Jadestone Energy plc (JSE) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the Jadestone Energy Investor Call. My name is Nadia, and I'll be coordinating the call today. [Operator Instructions] I will now hand over to your host, Paul Blakeley, CEO, to begin. Paul, please go ahead.

Thank you, Nadia. Ladies and gentlemen, good morning, and thank you for joining this call to discuss the new financing arrangements which we announced late yesterday U.K. time. I'm Paul Blakeley, Jadestone's CEO, and I'm joined in Singapore today by our CFO, Bert-Jaap Dijkstra; and in London by Phil Corbett, Investor Relations Manager. In this call, we'll run through the presentation, which has been uploaded on our website at www.jadestone-energy.com. It's on the Investor Relations section, or you can view it via the link on the webcast. And after that, let's open the call for a Q&A discussion. Slide 2 outlines our standard disclaimers and, in particular, the cautionary remarks regarding forward-looking statements and non-IFRS measures used in this presentation. And with that, we can get started, reflecting first that the announced financing arrangement may have taken some of you by surprise, but is the result of a series of events, which we'll explain and which moved very quickly upon us, and for which we needed to take fast and decisive action. On Slide 3 now, I did want to just offer a brief reminder of the objectives of the business and highlight that this equity raise and standby debt facility, following closely on the announced reserves-based lending facility of up to $200 million, which, together, now establishes a full funding solution for all our currently planned activities going forward and with the additional buffer of the standby debt. This funding covers the Akatara project in Indonesia, which remains on schedule; the drilling of infill wells in Malaysia, due to commence in third quarter; and follows on from stand drilling late last year; 3 acquisitions recently closed; and with further opportunity emerging from our participating interest in the PNLP licenses in Malaysia. Moving to Slide 4 gives a reminder of how we're continuing to broaden the asset base of producing fields, which, in turn, places less reliance on Montara and events such as the recent extended shutdown that occurred there. With portfolio expansion in multiple jurisdictions and the addition of gas streams at Sinphuhorm and Akatara, this increasing diversity provides far greater resilience for the business. Furthermore, we're also reducing concentration risk in assets with high decommissioning security and providing greater portfolio protection from volatility in commodity prices. Note that we continue to be very selective on what we invest in, seeking high returns and value in everything we do and focusing M&A only where follow-on investment opportunity in the asset has been clearly identified and verified. It's this activity which can generate exceptional returns, such as drilling infill wells, for example, at Montara, Stag and in Malaysia, and concentrating on early cash flowing activity, which leads to rapid paybacks. And now to Slide 5, where I'd like to put some background to the financing arrangements announced today and then let Bert-Jaap fill in the details. We're responding to an unusual set of circumstances, which, of course, originate from the extended shutdown at Montara, an isolated incident, which has been fixed and with routine operations now restored. This incident occurred during a record cycle of investment comprising both organic CapEx overlaying with M&A activity, which, of course, included CWLH and Sinphuhorm. There's added complexity due to the RBL debt capacity decreasing temporarily, a feature of RBL structures and which triggers a partial repayment in early '24, reducing the borrowing base, until Akatara comes on stream when it then returns to $200 million. There are many moving parts to this, which I'll leave to Bert-Jaap. Suffice to say that this uncertainty has created a need with certain stakeholders to resolve it immediately rather than during the next several months as we had planned. In a very concentrated period, we have worked with Tyrus Capital, our largest shareholder, to put in place a financing package in 2 main components. The first is an equity underwrite facility of $50 million to ensure this amount was raised and which, given the earlier outcome that we've just announced, will no longer be required. The second element is a standby working capital facility, the headline terms of which are laid out on this slide. This provides a buffer with no intention to draw down, but in the event of reasonable worst-case downside scenarios is immediately available. This financing package underpins our growth as we look to increase production next year by 50% once Akatara is on stream and without further acquisitions assumed. It provides funding certainty for our shareholders, and we're grateful for their support. Slide 6 really emphasizes what we've already discussed, but in a simpler graphic. The growth trajectory is clear with follow-on options, which could make this exceptional. Note the shift from a very limited asset base on the left to a much broader portfolio on the right, with further potential from a strategically targeted opportunity, which should fit well within the borrowing base and the redevelopment of PNLP in Malaysia as well as the potential for some movement in the Vietnam gas development. Overall, we firmly believe this financing initiative, together with the RBL, gives us a strong platform to take the business forward, moving production beyond 20,000 BOEs per day and rising further into the future. This is a key inflection point for the business, and the cash generation from the expanded production base is very accretive. And so with that introduction, I'll hand over to Bert-Jaap to provide context around the financing package, some detail on the structure and the business outlook that follows. Bert-Jaap?

