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BW Offshore: First quarter results 2022

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BW Offshore
BW Offshore

First quarter results 2022

HIGHLIGHTS

  • EBITDA of USD 84.8 million

  • Operating cashflow USD 147.9 million

  • Equity ratio 35.9% and USD 409.1 million in available liquidity

  • Annual dividend increased to include USD 20 million of BW Energy shares as in-kind distribution

  • Barossa FPSO project progressing as planned

  • Awarded limited notice to proceed for Shell’s Gato do Mato development in Brazil

  • Agreement to divest the FPSO Polvo to BW Energy

  • Contract extensions signed for BW Joko Tole and Espoir Ivoirien

  • Recycling of FPSO Umuroa in compliance with Hong Kong convention

In the first quarter, BW Offshore continued to execute the Barossa FPSO project according to plan. The gas and condensate FPSO project is approximately one-third completed in line with schedule. BW Offshore has proactively locked in key subcontractors for the Barossa FPSO to reduce risk, maintain schedule and mitigate cost inflation as much as possible. The Company is in close dialogue with its subcontractors and equipment providers to ensure early identification and mitigation of potential challenges considering the further pressure on global supply chains in the wake of the Russian invasion of Ukraine and the continued Covid-19 lockdowns in China.

“Our focus is on the safe and efficient execution of the Barossa project, we are delivering on divestments on non-core units and we maintain good performance from our core assets,” said Marco Beenen, CEO of BW Offshore. “We are therefore pleased to announce an increase in shareholder distributions as well as an agreement to proceed with preparatory work for the supply of an FPSO for the Gato do Mato development, a new infrastructure project which meets our investment requirements of a long-term contract, investment grade counterparties and an attractive partnership model.”

Based on the Company’s financial position and current business and liquidity outlook, the Board of Directors of BW Offshore has decided to increase the annual dividend to include USD 20 million of in-kind distribution of BW Energy shares in addition to the annual USD 25 million cash dividend, both to be paid on quarterly basis.

This equates to a quarterly cash dividend of USD 6.25 million, or USD 0.035 per share, and an in-kind distribution of USD 5 million of BW Energy shares, equal to 0.00890114228042 shares in BW Energy per share in BW Offshore based on a five days volume weighted average price (VWAP) of NOK 29.94 leading up to 25 May 2022 and the currently outstanding 180,814,883 shares in BW Offshore. Shares in BW Offshore will trade ex-dividend from and including 8 June 2022. Shareholders recorded in VPS following the close of trading on Oslo Børs on 9 June 2022 will be entitled to the cash and share distribution payable on or around 17 June 2022.

On 26 May, the Company announced the award of a limited notice to proceed (LNTP) by Shell Brasil Petróleo Ltda (Shell) and its partners for early-stage engineering and supplier reservations for the supply of an FPSO for the Gato do Mato oil and gas field offshore Brazil. Shell and its partners target to award a lease and operate contract to a consortium comprising BW Offshore and Saipem S.p.A., which will be jointly responsible for the engineering, procurement, construction, and installation (EPCI) of the FPSO with expected delivery in 2026.The award is subject to the parties finalising the commercial and pricing terms of the contract in view of the current inflationary supply chain situation and a final investment decision to proceed by Shell and its partners. The FPSO lease and operate contract will have a firm period of 18 years with seven years of options.

FINANCIALS
EBITDA for the first quarter of 2022 was USD 84.8 million (USD 102.3 million in Q4 2021). The reduction was mainly related to the announced sale of BW Joko Tole. Although the sales transaction has not been closed, the agreement stipulates that economic impact from and including first quarter would be for the benefit of the buyer, and profit impact from BW Joko Tole has been eliminated from the accounts.

EBIT for the first quarter was USD 30.4 million (negative USD 50.9 million in Q4 2021). Q4 2021 was impacted by impairment of USD 86.3 million, which has resulted in lower depreciation of USD 12.6 million in the first quarter of 2022.

Net financial items were positive by USD 14.2 million. This is mainly driven by significant positive mark to market (MTM) changes in interest rate hedges as long-term interest rates have increased significantly during first quarter. BW Offshore is well hedged on interest rates under all debt facilities.

Net contribution from BW Offshore’s 27.5% ownership in BW Energy was USD 9.5 million (USD 23.7 million in Q4 2021). The company completed one lifting in the quarter at USD 120 per barrel.

Net profit for first quarter was USD 46.3 million.

Total equity at 31 March 2022 was USD 1,079.3 million (USD 1021.4 million in Q4 2021). The equity ratio was 35.9% at the end of the quarter (33.9% in Q4 2021).

Net interest-bearing debt was USD 607.3 million (USD 653.4 million in Q4 2021).

Available liquidity was USD 409.1 million, excluding consolidated cash from BW Ideol and including USD 175 million available to draw under the corporate loan facility.

FPSO OPERATIONS
The FPSO fleet continued to deliver stable uptime in the quarter with a weighted average fleet uptime of 94.9% (96.2% in Q4 2021).

In January, a one-year extension was signed for the lease and operation of ABO FPSO until end of Q4 2022.

