Jadestone Energy plc (JSE) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Jadestone Energy Full Year 2022 Preliminary Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. Paul Blakeley, CEO. Please go ahead, sir.

Great. Thanks, Laura. Ladies and gentlemen, good morning, and welcome to Jadestone Energy's Full Year 2022 Preliminary Results Conference Call. I'm Paul Blakeley, CEO, and I'm joined in London today by our CFO, Bert-Jaap Dijkstra; and by Phil Corbett, Investor Relations Manager. In this call, we'll run through a presentation, which was recently uploaded on our website at www.jadestone-energy.com. It's in the Investor Relations section or you can view it via the link on the webcast. And after that, let's open the call for question and answer. On slide 2. This outlines our standard disclaimers and in particular, the cautionary remarks regarding forward-looking statements and non-IFRS measures used in the presentation. And so that -- with that, let's get started. Turning to Slide 3, which picks up on some recent performance highlights from the business during the year and provides a useful snapshot of where we are. But upfront, I can only describe 2022 as the most extraordinarily frustrating year operationally, one which largely overshadowed the underlying progress made in a number of other key strategic areas. The first half of the year validated how well our strategy works as we continued to generate significant operating cash flow, building our cash balance to a record $162 million by midyear, and which arguably could have reached $250 million by year-end, if it weren't for the events at Montara. The second half, however, was a different story, highlighting the current overreliance on Montara for operational and financial performance, showing vulnerability to single events on the asset as we continue to restore the facility to appropriate condition. Since then, we focused on a work program to bring Montara back on stream safely and having strengthened our procedures to do so with confidence of higher reliability and uptime performance. Almost hidden behind this event, significant progress has been made on a number of fronts. Akatara, for example, is a highlight of 2022 as we sanctioned the project, which will deliver low-cost energy to communities that need it, a project which is running on schedule and budget, and which will contribute significantly in 2024 and beyond. Akatara is also an important step in our strategic aim to diversify the portfolio, remove our reliance on Montara. And with the inclusion of acquisitions at CWLH and Sinphuhorm both with potential for building additional equity interests, we're already establishing a greater breadth and depth to the business. Bert-Jaap will touch on financial performance in a moment, but helped by high crude prices and premiums, we delivered record revenues and operating cash flows, notwithstanding Montara, ending the year with balance sheet cash up, including increasing dividends and opening our first share buyback program. Now to Slide 4, I'll just spend a minute putting the portfolio in perspective against the broader strategic objectives of building a leading upstream independent in the region. Recognizing that we're targeting an increasingly large pool of opportunities, which sit uncomfortably in the hands of their existing owners, we're delivering the key principles of cost management, facility improvements, added reserves and value creation. We simply want opportunity to be in the right hands. And whether it's branded assets under invested assets, nonstrategic assets or assets immaterial to the majors, we believe we're building a track record across a breadth of activity in a more challenging world of shrinking finance and growing regulatory presence. Now let's move to Slide 5, which summarizes some of the steps we've taken in pursuit of our net-zero commitment, with multiple work streams to support our aim of setting out by the end of this year a more detailed road map of how we aim to get there. We've made good progress on building a greater understanding of the emissions profiles of our assets, what are the existing and potential mitigation actions and what is their cost and return. We're now on the final stage of feasibility studies, assessing a short list of reduction options and the detailed implementation plans for each. And so far, we're on track to deliver more detail to the net-zero pathway as promised. We're more convinced than ever that the energy transition requires upstream operators like us with high standards of governance and transparency, that manage and extend the lives of existing producing fields. This provides essential energy through transition without exploration or major new developments, working with an existing footprint and with a focus on emissions reduction and mitigation, all consistent with the IEA-stated objectives. And with that, I think I'll hand over to Bert-Jaap to take you through the financial performance of the business. Bert-Jaap?

