Welcome to BW Energy's Q1 Presentation for 2023. For the first part of this call, all participants are in a listen-only mode. Afterwards, there'll be a question and answer session. To ask a question, please press five star on your telephone keypad. This call is being recorded. I now turn the call over to the speakers. Please begin.
Thank you. Welcome to the first quarter presentation 2023 by BW Energy. This presentation will be hosted by Knut Sæthre, our CFO, Lin Espey, our COO, and myself, Carl Arnet. I will run through the first part of the presentation. Knut will take over. We're all three ready for Q&A. Without further ado, please note our disclaimer. I'll go on to the highlights of first quarter 23. The Hibiscus Ruche first oil was achieved in early April, slightly outside the first quarter. We are extremely pleased that we managed to do the project with excellent HSE statistics. I will mention this again. We have our new gas lift compressor on board the BW Adolo. It's undergoing commissioning. We expect to start it up in May.
It may slide into June, that is the world of commissioning. At least we are now in the testing phase of this gas lift compressor. The RBL, we have now a committed accordion, the RBL is then at $300 million total. The first quarter gave an EBITDA of 18.5, with a net loss of $5 million. We had one lift in the quarter to BW Energy of 750,000 barrels, and we achieved a price of $77 per barrel. Our cash position was at $166 million, and we agreed to defer the takeover and the payment of the FPSO Polvo, and this will be covered further, in further detail later in the presentation.
Our zero harm to people and environment is, of course, extremely key to our business. We want to minimize the impact of environment on our environment of our operation. We want to work for local society, and we of course strive to have the best principles of governance. We are pleased that the first quarter was without any recordable lost time incidents, one of the key measures of this policy. And we also had no environmental incidents year to date in 2023. On to Dussafu. The Dussafu production was in the first quarter 660,000 barrels, equal to about 7,300 barrels per day.
The production was, of course, greatly impacted by, first, of all the development activities of tying in Adolo, MaBoMo to Adolo, and also a planned maintenance of the FPSO and annual maintenance campaign. This affected the OpEx per barrel, which was, of course, high, much higher due to the lower production, and that was $58 per barrel. We had one lifting with a realized price of $77. We expect to start up the gas lift compressor, and this compressor is to support the production from the Tortue wells, the six wells we have in the Tortue reservoir. So far we have not been able to produce all the wells simultaneously due to the lack of gas lift and this has unfortunately taken much longer to realize due to COVID-related, supply chain issues.
We are now finally at the stage where we have the compressor on board, it's hooked up, and we are now testing the compressor, undergoing so-called commissioning. As soon as that commissioning is completed, we will be able to start production or get increased production from all the Tortue wells. This is of course a long-awaited situation. Next on Dussafu is of course the first oil from Hibiscus Ruche that we achieved in early April in line with our plans. We are very pleased with the well performance, which means we have a well-functioning reservoir and a very well-functioning well in the first number 3H well that we have drilled. This is of course the most important because if you have a reservoir problem, that's serious.
Other problems can always be rectified, but a reservoir problem is a bit more serious. We are pleased that the reservoir is very strongly performing, which bodes well for the Hibiscus Ruche continued development, of course. We had a very strong HSE performance in the project from day one until first oil, we had 0 LTIs, and this includes yard work, this includes the installation work, everything. We are extremely pleased with that, and we honor everybody that has been involved in that in the company because this is really superior performance. The drilling and completion work is now underway with the second well, the DHIBM-4H.
We are currently in, let's say, drilling and completion phase of that well, so we expect to have that delivered to operations fairly soon, June-ish, I would say, early June-ish. Campaign, we are in the campaign, we are targeting 4 Hibiscus Gamba wells and 2 Ruche Gamba wells. These are the wells that have been given targets. We have a further two options, so we have four firm and four options. We have decided to take two of the options. We have additional two options, and we are in the process of evaluating targets for these wells, these optional wells as well. The six initial wells that are planned today, is expected to add about 30,000 barrels per day of production when they're all completed and online.
The production forecast on Dussafu is 8-10 million barrels for the full year 2023 when all is said and done, and we expect a OpEx per barrel of $20-$25. The current production is approximately 16,500 barrels per day, we're very pleased with that production. We expect the next lifting in May to be around 900,000 barrels. You can see in the caption on the right-hand side the production profile that we are expecting for 2023 and then onwards from 2023. On to Maromba. We are still working hard on the final investment decision, which is due as soon as we have completed the project financing activities.
