Orrön Energy AB (publ) (ORRON) Earnings Call Transcript & Summary

[Audio Gap] Lundin Energy Virtual Town Hall Meeting. It's the first time we're having such a meeting in a very short format for our shareholders. We normally do this presentation in a physical form in Stockholm. We have done that in the past. Unfortunately, due to the pandemic situation, it's not possible to do so, but we actually believe that this virtual format work very well and also allows for greater attendance from people all over the world. So I would like to say that we're extremely happy to have so many people joining tonight's presentation. I hope it will be a very informative one. We do follow very strict COVID-19 regulations wherever we are. So that's why you see all of us being in different rooms tonight. The presentation by CEO, Nick Walker, will be followed by a Q&A session. And the Q&A session works in a way that you go to the bottom of your screen, you have a Q&A tab. And you ask your questions in writing, and they will be brought forward to both CEO, Nick Walker; and CFO, Teitur Poulsen, at the end of the presentation. My name is Robert Eriksson. I work with media contact for Lundin Energy and also assist our VP, Investor Relations, Ed Westropp, on the Swedish Investor Relations side. Without any further ado, I would like to hand the floor over to Lundin Energy's CEO, Nick Walker.

Well, Robert, thanks very much for the introduction, and good evening, everyone. It's really great to have you all join us for our virtual shareholder town hall meeting and for us to have this opportunity to share an update on Lundin Energy. For me, it's a little strange presenting to myself in a room. And so hopefully, the next time we can do this, we do it in person. But as Robert says, these things have worked quite well for us, and hopefully, it will for you today. What I'd like to do, first of all, is spend a little time talking about the context for the business environment, and I think it informs how we see the strategy for our business. The energy transition is accelerating. And we need to play our part, and we are. And we need to do that to adapt to stay relevant. What you can see here is that the demand for energy continues to grow on the back of population growth driving economic growth. And you can see that in any scenario, oil and gas remains an essential element of the future energy mix, and you can see here, representing around 50% in 2040. So 20 years from now, still 50% of the energy mix whatever scenario we head down. And the 2-degree scenario is meeting the Paris Agreement. But also, the world needs to decarbonize to reduce carbon emissions. And to be on a 2-degree scenario, the world has to remove 50% of its carbon emissions that it has today by 2040. And really, there's hardly a person on the planet that doesn't use oil and gas in some way every day. And so to decarbonize, the challenges on all of us is going to require action from every sector of every industry. And it's going to take some time to achieve. And so the key is to decarbonize energy systems to meet demand for low-cost and plentiful LNG that this -- that the world needs. And if we now then focus on the oil side of the energy equation, which is the focus of Lundin Energy, where most of our product is in that sector. The world is oversupplied with oil today. And we saw that in stark reality last year with the price volatility and record low prices that we saw, and we do need to be prepared for that. And I think businesses need to be resilient to low prices. But in the long run, due to lack of investment into the industry and declines, the world is going to require significant new supplies. And if you look at the International Energy Agency projections on stated policies, that's the policies that -- energy policies that countries are following today, up to a massive 60 million barrels of new supply is going to be required by 2040, and that's just huge. So the key is to deliver efficient, low-cost and lower carbon barrels to meet the world energy requirements. And so the point is oil and gas has a role in the future, but we have to adapt and change. And we need to play our parts to decarbonize to stay relevant. And I think that's important context to how Lundin Energy sees our strategy. And that leads nicely on to how we do see our strategy. Although there's been a change of leadership, the strategy is unchanged. We're an oil and gas company. We're focused on organic growth, and we think that's the best way to create shareholder value. And it's how we've created the business we have today of a market cap close to $10 billion. But it's more than that. It's complemented by quality, low-cost, low breakeven price assets that deliver strong free cash flow generation, making us resilient to low prices and leveraged on the upside and supporting a sustainable and growing dividend. And second, also through the delivery of our decarbonization strategy, is to be a leader in carbon emissions, making us investable into the future. And it's this powerful combination that allows us to deliver resilient, sustainable growth. I now have a short movie, I think, which will help set the scene for our business environment that we're operating in and provide some more context to our strategy. [Presentation]

