BW Offshore Limited (BWO) Earnings Call Transcript & Summary

Hello, and welcome to today's BW Offshore First Quarter Presentation. My name is Bailey and I will be your operator for today's call. [Operator Instructions] Speakers, please begin.

Good morning, and good afternoon, everyone. Welcome to the first quarter 2020 update of BW Offshore. My name is Marco Beenen. I will run you through the presentation together with Stale Andreassen, our CFO, who will cover the financials. Please note our disclaimer. And then I'm moving to the highlights. We have signed a limited notice to proceed on a new interesting project for Shell and partners in Brazil, the Gato Do Mato project. We have pursued this project for some time now, together with our EPCI partner Saipem. And this has resulted now in a start with engineering activities while we finalize commercial terms and inflation risk allocation. So this is an exciting moment for us. On our divestment program, where we have progressed with divesting FPSO Polvo and Umuroa. I will come back to that later. And then we're also pleased that now we have progressed our financial agenda sufficiently that we can increase our annual dividend with $20 million of BW Energy shares as a dividend in kind, in addition to the cash dividend of $25 million a year, which we have been distributing past years. Operationally, we started 2022 with a good quarter. Good progress on the Barossa project, it's close to 1/3 complete now. Solid EBITDA and operational cash flow of USD 85 million and USD 148 million, respectively. And our subsidiary, BW Ideol as part of a consortium with Total and CARE has taken FID for a 30-megawatt floating wind farm development in the South of France, which is called EolMed. Then operational update and diving straight into Barossa, which is the most significant undertaking currently in the company. Since the start of the project, we had to navigate a challenging supply chain market where we had to protect the schedule and lock in our costs as fast as our progress on engineering and the finishing would allow us to do so. I'm pleased with the progress we have made since and where we are now. We have delivered 2.4 million man hours without any injuries, the keel laying of the hull took place ahead of schedule. Engineering has progressed till 90% 3D model reviews and we have now placed the purchase order for all major procurement packages, and we've locked in all our key subcontracts. And the latest of that was the integration contract with Keppel Shipyard, which is our long-term partner, and they have also significantly contributed to the success of the Catcher FPSO in the past. The inflation in the supply chain has, of course, also an impact on the cost of the Barossa project as we also explained earlier. But we do remain within the buffers of the project and the project economics remain very robust. The project has now entered a phase where progress is very much driven by our key subcontractors, which we have carefully selected and we're working closely with them as partners to ensure that the project remains on track. Moving on to fleet and HSE performance. First of all, the HSE safety statistics keep trending down on the back of an approved operational integrity framework. We still had an LTI on our unit in Mexico, Yùum K'ak' Náab. But fortunately, this was not a very serious injury, and we are implementing the lessons learned. To protect our people and the assets and operations from COVID infections, we still incur about $1 million a month of COVID cost that are linked to precautionary measures, including still in quarantine and vaccination programs. At the start of 2022, we have changed the calculation of the commercial uptime to a weighted average of revenue contributing per unit. This means that going forward, we will be closer -- or we will have a closer relation to our financial performance and our commercial uptime, which will be governed by the performance of the core fleet. So the historical numbers you see here in this graph are corrected for this new method. And you also see that the quarter we have now is somewhat below the previous quarter, and that has to do with the 12-day planned shutdown of BW Adolo because that's one of the 3 core units that contributes now very significantly to the commercial uptime. Here, you see 3 core units in operation plus the Barossa unit under construction. These core units delivered 98% of the backlog amounting to USD 7.5 billion by the end of first quarter. And of that, 84% is firm. Highlighting Catcher, sees continuously delivering 100% commercial uptime and it is also positive that Harbour Energy has commenced a 3-well drilling program now. BW Adolo is preparing for the tie-in to the Hibiscus/Ruche development -- sorry, Hibiscus/Ruche development, which will significantly increase the production and therefore, the production tariff to BW Offshore. And Pioneer continues to provide stable cash flow for both us and for our client, Murphy. And we are looking forward to hopefully extending RBL into 2024 for a firm contract. We're making good progress with divesting the non-core fleets, which frees up liquidity without having a significant impact on operational cash flow, and it also creates the opportunity to simplify the global onshore organization. More specifically, about the units, Joko Tole in Indonesia is now close to completion of the transaction we have announced earlier. Umuroa has been sold for recycling, and we will supervise on-site together with Grieg Green to ensure that all these activities are done in full compliance with the Hong Kong Convention for ship recycling but also BW Offshore's recycling standard. Polvo has been sold to BW Energy for $50 million, and this unit will now be refurbished for redeployment on the Maromba field in Brazil. Then Yùum K'ak' Náab in Mexico. This unit comes to an end of its financial lease term in July this year, so very soon. And then the title will transfer to our client, PEMEX. We're supporting PEMEX as much as we can to be well prepared for a safe continuation of the operations of the units when this term ends. Then this slide shows the remaining units with short-term contract extensions till the end of the year and early next year. First, Petróleo Nautipa, that unit will stop production end of September, and then we go into a decommissioning and demobilization phase. The units in Nigeria may extend their contracts and/or will be divested as well. And we're making progress on the transaction opportunity for Athena. So BW opportunity remains then the redeployment candidate. And this is a very interesting redeployment candidate. And we have now a few discussions with clients on various redeployment prospects. And obviously, this is a strong business development focus for us. With that, I'm handing over to Stale to run you through the finance section.

