BlueNord ASA (BNOR) Q2 2025 Earnings Call

🎥 Jul 10, 2025 📺 Fyfull ⏱ 55m 👁 171 views

BlueNord ASA (Oslo: BNOR) reported a standout Q2 2025, with revenue surging 52% to USD 260 million, driven by a 90% QoQ lift in Tyra hub production, now averaging 28 mboe/d. EBITDA reached USD 133 million, up 66% from Q1, and operating cash flow hit USD 70 million ([bluenord.com][1]). The company also refinanced its BNOR15 bond to eliminate dilution risk, proposed a USD 49 million cash dividend, and initiated a USD 50 million share buyback program. With strong liquidity of USD 718 million and strategic hedging in place, management laid out a robust outlook for continued production growth and s...

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Transcript (28 segments)

Yan0:00

Good morning everyone and welcome to our results presentation for the second quarter of 2025. Before we dive into the details and take you through the key highlights of what's been another busy quarter for the company, I'd like to briefly take a step back and reflect on how far we've come. Firstly, I think it's worth noting that everyone you'll hear from today has been with the company since the start of this journey in 2019. We've all been a part of shaping the business and importantly driving it forward. And if I look back now to when we adopted the simple clear theme of focused on delivery in 2021, I'm pleased to be able to say that is exactly what I think we've done. We've kept our base business robust with production declines averaging less than 4% per year. We've started up Tyra, witnessing production steadily increase as the ramp up progresses. We've been consistently profitable, underpinned by a disciplined hedging program. We've transformed our capital structure, raising over $1.7 billion of debt in the process. And perhaps most importantly for our equity investors, we've made tangible the theme of maximizing shareholder returns. Firstly, just by adopting our inaugural distribution policy and then by starting down the path of delivering back to shareholders exactly what we said we would. We've navigated some extraordinary times from record high gas prices to becoming experts in transformers for gas compressors. And while things haven't always progressed as quickly or as smoothly as we'd hoped, through it all, we've protected the balance sheet and focused on executing what has been within our control. And in that vein, the second quarter of 2025 is a period where much of what we've spent the last six years working towards came together. We successfully met the Tyra completion test, confirming the RBL technical bank's assessment that Tyra is no longer a project, but a fully operational production hub. We declared our first dividend and announced an upcoming share buyback, marking the beginning of our capital returns program. And finally, we refinanced the Bor5 convertible bond, removing a significant source of potential equity dilution. So, while we're proud of the progress we made, we know the job isn't done. There's still plenty left to unlock across our asset base that holds significant remaining potential. And with that theme in mind, let's turn to the first slide and take a closer look at what we've achieved this quarter and where we're heading next.

Starting with our base production, Dan, Halfdan, and Gorm delivered 21,000 barrels of oil equivalent per day during the quarter, which is in line with our guidance and continues to demonstrate the predictable low decline performance that we've seen from these assets since 2021. During Q2, we had planned shutdowns to allow for activities, and we expect higher production to come in the second half of the year as a result of this. As we highlighted last quarter, the above expectation performance of the Harold East Middle Jurassic well has reduced the immediate need for further infill drilling. Combined with our continued focus on capital discipline and the flexibility that we have around capex, we continue to expect 2025 expenditure to come in around $50 million below our forecast from the start of the year. And together with operating cost reductions that we're already seeing from higher Tyra volumes, we're well positioned to navigate any commodity price volatility.

If we turn now to Tyra, production averaged 16.8 thousand barrels of oil equivalent per day in Q2, up more than 90% compared to the first quarter. We reached peak production of around 28,000 barrels per day net to BlueNord in June, which is right in line with our guidance for steady-state operations. The reservoir continues to perform well and the operator's focus is now rightly on increasing uptime and delivering more stable operations. Looking ahead, we expect Tyra to be able to maintain plateau levels through the rest of 2025 and well into 2026. And this is underpinned by the continued strong performance from Hemj, which extends the period during which our production is constrained only by processing capacity by at least another 10 months. And when the existing Tyra well stock eventually does come off plateau, that's when we'll bring on additional volumes whether through near-term infill drilling or for more material projects like Tyra North and Voldemarbo South.

