Bw Energy Ltd

A warm welcome to first quarter 2024 presentation by BW Energy. This presentation will, as usual, be hosted by our CFO Knut Setra, our COO Lynn Espy, and myself, Carl Arnett. It's a pleasure to welcome you to another eventful quarter for the company. But hopefully you will see that it's eventful in a very good way. So I will dive straight into it. And please note our disclaimer. And then we have the first quarter risk highlights. Our net production from Gabon and Brazil was 27,300 barrels per day. average, and we achieved first oil from Hibiscus South in early March, and we're very proud, rightly, that this was five months after initial discovery. The second Hibiscus South well confirms the northern extension of the Hibiscus South accumulation, and again with good reservoir quality. I will come back to that in more detail later. We have also made a substantial oil discovery on the northern flank of the Hibiscus main field. And that will also be covered in more detail later. We also executed a sale lease back of the Marboma facility with 10 year lease term in April. $150 million. The Q1 EBITDA. was 109.7 million, with a net profit to company of 47.4 million. We had three liftings in total of 1.9 million barrels. And our cash position was still healthy at 150 million. We do invest significantly, as you can understand from our program, but that's all to the benefit of our shareholders. The Golthino prepayment facility was extended and increased to 120 million. We managed to stabilize production at a higher level, even though we're still pending ESP, new ESPs, and we managed to put new wells into production. But so we have managed to recover. but we still haven't finally solved the ESP problems. With respect to our LTI, we recorded no LTIs in the first quarter of 2024. We further had no environmental incidents, and we continue to progress very well on our local community initiatives, and we are a very active participant in a number of programs to help local communities where we operate. So a bit more granularity on the DUSIFU status. In terms of production, the net production in the first quarter was 1.66 million barrels equal to 18,260 barrels per day. OPEX was reduced suitably down from current or previous levels to 23 dollars per barrel and that was we did achieve significant operational efficiency gains and of course also some production growth compared to previous quarters we are progressing on the esp solution we have three conventional esp systems ordered And we aim to install these shortly as per our work over schedule. We have an additional four conventional systems that is expected to be delivered in the Q3 2024. And they will also be installed as per the work over schedule. Presently, the FPSO Adolo is shut down for annual maintenance and tank inspection. We expect this to take a bit more than three weeks, a bit early to say yet because of the tank inspection. But of course, we are progressing as quickly as we can. And of course, we are continuing unabatedly with our drilling program. Again, Hibiscus has proved to be a very prolific area. We established First oil from Hibiscus South in March, less than five months after discovery. And the well is producing 7,800 barrels per day, which is, of course, very useful. The 2P pilot or the Hibiscus South pilot number two has confirmed that there is a northern extension of this Hibiscus South field. And we aim, of course, to put this in production later in 2024. And it's currently being evaluated in the totality of our very, very much ongoing extensive drilling program. We also made a pilot and discovery in the northern flank of the Hibiscus main field. This is the first instance where we see a common gum bud and tall hydrocarbon accumulation. And it's very, very, let's say, it gives us a good indication that there will be a notable increase to the oil in place and the recoverables reserves of hibiscus. This again, underpins the very good performance of the hibiscus six h which is flowing naturally still and flowing very well this i think shows that our strategy of infrastructure-led exploration or appraisal is working out extremely well and we are adding to we are able to add significant reserves to the already discovered resource. Back to the Hibiscus Rouge drilling program. We are discussing a significant extension of the drilling rig contract with our supplier. We will of course aim to complete the two production wells. The well into the northern extension of the southern Hibiscus south. and the northern extension of the Hibiscus main. We are, of course, also planning to do a number of work orders related to the workovers related to the installation of the new conventional ESPs that we have on order and is being delivered as we speak. And of course, the objective is to increase juice and fuel production up to the Adolo nameplate capacity. Another key target for the company is to drill the BRBL, Prospect B formerly called, as the fourth