I hope you enjoyed that. I've seen this a number of times now, and it inspires me each time I do so. I now want to get on to talk about our business. This slide gives a snapshot of Lundin Energy today. Through the drill bit, we've built a business of 1 billion barrels of reserves and resources. And we've been progressively bringing those resources into production, and we're set to go over 200,000 barrels a day by 2023. And these quality early life assets deliver industry-leading low operating costs. And you can see we're delivering $3 per barrel operating cost this year, and we're set to see long-term levels around that level. And through the delivery of our decarbonization strategy, we'll become carbon neutral from our operations from 2025, and that's going to be a first for the upstream industry. And because of our low operating costs and low capital to develop out and produce our resources, it means that we deliver very low free cash flow breakevens as a business and averaged around $10 a barrel over the next 6 years. And what that means is that for any oil price above $10 a barrel, we start to generate free cash flow that we can use to pay down debt or to pay dividends. And when you put it in the context of an oil price that's just under $70 today, we're clearly heavy -- highly leveraged on the upside. And what this means is that the businesses are robust to low prices, but we were leveraged on high prices. And it means that we're positioned to deliver strong shareholder returns. We've got a track record of doing that Over the last 10 years, we've delivered $4 billion back to shareholders at the same time as more than doubling the share price. And so on the back of our strong performance and the outlook for the business, we'd be -- we proposed a dividend of $1.80 per share, which will be voted on at the AGM at the 30th of March. And now that's an 80% increase over the dividend we provided last year. But really, it's just taking it back to the dividend that we had originally announced pre-COVID. What we're offering is a dividend, which is around -- is over 5% yield, which is above most of the majors. And when we look long term, our policy is aligned to be able to provide a sustainable dividend even below $50. And of course, our aim is to grow it also long term. The core of our strategy is organic growth through innovation. It's about deploying our expertise, our latest technology, where we're a leader in seismic, to unlock new plays and new reservoirs. And we see growth in multiple opportunities, about maximizing recovery and step-outs around our world-class fields. Second, about continuing to explore in the mature basins in Norway, where we see lots of opportunities still. And it's about a component of our exploration going into frontier areas, where we see higher reward but higher risk opportunities. And then we complement that with opportunistic acquisitions, where we can create value and where we see a strategic fit. And we have a track record of delivery. We've built a business with 1 billion barrels of resources for $0.80 per barrel, and you just can't buy reserves at that price. And this leads on to our track record of delivering long-term production growth. Last year, we produced 165,000 barrels per day. That's at the top end of our original guidance range. And this is driven by our key fields, Edvard Grieg and Johan Sverdrup, which we brought into production and are moving to plateau. And things just get better and better there. And we've now produced above guidance or better for 22 quarters running. Our guidance for 2021 is 170,000 to 190,000 BOEs per day. That's 8x production growth as you can see from 2015, where at the same time, we've grown reserves. And we're now certain to go over 200,000 barrels a day by 2023. And our aim is to sustain above 200,000 barrels a day with upstays in our world-class projects and a pipeline of new projects that we've got coming forward, and we'll talk about how we'll do that in a moment. The second element of our strategy is about financial resilience. We saw the ultimate stress test on our business last year with the record low oil prices. And yet we still delivered strong financial results, around $450 million of free cash flow, which is 1.4x our dividend cover. So very strong performance in record low oil prices. And this is -- what you can see is we have world-class, low-cost assets that deliver high-margin barrels. And we have industry-leading low operating costs long term of $3 to $4 per barrel. That delivers a low free cash flow breakeven, as I talked about, around $10 a barrel for the next 6 years, demonstrating resilience to downside prices and leverage on the upside. And of course, we're generating a lot of free cash flow, $4 billion to $6 billion over the next 6 years at an oil price range between $45 and $65 per barrel. So I think, quite a modest range. And today, we're sitting above that with the oil price today around $67. So very strong cash flow generation. And this gives us the flexibility to balance capital allocation between funding growth, managing a conservative debt position and providing a material, sustainable