Speaker #1: Welcome to this BW Energy third-quarter presentation. This presentation will, as usual, be hosted by our Chief Operating Officer, Brees Morlaugh, and our Chief Financial Officer, Thomas Young, and myself, Karl Arnitz.
Speaker #1: Before we talk about the quarter, I want to talk about the recent incident on the Dusefu license. As you are aware, on the 24th of October, the Prospect 5 rig sank during pre-loading just outside our Mabomo facility.
Speaker #1: 115 people were on board, with 110 of them rescued and safely brought to Port Shanti. Our thoughts are with the families, friends, and colleagues of those affected.
Speaker #1: This is a tragedy, and it puts everything else we talk about today into perspective of course. I want to thank particularly the crews and rescue teams who brought the 110 people safely to shore.
Speaker #1: And thank you also to the country of Gabon, President Nguema, his administration, to board drilling, and to our neighbors, Valco and Porenco. All came to help without hesitation.
Speaker #1: This is really the industry at its best. Our priority remains to support the search, the people affected, and then analyze what happened. On the business side, briefly, production was already shut down as a precaution before the rig arrived, and there is no damage to our facilities.
Speaker #1: That has been ascertained. With video surveillance. There was a known volume of diesel on board the drilling rig, and we are working to minimize any environmental impact.
Speaker #1: As you understand, we are still in an early phase, and the main focus has so far been on the search and rescue efforts. This will impact our Dusefu timeline and Brees will provide some further comments on that.
Speaker #1: I'm sure there are many questions, and we will do our best to answer. What we can today, based on what we know today. Beyond the incident, the third quarter brought real progress in our operations.
Speaker #1: Our development projects are all moving as planned. We had 2 discoveries out of 2 appraisal wells in the northwest corner of Abiscus Main. We made a strategic entry into Angola, and this will be commented further.
Speaker #1: The Kudu farm down has drawn strong interest. And we will provide some comments on that too. And we extended key financial agreements. Production was 21,500 barrels per day, and Brees will cover in more detail how that was achieved.
Speaker #1: Financial results reflected the timing of liftings, which Thomas will explain in detail. We have, as you know, 5 projects in execution. Which we expect to add 222 million barrels of 2P reserves.
Speaker #1: Mabomo phase 2 is the one affected by the incident. The other projects we are pleased to report are on track, and that is why we maintain our target of more than 100,000 barrels per day in 2028.
Speaker #1: The appraisal results were strong. But of course, first oil from Mabomo will be have to be rescheduled to a later date than the planned first quarter of next year.
Speaker #1: Maromba is our largest project, and it is on track. The FPSO topside modules have been delivered, to site at Dalian, and we are working towards a sail away of the FPSO in the second quarter next year.
Speaker #1: The wellhead platform will go to Brazil by heavy lift in January. Subsea equipment and drilling are all on schedule. We are on track for first oil late 2027.
Speaker #1: The next key step in the Maromba project is the getting the wellhead platform from Dubai to Brazil. The tow through the Strait of Hormuz is planned for December, and a transfer to heavy lift in January and then to Brazil.
Speaker #1: We are constantly reviewing the security situation and we are in constant dialogue with the tow operators. When we get to Brazil, the unit will have to pass several regulatory approvals from AMP, IBAMA, Navy, and obviously also customs.
Speaker #1: And we work closely proactively with all them, and these all these processes are in line with the schedule. We have also in the quarter been pleased to announce our strategic entry into one of Africa's most important oil basins.
Speaker #1: Together with 2 as operator and our partner Chariot, we have gained exposure to producing assets. Our share is expected to be around 8,000 barrels per day, from the first quarter of 2027, when we expect closing.
Speaker #1: The terms are attractive, around $6 per barrel of 2P reserves after interim cash flows. With payback in under 2 years, and last but not least, a fully funded abandonment fund.
Speaker #1: Just as important there are more than 500 million barrels of identified upsides, some of those resources are already being targeted and brought forward from the nearby PKBB field, which should add further production in the coming years.
Speaker #1: Last but least not least, the Kudu farm down. The Karas 1A results are now full integrated, and they showed 3 plays with both oil and gas potential.
Speaker #1: This summer we launched a farm down. Interest is strong. We are in dialogue with around 50 companies with about 20 NDAs signed so far.
Speaker #1: We expect to complete the farm down, including government approvals in the second half of 2027. In parallel, we continue our dialogue with the government on gas-to-power, and with that, I hand over to Brees for the operational update.
