MER.STMER.STSTO
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Operator: Hello, everyone. My name is Jenny, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Meren's Fourth Quarter 2025 Results Presentation. [Operator Instructions] This event is being recorded, and the recording will be available for playback on the company's website. I will now pass the meeting to Mr. Mussannah Chowdhury. Please go ahead, Mr. Chowdhury.
Mussannah Chowdhury: Hello, everyone. Thank you for joining us today for Meren's Fourth Quarter 2025 Results Presentation. I'm Mussannah Chowdhury, part of the Investor Relations team here at Meren. And I'm joined today by Oliver Quinn, our Chief Executive Officer; and Aldo Perracini, our Chief Financial Officer. We'll begin today with prepared remarks and then open the floor to questions. Just before we get started, a quick reminder that today's presentation contains forward-looking statements. These reflect our current assumptions and expectations and are subject to risks and uncertainties that could cause actual results to differ materially. More detail on these risks can be found in our regulatory filings with SEDAR + and on our website. With that, I'll now hand you over to Oliver. Oliver, please go ahead.
Oliver Quinn: Thanks, Mussannah, and thank you, everyone, for joining us today. This is my first results presentation as Meren's CEO, and I'd like to begin by thanking my predecessor, Roger Tucker, for his strategic leadership and personal support over the past few years. I'm proud to have been given the responsibility to steer the company through its next phase of growth to lead a great team of professionals and to continue working with our industry and government partners towards long-term value creation. Turning to Slide 4 and an overview of 2025. I'm pleased to report on a year of strong delivery. To begin with, last March, we closed a transformational prime consolidation deal, doubling our reserves and production from our high-quality and high netback assets offshore Nigeria. This was a strategic transaction as we simplify the ownership structure of our core assets, enhancing day-to-day control and creating a strong platform for further growth. Through 2025, we have successfully integrated Prime and have a lean and fit-for-purpose organization to manage our production assets as well as progress our strong portfolio of growth opportunities. Underpinned by closing of the Prime amalgamation, we delivered strong shareholder returns with USD 100 million in base dividend and $8 million in share buybacks. Alongside shareholder returns, the balance sheet has been strengthened with the repayment of $420 million of the outstanding RBL facility, delivering both cost savings and a healthy year-end net debt-to-EBITDAX ratio of 0.4x, all whilst maintaining significant liquidity to cushion the business against market volatility. Aldo will talk in more detail about the maintenance of a prudent leverage position and our broader approach to ensuring financial resilience through the cycle. 2025 was a year of transformation for Meren, but our focus today remains on continuing to maintain our balance sheet strength, enhancing the production profile through organic growth opportunities, and continuing to mature options to deliver long-term value to our shareholders. I'll now take you through our production performance on Slide 5. For 2025, we achieved working interest production of 30,800 barrels of oil equivalent per day and 35,100 BOEs per day on an entitlement basis, both in line with our full year guidance. During the first 9 months of the year, the Akpo and Egina infill drilling campaign supported steady average production of around 32,000 BOEs per day on a working interest basis with production lower during the fourth quarter primarily due to planned maintenance shutdown on the Agbami field. Q4 production was also impacted by minor facility issues, including temporary shutdowns related to power supply, particularly during the second period of the quarter. These issues were actively managed through targeted operational interventions, enabling the fields to continue performing in line with expectations following resolution. As previously communicated, the Akpo and Egina drilling program was paused in the third quarter to allow incorporation of positive early results from our recently acquired 4D seismic data set that will aid in the optimization of drilling locations. Due to the earlier finish of the 2025 drilling campaign, our full year capital expenditure came in at the lower end of our guidance range. In 2026, we expect to see sustained drilling campaigns in each of Akpo, Egina and Agbami commencing later in the year. I'll now hand you over to Aldo to take you through the financials.
