Bluenord ASA

OSE:BNOR

Earnings Call Transcript 2024-Q3

[Euan Shirlaw, executive]

Good morning, and welcome to BlueNord's results presentation for the third quarter of 2024. I want to start by saying that we've had a really strong 3 months with lots of movement, all of which has been in the right direction. So firstly, we've had great performance from our base assets. Quarterly production was right at the top end of our guidance for the period.

We've also seen progress on Tyra steadily accelerate. This can be most clearly seen through the timing for when maximum technical capacity will be reached, being brought forward by more than a month from the end of December 2024 to mid to late November 2024.

And as we announced yesterday, we've also made a meaningful gas condensate discovery through the HEMJ well. As is the benefit of having all the necessary infrastructure in place, this is a keeper well, where production is set to begin by the end of the year. So these highlights show that we're already maximizing the potential of our asset base and are also now significantly closer to fulfilling our long-term promise of substantial shareholder distributions, while, at the same time, maintaining a robust and conservative capital structure.

So I'm very pleased to be joined by the team this morning to walk you through what I've just told you about in a little bit more detail. But before doing that, I want to make one quick reference to housekeeping. So we'll have Q&A at the end, and please feel free to submit your questions as we go through. And with that, let's turn to the first slide.

So our net production in Q3 was 25,000 barrels a day of oil equivalent, and that was at the top end of our guidance for the period and also represents an increase from 23,500 barrels of oil equivalent and 24,500 barrels of oil equivalent in Q1 and Q2 2024, respectively. But importantly, it also reflects a continuation of the strong track record that we've built, with us now having had 15 consecutive quarters at or above our production guidance.

What we're also seeing this quarter is the continued benefit of having active drilling operations in the DUC. Not only do we have the ongoing contribution from the first infill well drilled on Halfdan earlier this year, but we also announced yesterday the substantial HEMJ discovery that will extend the plateau on Tyra. Combined with our ongoing optimization and management campaigns, this active approach supports a positive outlook for our base production levels for the rest of 2024 and beyond.

We're also making good progress in bringing the Tyra field back into production. So Miriam will talk you through this in more detail, but we now expect to see the hub at maximum technical capacity in the second half of November. And what this will allow is plateau production to be reached in Q4 and for us to exit 2024 at over 30,000 barrels a day of oil equivalent net to BlueNord.

Once we are fully at plateau, we intend to utilize the material near-term free cash flow that we generate to both make significant capital returns to our shareholders and also maintain a conservative capital structure. The distributions will be set based on the previously announced distribution policy, which will see us pay out 50% to 70% of net operating cash flow for the 2024 to 2026 period.

I'll hand over in a second to Cathrine, who will also talk about what the future looks like for us in Denmark, but our position remains clear. We'll look to produce more from our existing base of 2P reserves and 2P resources where it makes economic sense to do so. And these volumes, which stood at 213 million barrels at the end of 2023 will support not only our near-term growth, but also the stability of our medium-term profile and ensure that we have material production levels out to 2042 when our current DUC license expires.

And then moving on to look at where we are from a financial perspective, Jacqueline will later on in the presentation provide more detail. But the high-level summary for me is that what we are reporting today is that the recent strong operating results are continuing to be reflected in the financial results. And that further, the capital structure reset that we concluded earlier in the year, provides us with not only substantial liquidity, but also a firm base to deliver on our future objectives.

So all in all, it's been a strong quarter that's seen us both deliver for today and for the future. I'll come back at the end to offer some closing remarks. But in the meantime, let me hand over to Miriam to talk you through our operations in more detail. Thank you.

[Miriam Lykke, executive]

Thank you, Euan. I look forward to presenting the operational status and look ahead. As Euan just presented, there are many positive updates today. I will first take you through the status of the Tyra redevelopment project and present how we plan to deliver on Tyra in 2024. Then I will present how we have achieved a strong Q3 base asset production, and present the outlook and planned activities for the base asset. Lastly, I will present the preliminary findings of the successful drilling of the Harald East Middle Jurassic well.

Let me first emphasize the importance of Tyra. The Tyra redevelopment project is not only strategically important to BlueNord, it plays a vital role in securing energy for Denmark and Europe in the coming years. The redevelopment of Tyra will unlock substantial volumes of gas from both the Tyra field and its satellite fields as a result of the installation of new modern facilities.

