Welcome to this BlueNord webcast for the second quarter results. I'm happy to say that we are on the track that we expect to be on. We are delivering what, according to our own expectations and what we have communicated on previous presentations. We feel that we are in a good position even though the industry as a whole is not necessary in sort of the best place it has been. And in that respect, I'm very happy to introduce to you the new, the appointed CEO of BlueNord, David Cook, coming with a vast experience from this industry and can help us move BlueNord as a company and an investable item, investable company, forward as we move according to the plan and hopefully some sort of initiatives outside that.
Dave, I'll just leave this to you. Thank you very much.
Thank you, Riulf. It's great to be here and a pleasure together today with Atle and Euan to share our 2Q results. Our current journey as a substantial North Sea E&P company was catalyzed with the acquisition of the Danish DUC assets in 2019. Since then, we have delivered consistent, reliable performance. Through our solid foundation in the DUC, we've created a distinctive position whereby we can be confident in continuing to produce strong outcomes such as we see in this 2Q report. Our 2Q financials are important, but let me note a couple of highlights before we get to the numbers. First, our response to the COVID pandemic and the response of our partners in the DUC have always put the health and safety of our people first.
BlueNord's business continuity activity have allowed us to keep our people safe, both in the onshore and offshore environments while continuing operations. The DUC operator's response has been unwavering in addressing and assuring the ongoing forward safety for our people offshore. Second, while safely continuing our offshore activity, we have been able to complete the Tyra 2020 offshore decommissioning campaign. Atle will speak to both safety and the Tyra development in more detail as well as operational performance. These are important highlights of our operational progress. At the core of our business, production has continued within guidance as it has quarter after quarter, leading to financial outcomes in EBITDA, net result, and operating cash flow of $96 million, $20 million, and $78 million respectively for the quarter. Jon will take you through more detail on these results.
All of this underpins our strong liquidity position with a cash balance of $227 million. We also have additional undrawn liquidity available in our RBL. The positive RBL redetermination outcome is supported by our strong 2P reserve replacement. As I noted at the start, it's great to be here. Having joined BlueNord as the CEO, I join a focused team who, like myself, are deeply experienced in the North Sea. Our experience, a well with alignment to drive great operations performance and distinctive opportunity generation create an exciting future for BlueNord. We intend to approach and mitigate our sector's increasing uncertainty and volatility distinctively. We'll utilize our financial, commercial, and technical acumen to enhance shareholder value in a manner that is also supportive of the energy transition.
On that note, let me turn it over to Atle and Euan for some additional 2Q detail.
Thank you very much, David, and a very warm welcome to everybody from Oslo. I think I would like to start by saying acknowledging uncertainty and understanding risk and managing risk is really at the core of what we do in BlueNord. I think in particular through times like this with an unexpected and unprecedented pandemic and really tough market conditions, it's more important than ever before. I think you will see that companies do that differently. Some do it well, and some may not do it so well.
What we have said quarter after quarter is when Tyra goes offline. I just want to remind you that that happened in September last year, we will be at a place where we will have stable cash flow, stable production from Gorm and Halfdan and Dan throughout the project execution period of the Tyra redevelopment. This is certainly the case. We also put deep understanding of the underlying assets, understanding reservoir and predicting reservoir performance and thereby also production performance at a core, as a core competence for Noreco. We have since last year spent a lot of time and effort building that confidence.
I think that if you look at the production performance so far and the ability to guide throughout the different quarters, I think that is a testament of what we set ourselves out to do. In the interim period which year are being shut down, we will typically be at around 30,000 barrels oil equivalents per day. In the very beginning, somewhat higher, and towards the end, somewhat lower. That is driven by most and foremost by the natural decline of the underlying assets. Let's have a closer look at the underlying assets and what is actually giving us the production that we see for this quarter.
Around 28,000 barrels per day, on an average, which is exactly what we in line with what we forecasted and predicted, whereby Halfdan, as expected, provides roughly 60% of the production and also being the highest performing assets as such. Now, remember this is throughout the peak period, if calling it that, of the COVID situation. Like David also underpinned, the operator has really handled the COVID situation in a very professional manner, whereby people's health, the safety, the integrity of the installations were put first. However, also balanced by a tremendous effort to have the minimal impact on the production. Since mid-March, the installations offshore were demobilized as much as possible. Critical activities were put on hold, postponed.
Some of the major maintenance programs, well interventions, so on and so forth, were rescheduled and pushed out in time to make sure you focus on the real core of the business. At the same time, strict measures were put in place in terms of quarantining people offshore, crew changes, testing, and so on and so forth. The result is that the impact on the production was minimal and also with no like zero cases offshore, which also I think is a great performance.
