Good morning, everybody. This is
John Hamilton, and welcome to our trading and financial update for the Q1 of 2021. I'm joined today by my colleagues, Richard Morton, our Technical Director Nigel McKim, our Projects Director Tazeen Kadir, our CFO, take us through some slides following which we'll be open for Q and A. 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, perception of historical trends, current conditions, expected future developments and other factors that we believe are appropriate to make under the circumstances. Although we believe the expectations reflected in forward looking statements.
Our 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. So the current slide you're seeing is the way in which you can ask questions either during the slide presentation, in which case we'll pick them up if you write them in or you can raise your hand using the hand icon and we'll try and take your verbal questions as well. Next slide please. So a quick overview of the company. We believe this is our most important quarter ever in the history of Panoro.
We completed the acquisitions from Tullow in Equatorial Guinea and increasing our stake in Gabon. That transaction should close soon in Gabon. And what we have now is what we believe to be truly a full cycle E and P company. We have operations in the North Africa right down from the tip in South Africa. We have production diversified across 3 different countries.
We have 2P and 2C resource number in excess of 70,000,000 barrels. We have a reserve long reserve life on our assets and we hope to be producing somewhere in the range of around 9,000 barrels a day during the course of this year. So we believe through these transactions and over the past couple of years, we have built a very sustainable business E and P in Africa. I'm very proud of that. Next slide please.
So so some of the key messages we want to get across in terms of the equity story here are 3 key messages. One is that we are in production growth mode. We organic production growth in our portfolio. We hope to be producing around 9,000 barrels a day this year on average. We've drilled 5 new production wells still this year, 3 in Equatorial Guinea and 2 in Gabon to be brought on stream.
We hope to have an exit rate in excess of 9,500 barrels a day at the end of the year and we're on target producing excess of 12,000 barrels a day during the course of 2023. So we have within the portfolio production growth. We also have near term triggers. We have an exploration well in the bond at the North. We have an exploration well in South Africa, which we hope to by the end of the year.
We also have the Petronor dividend, the dividend of Petronor shares which we hope to complete that transaction in the near future. On a cash flow basis, we can start being judged now on a cash slow basis. We have very strong free cash flow in this business. We are fully financed for the growth that we have announced and we're well positioned to pay dividends in 2023. These are the key messages we want to get across.
Next slide please. So on a pro form a basis, our 2021 Q1 highlights, we obviously announced the transformational acquisitions. Our group. Net production was 8,000 barrels a day on pro form a basis. By pro form a, we mean including the effect of the increased stake in Gabon and the new asset in Equatorial Guinea.
We have production growth activities across the portfolio, which I'll touch on. We had a big quarter in terms of liftings. We had 3 crude liftings, 1 in Tunisia, 1 in Gabon and a big one in EG, dollars 59,000,000 Cargo in EG. And although it gets kind of repetitive to talk about these days, we still are working in a COVID environment and we're pleased to say that our systems, our health and safety record hand. Our protocols improved again resilient in the quarter.
On the financial side, you can see the effect on a pro form a basis of our revenue Line and also our EBITDA, which is $25,000,000 that's been reduced $31,000,000 simply on an accounting basis given the over lived position in Equatorial Guinea when we lifted that cargo. So that will unwind during the course of the year. So it's hard to look at it on a quarterly basis because of that over the thunder lift, but it gives you a feeling on the EBITDA side about the strength of this business now with very strong numbers coming through, which you'll see again that overlooked position from an accounting perspective on $1,000,000 that $31,000,000 recovered back into EBITDA. And again, we have a lot going on our balance sheet at the end of the quarter. It's kind of hard to describe it because we have all the movements around the completion of the acquisitions and draw downs of debts and all that.
And we also have this huge receivable $59,000,000 from the cargo we moved to VG. We received the cash for that now in April. But so the balance sheet is quite different as well. Next slide please. Financials in some more detail.
