Okay, welcome. Good morning, everyone, and thanks for joining us here in Hotel Continental. We will present our second quarter results to you, but we will also give you a high-level strategy update, and that's the result of a review we took over the summer. We took stock, basically, of what we delivered, of our strategy the last five years. We also took a look at the focus forward and the refinement of that strategy for the next five years. We have taken a look at the markets, our positioning in that market, competitive strengths, and also we revised our project execution model with the right risk-reward for the size of projects we see in the future for the company. After that, we will be happy to take questions.
For those of you joining online, you can participate in that through the Q&A function in the webcast, and of course, very welcome as well to join this event. My name is Marco Beenen, CEO. I'm here with Ståle Andreassen, CFO, and Anders Platou, Chief Strategy Officer. We will present, but we also have representation of the company from our new ventures group headed by Fredrik Savio sitting there, and also Jon Harald Schilde, business development, and they also will be happy to engage in any questions after the session. With that, please take note of our disclaimer before I continue with the highlights. I'm pleased to report that BW Opal now is hooked up on the Barossa field, and we're very close to starting up now and flowing the first gas through the facility.
We delivered a strong financial performance in this quarter, but also in the first quarter, and that means that we can raise our 2025 EBITDA guidance to a range of $240- $260 million. Also, our second quarter cash dividend will be maintained and consistent with what we did last year and in full compliance with our covenants. Ståle will come back to the last two points. I will continue with an operational update. I must say it has been a busy quarter and busy summer for us, not the least with our flagship BW Opal now leaving Singapore, heading to Australia. She left there end May and then arrived in the field in June, and then we started all the preparations for the startup. We also handed over the operation and maintenance of BW Adolo FPSO to BW Energy.
We are progressing a couple of pre-FEED activities for several new prospects as well over this summer. I start with BW Opal as mentioned in the highlights already. She is now very close to starting up, and that will be followed by first gas. That also means that we will remain within the guidance that we've given previously, or well within that guidance, actually. At readiness for startup, which we call RFSU, it means that a 60% day rate will kick in, and that will then increase subsequently over various other milestones to the full rate of 100% at practical completion, and that's scheduled for the fourth quarter this year. That is when the contract actually starts. That's the 15-year firm lease and operate contract that generates $4.6 billion, and that includes the lease prepayments. In addition to that, we also have the 10-year options that come after that.
The operation and maintenance services during that period will be fully reimbursed in a separate contract, with markups and incentives. Continuing with our fleet and HSE performance, as you can see, our three operating assets have been consistently delivering very high uptime, basically close to 99% and above for the last six quarters, and that's the result of the high grading of the fleet. This is a result of the divestments we have executed in the last couple of years. You can see that with that consistent high uptime, that obviously drives the predictable cash flows. I'll come back to that in the next slide. Our HSE statistics seem to trend up, but it should be noted that we include the recordable incidents over the past 12 months, and we divide that by the total man-hours of projects and operations.
As the projects activities are now sharply winding down, you naturally divide by a lower number, so you will see an initial trend up. I consider that as temporary, and that's also because we don't see an increase in incidents. It's not a concern of safety performance, but nevertheless, we're monitoring these trends very closely. The main focus, as always, is on the high-potential incident. We had one to record on Pioneer in this quarter, and high-potential incidents are always followed by the highest level of investigation and learnings that we have in the company. I mentioned the core FPSO fleet delivers high commercial uptime, and that results in predictable and strong cash flows, and this will further grow once BW Opal will come on rate. As I said, that will be very soon.
On the operating units, I mentioned already BW Adolo is now being operated by BW Energy, and that creates synergies for them for their carbon setup, and it also allows us to exit. We continue to benefit from the charter rates and the production tariff, and that will at least last till 2028. By that time, there will be a call and a put option of $100 million, so it's quite likely that that will happen. Till that time, we have the charter rate and production incentive, and the production incentive is linked or will be close to the nameplate capacity of 40,000 barrels per day. That's the expectation that the unit will produce for the time to come. BW Catcher delivers consistently 100% commercial uptime. We have a very good performance on that unit, and we also have an effective bonus-mileage performance regime that drives those results.
Based on the decline of production in that field, I'm also convinced that we will continue and that the unit will be needed there till at least through 2028. We are having discussions with our client to convert the options into a firm contract extension. We also see her as a very strong redeployment candidate in a market where there are actually very few usable redeployment FPSOs available. Either way, we have a good view on the future of Catcher. For Pioneer, we now entered into a five-year reimbursable contract, with potentially some upsides if the production on that field would increase after interventions by the client. I conclude this operational update with an update on the FEED and tender activities, which are public. First of all, the Block 29 development in Mexico.
