Aker BP ASA

OSE:AKRBP

Earnings Call Analysis

Aggressive Growth and Positive Projections Mark Quarterly Results

This quarter, the company saw a 43% increase in membership, reaching 508,000, with revenues surging 75% to $1.2 billion—a result from successful onboarding of new PCPs and membership gains in new markets, outpacing guidance. Adjusting for MDX Hawaii's sale, which impacted the evaluation, membership and revenue growth were even more formidable at 49% and 85%, respectively. The adjusted EBITDA loss improved significantly by over $20 million year-over-year to $6 million. Looking ahead, the company's leading position in the full-risk model market continues to strengthen, with a robust class of 2025 partners already in sight, projecting 25,000 ACO REACH and 110,000 new MA members for the class of 2024. Guided by strong quarter performance and a conservative reserving approach, the outlook for 2023 adjusted EBITDA is raised to $6-18 million and medical margin predictions are set at $455-470 million, conveying a solid footing for 2024 and beyond.

Substantial Growth with Promising Outlook on Risk Adjustment Management

The company demonstrates confidence in carrying forward its performance momentum, particularly through its REACH program, due to its successful cost management relative to the benchmark. Moreover, it anticipates that reserve actions taken within Medicare Advantage (MA) will likely reduce the risk of negative claims development in the upcoming year. Notably, the company has a positive outlook on its ability to navigate the new risk adjustment model slated for 2024, which contributes to a robust foundation for sustained performance.

Membership and Revenue Surge with Adjusted EBITDA Improving

Total membership on the company's platform has increased significantly to roughly 508,000, encompassing both Medicare Advantage and ACO REACH. Specifically, consolidated MA membership rose by 58% to 420,000, attributed to the expansion into new partner geographies coupled with 9% growth in existing geographies. This expansion has fueled a 75% year-over-year increase in reported revenues, reaching $1.2 billion for the third quarter. On a per member per month basis, the revenue saw an 11% upswing, primarily owing to benchmark adjustments and a favorable membership mix. Despite slight deviations from expected performance attributed to the Hawaii segment, adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) has shown impressive recovery, turning positive year-to-date after being negative in the previous year, which indicates the company's growing financial health.

Updated Guidance Reflects Prudence and Progressive Stance

Looking forward, the company has adjusted its EBITDA outlook to a range of $6 million to $18 million, marking an increase from the previous lower bound yet a narrowing of the range at the upper end. Medical margin projections have been revised downward approximately $50 million to a range of $455 million to $470 million, primarily due to the strategic exit from Hawaii and heightened reserving measures aimed at fostering a conservative financial base moving into the next year. This revision mirrors the firm's cautious yet optimistic approach to maintaining a stable financial posture in anticipation of embracing utilization trends and refining its model to preempt potential pitfalls with health plans, ensuring the fidelity of future financial representation.

Earnings Call Transcript 2021-Q1

[Kjetil Bakken, Vice President of Investor Relations]

Good morning, and welcome to Aker BP's First Quarter 2021 Presentation. My name is Kjetil Bakken, and I'm heading Investor Relations in Aker BP.Speakers today are CEO, Karl Hersvik; and CFO, David Tønne. And when they have delivered their prepared remarks, we will have a Q&A session. If you have further questions or queries about the first quarter report or about Aker BP in general, the IR team is always at your service.I assume that you're all familiar with our standard disclaimer. So now let's get started. Kalla, I leave the floor to you.

