Aker BP ASA (ORRON) Earnings Call Transcript & Summary

Good afternoon, everyone. We are very pleased that you could join us to hear more about today's exciting and transformational announcement. A few minutes ago, the Boards of Aker BP and Lundin announced a pivotal step in the history of the 2 companies, creating what we believe will become the best pure-play independent oil company in the world, and I'm told, the largest public transaction in Norway the last 15 years. Before diving into the details of the transaction, I want to share with you some insight to the events that brought us to this historical moment. Over 5 years ago in 2016, we partnered with BP to merge Det norske and BP Norway to create Aker BP. It's been quite a ride and nothing short of a success story. Aker BP is, today, one of the largest independent listed oil companies in Europe and has created significant leverage for both its shareholders and for Norway. But in true Aker and BP fashion, already in 2016, we had our eyes set on another potential opportunity for value creation. A subsequent transaction with Lundin Energy was the vision that Bernard Looney, the current BP CEO, and I shared from the very first day, a transaction which we have not only dreamt about often but also a combination which shareholders, investment banks and others have repeatedly and consistently encouraged us to pursue. It's not difficult to understand why. Lundin Energy is a fantastic company with the Lundin family, Lukas and Ian, in particular, as a successful visionary and entrepreneurial main shareholder. We know both the company and the individuals as a great partner and a highly capable operator on the Norwegian Continental Shelf. We often discussed internally that Lundin Energy and Aker BP were clearly two complementary companies, both with the Norwegian Continental Shelf as their sole focus area, both with world-class assets like the 31% combined ownership in the Johan Sverdrup field and both with highly competent, strong teams. There were those who liked the idea, including many of you. And then there were those on the other side of the fence, including, by the way, our main shareholder, who claimed that it would never happen. Today, I'm happy to say that sometimes, not often but sometimes, even he's mistaken. Because after all these years, we got the opportunity and both [ Hiling ] and I became busy overnight. Now finally, we can share the enthusiasm about the fact that the long-time vision and dream that some of us had, has become a reality and a vital part of our joint future. The guy who has kept us busy the last couple of weeks is standing next to me here on stage, Nick Walker, CEO of Lundin Energy. It's great to see, Nick, that you are just as happy about this transaction as we are. So Nick, please share with us your perspectives on this opportunity.

Øyvind, thank you, and good afternoon, everyone, and thank you for joining with us. I think this is a tremendous deal to put two tremendous companies together to make something even better and bigger. I think it's a great deal for Norway. I think it's a great deal for our shareholders of both companies. And I also think it's a great deal for the Norwegian staff on both companies, putting two great companies together to create lots of growth opportunities for individuals. As Lundin, we've been focused on creating value for shareholders for over 20 years, and I think we've created a lot of value over that time. And we always look, as a business, to see how we can continue to create more value for our shareholders. And I think putting these two leading Norwegian independent companies together to create another Norwegian champion, the second largest E&P business here in Norway, and I think one of the world's greatest upstream independent companies is a great opportunity. And I think it's a win-win for both sets of shareholders. I think if you look at it, it's 1 plus 1 equals more than 2 and I think that's the key ingredient with this. It creates Europe's leading E&P company at scale, which I think is really important through the energy transition, and we've recognized that. It also creates production growth. And I think when you put the two companies together, as I think you'll see, is it creates a tremendous growth profile but not -- more than that, it's low cost and low carbon. And I think it sets the business up to be successful through the energy transition, delivering long-term value and, I think, strong cash flow into the future, which importantly allows the business to deliver sustainable and growing dividends long term. When you look at the business together, Lundin's shareholders will own 43% of the business. And so we're not going away. We're -- the Lundin shareholders are part of this and joined in the success of the joint company. And indeed, the Lundin family will retain -- be one of the largest shareholders with 14.4%. You look at this, it solidifies some value, around 20% of the Lundin value today, but importantly, gives shares in the joint company, which will deliver strong shareholder returns over the long term. And on top of that, we are retaining into the existing Lundin Energy business, the renewables business, which we look to grow. So I say that this is a great deal. As I mentioned at the beginning for Norway, for our shareholders and for the Norwegian staff in our business. And I do want to just say a little bit about the renewables business, that it's a new renewables business. We have 3 high-quality renewable assets in the Nordics. It's debt-free and with significant cash reserves, and we're generating free cash flow from the end of 2023, so with the capacity to grow the business further and also positioned to pursue other opportunities in the energy transition. We will talk more about what this business looks like as we lead up to our Annual General Meeting around approval of this deal, what the Board looks like, what the strategy looks like and what the management will be like. But what I want to do is before I hand back is to reiterate, it's a great deal for Lundin Energy and Aker BP. I want to congratulate Øyvind and your team for putting this together. We've worked very hard. A lot of late nights for the last while, and I think it's a great success for both of us to create one of the world's great upstream independent E&P companies. So thank you for the cooperation. I'll hand back to you.

