Q2 2021 Brooge Energy Ltd Earnings Call
Greetings and welcome to the Bruce Energy limited half year 2021 earnings results call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
Now I'll turn the conference over to your host Mr. Valter Pinto managing director Casey SA strategic communications. Thank you you may begin.
Thank you operator, and good morning, welcome to the Bruges Energy financial results Conference call for the six months ended June 30th 2021.
On today's call will be Nico Party Cooper, Chief Executive Officer. So he had masoud Chief Financial Officer, and Chief strategy Officer, we'd like to remind everyone that this conference call contains certain forward looking statements all statements that address our operating performance events or developments that we expect or anticipate occurring in the future are forward looking.
Statements. These forward looking statements are based on management's beliefs.
And assumptions and are not on the information currently available to our management team.
The team believes these forward looking statements are reasonable as and when made.
However, you should not place undue reliance on any such forward looking statements because such statements speak only as of the date when made we do not undertake any obligation to publicly update or revise any forward looking statements either as a result of new information future events or otherwise except as required by law.
In addition forward looking statements are subject to certain risks and uncertainties that could cause actual results events and developments to differ materially from our historical experiences or our present expectations or projections. These risks and uncertainties include but are not limited to those described in our risk factors and elsewhere in our annual report on form 20-F filed.
With the Securities and Exchange Commission and those described from time to time.
The reports when we filed with the F D C and now like to turn the call over to Mr. Nico Party Cooper, Chief Executive Officer, Bruce Energy Nikko. Please go ahead.
But anyway, thanks, Walter for the introduction and thank you everyone, who has joined us on today's call.
As you know these there are continues to be significant volatility across the worlds with politically disruption to global supply change.
Our stores are no provides a crucial shows that this time acting as an essential link in the oil industry.
The chain by supporting the infrastructure and storage needs of the industry.
Hey, Linda markets to work efficiency.
All storage continues to be an especially high demand and as our terminals I know ideal geographical location. It has been incredibly important that we demonstrate reliable service at this time.
I'm pleased that we have.
Achieved this with our phase won't terminals continuing to operate seamlessly and at full capacity. Despite just like.
Disruptive market conditions.
It's reliable and high quality service has been recognized by the market with BP JC Whitney and the global workforce, Florida Award for the best terminals, a year and the middle East for the third time in a row.
Moreover, so far this year, we have been able to take advantage of the high demand for oil storage and our growing reputation as one of the best providers in the industry.
By securing new contracts at more attractive terms.
In June we renewed fixed lease contracts with our clients for 233072 cubic meters phase one storage capacity and the premium that 70% higher than the starting six leased storage price off the earlier contracts.
Contract renewals consists of a total of 19072 cubic meters signed with two clients on that three year terms, each consisting of one year.
To your mutual renewal clause.
43000 cubic meters was revenue by clients for a three year term consisting of six months for six months.
Subject to a mutual insurance on an additional two years. These developments all of the five new customers that we secured in 2020 as higher storage rates and terms of agreement.
This further demonstrates the resilience of demand for oil storage during this time of macroeconomic uncertainty.
We are pleased to have the we are pleased to have delivered.
We are pleased to have delivered year over year growth in revenue.
Our business benefited from higher fixed storage rates revenue for the six months period ended June 30th 2021 increased to $26.0 million as compared to 29 $81.0 million for the same period ending June 30 of 2020 with a greater portion of the company for six.
So as revenue as opposed to variable and show your revenues.
We have also commenced operations at our face to storage facility and have received our first cargo edits terminals. Following the successful completion of all testing and commissioning at the sites.
The receipt of regulatory approvals. This is a major milestone kombucha newsy and for those months careful planning construction contract negotiations on testing.
All while navigating a challenging macro environment.
It's impacted.
Our supply chain and construction timelines.
The phase two facility, which now includes capacity to store crude oil along with fuel is officially open and there'll be contributing revenues.
In the second half of 2021.
Fired capacity fully contract within multiyear take or pay contract.
Our phase II facility was built with the same award winning standards S. Our phase one facility.
And some of the latest technology to maximize company performance and efficiency.
Reducing operating costs, our seamless out to make the storage solutions user superior facility designed it is designed to reduce call to close before the end users and Gulfport in Chile service solutions sets us eating and blending.
The facility includes clean petroleum product storage capacity as well as schools oil storage capacity and is fully contracted for.
The launch BP jazz. She is now the second largest independent storage operator in the region.
The capacity of approximately 1 billion cubic meters or $9.0 million barrels simultaneously, we laid the groundwork for our phase III storage facility and refinery projects, even why completed the feasibility study for phase III.
The result of which support the financial viability of the projects you I highlighted upcoming infrastructure investments in the region as a key driver of sustainable storage demand and rising domestic and export demand for refined products is a key driver of the refinery.
