BW Energy Announces First Half Year Results

Source: www.gulfoilandgas.com 8/20/2021, Location: Africa

HIGHLIGHTS
• Safeguarding people, operations and assets amid continued COVID-19 pandemic
• H1 2021 EBITDA of USD 80.2 million and net profit of USD 23.5 million
• Strong balance sheet with cash position of USD 216.5 million at 30 June and no debt
• Completed a private placement raising gross proceeds of USD 75 million in January
• Drilled and completed DTM-7H on time and below budget, with first oil expected from DTM6H and DTM-7H in early Q4 2021
• Drilling operations on Hibiscus North exploration well ongoing
• On track with the Hibiscus-Ruche development including the jack-up rig re-purposing
• H1 2021 gross production of 2.2 million barrels with 1.3 million barrels net to the Company
• Sold 1.6 million barrels of net oil in H1 2021 compared to 1 million barrels in H1 2020

FINANCIALS
- Operating revenues for the first half-year of 2021 amounted to USD 143.9 million, an increase of USD 89.7 million (USD 54.2 million)1
- Operating expenses were USD 63.7 million, an increase of USD 46.0 million (USD 17.7 million).
- EBITDA for the period was USD 80.2 million (USD 36.5 million). The increase in EBITDA was largely due to higher oil price and more liftings in first-half 2021 compared to the same period in 2020.
- Depreciation was USD 34.6 million (USD 32.2 million), mainly related to depreciation of the Tortue oil field. Operating profit for the first half-year was USD 45.6 million compared to a loss of USD 7.6 million in first half-year of 2020.
- Net financial expense was USD 3.4 million (USD 9.1 million). Tax expense was USD 18.7 million (USD 12.5 million). A majority of the tax expenses relates to the operation of the Dussafu Production Sharing Contract (PSC) arrangement in Gabon.
- Net profit for the first half-year was USD 23.5 million, compared to a loss USD 29.2 million in the first half-year of 2020.
- Total equity at 30 June 2021 was USD 540.3 million, an increase of USD 85.0 million (USD 455.3 million), mainly reflecting USD 73.6 million of net new equity raised the January 2021. The equity ratio was 60.7% (58.7%).
- Total available liquidity as of 30 June 2021 amounted to USD 216.5 million of which USD 20.2 million are JV funds.
- Net cash inflow from operating activities was USD 74.5 million (USD 26.3 million) in the first half-year.
- Net cash outflow on investment activities was USD 36.3 million (USD 58.6 million), mainly related to the Tortue and Hibiscus-Ruche development. Net cash inflow from financing activities was USD 57.7 million (inflow USD 78.9 million).

E&P OPERATION

Dussafu
Operations in the first half of 2021 remained impacted by the COVID-19 pandemic, and as a result production averaged approximately 12,000 bopd gross and 7,300 bopd net to the company. BW Energy and partners lifted three cargos in the first half of 2021 for a total of 1,970,405 barrels of oil.

BW Energy’s net entitlement was 1,328,152 bbls of oil in the first half of 2021. Net sold volumes, which are the basis for revenue recognition in the financial statement, were approximately 1,790,000 bbls which includes 195,000 barrels of Domestic Market Obligation (DMO) and is excluding State Profit Oil.

This resulted for the company an over-lift position of 300,000 bbls at the end of the period. In January, one lifting was executed by JV partner Gabon Oil Company on behalf of itself and the State of Gabon. Dussafu production continues to perform in line with expectations with four wells (DTM-2H, DTM-3H, DTM-4H and DTM-5H) producing at a current rate of approximately 11,000 bbls/day (gross) of oil to the FPSO BW Adolo.

E&P DEVELOPMENT

Dussafu
The Hibiscus Extension appraisal well (DHIBM-2) was drilled in Q2. The primary objective of the well was to test the northern extension of the Gamba Sandstone reservoir of the Hibiscus field, discovered in 2019. The findings indicated that the reservoir was water-bearing and the well was subsequently plugged and abandoned. The cost for the well has been capitalised, as it provided valuable information to better define the structure, stratigraphy and extent of the hydrocarbon resource in that portion of the Ruche AEE.

The existing Hibiscus 2P gross recoverable reserves of 46.1 million barrels established by the DHIBM-1 well, and its appraisal side-track drilled in 2019, are not affected and remain the basis for the ongoing Hibiscus/Ruche development project.

Drilling of the final horizontal production well, DTM-7H, on the Tortue field, was successfully completed according to plan in July. High-quality oil-bearing sands were encountered in line with prognosis. The completion and tie-in of the two wells (DTM-6H and DTM-7H) is underway with first oil expected in early Q4 2021. The Hibiscus North exploration well (DHBNM-1) was spudded in late July and drilling activities are ongoing. The well has a geological analogue to the Ruche Field, where the Gamba structure is the primary target.

Maromba
Following the success at Dussafu, BW Energy plans a similar phased development of the Maromba licence in Brazil, thereby minimising up-front capital expenditure, accelerating time to first oil, and allowing the production and the supporting organisation to grow organically. Phasing of the Maromba project will provide reservoir performance data which will be used to optimise future development stages. The project continues to progress towards the environmental approval with focus on optimisation of the field development with respect to investment, operational costs and schedule. The Field Development Plan was approved by the regulator (ANP) in August 2020 and final investment decision is planned by the first quarter of 2022.

Kudu
In 2017, BW Energy entered into a farm-in agreement for a 56% operated interest the Kudu licence offshore Namibia. In July 2021, BW Kudu Limited, a wholly owned subsidiary of BW Energy and the National Petroleum Corporation of Namibia (NAMCOR) completed a Farm-In and Carry Agreement, which increased BW Kudu’s working interest in the license to 95%. NAMCOR will retains the remaining 5% working interest which will be carried by BW Kudu until first gas. BW Kudu paid USD 4 million at completion of the transaction in early July 2021. BW Energy is continuing its efforts to develop this resource commercially.

CORPORATE MATTERS
On 20 January 2021, BW Energy successfully completed private placement of 23,690,000 new shares, raising gross proceeds of approximately USD 75 million. Together with the positive cash flow from operations, the company is well capitalised with a robust balance sheet, no external debt, and strong cash balance at period end of USD 216.5 million. This positions BW Energy to capture significant value creation by continued investment in the Dussafu license in Gabon, development of the Maromba discovery in Brazil, and other potential new ventures.

OUTLOOK
BW Energy prioritises safety first with “zero harm” as an overriding objective for people and environment. The Company is substantially reducing the carbon footprint of by developing discovered oil and gas resources through large-scale repurposing of existing production infrastructure.

Key macro drivers have developed positively during 2020 and into 2021 as societies have started vaccination programs and gain increased control of the COVID-19 pandemic. Disciplined OPEC production cuts has supported the oil price in the short-term, while oil demand is recovering with improvements in the global economy. The exact degree of demand growth will rely on the pace of global vaccine rollouts, easing of lockdowns and government economic stimuli through 2021.

BW Energy expects to generate significant positive cash flow at current oil price levels. With no debt, a solid capital base following the 2020 IPO and the January 2021 capital raise, and access to a number of accretive investment projects, the Company expects to create significant value for its stakeholders going forward.

BW Energy remains focused on realising long-term value creation via its phased development strategy targeting investments in high-return assets. The flexible investment strategy has proven robust for a range of market scenarios and positions the Company to address both short- and long-term opportunities to drive cash flow and earnings.


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