Welcome to this second quarter presentation from OKA. This has been the most peculiar quarter we have ever experienced. All the corona measurements that have been taken by various governments have impacted billions of people and billions of companies, including of course, OKR. The market of energy fell significantly. The market for petroleum fell by 25%.
The oil prices fell accordingly. And we have to do drastic measurements in our own expenditures. We reduced number of people onboard Droogen. We reduced or delayed several exploration activities, lay off a lot of consultants, etcetera, etcetera. And we have managed through this quarter in a good manner.
Not only, OKEA was impacted, the whole Norwegian offshore industry was impacted and that led to a lot of activities from the government. The first one was introduced by government by reducing the production permits in order to support the cut in production to at least cover some of the losses that oil had in the market. That meant that we had to reduce production in June. And we managed that by pulling forward a already planned maintain stop that was planned for September, move it into June. And hence, than stopping production and do nothing, we did stop the production in on the June 23 and just went short of the production permit we had.
And we will we are now not in production in Dogen and we'll do all the maintenance work, and we start production again on the July 27. A second very important measure that was taken by government and the parliament was a change in the tax regime in Norway, a temporary change that made it more favorable to do investments now the coming two years rather than stopping too much activity. This has a huge impact for the service industry. But it also has a fantastic impact for OKR. That means that projects like Hasanloos, which is a 2,200,000,000 cubic meter gas discovery just north of Jogen, which we put on hold in March, has now been taken up again, and we intend to pursue that project in order to take advantage of the revised tax regime and have that in production within three or four years.
OKIA engaged a lot with the authorities regarding these tax changes because the larger oil companies had a bit different agenda than the smaller oil companies in the sense that the running cash flow for the bigger companies was no problem, but that could become a problem for the smaller companies. That meant that we despite the favorable depreciation system that was introduced in Norway, could not take advantage of that unless we were allowed to have negative tax terms as we proposed. And, we are most, pleased that the government, no, the parliament actually improved the government's proposal and put together a tax system that now has enabled us to engage not only in Hus and Hus, but we are now looking at two other projects that we put aside in March. And we are also now voting in favor of several of the exploration activities that were postponed just a couple of months ago. So we will have drilling activities already later this year and also in exploration in March.
Another issue that OKEA came about because of the corona incidents, the falling oil price was that we were likely to come in technical breach with some of the bond terms. So we had to negotiate with some of the key bondholders. And the bondholder have now approved for a new regime that is more appropriate for OKEA going forward. And then I leave the microphone to Bitte Norem, our CFO, who will give you the hard figures of second quarter. Please, Bitte.
Thank you, Erik. As Erik said, this has been a peculiar quarter and our financial statements are impacted by the financial turmoils as we will see both on very low revenues and also on some one off and non cash items. But let's start with the revenues. Despite a very high production regularity during the quarter, produced volumes were 20% lower than last year due to planned shutdown both at and at We had sixteen days of shutdown at in relation to tie in projects and seven days at due to the planned maintenance turnaround, which started on the June 23. For Jura, we will be compensated for the deferred production when Nova comes on stream in 2021.
Sold volumes were 44% lower compared to last year, mainly due to only one lifting from Droggen in the quarter compared to two also with somewhat higher volumes last year as well as lower volumes from Jura due to general field decline. Due to the turnaround at Drogin, which will be ongoing for most of July, the next lifting for OKEA from Drogin will be in August. I assume it comes as no surprise that the realized prices are significantly down compared to last year. The realized price for liquids were 59% lower than last year, a reduction from $61 a barrel last year to $25 a barrel this year. And the realized price for natural gas was 69% lower than last year and at a historical low.
The result of the lower volumes sold and the lower prices of petroleum products was a reduction in revenue of 75% compared to last year, ending at million. To avoid confusion, I want to add that we normally use put options to protect against sharp drops in the oil price and I want to highlight that the effect of hedging is not accounted for in the petroleum revenues, but is classified as other operating income and is also subject to the ordinary corporate tax of 22% and not added the special tax of 56%. In the second quarter, we realized a gain on put options of million, which had a positive cash flow impact in the quarter. However, the effect on the income statement is different due to financial instruments like put options are recorded at mark to market. And you may recall that we recognized a gain of $31,000,000 in the first quarter and we actually had a small loss impacting the P and L in the second quarter of $3,000,000 as the oil price strengthened from realized the gain in May.
