Bw Energy Ltd

Welcome to the BW Energy Q2 presentation. My name is Alan. I'll be your coordinator for today's event. Please note this call is being recorded and for the duration, your lines will be on listen only. However, you have the opportunity to ask questions at the end. This can be done by pressing star one on your telephone keypad. If you require assistance at any time, please press star zero and you'll be connected to an operator. I will now hand you over to your host, Carl Arnet, to begin today's conference. Thank you.

Thank you, operator. A warm welcome to this BW Energy second quarter 2026 update. This update will be hosted as usual by our chief operating officer, Brice Morlot, and our chief financial officer, Thomas Young, and myself, Carl Arnet. Please note our disclaimer. and then on to the second quarter highlights. We have just started the Mabomo phase 2 drilling campaign. Super exciting and more of that will follow later on in the presentation. All development projects are on plan and budget and we had of course a record high cash flow on the current oil prices in the quarter. which have strengthened our financial position with respect to sources and uses. We are very much on track to deliver above 100,000 barrels production per day in 2028. On the Q2 results, we had revenues of $296 million in the second quarter We had a net profit of 44, cash from operations we're at 260 million dollars and we had a very healthy cash position of 254 million end of Q2. BW Energy is executing on five projects currently which will add 222 million barrels of 2P reserves and all these have low break-evens and rapid payback. This will take us to 100,000 barrels per day. We will double production in 2027 and we will double again in 2028 from current levels of around 25,000 barrels. The Mabomo Phase 2 drilling has just started and is on track. Maromba project is on track. Golfino goose project is on track. Verdun is on track. And we have also the Golfino new wells, the new infill wells we're planning. This is also on track where we have ordered all the lead items. In addition to our Let's say very concrete plans that you will be also given more granularity on later on in the presentation. We have significant upsides in all our licenses. We have the Bordeaux area upsides. We have additional DUSIFU targets in the north and east of our license with the Walt Whitman area. We have the Maromba Carbonates and we have the prospects of the greater Golfino area. So we have a significant backlog of additional targets that we are aiming to unlock as we go. Very quickly I will give you the update or status on the Maromba project. The FPSO Steel Renewal is very near completion and the current main work stream is on the top side piping and equipment refurbishment and tying of new equipment. The Wellhead platform, the leg extension has been executed. Very impressive. We have some of the longest legs in the business right now. and we are continuing with the refurbishment of the equipment. So far we've had no impact of the turmoil in the area and the logistic challenges have been solved without causing any project impact. SURF, the SURF contractor has been selected and procurement is continuing of all long lead items and we are also progressing well on the engineering. On the drilling we have selected drilling contractor and we are preparing for the initial six wells. So that's it, short and sweet. I will then leave the word to Brice that will take you through the operational update.

Thank you, Carl. Good afternoon, everyone. Now, let me walk you through the operational performance in the quarter. Total net production was 25,000 in Q2, broadly in line with Q1. At Dusafu, production was 19,000 bariloids per day, with a 98% production availability, reflecting strong consistent performance in Gabon. At Golfino, we produce 6,000 barrel oil per day at 74% availability, stable relative to Q1 and in line with the expectation as we manage the ESP configuration ahead of the boost installation. Under full year guidance of 24,000 to 27,000 barrel oil per day, this is unchanged. For the second half, three events would impact the production output. We have a two weeks planned shutdown at Dusafour in September. One Dusafour ESP is malfunctioning and potentially would require a workover if confirmed down. We are working right now to confirm this. And on the positive side, we see upsides to golfino production. Should the gas leaf compressor reliability be improved in the second half? We are working to resolve that as well. This is the issue that is the core improvement of the golfino boost project and should be removed in total by mid-year next year. As there are both events on the upside and downside that could happen, we keep the range unchanged, but production is expected to track towards the lower end of the guidance range for the full year. On the unit OPEX in Q2, it was $24 per barrel, so slightly above Q1, that was $22 per barrel. The absolute costs are largely stable. The increase is primarily driven by higher fuel prices for power generation, so no structural cost deterioration. The full year OPEX guidance of $22 to $26 per barrel isn't changed. First half average was $23 per barrel, so comfortably within the range. The H2 profile will be influenced by the Dusafu shutdown and in Brazil by the Golfinho gas cost sensitivity to oil price. So, Mabomo Phase 2 drilling campaign. I'm very pleased to present this today. The campaign has started. We started a few days ago. We are currently drilling two northwest hibiscus appraisal wells. targeting additional reserves in a part of the DUSAFU field that has not been produced before. If the appraisal confirms the resource, we will fast track conversion to production wealth in late 2027, adding production with minimal incremental cost. So a successful outcome could add up to 10,000 barrel oil per day, and this is on top of the four Mabomo platform production wells already planned in the business plan. These four production wells follow the appraisal program and each well is expected to add approximately 5,000 bpd gross. And we expect first oil from this campaign in early Q1 27 and the sequencing is deliberate, apprised first, then convert and scale consistent with how we operate across the portfolio. So Doosafu has a long and layered production runway and this slide shows how it builds up. We have the Mabomo phase two delivered for the first oil in Q1, 2027. adding approximately 20,000 barrel oil per day from four new producers with a further 10,000 barrel oil per day potential from the two appraisal wells that we are drilling as we speak, if successful. We should get the answer by September. Bourdon phase one follows in Q128 adding approximately 10,000 barrel oil per day from three initial wells across a 12-slot platform. Then we'll have Bourdon Phase 2 that will come in 2029. And then Walt Whitman Appraisal Drilling is planned for 2030. The long-term production targets for the Doucefou area is between 30 and 45,000 miles per day growth. The ACUMOED platform, which is the platform for Bourdon, is currently in conversion and will serve as a hub for the Bourdon development and opens up the southern part of the license for further exploration with Bourdon UpDeep, Bourdon SoftWest, Abaye and Bourdon SoftEast. Dusafu is not a maturing asset. The asset still has the majority of its production life ahead of it. Now Thomas will take you through the financial section.