We have been engaged in a FEED over the year, and we have completed that FEED in May. We were hoping that that would result in a contract award, or at least negotiations towards that. The client decided to consider broader options for the development and also a broader engagement with the market. We will be invited in that engagement as well, but it's a bit unclear when that will happen. For now, we will be compensated for the FEED work, and we will await the next steps by our client, probably in the next quarter or later this year. The Bay du Nord project in Canada is a development by Equinor, offshore Newfoundland in Canada. This is a location with a harsh environment, very cold as well, and it has the requirement for a quick disconnection mooring system in case icebergs approach.
Our engagement with Equinor started already more than two years ago, then in competition with four FPSO contractors that have been reduced to two with the start of a pre-FEED earlier this year. We're now nearing the completion of that pre-FEED. This is a very interesting project for us, and here we can really bring our competence of harsh environment hull solutions, but also our disconnectable mooring system competence, as well as the operational experience of both, namely Catcher in the North Sea and also Pioneer as a disconnectable FPSO in the Gulf of Mexico. The pre-FEED has been successful and is on track to be completed basically mid-next month. This has resulted in a close and effective collaboration with Equinor where we've defined the design, the safety standards, and also the commercial approach. Really looking forward to continue that collaboration with Equinor post the completion of the pre-FEED.
With that, I'm handing over to Ståle for a financial update.
Good morning, everyone. Let me see if I can use this to see the slides. Start with an update on the EBITDA. As you can see, the EBITDA for the quarter came in at $57 million, which is lower than the first quarter due to some one-offs. The commercial uptime, as highlighted by Marco, was very good on the fleet, very close to 100%, very pleased with the operational performance. The reduction quarter-on-quarter, which is about $40 million, was driven by the fact that we sold BW Pioneer in the first quarter. The unit is effectively out of our books. In the first quarter, we were also able to announce a successful outcome of the arbitration related to Polvo, which was also booked as a one-off. This explains the delta quarter-on-quarter to a large extent.
As Marco was referring to earlier, we have completed the FEED work for Repsol's Block 29 tender effort. We have been compensated for this work, and we have booked in a $10 million compensation in this quarter's result. When you look forward to the 2025 EBITDA outlook, we're now comfortable with the numbers. We are raising our guidance to a range of $240- $260 million. The main variability in the numbers is, as most of you who follow us closely would know, linked to the actual contractual startup date for BW Opal. A month from this unit generates more than $20 million to the EBITDA. When you look forward to 2026, it goes without saying that we expect to deliver significantly higher EBITDA contributions as this unit on its own will deliver more than $260 million on an annual basis.
On the income statement, if you follow through the Q2, you will see that depreciations have dropped significantly quarter-to-quarter, again explained by the fact that we sold BW Pioneer, concluded that sale in Q1. Depreciations have dropped from $32 million- $21.4 million, and we expect that to be the range where we're going to trend until the contractual startup for Opal in Q4. Under impairment, it reflects the write-off of the investment costs we made in the Block 29 tender work. If you try to compare the net investment cost, which for us was about $4.5 million in the quarter, this kind of completes the picture. $10 million compensated, $14.5 million as an investment cost. That's now been fully written off. Net interest income was zero in the quarter.
Our interest expenses on debt are basically offset by interest income on a substantial cash balance that we're holding. Also, this quarter, we could book a gain on hedging instruments, and this is basically due to the weakening of the U.S. dollar, which gives us a positive mark-to-market impact on the hedges we have in place for our Norwegian kroner-denominated bond loan. Moving down to taxes, this is now normalized again. At least this for us is what we consider to be normal going forward for a while, because we had an exceptional tax expense in the last quarter related to the sale of Pioneer. When you sum it up, net profit of $24.6 million for the quarter, which translates to $0.14 per share.
Moving to cash flow, I would say operating cash flow this quarter was nothing but exceptional at $103 million. $25 million of this is related to the prepayment from our client Santos for BW Opal, and $36 million is reflecting the full and final installment, or full and final settlement, related to the Polvo arbitration settlement. When you take this out of the equation, we still remain a very healthy $42 million in operating cash flow from the fleet. $97 million was related basically in its entirety to BW Opal as ongoing investment for that unit, and $24 million is reflecting the final payments related to the sale of BW Pioneer. We had to draw another $21 million from our joint venture to fund ongoing activities for Opal.
When you track through, you see, take into account CapEx, amortizations on debt, and the fact that we continue to pay dividends with $11 million. Also, this quarter, we still continue to increase our cash position, which now stood at just over $420 million at the end of Q2 when you exclude any cash sitting in our subsidiary, BW Ideol. From this quarter, we decided to make some changes and make some additions to how we present cash flow or backlog visibility. We introduced a concept called operating cash flow backlog.
