BW Offshore Limited (BWO) Earnings Call Transcript & Summary

Hello, and welcome to the BW Offshore Q1 presentation. [Operator Instructions] Today, I am pleased to present Marco Beenen, CEO; and Ståle Andreassen, CFO. Please begin your meeting.

Good morning, and welcome to the first quarter of 2020 update for BW Offshore. And this time, we will do this in a conference call in view of the challenges with the COVID-19 virus. Our CFO, Ståle Andreassen; and myself, Marco Beenen, we will first present an update of the quarterly results and the presentation. And then after that, there is an opportunity to ask questions. Next slide is our disclaimer. Please take note. And then moving to Slide 3, highlights of quarter 1. And most of this has already been communicated during the quarter. But first and foremost, our focus has been on safeguarding our people and operations amid the development of the COVID-19 pandemic, and we are very pleased that we have been successful in it so far. In the midst of this crisis, both our client, Murphy Oil, and us have been able to maintain a long-term view on the Cascades and Chinook fields in the U.S. Gulf of Mexico. And that was the basis for the long-awaited new contract of 5 years, plus 5 years of options for BW Pioneer. Obviously, we are very pleased with that. As we already mentioned, in February, BW Energy is now listed on the Oslo Stock Exchange. And we have paid our dividend in kind of USD 101 million of BW Energy shares to the BW Offshore shareholders. And despite the constraints imposed by the COVID-19 virus, we have delivered a good operational result with solid EBITDA of USD 130 million and an operating cash flow of $106 million. In addition to the extension of BW Pioneer, we also extended, as expected, the FPSO Polvo with 1 year as well as a short-term extension for Cidade de São Vicente, and that's to complete the decommissioning and demobilization from the field. So whilst the COVID-19 situation and the oil price drop did not impact our FPSO operations, it does logically change our view on the markets going forward and that justifies a noncash impairment of about 10% of the value of our FPSO fleets, mainly impacting our idle FPSOs. In view of our solid financial situation, the Board of BW Offshore has approved to proceed with a quarterly payout of cash dividend, as announced in February this year, which equates to USD 25 million annually. And in addition, it was approved to initiate a USD 10 million share buyback program, which is now almost complete. Moving to Slide 4. As stated, the COVID-19 pandemic required a fast and proactive response. We've put a significant amount of effort to respond to this pandemic using our well-established Operational Integrity platform, both locally and corporately. And we're actually proud of our operational teams that have been able to manage to avoid a virus outbreak on any of our 11 employed FPSOs today. We do believe that as you see with governmental responses as well, that the impact of the COVID-19 virus crisis can be mitigated by managing the risk early and take measures proactively for the various scenarios that can materialize and update those scenarios and procedures, with high level of attention to detail. As such, we managed to ensure our operations continue in a safe way. We established in early March a multi-disciplined COVID-19 Task Force, which is responsible for all the business continuity plans for each FPSOs. And these business continuity plans prioritize the health of our people and the continuity of our operations as well as those of our partners. And as we operate in 11 different countries, compliance with the guidelines of the public health advisory and all those applications is an integrated part of these plans. And a similar framework has been activated for all our onshore offices as well. Then moving to Slide 6. Our backlog provides the operational resilience that will help us to weather this storm. By end of March, our firm backlog increased to USD 2.9 billion, up from USD 2.7 billion at the end of 2019. This is an increase in the firm backlog. However, on the option backlog or what we call probable option backlog, we have taken a reduction in view of the current market conditions. So now the firm backlog is about 65% of the total of USD 4.5 billion. Translating that into an average -- weighted average firm duration of the contract of 10 FPSOs, that will give them a 5-year duration, we would include the probable options that will increase to 9 years average weighted duration of each contract. Moving on to Slide 7. It's important in this challenging environment that we keep our financial flexibility. And obviously, we're very pleased with our strong exit in 2019, where we refinanced both our corporate facilities and our bond portfolio fully. And we also reported a record revenue and EBITDA for the year, while we established the E&P business. And so for this quarter, first quarter in 2020, that means that we have a strong liquidity position now, which gives us the required flexibility. We can also complete the IPO of BW Energy. We can now start to actually return capital back to our shareholders. In view of the uncertainties caused by the low oil price and the COVID-19 pandemic, we are looking at optimizing our CapEx and OpEx, and we have taken measures for that. So we've deferred about $60 million of CapEx, and we're reducing our layup cost to the minimum. At the same time, we are also looking at positioning ourselves for FIDs in 2021. It's now more than ever important that we focus on strong risk management. Of course, there is the immediate response when the pandemic broke out on our safety of our people and the continuity of our operations as explained. But also more looking at midterm, depending on how long the oil price will stay low, we have a strong focus on our counterparty risk and we make sure that when -- and most clients do approach us to try to renegotiate our contracts. We do look strongly at win-win principles. We stay close to our equity and bond investors to make sure that our situation is well understood. And obviously, we make sure our commitments to the banks are done. Longer term, it is important that we retain our competence and capacity of our organization. We are looking to this crisis, and we are making sure we keep the sufficient liquidity to keep our flexibility. At the same time, we have selective business development activities and taking on a disciplined tendering for new projects to basically be ready when we are on the other side of this crisis. Last quarter, we talked about the 3 streams of our FPSO business: the normal extensions on the field, redeployments and new investments on our newest projects. And at that time, we had a positive view on all of those. Today, the extension, as you could see, and Pioneer confirms it, extensions can still take place and those will still take place even in the low oil price, and that is mainly due to the low field cash breakevens