Good morning and good afternoon. Welcome to our first quarter update of BW Offshore. My name is Marco Beenen, CEO, and I'm taking this call together with our CFO, Ståle Andreassen. I'll start with a disclaimer and then move on to highlights. First of all, BW Opal is on its way to Australia, on track for first gas in the third quarter. We have signed an agreement to sell BW Pioneer for $125 million, and that comes together with a five-year operations and maintenance contract to support our client, Murphy, with operational continuity. We won a $36 million arbitration settlement, which was in connection to disputed payments with our client, Prio, formerly Petro Rio. That was during our operations of Polvo in Brazil. We continue our shareholder distribution program, and that marks the 21st consecutive quarterly dividend payment.
Moving on with an update on our operations, starting with BW Opal. As I said, BW Opal left the CTM yard fully commissioned, and that was on the 28th of May. It will take about two to three weeks to its field offshore Darwin in Australia, and then it follows a hookup to the submerged buoy with the mooring and riser systems already pre-installed. We left four weeks later than planned, and that was due to required repairs of welding seams on the low-pressure seawater lines after integrity issues were identified during inspections, which were part of the commissioning activities. We have spent this extra time in the yard wisely to also do other work, which we otherwise would have to be done in our offshore phase. Indeed, this was extra work and time, but the overall cost remained well within the updated budget that we gave last November.
Readiness for first gas is now planned for the third quarter, and after that, we will do final testing, ramp up of production, and complete the project with expected formal contract startup in the fourth quarter of this year. We have a strong focus on maintaining a strong safety record which benchmarks well with the IOGP standard. The most important metric is the HPI, high potential incidents, and that's trending down, which is good, but we had a recording this year, this quarter, in connection to a gas release on Catcher, and that was during the removal of a gas metering probe. Every HPI is followed with a level three investigation, and we extract the lessons learned from that, and that delivers our continuous improvement program, and this is a very powerful program. The fleet delivered excellent commercial uptime of 100% this quarter, and that underwrites the results as well.
As mentioned in the highlights, we have reached an agreement with our client, Murphy Oil, to sell the asset to them, and this is attractive for us because it captures the remaining value of an existing asset upfront, and it also provides Murphy with a more flexible investing and operating solution. Obviously, this strengthens our financial position, and that supports our growth strategy, and the five-year O&M agreement ensures continuity for our U.S. team and also for our client. The O&M contract will provide a modest annual contribution at current production levels, but there are further upsides related to future production levels. Murphy has communicated before that it has plans to potentially drill another development well in the Chinook field in 2026. That brings me to the backlog and fleet contract update. The fleet will deliver strong cash flows from a solid revenue backlog.
It stands now at $5.4 billion on firm contracts, and the upcoming 15-year firm contract of BW Opal is taking the majority of this. Furthermore, worth mentioning is the record production from BW Adolo this quarter, and it has stabilized around the nameplate capacity since November last year. The handover of the operations of this asset to BW Energy has been completed in May, while we keep the ownership and therefore also the charter rates. As part of the updated contract structure, there is a $100 million put and call option on the vessel in 2028. Catcher, she continues to deliver stable operations with 100% commercial uptime, and based on the production decline rates and oil price expectations, we think that she will remain on contract to at least end of 2028. With that, I hand over to Ståle for the financial update.
Thank you, Marco, and good morning, everyone. As Marco showed you on the first slide, we had a very good financial performance in the first quarter, and we were able to deliver an EBITDA of $91 million. This number includes an additional $21 million being booked related to the arbitration settlement with Prio. Prior to the settlement, we have taken a conservative approach and only booked $11 million. I can say that this has been a hugely successful outcome, which has resulted in additional income being recognized. It's also worth mentioning that all the prepayments related to the lease on Catcher have now been fully amortized, which on a quarter-by-quarter basis means that the EBITDA will be $15 million lower from Q1 and onwards. However, this has no impact on the cash flow, which continues as before.
