Q2 2026 BW Offshore Ltd Earnings Call

August 24, 2026

Marco Beenen: at the end, you can use the Q&A function in this webcast for that. Please note our disclaimer. Then I move on to the highlights. We have delivered a solid EBITDA of $63 million this quarter. BW Opal is in stable production and generates revenues currently at approximately 85% of the nameplate capacity. Due to the de-bottlenecking issues which we discovered as we ramped up production, practical completion has been moved to Q2 2027. That shift in timing leads to an adjustment to our full-year EBITDA guidance to a range of $250 to $280 million. This shift has also triggered a non-cash impairment in this quarter, Ståle will come back to that in more detail. There is no impact on our commitment to our quarterly cash dividend under our covenants, which equates to $11 million or $0.0630 per share.

Speaker #1: At the end, you can use the Q&A function in this webcast for that. And please note our disclaimer. Then I will move on to the highlights.

Speaker #1: We have delivered a solid EBITDA of $63 million this quarter. BW Offshore is in stable production and generates revenues currently at approximately 85% of the nameplate capacity.

Speaker #1: But due to the bottlenecking issues, which we discovered as we ramped up production, practical completion has been moved to the second quarter of 2027.

Speaker #1: And that shift in timing leads to an adjustment to our full-year EBITDA guidance to a range of $250 million to $280 million. This shift has also triggered a non-cash impairment in this quarter, and Stoller will come back to that in more detail.

Speaker #1: There is no impact on our commitment to our quarterly cash dividend under our covenants, which equates to $11 million, or 6.3 cents per share.

Speaker #1: And lastly, the strategic review continues with interested parties, but the timeline is naturally impacted by the revised practical completion date for BW Offshore. I will now start with an operational update and dive a bit deeper into the progress with OPAL.

Marco Beenen: Lastly, the strategic review continues with interested parties, but the timeline is naturally impacted by the revised practical completion date for BW Opal. I will now start with an operational update and dive a bit deeper in the progress with Opal. As mentioned, since restarting production in May, the unit has continued to deliver stable gas production and revenue generation. We successfully replaced all compressor dry gas seals and completed extensive cleaning of the heat exchanger trains. In July, we also completed the first condensate cargo, roughly 300,000 barrels, which was an important milestone for the project and of course, also for the client partnership. Commissioning was largely completed in August, but as production increased, some technical issues were identified that prevented the ramp-up to 100% production rates and need to be resolved before practical completion.

Speaker #1: As mentioned, since restarting production in May, the unit has continued to deliver stable gas production and revenue generation. We successfully replaced all compressor dry gas seals and completed extensive cleaning of the heat exchanger trains.

Speaker #1: And in June—sorry, in July—we also completed the first condensate cargo, roughly 300,000 barrels, which was an important milestone for the project and, of course, also for the client partnership.

Speaker #1: Commissioning was largely completed in August, but as production increased, some technical issues were identified that prevented the ramp-up to 100% production rates. These need to be resolved before practical completion.

Speaker #1: These issues primarily relate to an underperforming CO2 removal system, where the membranes need to be replaced. Furthermore, the lean methanol tanks need to be cleaned because we discovered residual sink trace contamination.

Marco Beenen: These issues primarily relate to an underperforming CO2 removal system, where the membranes need to be replaced. Furthermore, the lean methanol tanks needs to be cleaned because we discovered residual zinc trace contamination, and we need to inspect and repair weldments in the steam system. I want to emphasize that while these issues are frustrating, they are standalone vendor and subcontractor related quality issues rather than a fundamental design issue. The unit produces at high rates, and we are working closely together with our client, Santos, to optimize production while we address these issues effectively. Given the delivery times of these membranes, we expect most of the repairs to be carried out in Q1 2027. That moves the start of the 15-year contract period, which is marked by practical completion, to Q2 2027.

Speaker #1: And we need to inspect and repair welds in the steam system. I want to emphasize that while these issues are frustrating, they are standalone fender and subcontractor-related quality issues rather than fundamental design issues.

Speaker #1: The unit produces at high rates, and we're working closely together with our client, Santos, to optimize production while we address these issues effectively. Given the delivery times of these membranes, we expect most of the repairs to be carried out in the first quarter of '27, and that moves the start of the 15-year contract period, which is marked by practical completion.

Speaker #1: To the second quarter of '27. For the remainder of 2026, we continue to produce gas under the volume-based revenue scheme, and that largely offsets a further $65 million of capex that we have to spend on completion.

Marco Beenen: For the remaining of 2026, we continue to produce gas under the volume-based revenue scheme. That largely offsets a further $65 million of CapEx that we have to spend on completion, which mostly fall in 2027. This $65 million is before any recovery under the warranty programs. Turning to safety and fleet performance. Safety remains our highest priority, and we continue to focus on maintaining a strong safety record. There was one new high potential incident in the quarter. There are no injuries with a high potential incident, but we treat it as a leading indicator for something potentially serious, and always follow up with a thorough investigation and lessons learned. The lost time incident trends is satisfying and trending down. The contracted fleet performed very well with another quarter of 100% commercial uptime.