that our operations show or the operations of our clients show, which is typically between the $10 million and $30 million (sic) [ $10 and $30 ] per barrel in 2020. But also the field abandonment comes at a high cost, and a lot of our clients have also hedged their oil price. So in that area, we -- we're still going strong. But on the deployments, we have taken a slightly different view, at least for the short term. Redeployments are very attractive for marginal view developments with smaller E&P companies. But with the current drop in oil price, most of these companies are impacted. And as you saw also with BW Energy, those investments are being postponed. So that means that the opportunities for redeployment will be pushed out a bit further in time. For the newbuild projects, we also expected that the market will be somewhat weaker in view of the lower oil prices. However, we still see a handful of prospects that we found very interesting, and those are with solid counterparties and with a relatively low oil price breakeven. One of these is the Dorado project in Australia, where we have been selected to participate in the pre-feed. And also the other prospects may result in an FID in 2021. So we're -- while our ambition last quarter was to land in new projects within 12 months, I think we have to revise that slightly in view of the market developments. But it's still very well possible to -- that one of these prospects will make an FID in 2021 for us. Then over to Slide 11, update on operations. As said, we had a strong quarter operationally. Our plan dropped a bit, which was mainly due to a long planned shutdown on Espoir beyond the number of annual maintenance days and also because of a delayed start of Vicente in view of E&P audit in Brazil. Other than that, all the units had a normal high, close to 100% uptime. On the HSE records, you see the graph on the right side of this page. We had 2 LTIs in quarter 1. So that's moved the statistics up a bit. These are last 12 months' statistics. I don't expect 2 LTIs each quarter. So you will also see this curve trending down probably during the rest of 2020. The orange line is the line we focus on most. This is the -- those are the statistics of the high potential incidents. And high potential incidents are, in fact, more important than the LTIs because they have a more -- they get more -- they're a more leading indicator, with a more forward-looking information. And obviously, we want to reduce the high potential incidents as much as possible, and we have spent a lot of focus. We've given that a lot of focus in the past years with the good results, as you can see in this graph, turning downwards. And we'll try to continue to do so. Then a short unit update, picking 3 units where, first of all, the Pioneer, we could report the 5-year extension, as already mentioned. And this adds about $350 million to EBITDA over the firm period. Obviously, very pleased with this. It was long-awaited. And as explained earlier, the negotiations typically will continue to the last day, but we're very happy that both Murphy Oil and ourselves, we're able to do such an agreement in the midst of the COVID crisis. And Catcher, production close to nameplate capacity with a commercial uptime, 100%. March was a very strong month with record uptime of commercially of 110%. And that was offsetting some of the shorter disruptions in January and February. Some of tie-ins -- as Premier Oil has communicated a few weeks back, some of tie-ins will be postponed and are planned for early 2021. But this is considered as a deferral of production, and we still expect that the plateau production will be extended. Then Umuroa, this is the unit in New Zealand where we were dealing with a bankruptcy of our client Tamarind Resources. We announced that we would -- that we were demobilizing from the field, and we're planning to sail to Singapore. In the last minute, we were stopped by the authorities as there was a disagreement about the approval of the demobilization plan. And as such, we decided to stay in these seasons during the southern hemisphere winter. As otherwise, we would take too much risk to undertake such operation in those conditions. And we're now working with the relevant authorities to develop a new demobilization plan, including following by the government, which is current ongoing negotiation. Then an update on -- and now on Slide 13. Then an update on our operations on the Dussafu field, together with our sister company BW Energy. Still high uptime. We managed to assure business continuity by mobilizing all crew in country. So we could rotate in and out, offshore/onshore without a need for international travel. This is, by the way, something we did across the fleet. So we keep maintaining the highest time on BW Adolo and the gross production in Q1 was just below 11,500 barrels per day. We saw first oil from 2 new wells in early March, and we're now producing about 17,500 barrels per day gross. The completion of the 2 additional Tortue wells as we're planning to tie in 4 more wells was deferred to 2021 by BW Energy and that was in view of logistical constraints as a result of the COVID-19 situation. And therefore, the production forecast of 2020 is now guided to between 15,000 to 16,500 barrels per day from those 4 wells instead of earlier planned 6 wells. Referring to the BW Energy update last week. It was decided that the 2020 capital expenditure program was about 50% reduced. Means the further development on the Dussafu field are on hold pending the ease of the COVID-19 restrictions. And the Maromba development focus on progressing the regulatory approval process, but also review project and field economics further, including evaluation of other FPSOs and this also includes the overall FPSO. But the strategic rationale remains unchanged. The long-term ambition to have a joint value creation through FPSO redeployments, both for BW Energy and BW Offshore, maintains. And as said, as soon as the COVID-19 restrictions will ease, we'll plan to continue the development of the Dussafu field further. Moving to Slide 14, the fleet contract review. Changes in the picture are obviously BW Pioneer with the contract, the 5-year contract extension. And Polvo, as announced earlier, as well as Cidade de São Vicente with the short extension. Umuroa is now in layup in the field, as just explained, and another change is that the contract with Petrobras for the building opportunity is now terminated by end of March. That was a long-awaited conclusion and that's formalized now, which means that we can now move on with developing new opportunities for these units. And we've already started marketing for several places. So that's good news and closes that chapter, except for the signing of the settlement, which is depending on Petrobras, but at least the most important for us is termination of the contract. Then I -- then we move to finance, and I'll give -- hand over to Ståle Andreassen.

