Vår Energi ASA (VAR) Earnings Call Transcript & Summary

Good morning, and a warm welcome to everyone here in the room and to those of you listening in on the webcast. We are glad to have you so many joining us for our first ever capital markets update and to celebrate 1 year as a listed company. The plan for today is the recap of Q4 and our full year 2022 results. Before going into why we believe Vår Energi is well positioned to deliver production growth and long-term sustainable value creation. Following the main presentation, including Q&A, we will have a 45-minute lunch break before the deep dive sessions with Vår Energi management. We will open the floor to questions after our CEO, Torger Rod; and CFO, Stefano Pujatti, have completed their presentations. We will take questions from the room and the webcast, and you can type in your questions in the comment section throughout the presentation, and we will address these in the Q&A. You will also have the opportunity to ask questions in the deep dive sessions after lunch. But first, we will give a short video introduction to Vår Energi before welcoming Torger to the stage. Thank you. [Presentation]

Well, good morning, everyone, to you here in audience and to you at the webcast. It is really great to be here and hosting the very first capital market upgrade for Vår Energi. On the picture behind you, you see us at the Oslo Stock Exchange. Because also today, we are celebrating 1 year as a listed company. One year ago, on the day, we were supposed to ring the bell but we couldn't because the Oslo Stock Exchange, it was closed due to maintenance. So of course, in Vår Energi, we are always looking for good alternatives. And we did it by ringing the bell from all our offshore installations and office locations. That is a really good way of engaging our people to celebrate or the kick off as a listed company. But yesterday, we were invited. We were invited from Oslo Stock Exchange to come and open the market. So it was really a boyhood dream come true for us to do the real thing, ringing the bell. So you can see a big group of happy people, and that is also what they're bringing with me today. As I said, is exciting to be here, and it's also really good to say welcome on behalf of Vår Energi organization, but also bringing my management team with me here today. So as I said, we are really proud and excited. And today, I would like to ensure that you are leaving with the following key takeaways: Number one, we are on track for high value growth. And that means above 350,000 barrels by end of 2025. And we have a clear strategic ambition to sustain beyond. Two, we have confirmed world-class exploration capabilities. That means that our hub strategy and a robust portfolio, it really delivers extended value. And thirdly, we continue our attractive distribution. We are confirming together with the Board, $300 million for Q4. That means $1,075 for the full year and we are also forecasting USD 270 million in distribution for Q1. All of this is enabled with path to ESG leadership and world-class capabilities. Now we will continue here, to present our Q4 results and number, and I will ask you, Stefano, to continue and to do that. So thanks a lot.

Thank you, Torger, and good morning, everyone. It is really a great pleasure for me to present the Q4 and full year 2022 results today. We will keep it a bit shorter than normal due to the capital market update. So let me go straight to it. During the fourth quarter, we delivered a quarter with solid cash flow generations from our operations in a continued strong market environment. We maintain safe and reliable supply of oil and gas with Q4 production on par with Q3 at 214,000 barrels per day, impacted by operational issues at partner-operated assets. We maintained our material gas share of 37% in the quarter. Our operations continued to deliver strong cash generation. The realized price was on average, $115 per barrel in the quarter with gas price of $182 per barrel. Cash flow from operations exceeded $440 million, down from Q3, mainly due to significantly higher tax payments. 2022 CapEx level ended within the guided level at around $2.6 billion. We can also confirm the dividend for Q4 of 2022 of $300 million to be paid in March. High realized prices and cash generation really underpin our continued strong financial position. With more than $4 billion in available liquidity at year-end, including undrawn facilities and a leverage ratio that was standing at 0.3x at the end of the year. Vår Energi continues to deliver strong exploration results and ended the year with an exploration success of close to 60% in 2022. Here, let me mention the Lupa discovery in Barents Sea in December, was the largest NCS discovery in 2022 and adds to our strong exploration track record. If we also include Calypso, Snøfonn and Skavl Stø, sorry, but not the easiest to pronounce for an Italian, we added around 65 million barrels in contingent resources in 2022. Here, you see a summary of key performance indicators in the quarter. We maintain a sharp focus on the safety of our employees and had no serious incidents in Q4. The emissions intensity for operated fields increased marginally to 10.5 kilo per barrel, which reflects high exploration drilling activity in the quarter. The strong cash generation continued and we will pay dividend according to the guidance. Now to safety. And safety is about people. Vår Energi's highest priority is to operate without causing harm to people and the environment, and our target is always 0 serious incidents and injuries. Our ambition is to be safest operator on the NCS and we have a strong focus on implementation of our safety initiatives that continued throughout the quarter. As you can see here in the slide, in the presentation, there is a positive trend of both serious incidents frequency and also total recordable injury frequency. These shows that our actions are working. On production. Q4 production was on par with Q3, fire on Asgard B and unplanned downtime on Grane had a negative impact. Balder production increased after completion of the planned maintenance during the quarter. And as I stated before, we maintain a high gas share of 37%. To enhance value, we continue to reduce NGL recovery to increase gas volumes and gas sales due to favorable market conditions. This led to a net production decrease of roughly 2,000 barrels a day in the quarter. But as I said, higher value realized for the company. We made also significant efforts during Q4 to rectify the performance issues, which affected production in 2022 and Rune Oldervoll, EVP for Exploration and Production is here with us today. We'll keep -- well, let's say, deep dive more into this later. But let me summarize the key items. We resolved the well issues on operated fields, both Balder, Ringhorne and Goliat. We had a full recovery from the Asgard fire and we repaired the Sleipner compressor. We have implemented learnings from the turnarounds. So we ended 2022 with an exit rate above 220,000 barrels per day. Our guidance for 2023 is in a range between 210,000, 230,000 barrels per day. Now let's move to exploration, something in Vår Energi we are very proud of. Exploration activity was high during the second half of 2022 with strong results in Q4. We made the largest NCS discovery of the year with Lupa in the Barents Sea, and we also made a discovery at Calypso in the Norwegian Sea. This adds around 65 million barrels in contingent resources to our portfolio for 2022 at a very low cost. The Countach and Angulata well were spudded in '22 and extended into '23. And last week, we got very positive first results with an oil discovery in the operated Countach well. Knowing Torger well, he will not forget to address this more into details later on. Going forward, we continue to target high-margin barrels located close to our key hubs in line with our hub strategy. Now let's deep dive into the key financials of the fourth quarter. We generated solid revenues and operating cash flow before tax of close to $2.1 billion in Q4 on the back of continued high oil and gas prices. Full year, we were close to $8.4 billion. EBIT and profit before taxes are at high levels and both increased from the previous quarter. This includes a net exchange gain of $281 million as the dollar has weakened compared to NOK. And also, we have increased liftings. Due to the cash build in 2022, our financial position is strong with $4 billion of cash and undrawn facilities available at year-end which is an increase of more than 75% from last year. Production costs is at $14.1 per barrel compared to $13.4 in the previous quarter, mainly driven by higher maintenance costs and stable production level. Full year production costs ended at $13.5 per barrel within the guided range. Vår Energi has changed the calculation of over/underlift in the financial statements to be in line with other operators on the NCS in response to demand from the market. From the fourth quarter of 2022, over/underlift positions are now both valued at production cost. I will now go briefly into more detail of our fourth quarter financial performance. More specifically on revenues, we generated more than $2.3 billion of revenues for the quarter. Compared to the previous quarter, revenues were down $166 million on lower product prices which accounted for a negative contribution of $490 million, offset by higher sold volumes that impacted positively by $324 million. For the full year, we generated close to $10 billion of revenues, an increase of more than 60% compared to 2021. These strong figures are a result of continued favorable market conditions and our large and diversified portfolio with material gas production, which for Q4 represented roughly 50% of revenues. The average weighted realized price in the quarter was $115 per barrel and we are especially proud of our realized gas price of $182 per barrel, which was above the average of the different hubs for the quarter. Going deeper into the gas sales in Q4, around 40% of the sales were on day-ahead basis and around $150 per barrel. Around 30% was sold on a month ahead basis at around $235 per barrel. And both months ahead and day ahead were weighted towards the French and the German market. Remaining volumes were delivered under contracts with fixed pricing, realizing an average of $163 per barrel. So going forward, we continue to have a robust sale portfolio with access to several markets, and we have the flexibility in the contracts to decide the split between month ahead and day ahead. For Q1, Q2 and Q3 of 2023, we will have fixed price sales representing between 20% to 35% of the gas sales. The price for these sales are approximately $285 per barrel in Q1 and $190 per barrel in Q2 and Q3. Here, we see the development in our cash position from end of Q3 to year-end. As you see, the CFFO before tax and working capital changes was more than $2 billion, reflecting strong market conditions. Taxes paid in the quarter amounted to almost $1.7 billion. Cash investments were at high level due to ramp-up of the major projects. We also used cash in financing activities for the final payment to Exxon and finally, also $290 million were paid in dividends to our shareholders. So taking all these elements into account, the cash position at year-end ended at $445 million, twice the level of year-end 2021. CapEx level was stable year-on-year at around $2.6 billion. Cash flow from operations increased by $1.1 billion year-on-year. So overall, an exceptional financial year for Vår Energi in the first year as a listed company. Vår Energi material cash flow generation support attractive resilient distributions. We maintain our dividend policy in a range of 20% to 30% of the cash flow from operations after tax in 2023 and onwards over the cycle. And we guide, as Torger mentioned, for a Q1 dividend of $270 million. As we did in the past, we will continue to assess the dividend level on a quarterly basis taking into consideration the company performance and macro scenarios development. Let me also add that we plan to pay approximately 30% of the CFFO after tax in 2023. As far as Q4 of 2022 dividend is concerned, we also confirm the payment of $300 million that will be paid at the beginning of March. With this, I conclude the Q4 presentation and leave the floor back to Torger to go through the Capital Markets Update.