Thank you, Paul, and good morning or afternoon to all of you on Slide 6. Operationally and financially, 2022 has turned out to be a year of 2 halves for Jadestone with very strong performance in the first half of the year, while in the second half of the year, the performance was negatively impacted by the Montara shutdown, especially the charts showing production and operating cash flow shows this difference in financial performance across both periods. Before talking about the 2022 financials, we note that we incorporated a restatement in the 2021 accounts. The 2021 year-end underlift position in Malaysia, previously valued at market value was restated by valuing it using production costs. This restatement led to a lower offsetting cost and hence, higher 2021 production costs by $5 million led to lower EBITDAX by the same amount and cash flow after working capital unchanged. On 2022. Year-on-year, the production expressed in barrels of oil equivalent per day decreased by 8% from 12,545 BOE a day to 11,487 BOE a day mostly due to the shutdown at Montara, partially offset by a full year of production from the PenMal operated assets. The decrease in production and the resulting impact on liftings was more than offset by the positive effect from higher oil prices and premiums year-on-year, delivering a record annual revenues and operating cash flow for 2022. Year-on-year 2022 revenues increased by 24% to $422 million which includes the contribution of a full year of PenMal and also reflects the $56 million of revenues from the lifting of CWLH in the fourth quarter of 2022. Over the year, 2022 operating cash flow increased by 74% to $158 million, mostly driven by the growth in revenues. The increase in cash balance at the end of the first half of 2022 shows the capacity of the business to generate significant positive cash flow. The year-end cash position, which increased by around $5 million over the full year 2022 to a total of $123 million, was supported by a significant decrease in working capital. I will spend a bit more time on the cash movements later. Over to Slide 7. The oil price had a strong positive effect on our 2022 results. In the chart on the left, the realized premium over 2022 of $7.80 per barrel was a record over the last 5 years and came in at more than twice the realized premium over 2021. This was driven by both the strong Tapis and Stag premium over 2022. In the charts on the right, we show the Brent pricing as well as the average Tapis and Stag premium. It shows that there is some degree of correlation with Brent pricing and the premium realized which meant that the recent liftings in a lower Brent environment have decreased a bit. In 2022, strength in the Tapis premium was driven by strong cracking margins for gas oil and jet fuel following the border reopening of various Asian countries around the middle of the year 2022. The most recent PenMal lifting showed the stabilization of the Tapis premium at around $3 to $5 a barrel. The Stag premium was very strong throughout the year, as the low sulfur heavy crude remained in high demand. The [ crude's ] unique specification makes it very attractive as blending medium to produce shipping fuel. Recent liftings have been in the range of $12.5 to $19 per barrel, also in line with recent volatility in Brent prices. Our CWLH crude traded at around $6 per barrel discount to Brent's late in 2022 due to weakening [ naphtha ] cracks as a result of decreased demand for end products from China. More recently, CWLH crude has recovered and traded at around Brent pricing. On Slide 8, with respect to operating costs, we have created a like-for-like comparison between 2021 and 2022. It shows that despite the inflationary environment, Jadestone has demonstrated a good level of cost control. In 2022, we reported total operating cost of $251 million compared to $212 million in 2021. On CWLH, the 2022 production cost was impacted by a large movement from an underlift to an overlift position of around $34 million following the acquisition with underlying cash calls OpEx of around $4 million. To ensure year-on-year comparability, we've made a small number of adjustments to both 2021 and 2022 reported operating costs. This includes exceptional situations, nonrecurring OpEx, and PenMal supplementary payments, which vary with oil price and acquisitions that in any of both years distorted reported costs. For example, in these charts, CWLH is excluded from 2022 and PenMal is annualized for 2021 to allow comparison. On this basis, the production costs are effectively unchanged year-on-year at around $170 million. However, we do note that in 2022, we have seen around 13 million lower cost in routine workover activity compared to 2021, which was offset by increases in various other costs with logistics and tanker rates as main contributors. This is also the main area where the company saw inflationary pressure in 2022 and early 2023, but which has most recently also seen some cooling. Our largest capital project Akatara, it has mainly lump sum contracts. On Slide 9, we present our usual cash quarter for setting out the main variations in cash during 2022, and in the separate graph on the right-hand side in the first quarter of 2023. The prolonged Montara shutdown has left its mark on our cash balance which has decreased significantly since year-end 2022. On this chart, 2022 cash flow generation before working capital, investing and shareholder returns was [ $130 ] million, CapEx mostly on the Stag drilling and Lemang project consumed $83 million, while the net effect of the CWLH acquisition was a consumption of $35 million, mostly representing the $41 million initial payment to the decommissioning fund, offset by the cash receipt on closing. We returned $25 million cash to shareholders and had a positive working capital effect of $36 million due to the proceeds of liftings received before year-end and payables, again, mostly related to Stag drilling carried across the year-end into 2023. As a result, total cash balances increased year-on-year by around $5 million to a total of $123 million at the end of '22. At the end of first quarter 2023, the cash balance was $64 million, which included a drawdown of just below $30 million on our interim facility to fund the Sinphuhorm acquisition. The remaining $20 million of the interim facility is solely available for the next tranche of abandonment funding on CWLH. During the first quarter of 2023, the other main movements in cash were $29 million of net operating cash outflows as liftings and associated revenues in the first quarter were more than offset by operating costs as Montara remained largely off-line in the period. $12 million of CapEx, mostly related to the Lemang development and $13 million related to unwinding of working capital, which was mainly related to payables on the Stag drilling campaign, which finalized late in 2022, which were paid in the first quarter of 2023. On Slide 10, we set out our financial framework, which will support our strategy of investing organically as well as acquisition-led growth primarily through producing assets. With Montara back on the stream, we are restoring our cash flow generation with the first 2023 nomination at Montara expected in early June. By the end of 2024, we will have significantly diversified our sources of cash flow with 7 producing assets and the mix of gas, fixed and variable pricing and oil. At that point, Montara is estimated to be around 20% of production. The reserves based loan, which we expect to close in May, will enable Jadestone to fund this business, including investment in the Akatara development and our infill well campaigns this year. On top of this, the RBL will have the flexibility to integrate producing assets in its borrowing base, enabling the company to fund further acquisitions in an optimal way. And we're structuring an accordion, which creates scalability also in support of future acquisitions. We are very encouraged about the opportunity set we have in front of us. Banks are supportive of Jadestone's positioning as a responsible operator looking to optimize existing discovered fields, not only on cost production and field life but also on greenhouse gas emissions. Jadestone's strategy is in line with the IEA guidance of avoiding investment in greenfield assets and focusing on existing production. The RBL has progressed to the point where 1 bank has obtained credit approval, while the other 3 banks are in the credit approval process. In parallel, the facility and its borrowing base are subject to certain other approvals, including the NOPTA approval of the CWLH title transfer, a decision on which is also expected in May. Hedging of a portion of our production is required for the RBL as this will underpin its debt capacity. We refer to the press release for more details on the RBL status. Over to Slide 11. We reiterate the guidance we communicated a couple of weeks ago. We're progressing on our decarbonization trajectory, and we'll come back with a plan in 2023. The April to December production guidance of 13,500 to 17,000 barrels of oil equivalent per day reflects at the lower end of the range, a prudent view of uptime and well performance at Montara as well as timing of the PM323 Malaysian infill drilling campaign. Our underlying operating costs are expecting to total between $180 million and $210 million, which, as usual, excludes several nonroutine items. 2023 will mark our second consecutive year of record investments with expected CapEx range of $110 million to $140 million, of which around 70% relates to the Akatara development project and 15% relating to the PenMal drilling. Over to Paul for the operational review.

