Welcome to the BW Energy Q1 2021 presentation. Throughout the call, all participants will be in listen-only mode, so there's no need to mute your own individual lines, and afterwards there will be a question- and- answer session. I'll now hand the floor to our speakers.
Welcome to BW Energy Q1 2021. This presentation will be hosted by our Chief Operating Officer, Lin Espey, our CFO, Knut Sæthre, and myself, Carl Arnet. I will take you through the operating highlights. Then Knut will, as usual, go through the financials. Then we will have a Q&A session at the end. Onwards to our second slide, our disclaimer. Please note our disclaimer. Quickly on to third slide. Highlights of the quarter. Our EBITDA was $33 million with one lifting completed. We restarted our drilling campaign. We are progressing well with our Hibiscus Ruche development. More details on those things will follow.
We completed one lifting of 650 kbbl . We realized a price of $67 per barrel. Average daily production was 13.6 kbopd gross. Unfortunately, I'm sure you, as followers have noticed, our Hibiscus Extension appraisal well did not contain hydrocarbons. Again, more will follow on that. We are progressing well with our preparations for the Hibiscus North exploration well, and we are more than one year into it, managing and closely monitoring the COVID-19 pandemic and its impact on operations. More will follow on that too.
On to slide 4 . Unfortunately, the company suffered its first lost time incident in March. This was associated with the reactivation work of Hibiscus Alpha. It is of course very regrettable, but it is the first incident for the company so far. We had no incidents, I am happy to report that, nor spills to the environment. That is good. We keep our record on that score. We have implemented certain hardening measures with respect to safety. This is associated with recent piracy cases in the Gulf of Guinea.
We do not have a heightened security risk status at Dussafu , but we have still selected or elected to implement certain measures to make sure that we stay safe offshore. The COVID-19 is still affecting our operations in a significant way, and it's a little bit different in the sense that with respect to our Hibiscus Alpha work, we actually see good capacity, and a good response from the supply chain to realize the project. We see that the capacity is there.
With respect to the FPSO, we do see that, yes, we are able to continue operations, but our ability to carry out modifications and additional work has been significantly affected. Of course, that's been going on for quite some time, and we do not see any imminent change to that situation. I will cover more of the effects of this later in the presentation.
Slide 5 . There's no significant changes to our production outlook, and we are, as you see, in a time where we will realize significant expansion in our production capacity going forward. On to slide 6 , Dussafu, and slide 7 . We had stable operations in the Q1 with a gross production of 1.22 MMbbl , equal to 13.6 kbopd . Our OPEX came in at around $23 per barrel, and that's including the $1 in additional COVID cost.
The COVID-19 pandemic situation continues to restrict the execution of work on the FPSO, and this is mainly related to the work that is in addition to the operations, i.e. modification work and other work that is required, maintenance work, et cetera. We are managing well to keep the operation going. We have a system of quarantining the crew before departure. It is costing us additional money, but it is operating well. The problem is for all the extra workforce, that is difficult to organize and difficult to get continuity in work. We will be drilling soon the DTM-7H after we have plugged and abandoned the Hibiscus extension well. We will then, after completing the DTM-7H, have the hookup and first production from DTM-6H and 7H.
The first oil from these wells is expected to come in the Q3 , Q4 of this year. Again, this is something that may be affected by the COVID situation, and I'll talk more about the consequences on a following slide. The full-year OpEx is expected to be in the $21-$24 per barrel bracket. On to slide 8 , the Dussafu production forecast. We have revised our estimate for 2021 from 5.2 MMbbl -5.8 MMbbl gross to 4.7 MMbbl -5.7 MMbbl .
I'd like you to notice that we're not talking about a lost production, we're talking about a deferred production or the potential of a deferred production. This is mainly related to the COVID-19 situation and the inability to get work executed outside of the daily operations. Of course, also any potential impact that we may have to our hookup campaign for the DTM-6H and DTM-7H. That is why we have an increase in the uncertainty of our estimate first and foremost, but also a potential that we may have to defer some production. We're not talking about losing production, but deferring production to later. Otherwise, you see the gross production profile in the upper left-hand caption, and the expected quarterly gross production in the left-hand caption, and the listing schedule in the right-hand caption.