Speaker #1: It's mostly fall in 2027. And this $65 million is before any recovery under the warranty programs. Turning to safety and fleet performance, safety remains our highest priority, and we continue to focus on maintaining a strong safety record.

Speaker #1: There was one new high-potential incident in the quarter. There are no injuries when a high-potential incident occurs, but we treat it as a leading indicator for something potentially serious.

Speaker #1: And always follow up with a thorough investigation and lessons learned. The lost time incident trend is satisfying and trending down. The contracted fleet performed very well, with another quarter of 100% commercial uptime.

Speaker #1: That excludes BW Offshore, since we're still in the commissioning phase and the formal contract term hasn't started yet, as I just explained. At the end of the second quarter, our backlog stood at $2.2 billion, of which 97% is firm.

Marco Beenen: That excludes BW Opal since we are still in the commissioning phase and the formal contract term has not started yet, as I just explained. At the end of Q2, our backlog stood at $2.2 billion, of which 97% is firm, and the only real change in the quarter is the timing of contract cash flow from BW Opal. The commercial uptime of Opal was approximately 75% in the quarter after the restart on 3 May. BW Adolo continued to deliver stable production above 26,000 barrels a day, and BW Catcher delivered close to 20,000 barrels per day, largely in line with the previous quarter.

Speaker #1: And the only real change in the quarter is the timing of contract cash flow from BW Offshore. The commercial uptime of Offshore was approximately 75% in the quarter after the restart on the 3rd of May.

Speaker #1: BW Offshore continued to deliver stable production above 26,000 barrels a day, and Catchon delivered close to 20,000 barrels per day, largely in line with the previous quarter.

Speaker #1: And then for Pioneer, we continued to provide the O&M service under a five-year contract. For MRPO, they have confirmed they will now begin drilling in the Chinook field in the second half of this year.

Marco Beenen: For BW Pioneer, we continued to provide the O&M service under a five-year contract for Murphy Oil, and they confirmed now drilling in the Chinook field in H2 of this year, which should result in a production increase for the remainder of the contract, and that benefits our managed fleet structure. Then an update on the Bay du Nord project with Equinor, currently in the FEED phase. This project with Equinor continues to progress according to plan. Since signing the FEED contract with Equinor in April, both commercial and technical work streams have advanced well, and we expect the FEED to continue throughout 2026. We have already achieved an important milestone with the issuance of the first major equipment purchase of the gas turbine generators, and this is fully reimbursed by our client.

Speaker #1: This should result in a production increase for the remainder of the contract, which benefits our manuscript structure. Next, an update on the Bay du Nord project with Equinor, which is currently in the FEED phase.

Speaker #1: This project with Equinor continues to progress according to plan. Since signing the FEED contract with Equinor in April, both commercial and technical workstreams have advanced well.

Speaker #1: And we expect the feed to continue throughout 2026. We have already achieved an important milestone with the issuance of the first major equipment purchase for the gas turbine generators.

Speaker #1: And this was fully reimbursed by our client. We've also opened an office in St. John's, and that's located in Newfoundland and Labrador, to strengthen our relationship with the local supplier base ahead of pre-operations and subsequent operations and maintenance services.

Marco Beenen: We have also opened an office in St. John's, and that is located in Newfoundland and Labrador, to strengthen our relationship with the local supplier base ahead of pre-operations and subsequent operations and maintenance services. Equinor's acquisition of BP's interest in the Bay du Nord project in July increases its ownership to 100%, and it further confirms their commitment to the project. We continue to expect a final investment decision and contract award early 2027. With that, I will hand over to Ståle, who will take you through the financials.

Speaker #1: Equinor's acquisition of BP's interest in the Bay du Nord project in July increases its ownership to 100%, and that further confirms their commitment to the project.

Speaker #1: We continue to expect a final investment decision and contract award in early 2027. And with that, I'll hand over to Ståle, who will take you through the financials.

Speaker #2: Thank you for that, Marco. And good morning, everyone. As usual, I'll do a bit of a deep dive on the financial section. I'll be starting with the EBITDA performance.

Ståle Andreassen: Thank you for that, Marco, and good morning, everyone. As usual, I will do a bit of a deep dive on the financial section, and we started with the EBITDA performance. EBITDA was $63 million in Q2, which is up compared to Q1 and in line with expectation. It is really a result of BW Opal delivering up to 97%, 98% of nominated gas volumes during the quarter, following the restart of production back in May. The new charter rates on the BW Catcher are somewhat lower following the contract extension back in February. 2026 EBITDA guidance is revised to a range of $250 million to $280 million from the earlier range which we gave, which was $310 million to $340 million, and it is largely due to the adjusted completion schedule for BW Opal shifting the contract start into 2027.