The benefits extend beyond just increased gas production. With Tyra's upgraded facilities, we expect a significant reduction in CO2 intensity by 30%. Further, operation of the new facilities will enable us to lower our unit operating cost to $13 per boe, improving our overall efficiency and profitability.

Now let's look at the status and future outlook for the Tyra redevelopment project for the remainder of 2024. I'm pleased to say today that we are only a few weeks away from restarting Tyra. As we presented in Q1, the Tyra 2 was restarted on 21st of March 2024. On 18th of April, while ramping up the export of Harald gas, an incident occurred in which the transformer providing power for the IP compressor short circuited. As communicated in Q2, there was an offshore incident impacting the LP transformer on 8th of July.

During Q3, the operator, TotalEnergies, has worked diligently to rectify the issues and ensure that we can safely restart Tyra. And at the same time, the operator has produced Harald gas in a temporary production mode from July to October. So the status of the project is that both the LP and the IP transformers are offshore on Tyra. The LP transformer is integrated into the system and the IP transformer is being integrated.

Implementation of protective measures into the electrical system to protect the transformers and other equipment are almost completed. Hook-up and commissioning activities have continued in parallel. So current outlook is that we are ready to restart Tyra in a permanent production mode between 15th and 30th of November as per the remit and ramp-up of production will be in line with reaching plateau in Q4 2024.

Now let us look at why we believe it's feasible to achieve plateau production in Q4 2024, building on the recent progress and the plans just presented here. So we have been producing gas from Harald West and Harald East fields from July to October. This production was conducted in a temporary mode, routing the gas directly to one of the export compressors. A full restart of Tyra will commence between 15th and 30th of November.

Reaching plateau production at Tyra in Q4 2024 is evaluated to be feasible due to the following 3 things. Firstly, the Tyra West and Tyra East facilities are ready to start up and all wells on Tyra have been unplugged. Secondly, the Tyra satellites Roar, Tyra South East and Valdemar have been reinstated. And thirdly, the fact that this work has been completed will allow for a faster ramp-up once Tyra is restarted.

So based on recent performance and the information just shared with you and in line with the remit just published by the operator, we believe that achieving plateau production by end of Q4 is feasible and at an exit rate of 2024 to be estimated above 13 mboe per day net BlueNord. And consequently, we have updated our Tyra production guidance to a range between 4 to 11 mboe per day for Q4 2024.

I'm also pleased to inform you that we have successfully completed the planned work on the permanent NOGAT line. This enables us to export gas both to Denmark via Nybro and to the Netherlands via NOGAT.

I will now present to you how we have achieved the strong base asset production in Q3, which is production from the Dan, Halfdan and Gorm hubs, and then provide an outlook and outline of the planned activities for the base assets.

Let us first look at the production data from the base assets for Q3 and the outlook for the upcoming quarter. So I'm pleased to share with you that the production in this third quarter has exceeded the production of the second quarter. And with the production of 25 mboe per day in net BlueNord, we are at the top end of our Q3 guidance range of 23 to 25 mboe per day net BlueNord.

This strong performance is mainly due to 3 things. First of all, we successfully have completed 14 out of 28 planned optimization jobs on Halfdan. We have increased the production potential from the Skjold field since August due to the Skjold Gas exploration pilot project. And thirdly, we've had a very high operational efficiency of 93% average for the quarter.

We expect a low base decline for the remainder of 2024 as we expect continued benefit from Gorm, on Dan and Halfdan, continued benefit from Skjold gas exploration project and also a continued focus on the operational efficiency.

So given the recent strong performance and our current understanding of the base assets and the continuous focus the operator, TotalEnergies, has on operational efficiency, I'm pleased to confirm that our guidance for the base assets remain unchanged with a range between 23 to 25 mboe per day net BlueNord for Q4.

So in summary, I want to highlight that the production from base asset is strong. It's within our guidance, and we have consistently met or exceeded our guidance for the last 15 quarters.

Now let us look at the rig activities for the DUC fields to support the ongoing strong production. So we continue to see positive impact from the production optimization work on Halfdan Northeast and Dan. We are using the Noble Reacher rig for the optimization work that we refer to as WROM. We initiated the WROM 2 campaign on Halfdan in Q1 2024, and we'll continue working on Halfdan into first quarter of 2025, where we have planned 28 different well interventions, which will contribute with additional production this year and subsequent years.