We acknowledge that when you look at the revenue backlog, as we've been presenting it in the past, with how we see contracts changing, where you see more and more prepayments from the clients, and we see more and more contracts going into being reimbursable, you get a bigger and bigger discrepancy between what is actually in our revenue backlog going forward and what is the net cash or net future cash flow being generated to BW Offshore. Revenue backlog, sort of quarter-to-quarter, stood at $6 billion, and 90% of this is firm. It does include $1.1 billion of prepayments from Santos, which we'll have to amortize over the firm 15-year contract period when that starts in Q4. The operating cash flow, as we presented it, basically fixes this. It stood at $2.2 billion.
It only includes our 51% of the cash flow EBITDA that will be generated by the firm contract period for Opal. We have factored in any future estimated operating costs as well as taxes to try and create a picture of this as clear net operating cash flow being generated by existing fleet. As you can see on the pie chart, half of this is expected to be generated within 2029. We believe this shows that there's substantial value creation in the existing fleet, which will cover, of course, debt obligations, but also give us a lot of flexibility when it comes to defining and following up on our strategy in terms of creating long-term growth and sustaining dividend distributions as guided upon. I'll do this slide quickly because it's starting to be very repetitive. We have effectively no consolidated leverage anymore. We are in the net cash position.
It was $213 million by end of Q2. As you see on the equity ratio, it trends very flat and stood at a very comfortable 30.7% at the end of the quarter. To sum it up from my side, available liquidity, I would say rock solid at $531 million. This includes $100 million under the RCF, which remains undrawn at the moment. We have a very comfortable debt profile, as you can see on the right-hand side. The guidance on remaining CapEx and investments in BW Opal stands as before, and obviously can be managed quite easily with our liquidity position as well as future cash flow from the fleet. We continue to pay our quarterly dividend of $11.3 million in cash, translating to about $0.063 per share going forward.
If you go back to the guidance we gave in Q4 last year, as we said, this is what we do. We will continue to do a minimum dividend for the first three quarters of the year with an ambition to pay out 50% of net profit as dividend in Q4. When you look at the fact that we have $87 million in net profit for the first half, I think we are in a very good position to get beyond kind of the minimum dividend ambition when we get to the end of the year, which basically would be if you deliver $90 million, we can't raise the dividend. Anything above would allow us to pay a higher dividend in Q4, which we'll present in February next year.
With that, I'll hand the word over to Anders, which will give us a strategy update, and eventually, we'll move to Q&A.
Thank you, Ståle, and good morning, everyone. As Marco said, we have just conducted a thorough strategy review, and this included a top-down scenario and market analysis, but it also included a top or bottom-up process involving a substantial share of our clients, employees, partners, and other stakeholders. The key takeaways are as follows. Firstly, BW Offshore is well positioned for the future, and we are addressing both energy security, but also the energy transition. Second, FPSO is also becoming even more critical due to increasing complexity of and size of field developments, and also the prevailing focus on stable supply of oil and gas. Finally, we see opportunities for floating transition solutions, albeit these are shifting out in time, and it also remains challenging raising capital for such ventures. We do have a continued belief the latter is an area with sound potential for future growth and attractive returns.
Against this backdrop, we feel we are well positioned for increasing value creation over time. BW is today a leaner and more streamlined company with increased investment capacity. We have also been disciplined in tendering over the last few years, given the constantly shifting market. There is, however, no denying we also have had our commercial and project execution challenges. Nevertheless, the current market context is very clear. Oil and gas will be here for longer. We see this in a large number of planned FPSO projects, which are underpinned by a positive market for our core business. In terms of priorities, we are continuously working to improve across all key functions to unlock this clear business potential. We're optimizing the way we do business and manage risk, both through strong partnerships and enhanced risk-reward models.
We also continue investing in our organization to ensure we have the right people and capabilities to deliver on BW 's long-term ambitions. In 2020, BW Offshore presented a revised strategy in which we moved away from medium-sized clients, shorter contracts, and relying on redeployments of our existing fleet. Since then, we freed up over $600 million by divesting 12 FPSOs and spinning off BW Energy, and we've paid over $200 million in dividends back to shareholders, and actually over $300 million if we include the shares we spun off or paid out when spinning off BW Energy, and we've also strengthened our financial position. In addition, we've secured and invested in a new FPSO project, as well as floating wind company BW Ideol. However, as mentioned, we have unfortunately not been able to deliver as many new FPSO projects as targeted.
Following the recent strategy review, we are now reaffirming our position and ambition in the FPSO space, and we're also refining our approach to floating transition solutions, and we're now renaming it floating transition solutions because we are, in fact, looking at areas beyond renewable energy production. Irrespectively, we're looking to add two segments in this area by the end of 2030. Our old strategy, though, is very much anchored in the conviction that oil and gas will remain a dominant energy source for years to come. We also see new business segments emerging in the transition area. However, we expect these to only start to mature towards the end of the decade and thereafter. Our view is nevertheless aligned with multiple external scenarios for the expected future development of the global energy mix, as you can see on the slide.
