Vår Energi ASA (VAR) Earnings Call Transcript & Summary

Welcome to Vår Energi's conference call. [Operator Instructions] This call is being recorded. I'll now hand the call over to Ida. Please begin.

Good morning, everyone. It is our pleasure to welcome you to this webcast in relation to Vår Energi's acquisition of Neptune Energy's Norwegian oil and gas assets and operations. I will hand the word over to our CEO, Torger Rod; and CFO, Stefano Pujatti, who will take you through the details of the transaction. After the presentation, we will open up for Q&A. Over to you, Torger.

Thanks a lot, Ida, and good morning all and what an exciting morning. Today, I have to say, I'm really happy, and I'm very proud to announce that Vår Energi will acquire Neptune Energy Norge. This will strengthen our position as a leading E&P independent and is fully aligned with our strategy as presented at our capital market update in February. This acquisition will support growth and value creation, really accelerating that. It brings ESG leadership. It has strong cash flow and attractive distribution capability. I like to say it's our value, cash performance and capability accretive deal. It is really a perfect fit. So now Stefano will take us through the details of the transaction. Please, Stefano.

Thank you, Torger, and good morning, everyone. So today, 2 separate acquisitions with Neptune Energy Group were announced. Vår Energi will acquire Neptune Energy Norge, and Eni will purchase Neptune International business, excluding Norway and Germany. Important to mention that the 2 transactions are interconditional. Going more closely into our transaction, we will pay a cash consideration based on an agreed enterprise value of $2.275 billion. The transaction will be locked box from January 1, 2023, and there will be customary completion adjustments for cash, debt and working capital as at December 31, 2022. We have a strong liquidity position and plan to finance the acquisition through cash at hand and available credit facilities. The acquisition will not affect our over-the-cycle leverage target of 1.3%. Net debt on EBITDAX and our dividend policy remains firm and unchanged with respect to what has been communicated so far. I will come back with more details on this point later in the presentation. We have identified synergies of around $300 million. These are post-tax discounted, which will be realized over time. These are synergies tied to a robust development and exploration portfolio, improved asset utilization and commercial optimization, in particular on the gas sales strategy. We expect completion during first quarter of 2024. Be aware that this depends on customary regulatory approvals and that any transaction of Neptune Energy International business is also approved. Torger, back to you.