and growing dividends. And with our quality resilient asset base, we can do all of those things. And the third element is delivering on our decarbonization strategy. We've accelerated the plan. We will become carbon neutral from 2025 from operational missions, and that plan is supported by real action. Firstly, it's about reducing emissions. The key components of this is about stopping burning gas offshore for power generation and providing electricity from shore. And we have a number of power from shore projects to power our facilities underway. And by 2023, 95% of our production will be powered with electricity provided from shore. And you can see what that does for us on carbon intensity, this is the amount of carbon we emit per barrel we produce reduces significantly. And by 2023 is going to be significantly below 2 kilograms per barrel. And now that's 10x better than the world average. Of course, we're using a lot of electricity. And what we've done is we've -- we want to replace and offset the electricity that we're using with our own generated renewable power. We've committed to 2 projects so far, which will cover around 60% of our peak usage. So a hydro project in Norway and a wind farm in Finland. And we're working on further projects so that by the end of '23, we will have 100% of our own generated power supporting our offshore operations. And the third element is what we then can't reduce. We've committed to some natural carbon capture reforestation projects to offset the remainder. And those 3 elements where we've committed capital, we've made project investments, allows us to accelerate carbon neutrality to 2025. And this is good business in many dimensions, from power future projects and renewable projects make good returns. I think we see from every investor conversation we have, this attracts and retains investors and bank funding. And in time, I think we'll see that we think that customers of our barrels will see value, too. I think this is very similar to low-carbon aluminium, which has a market, or what Tesla is doing today to source low-carbon nickel for their batteries. I think the buyers of our products will, in time, see that they also have to decarbonize and that they'll see value here. So for us, this is not just the right thing to do. It's also a good business all around. It's core to our strategy, and I think it makes us relevant and investable long term. And of course, we also focus on safe and responsible operations. We have a strong HSE track record. And on COVID, our team, I think, has done a tremendous job to manage through the crisis with agility, flexibility. And of course, this is continuing, and we're continuing to have to manage it. But I think we've been able to keep our operations on track and all our projects on track through this. We also ranked top quartile across all the ESG ratings that we participated in, in 2020. And I think that provides tremendous support and justification for how we do our business. I want now to spend some time focusing on the key assets. Actually, Lundin is a simple business. We have 3 world-class, low-cost assets. First of all, the giant Johan Sverdrup field, which has been developed in 2 phases. Phase 1 came online at the end of 2019, and Phase 2 will come online in Q4 next year. And we have a material 20% interest here, and this field accounts for 60% of our production this year. And you'll see that we see significant reserves and capacity growth coming. And then we move on to our flagship operated greater Edvard Grieg area, which has the Edvard Grieg field, where we have 65% working interest but also a number of tieback projects, some under development and some future projects to come. And that accounts for 35% of our production this year. And what you'll see is significant resource growth and plateau extension opportunities. And the third asset is Alvheim. It's a good asset, a great asset for us. It's been a long-term producer for us. But our working interest is smaller there, but it's still good. And we've seen reserves growth over 2x from the original sanction, and we still see a pipeline of new opportunities coming forward, and we'll be continuing to invest into that. So now what I'd like to do is just step through the key assets, and we'll start with the Johan Sverdrup field. It's a giant field, world-class. When it's on peak production full field plateau from the end of next year, it will account for 25% of Norway's total production. Phase 1, as I said, came on stream in Q4 of 2019, and the field has been performing above expectations on all fronts. We've seen excellent reservoir performance better than expectations, and each well is producing 50,000 barrels per day. These are massive wells and just a tremendous reservoir. We've also seen that the facility's capacity has been increased significantly. In fact, 3x we've lifted the facility's capacity last year. We're currently producing at 500,000 barrels a day, and we're set to increase to 535,000 barrels a day from middle of this year. And you can see that represents around 100,000 barrels a day of added capacity, and that's from the facility's