On to slide 9 , the Hibiscus extension and the preliminary results of the drilling and the data gathering campaign. The well location was chosen to test both the potential Mopale prospect and the Hibiscus prospect, these were two different seismic interpretations of the same area. The well very closely matched the predictions, we had, let's say, all significant levels came in on prognosis. Unfortunately, the main reservoir sand, the Gamba sand, was water-bearing. This is a confirmation that this was not a Hibiscus extension, it was a separate Mopale reservoir that we found. The Mopale prospect that we had was not very highly rated initially either, it was the potential of the Hibiscus extension that gave us the interest in drilling this prospect, that did not come through.
This, of course, has no bearing whatsoever on the Hibiscus 2P and the discovery we made in November 2019. We still have 46.1 MMbbl that was established by the first Hibiscus exploration well. There will be no consequences for the sanctioned Hibiscus Ruche development project. The Hibiscus Ruche is progressing extremely well. We are currently projecting that we will have first oil ahead of target, and we are now targeting Q4 2022, next year. We have awarded a majority of all contracts, and we have received tenders for all the outstanding scope. The jackup conversion is proving to reduce investments and time to first oil in line with our expectations.
We are on track for $100 million CapEx reduction, and of course, this gives us a very attractive project economics for this phase of development, the Hibiscus Ruche, where we have a very low cash breakeven of $25 per barrel and a 15% IRR at sub-$30 per barrel. On to slide 11. The next exploration well we are planning as part of this drilling campaign is the Hibiscus North. Hibiscus North is a geological analog to the Ruche field that was previously discovered. The Gamba reservoir is the primary target with Dentale as a secondary. We again aim to test the interpretation of both the legacy seismic and the reprocessed seismic and gather more data and useful data points for also future exploration wells. The well cost is estimated to $18 million with each sidetrack being approximately $9 million each.
The potential reserves of Hibiscus North is 10 MMbbl- 14 MMbbl . On to slide 12, the exploration program. We are planning two exploration wells per year for the coming four years. We have now done significant work in the Hibiscus area with the Hibiscus discovery. We have the Mopale failure, the Hibiscus North that is coming. You see another Hibiscus prospect in this caption, Hibiscus South. The Hibiscus South is planned to be drilled major from the Hibiscus Alpha, as this will be totally possible from the location. That's the current plan for the Hibiscus Alpha prospect. The work is ongoing to high-grade the next eight targets for 2022 and onwards. As you can see from this caption, we have a large number of significant developments to explore.
On to slide 13, Maromba. The main development on Maromba since last quarter has been the completion of the environmental baseline study. We are progressing towards an environmental approval from the government. Otherwise, the work is mainly related to our development and optimizing the CapEx and OPEX and time to first oil. The prospect again remains, of course, extremely interesting with a very large upside in reserves. That concludes my part, and I will hand over to Knut to cover the financials.
Thank you, Carl, and good afternoon, everyone. I will give you some additional information to the financial figures. First of all, I will also guide you to our website, the investor section on the website where you find all this material, including the earnings tables in Excel that might be useful for some of you. I move on to the income statement, slide number 16. As you can see, we had a decrease in operating revenue. That is due to the one lifting that we did in the quarter compared to two liftings in Q4. Lifting was done in April, realizing an average price of $66.70. That is the average dated Brent in March plus a premium.
The company then sold 0.8 MMbbl in total, including the DMO, domestic market obligation deliveries, and also had an underlift position, giving these revenues of $54.1. On the operating expenses, the operating expenses were $20.9 million. The production cost in Dussafu excluding royalties was about $23 per barrel, including about a million dollars in extra costs related to COVID-19, as Carl mentioned. We have some additional costs mostly related to restricted traveling and quarantining, and so forth.
