Welcome everyone. My name is Marco Beenen, CEO, I will host this conference call together with our CFO, Ståle Andreassen. In this call, we will present BW Offshore's first quarter 2023 results. Please note our disclaimer, I move on with the highlights. I'm pleased to report good progress on Barossa, now 67% complete by end of April. We have divested BW Opportunity for $125 million, we continue our return to shareholders with a combination of cash and dividend in kind in BW Energy shares. That's roughly 50/50, equivalent to about $45 million on an annual basis. The EBITDA in the first quarter came in at $79 million. Operating cash flow, $128 million, that includes $78 million of the prepayments of the Barossa day rates.
Moving on with an update on operations, starting with Barossa. As I just mentioned in the highlights, the Barossa project is progressing well with 67% complete and on track for first oil in the first half of 2025 as planned. We're extremely pleased with the excellent safety performance on this project accomplished by all parties involved with 14.1 million man-hours without a lost time injury event. The assembly of the megablocks in the floating dock is nearing completion, and we are preparing for a float-out in June, and the first major equipment packages are arriving in Dyna-Mac in Singapore for integration in the modules. You can see from the pictures that we are now deep in the construction phase in all areas: the hull in South Korea, topside modules in Singapore, and the turret mooring system in Indonesia.
As you know, the project is being executed in difficult circumstances. We're dealing with inflation and global supply chain disruption, but we remain on track and maintain our guidance on schedule and the project economics. On our fleet and HSE performance, the safety statistics are trending down for recordable incidents, which is good. In addition, we report on the high potential incidents, which we treat as leading indicators, and we follow them up in the highest level of our internal investigation process to ensure we take this incident as learning moments to prevent potential future incidents. This quarter, we had two of those type of incidents. The fleet commercial availability, expressed in weighted average fleet uptime, was slightly down, and that was due to logistical challenges in Nigeria, which impacted Sendje Berge. Overall, still a solid commercial uptime.
Our strong cash flow is underpinned by our core fleet, which in addition to BW Polvo Barossa, consists of BW Adolo in Gabon, BW Catcher in the U.K., and BW Pioneer in the Gulf of Mexico. The backlog of these four units now stands at $5.8 billion, that is 84% of our total backlog of $7 billion. The total backlog includes the most probable options that we have in these contracts. BW Adolo will now increase its productions above the average of 7,000 barrels per day achieved in the first quarter, this is due to achievement of the first oil from Hibiscus and Ruche Field in April. Now the second well is in progress. I will come back to this in the BW Energy section of this presentation.
BW Catcher had a strong quarter with 100% commercial uptime and an average production of just below 38,000 barrels per day. BW Pioneer also delivered a strong quarter, and we're looking forward to the results of the drilling activities in the Chinook field, which have started recently. An update on units that we have in layup. We sold both BW Opportunity and BW Athena for a total net proceeds of $130 million, and we reduced with that also our OpEx going forward. In case of BW Opportunity, this was part of a redeployment project which consists of an EPCI, and an O&M service contract, which we currently negotiating, while the FEED phase has already started.
On the non-core fleet, we are on track with the divestment of this portfolio, we're aiming for a conclusion before the end of this year. This will cover the units in Nigeria and Ivory Coast. Petroleo Nautipa is progressing decommissioning, cleaning, demobilization, followed by recycling in the second half of this year. For FPSO Polvo, we have already agreed a sales transaction with BW Energy, so that the unit can be redeployed on the Maromba field in Brazil. We have now agreed with BW Energy to delay the payment milestones in accordance with the adjusted timelines of the Maromba project. With that, I'm handing over to Ståle to run you through the financials. Thank you, Marco.
Moving to the final section. Starting with the overview as usual. You can see as operating revenues came in at $166 million, and EBITDA at $79 million for the quarter. If you compare to quarter four of last year, you will see that those numbers were impacted by the one-off reimbursement for the work we had done on the Gato do Mato project. As such, it's not representative for underlying business going forward. As Marco Beenen mentioned, we had good performance on the units during the quarter, only affected by the shutdown on Sendje Berge, which have limited impact on the financial results overall.
