Bluenord ASA

OSE:BNOR

Earnings Call Transcript 2024-Q1

[Euan Shirlaw, executive]

Good morning, everyone, and thank you for joining us as we present our results for the first quarter of 2024. Together with Marianne, Cathrine and Jacqueline will shortly walk you through our recent performance and also share our outlook for the remainder of the year. We'll follow our usual process with a Q&A session at the end. So feel free to submit any questions you may have throughout. But I want to begin with a major milestone that we achieved in Q1. After a decade-long journey which started in 2013 with a concept that then went through FID and led to the removal of the old facilities and the installation of the new before finally culminating with the execution of a successful hookup and commissioning campaign, we were delighted to announce the restart of Tyra II on the 22nd of March.And so before we talk more about the project's current status, I want to be clear upfront about what Tyro represents for us. This is a project that fundamentally transforms our operational profile. It more than doubles our daily production through 2024. It significantly reduces unit OpEx and it substantially lowers our emissions intensity, all while also unlocking future activities to sustain our production for years to come.Of equal importance, it will markedly increase our free cash flow, enabling us to deliver on our commitment to substantial shareholder distributions at the same time as we maintain a conservative capital structure.While the ramp up of a project of Tyra's scale was never expected to go in an entirely straight line, the transformer issue identified with the IP compressor has been understandably disappointing. Nevertheless, the impact here is fundamentally one of timing, and we benefit from having TotalEnergies as our motivated and focused operator. They're dedicating all the necessary resources to implementing both a permanent solution that we expect to be in place by Q4 and a temporary reconfiguration of the gas processing facilities to allow the restart of gas export in the near term. And with that said, to focus in on all these topics and more, let's turn to the presentation itself.So starting with production, our net rate in Q1 was 23,500 barrels of oil equivalent per day, which exceeded our guidance for the period and reflects a continuation of the strong track record that we've built. For those counting, that's now 13 consecutive quarters where our performance has been at or above guidance. By the end of March, production had also started from the first Halfdan infill well, which was in line with our pre-drill expectation at an initial rate of 3,000 barrels of oil equivalent per day net to BlueNord, this combined with the ongoing optimization campaign provides strong support and a positive outlook for the production levels from our base assets during the rest of 2024 and beyond. At the same time, the shelf drilling winner is focused on near-term growth and executing a program of infill drilling opportunities in the DUC. The next will in that sequence is Harald East Middle Jurassic, which was sanctioned in early 2024 and will be drilled this summer.We also expect further near-term sanctioning activity that will ensure that the rig remains active throughout the rest of 2024 and into 2025. In March we announced our 2P reserves at the end of 2023 or 186 million barrels of oil equivalent, which represents an excellent 135% reserves replacement ratio. When you consider that alongside our portfolio of near term 2C resources, we have 213 million barrels of oil equivalent that will support our near-term growth, the stability of our medium term profile, and ensure that we have material production levels out to 2042 when our current DUC license expires.We will cover Tyra specifically on the next page, but one point to note here is that our overall approach very much remains the same. We intend to utilize the material near- term free cash flow we will generate to both make significant capital returns to our shareholders and maintain a conservative capital structure. These distributions will be set based on the policy we announced last quarter with 50% to 70% of net operating cash flow expected to be paid out over the 2024 to 2026 period. Today we're also reporting that the strong operational performance just discussed has driven positive financial results. During the quarter, we've recorded revenues of $169 million and EBITDA of $88 million while also generating $88 million of operational cash flow. As a result of this, we exit the period with liquidity from cash and the undrawn portion of our existing RBL facility of $308 million.Last quarter we also told you of our plan to refinance this RBL facility, and today I'm pleased to be able to tell you that we currently have more than $1.5 billion of commitments for the new facility. And as a result, we expect to close a facility of at least $1.3 billion with a maturity in 2029, by the end of May. Jacqueline will provide more detail. But let me just say that given the backdrop for bank lending to the oil and gas industry, the position we're in today is a testament to the strength of our business and its credit story, our growing gas exposure, and finally our lower forward emissions profile.Now, having given that overview, let's turn to the next page to focus on Tyra in some more detail. So let's start with a few facts. The Tyra facilities were successfully restarted in the second half of March with the first export of Dan gas. And this was quickly followed by the first export of new gas from Harald in early April. Shortly thereafter, an issue was discovered with the IP compressor's transformer. And while this has been investigated, we've seen a temporary cessation of the export of this new Tyra gas. However, the export of gas production from our other 3 hubs remains unaffected.The investigation that's been underway has been focused on both identifying the root cause of the issue as well as developing permanent repair options. And as we announced yesterday, the operator has concluded that a replacement transformer is required. This is planned to be installed during the early part of the fourth quarter, and we expect to reach plateau production during the same period. Until this permanent solution is in place, the operator is focused on enabling a near-term restart of gas export, and this will be done through the temporary reconfiguration of Tyra's gas processing facilities. Our current expectation is that this will allow for the restart of gas export in July with volumes increasing through the third quarter. And while the IP compressor matter is being resolved, the commissioning work necessary to reach plateau production continues unaffected. The final work on the Tyra facilities and the reinstatement of the satellite fields is progressing well. And further from a subsurface perspective, we've observed reservoir pressure that is higher than BlueNord has assumed when building its production forecasts.And before handing over to Marianne to provide some more insight, I'd like to finish here by spending just a couple of moments discussing what this means for us. So firstly, what we have here is a facilities issue. A transformer is neither a complex nor a particularly expensive piece of equipment, and it is a relatively simple fix. While we still hope that the timeline to deliver this fix can be brought down, when it is implemented, we'll be able to quickly reach maximum technical capacity and plateau production. Secondly, the change that we've seen here when compared to our initial plan is a longer ramp up rather than the loss of volumes or cash flow. In fact, the positive below-ground results that I mentioned earlier support our expectation of strong performance once the above-ground issue is addressed and we're at plateau production.Thirdly, and this is to reemphasize a point I also made earlier, BlueNord's approach to its capital structure and distributions, which will see us return a significant portion of BlueNord's equity value to our shareholders over the next 2.5 years does not change.And with that, I'd like to hand over to Marianne to run through the operations section. Thank you.