Financially, this was a strong quarter. Revenue rose by 52% compared to Q1, Q1, sorry. And EBITDA was up 66% over the same period. Operating cash flow came in at $70 million. And based on this, we're proposing a distribution of $49 million for Q2. That represents 70% of operating cash flow during the period and sits right at the top end of our stated policy range. With Tyra now driving meaningful increases in profitability and as production continues to grow, we fully expect cash flow to follow the same upward trajectory. We ended the quarter with $718 million of total liquidity, adjusting for the dividend paid in early July and the $50 million share buyback we plan to launch next week, both of which are distributions related to prior periods. We have pro-forma liquidity of $465 million. And if we also reflect for our proposed Q2 2025 distribution, our adjusted liquidity position stands at $416 million. On the capital structure side, this quarter we successfully refinanced BR15, our long-standing convertible bond, which we'll talk about more shortly. But in summary, we eliminated a significant source of potential equity dilution by refinancing this instrument with a new hybrid bond. So all in all, we're in a strong position to continue to deliver for all our stakeholders. Let's now turn to distributions, an area where our strategy is clear with execution now under way.

Backed by the strong and stable capital structure that we've built, one that provides resilience and flexibility, our near-term priority is clear: to return meaningful capital to shareholders. As Tyra production ramps up, our cash flow will increase in step and our focus is on firmly ensuring that this value is passed through to our investors. The start of our distribution program has always been tied to one key milestone: meeting the Tyra completion test under our RBL facility. We achieved that in Q2 and with it unlocked the ability to begin significant capital returns. Up until the end of Q1, we had proposed in total $253 million of shareholder distributions covering cash flows generated through 2024 and the first quarter of 2025. During the second quarter, we formally declared a $23 million cash dividend and announced plans to initiate a share buyback of up to $50 million. That buyback is expected to launch early next week. And today, we're pleased to be proposing a further cash dividend of $49 million for the second quarter. That again represents 70% of our operating cash flow for the period and is at the top end of our stated distribution policy. And as with the prior cash dividend, this payment will be treated as a return of paid-in capital for Norwegian tax purposes. And we intend to declare it formally once the buyback is completed. What all this means is that we're delivering clearly and consistently on our strategy of material returns to shareholders. Every proposed distribution to date covering 2024 and the first half of 2025 has been at the top end of our 50 to 70% policy range. That's not just a reflection of past performance. It's also a strong signal of intent as we look ahead. Now, if we turn to the next slide, I'd like to talk a little bit about what we did during the quarter to eliminate a key risk of equity dilution.

If we walk through the refinancing of Bor15, this was an important transaction that we announced during the second quarter. To start with the basics, we agreed on a price to repurchase the outstanding Bor15 convertible bond. And to finance that buyback, we issued a new hybrid instrument. This was a transaction that achieved multiple objectives at once: cleaning up our capital structure, eliminating potential equity dilution, and maximizing our near-term ability to return capital to shareholders. For background, Bor15 was originally issued in 2019 to help finance the acquisition of our assets from Shell. It was intentionally structured to have both debt and equity-like features. That design was necessary to meet two conditions at the same time. One, it had to be treated as equity by our RBL banks for financing purposes. And two, it needed to offer fixed income-like characteristics to meet the investment mandate of the institutions funding the acquisition. In short, it was a bespoke solution for a specific transaction. And while it served its purpose at the time, it's not necessarily the kind of instrument you'd choose if you were designing your capital structure from scratch. We took the decision to refinance now because BR15 has features that would become significantly less attractive if we allowed the instrument to run to maturity. Chief among them, the risk of mandatory conversion into equity at the end of the year and significant dilution for our existing shareholders. Given that the bond was significantly in the money relative to its conversion price, the risk of dilution was very real. We chose to issue a new hybrid instrument to finance the repurchase of BR15 because it's as close as we could find to a like-for-like replacement but importantly without equity dilution. It's an instrument with both equity and debt-like characteristics and it doesn't increase our senior secured leverage levels. The hybrid also supports our long-term capital return strategy where we have a business with a long runway ahead of it. We expect to still be producing more than 50,000 barrels of oil equivalent per day by the end of this decade. So, we're confident in our ability to deliver our business over a long time horizon. We chose a hybrid compared to alternatives for several reasons. A senior unsecured bond would have increased our senior leverage levels, which we did not want to do. We want to keep this part of the capital structure in line with the approach that we've taken so far, thereby avoiding any negative impact on distribution capacity. And while we could also have considered a subordinated bond that may have come with features like amortizations that would have made it less attractive from a liquidity perspective. Ultimately the hybrid was the best fit. It allowed us to remove the dilution risk from BR15, maintain our financial flexibility and preserve our distribution potential. From our perspective, we achieved the outcome that we were aiming for. Now, if we move on to my final slide, I'd like to finish with an overview of the factors that we believe position BlueNord so well in today's environment.