But let's move on to the income statement. Starting with the operating income, million, which consists of the petroleum revenues of SEK259 million as just outlined, tariff revenue from Joya and also the loss on the put option of SEK3 million. Production expense amounted to SEK186 million or SEK118 per barrel produced compared to SEK102 million last year. The main driver of the increase per barrel is due to the lower volumes. Impairments amounted to $298,000,000 which is driven by currency effects, delay in EME start up and reduced reserve estimates from the P1 well at Jura.
We will come back to this a bit more in detail on the next slide. Exploration and operating expense consists of $10,000,000 in exploration expense, mainly relating to field evaluation activities on Hasselmooth and general SG and A cost of $23,000,000 The net financial items represents a gain of $92,000,000 which mainly relates to unrealized foreign exchange gain on the dollar nominated bonds due to the NOK strengthening against the dollars during the quarter. And this gain is partly offset by unrealized foreign exchange losses on bank accounts, interest expense and costs related to the bond amendment process. Taxes had a positive contribution of $2.00 €5,000,000 which results in an effective tax rate of 110%. Also in relation to the second quarter, we observed some impairment indicators, including the strengthening of NOK against the dollars in the quarter, which accounts for the largest portion of the impairments, but also that production start at Ime was delayed, which also drives the CapEx.
In addition, the reserve estimates at the Jura P1 project were reduced. In total, we recognized an impairment of $298,000,000 divided between three assets: technical goodwill relating to Johan Draugen of 54,000,000 and Oil and Gas properties relating to EMEA of $54,000,000 plus a deferred tax effect of $190,000,000 So of the total $298,000,000 the post tax impact amounted to 109,000,000 Cash at the start of the quarter was just shy of $1,300,000,000 and cash at the end of the quarter was in excess of $900,000,000 The cash from operating activities of $96,000,000 is low during the quarter due to the lower prices and the lower volumes sold. The taxes paid of $99,000,000 relates to the final installment of tax payable for 2019. Cash to investment activities mainly relates to Ime and also the P1 project at Jura. And interest paid during the quarter amounted to 83,000,000 of which OKEA02 amounted to €33,000,000 and OKEA03 amounted to €50,000,000 We're very pleased about the government's ability to react swiftly for the E and P industry as well as the service industry.
For OKEA, the temporary tax amendment is a game changer for 2020 and represents a trigger for us to reassess the profitable projects that were put on hold earlier this year. And to summarize the key changes, we are allowed to directly expense CapEx with effect for the 56% special tax basis, including an uplift of 24%. This has effect for investments made in 2020 and 2021 and also until planned production start for projects where a development plant has been filed by the 2022 and approved prior to the 2023. In addition, we are refunded the tax value of losses for the income years 2020 and 2021 rather than having to defer the losses. And importantly, the refunds will be settled through negative installments, which significantly improves the liquidity position of OKR as we are not in a tax paying position for 2020.
The cash effect for the tax year 2020 depends on several assumptions and we see that our latest projections are somewhat higher than the $60,000,000 initially indicated. And finally, about the bond amendments. We are also very pleased to have been able to successfully conclude the bond amendment process during the quarter. And even if we're not in breach of the original covenants at the end of second quarter, there is an overhang effect of the twelve months rolling EBITDA variable in the leverage ratio calculation that required a waiver of the terms from third quarter. This has been a key issue for us to solve and we're very pleased about the strong support for our proposal in the bondholder meetings on June 29, nearly 76% in OKEA02 and 84% in OKEA03 of the represented bondholders voted in favor of the proposal.
The revised terms is better aligned with the current outlook and also improves the hedging flexibility. In return, the bondholders were granted a put option of up to 15% of the outstanding bond at par in June year and increased redemption price call premiums of 100 basis points. Securing the existing debt position with improved flexibility along with the temporary tax amendments as implemented by the Norwegian government puts OKEA in a very good position to now continue to focusing on creating value to all our stakeholders. And with that said, I'll leave the word back Thank you.
Thank you, Peter. That was the financial results of the company. And I'm pleased to announce that we have had very good HSE results, both with respect to incidents and no harm to people, but also in terms of emissions and unexpected discharges. So we have also have very good production records on Joa and Droogen. Droogen has experienced one of the highest regularities for many, many since many, many years with an average of 98% availability on the Drogin facility during the second quarter and particularly in May with 99% uptime is extraordinary good, but also a fantastic target.