Thanks, Stefano. And today's transaction is an extension of the strategy that is the foundation of Vår Energi. And it is the continuation of more than 50 years of value equation on the NCS. We are accelerating our growth and value equation. Neptune Norway will strengthen our ability to deliver on all our strategic priorities. This includes a robust and diversified portfolio and our high value growth, our well balanced commodity mix, maintaining a material gas share as we deliver our development projects going forward, and even stronger partnership with Equinor, and it is also strengthening our organization. Let me elaborate on why we see this as the perfect fit. Neptune is bringing 12 producing assets, 3 operated and they are all located in Vår Energi's strategic hub areas. 7 is operated by Equinor. And as you know, Vår Energi's -- Equinor is Vår Energi's largest NCS partner. We also see a significant 2P reserves of 265 million barrels per end 2022 and our daily production of 67,000 barrels for Q1 2023, of which 62% is gas. Also, we see an attractive commodity mix and a very strategic ownership in this Snøhvit LNG amplifying our position in the Barents Sea area. Also, it is highly cash generative portfolio with low cost and limited near-term CapEx and low emissions. It comes with our team of about 300 employees plus 80 consultants of highly dedicated oil and gas professionals and about 104 of these are working offshore. Through this transaction, we are realizing our potential through growth and value creation, make a big step also on the path to USG leadership, and we are strengthening cash flow generation and future dividend capacity. So let's have a look on some of the key pro forma metrics showing that this is really a performance accretive deal. A combined Q1 2023 production of 281,000 barrels per day, which is up 31% versus Vår Energi alone. Also, we see a 25% increase in the 2P reserve base on the end 2022 numbers and a material increase in gas reserves. Also, we see a 33% reduction in carbon intensity on operated assets with the Duva field already electrified and more to come. And a clear contribution to lower production cost per barrel as we move towards our end 2025 target. So combined, this acquisition adds scale, diversification and longevity to our portfolio. Looking at the map, you will see that the acquired assets are complementary to Vår Energi's robust and diverse portfolio. We strengthened our position in all existing hub areas. Ownership in Snøhvit LNG and Melkøya amplify our leading position in the Barents Sea area. We get ownership in the new area with increased ownership in the Fenja license as well as equity in the Njord asset. In the North Sea, we add operatorship of Gjøa and Duva and increase our ownership in the Fram area, which we all know has a very high potential. And also Equinor is very clear on the potential in this area. And also going further south Gudrun is close to the Balder area and shares gas export infrastructure with Sleipner where we already are our partner. And here on this map, you can see it very clearly the perfect fit to our hub strategies. The asset portfolio with increased operatorship and ownership is fully aligned with our hub strategy. We see synergies we can realize across an attractive and combined development and exploration portfolio. We will focus on asset optimization. This includes infill drilling, but also looking at our portfolio and to high grade and potentially divest some noncore assets. And we further strengthen our cooperation with Equinor across a bigger portfolio, driving economy of scale even further. As you know, I like to say that you cannot talk about Vår Energi without talking about the Barents Sea and maybe vice versa. And we are really excited about our strengthened position in the Barents Sea. We get a 12% interest in the Snøhvit Field including the Melkøya LNG plant and adds this to our prospective area. This is important for several reasons. One, it will add significant gas reserves with our production extending towards 2050. Further, it is part -- as a part of this, we also become an owner in the only gas export infrastructure in the region. It is also highly complementary to our existing Barents Sea position in Goliat and Johan Castberg. It is an important strategic asset, bring us into the LNG market and also solidifying our position as a leading, reliable provider energy to Europe and the world markets. This is also a perfect fit when it comes to people. I'm really looking forward to when I can't wait to welcoming some 300 new employees to Vår Energi once the transaction is completed and we consolidate into one company. We have built an organization that is dynamic and flexible, and we will integrate the employees from Neptune in the existing structure. We have complementary skills, the same values and focus on health, safety, ESG and diversity. This is what I call capability accretive. This will provide flexibility, capacity and competence across all E&P disciplines and some example given, field development, drilling and well subsurface and exploration. We will actively apply best practice and knowledge. So again, we are very much looking forward to build on each other to develop Vår Energi for the future. So as you know, safety is about people. And together with high issue standard, it is a prerequisite for all we do. Vår Energi and Neptune Norway share the same focus on safety and ESG leadership through low carbon barrels and electrification. And the leading ESG performance is supporting Vår Energi's path to ESG leadership also going forward. We have a shared focus on safety and the ambition of being the safest operator. Neptune Norway has low emissions intensity of 2.4 kilos per barrel, well below the industry average and NCS average, supporting our ambition of lowering Scope 1 and 2 emissions by 50%, by 2030. Several electrifications projects are underway and operator Gjøa, as I already mentioned, is electrified for the very get-go, with Gudrun expected to be electrified by the end of this year. Both companies have very strong ESG credentials as demonstrated in the newest Sustainalytics rating, where both companies obtain medium risk and improved the score, actually placing us among the top oil and gas companies globally in this ranking. Both placed in the top 5 percentile out of 293 companies being the subject for the ESG ranking. That means actually that both companies is better than top 12 of these 293 companies. So together, we will enhance our ambition of being the safest operator and leading on ESG. I will then pass the word back to Stefano to talk about our value creation framework. So please, Stefano.

