Good morning, everyone. Welcome to the first quarter trading update of BW Offshore. My name is Marco Beenen, together with Ståle Andreassen, our CFO, I will run you through the presentation in this call. Please note our disclaimer. Starting with the highlights. We delivered a stable first quarter EBITDA of $48 million and a net profit of $23 million. We reached an agreement to extend the BW Catcher contract to 2030. That increased our firm backlog. We signed the FEED contracts with Equinor for the Bay du Nord FPSO, targeting a final investment decision in 2027. We continue our predictable shareholder distribution program with a maximum payout under our governance. Based on that, this quarter, we will pay a cash dividend of $11 million or $0.063 per share.
We adjusted the full year guidance reflecting the Catcher contract and technical downtime on BW Opal, and Ståle will come back to both in more detail. On the strategic review, as communicated in December, we engaged an external advisor in response to the incoming interest against the backdrop of strong FPSO market fundamentals and a significant re-rating in the sector. This process is active and progressing. Our board and management are fully engaged, and we will provide a more substantive update when the process reaches a conclusion, but not before. What I can confirm is that our operational priorities and capital allocation framework are unchanged. We're not in a holding pattern waiting for an outcome. Moving on with the operational update, starting with BW Opal.
On Opal, we completed the replacement of all export compressor seals in March. There is only one flash gas compressor seal remaining, which is due to be replaced this month. Gas production recommenced in May after a temporary shutdown in March and April, and that was to clean the heat exchangers in the dew point train. The root cause analysis for the heat exchanger fouling has been completed and is currently under joint review with Santos, and that includes the determination of the source of the substance that has caused the fouling. We expect to gradually increase now the production towards practical completion, which is expected end of June or early July. I move on to BW Catcher. As I mentioned, we're very pleased with this new contract that we have concluded with Harbour Energy.
This contract will now take effect in 1st of February 2026 and runs until 2030 ± 6 months. This is about a five-year extension. It adds approximately $490 million of firm operating cash flow to our backlog. An important element of this agreement is that the previous unilateral rolling 12-month extensions have been removed, this now provides clarity around the contract end date, it allows us to market the unit early for new projects thereafter. The updated terms include a 10% discount to the previous day rate. For more information regarding the new terms, I refer to the appendix slides of this presentation. I move on with HSE and also fleet performance.
We focus on maintaining a strong safety record, and I'm pleased that, this quarter there were zero incidents to report. The trend upwards that you see is caused by reduced man-hours as BW Opal is now in the commissioning phase and no new construction projects have started yet. The fleet delivered 100% commercial uptime in the quarter, but this excludes BW Opal as we are still in the commissioning phase and the contract term hasn't started. An update on our backlog. As mentioned, the BW Catcher contract extension significantly increases our firm operating cash flow. At the end of the first quarter, it stands now at $2.3 billion, of which 97% is firm. That in comparison, at year-end last year, the firm portion of the backlog was 77%.
BW Adolo production was a bit above 26,000 bpd , slightly down versus the last quarter of last year, and that is due to well workover to replace an electrical submersible pump and also natural depletion. Furthermore, BW Energy has secured a 25-year field extension of the Dussafu field. BW Catcher already discussed and she delivered uptime, commercial uptime above 100%. On BW Pioneer, we continue to provide O&M services under a five-year contract. With Murphy Oil now confirming the drilling of the Chinook field in the second half of this year, we expect production to increase for the remaining part of the contract, and that will benefit the management fee structure. As expected, we signed the FEED contract with Equinor for the Bay du Nord FPSO. This FEED is expected to run through 2026.
That includes further maturing the FPSO design, finalization of the execution plan, and commercial alignment with Equinor, as well as our selected subcontractors and vendors. Final Investment Decision and contract award is then expected in early 2027. We have now also opened a new office in St. John's, and that is to strengthen the relationship with the local supplier base in preparation of our pre-operations and subsequent O&M services. With that, I hand over to Ståle, who will take you through the financials.
Thank you, Marco. As usual, I'll cover kind of three elements, which is the financial performance and the guidance. We'll look at the cash generation and the capital allocation, and lastly the balance sheet. We'll start with the EBITDA performance and guidance. First quarter EBITDA, as Marco said, was $47.9 million and essentially stable quarter-on-quarter. This is a result of strong and high commercial uptime from the core existing fleet. However, offset by limited contribution from FPSO Opal during the temporary shutdown that we saw in March and April. Moving on to the guidance, we've had to revise our 2026 EBITDA outlook to between $310 million-$340 million.
