Orrön Energy AB (publ)

Welcome, everyone. Good afternoon or good morning. Welcome to the London Energy Q1 2022 results. We'll follow the usual form. Nick will take us through the highlights and operations, and then Tice will follow on with the financials, and Nick will round it off at the end with a little summary. For the Q&A, again, we'll follow the usual form. We'll take questions from the line first, and then I'll host any that we get through the web. So thanks very much for joining, and I'll hand over to Nick.

Well, thank you. Good afternoon or good morning if you're joining us from North America. And welcome to our first quarter 2022 results discussion, which will likely be our last before completion of the ACA-BP transaction. As usual, I'll cover off the operations update and then also talk through the ACA-BP deal status. And then Taito will walk us through the Q1 financials. Then, of course, we'll open up for your questions. First of all, the key highlights for the quarter. I really report our business continues to deliver on all fronts with strong production and financial results. This is underpinned by our world-class assets and, of course, strong oil and gas prices that we're experiencing. You can see that production came in at 191,000 BOEs per day for the quarter, which was towards the top of our guidance range. Our key projects are all on track. The Eons Federate Phase 2 topsides were successfully installed on schedule, and we're on top of First Oil in Q4 this year. And we have a pipeline of five new projects, including the large Whisting development, heading towards project sanction by the end of the year. Our high-quality cash-generative business delivered strong financial results. With continued industry-leading operating costs, you can see here at $3.7 per barrel, which is in line with our guidance. And we generated record quarterly revenue of almost $2 billion in the quarter, which yielded free cash flow for the quarter of $822 million, resulting us further deleveraging the business with net debt reduced to $2.1 billion at the end of the quarter. And the AGM improved the quarterly dividend increase by 25% to $0.5625 per share payable until completion of the ACA BP transaction. And we also continue to deliver on our degradation plan. Electrification of Edvard Grieg is on track for completion in the Q4 of this year. The MLK wind farm in Finland is now fully online. And we continue with top quartile ESG ratings, which to remind you, if we continue the business as is, the company would be carbon neutral from operational emissions by the end of this year. And on the combination of London Energy's E&P business with ACA BP, we're on track for completion of the transition on the 30th of June 2022, which I'll discuss in a moment. So in summary, we have an excellent start to 2022, and all of our key business priorities are on track. I'll now cover some of the details supporting this performance. So firstly, looking at production, our world-class assets keep on outperforming, deliver production in the Q1 of 191,000 BOEs per day, which was top of the guidance range. And you can see that's now 27 quarters running that we've met or exceeded guidance. At the end of the reporting period, Evergreen experienced a failure of some electrical systems, resulting in an outage for almost four weeks. Production has now partially restarted at about 75% levels and will ramp up to full rates during May. We took the opportunity to accelerate the Edvergrieg planned shutdown works, which were originally scheduled for May, to coincide with this temporary outage, which significantly reduces the impact. And we now only have a few days of planned outage of Edvergrieg in May to coincide with a Stura terminal planned shutdown. With the good performance in Q1, the outlook for the business and our general conservatism around our estimates, the full-year production estimate remains at or above the midpoint of our guidance range, which is unchanged at 180,000 to 200,000 BOEs per day. Now turning to our world-class assets, which underpin our business, Johans Frederik continues to perform at an extremely high level. with phase one operating very stably at 535,000 barrels of oil per day gross, with extremely high production efficiency. And you can see stellar operating metrics, operating costs of just over $2 per barrel, and exceptionally low carbon emissions, more than 100 times better than the bridge. We continue to see excellent reservoir performance, which we believe will lead to increased reserves and plateau extension, and this is being worked in the licensed partnership. The photo here shows how Johan Fedrup looks today with the newly installed phase two processing platform at the field center. And to give a sense of scale of the five Bridgelink platforms, the whole facility stretches over one kilometer end to end. When phase two is online, this will lift the full field capacity level to over 755,000 barrels of oil per day. And to put that in context, it's about one third of Norway's total production. Looking now at phase two of Jans Fedrup, the P2 top size was successfully installed on schedule, and we're now in the final commissioning phase, and drilling of the