Etablissements Maurel & Prom S.A. (MAU) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I'm happy to welcome you in this webcast. We will look at some slides and comment our 2019 results. Those were provided to you on our website this morning. I'm happy to provide some comments. So if you look at the first slide. I'd like to insist in on 5 key messages. The first message, very important for me, is that we are focused on our EHS-S performance and operations resilience. Safety is my first priority, but it's also the first priority of the company, of the entire management company and for all the employees. It's about quality, it's about leadership, culture, but also systems implemented and quality in field. And I think this is essential, as I don't think any company would be able to operate without a very high level of safety. And due to the current circumstances, so we have strong measures taken to ensure work continuity despite the COVID-19 situations, but I will get back to that. Our strategy is to capitalize on our know-how to grow a sustainable business for our company. What does that mean? It means to maximize value from existing assets and strengthen balance sheets, but also grow the business through exploration and M&A activities. I do understand that for M&A activities, we may have to pause some of those. But for 2019, we have sound financial results led by operational delivery. So the production, in Gabon mainly, has increased compared to 2018. We saw an increase of 19% for Gabon and 19% for the group. And we also have an operating cash flow before working capital of $263 million, so that's an increase of 35% compared to 2018, despite a 2% dip in average oil price sales. So we're talking here about $67.2 per barrel compared to $68.8 per barrel. Our exploration CapEx of $43 million. But also closing the Block 3 Angola acquisition in July 2019, stable 2P reserves at year-end with 192 [ million per barrels ] compared to 2018. So high liquidity and renewed support from banks and majority shareholders. So as of December 31, 2019, we had a cash flow balance of $231 million, plus an additional $100 million available via the undrawn share from the shareholder loan. And in March, a few days ago, we also obtained amendments from our lenders to ease debt repayments in 2020 and 2021. If you remember, we had this $100 million of shareholder loan, but also $600 million of bank debt. So we are still committed to debt reduction with repayments that we'll start in March 2020, but just this will be rescheduled for the payments, but I will come back to that later. But still, we are committed to reduce our debt, and we've started doing so. And the fifth key message is very important in the current situation. We took immediate actions to address the fall in oil price. So in the following days, right after the fall in oil price, we issued a request to all entities to revise all expenses, so operations, about investments also, and to also start last week an action plan to reduce costs. And I will provide more information on that, but we will reduce OpEx, G&A, CapEx, development and exploration costs. So on the next slide, so focused on EHS-S performance and operations resilience. So on Slide 4, you can see our performance on these 2 indicators. So the first one is the lost time injury frequency. So in 2019, this indicator was at 0.45 injuries per millions of hours. So last year, we were at 0.90, so that's a good result. And for the total recordable injury rates, it's slightly up. But I do think it may be related to a better reporting of all the incidents. As I said in my introduction, safety is the first priority of the company. And I think we have safety moments at the beginning of each meeting, but we also have a lot of more management in the field, and this is important to increase the quality on our workflow. And in December 2019, we also obtained 2 certifications. The first one is the ISO 45001 related to health and safety, and the ISO 14001 for environmental management. So on the next slide, you will see more concretely what we are implementing for -- to cope to the COVID-19 situation. Of course, we have a very active monitoring of this situation and full compliance with all recommendations from health authorities. So work from home is preferred whenever possible. So mainly all employees from our headquarters, except for a small group, work remotely now. And we also implemented strict proactive measures to minimize contamination risks on operations sites, if it is not possible to work from home, that means like with stricter entry controls, distancing measures, hygiene and disinfection. So far production sites in Gabon, where it is very important to implement these measures, even if in Gabon, the contamination, it is very limited so far. I think there is 1 death reported in Libreville. Still, we want to avoid this virus to reach our operations sites because we want to continue operations. We also made a donation of a stock of masks to a Parisian hospital. So what are our commitments to reduce our environmental impact, that's very important too for us. So this year, we participate once more to the CDP study, and we obtained a ranking of A-, which is good. And we also have some practical examples of these initiatives such as in Gabon on the Ezanga field, where we've got initiatives to reduce gas flaring in our new gas-fired power plant, so we can reduce our CO2 emissions and also savings on gas -- fuel gas. So environment is also very important for us and it will stay like that for the future. So capitalize on our know-how to grow a sustainable business. So our business model in Maurel & Prom has not changed. It is still to be involved in the whole chain of value, so explore, develop and operate. That means from exploration and appraisal to portfolio management. So we need to rely on our very good knowledge of Sub-Saharan Africa and Latin America. But also, we have a strong financial support from our main shareholder, which is the Pertamina group. I would also like to underline the work that we're performing altogether with the management committee. This management committee has meetings every 2 weeks where there is really a work -- common work between all these stakeholders. So in this management committee, I think you know all of them but just to name them, you have Philippe Corlay, our COO; Patrick Deygas, is our Chief Finance Officer; Andang Bachtiar, which is our Exploration Manager, Pablo Liemann from Business Development; Olivier Poix, our Commercial Director, In-Charge of Trading too; and Alain Torre, our company General Secretary. So I think it is a very strong team, a reliable team working together in full transparency. On the next slide, you can see that we focused on key objectives. Our first priority is relentlessly focusing ourselves on our EHS-S excellence, but also to maximize the value from existing assets, capital discipline, strengthen our balance sheet, but also maintaining liquidity, grow the business through exploration and M&A operations and create value and return it to shareholders. On the next slide, you can see a very rich and diversified portfolio of assets at various stages of development. So I'm going to go through each of those briefly. I mean you do have the slides so you can review those. But if we start with Ezanga in Gabon, I think we have a lot of production here. That's where our cash flow comes from. So the priority, strategic objectives here is to maximize resources and recovery. There's a lot of work implemented to optimize the field, optimize the injections to really maximize recovery. It's a complicated field, as you know. And we need to assess the potential of exploration upside as there is still a potential for exploration. And in the short