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BW Offshore, a leading provider of floating production services with a market capitalization of $478 million, reported its financial results for the fourth quarter of 2024, showing a solid performance in line with its guidance. The company announced a Q4 EBITDA of 72 million USD and a full-year net profit of 120 million USD. Despite a temporary dip in anticipated EBITDA for 2025, BW Offshore remains optimistic about its future projects and market positioning. The company’s stock, however, saw a decline of 2.96% in pre-market trading, reflecting investor concerns over the near-term outlook. According to InvestingPro analysis, the stock appears slightly undervalued based on its Fair Value calculation, with impressive gross profit margins of 67%.
Key Takeaways
- Full-year net profit reached 120 million USD.
- BW Offshore announced a total cash dividend of 59 million USD for 2024, up 22% from the previous year.
- The BW Opal FPSO project is nearing completion, with sail away expected by the end of April 2025.
- The company anticipates a temporary dip in EBITDA for 2025, targeting 220-250 million USD.
Company Performance
BW Offshore’s performance in Q4 2024 was marked by strong operational efficiency, with fleet uptime exceeding 99%. The company reported a full-year EBITDA of 380 million USD, aligning with its latest guidance. Trading at a P/E ratio of 4.0 and maintaining a healthy current ratio of 1.67, BW Offshore’s strategic focus on FPSO projects and energy transition solutions positions it well for future growth, despite a challenging market environment. Access the complete Pro Research Report and detailed financial analysis through InvestingPro.
Financial Highlights
- Full Year 2024 EBITDA: 380 million USD
- Full Year Net Profit: 120 million USD
- Q4 Dividend: 25 million USD
- Total (EPA:TTEF) 2024 Cash Dividend: 59 million USD, up 22% YoY
- Q4 EBITDA: 72 million USD
Outlook & Guidance
BW Offshore projects an EBITDA range of 220-250 million USD for 2025, reflecting a temporary dip due to market conditions. The company aims to complete the Barossa project and secure new FPSO projects, targeting the signing of one new project in 2025. Additionally, BW Offshore is expanding into floating wind projects, with plans to deploy five floaters by year-end.
Executive Commentary
CEO Marco Beines stated, "We target to land two [FPSO projects] in the next three years," highlighting the company’s strategic focus on expanding its project portfolio. CFO Stolle Andreasen added, "We expect significant revenue growth as you move from 2025 into 2026," indicating confidence in the company’s long-term growth trajectory.
Risks and Challenges
- Market Volatility: Fluctuating energy prices could impact project financing and profitability.
- Project Delays: Any delays in the BW Opal FPSO project could affect expected revenue streams.
- Competitive Pressure: The FPSO market is highly competitive, with awards lagging despite numerous projects.
- Economic Conditions: Global economic uncertainties may affect investment and operational costs.
BW Offshore remains committed to leveraging its harsh environment capabilities and flexible project financing to navigate these challenges and capitalize on emerging opportunities in the FPSO and renewable energy markets.
Full transcript - BW Offshore Ltd (BWO) Q4 2024:
Marco Beines, CEO, BW Offshore: Good morning, and welcome everyone to this Fourth Quarter twenty twenty four Presentation of BW Offshore. My name is Marco Beines, CEO, and I will present today together with our CFO, Stolle Andreasen. We can start with the disclaimer. Please take note and then I move on to the highlights. 2024 was a year with high uptime, good financial results and continued strong balance sheet.
Our full year EBITDA of US380 million dollars is in line with the latest guidance and above the initial expectations set at the start of twenty twenty four. Our full year net profit came in at USD 120,000,000. And this is the basis for increased shareholder return with the Q4 dividend of USD 25,000,000, and that results in a total of USD 59,000,000 cash dividend for the full year. And that is 22% higher than last year. It also equals to 50% of our net income and that’s in line with our maximum allowed dividend level under our debt covenants for the second consecutive year.