subsea wells has also commenced. Critical activities for First Oil are 95% complete, and the project is firmly on track for First Oil in the fourth quarter of this year. And there's a real opportunity to see earlier production if the project continues to see progress ahead of expectations. Costs are unchanged from the PDO, but I expect these to reduce as unused contingency is released through the remainder of the project. So in summary, Johan Federer continues to deliver above expectations and everything is on track with phase two. And in the greater Evergrieg area, we're delivering on the upsides that will keep the facilities full in the long term. At Evergrieg, the Power from Shore project is on track for completion in Q4 this year, at which point we can expect similar levels of emissions performance to Johan's FedRub. This project is a key element of our decarbonisation plan, and we're planning for another infill well programme. Having completed the Solvi Phase 1 and Rolls-Royce EWT tieback projects last year with good success, we're now barking on a future programme of three further tieback projects with the aim of achieving project sanctions by the end of 2022. There's significant further upside in the area, and I expect to see exploration and appraisal drilling here for many years to come. And there's an adage that the big fields get bigger and every Greek to live up to this. With reserves currently standing at over two times the original PDO and with potential further upsides. Performance from the three infill wells drilled and completed in 2021 are ahead of expectations. And a future infill well program is being planned for spud in mid 2023. And you can see some of the potential locations shown on this slide. To help mature the program, we're currently acquiring a further 4D seismic survey over the, a technology that's been extremely successful to date in understanding the movement of the fluids in the reservoir will help de-risk the opportunities for infill drilling. And we've also, we've already extended the path to the ever Greek area by five years from the original PDO to end 2023. And our aim is to keep the facilities full in the longterm. We're on track to bring forward the Solvay Phase 2, Rolesness Full Field and Lille-Princeton tieback sanction at the end of this year to take advantage of the temporary tax incentives. Both the Rolesness and Lille-Princeton projects will further progress our understanding and exploitation of the basement reservoir potential in the area, where we see significant opportunity of up to 300 million barrels gross. These projects will add high margin barrels and contribute to extending the plateau production at the Evergreen facility. And now turning to the Albion area, which has a track record of continually growing reserves and creating value. And we continue to progress multiple opportunities in the area. With three new projects being progressed, the Frosk and Cobra East Gecko projects are now in the execution phase. And the concept studies are ongoing at the Trell and Treen development with the aim to submit a PDO in the middle of the year. All these projects are being progressed under the temporary tax regime and have great economics with break-evens of $25 to $30 a barrel. And together we'll add 70 million barrels of gross reserves and deliver gross peak production of up to 45,000 barrels a day. It's really encouraging that we see these projects moving forward and continue to find opportunities and to create value here. And I think there's still more to come. And last year, we increased our interest in the large Wisting oil development to 35%, creating production core area for the business. Wisting is a high quality 500 million barrel project with strong economics. The development concept is now being finalised and the PDO submission is planned and on schedule for the end of this year. And as this development will be powered from shore, the project is fully aligned with our decarbonisation aspirations. We also see significant exploration upside close to Whisting with the surrounding acreage estimated to hold a million barrels of unrisked prospective resources. So this is a high quality project and supports the long-term production outlook for our business. And we continue to create future value. We have a pipeline of projects with three in the execution phase, five heading towards sanction this year, together maturing around 240 million barrels of net resources. And we continue to explore. We've got five wells remaining in 2022, targeting around 140 million barrels net prospective resources. And with the startup year on phase two later this year, the business will consistently deliver over 200,000 BOEs per day and quite possibly up to 250. And I believe our world-class assets can continue to yield further value creation opportunities. So I now want to focus on the ACA-BP combination and recap on the base of the deal. London Energy has a track record of creating value for shareholders for over 20 years, as you can see from this slide. Since the company's inception in 2001, the share price has grown from 3 sec per share to around 400 sec per share today, while along the way also distributing $2.5 billion