Bw Energy Ltd

Welcome to BW Energy's second quarter 2025 presentation. For the first part of this call, all participants will be in a listen-only mode. Afterwards, there will be a question and answer session. To ask a question, please press 5 star on your telephone keypad. This call is being recorded. I will now hand it over to your speakers. Please begin.

Thank you, operator. A warm welcome to the second quarter 2025 presentation by BW Energy. This presentation will be hosted by myself, Carl Arnett, and Brice Morlot, our CFO. Then straight into the highlights of the second quarter. We had a solid operational performance, which gave us an EBITDA in the second quarter of 99 million. and we had a second quarter net profit of 26.7 million. Our cash position is excellent at 192.9 million. All our projects are on track and our Moromba financing activities are progressing according to plans. And we have a robust financial position. The strong operational performance was caused by, of course, very good production availability on Ducifu with 99%. We also had golfino production availability at 80, a bit below our expectation, but still okay. We're working with, as you may remember, the Boost project to improve on the golfino, but we are currently seeing stable, good production also from golfino. The first half year of 2025 gave us a production of 6.2 million barrels, 34,200 barrels per day, which is according to our expectations and indicates a bit of or some reduced production due to decline. The guidance for 2025, as you may remember, is 11 to 12 million barrels, and we are doing well with respect to the guidance. The OPEX also developed very much in line with our expectations. We had a second quarter 2025 OPEX per barrel of 20.4, which gave us 18.3 per barrel for the first half of 2025. The second quarter was affected by the mentioned decline in barrels, which gives, of course, a smaller denominator. And we had some one-off costs related to taking over the operatorship of BW Adolo, the FPSO. Of course, we expect to achieve synergies with time, when these two operations are carried out by one company rather than two. And we are on track to meet our target for 2025 with $18 to $22 per barrel. So Jusufu very much continues to deliver. We had a very strong first half with 27.7 1,000 barrels per day net production to the company. And our production availability has been excellent. The 2P2C recoverable reserves on Ducepew stands at 123 million barrels. And we are currently working on the Mabomo phase two. where we expect to add 14 million barrels and we planned execution of that in 2026. The Moromba project is progressing according to our plans. The FPSO refurbishment on the yard in China is going well and we are currently working full steam on steel replacement and the upgrades we have planned the rig delivery is now expected in august a bit ahead of our initial expectations which are good and we have we are progressing well on the preparations to take over the rig and do the necessary conversions or upgrades to that in the yard All detailed engineering subcontracts are in place and we are progressing with the detailed engineering and we have placed all the long lead items or the contracts for the long lead items. So no negatives to report. Everything is going according to plan and our schedules look very realistic at this point in time. So we don't see any any ripples or anything that says we're out of kilter. So, very happy with the development on Maromba project. So, we are, I would say, progressing on all our high-value organic growth projects. Maromba, Golfino Boost, and Mobomo Phase 2. That will, of course, add all significance to BW Energy. We have pre-feed activities going on on Burdon, our most recent discovery on Duzifu, where we have current counting as 2C resources of 14 million barrels net to company. This is based on, of course, the... The wells we drilled on Bordeaux, where we did one discovery and a delineation well. We drilled three wells or one well with three side tracks. So this is the first. We do see lots of more potential on Bordeaux and nearby Bordeaux. So we will definitely be coming back with a proposal for a separate development. The last but not least is our appraisal and exploration activities where with our appraisal well in Kudu we have as you may have noticed we have contracted the rig to carry out the Karas appraisal well the Karas one appraisal well We expect a spud in the fourth quarter and carry out the drilling in 2025, according to our plans. This will very much put us on track to deliver industry-leading growth. We are looking at close to tripling our production from current levels in 2028. And this is from a very consistently developed resource base. We have been able to grow it over the years, as you see from this caption on the left-hand side. And we still have a lot of runway with our 2C resources, as you can see on the left with 388 million barrels where we are working hard to unlock these resources as well. But the resource base for the company is excellent. So with that, I will leave the word to Brice that will take you through the financials and some wrapping up comments.

