Panoro Energy ASA

OSE:PEN

Earnings Call Transcript 2020-Q1

[John Andrew Hamilton, Chief Executive Officer]

Good morning, everyone, and welcome to today's Panoro Energy Q1 2020 Results Presentation, our webinar. This is John Hamilton, Chief Executive Officer of Panoro Energy ASA. Now with -- we're all getting quite used to webinars and all that. We're trying something new today. So I hope that it works. Our previous provider, there was a 30-second delay. So we're trying this GoToWebinar product and hopefully, it works for everybody. If anybody thinks otherwise, please drop us an e-mail.If I could have the next slide, please. Before we get started, I'd like to quickly go over a few items so you know how to participate in today's call. Your screen should look a little bit like this when you're looking at your computer desktop. And on the upper right-hand corner, you can see circled in red the interface that you can use. So you're listening in using your computer system -- computer speaker system by default. If you prefer to join over the phone, just select phone call and the audio pane the dial-in information will be displayed. [Operator Instructions]Next slide, please. You'll have the opportunity to submit questions to myself and to the presenters by typing in questions into the question pane there on the left in this slide illustrated. And you can send in questions at any time. We'll collect it till the end and address them at the end in Q&A session. So you can also -- if you can see on the right-hand side, you can raise your hand for a verbal question by pressing that button, then we can unmute you and put you into the call. I'll remind you of all this towards the end of the presentation.So if I can have the next slide, please. 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 and perception of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances. Although we believe the expectations reflected in these forward-looking statements are reasonable, actual events or results may differ materially from those projected or implied in such forward-looking statements due to known or unknown risks, uncertainties and other factors.For your reference, our results announcement was released this morning and a copy of the press release and our first quarter 2020 report are available on our website as well.Next slide, please. As usual, today, I'm joined by these gentlemen: Qazi Qadeer, our CFO; Richard Morton, our Technical Director; and Nigel McKim Projects Director. They will all participate in the webinar and be available for questions as well.Next slide, please. So it's been quite an interesting quarter, I think, for everybody, and it's true for Panoro as well. Maybe I can just touch on a few highlights, if we can call them that. On the operations side, the important bit is that our staff are healthy and have adapted to the new environment, both office staff who have largely been working from home in all our locations and the operational staff who have really risen to the challenge and done well to our knowledge. We do not have any nasty stories in terms of impact of the virus within our community. And for that, we're very grateful. The HSE culture that we have and the systems that we have, have proven to be resilient so far, which we're very proud of as well. I think that is absolutely critical and the most important point that we can broadcast today that we have run safe operations, and our staff so far are healthy. And despite all that, production has been largely unaffected. In fact, we're producing over 2,000 barrels a day in the quarter, which is up from Q4. So production has continued during the period. We have had challenges. There had been some sleepless nights, some crew changes, some drama around lifting and things like that have occupied us. But so far, everything has worked out fine, but not without a little bit of stress and strain along the way. And as previously indicated, we have deferred some development activity in Gabon.If I look now at oil sales, all our liftings have occurred largely as scheduled, which is something to be said, not everybody can say that in this market, unfortunately, though we have lifted when we wanted to lift. Our oil sales in quarter 1 were a bit light and I think that was well flagged. We just had 1 Gabonese cargo and some domestic sales in Tunisia. That will step up as we get through the next quarters. So it was a light quarter. We also had international lifting early in April in Tunisia. Our crude is priced off a dated Brent, which I'll come back to. And one thing that, I think, we also like to stress here is that we get a lot of questions about this from analysts and shareholders about our offtake and our marketing contracts and who are they with and are we worried about them and do people have to come, buy our crude, and we're very, very fortunate. In Gabon, we work together with BP International. That's gone without a hitch. And in Tunisia we work with Mercuria. They've been a first-class counterparty as well. So we've not had any issues around people not wanting to lift crude, people not paying for crude and things like that, that has not been an issue for us.On the finance side, we've maintained a strong balance sheet, a net cash position. Our hedging strategy has proven effective, we believe, in this downturn, and we'll come back to that one. And as previously flagged, we have reduced CapEx, and we have done cost cutting as well. So on the outlook side, we really have been focused on financial discipline, maintaining our existing production, which is very, very important to us. Our production guidance for the year, 2,300 to 2,600 barrels a day. That's a slight trimming from the previous one. That's based on the recent announcements together with BW Energy in respect of the production range decreasing slightly in Gabon as a result of not being able to tie in wells 6 and 7. But the upside to our asset base is still there. We're just experiencing some timing delays. So we think that the future is bright for us.Next slide, please. We've all lived the coronavirus and the drop in the oil price, but I thought I'd just touch on a couple of these things. How has this impacted the oil sector generally? Some of them supplies to Panoro, some of them doesn't. Again, we've been rather fortunate we've been able to lift, we've been able to sell, we've been able to produce. So -- but here are the things that kind of kept us awake at night and to some extent, still do. I think things have eased a little bit now, but logistics have just been the thing to worry about. We have a global business. The oil business relies on