Aker BP ASA (AKRBF) Q2 2024 Earnings Name Transcript
Aker BP ASA (OTCQX:AKRBF) Q2 2024 Earnings Convention Name July 12, 2024 2:30 AM ET
Firm Contributors
Karl Hersvik – CEO
David Tonne – CFO
Kjetil Bakken – Head of IR
Convention Name Contributors
John Olaisen – ABG
Sasi Chilukuru – Morgan Stanley
Lydia Rainforth – Barclays
Yoann Charenton – Bernstein
Teodor Sveen-Nilsen – Sparebank 1 Markets
Victoria McCulloch – RBC
Mark Wilson – Jefferies
Karl Hersvik
Good morning, everybody. With this intro from the sailaway of the Fenris jacket and predrill module from the Verdal yard a number of weeks in the past and the following profitable offshore set up on the Valhall space, we welcome you to Aker BP Second Quarter 2024 Presentation. It is going to be given by our CFO, David Tonne and myself adopted by our standard Q&A session.
However earlier than that, let me begin with the highlights. Aker BP achieved wonderful operational efficiency this quarter with excessive manufacturing effectivity. We continued to show robust price self-discipline and maintained our place as a world {industry} chief in low emissions.
I’m happy to report that our tasks are progressing nicely. Fabrication and building actions are underway at a number of websites in Norway and overseas with the set up work offshore ramping up, as proven within the intro. And the whole CapEx estimate for our mission portfolio stays unchanged. We preserve a robust monetary place supported by sturdy money stream from operations. This enables us to spend money on our worthwhile tasks whereas additionally offering engaging dividends to our shareholders.
At Aker BP, we persistently ship excessive manufacturing from our world-class asset portfolio. Within the second quarter we produced 444,000 barrels of oil equivalents per day and the manufacturing effectivity elevated to 95% which is main on the NCS, as we remained regularly laser-focused on operational efficiency. In comparison with the earlier quarter, Alvheim, Skarv and Valhall delivered steady manufacturing. At Edvard Grieg, we noticed a discount on account of a mixture of pure decline, deliberate upkeep and a shutdown linked to the startup of Hanz.
At Johan Sverdrup, it’s a pleasure to see simply the way it retains on performing. This large discipline, with virtually 3 billion barrels in preliminary reserves, was initially designed for a gross oil capability of 660,000 barrels per day. Final yr, this was elevated to 755,000 barrels. If we additionally embrace pure gasoline, the sphere has a capability to ship near 800,000 barrels of oil equivalents per day. And the efficiency has been nothing however exceptional, with excessive manufacturing effectivity, very low manufacturing price of round $2 per barrel and with perhaps the bottom emission depth within the {industry} of lower than 1 kilogram of CO2 per barrel.
Within the second quarter, Aker BP’s share of manufacturing from Johan Sverdrup elevated to 241,000 barrels of oil equivalents per day. As we now have beforehand mentioned, water manufacturing has been growing in a number of the wells over the past yr. Now, that is as anticipated and one thing that the operator is managing however repeatedly optimizing manufacturing on a nicely by nicely foundation. We’re additionally including new wells with 4 added within the first half of 2024, and a fifth nicely have been began up now in July. One other 5 wells are deliberate for the second half.
As of right now, Johan Sverdrup continues to supply on the elevated plateau and the continuing drilling exercise will assist to keep up this degree till late ’24 or early ’25. The following step is to drill extra laterals from current wellbores to extend reservoir publicity and mitigate water manufacturing. We’re additionally approaching an idea choose for Part 3. It is a mission that may contain subsea wells tied again to the Johan Sverdrup discipline middle, with manufacturing startup focused from late ’27. At Aker BP, we consider that sustaining low price is essential for gaining a aggressive edge within the oil and gasoline {industry}. And we systematically work in the direction of this aim. And I am more than happy with the progress we have made.
Our manufacturing price for the quarter was $6.4 per barrel, nicely inside our full yr steerage of $7. This quarter, the manufacturing price was positively impacted by excessive manufacturing volumes, restricted upkeep actions and favorable foreign money impact, however but it marks a really robust begin of 2024. When evaluating our manufacturing prices to these of the related {industry} friends, Aker BP maintains a robust aggressive place. As illustrated within the chart to the correct, knowledge from Wooden Mac present that Aker BP has the bottom manufacturing price amongst a bunch of 20 comparable firms.
Aker BP’s greenhouse gasoline emissions have been under 3 kilograms of CO2 equivalents per barrel within the second quarter, marking a big enchancment over the previous couple of years. This progress is pushed by enhanced power effectivity and an elevated share of manufacturing from fields powered from shore. This excellent efficiency cement our place, as a world {industry} chief in greenhouse gasoline emissions depth, a development persistently demonstrated within the current quarters. Among the many roughly 300 largest upstream oil and gasoline firms worldwide, Aker BP stands out as top-of-the-line in emission depth, as proven on this chart.
