Welcome to the BW Offshore Q4 2020 Presentation. Throughout the call, all participants will be in listen mode only, And afterwards, there will be a question and answer session. Speakers, please begin. Good morning, everyone. Welcome to the Q4 2020 trading update on BW Offshore.
My name is Mark O'Binien, and I'm here with our CFO, Stol Andreasen, to talk you Through the presentation, I will cover the general part and Sola will run you through more details of the financials. Josh? I apologize that once more we have to do this update in a rather impersonal format as in a conference call. We obviously prefer to have a more personal interaction with our audience, but unfortunately that's still not possible and hopefully this will change in the course of this year. Then I want to ask your attention for the disclaimer.
Please take note. And I want to start this presentation with an update of the tragic accident, which occurred on our FPSO as for our Givorian on January 14 this year. This unit is located offshore Ivory Coast and is operated by us for CNR International. The accident occurred around half Basel 1 in one of the cargo tanks, which was isolated for repair and maintenance. Crude oil leaked inside the tank during a planned DEE isolation activity, and this resulted in 2 personnel suffering fatal injuries.
Immediately after the incident, we have started an initial investigation, which has resulted in some immediate corrective actions. And together with the client, we have worked towards a restart of the operation last week, 13th February. Phase 2 of the investigation, Comprehensive internal investigation, which is led by an independent investigator, is currently ongoing with the aim to establish the root causes of the accident and also the generic causes that have allowed these root causes to exist. This investigation will be concluded next month and it will lead to collective actions to fix these root causes and also for recommendations to the wider global organizations with changes to address these generic causes. I can assure you that this accident has been a true shock for the whole organization of BW Shor.
And we are very committed to learn from this action to ensure that it can never happen again in our operations nor in operations of others. We are committed to share our learning with our clients and partners and colleagues. With that, I continue to the next slide, which covers the highlights of 2020 and the Q4. 2020 was obviously a challenging year From an operational perspective, due to the COVID pandemic and forced us logically to focused on protecting our people and our operations. Despite that, the year has been financially solid.
Our operational financial results have been good actually with an EBITDA results of 436 $1,000,000 and operating cash flow of $387,000,000 For the quarter, it meant an EBITDA of $92,000,000 and a operating cash flow of $90,000,000 We decided to make further impairments during the Q4 in the fleet about $60,000,000 And inventory impairment of about €22,000,000 And Stora will explain to you a bit more further down in this presentation. Another event was the Abo contract extension, which extended the contract till end of this year with options beyond that, very much in line with the expectations. While we were focusing on keeping our operations going through the pandemic. We have very much focused as well on positioning ourselves for the other side of this pandemic. And we have progressed our position for FPSO tenders for large FPSO projects.
And we're also focused on positioning ourselves in the emerging floating wind market, and we have created a new floating wind company called BW EDO based on an investment in EDL. And I'll come back to this topic as well further later in this presentation. Moving on to the next slide, operational update, and then starting with COVID. The impact of COVID, it is still a challenge to keep all our units COVID-three. But in the Q4, we did not have any impact.
No units were impacted. However, this quarter, both in January February, we had one unit that was infected. It concerns Volvo in Brazil and Abo FPSO in Nigeria. During the year, we managed to reduce our COVID cost, and that is mainly because of the Full implementation of PCR testing allows us to reduce the requirements for quarantine And also somewhat better mobility allows us to reduce the amount of crude that we need to keep in country, but also reduce the crude cost. So we reduced from about 4,000,000 mid-twenty 20 towards €2,000,000 a month during the quarter, quarter 4 of last year.
And we think that is also the level where we will continue or we will stay on that level during 2021 till this pandemic goes away to the vaccinations. On fleet performance and HSE performance, we had a challenging quarter in the 3rd quarter, But in Q4, we recovered our uptime and trending in the right direction again. Similar for HSE, you do see that the statistics are trending upwards, which is obviously undesirable. There are 2 contributing factors there. 1 is more how the statistics works.