Thank you, Marco. As you can see, operating revenues came in at $194 million in the first quarter, and we delivered an EBITDA of $85 million. Financial performance on the core fleet was solid for Q1 with high commercial uptime. The sale and purchase agreement entered into for Joko Tole stipulate that the economic impact from the operation would be for the benefit of the future purchaser with effect from 30th of November last year. So although it's taken us somewhat longer to close the transaction than earlier anticipated, we are now closing in as we speak. And as a result, we have excluded any economic impact from this operation from EBITDA for quarter 1. Quarter-on-quarter, this has an impact on the results of approximately $10 million. Depreciation has reduced from $68 million in the fourth quarter to just over $55 million in Q1. Changes are mainly driven by removing FPSO Joko Tole and follow on from the basis of depreciation as these were classified as held-for-sale, awaiting completion of the sales transactions on these 2 units. We reported a very small gain on sale of assets as Umuroa was sold for a slightly better price than net book value. As we are 100% hedged against floating rate increases on all our loan facilities, we are well protected as we now see interest rates are increasing. This ensures that our cash flow is not impacted by increasing interest costs as this is offset by the hedges we have in that place. As rates continue to increase in the quarter, the value of these swaps increased and we booked a mark-to-market gain of approximately $26 million for quarter 1. BW Energy carried out 1 lifting in the first quarter with approximately 1 million net barrels to them at a price of $120 a barrel. This gave the company a net result of $36 million and consequently, $9.5 million as a net contribution to BW Offshore booked here as share of profit from equity-accounted investments. As we can see, net profit for the period came in at just over $46 million for Q1. Cash flow from operation, as we mentioned, $148 million for the quarter, so another good quarter operationally, $61 million came from underlying fleet operations and the rest came as through prepayments of the Barossa FPSO dayrate. We invested a total of $180 million in the fleet. The majority of this is related to Barossa, a total of $163 million and the remaining is linked to ongoing activities on the fleet, including repair activities for BW opportunity. As we closed out on the sale of Cidade de São Vicente and Umuroa in the quarter, we achieved -- or we received $27 million related to these 2 -- to the sale of these 2 units. We continue to fund progress on the Barossa project through our joint venture with ITOCHU, Meiji and Macquarie and BW Offshore injected $5 million in the joint venture. And at the same time, the joint venture funded in $84 million as payments for progress on the project. So with other elements being relatively self-explanatory, you see that we ended the quarter with a cash position of $235 million net to BW Offshore. We started using this overview last quarter as we wanted to create full transparency on the status of funding for the Barossa FPSO primarily as the structure is only partially consolidated due to having equity partners involved. The progress on funding is also a good measure for how we are progressing on the project overall. As you can see, equity and debt, we draw that pro rata based on forward-looking calculations of funding needed for the project. We did draw another $60 million on the project's debt facility in the quarter, and we injected a total of $10 million more equity. Prepayments from Santos is paid based on percentage measured completion on the project as well as some defined milestones. And