Vår Energi ASA ($VAR)

Hi, everyone, and welcome to the Vår Energi's Q1 Presentation of 2026. Today's call is being recorded. [Operator Instructions] I would like to introduce Head of IR, Ida Marie Fjellheim. Ida, please go ahead.

Thank you, and good morning to everyone. A warm welcome to Vår Energi's First Quarter 2026 Results Presentation. The presentation today will be held by our CEO, Nick Walker; and our CFO, Carlo Santopadre. Nick and Carlo will go through the presentation. And then afterwards, we will open up for Q&A. I will now hand the word over to Nick.

Well, thank you, Ida, and good morning to you all, and thank you for joining us today for our first quarter 2026 results presentation. I'm pleased to report we delivered as planned in the quarter with record high production and strong financial results, and we're strongly leveraged to the current high price environment. Our operations have not been disrupted by the war in the Middle East, demonstrating the strategic importance of Norway as a secure and responsible supplier of energy to Europe. We're continuing to transform as a company to harness the entrepreneurial energy of our team, implementing technology to improve outcomes and increasing the pace of value creation. We're showing further progress in incrementally improving the outlook for the company for increased resilience while maintaining flexibility, which I think is key in supporting investments through the cycles. With our high-quality portfolio of high-return early-phase projects, we are targeting to deliver long-term production above 400,000 barrels per day, which will sustain high shareholder returns over time. And underpinned by strong performance and cash flow generation, the company continues to deliver attractive shareholder returns. So now let us look at the highlights for the quarter. As planned, we delivered record high production in the quarter of 406,000 barrels per day. This is supported by strong performance from our operated assets with 97% production efficiency in the quarter. And all of the new projects we started up during last year are producing according to plan. We delivered strong financial performance with significant CFFO post tax in the quarter of $1.1 billion. Available liquidity is stable at $3.5 billion, and our leverage ratio was reduced to 0.7x at quarter end. And the company is well positioned in volatile markets. The war in the Middle East, I think, amplifies the strategic importance of Norway as a secure, reliable and responsible supplier of energy to Europe. We are leveraged to the high prices and we will see the North Sea premium prices reflected in the second quarter, with crude liftings priced in the first weeks of April averaging $130 per barrel. We've used this opportunity to lock in high gas prices for a portion of our volumes in the second and third quarters. We continue to unlock long-term future value from our high-quality portfolio, 2 projects were sanctioned in the quarter, which developed around 80 million barrels of net reserves, and we made 3 commercial exploration discoveries. Lastly, we continue to provide attractive long-term shareholder returns. We confirm a dividend distribution for the first quarter of $300 million, which means we pay stable or growing dividends for the last 17 quarters, and we're providing dividend guidance of $300 million for the second quarter. Delivering attractive and sustainable dividends over the cycles is a top priority of management. Should prices remain elevated through the rest of the year, we'll make a decision at year-end for an extraordinary distribution of excess cash to our shareholders. So looking at some of the details. Vår Energi as a leading pure-play E&P. And in the quarter, I see we've now grown to the second largest oil and gas producer in Norway. We have a high-quality, diversified asset base in all areas of the NCS, with interest in around 50% of all producing fields and infrastructure and a large exploration footprint. This is a opportunity-rich portfolio that will allow us to deliver higher production of value for longer. We also have a balanced commodity mix with gas being around 1/3 of our production volumes, making us one of the largest gas exporters from Norway. It also means we're leveraged to the current high gas prices in Europe, which I think are likely to extend beyond the end of the hostilities in the Middle East. In the first quarter, we delivered record high production of 406,000 barrels of oil equivalent per day, which is in line with guidance. All of the new projects we started up last year are producing according to plan. We continue with excellent performance on our operated assets with high production efficiency. And you can see that the second and third quarters will be impacted by some planned turnarounds. However, the annual average reduction is small at around 6,000 barrels per day. During this year, we will start up 4 new projects. Balder Phase VI, Jotun FPSO debottlenecking, Eldfisk North and the King Development. And we have a large portfolio of 60 new development and infill wells that will start up during the year. So far, we're on track with 11 new wells in production. We've had a strong start to the year and we're on target to deliver annual guidance of 390,000 to 410,000 barrels per day. Looking now at our operational performance. You can see that we'll continue to incrementally improve our outcomes. We've seen strong improvement in safety performance in the quarter across a range of metrics. And so far this year, we've had 0 incidents with serious potential. I think this takes hard work every day. We continue our trend of reducing carbon emissions intensity, and we're ranked in the top 15% of the industry globally, and our methane emissions continue at the near 0 level. We target to reduce emissions further from 3 main levers: electrification with power from shore, portfolio optimization and energy management. When the ongoing Njord and Snøhvit electrification projects are complete, approximately 40% of the company's production will be produced with power from shore. Together with Equinor, we have decided to terminate further work to develop an area solution for the electrification of the Balder Grane area with power from shore due to challenging economics. Together with Equinor and the license partnership, we'll determine how best to mature the development of the remaining resources in the area. In addition to emissions reductions, Vår Energi aims to become carbon neutral in our net equity operational emissions by 2030 through removals in the voluntary carbon market. We continue to