Panoro Energy ASA

OSE:PEN

Earnings Call Analysis

Earnings Call Transcript 2023-Q3

[John Hamilton, executive]

Good morning, everybody, and thank you for participating in our third quarter results presentation. With me today joined by Qazi Qadeer, Chief Financial Officer. Nigel McKim, our Technical Director; and [ Andy Diamond ], our Head of Corporate Development. Our Richard Morton is actually in [indiscernible] Equatorial Guinea today. So he's not joining us. He's down there working on [indiscernible]. 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. And for your reference our results announcement and this presentation going through the release this morning, which can be found on our website.

Next slide, please. So when it comes to question time, you can either type in a question, as you can see on the left panel there [indiscernible] previous question or you can raise your hand. You see there on the top left, the hand signal and we'll unmute you to let you ask a verbal question on the audio. I'll remind you of these instructions at the end as well. Next slide, please.

So it was a very strong quarter for us [indiscernible] with revenues of well over $100 million, very strong EBITDA, almost $65 million and net profit of almost $28 million. We then have the year-to-date highlights, which show the progression of the business as we've gone through 3 quarters. We still have 1 quarter to go obviously and a balance sheet, which is still on a net debt basis, we believe quite strong, $35 million of net debt.

In making those calculations, we're netting off the cash that we [indiscernible] facilities, which help us manage working capital, but those numbers are a good reflection of the balance sheet, the position of the company, which is good. And today, we've also announced a cash distribution of NOK 40 million with a separate press release, you can find the details of that distribution there.

It's important to note that this will be paid as a return of paid in capital, which is not a dividend per se, but it's the same thing in the end of cash. But in returning, it is paid in capital. This may benefit certain shareholders from a tax perspective [indiscernible] for us to return cash to shareholders, and that equates to NOK 0.342 per share. The final cash dividend for 2023 declared at our fourth quarter results, which are in February.

Next slide, please. It's always useful maybe just take a step back [indiscernible] growth trajectory and what that also means for shareholder distributions. We don't have to go to [indiscernible] back in time to see that Panoro was a very small company producing about 1,300 barrels a day back in 2018. Dussafu started coming online in that period, and we got, in 2020, 2,200.

We're slowly climbing this ladder doing approximately 9,000 barrels a day this year. And as everybody knows, we're looking to at least greater than 13,000 barrels a day during the course of 2024. And we started really through our commitment to returning cash to shareholders. We started that commitment [ 6 months ] earlier than originally guided. We started that in February of 2023 where we paid the very first one, NOK 30 million. And as you can see, we've been building that up. We've now moved to NOK 40 million, and I'll talk about it shortly, but we've announced the 2024 framework as well, policy for shareholder returns.

So I think what we're trying to demonstrate here is the company and its Board are very, very dedicated and committed to being a very strong shareholder return-focused company. At the same time, trying to run our business and manage our capital expenditure and other financial stakeholders at the same time [indiscernible].

Another point to make here really is around where we see the free cash flow inflection point. We are still in [indiscernible] halfway through up [indiscernible] halfway to the year, which is when most of the CapEx is behind us. And hopefully, the [indiscernible] continuing to build shareholder returns to our -- which we think is already in a very good shape.

Next slide please. [indiscernible] shareholder returns policy. [indiscernible] the exact timing of that is depending on the derisking of our production operations. We'll talk about it. We're about halfway through our extensive drilling program. It's probably busiest period ever in Panoro history, about halfway through it now, as we derisk the production operations in Gabon and Equatorial Guinea in particular.

And as we do that, the weighted [indiscernible] half as production milestones are achieved. [indiscernible] paid on a quarterly basis, [ next ] quarter results, which we will be discussed in May. And those will be paid as a return of pain in capital, tax benefits to certain shareholders, a efficient way for us to do that. But very substantial portion of that [indiscernible] trading a discount on an asset value.

We think depending on the circumstances inside periods and the share price in market, there's going to be opportunities for us to do share buyback during the course of next year. The key factors and assumptions behind these and what we try to do is take that [indiscernible] calculation that's around $85 current exchange rate [indiscernible] obviously continue to success this upwards [indiscernible] be higher, lower or if production so clearly there's some upside in the second half of next year to consider further [ revisions ]. This is approximately a doubling of last year's, the 2023 [indiscernible] really do feel we're continuing to be on the ladder here of increasing shareholder returns.

Next slide, please. What we try to do here is encapsulate the busy program that we talked about. We are really in the most active phase of drilling that this company has ever been and really is. It's remarkable and through the support of our shareholders and through the support of the financial community that's almost phone call and our lenders, we've really positioned the company well to get in a position where it can really undertake material capital programs.

And as you can see in 2023, we've drilled 4 Hibiscus wells. We drilled at least halfway through the Ruche well. That will be completed only in 2024, and we've made the Hibiscus South discovery. And what we have now going on are a series of workovers in Hibiscus, which we'll come back to. To related to the ESP issues, that have been well flagged. And we're in Equatorial Guinea. We're also warming up the rig right now with a couple of new workovers before we spud the first well probably around Christmas time.

