Hello, and welcome to the Panoro Energy Third Quarter Results for twenty nineteen Webcast. My name is Rosie, and I'll be your coordinator for today's event. Please note this call is being recorded. For the duration, your lines will be on listen only. However, you will have the opportunity to ask questions at the end.
Alternatively, you may submit questions throughout the call using the Q and A box found underneath the presentation window. I will now hand you over to your host, John Hamilton, CEO, to begin today's conference. Thank you.
Thank you, Rosie, and welcome, everybody, to our third quarter twenty nineteen results. For your reference, our announcement was released this morning. A copy of the press release and this webcast are on our website, www.panoroenergy.com. As a reminder, today's conference call contains certain statements that are or may be deemed to be forward looking statements, which include all statements other than statements of historical fact. Forward looking statements involve making certain assumptions based on the company's experience and perception of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances.
Although we believe the expectations reflected in these forward looking statements are reasonable, actual events or results may differ materially from those projected or implied in such forward looking statements due to known or unknown risks, uncertainties and other factors. I would now like to take you through our webcast slides. And if we could move from the cover page quickly through slide number two, the disclaimer, and then move please to the presenting team on the webcast slide number three. I'm John Hamilton. I'm the chief executive officer of Benoro Energy.
I'm joined today by Qazi Qadir, our chief financial officer, and also Richard Morton, Technical Director. There is some fake news here. Nigel McKim, our Projects Director is unfortunately traveling today. He's unable to join the call, but he's very much with us in spirit. If we could please turn to Slide number four, which is Q3 twenty nineteen highlights.
I won't go through these in a great level of detail because some of this will come up in financial slides we have a little bit later and through the asset slides that we're going to discuss. But if I could point out a few of the highlights that I think are worth noting here. Tortue Phase II in Dussafu and Gabon, the development drilling has started. This is well underway and we've been very pleased with the results so far on that. That is going to be a big event for us in the first and the second quarter of next year as we bring those wells into production in Gabon.
So we have a good visibility on production growth in Gabon coming through Tortue Phase II. During the quarter, we also made the transformational Hibiscus Updip discovery, has now been granted a 45,400,000 barrels of gross 2P reserves by Neville and Sewell. Richard will take you a little bit more through this, but this is a truly excellent piece of news for Panoro and its shareholders. And it has a big impact on the next phases of Dussafu, which will probably take production capacity on the field beyond the current nameplate capacity on the FPSO. So this is absolutely stunning news for everybody concerned.
In Tunisia, we're extremely busy with a number of workovers going and we're targeting gross production of 5,000 barrels a day. And the new news this morning is that we have a rig contract signed with CTF, which is a state owned drilling company for the drilling of the Salloum West prospect in early twenty twenty, with lots of other things going on towards the spudding of that well. This is making solid progress. Again, I will not go through all of the financial highlights here. I think Kazzi will pick those up, and obviously if there are any questions, we can come back to them.
If I could now ask you to turn the slide to slide number five, which is titled Looking Forward to 2022. You know, we we all get caught up in in in the the quarterly results and then the news releases and all that. But this slide is meant to really kinda take a step back and say, you know, what is the journey that Panoro is on at the moment? And we're quite excited by it. And this slide tries to capture some of the things that we and our shareholders can look forward to over the coming two years.
If I look at 2019, we're approximately 2,400, 2,500 barrel a day producer. Our revenue for the full year should be $5,560,000,000 dollars Our EBITDA should be around $30,000,000 So this is an incredible transformation for where we've come from, but the good news is yet to come. What's gonna happen over the next, two years, is that we're gonna have phase two on Dusufu come on stream. We're gonna have phase three on Dusufu come on stream towards the end of twenty twenty one. We're targeting the increase in production in Tunisia that we've talked about, and we're gonna hopefully have a per per barrel unit basis, OpEx coming down.
Now counterbalancing that, have a couple things that, will, will lower the production revenue numbers. Those are the Telo back end at Dussafu where Telo have the back end right to reduce us to 7.5% as most people who follow us know. And also, upon completion of our Nigerian sale, that will reduce some of the headline numbers, particularly the revenue side from from our business units. So that will that will, negatively impact the revenue line. But taking all those things together, if you look to 2022, late twenty twenty one, on an annualized basis using $60 Brent, using current assumptions, you know, we could be, should be about a 5,000 barrel a day producer.
