Welcome to this BW Energy presentation of fourth quarter 2020 and full year. This presentation will be hosted by CEO, Carl Arnet, our CFO, Knut Sæthre, and our Chief Operating Officer, Lin Espey. I will take you through the first part, which is the highlights and the assets details, and then Knut will take over and take you through the financials and a short summary. I move to the second slide. Please note our disclaimer. Should be very quick to go through. Moving on to slide three, our highlights. Our EBITDA was $28 million based on two liftings completed in the quarter. We did a subsequent capital raise of $75 million in January 2021, and I'm happy to report that we have resumed project execution activities, and I will come back to that in more detail.
As I said, we completed two liftings, achieved 1.1 million barrels net to BWE at an average price of $46 per bbl. The average daily production for the quarter was 13,500 bpd . We are preparing for drilling of the Hibiscus extension exploration well before completing the Tortue phase 2. We are also progressing preparations for the Hibiscus and Ruche development, which will with a reduced CapEx program and reduced time to first oil. We will cover that more in detail later. We are, of course, still dealing with the COVID situation. It has dragged on longer than we expected, but we are still maintaining production operations as per normal. Moving on to slide four. We have a zero harm objective for people and environment. For the full year, we achieved that goal for BWE. We had zero LTIs.
For our main subcontractors, we registered five LTIs through the course of 2020. There were two LTIs associated with operations on the FPSO Adolo and three LTIs associated with our installation project for Tortue phase 2 project. This is obviously going to be a focus of attention going forward. Moving on to slide five. This is our NSAI reserve update. Basically, the Dussafu production is reflected in the update. You can see it doesn't quite add up on the decimals, but that's within the expected noise of these checks and balances that we do with our third-party auditor. The Hibiscus extension exploration well is, of course, a potential trigger for a significant upward revision of reserves. We're talking about adding up to 100 million barrels of reserves from that, making it 150 million barrels total for Hibiscus area if the extension well comes in.
We have had a slight increase in the Maromba 1C reserves, while the 2C has been stable. This is based on more work of the models that we have for the Maromba. This, moving on to slide six, will give the displayed production outlook, with a gross production peaking at about 65,000 bbl per day, which is a bit more, 55,000 net to company, and that is including the Tortue phase 1 and 2, the Hibiscus phase 1, and Hibiscus Ruche phase 2, and the Maromba phase 1 and 2. Moving on to Dussafu with some more detailed comments. That's on slide seven, and then quickly on to slide eight. We had stable operations in the quarter, and we have restarted the Tortue phase 2 development. The fourth quarter production was 1.24 million barrels, equal to 13,500 bpd .
This was affected by our annual maintenance program that was completed in October, related to the FPSO operations. The Q4 OpEx was significantly higher than we had hoped for. This is again caused by the COVID, which added to our costs. We came in at $23 per bbl. Full year OpEx is about $20 per bbl, also a tad higher than we had hoped for. I think we guided $19 at the previous presentation. This is again related to the COVID and a slightly reduced production due to complying with OPEC quotas. The completion and tie-in of Tortue phase 2 wells DTM-6H and 7H will happen after the Hibiscus extension well. We expect to achieve first oil from the new Tortue wells in end of third quarter, beginning of fourth quarter. I say this with a little bit of, we have several factors affecting this.
We have, of course, if we should have a successful Hibiscus extension well, we are planning to do a couple of sidetracks, one or two, which will affect the start of the drilling of the DTM-7H. In addition, we have, of course, the continued COVID situation, where we see that it is getting more severe rather than less severe. We are, however, of the opinion that it's acceptable to restart project execution activities, and we feel that we have full control and that we will manage. We see that there is potential for some disruption or some delay to activities, which is not factored in necessarily in our Q3, Q4 estimates. Moving on to slide nine.
The Hibiscus development, this is the first well in the upcoming campaign, and the reason for that is to ascertain the potential extension of the Hibiscus, the reservoir we discovered towards the end of 2019, that this extends into what we previously called the Mpale area, which will make the Hibiscus reservoir significantly larger, and as we have told you before, up to 160 million barrels. This will, of course, make us localize the first offshore installation facility that we intend to install in the Ruche Hibiscus area. We will install that squarely over the Hibiscus project, and we will use the second offshore installation converted jackup that we have also bought to tap the Ruche and Ruche Northeast discoveries and any other discoveries we are looking at in the area. Moving on to slide 10. We have congealed our plans for the Hibiscus-Ruche development program.