I won't go into them in a huge level of detail here. But as you can see what we're doing is we're reporting our IFRS reporting in 1 column showing the effect of the pro form a of the acquisitions and on a pro form a basis showing the financials where again you can see $77,000,000 of pro form a revenue with EBITDA of $25,000,000 recognizing the $31,000,000 of over lift that comes through. So we're in a very, very strong position Financially. Next slide please. So what we'd like to do is take you through at a high level each of the assets we have now.
At Coteur Guinea, we produced net to Panoro 4,300 barrels a day. On a gross basis, this is 30,000 barrels a day, which is exactly on target from what we anticipated. Equatorial Guinea now represents more than 50% of our production. So this is now our most important asset by our in terms of production. And what's quite exciting about Equatorial Guinea, we believe, is that we're really on the cusp of the operator finally drilling new wells and trying to boost production here.
So the past 3 years, the operator Trident bought this asset 3 years ago and they spent those 3 years upgrading the facilities. They've not drilled any new wells and in fact they've been no new wells drilled in Equatorial Guinea since 2015. So the real task Guinea since 2015. So the real task from when they bought the asset from Hess was to improve the infrastructure work on debottlenecking sort of, if I can put it this way, kind of boring stuff, a resting decline on wells, looking to do things smarter and better. And So now it's the harvest time, and the first of those will be 3 wells to be drilled this year.
The first will spud in June in the Elon field. And again, these are the first wells to be drilled since 2015. I mentioned the cargo that we've already lifted, which was brilliant. We had $59,000,000 cargo 1 week after completing the transaction where we paid $88,000,000 for this asset. So again you can show at these oil prices how cash generative this can be for Panoro.
The Okume upgrade project is nearing completion. There's additional power and water injection gasoline capacity being installed. So again, things that are improving production and the operations. We also have commenced 2nd phase of the ESP program there. So we're going to start seeing production growth in those assets during the course of this year.
And perhaps just as importantly, the JV is very focused on production growth in 2022 and beyond. So we're really, again at the point here where the joint venture is now focused on boosting production having spent 3 years investing in this asset. Next slide please. These 2,380 barrels during the quarter. So that concludes the effect of the additional 10% from Tullow.
This is production from 4 wells. As those of you who follow us will know, we are busy now drilling the Tortue Reduction well, DTM-seven, which is the well is ongoing now and we plan to hook that well up and DTM-6H, 6H, which is the low we drew right at the time COVID really hit and bring those online during the end of Q3 Acthar 2. So we should see production growth coming in towards the back end of the year in Gabon. We did lift one lifting in that 56 1,000 barrels during the quarter. That does not that number does not include the effect of the TELO 10%, but just the pure Panoro one.
And Hibiscus Rouge development, first of all, is now targeted for the Q4 of 2022. BW Energy. The operator announced their results last week and probably the good news here that we've moved up the first oil target from that development from the Q1 of 2023 down to the Q4 of 2022. So there's been some very good news, very good progress on that the project, which will see production get towards the FPSO capacity of 45,000 barrels a day or more. We're going to be drilling the Hibiscus North prospect in the Q3.
So we have another exploration trigger in there. The Hibiscus extension well we drilled in May did not counter hydrocarbons. And lastly, we're expecting the closing of the Tullow acquisition during the Q2, so in other words, in the next couple of weeks. So we look to complete that one soon. Gabon now represents approximately 35% of our production.
Tunisia. Next slide please. Tunisia. We produced a little over 1300 barrels a day net to Panoro, 4,500 barrels a day gross. Production is frequently in excess 5,000 barrels a day.
So over a period of the quarter, you get certain shut ins of wells or temporary shutdowns that might impact the average over a quarter. But it's fair to say that production is frequently in excess of 5,000 barrels a day. I think it really demonstrates what we've done since we've taken over the asset where we've managed to boost production by 30% or 40% from the time that we bought it from Olympi. So again, we're very, very happy with our Tunisian asset and the production growth we've managed to achieve. We also had a lifting in the quarter for about 96,000 barrels at about $60 a barrel.
And we continue with the production growth story in Tunisia with workovers planned in Eliane and Sarsina are the ones that are right in front of us now. So we hope to be able to continue the production growth story in Tunisia as we go. We're also looking at the longer term potential of the asset working with ETAP, our partner to update the sub service models and plan further developments in some of the fields, including most importantly probably the Gluhiba field. All of this is true for all of the fields in Tunisia as well. Next slide please.