Speaker #2: Thank you, Cal, and good afternoon, everyone. Before discussing the quarter, I want to acknowledge the tragic incident of Saturday leaving 5 people missing, our thoughts are with the families and colleagues affected, and I want to sincerely thanks the rescue team, Gabonese authority, and the oil and gas company operating in Gabon for their exemplary support.
Speaker #2: For the quarter, the net production was 21.5,000 barrels per day, or 2 million barrels down to 25.3 in Q2. The facility performed well. The decline came from 2 well-specific issues, one at each asset.
Speaker #2: At Golfino, production was 4.7,000 barrels per day, with 58% production availability. This reflects a pump failure in one well, which will be replaced later this year, and continued downtime on the gas lift compressor.
Speaker #2: That is exactly the constraints Golfino Boost will remove from the next year. At Douzafou, net production was 16.8,000 barrels per day, with 99% production availability.
Speaker #2: On the FPSO Adolo, the loss came from 1 Mabomo well, where the electrical submersible pump failed in July, after nearly 2 years in operation.
Speaker #2: The well has been shut in since then, waiting for a workover. The workover was planned with the drilling rig and is therefore delayed. However, it can be done with a hydraulic workover unit, so bringing the well back does not depend on a new rig, and we are working on mobilizing a unit in the coming months.
Speaker #2: In the fourth quarter, we moved the planned 2 weeks maintenance at Douzafou to October, to coincide with the ESP workover. By the time of the rig incident, the maintenance was complete and Mabomo had been shut in as a standard pre-mobilization procedure, while BW Adolo FPSO continued to produce.
Speaker #2: Mabomo has been confirmed safe, to operate, and production has resumed. We expect the full year guidance of approximately 23,000 barrels per day, as announced in our operational update to hold, including the impact of the incident.
Speaker #2: Moving to cost, Unitopex was 27 dollars per barrel in the quarter, up from 24 in Q2. This is a volume effect, absolute production costs were 55 million, flat on the previous quarter, so the same cost base was spread over a lower production.
Speaker #2: Bias at Douzafou came in at 19 dollars per barrel, and Golfino 58. Golfino is also affected by the cost of gas, for power generation.
Speaker #2: Which follows the oil price. For the first 9 months, Unitopex averaged 24.5 per barrel, and the full year Opex guidance is maintained, at 22 to 26 per barrel.
Speaker #2: Turning to Mabomo phase 2, before the incident, the campaign had delivered a strong result, both a prize all well in the northwest pond oil that brings our track record at Douzafou to 13 successful well out of 14, the first well found 30 meter oil column in the Gamba reservoir with a good reservoir quality.
Speaker #2: We estimate around 17 million barrels of oil in place and about 6 million barrels of incremental recovery from dislocation. And the second well found 16 meter of oil, column in a separate accumulation, confirming as well movable oil.
Speaker #2: Together, the 2 wells support around 8 to 9 barrels of recoverable volume and 2 additional production wells. It is too early to say exactly when we will be able to drill, but we are already working to find solutions to continue the drilling program.
Speaker #2: This slide shows the depth of Douzafou portfolio and the option it gives us. Mabomo phase 2 will add up to 20,000 barrel per day gross, from 5 new producers, once drilling can proceed.
Speaker #2: Bourdon phase 1 is planned for first oil in the first quarter of 2028. Adding up to around 15,000 barrel per day from the Akum wellhead platform, which is being converted in Dubai right now.
Speaker #2: Before that, beyond that, we have an infield well on Tortue, Bourdon phase 2 in 29, and with what treatment appraisal, drilling planned in 2028.
Speaker #2: With the prospector 5 due to come off contract in 2027, before the incident, we had already started sourcing a rig for the Bourdon development.
Speaker #2: We are now looking at how best to fit Mabomo phase 2 wells alongside that program, and we will come back with our 2027 production outlook once the plan is framed up.
Speaker #2: On the long term, picture, it hasn't changed. Douzafou can sustain 30 to 45,000 barrels per day gross, and we remain confident in reaching more than 100,000 barrels per day for the company in 2028.
Speaker #2: With that, I hand over to Thomas for the financials.
Speaker #1: Thank you, Brice, and hello everyone. I'd like to start by echoing what Carl and Brice have said our thoughts are with everyone affected by the incident.
Speaker #1: On the financial side, it happened after quarter end, so it doesn't affect the third quarter figures. But it will, of course, delay first all from Mabomo phase 2, and I'll come back to that under the guidance section.
