BW Energy Ltd

OSE:BWE

Earnings Call Transcript 2020-Q4

[Carl Krogh Arnet, Chief Executive Officer]

Welcome to this BW Energy presentation of fourth quarter 2020 and full year. This presentation will be hosted by CEO, Carl Arnet; our CFO, Knut Sæthre; and our Chief Operating Officer, Lin Espey.I will take you through the first part, which is the highlights and the assets details, and then Knut will take over and take you through the financials and a short summary.Then I move to the second slide, our -- please note our disclaimer. It should be very quick to go through.Moving on to Slide 3, our highlights. Our EBITDA was $28 million based on 2 liftings completed in the quarter. We did a subsequent capital raise of $75 million in January 2021. And I'm happy to report that we have resumed project execution activities, and I will come back to that in more detail.As I said, we completed 2 liftings and achieved 1.1 million barrels net to BWE at an average price of $46 per barrel. The average daily production for the quarter was 13,500 barrels per day. And we are preparing for drilling of the Hibiscus expansion exploration well before completing the Tortue Phase 2.We're also progressing preparations for the Hibiscus and Ruche development which -- with the reduced CapEx program and reduced time to first oil. And we will cover that more in detail later.We are, of course, still dealing with the COVID situation. It has dragged on longer than we expected, but we are still maintaining operations -- production operations as per normal.Moving on to Slide 4. We have a zero-harm objective for people and environment. For the full year, we achieved that goal for BWE. We had 0 LTIs. But for our main subcontractors, we had -- we registered 5 LTIs through the course of 2020. They were 2 LTIs associated with operations on the FPSO Adolo and 3 LTIs associated with our installation project for Tortue Phase 2 project. So this is obviously going to be a focus of attention going forward.Moving on to Slide 5. This is our MSI reserve update. The -- basically, the Dussafu production is reflected in the update. This is -- you can see it doesn't quite add up on the decimals, but that's within the expected noise of these checks and balances that we do with our third-party auditor.The Hibiscus extension exploration well is, of course, a potential trigger for a significant upward revision of reserves. We're talking about adding up to 100 million barrels of reserves from that, making it 150 million barrels total for Hibiscus area if the extension well comes in.We have had a slight increase in the Maromba 1C reserves with -- while the 2C has been stable. This is based on more work on the models that we have for the Maromba.And this, moving on to Slide 6, will give the displayed production outlook, with the gross production peaking at about 65,000 barrels per day, which is a bit more 55,000 net to company. And that is included in the Tortue Phase 1 and 2, the Hibiscus Phase 1 and Hibiscus-Ruche Phase 2 and the Maromba Phase 1 and 2.Moving on then to Dussafu with some more detailed comments, that's on Slide 7 and then quickly on to Slide 8. We had stable operations in the quarter, and we have restarted the Tortue Phase 2 development. The fourth quarter production was 1.24 million barrels equal to 13,500 barrels per day. This was affected by our annual maintenance program that was completed in October related to the FPSO operations.The Q4 OpEx was significantly higher than we had hoped for. This is again caused by the COVID, which added to our costs. So we came in at $23 per barrel. Full year OpEx is about $20 per barrel, also a tad higher than we had hoped for. We -- I think we guided $19 at the previous presentation, but this is again related to the COVID and a slightly reduced production due to complying with OPEC quotas.The completion and tie-in of Tortue Phase 2 wells, DTM-6H and 7H will happen after the Hibiscus extension well. And we expect to achieve first oil from the new Tortue wells in -- well third -- end of third quarter, beginning of fourth quarter. And I say this with a little bit of -- let's say, we have several factors affecting this. We have, of course, if we should have a successful Hibiscus expansion well, we are planning to do a couple of sidetracks, 1 or 2, which will affect the start of the drilling of the DTM-7H. And in addition, we have, of course, the continued COVID situation, where we see that it is getting more severe rather than less severe. We are, however, of the opinion that it's acceptable to restart project execution activities. And we are -- we feel that we have full control and that we will manage. But we are, of course -- we see that there is potential for some disruption or some delay to activities, which is not factored in necessarily in our Q3-Q4 estimates.Then moving on to Slide 9, the Hibiscus development. This is the first well in the upcoming campaign, and the reason for that is to ascertain the potential extension of the Hibiscus, the reservoir we discovered in -- towards the end of 2019 that this extends into what we formed -- previously called the [ Mupani ] area, which will make the Hibiscus reservoir significantly larger. And as we have told you before, up to 150 million barrels.This will, of course, make us localize the first offshore installation facility that we intend to install in the Hibiscus area. We will then install that squarely over the Hibiscus project. And we will use the second