And furthermore, BW Opal, our FPSO for the Barossa project is on track for Sail Away by end April. Then the BW Opal progress. First of all, on February 15, we have celebrated the naming ceremony of BW Opal in presence of our client Santos and its field partners and also our asset partners Itochi, Meiji Shipping and Macquarie and more than 400 invited guests. It was an important day for everyone to look back and celebrate our journey which started four years ago in the middle of COVID, followed by global inflation thereafter, as well as global supply chain disruptions due to geopolitical conflicts. These were unprecedented difficult years, but we stuck to our commitments and we safeguarded the interest of all stakeholders and we have demonstrated that we can deliver one of the largest gas FPSOs in the world in full compliance with stringent Australian regulations.
Something we are rightfully proud of and it lays the foundation for future projects with top tier clients. Overall progress now is 92% with Construction and Integration at 99% and Commissioning at 85%. The next milestone is Sail Away and the plan is to leave the yard close to 100% complete as we can finish the commissioning scope at the CGM yard and nearby deeper waters. So there will be only limited work remaining offshore. And with that, we will be on track to be ready for first gas by mid-twenty twenty five.
Based on the previous guidance on cost to complete the project, I’m also pleased to confirm that we are well within that updated budget. After sail away, it will take two to three weeks towards from Singapore to the Brosefield offshore Australia. At arrival on the field, we will immediately progress with the hookup scope. The mooring and riser system is already connected to a submerged buoy, which will be pulled in and then locked to the upper part of the turret mooring system, which is integrated in the hull. Remaining scope to get ready to receive first gas is some reinstatement scope and then followed by final leak testing.
After the startup phase with First Gas, final testing of all FPSO systems and the other Barossa installations will follow and this will take place during the third quarter of this year. And then full ramp up of production and project completion with formal contract startup is expected in the fourth quarter. And Stolle, I will come back to how the phasing and the associated day rate payments will drive the twenty twenty five P and L. For HSE and fleet performance, I’m happy to report a very good uptime of more than 99% in the fourth quarter and this is delivered by our three operating units. We focus on maintaining a strong safety record and that’s governed by our operational integrity management system.
The light green line is the most important metric and that’s the high potential incident frequency. And this is a leading indicator. In the quarter, we had one LTI in the yard without a serious injury, but with potential for severe impact. And so this was also counted as a HPI. In general, the statistics are good and benchmarked with UK Oil and Gas statistics.
Our backlog stands at USD 6,200,000,000.0, of which USD 5,300,000,000.0 is firm. The stable and high uptime of the three core units in operations deliver strong cash flow. And zooming in on these two units, on Adolo, we delivered a record production in Q4 and that and we exceed original nameplate capacity since November. And this is because the electrical submersible pumps have been replaced and new wells have been added. We’re also preparing to hand over operations to BW Energy later this year.
And that’s because they have built a bigger presence in Gabon and that would allow to attain skill effects. BW of SURE maintains the ownership of the FPSO and that means the bareboat charter and the production tariff continues. And as such, the impact on the cash flow is limited. Also, Catcher delivers stable operations with 100% commercial uptime, and we expect her to remain on contract through 2028. And then Pioneer, also stable operations with high uptime.
The current contract expires March 18 and negotiations are progressing well. Further announcements on this will be made between now and March 18. And in the meantime, Murphy has announced a plan for further drilling in 2026. And with that, I hand over to, Stolle for the financial update.
Stolle Andreasen, CFO, BW Offshore: Thank you, Marco, and good morning, everyone. The fleet continues to deliver steady financial performance with Q4 EBITDA at $72,000,000 Quarter on quarter, this is lower than Q3, which was positively impacted by $10,000,000 contribution from the Zakaria project. 2024 EBITDA reached $318,000,000 aligning with the latest guidance, as Marco mentioned, and exceeding the initial forecast, which we had at $290,000,000 to $310,000,000 The fleet has delivered consistent and predictable results for 2024 and our results have been further improved by the 30,000,000 contribution from the Zakaria project. For 2025, we anticipate a temporary EBITDA dip to $220,000,000 to $250,000,000. This is down from 2024, although cash flow from operations are less impacted.