Very good, Bert-Jaap. Yes, thanks. So let's move on. If you can, Slide 12, which summarizes Jadestone's reserves and resource movements in 2022. This is a good story for the group, 45% growth in 2P reserves during the year, something equivalent to a near six-fold replacement of production. As you can see, the main drivers were the booking of Akatara resources into 2P reserves following the final investment decision, and with a further technical revision to reflect additional volumes committed under the gas sales agreement and some recent liquids upgrades to the recovery from wet gas production. We also added CWLH reserves following the closing of the deal late last year, but hold as much 2C resources in addition, following our assessment of the impact that new wells could have on the asset. Overall, the resource base is also growing with significant gas volumes in Vietnam awaiting development of the Nam Du and U Minh fields and further upside potential in Vietnam as well as discovered gas at Montara, which now has a potential export via the nearby Shell-operated Crux field currently just commencing development. So let's move on to the next slide, where we've provided some detail, which reflects on the current status of Montara. Rather than dwelling on the history, which we've discussed on a number of prior calls and in several market updates, I'd just like to give a small context. It's worth recognizing that since we became operator Montara in 2019, we've been undertaking an ongoing program to revitalize the asset through a systematic process of inspection, remediation and repair. Progress was impacted by COVID-related manning restrictions, which caused delays to the program, and which may have been contributory given we encountered the small hole in tank 2C near weeks before its scheduled intervention. And with that, we've concluded one of the most significant lessons in our view is to move away from time-based inspection on the whole on the vessel and move to a risk-based approach in the future. And while we've now undertaken an extensive 8-month shutdown addressing regulatory actions, carrying out detailed inspections in critical areas and any necessary repairs and maintenance, notwithstanding the major short-term impact on the business, this was something that was -- that had to be done and it had to be done right. And so we aren't rushing into this but working systematically to ensure to the best of our ability that there will be no further unplanned events of this nature at Montara. And just to give you an example, in the final stages of the planned shutdown in late January and February, we identified some anomalies in internal coatings in a pressure vessel as we show on the photos of the reboiler in this slide as well as finding some minor metallurgy issues on small ball fittings. Generally, these are easily rectified, but have been -- have delayed the gas system being brought back online. But since we've enjoyed some flush production, this has not been a concern. And since restarting production in March, the Montara wells have performed in line with expectations as we show on the top left of the slide. We can't rush this, but production will ramp up further in the coming days with compression and as additional wells are added and more cargo tanks also to be returned to service. Montara has stress tested our resilience, but I would like to take this moment to recognize the way in which the whole team has responded in these difficult circumstances to work through the issues and bring the asset back on stream. Now moving on to Slide 14, which provides an update on the tank work on the Montara venture, providing a whole schematic that shows the Phase 1 program, which is almost complete and which provided sufficient storage and flexibility to allow a restart of production. As we had communicated previously, this subset will be quickly expanded to 2 further central oil cargo tanks, which moves towards providing capacity for full-sized parcel offloads of around 400,000 barrels. In the meantime, to avoid risk of production interruptions due to storage limitations, an offtake tanker has been chartered for 3 months to provide storage flexibility. And today, we're just offloading a first parcel of around 150,000 barrels from the FPSO to the tanker. The extent of the activity at Montara, which with its confined space work, very manual repair and inspection processes and the nonroutine tasks have all been carried out without injury, and it's worth recognizing this also. But I'd also conclude the discussion on Montara with the thought that it's only the significantly cash generative nature of the portfolio in general and Montara in particular, that has ensured we have sufficient cash balances to weather the storm. The strategy we've adopted, acquiring cash flowing assets overlaying with capital projects, which deliver payback typically in months, will equally see us return to a strong cash position relatively quickly into the future. So now turning to Stag on Slide 15, where we highlight in red the 2 successful wells drilled last year which utilize donor well slots from old wells with low or no production in a very small and crowded well bay. Typically, all the infill wells have had initial rates at or around 1,000 barrels