Earnings call transcript: Panoral Energy reports strong Q4 2023 performance

Panoral Energy ASA reported robust financial results for the fourth quarter of 2023, driven by high production levels and disciplined financial management. The company achieved a net profit of $32 million on revenues of $106 million. According to InvestingPro data, the stock has shown remarkable momentum, gaining nearly 37% over the past six months and trading near its 52-week high of $310. Despite a challenging market environment, Panoral Energy’s strategic initiatives led to significant improvements in profitability and operational efficiency.

Key Takeaways

• Q4 2023 revenue reached $106 million, with a net profit of $32 million.
• Production guidance for 2024 set at 24,000 barrels per day.
• Capital expenditure for 2025 reduced significantly to $35 million.
• Strong cash position and reduced gross debt highlight financial discipline.
• New blocks added in Equatorial Guinea and Gabon enhance growth prospects.

Company Performance

Panoral Energy’s performance in Q4 2023 reflects its ability to navigate a competitive energy market effectively. The company reported a full-year 2023 revenue of $285 million, with a net profit of $56 million. With a market capitalization of $11.06 billion and revenue growth of 12.86% over the last twelve months, the company has demonstrated strong market presence. This marks a significant improvement over previous periods, driven by increased production and cost management. The addition of new exploration blocks in Equatorial Guinea and Gabon positions the company for further growth. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading above its intrinsic value, suggesting investors should carefully consider entry points.

Financial Highlights

• Revenue: $106 million in Q4 2023
• Net Profit: $32 million in Q4 2023
• Full Year 2023 Revenue: $285 million
• Full Year 2023 Net Profit: $56 million
• Cash Position: $73 million
• Gross Debt: $145.9 million

Outlook & Guidance

Looking ahead, Panoral Energy has set a production target of 24,000 barrels per day for 2024, with an expected production unit cost of $21 per barrel. The company’s capital expenditure for 2025 is projected to decrease significantly to $35 million, down from $100 million in 2024. This reduction indicates a strategic shift towards optimizing existing assets and improving operational efficiency. InvestingPro analysis reveals strong financial health metrics, with a current ratio of 6.01 indicating excellent liquidity. Subscribers can access 15+ additional ProTips and comprehensive financial metrics to better understand the company’s position.

Executive Commentary

CEO John Hamilton emphasized the company’s transition to a phase of higher production and lower capital expenditure, stating, "We are coming out of a very intensive period of CapEx, we’re coming into a period of higher production, lower capital expenditure." He also highlighted Panoral Energy’s financial discipline, noting, "We do like to think that we’ve got a very strong financial discipline in terms of looking at opportunities."

Risks and Challenges

• Fluctuating oil prices could impact revenue and profitability.
• Geopolitical risks in operating regions may affect production stability.
• Market competition requires continuous innovation and efficiency.
• Regulatory changes could impose additional operational constraints.
• Currency fluctuations may influence financial results.

Panoral Energy’s strategic focus on financial discipline and operational efficiency positions it well for future growth, despite potential challenges in the global energy market.

Full transcript - Penumbra Inc (NYSE:PEN) Q4 2024:

John Hamilton, Chief Executive Officer, Panoral Energy ASA: Good morning, everyone. This is John Hamilton, Chief Executive Officer of Panoral Energy ASA. I’m joined today by my colleagues, Kasi Kadeer and Richard Morton. 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 that 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. So this is our Q4 conference call and for reference our announcement was released this morning. A copy is available on our website www.peuroenergy.com. Next (LON:NXT) slide please. As usual the format of the presentation will be a number of slides presented and at the end participants can ask questions either by raising their hand, we will endeavor to we will endeavor to answer all questions.

You can also type a question into the frame as you can see there on the left and we’ll try to answer questions certainly unless the questions have already been answered by a previous answer. Next slide, please. So we announced our results today, I think a very strong quarter, a very strong year, with $106,000,000 of revenue in Q4, dollars ’50 million of EBITDA and a net profit of 32,000,000 in the quarter. Full year in the orange colors, just under 10,000 barrels a day, average for the year, dollars $285,000,000 of reported revenue, dollars 152,000,000 of EBITDA and a net profit of $56,000,000 Our balance sheet also very strong with cash position of around $73,000,000 Gross debt at $145,900,000 giving a net debt position around $73,000,000 and distributions during the calendar year 2024 of $246,000,000 kroner. Next slide please.

