Release Date: July 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Okea ASA (OSL:OKEA, Financial) reported solid operational performance with production of 38,400 barrels of oil equivalent per day, within the high range of their guidance.
- The Draugen field continues to deliver consistent production, and the power from shore project is progressing as planned, positioning Draugen for future production until 2040.
- The company has strengthened its liquidity position with the issuance of a $125 million senior secured bond, OKEA05, which was more than twice oversubscribed.
- Okea ASA (OSL:OKEA) reported a positive safety trend, with a decrease in both serious incident frequency and total recordable incident frequency.
- The Bestla PDO was submitted, and the project is expected to add 10,000 barrels of oil equivalent per day to Okea ASA (OSL:OKEA) when it comes into production in 2027, with a breakeven of around $40 per BOE.
Negative Points
- Okea ASA (OSL:OKEA) experienced a one-week unplanned shutdown at Brage due to a gas cooler issue, impacting production.
- The company had a planned shutdown at Statfjord A that lasted longer than expected, affecting production efficiency.
- Okea ASA (OSL:OKEA) reported a net impairment of NOK267 million related to Statfjord and Yme, driven by reduced forward prices for crude oil and risking of less matured projects.
- Production expenses were high at NOK229 per barrel, mainly due to high activity levels on several assets combined with lower production.
- The company is not paying dividends in 2024 and has not provided a clear timeline for resumption, subject to bond terms and future financial performance.
Q & A Highlights
Q: Can you discuss the breakeven power price or return on investment for the Draugen electrification project?
A: The Draugen electrification project is marginal in terms of direct financial returns, but its real value lies in ESG benefits and long-term robustness. It will increase gas export and reduce OpEx. We have locked in power prices for the first few years to mitigate risks. (Birte Norheim, CFO)
Q: Should we expect higher production from Statfjord in Q3 compared to Q2?
A: We are not providing specific production guidance for Statfjord for Q3. However, we are seeing increased production efficiency and positive results from recent wells. We are updating the drilling plan and strategy, which will be discussed in August. (Svein Liknes, CEO)
Q: What is the outlook for dividends in 2025?
A: Dividends remain a priority. Our capital allocation principles focus on maintaining a healthy balance sheet and balancing distributions to shareholders with growth. We are subject to bond terms that restrict dividends to 50% of net profit after tax. The Board will provide a plan once we can resume dividend payments. (Birte Norheim, CFO)
Q: Can you explain the recent impairment on Statfjord and the remaining book values for Yme?
A: The Statfjord impairment is due to risking less mature projects, not a change in asset strategy. We still believe in the asset's value potential. We do not disclose specific book values for Yme. (Birte Norheim, CFO)
Q: What is the expected production profile before and after the new projects come online in 2027?
A: We do not provide long-term production guidance, but the indicative profile suggests a drop to around 30,000 barrels per day before rising to 35,000 barrels per day with the new projects. (Birte Norheim, CFO)
Q: How much natural gas will be released for export due to Draugen electrification?
A: The electrification will release approximately 500-600 barrels of oil equivalent per day of natural gas for export. (Birte Norheim, CFO)
Q: What are the tax payment expectations for 2025?
A: Tax payments for 2025 are expected to be significantly lower than 2024, around NOK 2 billion, due to lower production and higher CapEx. (Birte Norheim, CFO)
Q: What are your hopes for the Arkenstone and Mistral exploration wells?
A: We are excited about both wells. Arkenstone is in the northern Norwegian Sea, and Mistral is closer to existing infrastructure. We will provide more details on resource potential later. (Svein Liknes, CEO)
Q: What is the focus for lowering OpEx in late-life operations?
A: We focus on value-adding activities and maintaining high production efficiency. Sometimes higher OpEx is necessary for increased production, but we aim to execute only essential activities. (Svein Liknes, CEO)
Q: What is the outlook for Yme for the next 12 months?
A: We are completing a well that will be put into production in Q3 and maturing more infill targets in the Beta formation. (Svein Liknes, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
