Var Energi ASA

Good morning everyone and a warm welcome to Vodunashi's first quarter 2024 results. The presentation today will be given by our CEO Nick Walker and our CFO Stefano Piatti. Nick and Stefano will present the results and afterwards we will open up for Q&A. I will now give the word to Nick.

Good morning and thank you Ida. Good morning to you all and a warm welcome to our first quarter 2024 results presentation. This is the first quarter where you will see the impact of the Value Accretive Neptune NG Norga acquisition in the results, which we're consolidating from the 1st of January. I'm pleased to report a quarter with record high production and strong financial results. We continue to provide material dividend distribution and we're making good progress on our plan to deliver high growth and value creation. Now let us look at the highlights for the quarter. We delivered good operational performance, with record production in the quarter of 299,000 barrels a day, up 33% from the previous quarter. This growth is driven by a full quarter of breeder blick, which is producing strongly at plateau levels, and inclusion of the Neptune Energy Nolga assets from the 1st of January. On the back of good operational performance, we continued to deliver strong financial results. Our gas sales strategy continues to realize above market prices, with a gas price of $67 per BOE, which was $14 above spot. Production costs beat guidance, with $12 per barrel in the quarter. We delivered strong cash flow from operations post-tax for the quarter of $1 billion. And we maintain a strong investment-grade balance sheet, even after paying for the Neptune acquisition. Vore Energy is one of the fastest growing EMPs, and we're making good progress towards our target of producing around 400,000 barrels a day by the end of 2025, and unlocking future value beyond that. We're maintaining targeted startups for both the Johan Casberg and Boulder X projects in Q4 this year. Our portfolio of eight projects in development and starting up before the end of 2025, seven of those are more than 50% complete. And we recently announced a discovery at Ringhorn North in the Boulder area. And lastly, we continue to deliver attractive and predictable shareholder distributions. We confirm a dividend for the first quarter of 11 US cents per share in line with guidance, which is to be distributed in May. And we're providing Q2 2024 dividend guidance of $270 million. the same as for the Q1 payout, and reconfirming a full year dividend distribution guidance of approximately 30% of CFFO after tax. So strong results for the quarter all round. We're the fastest growing EMP, the third largest oil and gas producer in Norway, and the second largest exporter of gas from Norway to Europe. A large diversified portfolio with interest in over 50% of all producing fields and associated infrastructure on the NCS and around 200 exploration licenses provides lots of optionality and growth opportunities, which we're working to move forward at pace. As we've previously stated, the Neptune transaction was the perfect fit, adding scale, diversification and longevity. And as we previously guided, we expect to yield significant synergies from the transaction of around $500 million post-tax over time. And now that we've closed the deal, we're moving quickly to deliver this value. We're also making good progress on integrating Neptune Energy Nolga into Vor Energy. We've aligned the two teams, and from the 1st of May, we'll be working as one team. pulling together to deliver on our strategy and goals. We've renamed Neptune Energy Norga as Vor Energy Norga, and we'll combine the company with Vor Energy through a strategy merger, with completion of this anticipated towards the end of the second quarter this year. Turning now to production. Q1 came in ahead of guidance at 299,000 barrels a day, with gas making up 37% of the production mix. Quarterly production was 33% above the fourth quarter of 2023. This is due to a full quarter of breathable production, which came online towards the end of last year and is producing strongly at plateau levels, and also the inclusion of the Neptune assets from the 1st of January. We also saw strong production efficiency from our operated assets, averaging 93% in the quarter. Turnarounds will impact the second and third quarters, and then you will see growth from our major projects, Johan Casberg and Balder X, both targeting startup in the fourth quarter. Additionally, we have three further projects to start up during the year and also a significant portfolio of infill wells being completed. So we've got off to a great start to the year and are firmly on track to meet our full year guidance range of 280 to 300,000 barrels a day. Looking now at our longer term growth outlook, we're set for significant production growth from today's level of 300,000 barrels a day. Eight new projects in development, with the main ones being Boulder X and Johan Carlsberg, will add significant volumes. We'll also dispose of some non-core assets to high grade the portfolio, and we're working hard on this. Putting this together means we'll grow to around 400,000 barrels a day by the end of 2025, which we're firmly on track to deliver. And with our quality portfolio that