Vår Energi ASA (VAR) Earnings Call Transcript & Summary

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

Thank you. Good morning, everyone, and welcome to Var Energi Second Quarter 2026 Results Webcast. Today, we will cover both our second quarter results and the announced Munotransaction. We will begin with the quarterly results presentation, followed by a presentation of the proposed transaction. Following by presentations, we will open the line for questions. I'm also pleased to welcome Ian Shade, CEO of BlueNord, who will be joining us for the Q&A session. With that, let me hand over to our CEO, Nick Walker.

Well, thank you, Ida, and good morning to you all, and I hope you're having a nice summer break, and thank you for taking time out for joining us today. We've had a very active quarter with lots to report on this morning. First, we'll cover our second quarter results, and then we'll review the BlueNord transaction details. And of course, I'm pleased to have you [indiscernible] with us who will make a few comments at the end and participate in the Q&A session. I'm pleased to report record financial results for the second quarter, supported by operational delivery as planned and high realized prices. We continue delivering strong momentum across Var Energi, and I'm excited about the company's outlook. We're improving outcomes, increasing the pace of delivery and optimizing the portfolio, which is increasing resilience and unlocking significant long-term value. And we're excited to announce today the combination of Var Energi and BlueNord, creating the largest independent producer of oil and gas in Europe. The combined business will have increased production target of around 450,000 barrels of oil equivalent per day and reinforces our role as a reliable and secure supplier of energy to Europe. Together, we're creating a stronger, more diversified company with increased scale, resilience and cash generation. The combination increases production, reserves and resources, underpinning our ability to deliver long-term value to our shareholders. And so now let us look at the highlights for the second quarter. Production is on track to meet full year guidance with production in the first half of the year at 391,000 barrels of oil equivalent per day. This is supported by strong performance from our operated assets and we expect production in the second half to be higher as our major planned turnarounds are now complete and with new projects and wells coming on stream. And as I said, we delivered record financial results in the quarter with significant CFFO post tax of $2.1 billion. We have increased resilience with net debt reduced to $3.4 billion, and our leverage ratio is down to 0.4x net debt to EBITDA. We completed a successful issuance of EUR 750 million hybrid bond in the quarter and have high available liquidity of $5.3 billion. And you can see we received a credit rating from Fitch of BBB with stable outlook to go with existing investment-grade ratings from S&P and Moody's. And we continue to unlock long-term value. Firstly, with the combination with BlueNord that we announced today, we are building the largest independent E&P in Europe. During the quarter, we sanctioned key projects in the Balder and Gjøa areas, developing 110 million barrels of net reserves. We see strong performance at the Bridabit field. This will see reserves increase by 50% since the PDO and lead to the next phase of development. And we've been actively managing our NCS portfolio with 5 transactions announced in the quarter, unlocking value creation and extending field life. And lastly, we continue to deliver long-term attractive shareholder returns as a result of the expected value creation from the BlueNord combination and our strong financial results, were increasing shareholder returns. We confirm a dividend distribution for the second quarter of $350 million to be paid exclusively to existing Var Energi shareholders. This means we've paid stable or growing dividends for the last 18 quarters, and we're providing dividend guidance of $350 million for the third quarter to the shareholders of the combined company. Delivering attractive and sustainable dividends over the cycle is a key priority for management, and we remain committed to our long-term dividend policy of 25% to 30% of cash flow from operations after tax over the cycles. So now looking at some of the details, starting with 2026 production. First half production came in at 391,000 barrels of oil equivalent per day and we're on track to meet the full year guidance range of 390,000 to 410,000 barrels per day. We continue to see strong performance on our operated assets with production -- with high production efficiency. And as we advised at the start of the year, the second quarter was impacted by planned turnarounds. And when the Balder and Jotun turnaround is completed during July, all of our major turnarounds for the year are behind us. Additionally, in late second quarter, Johan Castberg production was impacted by issues with the power generation system on the FPSO. Solution has been established and production was back to normal levels from mid-July. And looking forward, we're starting up 4 new projects during the year. As the Alpes North project in the Ekofisk area came on stream in the second quarter as planned, with production in line with expectations. And in the second half, we're on track to start at 3 projects in the Bolder area, the Hilton FPSO debottlenecking, the King development and Bolder Phase VI and we have a large portfolio of over 50 production wells that are planned to start up during this year. So far, we're on target with around 50% already in production, meaning we will see higher production in the second half of the year as our major planned turnarounds are completed and with new projects and wells coming on stream. And looking now at operational performance. You can see that we're continuing our strong trend of incrementally improving our deliveries. We're seeing strong improvement in safety performance during the year across a range of metrics. And we've now had 0 material incidents over the last 2 years. This takes hard work every day. And we continue, as you can see, 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 and 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 a strong improving trend. We achieved 94% in the first half of the year. This is inclusive of the impact of planned turnarounds and was better than we expected. And on production costs, we achieved $10.8 per barrel in the first half compared to our guidance of $10 for the full year. The increase was primarily driven by strength in Norwegian krone and adjusting for this reduces the first half OpEx to $10.3 per barrel, in line with the guidance for the year. We have ambitious targets to deliver further operational improvements, which over time will create significant further value. And as I mentioned at the start, during the quarter, we announced a series of transactions, high grading our NCS portfolio to strengthen long-term value creation. Firstly, the acquisition of Parion's assets to secure long-term production growth in the Joe and Asgard areas. Secondly, swap an agreement with DNO to align interest in the Ringer North development and