Tullow Oil plc (TLW) Earnings Call Transcript & Summary

All right, sir. Good afternoon, ladies and gentlemen. It's 12 noon. So I'll start the AGM. There's a quorum present, and I would really like to welcome everybody to this 2022 Annual General Meeting of Tullow Oil plc. I should first begin by introducing myself. My name is Phuthuma Nhleko, I'm the Non-Executive Chairman of the Board of Tullow Oil. Of course, we're at the location today, and I will be acting as former Chairman for the meeting. We do have with us present today, Jeremy Wilson, who's to my right, Senior Independent Non-Executive Director and also Chairman of the Remuneration Committee; Mitch Ingram, Non-Executive Director and Chair of the Safety and Sustainability Committee; Martin Greenslade, he's Non-Executive Director and Chair of the Audit Committee; Sheila Khama, who is Non-Executive Director; Genevieve Sangudi, Non-Executive Director; Rahul Dhir, of course, the Chief Executive Officer of the company; Richard Miller, who is our interim Chief Financial Officer; and Adam Holland, of course, Company Secretary. And I believe we've also got the representatives of the auditors, Ernst & Young, and solicitors, Dickson Minto, also present here with us. We do have 1 of our directors, Mike Daly, unfortunately, he is the only Non-Executive Director who could not make this AGM and sends his apologies. He's currently on the African continent somewhere, so would not be able to attend. I'd like to thank all of you very much for joining us today at this AGM. I'm delighted to welcome shareholders back. And of course, it's my first AGM into this room with us. And we're also very pleased to report that we've made use of new technology that will enable or allow many shareholders to also participate in this meeting online. We'll, of course, do our utmost to make this worthwhile experience for our shareholders. And in the process, we look forward to updating you on the progress that has been made in one of what we've achieved in the company over the past year. And of course, also to answer all the questions that you may have. The format that we will adopt in today's meeting is that I will Chair the meeting and ask Rahul to feed -- field a lot of questions as the CEO, and of course, update you on the progress as well. This will then be followed by a question-and-answer session with the Board. And as I said, all the Board members are here except for Mike Daly. We'll then move to the formal part of the meeting as we vote on the various resolutions that have been put forward in your AGM report. All the proxy votes received by post or online ahead of the deadline will be included in the results. And all the votes taken today will be taken by a poll rather than a show of hands. It is intended that the results of all the poll votes will be announced to the London Stock Exchange and published on the company's website as soon as possible after we've concluded the AGM. So I think with that short introduction, I'd like to hand over to Rahul. Thank you.