The transaction is consistent with Vår Energi shareholder value creation framework that we have been showing since the IPO and also our medium-term targets. Transaction is expected to be immediately accretive to earnings and CFFO per share as well as free cash flow positive given the efficient and highly cash-generative assets. The portfolio will benefit from low-cost barrels with an OpEx per barrel that is around 9. Development projects, Njord, Fenja and Bauge recently started production. This is ensuring that there is limited near-term growth CapEx, attractive early phase projects and exploration potential are also adding to future growth beyond the 2025. All in all, this is supportive of further strengthening future dividend capacity. Vår Energi maintains a strong financial position as we have shown in the Q1 investor presentation in April of this year, we have significant flexibility with $3.8 billion in available liquidity as of end of the first quarter. We will finance the transaction through available liquidity, including credit facility, so we will not request shareholders equity contribution to be able to execute the transaction. We maintained the over-the-cycle leverage ratio target of net debt on EBITDAX below 1.3. And as you can see in the pro forma of Q1 2023 post transaction, the leverage ratio is increasing very moderately by about [ 0.1, it goes from 0.3 to 0.4 ]. As mentioned, we will continue to be in a robust financial position, underpinned by a solid debt financing structure with well diversified maturities and currencies. Before handing over to Torger for his final remarks, we want to reiterate that there are no changes to our dividend policy following the transaction. This means that approximately 30% of the cash flow from operation after tax dividend distribution is expected for 2023. From 2024 onwards, the company will maintain its attractive dividend policy of distributing in a range between 20% to 30% of the cash flow from operations after tax. The transaction is expected to strengthen future dividend capacity post closing, given the highly generative cash flow assets. Torger, the floor is yours for concluding remarks.

Thanks, Stefano. And then to conclude, as you understand, we are thrilled and excited about this deal. And all in all, Neptune Norway is a perfect fit for Vår Energi. We will strengthen our position as a leading E&P independent on NCS. The people and assets from Neptune will support us in delivering our medium targets and our long-term ambitions, while maintaining as Stefano said, a strong balance sheet and attractive distributions. It is a value accretive, a cash-accretive and a performance accretive deal. We feel that this is really a walk to talk deal. We are delivering on our equity story as communicated as part of IPO and in the CMU. So thank you all for listening in, and now we are opening up for questions. Thanks a lot.

[Operator Instructions] The first question will be from the line of James Hosie from Barclays.

Congratulations on the announcement. I guess just if we could start with just a question on the deal price. Obviously, you've gone through a period of agreeing a fair price or upstream assets, particularly involving European gas has been quite complicated by the high and volatile prices. So I was wondering if you could quantify what you see as the breakeven oil and gas prices for this transaction?

Yes. First and foremost, I will say that we think this is a very value-accretive deal as I mentioned. And Also, you know the competitive landscape in Norway, which is very, let's say, tough and hard. And here, doing the way we have been doing it, we feel that we have been what say, been able to acquire Neptune Norway to the -- what are the international price and not the higher Norwegian price. So we are very happy and pleased with reaching the deal and also seeing the value activeness and the cash accretiveness in this deal. And I don't want to go into the details of the various assumptions that have been applying. And Stefano, I'm sure Stefano is keen to add some flavor to this. So please, Stefano.

Yes. And yes, James, you're right. There is a lot of volatility, but we are still -- we still believe that the fundamentals in terms of the dynamics of the macro we have been seeing so far are still there. And we still see gas prices despite the volatility. This will be quite sustained at least until '25, '26 where then potentially more LNG will come to the market. And let me also say this is a deal for the long term. So despite the weather and the volatility, we are here to invest for the long term. in terms of assumptions and breakeven and prices, we do not comment on the assumptions used, as you can expect. We believe that this is a value-accretive deal as Torger mentioned. Let me also maybe add a general comment. The price assumptions are revised periodically and they align quite well with the current market observations and the other recent and ongoing M&A transactions.

And then, of course, listening to Stefano, I'm keen to add also because this is really what they're bringing us solid commodity mix to Vår Energi. And as Stefano said, we strongly also see, let's say, the -- it was the importance of secure and reliable energy to Europe. And here, of course, gas will have a very important role in the long run. So -- and also would say, being part of the transition energy. So a very good fit, also bringing the commodity mix going forward to a very good level. We are talking about a 60-40 oil and gas mix by when we have the high-value growth in pace in 2025. So yes, strengthening our commodity.

Okay. Maybe just kind of sort of follow-up then. Is it fair to say that the deal is going to be free cash flow accretive in 2024 or '25, even at prices substantially below current forward curve. Is that a fair assumption to make?

