Panoro Energy ASA

John Hamilton - CEO Qazi Qadeer - CFO Richard Morton - Technical Director

Thank you, Courtney and good morning, everybody, and thanks to all of you for joining our second quarter call. This is John Hamilton, Chief Executive Officer.

I'm joined today by Qazi Qadeer, our CFO; and Richard Morton, our Technical Director. As we usually do I'll start, Richard will take you through an update on our assets we then will turn over to Qazi, I'll make a closing remark and then we can turn it over to any Q&A that might be out there which we obviously encourage people to ask questions if you any.

As a reminder, today’s conference call contains certain statements that are or may 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, on the stock exchange and a copy of the press release is also available on our website at www.panoroenergy.com.

I’ll turn it over to Richard now who will describe some of the activity that we've had on our assets.

Thank you, John, and good morning everybody. Firstly, in our Nigerian projects Aje, Panoro continues to be excluded from some of the joint venture information due to the ongoing legal dispute.

For that reason, some of the information we are able to provide today is qualified by a lack of full knowledge of the operations at the field. We are aware that the reentry of the Aje-5 well was carried out during the first quarter and that [seek two] [ph] side tracks we drilled.

We understand that the Aje-5 well was then put back onstream following the demobilization of the rig in May. Since then to our knowledge lower than the anticipated production from the Aje-5 field has continued from the Aje-5 well and the Aje-4 wells together.

A listing of Aje crude was completed in the early July 2017. From the data, we have available we estimate that on average the Aje field produced approximately 350 barrels of oil per day met to Panoro during the quarter.

With the reintroduction of Aje-5 production only occurring towards the end of that quarter. So, this equates to around 3,000 barrels of oil per day gross from Aje for the quarter.

We also understand that like other operations in the specter [ph] elsewhere, many of the contracts to provide services for the Aje infield operations have been reviewed and material operating cost reductions are being implemented as a result of these reviews. Meanwhile of course the joint venture continues to work on and refine detailed plans for the Turonian gas project, where three quarters of the resources of Aje are found.

With the limited production from the first phase of Aje the focus is shifting now to reaching a commercial solution for the Aje Turonian which aims to commercialize approximately 163 million barrels of oil equivalent hydrocarbon resources and that consists of gas, condensate, oil and LPG. Switching to Gabon now, where we have some bright and very positive developments, we announced on the 18 of July that Pan-Petroleum Gabon B.V.

which is the fully earned subsidy of Panoro and holds the Dussafu asset, has approved the operator's proposed work program and budget to move forward at full speed with the development of the Dussafu oil fields. The development plan that we're not implementing consists of two initial wells at Tortue in the Gamba and Dentale reservoirs.

As part of the drilling campaign, we have driven an appraisal side-track to the North West of the Tortue field to prove up hydrocarbons on that side of the field. The two production wells we drill will be tied back to a leased FPSO to be provided by BW offshore who are the parent company of our operating partner BW Energy and the tie back will be via subsea trees and flowlines.

The wells will be completed as horizontal oil production wells with provision for gas lift, the well design being similar to the successful wells drilled at Etame field located to the North of Dussafu. So, we're using tried and tested technology to develop this field.

Meanwhile once we refine drilling plants, contracting procurement for the project equipment and services is well underway. Fabrication of subsea trees well hedge is being carried and unless of an intent to be in placed other subsea equipment, such as flowlines and umbilicals.

The BWO owned FPSO [as you are right] [ph] is an excellent fit with the approved field development plan specifications. The FPSO is being well maintained and can be deployed on the Dussafu field with only minor modifications and investment required.

The FPSO is now being moved to the Keppel yard in Singapore where the necessary upgrades can be undertaken. The vessel is capable of handling up to 40,000 barrels oil per day with gas compression capacity of 18 million standard cubic feet of gas per day.

Back to the drilling campaign, a letter of intent has recently been delivered for provision of a jack-up rig for the drilling, that means when we intend to start the rig at Dussafu in the first quarter of 2018. Following the drilling and completion the installation of the FPSO in subsea equipment will be carried out and we're expecting first oil production to be achieved next year.