Thank you Brice and good afternoon everyone. Q2 was a strong quarter. The oil price environment gave us a meaningful tailwind that fed directly into revenues and cash generation resulting in record operating cash flow for the quarter. That cash generation has done real work on the balance sheet. Liquidity is up, leverage is down, and we've entered the second half in a better financial shape than when we started the year, which is pretty good when you're in the middle of the heaviest investment program in the company's history. Now, let me take you through the key drivers behind our quarterly results. Net production came in at 2.3 million barrels or 25,300 barrels per day, essentially flat on the first quarter. Sales, though, were 3.2 million barrels against 2.2 million in Q1. That difference, what we produce and what we sell is probably worth a moment because it does drive a lot of what we see in the quarter. We produce continuously, but we sell in cargoes of roughly a million barrels apiece. So the two really line up neatly within the quarter. At the end of Q1, we were carrying about a million barrels of produced but unsold oil, and we sold that down in Q2. On the revenue side, that worked out well for us. We realised $103.5 per barrel before hedges, again $79 per barrel in the first quarter, and with Brent averaging around $104, we captured essentially the full market price. We also lifted 1.4 million barrels in April at $121 per barrel. which is a level we haven't seen since 2022. So those inventory barrels were produced in the first quarter cost and sold at second quarter prices and that timing alone was worth somewhere in the order of 20 million. Perhaps fortunate rather than clever, but you know, money is money. So on the cost side, it works the other way, which explains why EBITDA only grew 29 million on 124 million of additional revenue. The inventory cost that was parked in Q1 came back out in Q2, a swing of roughly 76 million, with higher royalty and depreciation on sole volumes on top. This is of course simply a timing effect, not margin compression to be clear on that, and the underlying unit economics are unchanged. After 40 million hedging loss on the 1.2 million barrels of hedged barrels, effective realized price was approximately $90 per barrel and total revenue was 296 million. Which brings me to cash and I think the 254 that you can see on the right hand side is best understood in two parts. Around 121 million is what the business actually earned in the quarter, which is sold oil, cost paid, taxes paid, and I guess can be seen as the underlying run rate at current oil price. The other 139 million came out of working capital, which is essentially the first quarter reversing. If you remember in Q1, working capital absorbed about 134 million and operating cash flow was negative. And I did expect this reversal in this quarter. One thing I would like to flag for your models, though, the 40 million hedge loss is charged in the second quarter, but it does not actually settle in cash until the third. So it's sitting in payables as of the end of the quarter, which means third quarter operating cash flows will land roughly 40 millions below what third quarter earnings would imply. Investment activities were 101 million across Maromba, Golfinio, Boost and Dusafu. Financing was a net outflow of 66 million, mostly repayments of the corporate revolver. All that translates into a stronger balance sheet across most parameters and I think the slide sums it up quite well. Starting from the left, net interest bearing debt has come down 113 million to 698 million with leverage falling from two times down to 1.8 times. Frankly this is not development we expected to see before 2027 so it's a comforting sight in the middle of an investment program. Worth saying that CapEx of course is going to rank ramp up in the second half so we do still expect to have high leverage before we get to first of all Maromba. Book equity increased 113 million to 1.142 billion driven by the net profit and the hedge book moving in our favor well through to Q1. The equity ratio is back up to 40% and putting that against our equity covenant, which is effectively 25% before Maromba First Door. That leaves us with a very comfortable headroom. And on liquidity, we closed at 544 million, roughly 210 million above the first quarter. That is 254 million of cash, 290 million of undrawn revolving credit facilities across the revolver and the reserve-based lending facility. The two key drivers are 100 million of RBL accordion that we closed in the quarter and operating cash inflow, which of course is partly offset by debt repayments and ongoing investment spend. On the guidance, we are keeping the full year guidance unchanged across all four lines. On production, first half came in at 25.2 thousand barrels per day. Tracking the midpoint, in the second half we expect production to be skewed towards the lower end of the range as some factors will impact production rates. At Doosafu, a two-week planned shutdown in September and one ESP potentially requiring a workover. And on the positive side, we see upsides to Goffini production should a gas lift compressor reliability be improved in the second half. On operating cost, we were at $24 per barrel against a range of $22 to $26. Unicosts, Cuts both ways, fuel costs move with overpriced and unit costs move to volume, so a strong price stake with production at the lower end pushes us likely towards the top half of the range for the year. CapEx is at 231 million, at the halfway point implies a step up in the second half, as expected on the back of a back-weighted CapEx program, I'd say, with Mobomo Phase 2 drilling underway and Mobomo milestone payments coming through. G&A of about 11 million for the first half tracks ahead of the midpoint. We expected to drop in the second half compared to first half, which had a few one offs. We remain comfortable in the four year range. This chart brings together everything we've covered today and paints a picture of what comes next. What drives us above 100,000 barrels per day by 2028 is entirely organic. Five projects already in execution, all sanctioned and funded, built on the same infrastructure-led model that defines the company. And the growth does not stop at 100,000 barrels per day. The appraisal and upside layer represents a further step up that is within reach from assets that we already own and operate. Those are already identified resources and named targets, which includes Bordone Phase 2, Goffinio Phase 2 and 3, and upsides in proven targets around the current Maromba development. Beyond that, the exploration layer adds Wall Whitman, Leo Sengedumar, Goffinio Prospects, and further exploration in the Maromba area. So each of these layers feed naturally into the next and should enable us to comfortably sustain 100,000 barrels per day of production, hopefully into the next decade. To close, the investment case rests on four pillars. More than 600 million barrels of reserves and resources as the foundation for organic growth. A plan already in execution to take production from 25,000 barrels per day today to above 100,000 by the end of 2028. A portfolio that returns about 30% IRR at 60 Brent. And 2 to 4 billion of free cash flow depending on oil price between 2026 and 2030 against an enterprise value of around 2.2 billion today. So I think that remains a pretty solid investment case. And with that, that ends the prepared presentation and I will hand over to the operator for Q&A. Thank you very much.

