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Earnings Call Analysis
Q2-2023 Analysis
BW Energy Ltd
BW Energy's Q2 has been marked by significant operational progress. Notably, the completion of three producing wells at the Hibiscus field has been achieved, with a fourth well being near completion. The start-up of a second gas lift compressor to augment Tortue field production signifies further enhancement of their output capabilities. While there was one unfortunate lost time incident, it's noteworthy that the company has maintained an impeccable record in environmental operations, inclusive of the entirety of 2023 thus far.
The company navigated through Q2 with an EBITDA of $39.3 million and a net income of $5.3 million. These figures are buoyed by one lifting for BW Energy amounting to 950,000 barrels at $75 per barrel, contributing significantly to their revenue stream. A substantial RBL accordion has been secured and drawn, enhancing their cash reserves to approximately $233 million.
BW Energy is revising its development plans for the Maromba asset in light of market inflation, aiming to ensure an optimal and sustainable growth trajectory. Despite the review, expectations for peak annual production remain robust, forecasted between 30,000 to 40,000 barrels per day. Management demonstrates prudence by deferring FPSO payments, aligning them with the revised project timeline and awaiting a conclusion on project financing.
The successful acquisition of 3D seismic survey data for the Kudu asset presents promising indications and potential upsides. This milestone lays the groundwork for advancing the gas-to-power project concept in dialogue with government bodies, instilling confidence in the company's prospective operations.
The company celebrates a hassle-free restart of the Golfinho field with Petrobras at the helm, where successful production stability post-revamp resulted in an average of 9,000 barrels per day. BW Energy stands on the brink of closing this asset acquisition, dependent on forthcoming formal certifications.
The earnings presented show a favorable financial landscape, with operating revenues at $87.6 million from increased barrel sales and lower operating expenses, resulting in a healthier EBITDA of $39.3 million. The operating profit stood at $21.4 million, though additional costs related to the Golfinho acquisition slightly moderated this achievement. Despite these outlays, the financial stability is evident, with a sound profit before tax of $15.8 million.
Investments in the Ruche/Hibiscus development and the Kudu seismic have augmented the balance sheet's assets, underpinned by a fully drawn RBL. Trade payables naturally rose with the heightened activity, but the company's liquidity remains robust with a favorable end-of-quarter cash position of $233.5 million.
BW Energy gears up for a remarkable uptick in production, soaring beyond triple its Q1 output, potentially reaching 50,000 barrels of oil by year-end. With Golfinho's acquisition nearing finalization, new explorations underway at Dussafu, and financing methods like Golfinho oil pre-payment facilities being contemplated, the company is strategically positioning itself for sustainable growth and operational efficiency.
A warm welcome to the second quarter presentation for BW Energy. This presentation will be hosted as usual by our CFO, Knut Sæthre; our COO, Lin Espey; and myself, Carl Arnet. Please note our disclaimer. Highlights for the second quarter. three producing wells at Hibiscus has been completed and has been handed over to operations. And we are on a very good track to complete the fourth well and expect to have that handed over to operations shortly as well.
We have managed to start the second gas lift compressor after some initial commissioning issues, and it's now supporting the production from the Tortue field and that will be covered a bit more lately as well. Golfinho closing is imminent, and address that later. We had an EBITDA in the second quarter of $39.3 million with a net profit of $5.3 million. There was one lifting in the quarter to BW Energy for 950,000 barrels with a lifting price of $75 per barrel. We had a $100 million RBL accordion completed and drawn and cash available to the company is about $233 million.
We had, unfortunately, a lost time incidents in the second quarter, which was caused by one of our third-party support vessels which was there for the drilling operation. Otherwise, we had all other activities has been incident-free. We also had no environmental incidents in -- so far in 2023 and have had none since we started operations.