We are currently in a FEED phase. It will continue for a short while longer, and we have already started the basic and detailed engineering activities and the rig reactivation. This is all concerning the Hibiscus Alpha offshore installation. We plan very shortly to start the refurbishment and modification activities. We will have topside skins manufactured and integrated, and we will, of course, upgrade the rig and make it suitable for our purpose. You also see here the procurement activities that will start shortly, with, among others, procurement of the pipeline material. Then we move on to the offshore and field installation phase, where we will then install the offshore installation. We will drill and complete the first well, and we will lay the pipeline down to Adolo, and then we will have the tie-ins and hookups, and then achieve first oil in the first quarter of 2023.
Moving on to slide 11. The production forecast includes the Tortue, the Ruche phase 1 and Ruche phase 2, which may, as I've alluded to, be Hibiscus phase 1 phase 2 initially. We expect a 2020 production of 5.2 million barrels gross. This is, of course, a bit shy of previous guiding, but that is due to the suspension of the 2020 program, Tortue phase 2 and the subsequent delay then in getting production from the two last Tortue wells that we have told you about on multiple occasions. We expect a production in 2021 of 5.2-5.8 million barrels is our expected range, depending on, again, when we manage to complete the two wells after the Hibiscus extension exploration well.
You also see here in the caption to the right, the actual and planned quarterly liftings to BW Energy for the coming year. I will then move on to slide 12. Our exploration program, we have a number of very promising prospects, and they have become even more promising after our seismic reprocessing. We are planning two exploration wells per year for the coming five years. The coming drilling program that we have already mentioned will then include the Hibiscus extension exploration well. We are also planning another well in the Hibiscus-Ruche area. It is likely going to be the Hibiscus North prospect, but we are still talking to our partners, and we are still working on finalizing that decision. We think Hibiscus North is a very good prospect. The work is, of course, also ongoing to high-grade the next targets for the 2022 campaign and onwards.
On to slide 13. This is just a small snapshot from our second offshore installation facility, the Jasmin Alpha, the former jackup Balder. You can see here that the ship is being loaded on the heavy-lift vessel and being prepared for transit to the Middle East, where she will be in a yard and be readied for conversion. On to slide 14, Maromba. Quickly on to slide 15. As we have previously reported, the field development plan has been approved by ANP. We are progressing towards environmental approval by IBAMA. We are planning a social survey, which is the missing piece to get that approval. We have worked significantly on the project execution plan to reduce the time from start to first oil. We are also in parallel working, of course, on improved economics by, among others, achieving marginal field status.
We are tracking very well for an FID for phase 1 to be approved in Q1 2022. What we are targeting is breakeven below $40 per bbl while achieving 50% IRR. Moving on to slide 16. Maromba has long-term production potential. The first phase will be purely targeted to develop the Maastrichtian sands in the main body of the reservoir. We then have a Maastrichtian phase 2, and we then move on to phase 3, which is similar Maastrichtian sand, but in other sections, the Lobo and Eocene producers plus more trajectories. We then have a significant upside that is just rudimentary illustrated here, which is, of course, the carbonate, which will be an appraisal program and then significant development if we are to untap that. We then move into slide 17, Kudu, and slide 18.
The status on Kudu is that we have agreed to take over 95% working interest. We previously had 56, and the government entity, NAMCOR, will hold a 5% carrying interest after approval. This has now gone to the Namibian government for approval, and we expect that to be approved shortly. The Kudu gas field is located about 130 km from land and about 170 m of water. The thinking or the idea of the development is to feed gas to the shore, either to South Africa or Namibia, and mainly then use the gas for power production. We believe there's a significant market in Namibia and South Africa for this power. We are now going, as soon as we have our formal approval, we are going to start to revamp our efforts on taking this to a final investment position.
We are hoping to achieve that by end of 2022. Of course, gas projects are more complex, more government interaction intensive than oil projects. This is our ambition. We are, of course, prepared also for a longer haul if that is necessary. I will then leave the word to Knut, that will take you through the financials and a short summary.