Yes. As Stefano explained, we see this as a -- both our value accretive and a cash accretive deal. And also with Neptune, as explained by Stefano, is that they have a low CapEx in front of them and a solid production. So of course, this will give us significant resilience in our cash flow generation going forward already from the closing of the deal.

The next question will be from the line of Matthew Smith from Bank of America.

Congratulations on the deal. A couple of questions from me, please, would be, I appreciate you probably can't tell us what the cash outlay will be on closing given the uncertainty over time, and then that would sort of give us the -- would require free cash flow forecast. So I was just wondering if you could clarify what the cash outlay would be if the deal were to have sort of closed on the 1st of Jan 2023? Just wondered what the net cash flow or net debt position is of the business, please? I'll come back on my second question, perhaps.

Stefano, do you want to reflect a little bit on Matthew's question?

Yes, sure. Let me say, Matt, the point is, as you said, the transaction has an effect on 1st January 2023, and we have a lockbox principle. So the price that we have announced, USD 2.275 billion is the enterprise value. Then there will be the customary adjustments that we were discussing about. And these are mainly, let me say, the 3 main items really are the taxes. These are the taxes related to 2022 profits. And also, the other element is the cash. And the third element that is going to, let's say, correct, this is the working capital. So these 3 elements will adjust the starting point. And then from there on, as you can expect, having a lockbox principle, all the cash flows that would be generated from first January 2023 until the time where we will go to completion. And we have said that we expect to go to completion of first quarter of 2024. So this means that potentially, you might have 15 months or 12 months, whatever it will be, where the cash generation that will be done from 1st January 2023 will be, let's say, taken by the buyer, by us. So will actually contribute to reduce the amount that we were mentioning before.

Sure. Understood. Okay. So just following up then, sorry, are you able to just confirm me the way if there's any sort of significant net cash or net debt within the Norwegian business sort of as of the 1st of Jan 2023? I suppose that's just what I'm trying to get to the bottom of, if that's possible?

Yes. No, absolutely good question. We -- I can confirm we are not taking over any debt. The debt will be paid by the seller at completion. So we're not acquiring any sort of debt from the -- in the transaction.

Perfect. Okay. Well, that's very clear. And then second question is that's okay, following up there on a separate topic would be around the gas sales strategy. And just confirming whether this sort of transaction changes your overall sort of gas sales strategy that you've laid out? And just I guess how you sort of see synergies from bringing this into the portfolio?

Yes. No, thanks. No, we are not changing our gas sale strategy. I think this is one of the areas where we see significant potential and synergies because, as you know, we have a very good gas sale strategies in Vår Energi and now, of course, bringing the volumes in from Neptune will give us even more scale and even more, let's say, running room and potentials to create value. So we are going to apply our gas sales strategy, our gas sales agreements, our ability to use indexes and exit points to create value and now with a bigger value -- sorry, bigger volume, which we should also bring bigger value. So we are really excited about that. So we will utilize our gas sales strategies, our contracts, our tools or know-how and competence to create even more value with the volumes we are getting as part of this deal. Stefano, something to add?

Yes. And maybe just worth adding the fact that as far as instead, the LNG is concerned, Neptune has secured a long-term offtake for the entitlement that they have on the Snøhvit. So we plan to build on the market position that Neptune has developed over the years.

The next question will be from the line of Sasikanth Chilukuru from Morgan Stanley.

I had a couple, please. The first one was on production. I see you have reiterated the greater than 350,000 barrels per day production by 2025. I was just wondering why that 350 figure was not necessarily moved higher. Just wanted to check your thoughts on that. And also if you could comment on the production profile of Neptune Norway assets, that would be helpful as well.

Yes, I can start a bit there. And yes, we have said and we are still saying that we are going to produce more than 350,000 barrels by end 2025. And of course, that will be the case. And of course, we will have a higher production in 2025 and beyond following this deal than what we would have without. And we will spend some more time to set a new target and a new ambition. And -- but of course, it will be higher than what we have as of today. And -- but also, as we mentioned in the presentation, we might be looking into our portfolio upgrade, meaning that we are assessing to reduce or remove some noncore assets and these kind of things, which also might impact that. So that is why we would like to take some more time to adjust our targets and our ambitions. But yes, it will be higher than the above 350 going forward.