has significant upside, we can then organically sustain production at 350 to 400,000 BOEs per day towards 2030. And we all achieve this through firstly maximizing recovery and infill drilling at our high quality assets with drilling adding 30 to 45,000 barrels a day over the period. Secondly, by moving at pace our portfolio of over 20 early phase projects towards sanction and also drilling out our exciting near field and high impact exploration program. This will deliver sustainable production towards 2030. Responsible operations are key to our license to operate, and we aim to be the safest operator. Overall, we've a good safety trend. However, during the quarter, we had one incident classified as serious, resulting from an individual falling on ice, which we will learn from. Our belief is that it is important to position the company for the energy transition, to maintain relevance and investability long-term, and we're doing just that and are being recognized for it. We continue to make good progress on emissions reduction. And today, we're already in the top quartile of industry performance. We have a clear path to over 50% operational emissions reduction from our portfolio by 2030. This is driven by our focus on investments in reducing emissions and electrification of our key assets. And during the quarter, the Sleipner Field Center, along with the Gudrun platform, started receiving power from shore. are involved in five electrification projects and by 2030 our aim is around 70 percent of our production will be electrified and on methane emissions they're already today below the net zero classification we've become a member of the oil and gas methane partnership which aims to improve methane emissions reporting and finally The recent inclusion of VOR Energy in the Oslo Stock Exchange ESG Index is motivating recognition and adds weight to our commitment to take a leading ESG position. And now on production costs. We beat guidance with $12 per barrel in the quarter compared to a full year guidance of $13.5 to $14.5 per barrel. This performance is driven by the strong production results reduce costs and a favorable NOC exchange rates. Longer term, our target is to reduce unit OPEX to around $10 per barrel by the end of 2025. With the main drivers of this being the new projects coming on stream, which have average OPEX of around $4 per barrel, integrating fully the Neptune assets, which have relatively low OPEX costs, high grading the portfolio and realizing cost synergies and improvements. And as a company, we have an amazing portfolio with lots of optionality and growth opportunities. You can see here our 2P reserves stand at 1.24 billion barrels. 10 projects will come on stream over the next few years, which underpins our growth profile. Our continued resources, as you can see here, are at 750 million barrels. These are discovered resources, but where there is no committed development projects. and we've identified over 20 early phase projects that we are progressing. These target around 60% of our contingent resources, and we're working to define further projects. You should start to see some projects sanctioned in the first half of next year. And we have an exciting exploration portfolio of over 1 billion barrels of net risk resources, where we'll drill around 60 wells over the next four years. Putting all that together, we have over 3 billion barrels of resource potential in the portfolio. And it is this that will organically sustain our production towards 2030. Looking now at our quality project portfolio, which is key to delivering on our growth targets. We have 10 remaining projects in execution, which unlock more than 400 million barrels of net reserves. We're well into execution with seven of the 10 projects more than 50% complete. So the risks are largely behind us. Let me remind you that most of these projects are subsea tiebacks. This means more standardized concepts, less complexity and more predictable delivery. This project portfolio drives our growth trajectory and creates significant value, which you can see with break evens of around $35 per barrel. And turning now to our two large projects. The Jotun FPSO is a key enabler to continue to deliver future value in the Boulder area. This project unlocks gross production of 80,000 BOEs per day and with low operating costs of around $5 per barrel. The status of the project is the Boulder Jotun FPSO is now around 95% complete. The other elements of the project, drilling and subsea facilities, are progressing on plan. And actions taken at the FPS over recent months to increase the pace of the remaining construction and commissioning work has yielded results. With overall progress only slightly behind the revised plan and completion of the project is in sight. Targeted startup is maintained in the fourth quarter of 2024 based on inshore sail away in August. As we discussed with the 2023 full year results in February, risk remains if completion of the planned work and weather conditions will not allow offshore installation activities in the autumn of this year. And in this scenario, the P90 startup is by the end of Q2 2025. We've plated flexibility with the FPSO installation arrangements, giving us full optionality on the timing of making the decision