be recognized for our ESG leadership and are ranked by both Sustainalytics and S&P Global in the top 15% of the global oil and gas industry. For production efficiency on our operated assets, you can see we have a strong improving trend and we achieved a high 97% in the first quarter ahead of target. On production costs, we achieved $10.4 per barrel in the first quarter. This is slightly higher than target due to the impact of the strengthening Norwegian krone. And going forward, we expect to maintain production costs at around $10 long term. I think these elements go hand-in-hand, strong safety and environmental focus drives good operational discipline, and we aim to deliver continuous improvement, which over time, creates significant value. Vår Energi has an amazing portfolio, which is opportunity rich, where we have a track record of continuously growing reserves and resources organically. You can see our 2P reserves stand at 1.3 billion barrels, which underpins our current production levels, but we are much more than that. We have 2C contingent resources of around 900 million barrels. These resources are undeveloped. And we're moving forward over 30 early phase projects to develop around 2/3 of these volumes. We also have an exciting exploration portfolio of around 1 billion barrels of net risk resources. So putting this together, we have around 3 billion barrels of resource potential with 6% of this yet to be developed. Developing this opportunity is how we will deliver higher production for longer and meet our target of over 400,000 barrels per day. The levers that will drive this are, firstly, through maximizing recovery from our high-quality producing assets; secondly, delivering on our portfolio over 15 projects in execution. Thirdly, we're progressing over 30 early phase projects towards sanction. And finally, we're unlocking more value with our focused exploration program that is adding new projects all the time. With this program, we are progressing activity to create value from around 70% of the undeveloped resource upside in our portfolio. And on top of this, we continue to take an opportunistic approach to further M&A, where there is a strategic fit and we can create value. Looking now at how we will deliver this. We have 15 high-value projects in execution. These are all subsea tiebacks or facility enhancement projects. You can see developing around 290 million barrels net with strong economics, where the average breakeven is around $30 per barrel and rates of return are over 30%. And because these projects all leverage existing facilities, the average unit cost is very low at around $3 per barrel. All of these projects are progressing on track as communicated. And during the quarter, we sanctioned 2 new projects: Goliat Gas Export, with more on that in a moment, and the King Development. The first phase of the King Development is an extended reach well from the Ringhorne platform. The well is developing 2P reserves around 9 million barrels gross and with a low breakeven of below $15 a barrel. The well is currently drilling as expected to start up around midyear. Success will drive further King Development phases. And last week, we announced the sanction of the Goliat Gas Export project. This value-creating project secures the lifetime of the Goliat assets in the Barents Sea to around 2050 and unlocks future area developments. The project is increasing oil production from the Goliat field and allows the gas reserves that are currently being reinjected to be exported by the Hammerfest LNG plant and the gas banking arrangement and to be sold when processing capacity is available. The project comprises a 12-kilometer gas export line to connect the Goliat FPSO to the Snøhvit pipeline and is expected to come on stream in the third quarter of 2029. And this project is developing 2P reserves of 112 million barrels of oil equivalent, of which around 15% is oil. The project has robust economics with a breakeven in line with the company's target and provides significant upside potential from optimization of the Goliat operations. The project is also an enabler for the Goliat Ridge development where the resource potential is over 200 million barrels. We are working at pace to move -- to also move that project towards sanction. And we have a large portfolio of over 30 high-return early-phase projects that we are moving towards sanction. All our subsea tiebacks to existing infrastructure or facilities enhancement projects with low cost, short time to market and high returns, with average breakevens of around $35 per barrel and rates of return above 25%. We've built significant momentum with our subsea project factory approach and an entrepreneurial focus on value creation. We sanctioned 10 projects in 2025 and have sanctioned a further 2 projects so far this year. And you can see that we're working towards a total of 13 possible sanctions in 2026. And so I'm confident we'll deliver on our guidance of 8 project sanctions in the year. During the quarter, we secured a contract for a high-specification harsh environment drilling rig to allow us to do some of the more complex wells we are planning, and we have the people, the equipment and the contracts in place to deliver the planned project program. Delivering on this project portfolio will develop around 500 million barrels of contingent resources and we'll achieve our target of over 400,000 barrels per day long term. And we're continuing to add new projects that will further derisk the potential of our exciting portfolio. Turning now to our exploration program, where we have a leading track record. Since 2021, we've added 290 million barrels of contingent resources at a success rate of 45%, and over 70% of these volumes are already in production or in the development process. We've continued this success this year with 3 commercial infrastructure-led discoveries out of 6 wells drilled so far in the year. These discoveries are already being turned into value. Frida Kahlo will start production through the Sleipner this quarter. And Omega Sør is expected to sanction as a tieback to Snorre by year-end. Most of our high-impact exploration program in 2026 is in the second half of the year. We have 7 wells remaining with key prospects to be drilled in the Balder, Johan and Asgard areas. Looking ahead, we have a significant exploration position in all areas of the NCS. And we're already lining up an exciting program for 2027 and 2028 with some important high-impact wells. That rounds off my operational update, and I'll now hand over to Carlo to review the financials. Thank you very much.

