Oslo, Norway, 23 August 2019: MAGNORA ASA, a leading Norwegian royalty and license revenue company reports second quarter and half-year 2019 results.
CEO Erik Sneve and Executive Chairman Torstein Sanness commented: “Magnora ASA has returned NOK 499.7 million over the last 9 months to its shareholders – NOK 9.5 per share in total following the last distribution of 1 NOK on July 11th, 2019. Based on Magnora’s royalty and license agreements, the company expects to continue to generate revenues long term over the lifetime of the Western Isles FPSO, and from the license revenues from the design license related to the Shell Penguins FPSO currently under construction for the Shell operated Penguins field in the North Sea.”
Shareholders of Magnora on July 11, 2019, received a distribution of NOK 1 per share which is equivalent to a 13.4% dividend yield (based on closing price on the ex date).
Low operating cost yield-company
Magnora has through the second quarter of 2019 completed the transformation to a low operating cost yield-company. Magnora has a board approved aim to pay out all excess cash generated by the two license agreements, while maintaining a sufficient cash buffer. Magnora’s previous board was replaced with a new board in December 2018, and a new management replaced the existing one in Q2 2019. The new management team, which consists of 2 senior executives, is working on a 60%-basis to maintain a low cost and lean operating structure, and closely cooperating with the Executive Chairman to realize the full strategic potential of the company.
Magnora expects to maintain a cash balance of NOK 25-30 million. All excess cash generated going forward will be paid out to shareholders to the extent legally permitted, while maintaining a cash balance of NOK 25-30 million. As a yield-company, Magnora is evaluating the possibility of paying interim dividends from 2020. Given the agreements owned by Magnora and its current strategy, the company expects to pay a significant dividend for 2020, 2021, 2022 and beyond based on Magnora’s existing contracts.
Low fixed operating costs
The fixed operating costs of Magnora ASA are expected to be approximately NOK 7-10 million on an annual basis from Q4 2019, including non-cash items, when the previous management structure has unwound. The previous management and staff will be ending their engagements by Q3 2019. The new management has together with the Executive Chairman broad experience from strategy, investment, exit and corporate governance processes which will enable the company to develop further strategically.
Magnora has ambitions to grow as a company. The company has since the start of Q2 2019 evaluated a large number of new investments opportunities. The aim has been to create substantial new value for the company’s shareholders and realize the strategic potential of the company. None of the investment opportunities that have been evaluated to date have fit our strict criteria for investing and value creation. In one instance, the company initiated a due diligence process, but decided to withdraw from the process.
Dana Petroleum – USD 0.50 / barrel
The Western Isles agreement gives Magnora the right to USD 0.5 per barrel of oil produced and offloaded from the Western Isles FPSO (the “FPSO”) during the lifetime of the FPSO. The Western Isles development is expected to have a field life of 15 years. The FPSO is expected to have a design life of 20 to 25 years, and thus could produce oil for longer than 15 years. Magnora´s right to payments is tied to the FPSO, irrespective of operating location and field. Any potential oil field tied-back to the FPSO or any redeployment, irrespective of location, will also be subject to the payment obligations under the agreement. The Western Isles agreement is expected to generate income for Magnora in the years to come. The FPSO is owned and operated by Dana Petroleum and is currently producing at the Western Isles development in the UK sector of the North Sea. First oil was achieved in Q4 2017. The FPSO has a production capacity of 44,000 barrels per day. The related revenue for H1 2019 was NOK 23.2 million.
Shell – USD 16 million
The Penguins agreement gives Magnora the right to future license income of approximately USD 16 million from the Shell operated Penguins FPSO project. The Penguins FPSO is currently under construction in Asia. The payments of USD 16 million in total, are tied to three milestones. These three milestones are: 1) the completion and sail away of the FPSO from the construction yard 2) the installation of the FPSO at the field and achievement of first oil, and 3) the successful production, offloading and gas export of 4 million barrels which is estimated to be approximately 6 months after successful start-up. It is anticipated that the construction of the Shell Penguins FPSO will be completed in Asia during mid-2021. Achievement of the further milestones will take place subsequently.
H1 2019 Highlights:
- Relocated headquarters from Arendal in Aust Agder to Karenslyst Alle 2 in Oslo
- Reorganized management by the engagement of Erik Sneve as acting CEO (60% basis)
- Established strong relationships with companies, banks, brokers, advisors, entrepreneurs and fund managers giving us access to a relevant deal-flow and investment ideas
- All remaining transition agreements with Sembcorp have been terminated and the respective employees will be transferred to the new employer effective from September 1st
- Fixed operating costs (including non-cash costs) on an annualised basis, are expected to be in the range of NOK 7-10 million going forward from Q4 2019
- Operating revenue for H1 2019 was NOK 23.2 million
- H1 2019 EBITDA NOK 12.1 million
- As of August 22, 2019 cash and marketable securities are NOK 61.5 million
About Magnora (OSE: MGN): Magnora ASA is a royalty and license company looking for profitable investment opportunities. The company is listed on the main list on Oslo Stock Exchange under the ticker MGN. ASA is a royalty company looking for profitable investment opportunities.
For further information, please contact:
Erik Sneve, CEO, Magnora ASA
This information is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.