Hello everyone, my name is Sophie, and I will be your conference operator today. At this time, I would like to welcome everyone to Meren's third quarter 2025 results presentation. After the speakers' remarks, there'll be a question- and- answer session. Please note that at any time, participants in the webcast can submit questions using the questions button on the webcast interface. This event is being recorded, and the recording will be available for playback on the company's website. I will now pass the meeting on to Mr. Shahin Amini, Meren's Head of Investor Relations. Please go ahead, Mr. Amini.
Thank you, Operator. Hello everyone, and thank you for joining us for Meren's third quarter 2025 results presentation. I am joined today by Roger Tucker, our President and Chief Executive Officer; Aldo Perracini, our Chief Financial Officer; and Oliver Quinn, our Chief Commercial and Operating Officer. We will begin with prepared remarks and then open the floor for questions. Before we start, I would like to remind everyone that this presentation contains forward-looking statements. These are based on current assumptions and expectations and involve risks and uncertainties that may cause actual results to differ materially. You can find a full discussion of these risks in our regulatory filings that are available in SEDAR+ and on our website. Also, all dollar amounts in this presentation are in U.S. dollars unless otherwise stated. With that, I will now hand over to Roger. Roger, we are ready for you. Please go ahead.
I'm pleased to present another strong quarter with continuing delivery on shareholder returns and delivery. The completion of the Prime amalgamation marked a step change for Meren, and we have now honored our enhanced dividend policy with the declaration of the fourth quarterly distribution of $25 million, taking the total payout for 2025 to $100 million. Together with our share buybacks year to date, we have delivered meaningful shareholder capital returns of approximately $109 million. We have also materially reduced our outstanding RBL debt amount to underpin a stronger, more agile company that is built to deliver long-term returns and withstand market volatility. These deliverables reiterate the quality of our production assets in Nigeria and the company's financial strength and our disciplined capital management. Maintaining a strong balance sheet continues to be one of our top priorities.
Overall, it's been a resilient quarter, and we've delivered on what we set out to do, reinforcing our financial position and our commitment to creating long-term value for our shareholders. I'm also pleased to report that we have completed the integration of Prime, and the combined organization is working very well and seamlessly under the Meren banner. I will now hand over for Aldo to give a more detailed commentary on the quarter's performance.
Thanks, Roger. Now turning to our production performance. In the third quarter, we delivered production of 31,100 bbl of oil equivalent per day on a working interest basis and 35,600 bbl per day on an entitlement basis. This brings us to a working interest of 31,800 bbl of oil equivalent per day and 36,300 bbl of oil equivalent on an entitlement basis for the first nine months of the year, both of which sit within our 2025 guidance, which remains unchanged from the second quarter. Performance remained steady quarter on quarter, supported by strong contributions from the newly commissioned Egina wells and a successful well intervention on an Akpo well. These gains helped offset temporary impacts on plant and maintenance activity.
With the Akpo and Egina drilling campaign now on pause, work is focused on integrating for these seismic and well data to define and mature the next set of infuel targets. Turning on to the next slide. In the third quarter, Meren completed three oil liftings for around 3 million bbl at a realized all-in sales price of $70.8 per barrel. Year to date, we have completed nine liftings of around 9 million bbl at an average all-in sales price of $74.9 per barrel, which compares favorably to the dated Brent at an average of $70.9 per barrel. We have three cargoes scheduled for the fourth quarter of 2025. Two of these are hedged at $64.6 per barrel, with one cargo unhedged that will be sold at spot.
For 2026, we have hedged 2.6 million bbl of oil at an average dated Brent of $62.4 per barrel. The sales achieved in the first nine months, combined with our hedging strategy for the remainder of the year, create a prudent balance between risk management and market exposure, reducing volatility risk while preserving potential upside. This approach ensures we remain well positioned to generate solid cash flows through to the end of the year, regardless of market fluctuations. Moving on to the financials. For Q3, we delivered an EBITDA of $120 million, bringing total EBITDA year to date to $368 million. Cash flow from operations before working capital came in at $66 million for the quarter, with reported CapEx of $22 million, largely driven by the well intervention in Akpo. Free cash flow before debt service and shareholder distributions was $126 million.
