Penumbra, Inc. Price & Performance (PEN)

Although we believe that the expectations reflected in these forward looking statements are reasonable, actual events or results may differ materially from those projected or implied in such forward looking statements due to known or unknown risks uncertainties and other factors. So this is our Q4 conference call and for reference, our announcement was released this morning. A copy is available on our website .com. .Com. Next slide please. Usual, the format of the presentation will be a number of slides presented At the end, participants can ask questions either by raising their hands. We will endeavor to we will endeavor to to answer all questions. You can also The type a question into the frame, as you can see there on the left. And we will try to answer questions certainly unless the questions have already been answered by a previous answer. Next slide, please. So we announced our results today. I think a very strong quarter, a very strong strong year with $106,000,000 of revenue in Q4, dollars 50,000,000 in EBITDA and a net profit of $32,000,000 in the quarter. Full year in the orange colors, just under 10,000 barrels a day. Average for the year $285,000,000 of reported revenue.

Dollars 152,000,000 of EBITDA and a net profit of $56,000,000 Our balance sheet also very strong with cash position of around $73,000,000 gross debt at $145.9 dollars and distributions during the calendar year 2024 of $246,000,000. Today, we're also providing some guidance around production, around OpEx and around CapEx. Here we are with our working interest guidance for the for the year. Between 24,000 barrels a day. These estimates factor in operator forecasts planned routine maintenance that we often have on the assets and buffer for some unplanned outages. And our unit cost of production, we are guiding around $21 a a barrel production OpEx and additionally around $3 of non recurring project costs on top of the run rate production OpEx. 21. Next slide, please. Today, we're announcing the 2025 framework for distributions. This is a material step up from previous years. We are at $500,000,000 NOK target distribution through quarterly returns of paid in capital. And supplemented by share buybacks and potential special dividends during the quarters particularly in the final quarter of the year. Is an implied yield based on our current market cap of around 15% to 16%, which we think is very well positioned in the peer group in which we operate and shows a strong demonstration of our commitment towards shareholder It's worth noting that we do not pay dividends.

We pay a return of paid in capital which for certain shareholders may have some tax advantages, both in Norway and internationally. And that's worth noting. [indiscernible] quarterly dividend of DKK80 million, which we paid in March. And then during the course of the year, so then in in the May announcement, in the August announcement, the November announcement, the core cash distribution of DKK80 million, that's the total of DKK320 million distributed as cash During the year so far, we've already purchased DKK23 million worth of our own shares. If we look at the blue box, that leads on top of all that an additional approximately DKK160 million that can be used for additional share buybacks and or special dividends. With the bond that we did, we have also set up an ongoing very transparent framework where we're permitted distributions for following years 2026 and beyond will be based on 50% of free cash flow to equity for the calendar year no limitation of net cash pro form a post distribution. So again, very transparent and we believe very, very forward leaning shareholder distribution framework, all based on a calendar year. I can go to the next slide. As I mentioned, the distribution framework is changed with the bond that we did.

And we've gone from a sort of a financial year twelve months kind of February to February type of calculation to more of a calendar year one, so it's January to December. It's an important point to note here. This slide is simply to kind of reconcile our previously announced framework for the financial years that one could compare if one wanted to Our previous guidance, which had been DKK400 million to DKK500 million for 2024, financial year, based on an oil price of $85 oil price was about $9 less than that, dollars 85 based on the analysts' average oil price assumptions for the year at that time. Obviously, oil prices underperformed there. That had a delta in terms of our cash flow of about DKK30 million, DKK300 million or something like that. But despite that, we have returned significant amounts of capital back in 2024 And if we were still under the old framework, we think that we would perform around $330,000,000 against that framework. So again, this is just for comparison purposes. The new The new dynamic is really set around the calendar year, the DKK500 million and that is far less sensitive to oil price. We're not setting that one at 85.

We're targeting around $70 a barrel to achieve that. So hopefully some decent headroom on that. Next slide, please. So on the left side, we show our senior secured secured bond issue. Many of you will follow that we issued a bond at 10.25%, which is a saving of approximately 200 basis points on our previous loan. We set up a framework for $300,000,000 So a tap issue is is possible in due course if we should find the right acquisition targets for instance. And with that, we repaid the $82,000,000 of reserve based loan that we have. So this is really replacing one financial product with the next. And this has really provided us with great flexibility within our capital structure diversifying our access to capital. And we can see here in the orange what the amortization looked like. We very deliberately set out an amortization in our bond. We wanted to effectively replicate the reserve based loan, but do it at a lower price. So having amortization, which starts at the back end of twenty twenty six, and the bond matures approximately five years from now. On the capital expenditure, those of you that follow us know that we have very, very year last year.