Thank you, Phuthuma, and a warm welcome to those of you here in person and the others who are joining online. So this is my second AGM, and of course, the first one in person. So it's a different experience, obviously. What I thought I'd do is reflect on the transformation and the change for the past year. But then also, I think what will be more interesting for you always to talk about the future. But it is interesting as we sit here today to reflect on '21, which is really a transformational year. And we forget sometimes we began the year last year. In discussions with our banks and the bondholders really about how to address the very substantial that levels we had. And I would say, thanks to a lot of self-help. So you will remember, we did a lot of work in terms of cutting costs, selling assets. And also some help from the oil price, we were able to do a $1.8 billion bond refinancing around this time last year. And that really was transformational for us. And the reason why I say transformation is because it gave us -- one, is our absolute levels of debt produced. But also it provided us a longer-term maturity during which we're not repaying that, but investing in the business. So that ability to reinvest in the business, which is fundamentally a great business because you have tremendous resource with a very high return opportunity. So it really gave us that opportunity. And you remember, we laid out a business plan, a 10-year plan during our Capital Markets Day back in 2020, and really gave us the opportunity to implement that. And I'm pleased to say we're making very good progress on that. So just to highlight a few things. A big focus for us in '21, as you would imagine, was focused on safety. There was a step change. A really marked improvement in the performance -- the safety performance of the business, and that continues to date, and I really want to thank Mitch Ingram, who runs -- who Chairs our Safety and Sustainability Committee for a lot of the challenge on that. How did we do that? I think it's really around a very specific safety improvement plan, a lot of active leadership interventions and also trying to create a good reporting culture where people are not afraid to talk about issues. I think, again, COVID seems a little bit, fortunately, a distant memory, but we were in the midst of COVID through last year. The team managed the impact very successfully with really no real consequence on our producing capability and a lot of collaboration with our host governments, particularly in Ghana. And it was really kind of a cross-functional effort across the team. So a really good outcome. And fingers cross, it's going to back to kind of more normal operations. The other thing which is quite a kind of fundamental change in our culture and how we do business is a mantra, which sounds cheesy, but it's a really important thing. I said, we say, look, every barrel matters and every dollar counts, particularly when a $100 oil, it matters more. But even -- whatever it is, but it's that mindset. And I think we've been working hard to embed that in the culture. And Tullow is becoming every day, just to share with you, kind of a better operator. And when we look at operational performance, it was evidenced in '21, we were delivering probably 98% uptime in Jubilee, our flagship field, we never achieved that before. And you'd say, well -- and it's not just about uptime, it's about looking at how we're handling gas offtake, how we're managing water injection. So kind of a holistic approach. And again, that continues. I mean, we continue to invest in asset integrity, in safety, in preventive maintenance and really kind of driving that performance. We spend, as part of our business plan, of course, drilling is a very important component. If you look at our capital spend as part of the business plan, over 70% of the money that we spend is going to go into drilling. So drilling performance is really key. We laid out a cost of about $60 million of AFEs last year at the 2021 annual report. And I'm pleased to say the first few wells we drilled in '21 were at substantially lower cost, averaging about $52 million. And that $60 million compared to our previous drilling program, where the costs were almost $75 million. And that was not just all down to day rates. It's about the design of the wells. What are you actually doing? And then it's about a day-to-day focus on just relentless performance because if you're spending $600,000, $800,000 a day on drilling of well, every day that you lose due to nonperformance kind of counts. So a lot of focus on that. And of course, that coupled with the number I talked about the refinancing, which allowed us to start reinvesting. And the thesis we've always said is that these are great resource and what you need to do is invest in it. That's what we always said. And the best evidence of that I can share with you is what happened with Jubilee. So Jubilee, we started '21 at -- 2021 at about 70,000 barrels a day. We ended the year at 90,000, right, in 2021. What was the -- how did we do that? Very simple. We were investing. And that's very much what we will continue to do, and we're seeing continued evidence of that. In Gabon, again, which is -- and our non-op business, in general, I think we're very pleased with that business because that's been a stable business year-in and year-out, you invest and you sustain production. Both the operational teams and the subsurface teams have worked very closely with our partners there. And in particular, in Gabon, we've matured some very interesting prospects we did around the Simba field, which we don't talk about it enough. We own 57.5% of that. And last year, we accelerated a well into 2021, which almost kind of increased our production by over 50%, right? And so very material. And this is exploration where you drill a well today, and you can hook it up and get it in production in 3 to 4 months, and it pays off like this. So that's the kind of opportunity I think the company has in its portfolio. Also, you remember I talked about the self-help, and part of that, of course, in the non-op business, we sold our Equatorial Guinea business to Panoro for $133 million. And it was not just the Equatorial Guinea, but we also sold the Dussafu asset in Gabon, and that was an integral part of the restructuring of the portfolio. I think Tullow historically is very strong in exploration. And I think I'm pleased to say we've continued to retain that geoscience expertise, but it's focused on a couple of things. It's focused on: one, is enhancing value around our producing assets. So the example I gave to you of Simba is an illustration of that. So our geoscientists are working to create value today and not the promise of value in 10 years' time. And I think you'd all agree that's a very important thing. But also, we have opportunities which are kind of legacy portfolio. And I'm particularly excited because in Guyana, we're just spudding a well, which is Repsol-operated. It's the Beebei-Potaro well, which is a very material prospect, which again has been matured through the work that the team have done. So we are retaining some elements in a very prudent manner of some of the things that really drove value for us in the past. On that, I'd also want to share with you on Kenya. Really, if you reflect back, I was talking to somebody in the government the other day. This time, 2 years ago, we were in force majeure in Kenya, right? And there was a risk of losing the license. I think, today, we have a project that's been reengineered, reworked, a lot more robust. It's a project -- remember, long-term projects don't need -- they need to be able to work not just at $100 or $80. They need to be robust at $40, and we have worked hard over the past 2 years to do that. And also, we have been working pretty closely. I think you've heard me say this before, in terms of farming down, and we're making good progress in terms of bringing in a strategic partner there. The other thing which I'm very proud of is the work we've done on sustainability. And last year, in March, we made a commitment to get to net zero by -- on Scope 1 and Scope 2 emissions by 2030. And this was not just an idle promise. This was backed by very well-defined decarbonization plans in our operations, backed by capital investment around that. And also a pretty exciting nature-based carbon offset program, and that's really we're making tangible progress. Again, we've just signed a memorandum of understanding with the Ghana Forestry Commission to jointly investigate forestation opportunities in Ghana. So that, again, the benefit for us is it's not just provides a carbon offset, but equally, critically, it makes a huge impact in terms of Ghana's commitments to reduction of emissions, but also its combative social impact. So that's all kind of part of our net zero commitments. Obviously, there's some changes to the Board. I joined, I was very pleased to work with our previous Chair, Dorothy Thompson. And she left the Board at the last -- at the end of last year, put in a tremendous amount of effort working with our Board and the management team to really stabilize the business. And then we were delighted to convince