That sounds great.

And then I think that goes for the production profiles as well. Here, we are bringing longevity assets. We have talked about Snøhvit already. We have talked about Njord, which is already, what say upgraded and have a significant amount of tiebacks and prospects in the area. Same goes with Gjøa exciting discoveries done by Neptune last couple of years in that area. Of course, we are also almost -- were just as excited as Equinor when it comes to Fram, where we know are increasing our equities, and you all know the story in that area when it comes to both production and early phase projects and so on so. So here we are building the longevity and sustainability of production here. So that is really what makes us really pleased and happy and excited about this.

Great. The second was on capital allocation. You have highlighted there is limited near-term growth CapEx. I was just wondering if you could quantify the additional CapEx that war will take on 2024 onwards? Also, given that you're adding substantial debt at completion, as reducing this overall debt levels moved up the pecking order in terms of the company's use of cash proceeds. I asked this because one has so far shown great propensity to returning excess cash flow generated as dividends. I was just wondering how we should think about this now?

Yes. If I take extreme high level here, and then Stefano fills me in. Number one, there is no changes for 2023, given the timing of this event. And two, as Stefano explained in the presentation, we see that this is a cash accretive deal, meaning that it adds robustness and strength to our -- also our ability to distribute to our shareholders. And that is also reflecting what we see of CapEx near term here. And Stefano, something you will elaborate on in this regard.

Yes. No, I think, of course, we will need to be a little bit more precise at a later stage on the figures. But as a rule of thumb, I think the CapEx of Neptune are roughly 10% of the CapEx that we have in Vår Energi. So as Torger is saying, is not CapEx intensive. So that is a perfect fit where you have assets that are cash generative without adding -- on the CapEx burden. In terms of capital allocation, the capital allocation in general remains unchanged. So we have the big investment. As you know, we will be quiet in 2024. Next year, we have the 3 main big projects coming on stream. We will be also adding cash generation. And so the dividend policy remains unchanged. I would say, being based on CFFO and being this deal, CFFO accretive then you might be expecting even with the, let's say, having changed the -- even if we haven't changed the dividend policy being a percentage of higher CFFO you should expect an accretive dividend. And so yes, so everything remains unchanged, and this is, I think, the beauty of the deal where we actually are just strengthening our size, our production, our hub and actually improving the -- even improving the metrics. So yes.

Yes. So just quickly a bit -- so what we've also shown on the presentation is that we are increasing the pro forma. We are increasing the production by 31%. And as Stefano said, then increasing the CapEx by 10%. So then you see the good balance here and actually increasing the gap. And that is also, as Stefano said, is happening with the company. Now we are reducing our CapEx because projects are getting completed. And that has been the case for Neptune already since they completed the main investments actually this year when Fenja and Njord and this products we are starting up. So a very good combination in that as well that we are increasing the production, increasing the cash generation and then having a reduction in the CapEx expenditures.

The next question will be from the line of Teodor Nilsen from SB1 Markets.

Congrats on accretive deal. Three questions from me. We all know that Neptune has been in play for quite a while. Just wonder how your thoughts are around acquiring the entire Neptune portfolio not only to Norway. Second question is on synergies. Just to confirm the $300 million is that a post-tax number? And also on that, what more specifically can you say on in those $300 million? Final question is on gas and hedging, we know that your debt ratio will come slightly after deal, of course, since you -- only use debt in a deal? Should we assume that you maybe will hedge up slightly higher portion of gas going forward [indiscernible] over the past few quarters? Or should you just expect it to remain then the same?

