Fourth Quarter 2019 25 February 2020 Disclaimer THIS PRESENTATION - - PowerPoint PPT Presentation

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Fourth Quarter 2019 25 February 2020 Disclaimer THIS PRESENTATION - - PowerPoint PPT Presentation

Fourth Quarter 2019 25 February 2020 Disclaimer THIS PRESENTATION (THE INFORMATION MATERIAL) HAS BEEN PRODUCED AND PARTY SOURCES ARE SOLELY OPINIONS AND FORECASTS WHICH ARE SUBJECT DELIVERED BY NORWEGIAN ENERGY COMPANY ASA (THE


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Fourth Quarter 2019

25 February 2020

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THIS PRESENTATION (THE “INFORMATION MATERIAL”) HAS BEEN PRODUCED AND DELIVERED BY NORWEGIAN ENERGY COMPANY ASA (THE “COMPANY”). THIS INFORMATION MATERIAL DOES NOT CONSTITUTE AN OFFER, INVITATION OR SOLICITATION OF AN OFFER TO BUY, SUBSCRIBE OR SELL ANY SHARES IN THE COMPANY. THE COMPANY DOES NOT MAKE ANY UNDERTAKING, REPRESENTATION OR WARRANTY (EXPRESS OR IMPLIED) AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION (WHETHER WRITTEN OR ORAL AND WHETHER INCLUDED IN THIS INFORMATION MATERIAL OR ELSEWHERE) CONCERNING THE COMPANY OR OTHER MATTERS DESCRIBED HEREIN. NEITHER THE COMPANY NOR ANY OF ITS PARENT OR SUBSIDIARY UNDERTAKINGS OR ANY SUCH PERSON’S AFFILIATES, OFFICERS, EMPLOYEES OR ADVISERS ACCEPT ANY LIABILITY WHATSOEVER ARISING DIRECTLY OR INDIRECTLY FROM THE USE OF THIS INFORMATION MATERIAL OR OTHERWISE IN CONNECTION WITH THE MATTERS DESCRIBED HEREIN. THE DISTRIBUTION OF THIS INFORMATION MATERIAL IN CERTAIN JURISDICTIONS IS RESTRICTED BY LAW. THIS INFORMATION MATERIAL IS NOT FOR DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR INTO ANY JURISDICTION IN WHICH THE DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL. THIS INFORMATION MATERIAL MAY CONTAIN CERTAIN FORWARD-LOOKING STATEMENTS RELATING TO THE BUSINESS, FINANCIAL PERFORMANCE AND RESULTS OF THE COMPANY AND/OR THE INDUSTRY IN WHICH IT OPERATES. FORWARD-LOOKING STATEMENTS CONCERN FUTURE CIRCUMSTANCES AND RESULTS AND OTHER STATEMENTS THAT ARE NOT HISTORICAL FACTS, SOMETIMES IDENTIFIED BY THE WORDS “BELIEVES”, EXPECTS”, “PREDICTS”, “INTENDS”, “PROJECTS”, “PLANS”, “ESTIMATES”, “AIMS”, “FORESEES”, “ANTICIPATES”, “TARGETS”, AND SIMILAR EXPRESSIONS. THE FORWARD- LOOKING STATEMENTS CONTAINED IN THIS INFORMATION MATERIAL, INCLUDING ASSUMPTIONS, OPINIONS AND VIEWS OF THE COMPANY OR CITED FROM THIRD PARTY SOURCES ARE SOLELY OPINIONS AND FORECASTS WHICH ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL EVENTS TO DIFFER MATERIALLY FROM ANY ANTICIPATED DEVELOPMENT. NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARY UNDERTAKINGS OR ANY SUCH PERSON’S AFFILIATES, OFFICERS OR EMPLOYEES PROVIDES ANY ASSURANCE THAT THE ASSUMPTIONS UNDERLYING SUCH FORWARD-LOOKING STATEMENTS ARE FREE FROM ERRORS, NOR DOES ANY OF THEM ACCEPT ANY RESPONSIBILITY FOR THE FUTURE ACCURACY OF THE OPINIONS EXPRESSED IN THIS INFORMATION MATERIAL OR THE ACTUAL OCCURRENCE OF THE FORECASTED DEVELOPMENTS. THE COMPANY ASSUME NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS OR TO CONFIRM THESE FORWARD-LOOKING STATEMENTS TO OUR ACTUAL RESULTS. BY ATTENDING OR RECEIVING THIS INFORMATION MATERIAL YOU ACKNOWLEDGE THAT YOU WILL BE RESPONSIBLE FOR YOUR OWN ASSESSMENT OF THE MARKET AND THE MARKET POSITION OF THE COMPANY AND THAT YOU WILL CONDUCT YOUR OWN ANALYSIS AND BE SOLELY RESPONSIBLE FOR FORMING YOUR OWN VIEW OF THE POTENTIAL FUTURE PERFORMANCE OF THE COMPANY’S BUSINESS AND A POTENTIAL INVESTMENT IN THE COMPANY. THE CONTENTS OF THIS INFORMATION MATERIAL ARE NOT TO BE CONSTRUED AS FINANCIAL, LEGAL, BUSINESS, INVESTMENT, TAX OR OTHER PROFESSIONAL

  • ADVICE. THIS INFORMATION MATERIAL SPEAKS AS OF 17 OCTOBER 2018.

