Bw Offshore Adr

Good morning, everyone, and thanks for joining us here in Hotel Continental. We will present our second quarter results to you, but we also give you a high level strategy update, and that's the result of a review we took over the summer. And we took stock basically of what we delivered of our strategy for the last five years. And then we also took a look at the focus forward and the refinement of that strategy for the next five years. We have taken a look at the market, our positioning in that market, competitive strengths and also we redefined or revised project execution model with the right risk reward for the size of projects we see in the future for the company. After that, we will be happy to take questions. For those of you joining online, you can participate in that through the Q&A function in the webcast. Of course, very welcome as well to join this event. My name is Marco Benes, CEO. I'm here with Stol Andreasen, CFO, and Anders Plateau, Chief Strategy Officer. We will present, but we also have representation of the company from our New Ventures Group, headed by Fred Xavier, sitting there, and also Jan-Harald Schilde, Business Development, and they also will be happy to engage in any questions after the session. With that, please take note of our disclaimer before I continue with the highlights. I'm pleased to report that BW Opel now is hooked up on the Barossa field, and we're very close to starting up now and flowing the first gas through the facility. We delivered a strong financial performance in this quarter, but also in the first quarter, and that means that we can raise our 2025 EBITDA guidance to a range of 240 to 260 million US dollar. Also, our second quarter cash dividend will be maintained and consistent with what we did last year and in full compliance with our covenants. Stole will come back to the last two points. I will continue with an operational update. I must say it has been a busy quarter and busy summer for us, not the least with our flagship BW Opel now leaving Singapore, heading to Australia. She left there in May and then arrived in the field in June, and then we started all the preparations for the startup. We also handed over the operation and maintenance of BW Adolo FPSO to BW Energy, and we have progressing a couple of pre-feed activities for several new prospects as well over the summer. I start with BWO, Paul. As mentioned in the highlights already, sea is now very close to starting up, and then that will follow by first gas. That also means that we will remain within the guidance that we're given previously, or well within that guidance, actually. At readiness for startup, which we call RFSU, it means that a 60% day rate will kick in, and that will then increase subsequently over various other milestones to the full rate of 100% at practical completion, and that's scheduled for the fourth quarter this year. And that is when the contract actually starts. That's the 15-year firm lease and operate contract that generates 4.6 billion US dollar. And that includes the lease prepayments. In addition to that, we also have the 10-year options that come after that. Then the operation and maintenance services during that period will be fully reimbursed in a separate contract with markups and incentives. Then continuing with our fleet and HSE performance, as you can see, our three operating assets have been consistently delivering very high uptime, basically close to 99% and above for the last six quarters. And that's the result of the high grading of the fleet. This is a result of the divestments we have executed in the last couple of years. And you can see that with that consistent high uptime, that obviously drives the predictable cash flows. I'll come back to that in the next slide. Our HSE statistics seems to trend up, but it should be noted that we include the recordable incidents over the past 12 months, and we divide that by the total man hours of projects and operations. But as the project activity is now sharply winding down, you're naturally defined by a lower number, so you will see initial trend up. But I consider that as temporary, and that's also because we don't see an increase in incidents. So it's not a concern of safety performance, but nevertheless, we're monitoring these trends very closely. The main focus, as always, is on the high potential incident. We had one to record on Pioneer in this quarter, and high potential incidents are always followed by the highest level of investigation and learnings that we have in the company. I mentioned the core FPSO fleet delivers high commercial uptime and that results in predictable and strong cash flows. This will further grow once BW Opal will come on rate. As I said, that will be very soon. On the operating units, I mentioned already BW Adolo is now being operated by BW Energy. and that creates synergies for their carbon setup, and it also allows us to exit. We continue to benefit from the charter rates and the production tariff, and that will at least last till 28. By that time, there will be a call and a put option of 100 million US dollar, so it's quite likely that that will