Speaker #2: EBITDA was $63 million in the second quarter, which is up compared to Q1 and in line with expectations. And it's really a result of BW Offshore delivering up to 97–98% of nominated gas volumes during the quarter, following the restart of production back in May.

Speaker #2: The new charter rates on BW Catcher are somewhat lower following the contract extension back in February. 2026 EBITDA guidance is revised to a range of $250 to $280 million from the earlier range which we gave, which was $310 to $340 million.

Speaker #2: And it's largely due to the adjusted completion schedule for BW Offshore shifting, with the contract start moving into 2027. About $50 million of the revision is related to BW Offshore, and about $10 million is related to higher tender activity.

Ståle Andreassen: About 50 million of the revision is related to BW Opal, and about 10 million is related to higher tender activity. I would like to note that for the revision on Opal, about 40 out of the 50 million is pure prepayments to be amortized. When you calculate this, the net cash impact is very limited and around 10 million. Importantly, the long-term earnings capacity and contract backlog for the unit is unchanged. During this period until practical completion, estimated Q2 next year, we are generating incremental revenues. BW Opal post practical completion will deliver an annual EBITDA estimated between $265 million to $275 million per year under the 15-year firm contract. Operating revenues and EBITDA increased in Q2 as BW Opal resumed production. This is also reflected in higher tax expenses, while depreciation and recognition of interest expense will only commence at practical completion.

Speaker #2: I would like to note that for the revision on Offshore, about $40 million out of the $50 million is pure prepayments to be amortized. So when you calculate this, the net cash impact is very limited, and around $10 million.

Speaker #2: Importantly, the long-term earnings capacity and contract backlog for the unit is unchanged. During this period, until practical completion—estimated for the second quarter next year—we are generating incremental revenues.

Speaker #2: BW Offshore, post-practical completion, will deliver an annual EBITDA estimated between $265 million to $275 million per year under the 15-year firm contract. Operating revenues and EBITDA increased in Q2 as BW Offshore resumed production.

Speaker #2: This was also reflected in higher tax expenses, while depreciation and recognition of interest expense will only commence at the practical completion. The EBIT and the reported net loss reflect the impairment of $125 million on BW Offshore recognized in the second quarter financials, and that is despite us only identifying this and concluding this during the course of August.

Ståle Andreassen: EBIT and the reported net loss reflect the impairment of $125 million on BW Opal recognized in the Q2 financials, and that is despite we only identifying this and concluding this during the course of August. The impairment is triggered due to additional cost, as mentioned earlier, as well as additional borrowing costs to be capitalized during the extended timeline until practical completion. I want to highlight, no further impairment charges are expected from the delay in completion, and this impairment is also reversible under IFRS should we be able to improve on the completion timing or the cost picture. This is a non-cash event. There is no effect on liquidity or debt service as a result of the impairment. When you adjust for the impairment, the underlying net profit was stable and comparable to Q1 at $23 million. Operating cash flow remains stable quarter on quarter.

Speaker #2: The impairment is triggered due to additional costs, as mentioned earlier, as well as additional borrowing costs to be capitalized during the extended timeline until practical completion.

Speaker #2: I want to highlight that no further impairment charges are expected. The impairment is a result of the delay in completion, and it's also reversible under IFRS should we be able to improve on the completion timing.

Speaker #2: Or the cost picture. This is a non-cash event. There was no effect on liquidity or debt service as a result of the impairment. But when you adjust for the impairment, the underlying net profit was stable and comparable to Q1 at $23 million.

Speaker #2: Operating cash flow remains stable quarter on quarter. Investments were $38 million in the second quarter, of which about $30 million was related to BW Offshore.

Ståle Andreassen: Investments were $38 million in Q2, of which about $30 million was related to BW Opal, and the remaining largely related to funding of BW Elara, as we are now progressing construction of our first floating desalination plant. in May, we decided to make a short-term placement of $25 million into a fixed income liquidity fund to achieve higher return on surplus cash. Under IFRS, it is required that this placement is recorded as an investment, although we, for practical purposes, look at this as available cash, as we can liquidate this position at any point in time. Overall, we did reduce our cash position in this quarter when you consider this and other more regular movements to just below $280 million, and then I include the $25 million we have in the liquidity fund. It also implies that we continue to have a very comfortable cash position.

Speaker #2: And the remainder largely relates to funding of BW ELARA, as we are now progressing with construction of our first floating desalination plant. In May, we decided to make a short-term placement of $25 million into a fixed income liquidity fund to achieve higher returns on surplus cash.

Speaker #2: Under IFRS, it's required that this placement is recorded as an investment, although we, for practical purposes, look at this as available cash, as we can liquidate this position at any point in time.