The reduction is driven by two identifiable factors, the temporary shutdown for Opal, and as the timing there, and the amended terms for the new contract on BW Catcher with a 10% discount. Roughly two-thirds of the reduction relates to Opal and one-third relates to Catcher. More importantly, the underlying cash generation visibility remains very solid with these two units. This is driven by the long-term value drivers, the 15-year contract, two commands for BW Opal, and also now Catcher adding approximately five years of firm backlog. Income statement shows a very stable quarter. Operating revenues were just over $130 million, and EBITDA, as mentioned earlier, $47.9 million. Depreciations was broadly stable, and we delivered an EBIT of $27.5 million in the quarter, again, aligned with previous quarter.
Net profit was a solid $23.4 million, corresponding to an earnings per share of $0.13 in dollar terms. The quarter itself was therefore resilient despite the limited contribution from Opal. Cash flow, of course, remaining an important part of the investment case overall. This quarter we generated $43 million of operating cash flow now in Q1, which is a reduction quarter-on-quarter, mainly driven by the impact from Opal or the lack of contribution compared to expectations in the Q1. We continue to incur some CapEx related to that unit due to the ongoing commission work and repair work offshore. About 20 out of 29 million this quarter is related to Opal.
The rest is funding for our project Elara together with the BW Group and some CapEx undertaken by BW Ideol . The reduction in cash also reflects $33 million of Q4 announced dividend payment, which was paid in Q1, where we topped up the 2025 distribution to reach 50% of net profit. If you take into account that, as well as other recurring items, debt servicing and interest, cash net to BW Offshore was $329 million at the end of Q1. Very substantial, I would say. We retain a net consolidated cash position of $167 million per end of Q1 and equity ratio of 30% sharp. This gives us flexibility at an important part of the cycle.
BW Opal is moving towards practical completion. Catcher, as Marco has said, has now been extended through 2030, and Bay du Nord is in FEED now progressing towards FID early 2027. I want to mention we continue to present net debt and leverage excluding BW Opal project debt. That is because the unit has not reached practical completion and is not yet contributing steady-state EBITDA. Once that is achieved, we will move to a leverage presentation view, including both debt related to that unit and EBITDA, giving investors a complete picture. Nevertheless, the key message is in any case that leverage remains relatively low and very well managed and financial flexibility in the company is good.
At the quarter end, available liquidity stood at $568 million, which again includes an RCF which is completely undrawn. All in, cost of our debt remains at an attractive 4.9%. Again, I want to remind you that all our floating rate debt is fully hedged. The board has declared a Q1 dividend of $11.3 million, as also mentioned by Marco, equivalent to $0.063 per share. That is consistent with the framework of paying a minimum of $0.25 in dollar terms, minimum per year, but paid quarterly with a potential top-up in the fourth quarter to reach 50% of net profit. Overall, we continue to prioritize a balanced capital allocation framework.
We want to make sure we are financially resilient. We are able to support selective growth, as also talked about earlier and which Marco will come back to, and returning cash to shareholders. With that, I'll hand it back to Marco.
Thank you, Ståle. In the next section, I would like to give you an update on our strategic priorities that are with the aim to deliver the growth of our portfolio. I would like to start with the FPSO market. The FPSO market remains strong, and that's a result of the growing global energy demand and also the focus on energy security with multiple projects in various stages of maturity led by Africa, Brazil and Asia. There has been a clear shift from the conventional lease and operate to EPCI and O&M contract models or hybrid models like we developed for BW Opal and also for the Bay du Nord project, all with the aim to reduce project finance cost. We are agnostic to those contract models, and we have experience with all of them.
We're well-positioned for both the large new-build FPSOs and also smaller redeployment projects. We have proven this through the delivery of BW Opal, which is again, one of the largest gas FPSOs in the world. We also have access to a high-quality FPSO hull for redeployment with the acquisition of Nganhurra earlier this year. We now also have clarity on Catcher, which is a very attractive redeployment candidate in 2031 after this term that we announced it will end. We can apply flexible execution models, including strong partners to projects that meet our selection criteria. We have a strong focus on winning new projects while we maintain a disciplined approach, and this is reflected in our ambition of winning one new project every other year.
Currently, our 12 months focus is on the Americas, where we are working actively on selected projects. Those are led by Bay du Nord in Newfoundland, Labrador, which I just mentioned. That is in addition to Albacora and Búzios 12 in Brazil and also the Kan and Zama projects in Mexico. The Brazil tenders will be done in a partnership with Saipem. The Mexico projects with our client, Harbour Energy, are very suitable for the redeployment of BW Hurra and also later prospects with BW Catcher. We also see opportunities to leverage our FPSO expertise to develop low-carbon energy solutions and to create future growth opportunities in adjacent business segments. We take a disciplined approach with selective allocation of capital till these markets mature. We focus on creating the same shareholder value as in our core FPSO business.