We know what now is possible. We shall continue to run Droggen for many years. And in order to do that, we have to do it more efficient than today. So we have embarked on a project where we tend to reduce the operation costs on Drugen by 15% to be implemented during next year. That will enable us to keep the lifting cost on Drogan at a level that make Drogan a profitable project well into the 2030s.
And hopefully, no abandonment before in the 2040s. And with respect to abandonment, we have discovered in the discussions with the investors and bondholders that not everyone remember the deal we have with Shell that Shell will actually cover the amendment from both Drobium and Joao. And that both the budgets for development is going down and development timing is delayed to the benefit of both Okea and Shell. On Drogan, which is a mature field, there is always a lot of maintenance work. There's a lot of work with the wells.
And we have had problems for some time with a well we call D2. We did an intervention work there this during second quarter that failed, and we have to return to that well during next year with a more serious repair. Operating a mature field like Drogan has its challenges. And we have some problems with or challenges with purifying the produced water, where the core problem generates from the time when because seawater was injected into reservoir, a lot of hydrogen sulfate has been created and which again creates chemicals that impact the quality of the produced water, which again demands a lot of chemicals in the purification process on board Djogen. There, Overstaff together with Schlenberger has been extremely innovative and tested various way to reduce the origin of the problem down in the reservoir in a way that actually has led to a much cleaner produced water and has not only achieved better results in terms of purification, but also reduced the cost of doing this significantly.
You can read more about this project on OKA's webpage. And this is absolutely something that also could be used by other fields with this similar which has the similar problem. Ime project is however seriously delayed. There is work continues to be done on the yard in Nagersohn. And it is still within reach and the plan to finish the production unit there.
And Maersk Inspire is planned to leave the yard later this year to go onshore, but to go offshore, sorry. We And but we don't expect production before first half next year. Another project that has not been fully according to expectation has been the P1 project on Joa, where the latest appraisal and drilling activities on that prospect shows that is less reserves than we expected. But Neptune as operator is now going to drill two producers in that segment, and we expect additional production from Jura, the P1 segment, during fourth quarter this year. And then going forward, we did experience a lot of unexpected things in the second quarter, as mentioned, did millions of other companies.
So second quarter did not happen the way we thought it's going to happen, but we managed. We managed to cut costs. We managed to defer investment. We managed to assist getting new terms. We managed to solve with a breach.
We eventually will go into with bondholders with new bond terms. Our staff has been extremely adaptive to new circumstances. The Board has been active to facilitate those circumstances we came into. And the fact that we have come out of this in the way we did strengthened the company going forward. We see that several projects now are having a good runway in terms of because of the new tax returns that we have achieved in Norway.
And we expect to be extremely busy throughout also in the next quarter prepare the applications for new licenses. And we hope to land other business arrangements as we go forward. That means that we despite the kind of backlash we got in the second quarter, we maintain our production forecast to 14,000 to 15,000 barrels a day despite the continuous delay of the EMEA project. And we expect to invest almost NOK 1,000,000,000 in 2020. OKEA is actually the fifth largest offshore operator in Norway.
And we intend to capitalize on that experience by taking on new activities as we move forward. We will work a lot around the Drogin area to make sure that we have more resources into Drogin going forward in order to keep the lifting cost per barrel down. So to everyone that follows OKEA, we thank you for listening to this presentation, And we look forward to contribute to value creation in Norway and value creation to our shareholders going forward. Thank you very much.
Okay. That concludes the presentation. Operator, we can now move over to the questions.
And the first question is from the line of Theodore Nelson.
Viktor mentioned that you will now expect a cash payback for tax losses above the $60,000,000 that you previously guided on. Could you give some more details on that, how much you actually expect now and what's the reason for the deviation? And second question is for 2021. Given the current project portfolio that you have, how much do you expect to invest compared to 2020? This
is Biste here. Yes, you are correct that we do expect more than the $60,000,000 initially indicated. And obviously, the tax refund depends on several assumptions, including the timing of listings, the foreign exchange rates on December 31, realized prices and so on. So at this stage, we will not provide any exact number. I think the key point that we are making is that the impact on our liquidity is significant.
And may I ask you to repeat the second part of your question?
The second question was actually regarding CapEx for 2021. How much do you expect to invest next year compared to this year given the current project portfolio?
