Seplat Energy Plc (SEPL) Earnings Call Transcript & Summary

Good morning, and welcome to Seplat Energy Plc's Year Results 2024. [Operator Instructions] I would like to remind everyone that this call is being recorded. I will now hand over to James Thompson, Head of Investor Relations, to open the presentation. Please go ahead.

Thank you, Christa. Hello, everybody. Good afternoon, good morning. Welcome to Seplat Energy's financial results for the full year 2024 and our first since the completion of the acquisition of MPNU. On the call today are our CEO, Roger Brown; CFO, Eleanor Adaralegbe, and COO, Samson Ezugworie. After the presentation, we will move straight to the Q&A. Before we start, I would just draw your attention to the forward-looking statement on Slide 2. And now I'll pass the call over to Roger. Over to you.

Thank you, and good morning, good afternoon, everyone, and we're delighted to come here with our full year 2024 results. If you look at the slides, we just highlighted some of the operational and financial highlights for the year. Now, this is obviously now part of the enlarged group. We had, I think, 19 days of the Mobil producing or Seplat Energy producing, as it's now called. So it's not fully felt here, but you can see some of the impact. So in terms of the production, we're delighted that we met guidance. We're in the middle of the guidance range. And if you add in the impact of the set-new acquisition, it takes the 48,600 barrels of oil equivalent up to 52,000, almost 53,000 barrels of oil equivalent, and that's obviously up on last year. Then, looking at the reserves, the reserve numbers are 2x with the acquisition. If you actually look at our existing assets, our existing onshore assets, we're seeing an organic reserve replacement ratio approaching 200%, 176%. And that's really an upgrade, moving some of our contingent resources into reserves. And that increase is on the basis of almost 80 million barrels of production. So that's great for the existing business. And then obviously, MPNU brings on board a very sizable increase in reserves. Looking at the adjusted EBITDA numbers. Again, that's $539 million, of which $440 million is the contribution from our onshore business. And for set-new, it's almost $100 million for the 19 days. The final one here is around dividend. So, we have a lot of confidence in our business stability, and this is why we've increased our dividend. We've moved our $0.15 a share dividend up to $0.165. We have paid $0.096 to date. Therefore, we're declaring a core dividend and a special dividend, which is in aggregate $0.069 and will be paid shortly after the AGM in May, assuming it's approved by the shareholders. That's real confidence in terms of the business going forward. In the next slide, I'll summarize our year of delivery in 2024. It was a big year for the company. And you can see there, obviously, we completed the MPNU transaction on the 12th of December, and that has increased oil production 3x and 2x against reserves. What we've seen since the acquisition is a very motivated workforce that set new. About 1,000 people have come across and very excited to actually start to expand and grow these really prolific assets within Seplat. We'll talk about that in a second. Also, we've also seen in terms of delivery this year, where we had previously predicted a decline post-acquisition. We're actually not seeing that. And I think that decline has been abated, and we'll start to talk about some of the growth we're going to be doing in those blocks. We completed 3 major oil and gas projects on our, we call, onshore existing assets, and that's the Abiala, Sibiri, and Sapele gas plant. Sam, our COO, will cover some of that in his slides. In terms of the drilling campaign, again, Sam will deal with this, but we've been very active. With drill a bit in this year, we can start to see some big increases with 13 wells being drilled. It's the most active we've been since listing in 2015. And then in terms of the Board itself, we continue to refresh the Board. During the year, we had a new Chairman, a new independent senior INED, and another new INED on the Board. And of course, our CFO, Eleanor has came on as CFO in April, May this year. So pretty active from the Board perspective. If we then look at the set new itself, we set a 100-day target post CIC change of control on the 12th of December. We are in the middle of that. We're probably about 80 days through that. And what I would classify that as being is it's been very active. And in terms of those activities post-100 days, a lot of them have been completed. The transfer across decoupling from the ExxonMobil to Seplat has been very smooth. It's worked very well. Again, the staff is very motivated and ready to really grow these assets. And in terms of them, what we're looking at now is obviously the integration through the course of this year. We will be working through with consultants on board to look at putting the 2 businesses together in a very integrated fashion and really look at the group and position it for the future. In terms of the 2025 budget cycle, again, we just approved that through the Board. And there's a motivated partner that sees the real growth in these assets. And again, we're delighted to say we've got full support to accelerate what we're doing in terms of the work program. You can see there on the right-hand side of the slide, some of the operations. Again, you can see an increase in production, and we'll work through that this year. Moving on then in terms of transforming our business, let's just do a recap. So obviously, ExxonMobil or the mobile producing transaction has bought 4 blocks, 67, 68, 70, and 104, and it's a 40% interest. We have almost 10% unitized interest in the