[Karl Johnny Hersvik, Chief Executive Officer]

Thank you, David. That was -- thank you, Kjetil. And a very good morning to all of you who are following us on web or on the phone.First quarter of 2021 was a quarter that, in my mind, once again, demonstrated the core quality, at least some of the core qualities of this company. We maintained a high production level from the previous quarters, and we delivered this with high safety, low-cost and a low CO2 footprint.Our field development project progressed according to schedule despite some workforce challenges due to COVID restrictions. And we have now successfully completed the plugging campaign at Valhall in an excellent way, both faster and cheaper than originally expected.We are working hard to mature our portfolio or upcoming field developments within the deadline set by the temporary tax system. In the coming few months, we will take a final investment decision for Frosk and Kobra East/Gekko in the Alvheim area and others will follow. We are also on track for the concept select for NOAKA project in Q3.Strong operational performance also translate into strong financial performance and helped by oil recovery or price recovery in the quarter. We delivered a new record cash flow this quarter. And when it comes to things that are within our control, our financial guidance for 2021 remain unchanged. The key message is that we are following our plan.Now let's start by reviewing the main performance indicators for the quarter as we usually do. On the production side, we ended up with a production of 222,000 barrel of oil, which is basically unchanged since Q4. Behind these numbers, there are, of course, some pluses and minuses.We saw increased volumes from several fields, while other fields have not delivered this quarter. At Johan Sverdrup, we saw a positive effect of a capacity increase announced in December. At Ivar Aasen, the start-up of 2 new wells contributed positively. And at Skarv, production also increased, driven by Ærfugl, even though we had 1 week of unplanned downtime due to technical issues with a firewater lifting system during the quarter.At Alvheim, on the other hand, production was lower in Q1. This was partly due to natural decline, but also impacted by a shut-in well at Frosk, pending well intervention. The Skarv shutdown was the main reason for the drop in overall production efficiency in the quarter, but we maintain our goal for the entire 2021.In Q2, we expected lower -- we expect lower production due to planned maintenance shutdowns and our full year production guidance of 210,000 to 220,000 barrels of oil equivalents remain unchanged. I don't normally want to steal the thunder from David. But let me also briefly comment on the financial performance. Because in Q1, we delivered the strongest cash flow ever for a quarter in Aker BP's history. This was, of course, helped by high-volume and increased oil and gas prices, but is also supported by strong and continued cost control.Production costs ended up at $8.6 per barrel, in line with our guidance range. The capital spend was only around USD 400 million, which might look low compared to our full year guidance of $2.2 billion to $2.3 billion. And the simple reason is that the phasing of the different activities throughout the year. And thus, our guidance remain unchanged for 2021.Also, on the HSE side, we continued our strong performance in Q1. Our safety record has improved significantly over the last year, particularly related to total recordable injury frequency. And it compares very favorably to the rest of the industry. We had 2 recordable injuries in the quarter. And while none of them is classified as serious, we are still some way to go until we are at our goal of 0 incidents.When it comes to CO2 emissions, we ended up just above 4 kilograms per barrel. This is less than 1/3 of the industry average and represents an important quality parameter of our asset portfolio. And we are working hard to further improve this, both power from shore solutions for continuous improvement of energy efficiency through collaboration with partners like Aker Offshore Wind to develop new and clean energy supply to our assets. With our current plans, we expect our gross emissions to be reduced by 50% in the early 2030s. And by 2050, we expect to be close to 0.Now let's move on to our development projects because we have a lot of activity underway. The 3 largest projects in the execution phase are listed on this page. At Ærfugl Phase 1, we started production in Q4, and we're now working on Phase 2. This was originally planned to start production in 2023, but we were able to accelerate this by approximately 2 years with some bottlenecking and hard effort from the alliances. The first well in Phase 2 scope was even started before the Phase 1 last year. And now in the first quarter, we have drilled the remaining 2 wells and we are on track to start production in Q4 this year.For Johan Sverdrup Phase 2, the message from the operator, Equinor, is very simple. We are on schedule and on cost in accordance with plan. The picture on this page show the main support frame for the second processing platform at Johan Sverdrup, just before sail away from Thailand to Norway, where it will be integrated with 2 other modules and prepared for offshore installation.The Hod project is also progressing as planned, with construction of a wellhead platform ongoing at Kvaerner Verdal. We have seen some challenges related to the available manning due to COVID restrictions but for good collaboration with our alliance partners, we've been able to mitigate these effects and the overall schedule is still intact. As I said initially, we are also working hard to mature our portfolio of upcoming field developments.The