Morning, everyone. John Hamilton here, Chief Executive of Panoro. On this call this morning, I'm also joined by Nigel McKim, our Projects Director, and Richard Morton, our Technical Director, Qazi Qadeer, our CFO, here to talk to you today about our trading and financial update as at the end of the third quarter. As a reminder, today's conference call contains certain statements that are or may be deemed 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 we believe are appropriate under the circumstances. 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.
As a reminder, you can ask questions either by raising your hand, as you see the hand icon there, or you can type in a question. We will take questions at the end, and you can either raise your hand, in which case we will unmute you, and you can ask your question live, or you can type in a question, which we'll try and address as well. Next slide, please. Great. Just as a reminder, I want to talk a little bit about our value creation model, our strategy as a company, because I think it's very relevant in this time. We have an energy transition going on. We have higher oil prices.
We ourselves believe that we are into a long cycle of potentially volatile, but certainly higher oil prices, as oil demand continues to be present as we migrate towards the energy transition. We are entirely focused our strategy on how to maximize the position over the coming number of years that we believe oil will continue to be an important commodity and one that's going to be high demand. We've seen obviously a significant underinvestment in oil and gas capital expenditure globally over the past few years, which we believe will continue to support high oil prices. In positioning ourselves, we are looking from a capital allocation strategy towards a brownfield incremental production. We're looking to grow our production base, which those of you follow us know what we're doing.
We have a huge contingent resource base, 33 million bbl, which we hope to bring into the proven and probable reserve category in due course. We have a very good inventory of proven bbl, but also contingent resources for which to produce over the number of years coming forward. We're also looking at just opportunistic acquisitions. We've done a couple, OMV and Tullow, and we positioned ourselves to be one of a very few credible buyers in the market for what we believe will continue to be opportunities as larger oil companies dispose of oil assets. Exploration, we're not an exploration company. However, exploration does have its part in terms of making sure that you continue to replace the bbl you produce by finding new ones. We are focused...
Where we do exploration, we're focused on things that are very, very short cycle back into production, preferably near where we're already producing. Again, looking at infrastructure-led exploration, short cycle exploration, which can be brought into production, not frontier exploration type of opportunities. What that all means is that we've made a number of statements today that the board has decided on, where we're looking at the feasibility of bringing forward our very first cash dividend. We'd indicated at the time of the Tullow acquisitions that we're looking at mid-2023. Why at 2023? That was when the Hibiscus Ruche development would come online. We would de-risk that.
At that point, we were prepared to start with a dividend payment, cash dividend. We're seeing higher oil prices now, and the board has very much discussed what our dividend policy should be, and that dividend policy is very much about returning a significant portion of free cash flow back to shareholders. We'll be reinvesting some of that money back into the business, clearly, but a lot of it will be going back to shareholders. The timing of that first dividend is dependent still on a few things. We're looking at capital expenditure. We're looking at oil prices that they dropped off a little bit recently, but not too badly. Operational performance of the assets and critically the timing of our liftings.
The liftings is really what drives, you know, when we get our cash in the door and when we can pay that back out to shareholders. Hopefully the message has come through loud and clear today that we are looking potentially materially bringing forward that first dividend date, and we will be communicating that in the next couple of months where we see that evolving. Next slide, please. If you take our thesis as true, which is that oil prices will continue to be strong, perhaps even get stronger, we are exceptionally well-positioned to take advantage of that. We have as at the end of the third quarter 3.5 times more production than we had last year.
At the same time, at the moment, you know, we're producing, you know, close to 8,500 bbl a day, which is four times higher, and we're on track through committed and an agreed work programs to get in excess of 12,000 bbl a day during the course of 2023 over the next 18 months. We really, we're hoping to continue to ride the commodity cycle and delivering that organic production growth through our existing portfolio. I think we're exceptionally well-positioned. Next slide, please. Some numbers, I won't go through these in great detail. They're in the report. We're showing a few things here on a pro forma basis. Again, we completed the transactions with Tullow in March and May respectively, although we have the economic benefit of those from the first of January.
When I say pro forma, it means assuming that we legally own them from the first of January. You can see revenues of $107 million, net cash from operations $42 million. That's against a realized oil price of $67 a barrel. Now, we didn't have any liftings in the third quarter. That was well flagged. We have four liftings, however, in the fourth quarter. We have over 1 million bbl being sold in the fourth quarter. We've already lifted 130,000 bbl in Gabon. We have another Gabonese lifting. We have a very large Equatorial Guinea lifting in early December, and we have a Tunisian lifting towards the end of this month.