design, and that's come for almost 0 costs. And I anticipate further upsides with performance read-throughs to when we bring Phase 2 online. And Phase 2 is under development. It adds additional processing, and we also have some -- a lot of subsea facilities to develop the -- and wells to develop the aerial extent of the field to fully develop the field. You can see the project is over 50% complete, and we'll start the major offshore installations in the spring of this year. And the project remains on schedule. We've had some challenges around COVID, but I think Equinor has done a fantastic job to manage through that. And the project, as I say, remains on schedule for startup in Q4 2022. You can see here the full field production capacity guidance of 720,000 barrels of oil per day. And I think you can probably expect to see some upsides on that with the upside that we've seen on Phase 1. It's also a giant field with resources in the range of 2.2 billion to 3.2 billion barrels, this is a huge field in a worldwide context. And I think the reserves have been conservatively estimated. I expect to see upsides, but it's going to take some time to see. It's such a big field. It takes time to get the production history that we can understand where the upsides are going to come from. You can also see some world-class metrics, extremely low operating costs below $2 a barrel, and that's really, truly industry-leading. And again, this field is going to be powered from shore, and Phase 1 is already powered from shore, and Phase 2 will be powered from shore from the beginning, which means very low carbon emissions. And you can see less than 0.2 kilograms per BOE. And to put that in context, that's about 100x less than the world average of per barrel produced. So just tremendous carbon emissions metrics. And these metrics make for extremely strong economics. The full field breakeven oil price is significantly less than $20 per barrel. And that includes past cost around exploration and appraisal and includes an 8% rate of return into the calculation. So when you put it in the context today of $67 per barrel today, and the breakeven is $20, this is hugely economic and is a key component of the value of the company. So truly a world-class field, and I think it's going to continue to create further value upside. And I'll now focus on the Greater Edvard Grieg area. This just gets better and better, supporting the adage that the big fields get bigger, and we see lots of further upside and prospectivity. Area reserves have increased significantly, as you can see on the chart here, 2x since the original PDO or project sanctioned for it, now standing at 410 million barrels gross. And we see upsides in an area of prospectivity that has the potential to double this again to around 800 million barrels, and our aim is to unlock that upside opportunities. We continue to do that. This year, we will be drilling 9 wells in the area. 3 of those are exploration appraisal wells, and we have 6 development wells. And a number of those development wells have upside opportunities associated with them. And that package of wells will be maturing 220 million barrels of net resources to Lundin. The other thing is that the Edvard Grieg is a key component of our electrification and decarbonization strategy. Edvard Grieg will -- with Phase 2 of Johan Sverdrup development, Edvard Grieg sits nearby, and there's a project to fully electrify the whole of the area. And Edvard Grieg is participating in that. So by the end of 2022, Edvard Grieg will be electrified and means that our carbon intensity will go to similar levels to Johan Sverdrup. And this is a key component of how we're reducing emissions. And it's a prolific area, and it's allowed us to extend the plateau production from the area. When we sanction the Edvard Grieg project, it had a 2-year plateau period. It's now been extended to 5 years, so to the end of 2023, and I'm convinced it's going to go beyond. We also see capacity upside. Edvard Grieg and the nearby Ivar Aasen field share capacity through the Edvard Grieg field. And there's a contractual allocation of the capacity between the 2 fields. But when Ivar Aasen starts to decline and it's at that point now, it means that Edvard Grieg can use that excess capacity. And this is material for us. The contractual allocation of capacity is 95,000 barrels per day for Edvard Grieg. And we have, as Ivar Aasen declines, the capacity and capability to lift to 135,000 barrels a day. And again, in the context that we have, around 65% of the field -- of the volume as a material volume to us. We're also progressing 3 projects in the area to support the plateau extension. First of all, an infill drilling program at Edvard Grieg with 3 wells, which are started at the moment and will all be completed this year. We have 2 subsea tieback projects into the facilities ongoing. First of all, Phase 1 development of Solveig and then Rolvsnes extended well test. And those projects are well advanced and will come online in Q3 of this year. And all of these projects will help unlock future opportunities. And now these are some of the best