Tullow Oil plc (TLW) Earnings Call Transcript & Summary

Well, good morning, everybody, and thank you for joining us. As you know, it's been a very busy first half for us. And Richard and I are looking forward to taking you through our update. Today, we really find ourselves at a very key, a very important inflection point. And I think what this slide does is to highlight some of the key areas that Richard and I will talk about today. When I joined Tullow about 3 years ago and you had -- some of you would remember this back end of 2020, we outlined the plan that would turn the business around and unlock its underlying value. And you've heard me talk about the conviction we've had in that underlying value. Now for the past 2.5 years, really that plan has been focused on 3 very important things. Firstly, there's a very disciplined investment in our core assets to grow production. The second thing has been driving strong operational performance. And the third and probably very critical as well has been really building a culture of cost consciousness and capital discipline. All of this investment in time and effort is now manifesting and what you see is we're delivering a much improved core business, you're seeing us on a path to material debt reduction. And there's a delivery of some very important milestones, including most recently, I was in Ghana last week, we had a start-up of the Jubilee South East. I was very excited to see the President, the Minister of Energy, a lot of key stakeholders actually came to the Jubilee FPS. So it's an important milestone. So the capital phase that we've been in for the last, let's say, 2.5 years which has been driven by infrastructure spend, which is to drive production growth is now materially complete. So when we talk about inflection, and you'll hear Richard and I talk about this a lot, we're now ready to harvest. And really, the business is set to generate $800 million of free cash flow between '23 and '25. And frankly, I mean, it's going to be really -- will be more than $800 million in the second half, really the cash flow starting now through the next 2.5 years. I think the important thing is that the start-up of Jubilee South East and with a very flexible CapEx outlook, I would say to you this cash flow is now substantially derisked. What's equally important is that we remain committed to running the business with the same focus we've had on operational performance and cost discipline. And what all of this does is it enables us to further reduce the debt, really accelerate the deleveraging and put in place a sustainable capital structure, while at the same time, and this is important, is growing the business to create value for our investors, for our host nations and the employees. Let me now hand over to Richard. He's going to walk you through the first half financials but also update you on our finance strategy. So Richard, over to you.

