JFrog stock rises as Cantor Fitzgerald maintains Overweight rating after strong Q2
In its Q2 2025 earnings call, Okea ASA disclosed a total petroleum revenue of $196 million, falling short of the forecasted $2,020 million. The company’s stock reacted with a 0.69% decline in pre-market trading, reflecting investor concerns over the revenue miss. Despite a strong cash position and efficient operations, the market’s response highlights the impact of unmet revenue expectations. According to InvestingPro data, the company maintains robust financial health with a "GREAT" overall score of 3.22, supported by strong cash flows that sufficiently cover interest payments.
Key Takeaways
- Okea ASA reported $196 million in petroleum revenue, below forecasts.
- Stock price fell by 0.69% following the earnings announcement.
- Production guidance for 2026 has been increased.
- The company holds a strong cash position of $423 million.
- Average realized liquids price decreased by 13%.
Company Performance
Okea ASA showcased robust operational performance with a production efficiency of 93% and a daily production rate of 31,700 barrels of oil equivalent. Despite these strengths, the company reported a net loss of SEK 21 million, partially attributed to the decrease in average realized liquids price. The company’s strategic focus on asset management and production optimization continues to drive its operations, yet the revenue miss remains a significant concern.
Financial Highlights
- Total petroleum revenue: $196 million
- Operating income: SEK 206 million
- Net loss: SEK 21 million
- Cash and cash equivalents: $423 million
- Cash generated from operations: $115 million
Market Reaction
Following the earnings announcement, Okea’s stock price decreased by 0.69%, closing at 17.20. This decline reflects the market’s reaction to the revenue shortfall, despite the company’s strong operational metrics and cash position. InvestingPro analysis suggests the stock is currently undervalued, trading at an attractive P/E ratio of 2.82 with a gross profit margin of 69.88%. The stock trades with relatively low volatility (Beta: 0.31) and remains within its 52-week range of $1.43-$2.43, suggesting a cautious investor sentiment. For deeper insights into Okea’s valuation metrics and 7 additional ProTips, consider exploring InvestingPro’s comprehensive analysis tools.
Outlook & Guidance
Okea has narrowed its 2025 production guidance to 30,000-32,000 barrels per day and increased its 2026 guidance to 31,000-35,000 barrels per day. The company plans to invest $350-$380 million in CapEx for 2025 and $300-$360 million for 2026, with ambitions to drill up to four exploration wells annually. InvestingPro data reveals strong revenue growth of 14.38% over the last twelve months, with analysts predicting continued profitability this year. Get access to the full Pro Research Report for comprehensive analysis of Okea’s growth trajectory and financial outlook.
Executive Commentary
CEO Svein Lichtenes emphasized the company’s production achievements, stating, "We have produced in the high end of our guiding." CFO Berten Urhaim highlighted the strategic bond issue, noting, "The purpose of the bond issue was to refinance OKIA-four and to increase the liquidity buffer."
Risks and Challenges
- Revenue shortfall compared to forecasts.
- Decrease in average realized liquids price.
- Potential macroeconomic pressures affecting commodity prices.
- Execution risks related to exploration and development projects.
- Absence of immediate dividend plans could affect investor sentiment.
Q&A
During the Q&A session, analysts inquired about the company’s liquidity and bond refinancing strategies. Discussions also covered the timing of the Arkenstone JV restart and development plans for the Mistral and Johan Nor projects. Okea’s M&A strategy and criteria for asset acquisitions were also reviewed, reflecting the company’s focus on portfolio expansion.
Full transcript - Okea ASA (OKEA) Q2 2025:
Svein Lichtenes, CEO, OKEA: Good morning, and welcome to the OKEA Second Quarter Results Presentation for 2025. My name is Svein Lichtenes, CEO of OKEA. And as usual, I have my CFO with me, Berten Urhaim, who will then do the financing afterwards. There is a link on our homepage where you can post questions or also call in for the Q and A session, which will start immediately after this presentation. The highlights for the quarter is again that it’s been a very strong operational performance throughout the quarter.
We’ve seen high production efficiency and we’ve also seen strong production with 31,700 barrels of oil equivalent per day, which is in the high end of the range we have guided for. This is even though we have seen some lower production from Starchor due to delays in drilling of new wells, which has to be drilled to increase the production as it is declining. We have also seen then strong production performance from Brage especially and also Draugen and also Jura, which is operated by others, but which has also contributed significantly. The financial performance through the quarter has been affected by reduced forward prices. So we have seen a technical goodwill impairment of US32 million dollars this quarter.