Phuthuma to join the company. And we're all very excited. I think he brings a tremendous amount of understanding of Africa, a tremendous amount of experience and huge credibility and relationships. So Phuthuma, a warm welcome to you. And I believe under his leadership, we will really be able to reclaim sort of what I've always said when I joined Tullow was, it's an iconic company, a real leader in Africa, I believe we're well on our way to doing that. I'm also pleased to share that we have appointed a new CFO, Jonathan Swinney, who will join us later this year from EnQuest. Jonathan has got a very impressive background at EnQuest's strong listed company experience, but also a lot of work across M&A, financing and also real strong business leadership. So I'm really looking forward to his arrival at Tullow this year. Let me talk about -- talk a little bit about the past, I think. Let me talk about how we're taking the business forward. So the company, obviously, is in a very solid financial footing and also we have strong operational foundations. The thing that excites me about the business is that we have a really well-defined opportunity set. And that's unusual. If you think about in this business, people make or lose money in terms of how the capital is deployed. So having that line of sight in terms of investment opportunities, and like I said, we laid out a 10-year plan. I mean, that tells you something about the depth of the portfolio of resources that we have. So I think with the leadership that we have at the company and the Board, I think we're very well placed to build on these and to really kind of achieve our ambitions in the African oil and gas sector. And I think it's not just about making money, but I think we reflected on what our purpose is. And really, I think in a simple sense, it's to build a better future, as I said, through responsible oil and gas development. And it's about unlocking value in the resources that belong to our host nations. And I think what I'm proud to say is that we're really -- the work that we do, we're an engine of economic development in the countries that we work in. We laid out a Ghana value maximization plan, and we were pleased to share, and then Phuthuma visited with me and we met with the President to report the progress that we're making on that. And that plan would have about a $4.5 billion investment gross over a 10-year period, which will deliver north of $12 billion of value to the nation of Ghana. That's something I think we can be proud of. I think that's something that you, all the shareholders, can feel proud about kind of what impact the company is doing. And so it's, like I said, we'll generate the cash flows to repay our debt. We'll generate the cash flows to deliver value for our shareholders. But importantly, it's to have a real impact in the countries that we're working in. I think, as I touched on earlier, drilling is a very important part of our business. So we have a multiyear drilling program. We started in April of last year. That program continues. So the focus on cost on drilling efficiency is going well. I think the reservoirs are coming in as we expect. Somebody asked me, they said, "Well, how about individual wells?" So I said, look, the situation we wanted to put ourselves in is to be able to drill multiple wells. So in Jubilee, for example, we have a well inventory of 25 wells. In TEN, we have a well inventory on 25 wells also. Any individual well will do better or worse than we expect, right? We're not smart enough to outguess the nature. But in aggregate, in aggregate, we expect, and that's what we're seeing is the results are in aggregate as we're expecting. And that's the comfort that we have. And that -- you can only achieve that when you create the headroom financially to invest consistently. I think the other thing, which we're excited about, is that we completed successfully the preemption. If you'll remember, Kosmos acquired Oxy's stake last year. We had preemption rights on part of that, that deal was completed. We paid about $118 million in March. And that's -- the important thing is that it adds 4,000 barrels a day net to us unhedged. And that acquisition has a very rapid payback. And so what we've done as a consequence of that is increase the year guidance -- production guidance from previous guidance of 59,000 to 65,000 barrels of oil per day. I think the other part is that on the journey that we're on in the operational, it's building this operational ethos within Tullow is really building on the strong performance that I talked about in terms of safety, costs, operational efficiency. The next step for us was to take more control over the operations, particularly with the FPSO in Ghana. That transition is working well. It's going to drive more reliabilities, allow us to sustain the operating performance, but also drive down costs. And fundamentally, embed that sense of operational excellence in the business. You will hear us talk more about -- we talked a lot about oil, particularly in Ghana, but you will hear us talk more about gas as well, because there's a tremendous resource in gas in Ghana. And historically, we've been supplying gas -- associated gas to the government, and that's been part of an agreement that was several years ago to provide free gas to the government, right? That's associated gas. But now the next stage of that is underway. So we are looking at how we develop an additional 0.5 Tcf of associated gas. But on top of that, there's a very significant, probably twice as much resource of non-associated gas. And today, that conversation in Ghana is a lot more impactful than profound because, as you guys know what's happening in the world is LNG flows and gas flows have kind of changed quite dramatically. So if you're sitting in Ghana or as a policymaker, you are concerned about energy security. And we, as a partner in the economic development of Ghana, are now having conversations about how do we unlock that gas resource to not just provide energy security for the nation, but also be an important engine of economic development. So I think that's something you're going to hear us talk more about in the future. I think the rest of the portfolio is also quite well positioned to create value. Again, none of our business is great because it is reliable production, working with partners, and it's a low-cost operation for us. We have a lean team that drives it. In Kenya, I talked about the work that we've done in terms of bringing in a strategic partner. We're also continuing to work with the government of Kenya on the FDP approval. And I think, again, the Project Oil Kenya is another example where collectively we can feel really proud of the impact that project will have on value creation in Kenya. I mean, we've worked hard to firstly mitigate and reduce the environmental footprint of that project. We've eliminated flooding in the design. We're looking at accessing more renewable power. So it is going to be an interesting project from an ESG point of view, but also, it's -- it will deliver a tremendous amount of value for the nation. In terms of, again, what to expect on the exploration side, like I said, we're about to spud or would have spud -- I think about to spud the well in Guyana, which is the Beebei-Potaro well, we will be able to share results from that in the third quarter of 2022. Certainly fingers crossed in that. I think, just as I close, it's important to reflect on the state of the industry, and it is in flux. I think there is a very profound change in the whole fabric of the oil and gas industry. And I think there it creates an opportunity for us. We worked hard to create the operating platform. We worked hard to create a low-cost business. And we have built successfully, I would submit to you, on the tremendous legacy the company has in terms of relationships in Africa. So that's where the company is. And I think as the major companies, and I think you've seen this in the public domain, many major companies are looking to shift focus away from Africa, I believe, kind of as a responsible operator with the credibility that we have, I think we're pretty uniquely positioned to benefit from that opportunity set. I think we -- I would say to you that, that unique position is only possible because of the work that my colleagues, the teams, our partners, have done over the past couple of years. Some tough decisions, I think, that have been taken to really position us. I think we're in a unique position, a very interesting position, an exciting position to be where organically we see a lot of growth. And inorganically, we are well placed to take advantage of the opportunities. And I want to finish by thanking all of our investors and shareholders who have been supportive through the difficult times. I hope you can see the evidence in terms of your patience and trust kind of being rewarded. We've built and rebuilt our relationship and trust with our host nations, and very proud of the value that we're creating there. And the host communities, I think, who've been very supportive. And importantly, I think my colleagues in the Board. So many thanks to everybody, and let me hand over back to you to Phuthuma.