as you can see from this overview, we have received in total, now close to 30% of total estimated prepayments by the end of the quarter. So far, project CapEx is now nearing $500 million in total. So with $600 million in funding, we are overfunded at the moment, but this is to cover profit margin, interest on the project debt and working capital for the project. The balance sheet shows that we continue to be in a good financial position. Our net debt position was reduced to just over $600 million by the end of the quarter. Equity ratio increased by 2% to 35.9% in Q1, primarily driven by a strong quarter 1 net results. Overall, we have a good balance sheet, and we have good headroom to covenants. Total gross debt stood at just under $9 million by the end of the quarter. As you can see on the right-hand side, we continue to amortize on our debt. And except for this regular debt maturities, we have no large maturities before end of 2023. As Marco also mentioned, we've been able to move forward on divestments of noncore units. This is freeing up liquidity and at the same time, we are now entering a market with stronger underlying commodity prices. When you couple that with the fact that we are well hedged for interest rate exposures, we are now in a situation where we do not foresee that we will need to refinance a majority of outstanding capital markets debt, but rather repay a significant part of this in due course. For the secured loan facilities, the plan is that we will start addressing this during 2023. And we will consider to stretch these maturities in line with how we have development on the underlying operations that these are secured against. As we mentioned earlier, we are continuing to streamline and rationalize on the fleet portfolio. As we mentioned, we have been able to close out on the sale of Polvo for $50 million. We have now closed out on recycling of Cidade de São Vicente and Umuroa, which is also removing carrier costs and having these units to lay up. We are now very close to close out for Joko Tole, which will also bring another $50 million in liquidity to the company. And although we are working on a large project and we're pursuing all the project opportunities, we do now have a very comfortable liquidity situation having freed up close to $200 million in liquidity since October last year when you include the block sale we did on BW Energy shares. In total, as you can see, we have a liquidity of just over $400 million by Q1. We have now been paying an annual cash dividend of $25 million for the last 2 years. We have kept this despite taking on a large new FPSO project and also investing in BW Ideol and progressing on our renewable track. We think we have been delivering on the rationalization program on the fleet by divesting noncore assets, and we're also tracking well with our other activities. This puts us in a position where we are able to increase on the annual dividend. And as has been mentioned already by Marco, we have decided that we will add $20 million to our annual dividend for 2022 through dividending out BW Energy shares in kind on top of the $25 million annual cash dividend. We do believe that the model of dividending out BW Energy shares in kind with cash is a good solution for our shareholders as we pay direct yield in cash topped out with dividend in kind that allows shareholders to benefit directly from future value creation in BW Energy. Dividend in kind for BW Energy shares will be done in the same manner as we do with cash. We will dividend out shares in kind on a quarterly basis, meaning BWO shareholders will receive, in the next quarter, USD 6.3 million in cash as well as $5 million through BW Energy shares in cut. With that, I'll hand it back to Marco.