In Q2 2025, the Reacher will be used to carry out the Halfdan HCA gas lift project that will extend the life of the HCA wells. In Q3 2025, the Reacher will move to Gorm to execute Gorm 3 work. Two wells have been drilled in '24 with a Shelf Drilling Winner. We have decided to push the first Halfdan Ekofisk well to early '25 to be able to complete the workovers on Halfdan to proactively protect the production from these wells after completing HEMJ.

We will commence drilling on the first half Halfdan Ekofisk well, HCA-35, early '25, followed by the second Halfdan Ekofisk well, HCA-31. A final investment decision for the second well is planned for Q4 2024. So overall, the activity level is high, and we will continue to mature opportunities for the 2 rigs to support the production. So in summary, we see strong production and a very promising outlook for the coming years.

And finally, I'm pleased to announce that the Shelf Drilling Winner has successfully drilled the Harald East Middle Jurassic well in the eastern part of the producing field, Harald. The well will soon be completed for production and brought online in connection with the restart of Tyra. According to our assessment, the preliminary results are promising.

Our preliminary evaluations indicate the presence of 48 meters of good quality sand reservoir containing gas condensate. The estimated volumes are currently under investigation and will depend on initial production performance. The Harald East Middle Jurassic well is expected to increase production from the Harald field, extend the life of the Harald hub and enhance energy security in Denmark and Europe.

So to round off the operations piece today, I can say that the Tyra redevelopment project, our strong Q3 base asset production and the successful drilling of Harald East Middle Jurassic are all key parts of our strategy for 2024. Together with the operator, we are committed to deliver these operational objectives.

And now I will hand over to Cathrine, our Chief Corporate Affairs Officer, who will present the long-term outlook for BlueNord. Thank you.

[Cathrine Torgersen, executive]

Thank you, Miriam, and good morning to everyone. With the infill drilling program and Tyra 2 fresh in mind, I would also like to talk about how we work to support energy security in Europe and also what is a bit different being located in Denmark.

First of all, Denmark has a very stable fiscal regime for oil and gas producers. This is manifested through an agreement, which was made between the previous concessionaire in the DUC and the Danish state. The agreement, also known as the compensation clause, was entered into to ensure stability and the continuation of investments in the Danish part of the North Sea. And what that means in practice is that any fiscal changes specific to oil and gas taxation would entail compensation to the DUC partners. And this in itself is definitely an important differentiator compared to other jurisdictions and more important today than ever before.

Secondly, Denmark is absolutely at the forefront when it comes to the energy transition, this with a highly developed wind industry and also with bold objectives to be a CCS hub in Europe. BlueNord already plays an important role in Danish onshore CCS through its ownership in CarbonCuts and Project Ruby.

In addition to having heavily invested in wind and CCS, Denmark has, in contrast to most other countries, also set an end date for oil and gas production in 2050. This is through its 2020 North Sea agreement, which is 8 years later than our license expiry.

The North Sea agreement actually provides the current plays in Denmark with important stability for the next 3 decades. And with a focus on maximizing economic recovery prior to 2050, it also provides us with several opportunities to operate within a stable framework and with a set time line without any surprises.

Once Tyra is at plateau, Denmark will not only be self-sufficient, but it will also be one of the largest oil and gas producers in the EU. And as a net exporter of gas, Denmark will play an important role in the EU's energy security needs. Considering the alternative, which for the EU is LNG imports, this has on average more than 3x higher emissions intensity compared to piped gas from the DUC. And with energy security in Europe as a backdrop, that takes me over to the next slide.

With Miriam having gone through the infill well program, I'm not going to spend too much time on this, but I still wanted to highlight just how efficiently this drilling program can boost our gas production. With the first infill well adding 3,000 barrels per day overnight and with the success we have just announced on HEMJ, we're off to a very good start. And this continued activity will help us deliver important additional barrels in the next coming years.

Then we also have the development projects, all having unit technical costs of less than $20 per barrel. Not only are these economically attractive projects, but they're also carefully selected projects which can maximize the use of our existing infrastructure. We have this quarter matured 2 of these projects in particular as we are seeing potential synergies between them. These are Adda, which will be named Tyra North, and Halfdan North. Both have very strong economic profiles. And the first project can be tied directly back to Tyra's new processing facility, hence, the anticipated name change.