NEITHER THE DELIVERY OF THIS INFORMATION MATERIAL NOR ANY FURTHER DISCUSSIONS OF THE COMPANY WITH ANY OF THE RECIPIENTS SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE. THIS INFORMATION MATERIAL IS SUBJECT TO NORWEGIAN LAW, AND ANY DISPUTE ARISING IN RESPECT OF THIS INFORMATION MATERIAL IS SUBJECT TO THE EXCLUSIVE JURISDICTION OF NORWEGIAN COURTS WITH OSLO DISTRICT COURT AS EXCLUSIVE LEGAL VENUE

Disclaimer

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AN INVESTMENT IN THE COMPANY INVOLVES RISK, AND SEVERAL FACTORS COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT MAY BE EXPRESSED OR IMPLIED BY STATEMENTS AND INFORMATION IN THIS INVESTOR PRESENTATION, INCLUDING, AMONG OTHERS, RISKS OR UNCERTAINTIES ASSOCIATED WITH THE COMPANY’S BUSINESS, SEGMENTS, DEVELOPMENT, GROWTH MANAGEMENT, FINANCING, MARKET ACCEPTANCE AND RELATIONS WITH CUSTOMERS, AND, MORE GENERALLY, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN DOMESTIC AND FOREIGN LAWS AND REGULATIONS, TAXES, CHANGES IN COMPETITION AND PRICING ENVIRONMENTS, FLUCTUATIONS IN CURRENCY EXCHANGE RATES AND INTEREST RATES AND OTHER FACTORS. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALISE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED IN THIS INVESTOR PRESENTATION. THE COMPANY DOES NOT INTEND, AND DOES NOT ASSUME ANY OBLIGATION, TO UPDATE OR CORRECT THE INFORMATION INCLUDED IN THIS INVESTOR PRESENTATION.

Important Information

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.1) Adjusted EBITDA, please see Q4 report

  • Successfully completed a USD 175 million senior

unsecured bond issue - strong international interest and significantly oversubscribed

  • Improvement of the terms of its RBL facility,

providing the Company with additional financial flexibility

  • Net production of 31.7 mboepd in the quarter – in

line with Company guiding

  • Cash flow from operations of USD 87 million
  • Several planned workover activities and

maintenance campaigns successfully executed on Dan, Gorm and Halfdan, bringing Gorm to a 96.8%

  • perating efficiency in December.
  • “Safe state” reached for Tyra in January 2020, with

fabrications related to the redevelopment project progressing according to plan and budget

Highlights for the Quarter

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Average Production

31.7

mboepd Adjusted EBITDA1

116

USD million Operating Cash Flow

87

USD million Net Profit x

44

USD million

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Operational Review

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Liquids Gas

1) Production figures reflect the contribution from the acquired DUC assets from 1 August 2019. Figures do not take into account the volume guarantee

Production Delivered in Line with Guidance

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  • Net production of 31.7 mboepd1 delivered in line with guidance.
  • Tyra shut-in as per plan since mid September
  • Several planned maintenance campaigns successfully executed
  • Continous workover and well intervention activity to unlock barrels,
  • ptimize production and to maintain water injection capacity
  • Gorm operating efficiency of 96.8% in December following planned

maintenance campaign in November 75% Liquids 25% Gas

18,4 9,4 7,8 6,0 18,6 8,6 4,6 5 10 15 20 Halfdan Dan Tyra Gorm Halfdan Dan Tyra Gorm Halfdan Dan Tyra Gorm Halfdan Dan Tyra Gorm Q1 2019 Q2 2019 Q3 2019 Q4 2019

Production mboepd (net)1

<0,1 <0,1

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Halfdan

  • Average hub production of 18.6 mboepd
  • Stimulation of key wells securing barrels
  • Water injection system temporarily suspended as part of a

planned shutdown on Dan – successfully put back in operation

Dan

  • Average hub production 8.6 mboepd
  • Planned maintenance executed including compressor repair
  • Workover activities and well services according to plan, and wells

successfully put back on stream

Gorm

  • Average hub production 4.6 mboepd
  • Comprehensive maintenance campaign completed in November,

including wellheads, pipeline pigging, and water injection system repair.