offshore installation convert to jack-up that we have also got to tap the Ruche and Ruche Northeast discoveries and any other discoveries we are looking at in the area.Moving on then to Slide 10. We have congealed our plans for the Hibiscus-Ruche development program. We are currently in a feed phase. It will continue for a short while longer. And we have already started the basic and detailed engineering activities and the rig reactivation. This is all concerning the Hibiscus Alpha offshore installation.We plan very shortly to start the refurbishment and modification activities. We will have topside skins manufactured and integrated. And we will, of course, upgrade the rig and make it suitable for our purpose.You also see here the procurement activities that will start shortly with, among others, procurement of the pipeline material. And then we move on to the offshore and field installation phase, where we will then install the offshore installation. We will drill and complete the first well, and we will lay the pipeline down to Adolo. And then we will have the tie-ins and hook-ups and then achieve first oil in the first quarter of 2023.Moving on to Slide 11. The production forecast includes the Tortue, the Ruche Phase 1 and Ruche Phase 2, which may, as I've alluded to be Hibiscus Phase 1 and 2 initially. We expect a 2020 production of 5.2 million barrels gross. This is, of course, a bit shy of previous guiding, but that is due to the suspension of the 2020 program for Tortue Phase 2 and the subsequent delay then in getting production from the 2 last Tortue wells that we have told you about on multiple occasions. So we expect a production in 2021 of 5.2 million to 5.8 million. This our expected range depending on, again, when we manage to complete the 2 wells after the Hibiscus extension exploration well. You also see here in the caption to the right, the actual plan quarterly liftings to BW Energy for the coming year.I will then move on to Slide 12. Our exploration program, we have a number of prospects, very promising prospects. And we have become even more promising after our seismic reprocessing. We are planning 2 exploration wells per year for the coming 5 years. But coming drilling program that we have already mentioned will include the Hibiscus extension exploration well.We are also planning another well in the Hibiscus-Ruche area. It is likely going to be the Hibiscus North prospect, but we are still talking to our partners, and we are still working on finalizing that decision. But we think Hibiscus North is a very good prospect. The work is, of course, also ongoing to high-grade the next targets for the 2022 campaign and onwards.Then on to Slide 13. This is just a small snapshot from our second offshore installation facility, the Jasmine Alpha, the former jack-up Balder. And you can see here that the ship is being loaded on the heavy-lift vessel and being prepared for transit to the Middle East and -- where she will be in the yard and be ready for conversion.Then on to Slide 14. Maromba, quickly on to Slide 15. As we have previously reported, the field development plan has been approved by A&P. And we are progressing towards environmental approval by IBAMA. And we are planning a soil survey, which is the missing piece to get that approval. We have worked significantly on the project execution plan to reduce start from -- the time, sorry, from start to first oil. We're also in parallel working, of course, on improved economics by, among others, achieving marginal field status. We are tracking very well for an FID for Phase 1 to be approved in Q1 2022. And what we are targeting is breakeven below $40 per barrel while achieving 15% IRR.Moving on to Slide 16. Maromba has long-term production potential. The first phase will be purely targeted to develop the Maastrichtian sands in the main body of the reservoir. And we have a Maastrichtian Phase 2. And we then move on to Phase 3, which is similar Maastrichtian sand but in other sections, the [ Lobo ] and [ Miocene ] producers for small [ injectors ]. And then we have a significant upside that is just really mentally illustrated here, which is, of course, the carbonate, which will be an appraisal program and then significant development if we are to untap that.Then we move into Slide 17, Kudu, and Slide 18. The status on Kudu is that we have agreed to take over 95% working interest. We previously had 56%. And the government entity, NAMCOR, will hold a 5% carried interest after approval. So this is now going to the Namibian government for approval, and we expect that to be approved shortly.The Kudu gas field is located about 170 -- or sorry, 130 kilometers for land and about 170 meters of water. And the thinking or the idea of the development is to feed gas to the shore, either to South Africa or Namibia, and mainly then used the gas for power production. We believe there's significant markets in Namibia and South Africa through this power. So we are now going -- as soon as we have our formal approval, we are going to start to revamp our efforts on making -- taking this to a final investment decision. We are hoping to achieve that by end of 2022. But of course, gas projects are more complex, more government interaction-intensive than oil projects. So this is our ambition, but we are, of course, prepared also for a longer haul, if that is necessary.I will then leave the word to Knut that will take you through the financials and a short summary.