Today we’re also providing some guidance around production around, OpEx and around CapEx. Here we are with our, working interest, guidance for the year, between 24,000 barrels a day. These estimates factor in operator forecasts, planned routine maintenance that we often have on the assets and buffer for some unplanned averages. And our unit cost of production, we are guiding around $21 a barrel production OpEx and additionally around $3 of non recurring project costs on top of the run rate production OpEx of ’21. Next slide, please.

Today we’re announcing the 2025 framework for distributions, this is a material step up from previous years, we are at $500,000,000 NOC target distribution through quarterly returns of paid in capital and supplemented by share buybacks and potential special dividends during the quarters particularly in the final quarter of the year. This is an implied yield based on our current market cap of around 15% to 16%, which we think is very well positioned in the peer group in which we operate, and shows a strong demonstration of our commitment towards shareholder returns. It’s worth noting that we do not pay dividends, we pay a return of paid in capital, which for certain shareholders may have some tax, advantages, both in Norway and internationally, and that’s worth noting. We today have announced a quarterly dividend of 80,000,000 kroner, which we paid in March, and then during the course of the year, so then in the May announcement, in the August announcement, in November announcement, a core cash distribution of 80,000,000 kroners. That’s the total of $320,000,000 kroners distributed as cash at a minimum.

During the year so far, we’ve already purchased 23,000,000 kroners worth of our own shares. And if we look at the blue box, that leads on top of all that, an additional approximately 160,000,000 kroner that can be used for additional share buybacks and or special dividends. With the bond that we did, we have also set up a ongoing, very transparent framework where we’re permitted distributions for following years, 2026 and beyond, will be based on 50% of free cash flow to equity for the calendar year and no limitation of net cash pro form a post distribution. So again, I’m very transparent and we believe very forward leaning shareholder distribution framework all based on a calendar year. Now Now if I can go to the next slide.

As I mentioned, the distribution framework has changed with the bond that we did and we’ve gone from a sort of a financial year, twelve months kind of February to February type of calculation to more of a calendar year one, so it’s January to December, so it’s an important point to note here. And this slide is simply to kind of reconcile our previously announced framework for the financial year so one could compare if one wanted to, our previous guidance, which had been 400 to 500,000,000 kroners for 2024 financial year based on an oil price of $85 oil price was about $9 less than that, that $85 was based on the analyst’s average oil price assumptions for the year at that time. Obviously oil prices underperformed there, that had a delta in terms of our cash flow of about $30,000,000 3 hundred million kronor or something like that, but despite that we have returned significant amounts of capital back in 2024 and if we were still under the old framework we think that we would perform around $330,000,000 against that framework. So again, this is just for comparison purposes. The new dynamic is really set around the calendar year, 500,000,000 kronor, and that is far less sensitive to oil price.

We’re not setting that one at 85, we’re targeting around $70 a barrel to achieve that, so hopefully some decent headroom on that. Next slide please. So on the left side we show our senior secured bond issue many of you will follow that we issued a bond at 10.25%, which is a saving of approximately 200 basis points on our previous loan. We set up a framework for 300,000,000 So a tap issue is possible in due course if we should find the right acquisition targets, for instance. And with that, we repaid, the, $82,000,000 of of reserve based loan that we had.

So, this is really replacing one financial product with the next. And this has really provided us with, great flexibility within our capital structure, diversifying our access to capital. And we can see here in the orange what the amortization looked like. We very deliberately set out an amortization in our bond. We wanted to effectively replicate the reserve based loan, but do it at a lower price.