  • Operating efficiency of 96.8% in December

Halfdan Dan Gorm

Other D DUC fie ield lds Half lfdan, D Dan & Go Gorm h hub Half lfdan, D Dan & Go Gorm s satellit llites

Halfdan, Dan & Gorm Contributing to Stable Production

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Tyra – Progressing Towards First Gas

  • Fabrication of the two jackets nearly completed at Dragados’ yard

in Spain, sail away and installation in Q2 2020

  • Tyra «safe state» reached in January 2020.
  • Fabrication of new wellhead and riser modules subcontracted to

Sembcorp progressing as planned (delivery 2021)

  • Fabrication of accommodation module in Ravenna progressing as

planned (delivery 2021)

  • Fabrication of processing module in Batam progressing (delivery

2021)

  • Decommissioning of processing platforms during summer 2020

2021 2022 2020 2019 2018 2017 First gas Removal of TYE and TYW topsides & installation of jackets

FID

Photo: Total E&P Denmark A/S

Installation of topsides

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Contingent Current 2P Not yet classified

1) Company estimates 2) Independent estimate from Senergy (Lloyd’s Register) per YE2018

Maturing Resources to Reserves1

9 Current 2P

195

2

mmboe

130+

mmboe

70

mmboe

  • Halfdan Project
  • Project B – Oil Development
  • Project C – Gas Development

395+

mmboe

~3.8

bn boe

several projects expected to add reserves in the near term

  • Updated 2P figures to be

published together with annual report in April

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Halfdan Project (Oil Development)

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Implementation of Low Capex – High Value Projects

Halfdan

Project B – Oil Development Project C – Gas Development Unit Capex Reserve Basis Development Concept Production Profile (boed) Schedule

  • HCIIP: 50 mmboe
  • RF: 29%
  • Base case reserves 14.5 mmboe
  • High case reserves 27 mmboe

12 USD/boe

  • New 6 slot Well Head Platform
  • Un-manned, 4-leg jacket
  • Processing at nearby existing hub
  • Fully automated controlled from

existing hub 2021: FID 2023: First oil

  • HCIIP: 49 mmboe
  • RF: 20%
  • Base case reserves 10 mmboe
  • High case reserves 12 mmboe
  • New 12 slot Well Head Platform
  • Water injection and Gas Lift
  • Un-manned, 4-leg jacket
  • Processing at nearby existing hub
  • Use known and proven well

design and completion technology 2021: FID 2023: First oil 2022: FID 2024: First oil

  • New Well Head Platform
  • Processing at nearby existing gas hub
  • Upside in oil reservoir
  • 12-16 slots
  • HCIIP 88 mmboe
  • RF 21%
  • Base case reserves 18.5 mmboe
  • High case reserves 26 mmboe

12 USD/boe 9 USD/boe

1000 2000 3000 4000 5000 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 Rate (boe/d Equity Share) 1000 2000 3000 4000 5000 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 Rate (boe/d Equity Share) 1000 2000 3000 4000 5000 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 Rate (boe/d Equity Share)

Figures net to Noreco1

1) Company estimates

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2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

1) Company estimates

Sanctioned production to increase significantly

with a selection of mature projects having the ability to sustain production levels

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Sanctioned Oil Sanctioned Gas

Mature projects Contingent

50 mboepd

Oil Production1 Gas Production1 Total Production1

Sanctioned

Mature projects Contingent

Sanctioned

Mature projects Contingent

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Financial Review

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First quarter fully reflecting the successful temporary shut-in of the Tyra field

Summary of Q4 2019 Financial Results

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Hydrocarbon Revenue1 USD 172 million

  • Strong contribution from DUC assets in the fourth quarter of 2019
  • Adjusted EBITDA of USD 116 million including the contribution from the liquids protection agreement
  • Operating cashflow of USD 87 million supporting Noreco’s financial position; cash of USD 286 million

Reported EBITDA USD 59 million Hydrocarbon Production 31.7 mboepd Cashflow from Operations USD 87 million Cash and Cash Equivalents USD 286 million Unit Field Opex2 USD 24.7/boe Adjusted EBITDA3 USD 116 million Contribution from Liquids Protection USD 33 million Realized Liquids Price USD 77.2/boe

1) Excludes contribution from liquids protection agreement, which is recognized as a purchase price adjustment 2) Production expense in the period adjusted to exclude impact of over-lift and crude oil inventory movements and exceptional expenses (restructuring, stock scrap) 3) Adjusted to include contribution from claims under the volume guarantee in the period and exclude exceptional costs (e.g. transaction, share-based payments)

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74,8 77,2 Q3 2019 Q4 2019 46,3 29,5 Q3 2019 Q4 2019 160 172 Q3 2019 Q4 2019 41,6 31,7 Q3 2019 Q4 2019

Oil & Gas Production & Sales: Q4 2019

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Production1 Sales Realized Liquids Prices Revenue