Aldo Perracini: Thanks, Oliver. In the fourth quarter, Meren completed three oil liftings for around 3 million barrels at a realized all-in sales price of $64.4 per barrel. For 2025, we have completed 12 total liftings totaling around 12 million barrels at an average all-in sales price of $72.2 per barrel. Comparing favorably to dated Brent at $69.1 per barrel. Meren has applied a variety of different hedging instruments to protect the downside while also maintaining partial exposure to potential upside. This will include a mix of physical and financial hedges such as swaps, collars and puts, and you can find further details on this in our Q4 MD&A. Moving on to financial highlights. Before going through our numbers, it is important to note that we have reported an impairment of $105.3 million this quarter in relation to the Agbami cash generating units. I must emphasize that this impairment is noncash and it has no impact on our cash flows. This charge has come as a result of oil price volatility in 2025 and updated cost forecast relating to the Agbami field. More specifically, the updated cost forecast is mainly in relation to planned long-term life extension activities, allowing the FPSO to continue to operate reliably and safely through to the end of the license. This will also allow more flexibility on the FPSO to support future infield drilling and tieback opportunities, which we will touch on shortly. Moving on to our highlights. For 2025, we delivered an EBITDAX of $441 million. This fell just short of our full year guidance, mostly due to a larger overlift adjustment for the period relative to the estimates for the midpoint range of the revised guidance and other smaller variations on Nigerian royalties and levies. Cash flow from operations before working capital came in at $262 million for the year with a reported CapEx of $100 million largely driven by drilling activity in Akpo and Egina this year and facility costs on Agbami, both of which have met our 2025 guidance. Free cash flow before debt service and shareholder distributions was $289 million. As Oliver mentioned earlier, we have significantly deleveraged the business this year, paying down the RBL by $420 million, as well as distributing roughly $108 million in shareholder returns. Moving on to cash flow for the year. This slide shows the 2025 movements and year-end 2024 cash balance on a constructive basis as if the premium amalgamation had closed on first of January 2025. We ended 2025 with a cash balance of $175 million compared to an opening cash balance of $461 million. Net cash generated in operating activities for the year was $348 million, which included a positive working capital movement of $86 million, primarily driven by the receipt of oil sale receivables driven by the timing of cargo liftings. The cash outlay of $480 million post consolidation was for the repayments of the RBL, clearly demonstrating our intention to optimize our capital structure and resulted in about $12 million savings in reduction of financing costs. We also distributed a little bit over $108 million during 2025, comprised of about $100 million in base dividends and $8 million in share buybacks. Overall, through disciplined cash management, we have materially reduced our debt, strengthen the balance sheet and established a solid platform for sustainable growth and value creation. We are also pleased to announce our first quarterly dividend of 2026 of $25 million, which will be paid next month. Moving on to the next slide. At year-end 2025, our amounts drawn under the RBL stood at $330 million with a net debt position of $155 million and net debt to EBITDAX of 0.4x, significantly below our target of onetime. The chart on the right demonstrates our consistent and prudent approach over the last few years towards debt management with continuous efforts to optimize liquidity while minimizing borrowing costs. It is worth recalling that post premium amalgamation, we canceled an undrawn $65 million Meren corporate facility to eliminate standby fees. As a post fourth quarter update, we drilled down an additional $40 million under the RBL due to normal working capital timing related to liftings and short-term liquidity positioning within the group. So we have very good flexibility on the RBL revolver facility at competitive borrowing costs. We are currently in the process of refinancing the RBL that facility which will allow us to save more on borrowing costs and to enhance our debt amortization profile. In the meantime, as shown on the right hand side, we do retain an ample liquidity headroom. Moving on to the next slide. With our full year results, we have also announced our full year management guidance. Our working interest production guidance comparing to 2025 actuals reflects the timing for the recommencement of infill drilling campaign, which is currently expected to start towards the last quarter of the year. Our EBITDAX and cash flow from operation guidance relative to 2025 actuals reflect the lower production base and accounts for a lower full year Brent oil price at $63 per barrel compared to the actual Brent average of $60 per barrel for 2025. Moving on to the next slide. And before handing back to Oliver to take you through our organic growth opportunities, I will briefly highlight the positive developments in Nigeria. Implementation of the PIA was supportive to our business, and this positive development has been followed by a number of presidential executive orders aiming at facilitating investment in Nigeria's oil and gas sector and tackle project execution risks such as cost inflation and schedule delays. So we are seeing greater fiscal clarity, stronger government engagement and targeted incentives aimed at supporting upstream investments. Recent final investment decisions on projects such as Bonga North the Ubeta gas project and the HI offshore gas project demonstrate renewed capital commitment and growing confidence in Nigeria as a long-term energy investment destination. For us, a more stable and predictable operating environment is constructive for both capital allocation and valuation across our Nigerian portfolio. We are also seeing Nigeria's USD credit spreads tightening significantly from peak levels, reflecting a meaningful reduction in the market's perceived sovereign risk and improving investor confidence in the country. This has also been reinforced by recent positive credit rates and developments in recent months. We are very pleased to see these positive developments and continue to have high confidence in Nigeria and its oil and gas sector with clear fiscal and regulatory frameworks supporting our core business and key assets. I will now hand over to Oliver to take you through our portfolio outlook.