Overall, for the first nine months, free cash flow before debt service and shareholder returns stands at $229 million. We are on track to meet our management guidance as revised in Q2, and our full year guidance ranges are unchanged. Let's now turn to cash flows for the period. We closed the quarter with a cash balance of about $177 million compared to an opening balance of $267 million at the end of Q2. We achieved about $66 million in cash flow from operation before working capital adjustments and interest and had positive working capital movement of $81 million, most of which, about $63 million, was due to trade receivables driven by the timing of cargo liftings and receipt of sale proceeds between the second and the third quarters. Our major cash outlays were RBL repayments, dividend distributions, and capital expenditures.
In line with our approach to disciplined balance sheet management, we proactively paid down our RBL balance by $180 million, bringing our total debt to $360 million. This has been paid down further post-quarter, which I will touch on shortly. In line with our new payout policy, we made our third dividend payment of $25 million, bringing dividend distributions to $75 million year to date. As Roger had mentioned, we are pleased to have announced our fourth dividend distribution of $25 million to be paid next month. Through disciplined cash management, we have materially reduced our debt interest expenses, strengthened the balance sheet, and established a solid platform for sustainable growth and value creation. Moving on to the next slide. Deleveraging the business has been a priority for us since assuming Prime's RBL facility following the amalgamation. The balance was $750 million at deal completion.
We have looked to approach this proactively and in a disciplined manner. At the end of Q3, our RBL balance is still at $360 million, reflecting $319 million in repayments since taking this facility on, contributing towards a meaningful reduction in interest costs. Post-quarter, we paid down a further $30 million, bringing total repayments to $420 million year to date. At the end of the quarter, we had a net debt of $183 million and a net debt to EBITDA ratio of 0.4 x, well below our one-time ceiling for the year, demonstrating our strong credit profile. We will continue to optimize our capital allocation strategy, strengthening Meren's financial profile and positioning us to deliver value for shareholders. I will now hand over to Oliver to take you through our business outlook.
Thanks, Aldo. Turning to slide 10 on Nigeria. Following the break in the Akpo and Egina drilling campaign in Q3, work is underway to restart the campaign. The current drilling break has provided time to fully interpret the latest 4D seismic data and identify several future infill drilling opportunities. Operationally, progress is being made to secure a deep water rig to drill the Akpo Far East near -field prospect, followed by further development wells on both Akpo and Egina in late 2026. Akpo Far East is an infrastructure-led exploration opportunity with an unrisked best estimate of greater than 150 million bbl gross oil equivalent. If successful, it will deliver a short cycle, high-return investment, leveraging existing Akpo facilities and potentially adding significant near-term production and reserves.
Turning to the Priori development, project optimization work continues with recent seismic data indicating an increase in recoverable resources and likely better connectivity in the reservoir that may lead to a reduction in the development well count. This optimization exercise is continuing and will conclude through 2026. At Agbami, interpretation of recent 4D seismic is ongoing alongside rig and long lead item contracting in preparation for a 2027 infill drilling campaign. In addition to the infill drilling, an appraisal well is planned on the Ikija discovery, which in a success case will be tied back to the Agbami FPSO. Let's move to slide 11 for an update on Namibia. Front Venture continues to advance the Venus development, which remains on track for FID next year, with first oil expected in 2030. The environmental and social impact assessment is continuing to progress, which is a key step toward regulatory approvals.
The plan outlined includes 40 subsea wells tied back to an FPSO with a peak capacity of 160,000 bbl of oil per day, and once online, Venus could produce for more than 20 years, generating significant and sustained cash flow for Meren. As we get closer to the final investment decision, there will be scope for us to report contingent resources and ultimately reserves as part of our annual Canadian NI 51-101 reporting process. On the exploration side, work continues to plan for drilling on several remaining prospects, with Olympe remaining the key target and testing a different geological concept from Marula and with a significant potential resource base. Importantly, we retain full exposure to these high-impact opportunities with no upfront cost, as all exploration and development spending is carried through to first commercial production.
