today's meeting is that, as chair of the meeting, I will, you know, firstly ask Rahul, on my left here, as the company CEO, to provide an update on the business. This will then be followed by a Q&A session with the board, and I will direct people to respond, you know, accordingly, depending on the questions.
Thereafter, we will move on to the formal part of the meeting, as we vote on the resolutions that have been submitted. All the proxy votes received by post or online, ahead of the deadline will, of course, be included in, in the results. All the votes taken today will be taken by a poll rather than on a show of hands. It is really intended that the results of all the votes, will be announced to the London and Ghanaian stock exchanges and published on the company's website as soon as possible after we've concluded the AGM today. So I think, with that, those are the rules, and that's how we hope to conduct the business of the meeting. And I'd like to, you know, hand over to Rahul on the business report.
Yeah, thank you. Phuthuma, good morning, to you all, and thank you very much for for joining us. You would have hopefully seen my statement this morning, and I really want to reiterate my thanks to all our shareholders, and really want to appreciate your continued support. What I'm really looking forward to is talking to you and sharing the progress that we've made over the past year. This year, we've really consciously, we've positioned ourselves and repositioned ourselves and our brand to better reflect our very unique Pan-African identity as a very unique Pan-African energy company. A company that's building a better future through responsible oil and gas development. You would have seen that over the last few years, we've really pivoted our portfolio to focus predominantly on Africa.
Now, why that's interesting is the scale of the resource base in Africa is vast, with over 30 billion barrels of proven resources, and there's multiple opportunities across the kinda mid to the late-life assets and also with new production. And you put that in perspective. So with 8% of global oil supply coming from Africa currently, and over 40% of global new gas discoveries in the last decade in Africa, you get a sense of the growth potential there. At the same time, our industry is in flux, and you're seeing many international oil companies really planning to exit and divest mid-to-late life assets in Africa. And that's really something that is a unique opportunity for Tullow, because our platform and our capability sets, it provides us a differentiated access to inorganic opportunities across the continent.
If you look at Tullow organically as well, we have a very big opportunity set within our existing assets, with over 200 million barrels of 2P reserves, and over 700 million barrels of 2C reserves. And again, to put that in perspective, that's almost 40 times the production last year. And within this portfolio, you've got a number of very important organic value catalysts. And let me give you an example. So, you know, for example, Kenya, unlocking value from that is a material catalyst. Unlocking value from the Uganda royalty, getting a plan of development approved for TEN, getting long-term gas supply agreements in Ghana. Each one of these, each one of these has the potential to deliver very material value.
There's a lot of talk about energy transition, and in that context, we have a strong view, and I've been in public as well, to say, that Africa's developing nations, they have a real right to benefit from their own natural resources. And as you know, these benefits, they spread far and wide. And it's something that I believe differentiates Tullow from others, is our approach to shared prosperity, to ensure that we're bringing meaningful and long-lasting benefits to our host nations. We are a responsible oil and gas producer and very proud to again reiterate our commitment, and we just to also reassure you that we're on track to achieve our net zero target by 2030. So with that, I think we're well positioned for the energy transition.
We have a clear strategy to meet the needs of our host nations while taking into account the accountability for the impact of our operations. So if you think about... Again, this should not be new information for you, because you know that our strategy is really underpinned by a relentless focus on three critical areas, and these are now embedded across our operations. So the first is operational excellence, then capital efficiency, and increasingly, so business growth. And last year, 2023, was a year of significant achievement because we delivered on our business strategy across multiple dimensions. So firstly, we continue to have reliable performance and consistent delivery, and that really continues to support the very compelling and unique proposition that we offer.
For instance, in last year, the operating efficiency was in the high 90s, and we've managed to keep our cost base flat despite inflationary pressures. In terms of production, we saw growth, which was driven primarily through the landmark Jubilee Southeast project. But also there was inclusion of a new revenue stream in the form of Jubilee gas sales, and these were both significant milestones for Tullow and for Ghana. The Jubilee Southeast project, I think, is a demonstration of our strong project management and operating capability. And of course, it marked the start of a material deleveraging starting in the middle of last year, as we saw almost a 30% step change in Jubilee production.
