Good morning, good afternoon. Welcome, everyone, to the BW Offshore Second Quarter 2021 Update. My name is Marco Beene, and I will cover the general part of this update. And Stol Andreasen, our CFO, will run you through the financials. Unfortunately, once more, rather in personal format with this conference call.
But I'm hopeful that next quarter, we can return to will perform out of live attendance and at a selected venue and live streaming for those that can't attend. With that, moving on to the next slide. Please take note of our disclaimer when you process the information of this presentation and then Slide 3 highlights. We are pleased with the overall progress on Barossa. Our major contracts and packages have been locked in.
And equally important, the financing of our Deberos side FPSO is now very near to completion. Financial results were solid. 2nd quarter EBITDA came in at US91 $1,000,000 a bit below previous quarter, and that's explained by some positive one offs in the previous quarter and negative one offs in this quarter, but Stolle will come back to that. Operating cash flow was was $134,000,000 which includes $56,000,000 of lease prepayments for the Berelsa FPSO. And then cash dividend continues at same levels as previous quarters.
Will turn over to the operational update. Slide 5, HSE performance. HSE performance was good. Our statistics are trending down, and we had 0 recorded LTIs and will discuss high potential incidents in the Q2. Commercial uptime is trending back up and we're now close to our usual 99% average uptime as we normally have.
Will then zooming in to some of
the units on Slide 6. First of all, Volvo, she comes off contract. We started decommissioning and we're preparing for demobilization later in the year. She is a suitable candidate to develop the Maroma field also because obviously came off the Volvo field, which has similar oil characteristics. Then as far to reinstate the cargo tank, which was involved with the accident.
We are currently carrying out a planned 60 day shutdown, and this will impact the 3rd quarter results somewhat. Q4 will be normal quarter again, and we're also discussing complex extension scenarios with our client C and R. Dansendi Berge has a planned shutdown next month to carry out a tank inspection campaign, which will last about 2 months. And that brings us more or less to the end of the current contract, which expires early November. In the meantime, we're evaluating the best options for her, either a contract extension or a potential divestment.
And then Vicente in Brazil. We're moving her out of Brazil as layup there was too expensive, and we changed that to a cold layup in Oman. Overseas currently in transit to OMA. And then finally, Umeroa. And after we managed do agree with the New Zealand government last year that they would pay for the decommissioning and disconnection of the unit in New Zealand has now arrived in Indonesia for a cold layup.
This demobilization project was concluded without accidents and within budget will schedule and to the satisfaction of the authorities of New Zealand. Next slide, Slide 7. It's important to be reminded that of the current operating fleet, 3 units deliver about 85 percent of the cash flow, which are, in the first place, KETCHER, operating on the KETCHE field for Harbour Energy and delivering above 100 percent commercial uptime. Secondly, Adolo, producing on the Dussafu license in Gabon for BW Energy and Pioneer, for which we extended the contract with Murphy Oil till 2025 and 5 more years after that. If we add the new backlog of the Barossa FPSO for Santos, will be building out our portfolio with a solid backlog for the future, amounting to a gross number of $8,100,000,000 of which $6,800,000,000 is will fix, which is about 84%.
Then diving into Barossa, the project execution, will slide 8. The project has been off with a good start with several milestones already completed will be within schedule, like model test and first steel cut for the turret system and also steel cutting for the hull will already follow next month. The increase in commodity pricing puts cost will put pressure on our costs. But we have sufficient contingency to absorb this with and we're also mitigating this I'll by accelerating the lock in of our major contracts and packages like the will build fabrication contract, the turret system, the top side fabrication, the integration yard slot and the power generation packages. So while we're still early in the project, with already 66% of all procurement scope committed, we will be was less vulnerable to the dynamics in the market going forward.
Moving on to the fleet contract view. This is the usual slide. It shows what I already explained. You see the first four units there, Barossa to Quecher. That's actually now 95% together of our backlog.
Now Tipak comes off and Jurgen Kap as well during the course of next year. Jokurtola, SPA and AVO are all units that are on fields with still longer term production ahead of them. Serni Berge, I already discussed as well as Polvo. Moving on then to COVID, Slide 10. Despite the progress in the vaccination programs in some parts of the world, COVID-nineteen is still very much a threat to the health of our people and to the operation of our assets.
Therefore, we still have our quarantine protocols in place and enforced. And the cost of these have now been reduced to about $5,000,000 per quarter. But this is still a lot of money. However, the pie chart on the left shows the success of these protocols. As you can see, we only had one will have an infected case on 1 unit offshore in the Q2 and all the other cases are called during the pre mobilization.
So it shows the effectiveness, but it doesn't come without efforts and expenses. In the majority of our offices around the world, we're now seeing an increase of occupancy. In Singapore, we have been able to ramp up the Barossa project team as per plan. With that, I'm handing over to Stolle for the financials.