This place offers us a superb start line for additional reductions. We’re dedicated to repeatedly lowering emissions from our operations, which is an important a part of our technique to realize net-zero emissions throughout our operations by 2030. Past that time, we plan to offset the remaining emissions via nature-based carbon options.
[Video Presentation]
We’re nicely underway with the execution of our giant mission portfolio, which can unlock almost 800 million barrels of oil equal and develop Aker BP’s manufacturing to over 500,000 barrels per day in 2028. These tasks have sturdy economics with breakeven oil costs as little as $35 to $40 per barrel and a speedy payback interval of 1 years to 2 years at an oil value of $65 per barrel. The exercise has now ramped as much as full pace throughout the mission portfolio, and fabrication and building actions are progressing in response to plan in any respect websites.
We’ve got additionally began offshore set up for a number of tasks. The Fenris jacket, featured in right now’s opening sequence, is one instance. With this jacket in place, we at the moment are prepared to start out the drilling marketing campaign at Hanz. One other instance is the Skarv satellite tv for pc mission, the place all three subsea templates at the moment are put in on the seabed. And as we noticed within the final video, the primary 5 subsea templates have now been put in within the Yggdrasil space. We’ve got additionally accomplished one mission within the quarter as Hanz was purchased on stream again in April.
In parallel with the development and set up exercise, we’re additionally in search of additional upsides. One excellent instance is the drilling of the Frigg Gamma Delta geopilot within the Yggdrasil space. Check out this.
[Video Presentation]
Spectacular work from your complete workforce on the Frigg Gamma geopilot at Yggdrasil. Now, this initiative is essential for optimizing volumes, operations and price as we transfer into the manufacturing part of the sphere. And as Hanna talked about within the movie, we now have confirmed that a number of good previous oil discipline practices is simply previous. And this has put us able to drill additional, cheaper and higher manufacturing wells. I completely find it irresistible. This actually is the spirit of Aker BP and our alliances. We proceed to advance because the E&P firm of the long run.
In conclusion, we’re confidently on monitor to ship our tasks on time, on price, and on high quality. Exploration for brand spanking new oil and gasoline sources is an integral a part of the Aker BP technique to maintain and develop our enterprise. Certainly one of our key exploration targets is to make new discoveries that may add worth to our current belongings. Round 80% of our exploration exercise is concentrated on such near-field alternatives, whereas 20% are targeted on high-risk, high-reward wells in new areas. In 2024, we now have drilled eight wells thus far and made a number of discoveries.
The Adriana appraisal was a profitable appraisal, and this discovery is now a candidate for tie-in to Skarv. It’s going to observe up later this yr with the Sabina nicely. The invention at Trell North, though it’s small, is already included within the Tyrving mission with the primary oil anticipated already in October. And Ringhorne North was additionally a discovery, which has a possible to tie-in to near-field infrastructure.
Within the Wisting space within the Barents Sea, the exploration wells at Ferdinand and Hassel resulted in two small gasoline discoveries. We have been primarily in search of oil, nevertheless the gasoline may nonetheless be beneficial for future Wisting growth. On a extra optimistic be aware, Equinor just lately drilled a profitable appraisal nicely on the Wisting reservoir to assemble knowledge, each from the reservoir and the cap rock. This knowledge is at the moment being analyzed and will likely be used within the ongoing work to determine a growth idea for the sphere.
We do have a number of thrilling exploration wells arising within the second half of this yr. We’re at the moment drilling Storjo West, which is a follow-up of the Storjo East discovery from 2022, and a possible tieback to Skarv. Let me additionally spotlight a number of of the upcoming wells. First, I wish to point out Bounty. This prospect options an intriguing construction with important upside potential within the Norwegian Sea. A nicely was drilled on this license a few years in the past with oil exhibits. This new nicely will take a look at the up flank potential from this preliminary discovery.
Second, the Skrustikke and Kaldafjell wells are focusing on extra volumes which may improve the Garantiana growth. It is also price mentioning that following the Epsilon discovery within the Yggdrasil space final yr, we now have added a brand new prospect named Omega to the drilling plan for subsequent yr. This prospect options an fascinating construction with a mannequin just like Epsilon, which may additional contribute to future progress of the Yggdrasil useful resource base.
David Tonne
Good morning. I’m happy to see that one other wonderful operational quarter can also be mirrored in our monetary outcomes. We’ve got achieved robust manufacturing and earnings in a reasonably steady oil value surroundings, whereas sustaining industry-leading low manufacturing prices.