barrels that you can develop. They come with very low costs, really just for subsea infrastructure and wells and very limited incremental operating costs. And both the Edvard Grieg infill project and the Solveig project have a breakeven oil price below $20 per barrel. So very value accretive. And we have 3 potential new projects in the area. We have a Phase 2 development to Solveig. We have Rolvsnes full field development, and we have a discovery in the north of the area of Lille Prinsen, which we'll be appraising this year, and that's also a potential development. And we have activity on all of those this year to derisk the opportunities with the aim to bring them -- the project forward for sanction at the end of this year. And there's a real benefit to doing that. To encourage activity and to support jobs, the Norwegian government put in place some tax incentives last year. And if we sanction the project before the end of 2022, we get to take advantage of those opportunities. And that significantly improves the economics. And we have a number of projects that we're focusing on bringing across to sanction in that time frame. And we'll continue to explore in the area. We'll be drilling the Merckx exploration well. This is an exciting opportunity. It's around 160 million barrels, and we'll be drilling that later this year. And I think we're going to be drilling in this area for many years to come. So I'm excited by the upside of the area. I think we've got lots of opportunities to keep the facilities full in the long term. And I don't think most of that is included in the value that people see in the company. And then we're delivering on our growth strategy. We continue to build our position in Norway as one of the leading explorers. We have 7 core exploration areas. We expanded our acreage footprint last year by over 20%. And we have a prospective resource base on our acreage of around 3 billion barrels net on our acreage. And we have activities across all of the areas of the portfolio, balancing risk and reward. Our world-class assets underpin the growth. We continue to see facilities and reservoir outperformance, and I expect more to come. And we've got 4 projects underway, which I've talked about, and all of those come on stream by the end of next year. We're sustaining production through a pipeline of 9 potential new projects, as I say, aimed to utilize these temporary tax incentives. And those projects together have potential resources of 200 million barrels, and we're aiming to bring those all forward if we can by the end of next year. And we're delivering future growth with a material exploration program. You can see 7 wells to be drilled this year, targeting over 300 million barrels of net unrisked resources. And we aim to have a material program going forward of 8 to 10 wells. So I think when you put this together, it creates a pipeline of opportunities to provide a platform for future growth. And we have a strong track record of delivery. Averaged over the last 5 years, we've had a resource replacement ratio of 150%. And what that means is that for every barrel we've produced in that period of time, we've actually added 1.5 million barrels of resources, which means we're growing the business. And we've managed to do that at a time when we've been increasing production by over 8x. So I'm excited by the opportunities and prospects ahead, and I'm confident that as a business, we can continue to grow into the future. And so this brings me on to my final slide, which summarizes the key messages I wanted to leave you with. We're delivering strong growth. Production is set to go over 200,000 barrels per day by 2023. And we'll aim to sustain that with the upsides in our world-class assets and a pipeline of new projects and exploration opportunities that will continue to grow into the future. And our business is resilient. We have industry-leading low operating costs of $3 to $4 long term. We have low free cash flow breakeven business, and it means we deliver significant free cash flow in the range of $4 billion to $6 billion over the next 6 years, a modest oil price range of $45 to $65 a barrel, which allows us to provide a material, sustainable and growing dividend as well as fund growth and deleverage the business. We're also a sustainable business. We're decarbonizing our operations. We'll become carbon neutral from 2025, which is a first for the upstream industry. And I think, together, these factors provide resilient, sustainable growth for the business, showing we can deliver both economic growth as well as environmental benefits. I think, importantly, making us relevant and investable into the future. So those are the key messages I wanted to leave you with. Thank you all for taking the time to join this update on Lundin Energy. And for the shareholders, thank you for your ongoing support. And as Robert says, we're happy to take questions now. And as I mentioned, we're also joined by Teitur Poulsen, the CFO, who will help answer the difficult finance questions. So I think with that, I'm going to hand back to Robert to manage the Q&A process. So thank you very much.