Then we still have next year, 3 more production wells in Gabon, 3 production wells in Equatorial Guinea and 2 exploration wells. So I can't really think of the time in my time at Panoro, where the company has been busier. In the bottom part of this slide, we try and talk through a little bit some of the pros, some of the highlights and the low lights of where we are to date.

It's been excellent safety performance to date on the campaign, which is extremely important. The flow rates from the 4 Hibiscus wells have exceeded expectations with production reaching almost 40,000 barrels a day when 4 of those wells were online prior to some of the issues we've had with ESPs. So we know that the reservoir is delivering at or beyond expectation at the moment. So it does show you some of the potential.

On the negative, the ESP issues have caused production variability. And those, together with some of the earlier delays on the project, it probably put us by our estimate, 3, maybe even 4 months behind the original schedule that we've been on. So that is a negative, clearly, and that's been reflected in the market, I think quite loudly.

And then on the right side, let's talk a little bit about the electrical issues we believe can and will be rectified. The reserves aren't affected. So this is deferred production, was not lost production. We've now added an additional 7 production well, the Gabonese campaign, which should allow us to achieve higher rates, manage the reservoirs better, extend the plateau out, greater diversification of well stock.

It really is a nice add-on for us. And these infill wells in Equatorial Guinea can add additional volumes to what we've seen so far. And then we have 2 very high impact exploration catalysts, Bourdon, which is the old prospect B for people who have been around for a while with Panoro and the Akeng Deep well, which is the Kosmos operated well in Equatorial Guinea, very busy period.

Next slide, please. I won't blow on this one too much. This is simply a hotting up of production over the past quarters where our guidance was and reiterating the fact that we're going to get to 13,000 barrels a day when 6 of these Gabonese wells are online at the same time. We've also got the Equatorial Guinea campaign, which is coming in, so that should allow us some further upside there.

We have been over 12,000 barrels a day as a group when ESPs were working just fine. So we do know that we have the potential to get there. It's a matter of getting over the electrical issues that we've seen in Gabon. And then recognizing that we changed the work order of the drilling program in Gabon, our guidance for the year is around 9000 barrels a day, as previously announced.

Next slide, please. Our lifting update. The -- this is -- as we've always shown it, the final lifting that we have for the year, we've lifted already in Gabon and Tunisia in Q4. We've lifted about 0.5 million barrels -- a little over 0.5 million barrels in Gabon and Tunisia so far. We have one last lifting in Gabon, which is kind of right on the edge of the New Year, if I can put it that way at -- so that may slip just into early January, let's see, but this is largely as guided already.

Next slide, please. Every time we put out a little update here in terms of where our debt is and some of our CapEx guidance, there's no changes on the left side of this slide. The right side of the slide, we've guided around $75 million that's unchanged for this year.

We are upping slightly our CapEx assumptions for next year in 2024 and remains at $70 million to $75 million. We have never really provided firm guidance on that, but I think that -- indicatively I think most people assume we're around $60 million or $65 million so we're upping that slightly. The reason for that, I think, is evident. We are fast track the Hibiscus South discovery. So we have additional development where we're putting in there, and we're drilling 2 exploration wells.

We already drilled 1 in Hibiscus South and the other being Bourdon. So the combination of those things together with some rig time on the ESP remedial work, has meant that CapEx has drifted a little bit higher for next year than perhaps some were expecting, but understandable I think given the expanded work program.

Next slide, please. I'm not going to dwell here, but we do, again, try and provide this slide every time just to show the way the cash builds in the business and where the various elements are. I'm not going to spend any time on this. But if there are questions on it, we'll take those in the Q&A.

Next slide, please. Right, Gabon. We touched on it a little bit already, but we have the 4 Hibiscus wells, so as I've demonstrated excellent reservoir performance, good flow rates on those. We have some electrical integrity issues with ESPs, which we are currently in a period of diagnosis, repair and replacement. We've commenced that program. I'll touch on it a little bit later in the presentation, but that is currently underway. That has been a speed bump for us for sure.

It's nothing pleasant given the fact that we know that these wells flow so well, but everybody is on the case on this one. We've got [ Baker Hughes ], the pump specialist and supplier on board, the MaBoMo as we speak, together with BW Energy crews and other third-party experts. So we really are getting after it. But it has been a little delay into the business.

Hibiscus South will be fast tracked into production. You can see Hibiscus South there in the map. It was a really beautiful, little 20-meter oil pay, 6 million to 7 million barrels. It may not sound big, but these are extremely valuable barrels. We calculate something like NPV10, at least $40 a barrel on these. So basically the OpEx is almost free because you're already paying for everything through the MaBoMo, through the existing production. So it's been a fantastic discovery for us.

And we're finally going to get after Bourdon as well as part of this program. This is a rather large structure that could be extremely large. We have it for about 29 million barrels. It's got the targets in both the Gamba and the Dentale and it will probably be the last thing that we do as part of this drilling campaign. So we've exercised the options there. Tortue field, the gas lift compressor was installed and up and running in July and has been operating just fine since that time.