At the heart of our strategy is a very clear focus. We aim to maximize the cash flow from our producing asset base and then return a significant portion of that cash to our shareholders through our capital returns program. We deliver this by working with the operator to deliver the best operational outcomes possible, maintaining and optimizing a conservative capital structure, and actively managing risk in a volatile commodity environment. And while the first half of 2025 has seen its fair share of volatility, this hasn't dented our ability to deliver value for all our stakeholders. First, we benefit from a stable base of low decline production from Dan, Halfdan, and Gorm, now complemented by strong growth from Tyra. Importantly, both elements of our portfolio are now generating material cash flow and require no additional growth investment to sustain current levels. Second, with Tyra approaching steady-state operations, we're becoming a low-cost producer. We expect lifting costs to fall below $13 per barrel of oil equivalent and we've already taken steps earlier this year to scale back discretionary capex. That gives us flexibility to adapt to the market while continuing to generate strong returns. And third, we take a proactive approach to risk management. We hedge selectively, locking in attractive prices when the market gives us the opportunity to do so, so that we can continue to protect and enhance our cash flow outlook. Looking further ahead, the long term remains robust. We're building from a strong base, but there's still plenty of value to unlock. We see a clear path to sustaining production levels above 50,000 barrels of oil equivalent per day in 2030, supported by a stable regulatory environment and a portfolio of high-quality accretive investment opportunities. Finally, on our capital structure, while this has certainly evolved over time, we have prior to Q2 at least always been subject to certain constraints, particularly those linked to the Tyra completion test under our RBL facility. And with this milestone now behind us, we've taken what we see as the final step to reshape our capital structure with the convertible bond refinancing and hybrid issue. The result is simpler and provides us with a platform that fully supports our strategy of maximizing shareholder value. All of this gives us the stability and the visibility to maintain a consistent equity story, one that is grounded in returning 50 to 70% of net operating cash flow to shareholders through the end of 2026.

And with that, I'll now hand over to Miriam who will take you through a more detailed update on operations. Thank you.

Miriam14:51

Thank you, Yan. So today I will take you through how we have achieved the strong production for the base assets for the second quarter of 2025 and share the outlook for the remainder of the year. We have completed a high level of planned maintenance to ensure the facilities maintain high operational efficiency. This quarter work has been carried out on Dan. The ACA gas project is nearly complete and we are progressing on the Dan workovers. Today I will also update you on the status for Tyra performance and the ongoing work to improve operational efficiency and ensure stable production for Tyra. Let us first look at the production performance for the base assets for Q2 and the completed and planned activities for 2025 supporting the production. I'm pleased to share that the Q2 production from the base assets of 21 MBE per day net is meeting our guidance range of 20 to 22 MBE per day net. The quarterly production was achieved despite the completion of a high level of maintenance work. I want to highlight the fact that we have now consistently met or exceeded our guidance for the last 18 quarters. Following stable production in April with operational efficiency exceeding 90%. Plant maintenance on the HP compressor of the Dan field was successfully carried out in May and June. On the Gorm hub, production has been lower than expected due to slow ramp up after maintenance work in Q1 and issues with the lift gas compressor in the second half of June, but these have now been resolved. Production from the Halfdan hub has been stable throughout the second quarter with an average operational efficiency exceeding 90%. The ACA gas lift module was lifted onto the ACA platform in May by use of the Noble Retoric. As per plan, installation of the gas lift module caused the production from the ACA wells to be closed in for approximately 3 weeks in May. Production from ACA was successfully restarted at the end of May and the ACA gas lift module is expected to be operational from early July. In this quarter, three reactive and one proactive well workover were completed on the Dan field from the shelf drilling winner rig. The last planned workover on Dan is still in progress. After completion of the workover campaign, the shelf drilling winner rig will be released. The workovers will be adding volumes to 2025 production and beyond. Well integrity work is planned on Gorm in Q3 and Q4 from the platform adding barrels to the 2025 production. So in summary, production from Q2 was strong despite the high level of maintenance and we will maintain focus on keeping operational efficiency high.