On Ten, we did a lot of work during a maintenance shutdown to improve asset integrity and also to enhance production through improved recovery, liquids recovery from gas. We also took the opportunity to reduce flaring by 50% post the shutdown. And on Ten, certainly, and I'll talk more about this, you're seeing the benefits of continuing focus on reservoir optimization there. The drilling performance continues to be excellent. This program, which we started in April 2021, is now coming to a close, six months ahead of schedule. But we've been able to...
To give you a sense, I mean, the costs of the well is about 20% lower and nearly 40 days faster than the program that we did previously, which was in the 2018-2020 period. And I think this, the cost savings and the efficiencies, they've been driven really by a very disciplined approach to planning, a focus on reduction of non-productive time, improved well design, as well as very efficient and effective contracting. So now, as we look forward, there is a very deep inventory of opportunity sets that remains in Ghana, so the intention is to resume drilling in 2025, once this opportunity set is matured. Last year, also, quite a material event was very proactive and significant steps we've taken to materially improve the balance sheet.
I think since I've been at Tullow for nearly four years, singular focus for us has been really to improve the balance sheet. So last year, we reduced net debt by over $250 million, and that deleveraging trajectory continues. We generated free cash flow of $170 million. That was ahead of expectations. And to put that cash generation in perspective. Since 2020, this business has generated about $1.1 billion of free cash flow, and that's despite the negative impact of the hedging program that had outflows of about $600 million. Why am I sharing this with you? Because that gives you a sense of what the underlying cash generation potential of the business is. We also were active in the bond market.
We executed some very opportunistic and value-accretive bond buybacks of our 2025 notes. We also demonstrated access to long-term capital through a $400 million debt facility agreement with Glencore. That was in November. And what that does is, it not only extends the 2025 maturities potentially to 2028, but Glencore, being a very smart, sophisticated player in the industry, it provides a very strong endorsement of our business plan. We also executed post that two further tenders for the 2025 and 2026 notes, so buying back a total of $256 million of debt for $232 million, so that's again value-accretive.
So with that behind us, then in 2024, we're really starting a very different conversation about Tullow, about the future, about growth, about how we unlock value from the very deep set of organic opportunities that I mentioned earlier, and also how do we leverage this platform that we've built, to deliver on inorganic growth? So I think if we want to fulfill our purpose and deliver our strategy, it's really important, fundamental, that we maintain our reputation as a trusted partner to our host governments. We are deeply committed, and that's really the... Our purpose is to build a better future through responsible oil and gas development. And I hope our shareholder, I hope you've had a chance to see our 2023 sustainability report, which is, really captures all the work that we're doing to deliver our sustainability strategy.
But what I wanted to do here was to highlight just a few areas from our 2023 operation performance. So firstly, you've got to start with safety, and really, there is nothing that's more important than the safety of our people and all those who work at our site. And I'm pleased to say that we continue to have strong safety performance across our operated assets. The second area I wanted to highlight really is shared prosperity, where we really focus on creating economic opportunities for those who need it the most in our host countries. To give you a sense of the scale and the nature of this impact, in last year, in 2023, our local supplier spend that increased by 30% to over $220 million.
And the social programs that we run, they supported over 10,000 students and over 2,400 small businesses, to give you a sense of the human impact of the business. There is a tremendous focus we have on environmental stewardship, and we've made very tangible progress on our pathway to net zero on both Scope 1 and Scope 2 emissions by 2030. With modifications, we've completed the progress towards elimination of routine flaring in 2025. So I talked about the work we did at Ten in the shutdown to reduce flaring, that's part of that.
Also, in addition to the work we're doing to eliminate routine flaring, you do end up with harder to abate emissions, so we're taking a very hands-on approach to progress a nature-based solution in partnership with the Ghana Forestry Commission, and we're expecting to take a final investment decision on that, this year. Now, our focus on environmental stewardship is not just about emissions, but we also look at all aspects of how we protect the environment. Increasingly, we certainly feel we're at the forefront of recognizing the critical importance of biodiversity, to the planet's health and resilience, and we're committed to fostering biodiversity and conservation in all aspects of our operation.