And then Tortue continues to produce in line with expectations of all 6 wells producing. Next slide, please. Well, we all get little caught up in electrical issues and other ups and downs that we have in our industry, but we thought we would zoom out here a little bit and remind ourselves and remind anybody who cares to listen to us about what Dussafu actually is.

And if we start off with -- we start the Panoro. We acquired the seismic and drill those [indiscernible] wells. They're finding Ruche and Tortue back in 2013. And by time we get to 2017, we estimated around 24 million barrels were held on that block.

And since that time, we've added 91 million barrels through discoveries and revisions. We've gotten the deal to almost 120 million barrels. Also once you have in the Hibiscus South discovery, we've already produced 24 million barrels. So you can see this thing since 2018. This thing that's going to produce for many, many years to come. And on top of that, we have the 2C, the discovered resources that have not been commercialized yet. We have Bourdon and then we have the remainder of the exploration portfolio that we currently see, which is estimated to add another potentially up to 142 million barrels.

So we are on a license that is going to produce oil and hopefully find more oil for a long period of time. The ESP issues are very frustrating, but this really is a very accurate, we believe, description -- depiction of Dussafu's wonderful block we have. And we try not to lose sight of that as we go along.

Next slide, please. Well, this is about to become the next exciting thing. Equatorial Guinea has been producing fine, but it's about to get exciting. We have a very, very active program here for the next 6 months. The island innovator, you can see there in the picture is in country. It's already commenced workovers plan. The idea is to kind of get the rig kind of warmed up with a couple of easier workovers before it comes and drills.

3 new infill production wells, the first to be on stream probably towards the end of Q1 and the next 2 somewhere in the second quarter. There's a lot of other things going on, flow line replacements, gas compression units and gas injection, lots and lots of projects going on here. And on top of it, we're also then drilling the Akeng Deep prospect, which is a Kosmos operated well. That will be at the back end of the campaign, so probably the back end of Q2 we'll drill this. This is testing a deeper Albian play.

We touched on it before. If it's a discovery, you can tie it back. It's infrastructure led back to the FPSO. And its gross on this mean resource estimate is around 180 million barrels. So essentially a transformational exploration well, about 25% chance of success. So we have to keep that in mind.

But what we're seeing in this portfolio that we have together with the Gabonese exploration wells that I referred to earlier so we have lots of good exploration catalysts going on in the next 6 months here as well. Positively, there's also been -- there's also -- talk about tax risk in the North Sea and the U.K. and other jurisdictions. Well in the EG, they've gone the other way. They have actually lowered the profit tax rate from -- to 25% from 35% that will be affected from 2025 onwards.

But it's a very, very progressive government we find here in terms of trying to encourage you on the gas sector. And so that was very, very pleasing. We have a normal annual tax payment. It's going to lump sum tax payment that's due in Equatorial Guinea every year. That's the taxation regime, that's embedded within the production sharing contracts.

That this year is around $20 million and that gets paid as a lump sum, which will be paid in the fourth quarter of this year and every year going forward. That is just the timing of that tax payment. Next slide, please. Tunisia is doing very, very well. I think we are in a period of transition there. We've been very much focused on the onshore blocks here, the ones in orange that in Guebiba, El Hajeb, El Ain.

These fields have been producing very, very well. But we're about to embark on a period of concentrating now on the offshore, in the Cercina field, where we are undertaking a series of workovers in 2024, which will really help us work up the fields potential there as we get into a renewal period on that license.

So I think you'll hopefully be hearing some more about Tunisia in 2024. It was not a particularly active year in terms of news flow. In Tunisia, the production held up very well. But 2024, we could see a lot more activity as we get into some workover campaigns in Cercina.

Next slide, please. So our typical summary slide, we really find ourselves in probably the busiest period of our history. At Dussafu, we still very much stand by the delivering 40,000 barrels per day gross. There's been some noise around that kind of thing, but we very much stand by that. And we're also very much standby our production targets at 13,000 barrels per day as a group. These are unchanged targets.

The results of the new wells in Gabon exceeded expectations. And the reservoir deliverability has been very, very good. The ESP issues have obviously constrained production, but we're getting after it as we speak. There's a 3-well drilling campaign committed in Equatorial Guinea. And we have the 2 infrastructure led exploration assets in Equatorial Guinea and Gabon combined with cash distribution framework, which we think is very shareholder forward.

We -- if I could go to the next slide now. As a reminder, how to ask questions here, you can type in a question or you can raise your hand. I suspect that a lot of the questions are going to be around the ESP issues. And I think we suspect that this has created some uncertainty, and we ourselves have some uncertainty and we understand that.

It's frustrating. It's frustrating for us as well and frustrating for BW as well. But rather than sort of clog up the Q&A with questions on the ESPs, you'll appreciate that we're in the middle of this diagnosis program. So there's only limited things that we can say but what I'm going to do is actually Q&A myself. So I'm going to anticipate the questions that I think that you guys are going to answer, and I'd like to answer them.

