Bw Offshore Adr

Good morning and good afternoon. Welcome to our first quarter update of BW Offshore. My name is Marco Bienen, CEO, and I'm taking this call together with our CFO, Stola Andreasen. I'll start with a disclaimer and then moving on to highlights. First of all, BW Opal is on its way to Australia, on track for first gas in the third quarter. We have signed an agreement to sell BW Pioneer for 125 million US dollar. And that comes together with a five-year operations and maintenance contract to support our client Murphy with operational continuity. And then we won a 36 million US dollar arbitration settlement, which was in connection to disputed payments with our client Prio, formerly Petorio. That was during our operations of Polvo in Brazil. And we continue our shareholder distribution program, and that marks the 21st consecutive quarterly dividend payment. Moving on with an update on our operations, starting with BWO Pal. As I said, BWO Pal left the CTM yard fully commissioned, and that was on the 28th of May. It will take about two to three weeks to its field offshore Darwin in Australia, and then it follows a hookup to the submerged buoy with the mooring and riser systems already pre-installed. We left four weeks later than planned, and that was due to required repairs of welding seams on the low pressure seawater lines after integrity issues were identified during inspections, which were part of the commissioning activities. We have spent this extra time in the yard wisely to also do other work, which we otherwise would have to be done in our offshore phase. Indeed, this was extra work and time, but the overall costs remain well within the updated budget that we gave last November. Readiness for first gas is now planned for the third quarter. And after that, we will do final testing, ramp-off production, and complete the project with expected formal contract startup in the fourth quarter of this year. We have a strong focus on maintaining a strong safety record with benchmarks well with the IOGP standard. The most important metric is the HPI, high potential incidents, and that's trending down, which is good. But we had a recording this year, this quarter in connection to a gas release on catcher. And that was during the removal of a gas metering probe. Every HPI is followed with a level three investigations and we extract the lessons learned from that. And that delivers our continuous improvement program. And this is a very powerful The fleet delivered excellent commercial uptime of 100% this quarter, and that underwrites the results as well. As mentioned in the highlights, we have reached an agreement with our client Murphy Oil to sell the asset to them. And this is attractive for us because it captures remaining value of an existing asset upfront. And it also provides Murphy with a more flexible investing and operating solution. So obviously this strengthens our financial position and that supports our growth strategy. And the five-year O&M agreement ensures continuity for our US team and also for our client. The O&M contract will provide a modest annual contribution at current production levels, but there's further upsides related to future production levels. Murphy has communicated before that it has plans to potentially drill another development well in the Chinook field in 2026. That brings me to the backlog and fleet contract update. The fleet will deliver strong cash flows from a solid revenue backlog that stands now at 5.4 billion US dollar on firm contracts. and the upcoming 15-year firm contract of BW Opal is taking the majority of this. Furthermore, worth mentioning is the record production from BW Adolo this quarter, and it's stabilized around the nameplate capacity since November last year. The handover of the operations of this asset to BW Energy has been completed in May, While we keep the ownership and therefore also the charter rates. As part of the updated contract structure, there is a 100 million US dollar put and call option on the vessel in 2028. And then Ketcher, she continues to deliver stable operations with 100% commercial uptime. And based on the production decline rates and all price expectations, we think that she will remain on contract to at least end of 2028. And with that, I hand over to Stole for the financial update.

