Bluenord ASA

OSE:BNOR

Earnings Call Analysis

Quarterly Results and Strategic Updates

In Q2 2024, BlueNord produced 24,500 barrels per day, a 1,000 barrel increase from Q1, driven by strong asset performance. Despite a 26% drop in gas prices, revenues rose to $171 million from $169 million. The Tyra project, after temporary setbacks, is set to reach full production by Q4, expected to boost output to 55,000 barrels per day in 2025. The company completed a $1.4 billion refinancing, supporting its policy to return 50-70% of operational cash flow from 2024 to 2026. A net quarterly loss of $1 million was noted, but strong liquidity of $406 million ensures future stability.

Transformative Year Ahead

For BlueNord, 2024 is shaping up to be a transformative year. The executive team has articulated that significant investments exceeding $1 billion have been made to more than double their production capacity. This extensive investment signals a transition from a developmental phase to one focused on generating value for stakeholders.

Production and Operational Gains

In the second quarter, BlueNord reported an average production of 24,500 barrels of oil equivalent per day, reflecting an increase of 1,000 barrels compared to the previous quarter. This performance aligns with the company’s guidance of producing between 23,000 and 26,000 barrels per day. The production boost is attributed to several successful operational improvements, particularly in well reservoir optimization and enhanced contributions from infill wells, specifically the Halfdan project.

Strategic Importance of Tyra

Tyra has emerged as a strategic asset for BlueNord, not only for enhancing their production capabilities but also for contributing to energy security in Denmark and Europe. The company expects significant volumes from Tyra to commence in the third quarter, aiming for plateau production by the end of November 2024.

Capital Structure Reset

The financial landscape has also been optimized with a successful restructuring of the capital base. BlueNord refinanced its Reserve-Based Lending (RBL) facility, increasing its capacity to $1.4 billion, a $300 million uptick from the previous arrangement. This refocusing will provide them the liquidity necessary to support ongoing projects and future distributions to shareholders.

Return of Capital to Shareholders

The management has committed to returning 50% to 70% of operational cash flow from 2024 to 2026, contingent upon meeting certain performance benchmarks such as achieving plateau production at Tyra. Following this, they anticipate commencing material capital returns to shareholders, including dividends and buybacks, as early as the end of 2024.

Cash Flow Dynamics

Despite a slight decrease in earnings before interest, taxes, depreciation, and amortization (EBITDA) to $72 million this quarter from $88 million last quarter, the operational cash flow remained robust at $57 million, contributing to a total of $146 million year-to-date. The company ended the quarter with significant liquidity, reporting $136 million in cash and a further $270 million available from their undrawn RBL facility.

Hedging Strategy

BlueNord continues to adopt a hedging strategy to stabilize cash flow, currently hedging around 50% of their oil production and 30% of their gas output through 2024. This approach not only protects revenues against market fluctuations but also enhances predictability in cash flow, essential for meeting their ambitious distribution policies.

Outlook and Future Growth

The outlook remains positive with capital investments expected to sustain production levels beyond 2026. With 213 million barrels of proven reserves and planned infill projects, BlueNord is in a position to maintain an upward trajectory in production and support long-term financial health.

Earnings Call Transcript 2024-Q2

[Euan Shirlaw, executive]

Good morning, and welcome to BlueNord's Results Presentation for the Second Quarter of 2024. It is, as always, a pleasure to be here this morning, and I'm joined by the rest of the executive team to run you through not only the highlights of our recent performance, but also provide some more insight into why our outlook for 2024 and beyond is so strong. If we start with our performance in the first half, it's been a period that has been very much characterized by strong performance of our base assets, continued progress on the Tyra project and high levels of BlueNord-driven activity that we believe support our long-term position. And I think that's an important point as we run through the presentation, is that we are very clear on what our focus is. It's positioning BlueNord for future success.

So let's turn over to have a look at what we've been doing in some more detail. So this slide covers really the activities that we've been busy with in the first half of this year. And fundamentally, it goes across all of our strategic priorities. So operationally, we've made progress on not only the base assets, but also the Tyra redevelopment. So starting with the base assets for our infill well program, we've had the continued contribution from the first Halfdan infill well which started up at the end of Q1 of this year. In Q2 we also sanctioned a further well in Halfdan to be drilled later in 2024. We spudded the HEMJ well, which is a high-impact opportunity with the result due in Q3 of this year. And that's something that has the potential to add 8 million barrels of oil equivalent net to BlueNord in a success case.