I will then go on to cover a bit more detail Dussafu assets, production updates. We had a gross production in the quarter -- second quarter of 1.4 million barrels, equal to about 15,200 barrels per day. The production was positively impacted by first oil from the two Hibiscus wells. We did, however, struggle a bit with the completions of these wells, and they were a bit delayed in coming on production, which is, of course, then reflected in the number of barrels that we produced.
The OpEx declined in line with the production increase to about $35 per barrel. And we had one lifting, as I previously told you. We commenced the third Hibiscus well in mid-July. That has been handed over, and we are now drilling the fourth Hibiscus well. The gas lift compressor was lifted and installed and commissioned. We had some commissioning issues, and it was a bit delayed in coming on stream, as you know, compared to our initial plans, but it's now in operation and is performing well.
We have a current well capacity of approximately 30,000 barrels as we speak, and we are producing close to that, but we do have some ESP electrical issues related to one of the Hibiscus wells. And we may have to do an intervention that is currently being evaluated by our team. The Hibiscus/Ruche drilling program is continuing, and we are pleased with the operation today. We are drilling the fourth Hibiscus as well as we speak, the DHIBM-6H.
And we, as I said, expect to hand that over to operations early September. The campaign is targeted a further to Ruche Gamba wells, and we have now 6 firms and 2 options. We -- company is still evaluating further exploration and production drilling targets for the two remaining options. The current production outlook, as we speak, we produce about 27,500 barrels per day. We expect the next lifting to BW Energy in -- of 950,000 barrels in October. There will be two partner liftings in the meantime.
We expect production in the range of 7 to 8 million barrels, slight reduction compared to previous estimates. And we expect them to have an annualized average OpEx of $25 to $28 that is just related to, of course, the number of barrels that we expect to produce. And you can see here from the captions, the quarterly lifting schedule in the bottom left-hand corner of the slide and also the gross production profile.
Then on to the Maromba assets. We have decided to step through the development plan and optimize it with respect to the ongoing inflation that we see in the market. There are some significant shifts in the cost of inputs to a project like the Maromba development. And we, first of all, want to step through it to see is the plan the most sensible plan we can have in the current pricing environment. And of course, we are still -- the overall development is still awaiting the project financing to conclude.
So we feel we have time to step through and assure ourselves that we have the right development plan in the current environment. We still expect the peak annual production in 30,000 to 40,000 barrels per day range. We have also deferred the payment of the FPSO purchase in line with the revised project plan. But we are very optimistic with the respect to our ongoing efforts. So we expect to have a good revised plan for Maromba development fairly shortly. And of course, we will inform you soon as we have the conclusions on the investment and the project financing.
Then on to Kudu. We have acquired 3D seismic survey, and that was completed in May. The new data set will enhance both our model and derisk potential upside in the targets or the drilling targets, I should say, in our blocks. This is a very significant large block. We have already seen very high improvement in data quality, and our geoscientists are now analyzing the new data -- the new data tube that we have acquired. And we have some early indications, which, of course, tells us that the -- there is a lot of promise in the Kudu block as well. And the new results from Orange Basin is, of course, also underpinning and assisting in this analysis.
We are still executing the concept or working on executing a concept for planned gas-to-power project, and we are in dialogue with the government in -- or government bodies, I should say, in about this. And we are extremely optimistic with respect to the future of our Kudu assets. I think that is the conclusion today. As we said earlier, we expect to have the final analysis done approximately 1 year after we completed the survey so that will be more Q2 next year.
On to Golfinho. We are extremely pleased with the smoothness of the start-up of Golfinho. As we have related to earlier, this field has been shut in for a significant revision to the facilities. And it was recently restarted by Petrobras. The restart went extremely well, and the production has proven to be very stable. So we expect closing imminently. We are waiting some formal certificates of approval. But -- well, as you understand, these certificates or issuing these certificates is outside of our control, but we are working with the authorities. And we expect, as I said, imminently to be able to close this.
The expected production from Golfinho is around 9,000 barrels per day. And again, we have a nice proven recoverable resource of 38 million barrels of oil equivalents and also some gas potential. I will then hand over to Knut, who will cover the financials and sum up this presentation.