The last part I wanted to highlight really was around our equality and transparency, and we've really built up our reputation as a trusted partner, by upholding very high standards of transparency, equality, and governance. And if you look at our socioeconomic contribution in our host nations, so last year it was over $700 million, which brings the total over the last five years to over $3 billion. And within the company, I'm pleased to share that, today, 21% of our senior management positions are led by our women colleagues, and over 40% of management roles in the company are led by African colleagues. I wanted to talk a little bit about our recent performance. So if we can move on to that, please. So since the start of the year, I'll start with the operational performance.
We've seen good delivery on our drilling program. We got three Jubilee wells that were brought on stream in Q1, and a further two wells are, we're planning to bring them on stream this quarter. Once again, production efficiency has been very high. It's been tracking in the high 90s. We indicated in the statement this morning, the group production was in line with expectations in Q1 at about 66,000 barrels of oil equivalent per day. Though, I just want to flag with you that Jubilee is kind of tracking lower than expected, and TEN has been outperforming. For the year, we are reiterating today our guidance of 62,000-69,000 barrels of oil equivalent per day, but it's likely we flagged this, was that we're gonna come out towards the lower end of the range.
But importantly, importantly, we don't expect any changes to our group cash flow guidance, as the number of total liftings, the cargoes that we sell in Ghana, that remains unchanged. Just a brief on Jubilee. Production is lower than our expectations. It's really due to some of the new Jubilee wells having lower production compared to pre-drill expectations. Now, interestingly, the net pay reservoir properties very much have been on prognosis, but what we're seeing in some of the new wells is that the full impact of the water injection is not yet reaching these wells, so we're looking to see how we optimize the pressure support. So that's kind of one of the drivers for guiding the production towards the lower end of the range.
Also in April, we had some temporary interruptions to water injection that was caused by problems with a gas turbine compressor that's been addressed, but this is likely to have, again, some impact in the short term. If you take a step back, Jubilee obviously is an excellent field. Our conviction around the resource remains. We have about over 140 million barrels of 2P and almost over 100 million barrels of 2C, so it's a big resource that we still have to develop. What we are doing is, we're planning a 4D seismic campaign early next year. That's gonna be ahead of the next drilling program.
And that new data will help us guide the placement of the wells as part of the next program, which we hope to restart drilling sometime next year. On financials, as I said before, we're very much reiterating our guidance on the cash flow expectations, not just for this year, but we also remain on track to deliver $600 million between 2024 and 2025. And importantly, we're positioning ourselves to deliver sustainable free cash generation in 2026 and beyond. And, as you know, for this year, our cash flow guidance is $200 million-$300 million at $80 oil.
That's weighted towards the second half of the year, and that's largely driven by the fact that we have very substantial cash tax payments and capital spend, which is weighted in the first half, and the liftings and the revenue receipts are typically weighted in the second half. I think we're also pleased now that the legacy hedges are rolling off in May, so the company is well positioned to capitalize on higher oil price environment. And to give you a sense of the impact of that, an increase in $10 in the oil price, across the year, say to $90 a barrel, would generate an additional $100 million of free cash flow, so very significant for the company. But the company remains on track. I talked about the de-leveraging focus.
We're very much remain on track to reduce net debt to less than $1.4 billion and a gearing of about 1x. So that de-leveraging, we believe, is a very important driver for very material equity value accretion. So it's important then to start to look ahead. I think we are positioning really to deliver sustainable high cash flow yield, and we want to, at the same time, as we're planning to prioritize de-leveraging while starting to invest to grow. I think with stable production, a new potential new income stream from the Uganda contingent payments, the completion of the decommissioning campaigns in the UK and Mauritania, which have been consuming capital, lower debt, which would result in lower finance costs, we believe we'll be able to maintain a sustained material cash flow generation beyond 2025.