list on this page is the same as we showed on our capital markets update in February, but with 1 new column to show the status of each project. I am not in this presentation going to talk you through all these projects, but the common denominator is that we aim to sanction all these projects by the end of 2022, and hence, make sure they qualify for the temporary tax system.In total, these projects represent more than 500 million barrels, with an average estimated breakeven oil price of around $27 per barrel. The 2 projects that are closest to FID are both in the Alvheim area. And back in 2018, we drilled 2 successful exploration wells in the Alvheim area, the Frosk and the Gekko well. These 2 discoveries are now the basis for 2 upcoming field development decisions in this area, which are expected to add about 40 million barrels of net reserves to Aker BP.Meanwhile, we also continue to drill infill wells in this area. The Boa Attic South well started production in March, and we are planning 2 more wells this year. The third Alvheim-related project on our list is Trell and Trine. Here, we are currently doing subsea and tie-in studies. We have also done a couple of business development deals in the quarter in this area.One of them was with Lundin, who is our partner at Alvheim, Volund and Bøyla. Lundin come in as a partner on Trell and Trine, while Aker BP increased its stake on the Froskelår discovery and the Lyderhorn prospect. This will ease the tie-in negotiations between the Alvheim license and the Trell and Trine licenses.The other deal involved a 50% share in a license on the U.K. side of the border as a partner to Eni. The new license is bordering our existing acreage on the Norwegian continental shelf including the Rumpetroll discovery, and the purpose is continued exploration.If we move a little bit north over Alvheim area, we, of course, come to NOAKA. On NOAKA, we are continuing to work full speed ahead, in line with the previously communicated plan. We are now on the final stretches of the technical concept studies which will be completed by the end of May.The next milestone will be the formal concept select decision, which are planned in Q3. By then, we will also have drilled an appraisal well to test the producibility of the Liatårnet discovery.We have established a very strong and highly capable team for the NOA and Fulla project. And we are working closely and very integrated with our alliance partners, such as Aker Solutions, Subsea 7, Odfjell drilling, Maersk drilling and Halliburton as well as our licensed partners, LOTOS, to mature a technically robust concept that will maximize resource recovery and value creation. And we have established an excellent collaboration with Equinor, who is our operating partner -- who is operating a couple of projects.One of the key focus area is to ensure that all the interfaces between the 2 processing hubs are well-defined and with robust technical solutions. Once in production, it is our goal that the PDQ platform will operate with a high degree of digitalization and automation to deliver low OpEx and high regularity.We are also working closely with Aker Solutions, Cognite and ACE to digitize the project execution phase. The purpose is to drive improved quality and reduce waste and cost in the project. And more digital project execution will also contribute to populate data in the NOA and Fulla digital twin. This will enable new ways of working and robust or reduced OpEx when the field start production in 2027.Based on all the progress we've made, and where we are right now, I remain confident that we will be able to deliver the PDO before the end of 2022. And with that, make sure that the NOAKA development is covered by the temporary tax rules because we have covered extensively in the previous presentations.At Valhall, we have recently completed the last planned campaign of plugging old wells. In total, 30 wells have been plugged here since 2014, of which 18 have been done after the merger with BP in 2016. Compared to the plan we put in place in 2016, we have completed this program 6 years earlier and around NOK 5 billion or 45% lower than originally planned.I'm also proud to say that we have done this with near-zero CO2 emissions as we've been running the rig with clean power from shore via the Valhall field center. This achievement has also been enabled by pioneering new technology, including the use of bismuth plugs, which help us solve the challenge of potential meet end leads from the old wells. And, of course, result in lower CO2 emissions compared with conventional cementing technology.We share this success with our alliance partners, Maersk and Halliburton, who've been working together with Aker BP as 1 team to deliver these remarkable results. And I want to take the opportunity to thank Maersk and Halliburton for their contribution.On the exploration side, the Bask well was completed in Q1 and was classified as dry. Right now, we have 2 ongoing exploration wells, both operated by Equinor. The Garantiana West well is targeting additional resources to Garantiana, which is one of the upcoming projects in our list. Even if this is a relatively small prospect, it could have a meaningful positive effect on the Garantiana development. The Shenzhou well is a larger prospect located in the Barents Sea. And when Shenzhou is completed, the rig will move East to Stangnestind, where we will drill our final well in the Barents Sea for now.As you can see from this list, we currently have 5 more wells coming up throughout the year, and we will, of course, keep you updated as we progress.This concludes the operational update. And now, David, even though I stole some of your thunder, will go through the financials for this quarter.