In BW Ideol, which is a floating offshore wind specialist, we have already 68% ownership, this company is progressing multiple projects. The latest development is EolMed, a 30 MW project in south of France that was now connected to the grid and delivered first power in April. Earlier this month, the three turbines has reached maximum capacity. We also continue to progress our desalination joint venture with BW Group, where we leverage BW Water technology. BW Elara has now taken the investment decision for the first unit with a planned delivery in early 2027. Natural other segments to consider, which are close to our FPSO business are FLNG, gas-to-power, and with that, we can expand our offshore energy production solution portfolio. That brings me to the outlook.
To sum up, our key priorities are, first of all, the final commissioning, production ramp-up, and contract commencement of BW Opal. Also to complete the FEED for the Bay du Nord in 2026. Then we target a contract award in early 2027. That underpins the target of one FPSO FID in the next 12 months. We also want to bring the first floating desalination unit to the market in 2027. We continue to focus on value creation for shareholders through an attractive shareholder return program, as well as concluding our strategic review process. Then we're happy to take any questions you may have.
Okay. We have some questions that has come in. I'll read those and then I'll try and distribute it as I see best fit. First question is related to the strategic review. Maybe you can reiterate what you're saying. The person is asking whether it's possible to provide more details about the strategic review and also around the timing and how far the review is.
Yeah. Well, I think I said what I can say, but I want to emphasize again that this process has the full attention of our board and management and the process is ongoing, and we conduct it in a professional manner. What I can say is the underlying business that you've seen today, the backlog, the fleet performance and the financial position, Bay du Nord, all of that is the foundation of which any outcome will be assessed. I also want to emphasize that our primary obligation is to create value for shareholders, and that's the lens through which this process is being conducted. Yeah, we will communicate further when there's something more definitive to say, and that's not right now.
Yeah. Next question. Could you update on BW Hurra opportunities and condition and likelihood of a new contract in 2026? You did link it to some of the project opportunities you talked about in Mexico. Maybe you want to—
Yeah.
—elaborate a little bit.
Yeah. I think it was covered in the update in the market and where all our targets are. The targets in Mexico, BW Hurra is a strong candidate because it gives a very strong starting point for the hull and the gas turbine solution. That's definitely a market for her. We also see some opportunities in Asia, Australia for Hurra. Yeah, there's three, four of those out there.
Next one. Is there an increase in local content around the world, or at least local competition making it more difficult to win FPSO contracts? I think it's another one for you, Marco.
Yeah, and you can chip in, Ståle. Well, I would say there is always a drive and an increasing push for local content for all areas where oil and gas is being developed. I don't recognize so much the comment on local competition. I don't think that's the issue. Local content matters. It also matters for us. We are actually quite proud of our track record of delivering very high local content in our operations everywhere we operate, close to 100%. For construction, currently it's only Brazil that really pushes for a significant amount of local content, well, that's built into the price and into the project execution models by the whole FPSO industry.
In other places, that's less the case and it's simply because it will result in non-economic, non-economic projects.
Yeah. Maybe as a, as a comment, like you said, I don't necessarily see that's been changing that lot. It has been, there has been a drive in certain jurisdictions and mainly Brazil in particular for construction. When it comes to operations, we see this as a natural part of it. U.K. has a very strong focus on local operations. We do the same in Australia, will be the same in Canada, et cetera. I would say it's more about predictability, so the visibility on what terms you're working on so you can plan ahead. As you say, well, otherwise we just welcome it because that's how we have always done it. We're used to it, nothing that I would say that concerns us.
Yeah, exactly.
Next one. Can you explain more about your evolving project execution model? Does it mean you are securing a preferred shipyard and other contractors for future contracts?
Yeah, I think we also said it before in other updates, but, you know, as we see that these FPSO projects are becoming larger and larger and the CapEx number becoming higher and higher, it's important that we make sure that we bring this project within a risk level that is appropriate to the size of our company. Therefore, the updated project execution approach is very much focused on carving out some of the EPC risk and margins to partners. That's either joint venture partners, but it can also be to carve out EPC subcontract, large part of the scopes, EPC subcontracted to shipyards or topside contractors. That reduces the overall risk for us.
Of course, it also reduces the margin, but it brings it in the right risk-reward balance relative to the size of our company.
Next question. Good morning. Can you please provide more color on the new BW Catcher terms? What's the new annual EBITDA contribution towards 2028 and from 2028 onwards? There's a couple of questions here. I'll take them one by one. I can start with this one. We have provided the updated guidance in the analytical slides further back on, I think it's on page 22. Now we are guiding on between $140 million-$160 million, with a $150 million annual EBITDA contribution as being a midpoint here, which is 10% down from what we have guided on earlier, in line with the discount provided under the new contract.