Thank you, Nick, and good morning, everyone. In the first quarter of 2026, we delivered strong financial results on the back of record high production and robust realized prices in the quarter. Our average realized price for the quarter was $77 per BOE, and we generated the material cash flow from operations after tax of $1.1 billion. We continue to have a strong financial position with $3.5 billion in available liquidity. The leverage ratio stands at 0.7x, further reduced from previous quarter level. Free cash flow in the quarter was $475 million, more than sufficient to cover Q1 dividends. We continue to deliver attractive returns to our shareholders. We confirm the dividend level of $300 million for Q1 and also guide the same level for Q2. Our long-term dividend policy of 25% to 30% of CFFO after tax over the cycles remains intact. We're generating nearly $2.7 billion in revenues in the quarter, a 45% increase from the same quarter last year, driven by substantial production increase, where less than average of $77 per barrel in the quarter with average crude price at par with Brent for the quarter at approximately $80 per barrel. Realized gas price of USD 73 per BOE was approximately $7 below the average spot market reference price. This was due to a combination of volumes sold year ahead, LNG cargoes and volumes sold with month ahead indexation in a rising market, whereas the impact will be the opposite in a descending market. We continue to have a robust gas sales strategy with access to several markets while retaining the flexibility in the contracts to decide the split between month ahead, day ahead and fixed price. More specifically, on our oil sales, we ended the quarter in an underlift position. However, most of this has been reversed in April with a significant pace upside, and timing has turned out to be good as we have realized an average price of approximately $130 per barrel for the 3 million barrels priced until now in the month. Since the beginning of the year, price volatility has been high and increased further since the beginning of the conflict in the Middle East. In this context, we have seen material premium differentials to Brent for our oil and those premiums will be reflected in our next quarter sales. The company has carefully evaluated opportunities to hedge a portion of its oil and gas production with financial instruments, aiming to mitigate downside risk while preserving material exposure to potential market upsides. For the remainder of 2026, 23% of post-tax adjusted oil production is protected with an average floor of $64 per barrel and sharing full exposure to market upside. Maximum potential loss associated with hedging strategy in place is approximately $15 million. In addition, approximately 8% of the third and fourth quarter 2026 and 6% of the first quarter 2027 gas production has been hedged using collar options, assuring a floor at around $85 per BOE with a cap at around $280 per BOE. Considering both our fixed price gas sales and our gas hedging, approximately 30% of our gas sales for the remainder of the year have been sold with a forward price at around $84 per BOE. Vår Energi generated material cash flow in the first quarter. Cash flow from operations after tax in the quarter was $1.1 billion, a decrease from the previous quarter, mainly due to impact of working capital movements, offset by lower tax payments in the first quarter. CapEx for the quarter, including exploration, was $553 million, lower than the previous quarter. The 2026 development CapEx guidance is unchanged, and we expect to spend between $2.5 billion to $2.7 billion for the full year. Our liquidity and financial position continued to be solid with a healthy cash balance stable at around $700 million and total available liquidity of $3.5 billion. We have a diversified long-term capital structure with an average debt maturity of around 5 years, which aligns with the strategic needs of the business. Looking at the development of our cash position in the quarter. We generated above $2.2 billion before tax and working capital movements, up 20% compared to the previous quarter, mostly driven by higher prices and higher volumes. The effect of the price spike in March will