Yes. Thank you, Rahul, and good morning. Our financial results very much aligned with the theme that Rahul outlined, of Tullow being at an important inflection point. The phase of investment is now materially behind us, and we are moving into a phase of harvesting, which will see positive changes to all of our key financial metrics from the first to the second half of '23 and then into the future. As expected, lower production and the oil price environment have led to reductions in revenue and gross profits in the first half of '22. However, as we pass through the inflection point with Jubilee South East now on stream, we will see a significant reversal in the second half of the year with a material uplift in production. We've narrowed our production guidance between 58,000 and 60,000 barrels per day which is largely attributed to the Jubilee South East ramp-up, which will -- Rahul will return to later in the presentation. We very much continued our relentless focus on cost with OpEx down close to 5% and admin costs also down 17% compared to 1H '22. This is despite the continued inflationary environment that we see. This has largely been driven by the Jubilee O&M transformation project that we completed in '22 and also our continuous focus on continuous improvement and process efficiency. It's also worth remembering that profits for '22 were elevated through the one-off gain from the Ghana pre-emption transaction of $197 million. In terms of capital investment, '23 continues to be elevated with $187 million spent in the first half of the year, with a key focus on completing Jubilee South East. We're maintaining our full year guidance of $400 million, and I'll touch on our capital investment plans on the next slide. As guided, our trading statement and largely due to the investment program in Jubilee South East, the first half free cash flow was negative. However, we expect to generate over $200 million of free cash flow at $80 a barrel in the second 6 months of the year to maintain our guidance of $100 million for the full year. As a data point, at the end of August, we already delivered $75 million of this target. Net debt has reduced from $2.3 billion at the end of 1H '22 to $1.9 billion at the end of 1H '23. This is despite the negative free cash flow in the first half of '23, but was supported by the successful bond tender we completed in June, which I'll talk about in a bit more detail later on. Aligned with the free cash flow generation, net debt is expected to reduce in the second half of the year to $1.7 billion, and this will reduce gearing down to below 1.5x, and we remain on track to be 1x geared by the end of 2024 at $80 a barrel. So if we move on to our capital investment plans. Since the beginning of '21, we've invested over $800 million in our business. Close to 90% of that has been in our producing asset base. These investments have been very much focused on the wealth of high return and short payback opportunities that we have within our portfolio. With the completion of Jubilee South East, we expect our annual CapEx expenditure to reduce to between $500 million and $600 million in the 2-year period, '24 to '25. This reduction will mean the business will be able to harvest the cash flow being generated from our investment program. Notwithstanding this, we have a significant amount of flexibility within our CapEx program with the ability to reduce group CapEx to between $150 million and $200 million per year in a low oil price environment, whilst also still sustaining Jubilee gross production at 100,000 barrels of oil a day. That said, we have continued to replenish our investment hopper with new opportunities. For example, in our latest business plan, we have now included Jubilee projects beyond '26 and '27 that have the ability to sustain Jubilee production into the longer term and continue to provide high returns. In addition to this, with the potential approval of the Ghana gas sale agreement and the amended 10 plan of development, we'll see a new gas revenue stream as well as a compelling list of additional investment opportunities in TEN. We now move on to our hedging policy. Our legacy program that was implemented as part of the '21 refinancing has now begun to roll off. And as such, we've reinstated our previous hedging policy of protecting 60% of the downside for the first calendar year and 30% for the second calendar year. In addition to this, we will maintain at least 60% access to the upside at all times. This level of downside protection will allow us to continue to allocate capital to Jubilee in a low oil price environment to sustain production. We topped up the remainder of '23 to take us to 60% downside protection and the implementation of the '24 program is well underway. We've got -- in the first half of the year, we've topped up with straight puts, and whilst we're currently using white collars for the second half of '24 with an average so call of $115 a barrel whilst protecting a downside of $60 a barrel. So if we move on to cash flow, which is obviously a key fundamental point in our deleveraging strategy. And I've shown a version of this slide quite a few times before, but it's important to demonstrate the cash flow outlook for the next couple of years. We maintain our free cash flow target of $800 million between '23 and '25. But given the first half of '23, was free cash flow negative. This is essentially $900 million of free cash flow in the next 2.5 years. This is a material step change on the previous 2.5 years. This cash flow has been materially derisked with the start-up of Jubilee South East and subsequently getting to over 100,000 barrels a day. And as I've discussed on the previous slide, we have the ability to flex our capital expenditure in a lower price environment, which gives us confidence in our ability to deliver this. This cash flow will continue to transform the Tullow balance sheet and will enable us to emerge as a low debt business by 2025, which I'll cover in more details on the next slide. And as the graph demonstrates, we've already made substantial headway in reducing gross debt, net debt and gearing over the last 3 years. We've achieved this through a combination of organic free cash flow, asset divestments, but whilst at the same time, investing significantly in our business. This was further enhanced by the successful bond tender offer that we completed in June this year, where we're able to buy back $167 million worth of debt for $100 million, whilst also saving almost $20 million on interest costs. The free cash flow that we expect to generate will accelerate deleveraging, taking Tullow to net debt of around $1 billion and gearing of less than 1x by the end of 2025. This, in combination with our ability to either maintain or grow our gross asset value will mean that Tullow will emerge as a low debt business with a high asset coverage in the near term. And over this period and into the future, we will seek to maintain a minimum liquidity headroom of $200 million to $300 million. The combination of significantly reduced net debt and a lower headroom requirement means the amount of gross debt we will need by the end of 2025 is much lower than the amount that we are carrying today, and you can clearly see that from the chart. Outside of delivering the $800 million of free cash flow, our focus is very much on addressing our debt maturities of March '25 and May '26. We are well progressed in working out a range of options to address these maturities, and I expect I'll be able to provide a further update in due course. And as I'm sure you'll appreciate, until then, I won't be able to provide further details. In conclusion, our continued focus on cost and capital allocation and the delivery of Jubilee South East, places the company at a firm financial inflection point with material free cash flow growth and accelerated deleveraging that will support a successful refinancing. As our debt reduces and our gross asset base is either maintained or grown every dollar of debt reduction will translate into additional value for our shareholders. And I'll hand back over to Rahul.