Halfdan North is also a project with simple unmanned infrastructure, which can be tied back to Halfdan. And collectively, the infill well program and the development has the potential to add more than 6 million barrels of resources to BlueNord. And that takes me to the final page, which shows the significant impact of the step change of Tyra 2 and the existing opportunities I just went through.

It illustrates the production contribution from our existing and in-plan projects, which takes us to 55,000 barrels a day on average next year and allows us to sustain a high level 5 years later into 2030. And by adding infill wells from Tyra to the plan, as you can see in gray, we're also in a position to actually exit this decade above 55,000 barrels per day. And we're not only sustaining production high, which supports future cash flow for the company, but this plan also allows us to move barrels from 2C resources into 2P reserves. So put in short, our production profile shows how we can sustain a robust production over time, which again will support future distributions to shareholders, and that without having to seek for inorganic growth.

And with that, I say thank you for listening and pass over the word to our CFO, Jacqueline, who will take you through the Q3 financials.

[Jacqueline Lindmark Boye, executive]

Thank you, Cathrine. So you've heard the highlights for the quarter from Euan and more detail on how the base business continues to deliver from Miriam as well as the plan as we get ever closer to Tyra producing again and the promising drilling outcome on HEMJ. We also continue to progress maturing our infill wells and development projects that Cathrine highlighted.

So with that in mind, I will now take you through the financial results that are the outcome of that operational performance you've just heard as well as a recap on our capital structure, which sets BlueNord up for the future, an update on our hedging for the quarter, and finally, BlueNord's distribution plan.

So 2024 underlying financial performance continues in the third quarter on a stable path despite volatility and uncertainty in the commodity and financial markets. As Miriam highlighted earlier, underlying asset operating performance continues to be strong. And with our hedging in place to partly protect from this volatility seen during the quarter, the realized price on commodities has improved for this quarter.

You can see for this quarter, we have had higher gas volumes, with 2 wells on Harald producing through the Tyra export facilities. Offsetting this, oil liftings are down this quarter, which was an unwind of the prior quarter's overlift, and we ended the quarter slightly underlifted.

Revenue, therefore, for the third quarter is $170 million compared with $171 million last quarter. The message on operating costs is consistent with the inclusion of activities related to well recovery and optimization, which continues to support the strong base production performance. OpEx for the quarter is $74 million and OpEx per boe reduces slightly to $31 per boe. As a result, the overall contribution margin has improved in Q3 and continues to be positive.

Reported EBITDA in the quarter is $85 million compared with $72 million in the last quarter. Turning to the summary income statement, you can see the full earnings position, where I'll clarify a few points below EBITDA. First, you can see EBITDA is supported by consistent revenue and OpEx. The reduction in other production expenses is mainly due to the change from overlift to underlift of oil, and this supports the improved EBITDA due to better effective prices on oil and gas in Q3.

Net financial items reflects the work completed early in Q3 with the costs associated with the repayment of BNOR14, which was completed as part of the issuance of the new BNOR16 bond. Other movements include the noncash fair value movement of the embedded derivative in BNOR15 as well as some higher interest expenses, as we highlighted last quarter our interest rate swap has closed at the end of that period.

We note that tax expense continues to fluctuate quarter-to-quarter, and this is mainly driven by a need to revalue our foreign exchange position on the tax losses, which are denominated in Danish krones. So the underlying current tax expense is as expected. Overall, we ended the quarter with a net profit of $11 million.

If we now consider the balance sheet, the main items to highlight relate to derivatives, working capital and tax. Derivatives have moved with lower liabilities and higher assets, which reflects the downward movement in the oil price late in the quarter, thus increasing the value of hedges outstanding towards the positive. On working capital, you will note an increase in cash on hand as well as lower receivables and payables. This is partly timing and partly unwind of higher receivables of oil outstanding at the end of Q2 due to late liftings in the previous quarter. This compares with the majority of oil receivables being paid before the end of Q3.

Finally, as a reminder, taxes payable includes the remaining tax payable for 2023 as well as an updated estimate of tax payable for 2024. The majority of the $53 million payable reflects primarily a cash tax payable in November 2024. There continues to be no regular Chapter 3 taxes payable in the current year.