[Marianne Eide, executive]

Thank you, Euan. And good morning all. In my presentation today I'll focus on Tyra and give you the information that we have available on the IP transformer incident, which is what is holding us back from ramping up the export from Tyra. I will start with the production performance and I'm pleased to announce that we have another quarter where we exceeded our guidance.2024 is the year where BlueNord will double our production rate with Tyra ramping up to full production and BlueNord will reach a daily rate on more than 50,000 barrels of oil equivalence per day. Q1 production was very strong and we delivered an average rate of 23,500 which was just above our guidance or 22,000 to 23,000 barrels of oil equivalent per day. We have the continued benefit from well optimization work on Dan, and we have now started optimization work on Halfdan. The highlight of the quarter was the Halfdan North East well, infill well, HBA-27B on stream just at the end of the quarter, which delivered production as expected and 3,000 barrels net to BlueNord, and we saw a significant hike in production overnight, which contributed to our exit rate in Q1 of 27,000 barrels of oil per day. What also contributed to the positive result for Q1 was a delay of some maintenance and associated shutdown on Gorm. However, this means a few days of Gorm shutdown in April, so the deferment of losses from Q1 to Q2. We have also announced our April production at 25.5, where underlying performance is strong with good performance from HBA-27 continuing.Our guidance for the base assets is unchanged with a range between 23 and 25 for the remainder of the year. Second quarter, we are slightly higher due to the production boost from the HBA-27B well. Drilling operations on the first Halfdan infill well were completed in January. And after stimulating the well, we started production on the 26th of March with initial production rates spot on what we had expected. Currently we're doing critical P&A work on Dan with the shelf drilling winner. The next well in the infill drilling sequence is the Harald East Middle Jurassic well. This is a well with a large subsurface uncertainty and will give a significant gas production contribution from the Harald field producing into Tyra, if successful. The infill well sequence is dynamic and we will always use all technical information available, whether it's production data, reservoir pressure data for the seismic to ensure we pick the highest value targets to invest in. This means that FID and onstream dates will be shifted around, but it also means that we maximize the production from our investment in wells and our infill drilling portfolio has an expected unit development cost below $13 per barrel.In addition to the Shelf Drilling Winner, we also used the Noble Reacher for well optimization. And we are now working on Halfdan where we have planned to do 28 different well interventions, which will contribute with additional production this year. I will now move on to Tyra. And again, on the 21st of March we restarted Tyra, and we exported Tyra gas from Harald to Nybro in Denmark on the 10th of April. The Tyra redevelopment is of strategic importance and will provide necessary gas to Denmark and Europe and will transform BlueNord as a company. We will be able to unlock significant volumes from Tyra and the satellites with modern and efficient processing facilities. CO2 intensity from the Tyra facility will reduce with 30% compared with the old facilities. The increased production from Tyra also means that we will reduce our unit operating cost to $13 per barrel.I think it's worth taking a look back to see what we have achieved so far. The Tyra redevelopment project has been ongoing for more than 10 years. In 2017, the DUC partners made a decision to invest in continued production from Tyra. In 2019, production was temporarily stopped and the old Tyra facilities were removed in 2020. In '21, we started a huge offshore construction phase of Tyra II. And again, in March we restarted Tyra. On the 16th of April, while ramping up export of Harald gas, we encountered an incident where the transformer that is providing power for the intermediate pressure or IP compressor, short-circuited and this transformer will need to be replaced. I will give a bit of detail on how gas is processed on Tyra, so you can also appreciate the importance of this IP compressor.The first stage gas compression is referred to as the low pressure or LP, and takes gas from the separator, the gas and liquids have been separated with inlet pressure of 12 bar and compressed this to 30 bar. The second stage is referred to as the IP or intermediate pressure compressor, where gas is entering at 30 bar and is then compressed to 65 bar. All gas on Tyra is passing through the IP compressor. And it is also the IP compressor that supplies gas for fuel consumption as well as lift gas to boost the production from the low pressure wells. The third stage of the gas processing is the high-pressure stage. We refer to this as the export stage where we take gas at 65 bars from the IP compressor and pressure it up to 138 bar, so we can reach the terminals in Denmark or Netherlands.So the operator, they are working very hard on several fronts to manage this incident with the IP transformer. One team is working on the investigation and how to reinstate the IP transformer, a second team is working on developing solutions to still export volumes from Tyra in the interim period. They are making good progress, and we expect to resume export in July. In parallel with this, the operator is working full speed ahead on completing the hookup and commissioning. The reinstatement of wells and reinstatement of satellite fields so that we are ready for a quick ramp-up when we start production in July. We are also optimistic about initial production rates from the wells as observed reservoir pressure during the reinstatement is higher than what we assumed when we developed our production forecasts.So I'll now move on to our outlook for Tyra for the rest of the year. As I said, the operator, TotalEnergies is making very good progress in understanding the causes of the incident with the IP transformer. They have to do some additional verification work before they can close the investigation. The operator has mapped out the way forward both to replace the IP transformer, which we need to reach plateau production and to resume gas production and export from Tyra through an interim solution. The Tyra production for the rest of the year will be characterized by a ramp-up during Q3, while Q4 is getting close to full capacity and similar contribution from Tyra as the base assets. The 2024 exit rate will be above 50,000 barrels of oil per day, more than double of what we started the year with.I will now hand over to Cathrine, Chief Corporate Officer, and she will talk about the long-term outlook for BlueNord.