Thank you very much, Nick. And as he just said, this transaction makes perfect sense for both Norway and for the companies involved. In addition to the strategic rationale, there is also a bigger picture. One in which the oil and gas industry is undergoing a massive structural change. New winners and losers have been crystallized based on sector consolidation and transformations, not least impacted by the ability to deploy digitalization and new technologies. Some companies are choosing to transition away from oil and gas and into renewable. Others are becoming and remaining pure-play oil and gas. The world needs both. Together, we are collectively facing a world in which the demand for energy is rising, a world in which oil and gas is expected to lose market share to other forms of energy longer term, yet consumption of oil and gas is likely to grow over the next decade. This means two things, both of which provide a strong rationale for the transaction beyond our early vision of value creation: One, size matters. While a diversified portfolio is increasingly important, building sizable players is vital to ensure access to the resources needed to develop and invest in growth and improvement, and to set the standard for basins like the Norwegian Continental Shelf for a long time to come. This is especially important to ensure continuity through cycles in an industry volatile by nature. Following the transaction, Aker BP will be the second largest company on the Norwegian Continental Shelf with total reserves and resources of around 2.7 billion oil barrel equivalent. The company will almost double its current oil and gas production, and the ambition is to grow production to well above 500,000 barrels of oil equivalents per day by 2028. The organic growth comes from a highly profitable pipeline of projects, all made possible by the temporary changes to the Norwegian petroleum tax system. In addition, we expect to realize annual synergies of up to USD 200 million from the combination. Secondly, and in combination with size, pure-play companies are essential to ensure continued and long-term quality of oil and gas production. With this acquisition, Aker BP confirms its pole position as a low-cost, low carbon oil and gas producer. It will have among the lowest CO2 emissions intensity in the global E&P industry. And hence, the combined company will be in a very good position for shaping the lower carbon energy future. This rests largely on the unique quality of the NCS portfolio, especially with a significant 31% participation interest in the Johan Sverdrup field, providing industry-leading low-cost operations. The combined entity will continue to have the Norwegian Continental Shelf as its sole focus area. It will build on the combined competence of the two companies, not least within digitalization as well as leveraging the alliance model to drive up efficiency throughout the value chain in cooperation with suppliers. To sum it up, this is a transformative time for a vital industry. In that market environment, we are creating an even stronger pure-play company with an even more solid financial fundament, which enables continued investment in profitable growth, predictable growth in dividends, supported by a robust cash flow from a more diversified portfolio of assets and continued contribution to a lower emissions future. Now let me spend a few words on the structure of the transaction. The transaction is technically an acquisition where Aker BP will acquire Lundin Energy's oil and gas activities in Norway. In exchange, Lundin Energy will receive 271.9 million new shares in Aker BP and a cash consideration of USD 2.22 billion. Per Lundin's share, this is equivalent to approximately 0.95 Aker BP shares plus SEK 71 in cash. This means that the Lundin's shareholders will own around 43% of the combined company. The consideration will be distributed through Lundin's ultimate shareholders. The company will keep its Aker BP name and it's headquartered here at Fornebu, Norway. And the existing Board and the existing management team of Aker BP will remain in charge of the combined company. Ashley Heppenstall, the former CEO of Lundin Energy, is joining as a new shareholder-elected member of the Board of Directors. The transaction is expected to be completed in the second quarter of 2022 and is subject to shareholders' approvals in both companies as well as regulatory approvals. The Lundin family, Aker and BP will be under a 6-month lockup from closing. The terms negotiated are balanced and fair. This slide shows why. It outlines how the share prices of the two companies have correlated ever since the establishment of Aker BP back in 2016. Both the average since 2016, the average for the last 2 years and the closing share price yesterday are nearly spot on the transaction's exchange ratio. By combining Aker BP and Lundin Energy at the agreed terms, we are creating a regional pure-play champion on the Norwegian Continental Shelf, a unique point of departure for creating shareholder value for decades to come. Karl, the Aker BP CEO, will now explain why and how.