So with this sustained free cash flow generation and leverage below one times gearing, we'll also have the opportunity at that stage to consider accelerating investment and further growth opportunities, and also consider shareholder returns. I think the assurance we want to give you, while we're not highlighting any specific plans today, but the assurance we want to give you is that we'll follow the same rigorous approach to capital allocation as we have today. And I would say, you know, just in summary, with a strong balance sheet, a sustainable free cash flow outlook, I think the company is now well-placed to deliver value to our shareholders, both through organic and inorganic growth, as well as through capital returns. So again, just in close, I would say I really want to thank all of our shareholders for their support.
Happy to take questions and before we turn to any, to the resolutions.
Okay. Thank you, Rahul. I mean, I'm hopeful that the shareholders have found that to be a comprehensive report, demonstrating the progress that we hopefully are making in the last few years. We'll now take questions on the performance of the business or any other matters relating to the business of the meeting that you may wish to raise. I should remind you that if you do have questions on any of the individual resolutions, you know, this would be the time to ask those questions. I will now pass over to our Company Secretary, Adam Holland, who will manage the Q&A section of the meeting. Adam?
Thank you, Phuthuma. Good afternoon, everyone. My name is Adam Holland, and I'm the Company Secretary of Tullow. This year, we are again enabling shareholders to participate remotely via webcast. And accompanying the instructions to our shareholders on how to join this meeting online, you will have also received instructions on how to submit questions in writing via the virtual meeting platform, which we are using to host the meeting. So now is the time to please submit any questions that you may have relating to the business of the meeting. And so for those participating online, you can submit your question using the Q&A message box function, and you can type your question in the box on the right-hand side of your web page and click Send.
I will read out any questions for all the shareholders in the room here to hear, and Phuthuma, as Chair of the meeting, will then answer or direct your question to one of his fellow directors. If your exact question is not read out by myself, it will be because your question asks for the same information as another question that I have already read out. We may not respond to questions unrelated to the business of the meeting, but we will take such questions into consideration as we prepare for the trading statement and operational update to be released later in the year. So just whilst we give those online time to submit questions, we will now take questions from the room. Before asking your question, please give your name and state whether you are a shareholder, proxy or corporate representative.
If you are a proxy or corporate representative, please state your name and the name of the shareholder that you are representing. Thank you. Now we have a microphone in the room. Nicola, thanks. Any questions?
Chris Baldock, a small shareholder. Yes, for the small shareholder, the news isn't at all good at all. Looking at your annual report, it's very hard to work out whether your move to net zero by 2030 is a compulsory regulation or whether you're doing this voluntarily. Is this move going to hammer profitability of the company? And, looking at your other accounts, you gave away a lot to in tax contributions. I assume that you're paying quite a lot of U.K. tax, but you're also paying a huge amount to probably African governments. That may be all right, but you're also spending a lot of money on schools and other forms of education, and yet the shareholders aren't getting much at all. Is it 5 years since we got a dividend?
The price isn't very good either. Perhaps we should be given a bit more consideration when the future strategies considered. What is your opinion of future movements in oil price and the fact that you are slightly caught between two cultures, the culture of high tax in Britain and high tax in Africa?
Thank you, sir. That's quite a comprehensive question. I think all those different elements of the question really relate very much to the financial aspects of the business. So I'm going to ask Richard to field the responses, including the one on dividends and so on. Mm-hmm.
Sure. Good morning. From a tax payment perspective, maybe the first thing to clarify is, although we have a number of U.K. tax resident companies, we don't actually pay any U.K. tax because we don't have any operations within the U.K. The taxes that we pay are purely for our operations within Africa. The tax rates that we pay are the standard tax rates within these countries, and, you know, they reflect the revenues and costs that we've incurred through the business. In terms of where we are from a shareholder return perspective, look, we've made a huge amount of progress from a balance sheet perspective over the last few years, and as Rahul outlined, we've had significant deleveraging, and the balance sheet is getting into a much more stable place.
There is a bit more room to go, and I think what we outlined at full year results is with $600 million of free cash flow over the next two years, that will take us to $1 billion of net debt and gearing of less than 1x by the end of 2025. And we will still be generating sustainable free cash flow beyond that. And that's the point in time where we can start considering how we allocate that capital between shareholders and continuing to invest in the business.