a day, and we hope to continue this trend with some of the new locations highlighted in blue, of which high-graded candidates will be considered for a drilling campaign late next year or early the year after. And the latest Stag wells, shown on Slide 16, are very complex, very long horizontal wells towards the limit of technical feasibility due to complex trajectories, anticollision, low-pressure reservoirs and [ thin pay ]. The team are getting better with each well. And as a result of challenging the status quo will likely contribute to several more economic well options emerging. The Stag-50H well targeted unswept oil in the northwest of the field by geosteering across a relatively thin section of reservoir with higher oil saturations as shown with the hotter orange and yellow shaded areas in the cross-section. We extended the well left to right on the slide by 150 meters beyond plan, given the positive indications from the reservoir. And then Stag-51H was a similarly complex well completed successfully to the east of the field, slightly under budget and building further on our experience at Stag. Slide 17 is a quick recap of our view of the Cossack, Wanaea, Lambert and Hermes fields, an acquisition from BP, which closed late last year. Strategically, this very high-quality asset with nearly 900 million barrels of oil originally in place and low decline rates, offers significant upside through further infill drilling unlikely to be carried out by the current partnership. The potential upside we see in the CWLH fields from life extension activities in infill drilling led to a net 6.5 million barrels or circa 40 million barrel gross being booked into contingent resources at year-end. The transaction was completed in November last year for a net receipt of $6 million given the effective date of 1 January 2020. Half of the required decommissioning security was paid upfront and with the remainder to be paid in 2 installments this year. And it is worth just remembering that a stream of cash flow unencumbered by decommissioning costs will generate a very high forward valuation, which translates to a high borrowing capacity, helpful to our current RBL structure. And now moving to Peninsula Malaysia operated assets on Slide 18, acquired in August 2021. The team there have been working hard to reduce downtime and decline rates of the fields. And with our first infill drilling program on East Belamut to be drilled later this year, if successful, we'll likely see production restored back to the same level at the time of acquisition. As part of our emission strategy touched on earlier, these assets have been identified as candidates for effective investments to mitigate greenhouse gases. And the right-hand side of this slide sets out some of the initiatives that are currently underway, where we may see as a result, a permanent reduction in gas emissions from PM323 and 329. The next slide, Slide 19, summarizes the upcoming drilling campaign in more detail. The schematic on the right shows the existing well locations on the East Belamut field and how the proposed infill drilling locations are threaded into areas which are poorly swept. The success case for the infill drilling campaign should add 2,000 to 2,500 barrels per day of incremental peak gross oil production with gross drilling costs of around $19 million and a further $10 million for flowline replacement. Drilling should start in August, September and be completed by November. Further drilling campaigns across the Malaysia assets are being assessed with an expectation of more to follow. And so now the nonoperated Peninsular Malaysia assets on Slide 20, which were acquired as part of the overall SapuraOMV package. I have to say we're not favored at the time due to their nonoperated nature with little influence over the state operator. At acquisition, there were a minor part of the deal producing approximately 1,000 barrels a day net to Jadestone and have been shut in since February last year following the class suspension of the Bunga Kertas FPSO. Following attempts to repair the FPSO in situ, the operator has now decided to withdraw. And recently, we have assumed operatorship in the interest of continuity and efficiency given our existing neighboring operated portfolio. Following an initial valuation, we now believe there may be a very attractive redevelopment opportunity and are currently preparing a submission to the Malaysian upstream regulator for around midyear time. In the meantime, the previous operator will be responsible for removing the FPSO from its station, and towing it to a shipyard in Malaysia later this year. Once there, it will undergo repairs before being handed back to its owner towards the end of the year. The net share to Jadestone of this work is $15 million, although we expect to recoup most of this through existing decommissioning cess funds, paying out later this year or in 2024. As part of our redevelopment plan, we would be looking at suitable FPSOs, including both the existing vessel refurbished in the shipyard as well as others in the market today. And now moving to Slide 21 and an update on the Akatara project, where by the end of March, we were approaching 30% project completion for the EPCI contract for the field facilities. This is just