Good day, everyone, and welcome to this Q2 results presentation with Petronor E&P. My name is Danis Denschlet, Equity Analyst at Arctic Securities, and I will moderate the session. Today's presenters are CEO, Knut Sewall Chairman, Ias Al Hamus Chris Butler, CFO Claus Friedmandal, CTO Michael Barrett, Head of Exploration. And we will wrap up the session today with a Q and A session. And as such, I urge everyone listening in to send me questions, so we can I can bring those forward to the management?
And with that, I leave the word to you, Ignit.
Thank you, Daniel. Thank you for hosting this webinar and thanks to external investor. It's the first one to present our Q2 results here today. During first half, the company completed a capital raise It was DKK340 1,000,000. And half of the proceeds went towards acquiring increased Stake in the PNG F Seed assets, which totaling today 16.83 percent, giving us around 3,500 barrels of oil Our continued organic growth will come from the sorry, you should change to next slide, please.
Our continued growth should come from the infill drilling program at PNGF Sud. Production will commence next year and we expect to grow our production over the coming 2 years from this asset up to around 6,000 barrels of oil Per day, net to Petronor. In addition to the growth in PNGF SID, we also have the upcoming Archer Field Development Redevelopment program, which is assumed to add in addition excess of £5,000 of oil equivalent to our production base. So totaling, we expect from the organic growth to be able to maybe to much more increase 10,000 barrels per day. In addition to our organic growth, we have a targeted M and A strategy towards over 30,000 barrels of oil equivalent target.
On the financial side, first half year gave us solid EBITDA of $28,000,000 Equally important to date to the oil industry is the ESG focus we see in the industry. ESC comprise our core values of ethical behavior in the extraction industry. It's a key element where we can contribute to supply gas and LPG to our host Countries in Africa, gas is becoming a more important transition fuel for Africa. Africa as a continent need affordable energy to develop its human capital And their fight against poverty and deforestation. Next slide, please.
So to our M and A strategy, which has some questions already arrived to this session. We have a Target to reach 30,000 barrels of oil equivalent. This target is founded on a robust capital structure. We have our listing in Oslo combined with our supportive shareholders from Abu Dhabi. We have proven a successful The raise of capital this year of SEK 340,000,000 and we have a cash generating asset in Congo providing a strong cash flow over the next few years.
And they have a healthy balance sheet and a limited leverage. Further to that, we also work very closely with Tier 1 international traders which back the company in our large M and A activities. So based on these pillars, we are well positioned to execute on our organic growth strategy and we are well positioned to complete transformational and accretive M and A deals. All this, of course, while maintaining a conservative risk profile And focusing on delivering long term value to the shareholders. We put up the map of Africa here for a reason that Our focus is Africa.
We have very special focus on Sub Sahar Africa where we have production today. We have our exploration licenses, which we'll come back to later in this session. And we see a lot of opportunities coming to the market these days from the IOCs refocused and reshaping their strategies, Giving opportunities for companies like Petronor to fill a vacuum or a space where Assets in the range of few 1000 barrels up to plus 10,000 barrels is available in the market. By this introduction, I leave the word to Chris to go through the first half year results. Next slide, please.
Sorry. One more on the portfolio. Clavius will go through the production on Congo Brazil where we have a sustained production of redevelopment in Nigeria. And Michael then Hold us to it in the exploration portfolio. Then the word to you, Chris.
Next slide, please. Thanks, Knut. Good morning, everyone. Firstly, just to caveat that these figures in this corporate presentation are unaudited Unless they represent the comparative numbers from 2020, which have been audited by Alders BDO. So to start with, the group had 4 liftings in the first half of the year, lifting 420,360 sorry, 420,360 barrels.
And we achieved a weighted average selling price of $63 per barrel, in effect a 6% increase on the price during the same period in 2020, but that of course was during the market collapse last year. The pricing with our offtaker is Based on the average oil price during the entire month that the lifting occurred, which partly mitigates pricing risk. And with respect to our operations in Congo, under the terms of the production sharing contract, the profit oil tax and royalties payments are settled in kind. Consequently, the revenues grossed up for the crude lifted and entitled to the local government. So for the 1st 6 months of the year, Approximately $6,000,000 $7,000,000 of royalties were included in cost of sales and 14,600,000 Dollars of profit oil tax is shown as a tax expense on our income statement.