international people, international suppliers, ships coming and going, selling crude internationally on the high seas. And the logistics of that have just been severely compromised with the travel restrictions, the borders closing, the need for quarantines, isolation. This has all really impacted the business and has resulted in HSE protocols really having to be stepped up and adapted where possible. So we've been extremely busy trying to make it all work. And again, in Panoro's case and the operations we have, it has worked. But again, there's been enormous hard work that's gone into that, many sacrifices, personal sacrifices that have been made by people involved in the business. But we have done it successfully and I think perhaps we're a little bit more fortunate than others. We've also seen what it's done to the oil price. Together with the oil price war, we've had the global demand dropping and storage capacity becoming a huge theme. We've seen extreme volatility in oil prices. I mean leaving aside what happened to WTI, dated Brent, it's a seaborne crude. You're not going to see negative prices. I don't believe in Brent, but nonetheless, it's been under huge pressure. And we've seen, in many cases, stranded oil cargos or cargos selling for single-digit dollars per barrel in other parts of the world. So it has been a very, very challenging time for the industry and I'm not sure we're out of it yet, but things look a little bit brighter now.Next slide, please. I just want to illustrate what happens here. You get a lot of questions around how do you sell your crude? What does crude get -- how is crude priced? Brent gets priced on what we call dated Brent, which is a physical -- the physical market. It's what happens actually at the coalface, so to speak, when we sell the crude. And that is often a different price than what you see on your screen when you look at your Bloomberg or whatever, which is usually a futures price, near-term futures price. And here, all we've done is we've plotted the delta, the difference between the dated physical, the physical on the day versus the futures price you see on your screen. And over the past 5 years, and if you look back even further, you'll see similar trends. It's more or less -- it's usually a slight discount to the futures price. Sometimes you see it as a premium depending on what's happening with supply-demand, storage, et cetera. But what you saw during the crisis was unprecedented, really unprecedented drop in the physical price of Brent. And that's again the price you sell your crude at, not the price that you see on the screen, the futures price, but this is the price you sell your crude at went down $10, $12 discount to what the price on the screen was. And of course, depending on where you were, you saw people looking for discounts above and beyond that. So that's when you got into people selling cargos for single digit numbers. Now luckily, that is now rectified. Now we have -- we're back at a more traditional discount to the futures price at the moment, thankfully. But this is really what everybody was living through and where the panic set in.Next slide, please. So how is Panoro set up for all this? What's been our response? I think we like to think that we have taken a lot of steps before the crisis. We couldn't foresee the crisis, of course. But I think that we have always maintained a reasonably prudent way of managing our business. We took out oil hedges for 2020 and 2021 with floors of $55 a barrel. We did an equity placing in October of last year with very strong support of some of our largest shareholders and others. And that was really to put us in a balance sheet decent position going into the next phases of our Gabonese expansion.We had the option at the time perhaps to put a debt facility in place. We decided that's probably the wrong thing to do at that moment in time. In hindsight, that was obviously a very good thing. We streamlined our organization. We inherited an organization from DNO, as you guys know. In Tunisia, we cut the cost of that by 40% over the past year. And we kind of always kept a kind of low footprint corporately. During the crisis, as well flagged, we cut CapEx in Gabon by 40% and we delayed Ruche Phase I. That's more an oil price thing than the virus. And in Tunisia, we deferred higher CapEx activities like Guebiba-10, the sidetrack and Salloum West until the macro is a little bit more clear. And we've taken major steps to reduce overheads. We've even been a little bit cute with some hedging around the currencies, dollar hedge up some of the sterling and kroner cost base that we have. So I think we've responded well to it before and after.Next slide, please. And here's a slide talking a little bit about -- we had this discussion with the Board actually yesterday. We had a Board meeting yesterday. It's like taking a step back and looking at the corporate strategy over the past few years, we wanted to put ourselves in a position where we could withstand the cycle. We're in a cyclical business. There's no question. It's a cycle that I'm not even sure it's a cycle we've just been through, but the shock that we've just been through is not something that any of us really prepared for. But we were prepared for the cyclicality of the industry. And if you kind of just look, bigger picture, we put ourselves in a position where we're producing a lot more oil now. So we have a real cash flow coming through the business. We've strengthened our balance sheet and our cash position over the years. We've increased the number of wells we have from just a couple a few years ago to 18, 20 if you include Aje, where we have a diversification of wells. We have different countries as well. So Gabon, we've had some -- had to defer some activity there as it's been well flagged, but in Tunisia we're able to step it up. So that diversification in terms of country and well count, I think, is proving to work. And we've made new discoveries as well. I mean, a couple of discoveries in 2018, Hibiscus in 2019, we still have a huge exploration portfolio. So we're able to replace reserves that we produce through the exploration drill bit. So I think we talked about this with the Board. I think we're happy with the current circumstances. But nonetheless, I think we're happy that we put ourselves in a better position than we would have been a few years ago if we hadn't gone through the shock that we just have.Next slide, please. I'd like to turn it over to Qazi Qadeer now, our CFO, who will take you briefly through our financial highlights and talking a little bit about our debt and our hedging as well. Qazi?

