Noreco Announces Trading and Operations Update

Source: 6/28/2021, Location: Europe

Norwegian Energy Company ASA (“Noreco” or the “Company”) has announced a trading and operations update to the market for the two months ending 31 May 2021.

The Company's second quarter financial statements will, as planned, be released to the market on 13 July 2021. The Company has not completed its second quarter 2021 financial reporting. The estimates provided in this release are therefore subject to change and the second quarter financials may deviate from the information provided herein.

• Strong liquidity position of USD 272 million at 31 May 2021, consisting of undrawn RBL capacity of USD 178 million based on the Company’s current Borrowing Base and cash on balance sheet of USD 94 million
• Successful closing of new USD 1.1 billion RBL facility with existing and new lenders. This new facility, which has a seven-year term and amortizations from the second half of 2024, replaced the Company’s prior USD 900 million facility. This provides additional liquidity while also loosening the pre-Tyra leverage covenant and is a strong testimony to Noreco’s underlying assets and business. The semi-annual redetermination of the RBL Borrowing Base is currently ongoing and is expected to be announced end of June 2021, with the Company anticipating the facility’s cash drawing capacity to remain above USD 1 billion
• Due to favorable gas market conditions and to further safeguard pre-Tyra cash flow, during Q2 2021 to date the Company entered into additional price hedging agreements of 1.2mm MWh at EUR 29/MWh for Winter 2021 / 2022

• Net production of approximately 27.3 mboepd during the first two months of the second quarter, in the upper range of the Company’s annual guidance of 25.5 – 27.5 mboepd
• Operational efficiency of 83.5 percent during second quarter
• The Noble Sam Turner rig program for planned well workovers and well maintenance continues to have a positive impact on operating performance

Tyra Redevelopment
• High activity levels ongoing during 2021 are progressing the project significantly towards first gas
• Fabrication of the two wellhead and riser platforms (WHRP) and the processing and accommodation modules takes place on three yards
o Sembcorp Marine (Singapore): WHRP for Tyra East and Tyra West. Fabrication of the Tyra East WHRP is close to complete and the transport vessel arrived at the yard 20 June. The Tyra West WHRP is progressing towards sail away and installation during 2022. The temporary shutdown of the yard in May this year due to COVID-19 only had a limited impact on the Tyra project. As such the current progress at Sembcorp is not expected to create a risk to the first gas date
o McDermott (Batam, Indonesia): Processing module. Due to high frequency of COVID-19 cases in the area, enhanced precautionary measures have been implemented to minimize exposure and new cases. As a result, parts of the fabrication of the process module have progressed slower than expected. However, built-in contingency still allows the process module to sail away during 2022
o Rosetti Marine (Ravenna, Italy): Accommodation module. Due to COVID-19 impacts, fabrication is progressing slower than originally planned. Several strategic alternatives related to sail-away timing are currently being assessed, with no scenarios under current estimates that are expected to create a risk to first gas date
• Tyra budget: The official budget of gross DKK 21 billion has not been revised since FID in 2017. However, and mainly driven by COVID-19, the Company is seeing upward pressure on costs. While the Danish Underground Consortium partnership (the “DUC”) has not yet revised the official Tyra budget, Noreco as a non-operated partner internally assumes an estimated project cost of DKK 22 billion based on the Company’s independent assessment of information provided by the operator
• While the global COVID-19 pandemic continues to be a challenge, including at fabrication yards, Noreco expects the ongoing proactive mitigation and preparedness strategies being exercised will safeguard the Tyra first gas date in Q2 2023

NOR14 Covenant Headroom
Noreco has significantly strengthened its capital structure during 2021 through the refinancing of its RBL facility, providing additional liquidity and deferring amortization payments into the second half of 2024.

Using current forecasts, the Company does not expect to breach NOR14’s maximum leverage ratio during the Tyra Redevelopment period based on forward curve pricing assumptions. However, Noreco would like to add additional headroom under this financial covenant to reduce exposure to future market volatility and further secure delivery of Tyra. The Company believes refocusing the covenants on liquidity enhances the NOR14 bondholders’ position as this measure more closely corresponds to the core of Noreco’s underlying credit story in the period prior to Tyra recommencing production. It will also better reflect the revised RBL facility, where the pre-Tyra leverage covenant was relaxed with no impact on margin. Additionally, Noreco intends to address the leverage covenant impact of the shift in Tyra first gas to Q2 2023 that was announced in November 2020.

The Company is seeking to engage in a dialogue with bondholders and has appointed Arctic Securities and Pareto Securities to assist with this process.

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