Turning to cash. We report an operating cash flow before tax of $92 million. This compares with $57 million last quarter. Operating cash flow is up since last quarter primarily as the timing of cash receipts that affected Q2 has unwound in Q3 and is consistent with the working capital changes that were mentioned earlier on the balance sheet, after taxes paid of $6 million and a net financing inflow of $71 million attributable to the issue of the new BNOR16 bond, net of finance costs for the quarter and repayment of BNOR14. The remaining spend continues to be on Tyra redevelopment project and the drilling of the Harald East Middle Jurassic well. A total capital spend of $53 million this quarter is consistent with Q2.

Overall, we finished the quarter with a net cash inflow of $105 million. The liquidity position remains robust with $241 million of cash available and $270 million of undrawn RBL facility. This maintains our fully funded outlook with a closing available liquidity increasing to $511 million. So talking about cash leads us on to the capital structure, where I'll quickly refresh on the reset of the capital structure we completed in early Q3.

So the capital structure is now set 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, and we placed the new BNOR16 bond in the market in early July for $300 million and repaid 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 is $1.2 billion.

So moving now to the commodity price environment and how we are managing our exposure. So we continue to use hedging as a way to provide visibility over future cash flows, and we add volumes where it makes sense to do so. Similar to last 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 end 2026 is in the low USD 70 per barrel. And for gas hedging in this period, we have sought to take out more hedging to secure base pricing given gas prices have been consistently over EUR 30 to EUR 35 per megawatt hour. And the outlook to summer '26 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 to the end of 2024 58% on oil and approximately 50% on gas. This hedging approach continues to support our balance sheet and the capital structure, and it does help bring a level of certainty over our financial performance. So finally, a reminder about our distribution policy, which we will soon be delivering on.

So I've spoken about the cash flow we generate and particularly the cash flow to come once Tyra restarts. This will be used to support all stakeholders. I also spoke about our capital structure reset and how this has been an important step in enabling delivery of our commitment to shareholder returns. With these 2 points in mind, we maintain our plan to return 50% to 70% of our operational cash flow for 2024 to 2026. Beyond 2026, we will manage our business in a way that is consistent with our desire to maintain a meaningful returns profile, whilst maintaining a conservative capital structure through cycle, and we will make all future investment decisions accordingly.

In terms of timing, we have already delivered on several important steps prior to commencing distributions. And of course, the key item that remains is meeting the Tyra completion test. Once achieved, we will commence distributions as soon as possible.

In summary, 2024 financial performance to date reflects a consistent and stable underlying asset base, and that supports our balance sheet. Our hedging has supported this performance during some volatile and uncertain periods this year. And now we look forward to Tyra volumes very soon and rapidly increasing to further drive the cash generation we expect in the coming years. This is underpinned by a robust capital structure. So the business is poised for the step change as we look forward to our first distribution to shareholders very soon.

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

[Euan Shirlaw, executive]

Thank you, Jacqueline. So I hope that this morning has been helpful in giving an update on what we've delivered in the last quarter in particular. But I want to just take one step back and be very clear on what BlueNord has as its focus.

Firstly, we want to deliver the strongest operational performance that we can, whether that comes from the base assets or any development assets that we have. And then quite simply what we want to do is return as much of the cash that's generated from those assets as we can to our shareholders. And we'll do that at the same time as maintaining a conservative capital structure. So then what you've heard today is really about how we're going to deliver that potential.

So you've heard what we've already delivered this year, like our capital structure reset to provide us with the right level of flexibility. You've heard what we're delivering now, like positive progress on Tyra and the material HEMJ discovery. And you've also heard what we'll deliver in the future, with a clear and near-term path to meaningful distributions.

And with that, we'll now pause to allow any final questions to come in. But before I do that, I want to say thank you again for joining this morning and that I look forward to being back in one quarter's time when we expect to have more than doubled our current net production levels to over 50,000 barrels a day. Thank you.

[Unknown Executive]

Okay. First question, when will dividend be paid out?

[Euan Shirlaw, executive]

I'll take that one. So I think -- just to start, I want to reemphasize the principle that we've always been working on. So we have through the last 5 years invested in Tyra. We've invested in bringing on additional production capacity. We've had recent positive results with, for example, the HEMJ well, which will support the long-term performance of the business. And the principle that we have set the business around from that perspective is to say what we want to do is return as much of that cash flow as we can to shareholders.

