BW Offshore announced its plan to invest EUR 60 million in Ideol S.A, a global pure player in floating offshore wind technology and jointly creating BW Ideol, a renewable energy company with market-leading capabilities based on in-house developed and proven technology, supported by BW Offshore’s extensive experience from development and operation of offshore energy production systems.
BW Offshore expects to own about 50% of BW Ideol after a contemplated capital raise and listing as a separate company on Euronext Growth, targeted for end-March, with BW Offshore participating as an anchor investor. The investment and participation in the capital raise will be funded from existing liquidity reserves. Ideol S.A. founders and employees are expected to own about 20% of the shares post listing.
“Over the past year, we have made significant progress in leveraging BW Offshore’s extensive operational and development capabilities to position as an early mover in the offshore energy transition. This is reflected in good progress on new infrastructure-like FPSO projects with attractive long-term returns, and by developing partnerships to position us in the forefront of floating offshore wind developments,” said Marco Beenen, the CEO of BW Offshore. “We accomplished this against a challenging operational backdrop due to COVID-19, while maintaining financial flexibility to invest for growth and providing direct returns to shareholders through the BW Energy IPO, share buy-backs and cash dividends.”
On 14 January 2021, an accident onboard FPSO Espoir Ivoirien resulted in two fatalities. Production was halted and the FPSO was shut down after the accident. BW Offshore has performed a root cause analysis of the incident in cooperation with the field operator and local authorities. The FPSO resumed operations on 13 February 2021. “BW Offshore works continuously to maintain safe operations across the fleet and will apply lessons learned from the accident to prevent such incidents in the future,” said Marco Beenen.
EBITDA for the fourth quarter of 2020 was USD 91.9 million (USD 98.1 million in Q3 2020). The Company has decided to reclassify small-value items in inventory as consumables. Such items will in the future be directly expensed when purchased and as a consequence, items held in inventory at year-end were expensed. Inventory on units that are in lay-up has also been revalued, which led to a total impairment of USD 22.0 million for the quarter which was recognised as an operating cost and included in EBITDA.
EBIT for the fourth quarter was negative USD 30.0 million (positive USD 35.1 million in Q3 2020) after the impairment of USD 59.6 million on the FPSOs BW Athena, BW Cidade de São Vicente and Espoir Ivoirien. The company is expecting a more challenging market for redeployments of mature FPSOs going forward and is therefore also considering recycling of some of these units in lay-up.
Operational performance was solid for the full year of 2020 with EBITDA of USD 436.1 million (USD 542.9 million for 2019) and operating cash flow of USD 387.3 million (USD 608.3 million for 2019).
Total equity at 31 December 2020 was USD 945.0 million (USD 1,004.8 million in Q3 2020). The equity ratio was 36.5% at the end of the quarter (37.5% in Q3 2020).
Net interest-bearing debt was USD 936.1 million (USD 976.3 million in Q3 2020).
The Board of Directors has declared a cash dividend of USD 0.035 per share. Shares will trade ex-dividend from and including 25 February 2021. Shareholders recorded in VPS following the close of trading on Oslo Børs on 26 February 2021 will be entitled to the distribution payable on or around 5 March 2021.
The FPSO fleet continued to deliver stable uptime in the quarter with an average commercial uptime for the fleet of 97.8% (93.2% in Q3 2020).
On 18 November, BW Offshore signed an agreement with the New Zealand government for coverage of costs for continued safe manning of the FPSO Umuroa until such time as the unit is disconnected from the Tui oil field. Subject to prevailing COVID-19 restrictions, the disconnection is expected to be completed before second half of 2021.
On 4 January 2021, the contract for the Abo FPSO was extended until the end of 2021, with options until the second quarter of 2023.
The majority of BW Offshore’s fleet remains on contract with national and independent oil companies. These contracts have withstood market fluctuations, with options to extend exercised even during previous oil price lows. The resilience of our contract backlog and fleet was again tested and proven during a challenging period in 2020 where several extensions and a new contract was signed. The Company expects that the existing fleet will continue to generate significant cash flow in the time ahead.
The COVID-19 pandemic combined with reduced long-term oil price expectations have made the global E&P sector reassess its investment plans. At the same time, the industry continues to progress long-term field development initiatives on larger projects with low break-even costs. The Company is positive to the market for large scale FPSO infrastructure projects and expects that there will be a sizeable number of potential awards over the coming years. BW Offshore maintains a selective approach to such opportunities and has matured partnerships with global infrastructure investors which will accelerate the Company’s ability to take on accretive new projects and grow in the high-end FPSO market.
In parallel, investments in clean offshore energy production solutions are growing rapidly as a response to global initiatives to reduce carbon emissions. BW Offshore has over some time been evaluating investment opportunities in clean offshore energy. The announced investment in Ideol S.A. represents such an opportunity to create a floating offshore wind champion by leveraging BW Offshore’s experience in developing and operating offshore production systems and accessing capital markets.
BW Offshore has over time substantially reduced leverage and strengthened its financial solidity. Combined with the IPO of BW Energy, these measures position the Company to deploy capital towards future accretive offshore projects and long-term value creation, and to provide growing returns to shareholders and a quarterly cash dividend.