Oliver Quinn: Thanks, Aldo. Turning to Slide 12 and our business outlook, I want to focus on the organic growth opportunities in the portfolio, starting with our production hubs in deepwater in Nigeria. For Akpo and Egina, we are planning to recommence drilling in late 2026 with the Akpo Far East exploration well. Akpo Far East is a near-field prospects located just 5 kilometers from existing production facilities and represents the test of a fast-cycle infrastructure-led tieback opportunity with around 23 million barrels unrisked mean recoverable resource net to Meren. In a success case, first oil could be achieved through the Akpo FPSO in less than 2 years. The drilling campaign will then move toward infill drilling across both Akpo and Egina from late 2026 and into 2027. And this will add new production as we move through 2027. Beyond that, we have made progress around our undeveloped discoveries, Preowei, Egina South and Ekija, all located within 20 to 30 kilometers of existing Meren production hubs. That proximity is important as it offers a growth portfolio of short-cycle, capital efficient and lower-risk developments that utilize our existing brownfield infrastructure and together consist of around 42 million barrels of resource net to Meren. At Agbami, drilling also recommends in late 2026 with a campaign including appraisal of the adjacent Ekija discovery and 6 infill wells within the field. We are excited to get back to drilling in 2026 and the combination of testing new, low-cost resource and short-term production growth through infill drilling presents a series of low-risk, high-return opportunities to bolster our production profile and in turn, supports long-term value for shareholders. On Slide 13, let's turn to another key growth area for Meren, the Orange Basin. Beginning with Namibia, the joint venture continues to progress the Venus development project, which remains on track for final investment decision this year. According to the operator TotalEnergies, FID is targeted for mid-2026, with the environmental and social impact assessment now published and the environmental clearance certificate application submitted marking a key regulatory step towards FID. As a reminder, front-end engineering and design, FEED, is progressing with a plan for 40 subsea wells tied back to an FPSO with a peak capacity of 160,000 barrels of oil per day and a production life of 20 years plus, delivering significant and sustained cash flow to Meren. As we get closer to the final investment decision, we anticipate scope for us to include Venus in our annual reserves reporting process. Beyond Venus, several material exploration prospects remain to be tested on the license with planning in progress. And importantly, we retain full exposure to these high-impact opportunities with no upfront cost as all exploration and development spending is carried through to first commercial production. In Block 3B/4B in South Africa, the legislative notification and appeals process remains suspended pending the Supreme Court of Appeals judgment for Blocks 5, 6 and 7. From a project perspective, the identified lead prospects, Nila is drill-ready and the operator TotalEnergies is ready to commence drilling once the appeals process is concluded. To remind you, the cost exposure to Meren in South Africa is limited with the transaction completed with TotalEnergies and Qatar Energy including a capped exploration carry. Whilst the regulatory issues elsewhere in South Africa of cause delay, our 18% carried interest, combined with the scale of the prospects identified means we remain excited about the potential for the block and its ability to act as a transformational catalyst for Meren. Now turning to Equatorial Guinea on Slide 14. We hold two operated licenses to offer another set of organic growth options within the portfolio. Starting with EG-31. This is a shallow auto gas position close to existing infrastructure and situated around 30 kilometers from the Punta Europa LNG facility. Through 2025, our evaluation is focused on maturation of the existing Gardenia gas discovery that represents a circa 200 Bcf gross resource with the potential to be developed as a low CapEx, low unit cost short-cycle projects that utilizes capacity in the adjacent LNG facility. Beyond Gardenia, several nearby gas prospects, Macif and Whistler offer material longer-term growth potential with unrisked gross prospective resource estimates of around 5 Tcf. As part of our wider organic growth options, EG-31 provides an attractive rightsized LNG opportunity with low CapEx exposure through utilization of existing gas and LNG infrastructure. Moving to EGA team, a deepwater exploration block with oil prospectivity. We have identified basin floor fan targets with multibillion barrel potential in a series of stacked prospects. Across both blocks, we have been running a farm-down process. And whilst the two opportunities offer differing investment profiles, industry interest has been encouraging, and we are now in active discussions with potential partners. Importantly, we have secured 2-year license extensions for both blocks, giving us additional flexibility as we progress partnership discussions and align next steps with the government. With the right partners in place, drilling activity could take place in the next couple of years. Moving to Slide 15. I want to bring together these catalysts to outline the breadth and scope of our organic growth portfolio set across four countries and multiple basins. Whilst delivering corporate transformation from Meren in 2025, we have remained focused on active in deepening our evaluation of organic growth options and are confident as we move through 2026 that we are building a strong portfolio that offers compelling growth through choice and most crucially, whilst remaining within our disciplined approach to the balance sheet and financial frame. I'll conclude on Slide 16 and revisit our capital allocation priorities. Disciplined capital allocation underpins our business plan and the execution of our long-term strategy. Firstly, our balance sheet remains a core pillar of the business. Throughout 2025, we have demonstrated that discipline, and we will continue to maintain a minimum liquidity position of $150 million and a net debt to EBITDAX target ratio of 1x or less. Secondly, we see compelling value creation in our organic growth portfolio. Our Nigerian assets provide multiple pathways to grow production through infill drilling and subsea tiebacks. These low-risk short investment cycle opportunities, leverage existing infrastructure, generate capital-efficient returns and help build a durable foundation for long-term value creation. With a streamlined business firmly in place and a strong balance sheet, we continue to selectively screen inorganic opportunities that meets our strict strategic and financial criteria, ensuring they are accretive and complement our existing business and priorities. Thank you, and I will now pass you back to the operator for Q&A.
Operator: [Operator Instructions] First question comes from Jeff Robertson with Watertown Research.
Jeffrey Robertson: Thank you. Good morning. Aldo, can you talk a little bit about the timing of the liftings you anticipate in 2026?
Aldo Perracini: Yes. So for -- we have to look at the lifting as per FPSO, right? That is discretionary, and that creates the timing difference in relation to the liftings. So for 2026, we are expecting around eight cargoes spread throughout the year. So I think it's safely to assume they are evenly spread throughout the year just for simplification purpose.
Jeffrey Robertson: And Oliver, with respect to EG, does the 2-year license extension give the potential partners that you have had discussions with time to get an exploration well drilled on EGA team?