We've announced a distribution policy that for 2024 to 2026 recognizes the journey that shareholders have been on and the support that we've had throughout and I think rewards them appropriately for participating in that journey. So that principle hasn't changed. We're going to return as much cash as we can while still maintaining a conservative balance sheet.

In terms of the timing of it, the link to Tyra and particularly meeting the Tyra completion test is still in place. So it's very much dependent on progress with Tyra. What we have seen recently is that we've had an acceleration of the time line around when we expect maximum technical capacity to be reached. And we are clear today that we expect plateau production to be reached in Q4 and we expect an exit rate of 30,000 barrels a day.

So I think you can take some comfort from the fact that it is moving in the right direction. But I think the main thing is to say that as soon as we are able to and we are comfortable doing so, then we will make our first distribution.

[Unknown Executive]

Congrats on great results and development at Tyra. Could you please share some thoughts on the convertible bond and how it will be refinanced? Should we model in a conversion? Or will it be taken out by cash or a new instrument?

[Jacqueline Lindmark Boye, executive]

I can take that question. So I think first just to say that the plan for BNOR15 will be reviewed over this coming period. But I would highlight that in the last refinancing of this instrument, we were focused on and pushed to get an option to settle it in cash. So having that in place does allow for this method of settlement.

[Unknown Executive]

How much buffer or contingency does the 30,000 barrels per day Tyra exit rate production include?

[Miriam Lykke, executive]

So the rate is based on that we get to plateau production end of Q4, and it does not have any buffer contingency included.

[Unknown Executive]

Will you announce the 2024 dividend in relation to the Q4 report?

[Euan Shirlaw, executive]

We'll announce the 2024 dividend as soon as we can. I think the Q4 report is in February 2025. I think we would hope to have announced a dividend in advance of that, significantly in advance of that. So no. I think the answer is it will be -- assuming everything goes according to plan, it will be announced prior to February.

[Unknown Executive]

And then with reference to Slide 24, that has a bar chart of 50% to 70% of net operating cash flow also in 2024. There is reason to believe that the most significant parts of the first dividend are available liquidity after refinancing and that one, therefore, knows with a high degree of certainty almost exactly what the first dividend will be even if Q4 is not finished.

Question one, why can't one then guide the size of dividends already now since there's such a short time until the time of payment?

[Euan Shirlaw, executive]

So there is no direct link in our distribution policy between the available liquidity on our balance sheet and the distribution policy. We have 50% to 70% of net operating cash flow. And there is a reasonable degree of certainty around that number because we have the first 3 quarters already in the books. But ultimately, the quarter that has the most potential variability around it is Q4, and that's dependent on when Tyra comes on stream and when we are -- sorry, when Tyra comes on stream and then what commodity prices are during that period.

So again, assuming everything goes according to plan and we have Tyra with maximum technical capacity in the second half of November, as we get more certainty, we'll be communicating what the NOK or the per share dividend is. But equally, we want to communicate that once we are comfortable that we have a good understanding of what the number is. I think I go back to kind of the point that I said at the start, which is we -- I go back to kind of the point I said at the start, which is that as soon as we can pay one, we will.

[Unknown Executive]

Yes. And the same person has a follow-up question. Based on the available liquidity, this can quickly be between NOK 120 and NOK 180 per share. Is that wrong?

[Euan Shirlaw, executive]

So what we will do is we'll pay out the dividend for 2024 based on the full 2024 operating cash flow. When we go forward -- I think the starting point is that we will pay a dividend on a quarterly basis. So in principle, the 2024 dividend or the first dividend will be larger. I think what you can see if you run 50% to 70% over the operating cash flow is that gives you a good sense of what the first distribution will look like. And that's the policy and that's what we intend to do.

[Unknown Executive]

Yes. Do you expect additional wells to be required to recover the estimated 8 million barrels of reserves in the HEMJ reservoir? Is there an expected production rate for the HEMJ well?

[Miriam Lykke, executive]

So I can say that there will only be this single well. So the volume that we have reported is based on that single well. And so right now, we are looking into the post-drill results, and it looks like that the rate could be a little bit better than we thought initially. But we will get back when we get the well on production.

