Well, I have to say it's an absolutely stunning morning here in Oslo. I feel fortunate to be here to discuss the performance of PetroNor E&P. Good morning. My name is Jens Pace. I'm the CEO of the company. Today we put out an interim report covering the first quarter. I'm here to answer your questions about the company's performance over the first part of this year. I have a few slides, as normal, to get through to provide a little bit of extra context to the report we put out. I really want to get to your questions. Please send them in. We'll get to them as soon as I get through these slides. It's a fairly standardized pack. It starts with the disclaimer. I'll let you consider that at your leisure.
Really, we're starting off with production as normal. We've seen improved production over the course of first quarter based on how we ended the year in 2025. This comes from the additional production capacity that was added with new wells last year, as well as a reduced queue of workovers bringing wells back on production. We've seen production increase to an average of 4,700 barrels a day over the course of the quarter. We did have some interruptions, which I'll provide a little bit more detail on later on in this presentation. There was a significant interruption in February that has depressed that average a little bit. As we have gone into the second quarter, we've seen production come back strong. We're currently producing just shy of 5,100 barrels a day. That's going to give us a very strong second quarter.
We've also, in the second quarter, lifted and sold just under a million barrels of entitlement oil, and generated sales of $112 million. A significant cash input to the balance sheet. Looking at the balance sheet. Because we'd had no lifting during the first quarter, we have to take some of these numbers with a pinch of salt. For instance, the revenue for the quarter is not really revenue for the company. It's the grossed-up royalties and taxes that we pay to the government. We count that as revenue in the balance sheet. The main number to focus on here is cash in the bank at the end of the quarter of $44 million. No debt. This is the balance sheet that has now also received the proceeds of the lifting that we did in April. In May, we were paid $112 million.
You can start to see what the cash position looks like for the company. Looking at the liftings on the right-hand chart there, you can see that on average, we lift about 1 million to 1.2 million barrels a year. It varies according to the phasing of when we are able to get to a standard parcel size of 930,000 barrels, which takes us most of the year to build up. I've often asked, what is this in relation to our production of over 5,000 barrels a day? This is what we call entitlement oil. This is after we've paid our operating costs and also paid our taxes and royalty. We're left with about half of the working interest production, and that is what is available to sell. The bottom chart shows how this inventory builds up during the year.
You can see the build-up to about 500,000 barrels in April got us to the front of the queue at the Djeno Terminal , allowed us to get this lifting of just over 950,000 barrels. That means that we're now in what we call an overlift position. We'll be paying that back over the course of the coming months, and get back into balance and start building inventory towards the end of the year. We add about 100,000 barrels a month at the current rate in terms of entitlement oil. We'll be back in balance before the end of the year if production continues as anticipated, and looking to build up an inventory to have another lifting probably about this time next year.
We have to include that in our calculations of our balance sheet, and running the company until the next cash input next year. You can see on the bottom of the chart on the right that the realized average price for these liftings in the course of each year, and you can see that we really achieved a fantastic price relative to previous years in the second quarter of $116 a barrel. Looking at the flow of cash, this is the waterfall that I usually present that is a lot more meaningful if you've had a lifting during the quarter, which we haven't this time. We started the quarter with cash of just shy of $60 million. We paid $11 million to the government in terms of tax oil and royalties. Our operating costs at around $12 a barrel. Very low.
That was $6 million for the quarter. Running the company admin costs, our legal and professional services was just shy of $2 million. Working capital adjustments of $16 million, and CapEx investments in the assets of just over $2 million, which brings us to the $44 million that we had at the end of March. What's also shown on the right now is this injection of $112 million from the sale of oil in the second quarter, which is a post quarter close event. This has allowed our board to consider a strong balance sheet, and was the background to the recommendation to the AGM yesterday for a distribution to shareholders of NOK 3.25 per share. That was agreed by the shareholders in the AGM in the morning yesterday.
Just a few slides on the portfolio to give you a little bit more background to the production story, and what we're doing with the other assets. First of all, starting in Congo, where our production comes from. Gross field production of over 30,000 barrels a day operated by Perenco. Our working interest is 16.83% there. As I've shown you with the OpEx numbers, this is high-margin production. The other main asset we have is in Nigeria. It's our interest in OML 113, which contains the Aje Field. We see a redevelopment plan there for a gas development. I'll tell you a little bit more about what we're doing on that in just a minute here. Our working interest in that is now over 52%.
