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Welcome to the webcast, for the presentation of the first quarter results for for Rukia. We will present this from our office in Trondheim. My name is Tolomira, SVP no. No. Sorry.
VP, investor relation. With me here in the office in from him, I have our CEO, Eric Kalona, our new CFO, Brittanura, SVP project and technology, and lead controller, Also joining from Christian Sun, we have our SVP operations to get this done. Eric, or, yeah, you start.
Yeah. Good morning, everyone. In this peculiar year that we we are in now, We have, in Nokia, no corona sick people, so that is is good. We have had a very good operational quarter with no serious incidents in our operated activity. We have a good stable production, very good uptime on both EIOA, operated by Neptune and Jorgen by OKEA.
So operational wise, we're really pleased with how the quarter went. Financially, it's, of course, less good, but the income has been NOK $05,000,000,000. And our profit before tax and depreciation is was $312,000,000. However, according to accounting rules, we also have to adjust the values because of market conditions. The exchange rate, Norwegian kroner to US dollar has made our bonds more expensive.
So if that continues till 2024, we will have those extra expenses. And also, of course, the outlook for the oil price is lower than it was at the start of the year, and we consequently have impaired more than CHF 600,000,000 from our book value. CFO, Peter Noren, will go through this in in detail just after my introduction. What has been, of course, ours and most people's activities in the last month has been the reaction towards the corona epidemic and also adhering to the rules that the various countries have introduced, which of course has led to an enormous reduction in energy demand, which again has affected the oil price. Consequently, we have worked hard now to reduce spendings, and we have reduced the spendings this year by more than million.
I look for another CHF160 million in savings going forward. The operating cost has been reduced. We immediately after the corona pandemic was declared, we reduced number of staff onboard Drogin, for example, from more than 70 down to 36. So we took action immediately to save cash. We have, because of the market perspectives, we see going forward, we have also postponed projects and all our exploration activities.
So we do take this situation seriously, and I'll get back to that at the end of the presentation. But right now, I leave the word to Victor that can go through the financials from this quarter. Please, Victor?
Thank you, Eric. Talking on the revenue side, we have seen a very strong production during the quarter in excess of 19,000 barrels of oil equivalents per day. The general field decline has been offset by the very high uptime seen both on Droggen and on Jura during the quarter in addition to production optimization measures. The sold volumes are down by 22% compared to last year, which is partly due to a lower volume on the cargo from Draugin in the quarter as well as only one offloading of Jouer compared to last year. The realized prices are down both on the liquids, but most notably on the natural gas, where prices have come down by as much as 56 percent compared to last year.
And the lower sold volumes and the lower realized prices are partly offset by the strengthening of the U. S. Dollars and the sterling compared to Norwegian kroner and results in a total petroleum revenue of NOK $5.00 4,000,000 for the quarter. The financial statements, as Eric said, reflects the current market turnaround and significantly impacted by noncash items, impairment and unrealized foreign exchange losses relating to our U. S.
Dollar nominated bond loans. The total revenue of 61,000,000, in addition to the CHF $5.00 4,000,000 outlined on the previous slide on petroleum revenues, it includes unrealized gain on productions for oil and tariff revenue from Europe. The production expense reflects the volumes sold as well as a reduction in SG and A in the quarter and provides for our average production cost of $87.3 per barrel. That brings the EBITDA to $312,000,000 and it is the impairments of $634,000,000 and the net financial items of $423,000,003 82,000,000 of which relates to unrealized foreign exchange losses, which drives the net loss to GBP $785,000,000 for the quarter. And a bit more on impairment.
Obviously, we have observed some impairment indicators in the market as the pricing of petroleum products have changed significantly. And it is mainly due to the changes in forward curves that we are making such significant impairments. On the right hand side on the graph, we are providing an overview or a split in between the different categories of impairment. And the most significant one is the technical goodwill of CHF $346,000,000, which mainly relates to Joergen and Drogin. We have impaired ordinary goodwill of CHF $253,000,000 and a less significant impairment of EMEA of NOK 35,000,000.
On the cash side, we have a solid cash balance going into the quarter, just shy of 1,300,000,000.0. And we had a solid cash position going out of the quarter, just shy of NOK 1,300,000,000.0. You may note that cash generated from operations are somewhat less than usual. That's partly due to the lower revenues but also due to changes in working capital, most notably to the final settlement on the Shell transaction, which took place during the quarter. Investment activities mainly relates to IMA and also on the P1 well at Jura and some investments also made at Jura at Droggen.
You may have noted that we, during the quarter, performed or executed a partial buyback of the OKR02 funds. We bought back just in excess of $6,000,000 nominal value at around 20% discount. As Eric also said, the market is beyond doubt challenging at the moment. But after all, OKEA is quite well positioned to manage through the turmoils. We have a solid cash balance.