Moving to slide 12 and staying in the Orange Basin, let's turn to South Africa and Block 3B/4B. In September last year, we received an environmental authorization to drill up to five exploration wells, and whilst progress was being made to move through the legislative appeals process, this has now been temporarily suspended pending a Supreme Court judgment in relation to Blocks 5, 6, and 7. Despite this pause, the operator continues to prepare for drilling, with the Naylor prospect remaining the likely first target and with sufficient potential in a success case to support standalone development. To remind you, and important to note, the transaction completed with TotalEnergies and QatarEnergy last year will cover Meren's costs for one to two exploration wells, so there will be no demand on our capital as drilling commences.
In summary, across the Orange Basin, we maintain a leading independent E&P position with exposure to multiple near-term development and exploration opportunities, and all without any near-term capital requirements. Now, turning to Equatorial Guinea on slide 13, Meren holds two licenses offering differing opportunities. Inboard, Block EG-31 offers a compelling low-risk appraisal opportunity that could unlock a low CapEx, short cycle brownfield LNG project with a cost of supply competitive with U.S. gas exports. The block lies in shallow water close to the existing onshore EG LNG facility and contains several further gas-prone prospects in areas where historic wells have proven the presence of gas. The second position, Block EG-18, is a deep water exploration opportunity with billion-barrel scale oil potential.
Recent seismic reprocessing and technical evaluation has unlocked a large Cretaceous-aged basin floor fan system with several stacked prospects identified within the same play that has been actively pursued by several majors across the border in São Tomé. A farm down process for both positions has attracted strong interest, and we are actively engaged in discussions with potential partners for both blocks with the aim of reaching a conclusion on the farm up process by the end of this year. With the right partnerships in place, drilling activity could take place in late 2026 or 2027. I will now pass you back to Roger for his concluding comment.
Thank you, Oliver. It's been a solid quarter for the company. We ended the period with a strong liquidity position, a net debt to EBITDA of 0.4 x, and we have significantly reduced debt to optimize interest expenses, underscoring both the strength of our balance sheet and our disciplined approach to cash management. I'm pleased to have announced our fourth quarterly dividend, which will see the completion of our $100 million dividend plan, a clear reflection of our ongoing commitment to shareholders. Looking ahead, we see meaningful value across our portfolio with excellent catalysts in the pipeline, each providing strong long-term growth potential. Thank you, and with that, let's move to the Q&A.
Thank you, Dr. Tucker. We will now begin our Q&A session. If you have a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. Once your name has been announced, you can ask your question. If you want to withdraw your question, please lower your hand using the raise hand function. Thank you, and a moment for the first question, please. If you would like to submit a written question, please use the Ask a Question tab on the right-hand side of the player window. Our first question comes from Jeff Robertson with Water Tower Research. Please unmute your line and ask your question.
Thank you. Good morning. Oliver, can you give some insight into the production profile in 2026 in the fields in Nigeria and what you anticipate the lifting schedule might be for the first couple of quarters of the year?
Yeah, hi, Jeff. Thanks for the question. As we go into 2026, we've got activity commencing again in the fields. We've got three wells, if you like, three infill well activities, Akpo and Egina. We've got an Akpo Far East exploration well, which is important, and likely an Ikija well over on Agbami, which is appraisal. I think the key thing is on those wells, they'll be back end of the year, so we don't expect to see a meaningful production impact from them until early 2027. They're important, but they're late in the year.
Where that takes us is we'll see some natural decline through the year, and I think we're currently working through the final work program and budget with the operators in the next couple of weeks here, but we do anticipate kind of seeing decline into the high 20s in terms of production at working interest level before, again, that picking up again as we come through the end of the year and into 2027. I think on the second part of the lifting schedule, I think we're anticipating around 10 cargoes. Those are pretty evenly spaced throughout the year. I think you'll note this year we've lifted all our cargoes for the calendar year as of November, so we do not have any in December. I think our next cargo is coming in, two cargoes, I think in Q1 next year.
Yeah. Just to remind everyone, we'll do our full year management guidance for 2026 early next year, potentially in sort of late January or February, so we'll have more detail on the outlook for 2026 for our business. Is it correct to think that the Akpo Far East prospect is, if that's a success, that can be handled by the existing field infrastructure without any significant capital upgrades?