Thank you, Paul. Slide 7 then. The projected growth in production that Paul just presented on the previous slide is the main driver for the operating cash flow growth forecast in the base case from around 0 this year to around $160 million in '24 and around $190 million in '25. The forecasted operating cash flows after G&A, tax and working capital. The $120 million operating cash flow in '22, which includes exceptional income of just below $20 million from last year's SKU insurance claims settlement decreases to nil in '23, mostly due to lower forecasted revenues by around $80 million caused by lower oil price realizations across the 3 scenarios in this chart relative to the $96 per barrel Brent average across our oil sales in 2022. On current assumptions, we also expect to lift 200,000 to 250,000 fewer barrels at Montara than last year, primarily reflecting that the first lifting of the year from Montara of around 250,000 barrels only occurred in recent weeks. The $160 million operating cash flow forecast for '24 is based on a $75 per barrel oil price, so the recovery in '24 is driven by $130 million growth in revenues from increased production, with a full year of contribution and liftings from Montara, the positive impact of the PenMal infill wells and, of course, the start of production from the Lemang gas field early in the second quarter of 2024. Then into 2025, operating cash flow is projected to increase further to around $190 million, mostly due to the full year contribution of Lemang, which brings high-margin production and incremental production from the forecasted Stag infill drilling campaign in the second half of the year. You may notice that the projections are not very sensitive to oil prices. This is due to 2 reasons. First, we're hedging oil volumes under the RBL from fourth quarter '23 to third quarter '25. So for 2 years, for 50% of our liquids production. Second, the portfolio also benefits from the natural hedge that Lemang brings on fixed gas prices. These operating cash flow forecasts, combined with the impact of our record investment program in 2023, are the main drivers of converting our 2023 net debt position into a net cash position on the next page in 2025 in the base case. On Slide 8, we show the history of the company's financial position and forecasted evolution of the company's net debt and cash, which illustrates that we are expecting a short-lived funding requirement to finance our operations and, more importantly, our record investment program. Under the stated assumptions, we project a return to a significant net cash position in 2025. Looking back, we see the resilience of Jadestone's operating model. In 2018, Jadestone was carrying an RBL for the purchase of Montara, which was quickly repaid across 2019. During COVID, the company took active measures and successfully managed to remain in a relatively constant net cash position. With the increase in oil prices from June 2021 to June 2022, the company showed its cash generation potential and arrived in the $160 million net cash position at the end of the first half of 2022. In the period from first half '22 to year-end '23, Jadestone moves from a net cash of $160 million to a net debt position of around $100 million. This $260 million variance over the period is mostly driven by the company's $300 million investment program. The main elements here are a total of $190 million CapEx, with $70 million from the second half of '22 due to Stag drilling and the Lemang project, and $125 million CapEx for '23 in the midpoint of guidance, mainly due to Lemang and the Malaysian infill drilling this year. The other $110 million is acquisition related and includes around $80 million for all the CWLH abandonment fund payments and the Sinphuhorm acquisition for around $30 million completed early in 2023. The total is leading to the forecasted net debt position at the end of this year at around $100 million, depending on the oil price scenario. Note that this net debt position is before the transaction announced yesterday. So following the successful equity raise and all else being equal, this net debt in the base case is projected to be around $50 million. Additionally, we expect to stay well within our RBL covenant of consolidated net debt of less than 3.5x EBITDAX. During 2024, the company expects to reduce its net debt by around $65 million to a position of $35 million net debt at year-end on a $75 per barrel oil price. This is driven by operating cash flow of around $160 million, as explained on the previous slide, partly offset by planned CapEx. This is most notably Stag drilling and the last Lemang expenditure, projected interest on the RBL and other. Into 2025, the net debt position is forecasted to improve further to a net cash position of around $120 million at year-end. This is again driven by the operating cash flow for 2025 of around $190 million, combined with significantly lower CapEx projected, leading to a forecasted free cash flow contribution of around $150 million to arrive at that net cash position of around $120 million at year-end 2025. Over to Slide 9. First and foremost, we are very pleased with the recent closing of our RBL with 4 international banks for a total of $200 million. The facility represents a strategic stepping stone in support of Jadestone's longer-term future. The banks regard us as a responsible operator, likely taking a role in consolidating mid-life assets in the region, AIM-listed enhanced transparency and governance to high standards, the unique competitive advantage in operatorship, especially in Australia, combined with additional regional growth options in Southeast Asia. The RBL forms a flexible tool in support of Jadestone's growth. The company can use the RBL to fund its capital investment, and the RBL supports funding of