consolidate positions in the Yo area. And thirdly, divestments in equity interest in the Goliat and Fenia fields to accelerate value creation from recent exploration success and reduced capital commitments without meaningful near-term production impact. And lastly, an asset exchange with Equinor strengthened the company's position around Golar by taking an interest in and operatorship in the large Pion gas discovery with the plan to tie it back to the ore facilities, extending the third lifetime. And the strategic rationale for these transactions is multiple it's about high grading in core areas, increasing ownership in key assets, expanding into high-value opportunities, extending field lifetime, accelerating value realization from exploration success and flexibility and capital allocation. Combined, these transactions do not materially impact the company's short-term production target, but materially strengthen our long-term outlook. And I think these are great examples of how we're continuously high-grading the portfolio to create long-term value. Now looking at how we deliver on our long-term production targets. With recent project sanctions, we now have 16 high-value projects in execution. These are all subsea tiebacks or facility enhancement projects. And you can see a developing around 380 million barrels net and with strong economics, where the average breakeven is around $30 per barrel and rates of return of around 35%. And because these projects all leverage existing facilities, the average unit production 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 important new operating projects, all the next new wells and our subsea projects, which means so far this year, we sanctioned 4 projects, developing total reserves of around 170 million barrels net adjusted for the transactions that we announced in the quarter. This gives us high confidence that we will once again have an organic reserve replacement this year well above 100%. These project sanctions demonstrate our ability to mature and execute a portfolio of high-quality developments supporting production growth and long-term value creation. And now I want to look at the 2 sanction projects in the quarter. Firstly, the bolder next new Wells project is the next phase of development in the Balder and is enabled by existing infrastructure and available capacity. The project comprised the first phase of 7 wells tied back to the auto FPSO with expected start-up in Q4 2027. And provision is being made for future phases of drilling with the subsea facilities having capacity for an additional 9 wells. The initial project is developing gross 2P reserves of 86 million barrels. And of course, we have a high working interest here with 90%. So it's material to us. And you can see strong economics with a breakeven of around $30 per barrel and rates of return above 35%. This project also supports the planned consolidation of infrastructure, including decommissioning of the Balder FPU from 2028, which reduces operating costs and emissions. And we continue to see a significant resource upside in the Balder area, where we're deploying our subsurface expertise and technology unlock this opportunity, such as newly acquired seismic an advanced horizontal drilling and completion technology. Our aim here is to keep the facilities full in the long term. The remaining bolder Phase 5 wells and the initial King well will start up this quarter and Phase 6 will come on stream in the fourth quarter. And then we have both the next -- further bolder neck drilling, full development of King, ring on North, Rigon vision, all being progressed towards sanction. We see a lifetime for Balder well beyond 2045, and we'll be drilling in this area for many years to come. And then on to the subsea projects where Var Energi is the operator. This comprises the development of the Ophelia Joe Nord and Ceresa discoveries in 3 licenses as a coordinated subsea development tied back to the Ehm. First production is expected from Carisa already in the third quarter of 2027, followed by start-up of Aphelia and Neonode in the second half of 2028. And this project includes development of total gross 2P reserves of 76 million barrels of oil equivalent. And as you can see, strong economics again with breakeven below $35 per barrel and a rate of return above 25%. And this project is enabled by our project factory approach, combining standardized solutions, coordinated execution and utilization of existing facilities to accelerate development and the project will be executed through a coordinated drilling and installation campaign, leveraging existing supplier partnerships, realizing synergies and efficient execution. Yowa is a core operated hub in Var Energi portfolio, and we've been working to extend field lifetime. The -- or Subsea projects, combined with the planned development of the recently acquired Pion gas discovery through the hub is expected to extend for lifetime beyond 2045. We also see material exploration prospectivity near or with 6 operated exploration wells to be drilled in the next 18 months. We see exciting opportunities to continue to create significant further value in the e-hub area. And we still have a large portfolio of around 30 high-return, early phase projects that are moving towards sanction. All of these are subsea tiebacks to existing infrastructure or facility enhancement projects with low cost short time to market and high returns with average breakevens as you can see, around $35 per barrel and rates of return above 25%. And we've built significant momentum with our project factory approach. With the sanction of 10 projects in 2025 and a further 4 projects so far this year. And you can see that we're working towards a further 5 potential project sanctions in 2026. And which means we're on track to deliver on our target of up to 8 project sanctions this year. And while we've been moving projects forward into execution, we're continually replenishing the early phase project topper as we further derisk the potential of our exciting portfolio. We have the people, the equipment, the contracts in place to deliver the planned project program. And delivering on this project portfolio will develop around 500 million barrels of contingent resources and deliver on our long-term production target. And now turning to our exploration program where you can see we have a strong track record of unlocking value. We continued this success in the first half of the year with 3 commercial infrastructure-led discoveries out of 6 wells drilled. One of these discoveries, FreetoCalu is already in production, and the other 2 are being matured towards development. Now the majority of our exploration program in 2026 is in the second half of the year, and we have some exciting wells to come. Several exploration wells remaining with 3 in the Balder area, 3 important wells in the Gjøa area and a high-impact well in the Asgard area. And it's going to be exciting to see these results come in. And looking ahead, we have a significant exploration position in all areas of the NCS. And we have an exciting program already lined up for 2027 with some important high-impact wells. So that rounds off my operational update, and I'll now hand over to Carlo to review the financials, thank you.