The current situation is that project financing in the E&P space is getting increasingly difficult, and we are still working hard to put together something that will work for us and the financiers. We are seeing some light, we hope, in the end of the tunnel, so we're working hard towards this goal. The difficulty of putting together the project financing has given us some time, and we have dedicated that time to reduce cost. Of course, in the current high inflationary environment, this is very relevant. We are stepping through all our project development plans and see where we can optimize and shave costs of the, let's say, current development plan.
We are having some success in that, and we will of course cover that in more detail later on. The deferred startup of the project, we have negotiated with BW Offshore and also deferred the takeover of the FPSO and the payments that we agreed, so we now have an additional or initial payment in the fourth quarter 2023, with the remaining payment in the second quarter 2024. The expected annual production, just a reminder on Maromba, is 30,000-40,000 barrels per day when the first phase of the project is developed and on stream. On to Kudu. We completed the 3D seismic survey in May. We have shot 5,000 kilometers of very high quality 3D seismic over the whole license.
This dataset is going to go through several stages of development. We will have an initial report after 60 days, where we, let's say, get a more raw data interpretation, which will be then refined in a second report that will be completed in the third quarter 2023. We will have the final report about 12 months after the shooting finished, which will then be May 2024. You can see from the caption on the right side that there's been a lot of seismic activity in the Kudu area, Kudu neighboring blocks. Of course, this is spurred or triggered by the successful exploration activities of TotalEnergies and Shell.
You can see there are other large operators on the world scene that are busy in the area with Chevron and Woodside also shooting seismic. A very active area now in the Orange Basin in Namibia. Very interesting. More on Kudu will follow shortly. Finally, to sum up on my part of this presentation, I'll say a few words on the Golfinho status. The Golfinho transaction has now been approved by ANP, and this is one of the major approvals for realizing the takeover. Just to remind everybody, we are talking about takeover of 100% working interest in Golfinho and Camarupim clusters and 65% in Brigadeiro, as well as the FPSO Cidade de Vitória from Saipem.
The closing is subject to certain CPs and waiving of these CPs, and one of these is, of course, the restart of the field. The field has been shut in since June last year, and One of the CPs is that Petrobras will now, after having sorted all the technical conditions that ANP had, will restart the field before handing over to us. The expected production is approximately 9,000 barrels per day, and we have 38 million barrels of proven recoverable resource and as well a significant gas recoverable gas resource. As well as a lot of potential for future development. We expect now this transaction to go into the final stage where we take over.
The exact date is yet to be determined. We are prepared. We have done all the preparations. Everything is ready for our takeover. We are now waiting for production restart. That was my part. I will then leave the word to Knut that will take you through financials and then summing up.
Thank you, Carl, and welcome everyone to my part of the presentation, a few words to the financials. In the first quarter, we had revenues of $75.4 million. That was mainly due to the lifting that we had in March, the 750,000 barrel lifting. Just as a reminder, we achieved the average dated Brent, and then there is also a differential. The differential was negative, $1.50 for the March lifting, mainly due to still higher tanker rates that we see in the market. We also had a small gain on our derivatives, and then we had much higher operating expenses. That is due to our overlift position.
Technically, that adjustment in inventory goes into OpEx, the main reason for the increased OpEx in the quarter, bringing the EBITDA to $18.5. In addition to the OpEx, we also had the DMO delivery and somewhat also higher corporate costs. That was also mainly due to the preparations for taking over Golfinho. Depreciations are in line. The depreciations on the right of use assets a little bit lower due to the lower production, bringing the operating profit to $3.5 million. On the financial income and expenses, that is something new that has happened in the last couple of quarter that we finally see some interest rates coming back to the picture.
We actually get some interest income for our deposits. With the RBL that we put in place last year, we obviously also have interest expense. It's not all of that flowing through the income statement. Some of that is also capitalized as part of the Hibiscus Ruche project. We have the lease liabilities due to the FPSO lease, more and more technical cost. That gives us total net financial expense of $3.3 and a profit before tax of $0.3 for the quarter. Income tax expenses have been lower in the quarter due to the lower production, resulting in a net loss for the period of $5 million. Over to the balance sheet.
Just to take you through some of the main changes. The E&P tangible assets is increasing every quarter because of the investments, quite significant investments, as you know, in the Hibiscus Ruche development. Intangible assets also increasing somewhat, mainly due to the activities we have on the seismic side in the Kudu field and also some costs related to Maromba and the FPSO Polvo. On the liability side, I can draw your attention to the interest-bearing debt. We had $200 million drawn under the RBL. Initially, amount of $200 million was fully drawn at the end of the quarter.