happen. But till that time, again, we have the charter rate and production incentive, and the production incentive is linked or will be close to the nameplate capacity of 40,000 barrels per day. That's the expectation that the unit will produce for the time to come. Then BWCatcher delivers consistently 100% commercial uptime. We have a very good performance on that unit and we also have a effective bonus-malus performance regime that drives those results. Based on the decline of production in that field, I'm also convinced that we will continue and that the unit will be needed there. till at least through 2028. We are having discussions with our client to convert the options into a firm contract extension, but we also see a very strong redeployment candidate in a market where there are actually very few usable redeployment FPSOs available. Either way, we have a good view on the future of Ketcher. For Pioneer, we now entered into a five-year reimbursable contract with potentially some upsides if the production on that field would increase after interventions by the client. I conclude this operational update with an update on the feed and tender activities, which are public. First of all, the Block 29 development in Mexico. We have been engaged in a feed over the year, and we have completed that feed In May, we were hoping that that would result in a contract award or at least negotiations towards that. But the client decided to consider broader options for the development and also a broader engagement with the market. We will be invited in that engagement as well, but it's a bit unclear when that will happen. For now, we will be compensated for the feed work and we will await the next steps by our client, probably next quarter or later this year. And then the Bédouinor project in Canada. This is a development by Equinor in offshore Newfoundland in Canada. This is a location with a harsh environment and very cold as well. And it has the requirement for a quick disconnection mooring system in case icebergs approach. Our engagement with Equinor started already more than two years ago, then in competition with four FPSO contractors that has been reduced to two with the start of a pre-feed earlier this year. and we're now nearing the completion of that pre-feed. This is a very interesting project for us, and here we can really bring our competence of harsh environment hull solutions, but also our disconnectable mooring system competence, as well as the operational experience of BALT, namely Catcher in the North Sea and also Pioneer as a disconnectable FPSO in the Gulf of Mexico. The pre-feed has been successful and is on track to be completed basically mid-next month. And this has resulted in a close and effective collaboration with Equinor, where we've defined the design, the safety standards, and also the commercial approach. So really looking forward to continue that collaboration with Equinor post the completion of the pre-feed. And with that, I'm handing over to Stole for a financial update.

Good morning everyone. Start with an update on the EBITDA. As you can see, the EBITDA for the quarter came in at 57 million, which is lower than the first quarter due to some one-offs. The commercial uptime, as highlighted by Mark, was very good on the fleet, very close to 100%, very pleased with the operational performance. The reduction quarter on quarter, which is about 40 million, was driven by the fact that we sold Beetle Pioneer in the first quarter. So the unit is effectively out of our books. In the first quarter, we were also able to announce a successful outcome of the arbitration related to Polvo. which was also booked as a one-off. So this explains the delta quarter on quarter to a large extent. As Marco was referring to earlier, we have completed the feed work for Repsol's block 29 tender effort. We have been compensated for this work, and we have booked in a $10 million compensation in this quarter's result. When you look forward to the 2025 EBTA outlook, we're now comfortable with the numbers. We are raising our guidance to a range of 240 to 260 million. The main variability in the numbers is, as most of you who follow us closely would know, is linked to the actual contractual start-up date for BW Apollo. A month from this unit generates more than $20 million to the EBTA. When you look forward then to 2026, it goes without saying that we expect to deliver significantly higher EBTA contributions as this unit on its own will deliver more than $260 million on an annual basis. On the income statement, if you follow through the Q2, you will see that depreciations have dropped significantly quarter to quarter. Again, explained by the fact that we sold BW Pioneer, concluded that sale in Q1. So depreciations have dropped from 32 to 21.4 million. And we expect that to be the range to where we're going to trend until the contractual startup for Opal in Q4. Under impairment, it reflects the write-off of the investment cost we made in the block 2019 tender work. So if you try to compare the net investment cost, which for us was about 4.5 million in the quarter, this kind of completes the picture. $10 