Thank you so much, Stefano. And again, it is good to have our 1-year celebration as a listed company. And the 1 year and first, growth and value -- that is the theme of today's capital market update. And that is really what Vår Energi is all about. And that is also going to be the red thread through this presentation. Then back a little bit to the 1-year celebration of being a listed company. And we are -- even though sometimes it feels like a long time ago, we are still proud of being the third biggest ever IPO on Oslo Stock Exchange and also representing us as the biggest E&P IPO in Europe since 2006. And I think it's fair to say that this has been a really eventful year and exciting as well. It has been a lot of first ever for both the company and myself when it comes to being a listed company. And of course, this capital market update is one of those. Also, of course, it has been a very serious backdrop to this year, really driven by the war in Ukraine and of course, also the energy situation following. But let's look a little bit on IPO. We are proud of the significant value of the company. Actually, it's putting us in as a top 10 market cap company on Oslo Stock Exchange. Also, as Stefano talked to, and we have mentioned it a few times, we have distributed a significant amount to our shareholders. I'm talking about shareholders. I think it's quite striking to see that we have in a little bit more than a year's time gone from 2 very supportive shareholders to more than 30,000. And also when it comes to me and being the CEO of Vår Energi, one thing that makes me very happy and very glad is also to see the ownership, the ownership among our employees when it comes to Vår Energi. Together, the shareholders together, this is really making Vår Energi our company. Our energy, it's Vår Energi. And then moving on to our value proposition and creating leading E&P on the Norwegian Continental Shelf because that is what we are, a pure-play E&P company on the Norwegian Continental Shelf. And we have a very diversified portfolio at the best path in the NCS. And let me take you through the value proposition. We have a material and diversified production base. That is really maximizing our value through our hub strategy. And also, we have world-class capabilities. And yes, Stefano, I will come back to both exploration and Countach. And of course, this value, world class capabilities in this world-class portfolio, it's bringing a significant and tangible growth. Nobody is having a high-value growth to about 350,000 barrels more than 50% by end 2025 as Vår Energi. And also, we have a credible path to net 0 for Scope 1 and 2 by 2030. Stefano, he showed it, we have a material cash flow generation, we have an investment-grade balance sheet, and this is supporting an attractive and resilient distribution. So let's zoom in. I talk a little bit about the Norwegian Continental Shelf or why that is such a good place to be from an E&P company, pure play as we are. And really, really, it is about competitiveness. And you see it here on this slide, it is about cost competitive. And here, you see the green bar, that is Norwegian Continental Shelf compared to other regions of this world. And on production cost, we are more very competitive, lower than others. This is here with a very low emission. We have the lowest emissions of energy regions. And not only that, we are working to bring it further down. Also, which is important when you are into a long-term industry that is reliable framework. We have it both when it comes to open, transparent, safe and good working conditions. And also what I would like to highlight is really what I call the Norwegian alignment, stable fiscal regime and good alignment between authorities, the regulators also the industry and even the preparation when it comes to the importance of oil and gas and how we are going to develop that going further to ensure energy security and low emission. And of course, what really makes our living, there is a significant resource base yet to be produced on the Norwegian Continental Shelf. I would like to say that the numbers are 50-50-50. We have been doing this for more than 50 years. We have been -- and we still believe there is about 50% remaining. And so far, we have produced about 50 billion barrels. And just as a small anecdote, I have been in this business for 25 years, and we have always believed that there is about 50% remaining. And what is the message by that? That is saying something about our ability to replenish, our ability to develop these resources. And that is also what Vår Energi is going to do. We are going to develop these resources. Also, we are well situated with our proximity to Europe and never ever before have Norway had a more important role when it comes to supplying Europe and U.K. with gas and energy that we had in 2020. And we are certain this will remain. And here, Vår Energi is having a wide role. We have solid gas sales strategy. We have long-term contracts, and we have flexible price indexes as also Stefano talked about. Fixed pricing month ahead, they that and not to forget, we have access to the key markets in Europe. You see it in Germany, it is Belgium, it is France and in it is the U.K. This means that we are able to be a predictable and sustainable gas supplier also in volatile types. And of course, this is resulting in high value equation. And today, I'm really happy because one of the key members of the team, his name is Ove-Andre. He's our Head of Commercial. He is really a commodity expert. And I'd like to say that he is a gas nerd, and he will go further into this post lunch. So you should not miss that session. I move on, and then putting our energy into our leading E&P position on NCS. We are the second biggest independent oil and gas producer in Norway. You see that through our production and not to forget our significant resource base. And of course, this gives us a very good resource over production ratio. Also, what is really good and that is our exploration team and our excellent exploration team consistently delivers discoveries and resources. Because the bottom right of that is that we are building an even more robust portfolio going forward. And talking about robust portfolio and our value-enhancing hub strategy. Our robust portfolio located in the best areas of the Norwegian Continental Shelf. That is really our crown jewel. And you see it here from North to South Barents Sea, the Norwegian Sea, the North Sea and the Balder area. And the numbers to it is 158 licenses; 53, we operate, and we are part of 36 assets in production, and we have a very good commodity mix with 37% gas. In our hubs, we have a significant subsurface understanding. We know the geology, we create high value, true infill wells and subsea tiebacks. Of course, the diversified portfolio, that reduces risk. It reduces cost and it creates high value. And also typically in this hub areas, we have a high equity. That means that you are able to influence, impact and improve. So really to summarize, how do we summarize the hub strategies? Our hub strategy is really where everything comes together, our licenses, our prospects, our discoveries, our [ oil fields ] projects, our projects in development and operation, and we have a lot of existing infrastructure. And Rune Oldervoll is also going to talk about this, our hub strategies and give you better insight on what's coming there. So where is this taking us? Where is this taking Vår Energi? Let's go. Towards 2025, we have an unprecedented growth, more than 50% compared to our production in 2022. That takes us to above 350,000 barrels. We have 17 projects that are sanctioned, they are into development, and they are bringing a lot of barrels to Vår Energi. But there is, of course, 3 that is more key than others. It's the Balder X, it's the Breidablikk and Johan Castberg. And I will come back to those later. And we also have a plan for sustaining our production of high-value barrels beyond. And now I have to go straight on the left side here of the slide, from your side, you see the recipe here. We are going to talk about world-class exploration capabilities. We have infill drilling, increased recovery and extend the lifetime and also, we have a high-value project portfolio that are going to mature further, and we will be assessing value-accretive M&A. But this is all about capability. Today, we are a young company, and today, we are celebrating 1 year as a listed company. And in December, we celebrated 4 years of age as Vår Energi. But we have a very proud history and a strong legacy. We arrived on the Norwegian Continental Shelf in 1963 as part of [indiscernible] We -- and talk about capability. First capability is about competence, it's about capacity and it's about the way you're working. And we are really working hard to become and creating the leading pure-play E&P company. And it is about realizing our potential. Vår Energi, it is about people, clever people, and we have cover people. In November last year, we introduced a new organization to enhance the flexibility and efficiency in the organization to develop people and to clarify priorities. We also strengthened the management team or the executive team and we simplified the organization. Further, we have a well-established improvement program. For 2022, we realized synergies and improvements of about USD 200 million. And for the years going forward, we are planning and forecasting and improvement realization and synergies of $200 million to $300 million per annum. And Ingrid, our EVP for Technology, Drilling and Subsurface, she will talk about this later in the presentation. Then talking about the way of working. In Vår Energi, we believe that the future is about alignment, partnership and collaboration. First, we have a strategic priority which is being the partner of choice to drive performance and create value. That is also why we are really happy and proud and have big expectations when it comes to the strategic collaboration. We enter into last summer with Aker Solutions with Ocean Installer and Saipem when it comes to the subsea production systems and stuff. We are not stopping there. We are going to continue. We are going to establish this through the entire value chain. That means for drilling services, for maintenance and rigs. Also, what we are talking about the partner of choice. We are working very actively together with our partners and particularly the main partner, Equinor, to build economy of scale. Here, I would like to mention, for instance, the sharing of rigs and rig we are doing. And one concrete example is what we're doing in the Barents where we have been sharing the TransOcean Enabler. They are using it on Johan Castberg. We have been used for infill drilling on Goliat but not to forget to drill the exploration wells in the Barents. I think TransOcean Enabler has to be rig with most discoveries, I don't know in the world, but at least just 4 in recent time and 6 in total in the last 2 years for both in total Johan Castberg and Goliat. Also, we are doing the same actually in the South with Neptune that we're going to share rig. What is this giving us? It gives us a warm rig that we know is working with competitive rates. It improves performance, the safety standard and also it reduces emission. And of course, we have also a well-established business calibration with ENI. But all this comes with some clear practices. And ESG, including safety, that is really core of all our activities. Stefano, he said it, safety, safety is about people. And that is also why we can't have any other ambition than being the safest operator and also to be clear, this goes hand in hand with good operation, well-executed projects and strong drilling and well operations. We will never compromise on safe operations. Then talking about our clear framework for shareholder value creation. We have high-value production and we have a high-value production growth ahead of us. We have also low-cost barrels, and we have a clear ambition, which we are on track to, to bring down the production cost to about $8 per barrel. And I will come back to that later in my