We implemented the new definition in accordance with IOGP And that allows us to better benchmark industry wide. And it results in that you divide by less man hours. Instead of 24 hours per day, we divide by 12 hours per day per person. So that obviously has an impact on the statistics. But also in absolute terms, we have seen more incidents developing over the last 9 to 6 months.
We are investigating that. We want to understand what the impact of COVID is towards this, but we also want to understand if there's any relation with the accident we saw on thus far. Moving on to the next slide with a short update on some of our units. Catcher, first of all, We have seen some operational interruptions in the Q4. It's affected the uptime.
However, it did not affect the commercial uptime and the reason is that the downtime and reduced Production as a consequence were mainly related to plant shutdown to remove calcium arsenate out of produced water systems. And calcinedestinate is a substance that comes with the well fluids. And we're trying to solve this problem working together with our client who operates the reservoir, finding the right chemical dosing solutions to reduce or eliminate these impacts to our produced water systems. It's not super straightforward. It's a trial and error process.
So we're continuing to optimize that and to reduce the impact of this substance. I discussed already the ABO extension. And then for Umaroa, previous Quarter, we announced that we did find a last minute solution with the New Zealand government to pay for our costs for staying in country and working with them on the abandonment of the Chuy field. And that means that now our disconnection Costs are covered and this is progressing well. We're planning now to complete the disconnection late April, early May and then demobilize the unit from New Zealand to Singapore.
Next slide shows the fleet contract overview, a familiar picture for you, I'm sure, not much changes. But what is Worth notifying, although we did communicate that before, is that the client of Volvo, Our client, Petrobrio, has decided to not exercise their option to continue. So this contract will now end by the mid of this year. And then we will start decommissioning, disconnection and then demobilization to a Brazil yard, where we then can start preparations for potential redeployment to the Maromba field operated by BW Energy. We're also looking at our layup fleet, where we do see value in redeploying you'd like BW opportunity and also Umaroa.
But we're also thinking that the current number is more than what we need. And it starts to make sense to consider the sale of some units and or recycling. Moving on to the next slide, also familiar for you, we see the backlog which provides long term financial visibility, About $4,000,000,000 at the end of Q4 with a firm backlog of $2,600,000,000 and that's about 62% of the total, meaning the options cover about 37%. But with options, we mean here not all options that we have under the contract, but only those where we have a very high confidence that they will be exercised by our clients because the field is performing well and the field life is still further out than the durations of the firm contract. And then there is a very high probability that these options will indeed when need be exercised.
Last operational update is from BW Energy. The highlights of Q4 are that they have completed 2 listings successfully and their average production During Q4 was about 35,500 barrels per day. For they're now preparing for 2021 to Start a drilling campaign, which starts with an exploration well for the Hibiscus extension. And then continue with completing the Tortue Phase 2 development. Remember, this was stopped when the pandemic broke out.
Instead of 4 wells, only 2 wells were hooked up to the Adolla FPSO. And that's now they have now the intent to complete this, which will increase the production for Adolo, and that has a positive impact on the revenues generated by Adorno as well. All this, of course, is subject to the COVID-nineteen situation, as you, I'm sure, understand. There was also a successful capital raise, which took place in January of 75,000,000 That reduced BWO's ownership to just above 35% ownership now, which corresponds to DKK13 per BWO share linked to a market cap of BW Energy today of about USD 7.90 million. That concludes the operational update.
And I'm moving on to strategy and outlook, Slide 13, we have looked at the strategy going forward during 2020. And this will now consist of 2 parallel tracks. First, we remain committed to our FPSO business as our core business. But in parallel, we are also positioning ourselves to capture energy transition opportunities in adjacent business areas. And Boldtrex needs to deliver to 3 Clear financial objectives.
1st, a predictable return of our equity in investments of about 15% It needs to generate long term cash flow visibility and it needs to reduce our Cost of capital. We focus on 3 areas of Value contribution, I'm now on Slide 14. First of all, contract extension and redeployments of our existing fleet and value creation from and with BW LNG. And then for those units where we don't see redeployment opportunities, we will consider the sale or recycling process. New investments we will make in floating energy infrastructure projects, and that could be FPSOs for large field developments on long term fixed income contracts, but it could as well be large scale floating wind developments or even other floating power production projects like Finsons Gas to Power.
