Bluenord (Oslo:BNOR) Q3 2026 Earnings Call

0:00 Good morning everyone and welcome to Blue Nord's third quarter results presentation. Now, as I'm sure everyone listening is aware, things are a little bit different for Blue Nord today. And while this may be our final presentation as an independent company, we're going to stick to the format that's worked for us in the past. So we'll go through Blue Nord's performance in the usual way, with Miriam, Cathrine and Jacqueline taking you through the detail. And as always, you can submit questions as we go and we'll come back and answer them at the end. But before we do any of that, let's turn to the first slide and spend a few minutes on the merger with Vore Energy and why we believe it's the right next step for our business. So if I cast my mind back to the 1st of August 2019 and we'd just completed the acquisition of Shell's Danish assets and it was my first day as CFO.

0:56 At that point, there was really only one objective for us, and that was to get through the Tyra redevelopment. We knew that it was going to be tough. We probably just didn't know that it was going to be COVID tough. And getting through wasn't just an operational issue. It was also making sure that we had the funding and the balance sheet to see it through. And over time, that focus then broadened out from just getting Tyra done to making sure that we were focused on what Tyra meant for us as a company afterwards. So when I became CEO in 2022, it was about also making sure that we allocated the cash that the business would generate properly. and what that meant in practice was returning it to the shareholders who'd supported us along the way. So if I look back now, I think that it's fair to say at least from my perspective that as a company, we really did deliver on both of those objectives.

1:52 And I think that's a helpful backdrop when we then go to think about The merger. So seven years on, Blue Nord is a very different business. Tyra's back in production. We have a high quality, long life asset base with significant opportunities ahead of us. But importantly, we've also returned close to $800 million to our shareholders in a little over 12 months. So while we've demonstrated that we can be successful as an independent company, we're still a relatively concentrated business with assets focused in Denmark. And that's where the relevance of the merger comes in. Our assets are a natural fit with VORS, both geographically and geologically. And bringing the two businesses together gives us greater scale, more diversification and a stronger balance sheet. We believe that puts the business in a much better position to manage the cycle, invest in the assets, and deliver long-term returns for our shareholders.

2:53 And if we just turn onto the next slide, you can get a sense of the scale of that combination. So as you can see, Together, Blue Nord and VOR is expected to create the largest independent oil and gas company in Europe, with the DUC becoming VOR's fifth hub. In terms of where the transaction stands today, our shareholders approved the merger in August, and since then we've been working with VOR to satisfy the remaining conditions, including the necessary regulatory and government approvals. We continue to expect completion around the end of the year, subject of course to those conditions. And until then, our focus remains solely on running Blue Nord as we always have. And I think the results that we're reporting today demonstrate that.

3:41 So overall, Blue Nord delivered a strong third quarter with a significant improvement in Tyra performance and solid financial results. Starting with production, we averaged 43,600 barrels of oil equivalent per day in line with guidance with 26,000 coming from Tyra. And Tyra really was the operational highlight for us. Following the June maintenance campaign, we've seen a real step change in performance. We've had production days approaching 30,000 barrels of oil equivalent net to Blue Nord alongside record gross gas exports above 250 million cubic feet per day but importantly we've also seen much more stable operations so when we've had issues and the field has shut down we've had the ability to get the field up much more quickly and we've had far fewer shutdowns than we've seen previously Looking forward, we've guided Q4 production of between 42,000 and 49,000 barrels a day and Miriam will take you through that operational detail shortly.

4:47 Turning to financials, revenue was $346 million with adjusted EBITDA of $221 million. We also saw a meaningful reduction in operating costs compared to the second quarter. Net operating cash flow was around $70 million, reflecting working capital moves and tax payments in the period. We ended Q3 with liquidity of $392 million and Jacqueline will talk about the financial side in more detail shortly. Finally, on shareholder distributions, under the merger plan, we won't, as an independent company, be declaring any further Blue Nord dividends before completion. However, the plan does provide for cash compensation to our shareholders for qualifying VOR dividends ahead of completion.

5:39 With that, I'll hand over to Miriam for the operational review, followed by Cathrine and then Jacqueline for the financials, and then I'll come back at the end to sum up. Thank you. Miriam?