presentation. So really cost discipline. You saw the big free cash flow, $3.1 billion in 2022 and also the significant and material dividends. All this [ chored ] with our investment-grade balance sheet. So really, to summarize this, we are bringing cost discipline to our OpEx and CapEx going forward. And Vår Energi, we are a unique combination of high value growth, high value creation, investment-grade balance sheet and combining a significant distribution. And also Stefano said it, we are saying 20% to 30% of our cash flow from operations, and we want to be clear. For this year, 2023, I'll talk about approximately 30%. And I'm not letting Stefano off the recall this. Stefano, he will elaborate more on this framework when he's coming back to present our financial framework a little bit later in this session. So then I take a little bit of water. My team told me, Torger, you have to remember to breathe. So now I'm breathing as well, getting some oxygen to the head. It's maybe a small thing. But let's go back to the team, growth and high value creation. As I said, we have unprecedented growth in front of us and it is tangible and also that I will cover more. And we have some really focused projects with a very attractive economy. And this is really based on our delivering on operational excellence. So that is what I will be going to cover now in my next session. Continuous focus on operational efficiencies. That is what we are stating here. And we -- I showed it in one of my previous slides. I say we are working hard to bring down our production cost. Here, it is some certain specific and concrete building blocks. And the first and the big building block here is our projects that is sanctioned and in development. They are very competitive, not only when it comes to breakeven, but also when it comes to the production cost. In average, these 17 projects have our production cost per barrel in the area of $4, that will help. Then in addition, we are working with our capabilities and improving the cost basis. As an example, since 2018, we have been reducing the cost or improving the cost, I think that is fair to say by $70 million on Goliat alone. Also, we are doing actively portfolio management in our hubs, optimizing as much as we can. And I also mentioned already, our strategic partnerships or strategic collaboration to really create economy of scale to enhance competitiveness. I mentioned the rigs. I am not going to take that again, but there was one thing I would like to share with you, which is, to me, really exciting. And that is that we just recently announced together with Equinor, what we call the NLP. NLP, what does that stand for? I don't almost know myself. Yes, I do. It means Norwegian Logistic Projects. Here, we are putting together our pilot. Equinor and us, and we are going to look into how can we optimize, how can we create synergies? How can we ensure that we are getting more efficient in how we run our logistics? That goes to supply vessels helicopter basis. And of course, the driver here is really to realize synergies, save costs, reduce emissions because less transport up and down and back and forth, and of course, also improving safety because it will be less lifting and activities. And bottom line, of course, this means improved competitiveness in all sense. So that is how we are working our production cost. I mentioned our sanctioned projects. Maybe it's time to talk a bit about those. Here, you see what it means for us. And we state here that we see a derisked portfolio that is driving production growth. And as said, unprecedented growth. There is some key projects in this, I mentioned already, Balder X, Breidablikk, Johan Castberg. Those are bringing about 140,000 barrels to Vår Energi. But there is, in total, 17 projects, which has been sanctioned during the last years. And this means that we have been sanctioned this product ahead of the big PDO wave that we just recently saw. So this means that we are well into execution. We think it's derisked. It's not risk-free. It's derisked, less exposed, and that means it's less exposed for future inflation and potential resource constraints. And these are projects that, in general, are cost efficient, close to existing infrastructure and brings high value. And I will elaborate a bit more on this in the next slides to come. Here, you see it. Here, you see it on the map. This is our 17 projects, as I said, that is sanctioned, no sanction risk and they are well into execution. But first, they are bringing significant resource base, more than 500 million barrels well into execution. 11 of these projects, they are more than 50% complete. And what does that mean? That means that the subsea installations are on the seabed, they are installed, they are complete. The rigs are drilling. The people are mobilized. The construction workers, the engineers, they are working. And not only that, the key equipment is delivered at site and is installed in the vessels. Also, we had 15 of these 17 projects is what we call subsea tiebacks. In general, the subsea tiebacks, they are building on, let's say, standardized concepts, standardized subsea production systems. That means they're also simpler. They are lower risk, lower cost, low emission, low breakeven and high value creation, you could maybe guess that. And here, we are talking, you can see it on the slide. Here, we are talking about the breakeven in the area of approximately $30 and a very healthy internal rate of return above 35%. So that is our product portfolio, which is in execution well into development, derisked. And I talked about these 3 key projects, and I will now walk you through those a bit in my next slides. And let's start with Balder X. And starting with Balder X, I have to take a little bit of history, and this is really Norwegian oil and gas history because Balder X, Balder area, that is production license 001. This is really where the oil and gas history started in Norway. And in May, 1967, guess what? We were drilling the first exploration well in this area. Then 25th of November, same year. The very first oil, the very first oil was taken out of the reservoir. It was the first oil, but it will not be the last oil as you know. And this is really what they used during FPSO and the Balder X is all about, it is able to extend the lifetime. It's going to be a host for future subsea tiebacks and infill activities. And that means that we are going to extend the lifetime here in this area to more than [ 80 years ], because Balder X is going to be 2045 and beyond. So then Balder X. And you see the numbers here. Atle Reinseth, our EVP and Head of Product Development and Supply Chain, he will go more into details here. But what I would like to share with you from my point of view is that since we announced the revised schedule, moving the start-up from Q4 '23 to Q3 '24. I hope I got that right because that is sometimes missed. And of course, we had a significant cost increase. In September last year, we are progressing according to plan. And I have to say that it is really exciting to see that our old FPSO is starting to be a very modern episode where everything is coming together, and we have achieved several important milestones in the period. Among others, engineering, one of the things that we also mentioned when we did that back we said the engineering is significantly complete. That means that we have a good grip on the scope of work. Also, as I said, equipment, the main equipment, it is delivered, it's installed. Also, we have just recently concluded our heavy lift campaign, cranes, helicopter deck and so on lifted in accordance to plan, very safe performance. And also, we have mobilized the construction resources that we need. And we are getting the efficiency we are after there. Also here, the subsea production systems has been installed for a while. You can see it also here on the progress, significant complete, and we are drilling wells, 4 completed as we speak. Currently, we are now drilling subsea -- sorry, top hole campaigns. So that means we feel it's derisked and we confirm a scheduled confirmation with our plan startup in Q3 2024. I move on. I'm not moving very far because I'm moving to Breidablikk, a very attractive subsea tieback, and that is a subsea tieback to back to Grane. And Grane, that is the neighboring installations to both Ringhorne and Balder. Same area that operated by Equinor. It's a highly attractive and very cost effective business case. And as we understand, it is utilizing the existing infrastructure. Here, to make it a bit simple. All parts and I'm talking about the drilling, the subsea and the top side activities. We have a high activity period ongoing, is on schedule. Actually, the drilling of well is a bit ahead. Here as well, confirming a start-up plan for Q1 2024. And then I'm coming maybe to my favorite slide here today. And I think it is really difficult to talk about Vår Energi without talking about the Barents Sea and also maybe talk about the Barents Sea without talking about Vår Energi. Also, this is special for me because I have -- I live there. I follow my young days at Snohvit, where I was living in Hammerfest. So I really felt it on my body what this means for both the local community and activities and also -- the let's say, the exciting area it really is. And also, when you are looking at the slide, where should I start? It's almost hard to know where you are starting here. But of course, I would like to start with our strong position. We have a very strong position in the Barents Sea. And of course, we are an operator of Goliat. We have a lot of licenses there, and we are, of course, a big owner in Johan Castberg. And this is a very prosperous area. 6 discoveries in the last 2 years, a little bit more. And of Stefano talked about the Lupa, the gas discovery, the biggest discovery in 2022. We have Skavl Stø and Snøfonn, close to Johan Castberg. Rodhette, close to Goliat, Isflak also by Johan Castberg. And then, of course, what kicked off 2023 for us is the Countach. I'll take a little bit more about Countach later, but of course, promising, as Stefano said, potentially tie-back to Goliat. So really here, I think Johan Castberg fits perfectly. And again, where are we when it comes to the schedule here, very much the same story. Here, the subsea is completed, it is installed. The drilling for the Phase I, the wells that is needed to start up is also completed. That is why we are utilizing the TransOcean Enabler. And as we speak, the integration of FPSO is ongoing at the Aker Stord yard in Norway, on the West Coast of Norway. Planned startup Q4 2024 confirmed. That is the path. So then taking the big path over high-value growth going forward. But there is more. And just to get the equation, to say, come together. We have our remaining sanctioned projects, which is really securing us high-return barrels in the core area. And here, we are talking about more than 60,000 barrels. It's coming from subsea tiebacks that is located in the Norwegian Sea and the North Sea. They are all, as I said, subsea tiebacks to existing infrastructure. And sometimes I'm getting a question, which projects are gas and which projects are oil? To make it a bit easy. Those on the upper side here that is in the Asgard area, they are all gas related. So we have 6 of these projects that are gas related. These projects, they are cost effective as it says on the slide. They bring high value and short payback time to Vår Energi. So that was the growth of high-value until 2025. Also, I said in my introduction, that we have a clear ambition to sustain beyond and towards 2025 when it comes to high production and high value creation, high value with scale. Let's look a little bit on how we are going to work that. First and foremost, that is really -- I feel it is founded on [indiscernible] NCS. We typically are extending the field lifetimes and size, big fields are getting bigger. We are going to increase the recovery and we are doing that. They are playing technology and innovations to improve filling, seismic production efficiency really to extend their lifetime. We are long to capture the