Working money stream earlier than tax elevated to over $3.2 billion. Nonetheless, on account of two tax installments this quarter in comparison with one within the earlier quarter, post-tax money stream decreased. Money stream to investments elevated as anticipated, reflecting good progress on our tasks. This may also be evident in our tax funds within the second half of the yr, which we anticipate will likely be decreased by round 50%. On the finish of the quarter, our monetary positions remained robust with a low leverage ratio of 0.3 and ample monetary liquidity of $6.6 billion, together with $3.2 billion in money.
I’ll now stroll you thru the important thing drivers behind the outcomes, beginning with a assessment of our revenues. Complete earnings elevated within the second quarter, pushed by sustained excessive manufacturing and an overlift of 17,000 barrels per day. The typical realized hydrocarbon value rose by 2% quarter-on-quarter, with liquid costs holding regular at $83 per barrel. The realized oil value was in-line with the typical dated Brent for the quarter, the place slight optimistic crude differentials have been offset by timing of cargoes.
In consequence, the typical liquids value was barely decrease than the typical Brent value since liquid gross sales additionally embrace a small portion of NGL. Pure gasoline costs elevated by 11% in comparison with the earlier quarter, pushed by increased European spot costs. And general whole earnings was then $3.4 billion.
Manufacturing prices associated to bought volumes ended at $290 million. The rise in Q2 is principally as a result of overlift in comparison with an underlift within the first quarter. The price per barrel produced stays among the many lowest in our {industry} at $6.4 nicely inside our full yr steerage of $7 per barrel. The rise from $6.1 in Q1, was on account of increased deliberate nicely upkeep exercise at Valhall within the second quarter.
Exploration bills have been $108 million for the quarter, pushed by excessive exploration exercise, whereas depreciation remained steady at $588 million or $14.5 per barrel. We additionally acknowledged an impairment of technical goodwill this quarter on Valhall and Edvard Grieg. As beforehand mentioned, technical goodwill is acknowledged on numerous belongings upon acquisition. Since technical goodwill shouldn’t be depreciated, we are going to see extra such non-cash impairments sooner or later as manufacturing continues from acquired fields.
The efficient tax charge in Q2 was 75% in-line with the earlier quarter, after which web revenue was $561 million. We report robust working money stream earlier than tax of $3.2 billion. Nonetheless, we additionally paid $2.1 billion in taxes this quarter, protecting the remaining tax installments for the fiscal yr 2023. As anticipated money stream to investments elevated to $1.4 billion, reflecting our progress on the event tasks. In abstract, this resulted in a detrimental free money stream of $283 million.
Money stream from financing consisted of two foremost objects: the issuance of a Eurobond of [EUR750 million] (ph) and the cost of a quarterly dividend of $0.60 per share. Total, the online money place was largely unchanged from the earlier quarter. Because the tax funds for the fiscal yr 2023 have been accomplished in June, we’ll start paying taxes for the fiscal yr 2024 within the third quarter.
The entire tax to be paid within the second half of 2024 is at the moment set at roughly $1.5 billion, with one-third due in Q3 and two-thirds in This fall. As I discussed, this quantity is round half of what we paid within the first half of the yr. This discount is due, partly to increased tax deductions from the elevated funding degree in 2024 in comparison with the earlier yr. Transferring ahead, we due to this fact count on decrease money taxes assuming steady commodity costs. When analyzing money flows, it is important to know the timing of tax funds and think about multiple accounting interval. Specializing in a single interval can distort the understanding of the underlying money stream era of the enterprise.
Sustaining a sturdy steadiness sheet and a robust liquidity is a high precedence for Aker BP. We’re dedicated to upholding our funding grade credit standing, which ensures entry to capital within the bond markets on aggressive phrases, and we repeatedly work to optimize our capital construction. This quarter, we issued a EUR750 million Eurobond with an eight-year maturity on the 4% coupon charge. The issuance attracted important curiosity from traders and was considerably oversubscribed. Following this transaction, we now have lower than 1 billion in debt maturing earlier than 2028, with a mean maturity of 6 years and a mean coupon charge of 4%.
On the finish of the quarter, different key steadiness sheet metrics remained very robust. Internet interest-bearing debt ended at $3.4 billion. The rise from Q1 is primarily as a result of two tax installments this quarter and the phasing of tax deductions for investments made thus far in 2024, as already mentioned. Our leverage ratio continues to be low at 0.3 occasions web debt-to-EBITDAX, nicely inside our said inner threshold of 1.5 occasions.
Lastly, we preserve a robust liquidity place with $3.2 billion in money and extra $3.4 billion in accessible financial institution services. This compares favorably to the lower than $3 billion after-tax CapEx of our investments deliberate from now and till the top of 2028. Our robust underlying money stream era and sturdy monetary place can also be the idea for our dividend coverage. Within the interval from 2023 to 2028, accrued money from operations after tax is anticipated to cowl our whole investments at oil costs lower than $40, whereas the remaining is money for debt service and distribution to shareholders.