[Unknown Executive]

Will the distribution of dividend take place before year-end? And will you start with a substantial lump sum and thereafter a quarterly dividend? I think you've almost answered it.

[Euan Shirlaw, executive]

Yes, I think I've answered it before. But in the principle that we're going to read out all the questions, I think I can quickly say again, the timing of when we pay it will be dependent on when the Tyra completion test is met. And the first distribution is likely to be larger on the basis that it covers the entire 2024 period. Whereas going forward, it will be done on a quarterly basis.

[Unknown Executive]

What was the pre-drill estimate for the HEMJ well in terms of hydrocarbon column? Was it less than 48 meters?

[Miriam Lykke, executive]

So again, I can say it looks like the well has exceeded our expectations, so better than the P50. But we will come back once we have the well on production later this year.

[Unknown Executive]

Can you comment on the HEMJ discovery in terms of possible volume outcomes? You previously said that the well could add 8 million barrels net to BlueNord in a success case. Should we view 8 million as P10, P50 or P90 case?

[Miriam Lykke, executive]

So first of all, I can say that we haven't booked the reserves from this well yet. But the P50 is 8 million that we went out with earlier. And right now, we are looking into, after the positive results, to see what that looks like.

[Unknown Executive]

And then first question, can you provide some color on the size regarding the first planned distribution in 2024? And follow-up question, the approximate 150 million escrow to Total, when -- will it be released or which milestones needs to be met for it to be released?

[Jacqueline Lindmark Boye, executive]

So I think we've covered the point on distributions. But regarding the escrow with Total, that also needs the Tyra completion test to be met.

[Unknown Executive]

Can you elaborate on your shareholder distribution plans? Should we expect introduction of quarterly dividend once Tyra has reached plateau? Based on your available liquidity, as of year-end, there should be room to front-load distributions more than your current framework suggests. Is it likely or possible that you will kick off distributions program with an extraordinary dividend or buyback that would come on top of a base distribution level?

[Euan Shirlaw, executive]

So taking the first part of that. So we expect the distributions to be made on a quarterly basis once -- a quarterly basis once Tyra has reached plateau. I think we will also have to obviously meet the Tyra completion test. But once that happens, then we expect to be distributing on a quarterly basis.

I think to the second part of the question, I think the principle will be that because the first distribution that we make covers 2024, which is likely to be the majority of the year, then that distribution will be larger than it will be going forward, because going forward, it will be on a quarterly basis. But again, I think we've probably said enough of that in terms of the framework and what that means to be clear that we are sticking to the current framework. There's no change to the framework. It's 50% to 70% of operating cash flow at the moment.

[Unknown Executive]

Congrats on another strong quarter. First question, following yesterday's positive message related to the HEMJ well, what does this mean for the Svend redevelopment project?

[Euan Shirlaw, executive]

A very good question.

[Miriam Lykke, executive]

Yes, a good question. So this means, of course, that we will look into the Svend redevelopment project because that always required that we would be able to produce from Harald. So that's what we will look into now.

[Unknown Executive]

And then second question, what is a reasonable exit rate to model for 2024, given that you previously communicated 55,000 barrels per day with the HEMJ well now expected to contribute with volumes towards the end of the year?

[Miriam Lykke, executive]

So the thing is that Tyra, as we have communicated, will go to plateau. So even though this well comes in, you can't go over the plateau rate. But it will, of course, help us get to the plateau rate.

[Unknown Executive]

Third question, when do you expect to receive your restricted cash from TotalEnergies? Would it be Q1 2025? And do you think current gas prices are attractive enough to add on more hedges during Q4?

[Jacqueline Lindmark Boye, executive]

Yes. So I think I answered again the question on the restricted cash. So it will depend on the Tyra completion test. So once that is met, then that escrow will be released and replaced with a letter of credit. So in terms of hedging, that is something we've certainly been looking at and we continually do update. So the prices are attractive right now. And so we've been active in doing that. And I think we did show that in our latest position as well in the presentation of the hedging levels that we have, and we'll continue to add on.

[Unknown Executive]

And then the last question from the same person. Regarding dividends for 2024, can you provide a clearer picture of where within the 50% to 70% range on net operating cash flow you intend to target?

