Panoro Energy ASA

John Hamilton - Chief Executive Officer Qazi Qadeer - Chief Financial Officer Richard Morton - Technical Director

Charlie Sharp - Canaccord

Thank you Tom and good morning everyone. Thanks for participating today.

This is John Hamilton, Chief Executive Officer of Panoro Energy ASA, and on the call with me this morning are Qazi Qadeer, Panoro's Chief Financial Officer; and Richard Morton, our Technical Director. Following a brief introduction, Rich will take you through an update on our assets and then we'll turn over to Qazi, who will review our financial results for the first quarter, and then of course we’ll open up to Q&A as usual.

As a reminder, today’s conference call contains certain statements that are or may be deemed to be forward-looking statements, which include all statements other than statements of historical facts. Forward-looking statements involve making certain assumptions based on the Company’s experience and perception of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances.

Although, we believe 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. For your reference our results announcement was released this morning, and a copy of the press release and our Q1 2017 report are available on our website at www.panoroenergy.com.

So I’ll say a couple of words before turning over to Richard. First of all in April 2017 many of you who follow that we successfully closed the Dussafu transaction and received in excess of $11 million cash from BW Energy.

Panora Energy will also receive a non-recourse loan from BW Energy for upto $12.5 million at 7.5% annual interest rate in order to fund expenditures to the First Oil production at Dussafu upto $150 million gross cap. Post completion, Panora will retain an 8.33% working interest in the Dussafu PSE.

A total growth capital expenditure to reach First Oil in 2018 is estimated by the group to be approximately $150 million. We are thrilled to see the development finally moving forward on a fast track together with our new operating partner BW Energy.

This transaction strengthens our balance sheet with additional cash and the non-recourse loan, which limits our financial exposure through the First Oil. Nigeria, as you’re aware our subsidiary Pan Petroleum Nigeria Limited is in disagreement with this joint venture partners in OML 113 in Nigeria and we have been forced to initiate arbitration legal proceedings to protect our interests.

Prior to the commencement of the arbitration proceedings the company applied at the High Court in London in United Kingdom for interim release in order to protect its right in JOA. Panoro has been granted an interim adjunction which temporarily prevents our partners from taking any action in relation to new well cash cost at Aje.

Recently and post period end, the High Court of Justice in London made a finding that three of the JV partners were in contempt of the injunction order of the court handed down in January. The contempt hearing related to a meeting with the operating committee held in January and we were not invited to attend that meeting where certain resolutions were passed and we believe we are in breach of the injunctive order.

The judge has recently finalized the order of the court and he has found them in contempt of court, so in fact violating the injunction. And the order states the resolutions that were passed in January are unlawful as to English law, there was no fine imposed on our partners but they are as to pay our cost of having sought the contempt proceedings.

We acknowledge openly that the current situation Aje resulted uncertainty for shareholders. The actions we've taken and we will continue to take are done in the best interest of shareholders.

Finally, we do talk about growing our business and we're continuing to evaluate several opportunities to grow our business in West Africa and this is consistent with what we said previously, which is we're focusing on development production assets in West Africa, we're not focused on exploration, we're trying to contain ourselves to that region. I'll now turn it over to Richard who'll describe activity on our assets beginning with updating you on the developments in the Aje field.

Thank you, John, and good morning everybody. As John has described we've been excluded from some of the JV information due to the ongoing legal dispute.

And in such some of the information we're able to provide today is qualified by lack of full knowledge of what’s happening. We understand Aje-5 was reentered and side tracked and that rig was -- has now been demobilized from the Aje field location.

We further understand the additional wells Aje-6 and Aje-7 have been blocked from the current drilling program. Production from the Aje field continued during the quarter from the Aje-4 well alone.

Aje-5 was shut in pending its remediation issue. There was a lifting of Aje crude completed at the end of March 2017 and our net entitlement from this lifting was 26,210 barrels of oil, net of production royalty oil.

The performance of the field continued to be limited by the shut in Aje-5 well and on average the field produced approximately 248 barrels of oil per day net to Panoro during the quarter. Operations to repair the Aje-5 wells commenced in February 2017, the rig was contracted to reenter the well and the remedy the down hall program and ultimately a sidetrack was drilled from the Aje-5 down hall location targeting a higher point on the Aje structure.

Although at this stage we do not have sufficient information regarding the outcome of this operation. We do understand that the JV continues to work on and refine detailed plan for the trailing gas projects which aims to commercialize the approximately 163 million barrel oil equivalent to running gas resources.

Dussafu -- in April 2017 Panoro completed a sale of 25% working interest in the Dussafu licensed to BW Energy, assumed operating ship of the license after closing their transaction with Harvest Natural Resources. Panoro has recently participated in the first technical and operational meetings with BW Energy to discuss and approve work programs and budgets for the development of the Dussafu license.

BW Energy assumed operating ship for the Dussafu license and they have assembled a full project execution team in Gabon and in Huston. The team consist of seasoned oil development professionals including individuals with extensive experienced in the neighboring brining at [Atomme] field.

This is important as real project execution scales to the JV for the first time. A detailed project plan has been agreed and the JV intends to commence production from the Tortue field in the second half of 2018 via two subsea wells tied back to a leased FPSO.

The current expectation is for initial gross production of around 15,000 barrels of oil per day from the two wells. I’ll now hand over to Qazi, our CFO to take you through the quarterly financials.

