Bw Offshore Adr

Ladies and gentlemen, thank you for standing by. I am Emma, your chorus call operator. Welcome and thank you for joining the BW Offshore conference call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touch-tone telephone. Press the star key followed by zero for operator assistance. I would now like to turn the conference over to Marco Bienen, CEO. Please go ahead.

Good morning and welcome to the third quarter 2020 presentation of BW Offshore. In this call, I will give a general update and our CFO Stol Andreasen will cover the financial results. Moving to the next slide, our disclaimer, please take note. And then moving on to highlights on slide three. The third quarter was a challenging quarter from an operational perspective, with both the Juncker NAP and the Sandy Berger FPSO experiencing shutdowns, and that impacted our commercial uptime and financial results somewhat. Our EBITDA of $98 million and our operating cash flow of $82 million were therefore a bit lower than the previous quarter. but it is also further explained by a one-off settlement of $8 million that we had in Q2, and no such one-off revenues occurred in Q3. As expected, we received confirmation of a contract extension of Petroleum ATIPA until September 22. Furthermore, we reached an agreement with the New Zealand government for a fully funded stay and demobilization out of New Zealand, and this will reverse our voluntary liquidation. During the quarter, we were able to progress various standards for new projects. And last but not least, the board of BW Assure has approved a quarterly dividend as part of the annual $25 million cash dividend program. Moving to slide four with an update on COVID. As you are all well aware, the COVID-19 situation globally is not improving. and it requires proactive risk management planning and procedures to manage the operational impact. However, we are pleased that there were no new FBSO outbreaks since our quarter two reporting. However, the situation remains challenging, in particular in relation to crew logistics. It doesn't come without costs. The managing COVID costs has cost us about $4 million per month in this quarter. However, with full implementation of PCR testing protocols, as well as improvement in the flight availability in several countries, this is now reducing to about $2 million per month towards the year end and going forward. Then operational update on slide 6. on the right side you see the hse statistics with average ratios per million man hours over the last 12 months this is in accordance with the io gp definitions we're striving for zero harm and the most important metric to achieve this is the orange line with which represents the high potential incidents and that's trending uh downwards in a satisfactory way the That side of the chart shows the fleet uptime, commercial uptime, and it displays the dip that is caused by the incidents on Sandy Burger and Yunkapnab, as I just explained. Then moving to slide eight with further updates on some of the units. First of all, Catcher, our operation in the U.K., While the production was impacted by the need to remove calcium naphthenate from the produced water systems, our commercial lifetime was not impacted, as this counts as a company under production. It does, however, prevent us to capture benefits from excess production. We're working closely with our client, Premier Hall, to optimize the management of this issue and to avoid or at least reduce downtimes in connection to this. Furthermore, it's worthwhile to refer to earlier announcements made by Premier about their merger with Chrysor. and this merger creates the largest london listed independent oil and gas company and that obviously strengthens the ketchup fields operators financial position i already mentioned petroleum altipa with the contract extension and sandy burger is now backing production again since mid-october Also mentioned Umaroa, so we're very pleased with the recent agreement we made with the Ministry of Business, Innovation and Employment in New Zealand, as that will now cover all our costs till departure from New Zealand. And then Vicente, the contract was ended in quarter three, and we consider her now for redeployment or recycling Moving on to slide 8, BW Energy, our associated company doing the field development in Gabon and Brazil. We're looking forward to restart these development activities as soon as the COVID restrictions are lifted. In the meantime, the opportunities in the downturn caused by COVID has been captured through acquisition of JECA platforms rather than using new-built well-hub platforms for the hibiscus and re-development. And this is expected to reduce development costs with about $100 million, and it will also reduce time-to-first oil as well as the environmental impact of construction. The strategy of joint value creation to FBSO redeployments along for a short cycle of phase developments remains unchanged. We just have some delays due to COVID in executing those plans. The operations in Decevaux are still strong. Current production levels are around 14,000 barrels per day with an average operating cost of $19 per barrel. and to our 39 ownership um current value in bw offshore is about 11 kroner per bwo share that brings me to the fleet contract overview on slide nine What is worth noting is Petroleum Nautipa, beyond 2022, we're having discussions with our client, Valco, to enter into a new contract beyond that. Although expected to come off contract mid-2021, and we consider her as a very good candidate for the Maromba field development by BW Energy, And then ABO further down, descriptions are ongoing for further extension. This is a situation we are facing every year, and I find it quite likely that this contact will further extend beyond the end of this year. Moving to the next slide, slide 10. Our solid backlog provides long-term financial visibility. We have a total backlog of about $4.2 billion by the end of Q3. Firm backlog is about $2.6 billion, and 80% of that backlog is delivered to the three main units we have in the fleet, and that is Ketcher, Pioneer, and Adolo. Again, the ketchup partnership operated by Premier Oil is the largest customer. I mentioned the merger with Chrysor, which has significantly strengthened the balance sheet of that counterparty. With that, I give over to Stola Andreasen to run us through the financial results.

