BW Energy Limited (BWE) Q4 FY2025 Earnings Call Transcript & Summary

Hello, and welcome to the BW Energy Q4 Presentation Conference Call hosted today by Carl Arnet, CEO; Thomas Young, CFO; and Brice Morlot, COO. Please note, this call is being recorded. [Operator Instructions] I will now hand you over to your host, Carl Arnet, CEO, to begin today's conference. Thank you.

Thank you, operator, and thank you all for joining BW Energy's Fourth Quarter and Full Year 2025 presentation. My name is Carl Arnet. I'm the Chief Executive Officer of BW Energy. I will take you through some of the highlights for 2025 and the fourth quarter and some of our developments. Then you will have some more granularity on the operations from our Chief Operating Officer, Brice Morlot. And of course, as usual, some granularity on the financials by our Chief Financial Officer, Thomas Young. 2025 was a strong year for BW Energy with a record annual production, another record I'm pleased to say. And of course, with record production comes reduced unit OpEx. Our project portfolio is on schedule and cost, and we are very pleased to have raised a total of USD 1 billion, approximately USD 1 billion of low-cost financing related to our developments. We are also pleased that our discovery last year, Bourdon is moving towards FID and that will be more to come very soon in future reporting. So for 2025, we had a total EBITDA of $414 million with a net profit of $133 million. Our cash at the end of '25 was $150 million. Fourth quarter figures. Our net production for the quarter was 25,200 barrels per day with an EBITDA of $37.1 million. Our key projects are progressing into 2026. Maromba development is on track, and I will take a little bit more detail on that. And then we have MaBoMo Phase 2 with first oil in '26. This is of course, addressing low-risk and high profitability infill drilling opportunities we have on Dussafu. We hope to sanction Bourdon very soon, which will give us another cluster on Dussafu. And last but not least, we are still progressing very well on the Golfinho Boost project. So some more details on the growth projects. We have the Dussafu, which will have, of course, a pivotal year in '26 with the MaBoMo Phase 2, where we will address about 2P reserves of 14 million barrels, and we have 4 development wells planned, where we have in planning 2 Hibiscus appraisals. Golfinho Boost is, again, addressing about 12 million barrels of 2P reserves. We are converting gas lift wells to seabed ESPs. And the project is going very well. And again, a very accretive project, better than 30% IRR, and we are progressing, as I said well. Maromba, that's, of course, the big 123 million barrels 2P reserves, and we expect to drill a total of 12 production wells where we start with 6 in the first phase and then another phase of 6 that will follow. That's more drilling execution phases we're talking about. And again, a very high IRR for the Maromba project. And Bourdon discovery, we expect to have on this list very shortly. The Maromba execution is on track. We have reported extensively on the FPSO refurbishment and so you showed you pictures of that. It's going well, and there's full activities in Dalian at the China yard. The wellhead platform had an initial stay late or second half of last year in Singapore, where we did, let's say, an extensive assessment of work scope, and she's now been transported to the conversion yard. For the SURF, the main activity is engineering and procurement to prepare for the installation towards late '26. The other main focus of the whole Maromba execution is to prepare for the regulatory approval process, and we are spending a lot of effort in our engineering and preparations and, of course, also yard supervision to prepare for meeting all the regulatory requirements when we mobilize into Brazil. Next picture, very cool picture, shows the scale of our jack-up, our jack-up acquisition as she is being towed into the yard in Dubai. We have -- you can see it's a very large unit, and we have -- we are well underway now with the engineering and the initial mostly demolition work, but preparatory work for the conversion and the -- all the upgrades that we will do to have her serving as a drilling and wellhead platform. And the planned sail away to Brazil is end '26. Then on to update on our appraisal and exploration activities. We have just completed our 3D seismic campaign, the seismic shoot on Niosi Guduma and the corner of Dussafu and we will now, of course, enter a fairly extensive period of analyzing this seismic data. We are planning for 2 appraisal targets at Dussafu in the MaBoMo Phase 2 campaign, and we also have further targets. We are still planning the MaBoMo Phase 2 drilling campaign in its totality. So we may come back with further news later on. In Namibia, as you know, we have completed our Kharas-1A. We are now working on a preparation of a data room for our findings in -- on that well. The other activity we have in Namibia is, of course, the non-operated PEL-73, where our partner is undertaking onshore exploration campaign with, let's say, some initial good news on the drilling that has taken place there. Then we have announced some progress in Angola. Angola is a country of interest in our West Africa strategy. We have agreed with Azule Energy to acquire net 10% of Block 14 and 5% of Block 14K. I remind everybody that this is fairly extensive processes where you have regulatory approvals, there's closing conditions and also preemption rights. So we are not declaring in any form or fashion, victory today, but we have agreed with Azule Energy, and we see this as a very interesting opportunity to get a foothold in a mature hydrocarbon basin where we see a lot of future potential with the BW Energy strategy. So all in, we are very much on track to deliver industry-leading growth. We have given a 20 year '25 with a new record production, our guidance for '26 is flattish. We have activities to fight back on depletion, which you always have, and we expect to keep our production at very healthy levels in '26. But of course, as we have -- as we complete our developments and get the production from Maromba, we will see a significant threefold increase in production. So with that, I will leave the word to Brice that will take you through the operational update.