Thank you, Nick, and good morning, everyone. I quote that presentation rehome best today. Before we go into the details of the combination with Bruno, let's look at our second quarter 2026, where we actually delivered record financial results. We achieved an average realized price of $101 per BOE and generated a significant cash flow from operations after tax of $2.1 billion. Our financial position continues to strengthen. We reduced net debt from $5.2 billion in Q1 to $3.6 billion in Q2 and further improved our leverage ratio to 0.4x, with a record high level of available liquidity of $5.3 billion. During the quarter, we successfully issued a EUR 750 million sale bond and we were assigned with a travel rating by feature with a stable outlook, highlighting our energy strong credit profile. Free cash flow in the quarter was $1.4 billion. We continue to deliver attractive returns to our shareholders and on the back of a solid operational performance, continuous project sanctioning. Record financial results and in conjunction with the noncommission Nord, which is expected to complete around. With the dividend level for Q2 at $350 million and also guide the same level for Q3. Our long-term dividend poly of 25% to 30% of the CFFO per tax over the cycles remains intact. We generated record revenue of $3.7 billion in the quarter, more than doubling from the same quarter last year, driven by both higher production and higher prices. We are less than average an average price of $101 per barrel in the quarter with average oil price at $110 per barrel, approximately $6 per barrel above digit Brent. The gas price of $91 per BOE was approximately $1 above the average spot market reference price. A brief update also on our managing position. With regards to oil, for the remainder of 2026, 23% of our post-tax adjusted oil production is protected with an average flow of $70 per barrel, issuing at the same time, continued a substantial exposure to the price upside. Approximately 8% of our post-tax adjusted oil production were using color options, which provide market participation up to $140 per barrel with a floor of $75 per barrel. We also have in place 3-way option structures with a cash loss potential of approximately $5 million. With regard to the gas, approximately 8% of the third and fourth quarter 2026 and 9% of the first quarter 2027 gas production has been hedged using color options, issuing a floor at around $85 per BOE with a cap at around $275 per BOE. Considering both our fixed price gas sales and our gas hedging approximately 35% of our gas sales for the remainder of the year have a floor is at around $83 per BOE. Generated material cash flow in the second quarter. Cash flow from operation after tax in the quarter was $2.1 million, almost doubling from the previous quarter, driven by higher prices and higher lifting volumes. CapEx for the quarter, including exploration, was $645 million. The strong operating cash flow covered the CapEx with a solid margin, and CFFO to CapEx coverage was [indiscernible] in the quarter. Our full year 2026 development CapEx guidance remains unchanged at $2.5 billion to $2.7 billion. We expect activity levels to be somewhat higher in the second quarter -- in the second half of the year reflecting higher daily activity, more final investment decisions and projects start up. Our liquidity and financial position has significantly strengthened during the quarter with a healthy cash balance of around $2.5 billion and a record high total available liquidity of $5.3 billion. Looking at the development of our cash position in the quarter, we generated above $3 billion before tax and working capital movements, up nearly 50% compared to the previous quarter, driven by higher prices and higher sold volumes. Working capital impact has been slightly negative by $96 million, mainly due to a reduction in payables. Taxes paid amounted to $850 million related to 2025 results. With a cash outflow of $681 million in investments into our high-value project portfolio. In April, we successfully issued a EUR 750 million be bond, increasing our available liquidity. Also, in June stability as planned, $300 million in dividends related to our Q1 2026 results. The company has this quarter with a very strong financial position. We continued to reduce our leverage ratio, net interest-bearing debt on EBITDAX to 0.4x significantly reduced from 0.7x in the previous quarter and remaining well below our over-the-cycle target of below 1.3%. We are committed to maintaining an investment grade at in addition to our BAA rating from Modis and BBB rating for Standard & Poor, but with a stable outlook. We also obtained a travel rating from Fitch also with a stable outlook, strengthening our overall credit profile. Now let's look at the tax guidance for the remainder of 2026 and first half 2027. In the second half of the year, we will pay taxes related to 2026 results, and we are expecting to pay approximately NOK 25 billion. For the first half of the next year, we give sensitivities based on 2026 estimated profits at different price scenarios. In the second quarter, we paid approximately NOK 8 billion in taxes related to 2025 results, and we paid a total of approximately NOK 40 billion in the first half of this year. We continuously pursue value generation to our business model. We continue investing in our opportunity-rich portfolio, we can realize on exploration successes. And we pursue accretive M&A opportunities. As the deals we announced in the second quarter and the transaction we're announcing today demonstrate. We remain committed to deliver long-term attractive dividends to our shareholders is our third record demonstrates with 18 quarters of stable growing dividend. On the back of a solid over short performance, continuous project sanctioning, record financial results and in conjunction with noncommission or expected to complete around the end of '26. We raised the second quarter dividend to $350 million, and we guided $350 million also for the third quarter, which is subject to audit financial results with sufficient equity and general meeting approval of dividend. Gramalote work as the last few months have clearly shown to us. We continue to maintain a disciplined approach and we'll continue guiding dividend level on a quarterly basis, in line our long-term dividend policy of 25% to 30% of CFFO after tax over the cycle. We'll continue assessing the situation towards year-end as indicating during our previous quarterly call. The company continues to strengthen and progressing its growth plan, maintaining discipline and focus on value generation for longer. With that, I hand it back to Nick to go through the details of the combination with boon. Thank you.