Also included in the results is the closing out of various variation order activities related to BW Pioneer, which has added some additional income in the quarter. All in all, very strong financial performance. When you move to the 2025 EBITDA outlook, we have left the guidance unchanged, using a range of $220-$250 million. Although we have been able to book in more from the successful arbitration settlement, this has been largely offset by an expectation that a one-month-later sail away from the yard for BW Opal would just result in a one-month-later start of the contract as of now. Consequently, in the range of $20 million of the EBITDA contribution will just be shifted out into 2026 and beyond. Just a time shift on the EBITDA, but consequently, it means that our guidance for the years remained unchanged.
It's worth mentioning that the new O&M contract for Pioneer, as Marco alluded to, is generating a modest EBITDA contribution. Financially, that means an expectation of somewhere in the range of $4-$6 million per year, unless the client is able to increase production and we can earn more under the incentive scheme. As such, it has a limited impact on the EBITDA outlook. On the income statement, I'll direct you to depreciation, which you see is now slightly reduced to $32.4 million, which is due to the reduced depreciation in Q1 for Catcher, as depreciation is reducing in line with prepayments being fully amortized. Also here, it's worth noting that as BW Pioneer is now sold, there will be no further depreciations on that unit, and it's expected that depreciation will drop further for the next couple of quarters until the start of BW Opal in Q4.
That'd be the contract start, to be exact. The sale of BW Pioneer resulted in a gain of $14.8 million being booked in Q1. This quarter, we ended up with a net interest income of $1.1 million, largely driven by $4 million of interest income being booked as part of the arbitration settlement with Prio. We were required to split this as part of the settlement is booked under EBITDA, and what is considered an interest element under this settlement due to the late payment is now booked as interest income. Gain on financial instruments was $6.5 million, and it's related to usual mark-to-market fluctuations as we hedged all our interest rate and currency exposure on our debt, but no impact on cash flow.
If you move down towards tax expense, which is one of the larger elements of this quarter, we had to book a tax expense of $17.3 million, which is largely related to the sale of Pioneer. A big part of this number is related to the profit tax from the sale itself, and remaining is related to tax on profit from the fleet in the quarter. All in all, very pleased with the net profit for the period of $62.2 million, translating to an earnings per share of $0.34. Looking at the cash flow, we can see that cash flow from operation was $57 million. When excluding $6 million received from Santos in the quarter, that gave us a steady and good cash flow from underlying operation of $51 million.
Investment cash flow continued to be focused on BW Opal with $66 million out of $70 million allocated to the project. With the sale of BW Pioneer in Q1, we received $100 million, as we have informed the market about earlier. Now, as we are beyond Q1, we received also the remaining $25 million in May, and we have now closed out everything related to the contract, and all payments have been made. We called $45 million net from the Browser JV to fund ongoing activity on BW Opal, and you can see that we reduced our net debt by $15 million, which is predominantly installments or amortization on the Catcher loan facility. What is maybe worth mentioning here is that under interest payments or interest in general, we received $19 million net to BW Offshore in quarter one.
We have done some work on our hedging as we have effectively been overhedged on debt for some time. We have reduced our swap portfolio by a nominal of $100 million. As our hedges were taken some years back when interest rates were lower, these positions have been significantly in the money, and this resulted in us being able to take out $19 million as part of closing those positions. When you take that into account and you add ongoing scheduled payments under the lease or preference share lease deal with ICBC Leasing, as well as dividends being paid in Q1, we increased our cash position to over $400 million by end of Q1.
As we're getting to the end of the project period for BW Opal, with the unit progressing towards the field, as mentioned, the majority of the funding sources are now also largely being utilized, as you can see on the slide. During Q1, we did draw the remaining on the project financing, which is now fully utilized. We had limited equity injection from partners, but there's also just a few more millions to go before that $240 million equity is fully committed. You can now see we're getting to the end of the contractual obligated payments from our client, Santos.
