MAGNORA´S MAIN BUSINESS ACTIVITY
Magnora´s main business activity is focused on managing the Agreements:
The Western Isles agreement
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 construction of the newly built FPSO was completed in 2017. 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 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. In Q2 2018 and Q3 2018 combined, which were the two first quarters of oil production at normalized levels after start-up, Magnora booked license payments in total of 29 mill NOK related to the Western Isles agreement.
The Penguins agreement
The Penguins agreement gives Magnora the right to license income of approximately USD 16 million from the Shell 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 Penguins FPSO will be completed in Asia during mid 2021. Achievement of the further milestones will then take place subsequently.
Magnora’s corporate structure, following the completion of the SMIY transaction, is organized to be as efficient and cost effective as possible. Given the current structure of the Company, it is expected that total group operating costs will be in the range of NOK 7 to 10 million through 2019.
DIVIDEND / SHARE CAPITAL REDUCTION AND SHARE BUYBACK MODEL
The board of Magnora intends to carry-out further distributions of capital to shareholders, in the form of dividends and/or distributions of capital, and to launch a share buyback plan. The intention is to distribute the cash flow generated by the Agreements, in addition to any excess cash held by the Company, to the extent legally permitted, to shareholders. Magnora will at the same time seek to maintain an appropriate cash balance in the Company and will take this into consideration if proposing any dividends and/or distributions of capital. It is currently expected that a cash balance of approximately NOK 25-40 million will be retained by the Company. In order to facilitate further distributions, the board intends to recommend a share capital reduction as well as proposing the granting of an authorization to pay interim quarterly dividends to shareholders at the Annual General Meeting (“AGM”) to be held in April 2019. This may enable the Company to make distributions of capital to shareholders during 2019.
The board also plans to propose an authorization to implement a share buyback program at the AGM which could be deployed in combination with or independent of the dividends and/or distributions of capital mentioned above. The share buyback authorization proposed at the extraordinary general assembly (“EGM”) to be held on December 18, 2018, is an additional tool to return value to shareholders which will give the board flexibility to launch a share buyback program in the time period between the EGM and the AGM if deemed appropriate.
POTENTIAL NEW INVESTMENTS
The Company intends to initiate a process of evaluating potential new investment opportunities with the objective of realizing the strategic potential of the Company and to generate further shareholder value.
For further information, please contact:
This information is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.