Yes. Thank you, Stale. And I'll continue then with giving you an update on our strategic investments and a look on the market. So the window of opportunity for new project remains open -- or I would say, even widens. On the back of the energy security concerns, the Brent price is now in a steady over $100 per barrel, and that significantly increases the probability of contract extensions and redeployments. We also see that there is more interest in lease-and-operate versus owning production assets by oil majors as there is a reallocation of capital in connection with the energy transition. The supply/demand in the FPSO space looks attractive. There is a healthy number of new projects in the pipeline for at least the next 5 years, probably a decade. There are a reduced number of active FPSO players. And amongst those, most of them have already relatively full order portfolios. So that gives an interesting balance. And this gives us confidence to find the right projects, which meet our investment criteria. And those are that we want to invest in infrastructure like FPSO projects with firm contracts of 15 years or more, plus options. We aim for a return on equity of 50%, just like Barossa. And we want to contract with investment-grade counterparties to be able to finance this in an attractive way. And together, these criteria allows us also to find partners to co-invest in the asset. Projects we have been pursuing for some time now, and that meets all those criteria is the Gato Do Mato project for Shell and its partners in Brazil, as I mentioned, in the highlights. And this has now been progressed to a limited notice to proceed to kick off engineering and locking in capacity with key subcontractors. The Gato do Mato development is an oil and gas development offshore Rio de Janeiro, which over time will also export gas to show for our generation. We will execute the EPCI phase in partnership with Saipem, and we will replicate the financing model of Barossa, meaning we will include infrastructure investors as equity partners. During the LNTP, we will finalize commercial negotiations, in particular, in view of proper risk allocation of the inflation risk we currently see and where everyone is struggling within the supply chain market. Upon successful completion of the LNTP scope, it's the intent of Shell and their partners to award them an 18 years lease-and-operate contract to the BWO and Saipem partnership. Our subsidiary, BW Ideol progress as well in floating wind infrastructure developments and is amongst the front-runners who are actually transforming the pipeline of prospects into real projects. As mentioned in the highlights, the latest development there is the FID made on the 30-megawatt EolMed project in partnership with CARE and Total. And this is one of the very first floating wind developments in France, and it is in the same area where later the commercial tenders will be launched for the Mediterranean Sea and BW Ideol announced earlier that they will team up with EDF and Maple Power, and that's the same consortium and partnership that is also bidding for the Britney tender. So obviously very well positioned to continue to secure project portfolio now also in France. The EolMed development will consist of 3 10-megawatt turbines supported by the patented dumping pool floaters by BW Ideol. In the previous quarter, we mentioned that BW Ideol was one of the winners in the ScotWind licensing round with the award of an option agreement for a close to 1 gigawatt development. And this has now been formally signed. And while the consortium progresses with the consent application. We're also pleased that the interest by various major oil companies in the potential of floating wind farms powering oil and gas developments has now resulted in a first feasibility study to study the wind power to platform projects. And again, this is, in particular, interesting for FPSO developments, having in mind the typical water depth that those developments are in and where floating is the right solution. An update on our sister company, BW Energy, in which we hold a 27% ownership interest. BW Energy is proceeding with the Maromba development in Brazil. And for that, we have sold the FPSO Polvo, as I mentioned earlier. BW Energy is also progressing with the Hibiscus/Ruche project in the Dussafu field with a tie into our Adolo FPSO, and that will boost the production with about 30,000 barrels extra per day. First quarter was a very good quarter for BW Energy with 1 lifting completed of about 1 million barrels at a price of USD 120 per barrel. As BW Offshore, we benefit from this exposure to the high oil price to our significant ownership. And we also benefit from the production growth on Dussafu to the production tariff on Adolo. And that brings me to the summary of a good quarter and a positive outlook. Our main focus is the safe and timely delivery of the Barossa project, clearly, we're now also kicking off engineering activities for a potential new projects, Gato Do Mato for Shell to a limited notice to proceed. We are delivering on our divestment program of non-core FPSOs, which frees up liquidity and that supports our investment in new projects, and it also supports an increase of a direct return to shareholders. The high oil price supports contract extensions and redeployment prospects, and we are actively discussing these prospects for BW opportunity. And we continue to support BW Ideol to expand their project portfolio and team up with them for EPCI and power to platform opportunities for the oil and gas sector. And that brings me to the end of this update of quarter 1, but very happy to take any questions.