[Qazi Qadeer, Chief Financial Officer]

Thank you, John, and good morning, everyone. On Slide 11, we have a summary of our headline results for the first quarter. It is customary to note here that the results presented and discussed here are unaudited. We report our results split between continuing and discontinued business activities. The discontinued part includes Aje operations, whereas the continuing activities include our businesses in Tunisia and Gabon.I'll make a start with revenue for the first quarter which stood at $3.4 million, with a notable decline compared to the fourth quarter '19. This was principally a result of lower number of liftings and partially a decline in oil prices. Sales volume for the current quarter was 71,000 barrels as compared to 210,000 barrels in 4Q '19. Realized prices of $39 per barrel in Q1 and $65 a barrel in Q4 '19. Including the commodity hedges, the realized price was $55 a barrel for the first quarter 2020.Moving to EBITDA from continuing activities for Q1 was $310,000 compared to $5.5 million for the previous quarter. Again, the lower EBITDA is a function of low volumes and lower oil prices in the current quarter. Despite the adverse macro environment, we have achieved a positive EBITDA for the current quarter. Below the EBITDA line, we have after-tax profit of $8 million for the first quarter, which included $10 million gain from mark-to-market of commodity hedges. I will touch upon these hedges in a bit more detail in the upcoming slides. Finally, we exit the quarter with cash of $24 million and debt of $23 million.Next slide, please. Here we are discussing the loan instruments we have in place for Panoro. We have 2 external instruments, a senior secured loan facility with Mercuria of USD 16 million and a $7 million nonrecourse loan payable to BW Energy. Both of these items are as of end of March 2020. The Mercuria loan has quarterly loan repayments of about $0.7 million for 2020. Due to a drop in LIBOR rates recently, we are expecting a decline in effective interest cost of at least 1% for 2020. Mercuria has been a very supportive lender during this downturn and impact of COVID-19. In Gabon, we have a nonrecourse loan with no fixed repayments. Following every lifting, the excess cash flows from cost oil after deducting operating costs are used for making repayments. Profit oil portion of the revenue is always retained by Panoro. We had a $1.4 million repayment to BW Energy in January this year. In a low oil price environment, we expect repayments to be very, very low.Next slide, please. As John discussed earlier, the dynamics of dated Brent and pricing of physical crude, our hedge positions are also priced off dated Brent, and hence have a linear relationship with our cargo pricing, which is also based on dated Brent. We execute our hedge positions with Mercuria, which is, again, a first-class and robust counterparty. Almost 20,000 barrels are hedged and settled each month, which is equaling to about 25% of our production, mostly with floors of about $55 a barrel and have been providing the necessary cash flow support in recent months of low oil price environment. As of 31st of March, we have $9 million mark-to-market valuation of our commodity hedge contracts maturing during 2020 and 2021.This concludes my review of results, and I'll now hand over to John to take us through the guidance on Slide 14.