2019. So
in South Africa, we recently announced the completion of that transaction. We got the ministerial consent there, which is Astoria. It took a little while to come. The focus is now really on getting after the well and procuring a rig for the Gazania-one well, which we hope to Spud by the end of the year. This is a very significant prospect.
Its existing discovery, the AJ-one discovery made back in 1988 back in the part time times. And what we're trying to do here with this well is to come up dip of that targeting 2 different geological prospects within this basin this coming uptick from the discovery. The success case has the potential to be in excess of 300,000,000 barrels gross in terms of Spector Resource. So it's very meaningful well and we again we hope to spelt that well by the end of this year. So we have a very interesting exploration figure later this year in South Africa.
Next slide please. So this is our guidance. This is unchanged from what we provided at the time of our February Q4, our 2020 results. We haven't changed anything here. The production around 9,000 barrels a day, again benefiting from the fact that we have diversified production from 3 different assets here.
We've not changed our production guidance. On the capital expenditure side, we've not changed this number. In particular Gabon is a little susceptible to exact timing differences because the Hibiscus Rouge development is an it's an 18 month project basically. So exactly when CapEx gets spent, whether it's in December 2021 or January 2022, you might find some differences Zimniz numbers. But overall over the next couple of years, I think we've provided good guidance on the CapEx on that.
But we've not amended our CapEx guidance. A number of listings, we also not done that. We had 3 listings in this quarter. In the second quarter, we will have 2 liftings in Gabon and 1 in Tunisia. And then the 4th quarter is when we probably had another EG lifting that's probably a 650,000 barrel lifting probably in the Q4 as well.
So as you one can see with our drug any lifting that we've just had. Those are quite lumpy affairs. When they come, they're big numbers. And when they fall exactly in the quarter, we recognize revenue at Time of Lifting. So you could see on a quarterly basis, some quite some difference, but the important thing is to look out over a period of a financial year.
Next slide please. So here's a summary of the near term triggers that we have and everything going on in the company. Again, in Gabon, we're drilling the DTM-seven well, looking at DTM-six. That all happened probably towards the end of Q3. We are drilling an exploration well on Hibiscus North and plan to drill wells every year in Gabon.
The Hibiscus North prospect is unaffected by what happened in Hibiscus. It's a very robust structure and we're looking forward to drilling that one. Equatorial Guinea. As I mentioned, the first 3 infill wells being drilled this year. We will see this trend, we believe, continue into 2022.
Those additional wells in EJ have not been sanctioned yet by the joint venture that typically happens in Q3. But we would fully expect to see a number of production wells being drilled every year in Equatorial getting trying to again increase production there. Indonesia. We continue with our well workover activity. So it could be some news flow there coming through on the production side.
With the Pexanor dividend, which we intend to distribute to our shareholders upon completion of that transaction and we have the exploration well in South Africa. So we have a busy year ahead of us. Next slide please. And just a comments on where we are currently in terms of our market cap, which is obviously taking a bit of a hit on the Hibiscus extension well, the strengthening of the NOK, perhaps some other factors as well in there. But our market cap has come down quite a bit from where it was prior to drilling that well, which is surprising to us.
What we've done here on this slide is to kind of just take some of the analyst projections, Shin's take an average of where we see the analysts pointing and trying to compare that against our market cap. And what you can see here is on an operating cash flow basis $60 Brent. We'll be generating in the next 3 years $260,000,000 according to the analyst assumptions, again an average of them and $450,000,000 cash flow over the next 5 years. If we look at free cash flow, which the only difference between the two really is its capital expenditure. We're obviously spending quite a bit of money in Gabon at the moment for viscous Rouge development.
