Presentation of third quarter 2019 OKEA ASA 1 November 2019
Highlights 3rd quarter 2019 Operations • No serious incidents • Production of 18,125 boepd • High production regularity on Draugen of 97%, up from 86% previous quarter • Gjøa impacted by modification and export constraints • Consent for drilling two appraisal wells on Draugen in Q4 2019 Financial • Revenues from oil and gas sales NOK 612 million • Profit from operating activities of NOK 227 million • Net profit of NOK -77 million • Cash flow from operations of NOK 723 million 2
Production Solid operations on Draugen and tie-in of Nova & maintenance on Gjøa Daily average production (boepd) 25 000 20 000 11 108 15 000 10 496 10 488 8 135 10 000 10 898 5 000 9 648 9 241 8 637 0 1) Q3 18 Q4 18 Q1 19 Q2 19 Q319 Ivar Aasen Draugen Gjøa • 9% production decrease from Q2 to Q3 2019 • Lower Gjøa production than expected due to tie-in of the Nova project, corrective maintenance and reduced SEGAL 2) capacity • Draugen production amount to 53% of the total volume in Q3 1) Q4 18: Draugen & Gjøa reflect December production volumes only 3 2) Shell Esso Gas and Associated Liquids (SEGAL) pipeline system
Draugen Strong operations Net production (boepd) • Q3 operations 12 000 • 4 % production increase vs. Q2 2019 10 000 • Increase mainly due to planned maintenance stop in Q2 8 000 • Finalized preparations for Q4 drilling 6 000 10 898 campaign initiated in October 9 648 9 241 8 637 4 000 • Infill Ø drilling completed 2 000 0 1) Q4 18 Q1 19 Q2 19 Q3 19 Production regularity • Next steps 100% • Safe and efficient drilling completion of 80% Skumnisse • Results expected in Q4 2019 60% 97% 97% 86% 40% 78% 20% 0% Q4 18 Q1 19 Q2 19 Q3 19 Draugen partners: OKEA (44.56%, Op.), Petoro / Norway State DFI (47.88%) and Neptune (7.56%) 4 1) Q4 18: Draugen & Gjøa reflect December production volumes only
Draugen drilling campaign ongoing Successful drilling operation and livestreaming on Infill Ø Near field exploration drilling Infill Ø • Part of new development strategy in the license Skumnisse • Drilling commenced 15 October • Efficient slim well designs • Successful drilling operation on Infill Ø • OKEA qualified as drilling operator • Improved understanding of reservoir drainage • Skumnisse drilling ongoing • Targeting volumes of 24 mmbbl (gross) Top structure of Draugen 5
Drilling the Ø area - result Explaining the data that was streamed during drilling The logs as published in real time Interpretation 2.5 meters of oil left in the attic in the Ø area. Residual oil indicated by higher resistivity between the original oil-water contact and the local present one. Oil produced today on Draugen is a mix of: • residual oil in the water flooded reservoir • remaining oil pockets in top of reservoir Additional reserves: • undrained areas in the periphery of the field • oil trapped in larger attic areas • exploration targets in the vicinity of Draugen 6
OKEA’s revitalization of Draugen in 2019 “The OKEA way” What we have done How we have done it – “The OKEA way” • Identified potential for a • Focus on safe and efficient execution development strategy – no serious incidents or spills • Drilling campaign ongoing • Short decision lead time • Positioned for new APA licences • Reduced # of procedures by 25% • Plan to develop Hasselmus gas field and software applications by 33% • High production regularity • Smart use of new technology, • Reduced operational cost digitalisation and collaboration with • Successful MMO 1) project execution partners • Control system upgrade • Using industry standards for • Change of two x-mas trees and change of development projects pipe in oil train from carbon to stainless • Strong culture, competent people • Started new projects • Draugen long term power • Revised roles and responsibilities • Energy management plan • Revitalise earlier stranded projects • Power from shore feasibility • Flare gas recovery feasibility 1) Maintenance and modifications 7
Next level operational optimization using real time data Performed in close collaboration with ABB Making OKEA Real time Condition-based Simplifies supplier digital operational data maintenance collaboration An important step to drive Utilizing live, high quality Supports production More tasks executed continuous improvement in data to further improve regularity and cost onshore, lowering cost and operations by use of digital safety and efficiency at efficiency HSE risk technology Draugen 8
