Bw Energy Ltd

A warm welcome to this third quarter 2024 presentation by BW Energy. This presentation will, as usual, be hosted by our CFO, Brice Molot, and our Chief Operating Officer, Lynn Espy, and myself, Carl Arnett. Quickly on to the disclaimer. Please note it. I take that as read and we go on to the highlights. The highlights of the third quarter were that production was significantly up and net production was 25,570 barrels per day. That was including the planned golfino maintenance shutdown. DUSUFU had a quarterly gross production. of 2.5 million barrels, which is the highest since production started at Dusefu. Currently, Dusefu is producing 40,000 barrels per day gross, and all the ESPs that we have changed out are functioning extremely well. We also became operator of the Niossi Marine and Guduma Marine exploration blocks offshore Gabon. And we will cover that in more detail later. The third quarter EBITDA stood at 130 million dollars with a net profit of 48 million. We had three liftings totaling 2.5 million barrels. with a net average price of $82 per barrel. So this gave a record quarterly operational cash flow of 145 million, and our cash position was very healthy at 210 million. So third quarter key figures, our net production was significantly up compared to previous quarter and last year. Our revenue was of course also significantly up compared to last quarter and previous year. Our OPEX per barrel came down by about 17% compared to last quarter, and 7.3% compared to third quarter last year. This gave us the EBITDA, which was also of course significantly up, and net income that multiplied many, many times since a comparable quarter. And of course, also the same with the operating cash flow. So this is the production profile. And we can see the effect of the ESP change out and the impact on production. We can also see the Golfino planned maintenance shutdown that was conducted in the quarter. In terms of LTIs. We recorded zero LTIs in the quarter and we also recorded zero environmental incidents and this also goes for to date in 2024. Then on to Gabon and our primary asset Ducefou. Q3 net production to company was 1.9 million barrels equal to 20,150 barrels per day. We had a very high operational uptime on Ndolo and Mabomo. And as I said previously, the wells performed extremely well. We are now, of course, completing the change-out program, and we will see a further improvement in our production and regularity. The OPEX per barrel came down with increasing production to 20.5 dollars per barrel. We are nearing now completion of the Hibiscus Rouge phase one drilling campaign. We have some ESP replacement to do and we will before end of the year put two more Hibiscus wells and the Rouge well, and we will then have first oil from Rouge as well in the fourth quarter. The last activity in the current drilling program is the Beurdon appraisal well that will be drilled early in 2025. And you can see here in the caption, the Beurdon field outline, and we are going after risk gross recoverable reserves of 30 million barrels. As we have infrastructure in place, we can trigger a development of the Bordeaux. Should we be successful in our campaign, we can trigger developments at fairly low reserve basis. Further developments in Gabon is that we are expanding our resource potential. We have just signed PSEs for the Niosi Marine and Guduma Marine exploration blocks. BW Energy holds 37.5% working interest and is operator of these two licenses. They are surrounding the known Etam and Dusefu fields as well as some fields closer to shore and has a total acreage of close to 5,000 square kilometers. Then on to Brazil. The golfino production was affected by the annual FPSO maintenance program and came out at around 500,000 barrels total, which equals to 5400 barrels per day. This of course also affected the average dollar per barrel so we had a production cost of 63.3 due to the lower production. The availability of the unit is expected to improve after startup as we have done extensive maintenance on the equipment. The focus going forward is going to be on optimizing production capacity and availability and of course operating costs. The Maromba development is progressing according to plan. Maromba, just to remind everybody, this is an oil field that we intend to develop. It's in a very good region. You see some of our neighbors that are Peregrino, Papatera, and it's an oil-rich area. And we expect to have our, excuse me, FID in early 2025 and we are targeting first oil 36 months after FID. We are looking at a highly efficient concept reusing the FPSO that we have already acquired and a platform with dry trees and drilling capabilities. The plan is for an initial production of 50 thousand barrels per day from six wells. Then on to Namibia and Kudu. The Kudu appraisal program is progressing to plan. We have named our first appraisal well. It will be named Karas and we have defined the location for this well. We have also secured all the long lead items to undertake this drilling campaign in the second half of 2025. We are currently reviewing rig bids and we are pleased to say that the current bids look attractive and we see price levels that are somewhat below the expectations we had, so that is good. We have now completed, of course, the 3D seismic processing of the FAST PSDM. And that is, we have a number of good locations for also future appraisal wells. The KUDU gas to power field development plan, is progressing and we expect to deliver an FTP to the government early 2025. With that, I will hand over to Brice.