Amana field with Total. It brings a very significant infrastructure. You've got over 120 shallow water and offshore facilities, 1,500 kilometers of pipelines, and 190 producing wells. And importantly, you can see there are 413 idle wells, and that's something we're going to focus on. There are 3 operated export terminals, Qua Iboe, Yoho, and Bonny River terminal, and a broad range of facilities in the shallow water offshore with the outer limit of that is obviously 100 kilometers offshore. So it's fairly shallow water. But what it is, is a closed loop system from wellhead right through to export of the oil. We control and operate all of that. And that's really quite materially changed the business. If you then look at the foundation for growth, we have a massive launch pad for that. In terms of the subsurface, some of the best in the world subsurface. We've got large proven oil and gas accumulations in the license area. And I think this really is, as we've said it before, a bit of a sleeping giant. I think when we start to wake this up, we're really going to see some real growth here. In terms of 2P reserves, 2C resources, and world-class reservoir systems, you can see there in the bottom left, some of the production numbers and reserve numbers against all these assets, quite material. If I then look at the right-hand side and beyond liquids, if you look at the gas side, what we're going to be doing this year is really working with our reserve auditor to really narrow the gap between what we saw on the way in when we had CPR, which ERC did under the prospectus. And of course, that's limited what can be done on that process. And actually, what our management estimates are and what WoodMac is carrying on this, which is quite a big delta between the 6 Tcf you can see there in terms of 2P, 2C and 3C up to effectively 14 Tcf, which management estimates are and WoodMac. So we're going to be spending the first part of this year working on narrowing that gap, but we're very excited in the big upside potential, particularly in gas. We look at the portfolio itself. Again, we talk about the change of risk profile of the business. So we compare the onshore, which is the existing business with pro forma Seplat, which obviously includes set-new. We're moving from 5 off-take points to 8, obviously, the 3 new terminals. Third-party owned export were 100% on our onshore business. But when you blend and combine the 2, now 30% are third-party owned and 70% are obviously operated by us. And so you can see there the onshore 0% operated, now pro forma 70%. So very different and a lot more control over the end-to-end production here. Evacuation routes were 76% for Cadis, now it's 55% QIT. And then look at the export volumes, the 3x. And you can see that on the right-hand side of that slide, you can see the exports by volume. And you can see a big chunk of it is obviously Qua Iboe, which is the onshore terminal, and Yoho, which is the FSO on OL-104. So significant reduction in reliance on third parties, and that's really going to pay dividends for us into the future. And on to the next slide, looking at growth opportunities. Again, these is low-cost, short-cycle growth opportunities. If you recall, we have 413 locked-in wells. And so a lot of that activity level this year is going to be reopening wells that previously locked in. There are other debottlenecking activities we can do. And you can see that there, which is the EAP IGE, which is the in gas exchanger project. The equipment is in the country, and it's going to be installed, and that will have an impact on reserves and production. And then we are going to be operating at least 2 jack-up barges this year, possibly more, and we're looking to see how we can accelerate this. And that has a medium-term reserve addition and production addition and good payback with very good NPV volumes there. So you can see some of the projects and where they're going to be. EAP is really out in the East, and it's quite a prolific gas opportunity for us as well. On the next slide, I'll just summarize before I hand across to Sam to run through some of the operations. If we then look at the longer-term growth in the offshore business, we dimension this under 4 areas. Infrastructure. So, infrastructure really is about debottlenecking. We have some water-handling constraints at the QID terminal. We have some debottlenecking to do at the Bonny River terminal. And those will then allow us to increase production and be able to handle the water, et cetera. That is something to focus on this year. We put a 2026 plus, but really, we are looking at some of that now. Drilling this would be beyond reopening wells. We're going to be looking at infill drilling and bringing up jackup rigs to do that. What we need to do this year is obviously look at the subsurface, just making sure that we have been able to place the wells before we then launch that campaign. And again, we need to contract. And some of this, of course, we will talk about when we have a Capital Markets Day in Q3. In gas, we're very excited about the gas. The gas is very, very big potential here from domestic gas to export gas through LNG. And again, that will be around also EAP and Yoho, and we're working with our partner, NMPC, to really advance this and start to develop the gas in the near term. Then future field development, I think beyond getting the production up and looking at infill drilling, there's a lot of exploration potential here. Certainly, our regulator is very focused on ensuring that we actually have a long-term plan for the business, which don't look at exploration. So that will be probably 2026 plus. But that's just sort of what's the appetite of what's coming up in the future for us. So, let me hand across to Sam.