[Knut Ruhaven Sæthre, Chief Financial Officer]

Thank you, Carl. Moving on to Slide 19, the Q4 financials. And I'll also cover the full year as we have today also published our annual report, including the sustainability report, reports on payments to governments and also the annual statement of reserves. So it's all -- it was all out in our press release from this morning, and you can also find all that information on our website.Moving on to Slide 20, the income statement for the fourth quarter. So EBITDA increased by $6 million, mainly due to the -- we sold 550,000 barrels more of oil in the fourth quarter with our 2 liftings. The average realized oil price was more or less in -- the same. So $46 is what we achieved for the fourth quarter. Depreciations increased with the additional barrels sold. And we also had an impairment related to Kudu, and that was due to the fact of the agreement that we entered into NAMCOR, our partner. They -- or we had a trade receivable against them that we gave away in the negotiations. And as we are still in the phase of putting together a firm business plan, we have for now impaired that trade receivable. So all in all, that gives us an operating profit for the quarter of $4.9 million, slightly up from last quarter.On the Other financial items, it's very stable, where we had some gains due to a hedge we have for interest rates. As you know, the longer-term interest rates have increased. So our mark-to-market swap is kind of more in the money now than what we used to have. And that gave us then a profit before tax of $2.9 million And after taxes, we recorded a net loss for the quarter of $5.1 million.On the full year, we had EBITDA of $87 million compared to $192 million last year's. We had less barrels sold, less volume, but mainly the reason is then the lower realized oil price throughout 2020, which was $22 lower than what we achieved in 2019. So that's the main reason for the -- for this decrease.On the depreciations, they have been reduced to the lower volumes sold along with lower depreciation rate. Then we have the total impairment for Q2 amounted to $13.2 million for the full year, giving us an operating profit of $1.8 million for 2020.On the financial items, the main explanation here is on the lease liability interest extends the IFRS 16, where we increased the discount rate. And we also had the other financial items, mainly FX movements in 2020, giving us a negative 2.3. So the loss before tax ended up with $12.2 million. And after taxes, the net loss for the full year was $41.1 million.Moving on to the balance sheet on Slide 22. There are a lot of, let's say, minor movements. So I'll just cover the main ones. The inventory decreased from the third quarter to the fourth quarter due to a reduced over-lift position by $10 million. Then we had an increase in freight receivables and other current assets, mainly due to the December lifting that hit the trade receivables and gave us a high working capital. That was all paid in January. So it's now restored. And the cash situation was $120.6 million, a reduction from $145 million, mainly because of then the investments that we did in Dussafu and also then related to the acquisition of the 2 jack-up rigs.If I then move on to the -- or just to mention the $75 million equity issue that we completed in Q1. That's obviously not in here but will be in our next update. So we completed then our private placement in January -- 20th of January, which gave us standard gross proceeds of $75 million, ensuring us to have capital to deploy towards our accretive projects and capture a significant value creation going forward. And also to mention the changes here in the fact that BW Offshore did not participate in this capital raise, reduced their holding to -- from 38% to 35%, which is more or less the same as the BW Group ownership. So the free float has now been increased to approximately 30% after that capital raise. And as you also can see here, the shareholder equity is still very strong compared to total assets, giving us a very healthy and robust balance sheet going forward.And going forward on the Slide 23, the investments that -- this overview shows all our historic investments over the different quarters. And as you can see, we curtailed all investments after the COVID outbreak, put everything on hold, both Dussafu and Maromba. So we had very little CapEx in Q2 and Q3. And then we started to spend some money again in Q4. Here, you can see the -- mainly the jack-up investments. And going forward, we -- as Carl has been through, we will then now restart all our investment activities, first with the drilling and then all other activities. And for the year of '21, we have plans to spend about $160 million to $170 million, mainly comes in then in Q2-Q3 of this year.And then moving on to our cash flow situation. This shows our total cash flows for 2020. So we started off with $81 million 1st January 2020. Then we did the capital or did the IPO in February, giving us $121 million net proceeds. And in addition, we had operating cash flow throughout the year of $49 million and investments, mainly in Dussafu then, of total $74 million. And we have other financing activities. That's the repayment of debt that we also did early in 2020. So the company is now totally debt-free. And then we have the payment of lease liabilities, giving us the $121 million at the end of the year. So now with the capital raise that we did in January '21, we have more than $200 million in cash, as I said, the end of January.And then moving on to the summary and to Slide 26, the key value catalysts going forward. We are extremely excited about restarting our drilling program, and we'll then start with the Hibiscus extension well. Looking forward to the outcome on that one. And we are constantly looking at our seismic that has been reprocessed and to find the new targets after the Hibiscus extension. And as Carl also mentioned, we have one optional well that we will decide shortly which one that is going to be. And now we have several other planned wells in the next 5 years. On the Tortue Phase 2, the last 2 wells that are not connected, we hope to get there -- I mean COVID is a little bit unpredictable, as was mentioned earlier in the presentation. But we expect to be there in Q3, Q4, adding on about 8,000 barrels at peak, gross production that is.And then we -- with, let's say, the execution plan that we have now shows that we will get to first oil on the Hibiscus development in Q1 '23. And we will then also see what we can do with the FPSO. And as we also mentioned previously, we might have to increase that nameplate capacity, and that's in the planning, to ensure that the FPSO is not going to be a bottleneck going forward.And finally to Maromba, where our team is working there on the field development plan and to optimize CapEx and OpEx where we target FID early '22, with first oil expected in 2024. So all in all, we expect to generate a significant positive cash flow at current oil price levels and with no debt and solid capital base following the recent capital raise as well and access to a number of accretive investment projects. Like to do something in Maromba, but we're also looking at other opportunities. We don't expect to generate significant value for our stakeholders going forward.So that ends our presentation today, and we are now ready to open up for questions. So I give the word back to you.