positively impact second quarter cash flow. Increase of trade receivable for March sales contributed to working capital negative impact in the quarter of $525 million. These higher receivables will be collected in Q2. Tax paid amounted to $640 million, down compared to the previous quarter as a result of 2 cash payments instead of 3. We had a cash outflow of $582 million in investments into our high-value project portfolio. Also, in February, we distributed as planned $300 million in dividends related to our Q4 2025 results. The company has a strong financial position. During the quarter, we have reduced our leverage ratio net interest-bearing debt on EBITDAX to 0.7, down from 0.8 in the previous quarter and continues to be well below our over-the-cycle target of below 1.3. Our debt portfolio is well diversified. We have a Baa3 rating from Moody's and BBB for Standard & Poor's, both with a stable outlook, and we are committing to maintain our investment-grade rating. Our strong financial position, our resilient flexible project portfolio lay a solid foundation for continued growth and material shareholder distributions going forward. Now let's look at the tax guidance for the 2026 results. In the first half of the year, we paid taxes related to 2025 results. In the second half of the year, we give sensitivities based on 2026 estimated profits where half is paid in the year and half will be paid in the next year. In the first quarter, we paid NOK 6.2 billion in taxes, and for the second quarter of 2026, we expect to pay around NOK 8 billion. We have included a sensitivity for the second half of 2026, which is giving the cash tax estimates a different price scenarios, giving a range of $2 billion to $3.1 billion according to the indicated price ranges. Our balanced capital allocation framework remains firm. In the current delivery price environment, we are well positioned as a company, being set to produce at a record by level in 2026. Recognizing the potential for increased profit and cash flow generation in the current market environment, we will allocate such extra funds in accordance to our capital allocation framework. Any additional cash flow will be allocated between extraordinary shareholder directors and strengthen the balance sheet. Maintaining an investment-grade balance sheet remains a fundamental importance to us. We remain committed to deliver long-term attractive dividend to our shareholders as our track record demonstrates with 17 quarters of stable or growing dividend. For the first quarter of 2026, we confirm the dividend of $300 million and guide $300 million for the second quarter, each subject to other financial results with sufficient equity and general meeting approval of dividend. We're in a volatile world as the last few months have clearly shown us. We continue to maintain a disciplined approach. And for the remainder of 2026, we will continue guiding dividend on a quarterly basis in line with our long-term dividend policy of 25% to 30% of CFFO after tax over the cycle. Dividends remain top priority for the management with a clear focus on attractiveness and sustainability over the cycle. We will assess the situation towards year-end and should price remain elevated through the year at the current level, we will make a decision for an extraordinary distribution of excess cash to our shareholders in accordance with our capital allocation framework. The company is successfully progressing in its delivery path as planned, strengthening the basis for a material value generation for longer. Finally, I will summarize our 2026 guidance, which remains unchanged. Production guidance is 390,000 to 410,000 barrels per day. Production costs will be around $10 per barrel and we're willing to sustain at this level for the long term. Development CapEx will be $2.5 billion to $2.7 billion. Exploration expenses and AbEx will be around $250 million to $300 million, and $200 million, respectively. Last but not least, we are confirming Q1 dividend of $300 million, maintaining a dividend level of $300 million for Q2 2026. We're keeping the long-term dividend policy of 25% to 30% of CFFO post tax over the cycle. With that, I hand it back to Nick for concluding remarks. Thank you.