Welcome, everyone, to the financial part of this presentation. Just to be clear, I'm going to comment on the quarterly figures. We have this morning also issued a more formal first half report of 2023, which is then covering the half year figures and commenting accordingly. But now I'm focusing on the quarterly figures. So to the income statement, we had operating revenues of $87.6 million, an increase from the first quarter we also sold more barrels.
In the quarter, we had a lifting in May, which gave us a good revenue. We also had a few gains on the derivatives from the commodity hedging. And operating expenses were lower compared to previous quarter. We also significantly lowered the OpEx per barrel giving us an EBITDA of $39.3 million in the quarter. And just to highlight again, we have some additional costs in the quarter related to the Golfinho acquisition. We have been ready for some time to take over operations from Petrobras on the Golfinho field.
And in the quarter, we had about $11 million that were related to the Golfinho operations that we currently are undertaking. On the depreciations, it's somewhat higher. We'll depreciation from the Hibiscus/Ruche development. So today will also increase going forward, bringing the operating profit to $21.4 million in the quarter. Then on the financial items, nothing significant to focus on. Net financials was $5.6 million expense and then giving us a $15.8 million profit before tax. And the income tax expense with -- that comes with higher production, $10.5 million, giving us a net profit for the period of $5.3 million.
Over to the balance sheet. It's more or less the same comment. As usually, we are investing a lot in our Ruche/Hibiscus development, which you can see here under the E&P tangible assets. 47.6% increase in the quarter. And also in the intangible assets, we have costs or CapEx related to the Kudu seismic. On the liability side of the balance sheet, you can see we had a drawdown of the RBL accordion. So the RBL is now fully drawn.
And then also, you can see on trade payables, we have a very high activity and thereby also increased trade payables in the period. So the balance sheet is growing, but still giving us a robust and good balance sheet. For the cash situation, we started off with $166 million in cash at the start of the period, had operating cash flow, mainly then related to the May lifting of $57.9 million. And as mentioned, quite high investments in both the Dussafu license and also in the Kudu license of $75.6 million. And then we have the net financing activities, which is the net of the RBL drawdown and financial liabilities related to the dollar lease, giving us a net of $85 million and a cash position of $233.5 million towards the end of the quarter.
So still giving us a good cash and liquidity situation to continue our investment activities, both in Gabon and elsewhere. Then I go over to the summary of this presentation. So we have a step change in production. In Q2, we had a doubling of production. Right now, we are up to more than 3x what we had in the first quarter at least. And as you can see from the right-hand graph, if everything goes as planned on Tortue, Hibiscus and Golfinho, then we will get up to approximately 50,000 barrels of oil towards the year-end.
So just summing it up on production and exploration. We're optimizing the Dussafu output. New gas lift is finally there to support the Tortue wells. We have some work to do on the one well where we lost the ESP connectivity, but we'll -- we're doing our utmost to get that rectified. And then we'll also continue to assess the Kudu potential from the seismic. On the development side, it's -- we will continue to drill in Dussafu, also having some interesting exploration targets to look at.
We will also then finalize Maromba development plan and work on the financing and progress the Kudu gas-to-power project. On the corporate side, good cash position, as mentioned. Complete the Golfinho acquisition that is very important for us. The field has started up and is producing as predicted. So just hopefully, in a very short time period, we can get the final certificates that is needed to close this transaction.
In the meantime, we are working on also new potential financings. We have the RBL as mentioned, but we are also working on a possible Golfinho oil pre-payment facility that we hope to close in the quarter. And then most importantly, the operational cash flow is imminent for us to fund new projects and future returns. So that concludes my part of the presentation. So then we're over to the Q&A session. So I leave the word back to you, operator.
[Operator Instructions] The first question will be from the line of Teodor Sveen-Nilsen from SB1 Markets.
