Panoro Energy ASA

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

Fredericks Mae - Private Investor

Good morning, everyone. And thank you for participating.

This is John Hamilton, CEO of Panoro Energy, and the call with me this morning are Qazi Qadeer, our CFO, our Chief Financial Officer and Richard Morton, our Technical Director. I'll make a brief introduction, Richard will take us through an update on our assets and then we'll turn over to Qazi for description of the financial results and then we'll open up to Q&A.

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 the perception of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances.

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

2017 was a year of challenges for us. But we started 2018 by delivering on what we'd set out to shareholders.

At Aje we announced the full and final settlement of our legal dispute. The dispute was a long and challenging period for the company and its shareholders.

But we feel that our stance and our actions were robust legally and technically and we took decisions based on the best interests of shareholders. The settlement outcome we believe vindicates our actions and with the arbitration now behind us the JV is working hard towards realizing the potential of the Turonian gas at Aje, while making the current oil operations as efficient and profitable as possible.

At Dussafu in the early - in the New Year we announce the updated reserves report in the spudding of the first production will, together with our operator BWE we look forward to a year full of operational updates and Dussafu is just at the start of his 20 year concession and he's got excellent fiscal terms and he's got a long-term FPSO contract, success in the current well campaign will pave the way to demonstrating that it can be like the Atom [ph] analog to the north of us, which has been producing for 15 years with over 100 million barrels already produced and still going strong. So I'll now turn it over to Richard, who will go through our assets starting with Dussafu.

Thank you, John. And good morning to everyone.

During the quarter the development of the Tortue oil field in Dussafu continued according to plan. Various installation activities were carried out at the end of the quarter in preparation for the drilling and main installation phase at the field.

The first development well, DTM-2H, was spudded on January 27, 2018. This well and a second development well, DTM-3H, will be completed as horizontal oil production wells with open-hole gravel packs and gas lift.

In addition, an appraisal penetration called DTM-3, will be drilled in the northwest of the Tortue field and that will confirm the extent of the field and prepare for additional wells which may be part of the second phase of the development. The drilling is progressing according to plan and it's expected that the drilling will be completed by the end of the second quarter 2018, after that the subsea equipment will be installed in preparation for the FPSO hook-up.

The contract for the use of the Adolo FPSO has been agreed and the Field Development Plan approval obtained from the Gabonese Government. We're expecting first oil to be achieved in the second half of 2018 and the Operator estimates that initial gross production rates will be in the range of 10,000 to 15,000 barrels of oil per day.

At the end of the quarter an independent reserves report was completed by Netherland Sewell & Associates, NSAI and they calculated an estimates mid case 2P approved plus probable reserves of 23.5 million barrels of oil at Tortue. These are the total gross economically recoverable oil reserves, and the estimate is derived from the assumed production from four oil wells at the Tortue field.

The high case of 3P which is approved, plus probable, plus possible reserves is estimated by NSAI at 31.4 million barrels. In addition to these reserves, NSAI has also estimated gross contingent resources at Tortue and a mid case of an additional 11.6 million barrels with a high case of an additional 28.9 million barrels.

Additional wells beyond the four assumed for the reserves will be required to access these resources. The results of the new NSAI reserves report illustrate a material increase of over 80% of mid-case at Tortue, compared to the previous independent report which was completed in May 2014, and that was made prior to the new seismic data being available.

The 3P reserves at Tortue are approximately equivalent to the total contingent resources previously calculated for all of the four discoveries at Dussafu. The NSAI reserves review does not yet include the other 3 discovered fields in the Exclusive Exploitation Authorisation, which are Ruche, Moubenga and Walt Whitman and these will be updated in due course.

In addition, the independent reserves review does not include prospective resources associated with around about 27 prospects and leads already identified within the EEA area. Moving on to Nigeria and production at the Aje field in OML 113 is currently steady at around 400 barrels of oil per day net to Panoro.