So having an amortization which starts at the back end of twenty twenty six and the bond matures, approximately five years from now. On the capital expenditure, those of you that follow us know that we had a very, very heavy year last year. It became even heavier than we’d expected, which was guided. We ended up spending around $100,000,000 last year in CapEx, dollars 5,000,000 of that was sort of from 2025 that kind of crept back into 2024. So our guidance for the year has moved from approximately $40,000,000 to approximately $35,000,000 for 2025.

Next slide please. Crude liftings and sales on the left we have as we pretty much largely has guided the lifting pattern that we had last year. This year you can see that the second, third and fourth quarters are quite evenly balanced. The first quarter is going to be not terribly eventful from a P and L or cash flow perspective and that’s simply just the way that the cargos and the inventories on the vessels have built up. So we’re going to have very, very strong three quarters, the first quarter being a little bit quiet.

Next slide please. Cash flow reconciliation, I won’t go through it in detail here on this call, but we do try to provide that cash flow waterfall every time so everybody can see exactly where the cash moves. Next slide please. So there’s something around each of the assets. Gabon is still our largest asset in terms of production, in terms of reserves, in terms of net asset value.

And as previously reported, all new production wells in this expanded campaign have been drilled and conventional ESPs installed on them. The Tortue field, which is the original field continues to produce steadily from six pre existing wells using gas lift support. Gross production reached 40,000 barrels a day in November and has consistently remained around this level since. There is scope on the vessel should we be able to produce more than 40 to exceed that nameplate capacity by approximately 10%. We are currently drilling the Bordon Prospect well and that’s the last operation in this campaign.

We expect results to be announced during the first quarter. The Bordonovra which has been with us for quite a while now will be released after the Bordon well with no further drilling or Dussefouf planned in 2025. Next slide please. Equatorial Guinea being our second largest asset in terms of production reserves with asset value, Also had a busy campaign last year with the C45 and the OF19 infill wells drilled with the Noble Venture drillship. We encountered good quality oil in saturated reservoirs and unswept zones in both the Saba and the Ekuma Complex.

Both wells were put on stream in November and the joint venture is currently evaluating the potential for further campaigns in the Ekuma Complex, Saba field. That will not happen this year, that would be next year that those plans will become more clear. Next slide please. In Tunisia we are joint operator along with ETAP for those of you who follow us the activity there has been slow, it’s been impacted by delays in the regulatory process, it’s a very important asset to us, it continues to be an important asset to us, got very very good HSE performance on there, we brought a well online just recently around 200 barrels a day, following a nice workover, and we do have a couple of plans this year for some additional workovers on these assets, so we do have activity, it’s simply just not as active as we would like it to be and hopefully that situation will resolve itself in the coming months. Next slide please.

We added new blocks in both Gabon and Equatorial Guinea on the left. In Equatorial Guinea, we have recently signed a production sharing contract for block EG23. EG23 sits right there at the top of Equatorial Guinea in the tow thrust of the Niger Delta. It’s a very exciting block that’s just to the South of it has the Alba Field, which is ConocoPhillips (NYSE:COP), 1,200,000,000 barrels equivalent, operated, produced to date, operated by Marathon ConocoPhillips. It’s the largest producing field in the country and we’re right next to it.

And then just to the west of us, the Zafiro Field, which had been in Exxon (NYSE:XOM) development, has already produced over a billion barrels. So we found ourselves in a very, very nice postcode. This is an exploration license which we’ll have for three years, the only commitment on it really is to purchase and reprocess data, and during that period we will seek to work up drillable prospects, probably seek to farm that out before deciding whether to enter into a next period which could involve an exploration well, but it’s a very exciting block. And then we’ve also announced two PSC signed in Gabon which surround Dusseufu in the yellow, the Niose and the blue, the Fiduma blocks, this is all G and H we used to call them. And this is a fantastic collaboration between Panoro, BW Energy and Valco Energy who between us we probably understand this subsurface of this area between these three companies better than anybody else.