Thank you, Carl. As we move into a period of increasing project activity, I'm pleased to report that BW Energy continue to maintain a strong financial position. Our operating assets are delivering solid underlying cash flow and our balance sheet remains robust with ample liquidity and low leverage. Following the second quarter, we are also approaching completion of several key project financing processes. This will further strengthen our liquidity buffer, ensuring we are well positioned to navigate this transformative phase for the company. Altogether, our financial strength provides a solid foundation to capitalize on the significant value creation opportunities in our portfolio. Now let's take a closer look at the financial developments for the quarter. Starting with the top line, we continue to deliver production in line with expectations, but we had less liftings. So sales came down to 2.8 million barrels this quarter. some of this is offset by a 240 000 barrel increase in our end quarter inventory position the realized prices were as usual in line with brent averaging 67 dollars per barrel which is a decrease of 11% compared to the previous quarter. So the combination of volume and pricing resulted in a total revenue of $193 million. Our cash position is solid. On the cash flow side, operating cash flow ended at $162 million for the first half. We had an increase in working capital. This is driven primarily by sales proceeds in Gabon because the June lifting was not yet collected in cash at the end of June. Investment during the first half were $175 million, $110 million of investment in Gabon and the Bourdon exploration were. $41 million for the Marumba development and a smaller investment on Golfino and the preparation for the drilling of Kudu that we intend to spread in the second half of the year for $11.5 million. As we move into the second half of the year, we expect an increase in capital expenditure, but this is in line with the higher project activity. But in the same time, we anticipate a rise in cash flows from financing activities as we expect to close several project financing processes in the coming quarter. So in summary, we maintain a comfortable cash position, which provides solid foundation for our investment program. Turning to the balance sheet. Our net interest bearing debt currently stands at $421 million, which compares with our 12 months rolling EBITDA of $553 million. So the result is a strong net debt to EBITDA ratio of 0.8. And I'm also pleased to report that our current equity ratio remains above 40% at 46%. This is indicating a healthy balance between equity and debt. On the liquidity side, our liquidity position remains strong. In addition to our cash reserves, we have $70 million available through an unrun credit facility, the RBL, which in sum reached $263 million of total available liquidity. As of the end of the quarter, we have a mix of financing instruments in place, most of which mature after Marumba begins generating cash. We currently have one bond outstanding of 100 million. And during the second quarter in June, we tested the market with the intention of issuing a second bond. However, we choose to postpone this process as more attractive financing alternatives became available for the company. But with that said, we will likely return to the market when the timing is more favorable. We will share more details on other financing arrangements when the processes are finalized in the coming weeks. Marumba remains the key focus area for both our projects and financing teams. We have an efficient capital deployment. On the left-hand side of our financing plan, we have outlined the value sources of funding. We will enter into a dedicated financing arrangement for the Marumba FPSO with Cynosho. For the rig-to-wallet platform conversion for Marumba, we will pursue a leaseback arrangement similar to the successful approach we implemented with Mabomo and Dusaflu in Gabon. And in addition of our operating assets, in addition of that, our operating assets continue to generate strong cash flow. We estimate that the assets will contribute between 600 million to 1 billion in cash over the period assuming a brand price between $60 and $80 per barrel. So to cover the additional liquidity needs, we are in process of securing a separate bank facility backed by our main shareholder, the BW Group, and we will provide further details on the terms once the facility is finalized in the coming quarter. So altogether, this gives us a total financing capacity of approximately 2 billion, providing ample headroom to pursue our range of organic growth opportunity. And on the right side, you can see that we outline the intended uses of the capital. We expect to spend roughly 1 billion on Marumba prior First Oil. with the first six well, which represent about half of our total financing. And after first oil, we expect that Maromba will be self-funding for the second phases of the development. So alongside Maromba, we'll also invest in other high-value projects. We continue to invest in the assets we have, including Golfino Boost, the project to improve the wealth activation. There will be Mabomo Phase 2 on Dusafu for additional wells to maintain the plateau, and the well on Kudu, a prize oil well in Namibia, in the coming months. All of this will be executed while maintaining a robust liquidity position, ensuring financial flexibility and resilience through the cycle. With that, let's now take a look on how we are tracking against our target for 2025. On the production, we have had a strong start to the year with production averaging 34,000 barrels per day. This is primarily driven by the solid performance of Gabon, of Dusafu. While this has exceeded our full year guidance, we are not making any adjustments at this stage. as we anticipate approximately three weeks of planned maintenance in August during the third quarter. Operating costs per barrel, we remain well aligned with production levels and we are on track to respect our guidance. However, similar to production, we are not revising our guidance at this point. CAPEX, the capital expenditure for the first half came in at 180 million, which is relatively low, but fully in line with the expectation. This reflects the timing of our investment cycle as we have now entered the execution phase for the Marumba and the Golfinobus. Accordingly, we expect capital spending to increase in the second half of 2025 as the project activity intensifies. And G&A, general and administrative expenses, we have also developed in line with our expectation, and we are maintaining the estimated communicated guidance at the beginning of the year. So to conclude, our last slide of the presentation We are pleased with our year-to-date performance and the momentum we've built. We are delivering on our strategy to create long-term value as a fast-growing E&P company. We have a diversified portfolio of high-quality assets, a strong cash flow generation, and a robust balance sheet. And we are actively progressing a number of development projects that will drive high growth, setting on track to nearly triple the net production to above 90,000 barrels per day by 2028. And on the financial capacity, We have a resilient balance sheet, disciplined capital allocation, and the Marumba financing is nearing completion, so we are well positioned to fund our growth and deliver sustained long-term value for shareholders. That brings us to the end of the presentation. And then I leave the word back to the operator for questions from the audience. And then we will continue with the questions we have received from the web.