Well, thank you, Carlo. And moving on to now the details of the combination with Var Energi and BlueNord, which we were excited to announce this morning. As Var Energi continues to grow its natural evolution of our strategy to step outside of Norway and Denmark offers a low risk, stable operating and fiscal regime with similar offshore characteristics to the NCS. The combination increases our exposure to European gas markets and strengthens the company's position as a reliable and secure supplier of energy to. And this is a complementary transaction for both sets of shareholders where the companies together are creating a stronger, more diversified company with increased scale, resilience, cash generation and shareholder returns. It has growth with strategic assets in the highly compatible Danish continental shelf. It adds value with a raised long-term production target of around 450,000 barrels per day. It increased its returns with limited near-term investments and we're leveraging Var Energi's strong balance sheet to create significant financial synergies together supporting resilient cash generation and strengthening Var Energi's long-term dividend capacity. This transaction is accretive on a per share basis to reserves, production, cash flow from operations, free cash flow and dividend capacity. And the combination of Var Energi with BlueNord builds the largest independent producer of oil and gas in Europe and the fifth production hub area for the company and the Danish Underground Consortium or DUC further diversifying Var Energi's portfolio, and we're maintaining our balanced commodity mix at around 65% oil, 35% gas and it increased our exposure to European gas markets and expands access to European gas infrastructure and entry points, strengthening the company's position as a reliable and secure supplier of energy to Europe. And now summarizing the transaction details. Var Energi is to combine with BlueNord in a 4 share and cash transaction. The consideration is 248.4 million new shares in Var Energi representing a share issuance of 9.95% and $204 million in cash. This equates to 9.7153 shares in Var Energi for NOK 76.83 in cash for each share held in BlueNord. And the BlueNord shareholders to be compensated in cash for any dividend paid precompletion from the third quarter 2026 onwards. The transaction is subject to approvals by BlueNord shareholders and relevant authorities and license partners, and we expect closing around the end of the year. Post closing, the Var Energi free float will increase to around 43%, which is positive towards higher liquidity and increased index weightings. And the ENI will remain the long-term strategic majority shareholder with approximately 57% ownership post transaction. And this transaction represents another key step in our successful growth journey. We've built a high-quality portfolio through a series of transactions and then have successfully focused on exploiting the upside opportunities. Since the company's inception in 2018, we've increased production over 2.5x and we've created significant shareholder value. Since the IPO just over 4 years ago, total shareholder return has been around 190% and you can see some of the metrics from the transaction here increases scale and value creation with an increased long-term production target of around 450,000 barrels per day. Reserves and resources grew to 2.4 billion barrels with a long reserve and resource life at 15 years. We maintained a low operating cost of $10 to $11 per barrel, and we continue with top quartile emissions intensity. And the BlueNord assets are high quality with long life. The assets are part of the DUC consortium located in close proximity to our existing assets in the southern part of the NCS and with similar geology. Reserves and resources stand at 195 million barrels net and current production is around 45,000 barrels per day. These are derisked assets with lower near-term capital requirements and with low decline rates, which is complementary to our existing portfolio. And the Danish offshore area is a low risk and stable operating and fiscal regime with similar characteristics to the NCS. So the assets provide a strong strategic fit with our existing NCS portfolio. And the BlueNord combination adds to our material resource base, the combined company's 2P reserves will stand at 1.5 billion barrels, which underpins current production levels. And we're much more than that with 2C contingent resources of around 900 million barrels, where development plans are being progressed. And we also have an exciting NCS exploration portfolio of around 700 million barrels of net risk prospective resources. And so putting this together, the combined portfolio has over 3 billion barrels of resource potential with over 50% of this yet to be developed. This opportunity-rich portfolio underpins our value creation. In developing our material resource base is how we will deliver our increased long-term production target for the combined company of around 450,000 barrels per day. The levers that drive this are maximizing production from our high-quality producing assets, delivering on our portfolio of projects in execution, progressing our significant portfolio of early phase projects towards sanction and unlocking more value with our focused NCS exploration program that is adding new projects all the time and continuing to add to our portfolio with value accretive M&A such as the BlueNord transaction that we announced today. And with that, I'll hand over to Carlo to provide more details on how we create value from the transaction.