Well, thank you, Carlo. I have just one final slide to summarize. We're delivering on our investment proposition, and the company is positioned to generate more value for longer. Our material resource base of around 3 billion barrels is the foundation for this. We're currently producing above 400,000 barrels per day as planned, and we're targeting to maintain this level long term. And we are opportunity rich and are investing in a series of high-value, low-risk, short-cycle projects that will increase returns, adding significant value on cash flow. We continue to incrementally improve the business for increased resilience and flexibility with a free cash flow breakeven of around $40 per barrel, which I think is important for supporting investment through the cycles. We generate more value for longer and our leverage to higher prices, supporting long-term attractive returns in line with our dividend policy of 25% to 30% of CFFO post-tax over the cycles. The war in the Middle East, I think, amplifies the strategic importance of Norway as a secure and responsible supplier of energy to Europe. All of these factors combined to deliver significant shareholder value. And you can see total shareholder return since the IPO 4 years ago of over 170%. These are our first quarter 2026 results, and I think the reasons to be invested in Vår Energi. Thank you for your time, and we'd now like to open up for your questions. And with that, I hand to the operator.

[Operator Instructions] The first question will be from the line of Tianhong Bi of Citi.

Can you hear me okay? Hello? Can you hear me?

Yes, we can.

Nick, you mentioned extraordinary dividends. [ Eni ] also introduced an extraordinary dividend mechanism above $90 per barrel Brent. Is that the same kind of employ you guys have in mind for Vår as well? And then on portfolio opportunities, Equinor recently bring its NCS 2035 plan around a 50% reduction in both tieback cost and time from discovery to production. Do you see this as an operating efficiency tailwind for Vår? Or could it also create further M&A opportunities between Vår and Equinor.

Good questions. In terms of dividend, look, our focus of management is to provide long-term sustainable dividends. And clearly, if these prices continue through this year, then we generate significantly more cash than we planned. And we're going to continue guiding on a quarterly basis. But in terms of any extraordinary dividends, we will make a decision at the end of the year. So it will be into early next year when we report our Q4 results on what we would do with excess cash. But if that continues, then we would look at implementing an extraordinary dividend. We're not going to guide beyond that because I think there's a lot of volatility in the market. But ultimately, if we see high prices long term, we intend that we should return some of that to shareholders. In terms of moving projects forward. Look, I think we set out at our Capital Markets Day and also last year the increased pace of activity we're doing as a company through our project factory approach. We're already delivering projects quicker than we've done in the past. And we see that standardization, speed, simplification are all important factors for creating value long term, and we have a big portfolio of opportunities that we operate to move forward. So to give an example, Balder Phase VI, we sanctioned last summer. We've already installed much of the subsea facilities, and we will be online in Q4 this year. So that's 18 months after sanction. I think it's very good that Equinor is also moving ahead and increasing the pace. And of course, as you know, quite a lot of our portfolio overlaps with Equinor. And so many of -- about half of our 30 projects are operated by Equinor. And so their approach to increase pace, improve value, we fully support and is also good for us as a company. Hopefully, that answers your questions.

And the next question will be from the line of Teodor Sveen-Nilsen.

Two questions. First one on the potential impact of the higher prices we've seen recently [indiscernible]. I just wonder if you can discuss how the current prices and current cash flow impacts your investment appetite. Should we expect some accelerated project developments? Your thoughts on that would be useful. Second question is your sort of view on the realized oil prices. Obviously, you currently see a premium versus the current prices because of the Hormuz situation. What's your view on the spread between your realized oil prices and the Brent prices if Hormuz opens today?

I'll take the first question, and Carlo will cover the second. In terms of -- we said at our Capital Markets Day that we were going to lift our investment rate to speed up projects and invest more for longer to deliver over 400,000 barrels a day. The reality is we optimize our outlook for our company every day. I mean it's a whole series of decisions, and we look to create long-term value. I mean my aim is that we set out above 400,000 barrels a day long term. I would like to be able to improve that over time. So very much, we continue to look, outlook and look at the opportunities ahead of us to think about whether we can improve it. But I can't promise we're going to spend any more money than we've set out, but we continue to look to optimize our portfolio going forward. And that's certainly a possibility. So Carlo, do you want to address the...