Focusing in on the Congo here, and this is a fields complex with a number of different reservoirs at different levels and different accumulations. Totaling, originally in place about 2.3 billion barrels, and only a quarter of that produced to date. We see another as much production to come from this field as has already been produced. We're looking at long-lived production, decades of producing at current rates. That rate responds very well to investment in new wells, as has been demonstrated over the last few years in terms of adding new access to the reservoirs and improving the recovery factor. Infill drilling adds barrels at about $11 a barrel in terms of reserves, and OpEx costs are, as I've mentioned, $12 a barrel. This is a fantastic long-lived asset. We're planning to return to infill drilling next year.
The operator is discussing returning to infill drilling on the Tchibouela and Tchibouela East fields, which are in the north of the complex. The main part of the producing asset. You can see a production profile of the first quarter on the bottom right. The most noticeable thing that you'll see is this big outage during February, where we had a separator, which is a vessel that receives production and separates water from hydrocarbons. It's an essential piece of the throughput of the kit. We had some maintenance that was required on baffles in that vessel, which took the whole separator out for a couple of weeks. That is what has depressed our first quarter production.
It's come back strong since. You can see that going into the rest of the first quarter and into the second quarter, we've enjoyed production over 30,000 barrels a day. Looking at Nigeria and our interests in the Aje Field. I feel pleased that we've accomplished a lot of the things we set out to do on entering into the Aje Field. We've aligned the partnership, consolidated the position in the license, which has been a problem inhibiting progress in the asset previously. I think we've defined a project with very attractive economics, and we're currently working on improving the subsurface description to support that. We've nearly completed the modeling for a dynamic reservoir and for helping us in optimizing location of development wells. I'm confident that this is going to improve the economics even further.
Having said all that, we're faced with the reality now that in the current company context, that PetroNor is not the right company to take this project forward into a project financing phase. We have appointed a process to identify commercial options here, and this could mean a divestment of part or even all of our interests in Aje. It is a reality we face in order to support the project moving forward and securing some value for our shareholders in the near to medium term. Speaking of our shareholder value, and the focus of the strategy to look at existing assets rather than to look further afield and invest beyond our current portfolio has allowed us to generate quite a bit of cash. With that and managing our costs, we've generated excess cash to support shareholder distributions.
We distributed a total of NOK 4.2 per share over the course of 2025, and we've just approved a distribution of NOK 3.25 per share in the AGM yesterday, which will be paid out during June. Total shareholder return, if you include the rise in share price as well as these shareholder distributions, has exceeded 250% by our calculation, which puts us into a very small club of companies on the Oslo Børs that are delivering those kind of results. I need to mention the legal situation that the company faces in relation to the Økokrim investigation. This led to an indictment of a subsidiary of the company, Hemla Africa Holding AS. It was announced in January this year.
Hemla Africa Holding is 100% but indirect subsidiary of PetroNor. It is the holding company that holds our shares in the Congolese subsidiary that holds 20% of the PNGF Sud licenses in the Republic of Congo. It's an integral part of the company's financial structure. We categorically contest the indictment. We welcome, after over four years, the opportunity to have this case thoroughly examined in court. We understand now that that will commence in November this year. We expect an initial outcome from that process in the first quarter of 2027. It's likely that whatever happens there, either side will likely appeal that. It will go through to higher courts with an ultimate conclusion perhaps happening as late as fourth quarter 2028.
We're at the beginning of quite a long process here, but it's been quite a few years to get to this point, in some ways, it's encouraging that we can see an end here. To summarize, production capacity is increased by new wells, and we're producing over 5,000 barrels a day net. We're preparing for additional infill drilling in 2027 to maintain that kind of production level. We're building an inventory of entitlement oil at a rate of about 100,000 barrels a month, and that will pay back an overlift through the course of the next few months and get us back into balance before the end of the year. We anticipate our next lifting in 2027, probably at the end of the first quarter.
This has meant that we've had a very strong lifting this year, which has given us a good injection to the balance sheet, and has allowed the board to consider the distribution that we've just discussed. To conclude, we've appointed an advisor for helping us with the forward process on our position in Nigeria. I will look forward to updating the market on that as we get engaged with that process. That concludes what I wanted to say, and really it's over to you as to where you want to take the discussion. I'm open to your questions.
Thank you. We do have a couple of questions coming in from our online audience. First one is, how much do you expect to spend in legal costs in 2026?