[Operator]

[Operator Instructions] We have a question from the line of [ Teodor Nilsen ] from SEB.

[Unknown Analyst]

It's actually [indiscernible] from SEB. But 3 questions for me, if I may. First one on Hibiscus. What do we need to look for to have a reserve booking for 2P reserves at Hibiscus during this year? Second question, just on -- you mentioned the OPEC quotas, Carl. What's the underlying assumption in your production guidance for OPEC quota, potentially easing of those during 2021? And finally, just a small clarification on Maromba. There's one chart, at least it looks like, on Slide 16 that you indicate first oil in 2022 while [indiscernible] 2023. So just a clarification what's actually the key message there.

[Carl Krogh Arnet, Chief Executive Officer]

Okay. I think Lin is the best place to give you these answers, Teodor. So I think I'll leave the word to Lin.

[Lin Garner Espey, Chief Operation Officer]

Okay. This is Lin Espey. I think the first question was in regards to the Hibiscus exploration well and its impact on 2P reserves and would there be any impact in this year. So we're very excited about the Hibiscus exploration target. It's -- we're scheduled to drill it April time frame. We'll know the results roughly a month or so later -- a month -- 4 to 6 weeks later. And if it's positive, then we will integrate those -- that outcome in those reserves into our development plans. And we would look to book those reserves here, and they'll make a booking of those this year. So anyway, we're excited about that.And the other question, you'll have to remind me. Carl, did you catch that?