ahead of plan. The civil works at the site were almost complete, after which construction activity will increase with the arrival of equipment for the gas processing plant. In parallel, a number of the existing wells will be reentered and recompleted into the gas reservoir, sufficient to provide volumes with spare capacity to satisfy the contract quantities under the gas sales agreement. The project remains on track to commission the plant in early 2024, followed by contractual gas sales within the first half. Commercial terms for the LPG and condensate offtake, which are both important and valuable revenue streams in the context of the overall project, will be finished in parallel. We've also shown some images here of the progress in civils works at the main development site to illustrate the acceleration towards key project objectives over the next month. As an onshore development, with adjacent local communities, there's significant effort being applied to social responsibility and supporting projects for the benefits of local nationals. A very high percentage, over half, of the unskilled and semi-skilled labor is recruited locally with further commitments to training for the production phase, long-term labor hire and other benefits such as water supply by water wells at site. Slide [ 22 ] provides some commercial context of the project with the gas sales profile from the field shown in red. In addition, there are other profiles associated with analysis from the year-end 2022 competent person's report for the asset by ERCE with low and best cases. These will provide confidence in the assessment of reserves and general subsurface understanding to meet the delivery of contracted volumes. However, additional work completed in-house suggests significant further upside which will be the subject of more technical work and ultimately lead to additional gas sales as well as longer-term activity in optimizing remaining drilling commitments on the PSC. And now let's move to a slide on Vietnam and Thailand. While we had some success in our efforts to progress commercialization of our significant Vietnam gas resource base through government support for direct end user engagement, progress still does remain slower than we would like. Negotiations have moved forward to the point where there's mutual support to sign a heads of agreement between the 2 parties, which would allow for an updated field development plan to be prepared and submitted. But in the end, there is a declining supply of gas into the Ca Mau power station and industrial complex, and there are no practical or economic alternatives to the local gas that Nam Du and U Minh would deliver. There's no prospect of LNG imports to the area in the medium term, no other gas source and the only physical option would be high-speed diesel. With this dynamic, we continue to believe in the project. And the small committed Jadestone team based in Vietnam continues to explore all avenues to move forward the development of this resource which is strategically located to backfill Ca Mau. Now moving to Thailand following the recent announcement in February of the acquisition of the Sinphuhorm interest onshore Thailand. Production has been broadly above plan with nominations for the Nam Phan power plant consistently exceeding the daily contract quantity. This is consistent with our view that the region is short of energy. There's current activity on the asset with a compression expansion project and some drilling. A sidetrack of the PH-19 well is currently being drilled and is expected to complete next month and will be followed by a further well, PH-24. The booster compression project is on track and expected to commence operations in the third quarter next year. And as a result, this will be a year of heavy capital for the asset but will add significantly to extending the asset life. And so on to Slide 24, which I'll use to round off remarks as we look to put the Montara outage behind us and double down on what will positively differentiate us in the sector, doing what we say, delivering growth and value to shareholders. There are a number of catalysts in the short term to look forward to, including progress on Akatara towards first gas next year, closing the RBL, our first drilling campaign in Malaysia on the East Belamut field, a number of M&A opportunities emerging, which will access -- which we will assess critically to ensure they fit our criteria, an assessment of the former nonoperated portfolio in Malaysia, and continuing to identify -- and continuing to diversify the business to insulate us from any overreliance on single events while returning to growth and shareholder value. And finally, before I hand back to the operator for Q&A, I just wanted to express my thanks to all of the people within Jadestone who worked tirelessly to get us back on track. Despite a period of significant challenge imposed by the events of the past several months, our colleagues have remained focused and never wavered from doing the right thing. It's been a difficult and frustrating year for our shareholders, in particular. Lessons have been learned and implemented, but we do look forward with renewed confidence to the future. And with that, I'll hand back to the operator. Thank you very much.