Thank you, Carl. Moving on to slide 19, the Q4 financials, and I will also cover the full year, as we have today also published our annual report including the sustainability report, reports on payments to governance, and also the annual statement of reserves. It was all out in our press release from this morning, and you can also find all that information on our website. Moving on to slide 20, the income statement for the fourth quarter. EBITDA increased by $6 million, mainly due to We sold 550,000 bbl more of oil in the fourth quarter with our two liftings. The average realized oil price was more or less the same, so $46 is what we achieved for the fourth quarter. Depreciations increased with the additional barrels sold.
We also had an impairment related to Kudu, and that was due to the fact of the agreement that we entered into NAMCOR, our partner. We had a trade receivable against them that we gave away in the negotiations. As we are still in the phase of putting together a firm business plan, we have for now impaired that trade receivable. All in all, that gives us an operating profit for the quarter of $4.9, slightly up from last quarter. On the other financial items, it's very stable. We had some gains due to a hedge we have for interest rates. As you know, the longer-term interest rates have increased, so our mark-to-market swap is more in the money now than what we used to have.
That gave us then a profit before tax of $2.9 million, and after taxes, we recorded a net loss for the quarter of $5.1 million. On the full year, we had the EBITDA of $87 million compared to $192 last year's. We had less barrels sold, less volume. Mainly, the reason is then the lower realized oil price throughout 2020, which was $22 lower than what we achieved in 2019. That's the main reason for this decrease. On the depreciations, they have been reduced due to the lower volume sold, along with the lower depreciation rate. We have the total impairment for Kudu amounted to $13.2 million for the full year, giving us an operating profit of $1.8 million for 2020.
The financial items, the main explanation here is on the lease liability interest expense, the IFRS 16, where we increased the discount rate, and we also had the other financial items, mainly FX movements in 2020, giving us a - $2.3 million. The loss before tax ended up with $12.2 million, and after taxes, the net loss for the full year was $41.1 million. Moving on to the balance sheet on slide 22. There are a lot of, let's say, minor movements, I'll just cover the main ones. The inventory decreased from the third quarter to the fourth quarter due to a reduced overlift position by $10 million. We had an increase in trade receivables and other current assets, mainly due to the December lifting that hit the trade receivables and gave us a high working capital. That was all paid in January, it's now restored.
The cash situation was $120.6 million. Mainly because of the investments that we did in Dussafu, and also related to the acquisition of the two jackup rigs. Just to mention the $75 million equity issue that we completed in Q1. That's obviously not in here, but will be in our next update. We completed our private placement in January 20th, which gave us the gross proceeds of $75 million, ensuring us to have capital to deploy towards our accretive projects and capture a significant value creation going forward. Also to mention the changes here in the fact that BW Offshore did not participate in this capital raise, reduced their holding from 38%- 35%, which is more or less the same as the BW Group ownership.
The free float has now been increased to approximately 30% after that capital raise. As you also can see here, the shareholder equity is still very strong compared to total assets, giving us a very healthy and robust balance sheet going forward. Going forward on the slide 23, the investments that this overview shows all our historic investments over the different quarters. As you can see, we curtailed all investments after the COVID outbreak. Put everything on hold, both Dussafu and Maromba. We had very little CapEx in Q2 and Q3. Then we started to spend some money again in Q4. Here you can see mainly the jackup investments. Going forward, as Carl has been through, we will then now restart all our investment activities, first with the drilling and then all our activities.
For the year of 2021, we have plans to spend about $160 million-$170 million, mainly coming in Q2, Q3 of this year. Moving on to our cash flow situation. This shows our total cash flows for 2020. We started off with $81 million, January 2020. We did the capital raise or the IPO in February, giving us $121 million net proceeds. In addition, we had operating cash flow throughout the year of $49 million. Investments, mainly in Dussafu, then totaled $74 million. We have other financing activities, that's the repayment of debts that we also did early in 2020. The company is now totally debt-free. We have the payment of lease liabilities giving us the $121 million at the end of the year.
Now with the capital raise that we did in January 2021, we have more than $200 million in cash as at the end of January. Moving on to the summary, to slide 26. The key value catalysts going forward. We are extremely excited about restarting our drilling program, and we will then start with the Hibiscus extension well. Looking forward to the outcome on that one. We're constantly looking at our seismic that has been reprocessed and to find the new targets after the Hibiscus extension. As Carl also mentioned, we have one optional well that we will decide shortly which one that is going to be, and then we have several other planned wells in the next five years. On the Tortue phase 2, the last two wells that are not connected, we hope to get there.