Thank you, Nick. As Per said, the combination between age and Benard, the complementary transaction for Bose shareholders where the companies together are getting a stronger, more diversified company with increased scale, resilience, stronger cash generation and shareholder returns. We expect to create material financial synergies. We expect to reduce the financial cost above our currently as capitalizing on bone investment-grade balance sheet. We also see synergies from reduced overheads and strengthened our gas sales portfolio. We're expecting to realize $250 million to $300 million in synergies that will contribute to strengthen our balance sheet and enhance our dividend capacity. In addition to that is a material value generation potential upside from the maturation of the remaining 2C resources in the DCS portfolio. The combination will be accretive on all the key metrics on a per share basis after the capital increase. Production reserves, CFF after tax, free cash flow and dividend capacity. Distraction with a combination of shares and cash is a proof of our commitment to maintain our investment-grade rating. We strengthened our balance sheet, thanks to the share issuance, while maintaining the pro forma, the attrition of interest-bearing debt on EBITDAX well below our target of below 1.3 cycles with a minimal impact on the current metric. Our attractive long-term dividend policy of 25% to 30% of the CFF after tax on cycles is maintained and underpinned by the increased dividend capacity post combination. I will now summarize the key highlights of our strengthened investment proposal after combination with not. We'll increase our reservior resource base to $2.4 billion, which means a solid 15 years reserve resource life. The lantern production outlook is raised by more than 10% to around 450,000 barrels per day long term. Our CapEx guidance remains unchanged at approximately $2.5 billion average per year, and our portfolio remains characterized by short cycle investment with quick cash conversion leveraging on limited near-term CapEx associated with the DCS portfolio. We maintain a very resilient cash flow generation capacity, being free cash flow neutral at $40 per BOE. Our dividend capacity increases and will give additional support to our attractive long-term dividend policy at 25% to 30% of the CFFO after tax over the cycles. Finally, our free float will go from about 37% to about 43%. This will increase the liquidity of our stock and potentially increase the weight in the value stock exchange indexes when we're currently included. Look forward to expanding our shareholder base with no shareholders. And with that, I hand it back to Nick for concluding remarks.