Okay. Well, thank you very much Richard, for that very comprehensive summary on our financials and also the outlook. Really, our business, it drives the economic prosperity across all our host nations and our communities. And this is important. We really -- we recognize that our purpose is to build a better future through responsible oil and gas development. And I'm pleased to share a lot of great progress we've made across our ESG efforts this year. So let me start with our social investments, where really we -- our investments in certain programs across the host nations. They make a very meaningful impact on the communities where we operate. Let me pick one, which is this year, we completed Phase 3 of the senior high schools program in Ghana. These facilities, they'll enable about 1,000 students to access accommodation and senior high school education. And in fact, last week, we showcased this to our Board when they visited Ghana. The other thing that is very important for us is building local content capacity. And that's really quite fundamental to the success of our business. And a focus area for us this year has been on training and developing local suppliers in Ghana. And to that end, in July, we had 73 indigenous Ghanaian companies as well as 11 officials of the Petroleum Commission. They participated in what we call the Tullow Supply Chain Academy program very successfully, and they were all received certifications for that. And that's just an example of the number of local content initiatives that we have underway. Now as an operations-led company, our focus on safety is really integral to how we work. And what I'm pleased to say is that we continue to maintain our top-tier safety performance. As you know, we've committed to delivering -- to achieving net 0 on Scope 1 and Scope 2 net equity emissions by 2030, and we're making good progress on that. This year, we've been carrying out work to increase gas handling capacity. So as a direct consequence of that, TEN flaring has already been reduced by 50% compared to the levels earlier in the year. And we're very confident we're on track to eliminate routine flaring in Ghana by the end of 2025. And at the same time, we're working very closely with the Forest Commission -- the Forestry Commission in Ghana to advance a nature-based carbon offset project, which will not only have an impact for us, but would be a material contributor to helping meet Ghana's naturally defined contributions. Moving on to production. I think it's fair to say this year very much is a year of 2 halves. So the first half production was 53,500 barrels a day. We're expecting production in the second half to average at around 65,000 barrels a day. So that's a good, real step change of nearly 20%. And the big driver of that obviously is the start-up of Jubilee South East. And as a direct consequence of that, now we have gross production in Jubilee is now comfortably over 100,000 barrels a day. So that's almost 50% higher than what we had in Jubilee in the first half. And based on the performance that we see of the new wells, as well as the planned additions that we have this year, we're confident of achieving an exit gross production rate of over 100,000 barrels a day at Jubilee. At TEN, the team has done a great job at managing the field to achieve negligible decline during this year. Now you remember not that long ago, this was a field that was declining almost 30% a year. What's the magic there? There's better reservoir management as well as some recent facilities upgrades, they resulted in steady rates. And we expect this to continue for the rest of the year with an exit rate of approximately sort of current levels of about 20,000 barrels a day. The non-op business, which is Gabon and Cote d'Ivoire, that continues to deliver in line with our expectations. And I'll come on to talk a bit more about our Gabon portfolio shortly. What you'll also notice is that we've included Ghana gas in this chart. And that's really to help you get a sense of the scale of the production, and this is following the interim gas sales agreement. I think as we've shared previously, the current agreement is for an increased price of $2.90 per MMBtu. That equates to about a $4 million net revenue for Tullow per month. What's important from a Ghana perspective is that it really supports the economic development in Ghana with this gas being less than sort of half the weighted average price from other sources of gas in the country. So it is an important driver for energy security as well as economic development. Now we're continuing to work with the government of Ghana, as Richard said earlier, to finalize both the long-term gas sales agreement, and that's going to be supported by an amendment to the TEN planner development. And together, really, these will help us deliver undeveloped gas resources, which is a support, as I said, the economic development of Ghana, but also they'd secure a new revenue