term, immediate priorities for us, those are going to be to reduce costs, but of course not to sacrifice what is essential, but to be able to adapt to the demand and preserve our cash flows. For Mnazi Bay, we needed to optimize the production and also to adapt to the current market and reduce our costs. For Block 3 -- Block 3/05 and Block 3/05A in Angola, we need to restart the water injection. And there is a potential, at least that's our hope, in Block 3 to restore production at a higher level than the current level. And I think there is clearly a potential in this mature field. But we know that we have challenges for this field. So the operator is trying to solve these difficulties. For Urdaneta West, it's a beautiful field, a very high potential, but you know the situation in Venezuela and as of today, the political situation, but also the sanctions, make it impossible for us to work in a proactive and normal way, and we can only limit ourselves to safety and security actions to maintain -- to perform critical maintenance. But for the moment, this field is in a very difficult situation. For appraisal, now I'm mainly going to talk about Mios. So we should be able to start production by July this year. And we hope that in the long term, we'll have also production test to start. And that will be nice to have some cash flow. So snow -- Sawn Lake, sorry. I'm not going to mention here this field because you saw the WCS where you have like $5 per barrel at the moment. So the situation is complicated. Kari and Nyanga. I will mention that later in the presentation, but we need to see for this license, which is in the oil field, very important, but I will come back to that for Colombia. For COR-15 & Muisca, mainly COR-15 actually, well was scheduled for midyear. It is possible that we need to postpone that to the end of this year or early next year. But that will be a very nice objective for us. For these 2 wells for Namibia, beautiful prospects offshore. So first, we need to redefine our partnership as one of the partners is going to leave our license, and then that would be the beginning to then be in an optimal situation, a more realistic situation to assess the drilling timing. So that was scheduled for Q4, the drilling activity, and I think that will be postponed to next year as we need to redefine our partnership and also adapt to the market conditions. For Fiume Tellaro, so we are doing a seismic interpretation at the moment. We're lacking still some data here. But on the next slide, I would like to talk about our method. It is my method, I guess, but I think that after several months since I took over the leadership of Maurel & Prom, has become the management committee method, but also all the work teams in Maurel & Prom. First of all, I want us to do some teamwork. It is essential that we can work together to collaborate much more and to move from a more individual performance to collective success. And I think that this is really the success of Maurel & Prom. We have very talented individuals, and we need to rely on these talents to build basically a success together and also create an empowered management committee. I think that this will enable us to improve the quality of all decisions that we will make. Quality. We need to challenge key decisions. So that means taking more time to discuss, to discuss not only at the level of top management and the decision-makers, but also to discuss with all stakeholders involved. And I think that will completely change our process. But also to create a validation committee for project review and approval, and a peer review and rely on operating experience. And I think we need to change our culture of -- on costs and values. We need to implement a planning and more systematic planning function throughout our economic review of decisions, but also to improve our cost control activities and our tools. And of course, empower our subsidiary for the conduct of operations, but also preparation of long-term plans. I think we're very motivated at the subsidiary level. And I think it's totally normal. It's totally fair for them to have also the power to use their know-how, of course, with control by headquarters. And last point is about openness, promoting transparency, communication, interdisciplinary collaboration. And we need to also conduct an internal review of our employee opinions. And what I would like also to do, it's a priority for me, is to keep our values and our culture in a company where everybody feel -- is fulfilled and is happy to work for. I think it's essential for us in this context. And we are able to put it all together, the context. The market is complicated at the moment, very challenging, but we have a very motivated team and we will be able to improve and move forward together. For 2019, sound financial results led by operational delivery. So as I said, I'm not going to come back on our first priority, the relentless -- relentlessly focusing on EHS-S excellence, maximizing value from existing assets. That's what we've done with increasing our production level compared to 2018, but also improving our cash flow -- operating cash flow before changing working capital of $263 million compared to 2018. We also recorded a free cash flow generation on Mnazi Bay due to recovery of client receivables and also the first Maurel & Prom trading cargo lifted in March 2019, improving our economics throughout the whole value chain. So we took over that control. But also capital discipline, that is to say, strengthening balance sheet and maintaining liquidity. So we had some amendments with our lenders obtained in March 2020. So I will come back to that later on. But also improving our cash balance as of December 31, 2019, with the cash flow of $231 million, plus an additional $100 million available through the shareholder loan. So we're also going to grow the business through exploration and M&A. We closed our acquisition of 20% working interest in the Blocks 3/05 and 3/05A offshore in Angola. But we need to create value and return it to shareholders. So we need to maintain and preserve our value in adverse conditions. So in practice, we actually paid a share dividend in June 2019. That was for the first time since June 2012, and on-market repurchase of 1.2 million shares in 2019. So regarding our production, this is on the next slide, the 2019 activity review. So you can see for Ezanga, this increase in production plus 19%. So we managed to actually solve our pipeline issues that we faced mid-2018. So we also had new -- I mean 7 development wells that were drilled in 2019 and also 4 exploration and delineation wells that were very successful for -- 2 of which actually were very successful. Mnazi Bay. We can see that there was a decline in production due to an early and heavy rainy season in Eastern Africa in 2019. However, strong cash flow generation, $42 million (sic) [ $54 million ], thanks to recovery of historical receivables. So for the Block 3/05, 3/05A, transaction closed at the end of July 2019, and the first cargo was sold in December 2019. So the operator will restart water injection, so we can improve a better production level with a better recovery rate. And for Urdaneta West in Venezuela, we need to limit our activity to the strict minimum due to the sanctions. So at the moment, we did not book any portion of the production in 2019 as we have a very limited control of the operations, and this will change, I think, in the future, at least we hope. And we're also working on other elements to improve the amounts that were still due. But now I will give the floor to Patrick Deygas to come back on our P&L and also to comment on our cash flows, to really give you an overview of the whole year. So Patrick, the floor is yours.