Oliver Quinn: Yes. Jeff, yes, I think the 2 years is important in the sense of -- as we said in the presentation, we are in active conversations on both positions, and they are very different things, of course. But what that 2 years does is, it just gives us a runway to complete those conversations and see where we get to without license time pressure, if you like, which is good. It signals strong support from the government for the ongoing process. And to the specifics, yes, I think, look, it depends exactly when we might close the transaction and who it's with. But I think it's sufficient time to mature and drill a well. I think when you look at 31, we're very focused on Gardenia because that's a discovery. So that's kind of appraisal development straightaway that shallow water is technically not challenging. Quick to do. And 18 is deepwater. But again, we have one very, very high-graded prospects. I think people have looked at it take different views, of course, but they see the same prospect. And so therefore, you know what you're going after. It's not a matter of saying well, hey, let's get a partner and then rework the whole block. So yes, there's a reasonable time line there. I think next key step is kind of as we go through the first few months of the year here, where do we get to on the commercial front? And can we get the right partnership in place so we get the right funding structure to unlock both opportunities.
Jeffrey Robertson: Under the timing of the extension for Block 18, would the permitting of an exploration well add any time to the extension such that a group could consider the results of the well?
Oliver Quinn: Yes. So I think in the detail of it, you've got a 2-year -- well, whatever license period you've got, say, 2 years in this case. You drill a well, you make a discovery, let's say, and then you move in, in the contract, it defines kind of appraisal periods, commercial evaluation periods before you would declare commerciality and that brings time to do that, if that makes sense. So the first period is in summary, really for the first primary activity. And then depending on success and how clear it is from the first well, there is a period for appraisal there where you can come and put an appraisal plan together. That could be more appraisal drilling. It could say, well, hey, I'm going to test a well or whatever, but you have that period to do that.
Jeffrey Robertson: And lastly, for now, with respect to inorganic growth, Oliver, when you think about Meren's current opportunity set over the next couple of years, which would require capital dollars. What type of asset it's best in the portfolio do you think?
Oliver Quinn: Yes. Good question. So I think I'll start with what we have today, and I think hopefully you saw that in the presentation that I'll take a step back, really when we completed the prime amalgamation, of course, we were doubling down on production reserves, cash flow that we knew well because we've been a co-owner. We also knew there was a lot of organic growth opportunity in there. So exploration resource, contingent resource, high-value stuff. I think as we've moved through putting the two organizations together with a bit more capacity over the last 6 months, we're more excited about that. So I think we see a lot more opportunity around that portfolio for tiebacks to the three FPSOs. EG, as we've just talked about, we've matured that very well, and that's come a long way and looks exciting. So I think that set of opportunities in the company today is exciting and I think has emerged in a very strong way as a set of options. The other backdrop there, and Aldo touched on this in the presentation is the Nigeria landscape has drastically improved. I think both fiscally, politically support, you see production rising there quite quickly. You see investment dollars coming back from international firms as well as local companies. So there's a better landscape there beyond the technical for maturing things in Nigeria. So in sum, we're really excited about what's in the current portfolio. When you look at the character of that, it's high-value contingent resource coming into production short period, but infill drilling next couple of years, new kind of tiebacks end of the decade. So that's great, and that delivers a lot of value. What it does mean when we look at the inorganic space is we say, well, look, are there opportunities out there that could add production, cash flow, scale up the business in that respect in the shorter term. So they would complement the growth that's in the current portfolio, but they would kind of build the balance sheet, build the operating cash flow, let's say, and help us kind of fund some of those organic opportunities because, again, as we show our kind of capital allocation, we're not going to overlever the business to do that stuff, right? We develop a series of options, but we're choosing which ones to do in the context of that disciplined balance sheet. So again, some inorganic growth, if it's the right opportunity. And again, we're very, very disciplined on that, could help unlock some of those barrels as well
Operator: [Operator Instructions] Our next question is from David Round with Stifel.
David Round: Perfect. Sorry about that. A few questions from me, please. The first one is on the gas sales agreement. I read something about that this morning. Just wondering if you can give us a sense of how meaningful that may or may not be. The second question for me, please, is you've mentioned ATCO Far East and Acacia as specific targets. Just wondering how quickly those could be tied back in a success case. And I suppose if that is going to take a few years, how many infill wells should we be assuming each year to support production in the meantime? And if I -- actually, I'll sneak just a follow-on to that. You've got a '26 CapEx budget of $100 million to $140 million, I think. Are you able to just break that down for us, please, just in terms of how many wells are assumed in that? Is it all just long lead items, please?
Oliver Quinn: Yes. Thanks, David. I'll take the first one on the gas and then I can come back on the second one, and we can get to the third.
Aldo Perracini: Yes. Okay. So in relation to the gas sales agreement, it was a result of a prolonged negotiation that we were having to revise the index that's based on the contract that we signed back in 2018, given that it took some time to get that result. So there will be a couple -- a few impact that you're going to see through cash flow and P&L in the coming period. So there will be first one lump sum payment that we're going to receive now in the first quarter of 2026. Second, there will be an increased price coming from the revised index, which will flow through all the periods as we produce and export the gas from Akpo and Egina and there is a third component, which is the recovery of the arrears, right? The difference between what we should have received back from 2020 compared with what we have received and that delta we will receive also in time through a reduction of the handling fee. So you should expect a larger impact in 2026, given to the resolution of the contract. And let's say, on an ongoing basis, we are talking maybe something about, let's say, doubling the gas revenues that we have comparing with the last 2 to 3 years. So it should be meaningful, especially in the first year.