opportunities for long-term high value creation. And then I would like to use Rystad Energy and their assessment of the NCS because what they are saying when they're comparing it to the other energy regions of this world. They're saying NCS is #1 when it comes to emission. It's #2 when it comes to discovery rates, discovery success; #2 on recovery factor, #3 on production costs and breakeven. I think that is a very good combination. And if you are going to summarize it all, what does it mean? It means longevity. And we know that this will require hard work and improvement. And the recipe of this, you really see on your left, Here, we are talking about value-accretive M&A, continued exploration success, maturing high-value project portfolio and operational excellence. And I will walk you through these topics in my next slides. So hard work is about this, efficient drilling and improved recovery and operational excellence. And I will start -- there's a lot of numbers on this slide. I will start and try to focus piece-by-piece to explain how we are thinking. First, extend the lifetime and increase recovery. We have a significant resource base, more than 1.6 billion barrels in resources. That is a good starting point. Further, we have also a good track record when it comes to reserve replacement ratio. For the last 4 years, we are talking about above 160%. And then they also see that historically, based on experiences through infill drilling, we can improve or we have been improving the recovery factor from existing fields by 7% or more. And that is a clear ambition that we are going to continue doing also for Vår Energi, and that represents about 30,000 barrels from '25 towards 2030. Then to the operational excellence, continuous improvement. And we have a strong record when it comes to the operational excellence. We have been working this for years. And again, if you use -- and you saw it on the Goliat as a clear example here, and you saw it on the Q4 reporting from Stefano. Goliat, production efficiency in Q4 above 96%. And we have improved in general, more than 10% production efficiency in the last 4 years. And we are going to continue that. We are aiming for more. Our clear target is to bring this above 93% for our operated assets. And we are going to continue maturing our high-value portfolio. We'll talk about here also about our non-sanctioned projects, significant resource base, more than $225 million barrels and a low breakeven. And how are we going to do this? We're going to have a standardized -- what we call standardized factory approach on tiebacks. Because all the products you see here, they are subsea tiebacks. And you can see they are located in our key hubs. So we are going to have a disciplined approach. We're going to ensure robust concepts, and we're going to go countercyclic. And I already said, we're going to maintain our ambition of $30 in breakeven. And of course, to do this, we're going to leveraging our strategic partnerships. SPS, SURF, drilling services, maintenance and rigs. So we will backfill going further. Then taking us to our world-class exploration capability. I said it from the Rystad Energy that NCS is #2 in the world when it comes to discovery rate. And the average here is 29%. So 29%, that qualifies you to #2. In Vår Energi, our discovery rate for the last years have been above 50%, 57% for '22, 75% for '21. And also, based on this slide, it's no doubt that we, in Vår Energi, we are in the forefront. And you see it here also on the slide and what is this illustrating, the first one is the size of the discoveries per well, and we are #2. Then we are clearly the lowest and the best when it comes to unit exploration cost in the middle here. And of course, really what matters is the return. We have the highest return per spend dollars exploration than anybody. So summarized, nobody is discovering more than more than Vår Energi there. So what we like to do when we are talking about exploration, we -- even though we are -- doesn't sound too modest, we are modest so we say we are in a good shape, and we have a plan. So what is the plan? What is the strategy? Let's take 2023 because Stefano, he already covered the 2022 results. So '23 is here, we're going to continue to drill in our hub areas and then a few more words about Countach. Because Countach is really in the neighborhood of Goliat. It is promising. More work is undergoing. So we can't talk about the reserves because we don't know yet, but it is promising, and not only promising for this specific well, but of course, also it is promising because it is confirming together with Lupa that our exploration models are right. Our insights, what we believe is starting to be confirmed. So it gives good insight for other prospects as well. Then we are going to drill 2 high-impact wells for 2023. That is Venus, operated by us, which is in the Barents Sea, about 25 kilometers from Johan Castberg and then it's Rondeslottet in the Norwegian Sea. We also got to our 2 wells in the North Sea, which is Angulata and Crino. And then this also is really exciting is the wells we're going to do in the Balder area. We're going to drill 3 wells there. It's the Ringhorne North, it's the King Appraisal to appraise the big discovery we had in '21, and then it's Norma. So all this, of course, we are exciting because this is really about bringing more volumes into the hub with Jotun and Balder X is representing. Then also what we are working actively with is this award in predefined areas, APA. We got 12 APA licenses for 2022, 5 operatorships. We are pleased with that. And we are using it actively to get operatorships there. And also, we are pleased to see that authorities are talking about more blocks to be available for next year, 92 in total and then 78 in the Barents Sea. So we are, I would say -- so I'm excited to see what quality that might represent. Then moving further in our exploration strategy and [indiscernible]. This is what we plan to do in general -- in our strategy. And as we have said before, we have plans to drill 8 to 12 wells in total operated and partner-operated, and 2 high-impact wells per year. And as you can see in all the dots, we are really exploring in our hubs. Also, of course, we are using this to optimize because we go for quality prospects. I already talked about APA, but also we are in way, getting with real inducement. That I can't say, but I hope you know what I meant. There is licenses that we have our drill and drop and we drop them because we don't see the quality that we are after. So we also using this, as I said, actively to increase our operatorship. You saw the number, it is 53. Actually, we have been -- we have doubled our number of operatorships the last year from 24 to now 53. And we're going to continue doing that. So then I'm coming to one of the last items in our toolbox, and that is pursuing accretive M&A. You know Vår Energi was created, we are funded through M&A, shaped and formed. And that is such a part of our DNA and in our blood. And of course, yes, we might assess value accretive deals, but that is really what is all about. It's about value, not volume. So whatever we do, we do it for value, but of course, value with scale. So it might be license transactions as we did last fall, where we acquired 4 licenses in the Balder Area, it could be portfolios or maybe also corporate deals. But what is important for us, it has to be in accordance to our strategy. That means that we will like to see it in our hub areas, existing infrastructure. We will predominantly like to see some increase in operatorships, and of course, it has to be in line with our ESG strategy. So these -- our tool in the toolbox to support our strategic ambition, to sustain beyond '25 and going forward. Then I talked about sustaining. I talked about long term. And really to sustain high value equation, it is important and a clear prerequisite that we are responding to the ESG and being an ESG leader. And what is that about? It is about safe operations. It is about minimizing emission and really value creation for society and local communities. So we are operating [ real ] activities. We are going to create significant activity and value. So this is really about becoming an ESG leader. And rest assured, this is integrated in our strategy, our business and who we are. So that is really important for us. Then I hope you know we are committed to deliver a better future. That is really about energy security and low emission. And also, we are committed and utilizing the UN sustainability goals actively to really set direction and framework for how we work this. I know, I planned a short way to take you through the ESG and what that means for us on a high level. Environmental, we have a clear commitment to reduce our CO2 emission by 50% by 2030 for our operated assets. I will tell you how on my slide. Then also we have signed up for the OGCI, the Oil and Gas Climate Initiative, aiming for zero methane emissions by 2030. Then on the social side, as I said, local value creation and ripple effects. It is really a license to operate. Also here, in a way, that means that we are going to create industrial activity, job creation and competence development in the area. Here also, we are happy that we have created 10,000 of jobs over the last years. I think one very good example is really the spend -- the procurement spend we have had 95% of the spend to also suppliers was done in Norway for 2022. I think that is quite amazing. And then to conclude this slide, governance. Transparency and compliance is, of course, key to governance and for a company like ours. We have a solid rating for our ESG reporting and actions. And actually we are getting feedback from some rating agency among other system analytics, which is ranking Vår Energi 11 -- no 14 out of 155 E&P companies. I think that is pretty good. But of course, we have a clear ambition to improve further, both when it comes to our reporting. And of course, the culture and our actions going forward. So specifically, this chart is showing how we specifically and Equinor is working to reduce our emission by 50% and also going towards the net 0 targets for Scope 1 and 2 by 2030. So how are we going to do this? First to get to net zero, electrification is key. We have to make it that simple, that clear. And as you know, it not -- Goliat, not Johan Goliat that Goliat is already electrified from the very get-go in 2016. And we are working to electrify the Balder Area. And that includes Grane. We are going to do this together with Equinor, and we are planning to have this on electrodes by 2030. Also, with the Jotun FPSO and the Balder X project is giving us the opportunity to do is to optimize the Balder area. That means that we, at that point, will be retiring the Balder FPU. This will bring down the OpEx and it will bring down the Co2. So towards 2030 -- around 2030, we foresee that we will be retiring the Balder FPU and that -- by doing those 2 things, we will get to a 50% reduction with that also enhancing the area. Then for this or in addition, and relentlessly every day, we are working with energy management to bring down our energy -- or improve energy efficiency to bring down our energy consumption, to really improve on everything we can do in our operations and activities. And in addition, we are, as required, going to use residual emission or offset. So then -- and this is my last slide. On this, then I would like to take and talk about the key decarbonization initiatives. And I will do it very simple because I'm going to summarize these 3 items. This is about electrification, either power from shore or offshore wind. Two, it is about energy management, as I talked about, more efficient, reducing the demand in our activities. And three, it is about joint industry on R&D projects, also addressing our use of the product. So as you can hear -- and you have to get ready Stefano. As you can hear, ESG is embedded in our strategy, our business and who we are as individuals and colleagues. This is, of course, then also a case for our financial framework. So Stefano, you have to take it from here. Thank you.