Okay, I think he asked a question on the obligations of net zero and the impact on the financial statements going forward.
Sure. So from a Net zero obligation perspective, it's a voluntary commitment that we've made. We are, you know, committed to delivering that. From a cost perspective, I suppose it will translate in, I suppose, a few ways. Firstly, the engineering activities that we're undertaking on our vessels to reduce the flaring. And the second thing is our carbon offset projects that we're operating in Ghana as well.
... and those, the work that we're doing to reduce flaring, for example, in TEN, those are value positives and net present-
Mm-hmm.
-value positive projects, so they're good for the business anyways. And then the money that we would spend in the future for the carbon offsets would be a very small fraction of what we would spend from a capital point of view.
So, I suppose, as I mentioned, so the focus continues from a free cash flow perspective, is continuing to deleverage. We’ve made a lot of progress, and with the cash flow that we’ll generate over the next couple of years, we’ll be at 1x $1 billion of net debt by the end of 2025 and 1x geared, and that’s the point in time where we will be able to start considering shareholder returns.
All right, next question.
Good morning. My name is Mr. Leon Bunny, and I'm a man who lose about GBP 14,000 in Tullow Oil, going back some years. I have no objection you spending some of this money in Africa, because we owe Africa a lot. What I would ask you, from your report, you seem to be saying that we're doing very well, and we have 7-8 billion GBP free cash flow. I would suggest, instead of paying remuneration for the board, would you consider looking to give back the shareholders something, say, a penny per share, to just encourage them? Knowing that at one time you could have get almost a pound per share when the share was doing about 14 pounds per share.
Secondly, I could not find any report that the sale of Guyana Orinduik share to an Italian company or an Israeli company. Where is that money? It has not shown on your report at all. So this is what is puzzling me. Knowing that a man that lose about GBP 14,000 in Tullow Oil, I need to ask this question instead of you changing board members every two years, and all the strength they have. I'm using looking at the board members, and that board use strength all the time. Somebody have to address all these things. Where is the money that you sold part Orinduik in Guyana? That's I cannot find it, because I'm wearing two hats. I'm wearing actually three.
One as a Guyanese, one a big was a big shareholder for Tullow Oil, and poor Adrian lost his house and everything, and you all sit there talking about good progress. I don't know if you understand the meaning of the word progress. So if you can tell me... And the last time I was here, I inquire the rights issue money. I cannot find where that money gone. Three years ago, I don't know if anybody here can remember, I raised that question about the rights issue money. Here again, you sold a part in Guyana to another company, and it does not show anywhere. So I want to know whether you pocket the money on the remuneration way or you forget to do it. So you have to answer those questions. That's why I come here. I'm over eighty years of age.
I struggle to raise these questions because I know I would not get my money back from Tullow Oil. Adrian lost his house, he lost his trust. You see? So all I'm looking for is some truth. The last time I said, I told one of your member of the board, I said to him, in this world, if the minutes at the meeting would say, "I'm not saying you're lying, but I don't believe you." Here again, I use the same statement: I'm not saying you're lying, but when you're telling about progress in 2023, 2024, 2028, half of the board member would leave you. If you believe anybody believe what you're saying, it would reflect on the share price, just above 29 pence some days. Nobody is looking to merge with you or buy you.
All the other company, Ithaca, all of them, Wood Group, all of them, somebody want to purchase them, but not you. They have no confidence in the board. I go to a lot of AGM, no confidence in the board. Thank you very much. So one question I would let you take on to answer: where is that money that you sold part of Guyana?
Mm-hmm.
I can tell you who you sold it to, if you want to raise the name. It's not on your report, nowhere else.
We'll give them a chance to-
So those are-
If we give them a chance to respond, then you can follow up. Okay, thanks.