acquisitions of producing assets. Sinphuhorm, for example, generated more debt capacity than Jadestone paid in cash consideration. This demonstrates that the deal was very attractive, but also shows how the RBL can support inorganic growth. The total debt capacity is established in biannual redeterminations and is initially $200 million. This capacity is projected to decrease to around $90 million at the start of the second quarter 2024. Early in the third quarter in 2024, following successful completion test, Lemang will be integrated in the borrowing base as producing assets and the borrowing base increases again to $200 million. Until this happens, Lemang's contribution is constrained at 40% of the total producing asset contribution. The RBL closed later than we planned due to the continued slippage in the restart and stabilization of Montara, which was required by the banks to be able to close the RBL. Montara restart and hand over to operations occurred significantly later than we originally anticipated. Closing of the RBL with its final banking model occurred days before the annual report was due. The RBL was important in support of the going concern conclusion. In the run-up to closing of the RBL, oil prices had come down, which increased the forecasted liquidity shortfall in our final liquidity model. This liquidity shortfall was not unexpected, and management believed that we have mitigants to close this gap. I will explain in more detail on the next slide. However, executing these mitigants will take time for assessment and some will involve working with our banks to obtain consent, work which could only start after closing of the RBL. This shortfall was stress tested in a downside oil price and a negatively impacted operating performance scenario. Although this downside scenario is a low probability event, the Board took the decision to be proactive and raised financing now to safeguard the company's position for the future. The company prioritized equity over debt to avoid over-leveraging the balance sheet. To ensure protection against the tested downside scenarios, which could potentially disrupt the company's growth plans, in addition to the $50 million equity raise, we have also put in place the up to $35 million working capital facility, which we don't expect to draw. This combined equity and debt funding, in addition to the existing RBL, puts the company on a solid footing and provides financial flexibility to bridge across the temporary availability shortfall into the fast improving liquidity position following Lemang's first gas. Finally, on hedging, the RBL facility requires that we hedge 50% of our liquids production over the Q4 '23 to Q3 '25 period. To date, around 64% of the required barrels have been hedged at a weighted average price of around $71 per barrel and at the assumed forward curve in the RBL banking model. We expect to finish the program in the coming weeks. Over to Slide 10. The chart on this slide illustrates the debt availability over time from our current banking model. This banking model calculates present value of future cash flow using third-party verified production profiles, reserves, OpEx, CapEx and ABEX estimates. The oil price currently used in the banking model is $67 per barrel for '23, $62 per barrel for '24 and $58 per barrel for later years. This is well below the current forward curve. This brings forecasted field abandonment in the banking model much closer than we anticipate as we look at field lifetime extending activities. 33% discount is applied to the end result to arrive at the borrowing base. Going forward, the present value reduces with production and the abandonment timing coming closer, mostly for Montara and Stag, using the banking oil price deck. As referred to earlier, we have options to mitigate the dip in Q2 '24, which I discussed on the earlier slide. As said, all need time to assess, and some need bank's consent. Up to now, our priority was signing and closing the RBL first. Measures to manage the liquidity dip, which mostly stemmed from the decrease in the borrowing base in 2Q '24 are the following. Acquisition of producing assets has the potential to bring incremental borrowing base. As mentioned earlier, our recent acquisition of Sinphuhorm was more than covered by debt capacity in the RBL. Then we have additional hedging, which we would look to implement opportunistically if we experience a period of higher oil prices over the next 6 to 9 months. Then the facility agreement has a CapEx add-back feature, which allows the company to add back the forecast of next 2 quarters of CapEx spend, subject to intended use of the CapEx and bank approvals. Then we can look at phasing of significant expenditure in OpEx and CapEx and working capital management, for example, accelerate liftings from Montara and Stag. The work program can be optimized to generate incremental borrowing base, for example, by utilizing the CapEx add-back mechanism mentioned earlier. Finally, we started assessing the option to ring-fence Stag, which is an asset which has a negative contribution in the borrowing base due to the conservative assumptions in the banking model. The assessment of the feasibility of this option needs time and work, and it also depends on bank consents. The main conclusion from this slide is that Jadestone is looking at a temporary borrowing base dip in its RBL, which we believe can be improved going forward using various measures, with progressively more certainty around outcomes in the future. In summary, the $50 million equity raise and up to $35 million working capital facility, in combination with our RBL, form a solid foundation to bridge Jadestone into a period of operating cash flow growth and significantly increasing RBL debt capacity. Back to Paul for an operations update.