And we have also refinanced OKA06 during the last quarter. Berthel will go through the details of the financing section more afterwards. In our portfolio, we have completed the Sognifio East well, which was something we call the Kim discovery two years ago, and we have now completed the drilling there and we started that on July 1 in accordance with plan, and we see very healthy production from this reservoir, which has lifted production on Brage again back to a ten year high. We have also commenced drilling of the Talasker exploration and production well on the West Side Of Brage, which again we will continue to drill now and will then start production next year, which is an important contributor as we do have a no drilling period in 2026 on Barge, as we need the bed space for the Beslar development. The Gan West South production wells have also been sanctioned, which is a tieback to Drogin.
There is already a well there, so we will do a sidetrack on this well, which will also lift production from Drogin from next year again. Bessela development remains on track. We have now installed the subsea template and we are expecting the drilling rig Deep Sea Antai to arrive in the between July and August is the latest update for drilling starting drilling of the wells. And we have completed the protection of the power cable, which now is completed from onshore to Drogon and from Drogon to Njord. So that work is also completed and we do see good progress on the onshore facilities, which will be in operation from mid next year.
These are the key numbers for the quarter. Everything we do, we need to do safely and also sustainably. So I’m happy to see that we have a sustainable and continued stable serious incident frequency of 1.1. That means we have had no new incident. We’ve seen lower production, 31.7, as you can see here, which is still in the high end of our range.
And due to this increased or strong production, we are also narrowing down the guiding from 28,000 to 32,000 to now 30,000 to 32,000. So we are narrowing it down on the upper end of guiding. Production efficiency has been very strong of 93%. So we do see above 90% on all our assets. And our production expenses has increased slightly during the quarter, and that is predominantly due to subsea intervention on a scale squeeze on the D2 well on Drugen that I will get a little bit back to, which is an expensive thing to do.
On this one, we do see the natural decline from 34.2% to 31.7% over the quarter. This is mainly due to lower production from Starcho due to the drilling of wells that I have mentioned, but also backed then by increased production from other assets that we have in our portfolio. The production efficiency on our whole portfolio, as you can see here in the bottom, is all above 90 and that is obviously something we are working very hard to achieve. A quick rundown of the details on all our assets. Droggen, as I have mentioned, very good production performance.
We did attempt the scale squeeze, which is an intervention in the well D2 to get it flowing again, but we was unsuccessful in actually doing that, so we are still working on a solution how we’re going to get the D2 well back. The D2 has not produced neither in Q1 nor in Q2 this year. And we are commencing the drilling of the Gan West South, which we now have sanctioned by the end of twenty twenty five. We are using the same drilling rig that will be drilling on the Besla Field Deep Sea Antai first, and then it will come to Gunwer South immediately thereafter to do this production drilling, which will then increase production on Dreyugen from medium 2026. On Barge, again extremely strong operational performance with high production efficiency, also very high drilling efficiency, I would say.
So we have now completed the Sognefjord East production well, which have shown very good results and is now producing and as I just mentioned, taking the Barga production back up to a ten year high. So this will contribute significantly into Q3 and the rest of the year as well. And we have started now the Talaskar Exploration And production well drilling in July, and we expect the first production from this one in the first quarter of twenty twenty six. In the Statue area, lower production, as I already have mentioned, due to delays in the drilling of new wells and we are working very closely with the operator and also Voronasi as partner in the license to sanction new wells, but also look into the drilling performance on how we can contribute with our experience from our drilling operations as well to have the drilling operations more efficient, but also put it more quickly into operation after completion. Ivaraesen, again, a very good quarter, very high production efficiency, somewhat lower volumes from that is due to allocation of gas volumes related to the Hans tieback to increased oil recovery program for 2026 has been sanctioned and we do expect first oil in the fourth quarter of twenty twenty six after these wells have been drilled on Last but not least, the Jura Nova area, again continued very high production efficiency.