Thank you very much, Nick. We have quite a few good questions coming in, but we want more questions. So I remind everyone again that there is a Q&A function called Q&A at the bottom of your screen. And use that, not the chat function or raise hand, but the Q&A function. And write your questions, and they will be answered. I know that we have a lot of Swedish viewers tonight. And if someone wants to ask a question in Swedish instead, that is certainly possible, and I'm happy to translate. And with that, we move over to the first question. That comes from one of our shareholders asking about carbon capture and storage technology. Is that something that Lundin Energy will be looking into, and is that part of the business plan?

Yes. That's a really good question. We've looked at how do we deal with our own emissions. So what do we create through the production of our barrels, and we've looked at it from that scope. When you get to carbon capture and storage, I think it's a good technology, and I think it's relevant. But the linkage to our business is quite difficult because we're not an end user of the product. And so we continue to follow the technology. But so far, it's not something that we've chosen to branch into. We've been quite focused about how do we minimize the emissions from our business and become carbon neutral in the production of our barrels. So I think good question, something that we're thinking about the technology, but -- and it has its applications, of course.

Thank you very much. We're getting more and more questions, which is really good to see. Nick, you mentioned the wind energy plan in Finland. Can you tell us a little bit more about that?

Yes. No, it's up in Northern Finland. We've done the project with a company called OX2, who are a developer. And we also have a partner called Sval Energi, so we have a 50% working interest in the project. It's a big project, 132-megawatt capacity, I think 24 wind turbines of 5.5 megawatts each. So a big project. It's quite exciting. It's under construction at the moment, and it should be -- we should start to see power at the end of the year, probably beginning of next year. So this will cover off about 40% of our peak power usage that we have for offshore. And the other project that we've done is a hydro project. It's a river run-off scheme in Norway, which is 77 megawatts. That's under production, actually the first phase is, and the second phase is going to come on shortly. And when you put those 2 projects together, cover off around 60% of our power usage when we get to peak level. So great projects, and we're excited to do them. And as I said in my presentation, actually, we're looking at some further wind farm projects onshore. And hopefully, we can announce some things around that in due course.

Thank you. And the next question is about free cash flow, and how much of that free cash flow can and will be distributed to shareholders? And I guess that's a question for you, Teitur.

Yes. Good evening, everybody, and good to join the call. Yes. I mean, certainly, in this oil price environment, as Nick has already mentioned, we are generating significant free cash flow. If you look at our Capital Markets Day guidance which we gave in January, we gave an outlook on different oil price scenarios for 2021. And the highest one we got up to was $60, $60 a barrel back in January, and we were already above that. But that $60, we are set to generate over $1 billion of free cash flow this year, before dividend payments. And as you know, the dividend has been proposed to the AGM of $1.80, which is just over $500 million in dividend. So essentially, at today oil prices, we are more than 2x covering the proposed dividend, which, therefore, will mean that we will delever the balance sheet quite significantly this year. We are likely to exit -- at these oil prices, we are likely to exit 2021 at a net debt-to-EBITDA of less than 1x. So that's an extremely strong credit metric as we go into next year and has a good platform for increasing that dividend also as we go into 2022. Well, in terms of capital allocation, what we have said is over the next 6 years, we estimate to allocate just short of half of the cash flows we are generating in total into the business to grow the resource base and to develop, build out the discoveries we have. And then the other half will go into a split between paying more dividends and hopefully growing that dividend over time and then continuing to delever the balance sheet.

We can't hear you, Robert.