Thank you, Marco, and good morning, everyone. So as Marco showed you on the first slide, we had a very good financial performance in the first quarter and were able to deliver an EBITDA of 91 million. This number includes an additional 21 million being booked related to the arbitration settlement with Petro Rio. So prior to the settlement, we have taken a conservative approach and only booked 11 million. So I can say that this has been a hugely successful outcome, which has resulted in additional income being recognized. It's also worth mentioning that all the prepayments related to the lease on catcher has now been fully amortized, which on a quarter by quarter basis means that the EBITDA will be 15 million lower from Q1 and onwards. However, this has no impact on the cash flow, which continues as before. Also included in the results is the closing out of various variation order activities related to BW Pioneer, which has added some additional income in the quarter. So all in all, very strong financial performance. When you move to the 2025 EBITDA outlook, we have left the guidance unchanged using a range of 220 to 250 million. So although we have been able to book in more from the successful arbitration settlement, this has been largely offset by an expectation that a one month later sale away from the ER for BWO PAL would just result in a one month later start of the contract as of now. And that consequently, in the range of 20 million of the EVTA contribution will just be shifted out into 2026 and beyond. So just a time shift on the EVTA. But consequently, it means that our guidance for the years remain unchanged. It's worth mentioning that the new O&M contract for Pioneer, as Marco alluded to, is generating a modest EBITDA contribution. Financially, that means an expectation of somewhere in the range of 4 to 6 million per year, unless the client is able to increase production and we can earn more under the incentive scheme. So as such, it has a limited impact on the EBITDA outlook. On the income statement, I'll direct you to depreciation, which you see is now slightly reduced to 32.4 million, which is due to the reduced depreciation in Q1 for catcher as depreciation is reducing in line with prepayments being fully amortized. Also here, it's worth noting that as BW Pioneer is now sold, There will be no further depreciations on that unit, and it's expected that depreciation will drop further for the next couple of quarters until the start of BW Opal in Q4. And that will be the contract start, to be exact. The sale of BW Pioneer resulted in a gain of 14.8 million being booked in Q1. This quarter, we ended up with a net interest income of 1.1%. largely driven by 4 million of interest income being booked as part of the arbitration settlement with Petro Rio. We were required to split this as part of the settlement is booked under EBTA and what is considered an interest element under this settlement due to the late payment is now booked as interest income. Gain on financial instruments were 6.5 million and is related to usual mark-to-market fluctuations as we hedge all our interest rate and currency exposure on our debt, but no impact on cash flow. And then if you move down towards tax expense, which is one of the larger elements of this quarter, we had to book a tax expense of 17.3 million, which is largely related to the sale of Pioneer. A big part of this number is related to the profit tax from the sale itself, and remaining is related to tax on profit from the fleet in the quarter. So all in all, very pleased with the net profit for the period. of 62.2 million, translating to an earnings per share of 34 cents. Looking at the cash flow, we can see that cash flow from operation was 57 million. So when excluding 6 million received from Santos in the quarter, they gave us a steady and good cash flow from underlying operation of $51 million. Investment cash flow continued to be focused on BW Pal with 66 out of 70 million allocated to the project. With the sale of BW Pioneer in Q1, we received 100 million as we have informed the market about earlier. But now, as we are beyond Q1, we received also the remaining 25 million in May, and we have now closed out everything related to the contract, and all payments have been made. We called 45 million net from the Brossard JV to fund ongoing activity on BW Pal, and you can see that we reduced our net debt by 50 million, which is predominantly installments or amortization on the catcher loan facility well this may be worth mentioning here is that under interest payments or interest in general we receive 19 million net to be the offshore in quarter one we have done some work on our hedging as we have effectively been over hedged on debt for some time. So we have reduced our swap portfolio by a nominal 100 million. And as our hedges were taken some years back when interest rates were lower, these positions have been significantly in the money. And this resulted in us being able to take out 19 million as part of closing those positions. So when you take that into account and you add ongoing schedule payments under the lease or preference share lease deal with ICBC leasing, as well as dividends being paid in Q1, we increased our cash position to over 400 million by end of Q1. As we're getting to the end of the product period for BWPAL, with the unit progressing towards the field, as mentioned, majority of the funding sources are now also largely being utilized, as you can see on the slide. During Q1, we did draw the remaining on the project financing, which is now fully utilized. We had limited equity injection from partners, but there's also just a few more millions to go before that 240 million equity is fully committed. And you can now see we're getting to the end of the contractual obligated payments from our client, Santos. As Marco mentioned, we are well within the guidance on the completion cost for the project, but it still means that there is a gap of 100 to 150 million for completion of the project, which will be funded by BW Offshore through the remaining of the year as the other sources have been fully utilized. But all in line with what we have communicated earlier. Our net consolidated cash position continues to improve, largely driven by the sale of BW Pioneer and stood at 184 million at the end of Q1. And equity ratio continued to trend more or less flat and stood at a comfortable 30.9% in the end of the quarter. So if you then wrap up from a financial point of view, at the end of the quarter, we had a very good liquid situation with 542 million available, almost unchanged from year end, I have to say. As we sold Bidder with Pioneer in Q1, we received 100 million, but we also reduced our RCF with the same, so that had limited impact on overall liquidity. And as mentioned earlier, we decided to rebalance our hedge portfolio as we were over-hedged, but As you can see from this slide, we are still 100% hedged on all floating rate debt with an all-in cost of 4.8% on the debt portfolio. So we remain well positioned financially. Our cash flow is good. We have significant liquidity that allows us to comfortably meet liabilities combined with flexibility to take accretive strategic moves in the market committing to product opportunities, while at the same time stay committed to our earlier communicated dividend program. So with that, I'll hand it over to Marco for a market update.