Sure, sure, sure. Teo, thanks for the question. So when it comes to the realization and the premium on Brent and if I got correctly, your question is our view on what would happen if Hormuz opens tomorrow. Well, we see high premium, as we mentioned, and those will be -- this will become visible in our Q2 results because those premiums were mostly for the deliveries in May and onwards. I think that even if Hormuz opens today, this is something that will remain -- of course, will normalize over time. But in the very short term, it will still remain in a premium environment because it will take a while even if there is a full opening today to really absorb the situation and give to all the logistic aspects involved in that some stabilization. So I'm not expecting this to be a very long-term effect. But in this year, I would expect this to remain stabilizing over time for the next months to come.

[Operator Instructions]

This is Sasikanth Chilukuru from Jefferies. I had two questions. The first was regarding the extraordinary dividend. You also reiterated your dividend policy of 25% to 30% of CFFO. I was just wondering if you would stick to this policy regardless of the macro and even if the prospects of extraordinary dividend would fall under this policy? The second was on hedging. You introduced hedges for both oil and gas production this quarter. Could you share more detail on the policy guiding this decision? Additionally, should we expect further hedging activity going forward, especially particularly for oil?

Carlos, do you want to take this?

Yes, I'll take both. So when it comes to the dividend policy, our dividend policy long term of 25% to 30% focused tax over the cycle remains intact. So an extraordinary dividend will be part of the policy, but it's not going to change the policy because it's meant to be long term, it's exactly meant to go through the cycle and the fluctuations over the cycle. When it comes to the hedging of oil, we are taking a bit more, I would say, proactive approach compared to what we did back in the past because the company is very different. We had a program where we were basically hedging at $50 flat in the past years, and then we decided to take a bit different approach because the size of the company is very different. Also, the production profile is very much derisked compared to where it was when we were in the execution phase. So we look at the market always. The target is to hedge just part of our post-tax production. So we don't have close to 100% of production. And the main purpose is to secure a floor without capping the upside. So that's the main objective of the policy. And we will continue, of course, doing this actively over time because we do this on a rolling basis.

I think just to come back on the first one, our policy is 25% to 30% of CFFO post tax over the cycles. But clearly, with higher prices, we generate more CFFO. And of course, staying within the policy still gives us the opportunity perhaps to go above the dividend run rate that we have at the moment. So as we say, we will assess this at the year-end and make a decision at that point in time on the level of excess cash that we might return.

And we'll now take our next question from Victoria McCulloch of RBC.

Just one firstly on production. At the CMU earlier this year, you highlighted that January production was 416,000 barrels a day and that the capacity of the assets was about 440,000 barrels a day. Can you just talk us through the moving parts from, I guess, the average in January to the full quarter? And then on the Goliat Gas expansion, what's your -- I guess, what's the expectation in terms of timing for Hammerfest to be able to take the gas from this development sanction? What's your base case assumption in terms of timing? That would be very helpful.

Yes. On production, we set out at our Capital Markets Day how we performed so far this year. And clearly, we have upsets in the performance of assets and timing of activity coming online and new wells. So those things, all this is complex optimization. And so it's clear the quarter average was 406,000. That's in line with our guidance range for -- in terms of how we set out the year. And we're on track to deliver within our guidance range. And in fact, what I'll say is that the top end of our guidance range is still achievable from where we sit today. So timing of wells coming in has a bearing also on some of the outcomes. So that's sort of how we've set this out. In terms of Goliat Gas, it's a great project, actually. It secures the lifetime of Goliat to 2050. It adds more oil because it allows us to optimize the management of the reservoir, and then we deliver the gas into the Hammerfest LNG project. And of course, that is full for some time. And when that goes on decline or cannot meet its profile, we get the opportunity to use the capacity to redeliver our volumes. If you assume that it's full until it comes off plateau in sometime in the 2040s, that's when we would get the gas back. But if at some point during that time, the facility can't keep full for whatever reason, then we would also get volumes back. So -- but our base case is the assumption that it comes in the 2040s when Hammerfest LNG goes on decline. I think this is also a really important project for unlocking the future potential of Goliat. We have our Goliat Ridge discoveries that we've made and the potential there is over 200 million barrels, and we're working to move that project forward. And our aim is to do it as quickly as we can. It's very close to Goliat. But of course, the moment as we're injecting gas resources into the reservoir, we're limited on how we handle the gas. But of course, Goliat Ridge would also generate more gas, which would have a challenge for us. And then we'd have to spend money to dispose of that additional gas somewhere. So this project also facilitates and makes it more efficient to develop the Goliat Ridge. So they're linked. It's a good project. It creates the long-term perspective for the asset, and now we can go and invest into the remaining opportunities around there.