Speaker #2: So, overall, we did reduce our cash position in this quarter, when you consider this and other more regular movements, to just below $280 million.

Speaker #2: And then I include the $25 million we have in the liquidity fund. It also implies that we continue to have a very comfortable cash position.

Speaker #2: Leverage remains zero as we are in a consolidated net cash position, as presented. We continue to present net debt and leverage excluding BW Offshore project debt until practical completion.

Ståle Andreassen: Leverage remains zero as we are in a consolidated net cash position as presented. We continue to present net debt and leverage excluding BW Opal, the project debt until practical completion. Once this is achieved, as I have said before, we will move to a presentation where we include both the debt and the related EBITDA as part of our leverage. The impairment naturally reduces the equity ratio, now standing at 28.3% by end of Q2, which sits comfortably above the 25% minimum in our loan facilities. It also means we are well within our financial covenants overall. Available liquidity continues to be solid, stood at $511 million, and that includes just over $200 million on our revolving credit facility, which is completely undrawn. We still have limited consolidated debt that is hedged at a comfortable 4.9% all in.

Speaker #2: Once this is achieved, as I've said before, we will move to a presentation where we include both the debt and the related EBITDA as part of our leverage.

Speaker #2: The impairment naturally reduces the equity ratio, now standing at 28.3% by the end of Q2, which sits comfortably above the 25% minimum in our loan facilities.

Speaker #2: It also means we are well within our financial covenants overall. Available liquidity continues to be solid—stood at $511 million, and that includes just over $200 million on our revolving credit facility, which is completely undrawn.

Speaker #2: We still have limited consolidated debt that’s hedged at a comfortable 4.9% all in. Remaining committed investments total approximately $140 million. Around $120 million is the remaining net cash investment to complete BW Offshore, and that includes the incremental $65 million estimated for the extended work period.

Ståle Andreassen: Remaining committed investments totals approximately USD 140 million. Around USD 120 million is remaining net cash investment to complete BW Opal, and that includes the incremental USD 65 million estimated for the extended work period. The balance of the committed total, approximately USD 20 million, is the remainder of our 60% share for the first BW Elara desalination unit. In numbers, our share is USD 30 million of the total estimated cost of building this unit, estimated at USD 60 million. I just want to emphasize again that BW Opal will be producing and generating revenue during the pre-contract startup period that largely will offset the cash flow impact of the incremental CapEx without eating into the backlog. Our commitment to shareholder returns stay unchanged.

Speaker #2: The balance of the committed total, approximately $20 million, is the remainder of our 50% share for the first BW Elara desalination unit. In numbers, our share is $30 million of the total estimated cost of building this unit, which is estimated at $60 million.

Speaker #2: And I just want to emphasize again that BW Offshore will be producing and generating revenue during the pre-contract startup period. That will largely offset the cash flow impact of the incremental capex, without eating into the backlog.

Speaker #2: Our commitment to shareholder returns stays unchanged. We continue with the dividend policy of quarterly distributions, paying a minimum of $0.25 per share.

Ståle Andreassen: We continue with the dividend policy of quarterly distributions based on pay a minimum of USD 0.25 per share, which for this quarter again reflects a dividend payment of USD 11.3 million. As the impairment have an impact on what we can distribute for the year, it naturally reduces the 2026 net profit. A top-up in the Q4, as earlier indicated, should not be expected for 2026. However, looking beyond 2026, the framework remains unchanged and distribution capacity reset again from next year. Also, looking forward, I am pleased to mention that we have started the market sounding for the Bay du Nord FPSO financing, where we have seen significant interest from a number of banks.

Speaker #2: This quarter again reflects a dividend payment of $11.3 million. As the impairment has an impact on what we can distribute for the year, it naturally reduces the 2026 net profit, and a top-up in Q4, as earlier indicated, should not be expected for 2026.

Speaker #2: However, looking beyond 2026, the framework remains unchanged, and distribution capacity will be set again from next year. Also looking forward, I am pleased to mention that we have started the market selling for the Badenor FPSO financing, where we have seen significant interest from a number of banks.

Speaker #2: I believe this really reflects the robustness of the project itself, as well as reinforces a strong indication that BW Offshore is a credible operator in the space and that we have a solid financial position.

Ståle Andreassen: I believe this is really reflecting the robustness of the project itself, as well as a strong indication that BW Offshore is a credible operator in the space and that we have a solid financial position. With that, I am going to hand it back to Marco, who takes us through an update on strategy and the market.

Speaker #2: With that, I'm going to hand it back to Marco, who will take us through an update on strategy and the market.

Speaker #1: Yes, thank you, Ståle. In this section, I'd like to give you an update on our strategic priorities for delivering growth in our portfolio.