When going forward now, we should see minor impact as marginal units are leaving the fleet through the divestment program, but that should be offset by a better and higher tariff from Adolo as production is increasing in line with plant production increase from BW Energy and also somewhat offset by a lower OpEx as units are leaving the fleet. Looking at the overall income statement, as you can see, depreciations are reducing slightly. Again, it's just a natural effect of units being fully amortized. We have fully amortized FPSO Abo in last quarter of 2022. As such, you see lower depreciation in this first quarter of 2023.
The sale of BW Opportunity resulted in a gain, or as it was sold slightly above book value of $6.4 million, recorded in Q1. When you move on to financial instruments, you will see that we have a negative mark-to-market impact of $13.9 million in Q1 related to hedges we have put in place. This is mostly driven by strengthening of US dollar against other currencies that we have hedged and also declining swap rates, which has had a negative mark-to-market impact quarter-on-quarter on interest rate hedges.
Countering this somewhat is the fact that we are revaluating our bond loan in which is denominated in Norwegian kroner due to the same strengthening of US dollar, which has a positive impact on our P&L of $10.3 million in Q1. Other items are more or less in line with the expectations. Share of our investment in BW Energy was the impact was close to zero this quarter. Tax expenses similar to last quarter, we ended the quarter with $17.8 million net profit in Q1. Taking a look at the cash flow. As you can see, cash flow from operation was $128 million in Q1.
When you exclude the prepayment related to the Barossa FPSO charter, we had cash flow of $50 million from existing operations. I have to say that's somewhat lower than what you would expect. This is driven by some delay on payments from clients, which has come in after quarter end and as such not been reflected in this cash flow statement. We had net investments of $196 million in the quarter, of which $159 million is related to Barossa. The remaining cash flow out in the quarter is one related to the final milestone payment to Keppel for the repair work we have done on BW Opportunity, which was all settled ahead of the sale and some CapEx that we still are incurring on Adolo related to the tie-in for Ruche phase I.
I just want to mention that this CapEx also, although not so significant, but it does translate to a higher ongoing day rate, thus including an agreed return on the investment we are making on the unit. As Marco already said, we have sold BW Opportunity in the quarter, and we got $135 million in from the buyer. For Barossa, BW Offshore for our 51% ownership injected another $13 million into the joint venture, and the same joint venture paid another $100 million to the construction company, as we're progressing as per plan for the project. All the debt was reduced by $66 million in the quarter as we continue with the scheduled installments on our facilities.
You now can note that interest expenses are reducing to about $5 million for the quarter as we actually get quite a bit of benefit from the positive cash settlement under our interest rate hedges, which are now significantly in the money. End of the quarter, we had $283 million in consolidated when excluding consolidated cash from BW Ideol. Taking a look at the funding for the Barossa project. As Marco has mentioned already, we are progressing well on the project. We continue to fund as planned. In Q1, we did draw another $135 million on the project debt facility. Which is now about 50% drawn in total.
As you can see, we called another $25 million in equity when you combine the equity injection from BW Offshore, as well as our partners. This implies that there's approximately $52 million more to be funded from BWO until end of their project. Prepayments from Santos is coming in as expected. They are being paid based on percentage measured completion of the project. As of end of Q1, we had received $607 million from Santos, which shows their continued very strong commitment to completion of the FPSO. I've said this before, but again, we are 100% funded for all costs related to this project.
This quarter, the net debt reduced by almost $130 million - $369 million by end of Q1. The basically exceptional debt re-reduction in the quarter is largely driven by the sale of BW Opportunity that was closed in March. I also think it shows to demonstrate that we continue to fund equity for Baroasa as well as paying dividend without the need to increase on consolidated debt on our balance sheet. Equity ratio trended down slightly and stood at 32.4% by end of Q1. As you can see, we have two debt facilities and two bonds that needs to be addressed over the next couple of years.