Yes, thank you, Stolen. I'd like to say a few words on the market. I think the demand for FBSOs remains high. But there should be a recognition that there is a change in backdrop with increased geopolitical tension and lower oil prices. This drives uncertainty and that could push out some of the FIDs again. However, most of the opportunities are major energy infrastructure projects, which are robust in light of short term market fluctuations. And we don't see any impact on the tendering of feed and pre-feed activities. So we maintain our high level of engagement while remaining disciplined to our selection criteria. And we are progressing five targets, which are a mix of smaller and faster redeployment projects, as well as larger new build projects that takes a bit longer to develop. With the strong balance sheet and financial position, as Stol explained, and also a clear competitive offering, we are well positioned in this market. For gas FPSO opportunities, we leverage the Barossa project with BW Opal as one of the largest gas FPSOs in the world. We have proven harsh environment experience supported by our own hull design and disconnectable mooring solutions. And that puts us in a strong position for the Bay de Noor project for Equinor. And we also apply our long experience to offer flexible solutions in project financing and structuring. To fast track some of these redeployment opportunities, which several already identified, we acquired a high quality existing FPSO, the FPSO Nangoura, which brings both schedule and cost differentiators, in particular for the hull and mooring scope. We consider this as an accurate transaction with limited upfront payment and with an additional consideration contingent upon redeployment before June 2027. In our view, there are very few, if any, units left in the market of this quality. This unit was newly built in Samsung in 2006 and has operated in Australia since till 2018. And as we will focus mainly on the hull and mooring systems to redeploy, we keep the layup cost to a minimum. Then a further update on floating wind and the activities of our subsidiary BWEDO. The picture on this slide shows the installation of the transition piece of the BW-EDOIL designed 10 megawatt floater for the EOMAT project, which is a three times 10 megawatt project. And this is led by CARE in the south of France. BW-EDOIL delivers the design and engineering. Once completed, that brings the total number of BW-EDOIL floaters in the water to five. And that reinforces the leading position among technologies in this emerging global market. Furthermore, a tangible EPCI pipeline with the Buchan Offshore Wind project in Scotland of one gigawatt and the AO6 250 megawatt project in France is progressing. And that represents about 70 floating foundations based on BWDL's proprietary design. And these concrete floaters will be produced at industrial fabrication lines, which are being developed in the UK and south of France, with production expected to start around 2030 after FID has been taken for these commercial scale floating wind projects. Long term, BWDL will focus on the technology and EPCI supply supported by selective co-development activities as a strategic enabler. As large a shareholder, BW Offshore provides a 6.7 million euro shareholder loan to finance the next 12 months of operation of the company. And that brings me to summary and outlook. Obviously, the Barossa project with BW Offshore is the key focus for this year, and we are now focusing on the startup in the third quarter of this year. In parallel, we're selectively progressed new FPSO projects and we target still one FID in this year and then subsequent another FID in the 12 to 24 months thereafter. We continue to support BWD Oil as an early mover in the floating wind EPCI offering. But we also look broader in the potential of offering floating energy transition solutions. And we continue to share value creation directly with our shareholders to our dividend programs. And that brings us to the Q&A. Stol and I are happy to take any questions you may have. Well, there seems to be no questions on the web. No. So if no questions are on the web, then we could take any questions that would come in right now. And otherwise, if there's no questions at the moment, then I think we can then conclude this call and I would thank everyone for their participation. and happy to follow up with other questions later. But now I see Stola, there is a question coming in, correct?