This, again, forms the basis for our market assessment, targeted segments, and overall long-term planning. Importantly, fossil fuels and our FPSO offering remain highly relevant well into 2040. Onto the market, which we find certainly exciting. We see multiple opportunities in regional hotspots like Brazil, Asia, and Africa. I want to emphasize we maintain a disciplined approach with clear selection criteria, and this applies both to new builds and also redeployments. As Marco has talked about on several occasions, the FPSO market has changed with larger and more complex developments, shifts from the lease and operates to EPC and O&M models, or even hybrid models for that matter. Our clients are offering prepayments to enable external financing as well as new approaches to risk management allow us to take on and better manage large FPSO projects.
That said, we also see a demand for medium-sized units and opportunities to reuse existing infrastructure through redeployments. Our success in these areas depends on aligning capabilities with the long-term market needs, as well as good project execution to ensure predictable value creation. We at BW Offshore are confident we have the competitive offering required to capture a decent share of what we see as a very exciting market. Success does, however, require we continue to work on strengthening our capabilities and organization. The goal is to ensure delivery of floating production offering that meets our clients' needs and the long-term market demands. I will briefly touch upon four areas. The first is simplification. By this, we mean standardizing how we approach design, risk-reward principles, as well as optimizing internal processes. Secondly, we are enhancing our client focus, and it starts with actively cultivating a client-centric approach throughout the company.
We will strengthen our business development efforts and frequency of tendering, and we will also look to make our contract negotiations more efficient. Thirdly, in our business, predictable project delivery is fundamental. We are therefore reworking our strategy and framework for managing project execution and risk, fully leveraging on learnings from previous projects. We have optimized the project organization and are developing long-term EPC partnerships. In addition, we are strengthening our processes to ensure clarity and certainty on project cost estimation. Lastly, and most importantly, it comes down to our people. Large and complex projects require big team efforts, and we will collaborate and lead by example, supported by a highly motivated workforce. The lease and operate contract model has historically been restricted by the absolute project size from a financing perspective.
Still, we have proven there are ways around this with robust financing, partnerships, and prepayments offered by our clients. In recent years, these clients have also shifted towards EPCI and O&M models, which further addresses some of the financing challenges. Irrespectively, with larger projects, the absolute magnitude of risk also increases, and this requires a change in mindset and ways of working. Using BW Opal as an example, we carried all the EPCI risk, and this meant that all project issues and deviations across multiple layers of subcontractors, suppliers, and project work streams filter up to us. We nevertheless managed to stay on schedule and deliver a state-of-the-art gas FPSO, albeit at a significant additional cost. Going forward, we will seek contract structures better aligned with our clients. We will also develop strong EPC partnerships to enhance project execution, capacity, and capabilities.
Lastly, we'll apply models for sharing risk-reward both with our subcontractors and other suppliers. As a result, BW can better manage projects with reduced risk and more predictable returns. Onto our FPSO prospects. We maintain the ambition of winning one new FPSO project every other year, and the promising market outlook I showed earlier fully supports this. We consider 12 of the FPSOs planned for awards towards 2030 as a good fit, and are currently progressing several opportunities. As Marco mentioned, we're working well on Bay du Nord with Equinor, and on Block 29, the client is considering its options following our bid submission. We are furthermore exploring opportunities for BW Catcher, which is currently on contract with Harbor Energy. We've also acquired the Nganhurra FPSO, which gives access to a high-quality hull, enabling rapid and cost-competitive responses to various redeployment opportunities.
Finally, we're advancing several other early prospects across multiple regions. Moving on to floating transition solutions and our plans to become a leading EPCI player in floating wind. Admittedly, since we invested in BW Ideol in 2021, lead times from project concept to actual installation of turbines and power generation have shifted out. This, of course, has also impacted the access to and cost of growth capital. Nevertheless, we see this as an exciting company with tangible revenue streams. Ideol are leveraging co-development positions as a neighbor of EPCI opportunities in Scotland and France. On the related fabrication side, the company is developing two dedicated construction sites in the same geographies for serial production of the proven damping pool platform. Zooming in on the port of our desire in Scotland, the ambition is to produce one floater every 12 days once the production line is fully up and running.