The drilling activity that I've just mentioned is unlocked by having a rig active in the DUC. And in that vein, I'm happy to announce this morning that we've also secured a 17-month extension of the Shelf Drilling Winner rig which will run from March 2025.

Turning over to Tyra. We're continuing to make progress on the project, but start-up has been impacted by some teething issues. So we had the first export of new gas in April of this year, but that was followed shortly thereafter by issues with the compressor transformers. And that ultimately has led to a temporary cessation of production. So together with the operator, the DUC is very much focused on not only the temporary restart of gas export, but also implementing a permanent solution that will allow us to reach plateau later in the year. On the temporary restart, it's positive that we will shortly have volumes being exported from Harald. And in addition to that, the operator continues to progress further options to export higher volumes before the permanent solution is implemented.

And then turning over to that permanent solution. So the IP compressor transformer, which was the first issue that we had in April, that repair is progressing well. In addition to that, hook-up and commissioning activities are now complete on Tyra West and the Tyra satellites. So while the root cause of the issue that has impacted the transformer still needs to be fully determined by the operator. [ Tech DK ] currently believes that this can be rectified in the time prior to the repaired compressors being installed offshore. And consequently, they have kept their current plan, which is the maximum technical capacity on Tyra should be reached by the 30th of November. And then supporting the ramp-up to plateau production, the completion of the hook-up and commissioning activities that I mentioned before, that will drive an accelerated ramp up.

Now turning just briefly to think about the significance of Tyra. Tyra is a hugely important asset, not just to BlueNord but also to TotalEnergies in Denmark. Denmark is a country in the EU more broadly. So reaching plateau production as soon as possible is very much the #1 priority. Well, it's, of course, disappointing that we've not had a flawless startup and a smooth journey to plateau, I think we can take comfort from 2 things as we look forward. The issues that have been identified have solutions. They're not reflective of any underlying issue with the integrity of the Tyra facilities but rather reflect the fact that when you turn everything on for the first time in a project like this, it often doesn't start up exactly as you expect, and some work is needed to get the asset fully operational. We also take comfort from the fact that TotalEnergies in Paris is increasingly supporting the Danish team. and that will help drive the outcome that we all know is so important.

If we then turn over to look at what's been achieved on the corporate side, and I'll talk more about this on subsequent pages. So just to provide a summary here, we completed the capital -- sorry, we completed the capital structure reset that we told you about earlier this year. This was important for us as it was necessary to ensure that their balance sheet reflects the strength of our forward credit profile, and that any distribution restrictions that we have are set such that they enable us to deliver our stated distribution policy. And with that in mind, I'm very pleased to say that, that capital structure reset is now done. We had 2 key deliverables in the second quarter. One was that we upsized our RBL facility and extended the maturity. And the second was that we issued a new senior unsecured note BNOR16. And what that means is that we're now fully set to deliver material distributions to shareholders when Tyra is at plateau production.

If we turn over to the next slide, just to look at some of the highlights of the performance in the second quarter. We had production in Q2 of 24,500 barrels of oil equivalent per day. That was an increase of 1,000 barrels of oil equivalent per day compared to Q1 and was in line with our guidance for the period. It was driven by strong base asset performance, which was the result of the positive results from the ongoing well reservoir optimization and management campaign and the continued contribution from the first Halfdan infill well, which is producing in line with pre-drill expectations. The activity levels that we have, including HEMJ and the second infill well that I mentioned previously, will support our outlook for 2024 and beyond. As I also noted on the previous page, for Tyra, we expect the near-term restart of gas export with Harald volumes coming shortly. We then expect to ramp up in Q3 and plateau in Q4 per the operator's current plan. And what we expect that, that will drive is net production to BlueNord of over 55,000 barrels a day of oil equivalent in 2025.