[David Torvik Tønne, Chief Financial Officer]

Thank you, Kalla, and good morning, everyone. Aker BP's net production in the first quarter was 222,000 barrels of oil equivalents. Due to a small overlift, the sold volumes ended at 223,000 or 20.1 million barrels in total for the quarter, up roughly 2% from Q4.The realized crude price ended at $61.1 per barrel, in line with the average Brent dated in the period. Adjusting for NGL, Aker BP's average liquids price was $60.1 per barrel, up 36% from Q4. If we include gas, the realized average hydrocarbon price was up approximately 34%, and consequently, we report a record high total income of $1.133 billion in the first quarter, up 36% from Q4.Production costs related to oil and gas sold in the quarter amounted to $176 million. The increase from Q4 is mainly driven by adjustment for over underlift the last 2 quarters. The cost of produced volumes has been quite stable over the period, with a small uptick, mainly driven by an increase in well maintenance activity at Valhall in Q1 compared to Q4. Production cost per produced unit amounted to $8.6 per barrel of oil equivalent, in line with the full year guidance of $8.5 to $9 per barrel.If we take a look at the other main items in the P&L. Substracting production cost and other operating expenses of $8 million from total income, we get an EBITDAX of $949 million. Exploration expenses amounted to $71 million, where $41 million was field evaluation costs, mainly related to NOAKA studies as the project is maturing as planned, towards concept selection later this year.In addition, we had $12 million in dry well costs, mainly related to the Lundin-operated Bask well. This gives an EBITDA of $878 million, up 41% from the last quarter. Depreciation was $258 million or $12.9 per barrel. The decrease in depreciation rate from Q4 is mainly driven by year-end reserve updates and decreased estimates for future abandonment costs on some fields.In the first quarter, we also recorded an impairment amounting to net $30 million, driven by Ula/Tambar and partly offset by a reversal of previous impairments on Ivar Aasen. The main reasons for the impairment charge are the effect of updated phasing of production and cost profiles on Ula, offset by the increase in short-term prices. Net financial expenses were $90 million and included $19 million in costs related to early redemption of the company's $500 million senior notes maturing in 2025.Apart from that, the other reason for the increase in net financial expenses from the fourth quarter is related to change in fair value of currency contracts. There was a loss of $6 million in Q1 while a gain of $42 million in Q4 as the Norwegian kroner strengthened late last year.Summing up the items so far gives a profit before tax of $501 million, up 113% from the fourth quarter. Tax expenses amounted to $374 million, which means an effective tax rate for the quarter of approximately 75%. Net profit in the first quarter ended at $127 million or $0.35 per share.With higher prices, stable production, low cash tax and spending in line with our plan, both operating cash flow and free cash flow was very strong in the quarter. Cash flows from operations amounted to $900 million. Investments, including payments on lease debt amounted to $343 million across the various spend categories, with CapEx being over 60%. Free cash flow before financing was thus $558 million, an increase of 141% compared to Q4.As already mentioned, during the quarter, we redeemed the bond and including the core premium, this redemption amounted to $515 million and was paid from cash. Interest paid was $63 million and purchase of treasury shares was $13 million. Dividend paid was $112.5 million, and we then ended the quarter with a cash balance of $392 million.In addition to the small change in cash on the balance sheet, there are a few things to note on the left-hand side of the balance sheet. Property, plant and equipment increased by $126 million. We had additions of $306 million, where investments at Valhall and Alvheim was roughly 60%, while Skarv and Johan Sverdrup made up roughly 25%. Depreciation amounted to $233 million, and we had a net impairment reversal of $53 million.Furthermore, other intangible assets decreased by $165 million. Other intangible was impaired with $83 million, while we reclassified exploration assets of $74 million to