Thank you very much, Roger, and very good morning, good afternoon, good evening, depending on where you're joining us from. Let me go a little bit deeper into sharing with us the operational performance in 2024. Roger already highlighted the production performance in terms of numbers. We delivered almost 53,000 barrels of oil equivalent, and 48.6% of those from our legacy business against the guidance of 46,000 to 52,000. But going beyond that, what is behind the numbers? In terms of oil growth, we delivered and brought on stream the Sibiri and Abiala fields, and Sibiri currently producing at about 3,000 barrels of 100% JVR. Abiala is also producing solid tank, and the plan is to ramp up Abiala to 5,000, 6,000 barrels of oil per day in the second quarter of this year. In the year under consideration, we delivered all 13 wells that we planned in the year, and 8 of those wells are currently producing 6,000 barrels of oil equivalent per day and 46 million of gas. Our gas delivery also got some very good boost in the year following the successful completion of the statutory turnaround maintenance of the Oben gas plant, where we also leverage the opportunity of the turnaround maintenance to displace the diesel engines into gas generators. The turnaround was delivered in time and under budget. And if we look at that and the SIGP project as well, where we brought in module 1 of that unit in the last quarter of last year, now ANOH storage is fully ready to receive gas bearing the OB3 completion. We are now well positioned to deliver an additional 400 million cost of gas to the domestic market, thereby positioning ourselves to meet the growing demand for gas in the domestic market. Our infrastructure in the year as well held up very well, underlined by a favorable security outlook. TMP Zone 6 in the East returned to full 24-hour operation in the last quarter of the year. And if you look at the Western asset, we had 40 days of downtime in the TFP Trans Forcados Pipeline. But this downtime was fully mitigated by the alternative line the Amukpe-Escravos Pipeline, bringing the overall losses on the line to less than 4%, which is the best in the year and in the period actually and in the recent history. So lastly, our sustainability journey also continued to make good traction where though our CO2 emission went up a bit because of the increased production out of the Eastern asset following the return of TMP Zone 6 and the shutdown that we took during the turnaround maintenance. We also see good progress in the other end routine flaring projects like the vapor recovery unit in [Ampu], Amukpe, Oben and Sapele were all delivered in the course of the year. So if we go straight into the next slide, you will then see a massive transformation in our resource base following the Exxon MPU acquisition that happened in the end of the year. The headline message here is that there is a very big scale. Our 2P reserve went up by 85%, and our 2C reserve also rose by 430%. This brings an aggregate value in terms of combined 2P2C in excess of 1.2 billion barrels of result volume. So again, if you look at the bottom right corner of this chart, you will see our CapEx spend over the last 3 years, which shows consistent growth in the CapEx spend. This, in essence, demonstrates a clear commitment on our side to growing and maximizing value from these assets. If we then go to the next slide, this is giving you a deeper insight into the production performance across all the assets in the course of the year. We delivered a 2% increase year-on-year compared to 2023. And with the inclusion of our end year performance ended up at 11%. So, in this case, you continue to see as well our continued drive in cost efficiencies and cost of our operations. The operating cost, if we kill off some, call it, underlying OpEx that we incurred in the course of the year, we would have ended operating cost at about $10.50 per barrel of oil equivalent, which is actually very competitive in the operating environment where we are. The next slide focuses on our midstream business performance. And our midstream business also continues to demonstrate a high level of resilience in the course of the year, realizing competitive gas price of $3.06 for 1000 [cost] and our full year revenue of $125 million, which is a bit up from the previous year. Of note here is that with the completion of the turnaround maintenance of Oben establishing this resilience and now Sapele integrated gas plant coming on stream and ANOH due to CAMA stream, we expect a major step change again in our gas performance in 2025 going forward. Next slide. On this, Roger had highlighted the growth opportunities on the second-to-last slide. So at this point, I will then take a few moments to highlight key activities and key growth opportunities that we have on the onshore side. Following the success that we have recorded in Sibiri and Abiala, we now have planned 3 additional wells in Sibiri and Abiala also ramping up to the full potential in the second quarter of this year. The benefit of this is with nearly 10,000 barrels of oil equivalent addition in our portfolio. And with the Eastern asset as well, we are going to resume drilling in the East following the availability of the TMP Zone 6 and ANOH, and SIGP already highlighted why we focus on delivering the LPG projects, which are the remainder of our end projects in the course of the year. Okay. So, let me then go into the guidance for the year. Group guidance is also going to take a step change in 2025, given the integration of Sapele into our asset. We expect 20,000 barrels of oil per day year-on-year growth, which takes us to the top end of our guidance. The guidance for the group will be 120,000 to 140,000 barrels of oil equivalent. This is made up of 75% to 80% of liquids and 20% to 25% of gas. If you then dig deep into the onshore asset, our guidance is 48 to 56, and this is split 57%, 43% liquid and gas, while Sapele is 72% to 84%, they are split into 88% liquid and 12% of gas in the course of the year. All right. So I will end up with the outlook for CapEx as well, which is on the next slide. The importance here is to highlight that our strategy is, first of all, to stem the decline in 7 new assets and return to growth for the first time in over 10 years. We have been on this asset now, as Roger highlighted earlier, for about 80 days. The early indications are very positive, and we see a quite significant opportunity to focus and deliver more value in this asset in the course of the year. So we will lay a strong foundation for growth in the short term. We will maintain OpEx activities to improve integrity, reliability, and uptime. That will be our first and primary focus while we then bring in the well work barge to commence operations in the second quarter of this year. And then the second [indiscernible] barge that will continue to drive integrity work starting from April this year. It is important to also highlight that in these assets, we are going to take a little bit of some downtime because some of the integrity activities will require that we take some downtime. But that is required at this point in time for us to be able to lay the serious foundation, the strong foundation for growth. Last but not least, we have also included some long-lead items for drilling activities in the CapEx guidance for the SEPNU activities for this year, while the technical work is ongoing to mature the subsurface opportunities to commence drilling starting from 2026. So that's the highlight of the key guidance for the year. At this point, I will hand it over to Eleanor, who will take us through the financials. Thank you very much.