That will be important for us because the cash flow from not only Tyra but also from our base production assets will be used to both support our distribution profile and maintain a conservative balance sheet. And just as a reminder of what that distribution policy is, we are intending to return 50% to 70% of our operating cash flow during 2024 to 2026. If we just turn to look at the longer term for a moment, what we expect to do is continue to support our production levels using our 2P and 2C reserves and resource base as a starting point. And what that will enable us to do with the 213 million barrels that we have across both those categories is support near-term growth, ensure the stability of our medium-term profile and finally make sure that we have material production levels out to the expiry of the DUC concession in 2042.

On the financial side, I'll leave most of that to Jacqueline, our CFO, who will provide more detail in the following section, but I just wanted to emphasize 2 points. One, our recent strong performance and the actions taken to reset the capital structure position us extremely well for the future. So in summary, it's been a strong quarter with delivery of activities that support our long-term performance. And if we turn over to the next slide, we can talk about the capital structure in a little more detail. So it was in our Q4 2023 results that we presented in February of this year that we set out the fact that we were intending to restructure our capital position. And there were really 3 objectives for that. One was to optimize our access to secured debt capacity. The second was to make sure that any distribution restrictions that we had within our balance sheet were consistent with our cash generation outlook. And number 3 was to make sure that we were able to maintain a conservative balance sheet on a through-cycle basis.

And during Q2, we completed the 2 material steps that were needed to deliver this reset. Firstly, we successfully refinanced our RBL facility. As I think most people are aware, it is a relatively challenging backdrop for bank lending to the oil and gas space. So the fact that we were able to deliver a $300 million increase in our facility size to $1.4 billion, really does show the strong support from our lender group. We also deferred the amortizations from the second half of this year into 2027, and we extended the maturity to 2029. And all of that makes sure that the RBL will remain an important instrument that will underpin our capital structure for the rest of this decade.

Secondly, we issued BNOR16. That's a new $300 million senior unsecured note, and it will mature in 2029. The proceeds from that issue were used to repay BNOR14 and will support our capital structure going forward. Just to spend one moment on BNOR14, the repayment of that bond was important because it enabled us to remove the link between historic net profit and distributions in our capital structure. That's something that would have restricted our ability to deliver our stated distribution policy. And I'm happy to say that with BNOR16, the new bond, the distribution covenants are consistent with our capital returns policy. Firstly, the Tyra completion test must be met, and then BlueNord is required only to maintain a minimum level of liquidity of $100 million. And that is in line with the distribution profiles that we have published and the estimates that we have given around that. So in summary, once Tyra is at plateau, we intend to commence our program of material capital returns imminently.

And then if I turn to the next page to walk through in more detail what that distribution profile looks like. So taking 1 step back, the cash flow that we generate and particularly post Tyra will be used to support all of our structures. As I mentioned on the previous slide, the capital structure reset was important because it enabled us to deliver our commitment to shareholder returns. And that means that from 2024 to 2026, we intend to return 50% to 70% of our operational cash flow. Beyond 2026, we still expect to have a distribution profile, and we'll manage our business in a way that is consistent with our desire to maintain meaningful returns. That means that we'll make all future investment and capital structure decisions accordingly. What that also means in summary is that the distribution policy that we've announced will result in the return of a substantial portion of our current equity value over the next 2.5 years.

If we turn to look at just the bottom part of that slide, in terms of timing, we've already delivered a number of the important steps that were required prior to commencing distributions. The key item remaining is meeting the Tyra completion test. And once that's achieved, which we expect to be in line with when Tyra reaches maximum technical capacity and therefore, plateau production will commence our distributions shortly thereafter.

Now before I move on to the operations section, I'd like to introduce you to our new COO, Miriam. Miriam took over from Marianne Eide during the second quarter of this year. And firstly, I'd like to thank Marianne for her strong contribution to the development of BlueNord since 2022. But in Miriam, we have a very capable replacement. So Miriam has worked with these assets from significantly before they were part of BlueNord as she was with Shell prior to our acquisition in 2019. She's also been our DUC asset manager since 2021, so she has a lot of experience with our asset base. And then finally, I'll just say that the new structure that we have reflects our underlying business as Tyra transitions from the project phase to the production phase.

So thank you very much, and I'll hand over to Miriam. Thank you.

[Miriam Lykke, executive]

Thank you, Euan. So I will now take you through the status of the Tyra redevelopment project, and I'll present how we plan to deliver on Tyra in 2024. Then I will present to you how we have achieved the strong Q2 base asset production that Euan just told you about, and then I will present the outlook and the planned activities for the base assets for the rest of 2024.