[John Andrew Hamilton, Chief Executive Officer]

Thanks, Qazi. We touched on this a little bit. This is our current guidance, the production of 2,300 to 2,600 barrels a day. This is obviously a significant increase from 2019. It is a little bit lower than our most recent guidance due to the recent announcement also with BW in terms of the permit of some of the production in Dussafu due to COVID-19, and this excludes Aje, obviously.International liftings, our current guidance is around 8 liftings this year. We had 1 in the first quarter as announced. We have probably 4 more remaining in the remaining 3 quarters in Gabon and 3 in Tunisia, always subject to a little bit of change, but that's our current view of the world. On the CapEx side, all have been previously announced. We had a full year CapEx of $31 million that was announced earlier this year. That has now been cut back to around $22 million, of which at the end of the first quarter we have about $15 million remaining. It's about $5 million in Gabon and then the balance is the Salloum commitment well in Tunisia and the Guebiba sidetrack. Those are both currently delayed. We're holding these in our CapEx guidance, terming them as a little uncertain probably towards the end of the year. And needless to say, given the circumstances, we're seeking CapEx reductions in -- across the board and across all of our operations. So these are historical CapEx numbers and assumptions. So hopefully, we'll be able to do a little bit better than that.Next slide, please. I'd like to now turn over to Richard Morton, who can take you through a little bit what's happened in Gabon. A lot of this has already been flagged, but I'd like Rich to take you through it, please.

[Richard Morton, Technical Director]

Thank you, John, and good morning to everyone. So in Gabon, production continues from the Tortue field, of course. The main highlight in the quarter being that the first 2 of the planned Phase 2 production wells, DTM-4H and DTM-5H came on stream in March. Gross production for the quarter averaged 11,485 barrels of oil per day, and that's net 861 barrels of oil per day to Panoro. We're currently producing around about 17,000 barrels a day from the Tortue field from 4 wells. The finalization of Phase 2 at Tortue has been impacted slightly by the COVID pandemic. The remaining 2 wells will come on later than originally planned. More on that in a moment. And accordingly, we've now reforecast an average rate of 15,000 to 16,500 barrels of oil per day for the year with an OpEx of $15 to $17 per barrel. For sales during the quarter, we had 1 lifting in Q1 with a net parcel size of 44,000 barrels of oil net to Panoro at a price of $32.90. The next lifting in Tortue will be performed by BP in June. And we have a further 3 lifting scheduled for the second half of the year. Crude is priced on a dated Brent average for the month of lifting plus a premium. In the future, activities in Tortue, as I mentioned, have been delayed by COVID and with the last 2 wells of the Phase 2 program being impacted. The 6H well was actually drilled but has not yet been hooked up and the 7H well drilling was postponed and the rig demobilized in March.The addition -- in addition, the firm exploration well planned for the end of the 2020 drilling campaign has been postponed, along with the optional exploration well slots that we were considering at the time. We, of course, still benefit from a significant exploration inventory and the license prospect map of the area on the right illustrates discoveries in green, prospects in yellow, orange and brown, and we plan to target some of these when the oil price situation improves.In the near future, we're looking forward to hooking up the DTM-6H well as soon as the operational situation permits. And then the drilling and completion and hook up of the final Phase 2 well, which is DTM-7H. We expect these activities would take place either at the end of this year or early in 2021.Finally, on Ruche Phase 1 which is the development of the Ruche and Hibiscus fields tied back to the Adolo FPSO, this has also been delayed and CapEx deferred. We thought it was prudent to pause this project for now until the macro situation recovers.And with that, I'll hand over to my colleague, Nigel McKim, to take you through activities in Tunisia. Nigel?