Qazi?

Thanks Richard and good morning everyone. In our results announced this morning, we have as usual included a detailed narrative on line-by-line analysis comparing the previous quarter.

Therefore, on this call today I’m only going to cover the key highlights of the first quarter 2017 results. It is also customary to note here that the results published this morning and discussed on this call are unaudited.

Further it is also worth mentioning here due to limited access of information about Aje field operations, judgements have been made to estimate the spending and production levels for the first quarter 2017. EBITDA for the current quarter was negative $2.5 million compared to $0.6 million in the fourth quarter 2016.

This comprised of the following key items. Number one, we have recorded revenue for the sale of our third cargo in March.

The sale procedures were attributed to settle the cash cost paid post period act. Realized revenue was in line with the uprising mechanism highly correlated to grant.

Number two is our estimate for cost attributed to operations was $2.5 million at Aje for the first quarter compared to 1.2 million in the previous quarter. The higher allocation is primarily due to timing of cash cost issued by the operator.

The mark was lower in 4Q '16 due to reversal of excess approvals from the third quarter 2016. As mentioned already due to ongoing legal dispute at Aje, estimations and judgments have been made for estimating the cost and operating metrics.

The last item is the general and administration costs from continuing activities which remained at $1.2 million with both quarters effected by continued legal cost in the period relating to Aje proceedings. The G&A costs for the current quarter including Aje dispute related cost of approximately $0.5 million, in comparison to $0.3 million in the fourth quarter 2016.

Net loss from continuing operations for the quarter was $3.4 million which is lower compared to the previous quarter loss of $40.4 million. This is predominantly due to the effect of an impairment recognized during the fourth quarter 2016.

The relinquishment of licenses in Brazil is still pending ANP approval and there is active engagement with the operator Petrobas to close matters in the current year. As mentioned in the previous quarters, the cost in Brazil are subject to periodic fluctuations, the loss primarily comprised of overheads and other expensing of relinquishment related cash cost.

On the balance sheet side, lower net equity reflects the loss in the first quarter, there is also an increase in accounts payables approvals and other liabilities reflecting higher operational accruals on Aje. Furthermore $1.5 million of funds were held as cash collateral supporting our legal cost at Aje.

This concludes my review of our financials and I will now turn back the call to our CEO John Hamilton for closing remarks and open up for questions.

Thanks Qazi. Well as you can tell we’re very, very excited by the developments at Dussafu where we see an operator who really does want to fast track this project and has assembled a great team.

So we are greatly encouraged by that and we do look forward to resolutions somehow of our operational and our legal issues at Aje, we are entirely focused on that as well. Operator I think -- Tom if we could open up the line for questions if there are some, we’d be happy to take them.

Good morning gentleman, I thought since nobody else was asking a question, I really should. I guess it's really on Aje, perhaps could you sketch out the time table that you see for the arbitration and the possible outcomes.

And aside from that given that your understanding that well six and seven, may have been dropped from the program, what realistically is the technical and production outlook for the field even if you have a successful alteration proceedings.

Thanks Charlie, the time table for arbitration is slightly subject to the wins of the judges that get appointed. So what happens in particular case is three judges are appointed through the ICC and they assemble themselves and look at their diaries and decide how they want to manage the case.

So at the moment we have said that we anticipate the hearing to happen during the summer. There is sort of a preliminary hearing that happens towards the end of June, and then as they actually sit sometime after that they have not exactly told us when we would anticipate that would happen, recently, shortly thereafter.

And their judgment similarly could take another month or two after that hearing, although we’re also advised sometimes it can happen quite quickly. So what we've tried to do is guide towards the third quarter in terms of something news worthy on the actual arbitration.

The contempt hearing that we refer to in the notes this morning was sort of an interim argument in between which we successfully won on top of our injunction. So far I think we've been doing the right things to protect our position, how the arbitration ultimately ends up of course we cannot predict, other are going to say that we -- as we've always said believe we have a strong legal position in respect of our dispute.

The other question you asked was a relation to Aje-6 and Aje-7, I think we're slightly constrained that we've being withheld the information with JV -- there is an argument is to whether they legally can do that or not and as you can appreciate we’re arguing our side of that but we are only getting limited information at the moment and so that’s frustrating for us and I imagine it's frustration for those of us who follow the company as well. However, we do understand that the rig has been released, I think we previously in our Q4, I think we had announced that we believe that Aje-7 has been dropped now, we believe that Aje-6 is been dropped as well and the rig has been released.

What do I think that means in terms of the production outlook for the field, what I think it means is that the current plans to drill those wells have obviously been postponed. I would imagine that if you asked our partners and ourselves, obviously there is more oil to go for ahead of or at the same time is developing the gas projects at Aje.

It’s simply that the rig is now being released and will not drilling those well under this current campaign. But you could see that campaign come back, I can’t predict exactly when that would be.

This simply means at this particular time this rig that had been contracted to work a number of days in the Aje field has been released.

Okay. Thank you.

Yes, thank you Tom and thanks Charlie for the question, and anybody else who has a question that they don’t want to be made on this call, please feel free to contact us by email and we’ll try to respond to those questions as well. Thank you all for joining the call today and we look forward to updating you as and when we have further developments.

Thank you very much.