But first, let me just emphasize the importance of Tyra. We all know that Tyra is strategically important, not only to BlueNord but also to Denmark as Tyra will provide necessary gas to Denmark and Europe for the coming years. The project will unlock significant volumes from the Tyra field and the satellite fields with the new and modern facilities in place. The increased production from Tyra means that the CO2 intensity from the Tyra facility will reduce with 30%, and that will reduce also our unit operating cost to less than $13 per boe.

Now let us look at the status and outlook for 2024 for the Tyra redevelopment project. So as we presented in quarter 1, Tyra was restarted on 21st of March 2024. Then on 18th of April, while we were ramping up export of Harald gas, an incident occurred, where the transformer providing power for the IP compressor was short-circuited. Last week, as communicated in the REMIT notice on 8th of July, there was an incident offshore impacting the LP transformer. The operator of TotalEnergies is working hard on 3 things: Firstly, to fix the underlying start-up issues and repair of the damaged transformers; secondly, to mature various temporary solutions for partial production; and thirdly, to continue the commissioning in parallel with this work. And with these 3 work streams, the current outlook is that we have the schedule of the repair of the transformers is in line with petrol production still in Q4. And further, there's a plan to resume Harald gas production in July by going directly to one of the export compressors.

And finally, commissioning is moving ahead at a good pace, and we have Tyra West ready for start-up with all wells unplugged and more than 50% of Tyra East wells are unplugged, and we will be able then to have a faster ramp-up. And I can also share with you that the planned work that was done on the Nogat line carried out for approximately 1 week in June and required the production from base asset went over Tyra to Denmark, went very well. And this demonstrated the export capability of the Tyra facilities.

And now let us look at how we plan to reach plateau production in Q4 2024 based on the recent progress and the plans just presented here. So the path to plateau production for Tyra is driven mainly by 3 things: firstly, temporary production from Harald starting in July and other temporary solutions still being matured; then that the start-up issues are being fixed; and then thirdly, that we have continued commissioning along for a faster ramp-up. So Q3 will be a restart of Tyra, and Q4 will be ramped up to plateau production. And based on the recent performance and information that I just shared with you, we believe and this is in line with the REMIT just published by the operator, that plateau production end of Q4 is achievable and we will keep the guidance unchanged for Tyra.

I will now present to you how we have achieved the strong Q2 base assets production, which is production from the Dan, Halfdan and Gorm hubs, and then present the outlook and planned activities for the base assets for the rest of 2024. So let us first look at the production from the base assets for this quarter and the outlook for the next 2 quarters.

So today, I'm happy to share that the production in this quarter 2 has been higher than the production from quarter 1. And with a production of 24.5 mboe per day net BlueNord, we are well within our guidance of 23 to 26 mboe per day net BlueNord. The reason for this good performance is mainly due to 3 things. Firstly, the infill well Halfdan North East, the HBA-27B well is now on full production and is producing in line with expectations.

Secondly, we have increased production from the Harald authorization work that commenced early '24. And thirdly, the Skjold Gas Acceleration Pilot now shows early signs of increased production. So based on this recent strong performance and the current understanding of the base asset and also the continued focus from the operator on the operational efficiency, I'm pleased to share that our guidance for the base asset is unchanged with a range between 23 and 25 mboe per day net to BlueNord for the rest of the year.

So in summary, I want to highlight that the production for base assets is strong and within our guidance, and we have been within or above guidance for the last 14 quarters.

Now let's look at the rig activities for the DUC fields to support the continued strong production. We have seen a very positive impact on production optimization work so far on Halfdan North East and on Dan. We used the Noble Reacher rig for the optimization that we refer to as WROM. We are currently working on Halfdan where we have planned 28 different well interventions, which will contribute with additional production this year and subsequent years. And you will be very pleased to hear that we just extended the jack-up rig Shelf Drilling Winner for 17 months from March 2025 with an option to extend further with 2x 7 months.