[Audio Gap] how is that incorporated in your updated production guidance? My second question is on Golfinho. Should we expect any revenue recognition at all in Q3 from Golfinho? And my third question that is on [Lamido Kwai] Of course, exciting times [Lamido Kwai] with all the discoveries there. Could you please discuss potential for the gas and potentially pricing for the Kudu gas in the future?
Thank you, Teodor. We lost your first question. We couldn't hear you. Can you please repeat that?
Yes, sure. No problem. The first question that was regarding the ESP and the well intervention you're talking about. I just wonder how is the potential well intervention incorporated into your new updated production guidance?
Thank you. I guess I could quickly answer the second question, revenue in Q3 for Golfinho. So we will record revenues for Golfinho as soon as we take over, which is expected imminently, and we can elaborate a little bit more on that. So if -- just as an example, if the closing is 1 September, then we will recognize revenues from 1st September. But of course, it's associated with liftings. So that's when it really hits the books. So that's it on Golfinho revenues. So the first...
Sorry for interrupting, I think that was the question. Do you expect any liftings in the third quarter?
No, we do not...
I understand that there will be some production.
There will not be any liftings as far as I know. Petrobras did a lifting now in July, and they also did another one in August. And when closed, we have to come back to you with some guidance on Golfinho liftings for us.
So the first question, Lin, can you please say something more about the shape on Dussafu.
Sure. Regarding the production and this forecast incorporates the issue with the [double ESP] and [indiscernible]. Now that incident happened relatively recently, but we have endeavored to account for the loss of production in our forecast going forward. And I believe that it forecasts an intervention to remedy the issue. So there's going to be downtime loss production until we do that intervention, which is scheduled in a couple of months.
Good. And then the third question that was related to Kudu and gas pricing. That was the way I should understand it, Teodor?
Yes, it's Kudu and potential exit route for gas and also potential pricing mechanism for the gas.
I can try that. The -- there are several possible exit routes for the gas. And we have looked at before a route to Luderitz But there's also other possibilities. But I think the current plan is to land the gas in Namibia. And then, again, of course, we are looking at several possibilities here. The location of Kudu is very good for, let's say, any gas -- other gas as well associated gas that could be produced in the Orange Basin.
So we expect there to be some work also with potential partners on establishing a gas gathering network. But it's early days, and we are speculating a bit at this stage. But we have a concept, of course, for taking our gas for the gas-to-power project to the beach. But of course, as we have a potential for more and more gas, we may have to revisit what we -- where we land the gas. The current plan is to take the gas to a power station. And the gas price will be a negotiation based on a gas-to-power agreement and a power sales and will -- the gas price will then be a result of the development cost and the achieved price on the electricity sold.
But that's also a bit early days as we are -- as you can understand, looking at various possibilities for the amount of gas that we need to take to or to land in Namibia. So I know it's a bit of a, let's say, neither here nor there answer to your question. But the Orange Basin is super exciting, and there's a wide range of outcomes that are being -- I'm sure you read in the press the same as we do. And there is a lot of speculation also from Namibian parties going on as to the size of the resources in Orange Basin.
And I'm sure you also appreciate that this will affect both where we land eventually and also the technical solutions that we will use. But I think we have the right tools and the right location to become a gas hub in that part of the world and then we will have to see what that becomes.
The next question will be from the line of Tom Erik from Pareto.
I have a couple here. On CapEx later this year, how will that develop compared to the second quarter? Should we expect kind of a stable investment level? Or will that come down or activity of plan now? And on capacity on the FPSO as well now that the distribution is ramping up. Should we think about that 40,000 barrels per day? Or should we think about that at a somewhat higher figure some upside, at least given the debottlenecking potential that has been mentioned a bit earlier I think? And lastly, is there a time line for when you can expect some kind of Maromba uptake now that of the ties in [Brazil] is up to move forward?