We will have a three week maintenance shutdown planned in August for this asset, which will affect both Jura and Nova, and this will include adjustments of the processing facilities and an attempt to enhance production even further. On our development projects, they are progressing well. We have the Besla project, which is the tieback to Barge. The subsea template is now installed. As I mentioned, we are expecting Deep Sea Antai to arrive and start on the two wells to be drilled on Besla in between July and August.
We are still on track for a start up early twenty twenty seven, and we believe that we have good control of the risk on this project, and this will be a very significant contribution with 10,000 barrels net to Urquea when it starts early twenty twenty seven. And also the Droogen Power from Shore, a very complex project, but the onshore facility is now well underway. The onshore facility will actually be in operation from mid next year as we are providing power to Nord. We have completed the cable from onshore to Drugen. We have completed the cable from Drugen to Nord and we are now continuing with the equipment installation offshore, which is the next phase we are going into.
Again, an important and significant project for the Droggen to be sustainable until 2040 and beyond, and this will also reduce then the CO2 emissions by 95% when it comes in operation in 2028. So with that, I will get back on a summary later on, but before I do so, I will hand over the word to Berthet to take you through the financial section. Thank you.
Berten Urhaim, CFO, OKEA: Thank you, Svein. The financial statements for the second quarter are impacted by the reduction in petroleum prices, which resulted in a technical goodwill impairment. And that drives the bottom line into the red. I want to remind you that this is a technical expense, which will never have a cash impact and it therefore also has no tax shield. But let’s dig into the details and starting with production and sales as usual.
Production ended at 31,700 barrels of oil equivalents per day. The lower production mainly relates to Stadfjord, where drilling of new wells was offset to offset natural decline was delayed. We sold 33,000 barrels per day, which is a total overlift of 117,000 barrels. Market prices for both gas and crude decreased significantly during the quarter. The average realized liquids price was down 13% and ended at $63.1 and the average realized gas price was $71.4 The underlying realized gas price was down 23%, but was partly offset by a hedging gain on gas equivalent to $5.6 per barrel.
And this is included in the realized gas price. This resulted in total petroleum revenue of $196,000,000 The graph to the left illustrates our crude liftings over the last five quarters as well as the average observable market price. The graph to the right outlines the difference between the average market price of Brent for the quarter of $67.9 compared to the average realized liquids price for OKIA. Positive quality and price adjustments brought the realized crude price to $68.4 which is $0.50 above the market. 14% of total volumes sold were NGLs.
This is equivalent to 20% of the liquids volumes. As NGLs trade at a discount to crude, it reduces the average liquids price to $63.1. Here, we illustrate the volumes of gas sold over the last five quarters and the observable average market price in the same period. Following the peak in the first quarter, prices have come down, but remain historically strong. And then over to the profit and loss statement.
We deliver operating income of SEK206 million consisting of the petroleum revenue of SEK196 million and other operating income of SEK10 million. Other operating income mainly relate to net tariff income at Joa and Stavio of 5,000,000 and a change in fair value of contingent considerations of 3,000,000. The change in contingent consideration was due to lower forward prices. Production expenses amounted to 74,000,000 or $23.5 per barrel. The high cost per barrel was mainly due to maintenance activities on several assets as well as the lower volumes.
And as mentioned, impairment of technical goodwill amounted to SEK32 million and was mainly due to the lower forward prices. Exploration expenses and SG and A of $27,000,000 comprise exploration expense of $21,000,000 of which 8,000,000 relate to the dry well at Prince and 10,000,000 relate to seismic purchases. SG and A amounted to 6,000,000 Net financial expense amounted to DKK3 million and comprised DKK1 million in net expensed interest and DKK7 million in expensed cost tied to the refinancing. This was partly offset by a net currency gain of SEK9 million following a strengthening of Norwegian kroner against the U. S.
Dollars by about 4% during the quarter. Tax expense amounted to SEK26 million, which brings the net loss to SEK21 million. And moving on to the balance sheet. Goodwill amounted to $114,000,000 and comprised $98,000,000 in technical remaining goodwill and $16,000,000 in ordinary goodwill. Cash and cash equivalents amounted to $423,000,000 In addition to the cash balance, 41,000,000 in excess liquidity has been placed in money market funds, which are classified as other assets.
