BW Offshore: First quarter results 2020

BW Offshore first quarter results 2020

HIGHLIGHTS

• Protecting people, operations and partners are the main priority amid COVID-19 pandemic
• Solid EBITDA of USD 129.9 million and operating cashflow USD 106.3 million for the quarter from FPSOs
• Five-year contract for BW Pioneer and extensions for FPSO Polvo and BW Cidade de São Vicente
• Completed BW Energy IPO and dividend-in-kind distribution
• Initiated USD 10 million share buy-back programme 
• Cash dividend of USD 0.034 per share
• Non-cash impairment of USD 233.1 million
• Equity ratio of 35% and liquidity available of USD 406.8 million at end of quarter

In response to the COVID-19 outbreak BW Offshore has proactively taken steps to ensure the health and safety of people and to minimise risk of business interruptions, while it adheres to local public health advisories across all locations. Since early March the Company has established a COVID-19 Task Force responsible for executing business continuity planning for all FPSOs and onshore locations to ensure safe and efficient operations.

“Protecting our people, operations and partners is our main priority. We maintain high operational uptime and make operational adjustments as the situation evolves,” said Marco Beenen, the CEO of BW Offshore. “While we expect a slowdown in redeployment activity in response to volatile oil prices, we continue to progress selected new prospects with solid counterparties looking beyond the current market turmoil and COVID-19 situation​.”

FINANCIALS

BW Offshore completed the IPO of BW Energy in February 2020. Following the IPO, BW Offshore’s ownership in BW Energy reduced to 38.8% and consequently BW Energy is no longer being consolidated as part of BW Offshore from 1 March 2020. Share of profit or loss from ownership in BW Energy is presented separately below net financial items in the income statement.

EBITDA increased to USD 129.9 million from USD 118.1 million in the fourth quarter (figure is restated to provide comparable information). The increase was mainly a result of the provision taken on FPSO Umuroa during fourth quarter for expected loss of revenues.

BW Offshore recorded a non-cash impairment to the book value of the FPSO fleet and other assets of USD 233.1 million for first quarter. The impairment reflects uncertainty on redeployment following the current market turmoil and pressure on oil prices. The following FPSOs were subject to impairment: Berge Helene, BW Athena, BW Cidade de São Vicente, Espoir Ivoirien, FPSO Polvo and Umuroa.

Net financial expense was USD 92.2 million. This is mainly driven by significant negative non-cash mark to market (MTM) changes to interest rate hedges due to declining swap rates and negative MTM changes to FX hedges due to USD strengthening.

Total equity at 31 March 2020 was USD 999.2 million (USD 1,458.5 million in Q4 2019). The equity ratio was 35.0% at the end of the quarter (43.3% in Q4 2019). BW Offshore continues to maintain substantial headroom to the 25% minimum equity ratio covenant in loan facilities and the BWO05 bond.

Available liquidity was USD 406.8 million, including USD 171.8 million in cash and USD 235 million available under the corporate facility.

Net interest-bearing debt was USD 1,068.2 million (USD 996.6 million in Q4 2019).

The Board of Directors has declared a cash dividend of USD 0.034 per share. Shares will trade ex-dividend from and including 2 June 2020. Shareholders recorded in VPS following the close of trading on Oslo Børs on 3 June 2020 will be entitled to the distribution payable on or around 10 June 2020.

On March 31, the Board of Directors initiated a USD 10 million share buy-back program. In order for BW Group to maintain its current ownership interest of 49.92%, BW Group will participate in share buy-backs on a pro-rata basis.

OPERATIONS

The FPSO fleet continued to deliver consistent high uptime in the quarter with an average commercial uptime for the fleet of 97.3% (99.0%). The commercial uptime was affected by a shutdown on BW Cidade de São Vicente and a planned shutdown on Espoir Ivoirien.

In March, BW Offshore signed a new five-year contract for the FPSO BW Pioneer. The contract will add approximately USD 350 million of EBITDA over the firm five-year period. A one-year extension for the FPSO Polvo was also signed during the quarter.

The contracts for BW Cidade de São Mateus reached their final terms during March. The FPSO is currently in lay up in Singapore.

In April Petrobras extended the lease for BW Cidade de São Vicente until 11 June 2020. The Company has commenced planning for demobilisation of the unit from the field and is considering temporary lay up in Brazil.

BW Offshore has decided to prepare for a lay up of the FPSO Umuroa on the Tui field as it did not receive final clarifications from authorities to disconnect the vessel before onset of the southern hemisphere winter season. BW Offshore continues to work with the New Zealand authorities to develop a new plan for demobilisation, including funding. A significant portion of the estimated USD 20 million demobilisation cost was incurred before demobilisation was put on hold.

OUTLOOK

BW Offshore has over time substantially reduced leverage and strengthened its financial solidity, including refinancing the main loan facility and bond portfolio in 2019. With the recent IPO of BW Energy, these measures position the Company to deploy capital towards future accretive FPSO projects and long-term value creation.

The majority of BW Offshore’s fleet remains on long-term contracts with national and independent oil companies. Historically, these contracts have withstood market fluctuations with options to extend exercised during previous oil price lows. The fleet should continue to generate significant cash flow in the time ahead. The end of quarter order backlog amounted to USD 4.5 billion (USD 5.5 billion) of future revenue from firm contracts and options expected to be exercised.  

The combination of the COVID-19 pandemic and a new low oil price environment has made the global E&P sector reassess short-term investment plans pending a normalisation of demand patterns and supply-side adjustments. At the same time, the oil and gas industry continues to progress long-term field development initiatives. BW Offshore, with its service offering and ability to partner with field owners to provide cost-effective solutions, maintains an active dialogue in relation to several field-development prospects and FPSO projects.

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

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 first quarter results and Q&A will be hosted, please dial one of the following numbers:

Norway:

Singapore:

United Kingdom: +44 333 3009 273

United States: +1 833 526 8380 

You can also follow the presentation via webcast with supporting slides, available on:

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.

For further information, please contact:

Ståle Andreassen, CFO,

Anders S. Platou, Head of Corporate Finance,

About BW Offshore:

BW Offshore is a leading provider of floating production services to the oil and gas industry. The company also participates in developing proven offshore hydrocarbon reservoirs. BW Offshore is represented in all major oil and gas regions world-wide with a fleet of 15 owned FPSOs. The company has more than 35 years of production track record, having executed 40 FPSO and FSO projects. BW Offshore is listed on the Oslo Stock Exchange.

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

 

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