Thank you very much, Rahul. I mean, hopefully, that was a very comprehensive and composite view of where we are at Tullow. I think, we've dealt with the strategic issues, operational issues, and -- Am I not loud enough? Can you hear me now? Thank you, all right. So I mean, hopefully, that's given a comprehensive picture of the state of play on many aspects of the business and how we look at the midterm and future. Where the stage, really, we would like to take questions on the performance of the business or any other issues that you would like to raise. And I believe at this point, if you do have questions on the various individual resolutions, now is the time to raise those questions. So I think, process-wise, I will hand over to Adam as the Company Secretary, and Adam, you will help us to manage the Q&A. Yes. Thank you.

Good afternoon. My name is Adam Holland, and I'm the Company's Secretary of Tullow. This year, we are enabling shareholders to participate remotely via video cast. Accompanying the instructions to shareholders and how to join this meeting online, you will have also received instructions on how to submit questions in writing by the Summit platform we are using to host the call. So now is the time to please submit any questions you may have relating to the business of the meeting. And so for those participating online, you can send in your question using the Q&A message box function, and you can type your question in the box on the right-hand side of your web page and click send. So I'm going to read out any questions for all the shareholders to hear, and Phuthuma, as Chair of the meeting, will then answer or direct your question to one of his fellow directors. If your exact question is not read out by me, it will be because your question asks for the same information as another question that I have already read out. We may not respond to all questions unrelated to the business of the meeting, but we will take such questions into consideration as we prepare for the trading statement and operational update to be released in July 2022. And so with that, what we'd like to do first is please go to any questions in the room that we may have, and my colleague, George, will hand you the microphone. Please, when George hands you the microphone, could you please tell us your name and ask the question.

My name is [ Hugo Chita ], a private shareholder. Rahul, I think you've obviously done a very good job sorting out Jubilee. I'm intrigued as to -- I mean, there's been a lot of chatter about getting a second rig on board for some while. And I'm very intrigued as to why that hasn't happened already.

So no, it's -- so we are advancing to the plan, Hugo, had been to bring the second rig next year. We're very well advanced in terms of the whole tendering process. There's been a lot of interest in the market. So I think we have some good choices around that. So I would say we're very much sort of on track to bring the second rig in next year. As I said, there is a tremendous opportunity set to drill, both in Jubilee and TEN. We have -- and we'll be working through -- TEN is a tremendous resource. I don't think it's well understood by the market. It's 1.5 billion barrels of oil in place. If we just found TEN by itself, we would have been celebrating, right? It's a great resource. We did end up developing the most complex part of TEN early on, and I think that did create some perception issues. But nearly half the resource in TEN is undeveloped. We've got a TEN enhancement project that we're working on with our JV partners, looking from the ground up, subsurface, development concepts, how we drill, everything, right? And I think that's going to even change our perspective on TEN. So I think there's a deep inventory of opportunities. We had said back in 2020, remember, we committed to the first rig in December of 2020. And we felt that we were at a breakeven to run 1 rig when oil prices were in the high 40s, okay? Now -- and then we said, look, if prices were up 60, we can justify 2 rigs. And I think we're very much on that place. That's a longer answer to your question, but...