We issued a new bond loan in June with a nominal value of $175,000,000 And due to settlement of the $125,000,000 of KL04 bond in early July, interest bearing bond loans at balance sheet date amounted to $422,000,000 and comprise all three bond loans. Both cash and bond debt on the balance sheet as per June 30 is therefore artificially high, but with a net zero effect. Income tax payable of €98,000,000 represent tax accrued for the first half of the year, partly offset by €5,000,000 in tax refund for 2024, which is expected repaid at the end of the year. Asset retirement obligations of €935,000,000 is partly offset by asset retirement receivables of €445,000,000 from Shell, Equinor and Harbor Energy. As mentioned, we issued a new bond loan in June, which is our sixth bond issue.
OKEA06 is a senior secured $175,000,000 facility with four year maturity and a fixed coupon of 9.18%. And this interest is payable semiannually. The proceeds were used for calling the OKA-four bond and for general corporate purposes. OKEA-six has the same general terms as OKEA-five with exception of the distribution clause tied to net profit after tax. In OKEA-six, the definition has been modified to exclude the effect of technical goodwill impairments.
In relation to the refinancing process, we also increased the revolving credit facility to $45,000,000 The revolver still remains fully undrawn. Overall, the refinancing provides for a strengthened and longer dated capital base with no bond maturities until METEO twenty twenty eight. Cash generated from operations was $115,000,000 Taxes paid of $108,000,000 includes the two last tax installments for 2024. Issue of the new bond loan resulted in net proceeds of DKK 170,000,000. 80,000,000 was used for investing in the Drogin Electrification Project, the Besla development and production drilling on Stadtfjord and Brage.
This brings the total cash to SEK $464,000,000. During the quarter, we placed another SEK 15,000,000 in money market funds, bringing the total balance there to SEK 41,000,000 and the cash balance to CHF423 million. If we adjust for the settlement of the OKEA-four bond, which as mentioned was paid in early July, it brings the total cash to CHF337 million and the cash balance to CHF296 million. And finally, I will provide an update on our guidance. With a strong first half with production on the higher end of our expectations, we are tightening the spread towards the upper range and update our guidance for 2025 from 28,000 to 32,000 barrels per day to 30,000 to 32,000.
And as Svein mentioned, as a result of the newly sanctioned production wells, we increased our 2026 production guidance by 5,000 barrels per day from 26,000 to 30,000 barrels per day to 31,000 to 35,000. In relation to the newly sanctioned wells, we also increased the CapEx guidance for 2025 by 30,000,000 to $40,000,000 to $350,000,000 to $380,000,000 CapEx guidance for 2026 remain unchanged at $300,000,000 to $360,000,000 So just to end, a couple of other elements that’s worth highlighting. As mentioned, the OKR-four bond was repaid in early July after the balance sheet date for the second quarter reporting. This results in a somewhat grossed up balance sheet with respect to cash and interest bearing debt. As you may be aware, with effect from the tax year 2025, tax payment intervals have changed.
From the tax bill being split into six instalments per year, petroleum companies will now pay 10 instalments per year. The overall structure remains the same, where half of the payments are payable in the second half of the income year and the remainder in the first half of the following year. For OKEA, we have estimated that each of the five tax instalments payable in the second half of twenty twenty five will amount to between 5,000,000 and $6,000,000 In line with previous communication, we currently do not have an announced dividend planned. This is due to a relatively large investment program, particularly in twenty twenty five and twenty twenty six. The Board intends to revert to the dividend plan when it considers to be in a position to distribute.
And this will, amongst other things, depend on the macro environment. That’s all from me for now and I’ll give the word back to Jusswein for some closing remarks. Thank you.
Svein Lichtenes, CEO, OKEA: Thank you, Berthe. So as a summary then for the quarter before we go into Q and A, we’ve seen strong production performance on our assets. We have produced in the high end of our guiding, which means that we are narrowing in our guiding as well in the upper end. We have done successful refinancing of the company in this quarter. We are sanctioning new wells that will add to our portfolio and as has also been mentioned, adds so much that we are increasing the guiding by 5,000 barrels for 2026.
We still have an ambition to drill up to four exploration wells per year, but that always depends on having the right targets, which is attractive enough to actually invest in. And we are building our portfolio continuously and we are still looking for investment opportunities to grow the company further. So with that, we will go into the Q and A session and there should, as I said earlier, be a link on our homepage and I hope as many as possible will attend and ask questions that we will answer thereafter. So thank you very much.