Thank you, Tom Erik. I can take the first question to the CapEx. So we have a very high activity, as mentioned in the presentation. We have invested more than $150 million in the first year. It's mainly Dussafu with all the drilling and also in the first quarter also with the MaBoMo installation and startup. And in Brazil, we have more concept work ongoing studies that is out of the $150 million, that is about $15 million. That relates to Maromba.
And going forward on Maromba, it will still be study work for the new concept, but it will also then be the first of two payments to BWO of $30 million in October and then later, $20 million in April next year. That's the new agreed timing of the payments for the Polvo FPSO. For Kudu, we spent about $30 million in the first half of this year. That was mainly related to the seismic, let's say, at least $25 million of those were related to the seismic and the rest also for concept work and commercial preparations.
And going forward on Kudu, there's a little bit left for the seismic, about 5-ish and so another $7 million, $8 million for the rest of the year, I suppose. And the rest is for Dussafu with continued drilling. So let's say, it's $70 million, $80 million left for the remainder of this year and also something for next year, depending on targets and what to utilize on the options. So if that is clear to you, then we can go over to the next question on Dussafu production.
Yes, I can take that, Knut. So our production guidance of 40,000 barrels a day from Dussafu operator barrels hold. We're not changing that yet. Very pleased with the performance of the first three wells that we put online. They're coming in as expected or a little bit better. And we are working with BW, the FPSO operator, to see about expanding that capacity, but we're not quite yet there to propose any changes to our current forecast. But we're working on it.
Good. Just to add back to the CapEx question. Of course, Golfinho is something that we expect to come as well. I didn't elaborate on that. But I would prefer to come back to that at closing, we would obviously then issue a press release and say something more about the payments to Petrobras and Saipem, which would then come in addition to what I mentioned.
So the third question was Maromba updates. Maybe I can take that. As I said, we are the -- we are stepping through our development plan. We have done some updates. We do expect to see a slight improvement. Even though it is an inflationary market, we do expect to see a bit of improvement in our overall CapEx, but this is being detailed as we speak.
The real issue though is that we are working hard to put together the financing package for the project. Let's say, some of our previous trusted banks have pulled back from financing E&P investments. And we are looking at other sources. We are currently working on a package for the infrastructure and looking at various ways to either get infrastructure financing or lease financing for parts of this infrastructure.
So nothing is landed yet, and that is driving the schedule. We will have our new development plan technically vetted by the end of this year, November time frame. And then, of course, we hope them to trigger the project as soon as we can when we have the financing package in place or packages, I should say. There are several sources.
Tom Erik, does that answer your question?
Yes. Much appreciated.
As there are no more questions in this call for now, I will hand it back to the speakers for any written questions.
Thank you, operator. We have a lot of questions to answer. I try to structure them a little bit. Let's go for Dussafu first. So Lin, if you could elaborate a little bit more on the, let's say, ongoing plans for Dussafu and the current well that we're drilling the 6H, when that will be up and producing and maybe also say something about what we're going to do after the 6H?
Okay. we are drilling the fourth well in the program, and it's the fourth well from the Hibiscus field and drilling is going well. We've actually have started the completion phase of it. And I think it's anticipated the well is going to be handed over in 2 to 3 weeks. We'll bring that well on. So that will be the fourth well. And as a reminder, Ruche Phase 1 was sanctioned as a total of 6 wells.
So this -- we're just about to complete the fourth well, and then we have two remaining wells. And these two wells will target the Ruche field, which is the adjacent field to Hibiscus. So there are all these wells be drilled from the MoBoMo platform. And so we'll bring those on. And as Carl mentioned, we are considering drilling some -- doing some additional activity, whether more development wells or a little bit of appraisal exploration -- appraisal, we're evaluating that and to see whether we want to extend this drilling program, but no official announcement on that yet.
Okay. And then there is a follow-up question from Nick in Sefton Place. If you had to do an intervention to fix the electrical issue on the Hibiscus well, what would that involve? And what might it cost? Would you need a rig to do this?