As Marco mentioned, we are well within the guidance on the completion cost for the project, but it still means that there is a gap of $100-$150 million for completion of the project, which will be funded by BW Offshore through the remaining of the year, as the other sources have been fully utilized. All in line with what we have communicated earlier. Our net consolidated cash position continues to improve, largely driven by the sale of BW Pioneer and stood at $184 million at the end of Q1. Equity ratio continued to trend more or less flat and stood at a comfortable 30.9% in the end of the quarter.
If you then wrap up from a financial point of view, at the end of the quarter, we had a very good liquidity situation with $542 million available, almost unchanged from year-end, I have to say. As we sold BW Pioneer in Q1, we received $100 million, but we also reduced our RCF with the same, so that had a limited impact on overall liquidity. As mentioned earlier, we decided to rebalance our hedge portfolio as we were overhedged. As you can see from this slide, we are still 100% hedged on all floating-rate debt with an all-in cost of 4.8% on the debt portfolio. We remain well-positioned financially. Our cash flow is good.
We have significant liquidity that allows us to comfortably meet liabilities, combined with flexibility to take creative strategic moves in the market, committing to project opportunities, while at the same time stay committed to our earlier communicated dividend program. With that, I'll hand it over to Marco for a market update.
Yes, thank you, Ståle. I'd like to say a few words on the market. I think the demand for FPSOs remains high, but there should be a recognition that there is a change in backdrop with increased geopolitical tension and lower oil prices. This drives uncertainty, and that could push out some of the FIDs again. However, most of the opportunities are major energy infrastructure projects, which are robust in light of short-term market fluctuations. We do not see any impact on the tendering of feed and pre-feed activities. We maintain our high level of engagement while remaining disciplined to our selection criteria. We are progressing five targets, which are a mix of smaller and faster redeployment projects, as well as larger new build projects that take a bit longer to develop.
With the strong balance sheet and financial position, as Ståle explained, and also a clear competitive offering, we are well-positioned in this market. For gas FPSO opportunities, we leverage the Browser project with BW Opal as one of the largest gas FPSOs in the world. We have proven harsh environment experience supported by our own hull design and disconnectable mooring solutions. That puts us in a strong position for the BADE Nord project for Equinor. We also apply our long experience to offer flexible solutions in project financing and structuring. To fast-track some of these redeployment opportunities, with several already identified, we acquired a high-quality existing FPSO, the FPSO Nangkula, which brings both schedule and cost differentiators, in particular for the whole mooring scope. We consider this as an accurate transaction with limited upfront payment and with an additional consideration contingent upon redeployment before June 2027.
In our view, there are very few, if any, units left in the market of this quality. This unit was newly built in Samsung in 2006 and has operated in Australia since till 2018. As we will focus mainly on the whole mooring systems to redeploy, we keep the layup cost to a minimum. A further update on floating wind and the activities of our subsidiary BW EDO. The picture on this slide shows the installation of the transition piece of the BW EDO designed 10 megawatt floater for the EOMET project, which is a three times 10 megawatt project, and this is led by CAIR in the south of France. BW EDO delivers the design and engineering. Once completed, that brings the total number of BW EDO floaters in the water to five, and that reinforces the leading position among technologies in this emerging global market.
Furthermore, a tangible EPCI pipeline with the Buchan Offshore Wind project in Scotland of 1 gigawatt and the AO6 250 megawatt project in France is progressing, and that represents about 70 floating foundations based on BW EDO's proprietary design. These concrete floaters will be produced at industrial fabrication lines, which are being developed in the U.K. and south of France, with production expected to start around 2030 after FID has been taken for these commercial-scale floating wind projects. Long term, BW EDO will focus on the technology and EPCI supply supported by selective co-development activities as a strategic enabler. As a larger shareholder, BW Offshore provides a EUR 6.7 million shareholder loan to finance the next 12 months of operation of the company. That brings me to summary and outlook.
Obviously, the Browser project with BW Opal is the key focus for this year, and we are now focusing on the startup in the third quarter of this year. In parallel, we're selectively progressing new FPSO projects, and we target still one FID this year and then subsequent another FID in the 12-24 months thereafter. We continue to support BW EDO as an early mover in the floating wind EPCI offering, but we also look broader in the potential of offering floating energy transition solutions. We continue to share value creation directly with our shareholders through our dividend programs. That brings us to the Q&A. Ståle and I are happy to take any questions you may have.