[Nigel Bruce McKim, Projects Director]

Thank you, Richard, and good morning, everyone. On Slide 16, we provide an update on the status of the Tunisian assets. And the map on the left-hand side shows the contiguous nature of the 2 assets acquired by Panoro, the TPS production assets located onshore around the city of Sfax with a further field offshore north of the Cercina Islands whilst the Sfax offshore exploration permit located adjacent to these concessions provides exploration opportunity. We have an active operational program on the TPS assets, which whilst being temporarily delayed due to the COVID-19 pandemic, is about to restart with a number of well workover operations. On the Sfax offshore exploration permit, we are in the final stages of detailed planning and approval for the drilling of the Salloum West well.The average gross daily production for Q1 2020 was 4,000 barrels of oil per day, an increase of 15% as compared to the gross production of 3,473 barrels of oil per day during Q4 2019. We are currently producing at approximately 4,000 barrels a day, and our near-term objective is to raise production to our target of 5,000 barrels of oil per day. Production has been little impacted by the pandemic. Focus during the Tunisian lockdown was on maintaining existing production levels, whilst new well work activity was deferred. OpEx for the operation is under USD 15 per barrel and so very robust to the current environment. 2 domestic liftings occurred during Q1 with a total of some 27,000 barrels net to Panoro at a sales price of $54 per barrel. In April, post the quarter end, there was a lifting of some 90,000 barrels with a sales price of $19 per barrel. And then the next lifting is expected in late July or early August. Fortunately, our hedging strategy has performed extremely well in helping us maintain revenue through this unprecedented period. As we look forward, we are about to commence an extremely active period with multiple well work and drilling activities, which I'll describe on the next slide. In addition, we are undertaking further optimization of the production facilities, and we have subsurface modeling work in progress on 2 of the TPS fields, which we hope will lead to further development activity in due course.Next slide, please. So this slide shows the TPS well activities, the specific recent ongoing and planned activities for the coming months. The Rhemoura-01 work, however, comprises stimulation and ESP replacement. The stimulation was very successful, leading to a fourfold productivity increase in this well. This has encouraged us to identify further targets for stimulation across other fields. It is also pointing to additional potential in Rhemoura itself.Some of the highest impact near-term opportunities lie in the resumption of production at the El Ain fields. At the EL AIN-01 well, we will be acid stimulating and then completing the well with an ESP for the first time. We will also be bringing the EL AIN-03 well back online after stimulation. Whilst at Guebiba-05, we have recently perforated the Douleb in the field, and we'll be undertaking an asset stimulation in the coming days. These activities alone will, we envisage, enable us to reach our target production of 5,000 barrels of oil per day.Looking forward, we plan a series of additional well work operations. On Guebiba-04, we hope to recover a failed downhole completion and to also complete this well on the Douleb reservoir. We're in the final stages of planning the drilling of a sidetrack on the Guebiba-10A well. And we have taken the opportunity of the delay in the final approvals of the Salloum West well to schedule this activity with the CTF Rig 06 ahead of the Salloum West-1 well.I'll now hand back to John for the next slide, Slide 18.

[John Andrew Hamilton, Chief Executive Officer]