Okay. The -- so as a reminder, this type of downhole electrical submersible pump system is actually wireline retrievable. So in theory or not in theory, in practice, you can pull the pump and motor out using wireline and not necessarily have to have the rig. We're still trying to identify what the issue is, and we haven't made a determination of which type of intervention we're going to do, whether it's a wireline treatment or use the rig that's location to pull the entire completion out. So I did -- the cost for if we do a work rig workover pull the entire tubing and completion out, the cost of that is gross $8 million to $10 million.
And as a follow-up to that, again from Nick, can you just confirm the amount of expected CapEx remaining for Hibiscus/Ruche Phase I end of June? And can you give some more color on why the CapEx estimate has gone up, given drilling performance seems to have now improved?
I can answer the increase in the CapEx. And the remaining CapEx, I think, Carl, you may have already answered that there. But the uptick in the CapEx that we've announced is primarily reflects the issues that we had in 2Q, which related to the completion installation problems with 3H well, running the completion. We had a number of issues that we had to work through. And then in 4H, we had the casing that we had to sidetrack. So those are two significant events that we've had to account for now in the CapEx.
Good. And then there is a question about liftings. We had lifting now in July. There will be another lifting for partners in August and another four partners in September. And if everything goes as planned with taking on the new well, we will then have liftings on a monthly basis. So for the fourth quarter, there will then be three liftings for BW Energy. And going forward, there will be monthly liftings.
I think we have covered most of the Dussafu questions on this. So if we then move on to -- there are lots of Golfinho questions. You say that Golfinho is producing and in accordance with expectations. According to marine traffic lifting has commenced. Yes, I mentioned that. How much has been lifted and who is entitled to the sale of the oil up until closing?
So that is Petrobras, and there has been two liftings to Petrobras, one in July and one in August. It is producing according to expectation. They started up early June production, bringing up in total six wells. The first two wells came up as expected, those are on ESPs. And the four remaining took some time. There are two gas lift compressors on the Vitoria FPSO, and it took some time to get those up to operational uptime, so to say. It was a little bit up and down. But when they came up, the average production cost of 10,000 barrels in July. So it's producing as expected. So I don't know if you have anything to add, Lin or Carl?
No, I think that's some it up.
Yes. And then you have guided on two infill wells to be drilled. How many months after close do you expect to commence the drilling campaign? And when will this be completed?
So I can touch on that. So once we've acquired the asset, then I think, nominally, we have -- there's two infilled wells that we've identified a gas well and oil infield well that we like, and those are identified as the first two capital projects. So we would work that up. I think the forecast, it's a little over a 2-year process before we would be able to get those two wells online.
Okay. And then next question, you will maintain a robust balance sheet and liquidity supported by RBL and possible Golfinho oil prepayment facility. Is this a new RBL, including Golfinho -- the possible Golfinho oil prepayment facility, is that related to offtake? Please elaborate.
So the RBL according, that is the $100 million that we drew down in Q2, that is related to Dussafu and has nothing to do with Golfinho. What we said in this presentation is that we are working on a trading facility, a prepayment facility that we hope to get closed in this quarter and that is also then related to a marketing agreement with an offtaker.
And then there is a question closing of the Golfinho deal is expected imminently, and you're awaiting formal certificates of approval, is that only for IBAMA. What other formal certificates do you need?
It's IMABA -- It is what we're waiting for is a certificate, and we hope to see that coming out rather soon, then we can go into the closing procedure, get everything...
Just a quick -- we first have to have the IBAMA then there is about 48 hours, and then we should have the final ANP approval. And then it's the importation of the unit as soon as we close with Saipem. So those are -- these are the outstanding bids and the first that we are waiting for is IBAMA.
Yes. Ticker of the FPSO Vitoria will be when the current short-term lease and operate contract for the FPSO expires, who is paying for the FPSO now and until close of the deal?