It came even heavier than we expected. Which was guided. We ended up spending around $100,000,000 last year in CapEx, dollars 5,000,000 of that was sort of from 2025 that kind of crept back into 2024. So our guidance for the year has moved from approximately $40,000,000 to approximately $35,000,000 for 2025. [indiscernible] [indiscernible] Crude liftings and sales on the left, we have as we pretty much largely has guided the lifting pattern that we had last year. This year, you can see that the second, third and fourth quarters are is going to be not terribly eventful from a P and L or cash flow perspective and that's simply just the way that the cargoes and the inventories on the vessels have built up. But so we're going to have very, very strong March, the first quarter being a little bit quiet. Next slide, please. Cash flow reconciliation, I won't go through it in detail here on this call, but we do try to provide that cash flow waterfall every time, so everybody can see exactly where the cash moves Next slide, please. So there's something around each of the assets Devon is still our largest asset in terms of production, in terms of reserves, in terms of net asset value.

And as we previously reported, all new production wells in the expanded campaign have been drilled and conventional ESPs installed on them. The Tortue Field, which is the original field continues to produce steadily from six pre existing wells using gas lift support Gross production reached 40,000 barrels a day in November and is consistently remained around this level since. There is scope on the vessel should we be able to produce more than 40 to exceed that nameplate capacity by approximately 10%? We are currently drilling the board on Prospect Well and that's the last operation in this campaign. We expect results to be announced during the first quarter. The Borneover, which has been with us for quite a while now, will be released after the Bordon well with no further drilling [indiscernible] 2025. Next slide, please. Equatorial Guinea being our second largest asset asset value. Also had a busy campaign last year with the C-forty five and the OF 19 infill wells drilled. With a Noble Venture drillship. We encountered good quality oil in saturated reservoirs and un swept zones in both the Seabed and the Kuma Complex. Wells were put on stream in November. And the joint venture is currently evaluating the potential for further campaigns in the Akumi Complex Seba Field.

That will not happen this year. That would be next year, but those plans will become more clear. Next slide please. In Tunisia, we are joint operator along with ETAP for those of you who follow us, the activity there has been slow. It's been impacted by delays in the regulatory process. It's a very important asset to us. It continues to be an important asset to us. Got very, very good HSE performance on there. We brought it well online just recently. Around 200 barrels a day following a nice workover. We do have a couple of plans this year for some additional workovers on these assets. So we do have activity. It's simply just not as active as we would like it to be. And hopefully that's situation will resolve itself in the coming months. Next slide, please. We added new blocks in both Cabool and Equatorial Guinea on the left In Equatorial Guinea, we have recently signed a production sharing contract for Block e. G. EG23. EG23 sits right there at the top of Equatorial Guinea in the toe thrust of the Nigel Delta. It's a very exciting block that just the south of it has the Alba field, which is ConocoPhillips. 1,200,000,000 barrels equivalent operated produced today operated by Marathon ConocoPhillips.

It's the largest producing field in the country and we're right next to it. And then just to the west of us, the Zafiro field, which had been an Exxon development has already increased over 1,000,000,000 barrels. So we found ourselves in a very, very nice postcode This is an exploration license which we'll have for three years. The only commitment on it really is to purchase and reprocess data And during that period, we'll seek to work up drillable prospects, probably seek to form that out before deciding whether to enter into a next period, which could involve an exploration well, but it's a very exciting block then we've also announced two PSC signed in Gabon, which surround Dusufu in the yellow, the Neossi and the blue Fuduma. Blocks, so G and H we used to call them. And this is a fantastic collaboration between Panoro BW Energy and Valco Energy, who between us we probably understand the subsurface of this area between these three companies better than anybody else. Any discovery can be tied into existing infrastructure. And it's a very, very nice long term acreage position that we've established in this key fairway in Southern Gabon. Next slide please.

So we talked a lot about production but what we also like to look at is the long term nature of the business. And just looking at what else the company has in its hopper, we had 35,000,000 barrels of 2P reserves at the end of twenty twenty three. We previously announced some discoveries in Gabon, which approximately 4,000,000 barrels net to us estimated at the midyear. Taking us to around 39,000,000 barrels. That's the end of twenty twenty three. Now we've come out with our annual statement of reserves in the month or so. So I think you'll have fresh data soon, but this is based on historical data. We also have 29,000,000 barrels of contingent resource, which booked. And then as we get into the oranges and the blue, you used to show the continued up upside that exists within the portfolio that we have, the organic portfolio we have, got 112,000,000 barrels of discovered 2C in EG23. That's the block I discussed in Ecuador, Guinea at the north of the country. In Dusufu, we have another 30,000,000 barrels of infrastructure laid out opportunities for ourselves there. We have a very large inventory of other things within Neoc, Kaduma, Blocky G01, Ekutoro Guinea, block EG-twenty three and ER three seventy six in South Africa.