What you're gonna see is, fourth quarter is gonna be, very different, in some ways, almost equivalent to, not quite perhaps, to the nine months leading up to that point. That really emphasizes the point around lifting. Sometimes we have lifting, sometimes we don't. You really need to judge us, I think, on a longer period of time other than a quarterly. Next slide, please. This is a lot of detail. I'm not gonna go through it, but it's trying to reconcile the IFRS reporting versus the pro forma basis.
This is something we continue to do this year post the acquisitions because a lot of things were moving around on the P&L and on the balance sheet as a result of those transactions we did that I think confused the financial picture a little bit. In this slide, we simply try to break out exactly what's happening on an IFRS versus pro forma basis and trying to explain some of the larger movements. I don't propose to go into those because these have been well flagged, and there's nothing new here in this particular slide that I think anybody will find surprising. Nonetheless, for full transparency, we'll continue with this presentation all the way through the fourth quarter of this year. For next year's financials, it'll just be IFRS. Next slide, please.
Again, just to provide as much transparency to our business as possible, we will continue to show a reconciliation of cash flow. This is a cash flow from the start of the period in the beginning of January, all the way through the year. Everybody can see how cash ends up, where cash from operations is, which is obviously for us, the key aspect here. Again, this is a chart that we'll continue to show to provide full transparency to our business. Next slide, please. CapEx. Again, CapEx guidance is about $23 million left to spend in the fourth quarter. You know, as everybody knows, we had active campaigns in EG and in Gabon. Some smaller things happening in Tunisia as well.
The Hibiscus Ruche Phase I is developing on schedule and within budget so far. The Gazania well in South Africa, we'll touch on a little bit. That's been deferred to 2023. This is our CapEx guidance for the remainder of the year. Next slide, please. An operations update in Equatorial Guinea. We drilled our first new infill well since 2015 at the Okume Complex. We had excellent quality oil saturated sands. That well is now on stream. It's performing way ahead of expectation. That's the very good news. The second infill well is underway, and we expect that to be on stream probably in Q4, probably in the next few weeks to a month. We have a new gas lift distribution unit installed in the Ceiba Field.
The partners are now very actively focused on further production growth activities in 2022 and beyond, comprising additional workover activity and potential development drilling. Equatorial Guinea is going extremely well, perhaps a little bit slower in terms of that production growth than we had expected, but that is now starting to come online in November and December. We're very, very pleased with what's happening there. In Gabon, the final two production wells were drilled as part of the Tortue Phase II. Those are the final wells for Tortue. Those are now on stream. Production at the moment is being optimized with the previously communicated shortage of gas lift capacity affecting the abilities for all the wells to simultaneously produce at their potential.
BW is very, very much focused on trying to get these wells to hit their full stride at the moment, and they're working hard on that. The Hibiscus Ruche Phase I development, as I previously mentioned, remains on schedule and within budget for first oil anticipated in Q4 2022. Within a year from now, we should have the first of the new wells, six new wells, the first of those coming online in the fourth quarter of next year. Hibiscus North was a discovery in the quarter that will be incorporated into future development planning. In Tunisia has been rock solid. We have a number of well operating activities going on, upgrades at various facilities.
We've had some really good success with some workovers there, showing that stimulation of the wells in conjunction with the use of ESP replacements can really boost production materially in well. We're looking at our entire well inventory now to see where else we might be able to apply this stimulation technology. We're looking at a lot of different things together with our partner on subsurface remodeling. One of the things about this slide that I like is that whereas perhaps a year ago or two years ago, we might have had one or two assets in which to talk about, and then we're fully seeing the benefits here of a diversified portfolio, a diversified by country, by operator.
That's really providing for us a really good stability, I think, and it's exactly where we want to be, is having a very diversified production portfolio, and that's showing its strengths right now. Next slide, please. We announced in the quarter as well a provisional license award in Gabon. Getting back to our exploration strategy, we are not frontier explorers. That's not our strategy. Our strategy is to continue to try and find oil that is near existing infrastructure. Again, to try and tie back short cycle exploration, where if you make a discovery, you can tie it back into infrastructure, not in 10 years from now, but in a couple of years from now.