Now let us look at the performance for Tyra in Q2. Tyra continues to ramp up. In Q2, we delivered Tyra production of 16.8 MBU per day net, which is an increase in production of close to 90% compared to the first quarter. However, this is still below our guidance of 26 to 30 MB per day net for the second quarter. The peak production to date was realized on 13th of June with gross production of 204 million scuffs of gas per day and 36 m of oil. This equates to approximately 28 MB per day net and currently we are producing around 26 MB per day net. I want to highlight that in this quarter we have proven that we can deliver production rates only slightly below the expected plateau of 30 MB per day net and this has been done with only up to 70% of the Tyra wells online. Process reliability and operational efficiency are key focus areas to maintain stable production at plateau production level. Tyra has consistently demonstrated meaningful production confirming facility functionality despite a slower than expected ramp up of the facilities. However, this lower than expected operational efficiency and process reliability in the first two quarters of 2025 have had a significant impact on the production. And as a result of that, we have updated the Tyra guidance for Q3 to reflect the ongoing work on the process facilities and execution of improvement plans. I want to highlight that early performance from the different Tyra fields supports that reserves are available. The slower ramp up means that we delay production of the reserves and extend the period with higher production. Tyra has delivered meaningful volumes daily for the last two months. There have been several remits published during the past months. It is however important to be aware that remits generally have been of a shorter duration than previous and in addition these remit notifications only address gas volumes exported to Denmark. The gas volumes exported to the Netherlands through the Nogen pipeline are not addressed in the remits. In many cases export to Netherlands can continue during remits as gas specifications are less strict for this export route.

Now let us look at the status for the Tyra wells and the work being undertaken to ensure stable production. In June, the Tyra completion test under the RBL bank's requirements was successfully met as stated in the press release on 10th of June. After seven months of actual production, the assessment focused on both oil and gas production, evaluating performance during a ramp up phase that was influenced by operational efficiency while also confirming the functionality of process facilities. The peak production in June was achieved with 98% of the wells commissioned and up to 70% of the wells on production. As mentioned earlier, this means that the reservoirs are delivering above expectation and we have already reached our estimated oil plateau rate. To reach the production plateau, we need to increase the production potential of Tyra by getting more wells online and we need to achieve stable operations and high operational efficiency. The remaining wells to be put on production have minor issues which is to be expected after more than 5 years of being shut in. Plans are in place to fix these issues including gas lift valves, chokes and hydraulic issues. This will be done over the summer. It's also important to mention here that not all wells are needed for plateau level production. And regarding achieving stable operations, the operator TotalEnergies' initiatives have completed the first phase of a reliability study to identify key factors impacting the process reliability and operational efficiency. These points are being worked by the operator with support from specialists. The second phase of the study is ongoing and the execution plan from this study will further improve the operations. I want to highlight that no underlying issues have been identified. The findings are part of normal issues observed during startup of this major scale project. To conclude the operations piece today, I can confirm that the continued focus on Tyra progress on ramp up and process reliability and our strong base asset production are all key components of our strategy for 2025. Together with the operator, we are committed to achieving these operational objectives. I will now hand over to Katherine, our chief corporate affairs officer, who will present the long-term outlook for BlueNord. Thank you.

Katherine23:18

Thank you, Miriam. And good morning to everyone watching today. With Tyra on stream, BlueNord is today one of the largest oil and gas producers in the EU and Denmark is now a net exporter of natural gas having been an importer since 2019. From an emissions intensity perspective, piped gas is undefeatable considering the alternative source which is imported LNG. As you can see here on the chart, the imported volumes carry a significantly higher emissions intensity versus the gas from Tyra. And with pipelines going directly to both Denmark and to the Netherlands, our gas production is a preferred option from an environmental perspective both domestically and also to the broader EU. With the geopolitical backdrop these past three years, our future production is not only important from an energy security perspective, it's also very important to the Danish economy. The oil and gas industry of which the DUC represents more than 90% is one of the largest contributors to Danish welfare through tax revenues and especially through the state-owned partner the North Sea Fund who has a 20% working interest in the DUC. The oil and gas industry in Denmark is estimated to deliver state revenues of 55 billion Danish kroner during the next 15 years with an upside of an additional 11 billion if further potential is utilized. And this brings me to how we intend to contribute medium and longer term with the resources we have today in our portfolio together with the partners in the DUC. We have agreed a tangible plan with activities over the next few years which will bring an additional 65 million barrels on production. This plan will support the production we're seeing this year such that we can keep the production more or less flat to the end of this decade and also beyond. This is done through a combination of smaller projects and also through the drilling of infill wells. We can start with the projects Tyra North, Halfdan North and Valdemar South which you can see on the left hand side. These projects require simple infrastructure with unmanned platforms and all three can be tied back to existing infrastructure. Two of them will be tied back to the Tyra hub. And the idea is really that these will help backfill the brand new and efficient processing capacity we already have on Tyra. The fact that these projects are tiebacks also helps to make them very competitive from a price point with unit technical cost sub $20 per barrel. Tyra North and Halfdan North have already been progressed sufficiently to be included in the 2P reserves and all three projects add significantly to future production with a total of 45 million barrels. In addition, we have several infill drilling opportunities. Infill drilling is a cost-efficient and relatively quick way of adding additional production. And the main cost element is really related to the rig that you're using. The infill wells in the portfolio also come with very strong economics with unit development costs of less than $13 per barrel. And we have more than 21 million barrels in both 2P reserves and 2P resources from the infill opportunities. These wells typically reach their peak production fast and decline quite quickly, but they have long production tails. So we try to pace them one after the other like a string of pearls.