Yes. Thank you, Carlo, and we're excited to announce the transaction today. We're excited to work towards BlueNord being part of the company and having the employees join us and also excited to have some new shareholders join us. And -- but before we go to questions, I'd like to ask you and Solar delighted that he's here today to say a few remarks before we open up for your questions.

Fantastic. Thank you, Nick. So I'll start by saying that 1 of the nice things about joining another company's results call even if these will soon be our results, too, is that you get to Baskin the globe of a strong quarter without having had to have done any of the work needed to deliver it. So the least I can do is say congratulations to the Board team. It's a really great set of results. But I think unfortunately, with this morning's announcement, today is about much more than just 1 quarter. It's a day that brings our 2 companies together strengthens both of us and opens up an exciting future. And what I'll do is I'll come back to why I think the combination makes so much sense, but I would like to start just by briefly touching on the BlueNord story. So BlueNord became a partner in the Danish Underground Consortium in 2019 and since then, our team has been focused on 2 things that have really defined the company we are today. The first was delivering the tire redevelopment, giving one of Europe's most important gas fields a new lease of life and also creating an asset that will continue producing strongly and at relatively stable levels well into the 2040s. The second and above all, was that we focused on delivering for our shareholders. So we built a capital returns policy with exactly that objective in mind. And in just over a year, we've returned close to $800 million to our shareholders. And that brings us to today. So for me, combining with Var Energi feels like a very natural next step in our journey. We've already shown what a focused company with 1 core area can do. And now when part of the enlarged Var Energi, our shareholders will benefit from a business with a broader portfolio, a longer-term returns profile and the support of an investment-grade balance sheet. And I genuinely believe that this is a case of stronger together. The combination brings far into Denmark through a world-class asset, and it reinforces the role of both our companies have always played providing reliable, responsibly produced energy to Europe. So whether you've been a more shareholder for many years or you'll become 1 through this transaction, from today, we're all invested in the same future. A larger, more diversified company with greater resilience and an even stronger ability to deliver through cycle. So that's the thought I'd like to leave you with. Even if it was already sunny, the future looks just a little bit brighter today than it did yesterday, thank you.

Good. Thanks, Ewen. I think with that, we'll open up for questions. I think the operator is going to run this process.

We'll now take from Tianhong Bi of Citi. Please go ahead.

Congrats on the transaction. The question is on the combined CapEx outlook. You're keeping your CapEx unchanged at $2.5 billion, while Blue not had previously guided to around $100 million to $150 million of CapEx per year through 2030. Is that a digital spend being fully offset by the synergies or is keeping the overall CapEx unchanged require any current projects to be delayed or deprioritized?

Yes. Thanks for the question. So when it comes to our average CapEx, as you for sure know we guided an average CapEx over our plan, which is 2026, 2032, of an average of $2.5 billion and I will not just guided what you say for a shorter period. And what we see is that on average, over the pedis not really changing the $2.5 billion. So you might have a gain 1 year when you have $100 million more. But as a matter of fact, the average over the plan period remains pretty much unchanged.

And reflecting that $100 million is a small percentage of $2.5 billion, too. So we're talking about small numbers.