In March, BW Offshore received a one-year contract extension for the lease and operation of the FPSO BW Joko Tole. The closing of the transaction to divest the FPSO, previously announced, is expected shortly with handover to its new owners.

In March, Umuroa was sold for recycling in compliance with the Hong Kong Convention at Baijnath Melaram shipyard in India. The sale generated USD 13.5 million in net liquidity. Grieg Green has been nominated as representative on site at the yard to monitor progress, compliance with environmental and safety regulations as well as proper application of the ship recycling plan. The FPSO BW Cidade de São Vicente was sold for recycling in early February.

BW Energy announced in April that the Company will proceed with the Maromba development project offshore Brazil. As part of this BW Offshore has signed an agreement for the sale of the FPSO Polvo to BW Energy for a total consideration of USD 50 million. The sale will be completed no later than 24 July 2023. BW Energy has the option to complete the transaction before that date. If the transaction is completed early, BW Energy will pay USD 30 million upon the vessel transfer date, with the remaining USD 20 million provided as a seller’s credit by BW Offshore until settlement on 24 July 2023 at the latest. An independent third-party valuation of the FPSO concluded that the sales price is within a fair market value range.

In May, the contract for Espoir Ivoirien was extended until end of March 2023.

OFFSHORE FLOATING WIND
BW Offshore is actively pursuing opportunities in the energy transition. The Company's primary investment is in offshore floating wind through the 53.2% ownership of BW Ideol, a global market leader with more than ten years of experience from design, execution and development of floating wind projects based on proprietary and patented Damping Pool® technology and engineering capabilities.

In January 2022, BW Ideol secured the rights to develop a floating offshore wind farm with an approximate capacity of 1GW off the northeast coast of Scotland in the ScotWind leasing round, as part of the partnership Floating Energy Allyance (FEA). In April, FEA signed the formal option agreement for the development according to plan, with site investigations and environmental studies as the next major milestones before consent application.

In May, the EolMed partnership comprising Qair, TotalEnergies and BW Ideol, made the final investment decision (FID) for its 30MW offshore floating wind development. The Mediterranean Sea pilot wind farm is set to become one of the first three floating offshore wind farms in France when it is commissioned in mid-2024. It comprises three 10MW wind turbines, each mounted on BW Ideol’s patented floating steel foundations and connected to the Electricity Transmission Network by a subsea cable. BW Ideol and Qair have cooperated on the project since 2016 with Total joining the development consortium as 20% owner in 2020.

OUTLOOK
BW Offshore expects the core FPSO fleet to generate significant cash flow in the time ahead. The firm contract backlog at end of March 2022 amounted to USD 6.3 billion, including the Barossa contract. With probable options, the backlog was USD 7.5 billion at the end of the quarter.

The war in Ukraine and the Covid-19 pandemic continue to affect global markets through supply chain disruptions and inflation across a wide range of commodities. The direct impact on operations from the pandemic has however started to decrease. The higher energy prices from late 2021 and into 2022 reflect both improved market fundamentals as more nations normalise activity levels in the wake of Covid-19, as well as concerns related to the security of energy due to the war in Ukraine.

The current high oil and gas prices have led the oil and gas industry to become more active in progressing new field development projects. The Company expects continued focus on long-term large field development initiatives with low break-even costs and low carbon emissions. The Company maintains a selective approach to such opportunities, progressing discussions on only a few high-end projects which can be developed in partnership with global infrastructure investors. In addition, activity tied to potential re-deployments has also increased, with a particular focus on BW Opportunity.

BW Ideol is BW Offshore's vehicle for investment in floating offshore wind. The company is progressing multiple projects supported by the funding from the private placement in 2021.

BW Offshore seeks to optimise the asset portfolio and overall cost base. This may include further divestments or recycling of FPSOs without contracts if redeployment opportunities do not materialise. The recent asset divestments have strengthened the Company’s financial position and support growth into accretive offshore energy projects and long-term value creation.

Please see attached the Q1 Presentation. The earnings tables are available at:

www.bwoffshore.com/ir/

BW Offshore will host a conference call of the financial results 09:00 (CEST) today. The presentation will be given by CEO Marco Beenen and CFO Ståle Andreassen.

Conference call information:
To dial in to the conference call where the quarterly results and Q&A will be hosted, please dial one of the following numbers:

Norway: +47 8150 3308
Singapore: +65 3163 4602
UK: +44 2039 362 999
US: +1 646 664 1960
France: +33 970 733 958 (PIN: 717338#)

You can also follow the presentation via webcast with supporting slides, available on:
https://streams.eventcdn.net/bwo/2022q1/

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

For further information, please contact:
Ståle Andreassen, CFO, +65 97 27 86 47
Anders S. Platou, Head of Corporate Finance and Strategy, +47 99 50 47 40

About BW Offshore:
BW Offshore engineers innovative floating production solutions. The Company has a fleet of 12 FPSOs with potential and ambition to grow. By leveraging four decades of offshore operations and project execution, the Company creates tailored offshore energy solutions for evolving markets world-wide. BW Offshore has around 2,000 employees and is publicly listed on the Oslo stock exchange.

This information is subject to disclosure requirements pursuant to Section 5-12 of the Norwegian Securities Trading Act.


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