And then I would ask that try not to repeat those same kind of questions when you come online. I just -- I have a feeling that there a lot of questions that may be coming from the same angle. So let me try and head them off. Hopefully, I'll do good enough job, and we will appreciate that obviously, we are in the middle of a program where we're getting information and details every single day.

So it's very much a moving fee.

So it's kind of hard to say much more than I will say, and then I will open up the questions. Hopefully, not many then on the ESPs. Hopefully, I will have dealt with them. So the first question I'm going to ask myself is what is happening at the moment? So to start off, it's worth commenting the driver to use these ESP technologies is -- these access ESP, they're called, is that this technology provides an advantage over traditional ESPs and that you can replace failed pumps using a production platform and wireless systems.

So you don't actually need a drilling rig. So this really creates a lot of operational efficiencies. ESPs do fail at a certain point. They don't last forever. And to the extent that you come in with a wire line, retrieve them and put them back in. It saves you having to bring a drilling rig -- expensive drilling rig out to replace them. So this has been the main driver.

And in the longer term, we have to expect that these ESPs will deliver significant uptime, cost benefits as a result. At the moment, BW in the middle of a diagnostic exercise, huge resources are being mobilized. And I really do mean that huge. This is a top, top, top priority for BW, but not only BW, but the ESP supplier, Baker Hughes, who are out there in force together with third-party exports on the MaBoMo.

So the process that's currently underway and is likely to take the next few weeks up until the end of the year, let's call it, is to pull these ESPs out and probably at least one of the lower completions below the ESP just to find out where the root cause of the issues that we've experienced in are. So it's really a root-and-branch exercise, pull everything out and look and see where we've got.

We don't have [indiscernible] yet with BW to update the market, but we'd expect this probably to be in the New Year. But this is the top priority for everybody concerned at the moment. The next question I'm going to ask myself is what could the issues be? Well, we have a wide range of theories and there's further work needed on these.

These ESPs are being used widely in the industry and indeed nearby by Chevron and Congo. So we feel a solution will be found. And as we've stated, the reservoir performance, the well, has been fantastic. So it's the utmost priority for us to get the situation rectified.

Next question I'm going to ask myself is how long will it take to fix? Again, it's too early to give a definitive answer and any response really could be a little bit misleading at this time. But on the spectrum of possibilities, we envision possibly as many as 3 months, depending on the nature of the issue found. Perhaps it can be solved earlier than that, but I think that that's probably as good a guess as I can give at the moment.

And other remediation of the issues will overlap and be mixed and match the drilling program remains to be seen and of course, with the Bourdon well coming. So we're looking at juggling, supplies, logistics and the priority of drilling the new wells. It all overlaps, and we're still putting the puzzle together.

The priority for the group, though, is to maximize production. So we're not going to forgo production. What we really want to do is trying to make sure that we're doing everything as properly as possible in terms of the repair of the ESPs and at the same time, making sure that we keep production rates as high as possible.

Next question I'm going to ask myself is, do you agree with the BWE guidance that they provided last week that obviously caused quite a stir for the people that do follow the 2 companies. And we were surprised by the guidance, particularly the low end of the guidance. Some of the guidance may have been driven by their desire to present a low target or one that they could beat.

What we personally believe could have been better explained was the effective time on the annual averages presented. So the original timetable for Dussafu had all the 6 wells to be completed by the end of this year, around Christmas time, in December or early January. So coming into January, would have been sort of at full tilt and a nice plateau as it were.

And due to all the well publicized and some of the delays we had and now with these ESP issues kind of intervening with the introduction of the Hibiscus South well, mixing the program up a little bit between exploration and development wells. Everything has been pushed out, as I said, by a series of, let's call it, 3 months. So when you're looking at an average production rate for a calendar year, if you're starting on January 1, at the top, obviously, that's a different number than if you're starting at the top in, say, the second quarter sometime.

So I think that could have been a little bit better explained, and I think it does explain at least some of the lowering of the production target for next year. So that's simply pushing the calendar out to the right by, let's call it, 3 months. So I think that, that is the point that probably could have and should have been better explained. The important thing for us really is to get to the 40,000 barrel a day level at Dussafu on a sustained basis and capturing that deferred production that we've just been losing recently.

And obviously, from a Panoro perspective, what we really like is that we have the EG wells coming online also in this period. So the benefits of a diversified portfolio are really starting to come through despite the adversity of these electrical issues. We still have EG, which is now stepping up to come on to the field and contribute new volumes for us. So again, we'd like to now open it up for questions. And with respect, we will answer questions around or try to answer questions around the ESPs to the extent I haven't dealt with them, but I would encourage people maybe not to ask questions that I probably can't answer or that I've already tried to answer in earlier statements. So Andy, can we open up the lines to any questions we may have.

[Unknown Executive]

Thank you, John. The first question will be from Steffen Evjen from DNB Markets.