Any discovery can be tied into existing infrastructure and it’s a very, very nice long term acreage position that we’ve established in this key fairway in Southern Gabon. Next slide please. So we’ve talked a lot about production, but what we also like to look at is the long term nature of the business and just looking at what else the company has in its hopper. We had 35,000,000 barrels of 2P reserves at the end of twenty twenty three, we previously announced some discoveries in Gabon, which are approximately 4,000,000 barrels net to us estimated at the mid year, taking us to around 39,000,000 barrels as of the end of twenty twenty three. Now we’ve come out with our annual statement of reserves in the next month or so, so you’ll have fresh data soon, but this is based on historical data.

We also have 29,000,000 barrels of contingent resource booked. And then as we get into the oranges and the blues to show the continued upside that exists within the portfolio that we have, the organic portfolio we have, we’ve got 112,000,000 barrels of discovered 2C in EG23 that’s the block I discussed in Equatorial Guinea at the north of the country. In Dusifu, we have another 30,000,000 barrels of infrastructure led up opportunities for ourselves there. Then we have a very large inventory of other things within Neosi, Goduma, Block EG01, Equatorial Guinea Block EG23, and ER376 in South Africa. So we think that we have a very, very solid reserve base here, but importantly, we also have a very good contingent resource and prospective resource base to continue to feed the hopper over the years.

Next slide, please. So the key messages really are that we are coming out of a very intensive period of CapEx, we’re coming into a period of higher production, lower capital expenditure. We have long life oil weighted assets diversified across three countries, we have catalysts within the company both the Bordeaux ILX well, Nu Blocks in Gabon and Equatorial Guinea, We’ve diversified our access to capital during the course of the last year and we set that all up with what we think to be a very front footed shareholder distribution program with our return to paid in capital and share buybacks with a quarterly core distribution and ongoing share buybacks. So that’s it for the presentation, if I can go to the next slide and remind people how to ask a question on the right you can either raise your hand, my colleague Andy Diamond will try to unmute you or you might need to unmute yourself, or if you’d rather type a question in, we will endeavor to answer questions that haven’t already been answered that are typed in as well.

Conference Moderator: Thank you, John. The next question will come from Stephane Foucault. Stephane, You’re unmuted. Please go ahead and ask your question.

Stephane Foucault, Analyst: Yes. Morning, guys. Okay. Well, I get a few on my side. The first one is around the 25 Pollution guidance.

And could you give us a sense of the split between the various assets? Then the second one is, how do you see the M and A market at the moment? Have you looked at many things recently? Do you see things coming up that could be the oil price going down a bit? Are you bidding on things?

Interesting to have a bit of sense. And perhaps lastly, could you come back to the non recurrent OpEx between the Larkar barrel and what that corresponds to? Thank you.

Christopher Bach, Analyst, Clarksons: Yes.

John Hamilton, Chief Executive Officer, Panoral Energy ASA: Right. So I’m just trying to do quick calculation for you on the guidance and the breakdown between them. But it’s roughly going to be half Dusafu, and then let me get my numbers here correct then, it’ll probably be something like another 35% would be in EEG and then 15% in Tunisia, something roughly like that Stefan, if you need more precise numbers we can come back to you on that one, but it’s roughly that split. On the M and A side, you know, we always have always looked at opportunities. There are opportunities in the market.

We constantly evaluate them. What we’ve found often is that there seem to be companies out there that might have a strategic need to really buy something at a high price. We do like to think that we’ve got a very strong financial discipline in terms of looking at opportunities, looking at those opportunities against buying back our own shares, given the high discount to net asset value. So we are always looking because we do see a prize also in being a bigger company in terms of closing that discount to NAV. We do see that smaller companies trade at wider discounts to NAV in the stock market generally speaking, and as you get bigger, you can close that gap.

So we do recognize that opportunity, but at the same time, we need to be highly disciplined in terms of the price that we pay. We think we position the company very well to take advantage of those opportunities. We’re very well regarded, we believe, in the countries in which we operate, we have flagged the Norwegian flag, we do everything we say we’re going to do, we behave with high level of ethics, we believe we’re well respected in our peer market, if the selling companies can see that we can transact. We have done the bond issue, which is demonstrated financial capacity as well. So I think as a team here, we set the company up very, very well to take advantage of those opportunities, but again, the discipline is paramount.