In fact, that equates to 30 floaters per year, which can be potentially supplied to the entire UK sector and not just the Buckingham project where Ideol is invested. We firmly believe we have a competitive edge and the ability to capture a decent share of this overall business through local production in concrete, both in terms of cost and regional governmental support. Importantly, the Buckingham project alone will require the production of around 60 floaters. We are working closely with partners on the construction site to make it all happen. On the funding side, Ideol is today a private company, most recently financed with a shareholder loan. Based on their recent strategy review, BW Ideol targets positive cash flow from 2028 on the back of project-related engineering revenues and licensing fees. We also continue progressing discussions with potential investors.
In the longer term, we are looking to realize additional value through monetization of co-development positions around FID. In sum, we are encouraged by BW Ideol's position in an emerging market, which could become a substantial market opportunity from 2030 and beyond. We are also looking beyond floating wind and into other floating transition opportunities. As of now, we see three distinct solutions, and those are floating desalination, gas-to-power, and ammonia. Our view on times to commercial viability are rooted in scenario modeling, which drive our priorities accordingly. We maintain a disciplined, value-driven approach to capital allocation in these emerging segments. This means applying the same risk approach as in our FPSO business. In other words, contracted cash flows to quality counterparties and demanding similar returns. We furthermore focus on combining proven technologies in new ways and on projects that can be realized in areas with strong public support.
We see these as the new emerging segments that in a few years could provide opportunities for long-term profitable growth. I started this strategy section talking about increased value creation, and this is something that goes two ways. Number one, we have a clear focus on delivering long-term value to our clients. Two, we look to deliver increased value to our shareholders. We maintain our capital allocation framework, which guides our financial priorities, which are to ensure efficient operation and cash flow from these existing fleets, invest to grow free cash flow from new FPSOs and later also transition solutions, maintain a robust balance sheet, and pay growing dividends to shareholders over time.
Our aspiration towards 2030 is to deliver an average total shareholder return of at least 15%, and this is based on BW w inning three FPSO projects over the next few years, including extension of employment for BW Catcher, as mentioned. In sum, it implies doubling the company value by 2030, realized partly through direct quarterly returns and partly through share price appreciation, as BW Offshore grows through profitable projects. To sum it all up, I could hand it over to Marco, but I'd prefer stealing his thunder and doing the near-term outlook myself. Here it goes. Most importantly, startup of BW Opal remains imminent. We also continue progressing our FPSO projects and hope to land one relatively soon. Lastly, we maintain our attractive shareholder return program.
With that, we go to Q&A, and I think we can start with the people in the audience and then move on to the online questions. Thanks.
I will take charge of the Q&A in any case, but I will be in good company. Opening up, first the room, or anyone who wants to start? Yeah.
Thank you.[ Lucas Dalbet] Arctic Securities. On that 15% return target, is that a combination of dividends and other shareholder returns, or how exactly do you define it?
Yes. That's how we designed it to be a combination of direct returns through dividends and through equity returns through long-term value growth. That's how we need to look at it. I think from a perspective of how we aim to do it, we aim to be as forward-leaning on distributions as we can, as long as we don't jeopardize the potential to take on new contracts. We have quite a lot of discussions around when targets move out, and as you can see from the liquidity we're sitting on and the cash we're generating, we will need to adjust this based on how long until we can mature a project, how much cash we need, and adjust the dividends accordingly.
I can also mention that we are looking into covenants in terms of giving us more flexibility to, I would say, be more agile when it comes to capital allocation in terms of being more forward-leaning on dividend distributions when we have the ability to do so.
Okay. On the impairment you took in the quarter, was that the entire capital that you have spent on that project? Did you receive $10 million and you have expensed $15 million?
The total number is $21, $22 million invested in the effort over the total duration. Total compensation is between $14 and $15 million. We have gotten some compensation as we go, but it was smaller numbers. That's why we didn't go explicitly out with those. We also didn't start putting cost in the balance sheet from the get-go when we started. That's also why the impairment is $14 and not $21, $22.
Is that the typical kind of amendment for a FEED project, that you are basically spending $5 million on a FEED, and then you have some kind of a hit ratio whether you succeed or not?
I think you could say that. I think every serious FPSO opportunity takes about two years towards a contract award. In case of Repsol, it would actually be more. Let's say two to three years, that's the ten years. I also explained, you know, we're already engaged with Equinor since two years ago. Typically, there's a $5- $10 million investment linked with an opportunity over that period. It still depends a bit on the approach clients take. Certain clients say, you know, it's all your cost and you just do what you want to do, but you know, it's fully your cost. We don't pay anything. Then it's pure tender. You have clients that say, you know, I'll pay you some and then you need to deliver this, but for the rest it's your game.
Repsol was a bit more in that corner, partly specified and partly we had to do what we had to do. Equinor is taking, I would say, a more prudent approach and you see the larger operators going more in that direction where you fund these phases and make sure that the definitions and the whole project definition is solid by funding it actually, such that for both parties that's a better starting point. You have that range of approaches, which is different client to client, but either way, somehow you end up always with a certain level of investment. Yeah.