Yeah, that's right. It is kind of super interesting. It is only just single-digit kilometers east of Akpo and the facility. It is a large kind of target that could, for a first phase, come on within 18 months, two years, tied back to the Akpo facility. It is very reachable. The timing has really been around ullage and availability over Akpo. That is now with Akpo's natural decline, this time and space, if you like, have come together. Yeah, that would be tied back very, very quickly.
Thank you.
Thanks, Jeff.
Our next question comes from David Round, Stifel. Please unmute your line and ask your question.
Great. Thank you. Couple of my guys, the break from drilling in Q3, are you able to elaborate how that break has helped improve your thinking around future targets? I guess, more generally, are you noticing any different approaches between the different operators you've got in Nigeria? The second one separately, just on EG, as a clarification, are you looking at farming down those blocks individually or together?
Yeah. Hi, David. Thanks for the question. Look, yeah, a good point. You take a step back on actually Egina and Akpo, which is where the drilling break occurred this year. We say this a lot, but kind of world-class fields, kind of textbook petroleum engineering with 4D seismic over them. That allows us to shoot surveys at regular intervals, of course. In those fields in particular, we can see fluid movement, we can see oil, water, gas, and that allows us to kind of really hone in on the infill targets. Specific to the question, we took a drilling break in Q3, we have had new 4D come in over the fields, and the reason to have that break and go back Q3 next year drilling has been to allow that new data to be incorporated.
It looks very positive from us, so I think we'll see the two, well, two targets on Egina, one on Akpo, again, Q3, Q4 next year, and then we'd anticipate running into 2027 that there'll be some more follow-on drilling on the back of that data. Yeah, it's been useful. I mean, there is obviously a short-term impact on these mid-life fields from not drilling, but I think it allows us to come back with a more focused kind of target campaign. Just to move to the EG question, the simple answer is we see them as separate processes. Now, they have run kind of on a timeline in very close parallel, almost on top of each other. There are parties that are interested in both. There are parties that are interested in one or the other of the two.
We touched on it in the presentation, but they're very different in nature. EG-31 is kind of gas, brownfield LNG tieback through existing facilities, etc. EG-18 in the outboard, multi-billion barrel kind of oil target, so kind of material kind of catalyst if that comes in. Yeah, very different opportunities, and therefore we've run a parallel but separate process, if you like.
Okay. Thanks, Oliver. Very clear. Just in terms of the operator's approach in Nigeria, any differences there, or are they kind of getting on with things in a similar kind of fashion?
Yeah. Look, good question. I didn't mean to skip over it. Yeah, I think they're both very active, which from a non-operator perspective is what you look for, right? I mean, the fields, as we know, they're heading to mid-life. They're in that kind of natural decline. What they need is a bit of care and activity. I think from both operators, that's what we're seeing. We didn't talk about Agbami so much, but the plan is to come back. Chevron will drill six infill production injector wells in 2027. That's a pretty big campaign given the age of the field and kind of speaks to, A, their activity as an operator, which is very positive, and B, the nature of the resource base. I think Egina and Akpo, again, slightly different. We're seeing the same infield activity focus from TotalEnergies.
There's lots of opportunities there to mature, but there's a wider set of tieback and kind of organic growth opportunities around those FPSOs as well. We're seeing, obviously, it's Preowei, which is ongoing, but there are several other discovered resources within the license that we see TotalEnergies is taking quite an active view on at the moment. Yeah, look, I think we're comfortable that they're both engaged and active, which, again, as non-operator, really important to see that.
Brilliant. Very clear. Thank you.
All right. Thanks, David.
There are no further questions at this time. I will now hand back over to Shahin Amini to read through your written questions.
Thank you very much, operator. We've got a number of questions submitted over the Q&A facility and a couple of questions who were emailed to us earlier today. I'm actually going to start with an emailed question from one of our long-standing shareholders in Sweden, and I'm going to put it to Aldo. What are your expectations in the coming quarters for further reductions in net debt?