Thank you, Marco. Before we start with the financial results, I would like to highlight that as the listing of BW Energy has reduced our direct ownership to 38.8%, we have stopped consolidating BW Energy with effect on 1st of March this year. This means that operational financial figures that we presented only include the FPSO business. Net contribution from BW Energy before 1st of March, 8% of that results on discontinued operation and net contribution from BW Energy on a going-forward basis is presented as a financial investment in our income statement. We have also restated comparative previous periods to reflect results from the FPSO business only. And we have classified results from BW Energy as discontinued operations. So with that, we move to Slide 16. We started with an overview of financial figures from operation. We see stable results in the first quarter with a total EBITDA contribution from the FPSO fleet of $130 million. This is an improvement of 10% from fourth quarter, as it was affected by provisions we had to make due to the situation for Umuroa being currently in layup situation in New Zealand. Top line came in at $258 million, driven by revenues from reimbursable feed activities being completed and charged to the income statement during the quarter. Note that this has no significant effect on net operating results as we are expensing the costs related to the activities in the same period. And as you can see, EBIT, when adjusting for the impairment, was $34 million and slightly better than Q4. If you please move to Slide 17. Going to the overall income statement. As I mentioned, EBITDA came in at $130 million. Depreciations were in line with the previous quarter at $95.5 million. We recorded a noncash impairment on the FPSO fleet and other assets of USD 233.1 million. The impairment reflects uncertainty on redeployment opportunities following the current market turmoil and pressure on oil prices. The following FPSOs were subject to the impairment: Berge Helene, Athena, Cidade de São Vicente, Espoir, Polvo and Umuroa. As Marco mentioned, the impairment is, to a large extent, limited to units which are already off contract or is expected to come off contract in the relative merger. Going to net interest expenses. You can see they're slightly reduced to $16.4 million as we continue to reduce our debt. We have a loss on financial instruments of $86.7 million for the quarter. We have to take significant negative mark-to-market adjustment on our interest hedges for our loan portfolio as the U.S. dollar swap rate declined sharply during the first quarter. We also have hedges in place for currency exposure specific on our Nordic high-yield bond and also for certain operational expenses. Also, these have been significantly marked down during the quarter due to strengthening of the U.S. dollar. I want to highlight that this mark-to-market adjustment do not affect our liquidity planning going forward as they are put in place to provide visibility on debt payments and operational expenses. Other financial items were positive with $10.9 million, predominantly due to revaluation of the Nordic high-yield bond, which is denominated in Norwegian kroner. Loss from equity accounted investments was $6.1 million during first quarter. As we deconsolidated dividends from 1st of March, this number represents a net share of results from BW Energy for a period of 1 month only. And as you can -- know, for those of you who have been following the results of BW Energy, the results have been negatively impacted by a steep decline in the oil price during Q1. Tax expense for the quarter was $14.3 million. It's slightly higher than previous quarter, predominantly as we had to make some tax adjustments in the quarter related to our West African operation. We recorded a profit from our discontinued operations of $37.7 million for the quarter. As noted earlier, we present results from BW Energy as a discontinued operation up until 1st of March. The profit for the quarter came as a result of revaluing the ownership in BW Energy post-IPO based on the pricing that was achieved during the IPO, giving a one-off revaluation profit of approximately $50 million. However, this was offset by the negative contribution from BW Energy from our ownership for the first 2 months of the year. Overall, we ended the quarter with a net loss at $273.6 million. Moving on to Slide 18 and the cash flow overview. We started the year with a total cash position of $250 million. This cash position also includes the cash that belong to BW Energy and later been taken out as part of the spin-off. Operations has the largest and continued as normal throughout the quarter with operating cash flow from the FPSO fleet at $106 million. And again, note that we have removed any