Speaker #1: Turning to the quarter itself, I think the easiest way to look at Q3 is as a mirror image of Q2. In the second quarter, we sold more than we produced, and in the third, we sold less.
Speaker #1: We produced around 2 million barrels but sold only about a million, mainly because our Golfino cargo slipped from late September into October at the back of bad weather in Brazil.
Speaker #1: So we ended the quarter with around a million barrels in inventory, and that timing really runs through most of the numbers you'll see here today.
Speaker #1: EBITDA came in at 47 million, and after tax charge of 22 million, we report a small net loss of 0.7 million. The tax charge is mainly the profit all taxing a bond, which, unlike Opex and depreciation, follows production rather than the sales method, so it stays fairly stable from quarter to quarter.
Speaker #1: We closed the quarter with 200 million in cash. On the financing side, it was a fairly productive quarter. We signed a 208 million long-term lease for the Bourdon wellhead platform, which means the full infrastructure cost is financed long term.
Speaker #1: At an attractive cost of capital, and without our 7 to put in any upfront equity. We also extended our 250 million dollar revolving credit facility by 18 months, to August 2028, so all in all a good step in strengthening our liquidity ahead of more and more first all.
Speaker #1: Now, let me take you through what's behind the numbers. Starting with production and sales on the left, net production was 21,500 barrels per day, or 2 million barrels, down from 25,000, 300 barrels per day in the second quarter.
Speaker #1: Which really reflects the well issues at Douzafou and Golfino that Brice just took you through. Sales were 1.1 million barrels, that's against 3.2 million in the second quarter.
Speaker #1: Of which 950,000 barrels was our one Douzafou cargo, and the rest stayed profit all. So close to a million barrels went into inventory, roughly 0.4 million at Douzafou and 0.6 million at Golfino.
Speaker #1: In the middle are realized price before hedges came in at 83 dollars per barrel, down from 103.5 in the second quarter. The Douzafou cargo was lifted at the end of August and priced on the August average, and with Brent climbing quite sharply through September, August ended up well below the average for the quarter.
Speaker #1: On the right hand, total revenues and other income were 73 million, which includes a realized hedging loss of 22 million. And just as a reminder, we hedged 2 years ahead, as a requirement under our reserve-based lending facility and a significant part of what's rolling off now was put into place prior to the war.
Speaker #1: Now that hedging loss probably looks large relative to our sales and the reason is really our Golfino cargo. We had a cargo scheduled for the 22nd of September, and that cargo is priced on September, in line with our hedges, but the weather in Brazil pushed that lifting into October.
Speaker #1: So the hedge settled in the third quarter, while revenue on those roughly half a million barrels will be booked in the fourth quarter at September pricing.
Speaker #1: Which brings me to cash. We started the quarter with 254 million dollars. Operating cash flow before working capital was 26 million, which is low, but again, that's mostly the low sales volumes in the quarter.
Speaker #1: Working capital took out another 45 million, mainly the inventory build and part of that is already coming back with the Golfino cargo lifted in early October.
Speaker #1: It also includes paying out the second quarter hedging loss, as I flagged on the last call. Investing activities were 157 million, mainly maromba, Mabomo phase 2, and Golfino boost, as the investment program steps up in the second half, which is very much as planned.
Speaker #1: Financing brought in net 122 million, mainly drawings on the revolver and the various project facilities that we have. So we closed the quarter with 200 million in cash and 385 million of total liquidity, including undrawn facilities.
Speaker #1: And on top of that, our major developments had their own project financing in place. The maromba FPSO facility, the maromba B wellhead platform financing, and now the Bourdon lease, which draw down as those projects progress.
Speaker #1: Moving to the balance sheet, if you remember, we said last quarter that leverage would go up in the second half as capex ramps up ahead of maromba first all, and that's pretty much what you see here.
Speaker #1: Net interest bearing debt went up around 210 million to 910 million, which is roughly 160 million of additional debt to fund developments, and around 50 million less cash.
Speaker #1: Net debt to EBITDA moved to 2.7 times from 1.8. That said, part of that is simply lower EBITDA rather than higher debt. The last 12 months now carry both this quarter's timing effect and the fourth quarter in 2025.
Speaker #1: Which had the weakest all price over the last 2 years, and where we also ended the quarter with close to a million barrels in inventory.
Speaker #1: That quarter drops out next time, and as these barrels are sold, a new production comes on, with expected ratio to come down again. Although the Mabomo phase 2 delay will of course affect timing somewhat.