For Adorno, we expect increased contribution in 2025 as the unit is expected to operate at or near full capacity where the tariff under the lease will be improving EBITDA year on year. For BW Catcher, we expect stable operation. However, as the prepayment on the lease has been fully amortized, the EBITDA reduces by $60,000,000 annually without cash flow being impacted. The current contract for Pioneer expires eighteenth of March as Marco updated you on. Negotiations are progressing well, but due to the commercial sensitivity, we have chosen not to include any guidance beyond the current contract term for now.
BW Opal is expected to start our production mid this year. It will start with a reduced rate until we reach a practical completion expected Q4 this year and a formal contract period start. Although we will receive charter rate, we are under IFRS only allowed to start recognizing revenues upon practical completion and all cash received before this date will then be amortized over the fifteen year firm contract period. As a result, EBITDA from this unit in 2025 will be lower than the actual cash flow generated. SG and A is expected to be similar to 2024 and estimated at around 45,000,000, driven by an expectation of high tender activity also in 2025 and including SG and A for BW IDO.
This information can be really combined with our analyst slide further back in the presentation. Now let’s review the income statement. Depreciation is slightly reduced to just over 41,000,000 due to reduced depreciation towards end of Q4 for Catcher. And note that depreciation into 2025 will drop compared to 2024 with reduced depreciation on Catcher for the year. Again, we refer to our analyst slide for more information.
Moving to other financial items, we see that this has given a strong positive impact in the quarter. This came from revaluation of our bond loan in Norwegian kroner due to strengthening of US dollar as well as a remeshment of the finance liability we have on our balance sheet related to the Brossa project. And this is a non cash accounting technical remeshment we do. This positive impact was somewhat offset by a 9,500,000.0 negative impact from equity accounted investments due to the remeshment of the counter balance sheet asset in the Brossa joint venture, also a non cash technical adjustment. And with that, we’re overall pleased to be able to deliver a net profit of 40,800,000.0 for Q4.
Cash flow from operations, you mean at 79,000,000 When excluding prepayments from Santos, the underlying operational cash flow was good at $54,000,000 Investment cash flow remained focused on BWOPAL with SEK 84,000,000 out of SEK 97,000,000 allocated to the project. The remaining is largely capitalized tender cost for the Block 2910 that we are pursuing for Repsol (OTC:REPYY). We called 69,000,000 net from the BRAZSA joint venture to fund to fund ongoing activity for BW Park in the quarter. And we reduced net debt by 171,000,000 of which 157,000,000 is related to repayment of the convertible bond, which is now fully repaid and the rest is for scheduled repayment of the catch a loan facility. So after paying 11,000,000 in the dividends in the quarter, we maintained a strong cash position at above $300,000,000 We continue to utilize the funding resources for BidoPal in line with projects on the with progress on the project.
In Q4, we drew down another 52,000,000 on the project debt facility, leaving 88,000,000 available. We required only 4,000,000 new equity, while Santos paid $25,000,000 under the contract. This resulted in total received funding of $2,265,000,000 and the CapEx increased to just under $2,300,000,000 Our net consolidated cash position continued to improve quarter on quarter as the fleet continued to deliver steady cash flow and stood at SEK74 million by end of the year. And as you can see on the right hand slide, our equity ratio increased to 30.8%. By year end, we do maintain a very strong liquidity position with $540,000,000 in available liquidity.
We do remain well positioned financially. We have a strong cash flow. We have ample liquidity that allows us to comfortably meet liabilities combined with financial flexibility that enables us to pursue growth opportunities as well as pay dividends. Our capital allocation framework is built upon a disciplined operating model where we build on the cash flow generated by our FPSOs. With the way we’re operating, we have and we will have good cash visibility on cash flow going forward.