Will
Thank you. Next slide. Thank you, Marco. Will Next slide, please. So we're starting with an overview as we usually do.
Will As you can see, operating revenues were almost in line with the Q1 at NOK 208,000,000 will now take a look at the EBITDA. In Q2, while EBITDA came in at SEK91 1,000,000 for the quarter, which is about 18% will be below a relatively strong quarter 1. The EBITDA for second quarter has been impacted by a number of items. We are incurring higher layup costs for CSB in Brazil than anticipated as we're not able to do cold layup. I will be discussing on bringing the unit out as soon as practical.
And although this has taken some time, we are now on our way
will be discussing the Q1
of 2019. We have, as Marco mentioned, also brought Yumoroa safely back to Indonesia for layup. And although the cost of decommissioning the unit was covered under the contract, the The actual cost of transportation of the unit was not reimbursable and is another cost element impacting the result for the Q2. And In general, we have seen that activity level on the fleet has been relatively high, resulting in somewhat higher will discuss the cost when you compare like for like quarter on quarter. As Marco also mentioned, we continue to have will be able to manage COVID, where we incurred about $5,000,000 this quarter on management.
And As we look at it, we consider this will continue at similar levels for quite some time going forward. I also want to mention that with BW IDO will now own approximately 53% by BW Offshore. We have to consolidate their business as part of our results. And the EBITDA impact of IDOL of negative SEK 2,200,000 in the second quarter will be discussing the results of the BW Offshore Group. So but looking forward, I want to highlight that as the contract for Pol was ending and with Sbor and Sverdrup going into a period of will be in the shutdown where we have to do tank inspections.
We do expect to have some limited negative impact on results will be in the in quarter 3 as well.
Next slide, please. Will
On the income statement, I'll comment on some of the main items. As you can see, depreciation and amortization is will go up a little bit from quarter 1 to SEK68 1,000,000. This is a result will include depreciation and amortization of assets and technology in BW IDOL as part of our accounts. We did sell Bergelena for SAKRE in the Q2. No impact on our income statement as the unit was sold for a price will be equal to net book value.
When you look at the financials, net interest expenses were in line with previous quarter, while we had to record a mark to market loss on financial instruments of SEK 9,000,000 in quarter 2, Predominantly linked to swap rates reducing quarter on quarter. And this was somewhat offset by will provide a positive revaluation effect on our bond loans. Our investment holding in BWMG continued to provide a positive contribution to our results with SEK 5,300,000 to BWL4 from an overall net result of SEK 15,500,000 will be in BW Energy in quarter 2. So with underlying taxes from operations in line with expectations at I'll take the next question. We posted a net profit for the period of SEK 5,900,000.
Next slide, please. Will We started the quarter with a total cash position of 210,000,000 I'll Of which SEK 60,000,000 were consolidated cash from BW Ideal. Cash flow from operations was SEK 134,000,000. This includes I'll be receiving the prepayments from Santos for the Borossa FPSO. As we stated before, the contract with Santos includes the prepayment I'll of debt is sold there during construction of approximately SEK1 1,000,000,000.
And this will be presented as cash flow through operation I will as it is technically part payment of the future lease of the FPSO. We invested I'll SEK41 1,000,000 into projects. This is predominantly linked to Barossa as I'll also note that CapEx on the existing fleet was limited in the Q2. As I mentioned earlier, Bergelena was sold for recycling in Q2 for, as previously communicated, net proceeds of SEK16 1,000,000. Will We continue to amortize on our debt, and we did schedule repayments on the cash facility will take a repayment under our corporate facility, reducing our debt by SEK 88,000,000.
The remaining items are, I would think, self explanatory and to a large extent, in line with previous quarters. So that taken into consideration, we ended the quarter with a net cash position of SEK 148,000,000 when will discuss the financial results. Excluding consolidated cash from BW IDO of $55,000,000
Next slide, please. Will
On the balance sheet, you can see that we continue to reduce our will net debt, reducing it from SEK930,000,000 in Q1 to SEK 854,000,000 I'll be happy to report that by end of second quarter. In terms of ratios, you see the leverage ratio is trending flat in line with previous I'll take the next few quarters, while the equity ratio trended up just slightly and stood at 39.9 will present at the end of Q2. We have said this before, but I want to reiterate that will now take a look at the balance sheet to be able to take on growth. And as we ramp up the activity on Ambrosa for the in the coming quarters, will now take a look at the financial results.
Will Next slide, please.