Thank you, Torger. So I think you saw this slide before with Torger, but I like to start off really by quickly repeating our framework. We are set to deliver over 50% of production growth by end of 2025 and achieve a significant reduction to production costs, driven by new high-margin barrels. This positions us to continue to deliver strong free cash flow and attractive shareholder returns. We have been paying $3.9 billion to our shareholders since 2019 which becomes, let me say, which becomes $4.2 billion if we include the upcoming payment that is expected to be done in early March related to the Q4. So we have a clear and balanced capital allocation framework in place, starting with sustaining production on existing fields and funding CapEx on existing developments, and new value-creating projects. Our CapEx policy is flexible and built on the ambition of average portfolio breakeven of around $30 per barrel, as Torger already mentioned. We are committed to maintaining our strong investment-grade balance sheet and a robust credit profile, while paying dividends according to our stated policy. Additional free cash flow will be used for extra shareholder distributions and debt repayment. Let me also proudly say that this has been the case since the IPO, where we delivered on our commitment by being able to pay attractive dividends to shareholders and at the same time, progress the investment and at the same time, deleverage substantially. We also have clear criteria for any M&A activity focused on the NCS. I think Torger went quite well through the through the -- through our criteria. So we have a very selective and disciplined approach, which is really designed to exploit synergy around the existing operations, but the most important thing for us is really to drive value. So if we look to the coming high growth period in -- from '23 to '25, we are very well positioned to deliver attractive and resilient distributions during the peak investment period. If we apply forward gas sales contracts and the forward curve for oil and gas, we deduct taxes and CapEx for the period, we still see strong free cash flow generation and also a good headroom to deliver on our long-term dividend policy. We also see robust cash generation across various price scenarios. So looking at the next 5 years, which includes the high activity period to deliver on our production growth, we have cash flow breakeven of approximately $35 per barrel, and this is also including the remaining tax payments related to 2022. We also have greater flexibility with regards to CapEx as we mature our portfolio of unsanctioned development projects. And these will mainly be low-risk subsea tiebacks, which are simple, standardized and cost efficient. But let me say, most importantly, we will be disciplined in what we bring to FID, which needs to be in accordance with our requirements, which are breakeven, not higher than $30 per barrel and internal rate of return higher than 20%. Now looking a bit more closely at CapEx. We expect between $2.4 billion and $2.7 billion in 2023, mainly tied to the 3 major events development projects that are led by Balder X. We also see approximately the same level for 2024, while 2025 CapEx is set to come in a bit lower based on the current sanctioned portfolio, and especially as we ramp production toward our year-end target of above 350,000 barrels a day. Turning to our financing. We have a strong balance sheet, supporting an investment-grade rating. We have deleveraged significantly over the past year. Net debt to EBITDAX has been reduced from 1x at the end of 2021 to 0.3x at the end of 2022, and this is well below our leverage target through the cycle. We are actively diversifying our debt portfolio as we refinance the $3 billion bridge to bond facility that is maturing at the end of 2023 in November. In 2022, we issued 3 bonds in the U.S. capital markets, raising $2.5 billion. We expect to continue to have access to the bond market going forward when needed. So our Baa3 rating from Moody's and our BBB rating from S&P were confirmed in 2022, both with a stable outlook. Due to strong commodity markets with exceptional gas prices in 2022, we exceeded our dividend ambition at the IPO a year ago that was set initially as a minimum of $800 million, and we ended with $1.75 billion in dividends for the year 2022. Final quarterly distribution of $300 million will be paid in March, and we maintain our dividend policy of 20% to 30% of the cash flow from operations after tax over the cycle. And we are guiding for a Q1 dividend of $270 million, and as I stated before, the dividend will vary with our operational performance, macro environment, but plan is to distribute approximately 30% of CFFO after tax, specifically in 2023. So to sum up on my section, we are well positioned to deliver on our growth and cost targets and continue to pay attractive dividends in the years to come. Let me, as a last thing, summarize our key points of the 2023 guidance. Production is expected to be in a range between 210,000 to 230,000 barrels per day, production cost in a range between $14.5 to $15.5 per barrel, CapEx in a range between $2.4 billion, $2.7 billion and cash tax payments are expected to be approximately $1.8 billion in the first half of this year. Dividend, $270 million for Q1 2023. Now I think it's time to hand over to Torger for some closing remarks before we start with the Q&A session.