Okay. Thank you, Shahin. In relation to debt reduction and the leverage in the balance sheet, I think we have done a focus. We focus a lot throughout 2025. You have seen the amount of reduction we did with the existing RBL. As it's natural in this kind of instrument, as we progress towards the maturity of the facility, we get compressed by the low and life core ratio, and therefore we have to continue to make payments or we'll continue to have a reduction in our borrowing base, and that will continue to happen throughout 2026. In terms of what we plan for the next year compared to 2025, I think the main difference is that we have already started the process to refinance our existing facility. So far, we have been getting strong indications from the banking syndicate.
If we're able to achieve that target, which we expect for the beginning of 2026, we then should be in a position to keep our borrowing base higher for a longer period of time, which will give us additional liquidity for whatever reasons, so organic growth, inorganic growth, and etc. That's the plan in relation to that as we get into 2026.
Thank you, Aldo. The same investor, a couple of follow-on questions. I'm actually going to address this myself because these questions are kind of detailed about our 2026 estimates and outlook. As I mentioned earlier, we will give a more detailed, we will give a detailed management guidance next year. Oliver, I think it's fair to say that right now, the team are very busy with the JV partners in sort of setting the board program and budgets for next year, correct? There is still some work we need to get through before we're ready to give the share management guidance.
That's right. We'll play that out through the end of the year. As you say, early next year, there'll be a clear board plan on production, board vision on that production.
Okay. Very good. Thank you. Going back to Aldo, this is a long-standing point of debate. The question is that as you're lowering net debts in 2026, what are your expectations or what is your outlook for one in terms of capital allocation and shareholder returns? Can you sustain the dividends?
Okay. Good question. We get that question a lot. I think the sense in terms of capital allocation, again, the focus in 2025 was to reduce the RBL as we were not utilizing the whole liquidity we had available under that facility. We achieved significant interest expense reduction throughout the year, which I think is an important way to generate equity value for our shareholders. Now, when we look forward, I think the way we look through capital allocation and distributions, we look at mainly four things. First, we look at the short-term or the cash generation coming from the Nigerian assets and then how short-term production behaves. That is the first bit. The second bit would be in relation to organic growth through the existing portfolio. As you know, in Nigeria, we fund organic growth with existing cash flow from operations.
Outside of Nigeria, we fund organic growth through the carry arrangements, which we have put in place with partners, for example, in Namibia with TotalEnergies through Impact. The third part that we look, we then look at the debt obligations. Again, as I mentioned, we would continue to have a reduction in the borrowing base through 2026. To address that, we have restarted the refinancing exercise, which will give us additional liquidity to go through that. The fourth part, which is a little bit out of our control, or a lot out of our control, is the oil price movements, right? I think we are looking at oil price forecasts for 2026, which vary, and most of them are on the bearish side, which we see also reflected on the forward curve.
We're going to be very, very careful when we look at additional distributions in 2026 or elsewhere as we prepare for a year where we expect to have a lot of cash flow volatility given the oil price. That's the mechanism. That's the process that we go through when evaluating dividend distribution. When we go through all of that, as of this moment, we don't foresee any surprises into 2026. Again, keeping an eye on oil price, which will be the major variance.
Thank you, Aldo. There is a couple of questions on M&A, as always. We can't go into detail. Perhaps from a more philosophical and high-level point of view. Roger, perhaps you wanted to start first. How does Meren see M&A opportunities in the market? Two specific jurisdictions have been mentioned, but one continent, South America and Nigeria, in two different questions. How do we view opportunities?
Thanks, Shahin. We are looking at a whole series of opportunities. As I've said before, and as Oliver has said, we're in no rush. We have a balance sheet which allows us the opportunity to wait and find the right opportunity. I think in the short term, if we do anything, it is likely to be within West Africa. We are reviewing a series of opportunities there. All I can say at the moment is that we have the luxurious position of being able to wait until we find the exact right opportunity. No rush. We are reviewing very, very carefully, and whatever we do will fit with our investment criteria.
Thank you. That's it, really. I don't have any other questions that we haven't already answered from the webcast. I am going to hand back to the operator to bring this presentation to a conclusion.
This concludes today's call. Thank you very much for joining. You may now disconnect.