With that in mind, we have been spending two years now working on these exploration blocks, which surround the Dussafu acreage and nearby to the Etame complex, which is operated by Vaalco. We were able to bring in BW and able to bring in Vaalco to join our group. We, between the three of us, effectively know this area better than anybody else. We have a provisional award. That doesn't mean it's awarded. We still have some negotiations with the government to do. This is exactly the kind of thing you would like to see us do, we would like to see us do on the exploration portfolio, is doing smart things in and around places where we know that if we make a discovery, we can produce the oil pretty quickly. Next slide, please.
I'll just finalize before questions. We have a very busy Q4. We have about 1 million bbl, over 1 million bbl being lifted against the current strong oil price environment. We have new wells on stream in EG and in Gabon. We're moving towards, let's say, 8,500 bbl. Perhaps can get a little bit higher than that by the end of the year, but let's see. It's a good, strong production. That's a good 10%, 15% higher than the year to date average. We're very pleased with that. We've expanded our footprint in Gabon, hopefully provisionally, which is consistent with our strategy. Strong financial position, $45 million cash in the bank at the end of the quarter and net debt of approximately $52 million.
It's our intention to pay a sustainable quarterly dividend payout and return a significant portion of free cash flow to shareholders with buybacks as a complementary mechanism. We are assessing the feasibility of bringing forward that maintenance cash dividend as soon as possible. Our pro-growth prospects remain strong. With that, I'll flip to the next slide, just to remind you how to ask a question, and we will open up question. You can either raise your hand with the hand icon, or you can type in a question. My colleague, Qazi, is going to flag up any questions to me, and I will allocate. I'll either answer them myself or allocate them to the team.
Thank you, John. Good morning, everyone. We have the first question from Sigurd Skardsheim. I'm going to open your line, Sigurd. You may speak now, please. Once again, Sigurd, if you are listening, please ask your question. I think there's some technical issue. I will move on to the next one. Next question we have is from Stephane Foucaud from Auctus. Stephane, you may please speak now.
Yes. Hi. Morning, guys. A few questions for me. The first one I saw that the production guidance at the end of the year has been adjusted a bit. I was wondering which moving parts have changed. On the CapEx side, you talk about EG, and I think likewise, the budget for 2021, there is more allocated to EG. And again, in quite material way, I think I was wondering what are the activities behind the change. And lastly, if you could talk about the dividend quite a bit. Do you have some sort of framework in mind? I think you talk about free cash flow, but would that be. Are we talking in terms of formula for some sort of share of earnings, share of cash flow, share of free cash flow?
What's the general idea do you have? Thank you.
Sure. Stephane, your first question, yes, we've trimmed our sort of year-end number a bit. That is, you know, principally down to EG doing fine. The first well is coming online well. Some of the other smaller activities are also now starting to harvest. I think there's just a bit of conservatism being communicated here in terms of that year-end number. You know, it's principally down to, really, I think Dussafu. We just brought those two new wells online. You know, on paper, you know, they add production immediately. I think the reality is we're still trying to optimize how that cluster of six different wells interface with each other, the use of the facilities on board, including the gas lift compressor.
BW are busy trying to optimize that at the moment. You're just finding a little bit of conservatism baked into our revised guidance, which I think is sensible. Nothing has really changed at the end of the day. We, you know, continue to be on a growth trajectory. It's just that year-end number, it's just been shaved a little bit, and that's principally down to some conservatism on the Dussafu, you know, peak number in the quarter. EG CapEx is up slightly. I think we have an excellent first well. Really, it's probably producing, I'd say almost double what we expected to. You know, it's early days still, but it looks really good well.
There were some increased costs in the drilling of that well. There was also a couple smaller unplanned activities with the rig and some a little bit of flat time on the drilling. That's resulted in small increase in CapEx in EG. With respect to the dividend, I think the model is very much gonna be based around free cash flow. You know, I think the board is what they wanna do is they want to start trying to articulate this more and more. Rather than come out with a precise formula now, which, you know, on paper that dividend is a year and a half away, so it's a little early for that.
What we're obviously communicating is we think that under certain circumstances, we can bring that materially forward. It's likely to be something around free cash flow rather than earnings, or something down the P&L. I think that is really based on, you know, sometimes a P&L for an E&P company can be, you know, there's a lot of stuff happening below the line, which. When in fact, what you're really concentrating on here is cash flow generation, post CapEx, and the allocation of that free cash flow towards shareholder dividends, towards, you know, new CapEx, which hopefully maintains or increases production, and obviously towards just debt service, which is normal. It's likely to be something around free cash flow.