Oliver Quinn: Okay. I think on the second one, David, it's a good question on Nigeria. So maybe I'll just take a step back. We're getting two rigs back end of this year, which we'll come on to on timing and your CapEx question. But actually, what has happened is we've had the longest drilling break across the three deals since kind of first oil. So when you look at our '26 guidance, it's effectively that's what it reflects. There's, of course, natural decline, as you'd expect. But we've had this long drilling gap that, again, we haven't really had before. And that's probably what's underpinning that decline. So we turn to how do you firstly arrest that decline? And then how do you grow from the base, if you like. So I think in terms of arresting the decline, it's, as you said, the infill drilling. So when we look at that next program, to start with Agbami, rig will come somewhere at the end of this year. I mean there's operational uncertainty on exactly what time the rig arrives. But nevertheless, it's firm, it's coming. And there are 6 infill wells planned on Agbami through '27 across the year. So when you look at that, I mean, that's quite -- for a field of that age, it's quite positive. It's quite sustained. So there's a relatively big infill drilling campaign there, which will arrest natural decline. And then we go across to Egina and Akpo with TotalEnergies operating. And again, in parallel, if you like, TotalEnergies are contracting for a rig. The plan is to bring the rig in again, towards the end of this year. So we're kind of guiding Q4 plus or minus operational kind of issues on where the rig is coming from. And again, interestingly, there's two buckets of opportunity there. One is the kind of Akpo Far East, so testing growth, either prospective resource that's near field, contingent resource. And then as we move into '27, the focus will be on infill drilling Egina and Akpo, so three wells there. So that gives us in the kind of near term, if you like, at the end of this year, the kind of barrels that are coming on stream. It will be early '27, but barrels come back on stream and rest of natural decline. and equally gives us some more certainty on prospective resource, contingent resource and how that may play out. On the latter, I think reality for the tiebacks is Akpo Far East is quick because it's 5 kilometers from the FPSO. So we hope to get first oil from that in the success case in less than 2 years. And I think the wider tieback opportunity set, we didn't talk about it today really, but Preowei near Egina, there's Egina South, which is a similar size discovery to the south of Egina. Those things are kind of 3-year cycle. And again, we are optimistic of making project progress on those this year, and then that would be Preowei first oil '29. Egina South, a bit more uncertain, but again, 3-year cycle, so kind of end of the decade. Akpo, which we did mention is a potential tieback to Agbami. And again, similar to the well that we will drill probably end of this year, early next year, that's an appraisal well. So again, it's discovery contingent resource. And depending on what we find in that appraisal well, that's again circa 3-year cycle tieback to Agbami. So I think I'd characterize it good campaign of infill drill coming in the short term, kind of end of this year, good testing of contingent resource that gives us kind of a lot of options for growth barrels end of the decade. And then that leaves us kind of one more gap, which is, well, what more infill drilling is there to do before the end of the decade to keep production up in the fields. And so I think there we see 2 or 3 options at least in Egina and Akpo, so potentially '28, '29. And in Agbami, 6-well campaign is pretty big anyway, but we're working there on is there another similar campaign a year or so later. So I think we'll be on and off active on the infill drilling in summary through to '29, 30 with the aim of sustaining base production. And again, in parallel, that keeps us going while we grow the kind of contingent resource projects and prioritize which of those are the best to do.
David Round: Okay. That's really helpful. And sorry, just a final one, just around CapEx for this year. I mean, is that mostly long lead items?
Oliver Quinn: It's -- there's some long leads in there. I think the range that you see is really the timing of rigs arriving. So it's a classic year-end issue. So we're planning on Q4, but those rigs could arrive just contractually operationally, possibly Q3, and they could equally arrive late Q4. So it gives us a bit of a range on that number. But it's primarily -- we're assuming the wells are drilling Q4, so it's CapEx in the ground as it were. We did put some numbers in some CapEx into long leads last year for Agbami, for example. So that was done kind of '25 mainly.
Operator: Our last question comes from David Mirzai with SP Angel.
David Mirzai: Firstly, on exploration, you've got Far East Deep. You've got [indiscernible]. Is this in reference to deeper reservoirs or down fault? Have you intercepted them? What's the reservoir like? What's the kind of risk both around volumes and deliverability in regards to these prospects? Secondly, appraisal. You pointed out your contingent resources on Preowei on Ekija in South in Nigeria, but also the existing Gardenia discovery in Equatorial Guinea. Obviously, these discoveries have been around for a while. You've had capacity in nearby facilities and they haven't been developed. What's the key hold up, the key contingent reason behind these resources not being developed to fully utilize their respective FPSOs? And just lastly, on scale, I mean it's quite kind of observable to any analyst and investor that the market wants fewer oil and gas companies with greater scale, broader portfolios, more ability to finance their own developments and that they reward effectively higher cash flow with lower debt levels and with greater liquidity. Now having gone through the process of combining in Prime, that's clearly the next step forward for you. And I just want to kind of get your thoughts around what scale is enough or what your investor base is really looking for you to bring you up to the next level.