million compensated, $14.5 million as an investment cost. That's now been fully written off. Net interest income was zero in the quarter. Our interest expenses on debt is basically offset by interest income on a substantial cash balance that we're holding. Also, this quarter, we could book a gain on hedging instruments, and this is basically due to the weakening of US dollar, which gives us a positive mark-to-market impact on the on the hedges we have in place for our Norwegian Krona denominated bond loan. Move down to taxes. This is now normalized again. At least for us, it's what we consider to be normal going forward for a while because we had an exceptional tax expense in the last quarter related to the sale of Pioneer. So when you sum it up, net profit of 24.6 million for the quarter, which translates to 14 cents per share. Moving to cash flow, I would say operating cash flow this quarter was, well, nothing but exceptional at 103 million. 25 of these is related to the prepayment from our client Santos for Biddle River Pal. And 36 million is reflecting the full and final settlement related to the Polvo arbitration settlement. So when you take this out of the equation, we still remain a very healthy 42 million in operating cash flow from the fleet. 97 million was related basically in its entirety to BW Pal as ongoing investment for that unit. And 24 million is reflecting the final payments related to the sale of BW Pioneer. We had to draw another 21 million from our joint venture to fund ongoing activities for Opal. And when you kind of track through, you see, take into account capex, amortizations on debt, and the fact that we continue to pay dividend with 11 million also this quarter, we still continue to increase our cash position, which now stood at just over 420 million end of Q2 when you exclude any cash sitting in our subsidiary BW IDO. From this quarter, we decided to make some changes and make some additions to how we present cash flow or backlog visibility. So we introduced a concept called operating cash flow backlog. We acknowledge that when you look at the revenue backlog as we've been presenting it in the past with how we see contracts changing, where you see more and more prepayments from the clients, and we see more and more contracts going into being reimbursable, you get a bigger and bigger discrepancy between what is actually in our revenue backlog going forward and what is the net cash or net future cash flow being generated to BW Offshore. So revenue backlog, sort of quarter to quarter, stood at 6 billion and 90% of this is firm. But it does include 1.1 billion of prepayments from Santos, which we'll have to amortize over the firm 15-year contract period when that starts in Q4. So the operating cash flow, as we presented, basically fixes this. It stood at 2.2 billion. It only includes our 51% of the cash flow EBITDA that will be generated by the firm contract period for Opal. We have factored in any future estimated operating costs as well as taxes to try to create a picture of this is clear net operating cash flow being generated by existing fleet. And as you can see on the pie chart, half of this is expected to be generated within 2029. So we believe this shows that there is substantial value creation in the existing fleet, which will cover, of course, debt obligations, but also give us a lot of flexibility when it comes to defining and following up on our strategy in terms of creating long-term growth and sustaining dividend distributions as guided upon. So I'll do this slide quickly because it's starting to be very repetitive. We have effectively no consolidated leverage anymore. We are in the net cash position. It was 213 million by end of Q2. And as you see on the equity ratio, it trends very flat and stood at a very comfortable 30.7% at the end of the quarter. To sum it up from my side, available liquidity, I would say rock solid at 531 million. This includes 100 million under the RCF, which remains undrawn at the moment. We have a very comfortable debt profile, as you can see on the right hand side. The guidance on remaining capex and investments in BW Opal stands as before and obviously can be managed quite easily with our liquidity position as well as future cash flow from the fleet. we continue to pay our quarterly dividend of 11.3 million in cash translating to about 0.063 or 6.3 cents per share going forward but if you go back to the guidance we gave in q4 last year as we said this is what we do we will continue to a minimum dividend for the first three quarters of the year with an ambition to pay out uh 50 on net profit as dividend in q4 When you look at the fact that we have 87 million in net profit for the first half, I think we are in a very good position to get beyond kind of the minimum dividend kind of ambition when we get to the end of the year, which basically would be if you deliver 90 million, we can't raise the dividend. Anything above would allow us to pay a higher dividend in Q4, which we'll present in February next year. So with that, I'll hand the word over to Anders, which will give us a strategy update and eventually we'll move to Q&A.