I'm pleased to say that we have now launched the refinancing of the corporate facility and the facility for BW Catcher, which both have their original maturity mid 2024. We are targeting to extend the corporate facility with five years from closing and the Catcher facility with 3.5 years from closing. We do have a target to close these refinancing efforts within end of second quarter. We think that we are offering lenders an attractive refinancing opportunity backed by units which have good cash flow visibilities and in two facilities that are further supported by our corporate guarantee. Post-closing of the refinancing, the next step will then be to start addressing the outstanding bond debt that we have in the market. As I've said before, we indicated that we...
As we've indicated before, sorry, we expect to reduce this debt significantly on a gong-going forward basis. To sum it up, and I think Marco has said it to a large extent, we are progressing well on the investments on the non-core fleet, freeing up $130 million from the sale of BW Opportunity and BW Athena. The efforts on the remaining non-core units are, in terms of the investments, are continuing. Also including the sale of Polvo, which is now being moved to completion by first half of 2024. Looking at the liquidity situation, I would argue it's rock solid with the sale of Opportunity, and we now have over $520 million in available liquidity at the end of the quarter.
With the liquidity situation being where it is, we have continued to opportunistically repurchase the convertible bond as it's trading significantly under par. As I mentioned on the previous slide, we are now well on the way with the refinancing of both the corporate facility as well as the Catcher facility, which all in all will help improve our overall financial flexibility and our capacity when it comes to new project business that we are in the market for. I think when you bring this to the project and the outlook there, as Marco is saying, we are delivering well on Brasa, and we have a good cash flow visibility with activities we're undertaking.
That allows us to continue with what we would argue is a substantial dividend program at the same level as before and which is at current share price level implies a dividend yield of approximately 10% annually. With that, I'll hand it back to Marco for the remaining part of the presentation.
Thank you, Ståle. The last part of our presentation is an update on our strategic investments. The window of opportunity is definitely still open and even improved on the back of concerns about the energy security and relatively high oil prices. This also supports contract extensions and redeployment, which are obviously relevant for our core fleet. For new FPSO projects, this year we may see 10 new awards in the market, and there are about 40 - 50 serious FPSO projects on the map between now and 2030. As BW Offshore, we're targeting the four-five most attractive of these. We do see that lenders and investors are increasingly selective on which projects to support. In addition, we see several banks no longer supporting oil and gas developments, including these FPSOs. Selecting the right project is absolutely key here.
Our preference remain long-term lease contracts with lease prepayment, similar as we have with the Barossa project. We're also looking at EPCI plus long-term O&M opportunities. Key criteria for us is that we will not invest in projects which require residual value risk in the asset. In the floating wind segment, the assembly of the first EolMed floater based on BW Ideol's damping pool design has now started in Port La Nouvelle. Our subsidiary, BW Ideol, has signed a heads of terms with the local developer, Elawan Energy, to co-develop floating wind projects in Spain and Portugal. The BW Ideol board has approved a partnership for the Celtic Sea tender. Good progress have been made for the product development funding backed by France Investment Fund ADEME. ADEME will invest $40 million in BW Ideol's project portfolio.
Last but not least, the Ardersier Port, where BW Ideol obtained exclusive rights to manufacture floating wind turbines, has now secured GBP 300 million to progress the development plans. Moving on to BW Energy. BW Energy is on track for a step change in production during 2023. They started with the first oil from Hibiscus /Ruche, and that added about 6,000 barrels per day, which is in line with the expectations. It will continue to bring five more wells online during this year, targeting about 30,000 barrels per day when all these six wells are online.