So we think that we have very, very solid reserve base here, but importantly, we also have an important very good contingent resource and prospective resource base to continue to feed the hopper over the years. [indiscernible] So the key messages really are that we are coming out of the variant intensive period of CapEx. We're coming into a period of higher production. Lower capital expenditure. We have long life oil weighted assets diversified across three countries. We have catalyst within the company both the Bordon ILX well, New Blocks In Gabon and Ecotro Guinea. We've diversified our access to capital during the course of the last year and we set that all up with what we think to be a very front footed shareholder distribution program with our return of paid in capital and share buybacks with a quarterly core distribution and ongoing share buybacks. So that's it for the presentation. If I can go to the next slide and remind people how to ask a question. On the right, you can either raise your hand colleague, Andy Diamond will try to unmute you or you might need to unmute yourself. If you'd rather to type a question, we will endeavor to answer questions that haven't already been answered.

That have typed in as well.

Thank you, John. The next question will come from Stefan Fukard, You're unmuted. Please go ahead and ask your question.

Yes. Good morning, guys. Okay, well. Again, the two on my side The first one is around 25 phototrans guidance. And could you give us a sense of the split between the various assets? Then the second one is, how do you see the remaining market at the moment? Have you looked at many things recently? Do you think things coming up that could be the oil price going down a bit? Are you bidding on things? Interesting to have a bit of sense. And perhaps lastly, could you come back to the nonrecurrent OpEx, the [indiscernible] [indiscernible] Right. So the I'm just trying to do quick calculation for you on the on the guidance and the breakdown between them, but it's roughly going to be [indiscernible] [indiscernible] And then numbers here correct then. It'll probably be something like another 35% would be in EGE and then 15% in in Tunisia, something roughly like that to Stefaan. If need more precise numbers, we can come back to you on that one. It's roughly that split. On the M and A side, we always have always looked at opportunities There are opportunities in the market. Constantly evaluate them. What we've found often is that there seem to be companies out there that might have a strategic need to really buy something at a high price.

We do like to think that we've got a very strong financial discipline in terms of looking at opportunities, looking at those given the high discount to net asset value. So we are always looking because we do see a price also in being a bigger company in terms of closing that discount to NAV. We do see that smaller companies trade at wider to NAV in the stock market generally speaking. And as you get bigger, you can close that gap. So we do recognize that opportunity, but same time, we need to be highly disciplined in terms of the price that we we pay. We think we position the company very well to take advantage of those opportunities. We're very Well regarded, we believe in the countries in which we operate. We have the Norwegian flag. We do everything we say we're going to do, we behave with high level of ethics. We believe we're well respected in our peer market. If the selling companies can see that we can transact, We have done the bond issue, which is demonstrated financial capacity as well. I think as a team here, we set the company up very, very well to take advantage of those opportunities.

But again, discipline is paramount. The non recurrent CapEx is really things around not so sexy things around facilities maintenance, life extension stuff around the vessels, Much of it will be in the EG asset rather than Dusafu's brand new kit.

The EG asset is clearly a bit older and every year well, not every year, but certainly every year we evaluate what opportunities are there. That can improve the life of the facilities and maybe able to enhance production things that are a little less sexy. Than drilling new wells, but also don't form part of core core operating OpEx. And clearly, those projects can be dropped in periods of low oil prices or they can be dropped at the tail end of the life of the asset. For instance. But these are things that make sense to do to extend the life out of the facilities. And again, principally, this is Equatorial Guinea. Hope that answered your questions.

Yeah, great. Thank you.

Thank you. The next question is from Christopher Bat Christopher, you're self muted. If you could unmute and go ahead with your question, please.

Yes, guys. I'm Christopher from Clarksons here. Thanks for taking my question. So the first question is on the lifting schedule for 2025, which shows an uplift of around 6% while the midpoint of the production guidance range shows an uplift of 20% relative to 2024. Levels. First, can you provide some color on that? And also to follow-up on kind of the production guidance range what is the key factors for producing in the lower or the upper end that guidance. And my last question is related to prospect B. Could you please also provide some comments on your expectations now that we approach some results.