And then 3rd, we're also studying where we should position ourselves for the future further out, particular with a focus on opportunities for offshore clean fuel production from renewable Energy and how we could combine that with wide scale floating wind developments. Moving to The next slide. As we communicated earlier, we are looking at FPSO investments for Those large scale oilfield developments with long term contracts and with investment grade counterparties and based on cooperation with equity partners jointly owning and financing those new assets. Regarding BW EDO, As announced on Wednesday, we are investing in EDL to take a leading position in the emerging floating wind market. And with this move, we are creating what we like to call a floating wind champion by combining 4 decades of BW Offshore's deepwater experience with EDOs technology and their pipeline of projects in this new market.
BW EDO will be our vehicle to target and develop our projects on a global basis. And our ambition is to consolidate all our floating wind offshore activities over time in BW, EVO. Thirdly, we have been working on a joint venture with Imvenergy. We have managed to agree on adds of terms with them. Invenergy is a U.
S.-based renewable and utility company that has already developed more than 27 gigawatts of operational projects across Americas, Europe and Asia. And coupling a leading developer of a land based renewable player together with BW Offshore as a established offshore production player. It makes a lot of sense from a strategic perspective when you look at actually developing floating wind business. We're building already on our already existing Imbelinegy relationships through the BW Group and more specifically, the successful FSRU project that is LNG with the Netherlands together with BW LNG. The mandate of this cooperation is quite clear.
It is for BWO and LNG to jointly bid for floating wind assets in the Scott Wind Leasing route that is upcoming in the coming months. Then moving to the next slide, there's an update with regard to our new It is our project FID, which we target in the first half of twenty twenty one. I believe we are on track, and we are progressing our financing accordingly. We have now matured our partnership with Global Infrastructure Equity Investors, and we're firming up our debt financing. We want to make sure that we have both our equity as the debt financing in place prior to taking such an FID.
Furthermore, we are ensuring project execution preparedness based on the Kedshid project experience. Selecting the same suppliers and yards as we did with that project, which was executed successfully. And also by further detailing the engineering work we have done in the past years on our rapid framework, where a rapid framework will be the basis for such large scale FPSO project. Moving on to Slide 17, explaining A bit more about the investment of any deal, and this slide very much summarizes the presentation we already gave on Wednesday about this investment. In short, we are creating a global integrated floating offshore wind company, we call it BW EDO.
And this growth and value creation in BW EDO will be accelerated by BW Offshore as an industrial partner. We're targeting an involvement of about 10 gigawatts of projects by 2,030. And the aim is now to list BW EDO on Euronext Growth before the end of next month, with BW Shure as the anchor investor, and we expect to own about 50% after the capital raise. And then both BW Shure and the EDO founders, which includes the CEO, will remain the long term owners of this new company. More news about this process will follow in due course.
With that, I want to hand over to Stolle to We'll move to the financials.
Okay. Thank you, Marco. I'll now move on with the financials. So from an operational point of view, 2020 has been challenging, as Mark mentioned earlier. However, the financial situation for the company remains really robust.
We see the steadiness of our revenues, our EBITDA and operating cash flow For the full year of 2020 compared to previous year, it does prove how resilient the yeast business model is in the challenging markets. Revenues overall for full year came in at 886,000,000, which is 6 minutes below 2019, while our EBITDA when you adjust for inventory impairments came in approximately 50% below 2019 figures. So the overall EBITDA form for 2020 has been affected by The extra spend or the investments we have made to manage COVID to keep our units in operation, but we also had some shutdowns throughout the year as well as that CHC ended the contract in Q3 2020. Going to the quarter on Slide 20. Operating revenues increased by percent to $223,000,000 in Q4, while EBITDA, when you adjust for inventory impairment, increased by 16% to RUB140 1,000,000.