And can you also talk about discoveries you've made in Guyana? Because [indiscernible], et cetera, when the oil prices fall, [indiscernible] get didn't work. But [indiscernible], that must now be a valuable asset, and we don't know anything from the company about it.

So I think what we've done, Hugo, is looked at -- so there were 2 issues. And not to get overly kind of technical on this, but the question was, there is oil there. Where did it come from? What's the source rock? And so there's a question of the discoveries that happened in 2019. So this is before my time. They were [indiscernible], more expensive to develop, heavier, again more expensive to develop. But then there was light oil as well. So the team has done a lot of work in terms of trying to understand what I call, in non-geologic terms, the plumbing, i.e., where is the oil cooked, where does it travel through and where does it get trapped. And I think we have a pretty good understanding of it. What we've prioritized Hugo was to say, the Kanuku block, where we have an obligation well, we think there's an opportunity for light oil. So we said, look, let's prioritize that because that's an easier question to answer if you make a big discovery, and that obviously has implications on Orinduik, where we have a 60% stake. So we prioritize that. But I think in the main, we'll also look at the results of these and say, what do we have discovered already and does that make sense. So it is very much kind of in focus, but in a particular sequence.

George has a question.

I'm a long-term shareholder, and I'm very disappointed with Tullow. I've been a shareholder longer than all of the Board members. And I remember when you had your AGMs that it had [indiscernible] in the city. And I'm very disappointed that the company has just sort of gone downhill. It's just, I don't know, I felt like selling my shares and then so why bother, they worth so little. But getting on to the main thing is diversity on the Board. You could certainly do with more diversity. But then saying that, I also noticed that on Page 82 of the annual report, some members of the Board do not have any shares in the company. And I don't ever vote for reelection of people who don't have shares in the company. I use my hard-earned cash to buy shares, and so therefore, no vote for me today. The other thing was dividends. Now with oil trading at $110 a barrel, I've got shares in BP, Shell, Exxon and Genel and also Gulf Keystone. Now Gulf Keystone and Genel are a lot smaller than you, and yet I get a quarterly dividend from them, but I've got zilch from Tullow Oil for, I don't know, how many years. I think it's a disgrace the way they -- you should squeeze your assets that you've got and not go [indiscernible] about wasting money on more exploration wells. Also, are you still flaring of gas at your oil sales? Because I think that's a dreadful waste of resources. I mean, every time I see a picture of an oil rig somewhere, there is flaring off the gas. And I think what a waste and also the effect on the atmosphere and stuff. The other question I have is regarding over-boarding. You said, Mr. Daly, isn't here today, it's probably because if you look in the TV, he's got a few other appointments and maybe he is in Africa, as you said somewhere dealing with those issues. These are the questions I have for the Board. But I'm really disappointed. And if the meetings continue like this, there'll be more Board members than there are shareholders. And also the shareholders, if I'm having a meeting at noon, I'm diabetic, and refreshments. There's no biscuit at all. It was just coffee team. I remember a meeting when they were quite lavish. I mean your pay hasn't gone down over the years, and yet the share price, I remember at one time, was about GBP 18 a share. Now it's 50p or 54p, and yet your pay goes up every year, your remuneration of whatever you call it. And yet, we don't see any payback for it. That's my concern.

Thank you, sir. Rahul, I think let me address the question of diversity and the purchase of shares, and then maybe Richard, you can speak about the dividends and then you can speak about the flaring. I think on diversity, of course, to put everything in context, I essentially became Chair from the first of January this year, suffice to say that we are going to do everything to continue to see how we can get a good balance with respect to diversity and also retaining, shall I say, the diversity of skills that we need on the Board. So that's something that is upper mask in our mind, and we're going to strive to do that certainly in the next 2 years. The question of directors purchasing shares. Once again, just to put into context, one has come early, some of the directors on the Board are pretty new. And I think during their period, as I understand it, there was quite a lot of activity that required that the company go into a close period. So they couldn't purchase shares whilst the restructuring was certainly underway. But it's certainly a point that has been well made and something that directors will be reviewing going forward. So I think that's really where we are on diversity and directors acquiring shares in the company. On the dividend in the history, Richard, do you want to comment?