[Euan Shirlaw, executive]

I think that's something we'll communicate near the time. But I guess I can say a couple of things about principles. One is that -- I mean, just to be clear, we don't intend to carry any more cash on the balance sheet that we need. So I think you can form a view around whether we think about it in terms of an extraordinary dividend or not. I think what we're saying is that we'll want to have a comfortable working capital position and liquidity position, but we're not going to sit with hundreds of millions of dollars on our balance sheet just because it sits outside kind of the policy.

I think where we will look to fall within that range will be dependent on the liquidity position at the time and how Tyra is progressing. I think given the liquidity position that we have at the start, you could reasonably expect us to be closer to the top end of that number in the first instance. But equally, I think we need to be clear that that's going to be something that's going to be defined and there will be more clear guidance on as we go forward.

And I mean, maybe just one thing also to add from my perspective. I think it is clear today that there are a lot of questions about the distributions, and I think that's very fair. I think, unfortunately, we are at the place where we are very close to Tyra starting up. And ultimately, while we've been clear on what the framework is, what we don't want to do is overpromise and under deliver when it comes to the first distribution. I think this is a good distribution policy and one that will be beneficial to the shareholders. But I think we also want to be clear that we need to be confident in terms of the specific numbers that we'll be able to deliver.

And I guess the final thing I would just say on that, we will be very clear going forward in terms of what the numbers are. And we're getting close to that point. But equally, given we are still in the important part of making sure that Tyra starts up according to plan, safely and continues to produce, we also want to be clear that we need to do that before we can give any more certainty.

[Unknown Executive]

And then as a follow-up, will the distribution be each quarter going forward?

[Euan Shirlaw, executive]

Yes, that's the expectation.

[Unknown Executive]

Yes. Are there other prospects in your portfolio that could fall under the definition exploration just like HEMJ that you view as likely drilling candidates over the next 3 years?

[Miriam Lykke, executive]

So as we presented earlier today, we have a lot of interesting infill wells that we will keep drilling next year. So within the next 3 years, that is where we see that we will drill infill wells. So at the moment, no.

[Unknown Executive]

And then how long do you expect to be able to stay above 50,000 barrels per day with a new discovery added as well?

[Miriam Lykke, executive]

So we haven't -- so since this is a new finding, we haven't done the -- sorry, the calculations for how long this would last. We will need to get the well on production first and see how it produces, and then we can come out with what we think 2025 would look like.

[Euan Shirlaw, executive]

But I think what we can say in terms of a principle is that we've published the long-term production profile in the presentation. I think one of the things that HEMJ adds -- well, it doesn't necessarily add higher volumes. What it does is it elongates the plateau production level on Tyra.

[Unknown Executive]

What signs are you seeing from the operator in terms of going after tieback opportunities over the next years?

[Miriam Lykke, executive]

So we're seeing that they're doing a lot of good work on the different development projects, and we're seeing that they're doing a lot of work on the infill opportunities. So we see that they have picked up activities. And also, I think the fact that they went out now and told about this find is a good sign that they really want to do something in Denmark.

[Euan Shirlaw, executive]

I think it also demonstrates that Total's exploration approach is one where, yes, they have high-impact exploration in places like Namibia, but there's also very high-impact exploration -- sorry, high-impact infrastructure-led exploration that you can do in places like Denmark. And I think it's very positive that we've been going out and doing that.

[Unknown Executive]

Yes. Apart from meeting the base requirements under the RBL, would you like to add further hedges on natural gas once Tyra hits plateau? And do you find current forward natural gas prices for '25 and '26 attractive enough to lock in?

[Jacqueline Lindmark Boye, executive]

Yes. I mean, currently, when we're looking forward, there's certainly attractive pricing. So the opportunity to put in more hedging where we can certainly does make sense. Of course, as you mentioned, once Tyra hits plateau, obviously, we want to see those volumes from Tyra to make sure that, that is there and then make sure we're hedging accordingly. So that's, of course, something we do consider as a part of our policy.

[Unknown Executive]

And then final question. Do you plan to do buyback of shares?

[Euan Shirlaw, executive]

Yes. So we refer to the distribution policy as being 50% to 70%, and that's intended to encompass both dividends and buybacks. So I think it is certainly a concept that we're considering. But equally, it will be dependent on things like the share price at the time. But yes, a buyback of shares is something that's certainly considered as part of the distribution policy.

[Unknown Executive]

And that concludes the Q&A session. Thank you.