So overall, we're seeing better financial performance from the fleet, but we've been able to take Measures to reduce COVID quarter on quarter in combination with more mobility of the crude as Marco mentioned earlier. And also now we have contribution from Senneberga that will decrease our production in October And we have contributions from Uroa as a result of the contract with the Zealand government. On top of this, we closed the negotiation for Additional funding for 2020 related to Sbar in Q4. This was recognized in the same quarter and gave us a positive EBITDA impact of approximately 10,000,000. In Q4, we reviewed our inventory on the FPSO fleet.
The inventory we have consists of a mix of high value items and a significant number of smaller value items, which are which has relatively high turnover and is similar to consumables. From 2021 numbers, we have decided that you will recognize such small value items as operating expenses when they're purchased. And consequently, they have decided to write off for small value inventory items in Q4. In addition to this, we have also chosen to write off all inventory on units that are in layup, which in total resulted in one off impairment of $22,000,000 in Q4. And it's worth noting that this change in principal is not expected to have any impact on the fleet EBITDA going forward.
Moving to Slide 21 and the income statement. And I'll take you through the main items. So EBITDA after repair came in at 91.9 And in sorry, in Q4, we recorded an impairment on our FPSO fleet of €59,600,000 The impairment affected the units for Gagena, SOVESTENTA and SIVORI. So this is the 2nd round of impairments on our FPSO this year. And the impairments In the quarter 4 was driven by that, we're still projecting a market where there will be less opportunities for redeployment of all the units than we predicted 12 months ago.
The market for older units or we deployed as we see it, mostly is a bit for more marginal developments. And although we see oil prices are coming back up and much higher than when you took impairments on our fleet back in Q1, we think market fall for these kind of rate appointments and continue to be uncertain. And as Marco mentioned earlier, we have several units that have come off contract or some are coming off contract shortly as expected and with limited possibilities to read it for all of these units over the next few years. The impairment do reflect that we are considering certain of these units to be recycled in the near future. So looking at the operating results, that came in at negative €30,000,000 for the quarter.
Our net interest expenses were in line with previous quarter, while for Q4 we had a gain on financial instrument of 23,200,000 This was predominantly a result of positive mark to market adjustment on our FX hedges and our interest rate swaps as both we have seen a weakening of the U. S. Dollar relative to Norway to commerce and that we see that U. S. Dollar soft rates have increased quarter on quarter.
All financial items were negative by $11,700,000, predominantly due to revaluation of bond loans, which The nominated gain in NOK. So as a share profit From our loans from equity and current investments, we had the negative impact of $2,800,000 which is the impact from the ownership we have in BW Energy. And overall, the result for the quarter came in at negative 43,000,000. Moving to next slide and cash flow overview. We started the quarter with $142,000,000 in total.
Operating cash flow for the quarter was $90,000,000 which is 10% better than in quarter 3. And this is despite the fact that the additional revenues I referred to on Escobar would not we paid before Q1 and has not been captured in the current operating cash flow number. We continue to see limited investment on the fleet with overall $7,000,000 in the quarter, while we continue to reduce on our debt. We overall reduced our debt to $54,000,000 in Q4, $25,000,000 of this was scheduled installments on our facilities, while the remaining $25,000,000 was repayments within under the corporate facilities. As in today's environment, we basically have several interest from having surplus cash on hand.
We're very focused So minimally working capital by repaying on the RCF as often and as much as we can. So when we take into account that we paid approximately $30,000,000 in interest, we paid $6,000,000 in dividends and $12,000,000 under the preference share arrangement we have with us, we had a cash position of R140 $1,000,000 by end of the year. Going to the next slide on balance sheet. So our balance sheet at the end of 2020 continues to be solid. We have a steady strong cash flow from the fleet And we have used that to continue to reduce our net debt.
And if you compare The net debt we had in Q1 after we have spun off and listed separately VWG until end of the year, we have reduced our net debt by approximately 13%. The leverage ratio Continue to trend at 2.1 times when you look at last 12 months EBITDA over net debt. And I I would say the important part here is that this leverage ratio and the contribution from the fleet, it continues to give us flexibility to leverage as part of creating new accretive business and as we have an intent to secure new FPSO projects in particular in the near term as also highlighted by Mark. The equity ratio decreased by 1% As to that, 36.5% by end of Q1 sorry, Q4 and is predominantly driven by the impairments we recorded in Q4. Going to the next slide, Slide 24, Looking taking a look at the installment profile, you can see that the profile shows that we have ample time to plan our financing needs and we have flexibility to time the market as we have no significant debt maturities for the next couple of years.