[Operator Instructions] Your first question comes from the line of Matt Cooper from Peel Hunt.

So I'm going to start with 3 questions on Montara. So if you could tell me what your 6,000 barrel a day guidance assumes in terms of post ramp-up rates and also when that will be achieved? And then second question is, given the amount of general maintenance that you've recently been conducting, when is the next scheduled shutdown. And then final question on Montara is, are you still planning to increase the amount of bed space on the vessel?

Thanks, Matt. All -- somewhat related in a way. So the assumption on production, which for the remainder of the year, which of course, does take into account both planned and unplanned maintenance. From a planned maintenance perspective, we do two compressor quick service inspections and blade washes a year. So of course, we've done one now as part of the restart, and there will be one later in the year, late third quarter, early fourth quarter, I imagine, which is in the planning stages. And with that, we'll take advantage of a few days outage to pick up any other work scope. But that's the planned activity at Montara for the remainder of the year. And that answers, I think, your second question around schedule shutdown. The 6,000 barrel would take into account, that planned outage, a certain proportion of unplanned. And if you imagine on a good day, we can imagine that Montara might be in the 7,000 to 7,500 barrels range and with shutdowns and so on, it would equate to something around 6,000. And that's how I think you should think about it for now. In terms of ramp-up, we're working on the final stages of just bringing the compressor online. Delays have had nothing to do with the compressor, but a couple of things within the gas system, which I've touched on in the presentation. Again, most of it is relatively straightforward physical stuff, not complicated, well repair, some bolts that were wrong metallurgy, those sorts of stupid things go back to the original vessel conversion, annoying but easily fixed. So with the gas compressor running, there's an additional 4 wells that are available with gas lift. And I do imagine that we'll be able to bring production up relatively quickly, and there is a profile assumed, of course, in our guidance range, which does assume that those gas lift wells will be available within weeks. In terms of bed space, I think one of the key conclusions for us is Montara needs -- we need access to more hands at work sites. And we have concluded the first phase of the study to look at the different options for expanding the accommodation from small expansion, simple and quick to something more material, which would require significant modification. In all cases, it needs a safety case to be resubmitted based on whatever plans we come up with and that's part of our thinking. It means it's not something we can do overnight. But the 3 options that we've looked at are under consideration right now. And may be adopted in the phase way, starting with something small and simple and working our way through to something more significant, but we have to have more bed space, and that's certainly a key objective.