[Operator Instructions] Our first question today comes from Haakon Amundsen from ABG.

A couple of questions for me. Congratulations on Gato Do Mato. I don't know if you can put some more color on it. I understand you haven't completed the negotiations and everything, but can you give some more details on the structure? What I'm trying to understand better is kind of your net equity share of the CapEx on that project. So roughly the size of the project. That's question number one, on the project. And the second thing, what can you do to kind of protect your position with respect to inflation and supply chain concerns on that project that was not present on Barossa?

Thank you, Haakon. I can start with the first question and Stale, you may want to comment on the first question. But talking about inflation obviously, that's the issue in today's world. We've seen the inflation impact last year. But in the current security crisis also in the world that's a difficult topic, and that's exactly a key topic that has still to be concluded during the LNTP. And I can say our client understands that and so our consortium with Saipem we're discussing that with Saipem. And that's why we still need to conclude the final commercial model and a proper risk allocation. But at the same time, everyone agrees that it's in the interest of the project and all parties to progress engineering with the aim to maintain schedule. Stale?

Yes, on the first question, which if I understood, Haakon, what you were asking for is there are sort of some numbers on the -- or size of the project relative to, for instance, Barossa, if I understood you correctly?

Yes, for example. And also if there's going to be kind of a prepayment of the dayrate or anything that can limit the net equity you need to inject in the project? So if you can talk a little bit about the numbers and the mathematics portion, just to better understand that.

I think we need to be a bit conceptual at this point in time so far, it's a limited notice to proceed, we have been awarded. And we haven't finalized all the commercial terms under the contract. The model and structure will be replicating the Barossa structure where we split this up. In this case, it will be different in the sense that we will team up with Saipem on the EPC part while on the ownership side, we will bring in equity partners as before. There will be an element of prepayment under the contract. We don't want to go into details on how much that is relative to how it was on Barossa. Barossa was probably a bit of an extreme case as such with prepayments being close to half of the overall project value. So this will not be in the same magnitude, but it's a significant portion as such. In terms of overall size of the project, it's a smaller FPSO with inflation, you are -- we're not very far off from when it comes to estimated CapEx numbers. But also these things are still to be firmed up. Not sure if you want to add anything, Marco?

That was very helpful. Just a couple of more housekeeping. You mentioned that you were -- you're likely able to repay the unsecured debt at maturity still that's also valid in the case where this Gato Do Mato is proceeding and opportunity is being redeployed? Or what should we think there? I mean -- or is this a scenario where you...

Yes. What I think I said was that we are in a position where we could repay majority of the capital markets debt. We haven't decided exactly how much, but liquidity is good and the cash flow going forward also looks good. This also includes a case with Gato Do Mato, and we do not have an intention to refinance $400 million of capital markets debt. As a ballpark figure, we could look at rolling over somewhat less than half of that at the most, I would say, that's how it is at the moment.

Okay. That's very clear. And just one last for me. I'm sorry for following you with 4 questions. But did you spend any more of your contingency on Barossa in the quarter?

I can comment on that. We haven't changed our view on how much contingency we need to draw for to complete the project that hasn't changed much. But there is naturally as you progress and in this inflationary environment as we progressed and kind of completed most of the procurement commitments we also continued to draw from the contingency, but not, I would say not beyond what we assumed we would do. So in my view, the project is very much in control. We're just dealing with a reality, but we had allowances for that. We have solid project buffers. And the overall net result for the project is still very robust. So we're still very happy with the developments.

[Operator Instructions] The next question today comes from Christopher Mollerlokken from SB1.

Starting with Barossa. So you said that you have -- you placed all the major procurement packages now. But if you were to provide an absolute CapEx number for that project, what would that number be now?

We always include contingencies in the project number -- in the project CapEx. So from that perspective, it's not -- it hasn't changed that much, maybe slightly above, but not that much because that's how we estimate things. We have allowances contingencies and then profit and then that together defines the buffers. And so there hasn't been really a change there.

Good. And in terms of Gato do Mato. So you do specify that there is of course, inflationary environment now in the supply chain. And could you give some color on how you're tackling that? Because you're hearing from some sources that from some subsuppliers you get 1-day pricing quotes. You've talked with Shell now for 7 months. Of course, it's hard to give them a price, which will not be valid tomorrow. How is it possible to proceed without having basically floating prices in the contracts with the end clients? Or will it be a floating based pricing?