[Cathrine Torgersen, executive]

Thank you, Marianne, and good morning to everyone. I will not spend too much time on this slide as our key objective to contribute to energy security to Europe while at the same time do what we can as a company to support the energy transition remains the same. One focus area for us is CCS through our ownership in CarbonCuts. In CarbonCuts, we're assessing what we think can be a fantastic onshore storage project called Project Ruby. And in the beginning of the quarter, CarbonCuts submitted a license application to the Danish Energy Agency, the DEA, where the vision is to store about 1 million tonne of CO2 per year from 2030 in the area Rodby Structure on Lolland. This is located at the south tip of Denmark and very close to the German borders. The location of the potential storage site opens up for opportunities for several corporations with countries located around the Baltic Sea. The award of the storage license from the DEA is expected later this year. And our view remains that CCS will be an important solution on a global scale as it is the one true emissions removing activity which does not compromise the security of supply.In BlueNord, the long-term plan, we have both infill wells and development projects. This plan is reflective of what is the objective of the partnership to maximize economic recovery from the DUC. The infill wells are expected to increase gas production over the next years. And the first well, which was spudded last year, we saw first production from late March with an initial rate of 3,000 barrels per day, which was in line with our expectations. The next one up is the HEMJ well, which will be spudded during this summer. And given this is an exploration well, the potential volumes are not included in our production estimates. It's also worth mentioning that the infill opportunities, which have been unlocked by Tyra, where we have 6 wells under maturation.The 3 development projects on the right-hand side will ensure that a high level of production is sustained over time and beyond the end of this decade. These are cash-generative projects which will come with very robust IRRs that can tackle even the most challenging commodity price environments. Production from the 2 first projects can also be tied back to Tyra II, which is a very good way of utilizing the new facility on Tyra and also backfill the process capacity. The long-term plan also shows how we intend to mitigate decline and maintain significant production levels following the Tyra plateau later this year. We expect to exit 2024 above 50,000 barrels per day and for the next year above 55,000 barrels per day. And from 2025 to 2030, we expect to produce about 50,000 barrels per day plus minus. This is based on our base production optimization work and our in-plan projects. In addition, we also see an opportunity to surpass this by adding identified projects that are currently out of plan, but which we will progress if deemed attractive from an economic perspective.And as a closing key takeaway, this long-term plan is going to support dividend stream to our shareholders such that it has not only kept high for a few years as a result of Tyra, but it also allows us to sustain a robust capacity longer term.And with that, I'd say thank you for listening, and we'll pass over the word to our CFO, Jacqueline, who will take you through our financials.

[Jacqueline Lindmark Boye, executive]