Thank you, everybody, and welcome again to our call, and thank you for listening. So our first slide here, just to highlight some of what Roger has already alluded to. Strong revenues of over $1 billion, including lifting that came in post-completion from our SEPNU asset. I think what's positive here is that the commodity prices remained fairly high in 2024, and we benefited from that, maybe not so much in the fourth quarter. But overall, our realized oil price ended at $80 per barrel. On adjusted EBITDA, with the introduction of SEPNU as well, that went up slightly. But if you think about the business before SEPNU compared to the prior year, it was largely flat but still very positive. I think we really benefited from increases in our oil production from the underlying business. I mean on the gas side, maybe deep slightly, but we had the benefit of slightly higher gas prices that made the revenue, sort of supported the revenue growth that you see on the screen. Pretax profit, very positive. I mean, we did have some one-off items that I'm going to get into on the next slide. I think the most positive point on this slide is really our confidence on the outlook, and this supports the dividend growth that we've highlighted. So 10% year-on-year on total dividend, and for 2024, it's $0.165 per share. On the next slide, some more details on the financials. So you see, on the oil revenue, it sort of highlights the impact of the additional liftings we got in Q4. Gas revenue still exceeded our 2023 performance, mostly from what I described, I mentioned earlier, the gas prices offset by slightly weaker production. Again, we did have some turnaround maintenance that happened on our gas plants in the year, again, part of shoring up the quality of the gas production. But now we're beginning to see better performance even in the fourth quarter going into 2025. So total revenue, again, over $1 billion. Cost of sales: I think one thing that we would highlight, I think I'll highlight that in the coming slides, is we did have a number of one-off costs that impacted our cost of sales or our production cost and also our G&A. Again, a lot of that is mostly tied to the transaction costs that were included as part of G&A. Normally, this would have come as part of a capitalized cost in the transaction. But because of the nature of the acquisition, we have to report this in G&A. The bargain purchase simply is what you would call sort of a negative goodwill, but it's really the difference between the valuation on the books and the value of the assets. So positive that there is a noncash accounting impact on the books. But overall, profit before tax was quite significant after adjusting for the financing costs. On the tax side, we see some big jumps there. A lot of that's coming from the SEPNU's post-completion tax, and I'll explain that in a bit more detail, but ending the slide really with the strong capital investment. Again, one of the things we'll see in our business is that year-on-year, we've continued to invest in the business, drilling wells, growing production, arresting decline that we see happening on our existing business and part of what we're going to be doing on the SEPNU assets as well. So, we completed 11 wells in 2024, with the additional 2 wells completed very early in January. So good cash generated from operations, again, impacted by some of the one-offs that I already mentioned. Again, Q4 is where we would see the impact of the acquisition. There was quite a lot going on in Q4 ahead of when we completed the transaction. So you see that on the next slide in the cash flow waterfall. So, cash remains very strong. We started the year with $450 million and ended the year with $470 million. I think the biggest impact, like I said, is in the fourth quarter of the year. We did a lot in getting the office ready for the new staff that we inherited, along with a number of other items, including the transaction costs. And then also we had some tax audits that the impact of that is showing on our Q4 performance. I think another maybe one important point is also the lifting. I mean, we did have around EUR 40 million, almost 0.5 million barrels of crude on the underlying business that we will see the cash came in, in Q1. So the impact of that is showing. But I think it's all positive because everything that we did in Q4 was really around supporting the new business. In addition, we inherited some net cash flow transactions from the SEPNU acquisition. So all in, you see the impact of CapEx and proceeds from our other assets. And then, of course, what we paid in dividends showing up on this slide, again, is part of what we've done to support the shareholder activity. And then we've repaid some of our debt and financed our debt around almost $130 million. So next slide, just going over to the balance sheet, again, still maintain a very strong balance sheet post the transaction. At $470 million in gross cash and our gross debt doubled with the full drawdown of the RCF and the additional advanced payment facility that we got from ExxonMobil to fund the transaction along with $22 million of cash that we used to complete the cash consideration in December of $800 million. I think what's to highlight here is on the leverage side, still very positive. We've maintained our leverage even with the gross debt because, again, the combined business increases our EBITDA. So net debt to EBITDA numbers on a pro forma basis is still very much in line with what we've seen in our underlying business. And then you can see the diversified debt structure in the chart. So, the doubling of our gross debt is a combination of our senior notes and the RCF along with the advanced payment facility. The next slide is a slide I'll end with, and it's really looking forward. I know there have been a number of questions around the cash taxes, especially with the historical performance of the MPNU assets. And that historical information has shown that taxes have been around 85% of the cash flow from operations, and we're looking to sort of optimize that and bring that down in 2025 by really focusing on investing in the business, both onshore, both via CapEx and also OpEx. I mean, Sam talked about the investments we want to put towards drilling longer term, but there's quite a lot of investments in the operating expenditure, and that's taking advantage of the tax opportunities there. Now we are also looking on the PIA side, looking to convert SEPNU. We'll start the conversations with NUPRC in 2025, again, because of the transition and also the period where we were trying to acquire the asset. That request for conversion was not done, but we'll start that process. There are benefits there. Royalties are going to be a lot lower, and there are some advantages on the total tax side. Now, for our existing business, we progressed quite well, and we've gotten a recent feedback from our regulator supporting our application. So we're expecting to close that out in the first half of this year. Now on our debt structure, so we have the RCF, which matures in June of 2025. So once we are able to refinance our 2026 notes, the RCF will extend to the end of 2026. Now on the hedging side, we've been quite proactive. So we've hedged our crude now up to the third quarter of 2025 in view of obviously the bigger business. So we've done assurances of that, and we're quite focused on doing that fairly quickly. So quite pleased that we managed to get that done. And then maybe finally on this slide is sort of to pick up on how we've managed our working capital. I think the JV partners have gotten really good feedback from the JV partners on cash calls, very positive in 2024. And I think we've sort of seen a lot of the JV cash flow performance very positive in the last 2 years improved quite well. So we're looking forward to those opportunities constantly improving in 2025. So with this, I'd like to hand over to Roger to do a wrap-up. Thank you.