The characteristic of the DCS portfolio is actually to have a relatively small amount of CapEx. That's the.

I mean this is 1 of the belt. I think the point here is it's very complementary profile because the development CapEx is being spent on the Danish assets and all the blue or assets. And so the decline rate is growing to below and the relatively small capital has to go in whereas we as a company, yes, our big projects are behind us. But as we've announced, we've got almost 50 projects that we're moving forward to sustain long-term production, and that requires investment. So when you put the 2 companies together, our cash flow profile is strengthened as a company because we have more cash flow and reduce capital with the combined company. So I think it's -- there's a lot of synergies putting the 2 together.

Next question will be from the line of Prem Cook of RBC.

Can you just talk us through the strategic thinking on this expansion to the day's continental shelf? And maybe, in particular, in relation to this, Nick, you said it was a natural evolution of Var strategy to step outside of Norway. What other geographical areas do you see as a step outside of Norway that you're targeting as part of your wider M&A strategy for the longevity of the business. And there was 1 question, I'll leave it there.

No, thanks for the question, and I knew that question was coming. So look, we're a big company. We're producing 400,000 barrels a day. And really, there's been a lot of consolidation of activity in Norway, 10 years ago, there were 50 companies active in Norway now there's half that number. And of course, we have been a big part of that consolidation. And we've created a business before BlueNord of producing above 400,000 barrels a day long term. But we shouldn't be satisfied with that. As a company, we want to continue to grow. And we are still focused on trying to grow within Norway, and I think there are opportunities to do that. And you saw us announce, for example, 5 transactions in the quarter, 1 of which was the acquisition of the remaining assets of Palio relatively small deal, but it's another good example of consolidation, and I think there's still things to do here. But I think we have to be realistic as a finite limit to this. And we should not be satisfied as a company with just producing above 400,000 barrels. They have 400,000 barrels as long as we can and then declining. We have to continue to create growth and value long term. But where we go is not quite so easy because Norway is a low-risk regime, which is very supportive investment into the industry and is reflected in who we are as a company. And so what I said is the natural evolution for our strategy. And I think stepping into Denmark is a very similar risk profile to us. It's serology. It's not very far away. The fiscal regime is very similar. And I think it's a great fit with us. Now it does say we were prepared to go outside of Norway. And I think we would be prepared to go elsewhere, but we have to find a place that's compatible with our risk profile as a company. And that's not that easy. So we will keep looking. And I think the key thing about M&A is you have to be opportunistic about this. And it has to fit our strategy and we have to be able to do it where we can create shareholder value. And those are how we look at this.

And the next question will be from Teodor Sveen-Nilsen of SB1 M. Please go ahead.

Also Conrad, which looks to be for both parties. I believe -- or a on 2 see resources. Nick, what will you do with the 2C resources of rumor that the team in Bus not been able to do this far?

Well, we took a perspective on that thinking about the transaction, and we would hope that we could unlock these things. And I think Bruno has done a fantastic job in creating value and -- but I think there's an opportunity here for us to work with the operator to create value out of this. And you've seen what we've been doing in Norway, and I think we've got the capability and a push to try and create value out of those. But I mean, we haven't valued it on this basis, but it's an upside in our transaction that we see as an opportunity to create further value and we should be looking to maximize production and value out of these assets. And I'm sure that's what will happen in due course.

And we'll now move on to our next question from Naisheng Cui of Barclays. Please go ahead.

Congratulations for the deal. One question from me, please, a Energy paid limited premium on Blue not shares. And could you comment on the bidding process or probably just how was the competition level in bidding resources in the weather North Sea region, please?

So maybe I can start by taking that one. So there wasn't a bidding process, so to speak. We had a bilateral engagement with or I think we went through a very helpful diligence process where we both understood our asset bases better. And I think from our perspective, the real point here is that we think there is a significant value uplift from being part of the combined Var entity. So we think it's a stronger combination. We think there is a much more resilient outlook for distributions, we think that with the production profile is above 400,000 barrels a day into the 2030s, there's really significant potential there that our shareholders will continue to benefit from. Particularly because the consideration is 80% stock, our shareholders aren't really giving up upside. We still get to participate in that, and they get to participate that in a much stronger base. And I would just echo the point that Nick made before in relation to the 2C question, there is a lot of potential that still remains within the Blue more balance sheet -- sorry, within the Blend portfolio, but it's really about making sure that you're able to deliver that. And that's something where I think based on the experience that Var has demonstrated in Norway. There will be some good operational synergies as well in terms of being able to take that experience and exercise it in Denmark.