PP&E related to the Frosk test producer.On the right-hand side, tax payables has increased $289 million, up to $452 million. And bonds and bank debt has decreased with almost $500 million, down to $3.5 billion. In Q1, we have taken several steps to further optimize the capital structure, improving our financial flexibility for the years ahead.In February, Moody's upgraded Aker BP's company credit rating to investment grade. As a result, all 3 main rating agencies now have an investment-grade credit rating with stable outlook on the company. Following this, the focus this quarter has been on extending our maturity profile, adjusting liquidity position and reducing financing costs.Firstly, we have redeemed one of our last 2 outstanding callable bonds, removing maturities from the CapEx-heavy period of NOAKA in 2025. This bond was issued in 2018 with a coupon of almost 5.9%, significantly above what we expect to achieve if we were to issue a new bond today.Secondly, the maturity of our working capital facility has been extended from 2022 to 2024, with the option to further extend to 2026. Given the diversification of funding sources and successful issues of long-dated bonds in 2020, and the strong free cash flow generation expected in '21 and '22, we have scaled down the working capital facility from $2 billion to $1.4 billion as planned when the facility was established in 2019, and to reduce commitment costs.Lastly, we have utilized the remaining extension option on the $2 billion liquidity facility to extend the maturity from 2025 to 2026. Both of these bank facilities are currently 100% undrawn and are established to provide financial flexibility, supporting both our organic investment program, and enables us to react quickly to any potential inorganic opportunity.The refinancing done in Q1 was oversubscribed and allowed us to upsize from the initial invitation of $1.25 billion, which with you as a strong testament to the credit and business profile of Aker BP and the good relationship we have with a very supportive bank group.The result of the strong cash flow generation and the refinancing activities are that at the end of the first quarter, net debt has been reduced from Q4 with roughly $350 million, down to $3.1 billion. Leverage has been reduced down to 1.2x EBITDAX, which is back to pre-COVID levels. And our available liquidity remains industry-leading, ending the quarter at $3.8 billion.Furthermore, apart from the $750 million of senior notes maturing in 2024, which is callable in June this year, Aker BP now have only $1 billion of debt maturing before 2030. Combined, this provides the company with superior financial flexibility, supporting both our investment program in high-return barrels as well as allow us to capture value-accretive inorganic opportunities that may arise.Before closing off with a summary of our key guiding parameters, let me say a few words on forecasted cash tax payments the next 5 quarters. In Q2 this year, we expect a small refund, which is the remaining installments for the fiscal year 2020. For the fiscal year 2021, we expect to be cash tax breakeven at roughly $50 brent for the remaining of the year. And at current oil prices, we expect to pay roughly $150 million to $200 million on average per quarter in the second half of '21 and the first half of 2022.Now, to round off my presentation, let me walk you through the key guiding parameters for 2021. In short, we keep all our guiding parameters unchanged from our capital markets update in February. Production in Q1 was strong and slightly above the guiding range. But as we now move into a maintenance season, we expect a bit lower production in Q2 before picking up again towards the end of the summer. Capital spend was roughly $400 million. And as our project activity is progressing as planned, we expect capital spending to pick up in the coming months.Production cost of $8.6 per barrel in Q1 was as expected. On a per barrel basis, we expect cost to increase in the second quarter as production slightly decreases. We then expect cost per barrel to trend downwards again during Q3 and Q4.Lastly, our proposed dividends of $450 million for 2021 remains unchanged. And the Board of Directors has resolved to pay a quarterly dividend of $112.5 million in May.I will now leave the word back to Kalla for some concluding remarks before we move on to Q&A.