Thank you very much. Let me, I think, begin with the board question, and then I'll ask, Richard to respond with respect to the Guyana sale and/or, you know, Rahul, you can add. I would really begin, sir, by just saying that... The longest serving member of this board, I think, is four years. And therefore, the people sitting around this table have been in three years, some even less. And I certainly would like to believe that they have made a concerted effort to ensure that the company gets the right skills, capacity, and advice to try and right the ship from the history.
We can't sit and be defending the history, but it is our fiduciary duty to say, notwithstanding the history of which we were not part, we need to do what is in the best interest of the company and its shareholders. I can say with a great degree of confidence that the board of directors on this company and the broad skills that they have presented has made an enormous difference in evolving from where the company was over four years ago to where it is today. I think it would be, anybody would be hard-pressed not to see that progress, notwithstanding the difficulty of the past. So I think that's the first point. I think the second point is, of course, it's a publicly listed company, it's a PLC company, and accordingly, directors, you know, will be remunerated, hopefully in consistent with market norms.
But what's more important was your point about shareholder returns, and I believe that the CFO did touch on it, that we are all working hard to get to a point where this company can hopefully return to paying dividends and ensuring that the total shareholder return begins to increase. Of course, share price and the market is not something that is completely entirely within our control, but certainly performance, free cash flows, and a credible dividend policy in the coming years is really what we are aiming for. So I, I really hope that, you know, in a few years' time, we'll sit here, and you will see us to have been credible, you know, in variance to the way that you may see us today. So that would be my perspective. On Guyana, Richard, maybe you want to respond on...
I think the question is: Where's the money? What happened to the money?
Sure, sure. So, maybe just to highlight a couple of things. So, the transaction was announced on the 10th of August in 2023. There is a press release that's available on our website that outlines the terms of that transaction. Also, I refer you to page 152 of the annual report and accounts, which outlines the transaction and the accounting for that transaction. In total, we received $700,000 in respect of that transaction. And we also benefit from an ongoing royalty should that development move into production. The $700,000 can be seen on the front of the cash flow statement on page 133 of the annual report and accounts.
Okay. What you are saying, you have it on the computer. My question was, dramatically, I could not find it. I could not find it here. So if somebody say, "I made 2 pound profit on something," and you have not put it on the statement, so where do I find it? If I can't read computers, I'm 84 years of age. So what I'm saying is failure for you to disclose, only because I was from Guyana, and I get to know because there is nobody you can talk to in about Tullow in Guyana. Everybody else is going to Guyana and find oil. You better look at the Stabroek Block and all these places. Everybody's going there. Shell is going there. ExxonMobil is going there. You are withdrawing from there. You must be crazy, man.
So if you can send me where it appears on your report, that is what I ask. I'm not asking you to tell me. I know what the figure is. I want you to show me where it's on this. Here, you have a lot of things on the board there. You know, you have a responsibility to disclose these things. That is your responsibility. So your failure to do that is a failure as well.
Okay.
No, let me finish. You haven't answered.
Uh-
We can send it.
Yeah, so we can, we can, maybe we can liaise with, liaise with you after the meeting, and we can send you the information, or I can, I can show you on the pages of the accounts. But it, page 152, the transaction's disclosed-
No.
- and 100, page 133 of the cash flow statement.
If I say I don't believe you, if I see it in writing-
Yeah.
because I look for it. I spend a lot of time here because there's a man sitting here who lose over GBP 14,000 on Tullow Oil. If other people don't lose, well, it's up to them, their good luck. So I'm asking a straightforward, which you're paid to do. Failure to comply is like a fault on your character. A fault, not on this one character, okay?
Mm-hmm.
Even today, when you-
Okay. We will follow up with that after the meeting.
Thank you, sir. We note your point, and I think as Richard has, you know, indicated, you know, whatever he needs to do to give you the assurance and make sure that that is properly reflected, I think we should do that.
You can send it to my home address.
We shall certainly do that, sir. Thank you very much.
Thank you.
Next question, hmm.