cash movements related to BW Energy from our operating cash flow. Investments in the FPSO fleet was $19 million for the quarter. This is mainly maintenance CapEx on our fleet as well as cash we have spent for the preparatory demobilization activities of Umuroa in New Zealand. We reduced our net cash position with $107 million as a result of the spin-off of BW Energy in February. We continue to reduce our debt position during the quarter with a net debt reduction of $36 million, reflecting scheduled repayments under our various facilities. We paid $14 million in interest and lease liabilities. Interest payments are now reducing as we have both refinanced our debt, projected lower effective interest rate and as we are continuing to reduce our debt levels. Including $8 million paid to ICBCL under the pref share arrangement we have with them, we retained $172 million in cash by end of Q1. Moving on to Slide 19. BWO continues to maintain a healthy balance sheet position with significant headroom to financial covenants. Despite spinning off BW Energy, a business that has no debt but cash only, we maintained a net debt position at just over $1 billion by end of Q1. Leverage ratio, which is based on last 12 months EBITDA from the FPSO business, stood at 2x by end of Q1. And also here, please note that we have removed any EBITDA contribution from BW Energy in the historical figures. This is a comfortable level for our company based on the current fleet backlog and near-term limited loan investments to be made. The equity ratio dropped from 43.3% to 35% by end of Q1. The reduction is driven by the impairment we have chosen to take on the fleet while still BW Offshore continues to maintain a substantial headroom to the 25% minimum equity ratio covenant in our loan facility. Moving to Slide 20. BW Offshore managed to complete our planned refinancing activities during 2019. We have, of course, no anticipation about what the market will bring in 2020. But we set our targets, and with very good support from our banking group, we managed to close out all planned activities adjacently. Having completed this, we have improved the financial flexibility of the company as we have created a debt installment schedule where the company can comfortably continue to reduce debt with the free cash flow from the current fleet while building capacity for selectively taking on new growth opportunities at the right time. Moving to Slide 21. Being in a situation where market visibility is uncertain, we have increased our focus on cash preservation and liquidity further. We are estimating that approximately $60 million of what is planned CapEx will either be deferred or fall away. With BW Energy revaluing development on Maromba, we do no longer plan for Berge Helene to be part of this project, and we have therefore removed all our planned CapEx for this project from our internal forecast. For the repair of BW Opportunity, we have negotiated a new plan with Keppel to defer majority of the investments beyond 2020. We have also gone to minimum manning on most of our operating units in light of the COVID-19 situation. And as part of that, we are also evaluating as well as deferred planned nonessential life expansion CapEx on several units. Planning for this is still ongoing, and it's somewhat dependent upon when activities naturally can pick up. At this point in time, we estimate CapEx for remaining part of 2020 to be in the range of $30 million. We continue to have good liquidity position in the company with $235 million of available liquidity from our committed corporate credit facility on top of the $172 million in cash that we had by end of this quarter. In total, this gives a liquidity of $407 million. Although we are on an unprecedented situation, we have a resilient backlog in our fleet that produces solid free cash flow. We have a manageable CapEx program, we have financial flexibility through the recent refinancing and robust liquidity position for a company our size. Being in the situation, we believe it's appropriate to stay with our communicated ambition to return value to our shareholders. On the basis of this, we have concluded that we will assume the payment of cash dividends, as announced earlier, with a planned annual cash dividend of $25 million, where the Board has approved to pay as a quarter of this now equivalent to a cash dividend of $0.034 per share to be paid out now in the second quarter. The Board also finds it appropriate to initiate a share buyback program where the company can buy back shares for up to $10 million. The program was initiated at end of March and is, at the time of this presentation, approximately 85% complete. So with that, I end -- give the word back to Marco for -- to take us through the strategy and outlook.