Oliver Quinn: Yes, thanks for the questions. I think we start with the first one, the exploration point and kind of split that up. Akpo Far East is exploration. So that is prospective resource, let's say, it's kind of 1 in 3, 1 in 4 chance of success geologically. I think -- the commercial chance of success on the back of that is extremely high because it's very close to the existing infrastructure. It's within the kind of field physical ring fence, if you like. So the economics are extremely compelling. So it wouldn't take a huge volume there to reach commerciality. So that one is about geological chance of success. I think the others, just to segue that. So Ekija Egina South are appraisal. So those are contingent resource for us today. So the discoveries that we think, again, are strong candidates for tieback and development, but they do need some appraisal drilling to confirm volumes and technical parameters. And then Preowei is slightly different again because that is actually reserves for us, that's 2P reserves. And that really reflects the fact that Preowei has been very advanced as a project. It was delayed in COVID as many things in terms of CapEx contracting costs, but it stayed in 2P reserves for us because it's very advanced as a tieback to Egina, and that's a project that we are pushing with the operator and our partners to mature this year towards a final decision. So they're all slightly different. I think the only pure exploration one in that set is Akpo Far East. The others are really about appraisal and again, just rightsizing, improving commercial volumes. I think the second question, the wider point on Gardenia and some of the other resources. Look, I think there's a timing point to a lot of this stuff. So in two respects, one, the projects themselves and actually the second one, the market, which I'll come back to because I think it also addresses your third point. But if you look at our three FPSOs in Nigeria, huge fantastic facilities, huge capacity. They've been full for most of their life, of course, and their varying ages. They are in this natural decline phase, which you see in the base production. But what that means is there's an optimal timing point here of saying, well, actually, when is the right time to develop resource to backfill those facilities. And that's now because you don't just want to be able to bring a small amount of resource in. And of course, you want -- for the economic development, you want to be able to maximum development of something like a Preowei. So I think the timing point is partly on the infrastructure and when is that infrastructure available, when is the right time to backfill. I think specifically, again, on EG, look, we've had that block for a couple of years, '31, but having worked that through, matured it, particularly Gardenia as a discovery. Again, that's a timing point in that the monetization is through the existing EG LNG brownfield facility. And so it's the optimal timing of doing the project, knowing that there's capacity in the brownfield infrastructure, which you will use to produce LNG off the back of it. So I think that timing is now. So again, we'll make decisions on all of those through the coming period in terms of the right thing for capital allocation. But certainly, the project aspect has unlocked. I think more broadly, again, the second point on that, where is the industry? And I think you alluded to it again in your third question, but the industry is back in a kind of growth mode. I think a lot of bigger companies are short of resource. And so there's a lot more support for the right type of project, the right type of CapEx. Now again, from our perspective, we are super disciplined on the balance sheet. So lots of good opportunities, but what we're not going to do is overleverage the balance sheet, expose ourselves to CapEx overruns, et cetera. So we'll do it in a prudent way, but I think it's a good time to be maturing contingent resource and pushing that into reserves and ultimately monetization. So there's a macro backdrop, I think, is important there as well. I can move on to the third question, David, or if that covers your first two.
David Mirzai: Sorry, I was just being unmuted there. Yes. No, just to dig down on Akpo Far East, what is the geological risk, sorry?
Oliver Quinn: Geological sorry, specifics. Yes, it's trap really. So the reservoir is same as the Akpo field. So we understand it well. It's a phenomenal in the detailed kind of type permeability reservoir, super good fluids. So the thing on Akpo Far East is the trap. Is there an updip trap that works? And then I think there's a secondary more commercial risk on fluid. But that's secondary in two senses, one that we have a good handle on the seismic. So we think we understand that fluid and it's oily and we can characterize that. And actually, the second part of that, Akpo, of course, is a very gassy field, and we export that gas. And as Aldo just talked about earlier, we've got improved pricing on that gas as well. So I'd say that's a secondary risk, but the geological -- fundamental geological risk is trap, yes.
David Mirzai: That's great the first two. Obviously, question three around scale. You've talked in your first two answers that you're being prudent with the balance sheet because cost overruns. Obviously, there's that argument that if you are twice as large as you are now, you have to be a lot less risk averse.
Oliver Quinn: Yes. No, I think it's a great question. And I think in terms of the strategic position of the company, again, I'll take a step back. 25 years ago, we were Africa Oil as it was, a completely different company, much, much smaller in scale. You roll forward through that period, we've doubled reserves, production, et cetera, which has been a big step forward in the scale sense. I think that has allowed us to mature some of these projects in a better way with more confidence because of the scale. So I think it speaks to your point. As we then look forward, look, I think there's a balance here because I recognize and agree with the points you make about the industry. I think it is overdue this space within the industry, let's say, the international independents. It is overdue some consolidation, some capital efficiency, G&A efficiency, et cetera, absolutely. And we see that. I think when you come to execute around that, I think, again, our message is disciplined. So yes, the ultimate prize does all the things that you described, again, agree with that. So for us, it's not so much that fundamental principle. It's the pathway to get there. So again, we look at the business today, it's incredibly strong balance sheet. We have some natural decline in production this year, but it's arrested and we go back into kind of growth through the end of the decade. We didn't, for example, in this call, talk about Venus and Namibia, but Total have signaled very publicly that it's FID this year that adds barrels for us in 2030 on their time line. So we go back into that mode. So I think great. But what we're saying is, look, we protect that. That's always the #1 job is to protect that business, make sure it's robust. But equally, go and look at inorganic transactions that are accretive to that. And then they really have to be. We don't want to dilute that business just for the sake of scale, but we recognize there are steps that we could make that give us both scale and they are accretive. And those are the things that we are kind of narrowing our focus to. But I think short answer is yes, we are still active in that world. We still look at things. But again, we do it with rigor and discipline.