In addition, an additional gas lift compressor on board FPSO Adolo will further support the production. Startup is now expected very, very soon. In Brazil, the planned transaction of the Gouveia field is now progressing towards closing. In Namibia, on the Kudu field, a 3D seismic campaign is progressing to further study the potential of the reservoir following the recent nearby discovery made by a couple of oil majors. This may open a whole new oil and gas region. That brings me to the end of the presentation. Brief summary and outlook. As we explained, full focus is on the safe and timely execution of the Barossa project, which is going as planned. We will conclude the fleet divestment program in the second half of this year. We're actively but selectively progressing new infrastructure type FPSO projects.
We continue to support BW Ideol in pursuing floating wind opportunities, both co-development as well as the first EPCI opportunities. We continue to support BW Energy in the ambitious production ramp-up. We remain focused on shareholder returns while we grow the company, both in the FPSO segment and the renewable energy segment. That concludes this presentation, we will then continue with the questions that we have received on the web.
Okay, I'll go to the web where we've received a few questions. I'll start with the first one from Christopher Møllerløkken from SpareBank 1 Markets. There's actually two questions there, I'll do the first one first because it's simpler. I'll take the second one for you, Marco, but I can take the first one. The CapEx excluding Barossa was higher than expected in first quarter. What is it used for, and what's the guidance for CapEx excluding Barossa going forward?
As I mentioned in my part of the presentation, the majority of the CapEx excluding Barossa was for the final milestone payment to Keppel related to the repair project that's been going on for that unit. That was all cleared out before the unit was sold and was closer to $30 million now. That's now done, and the rest was related to Adolo as we're doing some upgrades related to the tie-in project there. Going forward, as kind of units are, all the units are being phased out, we do no investments on them. Catcher and Adolo generally are reversible contracts, we have very little in terms of planned CapEx for these units.
What we have in the pipeline is to finalize the work we're doing related to this tie-in activities for Adolo, which should be in the magnitude of $5 million-$10 million in total in terms of CapEx excluding the Barossa project going forward. Very limited. The second question is on if the Barossa FPSO is completed according to plan, but Santos is not able to start production due to delayed drilling program, will the contract terms still allow you to go on your contracted day rate, or would it be fair to assume you would receive a standby rate until Santos is ready to start production? Marco, you wanna take that one?
Yeah, I can answer that. I mean, our contract is very clear on this. If we are ready to receive first gas, but we cannot proceed, we will receive a standby rate. The difference between standby rate and contract rate is not very much. The good thing about the standby rate is in fact that the contract term is not starting. This comes on top of the firm period of the contract. In that sense, limited impact on our expected cash flows, whether we go on standby rate or contract rate.
Okay. The next question is coming from upstream. In terms of the fleet, if your divestments are completed, how can you compete in the redeployment market, which evidently the oil and gas markets or oil and gas companies are turning to with enthusiasm? Maybe just to start from my side and then you continue, Marco, on this. I think we have tried to be quite vocal on the fact that we are predominantly focused on new build projects. We're very particular about counterparties and the type of contracts we are entering into. We are not looking to take also residual value risk on the assets and looking more for the type of long-term infrastructure type projects.
It's a conscious decision to divest all the units as we don't actually see them as viable redeployment candidates. Not that we're not looking at these opportunities if they are around. If you had the right unit, that is also a potential for us. I don't think we see this as our. This is not main part of our strategy. We will see if the right projects come around with the right fit on the right unit. Otherwise, I think we are more focused on the market where we do new builds. You wanna add to that, Marco?
Yeah. No, you said it correctly, but indeed our strategy was to extract maximum value from our existing fleet, and we do that through divestments, but also redeployments where redeployments make sense. The units we divest, we didn't consider as very suitable for redeployments in the first place. The fact that we complete these divestments is just progress, is a good thing. In view of redeployment opportunities, there were basically four assets that we had, which was Polvo and then BW Opportunity, and then we still have BW Pioneer and BW Catcher. Those were the assets in our portfolio that could potentially be redeployed. Well, Polvo will be redeployed with BW Energy. BW Opportunity we sold, but we're also expecting to progress into a redeployment project for that unit.