Thank you, Carl. It's very satisfying to see production so high and it's reflected in the financial figures. Let's dive in the Q3 financial section. To the income statement for the third quarter, we had an operating revenue of $206 million. It's plus $41 million compared to Q2. We had three liftings, two for Dusafu and one for Golfino, 2.3 million barrels compared to 1.8 in the last quarter, and 8.6 million of unrealized gains on hedging. It reflects the highest quarterly production since inception. And as Carl mentioned, we are now in Q4 producing over 40,000 barrels per day gross. Operating expenses are on the right track. $85 million, minus $3 million compared to last quarter, which gave us an EBITDA of $130 million. For the third quarter, it's plus $44 million compared to Q2. This is an excellent quarter for BW Energy with strong production growth on track for ESP change out by year end and with three ESPs, three wells remaining in the work of a program. Depreciation, the difference with last quarter is related to the lease of our supply boat in Brazil for Golfino. These lease contracts were effective from February, but they were not identified as leases and accounted for under IFRS 16 until September. So in Q3, we recognize the catch-up impact for Q1, Q2 and Q3. giving us an operating profit for the quarter of $78 million. It's plus $37.9 million compared to Q2. Interest income, we have $1.6 million of Mabomo, CEL and ISBAC interest from GV partners. We had interest expense of 10 million versus 5.6 in Q2. The main difference you see here is an increase due to 2.5 million corporate bond interest and 2.5 million due to less interest capitalized for Dusafu project. So a profit before tax of $75 million. It's plus 34 compared to Q2. and income tax expenses of 17 million dollars. So we end the third quarter with a net profit of 48 million dollars. To the balance sheet, tangible asset, there is a downward adjustment of 25 million on golfino asset retirement cost. The abandonment dates were delayed from previous estimated 2033 to 2042 Therefore, the discounted PV for the future liability is now smaller. Right of use assets, a net impact from adding the new leases of our supply boat in Brazil for Golfino. Intangible assets, we have an increase of 10 million. The studies are capitalized to intangible assets before FID. This is mainly studies on Kudu and Maromba. Other non-current assets, 30 million investment in Recon Africa shares. The original investment is 16 million, but we recognized the decrease in fair value of shares of 2.6 million. Trade and receivables, we had 41 million Q2 golfino lifting proceeds collected in Q3 and 14 million of DMO sales. And we end the quarter with 209.8 million in cash. Over to the equity liability side of the balance sheet. We can also see the effect of interest bearing debt of golf, you know, oil prepayment facility that started to amortize with a fertile first amortization during the August lifting. We can see a decrease in asset retirement obligation by 58 million. This is the Brazil a whole calculation due to revised abandonment date. Um, these liabilities increase. This is the new facilities of good funeral. Um, and you can see that we have a very high activity on the investing side, giving us high trade and other payables, mainly due to drilling and work of a program. So holding all very strong balance sheet with 42% of equity ratio. And an interest bearing that off about $556 million. To the cash flow overview, we had the cash at the end of September of close to $210 million. That was $244 million end of June. We had an operating cash flow of $145 million. That was $63 million last quarter. And net investment of $98.6 million. That was $125 million in Q2. mainly related to DUSAFU development, but also the investment in RIC and Africa shares. Then a net financing activities of $80.7 million. That was $155 million last quarter, and that gives us a $210 million cash position for this quarter. Here you have some guidance to our lifting schedule and also on hedging. On Dusafu, we had two liftings in Q3, 796,000 barrels with an average realized price of $83 per barrel, and another lifting of 779,000 barrels with a realized price of $80 per barrel. In Golfino, we had one lifting in Q3 of 487 barrels. In April, at $81 per barrel. So we will have three liftings for Dusafu in Q3 and one for Golfino. So the numbers might be good also for Q4. A few words on hedging. We have a requirement to hedge in the RBL facility for Dusafu, where we have to hedge 40% of the production year one and 25% for year two. This is completed, and we are also hedging part of the production of Golfino, about 25% of the annual production in 2025. So currently, we have 4.9 million barrels hedged for 2025. 25, 26, and this is a mix of puts, zero-cost collars, and swaps. Over to the summary. We are on track to maintain our production guidance of 10 to 11 million barrels net to BW Energy. On the production cost, we reduced our guidance this quarter to 30 to 32 dollars per barrel. So this is a very good news instead of 35. And we are on track to respect our guidance on capex and GNA. And to the final slide of the summary, on the production side, our target is to complete all ESPs, change out with conventional ESPs before the end of the year. Production is at peak right now at 40,000 barrel oil per day, and we still have three wells to come online before next year. We'll continue to optimize Golfino. Many things to do on our current well portfolio. On the exploration side, we plan to drill Bourdon appraisal in February and to drill an appraisal well in Namibia to assess the kudu potential. Since we acquire two new blocks in Gabon, we are preparing a 3D seismic to assess the potential of those two blocks. On the development side, we continue to optimize Marumba development plan and hope to complete all the studies early Q1 and also continue to progress the Kudu Gas to Power project. And on the corporate side, we focused our effort of boosting on boosting our operational cash flow and to complete Marumba financing before the end of the year. So that brings us to the end of the presentation. And then I leave the word to the operator for questions from the audience. And then we'll continue here with the questions we have received from the web. Thank you.