Thank you, Marco. Then we move to slide 12. And as usual, we're starting with an overview of the key financial figures for the quarter. As you can see, and as was also earlier mentioned, we achieved an EBITDA contribution from our operations of 98 million in Q3. It is a reduction of about 15% from what was achieved in the second quarter. Firstly, we did expect Q3 to come in somewhat lower than the second quarter as a result of the one million positive one-off settlements we received in the second quarter for the outstanding claims related to the former project for FBSO, P63. We had, as Marco mentioned earlier, we had some downtime on Junkalknag. The unit operating for Pemex was hit by a tanker during offloading. And this led to approximately one month shutdown of the unit. We have not been paid by Pemex for this period. And although we are disputing this, we have not recognized any revenues for the quarter. And this has impacted our EBITDA negatively. On top of this, we continue to battle with COVID. We are investing quite highly to manage COVID costs related to crew and related, which has an impact on our results for the quarter. When you look at the revenues, it's mainly reduced due to the two items I mentioned before, the settlement we have in Q2, and then the downtime we have for YK and Q3. Moving on to slide 13. As you can see, depositions were pretty much similar to previous quarter at 63 million. This overall gave us an EBIT or operating result of 35.1 million for the quarter. Net interest expenses came in at 13.2 million, which is down from 15.2 in Q2. This was as expected as we continued to amortize on our debt. and also then an additional repayment on the corporate facility in Q3, reducing our gross debt and consequently also the interest expense. We had a gain on financial instruments of 8.3 million in quarter. This came as a result of positive market to market adjustment on our FX hedges, as well as our interest rate swaps, as both U.S. dollar as a currency has strengthened against NOC, and also as we see U.S. dollar swap rates have increased quarter on quarter. Other financial items were negative by 3.3 million, and this is predominantly due to revaluation of our Nordic high yield bond law, which is denominated in NOC. And as we see, the Norwegian kroner has strengthened against the U.S. dollar and quarter. We will have to take a market loss on that. And note, any negative effects from valuation or revaluation of the Nordic high-end bond will have a positive effect on financial instruments as the loan is fully hedged. But for presentation purposes, we have to show this on two separate lines. We recorded a loss from equity account investments of 4.7 million during Q3. This is coming from BWO's 38.8% net share of the results from our investment in BW Energy. Income tax expense was 7.6 million for the quarter. More or less in line with our expectations and within ordinary fluctuations, quarter on quarter. And overall, we have a net profit of $14.6 million for quarter three. Moving on to slide 14 and the cash flow overview. As you can see, we started the quarter with a total cash position of $206 million. Operating cash flow was 82 million for the quarter. This was slightly behind our target. And although we had a recently steady quarter, our cash flow was affected by the incident on YKM. And we also see that we had higher cash outflow as we've been building some working capital, buying additional spares, and building on our inventory due to higher maintenance activity on the FBSO fleet. And just worth mentioning, If you compare operating cash flow this quarter to second quarter, which was roughly 120 million, it's important to remember we did receive one of settlement from Petrobras in Q2. And another thing in Q2 was that we received back 17.5 million related to cash collateral, which we had put up in Q1 due to extreme FX movements. We saw where the U.S. dollar strengthened significantly against NOC. and this required us to put up some cash collateral on our hedging instruments. But due to the reversal of the U.S. dollar versus NOC in the second quarter, this was all received back. So it's just important to note that there was some one-off movement in Q2 that gives an artificially high variance quarter on quarter. We did spend 10 million on maintenance capex on fleet and some other investments related to some pre-feed activities we were performing, which overall gave a total free cash flow of 72 million for the quarter. We reduced our debt position quite significantly in Q3. 