How much do you budget for a year that you will spend on initiatives like this, and then every second year you get an award?
In terms of activities, let's say $20 million- $30 million activities, and then, you know, investment around $10 million, $15 million.
Okay.
Maybe I could just add on this one too, how we see the market because I think this is quite relevant to how we see the market is now getting more comfortable on our side with less competitors, but a large number of prospects. We are gradually also seeing that compensation is getting closer and closer to the effort we need to put in. Where in the past, Petrobras is still there, but they basically say, you tender, you take the cost. If you win, good for you. If you lose, you take the cost.
I think on all other prospects we are pursuing, we see to a large extent that you're getting quite close to now getting compensated for the FEED, and driven by fewer market participants, bigger efforts that are being undertaken, and less competition on this where the clients see that, okay, if you're going to get subcontracts to go into multi-year tender effort, they're not going to be willing to do this with significant cash outlays on top of their kind of cost of time and effort and the risk that they're taking.
From the new type of offering that you are sort of looking to expand into over the next years, which one do you think is going to be the first one where you're going to secure a commercial award?
Yeah. I would say the Petrobras tenders in one way tend to go relatively fast because it's, you know, it's a low first technical qualifying and then the lowest bidder and then some negotiation, but that goes relatively fast. The timeline seems to shift. Still, you know, if Petrobras like the stuff that they put in the market now, they will probably be awarded by mid-2026.
Yeah, I was actually thinking about the, you know, gas-to-power.
Oh, those timelines.
Which one would be in your head?
In the transition, I think we see we find this floating desalination market very interesting, and that could potentially move first. Gas-to-power is real, and I mean, there's lots of discussions here also in Norway, but still, you know, it's not, particularly if you have to add CCS. Yeah, we still think it's a few years out, and ammonia even more so. That's also why we really also want to communicate we see a good FPSO market. This will be needed, and we have the organization and the capital available. That's what we really want to press on. In the meantime, we'll stay disciplined on monitoring the timelines of the transition because we have all seen sentiment swing and then timeline swing. I don't think you can extrapolate sentiments just as you couldn't five years ago.
I don't think you can extrapolate the sentiments now, but we need to stay close. It's also fair to say that these things will not go fast. We're staying disciplined there with how much we progress.
Okay, thank you.
Hi. Eric Aspen Fosså, SP1 Markets. I just want to have a question on the future FPSO opportunities. With the Repsol project now most likely out of the picture, what type of projects do you see as most likely within the next 12 months? Is it a renewable redeployment project, and what type of region?
It's a bit of both, and maybe it's more the other answer I started. I think there's a couple of Petrobras projects coming in the pipeline. There is a legacy of the things move, but still, once the bids open, it goes fast. I think that will come by mid-2026. Equinor talks about contract awards more towards the end of 2026. Those are both new builds. The Repsol project has not disappeared. As you can see, we have done a lot of work. We will still be part, we will evaluate how they come back to the market, but we can still be part of that. You know, then that project would go relatively fast as well. Maybe more at 2026, but that's a redeployment. Also, with Nganhurra, we see a couple of opportunities that we think will get a contract award somewhere, yeah, second half in 2026.
That's a bit of the timelines. It is a bit where we're taking a mix. We take the smaller, more redeployment projects that in principle go faster, and then the larger new build projects. It's kind of the things we work on most actively now is about four, and it's two-two split.
Okay, thank you.
Morning. Russell from Upstream. I'm not usually an environmentalist, but I have to ask about Barossa and the CO2 situation at Barossa. There's going to be a lot of CO2 vented from your FPSO. I'm just curious to know how you feel about that, about the high volumes of CO2, and also what sort of capabilities the FPSO has for, I guess, reducing the amount of vented CO2.
Yeah. The design is such that we can either take the CO2 out on the facility, or we can export the CO2 to the Darwin LNG facility, and then it's taken out there and exported to an abandoned reservoir. That's the plan that Santos has, and they're working hard on that. They're actually installing pipelines as we speak. We're all trying to work on that to get this in place as soon as possible. There is a very robust carbon capture plan in place, actually not only for Barossa, but for the whole oil and gas area there. My understanding from Santos is that's a clear strategic focus as well. In the meantime, CO2 will be extracted from the gas on the facility.
The timelines, I don't know exactly, but what I do know is that this will, you know, we'll try to minimize that period and move to the carbon capture solution as soon as we can. Yeah.
Okay. If there are no more questions from the room, we'll proceed to the online questions. Referencing to the Petronas logo on the FEED presentation earlier, is Fosså Offshore also involved in the Kalidang FPSO FEED project?
No, we're not directly involved.