Thank you. If you do wish to ask a question, you will need to press five star on your telephone. To withdraw your question, press five star again. There'll be a brief pause while questions are being registered. Our first question comes from the line of Theodor Sven Nielsen from SV1 Markets. Please go ahead, your line is open.

Good afternoon, Carl and Brice. Congrats on a good report. A few questions for me. First, I'm positive to see that the production now is at 40,000 barrels. I just wonder, for Q4, how much could we model? I guess it would be too aggressive to assume 40,000 barrels for the entire fourth quarter. The second question, that is on your long-term production guidance. I noticed that you removed the slide that you previously used in the presentation, which showed production, I think it was out to 2028, maybe. Could you say anything about how to think around the level of production in 2027, 2028? Of course, I understand that it's very sensitive to Marumba startup, but then it's also useful. And then, a final question that is on Golfinio and the production heading into 2025. There's been substantial decline on Marumba recently. How do you think around the level for 2025, and what will trigger that you will consider new wells on Golfinio next year? Thanks.

Yeah. Yeah, I don't know. Maybe you should take the first one, Lynn. Did you get it?

Yep. What I heard was the thoughts on production in Q4 from Dusufu. And then... So production, as you heard, as Carl mentioned, is we've achieved 40,000 barrels a day. And unfortunately, no, we will not average 40,000 barrels a day for the quarter, but we will be up from our Q3 average production that we showed here earlier in the presentation. So anyway, so I think it's going to be roughly 20% up or so in Q4 relatively. to Q3, but it is a little bit variable because we are bringing new wells on and the timing of that, so there is going to be a lot of fluctuation with that, but production will be up from Q3. And then I think the other question I heard was about golfino production. And golfino production, we have had some operational problems. In Q3, we had the scheduled maintenance and a host of other gas compressor, gas lift compressor issues. What we do think is that we'll be able to restore uptime. One of the gas lift compressors had to be sent onshore for repair and maintenance, and it should be back in Q1. But overall, I think we would expect to see our production stabilize in 2025. There was a third question that I...

I didn't quite get it. That was about the production until 28, was it?

Yes, I just noticed that you have removed the illustration where you sold the production to 2028. Could you give any color on what to expect from now until 2028 in the production trajectory? Does it deviate substantially from what you have sold before?

Well, 2028, until 2028, will be a lot of things happening, among them Maromba. So the other thing is, of course, we will drill Bordeaux, and we have a second phase of drilling on the Hibiscus Rouge. So we are very optimistic on the production levels from the Hibiscus Rouge area, because we did prove up significant additional reserves, particularly in the Hibiscus South and Hibiscus. And we do expect to be able to maintain our production plateau from the Hibiscus Rouge at a higher level than previously. But I don't know if you want to kind of give it a flavor, Lynn, of...

Yeah, no, I think you got it. I think we feel very good about the Ducifu production. No, we feel there's no change in guidance, I think, long-term guidance from the Ducifu. If anything, I think we're more bullish. Void by the, you know, we had the reserve ads last year with the discoveries, Hibiscus South, et cetera. And so our production guidance for Dusafu, I think, largely remains intact. So, no, we're very, very pleased with the performance so far.

Okay. I hope that gives you a flavor or did you have something or a follow-up question?

Yeah, absolutely a good answer, but I just follow up on the question regarding the Ducerfoy gross production in Q4. Elin, you said 20% higher than Q3, so does that mean we should expect somewhere between 32 and 33,000 barrels per leg gross from Ducerfoy in Q4?

Yeah, I think that's in the right ballpark, but I may put a wider bracket band. Again, we're doing all these workovers. We're bringing wells online, and the timing of it kind of affects the overall average in a single quarter, but that's the ballpark. I think that's reasonable.

And I think, Lin, we should also mention that we do a bit of testing as we put these wells online. So we're not getting full production all through the period. There is a bit of testing, and prudent operatorship dictates that you do test a bit when you put wells on. Exactly.

Yep. Understood. That's all for me. Thank you.

Thank you.

Our next question will be from the line of Tom from Pareto Securities. Please go ahead. Your line will be unreaded.

Congrats on a good quarter and getting just a few up at 40,000 bars per day. First question on that. How long do you think it can stay at that level and what kind of What time should we expect into next year? And how long can you then have that all going before you need to drill more wells? And when will you actually do that? And then second question on Maromba. Can you talk a bit about how the capex figure on that is developing? Have there been any major changes for the year to date on that? Thank you.