My colleague Klas will talk about the production levels actually in Congo in a second. But due to the obviously increase in oil revenue, the oil prices, our revenue Slightly disguised as the production was lower than originally planned and expected in our budgets. And with the delay in the infill drilling program, As at the half year, only $1,100,000 had actually been spent on the CapEx program, with the remaining planned investments now just Skewed towards the Q4 and actually the start of 2022. At the start of the year, Historic $3,600,000 outstanding receivable from 1 of our minority shareholders and a subsidiary was settled in exchange for an additional 10% Of Hemla E&P Congo. And that actually reduces the non controlling interest of our subsidiary to 15.85%.
It has been one of the aims of the group to actually try and streamline the administration of the entire group over the period. And with that in mind, the Sumero transaction that was included as part of the private placement in March has meant that the 27.273% Non controlling interest of Hemla Africa Holdings subsidiary was purchased by Petronor for $18,000,000 in shares. But as the shares were not actually issued until July and then listed in August, the half year interim report does not reflect this equity transaction yet. However, please expect in the next quarter's report for the share capital to increase by about $18,000,000 And then the non controlling interest of this subsidiary will be eliminated and the balance will actually be offset against the retained earnings of the company. So going forward, the ratio of the split, profit attributable to our shareholders will actually increase.
And then the Congo operations will only be diluted by the remaining 15.85 percent of the non controlling interest In Hepco, Hemla E&P Congo. And the reason why the Petronor has actually benefited from the higher equity interest in PNGF Sud Operations from the start of the year is because the subsidiary Hemla Africa Holding has not actually paid any dividends or distributed any capital Back to those non controlling shareholders since the SBA was agreed in February. Regarding our exploration licenses, in April, unfortunately, Petronor announced that due to the after the several meetings of numerous meetings we've had During the Halton proceedings for the Senegalese licenses, the formal arbitration had to resume. And as the formal process is ongoing, the company is limited in what can be stated publicly on the matter. In May, The group completed the purchase of SP Guinea Bissau from Svenska Petroleum, thereby enhancing our already quite extensive exploration portfolio With the addition of the Esperanza and SINAPA licenses in Guinea Bissau.
And it has meant that as at the half year, we have got $1,700,000 of long lead items for the drilling campaign that had originally been planned by SenSco. And we have actually incurred $1,300,000 towards 3 d seismic data from TGS over that Guinea Bissau license area. Just a comment on our debt. In June, that was actually the final month of our 12 month grace period for the $15,000,000 Debt facility that we have with Rosamalla and we have now started paying the monthly RINs principal amounts back. So the interest bearing debt for the group was $18,100,000 slightly down on the 2020 year end number.
Next slide, please. One of the key events clearly of the first half of the year was the private placement where we raised It's NOK340 1,000,000, so approximately NOK40 1,000,000 and the primary purpose of the equity raise Was to finance the planned InfoWorld program in Congo, increase the oil recovery rates on the PNGF sub licenses and provide working capital for general corporate purposes. The private placement was supported strongly by our 2 largest shareholders, Petronor and NOL Energy. But due to the related party transaction of the Sumero transaction that was included as part of the private placement, it meant that we had to split The product placement into several stages, so we could obtain shareholder approval at a general meeting. And as part of that governance, We had to prepare an independent expert's report to ensure that the related party transaction was fair and reasonable, and that was circulated at the NERDCEN meeting from back in April.
So again, eliminating these non controlling interests, we've Streamline the business and reduce the admin burden that we have. And by increasing our interest in this asset, which is already well known to the business, We see this low cost and high production. Regarding the actual status of the private placement, it took obviously A little longer than planned to complete, but as of the half year, only the first tranche of the $84,000,000 shares sorry, dollars 84,000,000 shares have been issued, Thereby increasing the share capital by $10,000,000 since the year end. And shortly post period, tranche 2 Of the private placement consisting 224,000,000 shares were issued in July and then subsequently listed On the Euronext exchange in August after the listing prospectus was approved by the Norwegian FSA. Clearly, the company had always intended for our existing shareholders and not just our majority shareholders to be able to take part.
And That is why a repair offering for up to $60,000,000 shares was launched last week. The subscription period actually started a week ago on the 24th August. The eligible shareholders have been allocated 0.23770 untradeable rights for each share that they held it back in March And the offer price will be the same as at the private placement, so NOK1.1 per share. Oversubscription is going to be permitted, but we can't assure that any shares will be available for oversubscription. And in addition, subscription without rights Will be permitted, but again, these will only be allocated if there's still some available after allocation to eligible shareholders that have already oversubscribed.