5:56 Thank you, Euan. As Euan mentioned, I will now take you through our operational performance for the quarter. Q3 showed the benefit of the work completed earlier in the year. Production reached the highest quarterly level since restart as tire production stepped up after the June shutdown and the base assets delivered through planned maintenance. The base assets delivered within our guidance range despite temporary integrity constraints on Dan and Gorm which were resolved by the end of the quarter. At Tyra, production increased significantly compared with Q2, reflecting the benefits of the improvements delivered during the planned June maintenance. Q3 also marked a new milestone in operational stability, achieving the most consecutive days without shutdown since restart.

6:47 And Tyra also delivered within our guidance range. I will now show you an overview of total production for the quarter. Q3 production reached 43.6 thousand barrels of oil equivalent per day, the highest quarterly level since Tyra restart. That compares with 43.1 in Q1, the previous high, and 37.2 in Q2 when planned shutdowns at Gorm and Tyra impacted the production. Tire was a key driver, increasing from 19.3 in Q2 to 26 in Q3. The base assets contributed 17.6 thousand barrels of oil equivalent per day, delivering through planned maintenance.

7:35 This quarter, Tire delivered a step change in performance. Following the planned June shutdown, we saw record production days close to 30.000 barrels of oil equivalent per day and gas export at maximum capacity. We exited the quarter at approximately 50,000 barrels of oil equivalent per day, giving us strong momentum going into Q4. Let me now take you through what lies behind this performance, starting with the base assets. In Q3, our base assets produced 17.6 thousand barrels of oil equivalent per day within the 17 to 19 guidance range, in accordance with planned maintenance and some integrity constraints.

8:21 Planned maintenance at the Halfdan hub was safely completed, running from late July to late August, with full rates resumed afterwards. Halfdan remained stable with high efficiency above 95% in September. On GORM, July production was limited by lift gas constraints during compressor maintenance and was stable thereafter. The ROM3 campaign is progressing, with three of the six well interventions completed, with gains still to be confirmed. The campaign is expected to unlock additional production potential. And then the integrity constraints were resolved by quarter end and KRAKA returned in August after the manifold replacement and was shut in again for a period in September for corroded flow line repair. The repairs are complete and production was back towards expected levels by quarter end.

9:15 So looking ahead, Q4 is positioned for stronger base acid production with limited plant maintenance. The only plant activity is a partial shutdown on Gorm in November for compressor maintenance. This is supporting a guidance range of 18,000 to 20,000 barrels of oil equivalent per day in Q4. Turning to Tyra. The planned June shutdown delivered key production and reliability improvements and the benefits are now clearly visible. As presented previously, our focus has been on three key areas. Increasing available well potential, improving processing capacity and export capability, and strengthening operational reliability.

10:03 The shutdown scope was designed to address constraints in each of these areas, and it was executed safely and successfully. Starting with weld potential, the heraldry bottlenecking, including the choke replacement and the rerouting of weld production, was the main driver of the step change in tyre production after the shutdown. On processing capacity, the shutdown rectified the underlying causes of reduced performance of the tyre LP separator. Maximum gross gas export has increased from about 215 to around 250 million standard cubic feet per day and gas production rates are now around export capacity level.

10:50 The shutdown also delivered reliability improvements and we have seen fewer unplanned shutdowns and recovery from production upsets is now faster. The successful picking of the Herald Pipeline in September was the first milestone to unlock production from Lolita. Overall, the message is that the benefits from all the work carried out on Tyra are now being realized. Net production reached a daily record close to 30,000 barrels of oil equivalent per day. The highest production day, week and months since startup were all achieved in Q3. So in summary, the shutdown delivered the improvements needed to remove constraints, and Tyra is now operating at a significantly higher and more stable level.

11:40 So to summarize the Tyra status, we continue to see solid progress at Tyra. Q3 production reached 26,000 barrels of oil equivalent per day, and well and reservoir performance remain robust. Q3 also set the record for most consecutive days without a shutdown. Further process optimization is underway to support higher and more stable production. Separation is still to be optimized, particularly in relation to emulsions, and a field trial to optimize this is ongoing. Upcoming activity is an inspection of the Harold to Tyra condensate pipeline in December, with production impact reflected in the guidance. Together with the improvements already delivered, these support our expectation of more stable operations and high production levels in Q4, with guidance of 24 to 29,000 barrels of oil equivalent per day.