Marco Beenen: Yes. Thank you, Ståle. In this section, I would like to give you an update on our strategic priorities for delivering growth in our portfolio. The FPSO market continues to provide attractive opportunities, and we see more than 70 potential FPSO awards over the next five years. That is supported by an increasing energy demand, energy security consideration, and continued offshore investments. It supports to remain disciplined and selective about the opportunities we pursue with a focus on strong counterparties, robust returns and appropriate allocation of risk, which includes effective partnership models. There has been a clear shift in the market from the conventional lease and operate contracts towards EPCI and O&M or hybrid models. That is like the ones we developed for BW Opal and Bay du Nord. That is all aimed at reducing project financing costs. We are agnostic to these contract models.

Speaker #1: The FPSO market continues to provide attractive opportunities, and we see more than 70 potential FPSO awards over the next five years. That is supported by increasing energy demand, energy security considerations, and continued offshore investments.

Speaker #1: It supports us in remaining disciplined and selective about the opportunities we pursue, with a focus on strong counterparties, robust returns, and appropriate allocation of risk, which includes effective partnership models. There has been a clear shift in the market from the conventional lease and operate contracts towards EPCI and O&M, or hybrid models—like the ones we developed for BW Offshore and Badenor—and it's all aimed at reducing project financing costs.

Speaker #1: We're agnostic to these contract models. We can deliver all of these, as we have experience with all of them. We're well positioned for both the large, new-build FPSO market segment, but also the smaller redeployment projects.

Marco Beenen: We can deliver all of these as we have experience with all of them. We are well-positioned for both the large newbuild FPSO market segment, but also the smaller redeployment projects. We can leverage the experience and lessons learned from BW Opal, one of the largest gas FPSOs in the world. We also have access to a high-quality FPSO build for redeployment with the acquisition of BW Jura earlier this year. We also now have control on the availability of Catcher to the firm contract extension without options, and Catcher is a very attractive redeployment candidate from 2030. We have a strong focus on winning new projects with a clear growth ambition of one project every other year. That means executing two projects in parallel, but in a phased manner.

Speaker #1: We can leverage the experience and lessons learned from BW Offshore, one of the largest gas FPSOs in the world. We also have access to a high-quality FPSO hull for redeployment with the acquisition of BW Hura earlier this year.

Speaker #1: And we also now have control on the availability of Catcher to the firm contract extension, without options, and Catcher is a very attractive redeployment candidate from 2030.

Speaker #1: We have a strong focus on winning new projects, with a clear growth ambition of one project every other year. So, that means executing two projects in parallel, but in a phased manner.

Speaker #1: Between now and 2030, of the mentioned 70 prospects, we identified 12 targets which we expect to meet our selection criteria, and we aim to win two or three of those.

Marco Beenen: Between now and 2030, of the mentioned 70 prospects, we identified 12 targets which we expect to meet our selection criteria, and we aim to win two or three of those. However, as mentioned, we maintain a disciplined approach and that is also reflected in the latest bidding round for the Albacora tender and also tenders in past years. We were not the lowest bidder in the Albacora tender, but I believe it reflected the right balance between commercial discipline and also value creation. The process established a strong partnership with Saipem, and that strengthens our position for future opportunities in Brazil, which we consider a key market with a strong pipeline of new FPSO projects. The 12-month focus is on the Americas, where we are working actively on selected projects, which is led by Bay du Nord, which I already talked about.

Speaker #1: However, as mentioned, we maintain a disciplined approach, and that is also reflected in the latest bidding round for the Alba Core tender, as well as tenders in past years.

Speaker #1: We weren't the lowest bidder in the Alba Core tender, but I believe our bid reflected the right balance between commercial discipline and value creation.

Speaker #1: The process established a strong partnership with SIPEM, and that strengthens our position for future opportunities in Brazil, which we consider a key market with a strong pipeline of new FPSO projects.

Speaker #1: The 12-month focus is on the Americas, where we are working actively on selected projects, which are led by Badenor, and which have already been talked about.

Speaker #1: In addition to Búzios 12 in Brazil, and also Cannes and the Zama project in Mexico, these Mexico projects with our client Harbor Energy are well suited for redeployment of BW HURA and later also for new deployment of BW Catcher.

Marco Beenen: In addition to Buzios 12 in Brazil, and also Kan and the Zama project in Mexico. These Mexico projects with our client, Harbour Energy, are well suited for redeployment of BW Jura and later also for new deployment of BW Catcher. We see opportunities to leverage our FPSO expertise to develop low-carbon energy solutions and create future growth opportunities in adjacent business segments. Here also, we take a disciplined approach with selective allocation of capital until these markets mature, and we focus on creating the same shareholder value as in our core FPSO business. Worth mentioning is the progress of BW Ideol, our floating offshore wind company, where we hold 68% ownership. BW Ideol also signed an exclusive partnership agreement with NGE, and that is France's largest construction group for the Fos3F floating foundation fabrication line in the south of France.