Well done. Thanks, Bert-Jaap. Okay, let's move on to Slide 11 and turning to Montara, where after securing tank 2C, we have completed an early phase of tank restoration, completed an extensive 4-yearly maintenance campaign, and now see operations restored to pre-shutdown levels. You can see on the top left that production is settling in a range around 7,000 barrels a day, with a further 500 barrels available once we complete some minor wellhead maintenance on 2 Montara wells. This reinforces our guidance at Montara and, more broadly, where group production has settled at around 17,000 BOEs a day, even while we have a well on Stag, which is under workover, a spool change-out of the Chermingat field in Malaysia and a few other minor well work activities. The tank reinstatement program shown on the bottom left signals a slow and thorough close visual inspection program tank by tank. With Phase 1 now complete, we're focused on a water balance tank, then tank 1C and systematically working our way to returning to a 6 or 7 tank operation, which will restore full-size parcels of crude for offload. In the meantime, we're selling smaller volumes, and we're using a standby shuttle tanker as a host storage facility to ensure no disruption to production operations. The goal for the operations teams is clear, a constant focus on safe production operations, along with high uptime and a ruthless control on costs, and we will do all we can to support them in this. Slide 12 provides an update on the Akatara project and a summary of the economic return of what is our first new development within Jadestone. The team has many years of experience of this type of activity from past Talisman Energy days, but it represents an exciting milestone for this company. We're firmly on schedule at 35% complete, and on budget, with costs largely constrained through a fixed price lump sum contracting strategy. With over 700 personnel on site, progress is good, and we've just achieved over 1 million manhours of safe working. Long lead items, such as compressors and generators, are usually the high-risk items that impact schedule, but I'm pleased to report that all have passed factory acceptance testing and are in dispatch to the region. The economic summary on the left emphasizes the significant early cash generation, which, under the PSC regime, allows for recovery of costs, both past and current project costs on an accelerated basis. This drives high IRRs and is a big contributor to a very rapid deleveraging of the balance sheet, as Bert-Jaap has already shown. We're excited by subsurface upside in the Akatara reservoir well beyond the current contracted volumes, and we're already working towards incremental sales contracts over the first 5 years. This is truly a good news project. Touching on key activities and catalysts in the coming months, let's turn to Slide 13. The Montara tank reinstatement following restart is high priority. But drilling in East Belumut this year and further drilling in Malaysia and at Stag next year are catalysts which help offset declines and are important value adds to the business. We're also preparing to work over the 4 wells at Akatara early next year for first gas and with more to follow. We're also in an exclusive arrangement to assess the future redevelopment of the PNLP assets in Malaysia, in which we currently hold an operating interest and are increasingly excited about the potential. The next step requires us to make a bid submission to the regulator around end June. We also hold a view that slow but steady progress on gas sales in Vietnam may move ahead to a potential for signing a gas sales agreement and an FTP submission next year. FID would come later after the field development plan is approved, but it will be nice to see Vietnam moving forward. And finally, we're looking to advance small tuck-in opportunities, which can be absorbed into the RBL if they exhibit the right cash flow characteristics. As Bert-Jaap said, CWLH and Sinphuhorm met these key criteria and we will be equally selective to ensure near-term opportunities can also be debt financed. Slide 14 now, which provides guidance for the year. It's worth emphasizing that unit OpEx is likely to reach a high watermark this year. This, of course, is due to only a partial year of production at Montara and some one-off costs around shuttle tankers in what has been a very volatile market. In other areas, logistics costs are up, and drilling activity is likely to see inflationary pressure next year, though this year's program is holding the cost base firm. The good news is that 2024 should see much of this OpEx pressure reversed due to stable production operations, and we expect tanker usage to return to normal. This is in combination with the fall of committed capital program, which is likely to soften in our business next year as Akatara wraps up. But just to conclude and to be clear, we retain guidance for the year as we laid out, and we believe we're in good shape. Now Slide 15. With our balance sheet and liquidity underpinned by the placing and standby working capital facility, Montara operations restored within an increasingly diverse production portfolio, and Akatara moving ahead on plan. With all this, the Jadestone equity story stands at an inflection point with a clear line of sight to significant cash flow generation and a rapid deleveraging of the balance sheet. I want this point in time to be seen as a relaunch of the business, which sees us return to healthy cash generation and a strong balance sheet, which has been a hallmark of this company. Ladies and gentlemen, we've been through a difficult period. No company of our size comes out unscathed from an extensive period of key asset outage. We've sought every avenue for solutions, managing stakeholder speed bumps on the way. However, we now find ourselves with a tremendous opportunity, baked in short-term growth from an expanding and diverse portfolio, an environment with opportunity to further deepen the business with high-quality assets, and a significant financial capacity, largely backed by the highest quality international banks that have stamped our business as meeting their very highest of standards. So we now draw a line committed to delivering our work program, including safe and efficient operations across the portfolio, Akatara on schedule, adding 50% more production in 2024, and restoring the balance sheet and shareholder returns. We'll communicate this to the market effectively and with the aim of seeing this delivery reflected in our share price. And with that, I'll hand back to the operator, and we'll take your questions. Thank you.