Thank you. So, just to wrap up the last slide. I think the key message here is that, obviously, the group now is much bigger, and it will really unlock a number of material value creation opportunities. In terms of production numbers, there's going to be a decent uplift in production. Now, this is an average greater than 20,000 barrels of oil equivalent a day working interest. This is an average. And this is really going to be largely the drilling campaign on the onshore assets as well as really looking to reopen up, shut-in wells in our shallow water offshore assets in set-new. And the timing of that, we've been conservative in how we look at this. So that should add quite significant production. And the bottom left there is our low leverage. We're really running a very low leverage of 0.7x net debt to EBITDA, which is well below our in-house company-approved target and well below the covenants in the debt. In terms of the reserves, we look at 2P 2C, it's 1.2 billion barrels working interest, and it's probably more than that. And again, we'll work through this year in really reconciling what we're reporting in the CPR and what the management estimates are. But we do expect that to grow in terms of reserves and resources. And then in terms of post-tax cash flow from operations, Eleanor has talked about some of the stuff we're going to go on the tax. Really, this is about investing and spending the money in the ground, and that then reduces our effective tax rate accordingly. So the company is well poised for growth, and it's going to be quite an exciting 2025 and onwards. So that wraps up the presentation. Now, I'll hand it back to the operator for Q&A.

[Operator Instructions] Our first question comes from Nikolas Stefanou with REDD.

It's Nick. I had a couple to ask on the operational side of things and a couple on the financial side of things. So just for the development plan on the offshore assets, I can understand the sort of like fiscal appeal of doing workovers in sort of like shutting wells. As well as kind of like the sort of like the payback times there. But I want to understand a bit more. Are you targeting reserves there that are not really captured by the CPR? And if you can give a bit of background, those wells that are going to reopen, why were they starting to begin with? Was it in a period of kind of like low oil prices that were not very economic to kind of like have been running, and now you think it's sort of like more appropriate environment, or are there other reasons? And then the second one on the operational side, I just want to get an understanding, I think around 12% of the production from MPNU will be gas. Where are you selling that gas? And what is the price you get for that? Then I've got some financial questions.