We target to grow our FPSO business through new products, which will increase free cash flow from the business over the next few years and we pursue products where we can offer a competitive solution and where we can create strong value for our clients. Longer term, we aim to expand into low carbon energy production solutions by leveraging our FPSO expertise. And to do so, we need to invest, although we want to emphasize our very measured approach to this until commercial readiness can be demonstrated. We prioritize maintaining a strong balance sheet with modest gearing while expanding on our liquidity sources, which again allows us to capitalize on targeted growth opportunities in the FPSO space and also target an overtime growing dividends to our shareholders. On the right hand side, you can see that we have consistently increased our dividend distribution since 2021, including a dividend for 2024, which is $0.33 per share or $59,000,000 which is a 22% increase year on year.
If you look at that in context of the dividends we paid based on 2021 results, that is an increase of 135%. It also means that we have distributed 177,000,000 since 2021 when you include the dividends we announced today. For 2025, our target is to continue to distribute a quarterly dividend based on a base of 25¢ per share annually with the potential to upsize this if our net profit for the year would allow so. With that, I’ll hand it back to Marco.
Marco Beines, CEO, BW Offshore: Yes. And a further update on our strategic priorities. First of all, the market the FPSO market remains strong with a high number of projects on the map, while at the same time awards have been lagging the last three years. And this puts more pressure on the timelines for new projects in the years ahead of us. Furthermore, the demand for new FPSO projects continues to be supported by the current energy prices.
So this results in an active market, which is reflected in ongoing high tendering pre feed and feed activities. For us, with the Barossa project nearing completion, we have stepped up our level of engagement. However, we remain selective about which prospects to pursue. From what is shown on the map, my view is there are about 30 credible FPSO projects, which could be awarded in the next three years. Of those, we have targeted about six where we have an edge.
And of those six targets, we aim to land two in the next three years. We are well positioned in this market with a strong balance sheet, available capacity and a competitive offering, which leveraged our large gas FPSO experience with a reference to the Barossa project, our proven harsh environmental capabilities supported by our own whole design and mooring solutions and relevant operational experience, our redeployment experience and also our long experience in flexible project financing solutions. Taking a closer look at two of those active prospects. First of all, Block 29 for Repsol in Mexico. This is progressing well based on the OSX-one redeployment and that’s a unit we’re very familiar with.
We’re still at the FEED stage with potential FID and contact award late twenty twenty five. The project is backed by strong counterparties and it meets our investment criteria. Then we are also one of the two FPSO providers chosen for the pre feed for Equinor’s Bailey North project offshore Canada. Here we leverage our proven house environment hole design, disconnectable mooring solutions and our operational experience in the North Sea and the Gulf Of Mexico. Again, investment grade clients and a project that meets our criteria.
Moving on to floating wind. Our subsidiary BWDL continues to make progress as an early mover within the emerging floating wind market. The picture on the right shows the fabrication for the EOMET project in South Of France. The floaters and turbines are on track for installation by year end and this will bring the total number of BWDO floaters in the water to five, which reinforces the leading position among technology deployed globally. In Scotland, the one gigawatt Bougain offshore wind is moving ahead as planned with consent application mid this year.
And in France, partners EDF (EPA:EDF) and Maple Power recently were awarded the two fifty megawatt AO6 license based on BW DOL technology and local fabrication solutions. These two projects alone represent a tangible EPCI pipeline of some 70 floating foundations based on BWDL’s patented and proven floater design. These floaters will be produced at the industrial concrete fabrication lines that are currently being developed in The UK and France. Longer term, BWDO in collaboration with BW offshore will focus on technology and EPCI offering supported by co developments supported by co development activities as a strategic enabler. That brings me towards the end of the presentation summing up the twenty twenty four highlights.