Thank you, Øyvind, and thank you, Nick. It is not difficult to share your enthusiasm on today's announcement. The new company announced today it will truly be an oil and gas company fit for the future. And it is, of course, tempting today to describe the new company in many words, but it's even more powerful when done in numbers and listen to this. After the acquisition, the company will have around 1.5 billion barrels of oil equivalents in reserves with nearly 90% liquids. The resource base, that is unsanctioned oil and gas discoveries, amount to roughly 1.2 billion oil equivalents, also this mostly oil. And as previously highlighted, the production will be around 400,000 barrels of oil equivalents, while the operational cost is below $7 a barrel. This is, in fact, the target level presented to the Aker BP CMU in February and a testimony to the quality of the portfolio. And last but not least, maybe the most impressive metric is the combined companies' CO2 footprint at around 3.8 kilograms per boe produced. Needless to say, this is truly world-class performance, positively impacted by the high production from Johan Sverdrup but also by the high degree of electrification of our installations. By the safe and efficient operation that historically has been the hallmark for both Lundin and Aker BP. And further, it speaks volumes to the quality of the underlying portfolio. Speaking of portfolio, through the transaction, we are creating a company that has an unparalleled portfolio of high-quality assets with strong and growing production. While Aker BP and Lundin has had ownership interest in many of the same fields, including Alvheim and more than a 30% interest in the exceptional Johan Sverdrup, the transaction also grants us access to new assets in operation and exposure to some very interesting development projects. In fact, the company will operate or participates in most of the new field development -- major field development, that is, on the NCS with NOAKA, NCP, King Lear and Wisting as the 3 biggest projects. The combination will allow Aker BP to roll out its operating model on an even greater number of assets. New projects will be developed under the alliance model, reducing cost and improving quality of these developments. Additional activity will lead to reduced cost for all activities under the alliance umbrella. Aker BP will strengthen and increase our digital efforts, and the combination paves the way for a true leadership and digitalization of all activities in the company. In addition, we will provide an even greater contribution to the digitalization of the industry at large. The new company will be in possession of perhaps the most interesting exploration portfolio on the NCS. And in the months to come, we will high-grade that portfolio to increase the value of an already extremely interesting exploration campaign, both in 2022 and in 2023. In total, the company expects to realize up to $200 million in operational and financial synergies per year over the next few years. And finally, we are combining two of the most, if not the most, competent teams in the oil and gas industry. And acting as one team going forward, this will be truly hard to beat. Finally, in a world where ESG has firmly taken the center stage on the oil and gas company's strategic agenda, the most resilient strategy is to produce with the lowest possible carbon footprint and the lowest possible cost. And it's safe to say that after the acquisition, the starting point could not have been better. The combined entity will simply have the lowest operating cost and the lowest carbon intensity in the industry, creating an industry leader along both dimensions and demonstrating the company's unmatched quality. Both cost and emissions are, of course, helped by the significant ownership share in Johan Sverdrup, but the overall performance of this portfolio is impressive and will continue to improve in the coming years. We believe this serves as the backbone for creating the E&P company of the future. But we are not resting on our laurels and we'll continue to work diligently to reduce [ this ] footprint even further wherever possible. Another important trait of the company is the substantial hopper of new development projects. And with the current portfolio, the company will immediately almost double its current oil production to around 400,000 barrels. In addition, the current portfolio of development project has the potential to grow production to well above 500,000 from 2028 from a highly profitable pipeline of projects. In the next few years towards 2023, Sverdrup Phase 2 will significantly increase production with a natural decline in the following years. But when we approach '27 and '28, the inclusion of and NOAKA, NCP, King Lear and Wisting will again lift production volumes to new record highs for the company. All these projects will be developed under the temporary tax regime, and PDO will be submitted before the end of 2022, adding robustness to the project economics. We will continue our tireless effort to improve the project development portfolio and projects under execution every single day as one team. But all this growth will, of course, require capital. And when it comes to capital allocation, make no mistake: Aker BP's priorities remain firm. The #1 priority is to maintain financial capacity. E&P is a capital-intensive industry, and access to capital at attractive terms is a cornerstone for our agenda of profitable growth. In this respect, the combination of the two companies will, without a doubt, increase access to and most likely reduce the cost of capital. The second priority is to invest in our unique portfolio of growth -- profitable growth project with low life cycle breakeven and attractive risk-reward ratios. This investment activity will, in turn, enable us to meet our third priority, which is to return value to our shareholders for a predictable dividend. Our Board of Directors has resolved to increase the dividend by 14% compared to what Aker BP communicated on our Q3 presentation. This means that the dividend per share will increase to $1.90 from 2022, up from $1.35 this year or up from USD 600 million to USD 684 million for 2022 with effect from Q4 2021. In addition, Aker BP has previously stated that we aim to grow at least 5% a year, and this ambition is restated for the new company as long as the oil price is above $40. And finally, it is our opinion that the robustness of the dividend is significantly improved with increased quality and diversification in the underlying portfolio. So to sum up, with this acquisition, we are creating the E&P company for the future, with an industry-leading position as a low-cost, low carbon oil and gas producer, the most attractive growth pipeline in the industry and a high dividend capacity combined with strong investment-grade credit rating. And while creating the E&P company for the future is no small ambition, our starting point could not have been better. More concretely, Aker BP in the months and years to come will run our assets with safe and efficient operation, low cost and low carbon emissions. We will continue to use the unique Aker BP alliance model to develop a large hopper of profitable projects, which will pave the way to production of more than 500,000 barrels in 2028. We will aggressively pursue digitalization and other improvement activities to improve our position further. And we will develop the best team in the industry from an excellent starting point. Thus, the value creation pillars for both the transaction and for Aker BP going forward will be scale, quality and return and this will truly be the E&P company for the future. And with that, I'm handing back to you, Øyvind.