Thank you. If you do wish to ask a question, please press five star on your telephone keypad. To withdraw your question, you may do so by pressing five star again. We will have a brief pause while questions being registered. The first question is from the line of Theodore Nielsen from SB1 Market. Please go ahead. Your line will now be unmuted.

Good afternoon, Carl, and thanks for taking my questions. A few questions from the first on the in your Bruce project, could you just take us through the status and also remind us of what kind of production level you assume at the end of the Bruce project? Second question, that is on the ARC. It looks like the law that you previously talked about now has been renamed the SRCF, is that correct? And my third question, that is on the working capital. I understand that the working capital investments in Q1 was mainly related to a lifting in late June. Could you just confirm that that has reversed now, i.e. that the Q3 operation cash flow will be much higher than in Q2? Thanks.

Okay, Theodor, I'll take the first question. I didn't catch your second question because there was some break-up on the line. But anyway, golfino boost production, we're targeting about 2,000 barrels of increased production from the boost project. We do have, of course, as always, some natural decline. So we... produce on a good day from Golfino around 7,000. And then we have the FPSO downtime or the field downtime of about 80%. But the boost itself is estimated to give about 2,000 barrels per day.

Yes, and for the working capital questions, while we were producing very well and generating a strong cash flow for the first quarter, but we had a working capital effect of 61 million impacting the cash flow. This is due to the liftings in June that was paid in July, so in the third quarter. And that's the explanation. And the second question wasn't very clear. The line was not okay.

So if you can... Can I repeat the second question?

Yes.

Can you hear me now? Yes, we can hear you now. The second question was on the RCF. It looks like that is the same as the shareholder loan that we previously had. Is that correct? And can you just say something about the terms on that RCS?

Yep. So as you remember, in June, we tested the market with the intention of issuing a second bond. However, we chose to postpone the process because we had more attractive financing alternatives. And we are now progressing with a corporate facility. This will be a commercial facility through banks backed by our main shareholder, BW Group, up to 250 million. And for the other financing solution, the Maromba FPSO ECA is progressing according to plan. The FPSO financing is subject to Sinosure Policy Insurance. And the Wallet Platform Lease financing is in final agreement stages. And all final documentation are progressing very well. And we will issue a dedicated press release at closing in the coming weeks. Okay, thank you.

And then just a follow up to Karl's comments on Goldfinio Boost. You talked about 2,000 barrels per day and that the current production is 7,000 on a good day. But there will be some underlying decline. Does that mean that we should expect like 8,000, 9,000 per day maybe in 2027 from Goldfinio? Is that a fair estimate?

I think eight to nine is a fair estimate, yes. We are fairly far out on the decline curve, so the decline is not, or the natural decline is not as rapid as you would see in a new field. But, yeah, I think that's a fair estimate, yes.

Okay, thank you. That's all from me.

The next question is from the line of Tom Erick from Pareto Securities. Please go ahead. Your line will now be unmuted. Thank you for taking my question.

First one on Marumba. There was some talks earlier about the regulatory process as well. Of course, hopefully a formality, but a lot of things that have to be checked off. Can you provide an update on that, if it's too early to say anything new, or if there has been achieved some milestones there already, or when that can happen? And then next on this issue, obviously, the cash flow machine that will fund Marumba and other initiatives. Can you give some indication of what we should think about production next year and also capex, given where you stand now with the success you had earlier this year and how you see that developing into the production figures of 2026? Thank you.