to shareholders through spin-outs and dividends. representing an exceptional 28% communal average return to shelters every year for 20 years. How we felt to prosper through the energy transition, we need to build greater scale, as well as retaining focus and being low cost and low carbon, which led to the process we ran last year, resulting in the transaction to combine London Energy's E&P business with ACA BP. And in London Energy, we leave behind the renewables business, which is well positioned for growth. The combination of ACOBP and London Energy's E&P business is a tremendous deal, drawing on the best of both companies to make something even bigger and better. creating a Norway pure-plate E&P company of scale with production growth into the next decade, a complementary portfolio of industry-leading low-cost and low-carbon emissions assets, which is positioned to be successful through the energy transition. The combined company will be Europe's leading independent E&P company with a marginalisation of about $25 billion. And this will be a business that's financially stronger through the cycle and is able to deliver sustainable and growing shareholder returns into the next decade. And so I believe this is a tremendous deal for shareholders where the value of the combined business is greater than the component parts. And so for the London Energy shareholders, you can see on this slide what this delivers. Firstly, a significant upfront cash consideration of approximately three SEC per share, which is just under 20% of the value of the company. Secondly, the opportunity to be a shareholder in the leading European E&P company, receiving approximately 0.951 shares in ACA BP for every Lundin share. And thirdly, a retained interest in a standalone renewable business that's set for growth. Overall, the existing Lundin Energy shareholders will own 43% of the combined company, and Family will remain a key investor with around 14%. And in terms of process to approve the combination, the deal has now been approved by the shareholders of both companies. Customary government approvals are required, which we believe will be obtained. And we expect closing of the transaction on the 30th of June this year. And this is what the combined company looks like. It will have reserves and resources of 2.8 billion BOE, putting production growth from current levels of around 400,000 BOEs per day to over 525,000 BOEs per day in 2028. And this is being delivered at industry-leading low operating costs, less than $7 per barrel, and thus yielding high-margin barrels. The combined business will continue with industry-leading low carbon emissions of around one quarter of industry average, providing the combined entity the opportunity to continue aggressive and market-leading decarbonisation strategy, where the aspiration of ACA BP is to achieve carbon neutrality by 2030. And the business has the financial strength and cash flow profile to pay a growing and sustainable dividend into the next decade. ACABP has guided a 14% increase in dividend for 2021, meaning the combined group will pay an annual dividend of $1.9 per share post-deal completion on a monthly basis and growing thereafter by at least 5% per annum when the oil price is above $40. And so this will be a world-class company by any measure. And I'm convinced that the combination with ACABP is a win-win outcome for both sets of shareholders. And so for the remaining London Energy business, this is a new renewables energy company that is a platform for growth. The business comes out of the gate in a strong position, high-quality renewables assets in the Nordics, which when fully built out will produce around 600 gigawatt hours per annum, enough to power around 150,000 homes. The business will be fully funded with cash to build out the committed projects and will be generating free cash flow from the end of 2023. Being initially debt-free, the business will have the capacity to raise capital for growth and acquisitions. The company will be members of Lundin Energy's board of directors, a management team with knowledge of the current asset base and a proven track record of building public companies and creating shareholder value. It's intended that on completion of the ACABP transaction that Dan Fitzgerald, our chief operating officer, will become the CEO of Lundin Energy Renewables, who I believe will do a fantastic job. The company will also remain listed on the NASDAQ Stockholm Exchange. We've seen through building our existing renewables portfolio that the market's fragmented and that there's a real opportunity to create value in this space. And the long-term vision is to grow Lundin Energy Renewables into an industry-leading business with scale and sufficient cash flow to be able to provide progressive shareholder returns. And so I believe with our entrepreneurial spirit and focus on value creation, there's a tremendous opportunity to deliver on this objective. And we'll announce in mid-May more details on the government framework for this new business. So that wraps up the operational update and an overview of the transaction. And I'm now going to hand over to Taito who will take us through the financials for Q1.