81% operational efficiency throughout the quarter taking this into account, and also primarily driven by the fact that there was a planned shutdown of the entire field for the last 5 days in June, also extended into July, in order to repair the parts of the gas or oil export system and the interface to the pipeline to for the oil export to Fredericia. That was planned. It was executed, no incidents, no accidents, and according to the schedule.
It's also worthwhile mentioning that this week has been perhaps slightly more exciting than before when it comes to offshore operations and the DUC, whereby, as you may have picked up in through media, that Greenpeace decided to execute a, I would say, a friendly, but nevertheless, surprising action to one of the platforms of the DUC on the Dan B platform, which one had to respond to. Again, the operator responded in a professional manner, whereby a non-confrontational approach was then taken. After two days, the action was then completed, and the activist left the installation.
The safety was taken well care of, and also I think the way it was covered by the media was also appropriate. It also had a small impact on the production with two days of shutting down Dan B, which is also taken into account together with the continuous COVID measures and the fact that we have some more planned maintenance taking place in Q3, this time on the gas export support system, that we have then decided also to maintain the guidance as at the same level as we did for the previous quarter, i.e. Q2, at 27,000-29,000 barrels a day. That's what we are guiding for also this quarter.
The Tyra redevelopment project is unique in its kind, not just because it's important for BlueNord, the joint venture partners and for Denmark, but it's also a project where it's both greenfield and brownfield. It's about removal, it's installation. It's not, we shouldn't forget that the removal part is also a vital part of the project and not just putting the new things in place there. Far 17 million man-hours have been spent on the project in total, in a safe manner. No serious incident and accidents, which is very important for everybody involved. It's also worthwhile mentioning that Tyra is unique also because there's no subsurface risk. The reserves are there. There's no drilling risk because we're not gonna drill any new wells. We're gonna use the existing wells.
To see what has happened throughout the summer, where the 2020 offshore campaign was then executed and completed is really a remarkable sight. 750 people been out in the there planning and executing since the shutdown of Tyra in September. Now first the phase I, which with the largest crane vessel in the world, taking place during the summer months, when more than 20 lifts were executed. Now the second phase with the biggest construction vessel in the world, removing the two big production platforms, the topside from Tyra East and Tyra West. Sustainability and safety is really at the core of Noreco and Tyra as such.
I'll talk a little bit more about the sustainability and the recycling on the next slide. It's also, I think, worthwhile mentioning that this is a milestone for the project indeed. More than 50,000 tons of steel has been removed from the installations and the offshore. It's actually equivalent to seven Eiffel Towers. These are big dimensions we are talking about. In terms of COVID, which has impacted the entire industry, construction yards, supply chain, what have you, it has had different impact on the construction yards with regards to the Tyra project. Some has not been affected, some has been affected. The good thing is that we can see that they're all operational now.
Some are either fully operational or in the process of ramping up to full manning. What is also great to observe is that there is a contingency built into a large and integrated project schedule. With the current disruption, disturbances of COVID in the different construction yards, we can see that now that contingency has been well-placed and well-spent, and also it's been absorbed, so to say, by the integrated project schedule. That gives us also a much bigger confidence in the current plan, which still holds. If we look at what's happening with Tyra and all the steel, as I said, safety and sustainability is really at the core for Noreco and also the Tyra redevelopment project.
Many years of planning, engineering, and applying state-of-the-art technology, horsepowers, what have you, has really come together in this removal campaign. Some of the removed steel goes to Holland for recycling, some of it goes to Denmark, creating jobs, creating business. Good for us, good for Denmark and the society at large. The big topsides going to Fredericia in Denmark is actually the largest recycling project that has ever taken place in Denmark, and we are happy to contribute to that. Not only does Tyra offer a 30% reduction in the CO2 emissions compared to the old setup when it's being started again, we're also able to recycle larger parts, actually more than 95% of the topside facilities.
This pretty much completes the sort of excitement I would say this summer. There's one thing left, and that is installation of the jackets for the new accommodation module and also the processing platform. Those are currently in Spain. They are on the barge and prepared to be sailed away up to Denmark next week and then installed during mid of December. We're really looking forward to that, completing everything for this summer campaign. I think that we've seen that the DUC operator is capable of managing changes, managing risk, and just as they did that with the offshore operations and the performance of the assets, we're also seeing the same for the Tyra redevelopment project.