... My name's Paul Etheridge. I'm a shareholder. Looking at what you've said today, using the daily production, annualizing it, that's about 20 million barrels, give or take, if my mental arithmetic is right. You talked about 2P reserves as being about 100 million barrels, so that's basically 5 years' production. You're talking about getting the debt down to $1 billion in two years' time. The market cap of the share price isn't that high, unfortunately. And my concern is that with $1 billion in debt in two years' time, I don't think you're gonna get an awful lot of flexibility, per se, to really grow this company with that amount of debt.
The free cash flow, while welcome, again, isn't really is $hundreds of millions rather than accumulated debt of $1 billion as being forecast. I'm concerned about whether the company really will be able to grow, but by itself, or whether it really does need a partner. I know that a few years ago, that you did have the potential of a partner, and they walked away for whatever reasons they had. But that's my concern. I've got my doubts as to whether the company can really grow in the long term with that amount, with the amount of debt that's been projected today. Thank you.
Rahul, you want to respond?
Yeah, sure.
Uh-huh.
So I think very good question about the potential. So I—as I said earlier, we have a 2P reserve base of about 200 million barrels, so that's about 10 times. There's a 2C resource. So the way you think about the pipeline is we have contingent resources, and the geoscientists will invest time to de-risk that. So not all... We have a contingent of about 700 million barrels. So when you add the two together, it's about 40 times the production. Now, not all of the 2C is gonna get converted into 2P. So I think organically, there is a pretty healthy pipeline of opportunities. I think I go back to what I said, and Richard sort of echoed, which is that we've spent a lot of time in the last 3 years.
We've delivered $1.1 billion of free cash flow from this business, from these underlying assets. A lot of that money has gone into reducing the debt level. So if you think about what the company has done over the last three years or so, four years, we've been investing, so drilling wells in Jubilee, TEN in Gabon, and we've been reducing debt, right? By the end of next year, we should be at a level of debt which is sustainable, so it's a relatively lower debt. So then you say when the company, the 20 million barrels of production, let's say, converts into cash flow, operating cash flow, that money then goes into investing in future growth, converting those 2C into production. The amount of money that you're spending on debt probably is half of what it is in the past, so that's additional money.
That's when we start to think about returning capital to shareholders. The last piece is that the industry is changing. You see the major oil companies exiting West Africa, and the sorts of assets that they're divesting are exactly the sort of assets that Tullow, your company, is good at producing. I think we have a unique skill set on that.
Uh-huh. Do we have any written questions?
Can I just-
Oh, sorry. Okay. Uh-huh.
Very quickly. Thank you. I appreciate your answer. The company's production has actually been falling over a number of years. I accept you are, have been investing. So with production falling, I guess another question would be: well, when is it gonna start increasing? 'Cause if it doesn't start increasing, then we're still gonna have a problem in the future. I accept the hedges have been a problem, and perhaps they're no longer gonna be such a problem, so that should be a positive. But I'm not getting any feeling when that debt's gonna get paid substantially down, basically. That's my concern.
Richard, you want to talk about
Sure, I mean-
Uh-huh, coming down. Uh-huh.
And maybe to sort of build on Rahul's point, and particularly from a valuation perspective, you know, the 2P reserves that were outlined, the audited value of those as at the end of the year was $3.4 billion versus, you know, our net debt position at the time of $1.9 billion. So you sort of play that net debt forwards given the $1.6 billion, sorry, given the cash flow that we generate over the next two years, and we're $1 billion of net debt. And, you know, in reality, you take that cash off the NPV of the assets, and you've got substantial headroom. You know, this is one of the sort of core investment cases for Tullow. It's that debt-to-equity conversion as we continue to de-lever.
By the end of 2025, we've still got substantial value within the existing portfolio, and as Rahul said, we've got a hopper of opportunities to bring in and continue to sustain the production base.
In terms of... So you're right. So the absolute production, let's say, last year, was less than what it was in 2019 because we divested a lot of the assets. So we divested out of Equatorial Guinea, we divested assets in Gabon. So part of the absolute decline. But then this year, production, what the guidance we're giving is better than what it was last year. And if you remember what I said earlier, with the onset of Jubilee Southeast. Last year, we had a 30% second half of production, second half production in Jubilee last year was 30% higher than the first half, which was a direct consequence of the investment. So I think where the company is now is you're starting to see the growth finally come through from the investments that we've done.