Thank you, Cathrine. So financially, 2024 has started with a quarter consistent with what we saw for most of 2023. That is a financial performance that reflects excellent underlying asset operating performance. The commodity price environment has still been muted for gas, although we have started to see some upward movement late in the quarter and then into April. Oil has remained relatively stable during this period. So for the quarter specifically, given with the effective gas prices, they were about 3.4% lower and we had oil prices around 3.8% higher than the previous quarter. Plus we had lower oil liftings again this quarter due to timing. So that was increasing our inventory position on oil, which we expect to unwind over the coming quarters.Revenue result for the first quarter was $169 million compared with $184 million last quarter. The message on our operating costs is consistent with the inclusion of activities that relate to well recovery and optimization, which continues to support the strong base production performance. OpEx for the quarter is $71 million and OpEx per BOE of $33 per BOE. As a result of the above, the overall contribution margin continues to be significantly positive with EBITDA reported of $88 million, and this was compared with $95 million in the last quarter.So turning to the income statement. You can see the full earnings position where I'll clarify a few points below EBITDA. You can see here in the income statement, our net financial costs are impacted in the first quarter by a few items that are primarily noncash. Firstly, we had to update the Q4 2023 figures to reflect the capitalization of borrowing costs. This was adjusted during our full year financial statements and resulted in a reduction in the financial expenses in the income statement of $21 million in Q4, which we do not see in Q1 of 2024. This is essentially a reclassification from the income statement to the balance sheet. Secondly, we also have a noncash movement of the fair value of the embedded derivative on the convertible bond. This moved from a $9 million gain to a $17 million loss in Q1. Finally, foreign exchange movements can fluctuate, and we experienced a shift from a loss of $10 million to a gain of $4 million in this quarter.I think the other point just to highlight here on the income statement is the tax expense. So this does reflect an effective tax rate on the income statement of 51% for hydrocarbon tax. We do however note that the tax expense can fluctuate quarter-to-quarter. And this time our corporate income tax was a part of the reason for the higher tax expense shown due to a higher interest limitation deduction restriction. So overall, we ended the quarter with a net loss of $5 million.If we now consider the balance sheet, the main items to highlight are linked to tax and derivatives. So looking at the balance sheet, you can see our deferred tax position has increased in this quarter, and that's because of the impact of tax on derivatives, which goes to the equity reserve. This has increased our loss carryforward, but that will unwind as derivative positions settle. Now in terms of taxes payable, we have accrued for our expected tax payable associated with Q1 2024, and we have updated the amount we expect to pay in relation to 2023 that will be payable in '24. So of the total $129 million payable, approximately $50 million is actual cash tax payable in 2024. And this is approximately $70 million lower than our initial estimates. There continues to be no regular Chapter 3 taxes payable in the current year.A final point to note is the change in derivative assets and liabilities. The decrease in the asset position is due to the settlement of a number of the highly priced gas hedges that we had put in place back in 2022. And then on the other side, you can see with the oil price strengthening, this results in an increase in our liability position on outstanding hedges.So now turning to cash. We continue to report a solid operating cash flow before tax of $88 million this quarter. After taxes paid of $12 million and finance costs of $12 million, the remaining spend continues to be primarily on the Tyra redevelopment project. That was $54 million. And then we had some other investments, including the first Halfdan infill well, some other minor CapEx and decommissioning. Overall, we finished the quarter with a small cash outflow of $9 million.The liquidity position is still robust. We have $158 million of cash available, plus $150 million of