Yeah. We are not providing any guidance on 2021, and we are now in the process of reassessing our project strategy following these quite significant changes that has happened now in June. So we will revert with the forecast and guiding on 2021 CapEx down the road.
Okay. Thank you.
Our next question is from the line of Mr. Joko. I
have four of them. The first of them is you mentioned that post the last well appraisal well, you got worse results than expected from your P1. Can I just ask how is that going to impact the future production profile of that expansion? So that's the first question. The second and third, which are relatively quick and related are, are you expecting to make any more tax payments in 2020?
And I saw you had a very big working capital reversal in Q2 sorry, working capital outflow in Q2. Are you expecting it to reverse in the second half of the year? And then my last question is with regards to Haschelmuth, which my understanding was that that project had been pushed more towards 2023, 2024. But from your presentation, kind of seem to read that you're thinking of bringing it forward again. Is that the case?
Maybe I can
Perhaps I can make a text message before I can start, and then you can take over with the Okay. The the URP one, the the reserves is about half of what was the estimate before the the project, which also led to the impairment that we did this quarter. But with respect to production, the development of that segment has been reduced the scope has been reduced from three wells to two wells. And the initial production, is pretty close to what was the original plans. So it is more the longer term production from that segment that is impacted.
So we expect the production to come onstream in as we said in the fourth quarter. And we see the 2021 production from V1 to be pretty close to the original plans. With respect to Haussimers, it is of course we came a long way before we put the project in the fridge in March because of the circumstances that appeared at the time. So the plan there is to submit the PDO in due time of the time limit for the new tax regime in 2022. Hence, we are, we may be one year delayed, but it depends on summer season for installment and and we think we can make that in in 2023, which is, yeah, that that's the plan as as for now.
But But the final decisions on that is not made in the partnership yet, so we'll revert to that towards the end of the year. But we have reengaged some of the service companies related to the project, and it full speed on the planning of that project from at least from after the summer from holiday. So then, Vite, you take the next few perhaps.
Yes. So I think for the tax payments, we don't have any tax payments for 2020, but rather we get refunds as underlined by the new temporary tax regulation. But we have the final settlement of 2019 payable in the fourth quarter. As for the working capital, yes, this is somewhat higher than usual in the second quarter, and that is partly related to the fact that we have not offloaded the inventory at So during the turnaround, there is quite a significant volume in inventory at Droggen. So this will reverse as we do the offload in August.
But working capital could depend on the timing of the lifting as well.
Got it. If I may just ask a follow-up. I understand that the working capital has to do with the timings of the lease and in this case with the offloading after the turnaround. In Q1, my understanding is that part of the negative working capital was a permanent move related with the purchase of the fields. I guess my question more is independent of timing, should we expect that the full working capital of Q2 will be reversed over the next one, two quarters, whatever it is, but should we all expect it to all come back?
Or is there any element of it which is permanent?
Well, we do have spare parts and such in inventory that moves slower than trade payables and receivables and so on. But the most significant numbers in the working capital will move in line with the listings and the ordinary payment cycle from vendors and from customers.
Got it. So most of it will be something that's reversible over, I don't know, one or two quarters, right?
Yes. That's right. And you are correct in referring to Q1 where we had the settlement of a pro and contra in relation to the Shell transaction.
Thank you.
As there are no further questions from the conference call at this time, I will hand the word back to the speakers.
Yes. Thank you. We have one question on the webcast. It's from Magnus Soren at Fearless. Can you elaborate on the two other projects you mentioned in addition to that might be reassessed following the tax changes?
And, Eric, do you want yep.
Well, there are there are several of the exploration projects that is now progressing faster than we said in March, both with respect to Wealth this year and already in the first quarter next year. That goes for one thing. And of course, the whole in addition to Hasanmuth, we are also involved together with Equinor in another gas discovery just north of Aasenmuz, which is also now being assessed whether it should be developed together with Aasenmuz or not. And further, this regime also incentivize us to look more aggressively on the grabbing development, even though that is more significantly more marginal development than Auselnus. So we we will revert to that when we get later this year when we have reviewed the plan and and got them approved in the various licenses.
So the oversight of that will be easier to convey at the end towards the end of the year.
Okay. Thank you, Eric. There's no further question on the, on on the webcast. So I think that concludes the the the q and a session, and, thank you all for, for