Good morning, and thank you for joining us today. I'm Richard Miller, CFO and Interim CEO, whilst the process to find a new CEO is ongoing. This is taking longer than expected, but I'm pleased to share that it is progressing well, and I do expect that the next time I sit here, it will be back as just CFO. During this period, our senior leadership team's expertise and commitment have ensured our continued stability, and we have made good progress on a number of fronts that I will cover on the next slides. During the first six months of the year, we have progressed a number of strategic priorities.
We started the year with the successful outcome of the Ghana Branch Profits Remittance Tax Arbitration, and we continue positive engagement with the Government of Ghana and GRA with the aim of resolving the outstanding disputes on a mutually acceptable basis. We have signed the SPA and completed the Gabon transaction in the space of two and a half months, realizing $300 million of proceeds. We've signed the SPA for Kenya and are looking to complete and receive the first two milestone payments, totaling $80 million before the end of the year. We've made good progress from a cost reduction perspective, with a $10 million reduction in 2025. We have plans underway to further reduce G&A, targeting at least $50 million of savings over the period 2025 to 2027.
We have repaid the 2025 notes and extended the revolving credit facility, which has now been repaid. Our focus is now addressing our upcoming 2026 maturity and further deleveraging. I will now turn to our operational performance and catalysts. From an operational perspective, we've returned to drilling in Ghana and have successfully completed the first production well of the current campaign. The well encountered a higher-end net outcome for net pay and came on stream in late July. The high-quality 4D seismic data, which we acquired at the start of the year, is now being used to generate improved models that will directly inform the well planning process. We will further enhance this dataset with the capture of an Ocean Bottom Node seismic survey in the fourth quarter of 2025, which will underpin infill drilling locations across both TEN and Jubilee.
Jubilee has underperformed in the first half of the year, which has impacted our free cash flow for the year. However, we have a number of production optimization activities that have been delivered or are planned that give me confidence in our ability to improve the declines we have seen. We have commissioned artificial gas lift on the eastern side of Jubilee and have sanctioned artificial gas lift on the western side of Jubilee, which will both uplift production and add reserves. We have a collaborative and constructive relationship with the Government of Ghana and have made a valuable step forward with the signing of the Memorandum of Understanding to extend the licenses in Ghana to 2040. This step will maximize the value potential of both TEN and Jubilee, and I'll cover this in more detail later on. Now, moving on to our first half results.
Production has been lower in the first half of the year, reflecting the downtime from the successful Jubilee maintenance shutdown, the fact that we had no new wells on stream, and the recent Jubilee underperformance. Oil prices have been lower in the first half of 2024, which has also impacted free cash flow for the first half. Following the completion of the drilling campaign last year and increased capital efficiency in 2025, we have seen a material reduction in capital expenditure in the first half of the year. Free cash flow for the first half of the year, just like last year, is negative and represents the phasing of tax payments, gas receipts, and higher operating costs associated with the shutdown and CSV campaign. As a result, net debt at the end of June was $1.6 billion. Now, let's move on to the full-year outlook.
This slide highlights the changes in our full-year guidance based on the completion of the Gabon transaction. Group production guidance remains unchanged and has been adjusted for the removal of about 10,000 barrels of oil per day from our Gabon assets. We do expect to come in at the bottom end of the range of 40,000- 45,000 barrels of oil per day based on performance year to date. Capital expenditure after removing Gabon is expected to be $185 million weighted to the second half of the year, with only $25 million spent outside Ghana in Cote d'Ivoire and Kenya. Decommissioning guidance for 2025 is adjusted to $20 million with the removal of Gabon escrow payments, and free cash flow at $65 a barrel, excluding disposals, is negative for the full year.
This is driven by the loss of Jubilee cargoes, tax payments in Gabon, and higher operating costs associated with the shutdown and CSV campaign. I'll go into more details on the actions underway to materially improve the cash flow potential of the business later in the presentation. Cash flow guidance, inclusive of the proceeds from Gabon and Kenya disposal, is $300 million at $65 a barrel. This does include $35 million of Gabon tax for 2024, which was not reimbursed as part of the deal. This cash flow generation will drive year-end net debt to around $1.1 billion, which is in line with where we previously guided. Now, let's go into more details on what we're doing from a cost perspective. We continue to focus on reducing our cost base in line with the simplified business that we are.