Now you can. Thank you. I will eventually learn to unmute meetings. Sorry. Thank you, Teitur. And we have -- the next question is about M&A activity, noting that valuations are quite high in the private, when it comes to private deals, but lower in the public market according to this attendee. And he would like to know how you view M&A opportunities going forward?

Yes, perhaps I'll take that one, Robert. I mean, our core focus of our business is organic growth through the drill bit, and we think that is the best way to create value, and that will remain the core of what we do. But of course, acquisitions can play a part, and we have done a number over the years, some smaller ones. And we did an acquisition of Wisting last year, and I'll use that to talk about it. But I think the key thing for us is they have to meet our strategy. So first of all, they have to be -- we have to be able to create value from them. So we have to get them at a price where we can create a value. It's no good just exchanging dollars for barrels. I don't think that creates shareholder value. But secondly, it has to fit with our strategy. And we've deliberately focused on early life, undeveloped or assets where we can have quality business, and I think assets need to meet that requirement. So we're not interested in the mature assets. And really, the things that are usually for sale are the mature assets, which come with high cost, usually not a lot of upside, and they're hard work. And I think if you take an asset of that character and put it with us, I think it downgrades the quality of our business. So we're always looking to see how do we improve shareholder value on a per share basis, not about how do we make a bigger business. It's about creating shareholder value. And Wisting is a really good example. We made an acquisition last year of a 10% interest in the large Wisting field in the Barents. It's a 500 million-barrel field. It's undeveloped at the moment, but it's heading towards project sanction at the end of the year and next year, and I'm sure it's going to get there. It's a very interesting field. I think it's been derisked from a subsurface perspective. And we were able to get that at a cost of $1.80 per barrel. And that sort of deal we can make a lot of value on. And it fits perfectly with our business. As our capital that we have at the moment drops off, this comes in to allow us to spend it, dollars on it tax efficiently. And it gives long-dated production, which supports the longer-term outlook for the business. So the only unfortunate thing, we got only 10% of it. I'd have liked more, but who knows what we can do in the future. So that type of deal is what we'll do any day, and we keep looking for them. But the challenge we have today is the oil price, I think, has come back too quickly, and I think that's going to keep prices up. So -- but we continue to look and if we find the right things that we can create value, we'll certainly do it.

And exploration is important, as we have heard, that's the growth of Lundin Energy. So what are the most exciting wells according to you to be drilled in 2021?

I think we have a really exciting package. It's actually a mix, to be honest. So 7 wells, targeting over 300 million barrels. A number of those wells are appraisal wells. So they don't carry huge volumes with them, but actually, they're really impactful because they move projects forward. And so we're going to be appraising the Iving discovery. We're appraising Lille Prinsen. We're appraising areas around Solveig. So I think those are exciting wells because they can move projects forward and create value. But we have some bigger things. We're drilling Merckx, which sits next to the Utsira High, which is quite large. We're drilling something called Dovregubben, which is to the east of the Utsira High. And up in the Barents, we're drilling something called Shenzhou. So I -- those are the 3 high-impact wells that we're doing this year. And you should watch out for those. They're exciting, and they're great opportunities. And really, we look to have a high-quality portfolio. So it doesn't make it in our portfolio unless we really like it. So I like them all.

And we're getting a few questions about the Barents Sea well. What are the plans for the Barents Sea? And when do you expect to see the first oil, gas being produced from Lundin Energy assets there?

Yes. So it's a good question, actually. And we've drilled a number of wells in the last 6 months, 3 that were disappointing. And -- but I remain interested in the area. It's 1 of 7 core areas for us, exploration areas, and we continue to explore there. And as I mentioned, we're going to drill a well later this year. But I think when you look at the whole area, it's a huge area. It's 400 kilometers by 300 kilometers. There's around 3 billion barrels of discovered resource there. There's 2 fields on production. There's 2 big fields, one under development, and one heading to development, Wisting. And we have our Alta discovery, which is probably economic as a tieback into something else. It's not stand-alone. But there's not just 4 big fields found in this huge area. There's definitely some more opportunity there. And when you look at the activity levels, it's been up and down. And really, there's -- over time with change in oil prices. And really, when you look at the activity, there's really only 2 active players, us and Equinor. So we remain interested about it. And in terms of when we're going to see first production, well, we have a piece of Wisting. That's heading to first oil or to sanction at the end of next year. And the aim is to have that on production in 2028 is the time frame that we're looking at, at the moment. So it's a way out, but it fits very nicely with the profile that we have as a company.