Stay tuned Stefano, this won't take a long time. You see -- you almost see it here. As you know, the theme of today, growth and value creation. And that is really what Vår is all about. I hope you agree to that. And just to repeat my key takeaways that I hope you all bring with you home from today is that we are on track for a high value growth by more than 350,000 barrels by end 2025. We have a clear strategic ambitions to sustain this further. We have confirmed world-class capabilities when it comes to oil exploration. Is -- our strategic hubs and robust portfolio is delivering extended value. And as Stefano just talked about, we continue our attractive distribution, USD 275 million for 2022, USD 270 million for Q1 and then approximately 30% specifically for 2023, our cash flow from operation post tax. So that was really it. I want to say thank you for the attention. And now Stefano, it's Q&A.

Thank you very much. Thank you very much, Torger and Stefano. We will now open up for questions. We will start with those of you in the room here before we address questions from those dialing in. And then we'll answer the questions from the chat. Please introduce yourself and try to limit yourself to maximum 2 questions per person.

Jørgen Bruaset from Nordea. Just a couple of questions around the OpEx per barrel guidance both for '23 and '25 in -- so on the production guidance, it looks relatively flattish year-over-year, but close to 10% cost risk per barrel. Can you just elaborate a bit on the bridge and the components of driving that cost increase? And how much of that is the increase in power costs? And on the '25 guidance of $8 per barrel, even if you can obviously play with different scenarios on decline from the current barrels on stream, but it looks like a quite steep cost reduction from the $15 per barrel on the current producing assets to reach the $8 per barrel. So can you just also elaborate a bit on the bridge there.

I will start. I will do my best -- start on the production cost for 2023. Because -- and you are right, for us, it is really maybe 3 main ingredients that [indiscernible] is driving this guided number. It's one, we have increased maintenance activities, both operational maintenance and also well maintenance. So that was on [indiscernible]. And then also what you alluded to, we have what we call commodity-driven items in our operational expenditures. And that could be typical power, fuel and also CO2 and also some tariffs that is then going up because of higher commodities. That is about 1/3 what we're talking about here. But of course, just to be clear and I'm sure Stefano is going to add it if I don't. And -- but of course, this -- yes, this increase is, of course, by far surpassed by higher commodity prices, but it is a consequence of it that we get that increase. So that was the OpEx for '23. Then you're right. We are starting to get in fresh and new production already this year. But of course, the steep -- was a -- production growth is coming in '24, and that is, of course, also the same with the reduction in OpEx when we're getting these barrels on stream with this average of $4 per barrel. So that is the big driver. And then -- of course, as we also talked about that we are working relentless to bring this down and, of course, also to get affect through this strategic collaboration and the scale of -- economy of scale that we're getting. So that is really the elements there.

Yes. And maybe one element that is worth mentioning for the OpEx in '23 is inflation because that is assumed to be around 4% for 2023. So it is also a bit higher. So it's also contributing to the increase specifically in 2023.

So that's incorporated in the number.

Yes.

Okay. Perfect. And then final question from my side. You touched upon M&A. Can you link your thoughts around M&A to your thoughts on capital distribution. So is the payout policy of 20% to 30% of CFFO protected in an M&A scenario? Or is that something that you will consider depending on what type of M&A scenario you are looking into?

Should I start and you can take the details there. Number one, of course, we -- as [ I already ] comment specifically on this. And I -- so I really said there is maybe 3 buckets of M&As that could be assessed. And of course, I talked about these prospects, which we have been doing. No impact. Could be some portfolio optimization or bigger things and then a potential corporate thing. And then, of course, these 3 differences will also have a different impact on how Stefano and me and the Board is assessing the distribution. So I don't know if you have anything to add there, Stefano?

No. It really -- as you said, it will very much depend on what kind of M&A potentially comes. But the point is, if we look at it historically, we have made a substantial M&A like the Exxon deal, which was a $4.5 billion M&A, the dividend policy has been maintained. So I think history always speaks in a positive way.

I think it is saying that look to the history to predict -- look to the past to predict the future. So yes.

Yes, next question here.

Ruben Dewa, Jefferies. Just a quick one on the $30 a barrel breakeven you mentioned for the projects. I was wondering have you seen this change much over the last year given cost inflation and changes in the Norwegian tax regime -- temporary tax regime? And then secondly, you gave us guidance for first half of '23 for tax $1.8 billion. I was just wondering if you could give us a steer on what this may look like for the full year.

I start on the projects Stefano, you take the tax. Starting on the breakeven. No, we haven't seen big differences. And that was also -- I think one of the messages that we had is that our projects -- significant part of it is -- was under the interim tax regime. So that's a good thing. Also, of course, a lot of these projects are well into execution. And that is helping us because we have in a way, shield them. It's not -- they're not immune when it comes to inflation and surprises, but they are pretty shield so we -- the project that we have in execution, as I -- as now I'm talking about our portfolio, is this robust and in the range of $30 as we -- there, and that was also very much as we talked about during the IPO as such. So yes, I think that is also -- and we also talked about the ambition we have for our future coming projects. And we saw -- we see that, that is in the same range. And also, you heard Stefano when it comes to the decision thresholds that we are pursuing. Yes, we are in there. Tax?

Yes. On tax, we have -- you will find here in the appendix. You find the sensitivity on tax, a different oil and gas price scenarios. So if we assume a scenario for Q3 and Q4 of this year of around $90 Brent and $140 per barrel for gas, you end up having to pay roughly $500 million in Q3 and roughly $1 billion in Q4. So it would be under that scenario would be an additional -- in the second half, an additional $1.5 billion. But you can see also there are other scenarios they are reflected. So I hope this is helpful to predict the tax burden for the year.

Question down here from Teodor.

Teodor Nilsen, Sparebank. Two questions for me. First, on financial gearing, you have, through the cycle, a target of 1.3x net debt-to-EBITDA. Of course, it's significantly lower now, and it looks like with the current dividend you're guiding for, you won't reach that level this year, at least, at the current oil and gas prices. So I just wonder when should we expect you to reach that level? And will you consider to do any buybacks or other initiatives to come around that gearing range you're guiding for? That's the first question. And second question is just on economics of electrification. Electrification is an important pillar for coming down to net 0 by 2030. And you showed a specific slide on that roughly half of the contribution. Could you just take us through a specific example of electrification, what the CapEx will be and what kind of cost savings that will imply and also tax savings.

