Aker Bp Asa Ord

Good morning everyone and welcome to our presentation of AKBP's fourth quarter and full year 2025 results, as well as our annual strategy update. I am joined today by CFO David Turner and you will also hear from a few others in the team as we go along. Our agenda today has three main parts. First, a review of our operational and financial performance in 2025. Second, our strategy update and the priorities that will guide us in the years ahead. And finally, as usual, a Q&A session. Let me start by the key highlights for 2025. We delivered strong cash flow from operations, supported by consistently high production efficiency across the portfolio. Our major development projects progressed as planned and remain on schedule for startup in 2027. It was an outstanding year for exploration, as we participated in the three largest discoveries on the NCS and added around 100 million barrels of resources. We maintained an industry-leading cost and emissions performance. And financially, we kept a clear focus on shareholder returns while protecting the balance sheet and preserving financial flexibility. With that, let's look at 45 performance in a bit more detail. Full-year production for 2025 averaged at roughly 420,000 barrels per day, at the top end of our initial guidance a year ago. The outperformance was broad-based, and the production efficiency landed at 96%. I would particularly like to highlight the contribution from Alfheim, where we reallocated processing capacity to Törving for a commercial arrangement. This added flexibility and supported production in the first half of the year. Johan Sardrup continues to be our single largest contributor to production. The field delivered strong and stable volumes through 2025, supported by excellent reservoir quality, high regularity and very low operating costs. Last year, we took several steps to strengthen the long-term production profile. The retrofit multilateral campaign is progressing well, the second well is now on stream, and the third is being drilled. There has been a lot of attention recently around Equinor's comments on expected 2026 production, indicating a decline of more than 10% from last year. This should not come as a surprise. The field has produced around half of its reserves, and like any field in this phase, production will of course gradually decline over time. This expected decline has been reflected in our company guidance throughout. And we are taking active measures to manage this decline. For 2036, we plan to drill six infill wells from the drilling platform, along with a subsea campaign of three additional infill wells. We will also drill an appraisal well on the north flank, Tonjar, to assess the potential for a new template in that area. And then we have phase three. This subsidy expansion will add two new templates and eight wells. The project was sanctioned last year and is progressing as planned, with fabrication ongoing at several sites. Drilling of the phase 3 wells is set to begin towards the end of 2026, and startup is expected in the fourth quarter of 2027. Overall, Johansson remains a world-class asset that will continue to deliver high-value barrels for many years to come. We maintain an industry-leading cost level, with production costs of $7.3 per barrel. essentially in line with our guidance of around $7. This reflects strong production efficiency, a firm cost discipline, effective execution of maintenance activities, and a constant focus on the operational performance. Our emissions intensity was 2.8 kg of CO2 per barrel, among the lowest in the industry, and we delivered solid safety results with a low and stable TRIF and SIF. Keeping our people safe will of course always be our top priority. 2025 was also a very active year for our field developments. We often get questions about what this activity really looked like, what our teams are doing, how we worked on foals, and what scale that lies ahead of us in the coming years. So instead of walking you through every single task, I thought we'd just show you. This short video offers a quick glimpse into the pace, the scale of the activity across the field developments last year. Thank you. . . We will return to the two largest projects later in the presentation, but let me say a few words about the smaller developments. The Tideback projects are also delivering high value. In short, they are performing exactly as they should. Solvay Phase 2, tied back to Adolf Gregg, came on stream last week, on time and on budget. Simra, which will be tied back to Ivar Rosen, remains on track for startup later this year. and the SCARV satellites are progressing so well that we now expect first oil already in the fourth quarter, more than six months ahead of the original plan. 2025 was a breakthrough year in exploration. We participated in the three largest discoveries on the NCS and added around 100 million barrels net to AKBP. At Köttkake, we worked closely with DNO, combining our subsurface insight and fast-track development approach to rapidly unlock a matured discovery. At Omega Alpha, near Yggdrasil, we pushed the technical frontier with advanced geosteering, wired pipe technology and long horizontal drilling. This enabled real-time reservoir mapping and turned a multi-target well into one of the largest NCS discoveries in a decade. Lofven and Langermann is also a highly promising discovery, which was enabled by ocean bottom nodal seismic, where sensors are placed on the seabed to provide more precise geological data than traditional surface seismic. We will return to the topic on exploration later. Now, the 2025 numbers.