Just as a guidance as well for the Q2 , we had a scheduled maintenance shutdown in May, and we will also have some reduced production in the Q2 . That is, however, included in the guiding that was just given. Also in the Q2 , we will expense the Hibiscus extension well that was dry. That is not affecting these numbers. The drilling was performed in the Q2 , and we will then expense everything related to that well in the Q2 . EBITDA ended at $33.2 million.
As you can also see, depreciation were somewhat down. Depreciations are following the barrels sold, and we have fewer barrels sold in the quarter, giving us an operating profit of $17.4 million. We had the agreement that we entered into with NAMCOR in the last quarter, where we're going to increase our working interest to 95%. Everything related to Kudu is expensed, we are working on the updated business case and are looking for a capitalization of Kudu later this year. So far, everything that we have related to Kudu is expensed. On the net financial items, the main exceptional item in the quarter was an increase in the value of our mark-to-market on an interest rate swap that we had in place. Other financial items were $3.3 million.
Finally, we had then profit of $17.7 million, taxes of about $10 million. Those are increasing with the realized oil price, giving us a net profit in the quarter of $7.8 million. Over to the balance sheet on slide 17. Not much we have commented on some of the major items. The right of use assets are decreasing in value with depreciation. On the inventory side, you can see the effect of the underlift position. Inventory has increased from $8.4 to $14, and trade receivables has also increased a little bit with the lifting that we performed in March and where we have received the funds in April.
The main change in the balance sheet from the Q4 to the Q1 was the equity position. That has increased mainly because of the equity or the capital raise that we performed in January. All in all, this gives us a very solid balance sheet, and we have good liquidity and capital to deploy towards our accretive projects going forward.
On slide 18, a few words to the CapEx investments in assets. As you can see, there's still a low activity on Maromba before we come to FID. Also on Dussafu, we just restarted our activities with the drilling and we had about $13 million of CapEx in the quarter. That will then increase with increased activities going forward also when we start the conversion of Hibiscus Alpha. We will have somewhat higher CapEx in the Q2 , and then the main chunk will come into the Q3 and Q4 this year. We expect additional $140 million of CapEx this year from Q1.
Over to the cash flow situation. We started off at the start of January with $120.6. We did a capital raise in January, giving us net proceeds of $73.5 million. We also had a positive operating cash flow of $11.9 million, the payments of lease liabilities and the net investments, as I mentioned, giving us a final cash position at the end of the quarter of $184.4 million. That concludes the financial part of this presentation, I move on to the summary, to slide 21, with the key value catalysts. First of all, with exploration. The next target as mentioned in this presentation for exploration is the Hibiscus North, which is a total separate structure. We have, again, high hopes for success on the results there.
This is totally separate from the Hibiscus extension. We believe that the data we have from the whole Dussafu block now should give us good targets. We also have planned up to eight additional exploration wells from 2022 to 2026. On the Tortue Phase 2, the addition of the 6H and 7H wells will give us about 8 kbbl of additional production later this year. We have the Hibiscus Ruche development with an improved target now, where first oil is targeted for the Q4 in 2022, where then total production from the Dussafu will get up to the FPSO name plate capacity of 40 kbopd . Maromba, as just Carl went through, the target FID there is for the Q1 in 2022, with first oil expected in 2024.
On the dividend side, the annual general meeting just approved the policy where the intention is to pay dividends once we are done with our main investment activities for Dussafu and Maromba, where we then see significant operational cash flows coming out of those operations giving us cash flows to fund both projects and dividends. The dividend payout ratio stated is up to 50% of net profits. That concludes our presentation today, and then I leave it over for questions. I give the word back to you, operator.
Thank you. If you wish to ask a question, please dial 01 on your telephone keypads now to enter the queue. Once your name has been announced, you can ask your question. If you find it's answered before it's your turn to speak, you can dial 02 to cancel. We currently have one question in the queue, and that's from the line of Teodor Sveen-Nilsen of SpareBank 1 Markets. Please go ahead, your line is open.