Yes. Thank you, Ståle. Yes, few words on strategy and outlook. I'm moving to Slide 23. The achievements in 2019 created a strong position for 2020, and we were ready to start -- or to complete the process of listing BW Energy separately and start to return capital back to our shareholders and also look at investing -- making new investments selectively in the FPSO segment. Of course, we didn't plan for the COVID-19 pandemic, and that means that particular latter, the investment in new FPSO is likely to shift a bit to the right as it's not likely that our clients will make these kind of decisions in 2020. However, we do think that some of these could still materialize on 2020, and that's what we are focusing on and then selecting those with strong counterparties. Then Slide 24. In summary, we do maintain our strong focus on keeping all people healthy and keep our operations uninterrupted. We will leverage our balance sheet and the financial flexibility, as just explained. The FPSO market is likely getting weaker in view of the oil price, but on the supply side are constraints as well, mainly due to constraints in execution capacity as well as financial capacity. So that creates opportunities for us. And therefore, we are selectively pursuing new prospects, if they meet our required risk/return criteria. So we are positioning ourselves for growth when the markets normalize and we are on the other side of this crisis, and we target one FID for a new FPSO project in 2021. With that, we have -- we came to the end of our presentation, and we're open for questions. Operator, please?

[Operator Instructions]

Thank you. We have a couple of questions that's come in via the web. The first one is, how much of the EBITDA was a result of the provision taken on Umuroa? I can take that. I believe that's referring to the impact on Q4 as compared to Q1. We made a one-off provision of $13 million, that's 1-3 million in Q4 related to the Umuroa situation, and we have not made any further provisions in Q1. Then we have a second question. And that states, how do you evaluate CapEx versus returning cash to shareholders in the medium term? I can start with this one, and Marco, you might chip in if need be. As we look at our relatively limited CapEx on the existing fleet in the near to medium term, currently, that's mostly life extension on maintenance CapEx that -- although a lot of it is put on hold for the time being due to all the logistical challenges, it is work that will need to be taken on going forward to keep our units at kind of a necessary level of standard to be able to operate as expected under our contracts. So that CapEx will not fall away. However, being relatively limited, we don't expect this to impact what we have communicated when it comes to the planned annual cash dividend of $25 million. When it comes to new CapEx, as Marco has stated a couple of times throughout the presentation, we are pursuing the new prospects. We believe it's really important for us to add value to our backlog. However, the prospects we take on need to be of the nature that adds value long term to our business and are the right one. And therefore, we are very selective on those. And as we see it right now, we will need to evaluate that CapEx if we are in a position where we land a project vis-à-vis adjusting dividends longer, more longer term. And of course, if for some reason we shouldn't be able to be successful in new projects, then again we can evaluate the dividend going forward.

Yes. Maybe to add to Ståle's that, yes, we are committed to returning cash to shareholders. But on the long term, we also have to make sure that our business is sustainable, and we will have to make some investments of -- in projects similar to Catcher, which do get the returns that we're looking for. And as Ståle said, we have been very selective so far, and we will remain selective. But we do focus on a few opportunities where we think we can make a difference and where potentially those criteria can be met. And by the time we have to make such decision, we will evaluate the dividend. And it all depends, I guess, also on the size of the investment and how we finance it with partners or without partners. So it's too early to say, but I think our commitment remains.