And we'll now take our next question John A. Olaisen of ABG.

I wonder, do you have any precommitments from the Blue nor shareholders?

So we have sober AS who sit on our -- who are represented on our Board. They have supported the transaction and they hold under 10%, but that is the that is the commitments that we have so far.

Have you been in contact with BlueNord shareholders?

We have, since the transaction has been announced, obviously, had a dialogue with our shareholders, and that will continue in the near term.

Are they positive to the transaction? And do you expect the deal to come through without having to adjust the bid offer.

I think it's difficult for me to comment on that in the way that I think you're looking for exactly. But what I can say based on the conversations that we have had with Suber, who sit on our Board. And I think there's no reason to think that they aren't representative of the broader shareholder base. There has certainly been a strong recognition of the rationale for the transaction and participating as a shareholder in the combined and what the combined has the potential to deliver.

[Operator Instructions] Now I'll move on to our next question from Sasikanth Chilukuru of Jaffee.

A question regarding -- through the appendix of the deal. You mentioned the material Danish tax losses year-end 2025 of $336 million value post tax. So I was just wondering how that could be realized and how quickly those tax losses could be monetized.

So the tax loss position that we have is almost entirely Chapter 3 tax losses. So that is effectively the hydrocarbon tax regime that they have within Denmark. It depends on commodity prices, how quickly those are realized. But I think within the near term, within the next 12 to 24 months is a reasonable expectation.

And a question regarding gas prices. Our gas volumes or sale of gas volumes from the deal. Is it fair to assume that this would form a part of the overall gas volumes at are markets, no distinction in terms of how gas could be marketed in the -- post the combination.

When it comes to this, yes, as you said, this gas, of course, will become part of our overall gas portfolio. Clearly, there are contracts in place that will be honored and maintained as they had. But there are flexibilities you can -- we can find in our own portfolio, optimizing the overall portfolio because our approach again is on a portfolio basis. So having more volumes allow us to find opportunities, director indirectly within the overall gas sales and gas production we have. I don't know if we answered your question, but this is the way we're looking at it when it comes to the opportunity side.

A follow-up question from Tianhong Bi of Citi.

This 1 is on shareholder returns. You obviously have raised Q2 and Q3 dividends, your earnings release and presentation no longer mentioned a special dividend. Should we therefore assume that the higher base dividend has replaced a special dividend previously expected in 4Q? Or does that option remain open?

No, of course, we have lifted our dividends today, and this reflects also the 2 things. It reflects the higher prices that we've seen recently since the start of the conflict in the Middle East in beginning in March. And also record financials and, of course, the deal that we've done today, which is value accretive. And so we have lifted the deal, they do it then so and increase them. We remain open to the idea that if we see high prices going forward, that we will make a decision at the end of the year on a potential extraordinary dividend. But it's all depending on how we see the market going forward and what the results are when we get to February next year. As you'll appreciate, there's a lot of volatility. And I thought it was coming to an end a few weeks ago, and now it feels like it's not. And so it's quite uncertain what the outlook is going to be, and let's see where we are in February, and we'll decide then.

We'll now take our next follow-up question from Victoria McCulloch of RBC.

A couple more from me. Could you help us quantify the impact on 3Q production of the -- sorry, your Casper apologies and production issues due to the problems there? And then in listed BlueNord, can you give us a bit more detail on the bond -- the remaining bond with the synergies coming, I guess, from a financial perspective, are you required to wait until 2031 to redeeming the remainder of this.

So on the operational issues at Johan Castberg. I mean there were some problems with the power generation system. We've started in late June. It's -- we're now back at full production and we have a solution to manage this. So it's had obviously had an impact. I mean what I said, and we're not going to comment on individual fields and details like that. But -- on an overall basis, our second half production is going to be higher than our first half because we're -- basically, all of our shutdowns are behind us by now. And we're bringing on new projects, as I listed, and we've got quite a lot of new quite high impact wells to come on, so second half production is going to be higher, and we're on track to deliver our annual guidance outlook of 390,000 to 410,000 barrels a day. And then I don't know if you want to answer that.