[Carl Krogh Arnet, Chief Executive Officer]

I think it was Maromba was one.

[Unknown Analyst]

That's correct. And the last one was also assumptions for OPEC quota that's implied in your 2021 production guidance.

[Lin Garner Espey, Chief Operation Officer]

Okay. The production guidance. So we have been advised from the government of Gabon that they don't anticipate there'll be any OPEC restrictions on our production in 2021. So our production guidance does not reflect any restrictions.But as you know, it's -- the oil market is very fluid, and we'll have to wait and see on how OPEC reacts and then what that influences on Gabon. And as you know, Gabon is a very minor member of OPEC, but they still, on occasion, have to apply with OpEx overall cuts.And then the other question was about Maromba, first oil target or first oil date and...

[Knut Ruhaven Sæthre, Chief Financial Officer]

Yes. I think I can jump in. I think it's just the graph -- Excel to the graph that shows the '22 start. But that is -- that should be '24, as we have said clearly in the last slide, Teodor.

[Operator]

And the next question comes from the line of Tom Erik Kristiansen from Pareto.

[Tom Erik Kristiansen, Analyst]

This is Tom Erik for Pareto. Can you talk a little bit more about the impact if the Hibiscus extension well is successful? One thing is the placing of the metal production center on top of that. But will it not also immediately trigger up increased efforts on the planning to debottleneck the FPSO to 70,000 barrels per day? Or is more result needed for that? And then I have a second question around the financing strategy. Right now, you have a lot of cash and low leverage. Is the thinking around that to, call it, leverage capacity for M&A or later as you grow organically? Or will you build the E&P business with very low leverage at a strategic decision? In terms of acquisitions that have been mentioned before, how do you think that opportunity set looks right now compared to deploying capital at, say, Maromba? I guess priority #1 will be the [indiscernible], but it's very hard for external opportunities to complete the research you're seeing there. That's all.

[Carl Krogh Arnet, Chief Executive Officer]

Yes. Okay. So that was 3 questions. The first one was how -- what was that again? Just give me...

[Lin Garner Espey, Chief Operation Officer]

I can take that one. That was on the reserves. If Hibiscus comes in, what's the impact and how we produce it and would that trigger debottleneck on the FPSO. So in -- if Hibiscus extension comes in, it would have the impact of doubling our reserves from Gabon. And that -- wonderful outcome, tremendous outcome. And we would -- that would certainly entail us increasing production capacity to produce more oil.Now how we go about doing that? We have a number of options, one of which is we can debottleneck the FPSO to process more crude, which is one of the more obvious paths that we can take. There are other options. We can do processing on these platforms that these jack-ups that we're converting as well and send fully processed crude over to the FPSO. But yes, the answer to your question is if we have the outcome where we double the reserves, we would be looking to increase capacity -- processing capacity.

[Knut Ruhaven Sæthre, Chief Financial Officer]

And then I think the second question was about the leverage going forward and maybe also implicitly asking about the background of our capital raise. So just to please introduce, BW Energy has been exclusively funded by equity and the proceeds from the IPO. By the way, congratulations, everyone. It's 19th February, and we've been listed for 1 year today.So the company still has no debt, and the only thing we record are the lease obligations from the Adolo. So we still have a very strong balance sheet, which we definitely like. And if you look back at 2020 and see the volatility in our industry and also for our company with a very volatile oil price, and of course, the pandemic influence, it has definitely served us well to have a strong balance sheet and a very low gearing. So that's something, at least me as CFO enjoys. And going forward, we are still looking at financing options like the RBL that we mentioned many times. And what we have said also many times is when we resume investment activities, we will also then start to get the financing clear going forward with the RBL. And we also look at some other options. I don't know if...