Very good. Thank you.
Thank you very much. My next question is from Teodor Nilsen. Teodor, your line is open. You may speak now, please.
Thank you, guys, and thanks for taking my questions. Three questions from me if I may. Firstly, just on the Gazania well, that is obviously now postponed until 2022. So just wondering if you could provide some more color on when in 2022 you expect that well to be drilled. Second question is on hedging strategy for 2022. Of course, you hedged some of the volumes this year. How do you think around 2022 and the current prices and your hedging? My third and final question is on the lifting you had this far in Q4, could you indicate what kind of realized oil prices you had on that one? Thank you.
Sure. Gazania, Africa Energy, you know, in their third quarter results, you know, they reported that the operator, Azinam, they have been evaluating rig availability and really looking to maximize, or I should say, minimize the mobilization and demobilization cost of the rig. You know, ideally for a rig in a location like that, you wanna try and get a rig that's in the area. Unfortunately, they couldn't get one that was gonna drill by the end of this year. Africa Energy have reported that the license expires at the end of 2022 and they would hope to drill before then. They haven't provided any additional guidance to that.
What they have pointed out is that, you know, they're expecting Azinam to honor the terms of their farm-in agreement by the end of this year. We may well see some progress there by the end of the year, not the actual spudding of the well, but the sort of contractual arrangements around the identification of the rig. It's a little early for us, certainly as non-operator to provide any additional guidance on that. Now, your third question was around hedging. Second question was around the lifting, right, Theodore?
Yes, that's correct. The hedging and liftings were the two last questions.
Yeah. Liftings, we lifted about 130,000 bbl net to us a couple weeks ago. That price is on a month average for November. Whatever the average Dated Brent is for the month, which I suspect will be around $80 a barrel. It depends on what happens the last week of the month. Obviously, we enjoyed oil prices that were higher than $80 for most of the month. They dropped off a little bit, as everybody's seen over the past week or two, or past week, really. We probably expect around $80 a barrel for that one. We are lifting in Tunisia in about a week's time. That will price on in and around the oil price at the time of the lifting.
If oil is at $78, you know, it'll be $78, you know, less than that trades at a $1.02 discount to Brent crude. We're then lifting early December in Equatorial Guinea, where that also prices in and around the lifting timing. You know, hopefully, oil will be nice and strong in about 10 days time, which is when we lift. Then we have another Gabonese lifting towards the back end of December, and that one will price on the month average for December. Each of the contracts are slightly different, but you get some averaging effect in Gabon. The others are usually priced in and around the time of the lifting. In terms of hedging, we are largely unhedged in 2022.
We historically have some hedges in linked to our Tunisian crude, which is linked back to the loan facility we originally agreed at the time. Where we've hedged approximately 700 bbl a day to Panoro. Those are the only hedges we have, is 700 bbl a day in 2022. For the rest, we're nicely exposed to the higher oil price. Our hedging strategy will probably be to try to manage hedging in and around our lifting. Once we have some clarity on the lifting frequency. Remember, we lift our own barrels.
Once we identify when we think we're lifting, we will seek to try and hedge a certain amount of production, maybe 30%, 40% of production, in and around the timing of those liftings, just to make sure we take some of the drama out of the actual pricing, which is exactly what we've done in the fourth quarter of this year as well. We did a little hedging, as previously disclosed, in and around this EG lifting. We will continue to, I think, operationally hedge. We don't have any longer-term hedges in place.
Okay. Understood. Thank you.
Hope that answers the question.
Yes, absolutely. Thank you.
Thank you, Teodor. We have another question from Nikolas Stefanou. Nicholas, your line is open. You may unmute from your side and speak, please.
Hi guys, can you hear me?
Yes.
All right. John, just a couple of points on EG and then a corporate one. Just for 2022, because, you know, the rig is already there, I presume. In terms of, like, the logistics and in terms of, like, additional drilling, the time window must be quite short. What's the thinking about that? Because you are, I presume it's not gonna be a case where the rig will leave and then come back again. If you could just touch on that. Then on the gas, I think Trident, what they're trying to do is reduce the flaring in EG quite a bit, and I would expect that to include a gas reinjection.
Any kind of like updates on that you could give us some color? Then on M&A, are you kind of like you know down for say you know now or maybe you know the next couple of years, or do you still think oh there's quite a bit of opportunity in West Africa and you're still like on the lookout for further stuff?