Thank you, Carl, and good afternoon, everyone. 2025 marked another step forward for BW Energy with a new annual production record of around 30,000 barrels per day. This reflects the continued focus on safe and reliable operation across our assets. And it is encouraging to see our targeted work translating into a steady year-on-year improvement in production. Let me take you through the key operational developments during the year. Dussafu delivered another strong year, marked by high uptime and a rapid recovery following the planned maintenance in the third quarter. During Q4, production was impacted by a mechanical failure on one of our ESP. This was budgeted and planned for as part of the ESP maintenance, and we have a hydraulic workover unit that is already in Gabon ready to perform the workover. The workover will be performed without a drilling rig. The well should be back online mid-March 2026. Golfinho experienced some challenges in Q4 with maintenance being extended due to a lifeboat integrity issues. The well maintenance program will be -- will involve several optimization measures, also took longer than expected, but we successfully managed to resolve the issues and ramp up production towards the end of the year. In total, the full year production came in at 10.9 million barrels, so very close to our original guidance of 11 million barrel net to BW Energy. Let us have a look at the quarterly OpEx development now. On operating cost, I'm pleased to report that we ended the year comfortably within our guidance range at around $20 per barrel. This reflects high facility uptime, stable operating performance and continued cost discipline across our assets, particularly at Dussafu. Now let me take you through the operational outlook for 2026. We have an active year ahead 2026 with several important operational milestones to be delivered. So at Dussafu, first, we will commence drilling under the MaBoMo Phase 2 program during the summer. And base case -- our base case is that 2 wells will be completed and ready to come on stream late in the year. This well will be ramped up following the seasonal maintenance period in the third quarter with a contribution to fourth quarter production, while you will see the full production impact realized in 2027. As in the previous year, we will carry out our planned 3 weeks maintenance at Dussafu during the third quarter. And in addition, we have identified 1 ESP that requires replacement. This work is already underway and is expected to be completed by mid-March with only muted and temporary impact on production. Overall, for Dussafu in 2026, we expect a natural decline from the existing wells to be partially offset by the initial production from MaBoMo Phase 2. However, full production is expected to be somewhat lower than 2025 as most of the new volumes will contribute next year in 2027. At Golfinho now, we recently completed a substantial well optimization program as part of the Q1 maintenance. And we are already seeing positive effects across several wells. So with this improved well performance and reduced maintenance activity compared to last year, we expect production at Golfinho to increase in 2026. Taken together this support, full year production guidance will be between 9 million and 11 million barrels net to BW Energy, corresponding to 25,000 to 30,000 barrel per day operating cost. The operating costs are estimating around $20 to $24 per barrel in 2026. So OpEx remained under control. We expect to capture efficiencies gained on Adolo, including onshore support, repairs and maintenance crew as well and the removal of third-party markups, which should reduce operating costs while natural production decline across the portfolio offset some of these benefits on a per year basis. The operating cost guidance range primarily reflects the range of production outcomes. With that, I conclude the operational section and hand it over to Thomas for the financials.