appraisal in this drilling campaign. Then on to Golfino. I would very much say steady as she goes. We have had very stable production at Gofino. We achieved 82.82 million barrels in a quarter, about 9,000 barrels per day, with an average cost of $48 per barrel. We are progressing very well with the infield development plans towards FID this year. These are two wells that will give us, very low risk wells they are, so that will give us additional oil and gas production. This will of course be useful in reducing our per barrel cost and we also expect significant positive impacts on the reserves. We are in the process of securing all the long lead items, and we are looking at various drill or rig opportunities to entertain this program. Then on to Maromba. Not a lot of new things to report on Maromba. We are progressing. We are in discussions with Costco, shipping heavy industry related to the conversion program. And we are looking at the Wellhead platform concept and discussion with companies to undertake that work. Again, to repeat, the expected annual production is 30 to 40,000 barrels per day. The project economics is very solid and We are beavering away to have a FID as soon as we can get all the I's dotted and T's crossed and get everything organized. Kudu. Super exciting. Another major discovery outboard of us by GALP reported 10 billion barrels of oil in place. 60 kilometers distance from us. We completed our 3D seismic processing in May, as we have previously reported. We have, however, in light of the new discovery, and we have been able to access further seismic data just outboard of our block. And we have decided in light of the recent developments to bring that into our data set and to extend our analysis of our own position. And we see Of course, we find this extremely interesting, and it gives us a lot of good data points. We have secured long lead items now for a 2025 exploration program, and we are in the process of exploring various rig alternatives, and we have very productive dialogues with the other operators in the Orange Basin. We're also progressing on our concept development for the kudu gas to power project. That ends the operational update. I think I will then leave the word to you Knut to take us through the financials as usual.

Thank you Carl and welcome to the financial section of the first quarter 2024 results. First of all, we have been busy on adding on new financial resources. We closed a prepayment facility for Gofinio that we had in place already, but we managed to extend and increase that from $80 million to $120 million. And that new facility, that's a 12 month facility that was fully drawn at the end of the period. In addition, entered into an agreement on a lease or sale and lease back for Mabomo. The agreement was for gross $150 million, where of $110 million were to BW Energy, according to our ownership of the license. So this is to fund further our growth strategy, including the Gabon development projects. So this is a 10 year lease with an option to repurchase the unit from the end of year seven. We've also been active on other financings mainly for Maromba, where we're working on Chinese ECA financing and also with banks in the Middle East and also with other international RBL banks. To the income statement for the first quarter, we had operating revenue of 185. We had three liftings of 1.9 million barrels in the quarter versus four liftings of 2.7 in the fourth quarter. the main reason for the reduction in revenues, number of liftings. We had a loss from oil derivatives of 3.3. However, 3.8 of that was unrealized. So we'll see how that goes for the next quarter with the current oil price. Operating expenses was lower, $72 million. which then gave us an EBITDA of close to $110 million for the first quarter, so another good quarter for BW Energy. Depreciations and amortizations are in line, giving us an operating profit for the quarter of $73 million. We had the usual Interest expense, the main difference there was actually more from the fourth quarter where we had a capitalization of interest. That's why you saw a positive number there in Q4. So for Q1, we had interest expense of 2.9. What stands out here is other financial items. That is a continuing payment for the Golfinio cluster. So we paid a week. paid about $20 million to Petrobras. That was a contingent payment for the Golfinio transaction. And some of that comes up as other financial items, totaling $5.5 million. So the profit before tax, $61 million. Income tax expense of 13.8. As in the previous quarter, we have some deferred tax assets, for Golfinio that is a tax income. So that helps on the whole tax situation for the company. So that ends the quarter with a net profit of $47.4 million. To the balance sheet, as usual, we are always, as long as we have our investing activities, we're adding assets to, to the ENP tangible assets. That's mainly from the Hibiscus Rouge development, a little bit from Maromba