Thank you, and good afternoon, guys. Two questions from me, if I may. First, on slide 5 , you show your long-term production ambition. I just noticed that it looks like in 2025 that the graph you showed in the Q1 presentation indicates 4 kbopd-5 kbopd higher production compared to what you showed last time. I just wonder, what's the difference? It looks like it's Maromba Phase 1. What's the changes there? Second question is on Dussafu. I just wonder after the slightly disappointing Hibiscus extension well, have your risk assessment regarding the north and south prospect changed anything? Thank you.
I can maybe take that. This is Lin Espey. In regards to the Hibiscus North prospect, it is a complete independent structure than the Hibiscus extension. It's more analogous to the ridgeline, the trend of Ruche. The results of the Hibiscus extension have not affected the risk profile of Hibiscus North. We're still very excited about it, and it's due to be drilled perhaps in about 60 days once we finish completing the DTM-7H, which is our last Tortue 2 development well.
The first question was about peak plateau on the slide. We'll have to go back and look at it, but we haven't discounted any of our reserves of any of our projects, Maromba, Ruche, Hibiscus, and all that. If there is a little fluctuation, perhaps on peak, it might be a little bit of phasing and timing, but they all line up. From time to time, depending on when we're going to First oil comes on and all that, peaks can be adjusted a little bit up and down, but no change to reserves on any of our assets.
Just to add to that, Teodor, we've lowered our guidance somewhat for Dussafu in 2021 and 2022, We recovered that in 2023 and 2024. There is no loss in production. It's more a deferred production. When it comes to Maromba, the rest of our team has been working on the model over the last year, and it looks like the three first wells from Phase 1 in Maromba could give a somewhat better result than previously communicated. I guess that's answering your question.
Yes, absolutely. Thank you. That's all from me.
Thank you. Once again, if there are any further questions on the phones, please dial 01 on your telephone keypads now. While we're waiting for any questions to come through on the phones, I believe we have some questions on the webcast, I'll hand back to our speakers to address that.
Yes. We have some questions on the web. You might have answered a little bit of this already, Lin. Yeah. The question is, "Can you please elaborate around the drilling of the Hibiscus extension and the seismic used? Are you more or less optimistic about the next well based on the disappointing results?
Yeah. No. Drilling these prospects, there's uncertainty involved in all that. We've had an excellent track record to date, 5- for- 5 for success, and then we've had this disappointing result. All in, we're 5- for- 6, which is still an outstanding track record. I think industry track record, if you will. 1-in- 3 success, that's very good, and we're way above that now. We're still very enthused about the prospects, and we've got a lot of prospects still to drill. In the oil and gas business, there will be setbacks. You will drill dry holes.
I don't think that diminishes our enthusiasm at all for Hibiscus North. As I said earlier, Hibiscus North is a complete independent prospect structure. Success or failure of Hibiscus does not affect it. Hibiscus North, the trend line is more akin to Ruche. We're very excited about it.
As a follow-up to that, another question is, what prospect would you target after the Hibiscus North, and what is the prospect like?
Well, good question. We have a number of those candidates vying for that. Hibiscus North will be the end of this drilling campaign, and then our next drilling campaign will be associated with next year, associated with the development of the Hibiscus development. We are targeting that time, so next year, to focus in on drilling an exploration well or two. There's other potential in that greater Ruche area. There's the Walt Whitman area, there's the Prospect B area, as well as others. We haven't narrowed it down, so at this time we're not ready to guide on which particular prospect, but we've got a number that we're finishing our evaluation of.
Good. We have several questions here related to CapEx. Maybe I can combine some of them. The question is, what is the CapEx going forward for the company on the two main projects, mainly Hibiscus Ruche and Maromba? First of all, for Hibiscus Ruche, as I mentioned earlier in the presentation, the guiding was at $140 million from Q1 going forward this year. The main chunk of that is from Hibiscus Ruche. A little bit on Maromba, and as we've said previously, Maromba is running at $10 million-$12 million CapEx per annum prior to FID, where FID is planned for early 2022.
For the total Hibiscus Ruche, the remaining for 2022 and 2023 as well is about $450 million gross. That includes the remaining phase of Tortue Phase 2, and also the Hibiscus/Ruche Phase 1. Our share of that, the 73.5%, is about $330 million.