undrawn RBL facility, which maintains our fully funded outlook with closing available liquidity of $308 million.So talking about cash leads us on to the capital structure. Now I won't spend too much time on this slide, but it gives you the overview of the capital structure at the end of the first quarter. Our net debt is $1.1 billion. And excluding the convertible bond, the net debt is $868 million. But of more interest, I'm sure, is the status of our plan to reset the capital structure, which is outlined in more detail on the next slide.And here, I am pleased to say that we are well progressed in our plan to reset the capital structure, both to reflect our business going forward with Tyra producing again and unlocking our first distribution. We are well-progressed in the refinancing of the RBL and expect to close this by the end of May. As of today, we have credit-approved commitments of more than $1.3 billion. And with a highly supportive lending group, we expect we can close with a facility of at least $1.3 million. The new facility will have a maturity of December 2029 and amortization set to start in the beginning of 2027. Once we have finalized the RBL, the next step in the process will be to continue the work to address BNOR14 as we indicated last quarter. And once we have the capital structure in place, we will be able to start distributions when the milestones shown on the slide are met.So speaking of our distribution policy, it's worth reiterating a few key points. The main one being that we are committed and have a clear path towards the distribution policy we announced last quarter. The foundation of the policy is built on the substantial free cash flow that will be generated by Tyra, particularly in the near term. We will balance the need to reinvest our net operating cash flow in projects that maintain our strong asset portfolio and a conservative balance sheet through cycle with returns to shareholders then being prioritized. Our policy for 2024 to 2026 is to return 50% to 70% of our net operating cash flow to shareholders. And beyond 2026, we will continue to manage our business in a way that is consistent with our desire to maintain a meaningful returns profile.So a final point to highlight for me is the commodity price environment. Now we haven't changed our approach to hedging, and we continue to use hedging to provide visibility over future cash flows, and we add volumes when it makes sense to do so. This quarter is a good example of adding hedges using this approach. We added some oil hedges to the second half of 2024 and into 2025 and all of '26. And this was at an average price of $78 per barrel. But our focus has been more on gas. This quarter, and it was to take advantage of the periods where we saw upward trends, particularly in March and April. And we have added volumes across the second half of 2024 and through 2025 and 2026 with prices at and around EUR 30 per megawatt hour and slightly above.So this slide shows our position as of today. We will continue to take advantage of the market and add hedges when it looks attractive to do so and within our policy framework. So you can see from the chart, the average hedge price for oil ranges from $67.7 per barrel in '24, $74.4 per barrel in '25 and $73.5 per barrel in '26. The average hedge price for gas in winter '24 is at the high end with the average of EUR 99.4 per megawatt hour. Now these very favorable hedges did drop off from this point on. So from summer '24, the pricing is at an average of EUR 41.4 per megawatt hour. Winter '24-'25 is at an average of EUR 42.5 per megawatt hour, summer '25 at EUR 34.2 per megawatt hour, and we've also added hedges for winter '25-'26 now and also summer '26. These are all around, again, the EUR 30 per megawatt hour.So aligned with our latest production guidance, 2024 is hedged approximately 51% for oil and 32% on gas. Now this hedging approach continues to support our balance sheet and capital structure and helps to bring a level of certainty over our funding position. In summary, the first quarter of 2024 reflects a consistent and stable underlying asset base and cash generation that supports our balance sheet. We look forward to a step change in the business with Tyra volumes increasing as 2024 progresses. This is underpinned by a robust capital structure being reset to enable this step change, and we look forward to our first distribution to shareholders in the near future.And with that, I will hand back to Euan for closing remarks.