[Operator Instructions] And our first question go to Matt Cooper of Peel Hunt.

So starting off with hedging, is this planned to be entirely via swaps. And also the $71 per barrel average price today, is that inclusive of field level premiums?

Yes. Thanks, Matt. It's inclusive of the premiums and is indeed run by swaps. And the reason why it's $71 per barrel is clearly for the period that we're hedging, which is Q4 2023 into Q3 2025. This hedging is actually done very recently, and we've tried to cover the front end of the curve. We've tried to use the OPEC decision recently and to pick up a little bump on the front end of the curve, and we were reasonably successful in picking it up, although it slid away relatively quickly, as you know. But on the front end, we're now covered. And we're using -- to give you a bit of a flavor, again, Matt, we're using the time that we have under the RBL until roughly the end of the month. We're using that time to see whether we can optimize the overall hedging program because at the back end, it's not so volatile and we're hopeful that we'll bring some additional versus the RBL. We're sitting at the RBL level now, and we're looking forward to trying to improve on that.

Okay. And just thinking of, obviously, the high premium, particularly at Stag. Is it fair to kind of assume that on a pro rata basis, the hedging is split roughly equally between the assets? At 50% of group production, you'd be looking at roughly 50% of Stag, 50% of Montara, or will there be a difference between the assets?

Yes, it's really total volumes. I think in the end, the premium, as we speak, I think we presented that in Q2 last year, I think we see a correlation between the premium and the underlying. We believe there is some correlation, although it's not a direct link. But the underlying hedging is done on Brent. And of course, that Stag premium is pretty volatile on top of that. So the hedging really covers the underlying, if you will. And there could be still some, call it, positive volatility on the premium, where the banking model is roughly following our forward-looking assumptions on the premium on the back of what we think is going to transpire. But it's slightly correlated to the underlying Brent, as stated.

Okay. Understood. And then just turning to the new acquisition that you mentioned. I don't know if you can say whether this is a new asset or an increase in interest in the existing asset. And then kind of related question is around, would the equity raise likely have been materially smaller without this acquisition or likely to be in the same size?

We won't identify specifically on M&A activity, if you don't mind at this point, Matt. Thanks. However, as we touched on, everything we're looking at must really fit strongly within the criteria of the RBL financing model, and this will do that. What was the other part of your question? The raise. As Bert-Jaap touched on, I mean, this is all directly in response to a requirement placed upon us in terms of the size, and we couldn't adjust that at all. So it's a facility that was deemed to be needed for -- to meet the needs of a clean statement. Do you want to add anything?