The rig will be used for both drilling of infill wells and to carry out workovers. The rig is currently working on our next opportunity. As we announced on the 17th of June, we have just spudded the Harald East Middle Jurassic well. This is a well with large subsurface uncertainty. However, in a success case, this may increase reserves by up to 8 million boe net BlueNord and also gave a significant gas production contributions from the Harald field producing into Tyra. The well is expected to be online in Q4 2024.

And I'm also very happy to announce that we have just taken FID on the first of 2 Halfdan Ekofisk wells. And the plan is to take FID on the second well later this summer. The first well, HDA-35 will be drilled immediately after the Harald East Middle Jurassic well. So overall, activities have picked up significantly, and we will continue to mature opportunities for the 2 rigs to support the production.

So bottom line, we see strong production and a very good outlook for future years.

And I will now hand over to Cathrine, Chief Corporate Affairs Officer, and she will take you through the long-term outlook for BlueNord.

[Cathrine Torgersen, executive]

Thank you, Miriam, and good morning to everyone. While one of our key objectives is to contribute to energy security to Europe, we're also dedicated to initiatives, which reduce emissions and to exploring CCS. In this quarter, we have several exciting updates for all 3. As mentioned by Euan and Miriam, we have spudded the HEMJ well, and we have taken FID on another well. All which will secure important gas volumes in the short and medium term. For CCS, we have reached an important milestone in CarbonCuts, which was successfully awarded an onshore storage license in June by Danish Energy Agency. For this project, which is named Project Ruby, the vision is to store about 1 million tonnes of CO2 per year from 2030. Our ownership in CarbonCuts, it's not only fit for purpose for a company our size, but it also represents a true emissions-reducing solution, which doesn't compromise the security of supply.

And finally, for this quarter, as part of our initiative to continuously reduce emissions in the DUC, we have started testing out something which is called sustainable aviation fuel on our helicopter flights between [indiscernible] and the Danish North Sea. This is the first time this is being done in the Danish North Sea, and with the new fuel, we expect to see about 25% reduction in emissions related to this type of transportation.

And then moving to the long-term plan. which is aimed at maximizing the economic recovery from the DUC. We do this through our short- and medium-term opportunities simply divided into 2 categories: the infill well program and the development projects. We have already won infill well onstream, which overnight added 3,000 barrels per day to the production. In June, we spudded the HEMJ well. And today, we announced that a third well has been sanctioned. The infill well program is a really efficient and low-cost way of adding volume in a paced manner. All the wells are drilled by the jack-up rig Shelf Drilling Winner. And as Miriam mentioned, we're very pleased to have extended this contract by 17 months. It shows the confidence in the program and the willingness from the DUC partners to invest in our asset base. It's also worth mentioning that now that Tyra has been brought on stream, that has also unlocked several new infill opportunities in the Tyra hub with 6 wells under maturation.

The other category is the 3 development projects, which you can see on the right-hand side, Valdemar Bo South, Adda and Halfdan North. The 2 first ones are gas weighted, while Halfdan North is mainly oil. All 3 projects come with robust IRRs and production from Adda and Valdemar Bo South can also be tied back to Tyra 2, which is an excellent way of utilizing the new facility on Tyra and backfill its process capacity.

And that takes me to this page, which shows the positive impact of the organic opportunities I just went through. The long-term plan is a plan we have together with the DUC partners, and it ensures a high level of production throughout this decade. As you can see, we expect to be above 55,000 barrels a day on average next year, and remain at a high level 5 years later in 2030. The dark blue area, it represents the current base production, and it shows how long low the decline has been year-on-year. The steep step change of Tyra is seen in turquoise. And the light green is what we refer to as in-plant projects, meaning the infill wells and the development projects I just went through.

So by only sticking to this current plan, we are well placed to keep production high, support future cash flow for the company and move barrels from 2C resources to 2P reserves. Perhaps even more interestingly is the light gray shaded area at the top. These are additional opportunities like the Tyra infill wells, which are currently out of plan, but which we will progress in order to move them into the plan. And if that is successful, we're in a position to exit this decade above 55,000 barrels per day.

So summarized, this production profile shows that BlueNord, without needing to seek for inorganic growth is able to sustain a strong production and cash flow over time.

And with that, I will say thank you for listening and pass over the word to our CFO, Jacqueline, who will take you through the Q2 financials.