There seems to be no questions on the web. No.
If no questions are on the web, then we could take any questions that would come in right now. Otherwise, if there is no questions at the moment, then I think we can then conclude this call. I would thank everyone for their participation and happy to follow up with other questions later. Now I see, Ståle, there is a question coming in, correct?
Yeah, there it comes.
Okay.
Yeah, we can take that. I'll take it. The question is related to the FPSO that we just signed the agreement on. Some clarity around the Nganhurra, its condition, time, and cost of refurbishment, and which prospects are we targeting. You could assume, Marco, you could elaborate around the thinking around the unit.
Yeah. First of all, around the condition, this is considered by many, and we subscribe that as a high-quality asset in good condition, and in particular, the hull is in good condition. This unit has been inspected by several industrial parties, and we're quite happy that in the end, we were able to secure this asset. On time and cost of refurbishment, can't be really specific. It depends on the opportunity. Again, it will allow us to fast-track the hull for sure and the mooring systems and take that out of the critical path and take it out of the yard constraints and dry dock constraint issues in the market. On prospects also, I prefer to be not specific, but we do see prospects in Southeast Asia, Australia, and also West Africa.
There are quite a few opportunities there, and some of them we're already actively participating in.
Maybe, and you said it, but maybe just reiterate for everyone that predominantly this is an acquisition where we are looking for the benefit of using the hull and accommodation, and that the top side is probably less probable that will be used in a redeployment of this unit. It is really purchased as a baseline for a new project that would help us accelerate in terms of the deployment under a new contract.
Yeah, yeah, exactly. I mean, the top sides are really more field-specific where the hull is, particularly this hull, is very generically usable.
Okay. Next question coming in. Could you update on the status of Equinor BADE Nord and Repsol Mexico? So the two prospects you have referred to and spoken about, is it correct that you are the preferred contractor for Repsol, but still in a competitive situation for BADE Nord? I think just clarifying around sort of are we in a competitive situation on one or the other or on both of them?
Yeah. For Repsol, we are currently in a single-source process, and that's already the case for more than a year. In that sense, you can say we are the preferred contractor, but no final decision has been taken by Repsol. That's still, I think, between now and the coming, I would say, six months, that will be decided. On BADE Nord, indeed, we are still in a competitive process with two participants, and we are one of them.
Next question. This is actually overlapping, and you just responded to it. The first question here is there's two questions from the same person. The first one is, is there any target FID for the Block 29 project? It's the same as the Repsol project you just talked about where you said you're implying we would know within the next six months.
Yes, the target FID is hopefully before the end of the year. Yeah, but that's, of course, all in control of our client, Repsol, not in our hands.
Yeah. The next question is, will the Nganhurra FPSO be redeployed for this project? We can confirm that's not the intention for this unit. It is a target for other prospects that we are seeing. I think it's well known that it's the OSX 1, which is the kind of base case FPSO to be used for Block 29 and the Repsol project. Not sure if you want to add anything more.
Yeah. No, that's right. That's exactly correct.
Next question. For new projects, you said one FID in 2025 and another one in 12-36 months. To clarify, are you targeting to do two new projects? Is it fair to think one is redeployment and one is new build? To clarify, are we targeting two new projects and whether one of them would then be a redeployment and one would be a new build? If you can elaborate.
Yeah. Yeah. In the next 36 months, we're indeed targeting two new projects, and they will be a bit phased ideally. Also, when you look at how the prospects develop, that's the likely scenario. We target one, hopefully, in this year already. The five prospects we're targeting is a mix of redeployments and new builds. How it exactly works out, I would say the new builds take a bit longer to develop. The new build projects are larger developments, which takes a bit more time. That goes more to the later end of the 36 months. It could also be that we win two redeployment projects in that same time frame. That's a bit hard to say. If you chase five, I think it's a fair assumption that you win at least one and really target two.