Thank you so much, Karl. Before opening up for Q&A, it's my pleasure to welcome the Lundin team to the Aker family as a result of this transaction. We have been competitors in the past but we have also been partners in the past. And from that experience, we know your capabilities. Your reputation in the oil and gas industry is that you're one of the best and most competent teams with deep functional expertise. And I'm looking forward to adding only yet another 450 colleagues to our organization in Norway. I would also like to welcome the Lundin family, Ian and Lukas, in particular, as fellow shareholders in the combined business. We have been colleagues for several years and now we're sitting on the same side of the table. And I'm pretty sure that you're sharing my enthusiasm about the opportunity Karl just described. Last but not least, a big thank you to you, Nick, for your leadership. It has been instrumental and vital for ending up where we are today with an announcement which is a historical milestone for Aker but is also an important milestone for the Norwegian oil and gas industry, so thank you so much.

Thank you.

And then it's time to open up for Q&A.

[Operator Instructions] We'll move to our first question.

This is Sasikanth from Morgan Stanley. Thanks for the presentation. I just wanted to quickly touch upon the operating synergies that you mentioned. If you could provide more details on the $200 million that you intend to save on -- through synergies. Where are these coming from and how do you expect to realize that? That would be quite helpful. Also, just wanted to understand the rationale for the dividend increase. How did you arrive at that 14% increase in the dividend that you've highlighted? And finally, one last question. If you had any -- has Lundin Energy had the target of actually going carbon-neutral by 2023? Is there any revision in the Aker BP's policy on reduction of carbon emissions following the transaction or if you have thought about that, that would be quite helpful as well. Thank you.