Maromba is still a little bit early days. We are still in the phase where we're firming up the CapEx. What we have as an indication is that we're going to spend $700 million over the three phases, which will then start in 2023, and end up in 2026. That's the CapEx, and a related question to that, what kind of additional capital do you need to fund this development? The answer there is that we're very well funded for Hibiscus Ruche at the current oil price. We have a very good operating cash flow. We need some additional funding to get going with Maromba.
As we previously have communicated, we are working on an RBL facility. We put that on pause after we put all the investments on hold a year ago, and now we have resumed those discussions. That's one way forward. We're also looking at a sale and leaseback opportunity that we might get for the Hibiscus Alpha conversion project, so the construction and operating financing. I think that was it on the CapEx side. We have some other questions, a lot of detailed questions here.
First of all, it's related to revenues, the net lifting, the 650 kbbl figure, whether that is BWE's share or also partners. That is also partners. We recorded about 800 kbbl . 550 of that was our net lifting. We also have the DMO sales, as I mentioned in the presentation, and the state's profit oil, which gives the total of 800 kbbl. The answer is 550 of the lifting to BWE. There is a question to Maromba. Are you still discussing revised fiscal terms for Maromba with the Brazilian government, or is it now settled?
No, that is still ongoing discussions that we have, that we will continue until we get to FID. Just as a reminder, that was on a reduction on the royalty rate from 10% to 5%, if we can get to a marginal field definition of the Maromba field. We have a question, I guess that's a more philosophical question. Maybe you can take that, Carl. How does the company view profitability with the Maromba development when you look at the recent guiding from the International Energy Agency, where there seems to be an opinion that oil is not going to be such a huge energy source after 2050?
Well, I think we are of course aware of the, let's say, political currents and the political initiatives. BW Energy is specifically geared up with a business model that is to capture opportunities where there is a possibility to quickly get from investment start to monetization and cash back. That is also the plan on Maromba. From the time we start our investment cycle until we have our cash back will be a very short time. My expectation is that we will be there within a cycle of maximum six years. Of course, the reserves of Maromba could probably, or will probably be there for quite a lot longer.
We expect 20-year field life with the current development or current reserves, and then there are additional reserves. If the IEA estimates are panning out, then obviously the additional reserves may not be harvested. We believe still that the initial reserves and what the current development plan is geared up to capture will be very successful.
Good. We have a Kudu question. Maybe you could continue on that one, Carl. It says, can you talk about what you think the key elements are to making Kudu viable, and what progress are you making on these?
Kudu, yes. As we have said all along, Kudu is definitely a different play than oil developments. Kudu is gas. Kudu is sub-Sahara Africa, and we believe Kudu can be a very interesting component in the electricity play in the sub-Sahara region. First and foremost, of course, for Namibia itself, that is currently importing all power from South Africa. As we know, the South African power system is in need of renewal, and it needs to be taken away from coal.
We think there will be a drive for, of course, renewables, but also there will need to be some gas in addition to that to ensure the stability of the grid. We believe Kudu fits very well into that, and that's our game plan. It's a very long play, but we believe the fundamental market is there for the Kudu gas. That's our prime motivation. We are in the process of taking over the field 95%, and as soon as we have concluded that transaction, we will immediately start our efforts to define the development plan and the business case. For those that follow South Africa and Namibia, there's a number of initiatives to build reliable power in the region to replace the existing power sources that is coal-fired. That's the plan.
Good. We have a question here. Will the company in the near future evaluate buying back own shares? As a principle, we look at buybacks and dividends more or less in the same way, and we have stated clearly that we have a substantial CapEx program going forward, and our intention is then to pay dividends or it could also be buybacks, of course. The intention is then to wait until just a few years is operational which we then expect in 2024. We have significant operational cash flow to fund both new growth and dividends or buyback. I think that concludes the questions that I can see here on the web. Maybe over to you, Carl, for the final remark.
I think we have covered a lot, so I believe there is nothing much more to say other than thank you for your participation and interest in the company. We, of course, look forward to encounters again in the near future. Thank you.