Good morning, everyone. So for 2019, as explained, the results are sound, based on a very good operational -- operating capital. So we talked about Ezanga with increase in production and because the prices were quite stable, as we can see that the barrel was at $67.2 on average, so we could manage to have an increase here. So regarding the OpEx for activity, you can see that we managed to have an increase here of our OpEx of sales, but also increase in production in Gabon, generating, of course, integration of -- operating expenditures increase as a result of the integration also of the Angola acquisition, but that was for August 2019. So $48 million of exploration expenses were recorded including $31 million for the Kama-1 well in Gabon. So we can see a positive result, however, in decrease for the net income compared to last year. So now looking at the debt, but also taxes -- income taxes, we can say that we have a good result for SEPA with the Nigerian entity, but also we have a net result positive of $37 million. It was at $62 million last year or the year prior. Cash flow. We've also mentioned that with our working capital, so a negative change in working capital of $102 million. So that's a change. But also when it comes to the $43 million were also spent in exploration CapEx, the majority of which on the Kama-1 well drilling in Gabon. But also there will be a compensation in the future, but also due to the fact that we also had some cargoes -- significant cargoes. But in December, that will only be accounted for next year, that is to say in January this year, that represent about $100 million. But taking into account all these effects, you can see that the net cash flow is positive. So we continued our investments in development in Ezanga this year in order to support production, for an amount of $204 million -- $104 million, sorry. But also we drilled -- as I said, I've mentioned that the Kama-1 well drilling, but also restarting seismic activity in Italy. We also finalized the acquisition of our assets in Angola with a payment in 2019 of $35 million. So the cash flow available, taking into account all these elements, taking into account all the financials, the costs of our debt, but also dividends paid to our shareholders, you can see that this is negative, minus $50 million. So we indeed see this decrease. So here by comparing, of course, that's the change in cash flow.