Yes, which is excluding the mitigating actions, Matt. So the mitigating actions, as I mentioned before, they are not certain. We are around these very -- the probability of us getting, for example, CapEx add-back, just to take one example, the probability of us getting incremental borrowing base is 99%. But we can't bank on that now, which means that we couldn't, let's say, stick it in the forecast as a given. Same for the hedging. We just had an additional year of hedging, just to come back to your hedging question, maybe, Matt, another year on top of the 2 years that we have now for 50% would bring an increment of $10 million on the dip in Q2 2024, and $10 million for 50% of the volumes hedged, we said, look, we're not even going to propose this to the Board. But it goes to show that it's almost like the minimum you would expect, I think. Okay, we don't know what the oil prices will do going forward, but that $10 million is expected to be an increment on the base of what we know today. Again, given the uncertainty, we couldn't bank on it, and it's an uncertain outcome. I think it's more than reasonably probable, but that's not a given. Just a few elements here of mitigating factors that were not taken into account when reviewing the base case and when we were looking at the $50 million stop gap that was, call it, put upon us, as Paul mentioned.

Okay. Yes. That's useful context. And sorry, just final question. If you can give any more color on the PNLP redevelopments from your Slide 6. It looks like the production up there could be pretty material.

Yes. Of course, it was an asset that was in production, was shut-in prematurely, contains a production stream that was nonequity to our participation. It was a sole risk. And so all of that added together becomes quite material production. And the reinstatement is all about the refurbishment of an FPSO being put back on the facility -- on the fields and us assessing the quality of the remaining opportunities and any incremental activity that the previous operator wasn't going to carry out. And that's core business to us, and it's pretty exciting. And the reserve adds could be quite significant. So it's one that we are working very hard with a view to a compelling submission to the regulator by the end of June.

[Operator Instructions] And our next question goes to Mark Wilson of Jefferies.

The main question for me is you show very good color on Montara and the production so far this year. There has been outages. You've had cyclone Ilsa, compressor trip, but obviously, the assumption is that the facility will continue. At the same time, as we've seen, there's potential for uncertainties. So can we just talk about the contingency plan that is in place should Montara see another unforeseen outage? I imagine that working cap facility is part of it, please.

Okay. So as a part of the analysis, we ran a reasonable worst-case scenario. Bert-Jaap, why don't you just define what that looks like, to answer Mark's question?

Thanks for the question, Mark. So ultimately, I think we picked a scenario which I think may sound reasonable and may sound worst case as well. $60 per barrel oil, we picked that as a reasonable worst case. And on top of that, we estimated, let's say, the impact of a 3 months additional shutdown of Montara in front of, let's say, the liquidity dip period. So cumulative, it would be hitting that dip the most. That would need to have cover, and we have cover for that, which would be the $50 million equity. Indeed, like you said, Mark, it was on top of the $35 million contingent facility. And on top of that, there would indeed be credit for management mitigations, which we've been, I think, reasonably conservative in estimating, and we would live through that period on the basis of the -- of course, on what we know today.

Okay. Great. The second one, just so we understand, you explained it well, but the main criteria to increase the 2Q '24 borrowing base reduction would be if you can place those additional hedges. Am I right? Or do they require the production test to Akatara?

Well, Mark, I think -- well, look, you are right. So there's a few things here. So first, the dip is sitting right in front of Akatara coming into the borrowing base as producing asset. And it's constrained at 40% when it's a development asset. So it cannot contribute more than 40% of the overall total, which will switch into 100% contribution the quarter thereafter when the borrowing base jumps back at $200 million. So Akatara or Lemang is very small, let's say, 40% in the ultimate number before it goes on stream and deliver the full $200 million -- contributes to the full $200 million borrowing base in the quarter after. On the dip itself, there are various ways of managing it, and this is how I explained it in the presentation, but maybe just to rehash it a little bit, if you don't mind, Mark, one is the CapEx add back. It's in the facility agreement. Sorry, what was that, Mark?

I'm just saying, yes, please. Go over that. That's good.