Yes, sure. Can you hear me okay? Thank you for the question. So I think the key thing to remember is we've obviously made some significant progress over the last couple of years in respect of our total level of debt, the structure of it and our absolute leverage. But we're still currently sitting over 1.5x geared. So the focus of the company at the moment is to invest in these assets, grow the production base and generate the cash flow on which we'll be able to provide a stable, sustainable platform for shareholder returns over a sustainable period in the future. But the focus at the moment needs to be to invest in the assets, bring the leverage down and then be in a position to pay a sustainable shareholder return.

Well, you mentioned the directors that have been on the Board recently. It's actually 3 years. 3 years is an awful long time to buy shares. And you have to answer the every other question about flaring?

Yes. So that's -- I think thank you for your challenge on that. And I think that's something that we -- so we have committed to eliminating all flaring in Ghana by 2025, but I believe we'll be able to do that sooner than that. It's got -- so when the gas comes out of the oil, it's used for multiple things. So one is we use some of that gas as fuel. Some of the gas is reinjected into the reservoirs to support pressure and to help mitigate production decline. And then some of the gas is exported, if you will, or transported onshore for utilization in the local market. And what's left over is flared. To eliminate flaring, basically, there are 2 things that need to happen. So one is we need sustained offtake in the market in Ghana, and second is to expand the gas processing capacity within the FPSO. And we've got a clear investment plan to expand the gas processing capacity. We put that plan in place last year. We just finished a shutdown on the Jubilee on the [indiscernible] FPSO, which will be an important step towards increasing that processing capacity. So I would love to eliminate flaring instantly tomorrow. But you can imagine these are -- we're in 1,200 meters of water depth in a complex FPSO. So we have to make the investments and find the opportunities to do that, and that's what we're doing. But the commitment is very much there. And then in parallel, as I said earlier, we're working with the Guyana government to see how we can expand the gas opportunity within the country. And that's not just from our perspective, but that's from creating more energy security for Ghana. That's from creating the kind of platform for better sort of economic and industrial development for the company -- for the country. So be rest assured, I mean, we're very much on the case. I think the patients I would request is that it's not a magic wand, we can't do this overnight. But we are taking every opportunity to do this. And I think you will be proud of what we'll do.

Thank you very much for your question. Is there anyone else in the room who has a question? Please [indiscernible]?

Thank you. My name is [ Martin Beck ]. One question. Are you concerned about a default -- in Ghana, government default of the Ghanaian government? And what is the plan B there? I mean, if it happens, I mean, what are the implications, first of all, for you, if any? And then how are you going to deal with that if it does happen?

Look, we've been in Ghana for over a decade, right? And I think it's -- and certainly, and I've worked a lot in emerging markets through my career. I think I've been very impressed with the way the government has been dealing with, a variety of kind of financial issues, I think if you guys follow Ghana carefully. They've put in place a number of measures, both on the revenue side, as well as kind of mitigating costs. So we certainly kind of been impressed with the productivity which the government has shown. I think we're not sort of bankers. So I don't think we can comment specifically on their financial position. But certainly, as an investor in the country, what we see and are encouraged by is the government's commitment to bringing more investment in their commitment and support for the work that we're doing. And I would submit to you that the Ghana value maximization plan that I talked about of $12 billion to $15 billion of value for the nation, I think that, hopefully, will be an important ingredient for the nation. So look, we're not -- we're continuing with our investment plans. We feel pretty comfortable about the investment climate there. As I said to Hugo earlier, we're looking to bring in a second rig. So I think we're pretty comfortable with where they are.

Okay. But do you see any implications? I mean, it seems to [indiscernible]...

Yes. Look, I don't really sort of follow the government bond market that closely. I think -- I mean, you're right. I mean, the spreads have widened, but it's -- I think from our business point of view, the way we see it is that we're very much an integral part of the government's sort of revenue and economic development plan. So if anything, I feel like a sense of responsibility that we need to get going faster with what we are doing. And I think that's going to have an impact. That's going to have a positive impact.

And sorry, just as a follow-up [indiscernible]...

Sorry, could we please give you the microphone so people online can hear.

So just as a follow-up, how stable is the tax regime then in your mind? Because if they default, maybe they can renegotiate on the PSCs or however you...

So I think the petroleum agreements -- it's Martin, right?

Yes.

Yes. Martin, the petroleum agreements are very robust. I mean, they've covered by international law. It's a matter of public disclosure. We had a dispute with them on the branch profits remittance tax. Look, it's all adults grown up, so we kind of agreed with them that it's best to resolve this through international arbitration. That process is kind of underway. So we don't see an issue around the stability of the tax regime. I think tax authorities everywhere in the world, including in this country are people talking about windfall taxes next week. I think we'll do what they have to do. I think what we're very comfortable with are 2 things, which is really important. I think one is that our agreements are robust. And the second is that in all our interactions with the government, they behave very responsibly. And you don't have to take my word for it. I think look at the evidence on the [ BPRT ].