[Euan Shirlaw, executive]

Thank you very much, Jacqueline. So thank you again for joining us this morning. You've now heard from us about the strong base asset performance that we've seen this quarter and the support that we expect to see for these levels through the remainder of 2024. You've also heard that with Tyra having restarted, our main focus is on delivering the near-term restart of gas exports and the ramp-up to full capacity, an objective that we very much share with the operator. We will continue to keep the market up to date as we move forward, and I look forward to telling you in the coming weeks of the restart of gas export from Tyra.In the meantime, I'll leave you with a reminder of where we will be by the end of 2024. We'll have cemented our position as a material player in the European energy supply landscape. We'll have completed Tyra with net daily production above 50,000 barrels of oil equivalent per day. And having finalized our refinancing processes, we will also have commenced distributions to shareholders. While our production will increase and our cash flow will grow, our core objective is always going to remain the same, delivering the value of our portfolio to all of our stakeholders. And with that, I'll thank you for joining one final time, and we'll pause for a few seconds to allow for any additional Q&A to be submitted and we'll be back shortly. Thank you.

[Cathrine Torgersen, executive]

All right. First question. "Do you expect a ramp up to maximum technical capacity to be tilted towards the early end of Q4?"

[Marianne Eide, executive]

So our guidance is based on a ramp-up towards the middle of Q4. However, there is an opportunity to accelerate the repair and replacement of the IP transformer, and that's not been built into the current guidance.

[Cathrine Torgersen, executive]

"Do you currently have an estimate of when you expect the HEMJ well to contribute with volumes towards the end of the year, if successful?"

[Marianne Eide, executive]

If successful, we would expect the HEMJ well to contribute from the beginning of Q4.

[Cathrine Torgersen, executive]

"Can you provide any information on when you expect a restricted cash pledge as security for cash call obligations towards TotalEnergies released?"

[Jacqueline Lindmark Boye, executive]

Yes. Based on the current outlook, we would expect that to be very early in 2025.

[Cathrine Torgersen, executive]

"And do you see any changes from previous CapEx guidance? And can you provide some insight into what you expect for CapEx in 2025?"

[Marianne Eide, executive]

So we do not expect any changes to our guidance for 2024. And the IP transformer is a relatively low-cost piece of equipment. With respect to CapEx in 2025, that will be related to the drilling of infill wells. Currently we have not sanctioned any wells for infill drilling in 2025, but we would expect around 2 wells at $20 million each to be drilled in '25, subject to FID.

