News · Portfolio

BW Energy listed.

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BW Energy is finally listed on Oslo stock exchange. BW Energy is a spin off from BW Offshore. As stated in the IPO “BW Energy is a growth-focused oil and gas company involved in the acquisition, development and production of proven oil and natural gas fields, and currently holds majority interests in three hydrocarbon licenses in Gabon, Brazil and Namibia. The Company concentrates on proven hydrocarbon fields with significant upside potential to leverage the technical, operational and basin expertise with economically viable FPSO options.” Usually when an oil company leases a FPSO from BW Offshore (or any other operator) it is with a firm contract period around 7-10 years, but with options to prolong the leasetime. When the options run out, if there is still more oil left on the field, and the oil price supports it, the oil company will negotiate a 1-2 year extention of the contract. After this period the field is abandoned, and the unit returned to BW Offshore. Since the unit is specifically designed to a certain oil field, you can’t just lease it out again, without major investments. So the operator tends to get stuck with several units, which are not easy to sell, or lease. BW Offshore came up with the idea to buy smaller oilfields where they have, or have had operations before, with great knowledge of the area. They then rebuild the vessel to fit the new oilfield, and lease it out to BW Energy. Since BW Energy already have extensive knowledge of the surrounding fields, they seem to be able to locate a lot more oil than is already proven.

With the money from the IPO they have the finances to develop the Maromba field offshore Brazil. Current oil production from Dussafu is around 11 600 barrels a day. With the new wells coming online the next months production is believed to increase to an average of 16 000 barrels a day in H1, and 23 000 barrels a day in H2. In 2023 when Maromba comes online aswell, the daily production is estimated north of 50 000 barrels. With an average lifting cost of $12,50 a barrel, and an intention to pay out 50% of the profits as dividends, I am going long.

Lets play with some numbers:

Total number of shares in the company: 234 304 300, $ to NOK at 9,30 – production at 50000 barrels a day:

Average oil price EPS in $ EPS in nok Potential dividend
USD 40,00 USD 2,14 kr 19,92 kr 9,96
USD 50,00 USD 2,92 kr 27,16 kr 13,58
USD 60,00 USD 3,70 kr 34,41 kr 17,20
USD 70,00 USD 4,48 kr 41,65 kr 20,83

If this is correct, at $50 a barrel my whole investment is repayed with two years of dividends. Probably financial costs, field cost, tax, etc is not included in the lifting cost, so this tabel is probably not correct. (Field cost of Maromba was just $1 a barrel.) But it gives an overview of how much the oil price affects the earnings and dividends. BW is usually conservative in their estimates, so there might also be upside potential here. Of course the $ could also lower its value to NOK, and that would lower the returns in nok. But, lets leave out the macro stuff, and focus on the companies, shall we?

References:

BW Energy presentation

Click to access bw-energy-investor-presentation.pdf

And last, just to state the obvious, a disclaimer:

My publications do not offer investment advice and nothing in them should be construed as investment advice. My publications provide information and education for investors who can make their investment decisions without advice. The information contained in my publications is not, and should not be read as, an offer or recommendation to buy or sell or a solicitation of an offer or recommendation to buy or sell any securities. It may seem like investment advice, but it is not.

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