[Carl Krogh Arnet, Chief Executive Officer]

Can I just add one thing on -- I know there's speculation, do we go out and raise money because we're looking at M&A? Yes, we're always looking at M&A as an opportunity set. But we have excellent opportunities. We -- yes, we have Dussafu, and that's well recognized. Internally, we believe Maromba is an equally good opportunity with significant oil reserves and potential for significant improvement in recovery. So we do find the best opportunities within the company.But we are in front of a very, let's say, extensive investment program with our Hibiscus-Ruche development. And we could very easily see a scenario where we had a second offshore installation as well as Maromba. And we believe that, as Knut said, it is very much in our favor to be well capitalized and have a large operational freedom to pursue the business. So it is the primary objective, to invest in our existing projects, and that's where also the shareholders will see absolutely the biggest return.

[Operator]

There are no further audio questions. I'll hand it back to the speakers.

[Knut Ruhaven Sæthre, Chief Financial Officer]

Yes, we have a question here from the web. I think it's partly -- has been answered. It's about Hibiscus extension and the potential outcome and the way forward there. But maybe also a little bit of granularity, Lin, on the optional wells that we have in the drilling contract.

[Lin Garner Espey, Chief Operation Officer]

Okay. So we have signed a contract with bore drilling for firm 2 wells plus an option well. And as I said earlier, a program is going to start, well, in -- right now, it's scheduled into March where we start taking mobilizing the rig and then spudding the well in the first well in April. And the drilling sequences, we're going to drill the exploration well first. It's a key value trigger, the Hibiscus extension. That will test -- we have an alternative interpretation based on the reprocess seismic that the Hibiscus field is considerably larger, 3x as large as it's currently mapped.After that well -- and that well is going to take a month to 6 weeks. And if we're successful, we'll delineate that with up to 2 appraisal sidetracks. And then after that, we'll move the rig back over to the Tortue field, where we'll drill the DTM-7H well. And so that will be the second of the 2 firm wells. However, we do have an option slot to drill a third well. And we are contemplating drilling another exploration well in the greater Ruche-Hibiscus area, where we've been very successful. And as everybody knows, there's been the Ruche discovery. There's been the Ruche Northeast discovery. Then we had the Hibiscus discovery. So we're 3 for 3 over in that area, which is a highly prospective area.And as Carl mentioned earlier, if the Hibiscus comes in, we'll -- and gets a lot bigger, our -- one of our jack-ups that we'll be using as a platform will have a -- will be full of wells to drill just in the Hibiscus viscus area. And so therefore, we'll still have the Ruche and the Ruche Northeast discoveries to put online, commercialize. And we have a second jack-up that we could utilize for that.And as Carl said, drilling the Hibiscus North, which is one of our favorite prospects all along. And at one point, it was a toss up whether we drill Hibiscus North or Hibiscus. We chose to drill Hibiscus last time. So we're evaluating -- in the throes of evaluating -- finalizing or evaluating that, working that through the government, through the Board and through partners to finalize that. But we do finalize that decision here at the end of this month, whether we want to drill that second exploration well. Okay?

[Knut Ruhaven Sæthre, Chief Financial Officer]

Good. And then there is another question from the web, and that's about Maromba. You said you were going to have FID on Maromba in Q1 '22. What are the triggers of -- or what do you need to see to trigger the FID of Maromba?

[Lin Garner Espey, Chief Operation Officer]

Well, the -- good question. The -- and as Carl said, we're very excited about it. It's a wonderful-quality reservoir, 400 million to 500 million barrels of oil in place. We think our first development will produce about 100 million barrels, and this has been confirmed by third-party reserve auditors. So what we're -- what we've taken the time this past year is, I think, in the recognition that the oil market goes up and down. We want to make sure we have a robust project that returns a positive rate of return, in the 15% rate of return at a constant $40 oil price.And so we've been refining our development plan, our development options, like how we go about the development and make good -- we've identified 4 or 5 different elements that we wanted to further fine-tune. Some of these, such as the FPSO costs, some of these are the commercial arrangements between BWO-BWE and making sure that's most optimized for tax purposes. Others included the in -- on the subsurface side requirement for water injection or not and so on and so on. So we made good progress on all of these. And we are on track to take this to internal FID, as you said, first quarter of next year.