We have made positive steps in reducing our G&A costs in 2025, with a 60% reduction since 2019, and have put in place further steps to take G&A run rate down even lower for 2026 and beyond. We're targeting around $25 million per year of net G&A. From an operating cost perspective, Ghana costs are slightly higher in 2025 than the year before, and this is due to the inclusion of the shutdown and CSV campaign. Looking ahead, we have plans to reduce routine OpEx by $10 million per year for 2026 and beyond. Further to these cost-based adjustments, I would like to talk about the broader potential of the business and actions and options we have to realize increased organic free cash flow. As highlighted earlier, the organic cash flow of the business for 2025 is negative at $65 a barrel.
However, we're making significant progress on a number of fronts to reduce the cost base that will enable us to generate material free cash flow in the future. These steps include G&A and OpEx reductions that I've just touched on, reductions in the TEN FPSO lease costs from 2027 onwards, completion of the UK decommissioning campaign, and finally, reducing interest costs through the reduction of gross debt. In comparison to 2025, if we deliver on all of these actions, we can increase our annual organic free cash flow by over $200 million. On top of these organic free cash flow potential, we have a number of strategic income opportunities, which I'll touch about later in the presentation. Moving on, I'll now talk about deleveraging progress and our hedging portfolio. Refinancing is the key strategic priority for the business for the balance of the year.
We have made good progress with deleveraging so far this year, reducing gross debt by $0.3 billion. This has given us an annual interest saving of $8 million. I'm really pleased with what we've been able to do with the disposals and refining our portfolio today. This puts us in the best possible position to refinance our capital structure. Our senior notes mature in May 2026, and the Glencore facility matures in November 2028. We are advancing discussions with private capital providers, and we have plans in place to complete the refinancing of our capital structure before the end of the year. In terms of hedging, following completion of the Gabon disposal, we have around 70% hedge protection in the second half of 2025, with a floor of $60 and a cap of $75 a barrel.
We have now begun hedging in 2026 and have average floors of $58 a barrel and caps of $76 a barrel. We are still looking to maintain 60% downside protection whilst retaining at least 60% upside access through a combination of hedge structures. I'll now move on to operations, and I'll start with Jubilee. Jubilee production for the first half has been disappointing and has been impacted by certain wells in Jubilee cutting water earlier than expected, and as a result, impacting riser stability on the eastern side of the field.
Water injection rates in the first quarter of the year and the last quarter of 2024 were great, but we've been lower than this in the second quarter of this year, and this is due to the extended maintenance work on our gas turbine generators, which has now been completed, and mechanical issues with our seawater lift pumps, which will be addressed around the end of the third quarter. With these challenges resolved in the second half of the year, we expect to close the efficiency gap and get back closer towards the capacity, which is currently 300,000 barrels of water per day. This will help improve reservoir pressure management and improve voidage replacement, which has still been over 100% for the first half. As I mentioned earlier, we have a number of activities underway to optimize production, address the declines we've seen in the first half.
This includes riser-based gas lift, which is now operational on the eastern side of Jubilee, and we've sanctioned riser-based gas lift on the western side. We expect that this will not only increase production but also add reserves. We have also drilled and completed the first producer well of a six-well campaign. This well came in the high end of expectations of net pay and was brought on stream at the end of July. The second well we expect to drill this year will also be a producer and is expected to be on stream around the end of the year, providing a further production uplift. We will then continue the campaign with four wells in 2026. We've completed the 4D seismic survey in the first quarter and are working through the fast-track results to optimize future well locations.
The team are excited by the uplift in quality of the data and the potential this has to drive future value through high grading and uplifting of infill drilling candidates. We will also undertake an Ocean Bottom Node survey in the fourth quarter that will further enhance the velocity model and complement the 4D. The actions we've taken through the first half of 2025 and leading into the second half give me significant confidence in the future potential of the field. I'd now like to focus on what we're doing to build that value. We've agreed a Memorandum of Understanding to extend the Ghana production licenses to 2040. This will allow us to realize a material 2P reserves uplift associated with the extension, and we also have the right to drill up to 20 additional Jubilee wells.