In that sense, two out of those four are being redeployed. We have Catcher and Pioneer in due time. First we see, we expect those units to get into contract extensions, and then potentially they could still benefit from a strong redeployment market. One is not, I would say contradicting the other.
Thank you. Second one is also from upstream. In terms of potential new projects, can you provide some detail on the projects being pursued? Not sure what you want to.
Yeah. There's not too much detail to provide, or at least, I don't think it's desirable to provide too much details. What I can say is that we're definitely focused on Brazil and Americas in general. Of course, you know, West Africa is also a market we know well, and there could be opportunities there as well.
Yeah. I think what you are saying, what you also showed on the previous slide, that the market is very active at the moment. There's probably more in terms of limitations on capacity, internal capacity, financial capacity, supply chain capacity that also, I would say limit how many projects we can chase at the same time.
Yeah, exactly. That's why we're saying selectively. You know, the other light that can shine on, you know, what type of projects we pursue is that's linked to our criteria. We want contracts with strong counterparties. We want contracts that can be financed obviously. We will not take residual value in our investments.
Thank you. Next question is from Nick Linnane from Sefton Place, he's asking what is approximate increase in BW revenue you get from 1,000 barrels a day higher production in Gabon? Does this only kick in above a certain production level, or does it kick in from current production level? I think details on the contract, but yes, there is a tariff there. It's $1.5 up to 20,000 barrels and $3 above. That's how the tariff works in terms of how it affects our revenue stream with higher tariff. The next question is from Cinder Serby from Arctic. Despite a very good sales price of $125...
it's not euros, but $125 for BW Opportunity, you recorded a gain of only $6 million. Does that mean the book value was $119 million, or is the accounting affected by the deal you're negotiating with regards to redeployment? The book value was close to $120 million when the unit was sold. I think we have done quite extensive repairs over a number of years on this unit. I can't remember exactly the number on top of my head, but it's above $80 million which has been invested in this unit. You know, replacing the hold-off section of this, and new accommodation on this unit.
The big... I would say part of this unit is completely new, which is somewhat also reflecting in the price that the client has paid for this unit. It's also the reason why they saw it as a good opportunity for what they are, where they are gonna redeploy this asset. There's nothing else to the accounting that the book value was very close to the price that we achieved through this sale.
That being said, and has been said also in our, in our updates, is that we are now pursuing to do a kind of an EPCI services contract for this unit, where we will do the necessary upgrades to enable this unit to go on field for the client. Also combining this with a transitional type of O&M contract, where we will operate the unit for a period of time after activation. Next question is from ABG, from Haakon Amundsen. Sounds like we can expect the quarterly EBITDA run rate to remain roughly around the underlying level from this quarter in the near term. Is that correct? Can you provide some more color on the prospects for extensions on Catcher and Pioneer?
Is refinancing of Catcher facility linked to an extension? Well, on the first one, I think going forward, given that, as I also said, the marginal units are leaving the fleet. In the short term, I think we expect the quarterly EBITDA run rate to drop somewhat, but we expect this to be countered to a large extent by increased tariff being generated by BW Adolo when as production ramp up. But there might be a bit of a gap there until kinda this equalizes. If you ask me kind of today, I expect the next quarter to be some million lower than what we are what we have reported today due to this kind of change that's ongoing.
It's also hard to be 100% specific on this because of these divestment programs that we work on. It's difficult to give you kind of the exact timing of when units leave the fleet, when agreements are being closed, and that's affecting our short-term kind of internal forecasting a little bit in terms of being accurate. Somewhat, yeah, to repeat myself, some drop I expect in the near term, and then for this to be countered as these units are leaving the fleet and production is kind of being increased on BW Adolo countering this again. Then should bring EBITDA up to very similar levels as today.
On the second question, on the prospect for extensions on Catcher and Pioneer, maybe Catcher, sorry, Marco, you would want to elaborate on this, how you see it.
