BW Energy: 2021 Third Quarter Results

2021-12-13 19:08:31 By : Mr. Anne Xu

In the third quarter, EBITDA was US$8.3 million and net loss was US$10.3 million

The company did not take delivery this quarter, and revenue reflects approximately 195,000 barrels of DMO quarterly deliveries

Total production in the third quarter was 800,000 barrels

Maintain a strong balance sheet, no debt and a cash position of $170.6 million

The Tortue Phase 2 project was successfully completed at a price of USD 45 million below budget, and the DTM-6H and DTM-7H production wells were connected in October

Plan to pick up the company twice in the fourth quarter

Hibiscus/Ruche development activities are on track

Gabon's 12th offshore license round temporarily granted the right to operate two blocks

Acquisition of semi-submersible drilling rigs to reuse the Kudu development project in Namibia

The EBITDA in the third quarter of 2021 was US$8.3 million, which was lower than the US$46.9 million in the second quarter of 2021. The reason was that the company did not increase this quarter (as planned) compared with the two increases in the second quarter. Two upgrades are planned for BW Energy in the fourth quarter.

In October, BW Energy completed Tortue Phase 2 oilfield development, and the last two production wells DTM-6H and DTM-7H were connected and production started. The Tortue development project includes 6 production wells connected to FPSO BW Adolo. The second phase of development has been completed, with zero health, safety, security and environment (HSSE) incidents, and an investment of US$230 million, which is below the budget of US$45 million.

"With the completion of Tortue Phase 2, we are implementing our strategy in Dussafu. Despite the delays caused by the COVID-19 pandemic, we are pleased to execute the project well below the USD 275 million budget approved by our partners. The upcoming Hibiscus The /Ruche development represents the next important milestone. We are expected to achieve the savings of approximately US$100 million we previously announced on this development. The recent grant of the Dussafu license to the operators of two new blocks next to it further strengthens our long-term position and offshore Potential Gabon," said Carl K. Arnet, CEO of BW Energy.

Dussafu's four wells produced an average of approximately 9,000 barrels of oil per day, and the total oil production in the quarter was 800,000 barrels. The third quarter revenue reflects the quarterly domestic market obligation (DMO) delivery volume of approximately 195,000 barrels, and the ending inventory is less than approximately 203,000 barrels.

Compared with the second quarter of 2021, the main reason for the decline in production was plant shutdowns and temporary operating issues, as well as the previously communicated shortage of gas lift capacity affecting well flow. The nitrogen generator installed on the BW Adolo improved the start-up of the oil well. However, requiring additional gas lift capacity to optimize production, BW Energy ordered a new and larger gas lift compressor, which is expected to be installed in the fourth quarter of 2022. BW Energy is still exploring temporary measures to increase the lifting capacity until the additional gas lift compressors are commissioned.

“Due to the lack of gas lift capability, Tortue’s production will be affected for the remainder of 2021. Until the end of next year, supply chain constraints and delays in offshore operations caused by the pandemic have combined to exacerbate this situation. However, this will not change our view. Tortue's overall expected long-term production or recovery rate." Carl K. Arnet said.

Due to the decline in production in the third quarter, production costs (excluding royalties) were approximately US$36 per barrel, including approximately US$1.5 million in COVID-19 related costs. The total output of Dussafu in 2021 is expected to be approximately 11,250 barrels per day, or approximately 4.1 million barrels per day. The annual production cost (excluding royalties) is expected to be approximately US$30 per barrel.

The cash balance on September 30, 2021 was US$170.6 million, compared with US$216 million on June 30, 2021. The main reason for the decrease was investment activities related to Tortue Phase 2, Hibiscus/Ruche project progress, and Dussafu exploration and drilling activities.