This is another familiar slide. And again, you see the installment schedule show that we have a manageable maturity profile on our existing debt With the larger debt maturities only towards end of 2023 and into 2024. And although we're now will start to see the contribution from all the units are tapering. As they get closer to end of contract, the Key units on FPSO fleet continue to deliver substantial cash flow, and we do expect that they will continue to do so will now take a look at the financial results for
years to come. And this
is what gives us comfort towards refinancing of debt maturities in due course. I also want to highlight that we have substantial asset values through the investment in BW LNG as well as the investment in BW IDO, will take a look at the future. Will From a cash management point of view, I also want to caution that with a large project like Parossa, which is will be relatively capital intensive and also will tie up some working capital. We will plan will work on maturities and structural way to ensure we have good visibility on liquidity at any time. Next slide, please.
As Marco mentioned, We are near complete on the financing for Borossa now. We have continued to focus on this will walk through the whole quarter. And I'm pleased to say that we are now complete on signing a SEK 1,150,000,000 combined construction and will deliver financing for the project. The loan will be a 14 year facility when including the construction period will deliver through a syndicate of 9 international financing institutions. In parallel with this, we have been finalizing agreements with our partners will be happy to report that we will be able to report that
we will be able to report that we will be able to report that we will be able to report that
we will be able to report that we will be able to I'll be happy to report that we will be able to announce this now very shortly I will conclude. As we're always looking will now hand over to Mark. In the Q2, we were contemplating to launch our inaugural green bond will define the transition we have started on with our investment in BW IDO. A great deal of work was done to prepare for this, will include the following: Proceeds from a green bond is highly regulated I will have to be used towards investments in qualifying renewable activities. However, as the terms that were offered will not be satisfactory to build a voucher.
We did decide to halt the issue for the time being. But we might will come back to the market at a future point in time with this. On the liquidity side, as I've mentioned, we have to be focused now going forward as Parossa is ramping up. I will now turn the call over to Mark. We are making good progress on locking in large contract packages.
And as we are doing so, the spend curve will pick up in second half of this year. And As indicated last quarter, we estimate total CapEx in the range of SEK 500,000,000 by end of the year. Will We continue to evaluate opportunity costs on holding units in layup. And although will It's not a significant cost per unit for layup. They also tie up working capital, and we will be focused on make sure we rightsize the fleet going forward.
The estimated CapEx for existing fleet continues to be in the range of $25,000,000 for the full year of 2021. As shown on the slide here, overall liquidity was approximately SEK280,000,000 by end of Q2 when you exclude will discuss the consolidated cash from BW IDO. And this includes SEK 132,000,000 in available liquidity from the corporate facility. So with the recent investment in BWI, the oil and securing the contract for Brose, we believe we are on track will now turn the call over to Markku Beine,
and I will now turn the call over to Markku Beine, and I will now
turn the call over to Markku Beine, Which we believe is one of the cornerstones for future success in both the large scale newbuild FPSO segment and the Offshore Floating Wind segment. I'll Barossa itself provides for long term stable cash flow as well as the ability to grow our dividends in the medium term future, will provide for growth potential in a new and potential vast market longer term. Will We're also pleased to see that BW Energy is announcing multiple value triggers will be able to deliver the next couple of years, culminating in an intention to pay dividend when fully operational on Dussafu and Marumba. So with this, we continue to keep confident that we have good overview of our liquidity and that we can continue to pay a dividend as in previous quarter of USD 0.035. I'll hand it over to Marco again.
Yes. Okay. Thank you, Stolle. In the next slides, I would like to give you an update on our strategy in adjacent segments. And firstly, the floating wind segment.
Next slide, please. We're very pleased with how this market develops. The response to the recent scope and tender is a testimony that the floating wind industry is maturing rapidly and that there will be have significant growth to expect in that segment. And therefore, it's important to be an early mover with proven technology, it means having full scale floating wind turbines in the water and gaining experience on a daily basis. We're doing that through our controlling ownership of 53% in BW EDO.
We're combining BW offshore's global footprint and project track record with BWEDL's proven technology and product developer positions together with our partners. We're also teaming up to develop wind power service business through EPCI or lease of floating substations I'm Power to Platform Solutions based on BW EDL's technology. And in parallel, we have ship with a leading U. S. Renewable energy and utility company, Invenergy, which was established to submit bids for the Skopin tender.
Next slide, diving in a bit more on BW EDL itself. They presented their quarter our Q2 results last week showing that they're progressing well with building their project pipeline. And worth mentioning is the I'll have a project in the south of France. It's a 30 megawatt pilot project based on 3x10 megawatt work with wind turbines. And also in France, the partnership with a leading French utility for the Brittany tender.
Furthermore, a collaboration has been established with Hitachi ABB to deliver industry first scalable floating substations. And that's a competitive solution for both floating as well as bottom fixed wind farms. And that's in reference to this, what we call wind power service business that we're trying to develop with BWD altogether. In July, a joint development agreement was signed with INEOS Corporation for a commercial steel floating wind farm in Japan, will further strengthen the already quite strong position BWEDL has in Japan. In I work with U.