Thank you, Patrick. I'm taking over to first discuss Kama-1 exploration well in Gabon. So the Kari exploration, you can see that this is north of Nyanga-Mayomnbé. So this well is not a success, but is not a failure. We had a series of several oil shows. So several oil columns that unfortunately show that we do have a very mediocre quality of the reservoirs. So that was impossible for us to envisage a commercial testing. So we had a sample. We sampled this oil, but no positive -- immediate positive commercial impact. And the main consequence actually is we acquired a better knowledge. We confirmed the oil potential. And thanks to all the information collected, we are working on a potential drilling of a second well to maybe find a better quality of the reservoirs, maybe sticking to the same column discovered. So we immediately decided to take our time and not move on to a second well, just take the time for our teams to analyze the data before taking a decision. So studies are ongoing. So this is how it works for exploration. That happens. Success is never guaranteed every single time. So we need to accept the potential consequences, and we need to be smart in the next decision, in our next move. So for the next slides. The next slides are on our liquidity and renewed support from banks and shareholders. So a robust capital structure is important and high liquidity too. So just as a reminder, our cash balance was of $231 million. So we are able to cope with a lot. We're very solid. We had a renewal of our lenders' support through the agreement with the banks and PIEP. So we didn't change the final deadline, but we just changed the repayment schedule. So that means that we have access to liquidity to cash in a very favorable condition with LIBOR plus 1.5%, which is very reasonable. And I'm sure that our competitors do not have access to the same conditions, very favorable terms, and we've already started to repay this debt with our first repayment debt of -- in last month. So the total debt is $700 million, and the net debt is $469 million. So that represents 1.6x the EBITDA, which is quite reasonable. On the next slide. I'm not going to focus too much here, but I think Maurel & Prom already announced the reprofiling of its debt payment compared to '20 and '21 shares is reduced by about half. And then this was just like pushed further to 2022 and 2023. So maybe in 2022 or 2023, we may have to find a new financing to be able here again to smooth their repayment of the schedule. But that shouldn't be a major problem. And in the meantime, we would have already repaid a large amount of these 2 loans. You can also notice that our shareholder is actually pushed even further compared to the bank loans. And I'd like to conclude this presentation with 3 slides. 3 slides on the actions that we took immediately to address the fall in oil price. So first of all, I'd like to say that we are strongly positioned to weather the current challenging environment as, indeed, we are very flexible. Of course, we are operators of our main assets. So we have a significant control and flexibility over our development plans and our cost reduction initiatives. So we can pause at operations, but we can also restart very promptly as soon as conditions are favorable. So this is why we can rely on this flexibility for our operations activity, but also for the exploration drilling, and we will be ready as soon as we need to restart. And we will be able to restart in a better position, maybe with costs reduced. Resilience. Ezanga, our main asset, remains cash flow positive at $30 per barrel. So the bad -- the threshold will be, again, 20%, 25%, if there are no investments -- $20, $25, sorry. And our gas activity in Tanzania mainly are not impacted by fluctuation of oil price, as the gas price is not attached to oil price. Liquidity. We've mentioned that already several times, $231 million of cash balance and we also have the support of PIEP, but also the support from our banks. So actions. First, on OpEx and G&A. So we did not want like a plan with like tens and tens and thousands of measure. What we wanted is really to optimize the logistics to streamline our activities, to reorganize our interventions in different wells, to optimize our consumables, chemicals, all our chemical products, but also to reduce the staffing -- the staff count and to improve, of course, our civil engineering operations. And I -- but here, that's not the point to give you the whole list, but immediate actions were implemented. And what we would like our target is to have a decrease of 20% on our -- on an annualized basis of our costs. And to work on -- to achieve these targets, we have actions that have been identified clearly, and we're working on these actions very concretely. And I think we will be able to go even beyond these targets. So there we present between $25 million to $30 million of savings. That's significant as, of course, we already have cost-cutting plans in 2014 and 2015. So development CapEx, I think we were quite clear with that reduction as we immediately paused most of these expenses with the development drilling in Ezanga were suspended. And we were also able to keep the equipment on site, though. So that is very good because we will be ready promptly to restart as soon as the situation will be more favorable. So beyond this development, drilling, all the nonessential CapEx were either reduced or canceled. So that would represent for 2020 a reduction of 65% of the planned CapEx, whereas, of course, we were almost at 25% already of our scheduled CapEx. So this is why we had to adjust this reduction rate to 65% because these measures were only implemented like in the next -- in the past few weeks, of course. Exploration. We have a full flexibility to delay exploration activities in Gabon, in Nyanga-Mayomnbé, in Ezanga and in Namibia for PEL-44 where the license is maintained until 2021. And most probably for all countries, actually, these conditions will be extended. Dividend, I think it's very reasonable. I think that our Board of Directors recommended that no dividend should be paid for the financial year 2019. I think it is more reasonable to indeed keep as much flexibility as we can for the future, so we can maybe grab some opportunities and -- but we need to keep this flexibility. I do think it's reasonable not to pay any dividend. And I think a lot of our peers will do the same. So the 2020 forecast. I'd just like to also show you here or illustrate what is our room for maneuver. So for production, for Gabon, in our budget, we had an objective of 25 barrels per day -- so 25,000 barrels per day. But of course, as we stopped our development campaign, this objective was reduced, and we are now at 23,000 barrels a day. It's still a reasonable production. For Tanzania, we haven't changed anything here. In Angola, I have to say that we do not have a perfect control of the situation. We're not the operator. But the forecast of 20,000 barrels per day is maintained. We're still discussing, actually, with the operator to assess the full impact of the whole program revisions and also to try to encourage our operator to reduce the costs. But on the right side here, that's really what is the most important here, I would say. You have here the cash flows generated by the different operations at 2020 at various Brent prices. So if from April 1, 2020, if we have a Brent price of $25 per barrel, we will generate an operating cash flow of $70 million, but if it's at $35 a barrel, there will be $125 million operating cash flow. So here, we're trying to talk about 2020, of course, to cover all potential scenarios. So that's very important because if you look at the CapEx, so that's $80 million, including the development for $50 million and M&A for $30 million, and then the exploration and the financing. So what is important is like, for 2020, due to our cash flow position early in the year, without actually drawing on our -- the second lien of loans from the shareholder loan, I think that we should be able -- if we limit investments to the minimum, as we are doing now, we should be able to continue repay our debt, repay these loans. And I do think this is a satisfactory situation. And that was the conclusion of my presentation. I hope I wasn't too long. But what I really wanted is actually take the time to take your questions. So if I'm not mistaken, I think I should see your questions here on my screen. But we're actually just going to take a few moments to actually take and visualize these questions, so we're just going to take a few seconds.