We will continue to amortize on our loan facilities with approximately €120,000,000 per year for the next couple of years. And then as you can see on the back end, we will start getting into maturities on our bonds in 20232024. But Civil and administrative expenses, our intent is at the right time, we will work on the maturities and we will stretch this and we will refinance both loan facilities and both at the right time. Going to the next slide. We've said it before, we continue to reiterate that we think it's important to maintain financial flexibility to ensure we have capacity to be agile when market opportunities are there and have capacity to create growth for the longer term.
And as Marco mentioned, we are progressing well to secure a new FPSO project in the first half of twenty twenty one. We have spent a lot of time maturing our relationships with a limited number of global interest sector equity investors. And What's important is that these investors are investors that understand our business and they have an approach to project opportunities we're looking at, which will allow them to co invest with us from the time the project is secured as opposed to later. And this does provide us with early access to equity and facilities risk sharing through projects. And not only that, it also supports our capacity to grow as it reduces equity required from either offshore for each project and it does support us in recycling our capital from projects during the project phase and free of the credit bureau as compared to previous projects that the Vita Marshall has done.
Although we are not significant debt maturities for a couple of years, we will continue to explore how we can manage to choices early and how we can free up the credit from the existing fleet. As it is expected, some of the units will continue to will provide significant free cash flow for a number of years to come. And lastly, on this, I would I want to emphasize that as a large shareholder and as Marco mentioned, a large shareholder indeed a venture, We have significant value on our balance sheet in the companies that we believe will continue to grow in a very disciplined way and have significant dividend capital or dividend capacity. And This is capacity and can be used for growth opportunities or return back to shareholders, if and when received by the offshore. Our liquidity continued to be robust.
We had SEK 370,000,000 by the end of the quarter, of which SEK 230,000,000 is coming from our revolving credit facility. We continue to be very focused on actively managing our liquidity. And we have a number of things that we're focusing on. We see we have limited planned fleet CapEx in 2021 on the existing fleet With only 25 percent sorry, only 25,000,000 plan spend when you exclude any new potential projects. We have come to the end on a constant settlement for to the Autonomous And we expect that the $40,000,000 settlement, which we have highlighted some time, will be settled and paid well within the end of the first half of twenty twenty one.
And as Marco referred to and has been announced a couple of days ago, we do plan to invest €60,000,000 which is equivalent to just over $70,000,000 in the transaction for IDOL. And as we're aiming for the transaction to close and have the company VW idle listed by end of March, this will be liquidity that will be utilized within the Q1 of 2021. Lastly, When it comes to our shareholder returns, we continue to pay dividends with $0.035 per share being paid in Q1 2021 and we continue to stay behind our plan of paying an annual dividend of 25 And when you look at the various transactions over the last 12 months. When you include the dividend in kind in relation to the VIBDA Energy IPO, the buyback program and the dividend to bid, we have returned $135,000,000 to our shareholders over the last 12 months. And as mentioned a little bit earlier, our progress on work with partners, both for FPSO products and now also Going forward through by law, we believe it's a model that will help us enhance our asset returns.
It will allow us to progress our intent to invest in accretive projects and opportunities, which we think over time will help us lower our cost of capital. It will increase the value for dollar spend. And the fact that we can it will allow us for further recycling of capital can give growth potential to our already announced annual dividend over time. So with that, I'll hand it back to you, Marco, for the summary and outlook.
Thank you, Stallen. And then I will conclude with the summary and outlook. As you are well aware, COVID-nineteen is still affecting everyone's personal life as well as business, and this is now different for BW offshore. But we are prepared to deal with this as we have been doing in 2020. And I'm confident that it will not impact our EBITDA.
