BlueNord ASA

Good morning and welcome to BlueNord's results presentation for the second quarter of 2024. It is as always a pleasure to be here this morning and I'm joined by the rest of the executive team to run you through not only the highlights of our recent performance, but also provide some more insight into why our outlook for 2024 and beyond is so strong. If we start with our performance in the first half, it's been a period that has been very much characterized by strong performance of our base assets, continued progress on the Tyra project, and high levels of Blue Nord-driven activity that we believe support our long-term position. And I think that's an important point as we run through the presentation, is that we are very clear on what our focus is. It's positioning Blue Nord for future success. So let's turn over to have a look at what we've been doing in some more detail. So this slide covers really the activities that we've been busy with in the first half of this year. And fundamentally, it goes across all of our strategic priorities. So operationally, we've made progress on not only the base assets, but also the Tyra redevelopment. So starting with the base assets, for our infill well program, we've had the continued contribution from the first half done infill well, which started up at the end of Q1 of this year. In Q2 we also sanctioned a further well in Halfdan to be drilled later in 2024. We spudded the Hemj well which is a high impact opportunity with the result due in Q3 of this year and that's something that has the potential to add eight million barrels of oil equivalent net to Blue Nord in a success case. The drilling activity that I've just mentioned is unlocked by having a rig active in the DUC. And in that vein, I'm happy to announce this morning that we've also secured a 17-month extension of the shelf drilling winner rig, which will run from March 2025. Turning over to Tyra, we're continuing to make progress on the project, but startup has been impacted by some teething issues. So we had the first export of new gas in April of this year, but that was followed shortly thereafter by issues with the compressor transformers. And that ultimately has led to a temporary cessation of production. So together with the operator, the DUC is very much focused on not only the temporary restart of gas export, but also implementing a permanent solution that will allow us to reach plateau later in the year. On the temporary restart, it's positive that we will shortly have volumes being exported from Harold. And in addition to that, the operator continues to progress further options to export higher volumes before the permanent solution is implemented. And then turning over to that permanent solution, so the IP compressor transformer, which was the first issue that we had in April, that repair is progressing well. In addition to that, hookup and commissioning activities are now complete on TIRA West and the TIRA satellites. So while the root cause of the issue that has impacted the transformers still needs to be fully determined by the operator, TEPDK currently believes that this can be rectified in the time prior to the repaired compressors being installed offshore, And consequently, they have kept their current plan, which is that maximum technical capacity on Tyra should be reached by the 30th of November. And then supporting the ramp up to plateau production, the completion of the hookup and commissioning activities that I mentioned before, that will drive an accelerated ramp up. Now, turning just briefly to think about the significance of Tyra. Tyra is a hugely important asset, not just to Blue Nord, but also to Total Energies in Denmark. Denmark as a country and the EU more broadly. So reaching plateau production as soon as possible is very much the number one priority. Well, it's of course disappointing that we've not had a flawless startup and a smooth journey to plateau. I think we can take comfort from two things as we look forward. The issues that have been identified have solutions. They're not reflective of any underlying issue with the integrity of the TIRA facilities, but rather reflect the fact that when you turn everything on for the first time in a project like this, it often doesn't start up exactly as you expect, and some work is needed to get the asset fully operational. We also take comfort from the fact that Total Energies in Paris is increasingly supporting the Danish team, and that will help drive the outcome that we all know is so important. If we then turn over to look at what's been achieved on the corporate side, and I'll talk more about this on subsequent pages, so just to provide a summary here, we completed the capital structure reset that we told you about earlier this year. This was important for us as it was necessary to ensure that their balance sheet reflects the strength of our forward credit profile and that any distribution restrictions that we have are set such that they enable us to deliver our stated distribution policy. And with that in mind, I'm very pleased to say that that capital structure reset is now done. We had two key deliverables in the second quarter. One was that we upsized our RBL facility and extended the maturity. And the second was that we issued a new senior unsecured note, BNOR 16. And what that means is that we're now fully set to deliver material distributions to shareholders when Tyra is at plateau production. If we turn over to the next slide just to look at some of the highlights of the performance in the second quarter, we had production in Q2 of 24,500 barrels of oil equivalent today. That was an increase of 1,000 barrels of oil equivalent per day compared to Q1 and was in line with our guidance for the period. It was driven by strong base asset performance, which was the result of the positive results from the ongoing well reservoir optimisation and management campaign, and the continued contribution from the first half-dan infill well, which is producing in line with pre-drill expectations. The activity levels that we have, including HemJ and the second infill well that I mentioned previously, will