Speaker #1: We see opportunities to leverage our FPSO expertise to develop low-carbon energy solutions and create future growth opportunities in adjacent business segments. Here also, we take a disciplined approach with selective allocation of capital until these markets mature, and we focus on creating the same shareholder value as in our core FPSO business.

Speaker #1: Worth mentioning is the progress of BW Ideol, our floating offshore wind company, where we hold 68% ownership. BW Ideol signed an exclusive partnership agreement with NGE, which is France's largest construction group, for the FOS3F floating foundation fabrication line in the south of France.

Speaker #1: This partnership is a key step forward in delivering the strategy of unlocking the floater EPCI/EPC supply chain in France. The aim is to replicate that also in the UK later.

Marco Beenen: This partnership is a key step forward in delivering the strategy of unlocking the floater EPC supply chain in France. The aim is to replicate that also in UK later. We also continue to progress our floating desalination joint venture with BW Group, leveraging BW Water's technology. The first barge has been acquired and is undergoing conversion into a floating desalination unit, targeting project completion and the first contact in H1 2027. Other segments close to our core FPSO business and natural for us to consider are FLNG and gas to power, as that would expand our offshore energy production portfolio. That brings me to the summary, an ambitious outlook with clear priorities. Summing up, our key priorities are continue stable production on BW Opal and deliver practical completion in Q2 2027.

Speaker #1: We also continue to progress our floating desalination joint venture with BW Group, leveraging BW Water's technology. The first barge has been acquired and is undergoing conversion into a floating desalination unit.

Speaker #1: We are targeting project completion and the first contract in the first half of 2027. Other segments close to our core FPSO business, and natural for us to consider, are FLNG and gas-to-power.

Speaker #1: As that would expand our offshore energy production portfolio. And that brings me to the summary. And a busy outlook with clear priorities—summing up, our key priorities are continued stable production on BW Offshore and to deliver practical completion in the second quarter of 2027.

Speaker #1: Completing the fit on Badenor by the end of this year and signing one new FPSO project within the next 12 months, and then also bringing our first floating desalination unit to the market in 2027, along with continued value creation for shareholders through an attractive shareholder return program.

Marco Beenen: Completing the FEED on Bay du Nord by the end of this year, signing one new FPSO project within the next 12 months. Also bringing our first floating desalination unit to the market in 2027, and continued value creation for shareholders through an attractive shareholder return program. With that concludes this presentation. We are happy to take your questions via the Q&A function.

Speaker #1: And with that, that concludes this presentation, but we're happy to take your questions via the Q&A function.

Speaker #2: Okay, we'll just start with the first one, which is about the fabrication round and the strategic review process. Is there still a strategic review process ongoing, or should the press release sent out in December last year be disregarded?

Ståle Andreassen: Okay. We just start with the first one, which is a clarification around the strategic review process. Is there still a strategic review process ongoing, or should the press release sent out in December last year be disregarded? I would think, Marco, you can take this one.

Speaker #2: I would like to thank Marco. You can take this.

Speaker #1: Yeah, yeah, I mean, the answer is simple. And I also mentioned it in the highlights. The answer is yes, it's ongoing with interested parties.

Marco Beenen: Yeah. The answer is simple. I also mentioned it at the highlights, and the answer is yes, it is ongoing with interested parties, but naturally with the timeline shift in practical completion of BW Opal, conclusion of such process is also moving. So yeah, it is still ongoing.

Speaker #1: But naturally, with the timeline shifting for practical completion of OFFSHORE, the conclusion of such process is also moving. So yeah, still ongoing.

Speaker #2: Okay. And the next person actually has two questions in one. I'll take them, I'll read them both out, and maybe we can split them. The first one: is the non-cash impairment impacting the net result that is used as a base for calculating the dividend for the full year?

Ståle Andreassen: Okay. The next, Anders, personally, I have two questions. I will take them. I will read them both out, and maybe we can split them. The first one, is the non-cash impairment impacting the net result that is used as a base for calculating the dividend for the full year? The second one being BP intends to pull out from the Bay du Nord project. How is this impacting the project? I can take the first one around the impairment, how that impacts dividend. The way our covenants are structured, it allows us to pay out a minimum dividend of $0.25 per year regardless of net results. So in that sense, we can continue with the same dividend at the same level as we are announcing Q2, also for Q3 and Q4, regardless of that impairment.

Speaker #2: And the second one being, BP intends to pull out from the Badenor project—how is this impacting the project? I can take the first one around the impairment and how that impacts the dividend.

Speaker #2: The way our coherences are structured, it allows us to pay out a minimum dividend of $0.25 per year, regardless of net results.

Speaker #2: So, in that sense, we can continue with the same dividend at the same level as we're announcing for Q2, also for Q3 and Q4, regardless of that impairment.