Okay. Thank you for your question. Are there any further questions in the room? George, Rob, please? Thank you.

[ Chris Pollock ], ordinary shareholder. Roughly what price per barrel of oil should be reached in order to make all your operations profitable? And secondly, you've obviously got into a lot of debt. Can you just tell ordinary shareholders again what caused that debt and what measures you've taken to make sure that debt is never going to reoccur.

Yes. So thank you, both very good questions. I think to give you a sense, I mean, our operating costs are sort of in the -- in the sort of $10, $11 per barrel range. So the company has got a very strong, very resilient sort of cost base. I think we can make money, and that's a big part of the work that we've done over the past 2 years is to make the business resilient at very, very low oil prices. So that's -- so the business is very resilient from that point of view. I think it would be a hard place, I've only been here for 2 years. So a hard place for me to say what caused the company to have very high debt levels, in general. If you remember my comment at the beginning, in this industry, if people misallocate capital, in simple terms, if they invest capital in projects that didn't work out, that's really what causes the debt issues. I think importantly, sir, from your perspective is we've reduced the absolute level of debt quite substantially. We've sold assets, cut costs. The company is a much smaller company, not doing fancy AGMs, unfortunately, anymore. So it's a much smaller company, much more disciplined about costs. We're reducing our -- so a key important metric, I think, is what Richard called gearing, which is basically, if you take the net debt of the company and you divide it by the operating profit, that number was over 3.5x, which means the company was very highly geared. We're targeting below 1.5x. And I think that's good progress. And that's the path that we're on is to generate a lot of cash flow for the business, invest it and reduce the debt levels. So we had forecasted initially that we would get to 1.5x gearing by 2025, Richard? I think then we were saying it's towards the end of next year. And I believe it's going to be even earlier. So the assurance, I think, you can take away is that, from a financial point of view and our ability to reduce our gearing, I think we're making very good progress.

Thank you. There's a gentleman here at the front. He has a question.

[ Nicholas Siv ], I'm an individual investor. You mentioned, given very clear guidance in the Capital Markets Day about how you expect to increase revenues. And obviously, the drilling of wells is key to that analysis. You instantly mentioned that you've already been asked the question about the impact of individual wells on that, and you don't want to give that. But is it possible to give to maybe shareholders or in our presentations more disclosure? Because you must have some guidance as to how you want to do it, either by quarter or by collection of wells, so we can see -- because you're giving us a very positive analysis, which I'm very pleased to hear about as a shareholder, so we can sort of have some kind of sort of guidance as to where the path is going to go, if that makes sense.

Let's take that suggestion on board. I think it's an interesting question. So let's -- we'll reflect further and see. Look, our objective is to make sure people understand the business as transparently as they can.

I understand things keep changing like the preemption rights, everything else and the price of oil changes and everything else. But if it's possible to give more guidance without trying to restrict [indiscernible] what you can do in your flexibility, that would be very helpful.

I think, and just to remind people, so look, let's take that away. But I think what we do want to remind people is that we had laid out at the annual results in case you didn't see it, very clear guidance on what we're planning to do on Jubilee and what we're planning to do on TEN as we understand it today. And the key message we set is that both assets have a big resource base, very well-defined investment plans. And we said the pace of how the production changes on a year-by-year basis depends on how we mix and match Jubilee and TEN wells. But we said by 2025, we're very confident we'd get to 100,000 barrels a day in Jubilee and 50,000 barrels a day in TEN. So in case people have missed that, it's a very clear presentation. It doesn't answer your question, sir, but I think it certainly gives clarity.

Okay. Are there any further questions in the room, please? There's a gentleman here.

I'm David Oaks, I'm a shareholder. Rahul, thanks a lot for sharing your objectives in terms of net zero 2030. Certainly, the gas injection and gas commercialization scheme in Ghana [indiscernible] Scope 1 and 2. You've mentioned reforestation as an idea for achieving the net zero. What kind of proportion reforestation would cover of your Scope 1 and 2? And are you allowed to share here any other idea, in particular, if, at some point, you get some pressure to include Scope 3 as well.