[Karl Johnny Hersvik, Chief Executive Officer]

Thank you, David. Solid delivery and solid results as usual. So before we open up for questions, let me round off this presentation with reiterating our key priorities as they stand at the end of Q1, as I usually do.So let's start. Operational excellence is, of course, the fundament for everything we do. And this means running our assets with the highest safety standards and the highest possible efficiency. And this is always the #1 priority for Aker BP.With a high activity level on the field development side is also extremely important to make sure that we're doing the right things right. Flawless project execution means delivering our projects on time and on budget, which is essential to ensure we generate the desired returns on our investments. I have not mentioned our new operating model in today's presentation, but the implementation of this model is a key priority in order to further improve operational efficiency and drive down cost in our operations.The other main improvement theme is the digital project execution model, which I touched upon in connection with the NOAKA project. This will be the full -- first full-scale implementation ever on a fully digitally integrated project execution, and we aim to launch this in connection with the DG2 decision on NOAKA later this year.Continuing on NOAKA, it is, of course, a key component of our growth story. And the key priority right now is to land the development concept that is both technically, economically and environmentally robust. And that can be ready for FID within the deadline of the temporary tax system. And as communicated previously, I am confident that we will be able to do this.Alongside NOAKA, we are running full speed ahead with a dozen or so projects that will all contribute to continued growth and value creation for Aker BP and its stakeholders.This concludes our preprepared remarks, and we're now open for questions.

[Operator]

[Operator Instructions] Our first question today comes from Teodor Nilsen from SB1 Markets.

[Teodor Sveen-Nilsen]

I have 3 quick questions. First of all, on Sverdrup it's good to see that still good performance there. What should one expect production from Johan Sverdrup going forward? Is it fair to assume around 60,000 barrels per day flattish until Q4 2022? Or should we expect some maintenance work this summer?Second question is on Ula/Tambar, what's the value after impairment?And my last question is on exploration. What's the commercial threshold for the strong Trell & Trine well and also thanks to [indiscernible] well in the balance sheet compared to the pre-divestment that you presented on the slides?

[Karl Johnny Hersvik, Chief Executive Officer]

Yes. Thanks, Teodor. So regarding the Johan Sverdrup, we haven't normally disclosed the forward prediction on the individual fields. But there will, of course, be some discussions and possible interruption related to the installation of the new process platform. So -- but I don't think you're too far off with your estimations. Then with regards to remaining asset value on Ula/Tambar, I refer you to the note. So the book value recoverable amount is roughly $600 million. And then I think it's worth noting that, that does not then include the asset and retirement obligations and tax -- deferred taxes.And then your question for commercial threshold, that will, of course, depend on phase and reservoir quality in addition to volumes. But I think it would be fair to say that if this ends up at a stand-alone field development, volumes significantly lower than around 150 million barrels is probably difficult to do on a stand-alone field development, depending on reservoir qualities in the reservoir. Will probably be equal, both for Shenzhou and for Stangnestind.

[Operator]

We move on to our next questioner Yoann Charenton from Societe Generale.

[Yoann Charenton, Equity Analyst]

I would just like to go back on a few details, if you don't mind. First, on the phasing of CapEx throughout the year, is that possible to provide just an update on the level of mining offshore when it comes to personnel that is currently involved offshore, that would be great.Second point will be on production. You say that in the second quarter we should expect lower output from the company overall. Are you able to provide just a bit more granularity, what sort of asset is impacted by lower production levels?And then the last question will be more about business development. You have signaled this agreement with Eni in the U.K., north Sea. Are you able just to provide a few more comments on potential work ongoing in the second half of the year in the U.K. and North Sea?

[Karl Johnny Hersvik, Chief Executive Officer]

Okay. Do you want to start phasing on CapEx, David?

[David Torvik Tønne, Chief Financial Officer]

Yes. So I think the comment there is that we would expect CapEx to pick up, as mentioned throughout the year. And increase gradually with drilling both on Valhall and also the Hod project towards the end of the year. And with regards to manning specifically, offshore, I don't know, Kalla, if you have any sort of commentary on that?

[Karl Johnny Hersvik, Chief Executive Officer]

So the phasing majority of the personnel offshore is OpEx personnel or related to drillings. I think on the operations side, it's around 380 in total, which is pretty normal for this kind of situation. And we are currently operating 2, 3 rigs, which would probably amount about 100 per rig. So you probably end up in rate 750-ish. But that's not really the reason why we have -- why we have a different phasing in the CapEx profile.