The non recurrent cap, OpEx is really things around, not so sexy things around facilities maintenance, life extension stuff around the vessels. Much of it will be in the EG asset rather than Dusapu Dusapu’s brand new kit. The EG asset is clearly a bit older and every year, well not every year, but certainly every year we evaluate what opportunities are there that can improve the life of the facilities and maybe able to enhance production, things that are a little less sexy than drilling new wells, but also don’t form part of core operating OpEx. And clearly those projects can be dropped in periods of low oil prices or they can be dropped at the tail end of the life of the asset, for instance. But these are things that it makes sense to do to extend the life out of the facilities.

And again, principally, this is Equatorial Guinea. Hope that has answered your questions.

Stephane Foucault, Analyst: Yep. Great. Thank you.

Conference Moderator: Thank you. The next question is from Christopher Bach. Christopher, you’re self muted. If you could unmute, then go ahead with your question, please.

Christopher Bach, Analyst, Clarksons: Yeah guys. Christopher from Clarksons here. Thanks for taking my question. So the first question is on the lifting schedule for 2024 which shows an uplift of around 6%. While the midpoint of the production guidance range shows an uplift of 20% relative to 2024 levels.

First can you provide some color on that? And also to follow-up on kind of the production guidance range, what is the key factors for producing in the lower or the upper end of that guidance? And my last question is related to to Prospect B. Could you please also provide some comments on your expectations now that we we approach some results?

John Hamilton, Chief Executive Officer, Panoral Energy ASA: Sure. Thanks, Christopher. Good questions. Yeah. So the liftings, you know, obviously, we produce oil every day.

Telling you things you already know. We don’t sell it every day. Inventory builds up, but, you know, this is particularly for for Gabon and Equatorial, again, our biggest assets. You know, we’re FPSOs. Our entitlement, builds up on the vessels.

We coordinate, sometimes we lift on our own, sometimes we lift with partners. So there’s some variability in the number of barrels that we lift every twelve month cycle versus the sort of run rate of production. So there’s always going to be a little bit of mismatch on that. And there’s also obviously, on the liftings, we’re lifting our entitlement barrels rather than our working interest barrels. I think you understand those nuances.

So with our crystal ball right now, we’re just in February, just looking at the way we see the lifting schedules building is the number that we’ve provided there. Clearly, during the course of the year, we kind of amend that as we go. But it really just has to do with the lifting cycle and obviously trying to define something in a calendar year sometimes you have things that happen in December or January which fall into one year or the next which can provide some variability and that probably explains some of that variance that you’re seeing there. On the production range, again what we try to do the production range is take what we think are the what we know to be the approved operator budgets across all three assets for the year. We then look at those operator budgets typically include facility maintenance periods or planned maintenance periods for those of you who follow Dusifu closely last year you’ll know that we had a three week planned shutdown of the FPSO midway through the year, that’s approximately something like 6% of the uptime, sort of during the course of the year, three weeks out of 52 is about 6%.

We those operator estimates also sometimes look at some unplanned things, I mean typically on these FPSOs or in the subsea systems, you could have some unplanned shorter term shutdowns, it could be for a week or two, but it’s just to kind of provide a buffer there for things that we know will happen or expect are likely to happen during the course of the year. So the lower end of the range is kind of assuming quite more unplanned downtime either subsea or on the FPSOs and the upper range is is a higher level of performance on on that. But, you know, I think the the the mid mid side of that range, I think, is is what to focus on. I think it’s more or less where, most of the analysts kind of have their numbers anyway, and I think that’s, that’s that’s probably the best explanation I can give. On, Bordon, I suspect there are a number of people that will have questions on that as well.

I mean, obviously, we are not in a position to say anything as yet. We’re drilling what I will say is we’re drilling in a quite an exciting new area of the license, while we have a lot of wells in the Hibiscus Rouge area, a lot of wells in Tortue, a couple of discoveries in the north of the block, Walt Whitman and Mubenga, there is very little historical exploration, there’s no exploration, historical exploration in this particular area. It’s slightly deeper water too, so the seismic time depth conversions provide additional uncertainties in this area so together with PW Energy and Devon Oil Company our partners we’re just taking the proper time to do this correctly and we should have results during Q1.