[Jacqueline Lindmark Boye, executive]

Thank you, Cathrine. So you've heard the highlights for the quarter from Euan and then more detail on how the base business continues to deliver from Miriam as well as the plan as we near Tyra producing again and reaching plateau. We have also made progress on infill drilling and maturing infill well and development projects that Cathrine highlighted. With that in mind, I will now take you through the financial results that are the outcome of the operational performance that you've just heard as well as the changes in our capital structure, which sets BlueNord up for the future. And then finally, an update on our hedging for the quarter.

2024 underlying financial performance continues in the second quarter on a relatively stable path. As Miriam highlighted earlier, underlying asset operating performance continues to be strong and the commodity price environment has been relatively stable when taken on average for the second quarter. However, as expected, the effective gas price was lower by 26%, and this was driven by higher value hedges rolling off in the first quarter and the effective gas price now reflects more closely the current market pricing.

Offsetting this, we saw oil liftings up for this quarter, unwinding the prior quarter's under-lift as well as gas volumes being slightly up. Revenue, therefore, for the second quarter was $171 million compared with $169 million last quarter and $339 million year-to-date. The message on operating costs is consistent with the inclusion of activities related to well recovery and optimization. This continues to support the strong base production performance. There was a slight increase due to phasing of some study expenses and a one-off penalty associated with gas nominations. But OpEx for the quarter is $75 million and OpEx per boe remains at $33 per boe. As a result, the overall contribution margin continues to be positive, but this is mainly affected by a drop in effective gas prices when compared to the previous quarter. Reported EBITDA is $72 million in this quarter compared with $88 million in the last quarter and $160 million year-to-date.

So turning to the income statement, you can see the full earnings position where I will clarify a few points below EBITDA. So just as in the first quarter, net financial items are impacted by the noncash fair value movement of the embedded derivative in the BNOR15 convertible bond. This quarter was a $10 million gain compared with a $17 million loss in Q1. In addition, there is a $6 million noncash present value adjustment for the refinanced RBL which is presented on the balance sheet at amortized costs.

We also note that tax expense continues to fluctuate quarter-to-quarter. And in this quarter, it is mainly driven by a foreign exchange movement on the tax loss assets. This is denominated in Danish Kroner and must be revalued each period. So the underlying current tax expense is as expected. Overall, we ended the quarter with a net loss of $1 million.

If we now consider the balance sheet, the main item to highlight is also linked to tax. The balance sheet is relatively stable, and there are not many significant variances when comparing to the last quarter. PP&E continues to increase as we continue to work towards completion on Tyra, and receivables are up due to the higher oil liftings mentioned earlier, which occurred late in the quarter, and thus cash receipt is due in July.

But finally, taxes payable. This has moved by an amount, and this includes a final update for the 2023 tax return. This was submitted in May. And we've also updated the estimate for tax payable in 2024. Of the total of $54 million outstanding, approximately $45 million is an actual cash tax and the decrease since the last quarter is linked to the finalization of the tax return, and this reduction has gone against deferred tax. So there continues to be no regular Chapter 3 taxes payable in the current year.

Now if we turn to cash, you can see we report an operating cash flow before tax of $57 million this quarter and $146 million year-to-date. Operating cash flow is affected this quarter by the timing of cash receipts. This is on the oil volumes lifted in June, which will be received in July as reflected in the working capital this quarter of $17 million. After taxes paid of $7 million and finance costs of $11 million, the remaining spend continues to be largely on the Tyra redevelopment project of $50 million. We also saw the start of drilling the HEMJ well as well as some other minor projects and completion of the P&A work on the Dan Echo wells. Overall, we finished the quarter with a cash outflow of $22 million.

The liquidity position remains robust. This is $136 million of cash available and $270 million of undrawn RBL facility. This is following the completion of the RBL refinancing during the quarter. This maintains our fully funded position with a closing available liquidity of $406 million. This liquidity position does not include the net proceeds from the newly issued BNOR16 bond. And if we add that, we have a position of $506 million.

So talking more about cash leads us on to the capital structure, where I will discuss in more detail the reset of the capital structure, which we have just completed and adding a little bit more to what Euan highlighted earlier. So I'm pleased to say that this quarter, we have been able to complete the work on resetting the capital structure to optimize our access to capital and support the business strategy. We completed the refinancing of the RBL in June with a facility of $1.4 billion in place, which is upsized by $300 million with amortization to start in early 2027, and maturity extended to December 2029.