Speaker #1: Book equity was a billion and 77 million, down 65 million in the quarter. That's mainly the value of our hedges, which fell as all prices went up.
Speaker #1: And under hedge accounting, that changed goes directly to our equity. It's unrealized, and the flip side is that higher prices benefit the majority of our barrels.
Speaker #1: Which are unhedged. Together with a larger balance sheet as we invest, that took the equity ratio to 35%, which is still well above the 25% covenant that applies up until maromba first all.
Speaker #1: Turning to guidance. On production, if you remember, in July we said we expect to land at the lower end of our 2024 to 2027 thousand barrels per day range.
Speaker #1: With the third quarter operational update, we revised that to run 23,000, reflecting the well downtime at Douzafou and Golfino. We had planned to do the ESP work over together with the maintenance at Douzafou in October.
Speaker #1: The maintenance is done, but the work over has been delayed following the incident. So that well remains shut in for now, which affects the fourth quarter volumes.
Speaker #1: Booking to 2027, Mabomo phase 2 was planned to start contributing early in the year, and that will now be delayed. The resources are still there, and we plan to bring those wells on stream, and we'll come back with an updated 2027 outlook together with our full EA guidance at the fourth quarter subset.
Speaker #1: On operating cost, we keep the guidance at 22 to 26. Those per barrel: the 9-month average is 24.5, and worth noting our absolute production cost has been broadly stable in each of the two last quarters, so the move in the per barrel number is really just due to the lower volumes.
Speaker #1: On capex, we've suspended the guidance while we reschedule the Douzafou drilling program, and we'd expect to come in below the 600 to 650 million we guided previously.
Speaker #1: DNA guidance is unchanged at 12 to 40 million. So to wrap up, I think the investment case is unchanged and still rests on 4 points.
Speaker #1: More than 600 million barrels of reserves and resources as the foundation for organic growth. A plan in execution to take production above 100,000 barrels, per day by 2028.
Speaker #1: A portfolio returning above 30% IRR at $60 per barrel brent. And lastly, 2 to 4 billion of free cash flow between 2026 and 2030, against an enterprise value today of around $2.7 billion.
Speaker #1: Overall, the third quarter numbers are shaped by timing of liftings and some temporary well downtime, but the underlying case is intact. The Mabomo phase 2 barrels are delayed rather than lost, and we keep adding efficient financing to deliver the program.
Speaker #1: And with that, that ends the prepared presentation, so I'll hand back to the operator and we can then open for questions. Thank you.
Speaker #2: There are no questions on the phone, so I will now hand you back to your host for written questions.
Speaker #1: Thank you, operator. This is before we start bridges and go on, so he had to leave us for another meeting. Mr. Carl and I will try to cover any related questions.
Speaker #1: And we can follow up after the call if we need more detail. So with that, I'll jump into the first question here. This one is for Carl.
Speaker #1: We have a few questions on Punch Brew. So I'm just going to cover this one. In bore drilling's initial press release, they stated that the preliminary information indicated a Punch Brew is this still considered the cause of the incident?
Speaker #3: I would say a short answer to that is no. First of all, we have a long history of rigs standing next to Mabomo. In the exact location where Prospector 5 was standing, and there's been no indications of Punch Brew or any problems with soil previously.
Speaker #3: Secondly, in the extensive video or surveys done by ROV and video, there has been no indications of a Punch Brew observed. So we today regard this as highly unlikely.
Speaker #3: Of course, any collapse of a leg would appear as a Punch Brew. So we think that there are probably other causes of this collapse than a Punch Brew.
Speaker #3: But that's this is still work in progress, but we think this is the most unlikely scenario. At this point.
Speaker #1: Thanks, Carl. We have another question here. When do you expect Mabomo back in operation? And the answer to that is that Mabomo is producing at the moment.
Speaker #3: Yes, we're ramping up. Yeah, we're ramping up production as we speak.
Speaker #1: Next question is, which rig is going to drill at maromba?
Speaker #3: Well, on maromba, we will drill with maromba B. It is an integrated wellhead platform and drilling.
Speaker #1: What can be the financial impact will be the financial impact of low production but also reduced capex while waiting for the situation to normalize and go on.
Speaker #1: We the production from existing wells is ramping up and coming back online. Capex will be reduced as we're not going the Mabomo phase 2 drilling program will be suspended for now until we start back up.
Speaker #1: So the expectation is we have low production, but we're also going to have some low capex, and then we'll restart that as soon as we can.