Operator: There are no further questions at this time. I will now hand back to Mussannah to read through your written questions.
Mussannah Chowdhury: Thank you, operator, and thank you once again, everyone, for joining today and submitting your questions. I'll go straight into the questions. So I think one for you, Oliver, is given the transformative potential of the Venus discovery, we currently have 3.8% effective interest through our stake in Impact. While this free option structure is highly capital efficient, does management view this level of exposure as sufficient to capture the full value creation potential of the Orange Basin? And is there potentially a pathway or a world where we increase that exposure?
Oliver Quinn: Yes. Look, I think it's obvious question on Namibia and Impact. And again, for the third time on this call, take a step back. I mean, if you go to where we were a few years ago with this, Impact has done a fantastic job over a decade of driving Venus as a target at play, attracted TotalEnergies in, got the well drilled, made a great discovery. As co-owners of Impact, we're faced with the kind of interesting dilemma here that this huge world-class discovery, but of course, it quickly needs capital funding and capital funding of a big scale. I think as we've outlined many times on these calls, we've got a funding solution in place. We're not exposed to the capital, and we transformed that into a kind of CapEx demand that we couldn't fulfill into one that becomes a growth is a growth opportunity, adding barrels in 290. I think that then takes you to a place that says, well, it looks great. We'd like to have more. But I think with respect, we have another large shareholder in Impact. It's really the two of us own kind of 97%, 98% of that company now. And so we both see that. So I think, yes, in principle, of course, we'd like more exposure to a project with no CapEx or risk exposure and lots of barrels coming. But recognize that equally our fellow shareholder also sees the same attraction. So yes is the short answer, but the execution path on those things is a bit trickier.
Mussannah Chowdhury: And then one for Aldo. Aldo, could you please give some more detail on the Agbami impairment and the increased costs expected going forward?
Aldo Perracini: Yes. Of course, I think in Agbami was what we tried to explain throughout the materials that was not just related to one single item, right? So it was a combination of lower oil price and an increase in costs, mainly in relation to the life extension of the FPSO. So in terms of oil prices, I think that's obvious, right, throughout 2025 in relation to the decline. And then more specifically in relation to the Agbami FPSO life extension, Agbami will continue to produce beyond 2044, which is currently our license -- next license renewal period. So there's a significant amount of reserves already as 2P to be recovered from the field. However, what the life extension allow us to do not only to recover these additional reserves in a safe and reliable way, but at the same time, allow us to continue to invest or to develop or to plan for bringing contingent resources as 2P, right? And the 2P numbers are the ones we use for the impairment calculation, the recoverable value, but the 2C numbers, so the additional few wells that Oliver mentioned beyond the campaign 27, 28, [ Ika ], which is a to the Agbami FPSO, as well as other nearby opportunities outside our blocks -- those will all -- would all be produced through the Agbami FPSO. However, we need to make this investment upfront to extend the life of the facility and make sure that we comply with all the requirements and certification as well as having a reliable FPSO. So I think it's just a reflection of that. And when we get to mature midlife fields that we have to go through this exercise. So that's the detail behind the impairment on Agbami.
Mussannah Chowdhury: And just two more, I suppose, for you is can you give us some thoughts on the percentage of total hedging for 2026? And I think the second from this investor was can you just give us some color on our plans for the RBL going forward?
Aldo Perracini: So first of all, in relation to hedging, we have a policy where we hedge between 70% to 100% of our post-tax net entitlement production on a rolling 12-month basis. So what does that mean? It means that we check first, the amount of barrels that are exposed to oil prices, right, as we have cost recovery, for example, in our agreements in Nigeria, that means that not all barrels are exposed to oil prices, right? So we first calculate the post-tax and net entitlement and out of that, we hedge between 70% to 100% on a rolling 12 months basis. Now we make a combination of either physical port sales or swaps where we lock in the price that's close to the forward curve at the moment that we enter into the hedge. But we also have a mix of solar and food structures where we keep some participation on the upside as well for a certain percentage of these hedges. So that being said, at the end of 2025, we had approximately 3.5 million barrels of oil for 2026 sales that were hedged through a combination of physical and financial instruments. Out of that, 2.3 million are on the first half of 2026, which those are primarily hedged through the physical for sales, so through the physical offtake agreement with an average floor price of around $62 per barrel. And in the second half of the year, we have 1.3 million barrels hedged using a mix of swaps and collar structures. So we provide good downside protection, but we also retain some exposure to the upside. So that's in relation to the hedging part. For the RBL, I mean, as we saw through the presentation, our numbers, we -- it was very important for us in 2025 to pay down a substantial amount of the RBL facility, right? We had -- we started the year 2025 with substantial large cash position and to reduce financing costs, it made total sense for us to pay that down and reduce the financing costs. As we mentioned throughout the presentation, we estimated that we save around $12 million in financing costs just by doing that. Now the next step in relation to debt management, the last time we refinanced the RBL was in 2023 on the back of the license extensions in Nigeria. So we are now getting to that period where to keep a substantial headroom in the RBL facility, not necessary to utilize the money, but to have the flexibility to do so. We are in the process of refinancing the current RBL and we expect to finalize that sometime soon in the first half of 2026. So with that, we increased the RBL capability. But at the same time, we will continue to be very disciplined of how much we draw from the facility to reduce financing costs.