Recognizing the new development and taking into accounts the new operator and the operators plans and timing, ourselves and the operator have conditioned new independent reserves support to update reserves and resources estimates at Dussafu. We should be able to update you on results of that work in due course.

So that concludes this quarter's operational updates and I'll now hand over to Qazi, our CFO to take you through our quarterly financials. Qazi?

Thank you, 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 discuss the key highlights of the second 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 that due to limited access of information about Aje field operations, judgements have been made to estimate the spending and production levels for some of the periods presented. EBITDA for the current quarter was negative $1.9 million compared to negative $2.5 million in the first quarter.

Comprised of the following key items, oil and gas revenue in the second quarter oil and gas revenue in the second quarter 2017 was nil, as there was no Aje left in during the period whereas the first quarter revenue was $1.3 million and was generated from the sale of companies net entitlement barrels of 26,210 barrels. Other income in the quarter of $0.5 million represents the net gain on disposal of the 25% working interest in Dussafu.

Cost attributed to operations were $0.2 million at Aje for the second quarter compared to the Company's estimated cost of $2.5 million in the previous quarter. This represents cost up to the sale of the lost cargo Aje for all OpEx cost that lies in the cost of inventory will be expensed in the first quarter when lifting has occurred for the next cargo.

General and administrative cost from the continuing activities of $0.9 million for the second quarter in comparison to $1 million for the first quarter. In addition, for both the periods with the costs relating to ongoing Aje dispute have been separately reported as non-recurring dispute cost of $0.4 million in the second quarter and $0.2 million for the previous quarter.

Net loss from continuing operations for the quarter was $28 million which was higher compared to the previous quarter loss of $3.4 million. This is predominantly due to the effect of impairment exercise undertaken during the second quarter of 2017 on Aje.

The impairment as a result of conservative application of accounting principles to determine the recoverable amount of the asset as of the balance sheet date. It has been considered following figures and factors that include amongst others, the recent Aje well performance, rationalization of high acceleration cost and reflection of this associated with the [ph] asset in the current environment.

The Company's formal exit from its Brazilian business is still ongoing with slow progress towards the approval of abonnement and license relinquishment by the Brazilian regulators. The management is working actively with the operator Petrobras to bring matters to a close and to ensure that the ongoing costs are kept to a minimum.

However, the timing and eventual cost of such conclusion will be subject to necessary approvals by the Brazilian regulator ANP. On the balance sheet side, the key changes compared to the previous quarter is lower value for the non-current assets which is a direct result of the sale of 25% working interest in Dussafu and the Aje impairments are booked in the quarter.

There is also an increase in the accounts payable accruals under the liabilities reflecting higher operational accruals on Aje. Furthermore $1.5 million of funds were held as cash collaterals supporting our legal case at Aje that remain unchanged from the previous quarter.

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

Thanks Qazi. Thanks Richard.

And as you can tell we’re very pleased with the progress we are achieving at Dussafu. We've got an operator who is very determined to bring this field into production as soon as possible.

We think that they are doing a fantastic job. We've seen key contracts being advanced and every week there seems to be additional progress in moving this project forward.

We will obviously continue to update the market as in when they are key operational milestones and we do have the upcoming CPR as well has been commissioned with [Indiscernible]. At Aje the legal dispute continues.

We fully recognized the uncertainty that provides to shareholders, we're sharing those frustrations obviously and we are --we will continue to act in the best interest of shareholders and try and preserve what value we can from Aje. We work on it every day, I can assure you and we do recognize it does create uncertainty for shareholders and if there are any question, I would like now open it up to questions and will gladly take questions around Aje, Dussafu or anything else for that matter.

Courtney could you open up for questions please.

I know that a couple of the analysts are running to make the call this morning, Courtney, so if nobody has any questions, I do thank you again for participating in the call today. And remind people that certainly in the Aje situation, the company and the board are entirely focused on remedying the situation there.

We do recognize that creates some uncertainty and that has caused some frustration among shareholders. We fully recognize that, appreciate it and respond to it as well.

Thank you very much for joining the call and if there is anybody that has any questions, you can always email us, the contact details are on the website. And if there are any questions that people want to email in if we are able to, we would able to try to respond to those.

Thank you very much.