We have also, as previously announced, added another $100 million. The accordion was committed. Now we have increased the number of banks from five to eight, and the new total size of the facility is then $300 million. There has also been an increase in the asset retirement obligations. We have changed the policy in the use of discount rate. We have now moved over to the 10-year risk-free rate, as most companies has done as well. It's quite common in the industry that is leading to a lower discount rate and hence a slightly higher asset retirement obligations. That is for our Dussafu asset.
Still a very good and healthy strong balance sheet, close to 50% equity ratio. Over to the cash flow statement overview. We started the quarter with $211 million in cash. Had operating cash flow of $13.4 million. As mentioned, net investments of $73.5 million, quite high due to the Dussafu activities. A lot of CapEx going in there. Also, as mentioned, the Kudu seismic, and a little bit also on for the Maromba asset. Net financing activities that was a positive, mainly because the final drawdown to get the RBL then up to the $200 million drawdown as just mentioned.
Bringing the cash situation to $166 million at the end of the quarter, increasing our liquidity reserve with another $100 million, as just mentioned. That brings us to the summary. Just to draw your attention to the graph on the right-hand side. We expect a significant increase in production ahead of us. The management estimate now for the end of the quarter is just to be clear, that's a production level towards the end of the quarter, not an average for the quarter. With the new gas lift capacity, we will see an increase from the Tortue wells, bringing all six wells up to production. Hibiscus 3H is producing very well, as Carl mentioned.
We also expect to see initial production then from the next well, which is the number four, bringing production up from Hibiscus Ruche as well. With the assumption of closing Golfinho, that will add on additional barrels, as you can see here from, from the graph. On the, let's say, production exploration side, optimizing Dussafu, 3D seismic is the main activities on production exploration side. On the development is to finalize Maromba plan and financing and progress the Kudu gas power project. On the corporate side, good cash position. All hands are on deck in our Brazil team and also on the corporate side to get the Golfinho acquisition closed.
The situation on balance sheet and liquidity is also strong to pursue all these activities to ensure also operational cash flow to fund new projects and future shareholder returns. That finalizes our presentation of today, and we now move on over to the question and answer session. I give the word back to you operator to see whether we have some questions online, and I see that we also have some questions that have come in on the web. Over to you, operator.
Thank you. If you do wish to ask a question, please press five star on your telephone keypad. To withdraw your question, you may do so by pressing five star again. There will be a brief pause while questions are being registered. The first question will be from the line of Teodor Sveen-Nilsen from SpareBank 1 Markets. Please go ahead. Your line will be unmuted.
Thank you. Thanks for the presentation. Three questions for me. First on Slide 8, you show your gross production profile from up until 2028. When I just compare that to what you showed in the fourth quarter presentation, it looks like the expectations for 2024 production is reduced by around 10%. Just want to clarify if that is correct, and if so, what's the underlying driver for that? Second question, that is on Golfinho positive to see that ANP now approved the deal, but as far as I understand, you expect that deal to close then within a very two weeks. Is that correct? The final question is on Maromba. I know we've been discussing this before, but could you share any thoughts around your future owner share of Maromba to be useful. Thanks.
Thank you, Teodor. Good questions as always. First question was on the graph. There should not be any changes to our production outlook. I'm sorry if that is unclear in the presentation, but we still expect our production to be around FPSO capacity for 2024, that is. It comes down again until we get the phase II of the Hibiscus Ruche project online, as you all can also see in the graph. No, there should not be any change to the production outlook. The question on Golfinho about the closing.
There has been a lot of regulatory approvals, and we passed most of them, antitrust, and there has been a regulatory body called IBAMA have had to give approval because of the pipeline that we're buying that goes into the national grid. We have been approved as operators. ANP has approved the transaction as such. It's still pending some certificates that they have to send some evidence that they have handed all information over to ourselves. Should be more like a formality. The main, let's say, issue now is to get the field restarted, and that's what we are waiting on. This is a little bit out of our control. That's more between ANP, Petrobras and Saipem.
They also need, the Navy to approve this restart of the field. It looks like this is going to slide into June. That's the latest we know on that one. I don't know, Lin, if you have anything to add from your side.
No, that's exactly right. It looks like we may have Carl may have experienced a little bit of technical difficulty and dropped out. You and I will carry on in the meantime and see if he's able to rejoin. No, you're exactly right. Production forecast long term, there should be no material change. You know, maybe slight adjustments here in the short term, but long term, no material change there either.
Good. The last question was around Maromba, and whether we could give any updates. I mean, I think we talked a lot about Maromba in the previous quarter, and we're still, as we said in the presentation, we're still reviewing, our CapEx and OpEx estimates and looking at maybe a slight change of concept. I don't know if you have anything to add there, Lin.