Okay. So well, firstly, welcome back, I guess. So for those who know David, he used to work at Tullow. And so I think in terms of -- so the Scope 1, Scope 2 plan is pretty clear, right? And so a big chunk of that, probably 60% of the reduction is through this decarbonization. And these are things you will be familiar with. It's kind of revealing compressors. And I talked earlier about the investments in gas processing and all of that stuff. So it's very clear. And I think when we eliminate routine flaring, you'll take away a big chunk of the emissions, right? So that's pretty clear. We estimate roughly about 600,000 tonnes of CO2 kind of is harder to abate. So that's things like you have supply vessels, which are with fuel oil and things like that. So our -- the nature-based carbon offset program is really going to be around forestation and eliminating kind of deforestation. Those can easily cover that. We could probably -- I think, we'll come to the market, I think, by probably next year some time with much more specifics. So we're kind of in the concept select stage right now of projects. So I think probably next year, we should be able to lay out much more specifically what the investment plans are. But certainly, the scale of what we're looking at is substantially more than the hard to abate emissions that are left. I think, look, it's -- we focused a lot on Scope 1, Scope 2 because that's really what is within our control. I think there are people who are more experts in this area than I am who targets Scope 3, but that's really -- it's a human question about what do we as a society and humanity think about our own lifestyles and stuff. But look, our view is that we have a responsibility to help develop African oil and gas resources to the best of our abilities, while minimizing the environmental footprint. And one thing I think people don't talk about enough is everybody talks about emissions, but we should be really having a conversation about the environment, which means things like ocean health, things like water. And I think part of our objective is to help broaden that narrative because that's something -- that's an area we're working on as well.

Okay. Are there any further questions in the room, please? Rob, there's a gentleman there, please?

[ Edmond Chalon ], a private shareholder. I just refer to Page 27, I think it is of the report and accounts. You talked about adjusting events. I then look for information regarding this Norwegian offshore block, which is PL-537. And you've had to pay $76 million -- sorry, $76 million in regard to an arbitration dispute. So presumably, there's some oil or gas there. As I say, can we have a bit more information on that license?

Richard, do you want to comment?

So this was a license that Tullow acquired in Norway from the former owners, HiTec Vision. We sort of conducted at the time some exploration appraisal activity on the block. Following our exit from Norway, we sold that block to Statoil, now Equinor. So we don't actually own the block. What the claim in the accounts related to was a claim under the SPA for some additional contingent consideration relating to our acquisition from HiTec. So under a Norwegian arbitration process, we were unsuccessful and it was a full and binding results, which led to us having to pay an additional $76 million to the former owners of that block.

And I mentioned this was relating to acquisitions that were done in this year?

It's just to me now. I think -- well, it was certainly a lot earlier in the...

Okay. Any further questions in the room, please? Okay. Thank you. I'm just looking at the screen and the facilities available to our shareholders online and on the telephone, and it appears that there are no questions online or on the telephone. Could you please just confirm that at the back? Okay. Thank you. Well, I would just like to stress that it is really important that all our shareholders and stakeholders have access to us, and there are various e-mails and addresses and contact numbers on the notice of meeting and on our website. So although the AGM does present an important opportunity for our shareholders and stakeholders to ask questions, it doesn't have to wait until the AGM. And we're always available and willing to answer any questions that you may have. And so that ends the question-and-answer session. And I will now hand back to Phuthuma.

Thanks, Adam. And thank you very much for your questions and decisive comments. And I think all of that is well noted, and I think we take that on board. And as we go forward, we'll ensure that we address some of those questions. We now, of course, move to the formal business of the AGM. The notice of this Annual General Meeting dated 22nd April 2022 explains the business to be proposed and voted on today. The notice of meeting was made available to all shareholders, either electronically or distributed in hard copy or via the notice of availability, informing you, the documents were available on our website. Our 2021 annual report and accounts was made available to shareholders in March 2022 via the same method. With your consent, I propose that the AGM notice is taken as read. Thank you. In accordance with this best practice, the directors have once again decided to conduct each vote on the resolutions set out in the AGM notice by way of a poll, which provides an opportunity for shareholders who are not present today to vote their shares. For those attending the meeting online, the voting options will be on your screen. To vote, simply select your voting direction from the options shown on screen. Your vote has been cast when the check mark appears. If you wish to change your vote, you select Change my Vote. If anyone in the room with us who is entitled to vote does not have a poll card, please raise your hand now and we will arrange to get one to you. Please remember that you do not need to complete a poll card if you have already returned a form of proxy, unless, of course, you want to change your vote. As the Chair of the meeting, I'll be voting on behalf of all shareholders who have duly appointed the chairperson of the meeting as the proxy. And in accordance with how each shareholder has indicated, they wish me to vote on the proxy form. In respect of those proxies where the Chairperson of the meeting has been granted discretion as to how to vote in respect of a resolution, I will vote in favor of the resolutions. For those completing a poll card should put a cross in one of the boxes marked for or against or withheld, in accordance with the way you wish to cast your votes for each resolution. It should be noted that withheld is not a vote and will not be counted as a vote for or against the resolution. The results of each of the polls, which will include all votes cast today by the shareholders present in the room and all proxy votes submitted by post or using the online voting facility, will be announced to the London, Irish and Ghana Stock Exchanges as soon as they are available, which ought to be no later than 6:00 p.m. this evening. The results will also be posted on the company's website later today, and copies may be obtained at the company's registered office tomorrow. So that really concludes the formal business to be carried out at this Annual General Meeting. I therefore bring this meeting to a close. Thank you.