[Steffen Evjen, analyst]

So thanks for the clarity on the ESPs, very helpful. I have 2 questions more on your balance sheet and on your distribution. So first, I see if the oil price exceeds $85, you'll increase likely both dividends, but also accelerate your debt amortization. In light of that, just wondering what you consider to be the optimal net debt level going forward?

And my second question is a bit more down the road, but it seems like 2024 will be more of a progressing year and 25% might be sort of the full effect of all the work we're doing next year. Just what kind of sort of long-term capacity do you see yourself having on dividends and buying back in light of how that growth now will probably be more into '25 on production rather than '24. That's it for me.

[John Hamilton, executive]

Okay. Yes. On the balance sheet, in terms of optimal debt levels, I mean, we don't have like a targeted net debt level. I mean I think if we look at our debt -- and I'm not sure if any of our bankers are on the phone call today, but what the bankers do is they run the theoretical borrowing capacity of the assets, and then they calculate so much you could technically borrow.

And what I would say, without giving away all the numbers is that we are very under-geared as a company. We feel quite comfortable with the debt we have. Obviously, interest rates being high. It is an interest cost burden. So we're not sanguine about it. But we don't feel uncomfortable with the levels of debt we have right now. I think we would like to see them come down, as we start generating the free cash flow.

We do like a little bit of debt in the company. We think it's a good discipline for an E&P company. I've been around the sector a long time, and I think that an RBL is a really important tool to have in a company. It provides a third-party discipline with third-party reservoir engineers coming in and scratching around and asking tough questions.

And it's a very nice discipline for the company to have. And it also provides you with a facility that you could use if you needed it suddenly, if you needed if you had a new development well that needed drilling and you needed to borrow a little extra money in the short term. You have a facility in place. You don't have to start from scratch.

So I think we would, as philosophically, like to keep some debt on the balance sheet, but to keep it at modest levels. In terms of your statement on '24, yes, I mean, I think, arguably, we're a few months behind where we wanted to be, if you'd asked us a year ago, where we thought we'd be with Dussafu, it's drifted as I said, to the right by 3 or 4 months or something like that, which is pinched into 2024.

I think our -- what we can see from the Board's decisions in terms of doubling the target for 2024 is a real intention to be a very progressive shareholder-friendly company and return cash. And as you correctly say, as we get really into the second half of 2024, which is kind of where we get behind the CapEx of the $70 million, $75 million I talked about, the lion's share of that really is in the first half of this year.

But we really start coming out of that in the second half of the year. Obviously, '25, '26, '27, these are years where all the things being equal. CapEx is going to be quite a bit lower. Obviously, we make a big discovery in Bourdon. We make a big discovery in Akeng Deep.

We suddenly have a luxury problem of some additional CapEx to time an additional reserve. But these will be years where the free cash flow generation at normalized oil price will be considerable against our market capitalization. So I think you'll continue to see the Board being progressive in the attitude towards shareholder distributions. So I hope that helps answer your question.

[Unknown Executive]

And the next question is from Stephane Foucaud of Auctus Advisors.

[Stephane Guy Foucaud, analyst]

So starting on the dividend for 2024. If we look at the core dividend, you talk about, how should we think about this in terms of relative to 2023? Is -- the core is bit of a similar magnitude, at least that? Or what's the thought process, trying to think at the flow of cash payment [indiscernible]. Then on Bourdon, I think the well is targeting both Gamba and Dentale. Could you give us an idea of the split of those 20-plus million barrel resources between these 2 horizons. And perhaps lastly, Tunisia is becoming more important next year. To get a sense of maturity, what sort of percentage of CapEx you see going to Tunisia 2024?

[John Hamilton, executive]

Thank you, Stephane. Yes, great questions. On the core dividend, we didn't state the number. And the reason we didn't -- I know people would like to hear that number is -- it's still a number of months away. We're in the middle of this program. We'd like to just mature things a little bit more over the next couple of months, and we'll come back and talk about that early in the New Year.

But what I can say and I should say is that, no, we expect it to be at a higher level than we have been paying to date in the '23 cycle. We expect that to be a substantial core dividend. But we'd like to keep quite a bit of firepower on the share buyback and/or the special dividend depending obviously on the share price and the market circumstance. So we will come back, but I think you can imagine it being considerably higher than we've paid to date.

Your second question around the Gamba and the Dentale split on Bourdon. Nigel -- I don't have that handy. I believe most of the volume is in the Gamba. There is a huge Dentale structure below it Nigel, do you have that to hand? Or is that something they might need to circle back with Stephane on...

[Nigel Mckim, executive]

Yes, John, I've just been trying to check on that. I haven't got the numbers at my fingertips, so I think we'll have to circle back on that.

[Stephane Guy Foucaud, analyst]

Stephane, will come back, but it's a very, very nice looking Gamba 4-way, which would be the main target. The Dentale below it is historically, people have seen the possibility of Prospect B being north of 100 million barrels. And a lot of that comes from the Dentale -- the size of the Dentale below the Gamba.