And obviously, we have divested assets, and a big part of that was to protect the equity of the company back in 2021 when we had serious financial difficulty.
Okay, thank you. I don't believe that we have any questions online, but maybe let's take one or two more on the floor. Okay.
Just going back to our talk about net zero emissions by 2030. For the ordinary shareholder, it does seem perhaps a bit difficult for an oil company who are actually producing oil and earning their perfectly good living from doing that should promote too vigorously a net zero emissions by 2030, which is only, what? six years' time, a policy when probably fair enough yourself, you're probably burning quite a lot of oil. In this country, I don't think the average householder is really gonna be able to bring their CO2 emissions down to zero by 2030 at all, given the high cost of electricity and our dependence on North Sea oil for keeping our central heating boilers going.
Yeah, I think this one it would maybe be appropriate, you know, because you're talking policy here, to ask the Chairman of the Sustainability Committee. Mitch, do you want to respond?
Certainly. I'll just expand on some comments that Rahul made earlier, which is there's been significant progress being made on the Scope 1 and Scope 2 emissions. There's a clear plan in place, and the amount of capital expenditure needed isn't as significant as you may think in terms of what's actually needed. And it is good business practice, industry practice, that's continuing to proceed in this way, and we've got a clear path on how that's going to get done. So a lot of the capital has been expended basically to allow that to happen, as Rahul indicated earlier, really by next year, there's a clear indication that routine flaring will be eliminated in 2025. And then again, as we indicated, we're working closely with the Forestry Commission to really forward the emissions, to further that progress going on.
So there is a lot of work being done. It's, the team are very focused. There are clear indications of how this is going to be done, and it really doesn't impact production in a big way. It's something we're doing.
Thanks, Mitch. Okay. I think that hopefully brings the Q&A session of the AGM to a close. And thank you very much for those questions, which are very well noted and I think also helps us to continue to reflect as we make progress. So we'll now move to the formal business of our AGM. The notice of this annual general meeting, dated thirty-first March twenty twenty-four, explains the business to be proposed and voted on today. The notice of meeting and the twenty twenty-three annual report and accounts was made available to all shareholders, either electronically or distributed in hard copy or via the notice of availability, informing you the documents were available on our website. So with your consent, I propose that the AGM notice is taken as read. Thank you.
In accordance with that practice, the directors have once again decided to conduct each vote on the resolution set out in the AGM notice by way of a poll, which provides an opportunity for shareholders who are not present today to vote their shares. For those attending the meeting online, the voting options will be on your screen. To vote, simply select your voting direction from the options shown on your screen. Your vote has been cast when the check mark appears. If you wish to change your vote, select Change my Vote. If anyone in the room with us who is entitled to vote does not have a poll card, please raise your hand now. Okay, there's nobody. Otherwise, we would obviously arrange for you to get one.
Please remember that you do not need to complete a poll card if you have already returned a form of proxy, unless you wish to change your vote. As the chair of this meeting, I'll be voting on behalf of all the shareholders who have duly appointed the chairperson of the meeting as their proxy, and in accordance with how each shareholder has indicated they wish me to vote on their proxy form. In respect of those proxies, where the chairperson of the meeting has been granted discretion as to how to vote in respect of a resolution, I will vote in favor of that resolution. Those completing a poll card should put a cross in one of the boxes marked for, against, or withheld, in accordance with the way you wish to cast your votes for each resolution.
It should be noted that withheld is not a vote and will not be counted as a vote for or as a vote against in the resolution. The results of each of the polls, which will include all votes cast today by the shareholders present in the room and all proxy votes submitted by post or using the online voting facility, will be announced to the London and Ghanaian Stock Exchanges as soon as they are available, which ought to be no later than 6:00 P.M. this evening. The results will also be posted on the company's website later today, and copies may be obtained at the company's registered office tomorrow. So I think with that, we conclude the formal business to be carried out at this annual general meeting, and I therefore bring the meeting to a close.
Thank you very much, and thanks for your attendance.