We should have well over a $100,000,000 of, of, of revenue, $75,000,000 of EBITDA. And if I could guide your eye down to the to the red boxes there at the bottom, there's some some comments that go with that. We hope to pay our very first dividend, which will be in the form of Petronor shares, subject to completion of that transaction. That is hopefully a 2020 event, and then we're quite excited to be able to return, those shares to shareholders in a very interesting transaction, which I'll touch on. During this period, we'll be repaying, debts.
We don't have very large debts as a company, but nonetheless, we'll be repaying those during 2020 and 2021. In terms of operating cash flow, so taking, you know, after tax, so EBITDA, e EBIDA, you know, we should be 40 to $50,000,000 operating cash flow company when when all this is said and done, which is an enormous cash generating machine. And, of course, there's, of course, upside to this. We're we're we're trying to be a little bit modest in terms of these numbers, but there is upside in the assets beyond this. Again, hopefully that gives a picture of where we see the company going.
If I can turn to the next slide now, which is slide six, twenty twenty news flow. You don't have to wait two years for all this to transpire. We have plenty going on in this company in the coming twelve months. On the exploration side, we will be drilling Salloum West in Tunisia, which is an exciting well, which is close to our existing infrastructure. We're gonna be drilling another exploration well in in Dussafu.
We have those of you who follow us know that we have two optional slots for additional wells in Dussafu, which we we're hoping that we that we exercise those options. On the production side, we're going to have two new wells coming in the first quarter in Dussafu, two more coming in the second quarter. That will take our production to, you know, at the initial production rate, probably circa 25,000 barrels a day gross. In Tunisia, we're obviously also trying to ramp up to the 5,000 barrels a day, and we have lots of other production activities going on in Tunisia as well. On the corporate side, we're continuing to look at exploration and m and a transactions that will happen during the whole year.
We hope to be able to announce some things. We've hinted that we are looking at some exploration assets and we hope to be able to update the market on that in due course. Hopefully we'll have the sale of Ajeol Ml-one hundred thirteen completed subject to governmental approvals during the course of the year and that's a very first dividend that I referred to as well. So again, 2020 is gonna be quite a busy year for the company and plenty of news flow to get, stuck into. If I can now turn the slide to slide number seven, which is the proposed sale of our Nigerian interests.
We made a press release about a month ago on this. There's no particular new news on this one. We, as people know, we have conditionally agreed to sell our holding companies that hold our interest in Nigeria, which the ONO one hundred thirteen, the Adjay field, to Petronor, which is listed on the Oslo Access Bourse. And the structure of this transaction has been very much to be a win win, to hand over Adjaye to a company that has grand ambitions for the asset. Panoro shareholders are able to then benefit in the future of Adjaye and indeed in the future of Petronor itself, which is a company which has existing production assets in the form of the shares that we will receive as consideration.
It's our intention to distribute those shares to our shareholders in the form of a dividend. There's also some contingent consideration in due course of up to $25,000,000. The conditions that apply to this transaction are ministerial consent in Nigeria for this transaction and a bigger transaction that they're working on together with the operator YFP. Completion of transactions in Nigeria can often take time. We expect this to be a 2020 event, perhaps the middle of the year.
If I could now pass along to Qazi and have the slide pass to slide number nine, which are the financial highlights Q3 twenty nineteen highlights. Qazi, can you take us through the numbers here, please?
Thank you, John, and good morning, everyone. We announced our third quarter report this morning, which is available on our website at panoraenergy.com and contains detailed analysis of our quarter on quarter and year to date movements. Therefore, I'm only going to discuss key financial highlights this morning, are summarized in this slide. To begin with, revenue and other income for the quarter was $10,200,000 In the second quarter, it was $10,700,000 decreasing slightly. Please note that other income also includes includes the tax gross up of Dussafu in the revenue line, which we basically include for consistency in reporting purposes.
A breakdown of revenue and other income is available in our secure report. The decline in oil sales revenue is due to lower realized prices despite the higher number of sold barrels in comparison to the second quarter. EBITDA for the third quarter was $5,300,000 compared to $5,100,000 for the second quarter. This is higher despite lower sales and driven by lower operating costs for the barrels sold in this quarter from Tunisia and Gabon. Net profit is lower at half a million dollars in 3Q versus $8,100,000 in the second quarter.
The higher second quarter profit is due to $8,200,000 worth of reversal for impairment of Dussafu. We also report our results on an underlying basis using non GAAP measures after excluding items of nonrecurring and nonperforming nature like impairment and effects of commodity hedges. We end up with pretax income of $2,300,000 3Q compared to a million dollars in the second quarter. Last item I would like to point out is the is is the cash balance, which has moved from 25 and a half million dollars in the second quarter to $20,000,000 in the in the third quarter. This is due to net cash flow payments mainly for Dusofu and our strength in the working capital cycle.