Speaker #1: When can you provide guidance for new guidance for Mabomo ramp up? I think it's a bit too early to say exactly. We'll have to work through the current incident and then we will come back with a new plan, hopefully by the next quarter, not before.
Speaker #3: Yeah, Thomas, I just want to add that as Bree stated, we are already under in quite advanced discussions with rig operators for the Bordeaux drilling campaign.
Speaker #3: And our indications today is that the availability of a replacement rig is there in the market. And we expect to have clarity on rig availability sooner rather than later.
Speaker #3: So we're actually quite optimistic. On a replacement rig. What remains then to start a campaign is that we obviously need to be absolutely sure that we have no interference from the wreckage in bringing a rig in to drill in the on the well bay of the Mabomo facility.
Speaker #3: And that is still work in progress, but we do not expect that to take a lot of time. We think it will take some time.
Speaker #3: So we actually expect to come back to the market and present a new program in the not too distant future.
Speaker #1: Thanks, Carl. Looking at what remains as questions before, looking at what remains to be done on maromba, which single milestone do you see as the most critical to keeping first of all on schedule and why?
Speaker #3: Well, the most critical milestone in our mind has always been the regulatory approval in Brazil. That comes last, and it is a process that although you can't prepare extensively, which we have have done and are doing, you are starting that process when in reality when you arrive in Brazil.
Speaker #3: So that is and remains one of the biggest I would say timing risks of maromba. We are of course preparing in a way that we believe will take us to a position where we have minimal risk of delay, but this is something we cannot preclude.
Speaker #3: So this is our in our perception still the biggest risk. The other risk is the transit through Hormuz. That may or may not cause delay.
Speaker #3: We are constantly reviewing the situation, and we will of course apply the ALARP principle as low as reasonably possible to our decision making on on the transiting the strait.
Speaker #3: And we again, we're doing everything we can to prepare, and and also prepare ourselves to ascertain the security situation. But we are we are well placed to get out and get going on our dry tow in January as we have presented.
Speaker #1: Thank you, Carl. Next question. Carl, who is responsible for the inventory of pipes and equipment that was being carried at the prospect of five?
Speaker #1: Also when do you think you could receive another jackup drilling rig to continue work at Mabomo phase 2, which I think second one you covered?
Speaker #3: I think we've covered the second one. We are as we speak sifting through all the company provided equipment that was on the unit. And we are going to of course replace that very expediently.
Speaker #3: So we're not concerned because we we you we have we have the necessary kit for a number of wells. So we do not expect this to affect our program at all.
Speaker #1: Thank you, Carl. Next question. Lifting from Dusafu, does each partner do their own liftings or do you lift together? And the answer to that is we we do our own liftings.
Speaker #1: Probably B. Next question was was the prospect of five rig under bore supervision or had it been handed over to B2B when the incident happened?
Speaker #3: We it is always under bore's responsibility. Of course, as the operator, we are responsible vis-à-vis the government. We are the license holder, and we are the responsible operator.
Speaker #3: Bore is responsible vis-à-vis us under a contract. That is the let's say the the flow down of responsibility.
Speaker #1: Thank you, Carl. A couple of questions on liftings. So we had a lifting in October and then we have another planned in December on Dusafu.
Speaker #1: Do you have insurance coverage and if needed, how will any potential costs be shared among the producers?
Speaker #3: Cost among producers. We have of course insure comprehensive insurance coverage on our facilities, but as our facilities have not been affected by this incident, we do not expect to have significant you know problem or issue with insurance or any insurance claim or significant insurance claim.
Speaker #3: Otherwise, I I think you know this is something that obviously will take some play some time to tally up all costs and and how they will be apportioned and covered by the policies.
Speaker #3: We we understand bore is also comprehensively covered. Although we don't have the details or at least I don't have the details right now as we speak.
Speaker #1: Okay. That is the end of questions online. Thank you very much and thank you for joining today. If you have any follow-up questions, then please reach out to me or to the IR team.
Speaker #3: Yeah. Can I just add that we appreciate that you have participated. I'm sure you appreciate that this is difficult times for us. We are focusing on what is most important right now, which is the the people involved in the accident and making sure that they are well taken care of.
Speaker #3: That is our primary primary concern. We also will of course try to find all the five people missing. So far three has been identified as or there's three bodies that have been discovered.
Speaker #3: But two still missing. And we hope that the bore will bring news about this very shortly. But we will we have already started production.
Speaker #3: And we again maintain that or we say again that the the facility the Mabomo facility has not been affected by this incident. So we will shortly give you an update as to our program.