The joint managers for the private placement, so Arctic, Pareto and Sberbank, will have the prospectus available for view on their websites And can advise how to subscribe to shares. I will now pass on to Claus for the technical review.
Thank you, Chris, and good morning, everyone. Next slide, please. P and G is, as you know, our main production assets in Congo, Brasovil. On focusing on the right, you see the production profile from our recent competent persons report conducted by AGR, where a significant increase in the 2P reserves was established by March. Our numbers, we have produced 464,000,000 barrels on total PNGF out of a total stop of or in place Oil volume of more than 2,000,000,000 2,000,000,000 barrels.
In 2021, 1st Half of the year, we produced an average of 20,300 barrels on gross terms, A little less than our expectation due primarily to two reasons. One is we've had some In Congo, logistical issues on getting needed maintenance equipment for the production and for well Workovers, that situation has now been resolved and we're back on track and tackling the backlog in well workovers. Clog in well workovers and we're almost back up to expected production. Next slide, please. This is, of course, a good story on PNGF.
We started out in 2017 with about 6,500,000 barrels net In 2P reserves, we've grown year on year. You see the production in dark blue and Additions to 2P reserves in light blue. So our year on year reserves replacement ratio has It's been approximately 300% every year. In addition to that, of course, With the completion of the MGI enforcement and Sumero transaction, we've gone from a net 10.5% interest in PNGF to currently 16.8%. And we've More than tripled our reserves since then, so that's a good story.
In addition to that, Our OpEx from the former operator of the PNGF Sud, which had And OpEx of about $25 per barrel, producing barrel. We are now in 2020 been down to 10.4 Talos, we are in OpEx. So P and G is continuing to give us good results. Next slide, please. And this gives a little bit more flavor on the In fill drilling program, which we are about to embark on, as Chris touched upon, we are a little bit Delayed.
We were anticipating to start the infill drilling program mid this year, but now it looks like we're going Start approximately in December, again, starting with our the first field, the Littonsi field up to the left, where we are going for drilling 4 additional wells, 2 producers and 2 injectors, Followed then in 2022 by Cendo, where we have installed a 14 slots platform, starting out by drilling 7 producers in Phase 1 on that program. And again, then followed by the Cipelli, which has a 4 just like Calitansi, a 4 well infill program to producers and to injectors. And then also tentatively, followed by The Cebelli Northeast, which is not yet in our firm 2P program, but it's part of To see reserves for the field. I've enclosed also a production profile showing the wrap up In the production profile, as we add consecutively the production for each of these Simcel opportunities. These incrementals are shown on top of the base production that we have, showing also to the left So the actual production to date inclusive of August.
Next slide, please. Arce, we also produce from Arce, but less than on PNGF. This is our main Development asset, which where we want to tackle the significant gas discovery On the RG license, on the transaction itself, we are Still pending the approval of the Nigerian authorities, we had a Meeting with them in June from which we received positive feedback on the transaction And albeit delayed, we are hoping that soon we will receive the Ministerial approval of that transaction. In the meantime, we've been doing a lot of work. So the technical work is not lagging on the field.
We've been both working on the G and G, Modeling, the well planning, the FPSO replacement, which we have announced, but also commercial aspects In offtake for gas, condensates, LPG, etcetera, which we plan to recover from the field. So that concludes what I wanted to say on the technical. I now leave it to Michael Barrett, who will take us on to our exploration portfolio. Michael, you're muted.
Sorry. Thank you, Claus. Next slide, please. I'm going to talk you through the exploration portfolio that Petronor hold in the MSQVC described here as a West African exploration hotspot. It's of such note because of the huge discoveries in the last 5 years starting in the north.
You can see on the map on the right colored in red, the major BP cosmos discoveries, Mauritania and Northern Senegal. And then in green, the what's labeled as the SME field now called the Sangamo field operated by Woodside. It's about a 500,000,000 barrel recoverable, a long trend discovery with the acreage position held by Petronor. Colored in yellow, you can see the A four block with 90% equity operated by Petronor. And then to the south in yellow again, the 2 licenses in Guinea Bissau held at 78.6% equity position, The Sunapa and the Esperanza 4A5A licenses.