That is give us greater confidence to the plan that the operator is presenting by achieving first gas in 2022. We are certainly very excited to continue to follow and also monitor and support the operator, and we're looking forward to the time to come. With that, I'll conclude what I was going to say, and I'll leave the word to my colleague, Euan.
Thank you, Atle. Having now covered the operational side of the business, I will move on to focus some more on the financial performance during the quarter. I think to start, I would echo a lot of the thoughts that David and Atle outlined in the sense that I don't think it's unreasonable to characterize the current period, certainly in Q2 as unprecedented for the E&P industry as a whole, both in terms of the supply and demand shocks from an oil market perspective, which clearly had a significant correction or led to a significant correction of the oil price. Also the revised environment that we found ourselves in having to manage the business such that we were able to avoid unanticipated disruptions from an operational perspective, given the COVID environment.
As Atle has outlined, from an operational perspective, the process was well managed, there was a limited impact. Financially, we can report today strong performance that is in line with our prior expectations. It's a testament fundamentally to the structures that were put in place as part of the Shell acquisition, also subsequent too, that Noreco has been able to weather the potential storm over the period on both a positive basis, both absolutely and relatively to the rest of the industry. That talks very closely to our approach to risk. Where we can economically reduce our exposure to volatility, we will seek to do so in a way such that we're able to continue to deliver consistent and predictable performance. Our hedging arrangements did exactly what they were intended to do.
When from a price perspective, there were significant decreases from the prior levels, we realized an oil liquids price in the quarter of $66.5 per barrel, which was more than a 100% premium to the Brent price during the period. From our volume hedging arrangements that we have with Shell, the guaranteed minimum level of production that we receive and are commercially compensated for delivered $24 million of value for us in the quarter. It's based on these arrangements in large part that we are able to report today EBITDA excluding the volume contribution of $69 million. When we include the guaranteed level of production for our adjusted EBITDA, that rises to $96 million.
Looking forward, our financial position is such that we are in a strong position to continue to deliver on our objectives. We have price hedges in place that are significantly above the current market until the end of 2022. Looking at our liquidity, we have cash of $227 million on the balance sheet. We have undrawn RBL capacity of $49 million, and we have no near-term debt maturities. To briefly talk about our longer-term value proposition, both from the perspective that we were not required to take any asset impairments during the period, and also from the conclusion successfully of our RBL redetermination in a challenging macro environment. They both point to and provide evidence of the substantial remaining value of our investment in the DUC. Moving over to slide 12.
As Atle outlined, the production in the period was 27.9 thousand barrels a day. The deviation from Q1 was largely the result of planned maintenance activity. Our sales level was marginally higher at 28.2 thousand barrels a day, and that's a small overlift of 0.3 thousand barrels a day. Our realized liquids price in the quarter was $66.5 per barrel. As I noted before, that's more than a 100% premium to the price in the market over the same time horizon. Fundamentally, it proves the value of the hedging arrangements that we have in place. They protected us against decreases in the oil market when we needed to utilize them.
It is also worth noting that in normal market conditions, we would typically expect the crude that we sell from the DUC to be priced at a premium to the underlying Brent level. In Q2, and particularly April and May, the reported Brent pricing that you would see on a screen ceased to be a particularly good marker of where oil was trading in the physical market. I think that significant increase in differentials is something that's been fairly widely reported and is a, an industry-wide phenomenon rather than something that is specific to Noreco or the DUC. I think it is also important to note that as the market recovered, so has the premium level. Fundamentally, we are at a place today where it's not dramatically different from where we were prior to the prior to the COVID situation.
On revenue, we reported $135 million during the period. Turning over to our hedging arrangements. As we exit Q2 2020 and look into the remainder of the year, we continue to have material price arrangements, material hedging arrangements in place. From a price perspective, we have hedged volumes out to the end of 2022. They are at a significant premium to where the current market sits, both on the spot price or forward curve basis. As we have communicated previously, under our RBL facility, we have a minimum hedging requirement, which is 50%, 40%, 30% of forward production, one, two and three years. In the first half of the year, we obtained a waiver from our bank syndicate covering our minimum hedging requirement for 2023.
That was driven in large part by the fact that we are not in a place where we are forced to hedge at low levels. That is also a function, frankly, of the fact that we already have significant hedging in place. Looking at the volume arrangements that we have, Noreco benefited from the guaranteed liquids production level that is provided by Shell to an amount of $24 million in the second quarter, and we expect to continue to benefit from that throughout the remainder of the life of the contract to the end of 2020. Moving briefly to slide 14, a summary of our financial performance. I think we've covered a lot of the highlights in the initial pages, so I don't propose to go through this in a huge amount of detail. I will, however, just direct to some specific figures.
