Oslo, 3 August, 2022: Norwegian Energy Company ASA ("Noreco" or the "Company")
has today published an update on the Tyra Redevelopment Project ("Tyra II" or
the "Project") with the first gas date being revised by the operator of the
Danish Underground Consortium (the "DUC), 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 (the "TEG")
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 ("HUC").
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
- 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.
Noreco's Robust Underlying Business Model
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 Q2 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.
Marianne Eide, Noreco's Chief Operating Officer commented:
"Today's news on a revised scheduled for Tyra is disappointing, however we are
now entering the last stage of the Tyra Re-development with a good definition of
the work scope remaining to achieve first gas. We now have a robust plan built
on experience from the initial nine months of offshore hook-up and commissioning
and we expect to add more than 500 offshore workers. The complexity of the
operations at Tyra will increase and safe operations is our main priority.
The imminent sail-away of the TEG module from Batam is a significant milestone
for Tyra II with the onshore fabrication process complete. By Q4 2022, all
eight modules will have been installed offshore and, importantly, remaining
activity to first gas will be fully within the direct control of TotalEnergies.
In parallel with delivering Tyra we are working to increase gas production from
our producing assets in the DUC. We have seen positive gains from the Halfdan
stimulation campaign and for the upcoming infill wells we are prioritising gas
rich targets"
Euan Shirlaw, Chief Executive Officer of Noreco said:
"Noreco fully recognises economic, strategic and political importance of
achieving Tyra first gas. Our focus will remain on ensuring that the revised
project plan, as recently communicated to us by the operator, is secured