Importantly, we've agreed a guaranteed reimbursement mechanism for gas sales and will commit to work to increase the supply of gas from around 100 million scuffs a day to 130 million scuffs a day. We will also focus on advancing Ghana's capacity, working with both GNPC and the Petroleum Commission. The next steps are laid out on the slide. We'll agree a Jubilee Plan of Development amendment, enter into a fully termed gas sales agreement, and secure parliamentary approval for the reimbursement mechanism and license extension. We expect to execute these steps ahead of the end of the year. With the license extension combined with the high-quality 4D seismic data and the OBN survey, we are really excited by the potential of both Jubilee and TEN.
Based on the current recovery factors, we see a great opportunity to materially uplift reserves in the future and maximize value for Tullow, our partners, and Ghana. Now, moving on to TEN. At TEN, the team have done a phenomenal job on production, minimizing declines. Production is ahead of expectations, and based on this performance, we see enormous potential in both Enyenra and Ntomme and through the monetization of TEN's material gas resources. We have identified a number of production optimization activities to realize this potential. At Enyenra, we'd open new zones uplifting production, and we have projects in the pipeline at Enyenra South. At Ntomme, riser-based gas lift is supporting high recovery, and we see potential for water injection and infill drilling to drive recovery even higher. We will look to mature these opportunities through the 4D and OBN seismic surveys.
As mentioned earlier, from a cost-based perspective, we are actively working on a significant reduction in the overhead cost on TEN by removing the annual TEN FPSO lease cost in 2027. Now, to focus on the value from the rest of our portfolio. In addition to our valuable producing assets, we have a highly value accretive portfolio of opportunities through sales and royalty options. We've made significant progress this year. We've signed heads of terms and SPA and completed the sale of our Gabon business for $307 million, all within the space of five months. We've progressed the sale of Kenya. We've signed the SPA in July, and we expect completion and FDP approval in the second half of the year, which will see $80 million proceeds this year.
Looking into the future, we have the Dussafu contingent payment in Gabon, which is up to $24 million over five years that we expect to start receiving next year. There's also the Uganda contingent payment where we understand first oil is expected in 2026. Therefore, we expect to start receiving the royalty in 2027. In Kenya, we should start to receive the additional Kenya deferred payment of $40 million in 2028, with a bullet repayment in 2033 of any balance. We also retain future upside optionality through royalty payments related to oil price, resource, and production, as well as a no-cost back-in right for 30% participation in potential future development phases. I'm really pleased with the scale, speed, and consistency of these strategic actions taken, in particular the completion of the sale of our Gabon business and SPA signature for Kenya.
We'll look to carry this forward into the second half of the year and beyond. Now, to conclude the presentation, we have made exceptional strategic progress during the first half of the year. We have a clear set of priorities for 2025 and beyond. We have put in place a set of actions to stabilize production on Jubilee and have returned to drilling with six wells planned across 2025 and 2026. We'll look to drive value through efficient capital allocation and deliver strong production and cash flow. We are taking measures to reduce the cost base to reflect our revised portfolio, and we continue to have a supportive and constructive relationship with the Government of Ghana, as demonstrated by the license extension MoU, which paves the way to deliver value from our fields.
We will look to complete the sale of our Kenya assets to support continued accelerated deleveraging, and I have confidence in these plans as we aim to build on the positive momentum during the second half of the year to deliver the refinancing of our capital structure. This will position the company to focus on value creation for investors, host nations, and wider stakeholders. I'll now take questions.
Thank you, Richard. For a reminder for those on the telephone, if you'd like to ask a question, please press star one on your keypad. Our first question comes from Matt Smith at Bank of America. Go ahead, Matt.
Hi there. Good morning, Richard. Morning, team. Thanks for taking my question. Thanks for all the detail that you've outlined on the potential cost-saving initiatives. I think that sort of cumulative number of $200 million certainly seems to be larger than I'd anticipated, which is clearly very material and helpful for the potential cash flows going forward. I guess the critical factor in my mind has been the production performance, and of course, you've had a long drilling hiatus, which has now been reversed, five more wells ahead. That's the other critical point that I want to touch upon if I could. Where do you think Jubilee production in particular can grow to from here? Do you still believe it can grow as a result of the new drilling? Where could we be in 2026, 2027?