Speaker #2: But the impairment has an impact if you want to raise the dividend above the minimum level, as we have done for the last couple of years. So, the answer is yes, and that is also why I said that we should not expect that we will be able to do a top-up of the dividend for the fourth quarter this year.

Ståle Andreassen: But the impairment has an impact if you want to raise the dividend above the minimum level, as we have done for the last couple of years. The answer is yes, and that is also why I said that we should not expect that we will be able to do a top-up of the dividend for Q4 this year. But again, importantly, this resets from 2027, and we start fresh again. The second question, Marco, if you can take that as well.

Speaker #2: But again, importantly, this resets from 2027 and we start fresh again. The second question—Marco, if you can take that. So, BP intends to pull out from the Badenor project.

Marco Beenen: Yeah.

Ståle Andreassen: BP intends to pull out from the Bay du Nord project. How is this impacting the project?

Speaker #2: How is this impacting the project?

Speaker #1: Yeah. Oh, it's a bit stronger than the intention of BP. As I mentioned, Equinor has acquired the ownership from BP, so Equinor is now 100% owner of the field and has 100% interest.

Marco Beenen: Well, it is a bit stronger than the intention of BP. As I mentioned, Equinor has acquired the ownership from BP, so Equinor is now 100% owner of the field, has 100% interest. I think what it shows is the confidence of Equinor in the project and their commitment to meeting the timelines that they have laid out for this project. So from our perspective as the selected contractor for the FPSO, this is positive because it gives confidence that we follow the timelines and we can move from FEED into a contract award early next year.

Speaker #1: And I think what it shows is the confidence of Equinor in the project, and their commitment to meeting the timelines that they have laid out for this project.

Speaker #1: So from our perspective, as the selected contractor for the FPSO, this is positive because it gives us confidence that we can follow the timelines and move from FEED into contract award early next year.

Speaker #2: Okay, next one. The way it was written was a bit confusing, but I think the question is basically: why is the BW Offshore practical completion delayed, and what is the financial impact on BW Offshore?

Ståle Andreassen: Okay. Next one. It was a bit the way it was written, but I think the question is basically, why is the BW Opal practical completion delayed, and what is the financial impact on BW Offshore? Maybe, Marco, if you again could explain, maybe you just summarize what was said earlier in the presentation. What are the reasoning behind us shifting the estimate for the date of reaching practical completion for the unit?

Speaker #2: Maybe Marco, if you could again explain or just summarize what was said earlier in the presentation—what are the reasons behind us shifting the estimate for the date of reaching practical completion for the unit?

Speaker #1: Yeah, what I've tried to cover in the update on Offshore is that the unit is producing, and it's producing well, and it's producing at high rates.

Marco Beenen: Yeah. What I have tried to cover in the update on BW Opal is that the unit is producing, and it is producing well, and it is producing at high rates. We work very closely with our client, Santos, to maximize these rates. Over the past weeks when production increased, the result of that was because Santos added a third well, production or gas supply to the FPSO increased, so we could also increase our production levels. During that de-bottlenecking process, we discovered that we have a performance issue with the membranes of the CO2 removal system. To solve that, our assessment currently is that we have to replace the membranes of the CO2 removal system. That is a large job and also requires delivery of these membranes. These membranes have delivery times that bring us into Q1 of next year.

Speaker #1: And we work very closely with our clients, Santos, to maximize these rates. Over the past weeks, when production increased, and that was the result of that was because Santos added a third well.

Speaker #1: Production, or gas supply, to the FPSO increased, so we could also increase our production levels. And during that debottlenecking process, we discovered that we have a performance issue with the membranes of the CO2 removal system.

Speaker #1: To solve that, our assessment currently is that we have to replace the membranes of the CO2 removal system. That's a large job and also requires delivery of these membranes.

Speaker #1: And these membranes have delivery times that bring us into the second—in the first quarter of next year. So naturally, to be able to do that, to do that job, replace the membranes, we will move into the first quarter of 2027 to complete that.

Marco Beenen: Naturally, to be able to do that job, to replace the membranes, we will move into Q1 of 2027 to complete that. Then that will de-bottleneck the production, and we will reach 100%. After that, practical completion will follow. Financial impact is mainly the USD 65 million that comes together with these activities, as well as cleaning the lean methanol tank, where we found traces of zinc. We also are inspecting the welds in the steam system and expect some repairs there as well. The USD 65 million is additional CapEx, but as I said, we are producing, so it means we are also receiving revenue. The revenue is directly linked to the level of production.

Speaker #1: Then that will de-bottleneck the production and we will reach 100%. And then after that, the practical completion will follow. Financial impact, it's mainly the $65 million that comes together with these activities, as well as cleaning the lean methanol tank where we find traces of zinc.

Speaker #1: And we are also inspecting the wells in the steam system and expect some repairs there as well. This $65 million US dollars is additional capex.