12:37 So our strategy remains clear. Maintain momentum, maximize the value of our assets, and deliver the full long-term potential of Tyra. I will now hand over to Cathrine, our Chief Corporate Affairs Officer, who will take you through the long-term outlook for Blue Nord. Thank you.

12:59 Thank you, Miriam, and good morning to everyone. So speaking to the opportunity set and future of Blue Nord will be a bit shorter this time. However, there are a few messages related to the license and the future high-graded projects I want to touch upon. So Blue Nord's current and future production is of great strategic importance, not only from an energy security perspective, but also as a direct source of revenue to the Danish economy. Oil and gas revenues support the Danish Welfare Society through tax revenues, both from the companies and also through its state-owned entity, Nordsøfonden, which has a 20% interest in the DUC.

13:48 Since the beginning of this year, the Danish Ministry of Climate, Energy and Utilities have been exploring a potential extension of the DUC license to 2050. We believe it is important that Denmark now decides to take a responsible and pragmatic approach. It needs to recognize its role in the European energy markets. Today, the EU is highly dependent on imported energy. Thank you very much. and the current escalated geopolitical uncertainty really underlines the strategic importance of having reliable European energy supply.

14:42 Danish oil and gas production continues to play this role in supporting regional energy security, providing stable, lower emission and domestically sourced volumes that reduce reliance on imported alternatives. and Denmark has now the opportunity to make a tangible contribution in reducing Europe's dependence on imported energy. And then, regardless of the ongoing discussions related to the license specifically, we still have a strong set of high-graded projects, which are set to boost production, medium and longer term, and also support the new updated production profile of Vår Energi.

15:28 These are a combination of right-size development projects and infill wells. For the development projects, I will start with Halftan North and Valdemarbo South. Both have been reworked to simplify the complexity of each project and also reduce capex significantly. This means that even though you develop the projects in ways which deliver slightly less volumes, each barrel is going to be more profitable compared to the original plan. And while we continue to see a very strong commodity price environment today, these projects are also well set for future and can sustain any low price scenario. The third project, which is most likely the first one to be sanctioned by the DUC, is going to be Tyra North.

16:18 Tyra North is a tie-back to the new Tyra facilities, further utilising the efficient and new processing facilities which we aim to backfill to the greatest extent possible. Tyra North is a material project value-wise and is set to deliver almost 20 million barrels net to the company. We are step by step progressing towards FIDEA and the last quarter we finalized the FDP, which is also an important step in obtaining the governmental approval. For all the three projects, we expect unit technical costs to be less than $20, which includes both CAPEX and the incremental OPEX. And then we also have a program of infill wells and a jacob rig expected to commence work next year is going to carry out the drilling campaign in the DUC.

17:12 We have two planned wells on Halfdan, one on Valdemar and two on Sven. And lastly on the page you will also see the infill wells which we have named additional potential. These are mostly wells on the Tyra hub where we see a great potential for infill drilling as the Tyra hub carries a significant potential which was unlocked by the first gas. And with that, and I think for the very last time, I'm going to leave the word to Jacqueline who will take you through our financials. Thank you.

17:49 Thank you, Cathrine. So now I'll take you through the financial results for the quarter and how the operational activities that you've just heard about translate into strong financial performance. This quarter we have seen stable Tyra production and combined with an elevated commodity price environment that is translating into strong earnings and revenue, which we expect to convert into cash in the coming quarters. So with that context, let's start with the headline financial performance for Q3. Thank you very much. and Miriam Jager Lykke.

19:15 The cash flow performance is to some extent also the reverse of what we saw in Q2 where we actually saw a positive impact on that working capital effect. And this is due to the volatility and commodity prices that we see quarter on quarter. but in addition we also had a large tax payment and this relates to settlement of a number of prior years matters and that was 72 million dollars and we are expecting that to be partly offset with a tax receipt that is expected in the fourth quarter. So excluding the working capital and tax payments operating cash flow was 212 million dollars. Now to the balance sheet. This does remain robust. We had liquidity closing the quarter at $392 million, of which $261 million is undrawn RBL facility. And net leverage ended the quarter at 1.65 times.