support our outlook for 2024 and beyond. As I also noted on the previous page, for Tyre, we expect the near-term restart of gas export with Harold volumes coming shortly. We then expect a ramp up in Q3 and plateau in Q4 per the operator's current plan. And what we expect that that will drive is net production to Blue Nord of over 55,000 barrels a day of oil equivalent in 2025. That'll be important for us because the cash flow from not only Tyra, but also from our base production assets will be used to both support our distribution profile and maintain a conservative balance sheet. And just as a reminder of what that distribution policy is, we are intending to return 50% to 70% of our operating cash flow during 2024 to 2026. If we just turn to look at the longer term for a moment, what we expect to do is continue to support our production levels using our 2P and 2C reserves and resource base as a starting point. And what that will enable us to do with the 213 million barrels that we have across both those categories is support near-term growth, ensure the stability of our medium-term profile, and finally make sure that we have material production levels out to the expiry of the DUC concession in 2042. On the financial side, I'll leave most of that to Jacqueline, our CFO, who will provide more detail in the following section. But I just wanted to emphasise two points. One, our recent strong performance and the actions taken to reset the capital structure position us extremely well for the future. So in summary, it's been a strong quarter with delivery of activities that support our long-term performance. And if we turn over to the next slide, we can talk about the capital structure in a little more detail. So it was in our Q4 2023 results that we presented in February of this year that we set out the fact that we were intending to restructure our capital position. And there were really three objectives for that. One was to optimize our access to secure debt capacity. The second was to make sure that any distribution restrictions that we had within our balance sheet were consistent with our cash generation outlook. And number three was to make sure that we were able to maintain a conservative balance sheet on a through cycle basis. And during Q2, we completed the two material steps that were needed to deliver this reset. Firstly, we successfully refinanced our RBL facility. As I think most people are aware, it is a relatively challenging backdrop for bank lending to the oil and gas space. So the fact that we were able to deliver a $300 million increase in our facility size to $1.4 billion really does show the strong support from our lender group. We also deferred the amortizations from the second half of this year into 2027, and we extended the maturity to 2029. And all of that makes sure that the RBL will remain an important instrument that will underpin our capital structure for the rest of this decade. Secondly, we issued BNOR 16. That's a new $300 million senior unsecured note and it will mature in 2029. The proceeds from that issue were used to repay BNOR 14 and will support our capital structure going forward. Just to spend one moment on BNOR 14, the repayment of that bond was important because it enabled us to remove the link between historic net profit and distributions in our capital structure. That's something that would have restricted our ability to deliver our stated distribution policy. And I'm happy to say that with BNOR 16, the new bond, the distribution covenants are consistent with our capital returns policy. Firstly, the Tyra completion test must be met, and then Bluenord is required only to maintain a minimum level of liquidity of $100 million. And that is in line with the distribution profiles that we have published and the estimates that we have given around that. So, in summary, once Tyra is at plateau, we intend to commence our program of material capital returns imminently. And then if I turn to the next page to walk through in more detail what that distribution profile looks like. So taking one step back, the cash flow that we generate, and particularly post-Tyra, will be used to support all of our structures. As I mentioned on the previous slide, the capital structure reset was important because it enabled us to deliver our commitment to shareholder returns. And that means that from 2024 to 2026, we intend to return 50% to 70% of our operational cash flow. Beyond 2026, we still expect to have a distribution profile and we'll manage our business in a way that is consistent with our desire to maintain meaningful returns. That means that we'll make all future investment and capital structure decisions accordingly. What that also means in summary is that the distribution policy that we've announced will result in the return of a substantial portion of our current equity value over the next two and a half years. If we turn to look at just the bottom part of that slide, in terms of timing, we've already delivered a number of the important steps that were required prior to commencing distributions. The key item remaining is meeting the TIRA completion test. And once that's achieved, which we expect to be in line with when TIRA reaches maximum technical capacity and therefore plateau production, we'll commence our distributions shortly thereafter. Now, before I move on to the operations section, I'd like to introduce you to our new COO, Miriam. Miriam took over from Marianne Aida during the second quarter of this year. And firstly, I'd like to thank Marianne for her strong contribution to the development of BlueNord since 2022. But in Miriam, we have a very capable replacement. So Miriam has worked with these assets from significantly before they were part of BlueNord, as she was with Shell prior to our acquisition in 2019. She's also been our DUC asset manager since 2021, so has a lot of experience with our asset base. And then finally, I'll just say that the new structure that we have reflects our underlying business, as Tyra transitions from the project phase to the production phase. So thank you very much, and I'll hand over to Miriam. Thank you.