Thank you, Brice, and good afternoon, everyone. 2025 marked another strong year for BW Energy, both operationally and on the financial side. We delivered in line with guidance across our key cost parameters and secured further important financing supporting our ongoing field development projects. A good illustration of our approach to ensuring efficient financing is the latest lease arrangement concluded in the fourth quarter. By entering into the $275 million long-term lease for the wellhead platform, we have further optimized our liquidity profile during the key investment years in '26 and '27 ahead of Maromba coming on stream. Whilst the total Maromba CapEx remains unchanged, the revised structure shifts all wellhead platform-related costs past first oil. Overall, our value creation plan remains firmly on track. With the CapEx estimates unchanged and continued strong cash flow contributions from our producing assets, we have taken another solid step towards the company's next phase of growth across our key assets. I will come back to our updated financial outlook, but let's first take a closer look at the key developments for the quarter. Production for the quarter amounted to 2.3 million barrels. During Q4, production was impacted largely by 2 key operational events at Dussafu and Golfinho that were covered by Brice. If we were to adjust for these impacts, Q4 net production would have been about 1,700 barrels higher per day net, which would correspond to roughly 200,000 barrels for the quarter. Sales volumes were impacted in particular by Dussafu lifting that slipped into the following quarter. All in all, this resulted in 1.8 million barrels sold net to the company. The slight delay in the final lifting that was planned for year-end led to Q4 having 1 less lifting compared to Q3 with a resulting inventory at year-end of 900,000 barrels. Timing effects such as this are normal and will, of course, even out over time. During the fourth quarter, continued macroeconomic uncertainty weighed on all markets with Brent prices averaging about $64 per barrel compared to $69 in the previous quarter. BW Energy continued to realize prices close to Brent with an average realized price of $62 per barrel for the quarter. It's worth pointing out we had one cargo sold in December when Brent prices were at the lowest point during the quarter as our liftings are based on monthly averages rather than quarterly averages, the realized prices show a larger discount relative to the quarterly average Brent price. These same factors also impacted operating cash flow. Let me, therefore, turn to the key drivers behind our cash flow development this quarter. We entered the fourth quarter with a relatively high cash balance of $259 million given that we're in a period of elevated investment activity, a reduction in cash and liquidity was expected. Please keep in mind that although it doesn't show up on the liquidity definition, there is effectively about $375 million remaining undrawn project funding on the FPSO project finance facility and the Wellhead Platform lease. Operating cash flow came in somewhat lower than anticipated, mainly due to the extended maintenance in Brazil and the timing of the Dussafu lifting. This was largely offset by lower investment spending, reflecting the conversion of CapEx to lease for the Wellhead Platform project, which defers these cash outflows beyond 2028. The change in working capital primarily reflects the release of trade receivables following the receipt of sale proceeds from a lifting achieved at the very end of Q3. Beyond Maromba, we continue to invest in Golfinho Boost project with the rest of the spending related to Kudu facility upgrades and early planning costs for MaBoMo Phase 2 at Dussafu. Financing cash flows reflect debt repayments made in Q4. This included the termination of the Shell prepayment facility on Golfinho and partial repayment of the corporate revolving credit facility, aiming at reducing interest costs while maintaining a comfortable cash balance. I'd like to point out that the repayment of the Shell facility now leaves both Maromba and Golfinho field licenses unencumbered and available to facilitate further potential financing to fund our growth. Overall, the net cash movements were broadly in line with expectation. We ended the fourth quarter with $151 million in cash and a strong liquidity position of $366 million, including undrawn facilities, but as mentioned, excluding undrawn project finance facilities. Let's now look at how this is reflected in our overall financial position. Starting from the left-hand side, the net debt increased in line with the ramp-up of our investment program. The increase in net debt was primarily driven by lower cash balance with cash decreasing by roughly $110 million compared with the prior quarter. The increase in net debt to EBITDA also reflects a reduction in Q4 EBITDA of $105 million relative to the fourth quarter of 2024. This was the result of natural production decline as well as timing of the lifting that slipped into 2026. As a result, the leverage ratio increased from 0.9 to 1.5. This remains at a comfortable level with the quarter-on-quarter movement partly amplified by the temporary impact on EBITDA from the slightly delayed lifting and the planned reduction of cash on hand to manage interest costs. As expected, net debt