Thanks, Nick. Okay. So just in terms of the development plan, so obviously, we are looking to reopen previously shut-in wells. Maybe I'll start with that answer, and then I'll talk about some of the reserves, et cetera. So in terms of why they shut in, they're shut in for a whole host of reasons. Let's put them in broad categories. One is bottlenecking. So a big part of this is obviously mature assets are going to bring water with them. So there wasn't the investment put into QIT for water handling. And so, therefore, when the additional water came in, there was a processing constraint at QIT and therefore, the wells were shut in accordingly. Now, there's plenty of storage at QA. And again, we're looking at putting in together some projects to debottleneck that. We've done that existing at Seplat in the past, and the team is very clear on how to do that. Part of it is bottlenecking water-handling constraints. There's the project at the IGE project we talked about, and I won't go into that in any other detail. There are some back pressure issues in some of the wells. And again, we're looking at alternative solutions around that. There are other reasons like some of the platforms or some of the wellhead platforms have got aging infrastructure, so things like ladders and rails and stuff like that were resting, and they weren't replaced because Exxon was in divestment and has been for quite a number of years. So have no appetite to invest in it. Again, what we're going to be doing is with these barges is going around wellhead by wellhead, platform by platform, et cetera, and really fixing infrastructure and then reopening the wells accordingly. So there's a plan around it. I mean we're talking probably, I don't know, 10% of the locked-in wells that's sort of the target for this year, but maybe it's going to be more than that. And it's going to be quite a systematic process. We need to spend money on these assets. We've shown that in our existing business and that's pretty well versed in how we do it. So that will be the focus this year. In terms of the reserves, and again, it's probably less so on the oil side of things. But certainly, I think there will be some reserve upgrades. But being on the gas side, the gas gets sold in through BRT, which ultimately goes into Nigerian LNG. It's about 100 million SCFs a day. And there's also a project to increase that to about 170 million. But realistically, there was no gas solution, which means a lot of those gasses are resources because there's no development plan, and we're looking at a whole range of development plans, domestic gas plans, LNG, floating LNGs, et cetera. Looking at the management estimates and looking at things that would map what they're carrying, there's quite a big delta. And the problem is that when you go into these acquisitions, the constraint around the competent person's report is they have to assume that Exxon is running this into perpetuity. And so the stuff that Seplat will do, you couldn't assume that. So no very little investment, decline rates, et cetera, no reduction in taxes and everything else or investments to reduce the effective tax rate. And that's why you get quite a big delta between the 2. The ability to look at the actual assets themselves is very limited. So we will be working with a reserve auditor, Scott, this year and really going bit by bit with the team we have now. Obviously, with the Exxon acquisition, the team is at Seplat, and we'll work our way through that. We will narrow that gap and we'll communicate that into our Capital Markets Day, and that's why we've said it for Q3 because we need to do that technical work and have the CPR relook at the reserves, et cetera. So we're very confident that these resources are greater than we're projecting here, and also we'll be able to convert them into reserves in the near term. In terms of gas pricing, again, it's a bit early in this. But realistically, at the minute we're supplying into Nigerian LNG, we're getting dollars for that. We would expect gas prices to be in the $2 to $3 range, I think, in the long term, that sits with our existing business. And there may be potential for uplifts in that into the future with more access to an international market.

And then the financial questions. So, Eleanor, these are probably for you, both of them. I saw this massive 200 million-plus working capital buildup in the fourth quarter. And my understanding is that it is related to the acquisition. But I just want to know a bit more what is the nature of that buildup. Is it sort of like something that could revert in 2025? Or it's just kind of like maybe call it like a hidden acquisition cost. And then the other question is on the refinancing plans. My impression is that you do need to kind of like refinance the notes by March, like 3 months. Extend the RCF. Is the idea to kind of like do refinancing for both the RCF and the notes? Or are you thinking of maybe sort of like 2 different bonds or something else? What is the thinking about the financing?

All right. So on the first question, and you're right, we did spend significant cash flows in the fourth quarter to support the acquisition. Again, a lot of it was getting the office ready. We had systems, software, insurance, a lot of things that will allow us not to have disruptions. That's where the focus was, along with a number of one-off items that you would have seen in OpEx and G&A around things like gas flares. And then we also had a fairly significant underlift in the period, which I think we would catch up in the first quarter. That's why we call it one-off is not what we expect to see in 2025. So most of it is associated with the acquisition. On the second point, yes, as we've reported, our notes become current on the 1st of April 2026. The RCF as well will get also, at the end of June of 2025, also expires then. So if we get the notes refinanced, then there's the opportunity for the RCF to be extended to the end of December 2026. We have until the 30th of May anyway to consider that. So yes, that is definitely in our plan to consider that. Again, if you look at what we've shared already, you can see our maturity balance sheet is still very strong. We're very confident about the outlook. Again, depending on the market and what the market is saying, we will be looking to come into the market.

[Operator Instructions] And there are no further questions on the conference line. I will now hand over to James Thompson, Head of Investor Relations, to read out the written questions.

Thank you, Christa. Yes, we do have a few. So thank you very much for sending those in. If you have any more, please continue to do so. Maybe I could start. We had a few questions in terms of capital allocation and the dividend. As a bigger business, Roger, how are we sort of thinking about the balance between growth, the dividend, and obviously, the debt piece and specifically maybe the dividend? Obviously, investors were pleased to see the uplift today. How do we think about sort of 2025 in the current environment?

Okay. Well, look, on the dividend itself, and you've seen an uplift in the dividend. As we communicated previously, we have certain covenant constraints on our debt package, particularly in the bond. We are limited to how much we can pay out as dividends. And it is the higher of $0.15 a share or 7% of the market cap, which is why you've seen us increase it slightly. Now, as Eleanor has indicated, obviously, we're looking at refinancing opportunities on that. One of the aspects will be is having an amendment to some of the covenants, which will allow us to put in place a progressive dividend policy. And that's what we want to be doing. We spent a lot of time on the capital allocation, just thinking about it as a Board and what makes sense for the company going forward. Clearly, you can see massive growth opportunities here. Now, the assets themselves can fund that growth opportunity. And you can certainly see that all the assets are self-funding. On the gas side of things, it's a bit early to be saying how we do this, but it looks like some of the gas opportunities we should be able to do is not requiring a massive amount of investment. for us as a business to monetize in the near term. So a lot of the capital allocation will be focused on, obviously, growth, maintenance, integrity work, looking at advancing the gas and having a progressive dividend policy. We will probably later this year; we actually will be coming out with some changes to that, and we'll communicate this to the investors over the course of this year. But really, the focus this year is at the minute is to get set new working and really growing and then really setting the future for the business on a long-term basis. But there will be changes that will come. Again, we've said Capital Markets Day, and we're debating whether we have that earlier in the year. But what we want to be doing is set in the Capital Markets Day; the real future of the 5-year plan and capital allocation will be part of that. So watch the space. We will be coming through every quarter with some uplifts, some future projections, et cetera, but the bulk of it will really come in Q3 in the CMD.