The field produced an average of 285 barrels per day net to Panoro during the quarter, and this compares to 403 barrels of oil per day net in Q3 2017. The average rate was slightly lower and was affected by two operational shut-ins during the quarter.

Production from the Aje field continued from the Aje-4 and Aje-5 wells, with the Aje-4 well producing from the Cenomanian oil reservoir and the Aje-5 well producing from a new completion in the oil rim of the Turonian reservoir. The Turonian oil rim basin approximate 14 meter oil column that was encountered at the base of the 80 meter Turonian gas column in all of the Aje wells to date.

During the period Turonian was excluded from the joint venture operations. The Aje-5 workover and side-track fail to achieve sufficient oil production from the Cenomanian reservoir.

One of the side-tracks was a consequence of this completed in the Turonian oil rim and has proven to be a stable producer. This development is obviously encouraging for liquid production from the Turonian for the future.

Aje-4 continues to produce Cenomanian reservoir and we believe that although the area around Aje-5 has proven not to be productive significant Cenomanian potential still remains to the east of the field. Lifting from the field was completed in November and a further lifting is anticipated in March 2018.

A few development plan describing the development of the Turonian reservoir has been submitted to the Nigerian regulators for consideration. In parallel the process for the renewal of the OML 113 lease which has renew date of June 2018 has commenced.

Panoro is in the process of updating its independent reserves report for Aje with AGR TRACS International. This update will include results of the Aje-5 workover and the side-track drilling campaign in the Cenomanian reservoir, the subsequent completion of the Aje-5 side-track in the Turonian oil rim, and the production history from the field to date.

Details of the updated report will be made available in the second quarter of 2018. That concludes this quarter's operational update 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 line by line narrative comparing the previous quarter. Therefore on this call today I am only going to cover the key highlights of the fourth quarter 2017 results.

It is also customary to note that the results published this morning and discussed on this call are unaudited. EBITDA for the current quarter was negative $1.5 million compared to negative $59,000 in the third quarter.

This comprised of the following two key items. Number one, oil and gas revenue in the fourth quarter 2017 was $1.6 million and was generated from the sale of companies' net entitlement of 25,978 barrels.

In comparison, revenue from the third quarter was $3.1 [ph] million, as there were two lifting during the period net entitlement of 61,178 barrels. The second item that impacted EBITDA was the costs attributed to operations which were $2.2 million at Aje for the fourth quarter compared to $1.9 million in the previous quarter.

The higher cost is explained by mainly by two operational shut-ins during the quarter. General and administration costs from continuing operations were marginally lower in the fourth quarter at $0.8 million, compared to $0.9 million in the third quarter.

In both periods, the costs relating to Aje dispute have been separately reported as non-recurring dispute costs of US$45,000 in the fourth quarter and $0.3 million for the previous quarter. The company has continued to seek further cost reductions with the recurring G&A costs having being reduced by approximately 10% year-on-year to $3.7 million in 2017 compared to $4.1 million in 2016.

Net loss of $4.4 million from continuing operations for the fourth 2017, an increasing loss of $3.8 million compared to a loss of $0.5 million in the third quarter. The increase in losses predominantly the effect of only one lifting from Aje in the current quarter, compared to two lifting's in the previous quarter and also the effect of the revisions to the carrying values of the assets on both Dussafu and Aje, which resulted in a net impairment charge of $2.6 million during the fourth quarter 2017.

I would like to elaborate here that after reaching [ph] a settlement of dispute with OML 133 joint venture partners in November 2017, Panoro is only now received a date of all costs incurred since the dispute started in December 2016. Due to higher than anticipated expenditures on the Aje-5 workover and side-tracks, we deemed it prudent to recognize this one-off cost directly in the income statement as impairment.