Those are three questions for you, Karl.

Yes, thank you. So when it comes to synergies, I think there are 3 main components. Obviously, we are operating many -- or participating in many of the same licenses, so there will be cost synergies. In addition, when it comes to the balance between Edvard Grieg and Ivar Aasen, there is obviously operational synergies to be realized, both as Edvard Grieg is supplying a lot of the utilities to almost all utilities, in fact, to Ivar Aasen and also others as logistics, transport, et cetera, et cetera. And finally, we also plan to optimize, as I explained in my presentation, the exploration portfolio and high-grade add in such a way that we can drill better wells with higher probabilities. And finally, there is significant operational synergies from including the Aker BP portfolio and the Lundin portfolio into one common portfolio where the alliance, both in terms of project and drilling will have more work to be done. So in total -- and then, of course, there are financial synergies, reducing capital cost and improving access, as I also described. So in total, we estimate that this will be an up to $200 million run rate per year. So I think I'll leave it to that. When it comes to your question around our ambition level, we have obviously had an approach in Aker BP, where our drive to be a part of the energy transition have been threefold. The first one is to make sure that we run our business as best we can, maximizing tax and dividend payable to the government and our shareholders. And then, of course, they can, in turn, invest this in new profitable project that Aker is already demonstrating how to do. And then, of course, we are significantly and effectively [Audio Gap] our CO2 emissions from an operational standpoint. And then the third one is to participate in creating new and new opportunities in this energy transition. We will continue with that strategy and relentlessly work to reduce our emissions. When it comes to the dividend, I think I'll hand back to you, Øyvind.

Yes. So when it comes to dividends, the framework for Aker BP is the same. Karl already talked about it. It's about the balance sheet and the resilience of the balance sheet. It's about investing in growth and it's about providing high shareholder returns. And our dividend policy is based on having a balance sheet which is robust at $40 Brent. And the ambition is then to increase the dividends by a minimum of 5% per year if the oil price is above $40. And the new dividend policy, which means a 14% increase is, of course, based on this methodology. And Karl, when he talked about the synergies of the two companies, one of the key synergies is the combination of the two portfolios, which provides an acceleration of cash flow and also enhanced balance sheet resilience. And that's the key to the dividend increase.

We'll move to our next question.

This is Teo Nilsen of Sparebank 1 Markets. Congrats to both for a very exciting deal. Three questions, sir, from me. Firstly, on the listing, I think it's pretty clear that Lundin and Aker BP that you have had somewhat a different view on Wisting. So just wanted to hear your thoughts around what you think around that development going forward. Is that a divestment channel for the new company? My second question, that's on your overall exploration activity. Should we assume that, that will just be the sum of the two companies or will that be reduced compared to the current run rate? And then final question, maybe to Nick. Will Lundin Renewables stay as a listed company in Sweden?

Let us start with you, Nick.

Teodor, I didn't quite catch your question. Could you repeat the last question?

Yes, the question was, will Lundin renewables stay as a listed company in Sweden, the renewable assets that are not a part of the deal?

The intention, Teodor, and it will stay listed on the Swedish Stock Exchange, and we will -- as we progress through the approval of this transaction, then we'll detail more about what the strategy of that company is going to be going forward, indeed, the management and Board as well.

And then it was a question about the Wisting field development. The Aker Group, including Aker BP announced that development very well. It's one of the projects enabled by the temporary changes in the Norwegian tax regime. And the strategy of Aker BP will be to maintain the role as a license partner and support the development also in that capacity. And then we had one more question. Do you take that, Karl?

So I didn't catch your third question, Teodor.

It was on exploration, Karl. Is the exploration the sum of the parts or do you think differently around exploration going forward?

So as I explained in my presentation, we will sit down. We believe that the combined company has the most attractive portfolio of exploration assets in the business on the Norwegian Continental Shelf. And there are obvious synergies to be had from high-grading our portfolio even further. And in addition, this is probably the best exploration team in the two companies combined. So I see no reason that we shouldn't be rephasing our strategy on exploration. But it might not be a complete addition of the two companies' portfolio.