We've got another one here. Thinking about the first 100 days of the business, could you maybe kind of elaborate on any of the positive surprises that might have come through it compared to December and going into this now that you had a bit of a chance to look at the assets firsthand?

Yes. So I think for us, I mean, obviously, we look at this carefully, and we obviously signed a sale and purchase agreement back in 2022. But we were very limited in what information we could get because of the court case and the arbitration between Exxon and NPC. There's no doubt about it that these are first the best subsurface in the world. These assets, I mean, I think 1,400 square kilometers of acreage, full supply system end-to-end. I think one of the upsides has been here is, I don't know why we've challenged this, but it's just the personnel that came across one of the things that you worry about is just the morale and because it had been suspension mode for quite a number of years. This is really pleasantly surprised us. There's 1,000 staff have come across, really fired up. They are really grabbing the opportunities. And I think, in a way, they know what these assets can do. Quite a number of people in the leadership team and just below leadership team were in the company in the early 2000s when the company was heading at that point on its way to 1 million barrels a day, quite a number of them were drilling the wells, et cetera. So they know what's possible. And now having a shareholder that is absolutely 100% focused on Nigeria that is really going to spend the money and grow it. The enthusiasm is very good. I also think also to add to that, the interaction between the Seplat existing staff and the new, it's almost as if they've been together forever. So I think there's a really good camaraderie there. And I think, yes, subsurface and technical and all that sort of stuff determines the future. But I think also it's the culture, it's the people. And the enthusiasm around the people will really deliver that. And we can see it already. I mean, we were expecting some drop-in production. We're seeing an increase in the production, and we are absolutely seeing an enthusiasm to grow this very big.

Thanks, Roger. So we have a few questions on the tax side of things, Eleanor. Can we provide any kind of guidance in terms of obviously, the outlook for tax rates for the year, the impact of the investment that is being made in 2025, provide some more color effectively around the effective tax rate maybe between P&L and also kind of cash tax rates as we go through this year.

Thank you, James. So, thanks for the question. I think, like I said, we would be working towards bringing the tax rates down. I think the focus for us, as we've been talking on this call, is really building the foundation again, focusing on integrity. So you would be seeing when we start releasing our performance, a lot of this is going into OpEx some very important projects and work we need to do that are really short term generating oil, bringing the wells back on stream. And in doing that, we're even bringing in jack-up barges to do that. So the focus really is on building the business and also starting to provide for drilling in the coming years. So I think we are focused on this. We're quite keen on bringing the cash taxes down. Again, the more we build the business as a whole, the more that we pay the right taxes to the government, as well as managing the business more effectively. So what I can say is that we will be obviously bringing the cash taxes down in 2025 compared to what we saw, which was around 85% in the past 3 years. I mean, by double digits, we will be double-digit percentage, we'll be bringing that down. But we'll guide you as we go on. And the more that we understand the business, again, there's also a focus on trying to convert this to PIA. So there are some benefits there. It will take some time to do that for our existing or the underlying business. We started the process on PIA conversion in 2022 and just recently are getting to the point where NPRC is looking to approve this. So, quite a number of moving targets. I think what to focus on is the fact that we're bringing investments back into this thing. We've done that historically where any time we've taken assets from IOCs, I mean, we've worked them invested. In long term, this is what would ultimately build the shield and the capital allowances that we need to have a more efficient business.

Thanks, Eleanor. Maybe pivoting back to the onshore business question here, the legacy business onshore production is looking to go over 50,000 barrels a day this year, the first time I've been up there for a little while. What are the main drivers there? Can we say anything about exit rates and also rolling into this in terms of ANOH and are thinking about ANOH for 2025 and continue to see some challenges there. What are we doing to avoid the kind of downside outcomes of continued challenges with the OB3 line? Maybe, Sam, you could answer that?