We also placed a new bond in the market for $300 million, which settled on the 2nd of July and is not reflected in these Q2 results. But we show the capital structure here, including the new bond issue and the repayment of BNOR14. We have managed to deliver this while still ensuring BlueNord's business objectives can be achieved, in particular, access to sufficient liquidity, a diverse capital structure and ability to pay distributions in line with our cash generation outlook. Our net debt at the end of the quarter and after the new bond issue is $1.2 billion compared with $1.1 billion at the end of Q1. With the capital structure in place, we are ready for the first distribution which will be when Tyra ramp-up is achieved.

So a final point to highlight is the commodity price environment. and we continue to use hedging as a way to provide visibility over future cash flows, and we add volumes when it makes sense to do so. This quarter, we added hedges mainly in gas focusing on summer 2025 and winter 2025, '26 seasons. The average hedged oil price in the outlook to the end of 2026 is in the low USD 70s per barrel. For gas hedging, this period, we have sought to take out more hedging to secure some base pricing over EUR 30 per megawatt hour and for the outlook to summer 2026, pricing remains generally above that level.

This slide shows our latest position as of today, and 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 aligned with our latest production guidance, we are hedged in 2024, approximately 50% on oil and 30% on gas when including Tyra volumes. So this hedging approach continues to support our balance sheet and capital structure and helps to bring a level of certainty over our funding position.

So in summary, the first half of 2024, reflects a consistent and stable underlying asset base that supports our balance sheet. We continue to look forward to a step change in the business with Tyra volumes increasing as 2024 progresses. This is underpinned by a robust capital structure that is now reset and we're ready for the step change as we look forward to our first distribution to shareholders once Tyra is at plateau.

And with that, I will hand back to Euan for closing remarks.

[Euan Shirlaw, executive]

Thank you, Jacqueline. Before we hand over to Q&A, I really just want to leave you with 1 very simple message. So 2024 for BlueNord has been all about a year of transformation. We've invested over $1 billion to more than double our production capacity. And as a result, we're very much shifting from the development phase to the stage where we're able to deliver value for all of our stakeholders. And what that means, particularly from an equity perspective, is that we expect once Tyra is at plateau production to start the material return of capital. And all this means in practice that by the end of the year, we will also be setting with a portfolio that is producing over 50,000 barrels a day.

And with that, I'd like to thank you for joining this morning. We'll pause briefly to wait for any additional Q&A to be submitted, and then we'll come back to answer the questions. Thank you.

[Cathrine Torgersen, executive]

Thank you. First question. You have the guidance of production some substantial volumes from Tyra in Q3 and especially in Q4. This means that the temporary solutions is important. What are the risks that there will not be a temporary solution and only a permanent solution?

[Miriam Lykke, executive]

So what we have included is the guidance that's in line with the operator's current plan, and that has temporary solutions in quarter 3 but it also is in line with the fact that we can now ramp up quicker in quarter 4, and that will lead us to a faster getting to the Tyra production.

[Cathrine Torgersen, executive]

Thank you. How those new activities impact 2024 CapEx guidance, how much CapEx will be required to meet the production profile showed on Page 18?

[Jacqueline Lindmark Boye, executive]

So the activities that we've announced, including the FID of an infill well. That was all in the plan already. So what we've guided on in 2024 hasn't changed in terms of the activities. So that CapEx stays the same for '24. We haven't guided beyond 2024 at this stage. But as we have outlined previously and we include in our outlook, we do expect our projects in the future. So what's within that plan are in the mid-teens. So $13 to $15 per boe is the range for CapEx.

[Cathrine Torgersen, executive]

Assuming that Tyra ramp-up proceeds according to current plan, when do you expect to announce dividends?

[Euan Shirlaw, executive]

So based on the operator's guidance, which is that Tyra will be at plateau production by the 30th of November, we would expect to meet the Tyra completion test before the end of the year and consequently announced first dividend at the same time.

[Cathrine Torgersen, executive]

How similar are the 2 gas compressors? And are they delivered by the same supplier? What I'm wondering about is what's the issue on the second gas compressor expected following the issue on the first one? Any color here would be helpful.