Regarding dividends, Ståle, you mentioned discussions on renegotiating bond covenants to have more flexibility and not be limited by 50%. Any update on this?
I did not mention discussion with bondholders about that. What I said is that we're also on the question is that we have a dialogue around dividend covenants, but our approach is not just about dividend covenants. It's covenants in general. Number one, what's important for us is to have covenants that enable us to grow as a company and have a balance to what we're trying to do. We have covenants that we argue are a bit outdated from what we're trying to do today, where, for instance, large prepayments are kind of counted as debt on our balance sheet, although they are not repayable. With the new contract structures, you suddenly are not able to move forward.
We are having a dialogue on changing these, and the covenant restriction around dividend is one of those because, of course, it's important for us to be able to be efficient on our capital allocation. We believe it's good to have a balance where, yes, you have safety vis-à-vis lenders that lend us money that we're able to repay this, but there should also be a balance where you can reward your shareholders with dividends in periods where you have too much liquidity and nowhere to place it, which could be a potential for us as some of these prospects that we're looking at. You can't exactly calculate the time on when you can secure a project.
Yeah. I think it's fair to say that these covenants we have on dividend, we see them as a bit outdated, and they don't match anymore the kind of cash flow levels that we're going to produce in the coming years. That's why we're taking that discussion. We see potential for more dividend, and we want to have that flexibility. It's a logical step to do. Now, particularly, you know, Opal comes on stream. It all becomes very predictable what we're going to produce in the coming year. This is the right time to have that discussion.
Will Equinor reach FID on the Bay du Nord project this year? If so, when is the EPC award to BW Offshore expected?
Yeah. What happens on the Bay du Nord and what Equinor will do is really, you know, what Equinor has to communicate. I'm sure that there will not be an FID on the project this year. That's not where the development is at the moment. We're completing the pre-FEED that will be followed by FEED, and then that results in an FID. Equinor has a very solid, phased process to get to that decision. No, that will not happen in the coming months. It is a very interesting project that makes good progress, and we're both Equinor and ourselves are very happy with the progress we're making on the pre-FEED to define that project.
When BW Offshore states an estimated commercial viability for floating ammonia at three to five years, what are the drivers behind this? Are there any triggers to look out for? Contract length is stated as 10-20 years. What contract formats does BW Offshore foresee in this segment?
You want to start?
I can start. We've spent quite a few years now on green ammonia, trying to produce ammonia on a floater by the use of renewable power from shore. The power input and the cost of the FPSO unit and what people are willing to pay for it just doesn't stack up. We saw LOIs on 10-year contracts typically. That's shelved for the moment. Obviously, we're monitoring the market. What we do see that could be more commercial in the shorter picture is producing blue ammonia with residual gas, problem gas from existing oil fields. That's really what we're digging into now, and that could be near-term. We talk towards sort of 2030 in terms of real projects.
I guess your 15% return objective includes share price appreciation, but this doesn't depend exclusively on you, but rather the market. If you fall below the 15%, would you consider buybacks to accelerate the share price appreciation?
What I think you can say is that buybacks is always an alternative that we can use. Today, we pay dividends, but yes, the answer is yes, it will always be considered as an option to be, if we can't use the capital we have in a good way to create returns. Maybe just to comment on the value creation in terms of 15% return. We can't really drive the share price. That's not how we operate. We cannot operate the company on the basis of the share price. Share price appreciation is because it's driven by value creation overall and that people believe in what you do. That's the way I see it. What we focus on is creating return on equity by directly delivering value through the projects we do.
I mentioned earlier that our growth comes from that as well as the direct return investors do get when they receive dividends from us.
I would like to add, we in general terms, we really want to strike the balance, and we have been so far, and we continue to do so, to have a predictable dividend, ideally growing, but also grow the company. That's striking a balance. As we see, timelines of these relatively big investments are hard to predict on the quarter or half year or even year. That's where we then have flexibility of what you do in terms of creating the returns, but it has to be that balance. We have a clear ambition to build back and grow the backlogs after the divestments, both in the FPSO space and later in the floating transition space, and have a predictable dividend program.
Not directly a concern of BWO but thinking of risks regarding Catcher, financial problems of Waldorf seems to be getting serious. Could that affect our business here?
No, I don't see that as an issue for us. That's maybe an issue or opportunity, I don't know, for the partners and for other parties. The underlying part is the operator, Harbor, and the performance of the field. That's what we are exposed to, and that part we fully understand.
Will BW Offshore adopt the same EPC approach and partners as the Opal FPSO for the future engineering and construction projects?