And that leads me on to the production profile. Everything you see on this chart in blue, both light and dark, is production from the assets which are producing today. Tyra in dark blue was limited last year and this year will be the first meaningful year of production followed by an even more impactful contribution next year. As you see in 2027, output from Tyra continues to be high and one of the key drivers for this is the success of the Hemj well which we brought on production at the end of last year. This well is processed through the Tyra hub and has alone extended the plateau from Tyra by almost one year and it's also one of the reasons why we don't need to bring all the Tyra wells back on stream right now but we can save them until later. Pink on the chart represents optimization work we do to fight the natural decline. And in green and especially from 2027 and onwards, we see the projects and wells from the previous page that are categorized as 2P reserves. These will be significant contributors, keeping that output high from 2027. And during the same time period, the projects that currently sit as 2C resources in dark gray help support an above 50,000 barrels per day production. And it's expected that these 2C resources will be converted into 2P reserves as they progress. And then finally in light gray, we have the longer term 2C projects which have the potential to lift production closer to even 60,000 barrels in 2029 and 2030. So what we're really trying to illustrate on this page is how we face the different activities out in time such that we maintain and keep a stable and reliable production profile for the company. I think the key takeaway from these two slides is that after six very capex heavy years, the company has finally entered into its harvesting mode. And with a very limited capex, we're able to stay in this mode well beyond 2030. And in contrast to many peers, we are able to keep this production where it is today without having to seek inorganic growth. This is going to further support cash flow generation and at the same time deliver into the energy needs of Denmark and Europe. And I'm now going to leave the word to our CFO Jacqueline who will take you through the Q2 financials. Thank you.