(mboepd) (mboepd) (USD/bbl) (USD million)

1) Production figures reflect the contribution from the acquired DUC assets during the period and do not take into account the volume guarantee

Reflects underlift in the period of 2.2mboepd Average market price for Dated Brent of USD 62.5/bbl in Q4 2019 First quarter fully reflecting the Tyra shut-in

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Production Expenses Overview: Q4 2019

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Commentary

Q4 2019 Production Expenses USDmm USD/boe Field Operating Cost Direct Field Opex 45 15.6 Tariff & Transportation Expenses 23 7.8 Production G&A 4 1.4 Total Field Operating Cost 72mm 24.7/boe Adjustments: Change in Inventory 5 Underlift of Oil & NGLs (11) Insurance & Other 4 Accruals / Periodization 11 Exceptional Costs 22 Total Adjustments 30mm Total Production Expenses 102mm

  • Field Operating Costs

– Reflects costs directly attributable to the production / lifting of Noreco’s oil and gas production in Q4 2019 – Cost per boe reflects the shut-in of Tyra for the whole period – Expected field opex of c. USD 12/boe when Tyra is back on stream

  • Change in inventory & underlift

– Excluded from assessment of ongoing opex as irregular expenses and not reflective of underlying performance – Accruals / Periodization – Accruals of c. USD 6mm during period, reflecting overhead costs not included in the operator billing as of the end of 2019 – Periodization of c. USD 5mm for charges that are related to the third quarter of 2019

  • Exceptional Costs

– Restructuring charge of c. USD 11mm reflecting programme to ensure an efficient organisational structure going forward – Total also wrote-off certain inventory to reflect realisable value resulting in a c. USD 11mm charge during the period

1 2 3 2 4 3 4 1 2

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Overview of Hedging Arrangements: Q4 2019

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Price Volume

62,5 77,2 Market Price Realized Price

Result in Q4 2019 Forward Hedging Portfolio

(USD/boe)

  • Liquids Protection Agreement

– Noreco benefited from the liquids protection agreement with Shell during Q4 2019 – The Company recognized a contribution of USD 33 million during the period from this agreement – Noreco expects to continue to benefit from this agreement in future periods until the end of the protection period in December 2020 71,2 67,5 56,2 55,7 Q1 2020 2020 2021 2022

(USD/boe)

Average Hedged Price (USD/boe) Liquid Volumes Hedged (mmboe)

2.6 10.2 5.9 4.3

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59 33 22 2 116 Reported EBITDA Volume Guarantee Exceptional DUC Opex Transaction Cost Adjusted EBITDA

Adjusted EBITDA: Q4 2019 (USD million)

Financial Statements Q4 2019

Operational Q4 2019 Q3 2019 Production (mboepd) 31.7 41.6 Unit Field Opex (USD/boe)1 24.7 20.9 Profit & Loss (USD million) Revenue 172 160 Production Expense (102) (68) EBITDA 59 68

  • Adj. EBITDA

116 122 EBIT 31 (240) Net Result for the Period 44 179 Cashflow (USD million) Operating Cashflow 87 115 Cashflow from Investing (67) (1,116) Cashflow from Financing 131 1,135 Net Change in Cash 151 134 Balance Sheet (USD million) Cash & Cash Equivalents 286 135 Bank Debt2 746 746 Net Interest Bearing Debt: Covenant3 661 638 Net Interest Bearing Debt: Accounting 819 796

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1) Production expense in the period adjusted to exclude impact of over-lift and crude oil inventory movements and exceptional items 2) Reflects total principal outstanding; balance sheet values based on amortised cost 3) Excludes outstanding convertible bond (mandatory conversion to equity) and represents the metric upon which Noreco’s RBL covenants will be tested

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Overview of Key Items

Capital Structure Following Recent Bond Issue

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Net Debt Overview: 31 Dec 2019 (USD million)1

  • Reserve Based Lending Facility

– USD 746 million drawn end Dec-19

  • NOR13 Convertible Bond

– Subordinated bond with mandatory conversion to equity after five years – NOR14 Unsecured Bond – USD 175 million unsecured bond issue successfully completed in December 2019 – Strong international investor interest and significantly oversubscribed – Proceeds for general corporate purposes – 9.00% coupon with 6.5 year tenor

  • Other Non-Current Liabilities

– Includes deferred consideration of USD 25 million

  • Net Interest Bearing Debt: Covenant

– Convertible bond excluded from the RBL and NOR14 net debt to EBITDAX covenant 746 158 175 26 1 105 286 819 158 661 RBL NOR13 NOR14 Other Non- Current Liabilities Total IBD Cash Net IBD (Accounting) Convertible Bond Net IBD (Covenant)

1 2 3 5 1 2 3 5 4 4

1) Figures reflect drawn amount for debt instruments; balance sheet values based on amortised cost

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Q&A