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NORWEGIAN ENERGY COMPANY ASA

(NOR)
  Report
Real-time Oslo Bors  -  10:25 2022-10-03 am EDT
370.00 NOK   +5.11%
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Norwegian Energy Company ASA Update on the Tyra Redevelopment Project

08/03/2022 | 01:30am EDT

Norwegian Energy Company ASA published an update on the Tyra Redevelopment Project with the first gas date being revised by the operator of the Danish Underground Consortium, TotalEnergies, to Winter 2023 /2024. The revision has been driven by global supply chain challenges that have impacted the extent to which fabrication work on the process module has been completed in the yard in Batam. While the sail-away of the TEG will be a positive milestone that marks the end of Tyra II's onshore fabrication phase, it will depart with additional work required to be completed offshore in order to achieve first gas.

Additionally, the operator of the Project has revised its plan for the ongoing hook-up and commissioning phase. Based on the strength of Noreco's underlying business, with three producing hubs that are significantly cash generative in the current environment, the Company is fully funded based on current estimates and with a capital structure that continues to be set to deliver Tyra II based on the revised forecasts. Process Module: TEG: Seven out of eight modules are already installed offshore and the TEG has been the only remaining module where onshore fabrication is still ongoing.

With load-out of the process module beginning this week, the module will leave McDermott's yard in Batam in an incomplete state with approximately 580,000 hours of remaining work, where the operator expects approximately 165,000 hours are required to reach first gas. The Carry-Over work is mainly caused by the overall performance at the yard where overhang from COVID-19 has challenged the quality and progress, and the operator's efforts in mitigating actions have proved not to be sufficiently effective. The sail away of the module remains on schedule and is expected in early September where the TEG will be transported directly to the Tyra field by heavy lift vessel GPO Emerald followed by a lift and installation by Heerema's Sleipinir.

Offshore Hook-Up and Commissioning: Although TotalEnergies has focused on optimising the ongoing offshore activities at the Tyra field, progress is below the original plan and will be further impacted by the carry-over scope of the arriving TEG. As such, offshore productivity assumptions have been revisited with several identified areas of potential improvements and learnings which should have an overall positive effect on the Offshore Hook-Up and Commissioning performance going forward. Revised Start-Up of Tyra II: The final stage of the yard fabrication is now complete with seven out of eight modules in place.

As a result, TotalEnergies has revised the planning towards first gas according to the status of TEG at sail away. The operator has concluded that time schedule of the original planned work scope is no longer achievable and the probabilistic range of first gas dates for Tyra II is as follows: P10: October 2023; P50: December 2023; and P90: March 2024. Budget: As a result of the schedule change, the expenditure budget for Tyra II is expected to rise.

While the operator is in the process of preparing a formal budget for approval by the DUC partnership, TotalEnergies have indicated that they expect a gross budget to first gas of c. DKK 24.0 billion and to Project completion of DKK 25.7 billion. Net to Noreco, the remaining expenditure to reach first gas is approximately USD 300 million which implies a net increase to first gas of approximately USD 120 million compared to previous budget. The increase in budget is mainly related to higher expected costs on the hook-up & commissioning and project management.

The Company has in H1 2022 delivered strong results and is in a robust financial position. The cash generation from Dan, Gorm and Halfdan is significant and during Second Quarter 2022 the Company delivered revenues of USD 265 million and EBITDA of USD 167 million. This is mainly a result of high operational performance of all the three hubs and a favourable commodity price environment.

Noreco remains fully funded to deliver Tyra based on current estimates, with significant headroom under the financial covenants of the Company's debt instruments. With the remaining work of the Tyra Redevelopment Project being carried out locally at the Tyra field in Denmark by the operator, Noreco expects a higher transparency of the Project's performance and intends to update the market on a regular basis on relevant progress and milestones.


© S&P Capital IQ 2022
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Financials
Sales 2022 10 140 M 949 M 949 M
Net income 2022 1 058 M 99,0 M 99,0 M
Net Debt 2022 7 942 M 743 M 743 M
P/E ratio 2022 8,66x
Yield 2022 -
Capitalization 9 419 M 881 M 881 M
EV / Sales 2022 1,71x
EV / Sales 2023 1,02x
Nbr of Employees 30
Free-Float 90,1%
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Number of Analysts 1
Last Close Price 370,00 NOK
Average target price 513,00 NOK
Spread / Average Target 38,6%
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Managers and Directors
Euan Campbell Shirlaw Chief Executive Officer
Riulf Karsten Rustad Executive Chairman
Marianne Wold Eide Chief Operating Officer
Marianne Lie Director
Tone Kristin Omsted Director
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