Thank you, Ewan. I'll just... So I will now take you through the status of the TIRA redevelopment project and I'll present how we plan to deliver on TIRA in 2024. Then I will present to you how we have achieved the strong Q2 based asset production that Jon just told you about. And then I will present the outlook and the planned activities for the base assets for the rest of 2024. But first, let me just emphasize the importance of TIRA. We all know that Tyre is strategically important not only to Blue Nord but also to Denmark, as Tyre will provide necessary gas to Denmark and Europe for the coming years. The project will unlock significant volumes from the Tyre field and the satellite fields with the new and modern facilities in place. The increased production from Tyre means that the CO2 intensity from the Tyre facility will reduce with 30% and that will reduce also our unit operating cost to less than $13 per BUE. Now let us look at the status and outlook for 2024 for the Tyre redevelopment project. So, as we presented in Q1, Tire was restarted 21st of March 2024. Then on 18th of April, while we were ramping up export of Herald Gas, an incident occurred where the transformer providing power for the IP compressor was short-circuited. Last week, as communicated in the Remit Notice 8th of July, there was an incident offshore impacting the LP transformer. The operator Total Energies is working hard on three things. Firstly, to fix the underlying startup issues and repair of the damaged transformers. Secondly, to mature various temporary solutions for partial production. And thirdly, to continue the commissioning in parallel with this work. And with these three work streams, the current outlook is that we have the schedule of the repair of the transformers is in line with petro-production still in Q4. And further, there's a plan to resume Harold gas production in July by going directly to one of the export compressors. And finally, commissioning is moving ahead at a good pace, and we have Tyre West ready for start-up with all wells unplugged, and more than 50% of Tyre East wells are unplugged. And we will be able then to have a faster ramp-up. And I can also share with you that the planned work that was done on the Nogat line carried out for approximately one week in June and required that production from base assets went over Tyre to Denmark went very well. And this demonstrated the export capability of the Tyre facilities. And now let us look at how we plan to reach plateau production in Q4 2024 based on the recent progress and the plans just presented here. So the path to plateau production for Tyra is driven mainly by three things. Firstly, temporary production from Herald starting in July and other temporary solutions still being matured. Then that the startup issues are being fixed. And then thirdly, that we have continued commissioning allowing for faster ramp up. So Q3 will be restart of Tyra and Q4 will be ramp up to plateau production. And based on the recent performance and information that I just shared with you, we believe, and this is in line with the remit just published by the operator, that placebo production end of Q4 is achievable and we will keep the guidance unchanged for Tyra. I will now present to you how we have achieved the strong Q2 base assets production, which is production from the DAN, Half-DAN and GORM hubs, and then present the outlook and planned activities for the base assets for the rest of 2024. So let us first look at the production from the base assets for this quarter and the outlook for the next two quarters. So today I'm happy to share that the production in this quarter 2 has been higher than the production from quarter 1. And with a production of 24.5 MbE per day NBN, we are well within our guidance of 23 to 26 MbE per day NBN. The reason for this good performance is mainly due to three things. Firstly, the infill well Hafsan Tor North East, the HbA27b well, is now on full production and is producing in line with expectation. Secondly, we have increased production from the Herald observation work that commenced early 2024. And thirdly, the Skrull gas acceleration pilot now shows early signs of increased production. So based on this recent strong performance and the current understanding of the base asset and also the continued focus from the operator on the operational efficiency, I am pleased to share that our guidance for the base asset is unchanged with a range between 23 and 25 MBUE per day net to BlueNord for the rest of the year. So in summary, I want to highlight that the production from base assets is strong and within our guidance, and we have been within or above guidance for the last 14 quarters. Now let's look at the rig activities for the DOC fields to support the continued strong production. We have seen a very positive impact on production optimization work so far on Haftar Northeast and on Dan. We used a noble reed to rig for the optimization that we refer to as ROM. We are currently working on half-dand where we have planned 28 different well interventions which will contribute with additional production this year and subsequent years. And you will be very pleased to hear that we just extended the jack-up rig shelf-drilling winner for 17 months from March 2025 with an option to extend further with 2 times 7 months. The rig will be used for both drilling up infill wells and to carry out workovers. The rig is currently working on our next opportunity. As we announced on the 17th of June, we have just spotted the Herald East Middle Jurassic This is a well with large subsurface uncertainty. However, in a success case, this may increase reserves by up to 8 million BUE and also give a significant gas production contribution from the Herald Field producing into Tyre. The well is expected to be online in Q4 2024. And I'm also very happy to announce that we have just taken FID on the first of two Haftan EcoFish wells. And the plan is to take FID on the second well later this summer. The first well, HDA 35, will be drilled immediately after the Havl East Mid Jurassic well. So overall, activities have picked up significantly and we will continue to mature opportunities for the two rigs to support the production. So bottom line, we see strong production and a very good outlook for future years. And I will now hand over to Catherine, Chief Corporate Affairs Officer, and she will take you through the long-term outlook for BlueNord.