[Operator Instructions] We'll go to our next question.

It's Chris Wheaton from Stifel here. I'm struggling slightly to understand the rationale of putting the two businesses here because you could perhaps say it again in language I can understand because I can't see anything here that either business couldn't achieved themselves individually. If I look at merging two businesses, you've talked about the production profile looks very similar to what happens if I put my Lundin and Aker BP models together. The cash flow doesn't look very dissimilar. The debt looks, again, if you put the two businesses together, looks exactly where you'd expect it to be. And I'm really struggling with the industrial rationale of this. Can you help -- repeat it again for me, please, in the way that I can understand?

So this is the first time I'm hearing that argument. So Karl, will you take it?

I'm not sure I completely got you. But if you were challenging the argument as why these two companies could not survive alone, obviously, they could. But in combining these two companies, we are creating the best company out there. They -- we're absolutely certain that as you were combining both the quality of the portfolio, the quality of the teams and the portfolio growth going forward, there was no better company that could be created. So we truly believe that this is a unique opportunity to get the benchmark oil and gas company.

And what you said about cash flow is not correct. If you consider the cash flow in the time horizons of the temporary tax changes, which will -- has triggered a lot of investments in the Norwegian oil and gas industry, Aker BP will almost double its production due to projects which we are about to develop and have an aggressive growth program. Lundin is involving some of them but will generate significant cash flow. So from a financial engineering perspective, we are more or less copying what we did with BP Norway in 2016, combining a growth company with a cash-generating engine.

That's a very helpful answer. But yes, I see that the development profile of Aker BP didn't need the cash flow of Lundin to develop, so that's interesting. We'll take this offline.

We'll move to our next question...

If I may, just to give a comment to what you said about the combination. It's obviously true that Aker BP could fund the development stand-alone. But now we are creating an even more robust company which will be able to pay an attractive dividend in parallel with an aggressive growth even in a low oil price scenario. So the robustness of the combined entity is very, very strong.

Caller, your line is opened. go ahead with your question.

Yes. 2-parted questions from my end. First question regarding the synergies. Are all of the synergies to be realized in terms of reduced costs and if so, does that mean reduced organizations essentially? And then the second, the activity level in terms of exploration, will the combined company have a more high-graded exploration program, and the two entities on a stand-alone basis, meaning that the total number of net sales will be reduced?

Why don't you, David, take the question about synergies and then I leave it to you, Karl, to elaborate on exploration.

Yes. Sure, I can do that, and I might actually also answer the question on exploration when it comes to synergies. So it's not all about costs when it comes to the synergies and it's not all about taking out the organization, our employees. It's about synergies when it comes to the operation, as Karl talked about, the synergies between Edvard Grieg and Ivar Aasen. That's one major component. The second major component is, as Karl already mentioned, high-grading the exploration portfolio, which means that we will most likely not just add the exploration spend of Aker BP and Lundin together, but we will be able to optimize the exploration portfolio for the years to come, picking out the best wells, and I'm sure Karl can elaborate on that.

Yes. But I think it's already been answered. We will obviously high-grade, which in this clear language means that we will not add all the wells together but will only drill the most value-accretive wells. In addition, there is now a new operated hub in Aker BP, and that also means that we are obviously adding ILX or infrastructure exploration wells in the new hub as well.

We'll move to our next question.

Yes, it's Al Stanton from RBC. You might have said it at the beginning but perhaps I missed it, but can you just highlight who instigated this merger, please? Because I can't help but feeling that Lundin is getting out at the top here, it seems, to some extent. And then just two follow-on questions, if I may. How much discussion has there been with the Norwegian government authorities, the consolidation of operatorships and ownership in Norway I wouldn't necessarily seen as a good thing. So I'm just wondering whether they're on board with discussions at the moment. And then the final question is about change of control in the bonds. Do any bonds or debt need to be repaid as a result of the change of control?