Speaker #1: But as I said, we're producing, so it means we're also receiving revenue. The revenue is directly linked to the level of production. So the $65 million US dollar increase in capex during that period will largely be offset by additional revenue during that period before the contract term starts, which is the 15-year term contract, and that is starting at practical completion.

Marco Beenen: The USD 65 million increased CapEx during that period will largely be offset by additional revenue during that period before the contract term starts, which is the 15-year term contract. That is starting at practical completion.

Speaker #2: Yeah. So what you're saying because maybe it's something in different terms than the key matter for which is restricting production to reach 100% is really those membranes that you're because if they're not functioning 100% as they should, we are not also not able to get 100% of the gas to be on spec for the client.

Ståle Andreassen: Yeah. What you are saying, because maybe it is sort of in different terms, the key matter for which is restricting production to reach 100% is really those membranes that you Because if they are not functioning 100% as they should, we are not able to get 100% of the gas to be on spec for the client. That is why you need to limit it somewhat while we are waiting for the new one to replace. While the other systems is criteria under the contract, but not necessarily limiting production and what we can earn throughout this period. As you are saying, financially, the revenues we are generating are ahead of the contract start, with the contract still being intact, is cash for cash, largely offsetting the net extra cash outflow that we will incur due to that, moving the date out to Q2 of 2027 for practical completion.

Speaker #2: So that's why you need to limit it somewhat. While we're waiting for the new one to replace, well, the other systems are criteria under the contract, but not necessarily limiting production and what we can earn throughout this period.

Speaker #2: And as you're saying, on financials, the revenues we're generating are ahead of the contract start, with the contract still being intact. It's cash for cash, largely offsetting the net extra cash outflow that we will incur due to moving the date out to the second quarter of 2027 for practical completion.

Ståle Andreassen: There's no other, just trying to see if there's any other question. Please post it so they can read them out.

Speaker #2: No other, just trying to see if there's any other question. Please post it so we can read them out.

Speaker #1: Yeah, looks like we've covered the questions.

Marco Beenen: Yeah.

Ståle Andreassen: No?

Marco Beenen: Looks like we've covered the questions.

Speaker #2: Yeah. Does it seem to be? In that case—oh, wait. Okay, that's what I was thinking. I was holding a bit. Okay, a new question that came in.

Ståle Andreassen: Yeah. Doesn't seem to be. In that case, oh, wait. Okay. That's what I was thinking. I was holding a bit, but okay. A new question that came in. Do you expect shutdown on BW Opal during replacement of the CO2 membranes? If yes, how long and cash flow impact?

Speaker #2: Do you expect shutdown on BW OFFSHORE during replacement of the CO2 membranes? If yes, how long and cash flow impact?

Speaker #1: Well, yeah, I can take it. No, we will not shut down the asset, but it will impact production during a couple of weeks.

Marco Beenen: Well, yeah, I can take it. No, we will not shut down the asset, but it will impact production during a couple of weeks, as we will go bank by bank. There's two banks with CO2 membranes that we have to replace, so we will do two campaigns. And during that time, one bank will be out of service, so that would reduce the production with 50% for a couple of weeks as we see it now.

Speaker #1: As we will, we will go bank by bank. There are two banks with CO2 membranes that we have to replace, so we will do two campaigns.

Speaker #1: And during that time, one bank will be out of service. So that would reduce the production by 50% for a couple of weeks as we see it now.

Speaker #2: Yeah, so for a few weeks during this period. And the cash flow impact, as such, is not expected to be significant. But we can say we will assume there will be an impact, meaning we’re not able to deliver at current level during those shutdowns, as you’re saying.

Ståle Andreassen: Yeah. As you said, for a few weeks during this period, the cash flow impact as such is not expected to be significant. We can say we will assume there will be an impact, meaning we are not able to deliver at current level during those shutdowns, as you are saying it.

Speaker #1: Yeah. No, over the period until practical completion, I don't think the cash flow impact is that significant. But, of course, if we take out one bank to replace these membranes at that time, there is, of course, an impact on production.

Marco Beenen: Yeah. No, over the period till practical completion, I do not think the cash flow impact is that significant. Of course, if we take out one bank to replace these membranes at that time, there is, of course, an impact on production. Okay.

Speaker #1: Okay.

Ståle Andreassen: Well, now I think that is it.

Speaker #2: Yeah, I'll give it back to you.

Speaker #1: Yeah, I think that covers the questions. So, you don't see anything else, right? I mean, nothing else coming in?

Marco Beenen: Yeah, I think that covers the questions. Ståle, you do not see anything else, right? I mean, nothing else coming in?

Ståle Andreassen: No. From what I can see, no more questions coming in.

Speaker #2: No, from what I can see now, there are no more questions coming in.

Marco Beenen: Well, then that leaves me with thanking everyone for joining this call and wishing everyone a good day. Thank you.

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Q2 2026 BW Offshore Ltd Earnings Call

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