Yeah, there it comes. Yeah, we can take that. So I'll take it. The question is related to the PSO that we just signed the agreement on. Some clarity around the Ngahara. It's conditioned time and cost of refurbishment. and which prospects are we targeting? Marco, you could elaborate around the thinking around the unit.

First of all, around the condition, this is considered by many, and we subscribe that as a high quality asset in good condition, and in particular, the whole is in a good condition. This unit has been inspected by several industrial parties, and we're quite happy that in the end, we were able to secure this asset. On time and cost of refurbishment, can't be really specific. It depends on the opportunity. But again, it will allow us to fast track the hull for sure and the mooring systems and take that out of the critical path and take it out of the yard constraints and dry dock constraint issues in the market. And on prospects also there, I prefer to be not specific, but we do see prospect in Southeast Asia, Australia, and also West Africa. So there's quite a few opportunities there. And some of them we're already actively participating in.

And maybe, and you said it, but maybe just reiterate for everyone that predominantly this is an acquisition where we are looking for the benefit of using the hull and accommodation and that the top side is probably less probable that will be used in a redeployment of this unit. So it's really purchased as a baseline for a new project that would help us accelerate in terms of the deployment under a new contract.

Yeah, yeah, exactly. I mean, the top sides are really more field specific, where the hole is, this particular this hole is very generically usable.

Okay, next question coming in. Could you update on the status of Equinor by the North and Repsol Mexico? So the two prospects we are you have referred to and spoken about. Is it correct that you are the preferred contractor for Repsol, but still in a competitive situation for Vader North? So I think just clarifying around sort of, are we in a competitive situation on one of the others or on both of them?

Yeah. For Repsol, we are currently in a single source process. and that's already the case for more than a year. So in that sense, you can say we are the preferred contractor, but no final decision has been taken by Repsol. So that's still, I think, between now and the coming, I would say, six months, that will be decided. On BDNOR, indeed, we are still in a competitive process with two participants, and we are one of them.

Next question. This is actually overlapping. You just responded to it. The first question here is, there's two questions from the same person. The first one is, is there any target FID for the Block29 project? It's the same as the Repsol project you just talked about, where you said you're implying we would know within the next six months.

Yes, the target FID is hopefully before the end of the year. And, yeah, but that's, of course, all in control of our client, Repsol, not in our hands.

Yeah. And the next question is, will the Engahara FBSO be deployed for this project? And if we can confirm, that's not the intention for this unit. It is a target for other prospects that we're seeing. And I think it's well known that it's the OSX1, which is the base unit, kind of base case FPSO to be used for block 29 and the Repsol project. Not sure if you want to add anything more.

Oh, that's right. That's exactly correct.

Next question. For new projects, you said one FID in 2025 and another one in 12 to 36 months. To clarify, are you targeting to do two new projects? And fair to think one is redeployment and one is new build. So to clarify, are we targeting two new projects and whether one of them would then be a redeployment and one would be a new build? I'm not sure if you can elaborate.

Yeah, in the next 36 months, we're indeed targeting two new projects and they will be a bit phased, ideally. And also when you look at how the prospects develop, that's a likely scenario. We target one, hopefully, in this year already. The five prospects we're targeting is a mix of redeployments and new builds, but how it exactly works out, I would say the new builds take a bit longer to develop. The new build projects are larger developments, which takes a bit more time. So that goes more to the later end of the 36 months. It could also be that we win two redeployment projects in that same timeframe. So that's a bit hard to say. If you chase five, I think it's a fair assumption that you win at least one and really target two.