[Knut Ruhaven Sæthre, Chief Financial Officer]

Good. And then there is a final question here for Maromba from the web. What is your current attribute to trying to farm down Maromba? And what timing do you think might make sense for that if you do seek to farm down?

[Lin Garner Espey, Chief Operation Officer]

Carl, I'll put that over to you?

[Carl Krogh Arnet, Chief Executive Officer]

Yes. That's an interesting one. Well, we have been quite okay with accepting to have a high ownership stake in the developments. I know that the norm in the business is to have more partners than we have typically done so far. It doesn't mean that it's totally off the table to look at farming down, but we truly believe we have an edge in the development of these assets. We think we have a good plan. We have a good way of going about it. So we believe it is highly accretive for our shareholders to wait until the value is unlocked.Today, I think we could absolutely farm down, and we have suitors to that effect. But we believe it's in our shareholders' interest to take it quite a few steps further and get more clarity on the development solution and the development, and that would give a much better price. And it's that simple. Everything is for sale. It's just a question on price. But we believe we have a good plan, and we think it is in our interest to progress on that plan.

[Knut Ruhaven Sæthre, Chief Financial Officer]

Good. And then we have a Kudu question from the web and that's, what is the mix of liquids versus gas at Kudu? And what approximately gas price do you need to justify the development, assuming $55 oil?

[Carl Krogh Arnet, Chief Executive Officer]

We have very little liquids. It's quite dry gas. It's -- so that's -- there's no issue of liquids. We would obviously have to dry the gas to achieve pipeline quality, but the amount of liquids is very low. That's number one.The work we are doing -- or we are going to start, let's say, with a big effort -- or a bigger effort than we have had while we are negotiating the farm-in has been -- is exactly to make a good development plan that can meet the, let's say, expected gas price or the gas price in that market. An obvious contenders is -- or competition is LNG import. And we know that gas price for LNG, long-term LNG import. So that's our target. So it's a bit early to say where we are because that's exactly the work we're doing.But of course, based on previous concept and design, we are competitive. That's our overall judgment. And otherwise, we would not pursue this project. So we are confident that we will have a competitive solution.

[Knut Ruhaven Sæthre, Chief Financial Officer]

Okay. And then there's a final question from the web. Did you consider finalizing an RBL as an alternative to raising equity earlier this year? And if so, why did you choose the equity rate?

[Carl Krogh Arnet, Chief Executive Officer]

Maybe you take that, Knut.

[Knut Ruhaven Sæthre, Chief Financial Officer]

Yes. We -- I mean we see the RBL as a more complementary type of financing. It's a revolving credit facility. It gives us a good, let's say, access to liquidity at a fairly competitive price. But as I mentioned earlier, we also believe that we would have a very strong balance sheet, and it should be largely equity finance.We have a lot of, let's say, accretive projects to invest in like the Dussafu and Maromba. And it would -- we also believe it's good to have some extra dry powder in today's market.

[Carl Krogh Arnet, Chief Executive Officer]

I just want to add on that, that historically, I think it's quite clear that the oil industry has always come into trouble. It's been overleveraged -- or in the period, it's been overleveraged. Underleveraged is less of a problem for the oil and gas industry. So yes.

[Knut Ruhaven Sæthre, Chief Financial Officer]

Yes. No, that concludes the questions on the web. So then I guess I'll leave it over to you, Carl, for some final remarks.

[Carl Krogh Arnet, Chief Executive Officer]

Well, I guess, the final remark is that we are very optimistic and hopeful that we have the worst of the pandemic behind us. We are certainly confident enough to restart operations. We feel we can execute without too much, let's say, problems and -- to getting into inefficiencies. So we are optimistic. We do see that there is a lag from some COVID -- of the second phase of COVID in Africa, which, of course, is a bit of an unknown at this stage, but we believe we have proven that it can be mitigated or sufficiently to not affect our operations. So we are extremely optimistic. The Hibiscus extension is, of course, at a great price at this juncture as we restart the operations. So we are going to have some extremely exciting months ahead of us.So we thank you for paying attention to the company and our presentation, and wish you all a very good weekend.