Following the quarter end, we have raised $15,000,000 through equity private placement, which has further strengthened our cash position. On the commercial side, we are very pleased to to report that we have signed a offtake agreement for lifting of the silver crude with BP who are going to lift the barrels for the next financial year.
Thank you, I'll just add one more thing to that, which is in line with the guidance we provided in the second quarter, we saw second half of this year being six liftings. We've had two in the third quarter. We will have four liftings based on current estimates in the fourth quarter. So again, getting back to some of the points around revenue recognition and some of the volatility in quarterly results, fourth quarter should be a particularly strong one from a liftings and revenue recognition perspective. If we could now turn to Gabon slide, that's slide number 10.
I'd like to turn over to Richard Morton, our technical director, to take you through Gabon, and he will also take you through Tunisia, after which I will follow-up.
Thank you, John, and good morning to everybody. As a reminder, Gabon, we have a 8.33% interest, in the Dussafu permit, and operator is DW Energy, and the partner is Gabon Oil Company. If we move on to the next slide, slide number 11, this is a this is titled the Tortue field. We have Tortue phase one on production currently from two wells, a fast track project that continues on production in the quarter. And total production estimated for the 2019 is between four point one and four point four million barrels.
And that continues to produce from those two wells at about 11,000 barrels per day. Phase two is sanctioned and underway with the first of the four production wells currently completing. We expect the first production to come on stream in q one twenty twenty, and we're targeting an average of 20,000 barrels a day for 2020 for the Tortue Field with a peak of around 25,000 barrels per day midyear. We can move on to the next slide, slide number 12, which is titled transformational hibiscus updip discovery. So on the exploration side, we drilled and appraised the hibiscus updip discovery earlier this year.
We had a a very good discovery in the Gamba Reservoir with excellent reservoir properties. The main wellbore found a 33 meter column, 21 meters of net pay. We sidetracked, about a kilometer to the northwest to appraise a field and found, a common contact and a similar oil column with 26 meters of net pay. So an excellent result in in terms of that exploration, drilling activity. The gross two p reserves now assigned by NSAI are four 45,400,000 barrels of oil, and that compares, with our predrill estimate of 12.
So a very good result in terms of, the the reserves in the ground. We've now progressed a plan to bring that oil into, production as soon as possible, and I'll talk about that in a moment. And that's, the phase three part of the DISFO development. We've also identified certain, other prospects, and we'll talk about exploration drilling later on in 2020, in following slides. We've moved on to the next slide, slide 13, the NSAI 2P reserves position.
This graphic shows the development of our reserves position at Dussafu in the last two and a two years or so. And you can see that things have progressed very strongly from twenty three point five million barrels up to the current 113,000,000 barrels, which is a four times increase. So Tortue has moved from 23.5 to 42. We've seen much better production than than we'd initially experienced, and then we've added Ruche and Ruche Northeast into the two p position. And, of course, a hibiscus updip discovery gets us up to the 113,000,000 barrel to be reserves.
We move on to the next slide, slide 14. And this describes phase three, which, is also called, Ruche phase one. So here we've done a fast track development plan for to bring the hibiscus reserves into the FPSO as shown on the graphic on the right hand side. We've relocated the platform which was originally between Ruche and Ruche North East to the position shown there between his Hibiscus and Ruche. This will bring, oil from, development wells drilled on Ruche and Hibiscus in the Gamba via a subsea pipeline to the Adolo FPSO located at Tortue.
So we expect, an FID for this project, later this year. We've already approved, this project internally, and we are expecting first oil in the end of twenty twenty one. There'll be six Gamba wells initially drilled in Hibiscus and Ruche, and we have a gross CapEx of $445,000,000 for the project. The additional production will, of course, reduce our OpEx per barrel down to about $10, excluding royalties. And, we see further expansion of this project in three b, which will allow additional drill drilling in Ruche Northeast where we have capacity for up to seven additional wells.
Move on to the next slide, slide 15, and talk about the exploration activities on the license. On the right hand side, you can see that, we have a, a map of our Ruche exploitation area, showing in green the discovered fields and in, the other colors, the various prospects and leads that we've identified. So in total, we have nine current drillable exploration prospects. Adding up the prospective resources of those gets us to about 160,000,000 barrels. Some of these are Gamba and some in Dentale.