All right. Thank you, Nigel. Thank you, Richard. Just a couple of other updates on some of the other things we have going on. Block 2B in South Africa, we formed into in February, a very exciting exploration play together with Africa Energy. The application has been submitted to the ministry, the application for Panoro to enter the license. Like many ministries and government offices globally, the ministry has been closed. So it's not clear exactly when the approval timetable will happen, but our best guess is Q3, maybe Q4 of this year. The completion of this transaction is subject to this consent being received from the government and also the concurrent farm-in by Azinam for 50% of this block. In the meantime, we're busy with doing what we can, which is evaluating cost savings around the drilling operations and doing quite a bit of subsurface work still on this very exciting area. At Aje, production has continued. There's been some limited shut-in periods. The cost savings have been implemented by the operator there. We have, as previously announced, a transaction with PetroNor for the sale of this business, which is subject to the ministerial consent of this transaction plus another transaction that PetroNor are doing together with the operator. Those processes are underway, have obviously also been impacted by COVID-19, are expected to take another several months, but they are underway.Next slide, please. And this is a summary slide. We believe we still have a very strong outlook despite some of the timing delays we've encountered. On the corporate side, we believe we have a solid balance sheet with low-cost production. Our shareholder base and our lenders have been amazing partners to have through thick and thin. We look forward to dividending the PetroNor shares subject to the completion of that transaction towards the end of the year, hopefully. Our reserves, our resources remain there, highly valuable. They're still in the ground. Nothing has changed that. And we are taking a look at some market opportunities that are out there. We have nothing immediate. But clearly, this market does throw up quite a bit of opportunity. And of course, we need to be alive to that. On the production side, we look forward eventually to the hookup of DTM-6H, the well that was drilled in Gabon and drilling the DTM-7H when conditions allow. We look forward, obviously, to Ruche Phase 1 and the 50 million barrels that we have lined up to start producing there. And Tunisia, as Nigel stated, we're looking to bring on the production wells workovers in the very near term. And then still looking at Guebiba and other initiatives to try and boost production there.On the exploration front, we have Salloum West which is still there. We're continuing planning with that. Dussafu exploration, as Richard has touched on, has been deferred, but it's still very much on our radar screen. And we, of course, have Block 2B in South Africa, which is probably a 2021 event.So that concludes the presentation. And just as a reminder, if you would like to enter a question, a written question, you can do so on the question panel. And if you'd like to ask a question verbally, for those of you that are online, you can raise your hand by pressing that Raise The Hand button, and we'll hopefully be able to see that. So I'd like to now invite people for any questions.

[John Andrew Hamilton, Chief Executive Officer]

I see a question from -- let me just see here. It's a new technology from Teodor. Teodor, I'm going to try and unmute you here. Teodor, did that work? No.

[Teodor Sveen-Nilsen]

Just 2 quick questions. You discussed around like you realized oil prices for Q1. Could you say anything about the realized oil prices this far in Q2 compared to the reference prices we can see in the screen? And my second question is around dividend. You will, of course, dividend out the PetroNor shares this year after closing of the deal. But you previously said that you were aiming for a cash dividend from 2022 and onwards. Just wonder what kind of oil price environment do we need to see for you actually paying cash dividends from 2022?

[John Andrew Hamilton, Chief Executive Officer]

Okay. On the oil price, the only cargo we sold so far in the second quarter is what we already talked about in Tunisia, which was done in early April, unfortunately, in the middle of the crisis. So we achieved about $19 a barrel for that, which is a terrible price. But having said that, I think there are other cargos being sold at the same time in Africa for single digits. So I guess we have to count our blessings on that. That's been the only lifting so far. And the only other one we have planned for this quarter is one in Gabon in the month of June. The way the Gabonese cargos get priced is we look at the average of dated Brent for the month of the lifting. So in this case, June. We'll take the 30 days in June. We calculate what the average dated Brent is, and then we'll get paid a dollar premium to whatever that number is. At the moment, dated Brent is trading a couple, $1, $1.50, $2 below what you probably see on your futures screens. So right now, probably around $33, $34 a barrel, something like that. But we'll have to wait and price it until June. In the meantime, obviously, we have a hedge. Even though we didn't lift in May, we have the hedging income from May because the hedges are settled monthly, and we'll have similar hedges in June as well. In respect to the cash dividend, I think what we've always said is that we would like to pay a cash dividend once we get Ruche Phase 1 on stream, so the third phase of production. So once we have the so 40,000 barrels a day gross of production online in Dussafu, and that remains our intent, that second -- that project, Ruche Phase 1 needs to be re-sanctioned. I think we need to work together with the operator, with Tullow, with the State of Gabon and re-sanction that, which I think we'd like to see a little more strength in the oil price before re-sanctioning. And obviously, after the re-sanctioning, I think we're going to be bullish on oil price. And so it would be our intention still to try and pay a dividend, a cash dividend once that production is achieved.So we have a couple more questions here. Well, give me a second. Question from Jørgen from Fearnley Securities. You may need to unmute yourself, Jørgen. Jørgen, are you there?