I believe most of the 29 is in the Gamba with some contribution in the Dentale. But we're trying to come back to you on that one. And Tunisia CapEx, yes -- Tunisia CapEx is not going to be particularly high. I don't have the exact numbers in front of me, but I would have thought of that $70 million, $75 million, maybe 10% or 15% of that will be in Tunisia. It's not a big number. And really, it's not concentrated on big drilling campaigns. It's smaller scale workovers, depending on how you classify them, can either be classified for tax reasons as OpEx or CapEx, but it's not a huge number, Stephane.

[Unknown Executive]

The next question is from Teodor Sveen-Nilsen of SB 1 Markets.

[Teodor Nilsen, analyst]

First, a question on exploration. For us to understand, you plan to drill 2 exploration wells in 2024. And just on Slide 13, the resources you showed on -- for Dussafu license. When should we expect you and BW Energy to pursue those resources? Should we expect any new wells in 2024? Is that like a 2025 or beyond case?

Second question that is I want to ask about the ESPs, but I just wonder you could comment on right today -- what is the production from the Dussafu license today? And final question on -- and I think we discussed this before. I just want to ask it again. The general M&A market in North Africa and West Africa, where do you see opportunities, which are as likely to look into? And I should expect you to do anything over the next few years on the M&A front?

[John Hamilton, executive]

Sure. On the exploration front, what we've managed with BW to do is every time we bring a rig out to drill more development wells where they sort of both predominantly interested in production rather than exploration-focused strategies. I think we all recognize that you need to have exploration in the E&P portfolio, best to do it when you're producing oil and have the cash flow to afford it.

And so as a result, we -- on this particular one, we're effectively drilling 2 exploration wells so the Hibiscus South, which has been a discovery and Bourdon. And obviously, then I came deep that you mentioned as well. And I think you'll see that trend continue. So everybody is aware that there'll be -- the next phase of Dussafu, the Hibiscus Ruche Phase 2, which is not a 2024 event. That's more a 2025 event.

The drilling rig will come back out. And probably the same thing will happen again, which is we will seek to drill additional near-field, infrastructure-led type of exploration prospects on that block. So I wouldn't expect any more exploration activity from Panoro other than the 2 wells that we have -- that we've mentioned.

In respect to your question on Dussafu production. I mean it was one of the reasons I wanted to try and head off some of those questions is that the production at Dussafu is extremely variable right now. We are shutting down stuff, restarting stuff. So it changes day-to-day. So to give an answer to the question, I think, would be quite misleading or potentially misleading.

And all I would say is I think we're trying to come into update with -- together with BW. And again, we don't have a planned time for this. I suspect to be earlier in the New Year in terms of what it is we've decided, the issue was, where production is and where the forward-looking plans to the extent that those need to be discussed.

M&A markets. I think it continues to be dominated by large major selling out assets as they get to a period of immateriality to them or perhaps in an effort to get some carbon off their balance sheet, so to speak. We'll continue to see that trend, which has been going on for decades now, large companies, small companies, that trend very much continues, and it is exacerbated.

It's encouraged by some of the bigger mergers that have happened, the Anadarko and with Chevron Noble, the series of mergers that have gone on. What that does is it creates continued churn in these portfolios of these larger companies. The role that Panoro can play within that is important, I think. I think we've held ourselves out to be a very responsible partner within the JVs.

We seem to be well regarded in the countries in which we operate. So it's very important to be well accepted by the regulators in these countries. So we've worked hard over the years to make sure that we're seen in our industries -- so not the stock market necessarily, but also in our industry as a responsible party that does what they say.

We're not the biggest company in the world. So it's hard to think about the really big ones, but there will be opportunities for Panoro. I think the biggest part -- the biggest issue for us really, and that probably goes for a lot of other companies in our sector, we're trading at a discount to NAV. So you're trying to participate in the M&A market and trying to make money for your shareholders and you're trading at a significant discount to NAV. That makes the hurdle higher.

So we are, as you've probably heard from us before, extremely picky. We were very, very fortunate to be able to pick up the [indiscernible] assets, as we did a couple of years ago at a very, very attractive price, and those have shown to be excellent acquisitions.

We're looking for that type of opportunity where through a certain circumstance, could be a corporate situation. It could be a blip in the market. It could be something unique. It creates an opportunity for Panoro to really try and do something that's clever. In the meantime, we're not super greedy. We got -- we really have our hands full internally at the moment.

We've busiest period ever in the history of the company in terms of drilling and production growth. So we really need to be a little cautious when it comes to these kind of opportunities. But the M&A landscape is there and it's there for companies like Panoro to participate in. But the deal has to be the right one. I hope that answers the question in some respects.

[Unknown Executive]

And the next question is from Alex Smith of Investec Securities.

[Alex Smith, analyst]

You've answered most of my questions. Just a quick one on Equatorial Guinea, if I can. This was the profit tax update kind of makes Akeng Deep even more interesting. And are there other things in the hopper?