Christopher Bach, Analyst, Clarksons: Thanks, John. Great call. Just to follow-up on that production guidance range. So if things goes to plan, you expect to land at around 12 fast barrels per day? Or do you expect to land kind of higher in that range if everything goes to plan?

John Hamilton, Chief Executive Officer, Panoral Energy ASA: Yeah. I think we deliberately picked that middle of the range as kind of a sort of a good thing to target in on. Obviously, we’d like to see some, you know, some higher performance in that, but we have to respect also the, I’m sorry about that. I hear some feedback as well. Some, you know, we’re working together with the operators to make sure that we’re, you know, providing that guidance in line with what’s been, provided by the operators.

Christopher Bach, Analyst, Clarksons: Okay. Great caller. Thanks thanks, guys.

Conference Moderator: Thank you, John. A question submitted online, please. Could you expand on the strategic rationale for the bond issue and the benefit versus the increased interest payments?

John Hamilton, Chief Executive Officer, Panoral Energy ASA: Absolutely. The strategic rationale, I think that we have been through a huge growth period. And the reserve based loan, for those of you who know, is a product which is very widely used by companies like Panoro. Even, you know, substantially larger companies will have reserve based loans in there. It’s a wonderful product for the E and P market.

It’s quite flexible. You’re dealing with the syndicated lenders. Those lenders are often very, very supportive. We felt that as we were kind of coming out of this development period that we’ve been in that the bond issue made more sense for us. It’s more of a corporate style facility, so we have some expanded activities on the exploration front for instance, we have a bigger company now and we felt that at that time we were then ready to look at a product that had a little bit more of a corporate feel to it, the RBL is quite a tightly constrained product, it is very flexible at the same time but everything from shareholder distributions to exploration spend to other activities needs to be closely scrutinized by lenders, and I think we just felt that we had evolved as a company to the point that a corporate facility was more in keeping.

The bond market was in a strong position where we were able to refinance our RBL at something like 2%, a little bit more than 2% cheaper than we were paying under the reserve based loan, so there was also a financial benefit to it. While the gross amount of the loan is bigger and therefore bigger than the RBL, But there’s one other thing that I think some people have forgotten, which is we also made use of a working capital facility, which helped us manage our cash in between lifting. So sometimes you’d see at the balance sheet dates, you’d see us using this corporate facility, Sometimes it wouldn’t be there. And then intra quarter, you might not always see it in the financials, but we did rely on it. So we were effectively refinancing more than just the RBL.

We were putting ourselves in a position to have a stronger liquidity that was directly controlled at the top coat. So the strategic rationale was really I think recognizing the fact that we had evolved as a company. It also I think sends a very strong signal to the market of the number of E and P companies can’t access this market. We felt with the Norwegian company quarterly reporting stock market listing that entering the Norwegian bond market was a very natural progression for the company, that also shows the ability to raise capital in the debt capital markets for further acquisitions, which is a big benefit, for us as well. And it was, you know, we’re extremely pleased to have done the bond, is still very much the feeling in the company.

I mean, who knows how the bond will trade, but it’s tightened up a little bit. So, you know, I think we’ve got a very good response in the in the market from from the bond. And for equity holders, I think it’s a very, very positive thing too. Whereas shareholder distributions, were less predictable under an RBL. Here we have a framework which is very clearly established and that’s allowed us to come out with this very front footed distribution that we’ve announced today.

And it’s allowed us to have a very transparent framework for how that will look, in the coming few years as well. So it’s really provided us with the ability to put a very sensible and transparent framework together.

Conference Moderator: Thank you, John. A further question online around capital expenditure. We’ve obviously been through a very capital intensive development phase. Could you please talk a little bit about our capital expenditure ranking, high grading allocation process and any target return thresholds from investments we make? And, looking slightly ahead, how how how you would see growth versus maintenance expenditure.