We will be able to continue to deliver a stable EBITDA performance. And we have we can build on our strong financial flexibility that we have created over the years, which allows us to progress new and accretive FPSO prospects. In parallel, with our combination or through our combination with EDO, we're now creating this new integrated floating wind company. And we're setting it up straightaway correctly to make sure we can grow this with the right Capital, in the right cost of capital by listing VWEO next month on Euronext growth. And that concludes this presentation, but Stol and I are happy to take your questions.
There appears to be no audio questions at this current moment in time. So I'll hand back to the speakers.
Okay. We have a question that's come in via the web. The question is, are you considering any buybacks in 2021? I'm not sure, Marco, do you want to
No, you could take 1, Stolle? That's fine.
Well, yes. No, I think we haven't discussed it. We have been very focused on the transaction related to IDOL and on progressing on our ambition to secure a new Projects FPSO projects in the first half of twenty twenty one. But again, depends on what would Going forward, we have good liquidity overall. And with the just Look at it in terms of development on the project side on whether buybacks would be appropriate.
Yeah. What I can add is, I think we're very committed to the dividend that we have been paying past quarters and they intend to continue with that in the coming quarters. But indeed, share buyback is, I think, a bit more particular and depends on a lot of factors whether that would actually make sense. And as we announced, we're also focusing now on making some interesting investments in both the FPSO segment and the floating wind segments. So it's probably not the immediate thing to do right now.
No more questions on the web. I guess maybe the moderator can check if there's any more
Apologies, there's one question registered. It comes from Frederic Lewin from Carnegie. Please go ahead.
Hi, good morning. I was just wondering if you could comment on how you see competition for new FPSO projects, Both SPM and Nordic have taken on a lot of work last couple of years. So I guess there are capacity constraints as well.
Yes. Good morning, Frederic. That's correct. I think we have quite clear views on the Competitive situation, I think you pointed you stated correctly. In the past years, particularly 2018, 2019, Competition has taken on a lot of projects, and that has definitely taken a lot of their both execution as financial capacity.
And then some other competitors don't have are not in the financial situation to compete. So as we said earlier, the reason we were also very focused in 2020 to target an FID in 2021 is because We actually see a window of opportunity where competition is reduced and strong counterparty Clients are still investing in large projects where they're interested in lease. And that has partly to do with they have to reconsider the way they allocate their capital. And lease has become a bit more or has become a lot more interesting for them even for longer term projects, which you didn't see necessarily in the past years. So I think we have a great window here where we see more attractive projects than we have seen in the past, and we see less competition than we have seen in the past.
And that's exactly the window of opportunity that we're trying to capture and that we have been working on last year to deliver
on. That's great. And in terms of value chain, obviously, it hasn't been much inflation, But has there been any changes over the last year with COVID? And yes, I guess both sub suppliers in the yards would have Fairly good capacity these days?
Yes, that's correct. Maybe not as extreme as we've seen in other global crisis like after 2,008, etcetera, and maybe after 2015. But the fact is that there haven't been many projects being awarded during 20. So obviously, that puts pressure on the supply chain. And so it's definitely, again, from that perspective as well, a good window to invest and to engage with the supply chain market right now, right after we're still a bit in the pandemic, but everyone can see that or getting out of it.
And our strategy has always been as soon as this pandemic is over, we need to be ready and strike immediately journey and go forward and take the opportunities that come after such and then make an and yes, supply chain is one of those elements.
We have a question from the web, which you can take, Which is a question coming from Nick Linne from Sachin Place. He's asking for BW IDO, what is the expected mix of profit contribution from technology licensing versus EPC work versus Long term ownership of floating wind assets.
Yes. And that's That's a question that's not so easy to answer because it really depends on which time frame. Are you talking next 5 years, next 10 years, next 20 years? I think in the shorter term, it will be more on technology and EPCI supply of floaters. But on the longer term, For sure, it will be much more about the co ownership of Wind farms, floating wind farms in consortia.
And but it takes time to develop these obviously. It takes a couple years to after winning acreage to develop the plants and then build and then install and produce. So that part is further out, but will be the most significant part over time for sure.
At the moment, I don't have any more. There's no more web questions from the web.
Okay. In that case, I'll hand back to the speakers for any other remarks.
Okay. Well,
yes, I think this ends the presentation and this Q4 update.