Yeah. On both of them we're seeing quite a high probability of extensions being exercised. You know, probably somewhere between three and five years. In any case on Catcher, we see also beyond the extensions, we see also very good opportunities for redeployment. As mentioned, the market is there is a good market currently for redeployments and Catcher is one of the most versatile FPSOs in the space. Yeah, beyond extensions, we also see opportunities for redeployments. We have a few more years on the contract and at least a few more years extensions, and then we will look at that.
Thanks. I realized that there was a second question in there as well, is the refinancing of the Catcher facility linked to an extension? The answer is no. We're not negotiating an extension in combination with this. We are pursuing the refinancing on the basis that we are fairly confident that there will be e-extensions under the contract. The stretching of maturity that we're doing on that facility should be well within the timeline we have for continued charter for Catcher on the existing field. That's our view. Because the...
We're only asking for three and a half more years on the Catcher loan facility from estimated closing towards the later part of Q2. Next question is from Nick again from Sefton Place. Under what circumstances, if any, could Santos declare force majeure on the Barossa start-up date? Somewhat related to this, can you successfully commission the Barossa FPSO in order to satisfy these tests to qualify to receive the standby rate if there are no wells to tie into the FPSO?
Yeah.
Do you want me...
Yeah, I can.
... to forward that to Marco to elaborate a little bit?
Yeah, I can elaborate. I think, again, the issues that Santos has in their field development are linked to permits, environmental permits of the drilling program and pipe lay program. Has nothing to do with the FPSO. This has just, you know, this just requires additional work for Santos which they are completing. This cannot be seen as a force majeure event in any way. Our contract is very clear on that. The second question was then whether, you know, if again, as Santos has guided, these activities are not on the critical path. The FPSO is on the critical path, so they have time to, you know, provide this additional work that has been requested by the regulator.
If that would still result in a delay of the project and if there would be no gas, then I think the question was whether or not we can successfully commission and whether that would then prevent the qualification of the standby rate. The answer is no, that has no impact. The criteria for standby rate is that we are ready to receive gas. When those criteria are met, so basically the FPSO is ready and installed and pre-commissioned, that's where the entitlement to standby rate kicks in.
Yeah. Basically to the contrary, the standby rate is there to ensure we get a rate if the client is not ready.
Exactly.
No commissioning would then be necessary as long as we are able to deliver the FPSO on field, as you say. It's really there to protect us against the delays from their side.
Yeah. Which is, by the way, a very normal clause in, I would say, almost any FPSO new build contract.
Yeah. Thank you. The second question from him was, what is the current production level at, okay, for Pioneer FPSO, and what level do you think needs to be maintained for the option to be exercised?
Yeah.
Do you remember exactly what it was?
No, the BW Pioneer is producing around 10,000 barrels per day, around that. Well, personally, I think that is more than enough with current oil prices to keep it interesting to produce. What the break even is for the client, that is well, hard to say, and I also don't wanna speculate. I think, you know, there are. 10,000 barrels per day is still quite a comfortable production rate to continue to produce the field.
Maybe I was just thinking that in the fact that now that the client has decided to move ahead with the drilling indicates their strong interest to extend this because it's. There's maybe several elements to this. One is the current production, but I think we have said and we also know that for this to be extended, because the next block is from 2025 to 2030, so it's another five years, to be able to charter a period, charter FPSO for such a long period, they will need to replenish there with the. That's why they do the drilling as the current levels will taper off and not support that. That's at least what we think.
If you look at their activity now moving towards drilling, and you see where oil price is at and the outlook there, I think that is supportive of them showing strong indications that they want to move ahead with, and keep the unit on the field for longer.
Yeah.
Don't have any refresher, but that's the last question at least I can see on the web here if there's nothing else coming in as I refresh now.
Okay. Well, that's.
No, that seems to be it.
Yeah. If that's it, then I think that will conclude this call. I wanna thank everyone for the questions and also for your interest in our update and your participation in this call. Wishing everyone a good rest of the day until next quarter. Thank you.