Jacqueline Boye30:19

Thank you, Katherine. So, Euan shared with you reflections on the quarter including our new hybrid bond issuance to refinance Bor15. He also shared our proposed distribution for Q2 2025 of $49 million which is at the upper end of our policy. I'll talk a little bit more about Bor15 later. But here I would like to now talk a little bit more in detail around the performance of the financials first, which is of course underpinned by the operational performance and the outlook which Miriam and Katherine have already shared with you. So, Q2 2025 underlying financial performance stepped up when compared to the first quarter. As you heard earlier from Miriam, underlying asset operating performance is stable and Tyra volumes are now demonstrating a material impact. As I highlighted in the first quarter though, we continue to be affected by penalties on gas sales. However, to a lesser extent and this is non-recurring once Tyra is stable. The penalties impacted revenue in the second quarter by approximately $9 million. Excluding this impact, we had higher sales volumes for the quarter in both oil and gas of 66% and 37% respectively. This was partially offset by lower commodity prices with the average gas price down around 14% when including hedging and penalties. Now this actually compares favorably when you compare to the market pricing which was down around 24% quarter on quarter. For oil, the market price was down around 11% quarter on quarter. However, again with our hedges in place, we were able to see a realized price only down by 2%. So this demonstrates the benefit of hedging we've put in place recently on both oil and gas. Revenue for the second quarter is $260 million compared with $171 million last quarter. Underlying operating costs are up on an absolute basis but they are trending down on a per BOE basis. This is as expected as Tyra volumes continue to increase and in June we achieved a rate of around $22 per BOE excluding workovers. Now workovers this quarter continue and they amounted to approximately $18 million. This contributes around $5 per BOE and will be completed partway through Q3 until the rig contract ends. So OPEX for the quarter is $104 million and OPEX per BOE on average is $30 per BOE. Now excluding the workovers, that's $25 per BOE. As a result, the overall contribution margin is consistent for the second quarter and it continues to of course be positive. Reported EBITDA is $133 million and this compares with $80 million in the first quarter. Turning to the summary income statement, you can see the full earnings position. So here you can see EBITDA has increased significantly compared to the prior quarter as discussed on the previous page. The other production expenses is mainly an increase in overlift of oil and a reduction in oil inventory which is timing related. We also note that G&A includes restructuring costs of $1.6 million. Now this was a right sizing of the company and the organization and it will save us on G&A of more than $1.5 million per year going forward. When adjusting for primarily the penalties on gas and the restructuring costs, our adjusted EBITDA as reported is $145 million. Moving on, depreciation continues to increase as we now have Tyra volumes increasing. And now if we also look at the net financial items, this is affected this quarter primarily by the refinancing of Bor15. The embedded derivative in Bor15 is now derecognized and the value of the agreed buyback is fully reflected in the balance sheet. The net impact of these two items is a $9 million expense in contrast to last quarter where there was a gain of $13 million on the fair value movement in the embedded derivative. So we will no longer have this volatility in our financial costs going forward. Non-cash volatility does remain however on the tax expense line as we saw last quarter. This is mainly driven by the foreign exchange movement on tax losses which are denominated in Danish kroner and must be revalued each period end under IFRS. This quarter, there is a positive effect of $26 million compared with a positive effect of $17 million in the previous quarter. Due to the size of the balance, movements in Danish kroner have a large effect. However, we have started to utilize these losses and we will see the effect reducing over time. Underlying current tax expense is as expected. So overall we ended the quarter with a net profit again of $19 million. If we now consider the balance sheet, the main items to highlight relate to working capital, Bor15, and derivatives. So firstly to working capital, this quarter we have higher receivables due to higher volumes of oil and gas sold. In contrast to the first quarter, we have at the end of Q2 oil sales outstanding of approximately $45 million, whereas we only had gas receivables outstanding at the end of the first quarter. This means we have an additional impact of timing where these sales will convert to cash in Q3. We expect it to be the more normal state to have oil receivables outstanding at a quarter end. But this is of course dependent on the timing and size of liftings. Gas receivables continue to increase as the volumes produced increase with Tyra. Moving to interest-bearing debt, this has increased but this is now taking into account the agreed buyback value of Bor15. Bor15 is now recognized as at $332 million. This is up from the $242 million last quarter. Add to that interest of $9 million this quarter and of course the embedded derivative which I mentioned previously is now derecognized which was $72 million. This of course comes to the net effect of $9 million mentioned on the income statement. So turning to cash, we report an operating cash flow before tax of $71 million. This is compared with $70 million last quarter. Operating cash flow is consistent and not higher this quarter due to the working capital impacts described previously on the balance sheet where we have higher receivables in oil and gas. We also then paid $2 million in tax this quarter and have finance costs of $20 million. Now, this relates to the RBL facility. This leaves cash of $50 million before capital spend. Capital spend for the quarter is consistent with the previous quarter at $16 million. So we do maintain our expectation for capital investment to be around $50 to $60 million for the full year of 2025. And overall we finished the quarter with a net cash inflow of $34 million. The liquidity position is strengthened with $448 million of cash available and $270 million of undrawn RBL facility. This maintains our fully funded outlook with closing available liquidity increasing to $718 million. Here we have also illustrated the impact of the dividend and share buybacks that are to be paid early in Q3. This will result in an adjusted available liquidity of $416 million. Now on the capital structure here we illustrate what it looks like after the buyback of Bor15 is completed and the hybrid bond is issued. The hybrid bond is set to settle today. So this is our capital structure moving forward. On the next slide I will just reiterate some of the key points I shared with you earlier regarding the refinancing of Bor15. So this quarter we announced the finalization of an agreement to refinance Bor15. This has been a key objective ahead of the mandatory conversion at the end of 2025 and positively ensures no dilution of equity. The buyback price was determined using standard convertible bond market models and assumptions. So in order to fund the buyback, we have issued Bor17 hybrid bond. This is also an equity-like instrument and maintains a diverse capital structure with multiple sources of funding. It also enables us to maintain a level of flexibility and is a good fit for BlueNord as we look forward and focus on our strategy to deliver and maintain meaningful returns to shareholders. The hybrid bond matures in 2085. It has a coupon of 12% and the first call and coupon step up is in 4 and a half years. We expect this hybrid will be primarily classified as equity on the balance sheet with a small debt element. So moving on to the commodity price environment and how we are managing our exposure. 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. Our focus for hedging this quarter has been on both oil and gas particularly where prices peaked and with Tyra volumes picking up. Our focus was on the 2026 and 2027 years. Taking oil first, the average hedged oil price in the outlook for 2025 is $73 per barrel, which provides good downside protection given the uncertainty of where oil will continue to head this year. Equally, pricing in 2026 of $68.5 per barrel remains a good level in this current uncertain environment. Positions for 2027 are also being contracted and we continue to monitor the market direction for good opportunities to hedge. In total this quarter we added 2.7 million barrels. Gas hedging this period was also focused on seasons in 2026 and 2027 and you can see the additional volumes were approximately 450 megawatt hours contracted. We've been able to maintain the average prices per season as shown in the chart and this remains consistently around the spot price. So hedging for oil for 2025 is at 54% of our production and for 2026 39% of our production. Gas is at 61% and 40% respectively for 2025 and 2026. So this hedging approach continues to support our balance sheet and our capital structure and it helps to bring a level of certainty over our financial performance. So to summarize the second quarter of 2025, our performance reflects a stable asset base and Tyra continuing to improve with earnings now increasing. Once Tyra is stable and underpinned by our excellent base hedging position during this uncertain macroeconomic environment, we continue to expect a strong cash flow and earnings year. This underpins our ability to continue to deliver on our priorities. And with that, I will hand back to Yan for closing remarks.