The black dotted line on the map shows the edge of the carbonate shelf. And as I said, the exciting success in the Saint Laurent field, which has 2023 first oil expected 100,000 barrels a day, we fully expect the play trend to extend south into the A four license and also into the SINAPA Esperanza licenses. Below the map, you can see the Seismic line east west through the Atumancheva prospect. This is very, very similar in fact to the proven At the Sangamo field, identical track configuration and target reservoir intervals there. Coloured in green, blue, pink and orange, the dots on the map Signify important upcoming wells.
The A2 well in the north, the green dot in Gambia, We'll be drilled in Q4 of this year by far in Petronas. And that's targeting a bamboo prospect and potential southern extension of The Saint Gobain field, really a well to watch. The A four well will follow in the next couple of years In Petronor's license. Then further to the south there, you can see the pink dot is in the AGC And this is Impact's Synok well that's anticipated in the next year or so. And then finally, to the south, the Sinapa Esperance well That we're still hoping to drill in 2022.
The orange outlines on the map, this represents the current arbitration in Senegal And the hearing is scheduled in March of next year. Next slide. Okay, hand over.
Thank you, Michael. And thanks, Daniel, for raising this. This is Eyas Al Hamuz, by the way, the Chairman for Petronor. Good results. We're happy to have a robust capital structure for us at the end of Q2 with the successful equity raise that we have had.
I know the team mentioned that the support of the 2 largest shareholders were there, but I would like also to highlight that we've attracted new shareholders and new investors Petronor as a result of that equity raise that we hope will be as supportive as the existing shareholders that we have had. Cash flow, oil prices today are nowhere where they were last year. So we're happy with the cash flow that we have in The producing field we have in Congo. And we're looking forward to using this cash flow to reinject back and recycle it Into our existing operations for organic growth and further M and A. I know this is on the back of most of our shareholders, where are we going.
Claude highlighted again our target that we have set to the market 2 years ago of reaching 30,000 barrels. We are well Into that, frankly speaking, the market in Africa today As tremendous opportunities in West and North Africa that the team has been reviewing and working on. And we're still working and Hoping to deliver something to our shareholders for the end of the year. We're 4 months away from the end of the year, but the team is working day and night to deliver that. Financing and other investments, we're working with many Tier 1 RBL banks.
We're working with Tier 1 Traders who are supportive of Petronor and our West Africa expansion. And we're hoping that this combination would indeed Delivers the value that the management team has been working on for our shareholders. Happy to take any questions Now from our audience or Daniel, if you have received any questions beforehand, please shoot.
Thank you, Ios. Yes, we received quite a lot of questions now ahead of the presentation. So I suggest we'll just jump straight to them. The first one is related to the listing process of you transferring to the main lists. It's taken longer than originally anticipated.
What have been the cycles and what you see as the way forward now?
It's in process. Unfortunately, yes, it It dragged longer than we had anticipated. There's the delay of the equity raise that we have had And then the release of the prospectus for the subsequent offering. But rest assured, this is still the plan. We're working on redomicizing the company from Australia to Oslo.
And as a subsequent to that event, We hope to be listed on the main exchange in Oslo. So the plans have not changed. They're still there. Unfortunately, a few things were out of control that delayed it, but we're heading there.
That is reassuring. A question on the exploration assets and in this case, Senegal. Now you're not necessarily in the same Active talks and a court ruling may seem as the most likely outcome now. But do you have any talks besides the legal proceedings? Or is court ruling now the only outcome in your opinion?
I mean, we're definitely pursuing the legal route today because we could not reach an amicable solution with the government. However, dialogue is still there. It's not as active as it used to be when we were engaged in the discussion. Nonetheless, we value our partners In Senegal, maintaining dialogue all the time. And should there be an opening or a window To pursue an amicable solution outside of core, definitely we will pursue.
For the time being, we feel very strongly our case. And 2022 is around the corner.
Very good. If we then move to the Guinea Bissau assets. Is there a specific Time line now for the activities to come. Is there certain obligations that you have to meet going forward? Or are you free to decide your own activity level on that asset going forward?
Well, I mean, it's never that we decide our own We work in partners with our hosting governments in there. So we are actively engaged with the government of the Gambia. We're actively engaged with GNPC and the team to explore the options that we have on the table today. We're getting a lot of support the local government, they see a value in Petronor. Petronor so far has met all the Commitments that we have had to the government of Gambia once they restated the license.
So from a time line perspective, it's something we continuously monitor. We engage With our partners and I don't see any issue in the foreseeable future.
Thank you. And similarly, with the Gambian exploration assets, What sort of obligations do you have and what is the pathway forward with that asset?