Yeah, okay. Maybe you take the first part of the question and I'll do the Maromba part, Glenn.

Yes. So the first part, what I understood was production guide or how long we're going to be on plateau and production guidance for next year. And I don't know if we've officially given out the production guidance, but our expectation is that we have now achieved our production plateau, and our intent is to maintain it. We think we'll be able to maintain it through 2025. Now, achieving 40,000 with our annual shutdowns and maintenance shutdowns and just various ups and downs from operations, we're not going to be able to average that. I think it's

um you know it's going to be 40 000 less 10 or so but i think later we'll come out with our official guidance figures for 2025. okay so then to maromba uh well we we um as we have explained previously we have pivoted to a design where we have a fixed uh installation and dry Christmas trees, dry well bay and drilling facilities. We are exploring various options and we have a number of feasibility studies going on. We see significant potential in optimizing the surf, i.e. putting the FPSO closer to the fixed facility. And we also see significant upside in the potential reuse of facilities for the fixed platform. So all in, we see potential for significant improvement in the overall investment in the project. J. And we expect to conclude all the work we are doing a soil survey in early early next year January and we expect expect to complete our feasibility studies very soon thereafter. J. We have. J. kept the pressure on in China so. The FPSO, which is today the long lead item of the development, is being progressed and we are pre-investing in steel replacement already as we speak. So we are planning to have the financing concluded early next year. And then when we are ready to FID the whole project, we expect to get going on everything. So it's looking extremely promising. I don't want to come with specific figures yet because we are doing a number of, let's say, high-impact studies that the results are quite important to get the price, but it's looking very, very promising. And we are... I would say we today are 95% certain that we will FID this project in the course of the first quarter next year.

Okay, thank you both very much. Just one follow-up on this. There has also been some talk there about increasing the nameplate capacity of DSP. How difficult is it to do that?

To go above the nameplate? Well, the nameplate is a somewhat theoretical figure based on a typical oil being processed through a plant and it's based on retention time and output. So you need to knock the gas out, you need to achieve the basic solids and water quality in the oil. I would say it's looking very promising that we will be able to increase the nameplate. We will do some studies because we do have to study the safety equipment, PSVs, control valves, etc. We have to study this. But I would say we are very confident that we will reach a higher nameplate. And we expect to conclude this work again early next year. Now we have the capacity, the well capacity, and we can also do testing and see where we are hitting any restrictions in the plant.

Okay, thank you very much.

Thank you, Cham. As no one else is lined up for questions in this call, I'll now hand it back to the speakers for any written questions.

Thank you, operator. We have a couple of questions in the webcast. Many questions on high production and more whales to come. Can we talk about plan to explore the bottlenecking, etc.? ? Well, I think as Lynn mentioned, we hope to maintain the plateau in 2025. And could we raise production target? Yes, maybe. As Carl mentioned, we believe that the FPSO is designed for more, probably 45k. We are working closely with BW offshore team to secure this target. The production plateau could be challenged as well, higher production. The actual constraints is the separation capacity, but we think we can find a smart solution to improve this, and that could be triggered after the Bourdon appraisal. So let's see how it goes in Q1 next year. Question on recon Africa PL 73 license, where are the two exploration wells in the program? Well, we are not at the target depth yet. drilling is still ongoing. So we'll have more conclusion by the end of the month. Marumba FID, as we said, we hope to close all the remaining studies by the end of Q1 next year and to have the financing in place by the end of the year. What would be the water depth where the platform is going to be located at Marumba? The water depth is around 150 meters, I think.

Well, it depends a little bit on where we will locate the platforms. And that's where the soil survey is coming in. So in 150 to 170 meter water depth is what we expect.

Thank you, Carl. And the last question on how do PSCs terms for the two new PSCs in Gabon compared to the Dusafu PSC? Yes, the terms are quite similar. And while we are very excited with this new investment and to continue to expand in Gabon, we will maybe plan a seismic survey by the end of next year to assess any potential of this block. Then I think we covered the question from the web. If you have other questions, please do not hesitate to send us a mail at ir.bwenergy.no. Thank you very much for your participation, and I leave it to you, Carl, to close.

Well, again, just to chime in, thank you for your participation and questions. We have very interesting times ahead and we are looking forward to next time we're presenting as I think we will have a number of conclusions to relate to you at that time as well as very, very good results. So it's a good time. It's for us. We have turned the corner. We have managed to... to come back from the ESP issues that has plagued us through 24. So we are extremely optimistic about the future. And it's going to be exciting times for BW Energy. So thank you. And to those that follow us, thank you for participating.