In Aker BP, we’re dedicated to returning the worth we create again to our shareholders with dividends that replicate our underlying monetary capability via the cycle. We’re at the moment paying $0.60 per share every quarter and our ambition is to extend the annual dividend by 5% or extra over the present funding cycle, supported by robust money stream, worthwhile investments in an investment-friendly tax regime and a sturdy steadiness sheet.
To conclude the monetary part, let me give a fast replace on the steerage on key metrics. 2024 has been a superb yr thus far. Manufacturing within the first half amounted to 446,000 barrels per day, which is above the excessive finish of our full yr steerage vary. Within the second half, upkeep actions are deliberate at a number of fields and we nonetheless count on to remain throughout the authentic steerage vary for the total yr. Nonetheless, given the efficiency within the first half, we now have narrowed the vary by elevating the lower-end.
The up to date full yr steerage is due to this fact 420,000 to 440,000 barrels per day. Manufacturing prices have been $6.4 per barrel within the second quarter, and the year-to-date common is $6.2. We proceed to profit from robust price self-discipline and a positive overseas alternate charge. However, as we count on considerably decrease manufacturing volumes and better upkeep exercise within the second half, we additionally count on the unit price to development barely up. Therefore, we’re sustaining our steerage at $7 per barrel for now.
On CapEx, we now have spent barely lower than half of the funds by mid-year. That is in-line with expectations and displays the growing exercise degree in our tasks because the yr progresses. Due to this fact, we’re sustaining our steerage unchanged. The identical additionally goes for each exploration and abandonment spend, the place each actions are creating in-line with plan.
Karl Hersvik
Thanks, David. And earlier than we start the Q&A session, I would wish to summarize our efficiency and achievements this quarter throughout the context of the Aker BP technique. Within the second quarter, we efficiently achieved our operational and monetary targets whereas additional lowering our already industry-leading emissions depth. Our growth tasks are progressing as scheduled and inside funds. We affirm our CapEx estimates and our plan is to achieve roughly 525,000 barrels per day of manufacturing by 2028.
Moreover, this yr’s exploration outcomes have resulted in discoveries with promising industrial potential, and we now have a really fascinating exploration program deliberate for the rest of 2024. To this point this yr, we’re producing robust money stream, bolstering our steadiness sheet, and we’re additionally returning worth to our shareholders in-line with the dividend plan.
We are going to now take a brief pause earlier than opening the Q&A session. And as standard to take part, please use the Groups hyperlink supplied on the net web page. When you desire to pay attention solely, please keep tuned and we are going to resume in roughly 1 minute.
[Break]
Welcome again. I hope you took a possibility to replenish your espresso cup or put together questions or no matter you’d love to do. And I simply suppose we’ll go forward with the Q&A with out additional ado. And as standard, I am going to hand you over to Kjetil Bakken, which is Heading IR in Aker BP. Kjetil?
Query-and-Reply Session
A – Kjetil Bakken
Sure, good morning. We’ve got a forest of fingers within the Groups assembly. So, first query comes from John Olaisen from ABG. Please go forward John.
John Olaisen
Yeah, good morning gents. A query on Johan Sverdrup. You at the moment have — you had 4 new wells in manufacturing within the first half. May you inform us slightly bit on the affect of — the manufacturing degree of the brand new wells, and in addition when you have toned down the manufacturing from the opposite current wells so as to give house for the brand new manufacturing from new wells? And the way have the previous wells reacted? May you inform us slightly bit about that, please?
Karl Hersvik
Okay, John. Sure, I believe I bought your query. So to start with, I believe you will need to say that Johan Sverdrup is a extremely exceptional discipline, proper? It’s a fairly fascinating story. Very low manufacturing price, very low emissions depth, and distinctive uptime. And sure, you are proper, we now have added 4 wells thus far within the quarter. We simply added one other nicely now in July and there are 4 extra wells to be added for the remainder of the yr.
And that is primarily a query about optimization. So in fact, you might be distributing, as you are just about using your complete course of capability, you might be distributing the accessible course of capability throughout the nicely inventory. And meaning that you’re optimizing things like nicely potential, water manufacturing, water dealing with, water injections. And this can be a course of that’s regularly ongoing. So, in fact while you add new wells, you tune down the volumes from the opposite wells to handle that stream of oil and gasoline as much as the platforms.