So you can see in the next 3 years that we'll be generating about $150,000,000 in free cash and then if you look over the next 5 years considerably more. And when you compare that against our market cap, we would argue that this is quite a compelling valuation story. I don't think you'll find many other companies with this kind of cash flow versus market cap dynamic. The analysts are estimating free cash flow yields of between 20% 40% over the 4 years as we go forward. And again, the important part is we have free cash flow really starts taking off in 2023 as we get through CapEx period in the viscous Rouge development.
So we're going to become a very, very strong free cash flow generating company. And beyond the cash flow in that period. We obviously have a dividend we're planning to pay dividends. We're fully financed. We have a reserve life that is well in excess of 10 years here.
We've got 33,000,000 barrels of 2C resources, which are not included in any of these assumptions. So we don't include any contingent resource in our production assumptions, in cash flow assumptions. Those are things that have not yet been sanctioned to be produced and most of those reside within Equatorial Guinea. We can come back to that in the Q and A. So there is considerable upside here from these numbers.
And on top of that, we have other triggers every year. We have exploration wells each year and we have a growth strategy to complement return of cash to shareholders. So we think we have quite a dynamic company that's going to be significant cash flow generator with many other triggers on it against the rather what we believe is a modest market capitalization. So with that, I'm finishing up and I will open up to questions. Kathy is going to share the questioning.
So again, as a reminder, you can either raise your hand using the icon or you can type in a question to the question panel. We're happy to take questions and my colleagues may join in some of those as well.
We have a question from Stephane Fouchard. I'm going to open the line. Stefaan, you are speaking now, please.
Yes. Hi, guys. Good morning. A few questions for me. First, an accounting one.
The $6,700,000 current payable, I assume that refers to the expected payments of Gabonon closing. It's my first question. My second question around Equatorial Guinea. And I was wondering whether, 1, the 3 wells that the delays in 2021. Would that impact on reserve, particularly whether some of the 2C are being targeted?
And related to E. J, how do you see the potential reserve additional reserve booking moving forward with those 2C conversion. Is it a progressive affair? Or would you see a point where you would be starting sanctioning a healthy drilling program that would certainly boost the 2Q reserves. Thank you.
Kajee, do you want to take
the first one on the payable position and then perhaps Nigel, you can Nigel and Richard and more restrictions can answer the EG1, in particular, the conversion of 2C to 2P reserves.
Yes, sir. Good morning, John. I will start with the payable position. The recent developments, Stefan, is the consolidation of the Ecuadorian Guinea business, which was supposed to be at fair value as of completion date of 31st March. So as part of the acquisition, we have done 2 things.
1 is that we have our assets and liabilities at fair value. And by fair value, I mean that all the the overall lift position, but also fair value as well. So we mentioned about a $31,000,000,000 over lift position, which basically ends up in a kind of accounts payable or trade payables liability as well. And hence, you would see a jump in the payables, but we expect that to unwind as we produce more and replace it within inventories. A few other things and things, you are correct, that are payable.
We haven't booked the company's payroll yet. That will only happen on completion, but there are some some items like deferred consideration of $5,000,000,000 and some other payments in relation to the issues that we need to do in the future, which I
Thank you.
Richard, Nigel, do you want to take EGU. Nigel, do you want
to start? Maybe Richard can jump in as well if necessary.
Certainly. So on the question of drilling campaigns and reserves versus resources. What has been booked as a reserve on this asset is committed projects. So the forthcoming E LOM three well drilling campaign is part of the reserves that we carry for the assets. But we recognize there's significant additional drilling potential in this asset.
And John mentioned the substantial 2C resource That we have, that we carry on the project. The nature of the work on this prioritize future drilling targets. Now the nature of reserves bookings is that we cannot book those opportunities those reserves until the joint venture partnership have committed funds and agreed to drill those opportunities. So we will be progressively transferring 2C Resources into reserves as those future drilling programs mature. John touched on the fact that we believe late in 2022, there's going to be a further drilling campaign on this asset.
The joint venture partnership have not committed to that as yet, but we envisage that will happen during the course of this year. And indeed beyond that, We already see an opportunity for a further drilling campaign out in 2023, but those are notional plans at this stage that will mature over time.
Thank you. So maybe what you're saying
is that there might be a sanction taking place in 2021, which could have an impact On open reserve, and then there will be some more later down the line.