From 2028 onwards, there's always been a step down in the contract where the base rate steps down by approximately 25% from where it is today. A production linked KPI system kicks in, which is effectively that we get 25% of produced kind of barrels above 6,000 bpd , multiplied by the Brent oil price that is there and also capped to it. Under the new scheme, the same mechanisms apply. 10% discount to the charter rate, both now and also after 2028 on the lower rate. The KPI schemes kicks in again. There are some lower caps, which probably from a practical point of view, will not make much of a difference.
I think analysts and investors and others can do their own calculations on production levels. As a guidance, I could indicate that if you're producing, say, 12,000, 15,000 barrels and oil prices in the $60-$70 range, you will end up with some of the same all-in rate for Catcher post 2028 as you would before 2028. Of course, this depends on the exact production, and it depends on the prevailing oil price at the moment. I believe that the updated information we should give anyone pretty good avenue to calculate and estimate the sensitivity to this.
Yeah. You said KPI scheme. I know you mentioned, you meant, production tariff scheme.
Yeah, production. Sorry. Yeah, production tariff scheme. Yeah, correct.
The rate reduces 25%, but then it's kind of replenished by a production tariff scheme as you explained.
The next question was related to Opal and was projected CapEx for Opal to ensure contract startup. I presume this is related to remaining cash out. Remaining forecast of cash out is between $110 million-$120 million on, you know, paying all outstanding bills. In terms of growth that we have seen as a result of these delays and the additional work that we've done, that would be in the range of $30 million-$35 million to the CapEx overall. Just to kind of give both angles to this. Remaining kind of cash out is more linked to just things that are to be paid when the other milestones based, et cetera.
Important to also note that we also received more income ahead of the contract term.
Yeah.
Yeah.
Yeah. There's a natural offset, pre-contract as long as you produce. The last question is from the same person. Is the Bay du Nord FEED generating any free cash flow? The answer is it's cash neutral. We're not. There was never an intent that we would make any free cash flow or any profit on the FEED. This is a cash neutral engagement, driving us towards FID on the project. We're basically getting reimbursed what is being spent for engineering and design and development activities.
Next question. As of Q1 balance sheet, what is remaining CapEx related to BW Opal and the responsibility of BWO? I believe we have just answered that one. Also, are you able to recover any of the costs related to Opal startup challenges from either equipment suppliers or the client? I believe this is related to the repair activities and the root cause analysis. I'm not sure what you want to say on that, Marco.
It's whether we are able to recover any—
Yeah.
—these additional costs related to—
Well, I mean, yeah, I would think the delays that we had in the last, I would say couple of months, linked to the heat exchangers, that was obviously an unprecedented event, and it took a while to fully understand the source of this. I think our view is that this was not under our control, and as such, that is a topic for a discussion for cost recovery.
Given we are difficult to speculate on that now as we are focusing now on bringing production back up to kind of stable levels, working constructively with Santos, doing so.
Yeah.
Rather come back to the outcome later when that, when conclusions are made.
Yeah. You know, that needs to be fully concluded first, and then, you know, these discussions will also take place. Yeah.
The next question is, following kind of Bay du Nord and Opal. The question is, which other gas projects that BW Offshore is considering?
Yeah. Well, I mentioned we have for the next 12 months, we have a strong focus on Brazil and Mexico, and several tenders are progressing there. For gas projects, we are looking at Indonesia developments. There's several interesting gas projects there that could be a, that could be a next gas project.
Yep. Then there is another question, but it's more of a clarification to what we talked about earlier on Catcher. Just to confirm that the day rate stepped down from 2028 is a 25% reduction versus the original base rate or 25% reduction from the new rate, effectively 2026. Well, yeah, the rate in 2028 pre-contract amendment would drop by 25% from where it is today. So with the 10% discount that we are providing, there is a further drop from the original rate in 2028 because the way we measure it is, it's a, you know, the transition is consistent.
There was 25% drop in the rate from today, and into 2028, and with the 10% discount on today's rate, there'll be a 25% drop from that new discounted rate to the, to the new base rate being used for 2028 and onwards. Hopefully that is, that is clear. For Petrobras project which BW Offshore is bidding, such as Albacora and Búzios 12, where minimum local contents are being imposed, what are the measures being taken when partnering?
Yeah. Well, there are clear expectations for the Petrobras tenders, for this Albacora and Búzios 12, the clear local content expectations, which we will comply with. Together with our partner, we are developing a local content plan and approach. But we're in a competitive process, so, you know, I don't wanna give further details on that exact plan.
Okay. Just trying to see here. Did that one. Nope.
Any more questions?
No, no more questions popping up. That seems to be the end of it. I think I give it back to you, Marco, for closing up.
Yeah. Okay. Thank you. Well, I'm looking at if there's anything popping up still last minute, but it doesn't look like that's the case. With that, we have also answered all the questions, and I do want to thank everyone for participation in this call and also for asking the questions as you did. Wishing everyone a good day. Thank you very much.