Yes. We're going through a review of the concept. As Carl mentioned, you know, the challenges with cost increases as well as, you know, difficulties in the E&P financing sector as well. We're taking the opportunity to review the concept, and we're undergoing review. I think we anticipate about Q3, we'll probably have an update on the direction that we wanna take Maromba.
Good. Did that answer your question.
Just follow up.
Yeah.
Yeah, absolutely. Thanks for the clarification on production. I just wonder, is it the graph in the fourth quarter presentation that is correct or the graph in the first quarter presentation? In the fourth quarter, it looks like 2024 production will be 42,000-43,000 barrels per day, while in the first quarter it looks like it will be 38,000-39,000 barrels per day. Which of those should we rely the most on?
Well, what we have said, several times is that FPSO capacity is around 40,000. That's the nameplate capacity of the FPSO and that's where it should be the graph as well. We will have—
Okay. Thank you.
Produced the full capacity. That's the plan for next year.
Understood. Understood. Thank you, sir.
Good.
Thank you, Teodor. Again, there will be a brief pause while new questions are being registered.
Okay. Should we go over to the questions from the web? If that is okay,
Yeah, that's fine. There are no more questions in this call, so I'll just hand it for you for any written questions.
Okay. Thank you. We have a question from Chris Aristidou from Sefton Place, "Has Petrobras given any indication of when they are planning to restart for—" I guess that's Golfinho. "I assume there is a plan with a rough date given ANP approval." I think we mentioned that briefly in the previous question that we are waiting and yes, there is a plan and that plan always says it's more or less next week. We see that this could slide into June, but it should be very short term until we see the production restart. We have a question from Tom Erik in Pareto Securities. "What are the drilling plans at Dussafu beyond the current campaign?
Will you have a halt for a significant period of time to see how the wells perform or rapidly return to drilling to maintain the 40,000 barrels of oil per day?" Maybe you can take that, Lin.
Yeah, I can take that. As Carl mentioned, we've, we are currently drilling for sure six development wells in this drilling campaign. We've already completed one. The next well should be completed by next month. We have the option to add on two additional slots into this drilling campaign. We're evaluating whether or not we want to extend that to make this an 8-slot drilling campaign and discussing that internally with partners on that front. After that, it's anticipated we'll take a pause. We still have future development wells to be drilled in the Ruche Hibiscus for a total of 12 that we've got defined.
The duration of that pause will probably be dependent on reservoir performance and once we get up to plateau, monitoring that technically and then deciding when the optimal time is to come back in to drill additional development wells.
Good. Let me see if I can try to find any additional questions about Dussafu. Yeah, there is one from Ola Ekanger in SEB. "On Hibiscus Ruche phase I, should we still expect gross CapEx of $450 million as communicated previously?" Yes. I mean, we are in the middle of the drilling campaign, and we might see some increased cost. We had some issues in putting the cables down to the ESP, and we also saw some issues now on the second well that could increase CapEx, but it could also be savings that we could achieve later in the year. We don't have a new update as such.
You know, I think that's fair. I think it's fair to say that all the capital costs associated with the installation, the facility, that's the pipeline, those have all been completed. That's all done behind us, and as you said, the only remaining is drilling costs. Historically, we've had a good track record with drilling costs. These first two wells, we've had a few things that we've had to work through. The first one, as you said, the completion, some completion issues, but we were able to work through those. We had a casing issue on the second, but we're working through that as well. We'll work through that. Yeah.
There is another question here. Can see who it's from. Can you say when you expect to have the DHIBM-4H online producing? I think that would be in June.
Correct. That's right.
There is also a question to the compressor. We said that that also might slide into June. Can you elaborate a little bit more on what it takes to get it fully up and running?
Well, we've had to experience some difficulties, the construction, installation, logistical phase of it. The good news is it's offshore, and we've achieved mechanical completion. The team offshore is working through the final bits of commissioning and pressure testing and all that. We're in the final throes of getting that online, and it will be coming online. We may, you know, may have to work through a few little remaining issues through the commissioning, and then we anticipate it coming online.
Good. I think that was all questions that we had to the Dussafu status. We've also covered Golfinho. We are on to Maromba, from Ola Ekanger in SEB. Are you still expecting first oil from Maromba in 2026 and phase II in 2027, or is this previously communicated project limit postponed? It's hard to read what it says here, sorry.
I can take an answer to that, Knut.
Yeah.
I think what we need to let's say explain is that we are working to get the financing in place. From the point where we have the financing in place, we will use approximately two and a half years. That is the schedule. Until we can actually say, "Now all the financing is in place," we can't really push on and make meaningful progress. That's why we have decided to use this hiatus while we're waiting for the financing package to be completed, that we will use that to step through the project to see if we can work or find some efficiencies.