So here we go. CapEx add-back is written in the facility agreement with the banks. We benefited from this CapEx add back now. So at the initial, when we have $200 million borrowing base today, we have CapEx add-back active, if you will, which is, crudely saying, it's the next 2 quarters of CapEx. It needs to qualify, and banks need to approve, but they've done it on day one. We didn't bank on it in, let's say, the dip of the borrowing base because, of course, phasing. We could accelerate long leads. We can accelerate the program. Things may be a bit later. There, of course, is always shifting panels, a drilling rig, when is it available, et cetera. So we couldn't bank on the CapEx add back in that period. So the CapEx add back on the dip is currently assumed at 0. It will be higher, and we have a conservative estimate for that in the mitigating actions. Second one is M&A. Sinphuhorm delivered more debt capacity than the cash consideration. That's not obvious because, of course, the consideration comes out of the borrowing base, because the vendor needs to be paid. But on Sinphuhorm, there was incremental borrowing base over and above what we paid. So it could be incremental. Nothing is currently assumed, of course, in the dip. Working capital management, we can, of course, work that in temporary liquidity constraints. Phasing of expenditure, we could, of course, try and match a bit the expenditure with the borrowing base calculation, if you will. What I always find is that finance needs to follow the business and not the other way around, but there's always some room to maneuver and see whether there is some optimization that can be done. And we're counting on that to stay very close to this and see whether we can optimize. Then coming back to the hedging that you mentioned, Mark. The additional hedging, we could have taken another year, which would bring $10 million relief, if you will, in this dip in the borrowing base. But for the obvious reasons, we didn't want to do that, which also means that Paul and I are hoping that, that number of $10 million today will be hopefully substantially larger when we get an opportunity to roll in some opportunistic hedges. So that's really how we're looking at the hedging. We're looking forward and we may go opportunistic on this when the oil price has a patch of elevated prices. Of course, this would need to be, again, at the back end of the curve, so we need to be pretty structural, but let's see, right? Finally, and this is important, I think, Paul and I just came off the phone with 3 of the 4 banks. And we started working already on this, the potential solution on Stag. All banks are constructive. They're supportive. They want to work with us. That's not a guarantee because from a legal point of view and securities point of view, you need to cover all of your bases. And there's always -- the devil is always in the detail. But at the same time, all the 3 banks, and I'm expecting the fourth to do the same, they're very constructive on helping us on that Stag ring-fencing, as I mentioned before. That's a substantial block of potential borrowing base that we could bring back because Stag has a negative contribution in the dip. So we flagged it to the banks and say, "Look, we're going to come to you guys with proposals. And we're going to be as creative as we can be to improve this borrowing base." Now all of this package -- again, I mean, we said it a couple of times, Mark, all of this package, it comes with some uncertainty because we don't have certainty yet. It comes with bank approvals required, but the banks are very constructive. And we couldn't bank on it now. So in the end, on a liquidity forecast where we believe we could manage it, we were thinking that we would manage it over a period of 6 months for the banks, right, because we just signed the RBL and closed it on the 22nd of May. We didn't have the time. We had to sort this solution within a week because it's linked to the annual report, and the underlying going concern conclusion that is embedded in the annual report. So it's really, I think, the lack of time that drove us to go into the structural solution, which, I think, okay, painful from a shareholder perspective, I understand, and maybe a surprise to many, painful as well, but it gives us a very structural solution going forward on the equity front and supplemented, if you will, with a small working cap facility, which I think are at good terms. I hope you agree.

Is there any contingencies to access that working capital facility, just to help us understand that.

Sorry, Mark, I didn't...

Just to access the working capital that need approval.

No, it needs to be available.

[Operator Instructions] It appears we have no further questions. I'll now hand back to Paul for any closing comments.

Thanks a lot. Ladies and gentlemen, thanks for joining the call and for the questions. And I just want to say now, I'm really grateful to the shareholders who provided their support in this financing and, of course, particularly to Tyrus for its key role. But now it's time for us to look forward. I honestly believe that the business looks bright. There's significant growth and diversification. We see production rising to over 40,000 BOEs per day. And in turn, we can deliver significant cash flow growth to restore the balance sheet strength. And we look forward to your support as we work to achieve this. And thank you very much, indeed.

This now concludes today's call. Thank you so much for joining. You may now disconnect your lines.