Al, perhaps I'll take the first one. In Lundin, we've had a view for some time that I think during the energy transition, it's important to be -- to have scale. I think it's important to be low cost and low carbon, and we've been looking to see how we can create that and create more value for shareholders. So we approached Aker BP and we came to this agreement, which I'm very pleased that we've done. I think it makes -- it takes two fantastic companies and it makes one that's even better and bigger and I think it's going to create a lot of success and value for shareholders going forward. So that's the background.

And then to the question about dialogue with the Norwegian government, the Ministry of Oil and Energy in particular and the Aker Group as well as Aker BP, obviously, have a continuous dialogue with the authorities in Norway. And we have, however, not discussed explicitly this transaction before announcement for obvious reason. It has been insider information, so we will have that dialogue subsequently. But with a dominant position, we can do it on the Norwegian Continental Shelf. My personal expectation is that this transaction will be well received by the authorities as well as all the stakeholders in the Norwegian oil and gas industry. And your last question was about change of control. The only change of control provision triggered by this transaction is, as far as I understand, in the RCF and -- the Lundin RCF. That RCF is undrawn. But nevertheless, we have, prior to announcement, put in place backstop facilities. So I'm not aware of any change of control provision which will be triggered as a result of this transaction, which has not already been mitigated.

Maybe I can also add a comment or two on financing in total for the transaction because I think it's worth noting also that both companies, both Aker BP and Lundin has a significant cash position already at the current point in time, and they will, of course, be worked in more detail. The numbers referred to here is pretax cash savings, so there's obviously a tax element to it. When it comes to taxes and tax optimization, we don't necessarily see anything specific to mention there. And I don't know, Nick, if you want to refer anything with regards to withholding tax.

Yes. Withholding tax, I mean, it's an issue depending on the residency of the shareholding. So I think for most institutional shareholding, there won't be anything, but obviously, for some jurisdictions, there might, but it's -- I think for most people, there isn't.

We'll move to our next question.

Yes. This is Yoann Charenton speaking from Societe General. Again, congratulations for this deal. I would like to better understand, if you don't mind, what sort of assumption is being made for the ultimate recovery of Johan Sverdrup barrel? Because it looks like this is the most important variable to price these deals together with oil prices. And then the second question will be on the gas side of things because as we speak, European gas prices are 4 to 5x prices oil equivalents. And Aker BP and Lundin Energy, as instance, don't have the same exposure to gas. So I'm really trying to understand what sort of assumption you made for gas prices to sort of agree on the exchange ratio?

Will you take that, Karl?

Yes. So we have made no changes to the recovery rates of Johan Sverdrup from the already communicated recovery rates and reserves as a part of this transaction. And then when it comes to the merger balance, we have already demonstrated that the companies have basically been following each other, even if the relationship has been trading around a little bit. I think both the difference in oil and gas portfolio, roughly 80-20 split and the other makes the difference in relative pricing, not necessarily that sensitive to the transaction as a whole.

We'll move to our next question.

Yes. My name is [ Geoff Agresmin ], I'm a shareholder of Lundin. I have a question about reputation. As you're probably aware, Ian Lundin, who was welcomed is suspected of war crimes and Ashley Heppenstall, who will be welcomed as Director is suspected oversaw the devious operations that Lundin according to the federal prosecuting of Sweden has had in Sudan. I wonder how this merger, what it will do to the reputation, moral reputation of Aker BP, welcoming these people who, arguably, oversaw one of the worst operations, morally speaking, of the industry -- modern history of the industry. Second question is Lundin Energy AB will be left behind as an empty shell while there is a claim of about USD 0.5 billion laid down by victims of the war crimes. Doesn't Aker BP and its shareholders by accepting this view, facilitate the emptying of this company and basically denying the victim's war crimes access to Lundin operation? How does that relate to Aker BP's support for you in that principles?