First question from Jean-Luc Romain regarding the production in Venezuela. What about the production of 2019 with a 9,000 barrels per day as Maurel & Prom has a 32% of interest? So would that be possible to recover this in the future?

I would have preferred easier questions, but Venezuela, the situation is very complex. I was actually there last month. The situation is complicated. It's very difficult to plan anything. The operations are ongoing. With like a minimum operations mainly on safety, security and supply, the production is maintained at about 8,000 to 10,000 barrels a day. But this is very fragile, very unstable. And maintaining this production would mean that there is no further damage of the whole situation in Venezuela. When it comes to our 2020 budget, we did not book resources or income from Venezuela. We try to work, but I do believe also that over the last weeks, things are even more complex, but we were trying to recover some of the amounts that are due. Also following the acquisition, not so much related actually to the production of last year, but in being fully compliant with the rules, of course, and also within the limits of the U.S. sanctions, we just kind of secondary targets because we're not Americans. So we're working on this. But when it comes to the production, technically, we will maintain this at 8,000, 9,000 or 10,000 barrels a day, but we do not book any revenue from this production. What we hope is that if the situation improves one way or another, I don't want to, of course, be political here, but if the situation improve, the season is set with a huge potential, that would very easily and quickly restart as we've maintained here. And that's not actually the case for oilfields. Some oilfields in Venezuela have not been maintained. So restarting these fields will be complicated, but that's not the case for us.