I know there's quite a large 2C resource there. But then does this begin to make you think about maybe fast tracking a few of those kind of infrastructure-led kind of developments that you have in the hopper, bring them in a little bit earlier? Or are those discussions that are going on with the partners?

[John Hamilton, executive]

Yes, absolutely. So first on the tax, yes, I mean, it does make everything we do, not just Akeng Deep, but it makes it much more attractive. It extends the economic life of the field out. It's been encouraging, obviously, us to drill for more wells. And the government has been very, very good about that.

We don't necessarily put it in the press, but they've also encouraged us to drill Akeng Deep. So they're allowing us to cost to cover some of the costs of that well from Block S into Block G. So it's effectively a way of the government trying to encourage exploration and sharing the risk with the operators for that risk. So we're very, very pleased with the progressive nature of that opportunity.

There's so much to go for in Block G. We have a lot of contingent resource. We have a huge stow up there. There's so much oil, has been generated. It's already produced 500 million barrels of that field. And there's just so much more to give. So I think that this is the real first campaign that we've had with these 3 new wells and the exploration well.

There are a couple of additional slots on that rig as well to be exercised. But certainly, we see a sustainable campaign over the coming years to continue to go after some of that 2C resource and probably to find some more, to be honest. We benefit very much from 40 seismic there. So over the years, multiple acquisitions of seismic that are able to be viewed in terms of the way with the benefit of time that you can see the migration of oil. You can see where the [ unscripted ] areas are. And everything from a subsurface perspective there suggests that this field has a lot more resource in it than currently booked. So I hope that answers that question.

[Unknown Executive]

The next question is from Christopher [indiscernible].

[Unknown Analyst]

First of all, I have a question concerning the ongoing well campaign in Gabon, which now have been reordered to 7 production wells and 1 exploration well. Regarding the time line here, are you confident that all these wells will be drilled and completed by early first half 2024?

And the next question is related to dividends. If production next year were to exceed the expectations, could this lead to an increased dividend payment for 2024? Or would you stay within the guided NOK 400 million to NOK 500 million? And furthermore, could you elaborate a little bit on how you intend to strike a balance between dividends and the share buybacks as you are on such a discount to NAV? You might have touched upon this earlier, but just to clarify, please.

[John Hamilton, executive]

Sure. Happy to help. The remaining 3 wells to be drilled at Dussafu -- again, the only uncertainty now is exactly when we'll start those. That depends a little bit in terms of how we carry on with the ESP campaign. But yes, it would be our expectation that all 3 of those will be drilled and completed. What did you say in the first half of this year, probably looking maybe all 3 of them finished by, let's call it, sometime in the second quarter or something like that.

I would expect that early in the New Year, we'll be resuming drilling on those wells. Exactly when, I can't say at the moment. But yes, we would expect all 3 wells to be drilled in that period that you mentioned. So exceeding -- if production exceeds would we increase the dividend? We intend in January -- as we normally do in January, we're trying to come out and say, here's where the CapEx is, here's where we see our production ranges for the year.

And what sits behind those production ranges as we sit and when we work with the operators in each of the assets, we obviously an operator in Tunisia, but we work within the operators' budgets and we try and create an expectation of what we think production is and that production is based on, obviously, timing and reservoir performance.

It's based also on looking at uptime of the FPSOs, for instance. These vessels are not up time 100% of the time. They could be 95%. So maybe -- but we try and sort of -- as we get into the New Year, trying to establish what we think is a reasonable range of production. And again, we're trying to use -- we're trying to be consistent with where the operating budgets are.

Clearly, in the case of our 2 biggest assets, there is upside that could be manifested in the first half of the year, as we get into these wells and start producing them. And so I think the simple answer is yes. There is, of course, if production outperforms the current expectations that there is scope to revisit the shareholder distribution plan for sure.

And obviously, oil prices are important, too, given the CapEx we have, particularly in the first half of the year, even $5 swings. Your recent research report, Christopher, I think we even highlighted at this point, it's -- particularly at the moment we're in time right now, oil price is important. As we get over the hump, obviously, it becomes much more flexible in terms of the oil price.

But I would certainly expect that if all other things being equal, production exceeds, we can accelerate things. Again, I think the sentiment for the Board, and hopefully, that comes through in these 2 indications is that we have a board that's very serious about shareholder distributions. We're not being conservative for the sake of being conservative or over bullish for the sake of being over bullish.

It's just a commitment. We have a Chairman, who is a large shareholder as well. And so we believe, quite well aligned with shareholder expectations on that side. So we, of course, do what we can. And if we outperform, I think that's going to be good news for everybody.

[Unknown Analyst]

And regarding the balance between dividends and share buybacks, do you have any comments there?

[John Hamilton, executive]

Well, I refer back to the question that was asked by Stephane a little bit, where is the core dividend going to sit. It's obviously going to be higher than we've currently been doing. With share buybacks, I think that there is a real viewing within the company that the share is undervalued and that our share buyback is going to be a very effective way of using shareholder money, if I can put it that way, to buy back our shares when we're trading at a big discount to NAV.