Thanks a lot, Teodor, both for your questions and for your congratulations. It's appreciated. I will start, and I guess here -- just to be clear, Teodor, it is 2 deals. We have agreed to acquire Neptune Norway, and we have negotiated our [indiscernible]. And then as also Stefano explained in the transaction summary, Eni has agreed through their negotiation and spot to acquire what say, -- what we call the rest of the world, the assets there. So it is separate and we are very, I would say, happy and thrilled about acquiring the Neptune Norway deal. And we really feel, as you understood during the presentation, this is a topic on NCS, really high quality, both asset-wise, prospect-wise and people-wise, organization-wise, so really happy and good about that. Then I'll elaborate a little bit on the synergies. As we also said in the presentation, in the area of USD 300 million post-tax and PV based. And really the buckets we are putting this in, as I explained a bit already. It's the portfolio and the developments, this -- the hub synergies, complementary location of assets. And we see the prospects around some key areas like -- just to give you some examples, Teodor, Gjøa then Njord also building further on economy of scale. We see the effect of that. We have, for instance, our collaboration with Equinor in the Barents and in the Balder/Grane area. Of course, our plan is now to expand this further going to assets, sharing assets, helicopter bases vessels. And of course, also a significant early phase projects and prospects, which might -- will give us synergies compared to our own portfolio. Then also related to exploration, I mentioned the solid track record of Neptune Norway, which, of course, coincide very well with a track record of Vår Energi, and we'll what say adding both more prospects and ability to drive synergies there. And then also, we have already talked to the gas sales strategy, additional volumes, increased flexibility both when it comes to oil on the additional crude oil and the offtakes there. The gas I talked to already, and Stefano mentioned the LNG. So this is there and then on top of that, I know the main parts Teodor, but also in addition to that comes a very complementary portfolio with strategic fit building even stronger position in the Barents and also let's say, combining the capability of 2 organizations. So that was top of my mind on #1 and 2. Do you want to add something on this Stefano and maybe reflect a bit on the question related to the hedging from Teodor?

Yes, sure, Torger. I can take the point on hedging. And let me say the Neptune has already some hedging in place, which I believe derives from the, let's say, requirements they have in place with RBL, and I expect because until we go to completion, we will still be acting as 2 independent companies. So I will also expect that until we go to completion, this will continue on a quarterly basis as they have done in the past. When we will go to completion, we will need to see what to do at that point in time with the instrument or the hedging that are in place within the company at that point in time and take an evaluation. Let's say -- let me add. Going forward, we are increasing both the oil and the gas production. So overall, the expectation is that these additional quantities will be part of our hedging policy, let me say, of our conservative hedging policies that Vår Energi has adopted so far.

Okay. And just a few follow-ups there. On Neptune, did you look into the Rest of World portfolio for Neptune? And on synergies as far as I understand on your answer Torger, those $300 million includes both cost synergies and income synergies, right?

Yes. If I answer to the last one. I don't really -- I'm not totally certain if I understood the first question again, Teodor. But predominantly, yes, the answer is yes to the second question. But predominantly, we see a solid basis for increased income here. But of course, also driving costs down, and I talked about the production cost per barrel that here, we will see what we get in a very competitive portfolio. And we see increased, let's say, running room to work on our improvement program, economy of scale to bring that even further down both for the current Vår Energi portfolio, but also for the combined Vår and Neptune portfolio. So we are anyway pursuing both the income side, and we see -- and on the cost side, but we see a significant opportunity on the income side, given the gas, given the portfolio, given the prospects we have. And then the first was the total deal. Can you repeat, I heard you a little bit low there.

I'm just curious about how you -- or if you consider to buy anything from Neptune that is outside Norway.

Okay. Sorry. Yes. No, to be clear, Vår Energi, we are a pure-play E&P company, focusing on the Norwegian Continental shelf. That is low emission, high-value barrels.

The next question will be from the line of John Olesen from ABG.

Congrats with the deal. Could you talk a little bit about the exploration potential in the Neptune portfolio? For instance, how many wells will it be in 2023 and 2024? And maybe elaborate a little bit on the potential of these wells? Are there any high-impact wells in the portfolio, for instance, please?