We are very encouraged by these results the phase three expansion project is for a $7.0 million cubic storage.
245 million cubic meter storage facility, a modern mobile or 25000 barrel a day refinery and a larger hundreds an 80000 barrel a day conventional refinery.
Chest full build out of our phase three facility would position the company as the largest independent oil storage facility towards yeah with capacity to store clean petroleum courts, middle Distillates high and low sulfur fuel as well as groups.
Phase III expected consumption periods is two years.
If he severity study indicates that the project has Europe, Bruce economics, and reinforces the strength of our business strategy highlighting that the oil market is expected to continue to be the most important energy stores going forward with the middle East region continued to be the leading producer of export of crude over the medium.
Long term.
Oh stretch its strategic positioning in Virginia, where there's a high utilization of Europe.
Two stores journals, along with upcoming infra structure investments is expected to drive sustainable and growing demand for our storage solutions.
Listen there's opportunity as much as possible. We also plan to build out modular and our conventional refineries, including the capability to comply with the new I mode Twenty-twenty low sulfur room at a time when the UAE is adding to its full production capacity, which we anticipate will drive demand for refinery.
So this is for both the domestic and export market.
We have science refinery agreement with an old trading company for the 25000 barrel a day most of their client.
We plan to ship lease the land to the oil trading company, which will be responsible for constructing the refinery including bearing the full cost of the construction.
And the construction is complete we will be responsible for operating the refinery, earning revenue from pulling fleets on the take or pay basis. The agreement between <unk> and the oil trading company.
A tolling contract for 10 years or 20 years, two zero co listing over a five year contract to commence upon completion of the construction and finally and three renewal periods for five years each.
With are you, adding to its old production capacity, which we anticipate will drive demand for your signing shows its local domestic and export market. We believe it is an opportune time to enter the second the window industry disagreement is a low risk approach to advancing these plans as a toll trading partner.
We don't own the assets and take on the cost of construction at any old price risk, while our focus remains in our area of expertise as the operator of the facility. This is expected to drive additional revenue boost energy.
Favorable EBITDA margins.
We are now looking forward to potentially starting construction phase III over the next several months. Meanwhile, we are also in discussions with both global oil majors, which have expressed interest in securing portions of the capacity a lot of phase III storage facility.
Brian It's a beginning of construction, we will ensure that that should be fully contracted on a multiyear take or pay contract to provide revenue.
Building and disability.
With that I will now turn it over to Mr site muscled, our CFO to talk through our financial results sites.
The floor is yours, thank you Neil.
Thank you Nicole and welcome everyone.
Revenue for the six month period June 32021 was $24.0 million upfront payment from $9 million in the same period.
New guidance, Tony James Green 20, Hyatt its related demand was pretty good, especially after the WTO and crashed in the global truck Hagen was critical.
More specifically in Virginia Beach.
Drove the shortage piece.
HP is higher and the demand for ancillary services.
In addition, the company's high Tech and high speed passenger needs with the Lewisburg laws and issues like that.
Increasingly more attention, enabling the business to obtain five new customers with high opinions there.
The decrease of $5.0 million.
And ancillary services as compared to the same period of the data yet.
<unk> by $9.0 million from new contracts at higher Australia, He tapes and films.
And so many services revenue also into export charges of $1 million.
That had been by the company can afford.
It's all the Ts and reach out to the customers direct costs increased by $2.0 billion or 17, 2%.
And then point $2 million in the first six months of this year.
Largest expense increase was $7.0 million.
Import expenses due to the increased activity.
And movement with the introduction of more of a stimulus next was an increase of $2 million in England and patient quality of picking all states more patients the remaining quarter and up $1 million fixed how each of those targets maintaining so I guess for the board.
And higher depreciation, but not only in pieces.
Gross profit for the first six months was $17.0 billion compared with $23.0 billion in the same thing in North Dakota.
They didn't think of year over year increase of four point of view.
This decrease of <unk> $6 million in gross profit as a result opening season got it cost by $1 one.
I mean in dollars, partially offset by increase in revenue.
<unk> million dollars.
As I just mentioned.
General and administrative expenses increased by $1 million or 13, 9% to keep $170 million.
In June <unk>, when do you want the immediate reasons, but in pieces.
An increase of six $6 million and proficient target, we can do legal consulting fees and surcharges.
As well as proficient or exceeds all going to be those 6 million due to the Oracle B and N V. P. I think of the house.
I mean, he's a form $10 million and salaries and wages.
You can think of shopping from print.
Thank you.
And indeed in insurance charges of $2 million, which includes insurance.
Please and that it does.
That is an additional piece I'll point, you to a $4 million both on this piece.
These increases were partially offset by <unk> <unk>.