I believe the first one is, Stefano, is yours. And then maybe we can fight for the last one as such. But I will start on the second one, but you go first on the financial.

Yes. So you're right, the target is 1.3x. Currently, we are at 0.3x so far below the target But the target we have is a target which is over the cycle. This means that it be substantially lower in certain periods of high commodity prices like now. It might reverse back or be above 1.3x at a certain point in time later on. What we are really targeting here is to maintain a 1.3x over the cycle, and that is really the ambition from the company or the target from the company. So that should be read across the cycle.

Yes, should I start on electrification Stefano? I think first and foremost, we are investing in, lot's say, economical projects with a back number. So that is so -- I talk about investment, they're not our cost necessary. And that is also what we are pursuing for the electrification project. And of course, where we are building the business case of such and as you know very well, is that then we are putting in what we assume as a CO2 tax going forward. So that is the income side of it, if you want it like that. And of course, on top of that comes the CO2 quotas. Then it is very -- let's say, different from concept to concept because doing this integrated in a very low initial concept like Goliat, of course, [ anything ] corporate and business case it's not really there. And then, of course, there is some, let's say, doing it in retrospective, the -- then still we are pursuing to have back numbers and positive rate of return on this project. And as said, we also see it as an investment because this is also about, let's say, the longevity in our operations. If we don't put this in place, and this is the time to do it, then I think we will come to, I would say, Jotun [indiscernible] that realizing that this will be a requirement. So we act and we can and not when we have to in this regard. Then I think Stefano, you can correct me if I'm wrong, we are planning towards 2030 to use around $1 billion in this type of project if you are pulling it out from the various business cases that we are assessing. There's a question about tax here. I don't know if they see any difference in tax but maybe you understand it better.

No. No, I believe the electrification, is what you save essentially, I think from the -- for not paying the CO2 taxes, is that right?

Yes, question was on specific on CO2 taxes. Yes, that's right.

Okay. Okay. Yes. And then -- but of course, also, as I said, the income -- but also, of course, this CO2 is really created by burning gas. And this is, of course, we're saving that, that also comes as income as such. So that is what goes into the business case there.

And what's that number? You said $1 billion for electrification, would you dare to give any OpEx savings number?

But that again, it varies from installation to installation from case to case you don't have 1 number on that. So that I don't dare since you used that phrase, Teodor.

That's fair.

Sorry, maybe there was a point on share buyback.

Yes, that was yours.

Yes, sorry. I left it. So currently, share buyback is one of the tool that we have, let's say, in the toolbox that can be used by the company. Let's say, given the current floating to be evaluated, whether that is an instrument that serves the best -- the company and the shareholders. So -- but definitely is a tool that is in the toolbox and we will evaluate to use. Yes.

There was a question from James from JPMorgan.

It's James Thompson here from JPMorgan. A couple of questions for me. First of all, on 2023, I think a few people this morning were looking for a kind of base dividend in dollar terms from the company for 2023. And I think the Q1 was probably a beat, but obviously, there's a bit more nuance about what the outcome for 2023 is going to look like. So I just wondered if, first of all, you could give us your views on why presented in that manner, kind of leaving a little bit of uncertainty there. Just what do you think are the kind of are the moving parts that can affect your decisions on the kind of remaining quarters for the dividends. That would be the fair part. And then maybe I'll come to the kind of longer-term question after that.

We'll see. I can start a little bit and then Stefano, you take the rest. Number one, in 1 again, and Stefano talked about it. We would like to be very transparent and very open and very clear that -- on our dividend distribution and our dividend policy as such. And also, I think we have been that, and we have been distributing significantly. And then we feel that by being clear now that between our dividend over the cycle is going to be 20% to 30% of our cash flow from operation post tax. And for this year, approximately 30%. That, we think, is pretty clear because then you guys, you are doing your assessment, you will see how the cash flow goes and then you will also be rather clear on what the dividend will be. And then also, of course, one thing as we will continue, as Stefano said, and he will elaborate on it after is that do this assessment on a quarterly basis, that to really ensure that we are, let's say, within sequence of the macro, our performance, our production and other items. But all of this, in a way, be visible in our cash flow. So we continue being transparent, open and having a clear distribution policy and delivering solid yield. I think I talked about 12% to 14% now in what we are communicating. So Stefano, something to add?

Yes. Maybe the fact why there is -- there isn't a floor, which is a good question. The answer is there was a floor in '22. Because in '22, the dividend policy, we were listed during the year in February. So the dividend at that point in time was set as a minimum, which was $800 million. And then we were from, let's say, each quarter as the macro was improving, we were increasing the dividend, and then we ended up with $1.075 billion. Now we were quite clear that from 2023 onwards, then the 20% to 30% CFFO after tax would have been the policy, and that is what we are doing. And I think should be seen positively the fact that we are also giving within the range already, a guidance on what part of the range we plan to be. And let me also add on top that I think it's even more important to mention that we are doing this despite the fact that the gas price has gone substantially down compared to what we have seen at least now at the start of the year to what we have seen in 2022. So I think that is also a sign of resilience of the company.

So just in terms of longer term, you laid out some pretty impressive statistics should we say on the exploration side of things over the last couple of years. Given that anything you discover now is really not going to start until very late in the decade, I guess, in the best-case scenario. What is the stop you kind of extrapolating that good performance and being a bit more aggressive with your well count. And could you potentially ramp up from that side? And then second -- or the second part of that would be, of the 13 or so unsanctioned projects, can you give us a picture about how many you'd like to FID in 2023?

Starting with exploration. And -- you are right, of course, that we have a very solid track record. And I think one of the reasons why we have such a good track record is that we are going for quality and not quantity. And what do I mean is that we are using a significant, let's say, I want time to really ensure that we have quality in the prospects. That means that -- so it's not really about, let's say, having more prospects, building more wells if the quality is not there. So we believe that in all 8 to 12 wells that I talked about that is, in a way, reflecting our ability to create quality prospects. So that is what we're going to continue doing. And we here see this. We have a plan. We are in a good shape and we have a plan. I said that before, and we continue doing that. And that is really to discover and then drill [ dry ] wells. But then, of course, also to, in a way, we don't have to be too carried away. We know that, of course, exploration that is some risk and uncertainty to it. As I said, the average on NCS, which is the second best average in the world is 29%, we have a significant higher -- and Of course, we are working hard every day to continue like that. But I think the key is, as I said, to ensure that we have quality prospects, and that is what we have in our value funnel going forward.

And just in terms of FIDs for 2023...

There, maybe I need some help. And I hope Atle Reinseth -- already, FIDs and I think it could be different on FIDs and PDOs but you can say a little bit of what the project plans we have for next year -- of this year, I mean.

Okay. Yes. My name is Atle Reinseth. I'm heading up project development and supply chain, particularly for FID this year, we are certainly looking at Balder Phase 5. Officially, the potential tieback to the Balder. And other than that, there will be additional projects coming on in the consecutive years for sanctioning.

That's really the factory approach that we talked about. And of course, on top of that, we're also drilling infill wells and this kind of activities to enhance our production.

Question from John Olaisen here.

It's John Olaisen from ABG Sundal Collier. May I ask a little bit on the CapEx guidance indication you have between '26 and 2030 of USD 1 billion to USD 2 billion, a little bit of what's behind those assumptions. And if you could specify for instance, how much CapEx do you expect during that period for projects that are currently in production or under development. I assume that would a lot much lower number. And of course, USD 1 billion to USD 2 billion if you assuming $15 to $25 in CapEx per barrel -- new barrel. It's a huge number of new reserves, $50 million to $100 million in new development per year. I just wonder what kind of visibility you have on there, please?

Should start there as well Stefano? And I think there is a few clear assumptions. And at least one of them, I was trying to show on the slide because one of the clear assumption and that is also tangible that is building on the project concepts that is subsea tiebacks. We foresee that, and the portfolio that we are maturing now, and Atle said a little bit about is that -- the subsea tiebacks. So as I said, that it's more standard. It's also lower cost, of course, also is lower, let's say, time to market. So that is one of the clear assumptions that we don't foresee our Balder X project in that. I know I'm pretty exaggerating to the other side, of course, John, but -- so that is a clear assumption that we are putting in, that we are more building that based on our prospects going forward. That's also what we have in hand.