Thank you. There are currently no questions from the phone line. Please proceed for the written question.

All right. We have a question here. Can you give an update on the KUDU data room process? How much interest have you seen and what are the next steps?

Yes, so we did open the data room at the AAPG conference in Windhoek. That was mid-June. and actually we have seen a very good interest from a good range of players and the process is ongoing so we will update the market when there is something material to report.

Very good. I think this one is also for you Brice. How should we think about the production ramp into 27 as Marbomo Phase 2 wells and Maromba comes online?

Yes, so in 2027, we will have a lot of projects coming online. First, Mabomo Phase 2 with four new wells, perhaps two on top of that. We will get the result of the North East Appraisal. and if it's positive, we will add more wealth from the Mabombo phase 2. We will have Golfino booths coming online as well and then Maromba towards the end of the year. So taken together, we expect production to build steadily through the year, moving towards 50,000 barrels per day in the second half. but we'll provide more guidance on the 2027 later in the year.

Thank you. Next question. Q2 production cost of 145 million was the highest ever. What was the key drivers and what should we expect in the next few quarters? So as mentioned, most of the increase is due to the Q1 underlift barrels that was released into the second quarter as they were sold. Next, we have Q2 cash flow was strong, dream of our working capital. Is working capital now at a normalised level or should we expect a reversal shortly? Broadly normalised, yes. The one thing I would flag again is the 40 million of hedge settlement which was charged to the second quarter but does go out in cash in the third quarter. I have a what is the nature of Brazil oil export? Thank you very much. I have a question here for you Brice. How would you assess the geological risk in Maromba?

Well, we've been on Maromba, we have been working on the data set we have since many years now, and we do have a lot of data, DST data, and we are quite confident with the geological risk. So we don't see a lot of risk on the Production Forecast coming from the subsurface.

Thank you. Next question. You target more than 100,000 barrels a day from 2028. Do you have any unit OPEX target guidance from this year and onwards? Two-spoon golfini OPEX will come down as production comes on through our investment program. Maromba should start below $10 per barrel on average over the first few years of production. So in total, on the company level, we expect significant reductions from levels in 2026 as we see the outcome of these various investment programs that we have across our assets coming online. I have a question here for you Brice. Could you please provide a bit more colour on how you work to mitigate potential disruptions to the Maromba Whalehead sail away from Dubai in late 26?

Yes, so almost we are assessing options and actually we have several opportunities but as Carl stated last quarter the rig is in fact Chinese and that could prove valuable. In general, we have a low concern for the situation and we expect to be able to get the rig out in due time.

Right. I think that's all the questions I can see here. So that concludes the Q&A. Thank you very much and we'll see you on the next quarter.