Good. Next question is, Could we give any more guidance on the dividend yield for 2025 and 2026? We cannot guide on the dividend yield because it's calculated as a percentage, depending on where the share price is trading. What we can guide on is what we have said in terms of our dividend program. And that is that we are paying out the dividend per quarter now, based on the minimum dividend that we could pay throughout the year, which equivalent to roughly 45 million annually. Then when we get to Q4, depending on what the results are, if our results allow it, we will aim to pay out to adjust the dividend and to target 50% of net profit as a dividend to be paid. And as of now, that's the governance we have to stick to, and that's the program that we are following in terms of communication and distribution to shareholders. Let's see, let me go to some other questions, but I think there are Okay, next one. This is related to the arbitration. Is the US dollar 21 million arbitration impact included in the revenues in the quarter or as a negative cost? Well, I think it's booked as part of revenues. So it's additional revenue. So you will see 21 million of the revenues or 21 million increase on the revenues. That's how we have recorded the impact from the arbitration. Okay, a bit of a speculative question. Could you speculate about ExxonMobil long-tail gas field prospects? I mean, do we have an edge there?

Yeah, I can take that. I don't like to speculate in this kind of calls or in general actually, but what I can say is with BW Opel now coming on stream soon in Australia, and this is one of the largest gas FPSOs built in the world. Obviously, we're looking at all other gas projects there and Longtail is one of them. And naturally, we're talking with all clients where we could bring that to the table.

Okay, thank you. Next question. Can we elaborate a bit on the capacity of the organization to run two projects in parallel? If you get two deployment projects, will you then still target to get a new build? So I guess two deployments and you're Well, from two to three projects is the question being here. So I think it's just elaborate on how we see it in terms of capacity and how many projects we can run at the same time. I think that's for you, Mark.

Yeah, I mean, we will remain disciplined. And yes, it's a good market. But at the same time, we see that FIDs always take longer, things move to the right. So I'm not super worried that we run two projects in parallel and then you know, have to accommodate a third one. As I said in this call, we're target five prospect where we really have an edge. But then the timelines of these five prospects are within 12 to 36 months. So it's quite unlikely that they will come all at the same time. And also winning three out of five is not so likely either. So I'm not really busy with the, with with that problem, that would be a nice problem to have. But But at the same time, I don't think that's what we would do. And we would not run three projects on top of each other.

Okay, next question is related to the Namibia as a market, referring to that there are several projects coming. And the question is whether we are, we will be targeting any of those.

We are looking at Namibia, and this is seen as an area with large developments. But also there, you do see that success is not all the same. Some projects are moving ahead, and they're already in a feed phase and moving towards an FRD. Actually, there's one. We're not participating in that one. And then others are still in the development phase. It depends on, you know, timelines. I think our focus is not to really, you know, in projects in the more near term. But yeah, as Namibia develops, we will also see if there's an edge for us.

Next question. congratulations on the excellent results, but what would need to happen to covenants renegotiation to be able to increase shareholder remuneration? Are you working on this and is this being discussed internally? What I can say is that we, well, We have covenant restrictions under our senior loan facilities as well as our bond in the market, which limits our distribution to 50% of net profit. We are looking at ways to amend the covenants. We do feel they put some restrictions on us in terms of when you look at the liquidity we have available and the cash flow our fleet is generating. And although we always have to look at what is the best potential way to create value for shareholders, I invest in new projects versus distributing the cash. We also would like to see if there's room for more flexibility to distribute to more in periods where there's less opportunities to efficiently utilize the cash flow to deploy towards new projects. So the answer is yes. we will need to renegotiate then covenants with both our senior, with the banks, which are behind our senior loans, as well as bondholders as part of this. And this is something we're working on internally. That is what I can see, unless there's anything more coming in. The last question I had on my screen.

Yeah, it looks like... Yeah, it looks like we're through the list now. So glad we waited a little bit because there were many good questions. Thanks for that. And thanks everyone for participating in this call. I think that will be then now concluded and I wish everyone a good day and a good start of the week. Thank you.