Thank you and good morning to you all. As Carla just outlined, 2025 was a year of strong operational performance, providing a solid foundation for continued delivery of our value creation plan. Sustained high production and low operating costs combined with a relatively stable commodity price environment and immediate tax deductions for investments resulted in a record high operating cash flow of around $7 billion. Our development projects remain on schedule for startups this year and the next. In fact, the SCARV satellites have now been accelerated into 2026. At the same time, throughout 2025, our two largest development projects have increased in size, both in terms of total investments, but also the resource base and expected future production. We will return to this later. During 2025, we have taken several proactive measures to further strengthen our financial flexibility, and after BP enters 2026 in a strong financial position, with a balance sheet with low leverage and ample liquidity. Lastly, in accordance with our ambition, we increased dividends by 5% year over year. So with that backdrop, let's turn to the 2025 financial results. Earnings ended at $2.8 per share, compared to $3.5 in 2024. Importantly, we delivered a strong operating cash flow of $11 per share, up from $10 the year before. This provided a solid foundation for the $2.52 per share in dividends we paid, while also covering most of our growth investments. And finally, we closed the year with a continued low leverage ratio of 0.6 times net debt to EBITDAX. Zooming then in on a few key points from the fourth quarter. Production in the quarter averaged 411,000 barrels per day. With an overlift position of 20,000 barrels per day, more or less reversing the underlift from the third quarter, net sold volumes ended at 431. Realized hydrocarbon prices averaged $63 per barrel of oil equivalent, with realized oil prices, as normal, slightly above Brent. Operating costs came in at $7.9 per barrel produced, compared to $7.6 in Q3. The increase mainly reflects the facing of maintenance activities and production mix. Throughout 2025, we have, as expected, seen a stable increase in production cost per barrel, driven by the decline in production. This has been amplified by the weakening of the dollar against the Norwegian kroner, starting the year above 11 Norwegian kroner and ending around 10. As mentioned, operating cash flow for the full year was record high. Looking at the quarterly pattern, cash flow before tax payments and working capital movements remained fairly stable through the year. With tax now paid in 10 monthly installments, quarterly cash flow will be less volatile going forward, all things equal. Investments in the fourth quarter were 0.1 billion higher than the two preceding quarters, with the main driver being the major development projects. The combination of three tax installments, a small working capital increase, and higher capex resulted in a negative free cash flow of $427 million for the quarter, or minus 68 cents per share. Let me also comment on the impairments this quarter. As you can see from the income statement, we recognized impairment charges of $944 million in the quarter. These relate to technical goodwill on Johan Sverdrup, the Valhall and Alveheim areas, as well as other intangible assets at Valhall. The main driver this time is lower forward prices for oil and gas at the end of the fourth quarter, compared to the end of the third, which reduces the recoverable value in the accounting tests. As a reminder, technical goodwill is an accounting effect from earlier acquisitions. Because this goodwill is not depreciated under IFRS, we must test it every quarter. And all else equal, as we continue producing from the assets where goodwill was allocated, we should expect non-cash impairments over time. When price assumptions move, that amplifies the effect. Since impairment of technical goodwill has no tax deduction, the charges flow straight through the income statement and result in a high reported tax rate. For the quarter, the effective tax rate ended at 137%, and this is entirely driven by the impairment effect. If we adjust for these non-cash items, earnings per share would have been significantly higher, and the tax rate would have been much closer to what you should normally expect. And as always, for those of you who want a deeper explanation of technical goodwill and how impairments work in our accounts, I recommend the short video available on our investor website. Moving on to the balance sheet and recent developments in our financial position. Building financial capacity and ensuring access to capital is a continuous process for us. Over the past years, we have completed several successful bond transactions, which have strengthened our financial flexibility and pushed our debt maturities well beyond the startup of our major field developments. In October, we continued to capitalize on favorable market conditions by issuing $1 billion in 10-year senior notes maturing in 2035, with the tightest credit spread on a 10-year note ever achieved for Aker BP. To me, this once again confirms that the U.S. bond market and its high-quality institutional investors shares our confidence in the long-term outlook for oil and gas, the strength of the Norwegian continental shelf, and in Aker BP's strategy and value creation potential. Also in October, we refinanced our bank facilities, a total of $3.2 billion, with maturities up to five years, with options that could extend final maturity to seven years. This refinancing replaces the previous facilities that were set to mature in 2026. As shown in the chart on the left, net interest-bearing debt increased to $6 billion by year-end. At the same time, tax payables came down significantly to 1.1 billion. In practice, this means that half of the debt increase was driven by the reduction in taxes owed to the state. Our leverage ratio remains low, but as expected, given the current oil price environment and our investment program, it ticked up to 0.6 times net debt to EBITDAX at the end of the quarter. Total available liquidity stands at 5.9 billion dollars, where 2.6 is cash or equivalents, and the rest is our undrawn bank facilities. Now to round off, let me briefly recap how our 2025 deliverables tracked against our guidance. We started the year with a production guidance of 390 to 420 thousand barrels per day. As we progressed through the first half, performance was very strong across several fields, particularly from Tyrving in the Alvén area, which de-risked the lower end of the range. We therefore raised the bottom of the guidance at our second quarter presentation. Momentum continued through the summer, with consistent high performance across the portfolio, and importantly, a Valhall with no chalk influx issues for the first time in many years. This gave us the confidence to lift the guidance again in Q3, to the most recent guidance range of 410 to 425. For the full year, production in the end averaged at 420,000 barrels per day, at the very top of our original range. On production cost, we guided around $7 per barrel, and ended at 7.3. The main driver for ending in the higher end was the weakening of the US dollar versus the Norwegian kroner, moving, as mentioned, from above 11 to around 10 through the year. Underlying costs were in line with expectations, and with like-for-like foreign exchange rates, production costs would have ended below $7 per barrel. Turning to CapEx. As many of you will remember, we increased our 2025 estimate to around $6.5 billion in July. We ended nearly 8% above that, close to $7 billion. The increase was mainly driven by two factors. Good progress, but also higher spend on the PVP Fenris project, and the same currency effect that impacted production costs. The foreign exchange impact was however partly offset by our currency hedging program, which in the third and the fourth quarter delivered realized gains of $13 million, equivalent to a capex reduction of around $75 million. Expiration and abandonment spend came in as guided, close to $500 and $100 million respectively.