Yan43:44

Thank you, Jacqueline. So before we move into Q&A, I'd like to close with a few final reflections. So you've heard the key milestones from the first half of this year. And I really just want to underline again how far we've come. So we met the Tyra completion test, unlocking the next phase of value creation for BlueNord. We've now officially begun our distribution program with material capital returns now underway. And we refinanced what we saw as the final necessary part of our balance sheet, removing a significant source of potential equity dilution. Tyra production was up more than 90% quarter on quarter. And where that growth has been strong, we're now more focused on what's ahead with the operator prioritizing uptime and stable operations. So we see room for further increases not just in terms of peak production but also sustained average output as reliability improves. Today, we've also announced our next shareholder distribution covering the second quarter, together with the dividends already paid and the share buyback we plan to launch next week. We're making real progress on delivering on our commitment to maximize returns to equity holders. And what you've also heard this morning is that while we've traveled far on this journey already, we're only partway through. Our existing business has a long runway ahead, well into the 2040s, and we continue to see real opportunities to drive further value from the portfolio we have. So, I'll close on this. Our focus on delivery remains as strong as ever. Thank you very much for joining this morning and let's pause here to allow a few more questions to come in and we'll be back shortly for the Q&A session. Thank you.

Katherine46:07

Okay, thank you. We have received a few questions which are of a similar theme. So I'll now hand over the word to Yan who will address some of these.

Yan46:17

Perfect. Thank you, Katherine. So I think one of the themes of the questions that we've received so far has been around production and particularly the change in guidance for Q3 in particular. So I just wanted to provide a bit more information on that first of all. So during the second quarter, uptime at Tyra averaged about 60%. And that's been the key driver of production during the quarter. It's not been about reservoir performance or how wells are performing. It's really been about the time that the facilities have been online. So based on the progress that we've seen so far, we continue to expect that uptime to improve. And for Q3, we're guiding to 70 to 80% uptime. And for Q4, we expect it to be in the 80 to 90% range. Our long-term assumption remains the same, so 90%. And we still expect to reach that level during 2025. As Miriam mentioned during her presentation, the operator is very much focused on accelerating the increase in uptime. And of course, we want that to happen as quickly as possible, but we also want to be realistic in terms of what we're communicating to the market. So the changes that we've made today to the Q3 outlook reflect essentially that a change in the operational efficiency uptimes but it's not a change in our view on Tyra's long-term potential and that's why Q4 guidance remains unchanged. So looking further ahead, as we've obviously noted a couple of times, we've also seen significant outperformance from for example the Hemj well. However, in the longer term, the primary constraint remains for Tyra the gas processing capacity, which is 390 million standard cubic feet per day. And when we adjust for things like lift gas and third party volumes, that capacity, assuming 100% uptime, translates to production north of 30,000 barrels of oil equivalent per day net to BlueNord. But based on our 90% uptime expectation, that equates to around about 30,000 barrels a day net to BlueNord, which is consistent with what we've always said we expect when we have stable operations. So that was what I wanted to say on Tyra. I think then the other key theme has really been about distributions in the context of our liquidity position. So firstly, as everybody will know, we've set a very clear distribution policy: 50 to 70% of net operating cash flow. And so far, the distributions that we've paid out have been very much at the top end of that range. As we look forward, we'll continue to assess future distributions, not just against that policy, but also against what we're actually able to pay, taking into account things like our leverage position and retained earnings. This quarter, for example, our ability to distribute more has been constrained by our retained earnings position at the ASA level. So, in simple terms, what we need to do is we need to distribute retained earnings from the subsidiaries before we can pay them out. And importantly, we weren't able to do that until the Tyra completion test had been successfully met. So that will be done shortly and therefore we don't expect that to be a constraint going forward. Finally, just on the logistics for the dividend that we've proposed today. So that will be formally declared once we've completed the share buyback. The share buyback is expected to launch early next week. So we would expect that it will be declared formally by the end of next week. We then have roughly a week to go ex-dividend and then a further week for payment to occur. And those were the things that I wanted to say as an introduction. So I'll now hand back to Katherine for the specific Q&A.