And the entire thought, and I believe I have been over this fairly a number of occasions in these displays earlier than, is as you are including new nicely inventory, you might be lowering the whole publicity on the prevailing nicely inventory. That’s taking down the typical manufacturing charge. You might have extra wells. I believe we’ll find yourself at 41 wells after we end this yr. And you might be distributing the manufacturing volumes throughout 41 wells relatively than 31. So meaning in fact, a slight discount. The entire thought is, in fact to restrict the water coning that I have been discussing on Johan Sverdrup. And thus far the wells have been reacting fairly positively. And because of that, we’re additionally saying that we count on the present manufacturing charges at Johan Sverdrup to increase into very late ’24, early ’25.
John Olaisen
Okay. Thanks. And for ’25, you are saying you are planning for retrofit multilaterals subsequent yr. May you elaborate slightly bit on that? And will you additionally remark, will you be drilling extra new manufacturing wells as nicely subsequent yr, or will there all be these retrofits?
Karl Hersvik
Sure. So the entire thought with a retrofit multilateral is that you just use the prevailing casing and your current wellhead and Christmas tree, in fact. And you then drill principally a brand new lateral. On this case, you are simply inserting it a bit increased within the reservoir. And due to this fact, additional away from the water. Much less oil above the nicely, so to talk, which implies much less residual oil. So it is — once more, it is an optimization. And, sure, we plan to do fairly a number of of these. After which, in fact, the part after that will likely be part 3, the place we’re planning or gearing as much as, I might say, an idea choose in the direction of again finish of this yr, and a manufacturing begin late ’27. And there are not any new nicely slots accessible on the dry aspect. So any new nicely slots must be subsea.
John Olaisen
Okay, thanks very a lot. And have a pleasant summer season.
Kjetil Bakken
Sure. Thanks, John. Then the following query comes from Sasikanth Chilukuru from Morgan Stanley. Please go forward Sasi.
Sasi Chilukuru
Hello, thanks for taking my questions. I had two, please. The primary one pertains to Yggdrasil sources. It looks like on this quarter, you will have introduced again or decreased the online reserves again to 413 million barrels of oil equal from 450 million barrels of oil equal. And that is primarily going again to your authentic steerage. I used to be simply questioning for those who may touch upon this transfer. The second was once more a clarification on Johan Sverdrup. You highlighted 10 new manufacturing wells being introduced on stream on this yr, bringing the whole variety of wells to 41. I used to be simply questioning, these 10 wells and the determine of 41, are they a part of your preliminary growth plan or has this determine really elevated extra just lately?
Karl Hersvik
Thanks, Sasi. I did not really get your first query. May you repeat that?
Sasi Chilukuru
Sure. So the Yggdrasil sources on this quarter — in slide pack is 413 million BOE web to Aker BP. Final quarter, it was 450 million BOE. However the 413 million was your authentic steerage as nicely. So I used to be simply questioning what — for those who may touch upon this transfer.
Karl Hersvik
Sure. I believe the distinction between 450 million and 414 million is East Frigg. Whether or not we — so what you are saying is, it really decreased from the earlier quarter?
Sasi Chilukuru
Sure. In your slide pack, you had it at 450 million. In order that’s…
David Tonne
Sure. That is a matter of if East Frigg or North is included in that slide or not. So I believe that is simply the distinction between the 2. So I believe it is only a matter of how we symbolize the numbers, however there is no such thing as a basic change within the sources or reserves there.
Karl Hersvik
So I believe that the quantity you must assume on Yggdrasil in whole, together with East Frigg, remains to be 450 million, only for being completely clear. After which, Johan Sverdrup, and also you ask whether or not we now have added wells that we did not plan. We at all times plan to make use of your complete capability by way of manufacturing wells. So it is part of the preliminary growth scope.
Sasi Chilukuru
Okay, thanks very a lot.
Kjetil Bakken
All proper. Then the following query is from Lydia Rainforth of Barclays. Please go forward Lydia.
Lydia Rainforth
Thanks very a lot and good morning everyone. It’s really very spectacular to see that the tasks are on time, on funds, and the video confirmed us one space that has been higher than anticipated. Can I simply ask the place else are you excited in regards to the work that you just’re doing, the place else is the room for upside? And the flip aspect to that’s, it’s uncommon for issues to work as completely because it appears like they’re doing. So is there something that hasn’t gone as you anticipated throughout the mission course of?
After which secondly, on the associated fee base aspect, I perceive fully what you are saying in regards to the discount within the second half of the yr on the associated fee aspect, however is that this actually about being conservative now on the associated fee steerage? And I am going to depart it there. Thanks.
Karl Hersvik
Sure. Thanks, Lydia. It’s all in regards to the good, the unhealthy and the ugly, is not it? Nicely, I believe you might be completely proper. I believe that there was in fact many successes. And I believe the general message is, as we identified, it’s about conserving the tasks on monitor. And naturally, we’re spending numerous sources to just do that. There are numerous successes, and simply to say a number of. We have been capable of place all contracts. We have been capable of really now begin up each pre-fabrication and finally element fabrication as nicely on most of those yards, some in Norway, some overseas and the ramp-up of that exercise is definitely going as anticipated. I believe I mentioned this final quarter, that might be one of many focus areas for a minimum of me as a CEO of this firm.