Okay, thanks very much, Nick. And good afternoon or good morning, everybody. So as usual, we start off with some of the key highlights for the first quarter in terms of financial performance. And as you can see on here, it's yet again a quarter where some of our key financial metrics are setting new records. As you'll have seen in our report, we continue to split our reporting into continuing operations, which is essentially the renewable business, and then the discontinued operations, which is the E&P business. But in the slides we're going to show here, we are effectively combining those two to report on a fully consolidated, as we always have done in the past. So starting off with production and sales, Nick took you through the production numbers of 191,000 BOE per day for the quarter. We were over-lifted yet again in the quarter. This is the third consecutive quarter we were over-lifted. So the financials are driven off sales, and there we lifted 201,000 barrels by the equivalent per day for the quarter. We'll come back on the price realization, but the realization has been very strong. $104 a barrel for the oil and close to $200 a barrel for the gas in BOE terms. Operating costs continue to be Industry leading low and $3.71 is in line with our guidance. Despite seeing certain pressures on electricity and CO2 costs, but in the bigger context of the OPEX, we still remain within guidance. And investment levels came in just under $170 million for the quarter. And that's split on $120 million in CAPEX and $48 million on E&A spend. And then we had some renewable investments of $23 million in addition. So with the strong macro background we have at the moment, that's obviously generating significant cash flow for the business. The down number just below $1.9 billion for the quarter, which is a new record for the company. And also CFFO on the cash flow statement, over a billion dollars generated and with free cash flow at $822 million. So extremely strong cash generation. And that led to, as Nick said, deleveraging the balance sheet still further. So our net debt position at quarter end, just above a billion dollars and leaving the net debt EBITDA ratio at less than half time. If we then move on to the next slide and look at some of the key metrics that we report against, in the top right, you see the sales volumes we had in the quarter, 18 million barrels VOE sold during the quarter, which is slightly down on the same quarter last year and also on the previous quarter, whereas price realizations obviously continue to improve. And compared to the same quarter last year, 82% up on price realisation, $109 a barrel, oil equivalent. And even against Q4, which was a very strong price realisation in its own right, we're still up 30% against the previous quarter. So that generated revenue for the Q1, $1.97 billion, and generating, as I said, an EBITDA of just below $1.9 billion, which is up 86% on the same period last year. CFFO was just over a billion dollars. During the quarter, we paid cash taxes of $509 million. And with the increasing oil price, we also had a significant working capital build of $322 million. Those two items included, we generated CFFO of, as I said, over a billion from EBITDA of $1.9 billion. We also had strong free cash flow generation. We had cash flows from investments of $187 million, which is in line with our full year guidance over the period. So the quarterly costs we have had here is roughly of the guidance, both on development costs and E&A. So as I said, just below $190 million of investments. And that is then giving us an adjusted net profit of just below $400 million. We should be mindful of the fact that we are not charging depletion through the income statement from the date of announcing the deal with Accra BP. So this is under IFRS 5 accounts. And that's obviously going to improve the adjusted net results, given that the depletion charge is one of our higher cost items going through the income statement. So I mentioned strong price realization. If you look on the chart to the left to start off with, you can see for the barrels we sold, we realized $104 a barrel of the sold volume. But with higher gas prices, the BOE price we achieved was $109 a barrel. And you can also see at the bottom of this chart that the proportion of gas sales to oil sales is not surprisingly is increasing. So in Q1, we had 86% of the revenue was oil and 14% was gas related. And on the chart to the right here, you see the makeup of our real oil price. So the dated breadth for the quarter was averaging $102 a barrel. And due to the timing effects, in other words, when we lifted our cargoes during the quarter, we had an added benefit equating to $2.4 a barrel, given that after each lifting, we are pricing that cargo the five subsequent days. And the timing of those lifting played well into how the oil price behaved during the quarter. A slight discount on the physical sales of 50 cents. That's also significantly lower than if you look on the average over the previous three quarters, it was $1.50 discount. So we have a $1 a barrel lower discount than we have seen over recent quarters. And that then led to $104 a barrel realized price on all the cargoes we lifted. Looking then briefly on gas, we realized a price of $194 a barrel per BOE. And the pricing mechanism is the same as in previous quarters where we are selling everything the day ahead. So we are fully exposed to the spot gas price market, both in the UK and on continental Europe in relation to the gas volume that we are selling. Then looking at operating costs, as I said, the unit costs for the quarter, $3.72, with absolute costs for the quarter at $69 million. And you can see in the light blue bars at the bottom here, how the impact has come through in our OPEX costs on electricity and CO2 costs. If you look compared to Q1 last year, then electricity prices, which is what's powering Johan Sverdrup facilities, are up close to 230% compared to Q1 last year. And also CO2 taxes are up 70%, which is why you see that light blue increasing fairly materially over that period. But nevertheless, in the context of generating $1.9 billion of EBITDA to have an operating cost of $70 million, it's very well managed through our operations team in Norway to keep these costs under control and therefore generating yet another strong EBITDA margin