Thank you, Stolen. Good morning, everyone. So as Marco said, we have just conducted a thorough strategy review, and this included a top-down scenario and market analysis, but it also included a top or bottom-up process involving a substantial share of our clients, employees, partners, and other stakeholders. But the key takeaways are as follows. Firstly, BW offshore is well positioned for the future. And we are addressing both energy security, but also the energy transition. Second, FB is also becoming even more critical due to increasing complexity and size of field developments, and also the prevailing focus on stable supply of oil and gas. And finally, we see opportunities for floating transition solutions, albeit these are shifting out in time. And it also remains challenging raising capital for such ventures. We do ever continue believing the latter is an area with sound potential for future growth and attractive returns. So against this backdrop, we feel we are well positioned for increasing value creation over time. BWO is today a leaner and more streamlined company with increased investment capacity. We have also been disciplined and tendering over the last few years, given a constantly shifting market. There is, however, no denying we also have had our commercial and project execution challenges. Nevertheless, the current market context is very clear. Oil and gas will be here for longer. We see this in a large number of planned FPSO projects, which are underpinned by a positive market for our core business. And in terms of priorities, we are continuously working to improve across all key functions to unlock this clear business potential. We're optimizing the way we do business and manage risk, both through strong partnerships and enhanced risk-reward models. We also continue investing in our organization to ensure we have the right people and capabilities to deliver on BWO's long-term ambitions. So in 2020, BWO Offshore presented a revised strategy in which we moved away from medium-sized clients, shorter contracts, and relying on redeployments of our existing fleet. And since then, we've freed up over 600 million by divesting 12 FBSOs and spinning off BW Energy. And we've paid over 200 million in dividends back to shareholders, and actually over 300 if we include the shares we spun off or paid out when spinning off BW Energy. And we've also strengthened our financial position. In addition, we've secured and invested in a new FBSO project, as well as floating wind company BW EDL. However, as mentioned, we have unfortunately not been able to deliver as many new FBSO projects as targeted. Following the recent strategy review, we are now reaffirming our position and ambition in the FBSO space. And we're also refining our approach to floating transition solutions. And we're now renaming it floating, or sorry, in the transition, and we're renaming it floating transition solutions because we are in fact looking at areas beyond renewable energy production. Irrespectively, we're looking to add two segments in this area by the end of 2030. Our old strategy, though, is very much anchored in the conviction that oil and gas will remain a dominant energy source for years to come. We also see new business segments emerging in the transition area. However, we expect these to only start to mature towards the end of the decade and thereafter. Our view is nevertheless aligned with multiple external scenarios for the expected future development of the global energy mix, as you can see on the slide. And this again forms the basis for our market assessment, targeted segments, and overall long-term planning. Importantly, fossil fuels and our FBSO offering remains highly relevant well into 2040. Onto the market, which we find certainly exciting. We see multiple opportunities in regional hotspots like Brazil, Asia, and Africa. Still, I want to emphasize we maintain a disciplined approach with clear selection criteria, and this applies both to new builds and also redeployments. And as Mark has talked about on several occasions, the FBSO market has changed with larger and more complex developments, shifts from the lease and operate to EPC and O&M models, or even hybrid models for that matter. And our clients offering prepayments to enable external financing, as well as new approaches to risk management, allows us to take on and better manage large FBSO projects. That said, we also see a demand for medium sized units and opportunities to use existing infrastructure through redeployments. Our success in these areas depends on aligning capabilities with the long term market needs, as well as good project execution to ensure predictable value creation. And we at BW Offshore are confident we have the competitive offering required to capture a decent share of what we see as a very exciting market. Success does however require we continuously work on strengthening our capabilities and organization. The goal is to ensure delivery of floating production offering that meets our clients' needs and the long-term market demands. I will briefly touch upon four areas. The first is simplification. By this, we mean standardizing how we approach design, risk-reward principles, as well as optimizing internal processes. Secondly, we are enhancing our client focus, and it starts with actively cultivating a client-centric approach throughout the company. We will strengthen our business development efforts and frequency of tendering, and we will also look to make our contract negotiations more efficient. Thirdly, in our business, predictable project delivery is fundamental. We're therefore reworking our strategy and framework for managing project execution and risk, fully leveraging on learnings from previous projects. We have optimized the project organization and are developing long-term EPC partnerships. In addition, we are strengthening our processes to ensure clarity and certainty on project cost estimation. Lastly, and most importantly, it comes down to our people. Large and complex projects require big team efforts, and we will collaborate and lead by example, supported by a highly motivated workforce. The lease and operate contract model has historically been restricted by the absolute project size from a financing perspective. Still, we have