[David Torvik Tønne, Chief Financial Officer]

Then when it comes to production in Q2, as we already indicated also at the capital markets there will be variations throughout the year. And as mentioned, as we move into maintenance season now, production in the second quarter will be slightly lower towards the lower end, I guess, of the guiding range before picking up again, as mentioned, towards the end of the summer and don't go into any more specific details on that.

[Karl Johnny Hersvik, Chief Executive Officer]

And then regarding the entry into U.K. as a partner alongside Eni, I don't intend to comment on possible future activities, both in -- neither in the license nor in other possible activities. But I can provide you with a little bit of that insight into how this came about.So as you may be aware, we have spent quite a lot of time mapping the subsurface in the greater Alvheim area. With particular focus on injectites and particularly the [ net in the heimdal ] formation. And that has led us to be aware of an opportunity which we have now captured both on the Norwegian side and on the U.K. side. I don't think -- I think you can draw the conclusion that we are continuing to work with potential in this area. But I'm not going to comment on specifics to this regard.

[Operator]

We now move on to Anders Holte from Kepler for our next question.

[Anders Torgrim Holte, Equity Research Analyst]

I actually just have 2 small ones asking maybe something that's covered already. Just if you could, Kalla, is there anything more you could share with us on the progress of NOAKA? More specific on the time lines and how comfortable you can make me by making the clearly all important deadline, handing the plan for development towards end of next year?And then also, looking at your Slide #9 here, I know you just touched kind of comment on future business development ideas or endeavors there, but clearly, when you look at the Rumpetroll and the Froskelår discoveries, they both spill over to the U.K. site, is it not -- is it a farfetched thought that you will expand your presence on the U.K. continental shelf, just given your, I guess, given your exposure on the Norwegian side of those discoveries?

[Karl Johnny Hersvik, Chief Executive Officer]

So when it comes to NOAKA maybe I should have been more direct in my comments in the presentation. So first of all, I've personally spent quite a lot of time now diving into the concept, the cost estimates, the time line, et cetera, following Easter. And I must say, I'm really impressed by the team who has been working on this in the alliance. In a very short period of time, they have been able to mature the major technical solutions to a level that at least I haven't seen at this stage in a project before.So on that basis, I'm extremely confident that we will be able to deliver the NOAKA project according to the time lines we have previously announced. And just to reiterate what those are, we plan -- do plan for formal DG2 in Q3. And right now, and probably even before summer, the main technical elements will be locked in place, which means that there will only be costing on mid items and that kind of work remaining.And since this is an alliance project, and we don't have to work on competitive feed and tender processes following DG2. The technical teams will, immediately after making the concept selection, technical concept selection, progress with maturity into the detailed engineering phase. So we're actually also saving about 6 months compared to a normal project execution, which increases robustness in this time line. So in total, Anders, this is not on the top of my worry list for the moment.When it comes to the U.K., yes, of course, there are reasons for us expanding into the U.K., and it's mostly, as I commented on Johan's question related to the injectite expanding across the border. And then if you put that as a kind of a basis for answering your question, it's, of course, clear that the system does not expand infinitely on the U.K. continental shelf. So this is a stand-alone effort to continue tracking a system that we have been successful exploiting on the Norwegian continental shelf and do not constitute a strategic change or our bigger strategic effort on the U.K. side.

[Operator]

We go to our next question from Al Stanton from RBC.

[Al Stanton, MD & Oil & Gas Equity Analyst]

I get that Aker BP's a sort of technology-led company with very focused on efficiency. And at 4 kilos, your emissions are very good and leading. But it strikes me that net zero doesn't get much attention. I'm just wondering why, Kalla, it's not perhaps more prominent on your worry list. 2050 seems to be some way off given, particularly in the last month, everyone has been fighting to bring the date as far forward as possible. And yet, it doesn't feature in Aker BP's schedule that prominently.