We have no maturities until 2023 and no near term refinancing needs. In addition, we have production expense for the quarter averaging at USD 8.3 per barrel, and we are continuing to focus on preserving cash and reducing costs. However, we do see that in a continuing low price scenario for oil, we risk ending in a breach of on the leverage ratio in our bond loans during 2020. And we are, therefore, intending to approach the bondholders to seek a waiver, and we have mandated DNB markets as financial advisers in this process. As the final slide for the financial section for this presentation, we provide an illustration of the forecast cash development and also leverage ratio in two different scenario.
Both are based on the forward rates for gas and oil. And the yellow line represents the scenario where EMEA startup occurs before the 2020, and the blue shadow represents a scenario where EMEA start up is placed in second quarter. And as you may see, the EMEA start up impacts both the low point on the cash balance and also on the leverage ratio. And the additional volumes from Eva, EMEA, combined with increasing forward prices, supports the long term cash generation for OKIA. And we intend to approach the bondholders quite soon and with the ultimate target to summon for a bondholder meeting and get support for our waiver request.
Okay. Tore?
Yeah. Thank you. I'm Tore Beckinson, SVP for operations in the for both operated and and not nonoperated. And as David and Eric said, production has been excellent for the first quarter. In fact, we have beaten the target by 5% at Draugen and 2% at Dior.
If you go to the to the next slide, slide 13, you will see the Draugen details. And first and and most important, I I have to say thanks thanks to the organization for the fantastic work. We have no serious incidents or leaks in the first quarter, which is a fundamental principle of operations. And in addition, the availability which been achieved at Droggen is is phenomenal. We are 97% availability at such a mature asset.
And in combination with with production optimization, you squeeze barrels out every day, we have reached a 5% production above target, which is a very good result for us. When it comes to the operation during quarter one, of course, we are hit by by the COVID nineteen late in the quarter. We took measures straight away, reduced manning, implemented restrictions, and and we are in have been in control of the situation since since day one. In addition to to the COVID nineteen situation, of course, taking down the the OpEx and CapEx have been a process for us, and we have taken down the cost and also postponed and suspended the cost, which is important for for the, our operated asset, is to keep the safety performance. That's the the key of of of our operations.
The availability is is hard work every day. It doesn't come by itself. We will also now go to D2, one of our oil producers to to fix the downhole safety and get that back in production. And we are lifting our next load in in May. That is a safeguarded it's a it's a safe loading.
And, of course, continue to to manage the COVID nineteen situation. I don't think this is over by now. It still can come back also. And of course, we have a big maintenance turnaround coming up. We are in plants already, equipment already, contractors already.
And I have to mention our contractors. Thank you all for an excellent job in the first quarter. Without the contractors, we haven't been able to deliver. When it comes to EUA, and then Neptune do does a great job at EUA operationally, and and they have beaten the target by by 2%. And they have one incident at point three in ring at at license, but no leaks and and a very high availability.
You have also managed the COVID nineteen situation excellent, and they're also, of course, in the same situation as us, reducing OpEx and and CapEx. For you also, keeping the the safety performance is critical and availability, and, of course, we are able to maneuver through this COVID nineteen situation and and the low oil price scenario. So my final remarks is that, first of all, no serious incidents or leaks at Draven, our operated asset. That's critical. And of course, we beat our target on production first quarter, 5% at Draugen and 3% at EIO.
Thank you.
Okay. Thank you, Tore. And then, Kurt, on projects.
Thank you. I will try to give a short update on the most important OKR projects for now. First of all, we'd like to start with HIM, where we have just completed an offshore campaign. And you can see on the picture up to the right, the Webhed module that now has been successfully completed. There's some remaining work that's quite within control.
We are very pleased with the work done there. Also during the offshore campaign, we pulled the deep set of plugs into existing gas injectors, quite good achievement to manage to pull them well, and we managed to gather the information that we needed from the well to know what we had to do going forward. The the round that was sort of supporting the operation is demobilized well. Going to Egerson, where we upgrade the Magic Inspire. The the progress has been lower than planned.
Of course, the the current COVID nineteen situation adds to the challenge. So to mitigate the situation, we work and the operator works. And, of course, the yard works very hard to source people, both Norwegian skilled workers and also foreign skilled workers, all within the current COVID-nineteen regime. So looking forward, we the current plan is to start production end of this year. But of course, given the current situation with COVID-nineteen and other challenges, we see that there is a clear likelihood that we go into 2021.
It's really now hard to tell exactly the expected time, but hard measures have been taken to safeguard the schedule. The current situation, of course, also influences the CapEx on Yuma, and the 2020 CapEx is expected to increase somewhat. Going to the other projects. On Jura, the P1 project operated by Neptune, we have just completed the the the p one project is to tie back to Europe. We have just completed geo pilot, and we needed two additional side effects to meet the well objective, which, of course, draw the CapEx of it up.
We managed to get the information from the campaign that we needed, which was quite good. And, we now aim for a production startup of of Europe here and together with Nettin operator in first quarter next year. Further to the operator, Girabling Storchkirnum, which is a few development project. The current state is that it has been matured towards concept selects, the select. It's hard to say that we had to move two exploration wells in the license, Ilde and Jarve, up to 2021 to safeguard our expenditures.