No, I think what we're trying to say is rather the opposite. You know, and Anders Platou explained that was perhaps a more traditional FPSO approach that we took where you control everything. In a way, on paper, that will also create the highest level of profit, but it's also fair to say that you take the highest level of risk. Of course, when you do that in a time where everything works against you, which was the reality in the, you know, if you look at what the world had to face in the last five years, then you see that these risks are really too large for these large projects. That's why we're doing now the opposite. We're really looking at how you shift this risk. First of all, what can we shift to clients like inflation and commodity pricing, et cetera.
Then also very much to what can we shift to partners. How can we make effectively the projects smaller by carving out pieces of the project to partners and/or subcontractors. It's really shifting the risk upwards, sideways, and down. That requires a different approach. It also requires actually a smaller organization, and that's the measures we took as well. The size of our organization, and for that matter, the cost of our organization has also reduced quite a bit. We're reducing our exposure to risk, but we're also reducing our exposure to cost of the organization in between projects. As we say, as we now have said a couple of times, these timelines are hard to manage, and we need to remain disciplined.
I think we've shown that we're disciplined, but it also means you need to then kind of suck up the time that you sit in between, and you need to do that with the most efficient organization that you can have. That's the new model going forward, and that's quite different than what we have been doing in the past five years.
Following up on that, it has been discussed earlier in the Q&A, could you give us the net expected cost outlay range after normalized compensation that you expect to have for chasing new FPSO projects? Please base this on an award every second year as you target.
Sorry, I'm not sure.
I'm not sure I understood the question.
You can say it again.
Could you give us the net expected cost outlay range after normalized compensation you expect to have for chasing new FPSO projects?
Okay. That's maybe a bit similar as the question earlier. It sits somewhere between $5 million and $10 million, but the trend is also that it actually will be reduced because there's only so many competitors, and everyone starts to become more demanding to the clients to fund this. We see examples where clients fund everything, and in that way, also drive a much better outcome of the tender process. I think, let's say on average, about $5 million per opportunity, and we're chasing a couple of these per year.
All right. Thank you. Have you studied floating liquefied natural gas as another growth opportunity? If yes, why is it being discarded from the strategic plan?
Yeah, that's a good question, and it's not really discarded. We are actually looking at it, and I mean, Frederick's group at New Venge also looks at it. We're having dialogues with potential partners or potential O&M opportunities. It is a segment we see as a natural fit, but it's also fair to say that the segment has been promising for many years and still hasn't developed as we expected. It's also true that there's a couple of companies now active there that are progressing. This may be the time that FPSO contracts could play a bigger role there, and we will definitely look at that as well.
Thank you. That was the last of the questions received online, but perhaps there are more questions in the room?
Maybe some new thoughts. Yeah.
Just for clarity, just looking ahead on your contracting models, are you veering more towards EPC, O&M, and away from L&M?
We're a bit agnostic on first lease and operate or EPCI and O&M. It is true, of course, if projects get big, companies like us can't finance it on our own. Then we need equity partners and we need prepayments. We have shown that we know how that works. We can pull that off even for very large projects. It's not a lease and operate. There's no showstoppers there from our perspective. What you do see is that clients acknowledge that it is expensive capital if contractors try to finance for, you know, major oil companies. That's a natural kind of pressure on that model. Clients do generally value the competence that FPSO contractors bring, and that is the integration all the way from engineering into operations and all these steps in between and seamless startup and operations, et cetera. They like that offering still.
You see that a way to address that is to do a combined EPCI and O&M contract and put real incentives in the O&M that drives the right behaviors in the EPCI, which is different than if you do a more like shipyard approach on EPCI and an O&M with an O&M contractor. The client has to connect all these things themselves and have to make sure that they get the right EPCI solution for the right O&M solution. We're agnostic. We can do both. Either way, our offering is this integration of engineering into operations and all these steps in between. We see a market for both. Naturally, you see when the projects get bigger, it seems to trend more to EPCI and O&M, and for instance, more redeployment projects that are, you could argue, half the size capital-wise could be still more than lease and operate.
There's all kinds of creativity there. It's hard to say where it exactly goes. We're flexible. We have a lot of experience in financing projects. We can actually be quite flexible towards our clients on whatever model works with that. That's really our approach to take an open approach there and find a solution with the client.
Are you saying that you're focused on new builds and redeployments and not conversions?
Yeah. We've also done many conversions, so it's not that we can't do conversion. For me, between redeployments and conversions, these words are used both. It's a bit of a gray area because in many cases, the topsides are not very useful of an FPSO because you have to then find the exact field that works for these topsides, but the hulls are. You do a hull, you redeploy a hull, and you put the topsides on versus you convert a tanker and you put the topsides on. There's not that much difference. I like to redeploy FPSO hulls because you have a better starting point than converting a tanker. We can do either way.
Right. There are no further questions from online.
If there's no further questions, I would like to thank everyone for your attendance and participation, and have a good day. Thank you.