We've been busy looking at the seismic data which covers a block and reprocessing that to enable us to use that dataset to validate and, identify new prospects. We've been focusing, given our success in Hibiscus, on on analogs, for that discovery, broad flat structures with Gamba potential. And we're hoping to make some decisions in the coming months about which of these prospects to drill in the 2020 drilling campaign. Move on to
the next
slide, titled Tunisia. Here, we have two assets. First of all, the Sfax offshore exploration permit, where we have 52%, and, the TPS assets, which is a production asset, where we have 29.4, both partnered with ETAP. Move on to the next slide, slide number 17. As John mentioned, we are very busy in TPS, the production asset.
The the picture shows the satellite view of the of the fields onshore the well activities that are under underwent have been completed and are planned for the near future. So at El Ain, we've been progressing a workover on El Ain 3. We have an additional workover on El Ain 1, which is coming at the end of the year. On Gabiva, which is one of the main producing fields in the asset, we've been busy with with three workovers, and additional workovers will come on early next year with a contingent well called Gabiva ten in the Southwest of the field. So we see potential here.
There's lots of activity ongoing, and we're looking to bring production up to that 5,000 barrel per day target. Move on to the next slide, slide 18, entitled enhancing TPS production levels. So this shows historical production in the assets over time and the variation of that production according to different activities in the field. So we see that there are two main elements on the production profile going forward. First of all is maintaining the existing production with replacement of ESPs and workovers, integrity management.
And then we're busy working on plans for the enhancing the production levels where we think we can get up to and above the 5,000 barrel per day target. This includes new wells, sidetracks, and recompletions on new reservoir intervals in existing wells. Move on to the next slide, slide 19. This is entitled Tunisia Salloum West Well. And here, I'm describing activities on our exploration permit.
So we've made significant progress towards, the well spud. The picture on the left hand side shows the, the rig we have contracted. That's, currently, being mobilized to to Sfax, and the site is being prepared. So we have contractors on the site currently doing piling operations and civil works, and we anticipate spudding the well in q one twenty twenty. So as a reminder, this is gonna be drilled as a deviated well from, an onshore location, and it's targeting the Vireno formation, which, was, tested in this structure, by British Gas with the SAM one well in 1991.
And that, well tested at 1,800 barrels a day. So we see good potential to, confirm that, oil, resource and, bring that into production quite quickly. The nice thing about this well is it can be tied in very easily and quickly into our existing production facility at Remora, which is part of the TPS asset. We have a mid case of 5,000,000 barrels for this, and there's remaining $8,000,000 net to Panoro for CapEx for the well. With that, I will hand over to John to talk about our exploration strategy and outlook going forward.
Slide 20, please. Exploration strategy. In some of our recent press releases, discussed our desire as now as having a production company that we would like to, to ensure the longer and the medium term future of the company by also having exposure beyond our, exploration potential that resides within our Tunisian and our Gabonese assets, which in itself is is is very interesting, of course. But to to supplement that by taking some smaller exposure to material oil fields, smaller percentages, things that won't break the bank, things that won't expose the company to undue risk, but nonetheless that help expand the portfolio. So we are very busy looking at a number of opportunities using our regional knowledge, Richard's and the team's regional knowledge, particularly in the pre salt areas, Southern Gabon, looking principally at West Africa and North Africa.
And again, where we can come in using our experience, our data, our knowledge, team up with reputable oil companies. So we're not doing this on our own, we're doing it with companies that are also equally as as reputable and and sometimes quite a bit bigger than we are, to team up with them to pursue some opportunities. So we hope again during the course of 2020, we will have news to tell you on our exploration strategy, but we are focusing a little bit more time on broadening the portfolio on the exploration front. So I'd like to finish up with slide number 21, outlook. This is largely a repeat of what we've already said, but it serves to, again, underline what's going on in this busy company.
In the next twelve months, we're gonna be having high levels of operational activity. We're gonna have between two and four exploration wells in Dusufu and Tunisia, so lots of news flow there. We're gonna have four development new development wells at Tortue, which we hope to continue to update the market on as those come online. We're working, as Richard has stated, very hard on production enhancements in Tunisia to bring bring that very solid operation even higher. We're doing so in what we believe to be an ethical and a safety conscious way.
It's important that we have the license to operate in the markets that we do, and we take this very seriously. And as a company, as a growth company, we continue to look at business development opportunities, exploration, or further inorganic growth. We continue to evaluate transactions and only transactions really that make sense for shareholders. So with that, Rosie, I've finished the the slide pack and I'm happy to open up to any questions that there may be.
Thank you. You will be advised when to go ahead. So the first question on the phone line comes from Teodor Nilsson from SB Global Markets. Please go ahead.