Yes. Let me deal with that. Thank you, James, and thanks for that question. On the onshore side, we've continuously built some level of resilience within the assets. Operational efficiency, driving operational efficiency, and using technology to ensure that we don't incur unnecessary downtime has been a key driver. What we're also getting a very good handle on is making sure that our export route systems are also very resilient in the course of the year. If you recall, prior to this past year 2024, we had 3 years running where we had failures in the export systems in the third quarter of the year. That did not happen in 2024. Now, with leveraging the government security agencies and the government set up on the security, you will have also seen that the losses on the line have now gone to not just single digit, but somewhere 3.4% in the whole of the year. So those are the key things that we are driving, making sure that operationally, we are stable. And then the export route system that used to be a challenge, we also maintain some level of resilience there. In terms of exit rate for the year as well, we actually intend to exit pretty high with ANOH coming on stream. On the legacy business, we see a potential to go up to 70,000 barrels of oil equivalent. And then on the Sapele side, we have a potential to go somewhere around 800, 900. So overall, we have quite a strong exit rate for the year because we intend to run a very efficient business. So that's the outlook.

Thanks, Sam. We're going on with the call. We've got some sort of granular points. Obviously, we've given CapEx and OpEx guidance for 2025. Is there anything more we can say maybe around beyond that in terms of changes to OpEx, obviously, optically a bit higher than we've had historically? And what can we say about CapEx sort of more longer-term outlook, I guess, principally to do with the offshore?

Okay. Maybe I'll just pick up on that one. I mean we have guided $14 to $15 OpEx per BOE for 2025. I think one thing to highlight there is around $4 per barrel is very much focused on maintenance, what would normally sort of be maintenance CapEx type activity. But we need to do that in 2025 in the short term. I think going forward, we should be sort of looking to bring that down and sort of staying around sub-$10 per BOE on our business. That's always been our drive and our target. So, we're hoping to get to that in the medium term. And more importantly, it is to really say what we've said really on this call, which is CapEx is going to be quite key for us in the longer term. We need to start building CapEx activity drilling wells, and the true value of this business will start to see it combined with bringing back a lot of these idle wells. I mean, I think the opportunities are huge. Seplat historically has been a low-cost producer. I mean, in the last 2 years, there have been a number of one-offs, but now we're going to stabilize a lot more. So we'll start to see a lot of these metrics coming down. So it's a very, very positive outlook for the future. Thank you.

Thanks, Eleanor. So we've got another one in terms of hedging strategy, minor points, and plans for 2025. I mean, obviously, we put some of that on the slide and just hedging strategy going forward.

I think right now, it's pretty much the same. I mean, the focus for us is to ensure the downside. I mean, these are simple puts that we put in place. We've done that historically. We'll continue to maintain that subject to any changes or discussions with our Board.

Okay. That covers most of the questions we've had on the line. Well, actually have one more here. Just in terms of granularity, and maybe another one for you, actually, I don't know, can we say anything in terms of unit costs in terms of G&A?

Yes. So for G&A, I mean, we always want to be sub 5%, lower than 5%. I think isolating all these one-offs, G&A is something that should remain fairly flat on our combined business, and we can sort of share more on that as we share our results quarter-on-quarter.

A bit more of an oblique one here, but maybe more in terms of geopolitics, Roger. It's a bit of a volatile environment out at this point in time with new regimes, particularly in the U.S. So how do we see that affecting it, if at all?

Yes. I guess we design our business to run through every cycle. If you're a producer, that's what you need to be able to do. We've seen a real variety of oil prices. COVID, we saw $10 a barrel. So when we design our business, because our short cycle is to actually dial it up, dial it back as we need to, and we've proved that in the past. And that won't change. Obviously, a big focus on cost, cost control, efficiencies, et cetera. And with obviously set new acquisition with a lot more control end-to-end. And I think that will then obviously change the risk profile of the business. Gas is going to become more and more prevalent in our business going forward, and that's obviously decoupled largely to the oil price. So, on a macro level, that is where we are in terms of running our business. We had predicted a softening of oil prices this year and covered that; obviously, we continue to hedge as downside protection. We run our budget at $70 oil, but we run a range of different scenarios, $60 and below, and see how the business is going to react to that, looking at breakevens, et cetera, and low leverage for us as a business to make sure that we can continue to operate in all sorts of cycles. So it's a long answer to your question, but we can't predict what's going to happen in the future. We've seen what's happening with OPEC. We've seen what's happening in the U.S. on the macro side of the business. We're armed for lower oil prices this year. And I think over time, as the mix of our business changes, gas is going to be a much bigger part of our business in the future. I think we're going to be set up to manage it. It's a dynamic process, but we're not overly concerned where we are at the minute. We obviously love higher oil prices; everyone would. But the reality is we're ready and armed and ready for lower oil prices.

Thanks, Roger. That covers most of the key topics and the questions. So maybe I can pass it back to Christa if there's any more from the call.

[Operator Instructions] We have no further questions on the phone at this time. I will now turn the conference back over to Roger Brown for closing remarks.

Okay. Well, thanks, everyone, for listening, and thanks for all those questions. We're looking forward to an exciting 2025 and beyond. We are obviously coming out with our Q1 results towards the end of April. Again, we will be updating the market accordingly. We'll probably tighten some of those guidance ranges as we go throughout the year and obviously working forward and looking forward to a Capital Markets Day as early as we can, but it looks like in Q3. So, thanks, everyone, and have a good day.