Thank you, Miriam, and good morning to everyone. While one of our key objectives is to contribute to energy security to Europe, we're also dedicated to initiatives which reduce emissions and to exploring CCS. And this quarter, we have several exciting updates for all three. As mentioned by Joen and Miriam, we have spudded the Hemjey well, and we have taken FID on another well, all which will secure important gas volumes in the short and medium term. For CCS, we have reached an important milestone in carbon cuts, which was successfully awarded an onshore storage license in June by the Danish Energy Agency. For this project, which is named Project Ruby, the vision is to store about 1 million tonnes of CO2 per year from 2030. Our ownership in carbon cuts is not only fit for purpose for a company our size, but it also represents a true emissions reducing solution, which doesn't compromise the security of supply. And finally, for this quarter, as part of our initiative to continuously reduce emissions in the DUC, we have started testing out something which is called sustainable aviation fuel on our helicopter flights between Esbjerg and the Danish North Sea. This is the first time this is being done in the Danish North Sea. And with the new fuel, we expect to see about 25 reduction in emissions related to this type of transportation. And then moving to the long term plan, which is aimed at maximising the economic recovery from the DUC. We do this through our short and medium term opportunities, simply divided into two categories, the infill well programme and the development projects. We have already one infill well on stream, which overnight added 3,000 barrels per day to the production. In June, we sputtered the HemJ well, and today we announced that a third well has been sanctioned. The infill well program is a really efficient and low-cost way of adding volume in a paced manner. All the wells are drilled by the Jacob Rigg Shelf Drilling Winner, and as Miriam mentioned, we're very pleased to have extended this contract by 17 months. It shows a confidence in the program and a willingness from the BUC partners to invest in our asset base. It's also worth mentioning that now that Tyra has been brought on stream, that has also unlocked several new infill opportunities in the Tyra Hub, with six wells under maturation. The other category is the three development projects, which you can see on the right hand side. Valdemarbo South, Adda and Halfton North. The two first ones are gas weighted, while Halfton North is mainly oil. All three projects come with robust IRRs and production from Adda and Valdemarbo South can also be tied back to Tyra 2, which is an excellent way of utilizing the new facility on Tyra and backfill its process capacity. And that takes me to this page which shows the positive impact of the organic opportunities I just went through. The long-term plan is a plan we have together with the DUC partners and it ensures a high level of production throughout this decade. As you can see, we expect to be above 55,000 barrels a day on average next year and remain at a high level five years later in 2030. The dark blue area, it represents the current base production and it shows how low the decline has been year on year. The steep step change of Tyra is seen in turquoise, and the light green is what we refer to as in-plan projects, meaning the infill wells and the development projects I just went through. So by only sticking to this current plan, we are well placed to keep production high, support future cash flow for the company, and move barrels from 2C resources to 2P reserves. Perhaps even more interestingly is the light grey shaded area at the top. These are additional opportunities, like the Tyra infill wells, which are currently out of plan, but which we will progress in order to move them into the plan. And if that is successful, we're in a position to exit this decade above 55,000 barrels per day. So summarized, this production profile shows that Blue Nord, without needing to seek for inorganic growth, is able to sustain a strong production and cash flow over time. And with that, I will say thank you for listening and pass over the word to our CFO, Jacqueline, who will take you through the Q2 financials.