First of all, BW for Sail Away and First Gas. We positioned ourselves to deliver growth supported by a strong 2024 financial results, a solid balance sheet and our progress on early phase projects like Block 29 for Repsol and Baydonor for Equinor. And that would increase shareholder returns at USD 59,000,000 cash dividend, which is above 11% annual yield at the current trading. Then the last slide, outlook, our focus is on completing the Barossa project and start production from BWO, Paul progressing multiple new FPSO projects and target signing one new FPSO project during this year. Further develop our offering of energy transition solutions, including realizing BWDL’s potential as a leading flooring wind technology and EPCI provider.
And continue to see our value creation directly with our shareholders. And that brings us to the Q and A part of this presentation.
Stolle Andreasen, CFO, BW Offshore: Okay. And, we’ll move to the q and a and, can remind everyone who wants to send in the q and a on the on the chat and then we’ll pick them up. I’ll start with the first one that is coming in from Jeroen Strandsuma from Aventi. And the question is, what are the company’s projections for revenue growth in the next few years? And what factors are expected to drive this growth?
You want to take this, Marco, as I think this is related to the market opportunities we are pursuing and how they will contribute to potential growth for revenues in the years to come.
Marco Beines, CEO, BW Offshore: Yes. I can say a few words. I did mention in the in this update about our look in the market, a strong market with many projects that have been going through recycling process with our clients. So I think there’s quite a big pressure on well, in the market to sanction the next developments and address energy security challenges. And that also applies to FPSOs.
So for us, as I said on that market, we have identified six targets where we have an edge. And these targets could all result in an FID in the next twelve months to thirty six months. We target then to land two of those in the next three years. That will drive the revenue growth. The size of these projects, yes, differ from, let’s say, 1,000,000,000 to 2,000,000,000 plus.
And but then the larger projects we will probably do in partnerships. So I mean, that’s the kind of volume we’re looking at that we’re targeting for growth in the coming years.
Stolle Andreasen, CFO, BW Offshore: Yeah. Maybe just to add also in terms of the contract model, Sys, it also in terms of how the revenue will be growing for the company, also depends a bit on the contract model that is laid down, whether it’s a lease, whether we build an asset for a future lease or whether it’s more related to EPC where we build and deliver an asset, which will accelerate revenue generation from the projects. So that will also depends on this. But I think overall, as you say, as we see a good market with lots of prospects, which also brings balance in terms of enough prospects for us to be able to achieve a reasonable returns on the products we’re pursuing. We are very positive to revenue growth within the next five years.
One thing I just want to mention specifically is, although we don’t guide beyond 2025, it goes without saying that we expect significant contribution from Opar in 2026. On a full year basis, this unit will generate about $260,000,000 in EBITDA on an annual basis. So overall, we expect significant revenue growth as you move from 2025 into 2026 for BW offshore.
Marco Beines, CEO, BW Offshore: Yes. And maybe a few more words on the contract models. As you mentioned, Stolle, I think the contract models we see vary from still a lease and operate. For instance, the target in Gulf Of Mexico with Repsol, that would be a fifteen year lease and operate. But it can also be, DOT, so where we build, operate and then transfer after initial operation period.
And it could be EPCI plus O and M. And yes, obviously, depending on the contract model, the distribution of the revenues of such project undertaking will be quite different. But in either case, we’re a bit agnostic to what contract model it will be as long as the risk profile suits the size of the company. And we’re very focused on this growing the company in this strong market.
Stolle Andreasen, CFO, BW Offshore: Yes. Thank you. Next (LON:NXT) question is from Martin Carlson from DNB. And the question is, could you provide some update to the reduced rate, the percentage of the original rate for OPAAL until final completion? So so I can I can take that and and that is correct?
So, as we we said earlier in the presentation, the formal contract period only starts upon practical completion expected in q four. That’s the start of the formal fifteen year firm firm period. Anything before that is is a period which is set up under the contract to tune the facility to operate per per specifications. So how it would work and try to be specific here is that we will, we expect to have ready for startup to achieve ready for startup mid twenty twenty five. And as you achieve that, you are on 60% of the full rate.