Maintenance costs, we can each doing plus six months I think Randy one by one.
Due to restrictions associated with the COVID-19 pandemic traveling expenses decrease by foreign Ddos excuse me in autos and with easement expensive degrees by 0.0 by $7 million and business promotion expenses.
Increased by any of the.
You don't have $70 million.
During first half of the finance cost be 68% year over year to $11.0 million keep on four main.
The main reasons for indeed in finance costs, the finance cost.
On borrowings and bank charges and he was interest expense of $12.0 million on the 200 million bond financing facility.
Pick a coupon $10 million in Indesit.
For the six months.
June 33 income on them known as it gets.
No I'm looking at Randy with the proceeds from the new bonds.
Adjusted EBITDA was $18.0 million.
Well, if it's a five 7% of revenues in the first six months compared with $17 million or 79% of it is when you put it.
Okay.
This represented a decline of $7.0 million or 10%. The main reasons why they've just strictly because the claim.
Audit follows.
Number one did was an increase in total direct costs of $2.0 billion of.
Previously discussed.
Number two also general and administrative expenses increased by 39% odd $1 million for $9.0 million Lastly.
This overall increase in revenue of about <unk> million.
I didn't see it in expenses by $3.0 billion contemplate the.
<unk> I guess.
Net profit was $12.0 billion plus chop.
Claim 'twenty, one compared to $18.0 million in the same thing.
Good day ladies.
Kris was primarily due to the higher finance costs and lower noncash benefit from changes in fair value of getting approval.
Our balance sheet remains solid with cash and bank balances of $39.0 million.
Turkey for England.
Capital expenditures amounted to 14.
$21.0 million with the majority of the funds utilized school construction.
Specifically these payments of $16.0 million of which.
Each one when we didn't know it was provided on the company's operating cash flow and the balance of $14.0 million.
So on the policies of the Green bond financing.
Capital expenditures in the remainder of clinical into one are expected to be approximately $15.0 million.
Which is expected to be funded.
I am really through cash from operations and from the remainder of the proceeds.
The Franklin D. One.
Yeah.
These capital expenditures will consist primarily of expenditures.
The construction of the HD vest.
With that I will now turn the call over to operator to open the lines.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Once again its star one to ask a question at this time, well pause a moment to allow for questions.
Yeah.
Thank you. Our first question comes from the line of Martin <unk> with Edison Investment Research. Please proceed with your question.
Uh huh.
Gratulation on the reach and then my son and Oh, China.
Sure.
<unk>.
First cargo was announced.
And our first half of September.
And.
Well I'll say still be operating at full capacity.
So or does it need a ramp up period, and how long that will take.
Well. Thank you for your question Nico product over here.
The ramp up period is first.
First of all the facility is fully contracted.
And as you correctly mentioned.
I've started the operations.
Obviously, you cannot bring all the 600000 cubic in one go and based on today's information we anticipate this to be completed between four and six weeks.
Thank you and congrats.
Just to follow up on the office.
We know that our contract farfetched to we're already secured peanuts.
Is there any precedent A&P touring re negotiate the contracts till it gets more favorable conditions.
Hum.
Demand on storage.
Yes, I think that you need to see the next.
Our management of the company in the next two days or week and then your insurers.
And given on that part.
This multiple times, we did not announce that they ship.
Thank you very much.
You're most welcome and thank you for your questions.
Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad.
Our next question comes from the line of.
Oh.
So with RBC capital markets. Please proceed with your question.
Hi, everyone.
Just a couple of questions for me quickly.
Half.
The cost increases that.
You outlined in the press release, and then you talked about on the call I mean are those all recurring costs. So should we think of.
The new cost run rate.
Yeah.
Thank you all for.
For Ya.
So can you. Please take this question yet yet thankfully so these cost.
Basically this is the full year's carcinoma.
Six months and these are the.
Of course, this will not be going up.
And then in terms of percentage is it not been feeling more than what it is.
These are the Mexican caused that.
Good good.
Okay, great. Thank you and then.
Uh huh.
Where are you on the progress now of contracting phase three I think you said you were in discussions with.
With some potential customers, but just curious how far along you are and do you need to contract the entire share and a half.
Million cubic meters in order to proceed with construction of phase III.
Thank you over here so we are.
We haven't announced any of the contract is yet.
The team and myself, we are very close to.
Closing partially of the.
Contracted capacity.
Obviously.
We only built as we always did in phase one and phase two only built central circle up you've got contracted speculations.
The capacity.
Is obviously launched $7.0 million cubic.
Whereby we.
Believes that we can announce.
Let's say before restarting the construction or what type of capacity amounts we have been.
Contracted.
Does that answer your question Laura.
Yeah, Yeah that answers my question and then also on the Phase III refinery is the 300.