Brilliant. Yes. That's a very comprehensive answer. So I appreciate that. And just final question on liquidity. You have -- you mentioned in the call an additional nondilutive funding option is available if RBL close is delayed. If we assume quantity prices stay flat, how much of a delay to RBL close would require you to draw on that?

I mean essentially, it's a reserve plan, Matt. Our -- we have a high confidence in progress on the RBL. And I'll ask Bert-Jaap, if you might just clarify where exactly we are with the RBL. I mean you talked about it a little bit already, Bert-Jaap, but maybe just a bit more detail from that for the audience. But I mean, essentially, we have a very high confidence there. And so all of the focus and activities around that. But we wanted under a worst-case scenario to be able to have a sort of a backstop, and we have that arrangement available to us. Bert-Jaap?

Yes, sure. Thanks, Paul. And thanks for the question, Matt. On the RBL, as we've presented as well, 1 out of the 4 reputable international banks that we're working with has passed the credit approval stage, which, in effect means that the only, let's say, gates that we need to pass with this bank is signing the facility agreement. The facility agreement is a near-agreed form, which basically means that we just need to do some last knitting of bits and pieces, but it can't be major because otherwise, the credit committee would not be going through an approval. So that's 1 bank. The other 3 banks are in that same process. Given that one passed, I think it gives you an impression of where we think the other banks are. But of course, we're not inside those committees and processes itself. But we have a pretty high degree of visibility on the other banks as well. So when the facility agreements in near-agreed form and the credit committee approvals come through, as expected, in effect, what we then need is the NOPTA decision and of course, the approval of NOPTA for the title transfer of the CWLH asset, which we currently believe is forthcoming, and we're expecting it in May. This is an important element to the borrowing base and the facility. So we're, of course, working with NOPTA to see how fast we can -- whether we can actually advance the decision-making there. But we're confident that this is coming forth as well. And then it's custom ECPs. So documentation, reports, the usual customary conditions precedent before we close the facility and can go draw down on it. So yes, I think all in all, we're very far progressed and we're confident that this will come through in a close in May.

Your next question comes from the line of Ashley Kelty from Panmure Gordon.

Just a question around funding position. If there is any [indiscernible] RBL facility, and there's obviously this backup under which may or may not be available. Just wondering, in terms of the activity you've got planned, what would be curtailed or rescheduled?

Ashley, thanks. Our Plan B funding is available. And so our preference is to go with the RBL. It's more comprehensive. It's lower cost. Let's be open about that. And that's by far our preference. But the alternative is available. And so we're not contemplating -- yes, Ashley, I hope we've answered your question...

Your next question comes from the line of Mr. Mark Wilson from Jefferies.

Okay. The first point, there's been a number of questions regarding the RBL and the facilities. Can we ask how much the RBL facility size is you're looking to a range. Is that a fair question?