Then can I ask a follow-up on that quickly, nick. The breakeven for this project looks, I guess, lower than, I guess, the threshold at which you've talked about sanctioning projects at $30 a BOE. Is it just a very compelling investment at this point in the cycle in addition to opening up the wider investment area?

I mean it's the right time to do it. There's a lot of resources here. And actually, we haven't guided a specific breakeven, but it's in line with what we have used as a company, which is $35 a barrel or breakeven. So it's in line with that as a project.

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

Two actually, Q1 '26 was a 6th quarter in a row with significant underlift, if my notes are correct. I just wonder if you could comment on that a little bit. Is that just a coincidence? Or is this some -- is it not a coincidence? And also maybe, when should we expect to see a reversion of the accumulated underlifting? My second question is more a comment or a follow-up actually on Teodor's question regarding premium -- on premium to Brent. Are there any particular fields that you would highlight where you get significant premium to Brent at the moment? I know the Johan Sverdrup is seeing some $10 premium to Brent over the last few weeks. And I know you're not in Sverdrup, of course. But if there are any fields that you could -- would highlight, it would be interesting.

I'll take -- I can take both. Thank you, John. So when it goes to the underlifting, it's true that we've been in a stable underlifting position. And every quarter fluctuates. What -- I mean, it's just part of the lifting program is built up. You know that each feel is different, license is different. It depends on which is your equity volumes. So these are very operational mechanism. In Q2, what we see is that we see a significant reversal of the underlifting position, again, for the very same operational reasons because a lot of cargoes that were not lifted in March has already been lifted in April as we speak, because we are almost at the end of the month with a very high prices, and this is, of course, a positive note. So we expect Q2 to be in a good overlift position, so rebalancing the global position, but it's very operational. When it comes to the premium, just to give a bit of the grades that we see, we are seeing a lot of premium, very material premium is Johan Castberg, Grane and Balder, for example, just to make some examples of where we are seeing quite a material premium.

I think to give a bit of color that we were in over 40 fields. But we've seen premiums up to $20 for some crude sold in May, but we have a whole range of different qualities. So we don't want to provide guidance on the broad spectrum, but I mean.

Just measuring some of those that, yes.

But some very significant premiums.

And your next question will be from the line of Nash Cui of Barclays.

Nick and Carlos, I have two, please. The first one is on production flexibility. I wonder how easy is it for Vår Energi to push back on some of your maintenance or to bring more volume on land quicker than planned? And then my second question is on gas price actually. In your report today, you disclosed good gas collar options between $85 to $270 per barrel, which is amazing thus between Q3 to Q1 next year. I wonder given that, what is your view, kind of medium-term view on gas price over oil, where do you see the more relative upside, please?

Okay. So thanks, Nash. I'll take the first, and then Carlo will talk about gas prices. In terms of production, as I went through the slides, I think you saw that we have a slight dip in Q2 and Q3, which is planned turnarounds. But this year, we actually don't have many. And so the average impact over the year is around 6,000 barrels a day. We have looked at those to see what we can shorten or push back, of course, but there's very limited things that we can do, but actually the impact is very limited. In terms of trying to maximize production, that's what we do every day actually. So we work hard to deliver volumes. And I can assure you, we're going to maximize the production that we can out of our portfolio as much as we can. But I think we don't have much flexibility because we're already doing that. So hopefully, that answers the question. And then Carlo, maybe you -- to pick up the gas prices. And I might want to comment at the end as well.