stream, sustainable revenue stream for Tullow and our JV partners. I think you've heard both Richard and I talk about the Jubilee South East and that start-up really is a major achievement. And to put it in perspective, we took FID on this project in December 2020, work started really early '21. So kind of 2.5 years ago. And despite the challenges of COVID, inflation, supply chain constraints, the project was safely executed and is delivered on budget. And it's largely on time. I think it was planned to come on stream around the middle of the year, and it came on stream in July, so about a month after that target, which I would say is pretty good going for a project of that scale and complexity. We're also very proud of the local content that's been achieved on this project. It's impressive. The majority of the complex offshore infrastructure was really all fabricated by local companies in Ghana. And I think it really underscores the evolution of the Ghanaian supplier base, which we believe now can support substantial elements of the oil and gas industry in Ghana. I think it's also a testament to the commitment that we have and our partners have to developing local capacity. What's important, I think, with the GSE subsea infrastructure that it's now -- it not only services the wells on the Jubilee South East that we've drilled this year, but it will also importantly support future development of Jubilee and it'll provide tie-in points and also improve subsea flow capacity. So new wells that we've had online, the Jubilee South East wells as well as the Jubilee well we drilled earlier this year, are all delivering production, which is in line with expectations. I think drilling has also expanded the proven resources of the field in the South East with the discovery of Mahogany deeper. So this is kind of a newly drilled deeper reservoir, which is already put on production. And it's helped us kind of identify other untapped deep reservoirs which will be -- it's our targets for future drilling and potential development. The most recent well that we brought on stream, J66-P was brought on stream last week. We're currently producing at about 107,000 barrels a day. In fact, I was at the FPSO. I think when -- the day after it came on, so it's kind of exciting to see that. And if the 107,000 compares to 77,500 barrels a day that we would had in January. So quite a substantial kind of step-up. We're going to tie in 2 further water injectors this year. One of those is at Jubilee South East and the other 1 is on the Jubilee Main. And remember, the water injector is going to help mitigate the natural decline that these wells have. The near-term CapEx, Richard talked about CapEx flexibility. Where does that come from? So that's the near-term CapEx really will be focused on infill wells that will be drilled and then they're connected through existing infrastructure. And I think we're pretty confident that will enable production at these levels to be maintained for the next few years. So you heard me talk about operational excellence. I think a commitment to that is an integral part really of how we work. And I'm pleased to say the uptime continues with performance. We've averaged 97% across both FPSOs. There's a lot of work that goes into it. The team is kind of highly motivated. I think the work we did in terms of taking over the O&M at Jubilee last year that's kind of delivering dividends. So there is sustainable kind of improvement in the uptime. The well delivery has been very excellent as well. We've got 4 wells on stream this year and 2 more to go. And I'd say, despite all the inflationary pressures, the well costs really have been maintained and we've averaged around $55 million per well. We also focused a lot on gas capacity, so we're very much on track to deliver the planned improves in gas handling. So Jubilee, the target is to get gas handling capacity close to 240 million scuffs a day, which will enable this is important because it does enable some of our gas or oil wells to be produced at higher rates. At TEN, we had a planned shutdown in July, and we did invest in facility upgrades that's led to increased gas injection, which then helps enhance liquids recovery and also has helped us reduce , as I mentioned earlier, the TEN flare by almost 50%. So as the graphs show that with these enhancements on gas capacity, we're very much on track to eliminate all routine flaring on both the FPSOs by 2025. Moving on to the non-op business in exploration. We've optimized the portfolio in Gabon in the first half. And the idea really was to focus on assets where we can make an impact and we can drive growth. We achieved this through a swap deal with Branco is a cashless swap. But what it does is it gives us the opportunity then to leverage our technical skills and focus on the more material positions in key fields. And what it does is -- and I think you may have heard me talk about this before, it really places the Tchatamba