COVID is a little bit unpredictable as was mentioned earlier in the presentation, but we expect to be there in Q3, Q4 adding on about 8,000 bbl at peak gross production, that is. Then with the, let's say, the execution plan that we have now, shows that we will get to first oil on the Hibiscus development in Q1 2023. We will then also see what we can do with the FPSO and as we also mentioned previously, we might have to increase that nameplate capacity, and that's in the planning, to ensure that the FPSO is not going to be a bottleneck going forward. Finally, to Maromba, our team is working there on the field development plan and to optimize CapEx and OpEx, where we target FID early 2022, with first oil expected in 2024.
All in all, we expect to generate a significant positive cash flow at current oil price levels. With no debt and a solid capital base following the recent capital raise as well, and access to a number of accretive investment projects, like to do some Maromba, but also looking at other opportunities, we then expect to generate significant value for our stakeholders going forward. That ends our presentation today, and we're now ready to open up for questions. I give the word back to you.
Thank you. We have a question from the line of Teodor Nilsen from SB1 Markets. Please go ahead.
Good afternoon, thanks for taking my question. It's SB1 Markets, not SEB. I have three questions for me, if I may. First of all, on Hibiscus, what do we need to look for to have very sure booking for 2P reserves at Hibiscus during this year? Second question, just on, you mentioned the OPEC quotas, Carl Arnet. What's the underlying assumption in your production guidance for OPEC quotas and potential easing of those during 2021? Finally, just a small clarification on Maromba. There's one chart, at least it looks like on slide 16, that indicates first oil in 2022. Why on slide 60, 2020? Just a clarification, what's actually key message there? Thank you.
Okay. I think Lin is the best place to give you these answers, Teodor. I think I'll leave the word to Lin.
Okay. Hello, everybody. This is Lin Espey. I think the first question was in regards to the Hibiscus exploration well, and its impact on 2P reserves and would there be any impact in this year. We're very excited about the Hibiscus exploration target. We're scheduled to drill it, April timeframe. We'll know the results roughly a month or so later, a month forward to six weeks later. If it's positive, then we will integrate that outcome and those reserves into our development plans. We would look to book those reserves year-end. They would make a booking of those this year. We're very excited about that. The other questions, you'll have to remind me. Carl, did you catch that?
I think it was Maromba, was one.
That's correct.
Okay.
The last one was also assumptions for OPEC quotas implied in your 2021 production guidance.
Okay. The production guidance. We have been advised from the government of Gabon that they don't anticipate there will be any OPEC restrictions on our production in 2021. Our production guidance does not reflect any restrictions. As you know, the oil market is very fluid, and we'll have to wait and see on how OPEC reacts and then what that influence is on Gabon. As you know, Gabon is a very minor member of OPEC, but they still, on occasion, have to apply with OPEC's overall cuts. The other question was about Maromba first oil target or first oil date.
I think I can jump in. I think it's just the graph, it excel to the graph that shows the 2022 start. That should be 2024 as we have said clearly in the last slide, Teodor.
Yeah. Thank you. Understood. All clear. That's all from me.
The next question comes from the line of Tom Erik Kristiansen from Pareto. Please go ahead.
Thank you. Yeah, this is Tom Erik from Pareto. Can you talk a little bit more about the impact if the Hibiscus extension well is successful? One thing is the placing of the next oil production center on top of that. Will that also immediately trigger an increased effort from the planning to debottleneck the FPSO to 70,000 bpd ? Is more result needed for that? Then I have a second question around the financing strategy. Right now, you have a lot of cash and low leverage. Is the thinking around that to leave, call it leverage capacity for M&A or later as you grow organically, or will you build an E&P business with very low leverage as a strategic decision?
In terms of acquisitions that have been mentioned before, how do you think that opportunity set looks right now compared to deploying capital at, say, Maromba? I guess priority number one will be the Dussafu, but it's very hard for external opportunities to compete with the returns you're seeing there. That's all.
Yeah. Okay. That was three questions. The first one was. What was that again? Just give me.