on when to install. And if First Oil moves to 2025, it will have limited impact on 2024 production. And as the project is nearing completion, this is principally a schedule issue and does not have a material impact on guided costs. However, I want to stress that we're around 95% done on the FPSO. Completion is in sight. And we're focused hard on meeting the targeted First Oil in the fourth quarter this year. Our other major project is Johan Casberg. The development is progressing according to schedule and is firmly on track for targeted startup in the fourth quarter of 2024. The key focus is final completion of the commissioning of the FPSO, where Sail Away is planned in the summer ahead of offshore installation. All subsidy installations are complete. And drilling activities are going to schedule with 12 of the 15 development wells planned for startup already completed. Johan Casberg is a key catalyst for Vore Energy's growth profile. And you can see here plateau production from the field is around 190,000 BOEs per day gross and Vore Energy's net share being around 55,000 barrels a day. And these are high value barrels with OPEX of around $4 per barrel and breakeven economics of about $35. We also see further upside from extending the platter through infill drilling and area tiebacks, where further phases of development are being planned, these being cluster one and cluster two. And we'll be drilling the Snorris exploration well later this quarter. And now focusing on our exploration programme. To remind you, this year we are planning 16 exploration wells. And you can see targeting next risk resources of around 150 million barrels and for a total spend of around $300 million. And these wells are spread through our four hub areas and all but two wells are step out opportunities from existing infrastructure. So far this year, we've drilled three exploration wells with one success at Ringhorn North in the Boulder area. which has gross recoverable resources, as you can see, up to 23 million barrels. And in addition to unlocking new resources, improving the northern extension of the Ringhorn field, the Ringhorn North discovery also de-risks more drillable prospects in the area, and also opens up potential development synergies with nearby Vore Energy-operated discoveries, such as King and Prince and Evereving. So the Boulder area is much more than just the Boulder X project. We're ramping up exploration activity this quarter with six wells planned. Teresa in the Yoa area is currently drilling, and the high-impact Venus well in the Barents will spud shortly. It's going to be exciting to see the results from this program come in. So that rounds off my operational update, and I'll now hand over to Stefano to review the financials. Thank you.

Thank you, Nick, and good morning, everybody. Let's deep dive into the key financial for the first quarter and see why Vor Energy is a unique combination of value creation, extraordinary growth, predictable and attractive shareholder distribution underpinned by an investment grade balance sheet. As Nick mentioned already, this is the first quarter where we consolidate the former Neptune Norway since January 1st, 2024. We generated solid revenues and operating cashflow after tax of $1 billion in Q1 on the back of good oil and gas price realizations and strong production. Our balance sheet remains solid following the Neptune acquisition with a leverage ratio at 0.7 times net debt to EBITDAX and $2.3 billion in cash and under-owned facilities. We confirmed the first quarter dividend of $270 million and plan to pay another $270 million for the second quarter of 2024. I will now go into more details of our first quarter financial performance. We generated more than $1.9 billion of revenues, up $257 million versus previous quarter, and not materially below the Q1 2023, which had extremely higher gas prices, mainly due to higher volumes. We also continue to deliver resilient price realizations, and in particular, to be a top performer, especially on gas price, where we had a price realization of around $67 per barrel, which represents a premium of $14 per barrel compared to spot. The realized price for oil in the quarter was $84 per barrel, slightly above Brent. We were also in the money for gas hedging related to Neptune volumes, which provided an extra $5 million in the first quarter. Taking a closer look at the gas sales in Q1, around 53% of the sales were on day ahead basis at $52 per barrel. Around 31% was sold on a month ahead basis at $59 per barrel. The remaining 16% were delivered under contracts with fixed pricing, realizing on average $134 per barrel. Going forward, what can we expect? Continue to have a robust portfolio with access to several markets, and we will have flexibility in the contracts to decide the split between month ahead, day ahead, quarter ahead, and fixed contracts. For the next two quarters, we will continue to have fixed price sales representing around 16-18% of the gas sales for around $130 per barrel. Starting from the fourth quarter, the fixed price exposure will decrease to around 4%. And this is because upon time of nomination for the gas year ahead, we assess the forward curve to be undervalued. We have therefore chosen to keep our position open and