Good. Next question is, could we give any more guidance on the dividend yield for 2025 and 2026? We cannot guide on the dividend yield because it's calculated as a percentage depending on where the share price is trading. What we can guide on is what we have said in terms of our dividend program. That is that we are paying out the dividend per quarter now based on the minimum dividend that we could pay throughout the year, which is equivalent to roughly $45 million annually. When we get to Q4, depending on what the results are, if our results allow it, we will aim to pay out to adjust the dividend and to target 50% of net profit as the dividend to be paid.
As of now, that's the covenants we have to stick to, and that's a program that we are following in terms of communication and distribution to shareholders. Let me get some other questions, but I think there are. Okay. Next one. This is related to the arbitration. Is the $21 million arbitration impact included in the revenues in the quarter or as a negative cost? I can call it's booked as part of revenues. So it's additional revenue. You will see $21 million of the revenues or $21 million increase on the revenues. That's how we have recorded the impact from the arbitration. Okay, a bit of a speculative question. Could you speculate about ExxonMobil long-tail gas fuel prospects? I mean, do we have an edge there?
Yeah, I can take that. I do not like to speculate in this kind of calls or in general, actually. What I can say is with BW Opal now coming on stream soon in Australia, and this is one of the largest gas FPSOs built in the world. Obviously, we are looking at all other gas projects there, and long-tail is one of them. Naturally, we are talking with all clients where we could bring that to the table.
Okay. Thank you. Next question. Can we elaborate a bit on the capacity of the organization to run two projects in parallel? If you get two deployment projects, will you then still target to get a new build? I guess two deployments, then you're, from two to three projects is the question being here. I think it's just to elaborate on how we see it in terms of capacity and how many projects we can run at the same time. I think that's for you, Marco.
Yeah. I mean, we will remain disciplined. Yes, it's a good market. At the same time, we see that FIDs always take longer, things move to the right. I'm not super worried that we run two projects in parallel and then have to accommodate a third one. As I said in this call, we're targeting five prospects where we really have an edge. The timelines of these five prospects are within 12-36 months. It's quite unlikely that they will come all at the same time. Also, winning three out of five is not so likely either. I'm not really busy with that problem. That would be a nice problem to have. At the same time, I don't think that's what we would do. We would not run three projects on top of each other.
Okay. Next question is related to Namibia as a market. Referring to that, there are several projects coming. The question is whether we would be targeting any of those.
We are looking at Namibia, and this is seen as an area with large developments. You do see the success is not all the same. Some projects are moving ahead, and they are already in a feed phase and moving towards an FID. Actually, there is one. We are not participating in that one. Others are still in the development phase. It depends on timelines. I think our focus is now to really win projects in the more near term. As Namibia develops, we will also see if there is an edge for us.
Next question. Congratulations on the excellent results. What would need to happen to covenants renegotiation to be able to increase shareholder remuneration? Are you working on this, and is this being discussed internally? What I can say is that we have covenant restrictions under our senior loan facilities as well as our bond in the market, which limits our distribution to 50% of net profit. We are looking at ways to amend the covenants. We do feel they put some restrictions on us in terms of when you look at the liquidity we have available and the cash flow our fleet is generating. Although we always have to look at what is the best potential way to create value for shareholders, I invest in new projects versus distributing the cash.
We also would like to see if there's room for more flexibility to distribute more in periods where there's less opportunities to efficiently utilize the cash flow to deploy towards new projects. The answer is we will need to renegotiate the covenants with both our senior banks, which are behind our senior loans, as well as bondholders as part of this. This is, yes, something we're working on internally. That is what I can see. Unless there's anything more coming in, the last question I had on my screen.
Yeah, it looks like we.
A little bit.
Yeah, it looks like we're through the list now. Glad we waited a little bit because there were many good questions. Thanks for that. Thanks everyone for participating in this call. I think that will be then now concluded, and I wish everyone a good day and a good start of the week. Thank you.