Good. There is also a question to potential farm downs in Maromba. In the past, we've said our door is open. I think we've also been clear on having our study finalized before we can enter into more specific discussions. I don't know if you would add something to that, Carl.
Well, I—a farm in, farm out is depending on what side of table you're sitting on, is a business deal. We are never adverse to discussing, but we are not going to be rushing around until we have a very clear project and we have a defined value. I think, it's quite obvious that people will be more interested in buying into something where they can see a clear path to value.
Good. There is another question to Golfinho from Chris in Sefton Place again. How long after the Petrobras restart do you plan to take over Golfinho?
That's a good one. We will be looking for some consistency in the production before we lift our final CPs.
Yeah. I think to add to that, we also need to see the IBAMA approval, which is the final one for us.
Yes.
On our side. Yeah.
Yeah.
Good. Then there's a question to also Golfinho. BWE will be the owner of the FPSO Cidade de Vitória , what is expected to be OpEx on Golfinho? I think we also mentioned this in the past. We have to get this closed before we can give further details on OpEx levels, OpEx per barrels. It depends, of course, on production as well. If that is okay, I prefer to delay those questions to a future webcast. Then the next one, the Brazil deal has to be closed, but when do you expect to commence the drilling campaign covering the two infill wells, one gas and one oil? Maybe you could say something there, Lin.
Yeah. Well, part of what we like about the Golfinho opportunity is there's we've identified a number of infill wells that we could drill that will enhance production, create value, and one of which is oil well, infilled oil well in one of the existing producing fields. We're very excited about that. That's a well that's been targeted up- dip. We're working that through. First step is we need to close the deal and then officially become the operator. We've got that well, and we've got another prospect that we like. It's a gas well. Again, both these are low risk, what we feel is low risk targets
Not only those two opportunities, we've got a whole host of other ideas that have been targeted, that's in a large part what helped, you know, attracted us to this opportunity.
To add to that, there is a follow-up question. Brazil is in urgent need of gas. When do you expect to start production, gas production on Camarupim? If so, will that be tied back to the FPSO Vitória?
Well, that, the Camarupim gas field is one of the ideas, the reserves that are sitting out there that we want to target. How best we develop that is still open, but one of the ideas is exactly what the gentleman stated, that we would tie it back to the Cidade de Vitória FPSO and then go into the existing gas pipelines to the shore.
Good. We have a question from Oddvar Bjørgan in Carnegie. Do you have an updated CapEx guidance for 2023? There is not a major change to the CapEx guidance. I think we guided on $250-ish in the previous quarter. There might be some increase in Dussafu, as mentioned. It's early days still because we're in the middle of the drilling campaign. Maromba should be as previously guided. We have, as also mentioned in the presentation, deferred some of the payments that we will add to the CapEx when paid. On Kudu it's mainly the seismic shoot plus some man-hours. It should be in the same range.
Of course, after closing of Golfinho, we have to come back to what plans we have both in terms of our operating philosophy, but also and OpEx per barrel, but also then on our plans for investments and timing of those investments. We have, I think I saw some Kudu question, yeah, from Alejandro regarding the 3D seismic data acquired in Namibia. Did it reach deeper layers underneath Kudu?
Well, I think I can take this. What I can say is we completed the seismic. It's a modern 3D seismic, and what we can say is the quality of the seismic seems to be very good. Does it, in terms of the depth, it certainly covers all the formations of interest and that are out there including the Kudu gas formation, as well as the shallower Campanian formations, which is what all the, our neighbors out there are making the discoveries on. It goes deep enough, well deep enough to cover all the zones of interest.
Good. there was another question on Kudu. To what extent are you in dialogue with, other years oil companies holding neighboring licenses?
I think it's probably premature to discuss that. We're certainly aware and of what our neighbors are doing, and I think they're aware of what we're doing. We've elected to shoot the seismic and get the results of it and do our own evaluation. Then from there we'll put forth our strategy and set our course.
Good. There is a question from Michael. No, that was on Kudu again. What is the expecting lifting schedule for 2023? Has there been a lifting after March? Yes or yes/no. We're just about to do a lifting now in late May, as mentioned in the presentation. Going forward with the increased production, we then hope to see monthly liftings going forward at least from July and forward. Is that right, Lin?
That's right. I mean, literally, I think the next lifting is in the next few days.
Okay. I think that concludes the questions we have on the web for today. I'll leave it over to you, Carl, for closing.
Well, I think, I will, as usual, thank everybody for their participation and interesting questions. We look forward to speak to you again in about three months' time. Thank you.