Yes, Mark. Bert-Jaap here, of course, that's a fair question. We -- I have to say, of course, it's depending on how credit committees come back. At this point, we can share that we're guessing between $180 million and $200 million, $210 million. But like I said, it also depends on how credit committees come back. Why is that a variable mostly because the capacity of the RBL is also dependent on our hedging program, and I referred to that in the presentation as well. The more we hedge, the more borrowing base we can effectively create. So there's a bit of a balancing act between what do we need for the RBL and the liquidity that we see that we would require for the various activities that we have in front of us and the hedging program has, of course, we are -- what we call oil bulls, if you will. We would want to be minimizing hedging. And in effect, so it's a balancing act between minimizing the hedging for borrowing capacity as well as having sufficient capacity and the ultimate credit committee's approval on sizing. I think that sums it up. On sizing, there's a 2-staged approach. I referred to that in the presentation as well, Mark. The -- it's the original size of the RBL, and some banks have already indicated that they have more capacity than initially put in front of us, which then depends on our implementation of our strategy, essentially, which has all the strengths that Paul referred to, and of course is linked to our plan of acquisitions of producing assets, and this is in support of that.

Okay. Well, really quite material facility once in place. Now you've got operations now across 4 countries. Five, if we include Vietnam as well, you said still an extensive set of M&A opportunities ahead. Should we consider that new country entry is also still possible in 2023? Or do you think you've covered the main countries that you're focused on?

I think it's -- when you're in the M&A business, you're responsive to the quality of the opportunity. You don't drive that bus, you respond to it. Theoretically, is there a chance of a new country entry in theory, Mark, but it's highly unlikely. As I think about the things in the market today that we're looking at and likely to come to the market, they would generally fall within the areas where we're already present.

Got it. Okay. That's absolutely fine. Then my last question, and I just want to check on the 2023 guidance. So the -- in particular, the OpEx $180 million to $210 million, and CapEx $110 million to $140 million. Should we think of the OpEx number as being equivalent to the base OpEx numbers you showed on Slide 8. i.e., of around $170 million in the last couple of years. That base level is $180 million to $210 million this year. But is there any of these additional workovers or nonrecurring OpEx that we should be putting on top of it, please?

I think the best way I could think about this -- to answer your question, if you want to draw that immediate comparison. Of course, this year, we include a full year of CWLH. This year, we include a full year of Sinphuhorm, which wouldn't be comparable to the prior analysis. So if you withdraw, in round terms, something like $25 million, I think it's starting to look closer. But it's all about what the portfolio includes, okay? But Bert-Jaap, do you want to add anything?

Yes. I think, Mark, I mean, we didn't want to sort of confuse the investment community with having another definition. And this is why the analysis that we've done on gross production costs, basically ties back on very simple adjustments as far as we're concerned. And the nonrecurring bid there also ties back to the adjustments that we're making, for example, for adjusted EBITDA. So it's [ 1 0 1 ] linked to those adjustments. And for the rest, it's only a few pieces that we adjust for and it ties back to the accounts. So I think it's -- we really wanted to make sure that we capture, call it, everything there. On the production guidance number, there are more exclusions because it's more linked to the view that you are used to with the production per barrel view, which basically excludes some additional items that we consider as exceptional as well, including workover and some transportation and related. So in that sense, it's not one-on-one comparable, and I would use the analysis that we've presented to you as a stand-alone piece for the bridge between '21 and '22.

[Operator Instructions] There are no further questions at this time. I'd now like to turn the call back over to Mr. Paul Blakeley, for closings remarks.

Very good. Thank you, operator, and thank you, everybody, for being on the call. I'm not going to say very much more. I think we've had a long discussion about the business. I think we've reached a key point in time. We're moving forward, getting back on track for 2023 and beyond, growth and value being at the heart of it all, reliable operations reestablished. And I do hope that at Montara, particularly, we've turned a key corner, recognizing that one of the strategic objectives that we are well advanced with is to make Montara far less material within the business for all the right reasons. And we look forward to sharing progress on that with you all over the course of the coming year. And with that, my thanks to you all, I wish you all a great day.

Thank you so much, presenters. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day.