to EBITDA will continue to increase during this growth phase as we move forward to first oil in Maromba. Our equity ratio remains strong at 40%. And overall, we exited the quarter with a robust balance sheet, well positioned to progress into the next phases of our development program. With the new Wellhead Platform lease in place, we have materially improved the phasing of cash outflows while keeping the total project budget unchanged. The lease structure means the payment commences at first oil and extends over a 10-year period thereafter. As a result, pre-first oil cash outflows has been reduced by $274 million, improving liquidity during the most capital-intensive years of the Maromba project in particular. You can see this reflected in the investment plan where pre-first oil spend now totals approximately $725 million, with the remaining CapEx phase post first oil. The overall underlying Maromba CapEx envelope remains around $1.5 billion, with the majority allocated to infrastructure and initial development wells followed by additional sanctioned wells after first oil. The key takeaway is that we have not reduced scope, delayed execution or increased total cost. Rather, we have, during the quarter, strengthened liquidity, eliminated near-term funding requirements and further derisk the path to first oil. Together with the existing financing arrangements put in place earlier in '25 and strong operating cash flow, this latest financing optimization further reinforces our ability to efficiently fund greenfield developments through key production infrastructure. Capital deployment remains firmly on track towards first oil with our value creation plan progressing as intended. On the sources side, we are supported by strong underlying operating cash flow from Dussafu and Golfinho, combined with secured FPSO and rig financing on highly competitive long-term terms. Together with our existing liquidity, this gives us ample financial flexibility through the peak investment period. On the user side, the majority of capital is directed towards Maromba pre-first oil CapEx alongside continued investment across the portfolio. Even on the conservative oil price assumptions, we do generate excess cash flows that provide a further liquidity buffer and supports our debt service. In total, our CapEx outlook remains unchanged. The investment program is progressing as planned, and the overall funding structure remains robust. We continue to maintain a strong balance sheet with more than $350 million in cash and undrawn facilities and leverage at comfortable levels. Overall, this leaves us well positioned as we close in on Maromba cash flows with less than 2 years remaining to first oil. On to the 2026 guidance. We have another active and exciting year ahead with several key activities shaping our guidance. Our production guidance for the year is 9 million to 11 million barrels, equal to 25,000 to 30,000 barrels per day. The range reflects some remaining uncertainty related to the impact of MaBoMo Phase 2 drilling program at Dussafu. While new wells are planned to come on stream before year-end, any delay to the drilling schedule could result in production being deferred into 2027. In terms of phasing, we expect stronger production in the first half of the year, while the third quarter will be impacted by approximately 3 weeks of planned seasonal maintenance in Dussafu. We expect higher production in Golfinho following well optimization activities related to the Boost project as well as no planned major maintenance for the year. As highlighted earlier, operating cost guidance for '26 is $20 to $24 per barrel, reflecting continued cost control and updated production outlook. Capital expenditure for the year is guided in the range of $500 million to $600 million. The increase in CapEx guidance for '26 relative to '25 reflects the ramp-up of the Maromba development, including the FPSO and long lead items for drilling and SURF, start of Dussafu MaBoMo Phase 2 campaign and the Golfinho Boost project. As a reminder, CapEx related to Wellhead platform is no longer included in this guidance as no cash outflows will occur before lease payments commence following first production at Maromba. Finally, we expect G&A expenses to decline to between $12 million to $14 million for the year. This is a significant drop from last year, not due to big cuts in administration, but rather more of the cost being allocated to the project spend as we have increased our product activities. Before opening the floor to questions, I would like to share a few concluding remarks. Our investment proposition remains compelling. We are executing on our strategy to deliver long-term value as a fast-growing E&P company, supported by a diversified asset base, strong cash flow generation, efficient financing and a robust balance sheet. We're actively progressing our key development projects, which underpin a meaningful growth and support our ambition to reach production of around 90,000 barrels per day by 2028. This growth is underpinned by a solid financial capacity, disciplined capital allocation, resilient balance sheet and the completion of key Maromba financing milestones. Overall, BWE is well positioned to fund its growth and deliver sustained value for shareholders. With that, I'll hand it back to the operator to open the line for questions. Thank you.