[Miriam Lykke, executive]

So the start-up issues are related to the transformers and not the compressors and they are similar and they come from the same supplier. And TotalEnergies didn't think that this would happen again. But the fact that it has happened have led them to not know where to look closer to where the issue is with the transformers.

[Cathrine Torgersen, executive]

Can you give some color on the amortization profile on the refinanced RBL?

[Jacqueline Lindmark Boye, executive]

So amortization starts in the early part of 2027. And then it has a fairly even profile, I guess, through to December 2029 for amortization.

[Cathrine Torgersen, executive]

Thank you. On the full year production, do you still expect the production to average approximately 35,000 barrels per day?

[Miriam Lykke, executive]

Yes, we do.

[Cathrine Torgersen, executive]

On the first Halfdan Ekofisk well that was sanctioned during the quarter. Can you provide more specifics on exactly when in Q4 you expect volumes?

[Miriam Lykke, executive]

So right now, it looks like that we can do the final completion in late Q4. So it will be very late in December or in January that we expect the volumes.

[Cathrine Torgersen, executive]

Regarding the Tyra infill wells, you currently guide on 6 wells that are being matured. Can you provide an estimate on how many infill wells you have identified at Tyra and the potential volume contributions from both the wells that are being matured and the additional potential wells?

[Miriam Lykke, executive]

I think we will leave that forward, we get closer to maturing the wells.

[Euan Shirlaw, executive]

I think what we can say is that we have a portfolio of opportunities with Tyra. And I think as you go through the life of Tyra, given you've just spent -- we've just spent over $1 billion developing some new facilities, it will make sense to maximize the contribution that we are having from those facilities and obviously drilling infill wells is one of the ways that we can do that. So that maturation will continue through time.

[Cathrine Torgersen, executive]

Lastly, on the HEMJ well. If the well proves to be a success when specifically in Q4, can we expect first volumes?

[Miriam Lykke, executive]

We don't have the specific date right now. It depends on how long the completion takes. This is a high pressure well, but we expect it to be in quarter 4.

[Cathrine Torgersen, executive]

Can you please elaborate what the one-off penalty on gas nominations are?

[Jacqueline Lindmark Boye, executive]

This links to the nomination process and the expectations on what our gas volumes would be and that had included a component of Tyra gas. Of course, we then encountered issues with Tyra, which meant that production did not occur. But that has obviously been updated then in our nominations going forward as we have a full month forward gas nomination process.

[Cathrine Torgersen, executive]

We understood that the repair work of the IP compressor is in line with the plateau production in Q4 2024. What about the low-pressure compressor? Could you give us more color on what happened here? And how long it will take to repair?

[Miriam Lykke, executive]

So as we understand it, the IP transformer that we're repairing right now is on schedule to be repaired by -- so it will be offshore in Q3. And we also understand that now what happened is similar for this transformer and for the LP transformer, so they know how to fix it. And so that will take shorter time than the IP transformer.

[Euan Shirlaw, executive]

I think the main point here is that both of the repairs to the IP and the LP compressor are consistent with plateau production in Q4. So it's not just the IP compressor, it's both. The repair to both and having the permanent solution in place is consistent with Q4 and the specific date that Total has communicated is the 30th of November.

[Cathrine Torgersen, executive]

Was it a similar issue that occurred on the LP compressor as on the IP compressor? How many compressors of significance are on the Tyra field? What are the risks that other compressors could experience similar issues with our transformers?

[Miriam Lykke, executive]

So for this is the LP and IP transformers that was impacted and we don't have more than those 2 on the facility.

[Cathrine Torgersen, executive]

Thank you. That concludes the Q&A session.

[Euan Shirlaw, executive]

There was, I think, 1 more final question, which was, do we still expect to pay out the market cap to shareholders in the forms of dividends and buybacks before the end of 2026?

And the very simple answer to that question is yes. The majority of our dividend profile comes in the first 24 to, say, 30 months. So having a short delay to when we start paying that out doesn't change the ultimate that we will pay out. And fundamentally, a big part of that is driven by the monetization of the tax losses that we have, and we expected those to be used up in 2026 anyway. So yes.

[Cathrine Torgersen, executive]

All right. I think that concludes the Q&A session. Thank you.