Maybe Øyvind, do you want me to take those? I mean, I think I'd like to correct one thing that Ashley Heppenstall is not a suspect in this case. For our perspective, it's incomprehensible decision by the Swedish Prosecution Authority to bring an indictment forward. The company carried out activity in Sudan around 20 years ago legitimately and responsibly, and was endorsed by international community. And in terms of -- there's no basis for the alleged crimes. There's no evidence linking any of the company individuals or representatives to those, and we have serious issues with the investigation. So this is not going to proceed. It's not going to end up in a conviction. I think when you ask about whether we're leaving an empty shell, that's not true. We're leaving a going concern. We're doing a business with the renewable energy business. It's got 3 high-quality renewable assets in the Nordics. It's debt-free. It's got significant cash reserves when we split the company out and be generating free cash flow until the end of 2023, and it's got the capacity to continue to grow, and I think positioned also to continue to pursue opportunities in the energy transition. So this is going to be a good company. We aim to grow it and cover any of its liabilities. So I think I'd like just to correct those items.

Yes. And in connection with this transaction, it's a fact that none of the businesses or assets involved have anything to do with the Sudan matter. It is a ring-fence business acquired by Aker BP. And I can't see any reason why whatsoever this acquisition should jeopardize or have an adverse impact on Aker BP reputation, rather the other way around.

We'll move to our next question.

It's James Thompson, JPMorgan. Congratulations on the deal. A few questions, if I may. Just firstly, obviously, the temporary tax regime in Norway is encouraging you all to invest in growing your earnings, your relevant assets that pay. Does this transaction allow you to sort of maybe reprogram some of those? Or are you still going to target sanctioning all of these developments inside 2022, particularly, I suppose, given a new tax regime that could come into play in the middle of next year? So first question is really, does this allow you to maybe make a more measured approach to the growth projects in the business? Or will you still kind of look to cram everything into 2022?

Karl?

So one, these projects constitute probably the industry-leading pipeline in terms of profitable growth. We, at Aker BP, had already planned to execute all of these projects as is clearly stated in every market communication we've had for a long time now. I think the fact that we are now onboarding and joining forces with Lundin and we're also getting access to more people, better teams in total. So I see no reason that this merger should not, in fact, reinstate or reinforce our determination to execute these projects. And I think we're actually quite a lot better off at this point in time than we were just a few days ago.

Second question. So on the renewables piece, I mean, obviously, this has been a leading kind of component part of the Lundin equity story and on a very accelerated pathway to net zero. And the investments so far have obviously given more capacity than they have emissions. So I just wondered why Aker BP is not interested in that particularly. I mean, it would help actually reduce your own emissions, could maybe give you a more aggressive net zero target. So just interested to understand why that part of the portfolio is not of interest.

So was the question about whether or not we didn't not -- we have not acquired renewables business? Well, it was not for sale. That's the short answer. We wanted to retain it and to grow it and so we're looking forward to doing that.

Okay, all right. Well, that's clear enough. And just one final, just a clarification that the $1.90 a share dividend, that will be retained when the new shares are issued? So -- on the greater share count as well, just to confirm.

So we will increase, for Aker BP, to $1.90 per share as of January 1. So the two first payments also in 2022 will also be $1.90 per share and it will also be the dividend -- for -- a proposed dividend for the combined company as well.

And maybe I'll just clarify. We announced in our 3Q results that we're increasing our dividend for next year and the intention is that we will pay that increased dividend until the companies combine. So we have one final dividend in January at the current level but it will step up from April on until we close.

Gentlemen, we're almost running out of time, so that means that we have time for one more question, operator, please, the last question.

We'll take our last question now.

This is Paul Davey from Allspring Global Investments. I just wanted to double check, when you're saying Lundin Energy staying debt-free, I presume that means the current dollar pond is going to move across Aker BP. I know you said there's no change in control and you talked about repaying term loan, but has that bond got any special treatment attached to it?

So could you repeat the last part of that question, if there's anything with the bonds is...

Yes. I was just wondering if the Lundin bonds moving to Aker BP? Or are there plans to repay it?

No. They're moving to Aker BP and then we are assuming that this transaction is credit accretive also for the bondholders, but of course, if needed, we will also refinance them. But the plan is to keep the bonds as is. Well, then it's my pleasure to thank you all for attending this presentation today. And I hope we have been able to answer some of your questions, and we will communicate with the market in the days to come. But before that, I would like to wish you all a Merry Christmas, and I hope you all will be able to take some days off. So thank you.