What that mix looks like at the moment, I'd rather not be drawing on quite yet. Again, we still think we're a little bit early on that cycle. We just want to come into the New Year and get our bearings and figure out exactly where we are. But I think that you'll find that the share buybacks would be something that we would really like to use. We've done it before in the past, some very small ones, but you will see that it's very much in focus of the Board at the moment.

[Unknown Executive]

The next question is from Tom Erik [indiscernible].

[Unknown Analyst]

It seems to me the dividend guiding was pretty much in line with expectations and a solid one. But how much of the remaining capital that you expect to gain rate? Do you think you can use some organic opportunities compared to growing the underlying M&A capacity of the company and where do that stand at current? Do you think in terms of the ability to further accelerate growth through more acquisitions?

[John Hamilton, executive]

It's a great strategic question. And I think that, that is -- clearly the strategy of the company right now is in kind of delivering what we said. We've got all this great production growth ahead of us here. We've got our hands full. But clearly, a company like Panoro needs to always consider opportunities, whether those be corporate opportunities or whether those be asset-based opportunities that might require some capital to be dedicated towards opportunistic things.

So again, it really comes back to kind of what we were talking about before is we're finding attractive accretive opportunities in the M&A market. We will certainly be dedicating free cash flow towards those opportunities. But we have to look at them in the context of obviously our share price and the opportunity of buying back our shares instead.

So it's kind of an iterative process that we have to constantly go through. But it's in our blood, it's in our nature to -- for a mid-cap oil company to continue to try and grow. We don't set out production targets. We want to be a 50,000 barrel a day producer. We don't do that because that's kind of frameless really. Anybody can buy production. What we have to do is buy reserves and production well and cheaply with upside as well -- technical upside. We have to do all the proper homework there.

So if we can find the right opportunities that compete with shareholder returns in terms of their attractiveness, we will certainly dedicate some of the free cash flow towards that growth.

[Unknown Analyst]

Just a follow-up for me, John. How easy or hard is it to find those opportunities in the current market, you feel compared to, say, last year, you had almost $100 oil, still been very solid this year, but lower at, call it, $80 brand average for the year. Has more, call it, seller expectations come down to more realistic level? Or is it still a bit too sweet for the industry to harvest cash at these oil prices?

[John Hamilton, executive]

I think it's still a little too sweet. I think people still be putting in -- the seller will be obviously looking at the forward curve or something like that, whereas a buyer will not be looking to forward curve by all the -- assuming the oil prices drop considerably from here as you get a year or 2 out.

And so once you start putting those kind of oil prices into financial models, they're still ends up being that gap between buyer and seller expectations. That is often being made up in transactions that we see and ones that we've even done in the past, where you offer contingent consideration to the seller.

You say, well, right -- if you're right, if oil prices are 100, you can get some contingent consideration in 2027. If oil prices are 100, we're happy to give you some of that upside back. So you're finding those kind of creative structures through deferred or contingent consideration or the tools that you need to close that gap and maybe that's become a little bit more realistic.

But again, we're finding that your standard M&A opportunity where 20 oil companies are being invited to bid for something. This is not a good environment for Panoro to wait into and try and be the highest bidder on situations. We prefer a slightly unusual situation -- usual corporate situation where Panoro is well positioned, whether the fact that we're a public company or whether it's -- we're Norwegian or that we're accepted in the country where we can differentiate ourselves from the masses.

And the masses aren't that big to be honest. There are only a handful of credible counterparties in this market for these kind of things, but where we can differentiate ourselves as a buyer and where we can find the price that's attractive to the company.

Andy, I think we've probably reached an hour. So I don't know if there are any burning questions out there still, but we should probably expect the hour here.

[Unknown Executive]

Yes, John, just a question that's coming online is if you could please provide some context or insights on the group's operating cost per barrel metrics at the company level?

[John Hamilton, executive]

Sure. I'll answer that question, and maybe we'll cut it off from there. And if anybody has any burning questions, you can obviously reach out to us through other channels. The operating cost per barrel of the 3 assets are quite different. We have sort of Equatorial Guinea and Tunisia, which are steady state, if I can put it that way, assets that were operating costs have been kept comfortably low, depending exactly on how you calculate operating cost per barrel.

You could see in the sort of $18, $19 a barrel, $20 a barrel kind of territory. Dussafu has been more well flagged. The operator comes out every quarter and gives you an exact calculation of that. And that's obviously higher, closer to 30% at the moment because we're dealing with an FPSO, which is a fixed cost. That is the lion's share, together with the O&M contract and the FPSOs, the lion's share of the operating cost.

So the variable cost per barrel is very low. So the intention here is as Dussafu gets up towards that kind of plateau rate, those operating costs per barrel also come down into that kind of territory, let's call it, high teens. It's not there yet, but it -- if things go according to plan, it will get there. So hopefully, that answers that question.

And for the rest, I'd like to thank everybody for joining us. It's been a long call, but I appreciate everybody's attention and to the company and look forward to updating you guys on all things Panoro in the near future. Thank you very much.