35 million of a total of 109 was scheduled installments on the catcher and P&A facilities. The remaining 75 million was a one-off repayment we did on the corporate facility. We had a quite large cash position at the beginning of the quarter, and we used this to trim our balance sheet by repaying on the revolver, which will reduce our interest costs going forward, but which retains our liquidity as the down payment just decreases. are available draw on the revolver. We paid $12 million in interest on our facilities. We continued to pay dividends with $6 million paid also in Q3. And we paid $8 million in relation to the preference share agreement we have for catcher. So totally, we ended the quarter with $142 million in cash. Moving on to slide number 15. And as you can see, there's no surprises when it comes to the financial position of the company, and shouldn't be, as key units in the fleet are on long-term contracts, and results are relatively steady. We did continue to reduce our net debt, which stood at 976 million by end of Q3. The leverage ratio continued to trend more or less flat. It stood at 2.1 times the last 12 months reported EBITDA for the quarter. And I want to say, although this has trended flat, we expect it to continue to trend in a downward projection as we continue to deleverage and amortize off our debt as we go. The equity ratio increased by 1.7% in the quarter to 37.5%. And although there is a positive effect from the net result this quarter, the main impact is coming from the reduction in our cash position as we repaid on corporate loan facility and effectively reducing gross debt and the balance sheet size. Moving to slide number 16. It's a well-known slide. We have shown this before. And again, we want to emphasize that with this, as you can see, we have no major debt maturities before late 2023. We have refinanced all our capital market debt late 2019, and that gives us flexibility from a balance sheet point of view. We continue to amortize on our debt, as I mentioned on the previous slide. We are amortizing approximately 120 million per annum for the next couple of years, while this will gradually increase as we get into 2023. Overall, it does give us ample time to plan our financing needs and also flexibility for any opportunities that comes around. Going to slide 17, we have basically two priorities, one being to maintain financial flexibility towards any growth opportunities, while the second one being providing predictability when it comes to returning value to our shareholders. As you've seen on the previous slide, we continue to deliver as long as we have no new projects. We have a strong liquidity. We have almost 390 million in available liquidity when you're adding together available credit lines and cash. As mentioned earlier, we continue to incur costs related to COVID. However, as Marco mentioned earlier, we do expect that we will be able to drive down the cost of this going forward, reduce it by approximately 50% as we can do our own PCR testing and as we see borders opening, which allows us to more effectively move personnel. On fleet, we see limited capex on the existing fleet. That we think will continue both for the remaining part of 2020 and also throughout 2021. Overall, we are predicting capex to be in the range of 25 million. And that includes any investment in BW opportunity. We are now come to the point where we have been able to conclude on termination for the contract for , which was this unit operating for Petrobras. The sentiment for this has been more or less final for quite some time, and we have fully provided for any payment here. As we expect now all formalities to be closed relatively shortly, we want to highlight this settlement and our planned payment of 40 million, which we have estimated to be paid in early 2021. As I said, it will not have an impact on our P&L, but it will have a liquidity impact of 40 million. And when it comes to shareholder returns, again, as mentioned before, we will continue to pay a quarterly dividend, as said. But we want to emphasize, again, when you look at year-to-date, When you add up the B2B energy shares that we dividend in kind in the first quarter this year, the shared buyback program that we executed in Q2, and dividends paid so far this year, plus plan paid now in Q4, we will have returned almost 130 million back to our shareholders in 2020. We believe this stands as a strong commitment. to return value to shareholders. So with that, I'll hand it back to Marco for strategy and outlook.