The Hibiscus North exploration well (DHBNM-1) located in the Dussafu license has a drilling depth of 3,336 meters. An oil-bearing reservoir was discovered in the Shanggamba sandstone and the deeper Dentale formation. Wireline logging operations and fluid sampling showed that the amount of hydrocarbons was lower than expected. Preliminary results indicate that the oil field may be included in future development plans as a possible link to the development of Hibiscus Ruche.

The total recoverable reserves of Hibiscus 2P discovered in 2019 were 46.1 million barrels. Together with the previous discoveries by Ruche and Ruche North East, it laid a solid foundation for the current development of Hibiscus/Ruche. The implementation of the project is progressing smoothly, the conversion of Hibiscus Alpha is planned in advance, the configuration of all major contracts is in progress, and the first batch of oil targets will be achieved by the end of 2022.

In October, the company temporarily obtained the right to operate two blocks in the 12th offshore license round in Gabon. The award is subject to the final determination of the Product Sharing Contract (PSC) with the Gabonese Oil and Gas Development Direction (DGH). Blocks G12-13 and H12-13 are adjacent to BW Energy's Dussafu license. They will be held by a consortium with BW Energy as the operator (37.5%) and VAALCO Energy (37.5%) and Panoro Energy (25%) as non-operating joint venture partners.

The Maromba project continues to move towards environmental approvals, focusing on optimizing oilfield development in terms of investment, operating costs and schedule. The oilfield development plan was approved by the regulatory agency (ANP) in August 2020, and the final investment decision is scheduled to be made in the first quarter of 2022.

BW Energy is preparing a major revised development plan for the Kudu gas field offshore Namibia. The new plan for the natural gas power generation project is based on reusing the recently acquired semi-submersible drilling platform "Leo" as a floating production unit. The drilling platform was purchased for US$14 million. Compared with previous development concepts, repurposing will be able to optimize project schedules and significantly reduce capital investment. Reusing the existing energy infrastructure will also reduce the environmental footprint of the project. The time for final project approval depends on the realization of the Kudu Gas Power Project’s project financing solution.

"The acquisition of Leo has given us a clear understanding of the natural gas power generation project, which will provide Namibia with 250 MW of basic electricity at a competitive price. It will replace coal-fired power generation and contribute to the future safety, stability and A significant contribution to the development of sustainable energy supply,” commented Carl K. Arnet.

In July, BW Energy paid US$4 million through its subsidiary of BW Kudu Ltd. to complete the transfer of 95% of the Kudu license. The National Oil Company of Namibia (NAMCOR) retained the remaining 5% working interest, which will be held by BW Kudu until the first natural gas.

Please refer to the attached Q3 presentation. The income statement is available in the following locations:

BW Energy will hold a conference call today, followed by a Q&A with CEO Carl K. Arnet, CFO Knut R. Sæthre and COO Lin G. Espey at 14:00 CET.

Conference call information: To dial in the conference call that will host the third quarter results and Q&A, please dial one of the following numbers:

Norway: +47 2396 3688 Singapore: +65 6408 5768 United Kingdom: +44 3333 009 262 United States: +1 6467 224 903 France: +33 170 750 736

You can also follow the presentation through a webcast with supporting slides, available at the following URL:

Please note that if you follow the webcast via the above URL, you will experience a 30-second delay compared to the main conference call. This page works best in newer browsers-Chrome is recommended.

For more information, please contact: Knut R. Sæthre, CFO BW Energy, +47 91 11 78 76

About BW Energy: BW Energy is a growth exploration and production company whose differentiated strategy aims at proven offshore oil and gas reservoirs through low-risk phased development. The company can use existing FPSOs to reduce the time it takes to obtain oil and cash flow for the first time at a lower investment than traditional offshore development. The main assets are a 73.5% equity interest in Dussafu Marine Permit produced offshore in Gabon and a 95% equity interest in the Maromba oil field in Brazil, both of which are operated by the company. At the beginning of 2021, the total net reserves of 2P+2C will be 242 million barrels.

This information is subject to the disclosure requirements set out in Articles 5-12 of the Norwegian Securities Exchange Act.

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