Good morning, guys, and thanks for taking my questions. I have three questions, actually. The first one is on by the way, very exciting that you will will dividend out the the the total shares. So so so in terms of cash dividend, should we expect you to pay any cash dividend to when two next phases have come onstream? And second question is on CapEx 2020.
Could you just give us a reminder of how much you will spend on TPS and also in this approved full next year? And third question is just minus in the third quarter financials. You have very low lifting costs both on an absolute basis and also relative to to to listing in third quarter compared to second quarter. Could could you just briefly explain that? Thanks.
Sure. Sorry, Taylor. Can can you just repeat the third question so we understand that properly?
Third question is reasonable for very low lifting costs in third quarter compared to second quarter.
Okay. Right. Okay. So on your first question on dividends, well, you know, we we, you know, as as the slide, the this looking forward to 2022 slide states, you know, we are on a we're currently in a in a in a investment phase. We are dedicating CapEx to Dusufu phase two, Dusufu phase three.
We have activities in in Tunisia as well, including the Salloum exploration well. So, you know, we're very much focused on on on the investments required to lift that production to a level where, again, in that slide, you can see us if you kind of scroll forward, if you can imagine a couple years from now when we should be producing a very big wall of of post of tax operating cash flow. So, you know, we we we're trying to show the way towards what we see the company looking like, you know, as it currently as it currently is constituted today a couple years from now, and that would be in a very, very strong cash flow position. We are, in the interim, of course, intending to pay the the Petronor dividend, Petronor share dividend. That deal needs to complete, but assuming that it does, we have every intention of distributing those shares in the form of a dividend.
In respect of CapEx, the CapEx in Tunisia, will spend roughly, about $8,000,000 on the, Salloum, Westwell, during the course of next year. There could be some smaller CapEx in the TPS assets. A lot of the workover activity that Richard has discussed is more of an OpEx line item than a CapEx one. These don't tend to be very expensive operations to restore production, to increase production. There is one contingent well in there, the Guebiba sidetrack that we've mentioned, which is a slightly higher CapEx line item.
It could be a million or $2,000,000 net to Panoro during the course of 2020. That is still a contingent line item. Dussafu, it's kind of hard to give exact guidance because what ends up happening is we approve CapEx together with VWO, and and some of that money gets spent straddling years. And sometimes the cash calls don't match exactly the the perfect calendar year. But as we stated before, phase two is about $240,000,000, gross, project, which we're well into into the middle of that.
But but there is still CapEx to come. But it's hard to give exact guidance on that at the moment, but we can maybe seek to refine that with you offline for your next for your next note. And on the lifting cost, Qazi, do wanna touch on that?
Yes. So we basically, obviously, have, you know, different licenses where lifting are from with different per barrel operating costs. You know, in this quarter, we had lift ings both from one lifting is from Gabon and Tunisia, but no lifting from Ajay. So obviously, for Ajay, the the lifting costs are a little bit higher on a per barrel basis than than the rest of the portfolio we have. And as such, it's reflected in the OpEx cost for the quarter.
Yes. And Pedro, I guess it gets back to this whole issue around revenue recognition and the lumpiness of the quarters. We prefer to really look at more like half yearly trends to kind of an accurate impression of the various P and L line items.
Okay. Sure. Thank you.
We have a question now from the line of Jorgen Thorstenton from Fermi Securities. Congratulations
on a good quarter. Just one for me on the Southern West well. You say that net CapEx to you guys remaining in 2020 is €8,000,000 But on the specific well cost, which is I assume to be lower than the Dussafu Wells, would sort of $1,213,000,000 be a fair estimate on on the well cost there?
Morning, Jorgen. How are you? Yes. I think that's a that's a that's a fair estimate. The, you know, the the the situation is obviously different.
The Dussafu ones are are are are offshore wells. They're straight vertical wells, which are obviously designed to be P and A once we hopefully make the discoveries. This is a deviated well-being drilled from onshore. So it's a different animal. But your estimates are are roughly correct.
Yes. K. Thanks.
We have no further questions coming through on the phone lines at this time. So I'll now hand back to to John to go through any possible webcast questions.
Mhmm. Great. Well, I I appreciate everybody dialing in. And, again, hopefully, enjoying reading about our journey. We are, of course, available offline as well through the info email address we have at Panoro or for those who would like to speak directly, you can send us an email and we can set up a call.
Again, I thank you very, very much. Thank you very much, Rosie, to you as well, and goodbye.
Thank you, everyone, for joining today's conference. You may now disconnect your lines. Hosts, please stay connected and await further instructions. Thank you.