We just got one more question in here, where -- a question where someone's asking, do you have a leverage target or targeted range? I can start with this one. So in general, we believe that the current range we are in is the leverage ratio that the business can comfortably manage. And as we continue to amortize on our debt, we see it will continue to go down. However, the nature of our business will be having backlog. If you're going to add value long term, you will naturally see that leverage will increase, doing what will typically be a construction phase. So it's very difficult for us to kind of set a targeted range. Obviously, the rates need to be within reasons when looking at the projects that you will take on, and of course, within the covenants that we have. But we don't want to be specific on this one because it will go up and down with the project activity we have, typically grow towards first oil on a new project and then it will reduce as soon a new unit starts generating cash flow and you start amortizing on that.

And we've had some questions coming from on the phones now. The first is from the line of Alexander Lager of Arctic Fund Management.

For the Umuroa unit, could you give a range of possible outcomes here going forward and also what these will cost? What I'm interested in is your -- did the likely cash outlay, which you will have to make on these units over the next -- well, let's say, next year. That's it.

Yes. I can take that question. So we are working with the government to come to a plan, a demobilization plan where they will take the lead. We have been proactive in trying to demobilize the unit in the first quarter of this year at our own cost to steer away from the further exposure to the bankruptcy of our counterpart. That was stopped by an abatement notice of the Environmental Protection Agency, which was -- which we appealed against and we won and then there was a High Court overruling that again. So from our perspective, the authorities have created a little bit of a mess. And the best decision was to stay in-country now during the winter in New Zealand. And that gives time now for the government to actually step up and take the lead in this. The liquidator of Tamarind and the receivers have dismissed their assets to the Crown. So that at least has created more clarity. And we're now available to assist the Crown in working with them in demobilizing the field, and we're also expecting funding for that. Until that is in place, we probably have to -- we have an operating expense of $6 million or $7 million for the remaining of the year 2020. And then we will make the units hydrocarbon-free, and we can do a minimum basically lay-up costs in the field, [ talk a few hundred thousand dollars ] a month.

And our next question comes from the line of Morten Nystrøm of Arctic Securities.

Just a follow-up question on, let's say, cash distribution. You're guiding now on $30 million in remaining CapEx in 2020 and that will obviously impact your free cash flow positively. And taking that into consideration and the fact that potential new FPSOs have been put on hold, at least throughout 2020, has this made you rethink the dividend strategy? I mean you're paying $6 million per quarter in dividend, and I guess everybody can do the numbers and see what kind of free cash flow you are expected to deliver in 2020 based on the existing order backlog.

Maybe I could talk on this. No. Shortly, we're not changing our dividend strategy. Now we are -- we think as we also are pursuing prospects that we think are potentially the right ones with the right return for us longer term, we think it's important to build financial flexibility to be able to take on these prospects. So that means, yes, we are potentially generating more cash then and building free cash flow from the business. But we also think that's important for being capable of taking on new projects, which typically in our industry is quite -- the liquidity or cash, they put a lot of constraint as you do. But I think what we -- it's kind of similar to the previous question that we answered. I think longer term, we need to evaluate. If for some reason, we see that prospects that we're pursuing are -- we are not getting through or these do not show to have the return we expect, then we will come back to the dividend strategy.

And perhaps, we should also not forget the times we're living in at the moment and the uncertainties that are still there from a global economic perspective. I think everyone is still guessing how the global economy will recover and how fast, and consequently, what the impact to the oil price will be. Things are still volatile. Things could also bounce back. That could have impact on our counterparties. So I also want to stress that we're a little bit careful, and we emphasized the financial flexibility a couple of times in our presentation. And this is exactly why. So repeating Ståle a bit and also repeating what we said in the first -- in February, when we announced the dividend, we realized we announced a relatively moderate dividend compared to the cash flow we generate. At that time, we said we need the financial flexibility in the first place as well to see -- to make sure that we can also invest if we see the right opportunities. That remains. But as you rightly so say, it also pushes out a bit in time. But then I think the reason that pushes out in time is exactly those uncertainties. So I feel it's important that we are not -- that we're a bit careful as well these days. And this financial flexibility will probably be -- will probably help us through this even if things bounce back. I also want to emphasize that we -- if you look at 2020 now, we paid out dividend in kind of more than $100 million in BWE shares to BW Offshore shareholders. And we stick to our commitment of this moderate dividend of $25 million a year. And on top of that, we embarked on a $10 million share buyback program. And in perspective, if you look around us, I don't think there's too many companies that are actually doing that. So that's an additional reflection on the situation we're in.