20:12 So overall this quarter shows the strength of the underlying assets when producing stably with record earnings that will convert to cash in the following quarters and a strong financial position heading into the final quarter for the year. I'll now go into more detail on the key drivers of this result and we'll start with the realised pricing and our hedging position. So our hedging program continues to provide downside protection for pricing, which provides cash flow visibility and reduces the impact of volatility. We have placed minimal new hedges during this quarter given the current business position and the commodity price market. So for the last quarter of 2026 we remain around the same level with 66% of forecast oil volumes and 68% of forecast gas volumes hedged through swaps and collars.

21:08 So the next driver of financial performance is the cost base. and here on costs the headline is that as we expected the unit operating costs have come down since Q2 and are heading towards the target level again. The decrease this quarter shows a more normalised level with the tyre shut-in completed in Q2 and stable production for most of the quarter. Therefore, Q3 costs are closer to expectations on an absolute level for the business and production was also closer to normalised, meaning lifting costs and OPEX per BOE are on the path to the target again. That operating leverage is what converts stable production into operating cash flow, which is on the next slide.

22:01 So in Q3, net cash flow from operating activities was $70 million, and that was after the working capital movements. So the quarter was impacted by working capital, as I mentioned earlier, of $71 million, and this is demonstrating the timing of cash receipts in a rising commodity price environment. and Miriam Jager Lykke, Cathrine Torgersen The next part of the equation is capital intensity and with Tyra redevelopment complete, capital expenditure has stepped down materially and we continue to maintain the lower forecast capex outlook with a range for 26 of 40 to 50 million dollars with an expectation towards the lower end. and we still expect 2027 to 2030 to be around 100 to 150 million dollars per year.

23:15 This is also including maintenance capex and of course remains subject to project sanction and timing. So this brings us to the liquidity position at the end of the quarter. We closed Q3 liquidity with a liquidity position of $392 million and this includes $261 million of undrawn RBL capacity. The bridge on this slide shows the main movements. This is from Q2 to Q3 and you can see it includes the payment of our Q2 dividend. So capital management overall remains disciplined. We actually have minimal change in this quarter and the leverage is at 1.65 times at the end of Q3.

24:01 So to close the financial performance section, Q3 demonstrates strong revenue and earnings driven by stable production from Tyra and elevated commodity prices. The benefit of this performance will be realised through cash flow in future quarters and will continue to underpin a strong financial position. And with that, I'll hand back to Euan to take us through the final section of our presentation.

24:41 Before we move to questions, I think I'll just come back to where we started. We've come a long way since 2019, and I think we can look back on what we achieved with real satisfaction. Tyre has been redeveloped, brought back into production. We've returned substantial cash to our shareholders. and the business today is in a very different position from where it was in 2019 or 2020. But as we've discussed, we do believe that the next chapter for these assets is better pursued as part of a larger company with greater scale, diversification and financial strength. We continue to expect the merger to close around the end of this year subject to the remaining conditions and until then our focus is very much on running the business and working towards completion.

25:29 So I'd like to thank everyone at Blue Nord for what they've delivered, particularly over the last few months, and of course our shareholders for their continued support. And finally, I'd just like to say that it's been a real pleasure and a privilege to run Blue Nord over this period, and hopefully we'll have the chance to work together again in whatever form. So thank you very much. I'll pause now. We'll wait for any final questions to come in, and then we'll come back to answer them. Thank you.

27:13 Okay, thank you. We've only received one question. We have, however, received several very nice messages from analysts and shareholders, so thank you for those. I'm going to read off the one question, though, and this is for Jacqueline. How do you think around hedging in the period until closing of the Vård deal?

27:35 Yeah, we obviously have quite a large hedge book right now. So there really isn't a need from a business perspective to put on additional hedges. Equally, that's something that we don't need to do a lot on in this current commodity price environment. So you can expect it to unwind as is.

27:54 And that was it. Thank you, everyone, for listening in this morning. Goodbye.

27:59 Thank you. Thanks a lot.