That is correct, yes.
Okay. Thank you.
Thank you, Stephan. We have the next question from Theodor Limson. Theodor, I will open the line now. You may speak, please.
Good morning, guys. I have three questions, if I may. First one, just on as far as I understand, you will of course, you already received the cash of the EJ Listing in Q1 and that you also have listed in Q4. Could you indicate the size, the expected size of that listing? That's my first question.
Second question is on dividend level. I think you were discussed that previously as well, but on what basis will you set the dividend from 20 With the fee and going forward, will that be a percent of free cash flow or EPS or some kind of other number? And if also on how we should think around dividend The Hibiscus North well and the Gauthaulnia well. Thanks.
The first question on AG lifting that we received the cash in April, not in March, just to clarify. So we sold the cargo in March, so it gets reflected in those pro form a numbers that you see. We received the cash in April. The lifting in EG in the Q4 is currently targeted for around November, just see exactly when it falls. And that's likely to be a 650,000 barrel lifting at the moment.
The one we had in March was a 9 50,000 barrel lifting. So this one is probably going to be a slightly smaller lifting is our current estimate that a change and I will certainly update you in the market when we have a little bit more visibility on that lifting and the parcel size, but that's our current working assumption. Your second question, sorry, was?
That was around dividend, how would you think about that?
Yes. So the dividend policy, it's a great question and it's one that we what we've identified obviously is with the strong cash flow we have, particularly at these higher levels. Again, we designed this dividend strategy around the time when we completed these acquisitions and we've designed it around sort of long term oil price $45 $50 a barrel. So obviously these higher prices, it's looking even better. But what we decided to do is to just trying to get through some of this CapEx, make sure that the Hibiscus Rouge development is on track and all that and to debate the dividend strategy, which we'd like to articulate to the market because it's the right question to ask.
We're not quite in a position to define it yet for you, but clearly there's going to be particularly at these oil prices quite a bit of cash and it's likely to be indeed a metric along the lines that you've suggested. We're not quite ready to kind of define and frame that yet, but that is very much on the Board's mind to find that better. But as you can see, there's quite a bit of free cash available to pay a substantial dividend. The last question is on Hibiscus North. BWE, the operator have guided a range of between 10,000,000 and 40,000,000 barrels prospective resource on the Hibiscus North structure.
It doesn't take much to be commercial here because we can tie it back in eventually. It's quite close by Hibiscus. So even the lower end of that range, the discovery is highly commercial. On Gazania, Richard, can you fresh memory. So we have 2 different targets there.
Yes. Can you just
talk about the prospective resource in that well?
Yes. So Theodore on Gazania, That was targeting 2 separate stock prospects. The highest chance of success one is the designee prospect So which is $168,000,000 mean, dollars 168,000,000 and one above that is called Namakwoland, which has got a lower chance of success, But that's slightly larger, $186,000,000 So combined slightly over 300,000,000 barrels.
Okay. Thank you.
Thank you, Theodore. The next question. We don't have any live questions, but there are some from the web. Chad, do you know this one is from Daniel Stenzlet, today, which is roughly how much do we expect Dussafu OpEx per barrel drop with ROUCHE and HIBISCUS Onstream, both including and excluding the PSODs.
Well, Daniel, the big operating cost in Dussafu is the FPSO lease. Obviously there are other elements to operating cost as well, but it's largely it's a fixed cost. So what you're seeing right now in terms of the operating cost being announced by the operator is as a result of the lower production at the moment. We're set to go through our growth now over the next couple of years. And so the unit cost comes down quite dramatically.
I think the guidance once Nabisco Rouge is online is close to $10 a barrel and includes the lease. So really there is some variable cost as your production increases, but the lion's share of it really is a fixed cost and more production you're putting across. So you'll hopefully see operating cost per barrel coming down from the early 20s at the moment down to $10 to $12 a barrel something like that once This is Rouge comes online. I don't have the breakdown of exactly if we exclude the lease how much that operating cost would be, but it is by far and away the largest portion of that, the lease plus the O and M contract on that.