Mussannah Chowdhury: Thanks, Aldo. And then Oliver, I'll put this one to you, and it's something you briefly touched on a little earlier. How much risk do you see when it comes to securing the Nigeria drill rigs this year? And if you could just give us some more color on that?
Oliver Quinn: Yes. No, I think we're not concerned about that. I think we're very advanced, both joint ventures in the recontracting process. So I think we'll -- we're very confident those rigs will come this year that we'll get back to drilling. And again, I think what's been a quiet period for us, and that reflects our production, but actually, we're going to turn that around with those rigs coming towards the end of the year. And again, a combination of infill drilling, short-term barrels and getting back to testing some contingent resource and long-term growth and value. So look, I think first part of the year operationally quiet while we finalize the campaign. But then as we move into the latter half, it's pretty exciting for us to have two drill rigs again active for a prolonged period on our major assets. So I think that's quite a positive view to the year overall.
Mussannah Chowdhury: Oliver -- and just keeping on Nigeria, as a question, our reserves have dropped from 2024 to 2025. Of course, there's been a portion of production in there as well, but maybe you can give some color on that and how we're arresting that decline.
Oliver Quinn: Yes. And again, I think if you look at the shift in 2P, that is dominantly the produced resource. I mean every year, you're going to get some minor ups and downs on your kind of existing well stock and fields based on latest performance. But again, when you look at the year, it's really around the fact that we've had this, again, longest period in the kind of history of the fields without active drilling and adding new wells. And so you see that in the sense that you produce 2P reserves faster than you're replacing it in that context. But I think again, the two key points are, you look at our contingent resource, that has grown significantly through '25. So again, in terms of options for future value and growth of the business, that's good. And secondly, again, to the prior question, we're very confident that we're getting back to drilling here, not just with 1 rig, but with 2 and sustained campaigns starting end of '26 through '27. And therefore, we'll start to grow again on that time period, which I think is really positive as we look at the cycle, oil price cycle in particular.
Mussannah Chowdhury: And just two more before we close off. So when we speak about capital allocation, balance sheet strength and organic opportunities are the first 2 that we speak about. Just what should everyone read from this? And then shareholder returns, of course, and M&A coming third or inorganic opportunities, I should say.
Oliver Quinn: Yes. I think we've been very focused on the balance sheet, and we talked about that a lot on this call. And I think, again, that's important as a base to the business. Aldo talked about the moves we made last year. We paid down debt. We've got a lot of liquidity. We've got low leverage. And I think the way people should look at that is it's prudent. It's, of course, a volatile world, and I think our view is it will remain so. So we just have to deal with that. But starting with a strong balance sheet opens up a lot of options for us. It opens up options to allocate capital for organic growth, options to, as we are doing, returning cash to shareholders. And again, we've touched on it, the inorganic growth. It puts us in a very strong position to test from that kind of balance sheet, is there an organic transaction out there that makes sense for us? And is it better than the kind of organic growth capital allocation options we've got in the portfolio today. But that balance sheet gives us choices. And I think that's what's really key in this message is strong balance sheet, strong hedging in place for this year, very, very good foundation to grow the business, right? And there are a number of choices to do that, and we're always seeking to have those choices. And in parallel, again, we've been very strong on shareholder returns to recognize that we want to grow the business, but equally, we're not going to grow it at any cost.
Mussannah Chowdhury: Perfect. And just lastly, and one on EG. Given the size of the prospects in EG, would it be possible to go into EG-31 alone? Or how much are we willing to give away farming to a partner?
Oliver Quinn: We're definitely not going to give anything away if I put my commercial heart. But look, I think we're 100% in those licenses. Our partner is GPetrol a state national oil company. And so they have 20%, but they're carried in the early stages here. So it's 100% funding. So look, it's just -- it's a risk allocation and capital allocation that we're not going to do a project at 100%. That's not a statement of view of risk or value on the project at all. It's a point of saying, again, it's a portfolio effect, it's risk sharing and it's bringing in strong partners helps any project, and that's our focus. I think the important point on 31 is, again, we need to be really clear that the Gardenia discovery itself is something that could become a short-cycle fast track development with the right partnership in place. So it's not high-risk exploration dollars. It's lower risk short-cycle brownfield LNG, which could be incredibly low-cost resource for us as a company. So look, we wouldn't do 100%. But equally, we want to hold a material position in the project, recognizing the potential value it can bring to us. And again, I'll go back to the theme of it's around prudent capital allocation and discipline within that. Great growth options, we'll pursue them, but we'll do it in the right way that doesn't jeopardize the company.
Unknown Executive: Okay. Thanks, Oliver. That's all the questions we have for today. So operator, I'll hand back to you to bring us to a close.
Operator: This concludes today's call. Thank you for joining. You may now disconnect.