Yes. No, this is exactly -- I mean, you're spot on. So inflation is one thing. But if you understand the inflation and you can project the inflation for a while, then you can price it properly in and you can have kind of a normal process of pricing and then the finding contingencies around that and things kind of work. I think today, that is just -- I think it's impossible. So -- and that's exactly the topic we're working on with our clients. So how do we deal with that? Who can absorb those risks best if any? So one outcome is that we will roll for it will not be possible to take FID and sign a contract. At least not right now, today, that's why we proceeded with an LNTP and still progressed on the schedule. How that will look in a couple of months, we don't know yet. But ultimately, it will be about who can take certain risk and who -- how do we allocate those risks. Of course, the reality is that inflation is very much driven by the energy -- cost of energy and oil and gas prices. And so oil and gas companies are in a certain way hedged for project costs versus their revenues. So hopefully, they are a better placed to take some of these risks.

And just a final, perhaps a bit boring, but there is no boring questions. On the interest rate hedges. On the interest rate hedges. So you had a gain in the first quarter, but just the mechanics there, will the hedges have a certain maturity. So when you refinance, it will be -- or when you do a new exercise with the hedges will they be more costly to do because interest rates have increased since you first placed them? Just to understand how it works.

No, no, it is correct. When we hedge our loan facilities, we would normally hedge it kind of in line so that the hedges taper off as you're amortizing on your debt. So today, you don't have any more debt there left then your -- and then all your hedges have expired. You basically lock in your interest rate on your loan all way through. So you know what is your -- you go from a floating to a fixed interest rate on your debt.

But is there any basic [indiscernible]?

Yes. But what I want to say when we say 100%, in fact, we were trying to look ahead when we did refinancing on the corporate facilities and also on the Catcher facility. For those that stay mature in '24. And we expect that already at that point in time, we will try to roll it out further. We have hedges that goes beyond that. which means we would -- depending on where the market is at the time. We know at least where -- what our interest rate would be in terms of the margin -- the fixed portion of it, if we are to extend our debt, which is beneficial, if you believe in a higher interest rate environment going forward.

And final question. With the announcement that you will dividend out shares of BW Energy, with the closing prices from Wednesday, that would imply that we could receive shares in BWE for 11.5 years. Is that the run rate? Or is it more like a starting point?

Well, I can start with this and Marco, you can chip in on this one. We're not -- we haven't thought 11 years ahead when it comes to deciding our dividend. We -- with the Board, we discuss the dividend on a yearly basis. So the Board has given an indication of a dividend for this coming year. And of course, we have board meetings also on a quarterly basis where we can calibrate if we think we can increase the dividend further, but I think you should take it as that this is what we look at for this year. And then depending on our outlook and how it looks like, we could increase or change that dividend going forward. But you're right. If things stay to status quo, then you would continue more or less forever which is, yes.

Thank you. There are no additional questions waiting on the conference line. So I'd like to pass the call back to the management team.

Okay. Well, I think yes, go ahead, Stale.

Yes. No, I will switch in to the web where there's a couple of questions on the web as well. I mean it continues with the dividend. So the first question comes from Sinder Serbia (sic) [ Sebastian Grindheim ] from Arctic. The question is dividending out BW Energy shares maybe a good idea in theory. But have you considered that this will likely create a constant overhang in the BW Energy shares? I mean, I can start with this one. Yes, we have debated this quite heavily as such. The fact with the current dividend, given that we have one large shareholder it would only be -- or it would be in the ballpark of 800,000 shares. We would go to the remaining 50% shareholders on a quarterly basis. So if assuming everyone sold their shares on day 1, you might get somewhat overhang, but we think that the volume of shares that could hit the market is relatively limited. And secondly, we have debated this with certain shareholders and we get the impression we are doing what shareholders in BW Offshore want, and that is that we make a clean company where those who are BW Offshore shareholders can decide whether they want to own BW shares or not. And that's why we decided that we think is a good way of increasing our dividend is that instead of, for instance selling the BW shares and increasing the cash dividend we'd rather go -- we dropped at the middle step and we increased our dividend by handing out BW Energy shares as a dividend on top of the current cash dividend that we have. So we're not overly concerned that this will create an overhang on the BW Energy shares at the moment.