With 2025 behind us, it is time to look ahead. And before we turn to Al-Khabib's strategy, let me briefly step back and look at the broader strategic context, which really, in my mind, comes down to two questions. First, will the world continue to need oil and gas? And second, does the Norwegian continental shelf and AKBP have a role to play? On the first question, global oil demand continues to be much more resilient than many expected. Much of the growth comes from aviation, petrochemicals and expanding economic sectors that continue to depend on oil, while road transportation remains the single largest source of consumption. Our market analysis points to a continued growth in the global oil demand at least to 2035. The energy transition is accelerating, but the global demand for energy is growing even faster. we are still adding new resources of energy, not replacing the existing ones. We will therefore rely on hydrocarbons throughout the transition, and the world is better off sourcing these barrels from lowest emission producers. At the same time, natural decline in existing fields removes a large number of barrels in supply each year. which means substantial new investments is required just to keep the market in balance. If we step back from the short-term volatility, the oil market remains structurally tight. On the second question, let me start by saying that the Norwegian continental shelf is a fantastic place to be for an oil and gas company. Not only because of the resources beneath the seabed, but also the environment above it. We operate within a stable and predictable regulatory and fiscal framework, supported by high standards for safety and emissions. And we have a world-class supply ecosystem that drives innovation and raises the performance for the entire sector. According to the Norwegian Offshore Directorate, Norwegian oil and gas production is around its peak today and is projected to decline unless decisive action is taken. The Directorate outlines three scenarios towards 2050. In the high scenario, which reminds significantly higher production and creates significantly greater value for the society, three things must happen. First, Norway needs sustained exploration activity that delivers a large number of commercially viable discoveries, both near the existing infrastructure and in the less mature areas like the Barents Sea. Second, we need rapid technology development to increase recovery both from existing fields and to unlock resources that are smaller and more complex like type and HPHT resource. And thirdly, we need a continued industry commitment to invest in exploration, in developing discoveries and in improved recovery across the shelf. If we deliver on these priorities, the high scenario is certainly within reach. Norway can continue to develop its resources, contribute to Europe's energy security, and create sustainable, substantial long-term value for its society. This is Akka BP's clear ambition, and delivering on it will require technology, speed, and new ways of working. Areas where Akabipi already stands out. For years, we said digitalization would reshape our industry. Today, that shift is no longer theoretical. It is here. And Akabipi has a unique advantage. A long history of forward-leaning digital ambitions combined with a scale that lets us move fast. Over the past decade, we haven't just built digital tools. We've built a data foundation that connects the whole company. High quality, structured, real-time data. On the top of that sits a future-fit digital ecosystem that allows us to integrate, automate and optimize across exploration, drilling, project and operations. This foundation is what makes everything else possible, including the growth we are aiming for. We started out by improving analog work processes, then we digitalized them, and now we are entering a stage where the entire workflows themselves are being reconstructed. Artificial intelligence collapses in traditional processes and gets us to decisions in a fraction of the time. We're already seeing the impact across the business. In exploration, artificial intelligence is enabling earlier and better decisions. In drilling, wire drill pipe, long horizontals and advanced geosteering is delivering world-class performance. And at Yggdrasil, digital twins, autonomous systems and condition-based maintenance are turning remote and low-man operations into reality. And finally, across operations, AI agents are cutting troubleshooting time, improving uptime, and freeing our people to focus on higher-value decisions. But this is not experimentation. It's a capability. A capability that strengthens our competitiveness, increases our pace, lowers our cost per barrel, and supports the growth journey ahead. It is a differentiator that helps us move from discovery to first oil faster than ever before, and do so safely and predictably. And this is why we are so confident about the road ahead. Because we're not starting now. We are scaling on 10 years of investment, hard-won experience, and a data foundation that many talk about, but few actually have. The NCS now needs a step change in productivity. It is in fact a race to deliver faster, safer and at a lower cost. And the companies who manage that will shape the future of the shelf. RKBP is pulling ahead and I can assure you we do plan to stay here. Before we move on, let's hear a brief external perspective.