[Cathrine Torgersen, executive]

"And you do not include any Tyra gas in your Q2 guidance. What is the probability for seeing some production from Tyra during Q2?"

[Marianne Eide, executive]

So we did see a little bit of Tyra production in April before we had the IP incident. Again, our operator, TotalEnergies, they are working extremely hard to resume gas exports. So there is an opportunity, but we have not included it in our base case.

[Cathrine Torgersen, executive]

"What will be the timing for, one, announcement of the first dividend payment and, two, actual payment?"

[Jacqueline Lindmark Boye, executive]

So based on the current outlook, we would expect the announcement to be as a part of Q4, and then actual payment should be again shortly thereafter. So we'd expect that to be in early 2025.

[Cathrine Torgersen, executive]

"Can you please quantify maintaining a meaningful return profile, more or less of 50% to 70% of operating cash flow?"

[Jacqueline Lindmark Boye, executive]

So we are prioritizing the short-term distributions, and that's reflected in what we've presented as our policy. Beyond 2026, that is a little bit further into the future clearly and harder to be as specific. But we would expect that level to be lower than the short-term outlook that we've already communicated.

[Cathrine Torgersen, executive]

"And how does the Tyra situation impact bond buybacks?"

[Euan Shirlaw, executive]

So the starting point has always been that we need to have the restrictions that currently exist under BNOR14 removed prior to making our first distribution. Based on the profile that we've laid out today, I think our expectation is currently that, as Jacqueline just mentioned, that the distribution test will be met in Q4, and we expect to be able to make a distribution shortly thereafter. I think the specific timing of that distribution will be dependent on the delivery of the Tyra project, but we would hope that we would be able to make that in 2024 still. I think for the bond buyback itself, that will be, I think, linked to some of the other capital structure discussions and decisions that we take through the rest of 2024. What we've seen with the strength of the RBL market or perhaps not the market, but the strength of the RBL result that we have seen with an increase to $200 million -- increased by $200 million is that we don't need to remain in the high-yield market, but I think there may be some circumstances where it's beneficial for us to do so, and decisions around that may impact the timing of when we buy back BNOR14.

[Cathrine Torgersen, executive]

"Given that BlueNord upsized its RBL facility, does the company intend to take out BNOR and not have any senior unsecured bonds or refinance it under conditions that allow for distributions?"

[Euan Shirlaw, executive]

I think that question was also partly answered by what I just said. But I think in principle, the enlarged RBL means that we don't have to remain in the high-yield market. I think what we're very focused on is making sure that we have a capital structure that allows us to deliver the distribution policy that we've announced. And to the extent that we are able to achieve that also with a high yield or unsecured note part of the capital structure, then it will of course be something that we consider. But the main point is that what we're announcing today allows us to deliver the distribution policy that we announced last quarter.

[Cathrine Torgersen, executive]

"Slide 23 shows key milestones with Tyra completion tests met just before first distribution expected. Since plateau is now pushed out to Q4, will that mean that first distribution also is pushed out to Q4?"

[Euan Shirlaw, executive]

I think that would be our starting point, is that the distribution test which exists under the RBL is linked to reaching a level of production on Tyra that is not quite the plateau production that we've quoted from an equity perspective. It's a lower number than that. But equally, it requires Tyra to be at a certain level. As Marianne has also spoken about, we do hope to be able to accelerate that timeline. But the most likely situation in our base case at the moment is a Q4 for first distribution.

[Cathrine Torgersen, executive]

"And many of your peers are seeking to achieve higher valuation multiples through M&A activity. What is your view on this potential?"

[Euan Shirlaw, executive]

We have a fantastic organic growth profile within the DUC and we have a very clear business model. I think accretion of valuation multiples isn't necessarily our objective. I think what we are looking for is to make sure that we can distribute the maximum amount of cash to our shareholders that we can. And that's the key focus today. So M&A is not a priority at the moment.

[Cathrine Torgersen, executive]

And that concludes the question for today. Thank you.