Thanks, Chris. Good questions. Yes, so the liftings Obviously, we produce oil every day, telling you things you already know. We don't sell it every day. Gabon and Equatorial Guinea, our biggest assets. We're FPSOs, our entitlement builds up on the vessels. We coordinate sometimes we lift on our own, sometimes we lift with partners. So there's some variability in the number of barrels that we lift every twelve month cycle versus the sort of run rate of production. So there's always going to be a little bit of mismatch on that. And there's also obviously on the liftings, we're lifting our entitlement barrels rather than our working interest barrels. But I think you understand those nuances. So with our crystal ball right now, we're just in February, just looking at the way we see the lifting schedules building the number that we've provided there. Clearly, during the course of the year, we kind of amend that as we go. But it really just has to do with the lifting cycle and obviously trying to define something in a calendar year. Sometimes you have things that happen in December or January, which fall into one year or the next. Can provide some variability and that probably explains some of that variance that you're seeing there.

On the production range, again, what we try to do production range is take what we think are the what we know to be the approved operator budgets across all three assets for the year. We then look at those operator budgets typically include facility maintenance periods, so planned maintenance experience those of you follow Dusufu closely last year, you'll know that we had a three week planned shutdown of the FPSO. Midway through the year, that's approximately something like 6% of the uptime sort of during the course of the year. That's three weeks out of 52 is about 6%. [indiscernible] We those operator estimates also sometimes look at some unplanned things. We typically own these FPSOs or subsea systems. You could have some unplanned shorter term shutdowns, it could be for a week or two. But it's just kind of provide a buffer there for things that we know will happen or expect are likely to happen the course of the year. So the lower end of the range is kind of assuming either subsea or on the FPSOs and the upper range is is a higher level of performance on that. But I think the mid side of that range, I think, is what to focus on.

I think it's more or less where most of the analysts kind of had their numbers anyway. And I think that's probably the best explanation I can give.

On Board Don, I suspect [indiscernible] we are not in a position to say anything as yet. What I will say is we're drilling in a quite an exciting new area of the license. We we have a lot of wells in the Hibiscus, Rouge area, a lot of wells in Torture a couple of discoveries in the North Of Bulakwa, Whitman and Mubenga, There is very little historical exploration. There's no exploration historical exploration in this particular area. It's slightly deeper water too, so the seismic time depth conversions uncertainties in this area. So together with BW Energy and Devon Oil Company, our partners, who are just [indiscernible] taking the proper time to do this correctly. And we should have results during Q1.

Thanks, John. Great color. Just to follow-up on that production guidance range. So if things goes to plan, you expect to land at around 12,000 barrels per day? Or do you expect to land kind of higher in that range if if everything goes to plan?

Yes, I think we deliberately picked that middle of the range as kind of a good thing to target in on. Obviously, we'd like to see We'd like to see some higher performance but we have some respect also the I'm sorry about I hear some feedback as well. [indiscernible] we're working together with the operators to make sure that we're providing that guidance in line with what's been provided by the operators.

Okay, great color. Thanks guys.

Thank you, John. The question submitted online, please. Could you expand on the strategic rationale for the bond issue? And the benefit versus the increased interest? Payments Absolutely.

Strategic rationale, I think that We've been through a a huge growth period and the reserve based loan for those of you know, is a product which is very widely used by companies like Panoro even substantially larger companies will have reserve based loans and they're It's a wonderful product for the E and P market.

It's it's quite flexible. You're dealing with the syndicate of lenders. Those lenders are often very, very supportive. We felt that as we were kind of coming out of this development period that we've been in that bond issue made more sense from us. It's a more of a corporate style facility. We have some some expanded activities on the exploration front, for instance. We have a bigger company now we felt that at that time, we were then ready to look at a product that had a little bit, a little bit more of a corporate feel to it. The RBL is quite a tightly constrained product. It's is very flexible at the same time, but everything from shareholder distributions to exploration spend to other activities, it needs to be closely scrutinized by by lenders and I think we just felt that we had evolved as a company to the point that a corporate facility was was more in keeping. The bond market was in a strong position where we were able to refinance our RBL at something like 2%, a little bit more than 2% cheaper than we're paying under the reserve based loans. So there was also a financial benefit to it While the gross amount of the loan is bigger, and therefore bigger than the RBL.

But there's one other thing that I think some people had forgotten, which is we also made use of a working capital facility, which helped us manage our cash in between lifting. So sometimes you'd see at the balance sheet dates, you'd see us using this corporate facility Sometimes it wouldn't be there. And then intra quarter, you might not always see it in the financials, but we did rely on it. So we were effectively refinancing more than just the RBL, we're putting ourselves in position to have a stronger liquidity that was directly controlled at the top curve. So the strategic rationale was really, I think, recognizing fact that we had evolved as a company. It also, I sends a very strong signal to the market. We've A number of E and P companies can't access this market.