facilities, you can see offshore in the map as a core hub for Tullow. I think it also gets us a good balance on a portfolio between discovered resources and appraisal and exploration assets. So it gives us line of sight around some well defined opportunities to maximize the value of the assets through infrastructure led exploration. And the important thing is that this ILX can be rapidly tied into the existing Tchatamba facilities. So following the facilities upgrades that we've invested in, in Tchatamba, there's a new development expansion is planned for 2025 over there. Along with that, we're planning a development well in Wamba where we've had a long-term production test. And there is also short-cycle ILX opportunities drilling in Simba as well as DE8 around 2024. There are kind of more mature assets, the Echira and Niungo and the Ezanga licenses. They'll also see some infill programs next year. So this is all part of the campaign to sustain production in Gabon. The important thing is the government of Gabon has also agreed to extend the life of the number of licenses, which really kind of demonstrates the longevity of the resource base. And the extension obviously helps us add more barrels and what you'll see at year-end is a 100% reserve replacement in Gabon this year. I think you've all got aware of the political situation in Gabon. So we're obviously monitoring that very carefully. Importantly, all our staff are safe and the operations remain unaffected. The liftings have continued as normal, and we're continuing to plan activity and we're working with our partners to continue the operations. And certainly, the message from the government has been very supportive. So moving on to Guyana. You saw we announced our decision to sell our stake in Orinduik license to Eco. That's very much in line with the strategy that we've had and we've articulated consistently to really focus on the high-return production assets. And I think the deal delivers on the objective that we have of unlocking value from our emerging basins and particularly in a future success case, it does deliver some value and also removes any near-term CapEx from our license commitments. On Kenya, obviously, that remains a very interesting value option for us. You saw with the withdrawal of our partners, now we have 100% really, we benefit from that. It's been a bit of a blessing in the sense there is a simpler proposition for a strategic partner, and we continue with the discussions there. What I'll say is that we won't really say much more about that today, but we'll certainly look forward to providing updates when we have progress. So I think as I mentioned, kind of, at the beginning of the presentation, and Richard iterated as well is that we're really at an inflection point. I think in the last 2.5 years, I think you'll agree, we've done well to turn the business around through our investment, both the time and effort in the right areas. I think today, we're not waiting for an increase in production. I think -- well, it's here now. We're no longer waiting for the cash flow. It's no longer sort of jam tomorrow. As Richard said, we're delivering cash flow today. So already since the end of the first half of '23, we've delivered $75 million of free cash flow. We know that addressing our capital structure is an important priority, and we've got a very clear strategy for that. Delivering free cash flow, demonstrating the ongoing delivery of our plan and the quality of the assets, all of this will help the process immensely. Looking ahead, I would echo Richard's confidence. I think we will be a lower debt business by '25, and we'll successfully address our debt maturities, that will enable us to sustain and grow our business for the benefit really of all our stakeholders. So I think you'll agree that the first half really has been very significant, has been important for us because we've seen significant progress on a number of fronts. And most notably, as we've talked about, the Jubilee South East start-up. We're now delivering tangible results with a material step-up in the free cash flow, and you can already see that's underway. As we harvest the cash flow and delever, there is very material accretion to the equity value. And that accretion process is now materially derisked through the startup of Jubilee South East as well as -- this is important too, as well as our forward CapEx flexibility. We believe our business continues to be undervalued and this is largely due to a perceived debt overhang. So addressing our debt is a core focus for us and I'm very confident that we'll achieve that. But importantly, beyond all of this, I see a very rich future for Tullow with options, both organic and inorganic growth. And I continue to be excited about the very compelling kind of and the unique proposition, the value proposition that we offer, Tullow offers today. So thank you for your attention. I think we'll stop here and look to your questions.