Yes. And maybe I can add that for those years, we have quite, let's say, a relatively high share of uncommitted CapEx, of course, in the estimates, which is roughly 70%, 75% of uncommitted while the roughly 20%, 25% is the committed. So that also is giving you the -- probably the bit of guidance on the...

Could say one word before you get the second question, John. Because I think it has one important in a way message here also because I think we have been and we are investing quite a bit to increase the production. But we are staying flat or reducing the CapEx going forward. So really, use our huge growth in production, but a more flattish or even reduction in CapEx. So I think that is also a very good -- a good message from [indiscernible]. Some others, they are investing a lot and the production will come further out there. So that is -- I think it's the right gap to have that we are increasing production, but staying pretty stable or even having some reductions in CapEx.

My second question is a little bit related. You mentioned that there are no assumptions of new Balder X kind of projects beyond '25. I just wonder on the Norwegian shelf, are there any -- do you think there will be more big new project developments after [indiscernible] Balder X and Johan Castberg. And I noticed -- maybe I'm not sure you're going to comment on this afterwards. But in the appendix, you showed the details for your exploration program this year, and there are a couple of huge prospects. And are you going to comment on this...

I can take it all together, if you want?

Yes, please.

Yes, is the answer. I believe that there will be big field developments on the NCS, for sure. If I take a little bit of history telling here, I remember when I was a younger boy than I am today, still a boy, but not as young. I was on [indiscernible] development, that was in Equinor. Then it was, let's say, a stated belief within that company that this will be the last big field development that was in 2005. And I think we have -- the history have proven that very wrong. So I think, yes, there will be more big discoveries and there will be more big field development going forward. Then to tie it into what we are looking for, because I said that we are looking for high-impact wells, which might let's say, bring significant resources to Vår Energi. And specifically Venus is very exciting, which we are going to drill late in this year. It might bring in, if it kicks in, a significant amount of resources. But of course, as I said also, we are going to have cost discipline and we have going to find cost-efficient concepts. So we're not going to jump on a stand-alone development if we can do something else that takes it quicker to the market and cost less and is less also a risk. So -- but I will not exclude it, but that could be a very, let's say, a good discussion to have if you have a big discovery there. But that is right on Rondeslottet that not operated by us. I think the operator then should think talk about the potential concept but that is also a big structure, which might result in a big discovery. And I'm sure there is also others. And we are working with now to mature other prospects as well. And that is also why we are so clear that we want more. We want more acreage. We don't like that we are stopping the 36 round and so on because that is important to ensure that replenishment, I talked about. If we go to have a 50, 50, 50, we can't stop now and we are not going to stop now.

What kind of predrill probability of success out there on these big prospects in your portfolio?

We haven't -- I haven't at least looked into that. If it's -- I don't know, to be honest, we are accumulating and summarizing the big, I would say, the total numbers and the overall recovery -- discovery rate, John. So yes, I can't talk on behalf of on that question.

[indiscernible] with us, anyway.

That we appreciate.

And last question, just quickly on the $30 breakeven. Is that a real number or nominal number? So are you assuming inflation on top of the $30 a day and an inflation on that?

No, it's real.

It's a real number. And what kind of inflation are you assuming may if I ask.

We assume 4% for '23 and 2% for the following years.

Next question from James of Barclays.

It's James Hosie from Barclays. Just a couple of quick 1 here, but how much of your capital spending diverting for '23, and I guess, the next couple of years is going to be covered by the temporary tax regime?

I can start, and then the Stefano will fix this up after this. I think it's a great majority of the investments will be covered by the interim tax regime. The one I will know that is not covered is Johan Castberg.

I think the temporary tax regime was covering especially I think, Balder, but that was until the end of 2022. So I don't think Balder is covered anymore. So I think is a minority of the project that is of -- [indiscernible] remains, but Balder as far as -- I mean -- our operated project concern is outside.

Steffen Evjen from DNB Markets. On your projects, [indiscernible] to be progressing ahead of schedule on drilling. On Balder, you say 35% complete. As far as I know, the recontract is 60% complete. Bearing in mind that progress might not be linear, how comfortable are you getting that drilling program finished in time?

Yes. If I start on [indiscernible] very comfortable because we don't actually, it's more we say, we -- first of all, just to be clear, we don't need all wells completed as startup. And that was -- initially, that was not the plan. Now since we are needing more time to complete. We will have more wells complete than we actually initially planned. So that is on the positive side because that means that we will have more wells available which will add resilience and robustness to actually our building up that production, if that was understandable. So that is -- we are not -- I say that it's not impacting our startup. The wells are not critical for our startup. Now you have to shake your head if you're disagreeing or agreeing. He's not doing that, he's agreeing.

So just to be clear, when the field starts up or well will come on stream immediately?

No, that I don't say immediately, but my point is that we will have more wells completed with a startup in Q3 2024 than what we would or have also based on initial plans in Q4 2023. That means that we have more -- and also what we plan in the PDO. So we should have more well capacity when we are starting up than what we have in the initial plans.

And we'll take the next question from the phone lines. It will be Anders Rosenlund from SEB.

You have targets of increasing your leverage going forward, it seems or leverage through the cycle. But during the second half of the year, you did raise long-term debt in the U.S. market and debt doesn't become cheap. Maybe oil companies shouldn't have that much debt. What's your thoughts on that, and may that change going forward for oil activities to be 0 debt businesses.

So let me say, yes, you are right. We went to the U.S. capital market that was because we had, let's say, overall a $3 billion bridge-to-bond facility, the expiration of this facility is November of this year. So we went with the first tranche in May, where we refinanced $500 million. And then we went now in November with placing another $2 billion. It's remaining so far, $500 million. That is also something we will need to address by the end of this year, but we have ample time to do it. You are right, it's not coming cheap at this point in time. The cost of financing has gone up, but that is what it is. It's the market that's valid, I guess, for everyone. Now I don't think it's our -- it's our target to be a 0 debt business. We think having that access is important and should be part of how we run the business. So -- and as I said, these goes hand-in-hand with having this 1.3x leverage target over the cycle.

Okay. And if I may have a follow-up, that would be good. And this is a quarterly presentation figure. It's the contract coverage that you have on gas for the first half of the year looks extremely strong. And it seems like you have increased the coverage on increasing prices for the first 3 quarters of 2023. Can you just talk a little bit around that and how you're able to strike that kind of deals and whether you'll be able to fix more on accretive levels going forward? We obviously see the market, but if could just share some thoughts and comments on it.

I can start on high level. And then also, of course, I would like to promote the deep-dive that is happening after lunch on this venue, Anders. You are right. And I talked to the gas-side strategy that we have, we are also having focus on fixed price month ahead and day ahead. And this is really due to hard work. And really, we have a fixed price that consists of a year ahead. And then on top of that, our team is working to place fixed price, selling the gas through tranches when we see opportunities and high prices in the market. And this has really materialized well, and that is what you see on that slide that we were showing and that is also why we are as you are saying, we are in a good position when it comes to the fixed pricing we are able to appraise $285 in Q1, $190 in Q2 and so on. And that aside, that it's really the good work we have in our commercial group that they are seeing opportunities. And then we are placing tranches in the market and finding a buyer. And of course, it helps when we have those exit points and those gas sales contracts available. Okay well -- yes you can add something.

Maybe just to give you, I think we have presented in the presentation that the target is to have, let's say, between 25% and 35% of this in terms of target. Just to let you know, we have -- so far, we have achieved, I think, 25% of this target. So it's still work in progress. But of course, this needs to be done at the right moment when the market is there. So it's a tough job that Ove and the team are doing.

Thank you very much. I'm afraid that's all we have time for today. We're going to take a 45-minute break before we'll commence with the deep-dive sessions. There will be more opportunities to ask questions during those. Thank you very much.