So by doing that, we have reduced the spendings in 2020 significantly. The last project I would like to mention is the Hasanmuth, also OK operated, which is a gas tieback to Druggen. As you might know, we just passed decision gate two on that project but has now decided to suspend the project for the year. So we are in the middle of a process of closing it down controlled in close cooperation with our suppliers, which will enable us to have a quick restart when the time is right. By doing this, we, of course, reduced our CapEx exposure both this year and not at least next year significantly, which is quite good given this current circumstances.
So even though we have taken strong measures to reduce our expenditures, it's fair to say that the situation on P1 euro and LBM drives some additional CapEx for OKR in 2020. Thank you.
Thank you, Knut. And then Eric?
Yes, thank you all. In these peculiar times, the focus of the Board and the management is to prepare the company for the growth that will happen when we get out of this situation. And we have now the period now going forward, have too much oil out in the market. And it is sensible for us to try to forward all maintenance work and everything we need to do anyway to this summer in order to delay the next cargoes from Drogan. We have a cargo coming from Drogan now early May, which is partly hedged.
And we don't know if Norwegian authorities will impose some production restrictions, but this make a good business sense anyway to concentrate any stops, any maintenance work to this summer to not add to the difficulties in the market. So we estimate that the next cargo from Jurgen will be delayed till August yes, if that plan is carried out. So we are in addition to that kind of market adoption, we are protecting the cash and prepare ourselves for a growth position as the market conditions improves. We think that as analysts also estimate that a lot
of
production is taken fairly permanently out and that when market partly recovers that we will see a better pricing of oil products. So in for this year and also into next year, we need to protect our financial position. Bitol already mentioned the waiver period. But the long term outlook is very good. We will increase our production significantly when EMEA is in production and we expect a rise in product prices as to the market when it comes to 2021, 2022, and then we are in good shape.
Because of this
maintenance
work and we do and also they do on Johan, we're also going to tie in other fields. We will produce less the next few quarters than we did last year, which, of course, is a good thing in today's market conditions. So we prepare our company to grow into the future. And as everyone else, we, of course, follow various M and A opportunities as we go forward. So even though this year is financially challenging and not very profitable, the outlook for the company is, in my view, very good.
We have a very good we have proven our concepts that 700,000,000 barrels filled on the Norwegian Sea Shell are profitable at normal oil prices. And being the lead operator in this segment, we are going into a great future following this event that experienced today. So thank you very much for your attention for this presentation, and we look forward to answer any of your questions. Stolberg?
Yes. There has been a couple of questions on the webcast. The first one is from Anders Holte. What realized oil prices have you seen so far in Q2? And follow-up, any comments around the ability of selling cargoes?
If oil prices stay at the US dollar 20 mark, what would be the cash burn for UKL q two twenty? Thank you.
What do we want to say about the realized prices?
The the only realized prices we have had in the q two is was from from Europe. Yeah. And I don't have the overview of of that. No? So we we don't know those yet.
And as I said, the the the only two quarter cargo that which is most of our oil cost is from Durgen will happen in early May, so it hasn't happened yet. And then we think the next cargo will be in in August. So anybody's guess on oil price in August are appreciated. Send it to us if you know.
Okay. There was another question on EMEA, Heclet. What is the case on EMEA field development and production start? I guess you pretty much covered that.
You can repeat it if
you like. Yeah.
Yes. The planned production start for Everest end of this year. But as I said, the the current circumstances, of of course, drives a big uncertainty to the startup time. So so there is, of course, a significant risk that that we will experience a delay beyond that. But we work, of course, very hard to to safeguard the schedule, and and we we, of course, trust operator and and both Maersk and Aker to to work hard on this going forward.
Another
question here from Magnus Fagerbock. How many production wells planned at Gerbilingsdorskimming, and also how many planned at Hasanmuth?
I don't have the Husumers numbers, to be frank. Of course, we can provide that information. Husumers is basically one well. And since it's a gas field that is fairly easy to to drain. Mhmm.
Okay. And from Carl Friedrichscha Pedersen, can you guide for quarterly production and quarterly sales?
We are providing the annual guidance as was in on the last slide of 14 to 15,000 barrels of oil equipments per day. Sales, yeah, that's a function of both the market prices, which is uncertain at the moment and the production, of course. But as I said, if we are pushing forward the maintenance, that will have an impact on our sales in second quarter.
Okay. That was the question on the on the webcast. If you have after this presentation, have okay. Sorry. There was one one question coming up.
We can I think we can go for that? What is the cash cost per view given the lower production output anticipated this year?
Well, we are not guiding on that. We have guide we are providing the numbers for first quarter, which was 87.3, but we're not providing any further guidance on that as of as of now. Okay.
I think with with that, we we conclude the the webcast. If you have any more questions following this presentation, please feel free to to reach out, and we'll, try to answer as best we can. Okay? Thank you all for for watching this presentation.