Conference Operator: Thank you. We will now start the Q and A session. If you wish to ask a question, please press 5 star on your telephone keypad. To withdraw your question, you may do so by pressing 5 star again. There will be a brief pause while questions are being registered.
As there appears to be no questions on the conference call, I’ll hand it back to the speakers for any written questions.
Question Moderator: Okay. First question from liquidity for 2025 and 2026 has been secured after the announcement of the new bond?
Berten Urhaim, CFO, OKEA: Thank you for the question, Jorn. Well, the purpose of the bond issue was to refinance OKIA-four and to increase the liquidity buffer into a period of higher organic investments. So through this exercise, we provided added flexibility and also extended the maturities of our debt. But as of now, we have no other updates than that the board will revert with a dividend plan when it considers to be in a position to distribute.
Question Moderator: Okay. Next question from Russell Siewenke. Arkenstone, one of your JV partners has guided the restart in Q4 twenty twenty five. Does UKEA agree that this is the targeted redrill and comfortable with drilling safety risks?
Svein Lichtenes, CEO, OKEA: Yes. Thanks for that question. Yes, I noticed that. Our assessment is that it’s not realistic for us to do the Ark and Stone spud again in Q4 twenty twenty five, and that is something which is being continuously assessed in the license, obviously. So it could be updated, but we believe it will be pushed further out.
And I guess that also links to the second question that you have here, the drilling safety. And that is the reason why we also believe reengineering of the well needs to take place, and that’s why we also believe it will be drilled at a later stage. And obviously, we will not drill that well until all the JV partners are comfortable with the drilling safety risks.
Question Moderator: All right. Another question from Russell Sironke again. Mistral and Johan Nour, what is the development plan and timing for Mistral? And with Johanor, what is the status of that project? Is it still going ahead?
There are several other discoveries in addition to Johanor. So are there any complications with different JVs or agreements?
Svein Lichtenes, CEO, OKEA: Yes, good questions. When it comes to Mistral, the license there is working to develop that as soon as possible. And from the operator Equinor, it has also been defined as a fast track development project, which most likely will then be linked towards the Lindholm development. When it comes to Johan Nor, we have now decided to take a DG2, it is in December year, on what to do further on the Johan UR, and that is linked to the last questions where you say there are several discoveries in the area. I do not see that as complications.
I see that more as opportunities because then you can have a coordinated development of all these discoveries in the area. So that is something we are assessing at the same time. So the next decision gate for the Johanu and the area development there is to have a decision gate in December this year.
Question Moderator: Okay. Thank you. Another question from Jorn Egeland. Does the bond that expires in 2028 have the same covenants as the 2029 in regards to technical goodwill?
Berten Urhaim, CFO, OKEA: Thanks again, Jorn. As we also stated in the presentation, the general terms are the same with exception of the net profit after tax definition under the distribution clause, which in the new bond explicitly excludes the effect of technical goodwill. But bear in mind, for as long as the OKR05 bond or the ’29 bond is outstanding, the technical goodwill will not be excluded from the dividend capacity as that will be the least common multiple of the two bonds.
Question Moderator: Thank you. There is another question from David Meltzai. In terms of looking at investment opportunities, Ukea sold EMA interest as was nonmaterial. Will additions require operatorship or large equity stake? Or what other asset characteristics are you looking for given current intensive CapEx phase?
Svein Lichtenes, CEO, OKEA: Yes. And the M and A market and what we are looking at there, obviously, is quite a big picture. When we did the Wintershall DEA transaction, there was a perfect portfolio, I would say, because then you take over an aging asset that you actually operate, and we have demonstrated that we can turn it around. In addition, you are also including partner operated barrels in the same transaction. So I would say that is kind of the ideal transaction.
But we are trying not to be too screen out too much, so we are very open to a lot of opportunities. But having demonstrated now twice that we are able to turn assets around, which has been in the late life and put them in midlife again and extend the lifetime, I think operated assets will always be of a greater interest.
Question Moderator: Thank you, Svein. I think that concludes the written questions, unless there are any final ones. And no one on the line, so
Berten Urhaim, CFO, OKEA: That appears to conclude the call and
Svein Lichtenes, CEO, OKEA: we wish
Berten Urhaim, CFO, OKEA: you a good summer.
Svein Lichtenes, CEO, OKEA: Thank you very much for your attendance. Have a good summer.
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