Thank you, Olivier. And your other question from [ Rob Nuverse ]. What's the impact of the cost reduction on our guidance and forecast? So what's the impact then for the production for 2021, if we look like further ahead because if we suspend drilling in 2020, what will be the implications for 2021 production?

So I try to answer it already here with the 2020, as we were hoping a production of 25,000 barrels a day. That was in our forecast, in our guidance. But of course, we had to stop this. So that would mean an impact for 2020 of 2,000 barrels a day of decrease. So we will concentrate on light interventions like a workover pump replacement, optimization of injections on the wells. So we will limit this decrease to 2,000 barrels a day, so about 8%. For 2021, this will depend on our drilling operations, are we going to restart in 2020 the drilling operations, but also maybe our success rate. But if we were to completely stop all the drilling operations, I would think that, in 2021, we would be at about 21,000 barrels per day, I think. It is very difficult today to really give you a more accurate figure for 2021, but I do think there is a potential to concentrate all our capacities on reservoir engineering, not necessarily on the development wells, but on the day-to-day field management and maybe to limit this decrease -- this decline. So I think that would be minus 2,000 barrels for this year and minus 2,000 barrels also for 2021.

Another question from several shareholders on the breakeven, and the Brent price for a positive cash flow.

So I think I also answered to this on my last slide. If you remember this last slide, I showed that around $30 per barrel, we will continue to finance the investments and the repayment of our loans with a small impact on the cash flow. Of course, looking at the full year, starting today, at $30 per barrel -- I'm sorry, I'm repeating then what I said in my presentation. But if we were to suspend most investments at $30, we would continue our repayment -- the repayment of our loans. And we could imagine a situation where to protect our future, we would renegotiate these loans to keep a small margin of investment to maintain the production. And we could think of many different scenarios. But at $30 on average, of course, we are below $30 per barrel as of today. But if we, on average, have a $30 per barrel oil price, that's what the situation will be. Of course, we need to also consider the worst-case scenarios, and we would then continue with our cost reduction programs, and also that will enable us to maintain the situation, even if it would be more painful to implement. So when I see all these breakeven and when we manage to reduce the cost with actions that are planned and implemented in just a few weeks, I think our capacity to adapt is very high. And our starting point or benchmark situation is actually very sound. So I think we can congratulate ourselves as we really manage to really be realistic. And for some M&A activities, it's a very -- capital discipline, and therefore, we are a lot more flexible.

Another question from Baptiste Lebacq. The question is about the covenants for our loan facilities and what's the risks for these covenants for 2020?

Well here, actually, I'll give the floor to Patrick to answer to these questions. Yes. Of course, I can come back to those.

So we have 3 covenants to comply with. The first 1 is our net debt-to-EBITDA ratio. That needs to be below 4. We are at 1.6 at the moment. And then net worth, which is about our equity, that needs to be below $500 million. We are at $1 billion. And then the third ratio, the DCR, which is the debt coverage ratio, to compare cash generated on a given period with the repayment cost of our debt. And here again we are -- of course, we need to -- this ratio needs to be above 3.4 -- 3.5, sorry, and we are at about 15. So a very high margin here. So these covenants are very favorable. We're very comfortable with those, and we are not -- in the future months, we're not going to breach any of those.

Another question from several shareholders on the evolution of the cash flow between June and December. So in June, there is $361 million, and at the end of December was at $231 million. Can you just explain this evolution, this difference for 2019?

So I think this is mainly related to the agreements signed and the impact on these programs. So following these agreements, we actually recovered at the very end of the year these. So these are withdrawals. They are the collection, sorry, and those were performed at the very end of the year, and therefore, only accounted for early this year. We had a lot of expenses as well with the exploration in the second half of the year. So I think these are main explanations. So that's why we had a higher rate midyear, higher amount. So this decrease is actually compliant to our expectations, and our cash flow position then increased at the end of January. I think we were at around $300 million. Patrick, would you like to add anything?