Yes. I will not be that concrete and also just to be specific on the '23. As Stefano explained when it comes to the transaction summory, we don't expect any closing before into the Q1 of 2024. So for '23, I have no -- I was saying no comments and not any big insights there. When it comes to -- and I will be a little bit generic, no, because this is, of course, things that we will come back to when we have been also digesting it further. But as I said, it's not hidden fact that Neptune have a solid track record. They have been part of significant discoveries. The Blasto, the Dugong, Echino South, but also when it comes to their own areas closed by -- in the area of Duva which is Hamlet and I think it's Othello. And also there, there is further ILX potential there. So that -- so -- they have prospects, but we have to look into it and digested what it means for the, let's say, overall combined portfolio post '24, John and also when it comes to the high risk high rewards prospects as such.

But the exploration wells taking place in '23, that's your upside, however, of course, just to confirm that.

Yes. exactly. And we have talked -- we have discussed this before, and you're right. The '23 is about '23 is, so to speak, and as we have communicated before which is also rather exciting.

And maybe it -- just to add probably an important point. Yes, it will be ours. Furthermore, let me add, there are no contingent structures in the deal. So related to discoveries obtaining FIDs or earn-out on development in the macro scenarios. So if from 2023, upside will materialize, they are entirely for the benefit of the buyer.

Exactly. And then sometimes when we see M&A in the EP space, there are significant transfer fees related to seismics. Is there any of this in this transaction? Significant transfer fees related to thinking on the multiclient portfolio of Neptune?

To my knowledge, John, it isn't. Not over knowledge. It's it's not only my knowledge, it's our knowledge.

Okay. And then my final question is regarding dividend. You announced a Q2 dividend of $270 million, which is flat compared to Q1. Is it possible to talk a little bit about the second half dividend? For instance, if oil and gas prices stay where they're now, should we expect [ 270 ] for Q3 and Q4 as well? Last year, of course, you have upgraded dividends during the year.

John, you know the drill a little bit. And if I can talk a little bit and Stefano can think, so to speak. But the drill a little bit here is that there won't be long. There is -- we have a -- I think we have our upgrade, the quarterly update, the 25th of July. So -- and then the drill is as we will then give our forecast for the next quarter, meaning that we will then walk into the second half of the year and then give our indication what that believe. So at least -- so we haven't any way, prepared any update and any forecast on the dividend for Q3 and so on at this stage or as of today. But Stefano, I guess we can have confirmed our thoughts earlier. So Stefano, anything?

No, absolutely. Sorry, but you will need to wait for July. As Torger mentioned, let me say that in terms of dividend, 2023 will not be impacted because as we said, we expect the transaction to go to completion in first quarter of 2024. So 2023, we expect to be untouched by the transaction. So -- but we will, let's say, elaborate more in the second quarter presentation.

So summarize, John, what we said last time we met, so to speak, during the quarter 1 that is still valid.

As there are no more questions in this call. I'll now hand it over to Ida for any written questions.

Thank you. The next question is from Vidar Lyngvær at Danske Bank. There are 3 questions. Could you comment on the tax position of Neptune Norway? The second one is, what is your funding cost of the acquisition? And the third one is related to production profile post Q1 2023, for example, year-end '23 and year-end '24 production. Thank you.

I feel that these 2 first questions, at least Stefano is yours, the tax position and the funding cost.

Yes. Let me say, in terms of tax, let me say that in terms of tax, the tax is expected to be, let's say, in the deal, the tax related to 2022 profit will not be part of our, let's say, of our consideration. So we'll be on the seller. Even if -- so even if there are adjustments in the course of the year, this will still be adjusted. And then from 2023 let's say, as we are taking the cash flow, the tax component instead would be on for energy. In terms of funding costs, I would say that the funding cost is the one that you know we have bonds out in the market that is the debt structure of the company, I think, is known. Yes, then I don't know, in terms of production 2023, Torger?

Yes. 2023, I think we have been clear on, and we had -- where we are saying here that we -- and we will, of course, revert to that as part of the Q2 update as well, but we have been in a -- I'm talking about Vår Energi here because Neptune will not be bought of us in '23. So here we are maintaining our guidance, as we have been said before. And then when it comes to beyond, I've already mentioned that we will come back to -- we had a question from Morgan Stanley. I think also when it comes to our new ambition and our new targets. We'll come back to that. And what we see -- we said in our press release that Neptune is producing 67,000-ish barrels there. And that is also what we expect going forward as incremental on Neptune. So I think that is what we want to say at this stage.