80000 barrels a day is that the expectation for the refinery or is that just the maximum size depending on contracting.
The maximum size of the plot of land is what we mentioned in the announcement just now is $7.0 million cubic storage capacity of 25000 barrel.
Hello, Sophie finally.
The 80000 barrel refinery.
180000 barrel refinery on poultry length is the maximum what we can.
With having the other two in place being the low sulfur refinery and a $7.0 million stores with us.
Okay.
Great. Thank you very much.
Thank you all here for your questions.
Thank you once again, ladies and gentlemen, this star one to ask a question.
Thank you. Our next question comes from the line of Jeff <unk>.
<unk> with <unk> capital. Please proceed with your question.
Yes, Hello, Nicole.
Nice to be in touch with you again, and congrats guys forgetting phase III launch that's wonderful.
I have just a couple of questions for you one is.
Can we expect the gross margins on phase II and once after the ramp up phase do you expect them to be at the similar similar levels to phase, one or higher or lower than that that's my first question and secondly, do you expect any increase in your G&A costs for Phase III do you think you need more band power at the headquarters level and overall G&A for phase.
Or should it be expected to stay around the same levels. It is now.
Good afternoon, guys. Thank you so much for your question, let me take the second question for Neil first and I'll turn it over sort of the first questions in sight.
So the number of manpower.
<unk> as you know there are certain people operating the assets toward.
Sort of $1 million, we don't foresee it in significant increase of manpower due to the automation.
The asset is.
Managed from controllable by the Dcs.
Whereby additional manpower.
Operating that asset is not.
It's to be.
It just insignificant number.
For the operations at large.
<unk> please.
Sure.
First question from dish.
Yeah sure Nicole I guess.
So we expect the gross margins to improve obviously, thereby phase II revenue was kicking in since we have already we have been.
Making almost all the expenses on the maximum size. Therefore, the June 30th reserves from the phase one.
So we expect the margins to be.
And Bruce and as Niko said that.
But in terms of direct costs that might be slightly very slightly.
It might increase because of the automation of terminal.
It will not be a significant increase.
Wonderful thank you both.
Yes.
Thank you Russ.
For your questions.
Our next question is a follow up from the line of Martin <unk>.
With Edison investment research. Please proceed with your question.
I've got a question on the phase III. So we now are the total land capacity for phase III.
William.
Could be quicker.
But the <unk>.
Darby.
On the corn husk Williams so is.
Is there any scope to expand the storage capacity in the future.
Thank you Marta so the lengths can house, three 5 million cubic storage capacity overall at the lenders quota being built with thanks.
Because we are adding refinery of up to one that's an 80000 barrel that needs a significant size roughly about a million cubic storage capacity.
Therefore, the lens as we have mentioned in the discretionary in our.
Our call today that we can build two 5 million store cubic's towards the paucity of 25000 barrel a day local refinery I don't know.
180000.
Barrels a day convention refinery on that fulfillment.
So in case, the refinery would not materialize.
Then the lens can be constructed with $8.0 million towards cubic capacity.
And the local refinery.
Okay. Thank you so in the light of this a different capacity.
How is that reflected in our potential.
Capital expenditures for phase three so the previous guidance for that presentation available from one year ago. It was one <unk>.
William.
So how we should think about it.
Much of the.
The study that we see the numbers that we produce in our previews of IP that we're in the $2.0 billion U S estimates of course home management side.
Based on the three partners towards capacity.
The USW revealed that the $7.0 million cubic storage capacity.
Alright, though was not far off what the management has already forecasted back in 2020.
Okay. Thank you.
Does that answer your question, Montana, or do I need to elaborate more.
Our Oh I have to follow up on this capex.
So.
How we should think about the timing of the capital expenditures.
Should we expect for.
For 2021 and split evenly between 4042 free or.
Yeah.
Yeah.
The project overseas is a project what's lasting around 24 months to complete the $7.0 million storage capacity mobility, Mongo, so well data.
Construction, obviously is growing as per the project schedule.
Project costs on the project financing arrangements or if he would.
If we would sort of go embark on subsidy. It so the costs will be prorated over the over the upcoming 24 months on the moment up we started construction.
Thank you very much.
Thank you Martha.
Thank you ladies and gentlemen, this concludes our question and answer session I'll turn the floor back to Mr. Cooper for any final comments.
Thank you to everyone who.
Joined today's call. This is an exciting time in our developments, we are poised to generate significant growth going forward with phase two construction now complete and the facility operation.
In parallel we are progressing with our plans for phase three facility, which will include crude oil capabilities as well as adding more capacity for fuel and clean products.
And are encouraged by the feasibility study completed by you know what.
I look forward to providing you with further based on our progress on future earnings calls I will now ask the operator to close the lines.
Operator, do we close the lines.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.