Yes, I think you're right. So this is in accordance with our expectation with our agreements. So that explains why we had this decrease in operating cash flow. And let me just remind you that at the beginning of 2019 we were at $281 million.

A question, Nicolas Montel. So why amortization is increasing at a higher rate than production? And can you explain the BFR difference?

Patrick, would you like to answer?

I can try. So why for the amortization rate increases faster than the production? First element, this is not only about amortization. In this line, you also have depreciation of some receivables. So you cannot directly compare and extrapolate that way. And then the second question, I'm sorry. It's the BFR, right, BFR rate change evolution with the collection rate. Well so this is an entitlement recognition. What does that mean? It means that this is our performance compared to our rights, and our rights is our production rights independently of collection rates. So our turnover, our revenue is below what it should be at the entitlement. So there was one line in the P&L called collection rate variation to correct this discrepancy, to make sure that we have a recognition that is at the entitlement date. So this is an underlift situation. And I think, if I'm not mistaken, there is $50 million for this impact of underlift. Another important element, I think, is the receivables also at the end of 2018 and 2019 for these lifts. So in 2018, we had cargoes in Gabon that were paid in December 2018. However, this year, that was different for 2019. We did have a collection that was scheduled in November 2019 in Gabon and then in Angola too, but those were postponed to December. So that means that in the cash flow, we did not recognize the revenue for those in 2019. So this cash flow of $231 million does not include these lifts -- this cargo of December 2019. Those were recognized in January 2020.

Another question from a shareholder. Would that be possible to sell parts of the interest in Namibia in order to gain cash flow?

So for this question, first, the PEL-44, 45, the partnership that we have is changing. Our -- one of our partners is leaving. Therefore, what we would like is to redefine this partnership, for this partner to be replaced by another partner. And I think that generally to drill wells that are quite costly and it is not a good practice to be the owner at 100% because that means that then you will have a high exposure. That's very nice if it's a success. However, it's a very costly failure. And of course, exploration means also a reasonable rate of failure. And having a good partner, a partner of quality, is also a support. So I think in the future, we will try to share our exposure with a quality partner. So I think for Namibia, we will look for another partner. I am not sure that, that will bring us a lot of cash. I don't know how this deal will be structured, but that will reduce our exposure and sharing of expenses too, of expenditures, and that's the point.

Another question. Do you want to diversify Maurel & Prom into like renewable energy, such as solar energy or wind energy?

That's actually a difficult question. I think in the future, why not. But 2 points first. I think that the shareholders, first, when you buy Maurel & Prom, you are buying into an oil company. So I don't think that the diversification is really expected here, and I think it's not the right time. Well, if you look at the situation, we need to concentrate on the central right now. And I think we don't have the finances really to diversify in other sources of energy. And then another reason is like if we moved -- if we make that move, it won't be the same rate of return. We are talking here about a profit rates that are limited. So I think that on the long term, I think we need to consider that. But that's going to be on the long term. We're talking about several decades here, 1, 2, 3 decades, but we need to, of course, be forward thinking. But I think we still have some time before we can move forward with these type of initiatives. And thinking about it, there's nothing wrong, actually about thinking.

Baptiste Lebacq question. What about the cash flow guidance? Is that post the BFR evolution?

Yes, it is post BFR change.

And then another question from Nicolas Montel. Can I have a detail of the exploration costs for 2019?

So for 2019, right? So for 2019, for Kama $31 million; in Sicilia $5 million; in Ezanga 4 wells, $7 million. So that gives you $43 million that you can find in our 2019 books in Page 2, I think, in the press release. So maybe Mios, there was a little more and in Namibia maybe as well, very -- like small costs. But the main elements, such main items I just provided them to you.

And another question, Nicolas Montel. When it comes to the expectation of the gas demand in Tanzania, for 100%, 70 -- with the production. So what are the drivers of this demand? So why is this demand lower?

So when it comes to the weather conditions, there's no like heavy rains or scarcity. So I think that since the beginning of last year, we had a commercial date for our gas sale agreement. So what does that mean? It means that our purchaser has to buy the quantities mentioned in the contract. So the guidance here should not depend and production should not depend on demand. The production or at least the revenues are not dependent on that. However, the question here would be about the capacity of our Tanzanian counterparts and to pay the quantities and pay for these quantities. So we'll see. But we should not be subjected to like the weather forecast conditions if PDC cannot maintain its commitments. I'm just mentioning that because at some point this may become complicated.