After which, in fact, we have had challenges. I imply, which mission have not had challenges? And it is definitely this type of complexity. And most of this has been centered round deliveries from distributors the place we’re standardizing throughout your complete portfolio. And that implies that if one vendor is struggling, we’re struggling throughout your complete portfolio. However I am glad to say that each one of these conditions have really been resolved as we’re now coming into into the summer season of 2014, which is because of what you’ll say, a rare effort and a rare competency, however not the least to the alliance mannequin that we current to those firms which permits them to useful resource, prioritize, and put deal with the tasks in Aker BP.
After which, in fact this can be a steady battle. However at this cut-off date, we’re beginning to see the horizon. And also you ask the place do I put my focus? Nicely, an important factor proper now is definitely high quality. So while you’re achieved, or a minimum of have engineering underneath management, the entire mission schedule is pushed by high quality. When you can management high quality, you may management schedule, for those who management schedule, you management price as soon as the procurement is finished and the mission is settled. So that’s the place we spend essentially the most sources at this cut-off date.
After which your closing query was –.
David Tonne
On CapEx.
Karl Hersvik
Are we being conservative? No, we’re not. We attempt to be extraordinarily clear in Aker BP about what we really consider in, and really clear each by way of steerage on manufacturing on price, on CapEx, and expenditure. So after we are placing out the quantity we’re, it’s as a result of we consider that’s the actual quantity that the market ought to count on. And it isn’t a shock that we find yourself with slightly bit decrease burn charge within the first half than the second half, for those who see the ramp-up of actions throughout the totally different yards, as they’re now including manning, including metal, and including all of the parts from the distributors, and due to this fact including into cost schedules as we method the again finish of 2024.
Lydia Rainforth
Sensible. Thanks very a lot.
Kjetil Bakken
Thanks, Lydia. And now the following query is from Yoann Charenton of Bernstein. Is that proper, Yoann?
Yoann Charenton
Sure. Good morning. Thanks Kjetil. Good morning everybody. I wish to ask three questions. So one could be on the manufacturing steerage for the total yr. Wouldn’t it be doable to know what are the assumptions for manufacturing effectivity for each the underside and the highest ends of the vary? In order that’s the primary query. Second query is on Slide 17, which has simply been up to date. Is it doable to spell out the Dated Brent and up gasoline value assumptions you will have used to derive the mixed $1.5 billion tax installments falling due within the second half of this yr? After which the third query will likely be close to CapEx. So we now have seen this uptick within the second quarter. Is that this cheap to count on a seasonal moderation within the third quarter as a result of that is summer season, earlier than reacceleration of spend within the fourth quarter?
Karl Hersvik
Okay, manufacturing steerage. I believe what we now have included within the manufacturing steerage and the remaining a part of the manufacturing steerage is basically pushed by two parts. So the primary one is the upkeep actions in Q3. And there are two separate actions or separate drivers, I might say. The primary one is a SAGE shutdown, which can imply no gasoline export from Edvard Grieg, Ivar Aasen and Alvheim. And the size of that shutdown that SAGE shutdown will drive the size of the shutdown on the fields.
After which second, we now have a turnaround on Skarv, to do important tieback work which can want hydrocarbon-free surroundings so as to execute it. In order that’s principally driving that exercise. After which for the fourth quarter, it’s about how a lot of this manufacturing will ramp up, how shortly after we begin up the fields once more. After which in fact, you will have Tyrving approaching stream, and there are a little bit of one other transferring bits and items, proper?
So it isn’t as simple as explaining that there’s a manufacturing steerage on the highest and the underside. And the explanation that the span is what it’s for the total yr steerage, though we now have achieved 95%, is these two key elements, proper? So it is not likely pushed by manufacturing effectivity, it’s pushed by actions and the size of these actions through the upkeep exercise.
I’ll depart the Dated Brent query to you, David.
David Tonne
Sure. So I assume you check with the near-term tax cost slide, Yoann. So the rule-of-thumb right here is you could take a look at the tax funds that we illustrate for the second half of this yr and the primary half of subsequent yr as type of a full yr steerage, proper? After which you may really infer the value that we now have used for setting the tax installments for the primary — sorry, second half of this yr. So it’s fairly just like the $80 state of affairs, proper, for the typical for subsequent — or for the second half of 2024 sorry. After which we give the gasoline value assumption and the FX assumption additionally on the slide. So $9 per mmbtu and a US-NOK charge of 10 for the remaining of the yr.