Let me answer your second one first, and then I might ask my colleague Nigel or our colleagues Nigel and Richard to chip in on the gas in EG. You know, the way we look at acquisitions is very opportunistic. I mean, we think that the picture looks very good. We have large oil companies needing to sell for strategic reasons, energy transition. We're seeing, we believe, fewer and fewer competitors for more assets in the region. Access to capital has been difficult for many. So we do see a lot of opportunity and we need to keep a very active eye open for those opportunities. We think we're a very, very credible buyer.
We've demonstrated that a couple of times now that we've been able to do accretive transactions for our shareholders. However, we're not in a rush, and we know that we have a good thing going with our organic production growth. We are absolutely committed to being a dividend payer as soon as we possibly can. We won't do anything that kind of disrupts that trajectory that we have. We look because that's our job. We have to continue to look at opportunities, and we think there are gonna be a lot of them. We're not gonna be overeager. We're not in a rush to do anything. There's certainly gonna be. I believe over the next one to three years, there's gonna be a lot of opportunity to do more.
In respect to EG, yeah, the rig was there for a period of time. It has another commitment after that, so it needs to go. There are a number of other activities that are being identified by the operator in EG for 2022, which I think are gonna be quite positive. We'll be able to give an update in January when we come with our guidance for the year in terms of what we think that actually looks like for us.
We're very, very pleased with the progress the operator's making in terms of identifying not just drilling new wells, because those are always exciting of course, but there's so many other things that can be done on those operations to help maintain and boost production. I don't know. Nigel, do you want to come in at all on any of those initiatives?
Certainly, John. Good morning, everyone. Good morning, Nikolas. I guess you specifically asked about the gas flaring at EG, and that's very much a topic of conversation within the partnership at present and work that the operator is actively engaged with just now. We're not able to provide you any details just yet. It's very much work in progress. There is a longer term need and strategy to reduce flaring and to improve the management of gas across the asset.
It's realized that we can better apply the gas that's being flared to gas lift usage on both Okume and Ceiba and that there are a series of activities that are being looked at to do just that, to distribute the gas better and to manage the gas that the asset is generating.
Okay. Understood. A quick follow-up on Nige. Remember the infill well program was going to be three wells at Okume, right? Is that still the plan?
Nick, in our report, you may not have a chance to get in detail. We have drilled and completed one well, which is going extremely well, beyond expectations. The second one is just completing as we speak. The third, the top hole section was drilled, but we ran out a little bit of time, so that well will be deferred until well, probably into 2022, when we get the rig back, assuming the rig will come back. We've kind of drilled 2.5, if I can put it that way.
Okay.
The third well will be brought online at a later time. Now, what Kosmos has also, you know, communicated all this as well, is that I think you know, the sort of outperformance of the first well kind of made that decision a little bit easier, as it were.
Okay.
We kind of timed out a little bit on the rig.
All right. Thank you.
Thank you, Nikolas. We have one question on the website, which basically is about the situation on Sfax offshore permit, if you can give some more detail on that.
Sure. Yeah, we're making progress on that one. It's been slow going. As those of you who follow us know, we have a number of conversations with the government in Tunisia about sort of breaking this impasse that we have. We've put a paragraph in our third quarter report in respect of that. The solution is still evolving, but it looks like it's gonna be a renewal of the exploration period on that block. That's a very positive development. We secure the block for quite a bit more time. They will return part of the bank guarantee to us, and draw a part of it reflecting what they think is DNO's non-fulfillment.
If you remember, DNO left $8 million behind for us to deal with this issue. It's just a question around how much of that $8 million bucks we need to give to the government, how much we keep of the original DNO deposit. I think it's moving in the right direction. We still have some work to do on it. You know, I don't think there's any real near-term activity on Sfax offshore, but I think it's moving in the right direction.
Thank you, John. We have another question on the phone line. It's from Sigurd Skardsheim. Sigurd, your line is open. Please speak. Sigurd, we can't hear you still. Again, a reminder, your line is open now. I think we have no more questions either on the web or on the phone call. Thanks, John.
Thank you. What I'd say to Sigurd, if you can hear us, is that, you know, drop us an email if you like. We'll try and answer your question, bilaterally as it were. I thank everybody for attending. Thank you very much and, keep paying attention to us. I think we've got a lot of good stuff coming. Thank you.