This charge was partially offset by a reversal of previously recognized impairment on Dussafu that triggered from positive developments on the license like FID and independent reserves upgrade. On the balance sheet side, cash and cash equivalents stood at $6.3 million at December 31, 2017, not including $1.5 million cash which is due to be released, having been held as collateral against the dispute costs by the UK Court Funds Office.

On an overall basis, cash balances decreased from $6.8 million at September 30, 2017. No cash calls were paid during the quarter, however funds associated with the fifth and sixth Aje liftings have been utilized to fund Aje costs.

The USD$1.5 million held as security cost are in the process of being released and we will provide further update in the first quarter of 2018. Lower net equity reflects the loss for the fourth quarter.

This is also the - there is also the increase to the non-recourse loan from B.W. Energy in relation to the funding of Dussafu development.

As of December 31, Panoro's drawdown on the non-recourse loan was $2.2 million compared to $1.3 million as of September 2017. The non-recourse loan is repayable through Panoro's allocation of the cost oil in accordance with the Dussafu PSC, after paying for proportionate field operating expenses.

The repayment will start at First Oil on Dussafu. During the repayment phase, Panoro will still be entitled to its share of profit oil, as defined in the PSC, from the Dussafu operations.

As previously mentioned, since the settlement of the Aje dispute we have performed a review of historical costs incurred and recognized and - recognized an unpaid liabilities associated with such expenditures in the balance sheet. The proportionate joint venture liabilities resulting from the workover and side-tracks of Aje-5 have been higher than anticipated and as such have been - have resulted in a share of $6.1 million net to promote Panoro as of 31 December 2017.

Such liabilities as current in nature and are expected to be settled in full by the end of financial year 2018. In addition to these, $6.8 million is classified as long-term liabilities, as per the terms agreed between OML 113 Joint Venture partners, certain transitional arrangements were introduced whereby the sums will not be immediately payable.

During the transition period, any excess funds from Panoro's entitlement of crude liftings after paying for its share of operating expenditure shall be used to repay outstanding liabilities. In addition to this, commercial arrangements agreed as part of the interim settlement measures are expected to have an effect of increasing Panoro's existing revenue interest for approximately one year.

We do not anticipate any use of Panoro's cash resources and expect this to be funded from the sale of our share of Aje crude. There is a lifting anticipated in March 2018, which is expected to provide net proceeds well in excess of $3 million to Panoro.

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

Thank you, Qazi. As we said in the beginning, 2017 is now behind us and there's fresh momentum in the company.

At Dussafu we couldn't be happier with the job of BWE is doing as operator and we look forward to many operational updates during the course of the year. At Aje, the JV as you've heard from Qazi is living within its on means.

We don't foresee any need for any capital until such time as the gas development moves ahead. It's completely insulated there.

And we look - we continue to look for ways of growing the asset base of the company and do so with extreme care to ensure any acquisition is for the benefit of existing shareholders. Marco, I think we can open up for questions if there are any.

Hi. Thanks for your updates.

Just want to ask you a question related to the presentation, did you say that GABON has approved the Adolo FPSO contract at this stage?

Hi, Fredrick. Good morning.

Yes. The Gabonese there is been a lot of dialogue with the Gabonese around the FPSO contract and you can understand why we have a contractor that is also the upstream partner and so that contract is obviously sensitive to us as a third party - sorry, as the joint venture partners, but it's also very sensitive to Gabonese government report participants in the economics of the field.

And yes, the terms of the contract have been agreed between all parties and the - as you've heard the Adolo it's been renamed now from the Azurite [ph] I think BWE are still saying it's perfectly suited for the field, but it is well - is well and truly going to be the FPSO that is chosen.

Okay. Thanks you.

Thanks for your work with [indiscernible] keep up the good work. We'll speak later.

Thanks.

Thank you, Frederick.

Thank you very much Marco. And you've let us off easy this morning, but thank you very much for joining and keep track of us.

I think hopefully we'll be having some updates on a reasonably regular basis during the course of the year as Dussafu moves forward. Thank you very much.