Karl Hersvik
After which to your third query concerning CapEx, and CapEx ramp-up I can really guarantee you, and I do that with — I might say, a number of subjectivity, there will likely be no summer season break in terms of CapEx execution or spend.
Yoann Charenton
All proper, nicely famous. Nonetheless have a pleasant summer season, for those who can.
Karl Hersvik
Thanks, Yoann.
Kjetil Bakken
Thanks, Yoann. And now the following query is from Teodor Sveen-Nilsen from SpareBank 1. Are you there, Teodor?
Teodor Sveen-Nilsen
Good morning. Sure, I am right here. Congrats on one more robust quarter. Three questions for me. First, on Barents Sea. Karl, you mentioned the discoveries within the Barents Sea. I simply surprise, how far more gasoline do you suppose we have to uncover within the Barents Sea earlier than we are able to justify our pipeline growth within the Barents Sea? In order that’s the primary query. And the second query, which really shouldn’t be necessary for estimates nevertheless it’s simply out of my curiosity. This far on Sverdrup, how a lot has been produced from Avaldsnes and the way a lot has been produced from Aldous Main in comparison with the whole 2P reserves? After which newest — my final query is what is the newest on the court docket ruling on Yggdrasil and Tyrving? Thanks.
Karl Hersvik
May you simply repeat the third query, Teodor?
David Tonne
I believe it was associated to the court docket case — associated to –.
Karl Hersvik
Court docket case. Okay, effective. Good. Let’s begin with the Barents Sea. Yeah, nicely the gasoline discoveries at Ferdinand and Hassel has little to do with infrastructure and extra to do with tie-back on this factor. So it’s a totally different case. You then ask how a lot gasoline do we have to uncover to get to a pipeline. Sure, that is a very good query. Will rely upon price of the infrastructure, the standard of the gasoline, how a lot oil is related, et cetera. There’s a number of totally different parameters. My guess, within the vary of 150, perhaps whilst excessive as 200, definitely not under 100. I do not bear in mind off the highest of my head the share cut up on yr but on cumulative manufacturing from Avaldsnes and Aldous. So we’ll should get again to you on that.
After which on the court docket case, nicely, in actuality, we’re following two totally different assaults. After all, the court docket case in itself, Aker BP shouldn’t be a celebration. In order that is happening as it’s. After which we’re a state of affairs the place we’re attempting to restore the discussions round what sort of info is lacking within the present KU. I am really fairly calm round this subject. At this cut-off date I believe we now have a fairly good deal with on what is required and find out how to assemble that knowledge. We have despatched this system for a brand new revised KU at listening to, and we at the moment are about to finalize that piece of labor. So no matter how the enchantment case prove, we will likely be able to subject the knowledge wanted.
Teodor Sveen-Nilsen
Okay. Thanks. Simply following up on the Barents Sea, you are speaking about 150 million to 200 million barrels oil equal, proper?
Karl Hersvik
No. BCM of gasoline.
Teodor Sveen-Nilsen
BCM? Okay, BCM. Okay, that is clear. Excellent. Thanks, and that is all for me.
Karl Hersvik
I imply, these volumes are very, very tough to evaluate as a result of for those who really discover a number of related oil, then in fact you might be subsidizing the sphere growth. You then would possibly want much less gasoline to finish that infrastructure.
Teodor Sveen-Nilsen
Certain. Completely. I perceive it’s tough to evaluate that. Thanks.
Kjetil Bakken
All proper. Then subsequent query is from Victoria McCulloch from RBC. Please go forward Victoria.
Victoria McCulloch
Thanks, good morning. So a few questions remaining for me. So firstly on Edvard Grieg, are you able to give us slightly bit extra colour about what is going on on at that discipline? I recognize there was a shutdown for Hanz on the discipline this quarter, however you are greater than 30% down from this time or this quarter final yr. So perhaps what your expectations are on perhaps extra of a medium time period, or how we must always see declines of that discipline? After which larger image, once more query to you is, are you able to give me a bit extra colour within the CO2 story technique for Aker BP? Is that this optionality in the mean time or one thing you suppose must be a part of the corporate’s technique and a much bigger image going ahead? Thanks very a lot.
Karl Hersvik
Sure. So each particulars and large image. That is good, Victoria. On Edvard Grieg, I believe we now have been fairly clear that we — even final yr that we have been approaching the top of the plateau. After which, in fact the decline on these fields, they’re really the strongest simply after you go off plateau. After which, in fact, as you type of get down in the direction of the I would not say tail, however because the decline tapers off, the decline charges in share per time unit declines so to talk.