I think that's the other critical component to lifting the cash flows from here, please.
Yeah, thanks, Matt. I mean, we've got enormous confidence in Jubilee, and obviously, one of the steps we've taken this year that underlines that confidence is extending the licenses through a combination of optimizing our current production base and stemming declines, and also getting back to drilling, adding new production. We believe that there's fantastic potential to grow the Jubilee production base from where we are today. We've just brought a producer online, which has given us a decent uplift. We've got another producer at the end of this year and a full well campaign next year. We see significant potential to be able to grow from where we sit today.
Thank you. Thank you very much, Jay. Sorry, Matt. Our next question is from Colin at Capital Access Group. Go ahead, Colin.
Yeah, hi. Thanks for taking my questions. A couple, please. Could you just provide a little bit more detail on the decision points around repurchasing the TEN FPSO and removing the lease costs? Secondly, I thought there was an interesting bit in the announcement about the hearing on the loan arbitration case being delayed in order to give more time to allow settlement negotiations to continue. Presumably, that suggests there's a reasonably good prospect about actually negotiating a settlement here rather than having to run the arbitration process. I wondered if you could talk a little bit about that and whether it has any bearing on the third arbitration case, bearing in mind that you successfully won the case over Branch Profit Remittance Tax. Thank you.
Yeah, thanks, Colin. The fixed period on the TEN FPSO comes to an end in the first quarter of 2027, and our focus is on creating the most sustainable cost base for TEN point forwards. We're working on a couple of options in terms of how we can drive that cost base down, one potentially being acquiring the FPSO at a discount, or the other being extending the lease at a lower lease rate. We've got a number of actions that we're looking to complete during the second half of this year that will enable us to essentially realize that saving that we've got within that cost bridge. From a GRA perspective, we are actively working with the Government of Ghana and GRA to resolve both arbitrations on an amicable basis. We're in discussions.
We believe that the best outcome for both parties is to get to an agreement on a sort of acceptable basis. We both know where we stand in terms of the bid ask. It's about trying to now move that forward to some negotiated settlement.
Thank you.
Thanks, Colin. Our next question is from Lydia Rainforth at Barclays . Go ahead, Lydia.
Thank you, and good morning to both of you. I actually have two or three, if that's okay. On the free cash flow side, can we just come back to that? I think it's important to make sure I understand fully. If I think about where the guidance was at the AGM and where it is today, and that $100 million difference, can you just walk through kind of where that bridge is for us? If I'm thinking about it and take a step back, at $65 oil on an organic basis, there's not very much free cash flow there. Is the idea with the kind of the cost base and the cost-saving activities you outlined for 2025 to 2027 that basically you get to the point where incremental free cash flow is $200 million higher? That's the base that we should think about in a $65 world.
Sorry, the third one, if I could, I'm sorry, Richard, I know you've got a lot of these, but just on that cost base, can you take a step back and take us through that holistic approach to how you're thinking about running the business now that it is basically just Ghana and having taken out Gabon and Kenya and Cote d'Ivoire? I think that actually probably helps in terms of setting up where we are going forward. Thanks.
Yeah, thanks to Lydia. In terms of, I suppose, the revision in free cash flow guidance, the single biggest delta is the impact of Jubilee year-to-date production, which is essentially a shifted one and a half cargos from 2025 into the first quarter of 2026. That makes up the vast bulk of the difference. The only other changes are a slight increase in costs from running the OBN survey and also the inclusion of our second round of redundancy payments. In terms of how we think about where we sit today versus where we can go going forward, I think there are obviously two aspects of our free cash flow bridge that we're working on.
The first one is, as we set out on the slide, reducing the fixed cost base of the business, essentially being able to generate up to $200 million and potentially beyond of incremental free cash flow a year by reducing that cost base. Also, in line with Matt's question around looking to grow production from our assets, the combination of production and driving those reductions in costs, we believe that we can improve on where we currently sit from an organic free cash flow perspective today. As we start to think about how we run the business going forward, the reality is we're a much simplified business. We are a Ghana business with obviously some corporate activities, and that gives us the flexibility to significantly reduce the complexity of the organization, both in terms of layers and scale.