[Jørgen Torstensen, Analyst]

Hello?

[John Andrew Hamilton, Chief Executive Officer]

Hello, Jørgen, are you there?

[Jørgen Torstensen, Analyst]

Yes, I'm there. So I guess my question, it's along the same lines as Teodor. With respect to prices, you said during the presentation, if I'm not mistaken, that the delay on this issue, it's more a matter of oil prices than the COVID-19 situation. So the question is how -- what kind of oil prices do you need to sort of, let's call it, normalize activity and move forward with the next phase at Dussafu?

[John Andrew Hamilton, Chief Executive Officer]

Thanks, Jørgen. That's a great question. If I could just be a little more specific. I think some of the -- what happened in Dussafu was related to COVID and some to the oil price. So we had a rig in the field, obviously, drilling the 4 wells. We drilled 3 of those. The fourth one, we had to demobilize the rig, and that was COVID. We could not get the crews and the suppliers, the contractors in. That was purely COVID. The intention was to drill that third and fourth well. We drilled the third but not the fourth. And then coming with an installation vessel in June to hook both of them up. That had been the intention. That installation vessel due to COVID is unable to perform that activity at the moment, so which is where the uncertainty has been. So those 2 bits of activity have been impacted by COVID. The Ruche development, which we are about to kick off and had already kicked off a little bit, has been postponed due to the oil price. And we benefit in Gabon from very low operating cost, a good tax regime. The CapEx per barrel is modest for that development, around $10 a barrel. So technically speaking, $30 oil would still be fine. I think together with the rest of the JV, I think we need to see a little bit more strength in the oil price. I would say probably something with a 4 in front of it would probably be psychologically where we need it to be, even though technically, I think we could sanction and still make money off these current oil prices. I think the confidence, I think, like a little bit more of a buffer in front of us. We have market meetings coming up soon. So I'm sure this will be debated rather actively. I think everybody has been focused a little bit more on making sure we maintain what we have. Looking forward, I suspect it will be something like that, but we'll update the market as soon as we have a common view on that.Right. We have a question from Werner Solberg. Werner, I'm going to tap your hand there, and you need to come off of mute. Are you there? Werner Solberg? All right. Well, I'll come back to Werner. Maybe Stephane from Auctus Advisors. Stephane, can you hear me?

[Stephane Guy Patrick Foucaud, Head of Research]

A few questions. So a few questions for me. First, in Tunisia. So you highlighted the 5,000 barrel per day that could be achieved with working to bring subsets of the well program, and I'm not talking about Salloum. So what do you think would be the upside case if we are including the sidetrack and everything into 2020 well program in terms of production? Second question, how -- in your discussion in Nigeria with PetroNor, how are you seeing -- PetroNor obviously is responsive, obviously they're engaged with regard the divestment of Nigerian asset. And lastly, excluding 6H and 7H in Gabon, where would you see greatest view on the 2021 development CapEx program?

[John Andrew Hamilton, Chief Executive Officer]

Okay. Nigel, do you want to take his first question in terms of potential upside case in Tunisia?

[Nigel Bruce McKim, Projects Director]

Sure, John. So the well work that we talked about in the near term, which is starting today, in fact, on 2 of the wells, will we hope, enable us to lift production levels up towards the 5,000 barrels of oil per day target that we'd set. So that is activity that will be going ahead and taking place over the next month or so. The further work that you highlighted, the Guebiba-10 sidetrack, and indeed the operations in Guebiba-04 would happen later in the year. We're currently expecting drilling operations to start in August. But that clearly is subject to the improving situation globally based on the loosening up of international borders after the pandemic subsides. So the precise timing of that is uncertain. In that operation, we expect a well rate of 500 barrels of oil per day or thereabouts. But we have to remember that there's an ongoing decline in these assets at the same time. And we can also lose ESP pumps occasionally, and they typically have a life of 2 to maybe 5 years. So it's normal to expect some decline in the base production whilst we're adding production from newer activities. So we're targeting 5,000 barrels of oil per day in the near term. We're hoping to get beyond that. But the precise target is uncertain at this stage later in the year.