And proper now we’re really seeing that we’re in that bend the place you really begin truly fizzling out the decline charge. And the fashions are literally working fairly nicely. So I am extra comfy that for the remaining of 2024 and into 2025, we’ll see a extra steady charge out of the Edvard Grieg-Ivar Aasen hub space. Hanz will offset it to a sure diploma, however not totally. However then there are additionally infill drills — infill wells to be drilled on Edvard Grieg in 2025. After which, in fact, the satellites come on stream in ’27.
So that is type of standard oil discipline follow. It is simply that usually in Aker BP, after we take over these fields, they’ve already gone off-plateau and we do these type of re-development circumstances. On this case, we’re really following down the monitor earlier than we’re deploying the redevelopment actions. So we’re simply making use of the Aker BP mannequin additionally to the Edvard Grieg-Ivar Aasen hub.
When it comes to CO2 storage, I see that as optionality at this cut-off date. I have been actually, actually clear that Aker BP is a pure play oil and gasoline firm targeted on the Norwegian Continental Shelf. And Aker BP will stay a pure play oil and gasoline firm targeted on the Norwegian Continental Shelf. The rationale that we’re this with I’d say a reasonably small variety of folks is, one, it offers us optionality. If there are regulation adjustments potential to retailer CO2, it may probably be used to offset, relatively a nature based mostly offset mechanisms, you will notice within the Internet Zero Act, for instance.
So we do not actually understand how that recreation will play out. And due to this fact, it’s a very low cost, name it insurance coverage or optionality for us. Going ahead, if that is to be an exercise with a big COP increase we are going to take a look at constructions which might be extra optimum in the direction of the Aker BP current oil and gasoline actions.
Victoria McCulloch
Tremendous, thanks very a lot.
Kjetil Bakken
Thanks, Victoria. Subsequent query is from Mark Wilson from Jefferies. Please go forward Mark.
Mark Wilson
Okay, good morning. Thanks. Good morning gents. My query — the primary query is, we’re very clear on Johan Sverdrup oil manufacturing capability, 755,000, and also you say with gasoline it is virtually 800,000 barrels of oil a day. However can I ask what the water dealing with capability is, given the dialogue on water coming? After which if you’re at that water dealing with capability which that means that optimization is absolutely the one variable you will have as you carry on new manufacturing wells. I’ve one observe up. That is my first query.
Karl Hersvik
Sure. So water dealing with capability, that’s an fascinating query. So proper now we’re really at liquid most, and that liquid most is getting used for oil processing, primarily, proper? We may deal with important quantities of water. So by way of processing plant, water dealing with capability would most likely by no means be the primary restriction on Johan Sverdrup. It is going to be extra about the way you maximize the whole liquid dealing with capability at Johan Sverdrup.
After which in fact, we’re re-injecting all of the produced water. So reinjection capability might be a difficulty. At this cut-off date, we’re injecting 5 occasions greater than we’re producing. So it is unlikely to grow to be a restriction within the short-term. After which you’ll have, name it, produced water high quality points, that are normally really a case when you will have a low water minimize and never a excessive water minimize, as a result of you then get right into a water steady part. So the best way the method plant is ready up I believe this may primarily be pushed by the water minimize and the accessible nicely capability and the wells will not be pushed by topside water dealing with capability. I imply that is — to be trustworthy, Mark that is so overdesigned you could course of virtually something.
Mark Wilson
Bought it. Okay. Nicely, my second query and my final one now could be, you reiterated count on plateau to increase into very late this yr or early ’25. That might infer that these multilateral wells that you will carry on subsequent yr, you do not count on them to have the ability to preserve the plateau within the method that the brand new manufacturing wells you might be bringing on this yr do. It’d simply be fascinating to know the distinction there.
Karl Hersvik
Sure. So, the important thing distinction is that after we at the moment are drilling the final 10 wells, that implies that we now have a number of expertise with how the prevailing wells are performing. We’re extra unsure on how these multilaterals will likely be performing after we put them on stream, proper? And that is at all times the case. I imply, we begin with being slightly bit conservative after which we get extra expectancy right, if you need, as we get extra expertise. So we may find yourself really with multilaterals which might be actually, actually good. It is simply that the modeling proper now exhibits that we’ll most likely not have the stream space in these multilaterals that we used to within the huge 10.75 inch bore manufacturing wells that we’re at the moment producing.
Mark Wilson
That is very clear. Thanks a lot. My goodness, 10.75. Okay, I am going to hand it over. And nicely achieved thus far.
Karl Hersvik
Thanks.
Kjetil Bakken
That was the final query, I consider. In order that’s it.
Karl Hersvik
That is good. And that implies that we aren’t primarily logging off right here from the Aker BP headquarters, however a minimum of we want you a superb summer season break for individuals who are about to exit right into a summer season break. And for individuals who will not be, I want you a very good weekend. And I normally say that I want folks a protected weekend. So I am going to try this, too. Thanks, everyone.