We felt with the Norwegian company quarterly reporting stock market listing that entering the Norwegian bond market was a very natural progression for the company. That also shows the ability to raise capital in the debt capital markets for further acquisitions which is a big benefit. For us as well. And it was extremely pleased to have done the bonds. It's still very much the feeling in the company. I mean, who knows how the bond will trade, it gets tightened up a little bit. [indiscernible] So I think we've got a very good response in the market from the bond. For equity holders, I think it's a very, very positive thing too, whereas shareholders were less predictable under an RBL. Here, we have a framework which is very clearly established and that's allowed us to come out with this very front footed distribution that we've announced today. It's allowed us to have very transparent framework for how that will look in the coming few years as well. So it's really provided us with the ability to put a very sensible and transparent framework together.

Thank you, John. A further question online around capital expenditure. We've obviously been through a very capital intensive development phase. Could you please talk a little bit about our catalate expenditure ranking, high grading, allocation process and any target return thresholds from investments we make. And looking slightly ahead How you would see growth versus maintenance expenditure.

Okay. So I mean, we're obviously in a very capital intensive business. We've been through a very heavy period. We're coming into a much lighter period now.

We've got it around $35,000,000 It's about $40,000,000 but we moved $5,000,000 from 2025 to 2024.

Just the way the cash calls fell in that particular period. And when we ourselves look at it, we've been through the bond process recently, so we've had a lot of scrutiny around these issues, credit analysts and equity analysts all looking at this. I think people assume a sort of sort of similar level of CapEx going forward. In terms of the priority of CapEx, we obviously, we need to look after our business. So this maintenance CapEx has been referred to as obviously a very critical component. And that is decided through the joint ventures every year, what the key projects are, from an HSE perspective, from a improving the logistics facilitating production these kind of not so sexy things to talk about, but the things that are absolutely critical for the long term support of the business. Obviously, the more interesting CapEx is around additional drilling or workover activity. On the assets. This year, as everybody can see, is quite a light on that front. I think you'll see twenty twenty six more activity in both Caban And Equatorial Guinea. And when we look at these CapEx opportunities in terms of market in terms, I mean, we we are in capital intensive business, but we do expect very high returns from those capital decisions.

Again, they need to meet very high rates of IRRs typically north of apparently, I'm breaking up a little bit, but hopefully, everybody can hear me.

North of 20%, 25% are the kind of typical things we'd look at in excess of those levels. So we really need to look at returns that are well in excess of our cost of capital.

Andy, can you still hear me? Apparently, there's some [indiscernible] Yes. Thank you, John.

And just just finally final question from online. Is there anything you can say on what needs to happen in order to unlock the full potential of Tunisian asset base, which as you alluded to earlier, has been somewhat constrained of late.

Yes, sure. Again, I'm repeating myself a little bit, but the Tunisian asset is a wonderful asset. It's got long life. It's been producing for forty years already.

And it will produce for a long, long time to come. It's not a unique joint venture structure, but in North Africa, Africa, Egypt for instance also and a lot of the North African the joint venture model is quite different than it is in West Africa. It's that you're partnered with the state. Oil Company. So while we have State Oil participation in our West African business too, here we effectively joint operate with the state owned oil company. And that means that you're held a little bit hostage to what is happening in country with politics because the ultimate control of that state company comes from the government itself. And we're just finding that with the election cycles that the Tunisians have been through that decision making is is hesitant there at the moment and has been for the past year. So when we want to go after drill some new wells work over some wells or recomplete a well, things that are going to sustain that production grow that production. Things are just taking too much time. For our liking. What needs to change is probably just a little bit of stability come through in election cycle a little bit of stability in the country, some recognition that the that the oil and gas sector has a very important role to play in the economy of that country.

We're starting to see signs of that. It's just been a little bit of a tricky number of months now. But we are starting to see some signs of movement there. For instance, we've been waiting also for some license extensions on two of the fields, Remora and Sarsina. Those applications have been in for a while, which has meant we haven't really been able to go after spend new money on those assets. Pending those documents. And those are now well in process. So we're hoping for some breakthrough on that soon. So it's one of the benefits of, I think, having this diversified portfolio that we were in three different countries, three different geologies, three different operating models three different sets of partners that hopefully portfolio one can withstand soft period like we've gone through in Tunisia and hopefully it will come roaring back Thank you, John. That concludes today's Q and A. Thank you very much everybody for listening in. And if you do have any questions, you can send them into our [indiscernible] e mail address on the website, and thank you for continuing to follow us. Bye bye.