And I think those who want can look at annual EBITDA contribution and, yeah, do some approximation of of this. So then you’re on 60. That period will take around three months if everything goes per plan. Then you need to achieve what’s called an interim performance test, and that’s a period of one month in our in our schedule where we would be on 85% rate before you, you reach practical completion and the contract starts and you should be able to achieve a % of the day rate. So so that’s what we mean by the reduced rate throughout the period.
That there will be some months on reduced rate before we achieve practical completion. And as I said again earlier, under IFRS, we’re not allowed to recognize any of this income in 2025. We need to put it on the balance sheet and we need to amortize that over the firm fifteen year period, although we will be receiving cash from summer twenty twenty five. The next question is from Jeroen Souma again in Evente. What are BW offshore’s plans for expanding their fleet or acquiring new assets in the future?
Marco, you wanna have a go at this one? Yeah. Well, I mean Yeah. Bit cutting back to the what we have talked about already on on on the prospects, but okay. Go ahead.
Marco Beines, CEO, BW Offshore: Yeah. Exactly. It’s linked to the previous question. And depending on the contract model, we will always look at an operating component as well. So these new projects should also result in kind of a larger operating fleet.
And of course, it’s also interesting to look at if you can actually acquire assets as well and sometimes there are such opportunities as well, but it needs to fit obviously.
Stolle Andreasen, CFO, BW Offshore: Yes. I just think it needs to be the risk reward needs to be adequate when it comes to acquiring assets. Our balance sheet is such in a way that we have the flexibility to look at opportunities if they’re there. But as you said, they give the right return and they need to be a strategic fit for us. The next question is from one, this sort of from Cobas.
What sort of contract model are you seeing in your prospects? With BOT becoming the reference contract model, it still implies a challenge on financing from banks as BW offshore has a higher financial cost than your clients.
Marco Beines, CEO, BW Offshore: Johan, I can comment, Stolle, but you fill in. I’m not sure BOT is the reference contract model. I still think, as I said, we have the spectrum from lease and operate till EPCI plus O and M. Out of the six targets that we have, I could see that maybe three of them could actually be EPCI plus R and M. One or two could be BOT.
One or two could be lease and operate. So it’s really distributed. But we recognize the comment on higher financial cost and that’s exactly what shifts, I think, the contract model away from us financing and shifting to the client financing.
Stolle Andreasen, CFO, BW Offshore: Yes. I would think to certain as you say, we see a mix in the market, both lease and operate and BOT, EPC style type of contracts being launched. But maybe you can say there’s a tendency that the larger projects move towards BOTEPC and the more mid size because really nothing’s really small in this market. Those are leaning towards O and M or lease type of products where we can finance. But again, with the market model developing, we also see the hybrid solutions with lease and operate with significant prepayments from the client.
So it’s very difficult to say that there is a one type of contract model that’s overarching and very much something also we see developing in the dialogue with with the client when we are pursuing a prospect. So so it’s yeah. I think and and again a bit like you were saying on other things, we’re a bit agnostic to to this. We’re quite we’re quite flexible on on the contract model. It just needs to work with the right risk reward balance.
And, of course, what’s within our our remits of of financing that we can, that we can do, which very much depends on the on the contract length, the size of the project, where the project is, yeah, the financial strengths of the clients, etcetera. That was the last question I have on the web. So unless anyone has any burning questions, you I’ll give it a couple of seconds if someone wants to send something in. We’ve had a tendency in the in the past that we have questions coming in, just as we are, just as we’re as we’re running off and then we we don’t get the chance to answer those. So it seems quiet today.
Yeah. I think if there’s nothing nothing. So I guess Marco then you can you can wrap it up.
Marco Beines, CEO, BW Offshore: I don’t see anything coming in anymore. So, yeah, with that, I wanna thank everyone for your interest in BW of Sure and participating in this call and wishing everyone a very good day for the rest of the day. Thank you very much.
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