Next 2 questions from Daniel Stenslet at Arctic. In addition to the 265 million barrels in 2P. How many 2C resources will you acquire in the deal? And can you provide a breakdown of the $300 million of cost synergies?

Yes. Starting on the cost synergies, maybe we have given it in 3 buckets. And I won't, at this stage, be more granular than that. And this is something that we are working to really say, yes, bring forward. But we are confident in these synergies and see great opportunities in this deal. And also then the breakdown is as we mentioned a few times before today. So I don't have to repeat that.

Good. Next question is related to the Barents Sea. How do you see prospects for large-scale gas projects and infrastructure in the Barents Sea? And does this deal enhance your ability to make progress on that?

We see great prosperity and opportunities in the Barents Sea. That -- and we have communicated that. We communicated that on the CMU and also when we have the ability to talk about both the Barents, we do that. And this is not necessarily changing that view, but it is amplifying that view. And of course, it is really important for us that we know are part of all the important assets and the current assets in the Barents with Goliat, Castberg and Snøhvit. Snøhvit have proven historically wise to be a very good area with a steady flow of both prospects and new projects and adding lifetime and production at Snøhvit and we expect that to be the case. Then when it comes to the prospects, and there we have been talking about before, we are really excited about the prospects and opportunities in the Barents. And for me, it is really what's say, tied to 4 and now maybe we have to add 5 items. One is the ILX opportunities around Goliat, which was let's say, [indiscernible] plus the discovery we did in February. Two, it is, of course, the ILX and a standard area of Johan Castberg. Three, it was the gas and the [indiscernible] discovery, we did just before Christmas, which is what we call the FinMark Plateau or the FinMark platform, which could be new and that's a gas play and a new area where we get better, let's say, insight and understanding. And then the fourth is the Palo Shield play for the west, which we were going to have an exploration well called Venus to be spread either late this year or early next year. And then we then have the Snøhvit, and Snøhvit area as well, and we know there is several fields there with a nearby potential. So really exciting both on the production side, the operations side and also on the prospect side from our point of view.

A question for Stefano. Do you intend to issue bonds to enhance your liquidity position as you are paying this with available cash? What sort of liquidity position would you like to maintain?

Yes. Thank you for the question. Yes, let me say in terms of capital structure, as we mentioned, no equity component required, let's say, within the available liquidity of the $3.8 billion that we mentioned and the cash flow generation that the company has, we can fully support the investments that we have in the plan. The dividend policy and also this transaction. Now what we are planning to -- out of the $3.8 billion at the end of Q1, a $3 billion where, let's say, RCF facilities. Now what we will be looking into is really to have -- and what we want to achieve is to have well-diversified debt instrument with different maturities, different currencies and also being able to access a different pool of that investor. So that is more, let's say, something that we will be looking into before we go to completion with the transaction. But overall, let me say, the liquidity available that we have is providing plus the cash flow generation is providing quite good headroom to accommodate all the needs improving the transaction.

Final 2 questions from [indiscernible] at ABG. Neptune has been rumored to be for sale for a while. Was there a lot of competition for the acquisition? And secondly, are there any assets in the Neptune portfolio that is not a perfect fit and that could potentially be sold?

No, thanks for the question. When it comes to what is the competitive landscape, I think you should -- that's more a question for Neptune than for us. We are really happy that we are the one that has acquired Neptune Norway, and we are happy with say, the terms of the transaction. So that's, I think, my -- our answer on that topic. Now when it comes to the asset side, I said that earlier, we will do an overall assessment here when it comes to potential noncore assets and then let's say, potentially do our portfolio upgrade based on that. So I don't want to go into the specifics at this stage of time. But as I said, we will do an overall assessment, both when it comes to what we have in Vår Energi as of today and what we will have in Vår Energi as of Q1 2024.

Thank you very much. That concludes the Q&A, and I will hand it over to the operator to conclude the call. Thank you.

Thank you. As we have no more questions, I will now conclude the call. Thank you for participating.