of 96% for Q1. Then looking at tax on the income statement, the reported tax rate was 75%, which is lower than what it normally would have been. And that to some interest rates, what gains we had on some interest rate hedges, which are all non-cash, but because they're deemed to be ineffective following the ACRA BP deal, they're being fully charged to the income statement, which therefore reduced the effective tax rate. But if we strip out the impact from that, plus the FX loss that we had of $36 million, then our operational tax rate is more or less bang on the Norwegian tax rate of 78%, which is also what you would expect to see in terms of effective tax rate when you strip out certain financial items. And at the bottom of this slide, you see the chart which shows the actual cash tax payments that we have to make. And in Q1, as I said earlier, we paid $509 million in cash taxes in Norway. And depending on FX, but we are paid all in two further installments in Q2 this year of 4.5 billion Norwegian kroner per installment, so 9 billion Norwegian kroner in total. And based on the quarter-end FX rate to the NOC, that should come in at just above another billion dollars of cash tax installments in Q2, which still relates to the 2021 tax liability that we have on the balance sheet. And in Q4 this year, we will make the final tax installment to fully settle the 2021 tax bill. And that's estimated currently to be another $44 million to be paid. So if you look at the balance sheet for the discontinued operations, we at the moment have a book tax liability of $2.4 billion as of end Q1. And that therefore relates to to what remains to be left of 2021 tax liability plus the tax we have accrued for the first quarter this year. Then looking at the actual cash generation, we mentioned this up front, but very, very strong cash generation with the high gas and oil prices we have realised. So before allowing for working capital movements, we generated $1.33 billion of cash flow from operations after tax. And as I said, with an increasing oil price, the receivables were building. And actually, with reducing investment levels, our payables are also reducing. So combined, that led to a working capital movement of $322 million. So therefore, we reported our CFFO to the cash flow statement of just over $1 billion. billion. And as I mentioned, cash flows from investing activities just below $190 million. And that's our free cash flow number before dividend payments of $822 million. Dividends paid relating to the 2020 dividend declared, which was paid in early January this year, of $128 million. So that fully settled the 2020 declared dividend. And that therefore led to, yet again, hefty debt reductions, as we have spoken about, repayment of debt during the quarter of $540 million. leaving a cash build of $145 million. In terms of the absolute debt, we report at the end of Q1 just below $2.7 billion of gross debt outstanding, $2 billion in bonds, and just under $700 million in term loans, small drawing of the revolving credit facility. And we had cash of just below $600 million. So that therefore left a net debt of $2.1 billion. And you can see on the extreme right of this slide that we continue to have extremely good liquidity within the business. In addition to the $600 million in cash, we have an on-drone RGF of $1.4 billion. So all in, we have $2 billion of available liquidity to draw upon. And in the bottom left here, you see the impact from the transaction with Acre BP, where the agreement is that the renewable business from the word go will retain $130 million of cash. So when you look at our balance sheet under the continued operation, you will see we record a net cash position of $130 million. And you want to discontinue the operations balance sheet that we, in addition to that, also have $468 million sitting within EMP business. So combined, those two items make up around about $600 million in cash for the group in total. Then quickly on dividend, the AGM at the end of March approved a 25% dividend increase, as Nick mentioned, to $2.25. Already in 1st of April, we went ex-dividend on the first quarterly installment of that new dividend. And on 7th of April, you should have received the equivalent of $0.5625 per share in dividend payment. And assuming that the deal with Accra BP closes on 30th of June, which is the plan, then that would have been the Latin to distributed by Lundin Energy AB. And then the second, the next dividend you will receive will be through your Accra BP shareholding and the Accra BP dividend distribution will then occur during the third quarter of this year. And then just a quick housekeeping slide on our guidance. Effectively, everything's unchanged in relation to what we guided at the CMD earlier this year. And you see all the numbers here confirming guidance is unchanged. And before I hand back to Nick, I thought it would be interesting just to have a look back in time, given that this is our last quarterly financial presentation to the market. And what we've done here is look at cumulative performance since inception of the company back in 2001 and looked at some of the key financial drivers for the business over that period. And you can see here On the production front, we have produced over 400 million barrels BOE over that period. Over recent years, obviously, all of that has come from the Norway business. But if you look back in time, we've also had production out of Southeast Asia, out of Africa, out of South America even, and also from various places in Europe. And that has cumulatively generated EBITDA of over 22%. a billion dollars over this 2021 year time period. And also very significant, the cash flows from operation, which is a post-tax cash flow generation of over $17 billion over this period. And some other fun facts on the bottom left here. Peak production, which I think occurred three last year. for a full day stream, 216,000 VOE per day. That was obviously all coming out of Norway at that point in time. And the highest realized price we've had on any given cargo over the years is $144 a barrel. And that was on all of our cargo in the mid of 2008. And as you've seen through recent quarterly presentations, our cash tax ramping up and cumulative, we have now paid close to $3 billion in cash taxes. So with that, I will hand back to Nick for some concluding remarks.