This should allow us to focus much more day-to-day on the operations in Ghana and also streamline decision-making, which I think has continued to improve significantly throughout this year. Going forward, it will be a much flatter, leaner organization solely focused on Ghana and looking to really run as much of the business going forward out of Ghana as possible.
Great. Thanks, Lydia. Our next question is from Mark Wilson at Jefferies. Go ahead, Mark.
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Perhaps we'll just move to another question, and then Mark, if you can find a better place for connection, we'll come back to you. In the meantime, let's go to James Hos at Shore Capital, please. James, go ahead.
Hi there. Good morning. Just a question on the free cash flow guidance for the year, because that obviously includes $80 million from Kenya sales proceeds, $50 million of overdue gas payments in Ghana. I'm just wondering what gives you the confidence that these specific items are all received before year-end, given timing isn't really fully in your control. Also, can I just assume that if there's an arbitration settlement, does that mean another cash outflow before year-end?
Yeah, thanks, James. In terms of Kenya, there's really two CPs through to completion. One is a competition commission clearance that we're working on actively at the moment and believe we should be able to get that in the next couple of months. The second one is a transition arrangement, setting up Tullow-Kenya on a standalone basis. That is very much within our control, and we're working closely with Gulf to be able to accelerate that transition. We have a lot of confidence in being able to complete the deal within this quarter. If we look to the FDP approval, which triggers the second payment, Gulf are very committed to getting first oil in Kenya as quickly as possible.
We are working with both the Government of Kenya and the Kenyan government around the FDP, which will be required, and we're continuing to move that on in parallel to the transaction. We're setting ourselves up in the best possible way to ensure that FDP approval happens in the fourth quarter of this year. In terms of gas payments, the key thing that we're doing there has obviously been the MoU. That essentially gives us the solution for the gas outstandings, and that will give us a guaranteed repayment mechanism that we'll be able to utilize to ensure that we get paid for gas on a timely basis, both on a go-forward and a historic basis as well. The focus of any GRA settlement will be on a cashless basis.
Okay, that's clear enough. Thank you.
Great. Thank you. I don't think we have a good enough line for Mark just now. I think we've got time for probably two more questions. Our next question comes from Ashley Kelty at Panmure Liberum. Go ahead, Ashley.
Morning, Richard. Just wondering if we can expect any further asset disposals before the refinancing, or has that process essentially stopped and we're just looking at a sort of steady state for the portfolio?
Yeah, sure. Thanks, Ashley. We've obviously made really good progress on simplifying our portfolio this year. Our focus now is on running the two high-quality assets that we have in Ghana. We do obviously have a number of royalty streams that we could potentially look to monetize if we get the right price. Other than that, our focus is on running the two high-quality assets that we have in Ghana.
Okay, that's great. Thank you.
Thanks, Ashley. Our last question for today, and we'll endeavor to get back to those that have not had a chance to ask their question, for now, our last question is from Stella Cridge at Barclays. Go ahead, Stella.
Thanks, Matt. Good morning, everyone. Many thanks for all of the updates. I was wondering if I can just ask on the debt side. There are a number of helpful updates in there in terms of the refinancing options and some of the ongoing discussions. You do mention some risks associated with market conditions as well as agreements with stakeholders, including bondholders. I was just wondering, could you give us an update on any discussions that you've had with bondholders to date? Any kind of ideas or indications you've got from them about what kind of refinancing scenarios might be possible? That would be a helpful update.
Yeah, thanks, Stella. We engage with a number of our bondholders on a very regular basis in terms of updating them on the progress of the business, but also understanding their perspectives and views on the market. We've put together a number of options to execute from a refinancing perspective, and some of those options are dependent on being able to secure some private capital. We'll look to progress those over the coming months. If there is a requirement to go out to the bond market, then we'll be able to do that as part of one of those transactions.
Thank you very much. Really helpful.
Excellent. Cool. I think that draws an end to the presentation today. Thank you ever so much for your time.