Thank you very much, Rahul and Richard. [Operator Instructions] Our first question comes from Ashley Kelty at Panmure Gordon. Go ahead, Ashley.

First 1 is named Kenya. Since something [indiscernible] seems to be deleveraging at the moment with only sort of incremental CapEx projects. Can we assume that Kenya is essentially on the back burner and a long-term project because obviously you have the headroom or free cash flow to reduce obviously the debt and undertake a development like that. And secondly, I just wonder if you had any engagement with the new Gabon and if there is any indications of whether there is going to be a change to fiscals or ownership of assets in 2023?

Okay. I think I got most of that, Ashley. So I think on Kenya, the strategy remains unchanged. So I think what we've said always is that we would look to bring in a strategic partner, it's a big resource. We worked hard to create a field development plan, which is robust even at low prices, creates a lot of material value. And the idea of bringing in a strategic partner is to minimize our own capital allocation to that project. So that -- I think that strategy, Ashley, remains very much consistent with the acceleration of deleveraging that we've talked about, which is really about working with strategic partners and other sources of capital. As I said before, rather than give a blow-by-blow across a variety of options that we're considering, I think what I will say to you is that having 100% kind of has been a bit of a blessing because it gives us a lot more flexibility, and we'll continue very much on that strategy, and we'll share with you as and when we know. I think with Gabon, I think the focus very much in the near term has been 1 on the safety of our colleagues, the safety of the teams from our partners. And that's -- I'm very pleased to report that that's all been pretty incident free. I think the second focus has been on ensuring operations continue and liftings continue, and that's been incident free. I think the early messages from the government has been very much, as you say, business as usual. We're going to engage with them in due course and we'll report back kind of as we learn more. So that's probably what I can share with you today.

Thanks, Ashley. Our next question is from Alex Smith at Investec. Go ahead, Alex.

Quick one, I guess, on TEN. You kind of mentioned the plan of redevelopment. And I guess TEN was kind of the growth story for the back end of the decade, especially 2025. And you kind of mentioned in your comments about Jubilee kind of sustaining plateau for '25, '26, '27. I guess kind of removing investment from TEN, you could maybe see production declines quite quickly? Richard, you mentioned submitting a plan of development. If you could kind of understand what those plans are and where you kind of see investment in TEN over the coming years? And then secondly, just a quick 1 on, you mentioned inorganic growth in your final statement. We have seen some transactions in Africa, very sizable ones throughout the year. How are you seeing that market potential activity? Are there still kind of asset packages up scraps or anything that would take a particular interest?

Okay. So I think firstly, I think that where we are today in terms of Ghana, the organic growth opportunity set, I would say it looks a lot better today than it did a couple of years ago. And that's despite the fact that our view, intent has changed, right? And why is that? Because in the original plan that we had, we didn't really see or we didn't allocate a lot of capital to Jubilee beyond '26. I think what we're seeing today, and this is what Richard talked about is that we see Jubilee potential to sustain production at the kind of 100-plus level through a substantial part of the decade. So as we look at the kind of growth potential we see quite a substantial growth potential from Jubilee. That's number one. Number 2 is, I think the opportunity from TEN as we are defining in the plan of development amendment is two-fold. One is gas. So there is a potential to double the supply of indigenous gas in Ghana, which is largely going to be driven by an additional development in TEN. And there is an opportunity to sustain or to add oil production, particularly near infrastructure and infill stuff. So I think what the idea would be that once we have the plan of development and GSA approved, we will come back and be able to share that with yourself. So I would say the opportunity set as I look forward towards the back end of the decade in Ghana definitely is quite compelling, but it's a lot more of Jubilee than we originally had. So that's kind of interesting. In terms of inorganic, look, I think the way I would describe it is that, it has -- they are the building blocks. Number 1 is, I think, important priority for us is acceleration of deleverage. Number 2 is you've got an organic opportunity set where you've got a very high return, rapid payback. So anything that you do and what Richard and I have always done, and hopefully, you would respect that is that we're very disciplined in terms of capital allocation. So inorganic opportunities, we'll need to compete with that and the deleveraging priority. I think what we are seeing is that Tullow is kind of uniquely positioned with the track record that we have built up in terms of capital cost discipline, in terms of operational performance, in terms of value creation for host Nations, local content, a variety of things. I think this is something that's well respected. And so as the industry structure changes in the coming years, we're pretty confident that there will be opportunities that will come to us, right? But what we don't feel compelled today is to run out and chase deals. So we'll be disciplined. We'll be opportunistic. The stock will need to compete with what we have inorganically and our commitment to acceleration of deleveraging will be primary. So I hope that's clear.

Thanks, Alex. Next question comes from Mark Wilson at Jefferies. Go ahead, Mark.