Katherine50:29

Thank you. Next question, when can we expect costs to come down to the guided levels?

Jacqueline Boye50:37

Yeah. So a key element is relating of course to the Tyra production and as Yan has obviously just given a lot more detail on the expectations with Tyra improving and seeing more production later in this year and based on our guidance. So that will obviously reduce the per BOE basis. As highlighted also, there are workovers in this first half of the year which is related to the rig contract and we talked a bit about that last quarter as well. So instead of doing the infill wells, we are doing workovers at the moment. That contract ends around mid Q3. So at that point in time, we will also see a reduction in the opex where we won't be doing workovers then for the remainder of Q3 and then of course all of Q4. That contributes around $5 per BOE to our OPEX. In absolute terms, that was around $18 million this quarter. So if you exclude workovers this quarter, opex was around $25 per BOE. And then if we focus in on the direct lifting costs and exclude workovers from that line, then we were at around $17 per BOE. And this is the figure to cross refer to the $13 per BOE that we have been guiding and referring to. So putting that all together, Q4 should really be the first clean quarter where we are without the workovers and with Tyra producing as expected.

Katherine52:13

Next question. Are there any gas penalties this quarter? If so, how much?

Jacqueline Boye52:19

There are. So again, as indicated before as well, we did expect to still see some penalties. That has gone down. So from Q1 it was at $11 million. Q2 we saw around $9 million and it will continue to be on a trajectory downwards as Tyra stabilizes. And we also have in our process reflected the Tyra performance when we're nominating for gas.

Katherine52:49

Then how is the additional $56 million of compensation bonds payable to Bor15 holders calculated?

Jacqueline Boye52:58

So the buyback price was determined using a standard convertible bond market model and assumptions. So this was then based on a 5-day close on close average of the share price and that was between the 16th and 20th of June. I think just on that one, simplistically, the CB was in the money. So if you looked at the principal value of the CB, the actual value of the underlying shares was higher on conversion. So it was taking account of that and then also needs to take account of the fact that there was a small amount of option value left until the end of the year. So that was the basic principle around how we set the value.

Katherine53:42

And then why has the balance sheet at the end of Q2 included both Bor15 and the replacement bond when one is contingent on the other? This has led to an apparent significant increase in net debt which presumably has already reversed in Q3.

Jacqueline Boye54:00

So the balance sheet itself actually only includes the buyback value for Bor15. So that rounds to $332 million. The replacement bond will only be recognized in Q3 once that is settled. Looking at it just this is for the balance sheet itself. When you do look at the alternative performance measures, it's probably best to exclude that item that related to the previous value of Bor15 and only include the $331 million. Of course for covenant purposes, the convertible is also just excluded entirely.

Katherine54:43

And then final question, do you have a target net debt position that reflects a maximum efficiency level for the capital structure?

Jacqueline Boye54:52

So we've always talked about a net debt on a through cycle basis being around one and a half times. We're obviously from a leverage point of view quickly deleveraging and we can see that in our performance to date. So the net debt level will obviously be reflecting that covenant basis.

Katherine55:16

Thank you. That concludes the Q&A session. Thank you.