proven there are ways around this with robust financing, partnerships, and prepayments offered by our clients. In recent years, these clients have also shifted towards EPCI and O&M models, which further addresses some of the financial challenges. Irrespectively, with larger projects, the absolute magnitude of risk also increases. And this requires a change in mindset and ways of working. Using BW Opal as an example, we carried all the PCI risk. And this meant that all project issues and deviations across multiple layers of subcontractors, suppliers, and project work streams filter up to us. We nevertheless managed to stay on schedule and deliver a state-of-the-art gas FBSO, albeit at a significant additional cost. So going forward, we will seek contract structures better aligned with our clients. We will also develop strong EPC partnerships to enhance project execution, capacity and capabilities. And lastly, we'll apply models for sharing risk reward, both with our subcontractors and other suppliers. And as a result, BW Offshore can better manage projects with reduced risk and more predictable returns. Onto our FBSO prospects. We maintain the ambition of winning one new FBSO project every other year, and the promising market outlook I showed earlier fully supports this. Now, we consider 12 of the FBSOs planned for awards towards 2030 as a good fit, and are currently progressing several opportunities. As Marco mentioned, we're working well on Beidou Nord with Equinor, and on Block 29, the client is considering its options following our bid submission. And we are furthermore exploring opportunities for BW Catcher, which is currently on contract with Harbor Energy. We've also acquired the Ngan Hura FBSO, which gives access to a high-quality hull, enabling rapid and cost-competitive responses to various redeployment opportunities. Finally, we're advancing several other early prospects across multiple regions. Moving on to floating transition solutions and our plans to become a leading EPCI player in floating wind. Admittedly, since we invested in BWDL in 2021, lead times from project concept to actual installation of turbines and power generation have shifted out. And this, of course, has also impacted the access to and cost of growth capital. Nevertheless, we see this as an exciting company with tangible revenue streams. Ideola are leveraging co-development positions as a neighbor of EPCI opportunities in Scotland and France. And on the related fabrication side, the company is developing two dedicated construction sites in the same geographies for serial production of the proven damping pool platform. Zooming in on the port of our desire in Scotland, the ambition is to bruise one floater every 12 days once the production line is fully up and running. And in fact, that equates to 30 floaters per year, which can be potentially supplied to the entire UK sector and not just the Buckingham project where Ideola is invested. And we firmly believe we have a competitive edge and the ability to capture a decent share of this overall business through local production in concrete, both in terms of cost and regional governmental support. And importantly, the Buckingham project alone will require the production of around 60 floaters. And we are working closely with partners on the construction side to make it all happen. On the funding side, Ideal is today a private company, most recently financed with a shareholder loan. And based on their recent strategy review, Ideal targets positive cash flow from 2028 on the back of project related engineering revenues and licensing fees. We also continue progressing discussions with potential investors. And in the longer term, we are looking to realize additional value through monetization of coal development positions around FID. So in sum, we are encouraged by EDL's position in an emerging market, which could become a substantial market opportunity from 2030 and beyond. We're also looking beyond floating wind and into other floating transition opportunities. As of now, we see three distinct solutions, and those are floating desalination, gas to power, and ammonia. Our view on times to commercial viability are rooted in scenario modeling, which drive our priorities accordingly. We maintain a disciplined, value-driven approach to capital allocation in these emerging segments. And this means applying the same risk approach as in our FBSO business. In other words, contracted cash flows to quality counterparties and demanding similar returns. We further more focus on combining proven technologies in new ways and on projects that can be realized in areas with strong public support. So we see these as the new emerging segments that in a few years could provide opportunities for long-term profitable growth. So I started this strategy section talking about increased value creation, and this is something that goes two ways. Number one, we have a clear focus on delivering long-term value to our clients. And two, we look to deliver increased value to our shareholders. We maintain our capital allocation framework, which guides our financial priorities, which are to ensure efficient operation and cash flow from the existing fleet, invest to grow free cash flow from new FBSOs, and later also transition solutions, maintain a robust balance sheet, and pay growing dividends to shareholders over time. Our aspiration towards 2030 is to deliver an average total shareholder return of at least 15%, and this is based on BWO winning three FBSO projects over the next few years, including then extension of employment for BWO, catcher as mentioned. In sum, it implies doubling the company value by 2030, realized partly through direct quarterly returns and partly through share price appreciation, as BWF grows through profitable projects. So... To sum it all up, I could hand it over to Marco, but I prefer stealing his thunder and doing the near-term outlook myself. So here it goes. Most importantly, startup of BW Opal remains imminent. We also continue progressing our FBSO projects and hope to land one relatively soon. And lastly, we maintain our attractive shareholder return program. So with that, we go to Q&A, and I think we can start with the people in the audience and then move on to the online questions. Thanks.