Just a follow-up question on 2 FPSOs, the Abo and the Petroleo Nautipa. Any new information on VAALCO in Gabon or on Abo? Those units will come off contracts, I guess, around early '21. Should -- are those some units that -- where the option value has been reduced? Or you still expect these units to continue on their existing contracts and options being called?

Yes. Well, those units are typically these units at the end of their contract where the options are -- there are not that many options, but the field is still performing quite strong, definitely at the Abo field, but also the Etame field in Gabon next to our own field or BW Energy's field, Dussafu. So it feels like beyond the current contract and current options under the contract of both units. And what that typically means is that these contracts get extended, as you have seen, and that's also what we expect here. Now the license on the Abo field has to be renewed beyond 2023. So it's a bit difficult for Abo to look beyond 2023. But still then, I find it very unlikely that Abo would -- or that the contract of Abo would not extend until at least end of 2023. And on Nautipa, we're actively discussing with our client because they are in a similar situation where they -- well, they have the license extended and they're now working on a plan for another 5 to 10 years of field production, and we're actively discussing with them how we would structure that in the new contract for Nautipa.

And we have one further question in the queue so far. That's from the line of Haakon Amundsen of ABG.

A couple of questions for me, please. First of all, coming back to the FPSOs. I believe you mentioned that Espoir was included in the FPSOs you impaired in the quarter. That means should we eliminate that from our estimates in the option period?

Well, no, it definitely will continue for quite some time. But if you know, the contract is very, very long. And the impairments we have taken on the unit is relatively modest. And it is a reflection that we have been a bit more careful when it comes to the tail end for that project than what we had in our previous assumptions. So we still assume that, that contract will continue for quite a few years, more years to come.

Maybe -- sorry, to add, the duration of that contract is very much dependent on the level of investments our client will make. And so as the level of investments are a bit more uncertain now at a lower oil price, it's also, I think, justified to then reduce the expectations on the full length of that contract, which was going beyond 2030.

Okay. And a general question in the current environment. Can you -- maybe you can give some color on this. I mean is there any pressure from your clients to change the contract terms, given the kind of the low oil price? And how -- can you give a short kind of view on how you are protected by these contracts and how you would kind of approach such a request, if that's possible?

Yes, I can only comment generally. But I mean, as you hinted, obviously, everyone in this industry at the moment is looking for ways to preserve cash and so do all our clients. But we have longer-term contracts and these contracts are solid with termination clauses, standby rates, et cetera. So we have a good contractual protection in a way. But at the same time, of course, we have a culture of collaboration and you're in this together for a long time with your clients. And of course, we're actively engaging in the dialogue where we can help, if we can help. But it has always to be on a kind of win-win basis. There's no need -- I mean, we cannot -- we're not in the business of giving discounts to our clients just because. But sometimes, you can have a view on oil price developments where you link something to oil price where you create as much upside or more as compared to the initial reduction or you could agree longer-term extensions or there are elements that you can negotiate such that both parties are better off in a way. And of course, in these days, we're doing that, we're evaluating jointly the contract and see if there's somehow a win-win to create. But we take this in a constructive way. But at the same time, I don't feel pressurized to accept negative outcome.

All right. That's pretty clear. And just finally, just a housekeeping. Can you give your D&A run rate going forward given the impairments today?

The D&A run rate?

Yes, depreciations going forward.

That, I can't take on top of my head, what would be there. There will obviously be some adjustments due to the fact that you'll take the impairment. Why don't we come back to that, if you can.

And as there are no further questions at this time, I'll hand back to our speakers for the closing comments.

Yes. Okay. Well, thank you, everyone. Thanks for joining this call. It's a different format than we were used to, but I think it was still adequate. So thank you for your interest in BW Offshore. I hope to see and hear you back next quarter. And for now, wherever you are, stay healthy and stay safe. Until next time. Thank you.