Thank you, Nick. And we have a follow-up question on M&A activity. Could you, in any scenario, venture beyond Northwest Europe and look to other areas?

Well, we -- a few years ago, we spun out our non-Norway assets into IPC, and some of you may be shareholders still in that. And they've gone on to develop their business. And we did that for a reason is we saw opportunity to continue to grow in Norway and a lot of running room there to keep building the business. We also saw that a lot of our shareholders said to us is we want -- we've invested into you because of your success in Norway, and we don't want you to go and spend the money in places that we don't want to be. So I think at the moment, we see that we have a great business in Norway. I think we can continue to keep doing it. And actually, on the exploration front, we don't see a lot of competition, really, very few people. Equinor is the principal one. So we think we've got enough opportunity to continue to build and maintain the business in Norway as it stands. So this time, it's not something we're looking at.

And we have quite a few questions on your oil price expectations. The million-dollar question, where is the oil price heading?

Well, it's a good question. And we'd have never guessed a year ago seeing $67 today, of course. So -- and my observation is I think we should see stronger prices certainly this year and maybe going forward. And my observation is that OPEC seems to have got control of the price, and they're managing it very effectively. And the difference here is that in the past few years, the shale oil in North America has been every time the price has gone up, they drill more wells and produce more barrels. But the reality is I think this downturn has finally shown that, that business is not making a lot of money. And that investment into that is not coming. So -- and when you see what the players out there are saying, some of the large players are saying, "We're not looking at growing production. We're looking at sustaining it." I think we can see that prices could well be high. But we also have to be prepared as a business to be resilient on the low side. And I think that's how we look at our business on a range of prices. And we saw the benefit of that last year is we were able to continue doing our business, investing into our projects even though we saw low prices, and that's sort of how we look at this.

Thank you, Nick. And we have a question here from a shareholder saying that certainly a lot of opportunities lying ahead for Lundin Energy. But what would you say are the main threats?

I think it's -- one threat is the environmental threat around the energy transition and how we position ourselves long term. We've worked really hard as a company, first of all, to articulate what we're doing well and to set out a path that we adapt and change to react to that. And that's our decarbonization strategy, which I discussed. And we've got some real things behind that, that support it. And I think as an oil and gas industry, that is one of the biggest threats that we have out there to maintain relevance long term. But actually, when you look at the outlook, you see that oil is going to be needed for a long time. And so we just have to make sure we're placed in the best part. So we're at low cost, and we're low carbon. And if we do that, we maintain relevance long term. And I think the second one is a longer-term issue. It's how do we keep growing. If I worry about 2 things, it's these, it's how do we keep finding the opportunities to drill and create value long term. It's not something that's a worry short term, but we need to keep pushing and sustaining the business long term. And you see that we go us a long way, but this is a long-term industry, and it takes time. So we need to keep pushing those 2 things.

Thank you very much, Nick. And with that, we actually have no more questions for this presentation, I believe. And with that, I would certainly like to thank everyone calling in and joining tonight. It's been a great pleasure to have you all here. And I think it's fair to say that we will come back and have more of these meetings and try to answer all of your questions in the future as well. And thank you very much, Nick and Teitur.

Yes. Thank you, Robert, and thanks to all our shareholders and others, too, for joining us this evening. It's been great to share this update of the business. And hopefully, we can do it in person next time. I think it's more effective, but hopefully, you got a lot out today. And so thank you very much for attending, and good evening.

Thank you. Good evening.