First question is on the CapEx you outlined for '24, '25, $550 million, so that's quite materially below what we carry. So just what kind of work program should we factor into that? Is that continual semi-sub in Ghana in 4 to 5 wells a year?

So let me get Richard to address that, Mark.

Yes. So yes, so the CapEx program for '24, '25 is yes, it's very much Ghana focus. It's predominantly, I suppose, until we've got a gas sales agreement and TEN plan of development in place. It's very much focused on Jubilee and the ability to sustain over 100,000 barrels a day. So we're looking at potentially between 3 and 4 wells a year, but the sort of the spread of those wells over the 2-year period, that's what we're working up with our partners ahead of finalizing our budget program. So it's a very Jubilee focused program. We've got some good investment opportunities in Gabon as well, particularly around the Tchatamba area, which Rahul outlined, but it is a very focused Jubilee program.

And I think, Mark, what I would add is that the driver -- 1 of the driver before the kind of capital flexibility is that both in Gabon and in Ghana, we've investing -- last kind of couple of years, we've invested in subsea infrastructure. And that means that as you go forward, a lot of the CapEx is drill-x heavy, which means that it's faster payback, a much higher returns and a lot of flexibility.

Got it. Okay. Very clear. Another point, you said that you bought on the third producer at Jubilee South East and current production is around 108 and the water injection wells aim to maintain that level. So that's how we should think of the field, you've kind of reached plateau levels with the new Jubilee South East producers and we should sustain those current levels from here. So how should we think of it?

I think so. Yes. I think it's what we -- exactly. So I think the idea is with the water injectors, you're going to help manage the decline. These fields typically will decline, say, call it, 20%, 25% a year sort of on a natural basis, you typically would need 3 to 4 wells a year to sustain that, that's kind of perhaps oversimplifying it because we're always tweaking gas capacity, water injection. So like you saw in TEN, for example, we've been able to sustain without any new wells. But yes, I think that's a good way to think about it.

Got it. Okay. And then 1 last one, if I may. Quite a financial point. I just noticed in the results of the TEN FPSO lease ends in April 2024. And you do have a purchase option. And I was just wondering what the variables are between purchasing that FPSO or renegotiating the lease. How should we think about those?

Yes. Thanks, Mark. So yes, it's very much a sort of accounting-driven point. So as you've already said, we've got a purchase option within the contract or the alternative is that we continue to lease the FPSO. So when we have initially accounted for that lease sort of back in 2016, 2017 time, the assumption was on the -- what is the most economic scenario, and that is the purchase option within '24. Obviously, that is going to be dependent on capital. Where we are today is, obviously, we've got the TEN planned development ongoing at the moment. And once that is finalized, we will then be able to, I suppose, reassess what the assumption is around the lease and then, I suppose, reset that assumption from an accounting perspective. So I think the underlying assumption is that we will probably continue to lease the vessel. There is options that the team are working hard on in terms of how we can reduce the underlying costs on TEN and some of the assumption is around an amend and extend on the lease contract.

Okay. In that case, I'll hand it over. Thank you very much and congratulations on getting the field to this level.

Thanks, Mark.

Thanks, Mark. Our next question is from Chris Wheaton at Stifel. Go ahead, Chris.

And again, echoing what Mark just said, well done on getting Jubilee South East up and running. A question from me on the TEN field, please? And what -- kind of following on from your sort of answer to Mark there, what sort of plan B is here? Because if you assume that field continues to decline and even depending on where you allocate gas revenue between Jubilee and TEN, and I'm not sure quite how you think about doing that. TEN could be free cash flow negative as early as 2026 if you don't buy any FPSO lease in 2028, if you do. And I'm interested what the plan is to try and attack the cost base and make sure you get the field to work for as long as possible on an economic basis and not end up stranding gas that could be used for Ghana and therefore, stranding NPV as well in the future? That would be my question.