Gjøa Lower production mainly due to tie-in of Nova, maintenance and export constraints Net production (1 000 boepd) • Q3 Operations 12 000 • Modifications related to tie-in of Nova project 10 000 • Corrective maintenance related to heat 8 000 exchanger discovered and solved during 6 000 Nova modifications 11 108 10 488 10 496 4 000 8 135 • Temporarily lower capacity in SEGAL gas infrastructure system. Full capacity from P1 2 000 mid December Duva 0 Gjøa Q4 18 Q1 19 Q2 19 Q3 19 Production regularity • Next steps 100% • Daily production optimization within 80% capacity limits until SEGAL gas infrastructure capacity is fully restored Nova 60% • P1 development plan approved by 95% 92% 90% 89% 40% Norwegian Authorities and production start is expected late 2020/early 2021 20% 0% Q4 18 Q1 19 Q2 19 Q3 19 Gjøa partners: Neptune (30%, Op.), Petoro /Norway State DFI (30%), Wintershall (20%), OKEA (12%) and DEA (8%) Q4 18 figures reflect December production only 9
Financial review
Oil and gas production, sales and revenues Revenue decrease mainly due lower volumes sold and lower realized prices Oil and gas volume (boepd) Realized prices (USD/boe) Petroleum revenues (NOK million) Production Sales Liquids Natural gas 60,7 1 042 25 274 56,4 20 045 18 125 16 696 612 26,10 19,3 Q2 19 Q319 Q2 19 Q3 19 Q2 19 Q3 19 Q2 19 Q3 19 Q2 19 Q3 19 11
Income statement Decrease in operating income due to lower volumes and one lifting 2nd quarter 3rd quarter • Decreased income in Q3 Figures in NOK million 2019 2018 2019 2018 • Mainly due to one lifting on Draugen vs two in Q2 • Q3 volumes sold reduced by ~1/3 vs Q2 Total operating income 621 969 97 493 1 039 479 27 825 • Lower total volumes due to modifications and Production expenses -144 095 -2 463 -185 938 -2 235 maintenance on non-operated assets Changes in over/underlift positions and inventory 41 041 -2 563 -191 284 -8 582 Depreciation, depletion and amortization -176 966 -6 232 -184 170 -5 822 • Lower production expenses Exploration and operating expenses • Q2 higher than normal due to catch up on tariffs -115 138 -50 672 -111 543 -30 210 Profit / loss (-) from operating activities • Reclassification of well planning and field 226 809 35 563 366 543 -19 025 evaluations to exploration Net financial items -225 350 -65 766 -55 858 -47 441 Profit / loss (-) before income tax 1 459 -30 202 310 684 -66 465 • Exploration and operating expenses relate to Income taxes -78 587 -34 154 -293 121 34 346 • Seismic and field evaluation Net profit / loss (-) • Dry well on Kathryn and non-commercial well Infill Ø -77 128 -64 356 17 564 -32 119 Earnings per share (NOK) - Basic • Net financial items impacted by net exchange rate -0,76 -1,73 0,21 -0,86 loss of NOK 154 million due a ~7 % increase in Earnings per share (NOK) - Diluted NOK/USD rate -0,76 -1,73 0,19 -0,86 EBITDA 403 776 41 795 593 723 -13 203 12
Cash flow development during Q3 Strong cash generation NOK million 2 500 2 000 216 37 723 1 500 1 000 1 799 1 329 500 - Cash 30.06.19 Operating activities Investment activities Financial activities Cash 30.09.19 13
Outlook and concluding remarks
The OKEA journey continues OKEA is Acquiring Grevling to assess Closing of the Yme Acquire Draugen and Listing at Oslo Børs Roadmap to future founded development acquisition Gjøa from Shell value creation 2015 2017 2018 2019 2016 OKEA’s size measured in reserves 1 55 mmboe 0 mmboe 1 mmboe 11 mmboe 52 mmboe • • OKEA IPO and prepared for ✓ Increase daily production Bangchak enters into OKEA further growth as a long term strategic • ✓ Continue to explore for additional Approved as an • investor • • Sanctioned developments of operator on NCS Defining a Turning Yme from an reserves, identify stranded assets and Key strategic • Yme and P1 at Gjøa niche as a abandonment field to a • Able to extend field life for M&A opportunities decisions and Starting to attract NCS • development Draugen from 2027 to 2035 milestones ✓ Join exploration companies to develop Not yet sanctioned Grevling interest from operator opportunity • development, Hasselmus and international their discoveries Producing more than 20,000 Draugen infill investors boepd ✓ Continue to cooperate closely with the • Other prospective resources service industry when developing fields 1) 2P reserves from CPR 15
Ongoing development projects Yme Grevling/Storskrymten Grevling • Grevling/Storskrymten being further matured for • Wellhead module installed offshore in September DG2 in Q1 2020 • Rig campaign commenced in October • Energy supply from Sleipner a key factor for • Planned 1 st oil in Q2 2020 development 16
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