You talk about going into a 10-week hearing, everyone understands that that doesn't come cheap. Our legal costs for this year will be of the order of $1 million, that's a lot. People who have followed the company over the last few years will recall that when we had two work fronts with an investigation in the U.S. with the DOJ going on at the same time as this one in Norway, we were spending $1 million a quarter at that point. The closure of the U.S. investigation last year has been very helpful in managing costs, the work that we've put in to understanding the case means that $1 million actually seems quite reasonable going forward for the trial process.
Thank you. What level of CapEx do you expect for the current year?
This is a fairly modest CapEx year in that we're not doing any infill drilling program in the Congo. Our net CapEx this year will be about $8 million. I think you saw CapEx of about $2.3 million in the cash waterfall that I presented earlier. That's about consistent with that. With the infill program likely to start again in 2027, we haven't pulled an official budget yet, because that gets done in November this year. We would anticipate our net CapEx to be back to about $30 million, which it was previously when we had an infill drilling program. A modest year this year.
We have two questions on Aje. What kind of options are you considering in Nigeria? When do you think you can get a deal done on Aje?
Well, we're not putting any sort of boundaries on the kind of structure of any sort of commercial proposal we receive. It probably wouldn't be appropriate for me to try to opine on that at this stage. We're working with our advisor to see where the market is. I do think that the changes that we've seen in the world now means that development assets in Africa are perhaps getting more interest than they have done of late. I think companies are looking to diversify out of the Middle East. Strong balance sheets everywhere with the current kind of commodity prices means that there is a good market for development investments in Africa, we believe. That's certainly something that we've seen some early signs of. I'm hopeful that we will be able to get some proposals in the coming months.
The other aspect, though, of any sort of commercial arrangement in Nigeria is that there is often a lengthy approval process. Our recent experience of taking about a year to get the acquisition of New Age's interest in Aje completed is perhaps an example of that now. We believe the country will be very aligned with finding a solution for Aje that allows the project to move forward quickly, because I think there's a healthy market for gas in the region, removing impediments to development, I think, is in everyone's interest. We're hoping that we can get a speedy consideration of any proposals that we put to the ministry there. The first step, of course, is generating those, we'll be working with our advisor to do that.
Thank you. Will there be another shareholder distribution later this year or even in 2027?
We did have two shareholder distributions in 2025, but that was unusual, because we were reflecting two years' performance in one year. Effectively, the first distribution was in January, was delayed from 2024 into 2025. That was unusual. In normal course business, which is what we're operating the company in, we would wait until we have audited accounts for the board to fully consider a distribution, if it's appropriate to shareholders. We're not anticipating re-auditing our accounts for this year. This will be done in the normal cycle of business, and we will be doing it through the early part of 2027. That will be the next opportunity for the board to consider the balance sheet and what our cash needs are, and whether it is appropriate to follow through our dividend policy and distribute to shareholders.
Not anticipating another one this year, but certainly in 2027. Once we have visibility on our next lifting and demands on our cash, I think that will be certainly part of the normal consideration.
With plans to divest or at least reduce capital exposure in Nigeria, how does the board feel about revenue diversification by bringing in a second production and cash flow generating asset to support the dividends?
I think that was our previous strategy, to look for other producing assets, look for development projects or reserves in other jurisdictions with exactly that sort of diversification concept in mind. I think the reality of our situation here is that we are not in a position that we can actively engage in new business activities. I think it took us a while to realize that after the onset of the investigation. I think that's where we got to about a year and a half ago and decided to focus entirely on our current portfolio. We're fortunate in that that portfolio contains some really attractive assets and attractive opportunities to reinvest in the assets to sustain or even increase production. We do have a portfolio, but we're not looking to add any new jurisdictions in the near term.
A follow-up on Aje and the dividend topic. If Aje is sold this year, why not another dividend?
Yeah. I don't want to raise expectations too high there. If that changes our balance sheet positively, that would reopen the answer to the question that I was asked previously. The length of time it takes to get deals concluded in Nigeria based on our track record and the track record of others, is that we shouldn't be anticipating that to happen that quickly. If it does, yeah, it would be something that could change the story. I don't think that it's something we anticipate at this stage.
Great. There are no further questions, so I will now hand it back to you, Jens.
Thank you. Just a few quick points in summary. Obviously, a good production story and opportunities to reinvest in sustaining that. A fantastic lifting in the second quarter, both in terms of volume and the price achieved. I don't claim any credit for the timing. We committed to that in March before we understood how the world was changing. Nonetheless, sometimes it works in your favor, and that's what happened in this occasion. A strong balance sheet arising from that has allowed the board to consider a further distribution and maintain our recent track record of providing excellent shareholder returns. Thank you for your attention, and enjoy your weekend. Thank you.