I think, Chris, as I said to Mark, I think what we will do is once we have the kind of plan of development and the amendment as well as the gas sales agreement, Don will talk to you guys a little bit. Then we have all the data to kind of talk about TEN comprehensively. But to give you something kind of -- so I think what I see kind of with TEN is you have multiple shots at goal in terms of creating value. So there is -- on the oil side, you've got infill opportunities, you've got both sort of production as well as water injection. You've got the gas potential as well. And what we have right now is a project underway to look at how do we run the facilities differently. Remember, this is a facility -- the challenge with TEN has been that you're running at 20,000 barrels a day, you're running an 80,000 barrel a day facility, right? So is there fundamentally can be run that differently, which means that there is a different kind of fixed cost base. And also, the proposition, the wider proposition to Ghana government is that can be used TEN as a hub for other developments. So look, I think there is a lot of work that's going on in different pieces. It would be premature to give you specifics on that. But that's the mindset that we have is, at least in my head, Chris, it's like the value that you have in these assets is too poor, right? So there is subsurface value. So what's the resource, but there is value in the infrastructure as well. And can you run it differently? I don't have the answer to that, but be rest assured, I mean, that's something we're thinking through pretty carefully.

Are you still planning an exploration well on the Cote d'Ivoire side of the maritime border just across from TEN in next sort of second quarter mid next year?

Well there is a commitment well on 524, we've got 2 blocks, we've got 803 and 524. There is kind of seismic processing -- reprocessing sort of underway. And we're talking to the government about the exact timing of those wells and where does that sit in with the broader drilling program and all of that stuff. So that's -- so very much so there is planning underway. I don't think I could tell you exactly when we're going to drill it. But yes, there is planning underway.

That's great. And well done for starting to fix the balance sheet, which has been [indiscernible]

It's an exciting time. I think it's good to see the outcome of a lot of the hard yards, as I said, and the kind of jam today. So we're certainly feeling good about that.

I think you showed you've put in a lot of hard work and a lot of people haven't seen. So well done again.

Thanks, Chris, for that. I think we've probably got time for 1 more question. So I'll hand over to Matt Cooper from Peel Hunt. Go ahead, Matt.

So yes, 3 questions from me. First 1 is you have 3 Jubilee South East producers online currently? How many additional wells can the Jubilee South East infrastructure support?

So I think we have 2 more water injectors planned for this year. I think, the well inventory and I'm going to get this wrong, Matt, so -- but I think the well inventory that we have in Jubilee is probably another -- what we have line of sight on is probably another 15 wells. And I think you have the ability to tie in a couple more, at least on the existing manifold. But let me -- I need to come back to you on that. But I would say the near-term program, I would say, over the next couple of years, what Richard talked about we don't need new infrastructure, number one. Number 2 is we've got a lot of well inventory across Jubilee, Jubilee South East, Jubilee North East. So that's -- yes.

Okay. And does the good performance that you've seen at Jubilee South East increased your confidence regards buying back more of the 2025? And what's your latest thinking here?

Yes. Thanks, Matt. So look, the -- obviously, we completed the successful tender earlier this year. What we're focused on now is looking at a -- I suppose, a holistic refinancing solution for -- but we'll begin to start us to take us through both the '25 and '26 debt maturities. We'll always keep buybacks as a tool that we will -- can potentially use but we can't provide guidance in terms of whether we'll 100% do one.

Okay. And my final question was just around Gabon ILX drilling that's planned for next year. I don't know if you're able to give any more details on that, for example, around a number of wells, size of prospects being targeted and how quickly they could be monetized?

Not yet. I think there is a pretty rich portfolio. So I talked about Simba as well as DE8. I think so there is a rich portfolio. We're working with Perenco around the timing of that. The thing I would say to you with confidence is that with the upgradation of the Tchatamba infrastructure, the tiebacks are relatively quick. But I would say, once the budgets and the kind of rig lines are clearer for '24, we'll be able to give better guidance and timing of that. But certainly, there is a good portfolio of opportunities. That's for sure.

Thank you very much, Matt. So that will bring proceedings to a close. We'll endeavor to get back to everyone that hasn't had a chance to answer their questions, but thank you very much for everyone for joining us this morning.

Thank you, everyone.