Thank you, John. I think it was a web question. I hope it answers it, John. There is another one from Daniel, which basically asked about what would roughly be the OpEx demand for the EG assets 2C Resources are converted to 2P. And we see strong production growth from 20
I mean, Nigel, do you want to have a crack at the operating cost on EG if we're able to boost the production coming across the next couple of years.
Yes. John, I don't have the numbers to hand in that in my fingertips, but I guess the important thing to say here Is that the OpEx itself on this asset won't be increasing significantly with new wells. I mean the beauty of this Project NOW. It is that we've got a series of platforms from which to drill new development targets And processing facilities to tie those back into. And so the cost required will be CapEx to undertake the drilling tieback operations.
There would be some small incremental increase in the OpEx, but nothing significant. So as we drill further tranches of development wells. We would expect the production to be boosted and the OpEx per barrel to be reduced proportionate to that production increase.
I hope that answers the question. Yes. No, I think yes. Thank you, Nigel.
Then we have another question about Saks Offshore. What are our thoughts about our Sonoma West drilling permit?
Yes. It's a little bit the same as it was last quarter, which is we have plans to drill the Salloum West well in Tunisia that has been held up for quite some time now on government approvals. We've also had obviously COVID coming in the meantime. So we've been working with the regulator in Tunisia to try and come up with the best solution on that. So we don't have much
of an update on it.
I don't think it's very near term well to be drilled. I think COVID situation in large parts of most of Africa now is still quite live. The ability to get people in and out of the country from service providers, things like that from drilling well it's not the perfect environment to do it. So we still kind of have that thing on pause at the moment. We'll definitely update the market when that situation changes.
Thank you, John. One last question from another investor. It's about Equatorial Guinea, which asked us to elaborate on what the operator is doing with these infill wells and how it may impact production levels.
Nigel, I know you've touched on it a little bit. Do you want to just address the question, which is just what is the operator looking on these infill wells? And and again looking forward just to make sure we answer the question.
Absolutely, John. Yes, yes. So it's a very exciting stage in this asset's life, in fact. So typically, what one does at this stage in a project's life is create subsurface static models of the geology and run dynamic simulation models of the fluid displacement within the reservoirs. And on that basis, you identify targets for new development well drilling.
The rather unusual thing about this asset and what makes it so fascinating is that the seismic data It's really very clear. And we can not only see the reservoir subsurface, but we can see fluid movement subsurface. And the fact we've just been involved in a meeting with the joint venture partners where that type of information is becoming apparent in a new set of seismic data that was acquired last year. So the subsurface teams have created these dynamic models, And then now beginning to bring in that seismic data that can show where the water is, where some gas breakout has And where the optimal target would be for development drilling of the wells. And it's that work that's now informing the ranking of new development well targets for subsequent drilling campaigns.
And we're confident that we're going to be able
to share
more information on that in the months and quarters ahead as we begin to firm up those plans and sanction the forth coming drilling projects. In the meantime, I think as part of your question, you're asking about how the infill wells will impact production levels. What has been committed to this year is this 3 well campaign on the Elon field. And the total incremental production is expected to come through at startup of those wells is in the range of 4000 to 5000 barrels a day. So that's indicative of the type of impact that we can expect C from these wells.
But clearly, as modeling work proceeds and we firm up the next drilling campaign, we'll have more detail on precisely what we expect in subsequent activities.
I have opened your line. You may unmute from your side and please speak.
Good morning, Omar. Yes, yes.
Good morning. We have been waiting for the completion of the Gabon part of the transaction. Did you say now that you expect finalization of this within the next couple of weeks?
Yes. Yes, that's great. We always guided the end of the second quarter. It really just has to do with getting it through the ministerial consent basically and that's all in good shape. So we would expect to be able to announce the closing of that transaction certainly by the end of this quarter perhaps earlier.
Yes, thanks. Okay. Well, thank you everybody for joining. We've got a good sized crowd here today and very much appreciate everybody following us. And again, we're available if anybody has any individual questions, you can always come through directly to us.
Again, thank you very much for joining. Goodbye.