Yes. Sure, sure. So when it comes to the gas price and aging, as you mentioned, we got a very good spot to place a very attractive collar, I would say, with the target again to protect the downside, although we saw a cap so high that we felt it was very reasonable to enter into 0 collar. Where do we see most of the upside, it's a bit difficult question because the 2 things that are maybe now very much correlated because what is happening in the Middle East is disrupting actually both. And you also have to consider that the storage in Europe are very, very low. So in the very short term, if the blockade continues, I think both the market will be quite impacted. And there is a dynamic for storage replenishment in Europe that will be dragged into the summer, even if there is an opening and also fair to say that there are plans to be repaired over time, and this will take time. So incentive is that where there is the most -- it's a bit difficult to say, but I believe both will be pretty much sustained over the next months for maybe different dynamics, but in the end, a very same route. And Nick, please?

Yes. I mean, we're obviously disrupted in this period of time with gas suppliers in the world, and that's obviously why we've got big prices at the moment. And I think when this conflict ends, it will take some time to recover. I think there are some facilities need to be repaired and this disruption in the world will need to be unwound. But going into this, the assumption a lot of analysts had we would see very low prices in Europe due to the large flows of new LNG coming online, particularly in North America and the Middle East. I've made it clear. I didn't believe the very negative views. I think for lots of reasons, this disruption that we see today is a good example of the uncertainty. You can see many of those projects aren't necessarily going to come on time. But I also see a strong demand growth for energy, particularly in North America. You can't buy gas. New gas power generation capacity sold out for 6 years. And I mean, what's all that going to do when it comes online, it's going to burn a lot of gas and a lot of that's to drive AI and data centers around the world. And so I think world demand for energy and gas is perhaps underplayed and particularly in North America. And I think that would flow through to gas prices. So we have been a bit more positive on the long-term outlook once this market disruption at the moment settles down. So that's sort of how we look at things here.

And your next question will be from the line of Anders Rosenlund of SEB.

How much of the reported gas production is production gas, i.e., gas used for -- or fuel gas, as you call it, is for consumption?

Yes, we report this way and it's around 8,000 BOE per day.

[Operator Instructions] And we'll now move on to our next question from Steffen Evjen of DNB Carnegie.

I have a question on Balder production. So it was my understanding that the capacity here after FPSO was around 110,000 barrels per day gross in production [indiscernible] over the past 2 quarters. So my first question is, could you help me bridge the gap between the [ 90 and 110, ] and whether this is constraints in FPSO or performance of the wells or any other things? And my second question is, should we expect any upside from these levels over the next quarters to the capacity level?

Good, Steffen. I think we've explained in the past quite a number of times that these Balder wells, when we drill them, they have high initial rates, and they decline quite rapidly, and they have a very, very long tail. And so that requires us to continually invest into the portfolio we're bringing new wells on. So it reaches a peak rate rather than a plateau rate. And so when you -- last year, we installed the the Jotun FPSO that adds 80,000 barrels a day of gross production when it's potential when it's full. And then we also have the additional FPU production, which was about 30. And so you're right in saying we have potential capacity of 110. But we also have to continue to invest into the well stock to keep this full. And I think at the end of last year, we reported some delays on some wells on Balder Phase V. So that has had an impact. So we expected to have a few more of those wells on by now. But that was all built into our outlook for this year when we came into a guide for this year. And so it's this continuous process of continually investing into the capacity. What we are going to find is it's not going to be limited by oil capacity. It's going to be limited by gas handling capacity and water handling capacity ultimately because as these wells get more water cut and get more gas, that's what's going to be the limiting factor. And that's why we're doing the Balder debottlenecking project at the moment, which will come online later this year, which will -- which is essentially there to improve gas handling capacity and water handling capacity, which will help us produce the volumes out quicker. But we will be continuing to drill here for many, many years. And that's why we are confident to be able to say that we're going to be able to sustain around 80,000 barrels a day through the area long term. Hopefully, that answers the question.

There are no further questions in queue. I will now hand it back to Ida for closing remarks.

Thank you very much. There are no further questions from the chat. So that concludes the first quarter 2026 presentation. We thank you all for joining, and wish you a good rest of your day. Thank you.