plan to, when the time is right, to use other instruments like fixed price or quarter ahead to catch window of opportunities when they arise, allowing us to keep maintaining robust pricing for our volumes also for the coming gas year. From Q4 going forward, we will also be able to include the Neptune gas in our short and long-term contracts, which will offer increased flexibility and opportunities to realize additional value. I would also like to mention that our oil production is fully edged on a post-tax basis for 2024, including Neptune volumes, with monthly put option at a strike price of $50 Brent. And we plan to continue the program going forward also in 2025, where actually we have already covered post-tax production until end of Q1 2025. Cash flow from operations in the quarter was $1 billion, higher by $152 million compared to the fourth quarter, mainly due to higher revenues. Our capex for the quarter is $694 million, where Balder X and Johan Casper remain the largest contributor of the total spend and will be main contributors to the 400,000 barrels a day by end of 2025 target. The strong operating cash flow covered the company CapEx with good margin. The CFFO to CapEx coverage was 1.5 in the quarter. Our resilient and strong liquidity position continued following the Neptune acquisition. Here we see the development in our cash position from Q4 to the end of the first quarter. We generated $1 billion after tax and working capital movements, an increase of $150 million from the last quarter. We further had a cash outflow of $2 billion related to the acquisition of Neptune and investments in our high value growth projects. The net cash inflow from financing activities was $1.3 billion related to drawdown of the working capital revolving credit facility. We also distributed as planned $270 million in dividends to our shareholders. In summary, the cash position at the end of the year stood at $722 million and our available liquidity was at $2.3 billion at the end of Q1, including the payment of the consideration for Neptune compared to $3.7 billion in the previous quarter. The leverage ratio net interest bearing debt to EBITDAX ended at 0.7 at the end of the quarter, following the payment of Neptune. This is up from the previous quarter, but still well below our over-the-cycle target of 1.3. Our debt portfolio is strong and diversified with a weighted average time to maturity at 5.5 years when excluding the 60-year hybrid. This is supporting the execution of our growth strategy towards end of 2025 and beyond. Our BAA3 rating from Moody's and our BBB rating from S&P were reconfirmed in 2023, both with a stable outlook and we are committed to maintain our investment grade rating. The strong financial position lays a solid foundation for continued material shareholder distribution and growth, and this is a unique investment proposition that Vor Energy offers. Now, let's look at the tax guidance for this year. In Q1, we paid approximately 5 billion NOC in cash taxes, and for the next quarter, we have two tax installments amounting to around 10 billion NOC. At mid-year, we will update the tax estimates for 2024, and in the second half of this year, we will be paying approximately 50% of the 2024 estimated profits. We have included a tax sensitivity for the second half of 2024, which is giving the cash tax estimates at different price scenarios, with Neptune included since January 1st. Vore Energy has a strong track record of delivering value to our shareholders. Since the IPO, we have returned around $2.2 billion in dividend, and over the last eight quarters, we have paid a stable dividend of around $250-300 million. And our strong and resilient financial performance in the first quarter of 2024 continues to support attractive and predictable dividends. We confirm $270 million in dividend for the first quarter, which is equal to 11 cents per share to be paid on the 8th of May. The dividend guidance for the second quarter of 2024 is $270 million, despite a continued volatile commodity price environment, showing the commitment and resilience of the company to attractive shareholder distributions. We maintain our dividend policy of 20 to 30% of the CFFO after tax going forward, but with 2024 being in the higher range at approximately 30% of the CFFO post-tax. To sum up, we are well positioned to deliver on our growth and sustained value creation, and we will continue to pay attractive and predictable dividends in the years to come. Finally, I will summarize our key 2024 and long-term guidance. For 2024, our production guidance is 280, 300,000 barrels a day, which will increase to 400,000 barrels a day by end of 2025. Further, we have ambition to sustain 350, 400,000 barrels a day until 2030. Production costs in a range between 13.5, 14.5, a dollar per barrels with a target to bring it down towards 10 by end of 2025. CapEx in a range between 2.7, 2.9 billion dollars in 2024, going down to 1.5 to 2.5 billion dollars thereafter. cash tax payments of approximately $1 billion in the second quarter, and dividends of $270 million for Q1 2024, and $270 million guidance for Q2. And we expect to pay out approximately 30% of the CFFO after tax in dividends for 2024. With that, I hand it back to Nick for concluding remarks.