So that is Petrobras. And we will then take over or after closing, then the cost goes to BW Energy. And the plan is then to take over the FPSO after some handover time in the fourth quarter.
And then the final question that I see here on Golfinho's, how do you see the production of the restart of the field? You say something, Carl?
Well, the field has been shut in for a while, and we did expect to see some, let's say, increased level of production due to well recovery. And that has appear more or less as we expected, in line with our, let's say, theoretical model of the reservoir. We do expect to see some downtime on the unit as we have seen a very good start up. But I think it's prudent to expect there to be some equipment malfunction after a longer period of non- operation.
So we expect about 9,000 barrels, as we said in our presentation earlier. That is -- it's not super conservative, but it's not super optimistic either. It's -- I think we try to strike kind of middle ground in that estimate.
Okay. I think that was all for Golfinho. If I continue down on the list, there is a question from a Norwegian investor that have seen that we have registered a company in Norway, BW Energy Norway Management. Why was that done?
That is a pure management company. We have utilized BW Offshore for some supporting functions. Now we have moved some of the employees in Norway over to a separate management company. So there's nothing big news around that registration. It's just a practical thing.
Then I think we have answered some of these. Let me see there's anything. Regarding cash flow for H2, considering the payment of $30 million for the Polo FPSO and ongoing CapEx in Gabon, potentially Brazil, are there any sources beside existing cash on hand and operational revenue? What's the situation regarding the submersible drilling that was acquired for Q2?
I think we have answered the first part of the question related to financing. We are exploring trading facility for Golfinho in the shorter term. And then on the longer term, obviously, it's the Maromba financing that is being worked on situation on the Leo maybe shortly, Carl?
Yes. Well Leo is in cold layup. We are extremely pleased that we managed to acquire this unit at a very truffled market. So we are warehousing a very large, very new build unit that is very, very well adapted to the use we envisage as a gas hub in the Orange Basin. So yes, it's under cold layup and waits when we formally launch a project that will use it. But we are very, very certain we will use it as we are getting more and more confident that there will be plenty of gas coming out of the Orange Basin.
Good. And then there's a question on hedging. Can you give us some more details of your oil hedge pricing?
So we have obligations in the RBL to hedge 40% of the year 1 production and 25% of the year 2 production. Right now, that's only related to the Tortue production. And as soon as we get completion of Hibiscus/Ruche, then that production will be added. So we will do some more hedging going forward.
Right now, we have hedged about 1.5 million barrels with the use of zero cost colors where we have put between 50% and 60% and the calls are close to 100%. So that's where we're at right now. And we will then continue with hedging activity in the fourth quarter, considering also using the same instruments, zero cost colors or also swaps.
Then there is a question on dividends. Why is dividend payment conditional upon full operation for Maromba? Does it mean first oil? Is it a covenant in the RBL or just an internal decision?
There's nothing in the RBL stopping us from paying dividends. So that's up to the BW Energy Board. And what we have said in the past is that we have to see -- have a clear vision of the outcome of Maromba before paying dividends to shareholders.
Then there is a question about there is some news out there from the Ministry of Mines and Energy in Namibia that said in August that the Kudu gas reserves are expected to increase to 10 Tcf. Is that the case?
We think it's a bit early days to declare that. But normally, you would have to have a seismic interpreted. And I think we would also need a exploration well to prove up that amount of resources. But it is true that we do see a lot of potential in a lot of, let's say, we have a much clearer picture of the subsurface in the current data set. We can see that already.
But as I've said before today, the full interpretation of the current data is expected in May. We will have an interim report in October, where we will be able to, let's say, progress on our thinking, but May next year and potentially an exploration well, and then we can declare and say 10 Tcf. But that's a bit of maybe get.
Good. I think that concludes the list of questions that we see on the web. So then I'll leave the word back to you, Carl, for closing.
Well, I thank you for the interest and lots of interesting questions. Again, very much thank you to everybody for attending our presentation. Thank you.
Thank you.