So I'm not sure if whoever asked the question is familiar with the reinstatement and settlement agreement that we have signed. But there were Specific commitments and timelines to the process, which we have met up to date. We have a looming deadline that's coming up Soon. And we're working with the government on meeting that commitment towards the government.
I understand. And also, is it correct that BP has withdrawn from the adjacent A1 license in Gambia? And if so, will it have any effect on your plans at A4?
I think it's public knowledge indeed. It was reported in the news. BK has been in discussion with the government of the Gambia About withdrawal from there, I'm not sure what the outcome is today. We're not part of that License. Nonetheless, actually, we see this an opportunity that opens another concession for Grab up in Gambia should indeed VP,
Very well. A new question on also the business development side with regards to these exploration assets. How is the market in terms of reaching out to potential partners or The dialogue with potential partners with regards to a farm down, which would probably the most likely way to proceed before or ahead of drilling in this case?
I mean, if you had me this question Q4 last year or Q1, I think I would have had a more pessimistic answer to you than today. Today, we see an opening in the market. Probably the super majors are out, but small to medium sized companies Like Petronor or a little bit larger than Petronor do have a keen interest today. We are actively engaged In discussions with several potential Farm East. That would cover both Gambia and Guinea South.
And Should there be an award in Senegal? Hopefully, that will be part of the discussion that we're holding with our prospective partners. But it is back active, to be honest.
I see. When it comes to the RJ transaction, are you considering to pay for that transaction with cash given where the share is trading or is still share issue more likely?
The option is with Petronor and how we conclude That transaction, we definitely would like to have the shareholders of Penoro on the roster of Petronor that will indeed The value. Nonetheless, this is something that we will closely assess and see how to execute when the time comes. It could be an old cash and old share or a combination of both cash and shares.
Thank you. And perhaps a question for Chris. The cash flow in the first half of the year has been impacted by quite significant buildup in net working capital. Do you expect the working capital items to develop from here? Will they unwind or not?
Well, to be honest, I think we'll be fairly cash neutral for the rest of the year. Clearly, we have the significant Well, the investment program that had been planned down in Congo and that's been skewed towards the back end of the year. But overall, I think we will be cash neutral.
Thank you. And a question on Congo. What's the latest status for the negotiations and Plans for developing or reaching out and receiving approval for eventually developing PNGF BIS.
Unfortunately, people again have been following the news in Congo. They recently had a change in government. So there's a new oil minister And in return, there's a new Director of Hydrocarbon in there. July, when the budget was finalized and executed with the old DGH Director, it did not include this as part of the process. However, now with the new team in Congo, we hope to reactivate that discussion and we'll update the market accordingly.
Thank you. Back to Ajay. How fast will the next phase of the field be able to reach FID Once or if you get government approval, are you basically set to go? Or what needs to come in place before you can moving to FID and start on the construction phase of that field or that phase?
Our aim is, you know, we haven't been on the lazy side during or during our wait for the approval. But we're looking forward, as I said in the last quarterly presentation to engage both with the partners and get the proper Development budget for AGA. Meaning that, you know, the latest The figures we have been working on, we have assumed an optimistic FID of Year end this year. But given the delay, we may take that deadline To Q1 next year, that's when we're hoping then to deliver an FID.
Thank you. A question on lifting frequency. Investor is asking about the frequency, wondering if it's if we should expect more frequently liftings in the second half of the year compared to the first
Yes, this is Knutzer. So the liftings will be
more or less As
in the first half year, as we expected, it's since the oil price has increased and we pay our taxes in kind, With increased oil price, we're lifting slightly smaller volume because of the larger value. And we're lifting in parcels around 100,000 valves in each lifting. So that means that we have More or less the same listings in second half as in the first half. But of course, on a quarterly basis, you may see like Flituations depending on when the lifting takes place.
I see. Very good. Thank you. Final question on my list is related to your M and A path. I guess it's not something that you can be very specific on, but one investor is referring to the previous call where you alluded to perhaps being able to close one deal by the end of 2021.
Is that still a possibility? Could we see a deal being closed in the second half of the year?
We are working in Africa. So things
Thanks a lot sometimes, but we are working hard to fulfill our growth ambitions. And We hope over the next months that we're able to revert back the positive news to market that we're getting, yes.
I see. That's very good. We've covered all the questions on my list. So I think it's just time to say thank you to team Petronor for a good presentation, Very insightful info. And to everybody listening in, thank you for your attention.
Wish you all a good day. Thank you.