Another question from a shareholder asking about the exploration license in Ezanga with a potential important significant impact comparable to other exploration wells. Are you still very optimistic?

So sometimes we can be a little carried away when we talk about the positive scenarios. But I think, to be fully transparent, the objective at the time of the Kari well. So Kari well was a big target to potentially double the reserves of Maurel & Prom. But that was the reality -- That's the reality. However, this was just an exploration well. So success is never guaranteed. And as of today, the potential of the block remains. So we can see that the rock is there, that there is potential there. Kama was our major target in the license, but I'm not sure that today we are still hoping to have a major discovery such as it was actually initially thought in this license. However, we can still have some discoveries, but not of that size. So despite the increase of the revenue, we still have an operating capital decreasing. So the main items here that give you this final figure that you can find in the P&L, you have amortization that was significant. Patrick explained that. That was not only amortization, but there was also an exploration cost. Exploration is what it is. So when you don't have the success expected for exploration, you need to book these costs. So that's what happened.

So 2 questions for [ Pierre Boeris ]. So the first part of the question is on the next lifting. Did you already agree on the price per barrel at $25 per barrel? And what's the impact of Venezuela on the EBITDA for 2019 and what to expect for 2020?

So on your first question, usually, that's not how we do that for our productions. So it's -- Maurel & Prom is, of course, an oil company. So we rely on the oil price and on the markets for the next lifting. So in April, this cargo has been sold already, in good conditions compared to the Brent price, but that will be sold on the average of the Brent for April. For the next cargoes -- next liftings, those haven't yet been sold. So we're talking about May. And we are actually thinking now -- thinking of the best way to sell this cargo. But for now because we're talking about May, the price today is $23. So I don't think there's any here interest to already sell it ahead of time. Several options are being discussed. But I think we need to accept the fact that we are now at the bottom of that wave. Some people say that the Brent could go below $20 a barrel, like the WTI, but that's not something that is under our control. We don't have enough information or convictions to really mean that we would need to lock the next cargo at the price of today. There was a second part question on Venezuela, with the impact of Valenzuela on the EBITDA for 2019 and for 2020, the fact that there's no real access to production. So for 2019 EBITDA, I think that was about $2 million, $3 million. And for 2020, that would be roughly the same. These are like the minimum costs that we have to book to help PDVSA to help maintaining the asset. So we're talking here about security, safety and the critical maintenance activity expenses. And at the moment, we're not currently really receiving any revenue. So for the moment, we can only book expenses.

Last question from a shareholder. How do you explain the difference between the valorization or the value on the market of the shares of Maurel & Prom compared to the equity of the company, $1 billion?

Well, I think the market valuation and the equity, I think, indeed, $300 million, that's the value. So that was actually double that a few months ago. So the equity is an accounting value. So this is not -- there's no fluctuation there like you have on the markets. So our results at the end of 2019 confirm that the expected revenues from the assets are in line with our equity. So no impairments to book at the end of 2019. However, you probably saw the comment saying that the impairment testing performed today with the conditions with a barrel of $30 a barrel, this impairment test would be negative. So the conclusion is that, obviously, and at the end of June of this year, we will reperform the impairment test at the end of 2019 (sic) [ 2020 ]. And based on the different conditions or the situation, we will see if we do have an impairment or not. And if so, we will book it. But it is possible, as indeed, there's no miracle and very few hope that the market will shoot back to normal between now and June, I think that you can think about it, but that's an option to be considered for June.

I think we answered to all questions or at least we tried to answer to all your questions. Not always easy, of course. I would like to thank you very much. Thank you for attending and listening to this webcast. Thank you very much again. And in conclusion, I would just say that we are in a very favorable position to weather severe conditions. And I think we are in a better position than a lot of our competitors, and we have teams that are very highly skilled and committed to maintain and support our objectives in the future. And I think we're very happy about this process. And I think that we know where we want to go. We have our targets and our goals, and I hope this was clear in our presentation. And it will be a pleasure to see you in a next webcast. But I would like to hear again. Thank you very much. We want to be very transparent. I hope you've noticed that we gave you a lot of details compared to what we used to do in the past. And I hope that this helps you, and it enables us to build a trust within company. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]