I can take that one. Yeah, that was on the reserves.
Yeah
If Hibiscus c omes in, what's the impact on how we produce it, and would that trigger debottleneck on the FPSO?
Yeah
if Hibiscus extension comes in, it would have the impact of doubling our reserves from Gabon. That, wonderful outcome, tremendous outcome, and that would certainly entail us increasing production capacity to produce more oil. Now, how we go about doing that, we have a number of options, one of which is we can debottleneck the FPSO to process more crude, which is one of the more obvious paths that we can take. There are other options. We can do processing on these platforms, these jackups that we're converting as well, and send fully processed crude over to the FPSO. Yes, the answer to your question is, if we have the outcome where we double the reserves, we would be looking to increase capacity, processing capacity.
I think the second question was about the leverage going forward, and maybe also implicitly asking about the background of our capital raise. Just to at least introduce, BW Energy has been exclusively funded by equity and the proceeds from the IPO. By the way, congratulations, everyone. It's 19th February, and we've been listed for one year today. The company still has no debt, and the only thing we record are the lease obligations from the Adolo. We still have a very strong balance sheet, which we definitely like. If you look back at 2020 and see the volatility in our industry and also for our company with a very volatile oil price and of course, the pandemic influence, it has definitely served us well to have a strong balance sheet and a very low gearing.
That's something at least me, as CFO, enjoys. Going forward, we are still looking at financing options like the RBL that we mentioned many times. What we've said also many times is when we resume investment activities, we will also then start to get the financing clear going forward with the RBL, and we also look at some other options.
Can I just add one thing on I know there's speculation. Do we go out and raise money because we are looking at M&A? Yes, we're always looking at M&A as an opportunity set. We have excellent opportunities. Yes, we have Dussafu that's well-recognized. Internally, we believe Maromba is an equally good opportunity with significant oil reserves and potential for significant improvement in recovery. We do find the best opportunities within the company. We are in front of a very, let's say, extensive investment program with our Hibiscus Ruche development, and we could very easily see a scenario where we had a second offshore installation as well as Maromba. We believe that, as Knut said, it is very much in our favor to be well-capitalized and have large operational freedom to pursue the business. It is the primary objective to invest in our existing projects, and that's where also the shareholders will see absolutely the biggest return.
Okay. Thank you. That makes sense.
All your questions, I'll hand it back to the speakers.
Yeah, we have a question here from the web. I think it partly has been answered. It's about Hibiscus extension and the potential outcome and the way forward there. Maybe also a little bit of granularity, Lin, on the optional well that we have in the drilling contract.
Okay. We have signed a contract with Borr Drilling for firm two wells plus an option well. As I said earlier, that program is going to start Well, right now, it's scheduled into March, where we start mobilizing the rig and then spudding the well, the first well, in April. The drilling sequence is we're going to drill the exploration well first. It's a key value trigger, the Hibiscus extension. We have an alternative interpretation based on the reprocessed seismic that the Hibiscus field is considerably larger, three times as large as it's currently mapped. After that well, that well is going to take a month to six weeks, and if we're successful, we'll delineate that with up to two appraisal sidetracks. After that, we'll move the rig back over to the Tortue field, where we'll drill the DTM-7H well.
That'll be the second of the two firm wells. We do have an option slot to drill a third well, and we are contemplating drilling another exploration well in the greater Ruche Hibiscus area where we've been very successful. As everybody knows, there's been the Ruche discovery, there's been the Ruche Northeast discovery, we had the Hibiscus discovery. We're three for three over in that area, which is a highly prospective area. As Carl mentioned earlier, if the Hibiscus comes in and gets a lot bigger, one of our jackups that we'll be using as a platform will be full of wells we drill just in that Hibiscus area. Therefore, we'll still have the Ruche and the Ruche Northeast discoveries to put online commercialize, and we have a second jackup that we could utilize for that.
As Carl said, drilling the Hibiscus North, which is one of our favorite prospects all along. At one point it was a toss-up whether we drill Hibiscus North or Hibiscus. We chose to drill Hibiscus last time. We're in the throes of evaluating, finalizing our evaluating that, working that through the government, through the board, and through partners to finalize that. We look to finalize that decision here at the end of this month, whether we want to drill that second exploration well. Okay.