John Hamilton, Chief Executive Officer, Panoral Energy ASA: Okay. Yes. So I mean, we’re obviously in a very capital intensive business. We’ve been through a very heavy period. We’re coming into a much lighter period now.

We’ve got it around $35,000,000 It’s about $40,000,000 but we moved $5,000,000 from 2025 to 2024, just the way the cash calls fell in that particular period. And when we ourselves look at it, we’ve been through the bond process recently, so we’ve had a lot of scrutiny around these issues, credit analysts and equity analysts all looking at this. I think people assume a sort of similar level of CapEx going forward. In terms of the priority of CapEx, we obviously need to look after our business, so this maintenance CapEx that’s been referred to is obviously a very critical component and that is decided through the joint ventures every year, what the key projects are from a HSE perspective, from a facilities integrity perspective, from improving the logistics, facilitating production, these kind of not so sexy things to talk about but the things that are absolutely critical for the long term support of the business. Obviously the more interesting CapEx is around additional drilling or work over activity on the assets.

This year as everybody can see is quite light on that front. I think you’ll see twenty twenty six more activity in both Gabon and Equatorial Guinea. And when we look at these CapEx opportunities in terms of market in terms, I mean, we are in capital intensive business, but we do expect, very high returns from those capital decisions. Again, they need to meet, you know, very high rates of IRRs, typically north of north of, apparently I’m breaking up a little bit, but hopefully everybody can hear me. North of 20%, twenty five % are the kind of typical things we’d look at in excess of those levels.

So we really need to look at returns that are well in excess of our cost of capital. Andy, can you still hear me? Apparently, there’s some some breakup.

Conference Moderator: I can. Yes. Thank you, John. And, just just finally, final question from online. Is there anything you can say on what needs to happen in order to unlock the full potential of the Tunisian asset base, which as you alluded to earlier has been somewhat constrained of late?

John Hamilton, Chief Executive Officer, Panoral Energy ASA: Yeah. Sure. Again, I’m repeating myself a little bit, but the Tunisian asset is a wonderful asset. It’s got a long life. It’s been producing for forty years already.

It will produce for a long, long time to come. It’s not a unique joint venture structure, but in North Africa and Egypt, for instance, also and a lot of the North African, the joint venture model is quite different than it is in West Africa it’s that you’re partnered with the state oil company. So while we have state oil participation in our West African business too here we effectively joint operate with the state owned oil company And that means that you’re held a little bit hostage to what, what is happening in country with politics because the the ultimate control of that state company, comes from comes from the government itself. And we’re just finding that with the election cycles that the Tunisians have been through that decision making is hesitant there at the moment and has been for the past year so when we want to go go out and drill some new wells or work over some wells or re complete a well, things that are going to sustain that production, grow that production, things are just taking too much time for our liking. What needs to change is probably just a little bit of stability.

We’ve come through some election cycle, a little bit of stability in the country, some recognition that the oil and gas sector has a very important role to play in the economy of that country. And we’re starting to see signs of that. It’s just been a it’s been a little bit of a tricky number of months now, but we are starting to see some signs of movement there. For instance,

Christopher Bach, Analyst, Clarksons: we’ve

John Hamilton, Chief Executive Officer, Panoral Energy ASA: been waiting also for some license extensions on two of the fields, Remora and Sersinia. Those applications have been in for a while, which has meant we haven’t really been able to go after and spend new money on those assets pending those documents. And those are now well in process, so we’re hoping for some breakthrough on that soon. So it’s one of the benefits of, I think, having this diversified portfolio that’s, you know, we we’re in three different countries, three different geologies, three different operating models, three different sets of partners, that hopefully in a portfolio, one can withstand a soft period like we’ve gone through in Tunisia. And hopefully, it will come roaring back.

Conference Moderator: Thank you, John. That concludes today’s q and a.

John Hamilton, Chief Executive Officer, Panoral Energy ASA: Thank you very much, everybody, for listening in. And, you know, if you do have any questions, you can send them into our investor email address on the website.

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