K. Together with the joint venture partners. Bids were submitted for the Skopin tender. And then design and engineering service agreement has been signed for Taiwan. And this not only creates a have a strong position in that market, but also generate some immediate revenues for the company.
Finally, this month, heads of terms for a partnership I was signed for a floating wind development in Italy. Then moving on to BW Energy. Our 35% ownership in BW Energy, which has a current market cap of USD618,000,000 represent a significant value for BW Offshore. So that's Slide 21. It keeps us exposed also to the upsides was in oil price as well as to the dividend potential, as Stol also mentioned, once the Hibiscus project and the Maroma development are in production.
At the moment, the Tortue field income on produces about 10,500 barrels per day. And in Q4, this will increase when 2 more wells will come in production. Then the Hibiscus Russe project is on track for our first O in the last quarter of next year and the Maromba development is on track for a FID in Q1 of next year. We materialize our strategic fit with BW Energy to an increased production tariff when we are in production when the production on the Tortue field increases, as I said, by end of this year, I'm with this 2 new wells that come in production, and that will give an additional peak production of about 8,000 barrels per day. Already mentioned that Volvo is considered a suitable FPSO to be redeployed at the Maramba field development.
And there is also potential for additional redeployments like BW opportunity for new field developments. Will then to Slide 22. Basically, now summing up I'm looking forward. First of all, we're fully focused on will take delivery of the Barossa FPSO within budget and schedule. This is the most important activity we have in the company, and it is encouraging that we went off with a great start and have been able to lock in the majority of our commitments.
We will take a holistic view on how to maximize the value of the handful of units, which are approaching the end of contract in the coming 1 to 2 years as well as those that are already in layup. And this spans from either extending contracts, if it makes sense, but also looking at divestments, which means selling to either our clients or local operators will see if those opportunities arise or redeployments, preferably with BW Energy. And then for those units where none of these options are likely, we will proceed with recycling. And the aim is really to target a lower average operating cost, minimal layup cost and capture some divestment opportunities if they arise.
The Hibiscus
Reiss project from BW Energy is on track for 1st oil in the last quarter of next year, and we continue to expand the project pipeline of floating wind developments together with BW EDO and partners will provide a target of 1.5 gigawatts in operation by 2,030. And lastly, we continue to evaluate new floating energy infrastructure ship projects, both FPSO projects as well as energy transition opportunities. And that will end this update, but we're very happy to take any questions. And with that, over to the operator.
I'll I'll will We currently have one question in the queue. That's from the line of Hakan Andersen of ABG. Please go ahead. Your line is open.
Will Yes. Hi, guys. Two questions for me, if I can. Firstly, Marco, I think you mentioned that I will About twothree of the procurement scope on Barossa have been placed through contracts already. Can you give some color on the remaining amounts, How that is impacted by the inflation rate and how it would impact your contingencies, if in any way?
Can you give some color on that, please?
I'll
Yes, thank you. Good question. So there is a remaining procurement scope, but the sensitivity to commodity pricing is a lot less as it was in the early part have the scope. So obviously, the steel price has increased significantly. So we had to mitigate that and I'll make sure we have our slots and have access to these materials.
It's not just pricing, it's also making sure your schedule stays robust by be locking in the slots for these commodities. So I would say the rest the potential sensitivities are a lot less. There's some dynamics in the exotic material market. So we're looking at that. But again, it's of a very different magnitude than what we have been seeing in the first half year.
All right.
Thank you. That's clear. And Stahl, is it possible to quantify a little bit I'll The special items you mentioned with respect to layoff of Vicenza and transit of the Moruga in the quarter.
I'll Yes. How much what was the impact?
Yes. I'm just trying to get a better grip of the real underlying I'll How much impact those elements had on the EBITDA, if possible?
Yes. The Delta impact on Yumurua was will close to CHF5 1,000,000. As I mentioned, you had the transportation like from New Zealand will to Indonesia, which was covered by us in the quarter. So the toll error was relatively expensive as you can expect, and will That had an impact of about, yes, the SEK4 ish million in Q2. And for Service Centre, layup costs were about SEK1 1,000,000 a month.
So you had almost SEK3 1,000,000 will So and I just want to mention, as I also did I'll Earlier, for Salvatore Center, we're now on tow to Oman. So you have to expect Similar cost to what we have for Yumuru on that unit in Q3. So that will probably go up to will ballpark 5,000,000 of the cost base for that unit in the 3rd quarter.
I'll Understood. Okay. Thank you. That's it for me. Thanks.
Thank you. I'll Okay. It seems there's no further questions on the phone, so I'll hand back to our speakers.
Okay. And I don't think there are questions on the portal either, if I'm correct, Stolle, you have any
questions? No questions on the portfolio so far.
No. Will so then I think we can conclude that all questions have been answered in the presentation. And with that, I think we can close this session. Thank you for your attention, and looking forward to talk to you next quarter.