[Operator Instructions] The first question comes from the line of Teodor Sveen-Nilsen calling from SB1 M.

First, on Golfinho, you explained that you expect higher Golfinho production in 2026. I just wonder how much higher you should expect than the Q4 level? Is it like a doubling or even more compared to the Q4 level? Second question that is on liftings in Q1 2026. You said that slipped in -- or one of liftings slipped into Q1. So if you can give an indication of the liftings for the next quarter, that will be useful.

Thank you, Teodor. I can cover the first one. The line wasn't great. So I didn't -- wasn't sure if I fully heard you. In terms of the lifting, we had planned for the end of the year. It was slightly more than 600,000 barrels. But because of the tanker delay from the trader, it slipped into effectively Q1, so which meant that we didn't receive the cash nor do we take the profit from that lifting. The first question, Teodor, I didn't catch.

Yes. The first question was regarding expected Golfinho production in 2026. But I also have a follow-up on the lifting. So I assume you expect an overlift for Q1. Is that right?

On Golfinho, no, we exited the quarter with a bit extra inventory, aligning with the fact that we would had that lifting coming up, which we then took in Q1.

I was actually referring to the total company, the overall lifting for BW Energy, if you expect an overlift in Q1 2026?

Yes. Well, an overlift in the sense of the exit of the quarter.

Yes. So lifting will be more than production in Q1, right?

Yes, correct, because of that lifting at the end of the year basically very, very start of this year.

Understood. And then expected production for Golfinho in 2026?

Brice, can you cover that?

Yes. So production should be better from -- on Golfinho compared to last year. We've already seen some improvement at the end of the year, but we hope that we are -- we have done some good optimization on the wells, and we are confident that the production will be stronger this year compared to last year.

We currently have no questions coming through. [Operator Instructions] There are no further questions coming from the telephone line. Therefore, we're going to take now the question coming from the webcast, written question. The floor is yours.

Yes. We have a question from the web here concerning the Gabon CapEx budget as well as the contribution from Gabon into our production. So about 50% of our CapEx is Maromba, 20% Dussafu, 20% Golfinho, 10% Kudu in '26 and roughly 70% of the production will be coming from Dussafu in terms of the guidance. We have another question here. What is the status in Q2? How should we interpret the opening of the data room?

Yes. Maybe I should take that. Well, we have not fully completed our analysis yet of the Kharas-1 well. But -- well, as of today, we have 95% ownership in the license. What we see is that it's interesting, but it will also require extensive additional appraisal/exploration to unlock the potential of Kudu. And I think it's prudent that we open a data room and invite potential partners to have a look and see if they share our excitement and want to cooperate on continuing the work on Kudu. I think that's the main reason for a data room. We see -- we're still of the opinion that the Orange Basin is very early in its development. And -- there's -- even though there's quite a few wells drilled lately, it's very few wells if you look at historic data, how many wells were needed to unlock basins, et cetera, et cetera. So we found liquid hydrocarbons. That's interesting. But we also found that much more work is needed, hence, better room.

Thank you. We have the next question that you may be able to cover too. Is Angola included in guidance? The answer to that is no, but what can we expect from Angola contribution in 2026?

I don't think one should hold one 's breath waiting for Angola to be coming into our books. It is -- again, it's a new entry into a new country. We are extremely, of course, pleased that we have managed to make a deal with the seller. But as you all know, there's government approvals, there are partner approvals, et cetera, that you have to pass before you can access the assets. So yes, we see Angola is very interesting, but we are not there to declare victory today. Hopefully, we will have victory sometime in the future. But I don't want to start speculating on when we can have this all concluded one way or the other.

Thank you, Carl. That concludes -- I think that concludes the call. Thank you very much.

Okay. Well, thank you to everybody for listening in and participating. Always great to have good questions from participants. And well, see you next time.