I mentioned our reported EBITDA was $69 million. The contribution from the volume guarantee was substantial and raised our adjusted EBITDA, which is a metric that includes that contribution to $96 million. Our net result was $20 million during the quarter. We exited with cash of $227 million, and our net interest-bearing debt from a commercial perspective, which is to say excluding NOR13, was $724 million. As I noted on the first page, during Q2, we successfully completed our RBL redetermination. That is a detailed review that is done by our technical banks on the attributes of our underlying assets. It also involves the update of the key macro assumptions.
The result of that was that our borrowing base capacity increased by $188 million, that was clearly supported by both the hedging that we have in place, but also importantly by the strong operational performance of the business in 2019 and the position as we look forward, both from a production and a reserves perspective. Going forward, under our current facility, we expect the borrowing base to remain above the maximum amount that we are able to draw for the entire life of the loan. To conclude on the RBL page, I think it is clear that it is a strong testament to the strength of the Noreco business. It further strengthens our liquidity position as we go through the Tyra investment phase.
It frankly bucks the trend also of the broader E&P RBL borrower industry in the sense that we have had a positive RBL redetermination. Finally, it provides us with a strong capital base upon which we can use as a foundation to continue to build the company going forward. Finally, as we have, as we have gone through previously, we have outlined here just our capital structure. Our RBL was drawn $751 million at the end of Q2. NOR13 had a principal value of $164 million, and NOR14, which is the senior unsecured note that we issued at the end of 2019 continues to have a principal value of $175 million. Our net interest-bearing debt from an accounting perspective is $888 million.
When we exclude the convertible bond, which is the premise upon which our covenants are tested, our net interest-bearing debt decreases to $724 million. I think to summarize our capital structure, because it is important, particularly as we sit in what is a relatively abnormal market. We have a robust capital structure with, you know, a significant portion of it provided through permanent pieces of capital, which is NOR13 and NOR14. We also have a supportive bank group as demonstrated by the RBL redetermination. Both of those things lead us to a position where we have no near term debt maturities. Our funding profile is additionally strong. We have $227 million of cash, and we have $49 million of undrawn RBL capacity.
It's that firm foundation that I think gives us confidence in our ability to continue to build the company going forward by reporting our financial performance in a stable, and predictable way despite broader challenging market conditions. We look to be able to continue to use that basis to deliver our key goals. With that, I will hand over to David for some closing reflections.
Thank you, Ewan. It's quite clear that we offer an enticing value proposition. I noted at the start of today that our outcomes have been reliable. We've delivered on promises quarter after quarter since entering the DUC. Our performance through the first half of 2020 has been consistent and distinctive despite the incredible environmental volatility. We hold a material reserve and resource base. Our 2C resource, the barrels in our own backyard, is circa 200 million BOEs. The future value is supported by the present value of production, currently around 30,000 barrels equivalent per day for 2020, with a low decline rate on our base. Our known value growth is near-term, with the Tyra project progressing to a conclusion where we will be producing around 50,000 barrels oil equivalent per day after the restart.
Additional growth opportunities, recognizing our existing 2C resource, are low risk, low cost, and high value. We also hold tax balances, which could be an important consideration for future inorganic value creation opportunities. All this potential is underpinned by the predictable asset performance in the DUC, further enhanced by our production guarantee and 100% liquids hedge in 2020, as well as material volume hedges for 2021 and 2022. Finally, our significant cash balance and recent upward RBL borrowing base puts us in a distinctive place to consider investment options, especially in line with the energy transition. It's easy to understand the value that Noreco offers. Through that, you can understand why, as I said at the very start, it's exciting to be part of Noreco now.
Thank you, and we'll take some questions.
First question, do you have an estimate regarding CapEx for the rest of the year? Will it be around the levels of the first part of the year? Euan?
Yes. unfortunately, given the structure of the joint operating agreement that we operate under as part of the DUC, we're not able to communicate forecast CapEx numbers on behalf of ourselves. I think it is, it is a challenge that we face, and it is a result of us not having... it is a reality of why we have not guided on CapEx throughout the remainder of the year.
Is it possible to get an update on the share buyback program that was approved on the AGM this spring?
We launched a share buyback program at the start of the year, under both our RBL and our bond instruments. There are certain restrictions upon the share buyback levels that we're able to carry out. We received a waiver of those for the first half of 2020. I think going forward, we have no specific near-term intentions to relaunch a share buyback campaign. It is clearly something that we will consider going forward, depending on the market conditions and also the development of our business.