To add on then stress. I mean, as we do it per quarter, it's not in relative terms, not a super large volume in the market. And as Stale also pointed out, I mean many BW Offshore shareholders are also shareholders in BW Energy. And it's known that this is a discounted share and the prospects are really good. So we don't expect that this will result in a kind of dump of shares in the market. So that should -- so we don't actually expect an all-hang effect.

Next question is from Bendik Engebretsen, Danske Bank. Congrats on another solid quarter. Two questions. And the first one, could you elaborate on the timeline for the engineering contract or the LNTP for Shell? Maybe Marco, you could say a few words about that.

Yes. So this is -- well, it's kept by a dollar amount and an initial 4 months but we're not driving the timeline that's in control of our clients Shell and their partners. So whether or not that phase would be extended or not, that's to be seen. And I think that depends on the developments in the supply chain market and on our commercial negotiations.

Okay. The next question is, could you elaborate on how you have locked in key contractors for Barossa construction? So i.e., how much of 70% that remains on the project related to procurement versus manhour? I think you already said that basically procurement is close to 100% when it comes to equipment. But maybe you want to elaborate on that?

So maybe that was misunderstood. But Barossa project in terms of committing cost to external parties through POs and subcontracts that's kind of done. So now we're going to -- so in that sense, we're not very sensitive anymore to inflationary effects on Barossa. So it's really more for some of the questions pointed out, how do you deal with that for new projects these days. That's a different discussion. But on Barossa we don't really have that exposure where there is exposure on what's happening in the global market is more if there's disruptions in supply chain. So if our subcontractors struggle from disruptions to -- for their supplies, and that's something we just need to work with them if such effects would occur, that could cause delays and we need to see how we can turn sequences around to address that. So that's what I also tried to mention we work very closely now with our subcontractors to monitor their progress. And if they are affected by either future COVID outbreaks or disruptions in the supplies of materials, then we'll have to accommodate that by looking at our integration plans and sequence of doing that. And there's always some flexibility to do that. Bar in mind, an FPSO is an assembly of many components, and there's different ways of how you can put it together if a certain component would have some delays. And that's really what we will focus on for the next, I would say, 12 months or so when all these pieces come together and we integrated.

Thank you. And then we have a question from Herman Lia in SEB. It's overlapping a bit with an earlier question. When do you expect to complete LNP for Go Do Mato? You have -- what's the tenor of that? But the second part of it is and potentially secure the firm lease and operate contract?

Again, timeline is kind of capped by the amount, which is also in the press release. So there is a gap there. And then the question is, will that be extended or not? And again, that's all in control of our clients, not in our control.

Thank you, Marco. I think that's the last question I have on -- I can see on the web at least. Maybe back to the back to the operator.

Thank you. There are no additional questions waiting at this time.

Okay. Well, then I want to thank...

Marco, if you -- I just can -- there was one more coming just popped in if you're able to -- a minute. From [ Nick Line ] at [ Setiplace ]. China now seems to be the biggest source of supply chain risk given its approach to COVID. How much exposure do you have to Chinese sourcing at Barossa?

More or less 0, there is no Chinese content for the Barossa project. We don't have big subcontracts. I mean there could be maybe subcontracts to subcontractor, subcontractor somehow they could be Chinese components. But there's no -- we don't have direct contracts with Chinese yards or main equipment suppliers. So in that sense, we are -- the Barossa project is well protected.

Okay. Then that was the last one I have on the web.

Yes. Okay. So if that was the last question, and first of all, I want to thank for all those questions, very relevant questions, and thanks, everyone, for the interest this morning, and wishing everyone a good day. Thank you.