Good. There is another question from the web, and that's about Maromba. You said you were going to have FID on Maromba in Q1 2022. What are the triggers? What do you need to see to trigger the FID of Maromba?
Good question. As Carl said, we're very excited about it. It's a wonderful quality reservoir, 400- 500 million barrels of oil in place. We think our first development will produce about 100 million barrels, and this has been confirmed by third-party reserve auditors. What we've taken the time this past year is, I think in recognition that the whole market goes up and down, we want to make sure we have a robust project that returns a positive rate of return and a 15% rate of return at a constant $40 oil price. We've been refining our development plan, our development options, how we go about the development, and we've identified four or five different elements that we wanted to further fine-tune. Some of these are such as the FPSO cost.
Some of these are the commercial arrangements between BWO, BWE, and making sure that's the most optimized for tax purposes. Others included on the subsurface side, the requirement for water jet injection or not, and so on and so on. We made good progress on all of these. We are on track to take this to internal FID, as you said, first quarter of next year.
Good. There is a final question here for Maromba from the web. What is your current attitude to trying to farm down Maromba, and what timing do you think might make sense for that if you do seek to farm down?
Carl, I'll put that over to you.
Yeah, that's an interesting one. Well, we have been quite okay with accepting to have a high ownership stake in the developments. I know that the norm in the business is to have more partners than we have typically done so far. It doesn't mean that it's totally off the table to look at farming down. We truly believe we have an edge in the development of these assets. We think we have a good plan, we have a good way of going about it. We believe it is highly accretive for our shareholders to wait until the value is unlocked. Today, I think we could absolutely farm down, and we have suitors to that effect. We believe it's in our shareholders' interest to take it quite a few steps further and get more clarity on the development solution and the development, and that would give a much better price. It's that simple. Everything is for sale. It's just a question of price. We believe we have a good plan and we think it is in our interest to progress on that plan.
Good. We have a Kudu question from the web. It says, "What is the mix of liquids versus gas at Kudu? And what approximately gas price do you need to justify the development, assuming $55 oil?
We have very little liquids. It's quite dry gas. There's no issue of liquids. We would obviously have to dry the gas to achieve pipeline quality. The amount of liquids is very low. That's number one. The work we are doing, or we are going to start, let's say, with a big effort or a bigger effort than we have had while we have negotiating the farm-in, is exactly to make a good development plan that can meet the, let's say, expected gas price or the gas price in that market. Obvious contenders or competition is LNG import. We know that gas price for long-term LNG import. That's our target. It's a bit early to say where we are because that's exactly the work we're doing. Of course, based on previous concept and design, we are competitive. That's our overall judgment, and otherwise, we would not have pursued this project. We are confident that we will have a competitive solution.
Okay. Then there's the final question from the web. Did you consider finalizing an RBL as an alternative to raising equity earlier this year? If so, why did you choose the equity way?
Maybe you take that, Knut.
Yeah. We see the RBL as a more complementary type of financing. It's a revolving credit facility. It gives us a good, let's say, access to liquidity at a fairly competitive price. As I mentioned earlier, we also believe that we do have a very strong balance sheet, and it should be largely equity finance. We have a lot of, let's say, accretive projects to invest in, like the Hibiscus, Ruche and Maromba, and we also believe it's good to have some extra firepower there in today's market.
I just want to add on that historically, I think it's quite clear that the oil industry has always come into trouble if it's been over-leveraged or in the periods it's been over-leveraged. Under-leverage is less of a problem for the oil and gas industry. Yeah.
That concludes the questions on the web. I guess I'll leave it over to you, Carl, for some final remarks.
I guess the final remark is that we are very optimistic and hopeful that we have the worst of the pandemic behind us. We are certainly confident enough to restart operations. We feel we can execute without too much, let's say, problems and too getting into inefficiencies. We are optimistic. We do see that there is a lag of some COVID, of the second phase of COVID in Africa, which, of course, is a bit of unknown at this stage, but we believe we have proven that it can be mitigated sufficiently to not affect our operations. We are extremely optimistic. The Hibiscus extension is, of course, the great price at this juncture as we restart the operation. We are going to have some extremely exciting months ahead of us. We thank you for paying attention to the company and our presentation, and wish you all a very good weekend.