[John Andrew Hamilton, Chief Executive Officer]

Yes. So Stephane, I'd endorse what he says. I think let's try and get to our first target. Clearly, there is upside beyond that. I think we need to demonstrate to ourselves and to you all that we can get to the 5, and then we'll start looking at the next level. But what's very encouraging for us is that we're able to resume activity. Tunisia has kind of come out of the lockdown. We've had Ramadan, Eid is over. So everything literally is coming back together there now and we're able to get after that stuff which is very encouraging. Your question on PetroNor and Aje. PetroNor have been fantastic partners. They remain heavily engaged in all that is going on in Nigeria. We cooperate extremely well together, and they have a lot to add to the Aje story. They have a longer-term plan on Aje, which they're busy planning for. They're clearly not been licensed yet. So they have to do it on paper, so to speak. But they've been very engaged and a very constructive counterparty to deal with. On CapEx 2021, DTM-6 and DTM-7, we've already spent quite a bit of money on those wells because DTM-6 only had the installation left on it. DTM-7, we obviously bought most of the things for us. So it was only really the drilling activity and obviously the eventual hookup that remained. So there's probably a little bit of CapEx associated with those 2 things, but it's reasonably modest. Ruche Phase 1, I would hope that we would re-sanction it, again, some time. We need to coordinate with our partners on that. The real CapEx probably for that probably wouldn't really until 2022. 2021 would see some CapEx, but it's always a little bit back ended. You had some long lead items, wellhead platform and things like that, that there was some big cost on earlier in the cycle, but a lot of it comes more towards the end with the drilling activity. So too early to say really given all the uncertainties. But on paper 2021, leaving aside Ruche Phase 1, is a very modest CapEx year for us.All right. I think we have -- was 1 more? Yes. Hugo, I'm hitting your hands now. Can you hear us? I think you're on mute. You have to come off mute. Hello, Hugo? You look like you are off mute, but I can't hear you. Okay. Well, in the meantime, it looks like we have a question that's come through -- a few questions that have come through. Okay. There's a question on M&A. About whether there's sort of additional opportunities?Yes. I think that the shock has -- this question basically says, would you say that the shock we've been through has created more M&A opportunities in Africa? Is it possible to agree on price or is the bid/ask spread of the asset level typically very wide? Or is M&A not the top of your agenda these days with the oil price uncertainty and reluctance to add debt to your balance sheet?Yes. I think everybody is looking to do deals in this market, obviously. There's been a huge dislocation. And as you say, the bid/ask spread, I think, is still an issue. So obviously, companies would love to buy assets at a cheap level if they can but sellers are reluctant to try and pick this price out in the market and say that, that's the new reality. I think that there still is opportunity. I think if you have mature people who can look at maybe contingent structures, things that might have some payout in the future if oil prices rally or if production ends up being generated that, that is possible. So we have a lot of investment bankers who've also been sitting at home, working from home, who dream up all kinds of stuff. So I'd say there's lots of chat with very little activity. And we've seen Total go in and pick up the Uganda position of Tullow. We've also seen deals fall apart with Total again on the Anadarko deal. So I think it's -- I think there's a lot of chatter, but not so much activity yet. I think we may see some, but I think the world needs to stabilize a little bit first because for most companies, you're going to be relying on external capital to do transactions or your shares and share prices are low, external capital is probably scarce. So I think it's going to be a little while before we see a boom. But certainly, I think that there will eventually be quite a bit of opportunity available.Right. I think that, that is it. I see Hugo has still got his hand raised. So I'm going to try you one more time, Hugo, to see if it works. Yes, Hugo? I can see you've come off mute, but I can't see -- can't hear you. Great. Well, Qazi, do you see any more questions that I've missed?

[Qazi Qadeer, Chief Financial Officer]

John, there are no more questions I can see or any raised hands.

[John Andrew Hamilton, Chief Executive Officer]

Great. Well, thank you, everybody for joining. And again, hopefully, our technology experiment has worked. If you do have any feedback on it, please drop us an e-mail. And once you leave today's webinar, you'll also receive a follow-up e-mail with a link to a view of the recording of today and recording of today's webinar. So thank you very, very much for joining us, and have a great rest of your day. Thank you very much.