Next question is for David. Given lower supplier prices, are you considering to increase exploration activity?
We've talked about the strength of our, of our balance sheet and certainly our capital base. We have several things where we could look to deploy capital. I mentioned already a strong 2C resource base and what I call barrels in their, our own backyard. These are potentially the lowest margin, lowest cost barrels, highest margin that we could try to access. I think what we're doing is looking at everything across an investment hopper. Greenfield exploration is certainly not something that we are focused on. Whether we would find opportunities for step out, in intra-DUC projects for development, those are things that we are already progressing and are looking to potentially invest in over the near-term period.
Euan, do you see any factors that suggest significant change to Q3 earnings versus the reported Q2 earnings?
I think from an operational perspective, I think one of the things that it's important to move back to is just, as Atle highlighted, you know, we have been, we've been predictable in the sense that we have been able to guide closely to where our ultimate production has ended up during the period, which I think gives a good, a good view on how well we understand the assets and how well we understand the position going forward. I think also importantly financially, we come at it from a perspective that we have significant hedges in place, both from a price and a volume perspective, which reduces a lot of the volatility around potential future earnings.
I think to summarize the answer to the question, I think as we sit today, there is nothing that leads us to expect in any way that there will be a material change to our performance in the third quarter. I think frankly, when we look back at the second quarter, given the given the underlying market conditions, I think that also gives comfort that going forward, we'll be able to deliver stable and predictable performance.
David, assuming European gas price remains at current level, how do you think around Tyra profitability?
Tyra is a robust project. Certainly we've been watching and looking at the economics. We have no overly optimistic views of gas price. We're sort of in the conservative view of the forward curve. That said, we're gonna be continually trying to optimize not only the development costs with our operator between now and start, but we'll also be looking at how we can potentially optimize the actual operating costs once it has gone through restart. This is where our cooperation with Total and the North Sea Fund in the DUC is critical. We'll bring all of our ideas and components to try to reduce those costs and further enhance the economics, which we're already comfortable with.
I think it's probably important to talk about the fact that Tyra could potentially open up other opportunities for us to be investing at really low cost and high economic return as well. We have no concerns, if you will. I'd like to see gas prices go in a different direction perhaps, but the reality is we're fine if we continue along the forward curve as predicted at this point.
Next question is for David as well. Why don't the share price reflect the strong financial and operational position of the company?
Yeah, I don't know if you can see my body language. The flippant response is, "You tell me. I wish I knew." The reality here is if you look at metric valuations, we're not where we should be, and we recognize that. It's surprising. It's something that we are certainly talking to our current shareholders and trying to address because there is significantly more value in the company than is reflected in our share price. I guess if there's one, I don't wanna call it positive, one important thing to note in this, our share performance compared to our North Sea peers is actually stronger.
We've weathered through the sort of multiple black swans of COVID and the OPEC+ battles and things like that, perhaps better than our peers, but it certainly doesn't put it at a place that we are comfortable, nor do we believe that correctly reflects the value of the company, and we'll be continuing to make sure that we can get out and share that story and talk about why we need to see greater investment and more, quite honestly, more volatility on the share trading.
Next question is for Euan. How should we think about the differentials going forward? How could differential movements affect price realization in coming quarters? Is there an underlying price? Your guidance of $69 a barrel in Q3 including any DUC premium or discount.
Just to take the final part of that question first. The $69 per barrel that we have outlined as our hedge price for Q3 does not include any DUC premium. Historically, the DUC premium has been on average $1-$1.50. As I mentioned during Q2, there was a significant deviation from that which was driven by the situation in the physical market and the challenges that were faced given the issues around the drop-off in demand and the increase in supply that we saw. I think that fundamentally led to a significant increase in the level of the differentials, and that is something that was seen across the industry from Equinor down, frankly.
As we move forward, as I mentioned in the presentation, one of the things that we have seen is that as the market has recovered, and as we have exited Q2 and moved into Q3, I think we've seen a recovery in the overall physical market and the and certainly the position that we take with our DUC premium. I think going forward, we are in broadly the same place that we were prior to prior to the coronavirus resulting or prior to the market conditions that resulted from the coronavirus situation. I think we very much expect the discount from the original hedge price, which was $71 a barrel down to the $66, to be a one-off, and that is what we are seeing currently in the market.
I think going forward, we expect the differential to be pretty much in line with where it had been from Q1 prior.
That concludes the Q&A session and the presentation. Thank you.