[Karl Johnny Hersvik, Chief Executive Officer]

Thanks, Al. Yes, the first part of your question is very correct. We -- I don't know if we are tech-led, but we are at least driven by performance and trying our best to lead in terms of performance in every major segment. When it comes to net zero, I think the way we think about that Aker BP is that we will do our best and do everything we can to reduce the emissions that we are directly impacting on the climate, right?Which means that we have power from Skarv, we have Ivar Aasen, which will reduce emissions. We are continually working with smaller, I would say, more continuous energy efficiency improvement activities. This year will probably be around 10,000 to 15,000 tonnes, again from the same base in terms of reduction.And then we try to focus on the things we can, in fact, impact and then by minimizing our footprint, by maximizing our performance. We're paying back to both society and stakeholders. Which can, of course, decide to invest on negative CO2 measures, which they are probably better at position on executing than we are.So you won't really find Aker BP working very hard to develop offset mechanism to further reduce the scope if it doesn't directly impact how we operate our units. So we do believe that our shareholders are better positioned to allocate that kind of funds than we are as a company.

[Operator]

[Operator Instructions] We now move on to James Hosie from Barclays for our next questions.

[James William Hosie, Research Analyst]

A couple of questions from me. Just your comments on the debt profiles, are you actually planning to refinance the 2024 notes when they become callable in a few months? And then on your comments about being able to respond quickly to acquisition opportunities. Is it still challenging to find compelling deals in Norwegian asset market? That's something you've mentioned previously. And then just -- I mean, what's the likelihood next material transaction fees Aker BP export successful business model to a new geography, not just referring to the U.K.

[David Torvik Tønne, Chief Financial Officer]

Maybe I'll start with the refinancing, Kalla, then you do the M&A questions?

[Karl Johnny Hersvik, Chief Executive Officer]

Yes.

[David Torvik Tønne, Chief Financial Officer]

So I think what I can say on this is that this is -- the 2024 bond is something that we are, of course, evaluating currently. And of course, we can't go into specifics on that, but it's, of course, natural to evaluate, given that it's the last of the callable bonds that we have. And also when we look at the economics of that, but that will be -- the decision will be taken in due time.

[Karl Johnny Hersvik, Chief Executive Officer]

And then moving on to M&A and starting with the Norwegian continental shelf. I think the key issue we have, and we have to ask ourselves and are continually asking ourselves and the management team is what will create the most value for Aker BP shareholders. There are a number of transaction opportunities on the Norwegian continental shelf that are either coming to the market or ongoing at the moment.But the key issue for us is to understand how that is value-accretive to the story we have. I think there are basically 2 lines of thought here, right? The first one is to acquire production, which seems to be quite expensive, and it's very hard to find that's value-accretive to our shareholders. And the other one is to acquire more CapEx. And we are going to invest quite a lot into the organic hopper. And we don't normally see a need to further deepen that hopper. That being said, there might be opportunities -- combined opportunities that we will find attractive, but we'll come back to that as we progress these discussions.When it comes to the, let's say, exporting the Aker BP model, it's a question I get quite regularly. I would say, both from the main -- the main expertise in other basins, national oil companies, et cetera, et cetera. And my answer, too, has always been that our main focus for this period is to deliver on the project execution scope, deliver on a cost reduction we have planned and the emissions reduction.So right now, there are no plans to export, as you stated it, James, to other regions for the moment. I think we have plenty on our plate.

[Operator]

At this time, we have no further questions in the queue, gentlemen.

[Kjetil Bakken, Vice President of Investor Relations]

Okay. I guess then we can cash in those 10 minutes that we have allocated and wish you all a continued fantastic day wherever you are. Hope you all stay safe and that I know that many of you have already got your vaccines, and that's good, and we look forward to meet you all in person in the not-too-distant future.So with that, we thank you all. And please, if you have any follow-up questions, you know where to find us.

[Karl Johnny Hersvik, Chief Executive Officer]

Thank you.

[David Torvik Tønne, Chief Financial Officer]

Thank you.