Okay, regulatory process Maromba. Yes, it's an ongoing process. We have not passed any significant milestone as such. We are, of course, keeping AMP and IBAMA, which are the two main regulatory bodies that we need to relate to. abreast of the development of the project in terms of design and timing. But there's been no milestones as such. It's an ongoing working relationship where we keep them informed of our project. AMP's responsibility is, of course, to see these fields like Maromba, which are considered marginal fields, developed profitably to the advantage of the Brazilian nation. That's how they view it. So I would say it's a productive relationship within Maromba. you know, the rules that apply to this activity. So I can't, you know, really give a much more meaningful answer than that, or more granularity, if you like. It's an ongoing process, and we see it as a good process. On the JuicyFu production, we announced that we are planning to start the phase two drilling campaign on Mabomo around mid-year next year. And all those activities are going well. We are planning to add four wells. So that will, of course, give us a boost to production. We see natural decline. We are, in general, very pleased with the wells' performance. But as always, you have certain wells that are performing extremely well, and surprise on the upside, and we have certain wells that give us a little bit of a surprise on the downside. So it's always a mixed bag. But all in all, we have been, I would say, in totality, it's been very good. We're currently at around 35,000. We expect to see decline, I would say, of about 1,000 barrels per month. And then we will add new wells, and they will be in the range of, I would say, 5,000 to 7,000 barrels per day when they are, let's say, put in production. and at peak and then they will again start to decline similarly to what we see today. I don't know if that gives you enough granularity.

Perfect, thanks. There's one follow-up there. With the current state of the REIT market and Jacobs in particular, is there tempting to just go ahead and drill a lot more production wells so you basically know that you have a lot of capacity to stay at plateau for a long time or is the cost of capital too high given all the other organic growth initiatives you have ongoing now to basically spend money up front on that well the the we're working we're stepping through um as you may recall we have with the four extra wells we have used the um

We have used a well slot capacity on Mabomo. We will, of course, consider to, if we have a well that isn't performing as well as we would like it to, we have, of course, the possibility of reusing a slot and sidetrack the well. And that deliberation is going on. as we speak so yes we may do some more drilling in in terms of side tracks but it's that's a little bit too early to make any kind of firm firm predictions on that as it is work in progress and we're constantly of course monitoring the performance of each well and the reservoirs and and updating our reservoir models and understanding of Hibiscus, Hibiscus South and the Rouge reservoirs. So yes, we may do that if we find that it gives us incremental economics. We have in general very quick payback. I wouldn't say it's a big liquidity. It's not really a big liquidity issue. It's more doing the right thing and doing the work and preparing and planning.

Perfect. One last one from me. You obviously staffed up the team in line with the company being and becoming bigger as well. Is that process largely done now, or do you expect to have more people going forward as well to be able to follow up on all these tracks at the same time?

Well, we are working on our, let's say, on the footprint always, to make sure that we are as efficient as we can be. Yes, we are staffing up in certain offices, we're staffing down in other offices to achieve higher efficiency. So I would say we're not really increasing if you look at corporate and day-to-day activity, and do not consider, of course, the significant increase we have in manpower due to our high project load with Golfinoboost and the Baromba project. So we are working constantly to be as efficient, and as you can see from our Activities on Adolo, of course, we see an increase in manning, but it's indirect. It's manning that we have paid for anyway, because it's been a contract with BW Offshore. Now we are totally taking over that activity. And the objective is, of course, to achieve synergies by being one company rather than two, one administration, and improve and simplify the whole operation in Gabon. So, yeah, we are very focused on OPEX unit costs per barrel. We see that as the as the best way to ensure that we maintain our financial capabilities to develop the company like we want and according to our ambitions.

Perfect. Thank you very much for taking my questions.

Thank you. As there are no further questions from the conference call at this moment, I will hand it back to Bryce for any written questions. Please go ahead.

Well, thank you, operator. We have a couple of questions in the webcast. Questions from Mr. Samarkevic about the progress in completing the financing of the FPSO, the web platform. We already answered that, that it's progressing very well according to plan. And we are as well progressing the corporate facility. And we will communicate more details in the coming weeks. Question from Mr. Dodson, why not US listing would be very helpful. Well, thanks for your question. Today we are listed in Norway, a country with a significant experience in investing in oil and gas industry with a supportive regulatory regime for company and investor. We have a strong interest through the current listing. However, we are from time to time evaluating options for increasing the quality of our shareholder base. And we have done measures to increase accessibility for US, for example, with the OTCQX listing we did early in 2015. Another question from an investor about Mabomo Phase 2. Could you please give more details of Mabomo Phase 2? So as said, Carl, it will be four additional wells to maintain the plateau. It will be a phase development. So as such, we have a very high profitability per well and the wells will generate incomes before we are finished with the investment phase. And we target first oil in H2 2026. I think we have answered all the questions from the web. If you have any other questions, please do not hesitate to send us a mail to the investor relation mailbox. And thank you very much for your participation. And then I leave it to you, Carl, to close.

Well, as always, we appreciate your interest and the fact that you follow us. So, again, thank you for participating in this call. And I wish you all the best for the remaining summer. Thank you.