as well. We had an increase in inventory that is mainly because of the oil inventory we have on board the FBSO Vittoria for Golfinio. Trade and receivable assets, that was a big increase that is due to the DUSAFU March lifting and a DMO delivery. That was a trade receivable at the end, but it was then paid in April. So the trade receivables are more back to normal as we speak. We ended the quarter with $150 million in cash and over to the to the equity and liability side of the balance sheet. Here you can see the effect of the continuing payment to Petrobras of the 20 million reduced our long-term liabilities. You can also see that we have a very high activity on the investing side, giving us also quite high trade and other payables. So, there was an increase there as well due to mainly due to drilling. And you can also see the effect of the, uh, increased prepayment facility in Brazil to, uh, to 120Million dollars, uh, on interest bearing current debt as that is a 1212 month, uh, facility. So, uh. All in all, still a very strong balance sheet with more than 40% of equity ratio and net interest bearing debt of about $260 million. Quickly to the cash flow overview. We had the cash at the end of December of 194. We had operating cash flow of 99 and net investments of 80. mainly related to DUSAFU, but also the $20 million payment to Petrobras for Golfinio is included there. Then net financing activities of 14 gave us $150 million of cash at the end of the quarter. Here we have some guidance to our lifting schedule and also a few words on hedging. So to the graph on the right-hand side, you can see the quarterly lifting schedule to BW Energy divided between Gabon and Brazil for Dusafu and Goldfinio. On Dusafu, we had two Q1 liftings, both in March, totaling 1.4 million barrels with an average realized price of $83 per barrel. We also quite recently had a lifting in the second quarter of 730,000 barrels net to BW Energy. In Golfinjo, we had one lifting in Q1 of 490,000 barrels in February at $82 per barrel. We have two liftings in Q2. 500,000 barrels lifted in April at the price of $90. And then we have another lifting that is planned for June of 500,000 barrels. And a few words to hedging. As we've mentioned before, we have requirements to hedge in the RBL facility for Dusafug. where we have to hedge 40% for the year one production and 25% for the year two production. So currently we have 4.2 million barrels hedged for 2024 and 2025. This is a mix of puts, zero cost colors and swaps. We have also entered into some swaps for the Golfinio barrels, about 20% of the annual production has been been had using swaps for for golfinio then over to to the summary on the production guidance we have maintained that for the quarter is still still early days and we're still heading for 10 to 12 million barrels net to bw energy On the production costs, same, no change in the guidance, $35 per barrel. There we are trending towards the lower end of that guidance. On the net capex, we have increased our guidance somewhat from 250 to 300. The new number is 280 to 330. So we have an increase here. related to DUSAFU reflecting the good results that we've had on the exploration side, which then leads to additional completions and work that we have to do to complete these wells. And on the GNA, there is no change to our guidance. So to our final slide, as a summary, on the production side, Target is then to complete all ESP change outs and maximize the DUSA-FU output. And then we will, we have, of course, had the success from Hibiscus South just after five months of finding it. And now we will complete the second Hibiscus South well later in 2024. On the exploration side, later in the drilling program in Gabon to drill the Bordeaux appraisal well, and also to complete the 3D seismic evaluation to assess the CUDA potential and prepare for the exploration program. On the development side, it's to complete the Hibiscus Rouge drilling campaign, sanction the Golfinio infill wells later this year, and finalize Maromba development plan and the financing. And also continue to progress the KUDU gas to power project. On the corporate side, we will continue to fund investments through strong operational cash flow supported by our debt facilities and lease financing. And the intention is then to pay dividend of up to 50% of net profit when we have Maramba in full operation. So that brings us to the end of the quarterly presentation. And then I leave the back word back to you operator for questions from the audience. And then we will continue here with the questions we have received from the web.

Thank you. If you do wish to ask a question, please press 5 star on your telephone keypad. To withdraw a question, you may do so by pressing 5 star again. There will be a brief pause while questions are being registered. The first question will be from the line of Theodor Sven Nielsen from SV1 Markets. Please go ahead, your line will now be unmuted.