Var Energi Asa U/Adr

Hi everyone, and welcome to Vore Energy's Q2 presentation for 2025. This call is being recorded. For the first part of this call, all participants will be in a listen-only mode. Afterwards, there will be a question and answer session. To ask a question during the Q&A, please press 5-star on your telephone keypad. I would like to introduce Head of IR, Ida Maria Fjellheim. Ida, please go ahead.

Good morning, everyone, and a warm welcome to Orinashi's second quarter 2025 results. The presentation today will be given by our CEO, Nick Walker, and our CFO, Carlo Santopadre. Nick and Carlo will present the results, and afterwards we will open up for Q&A. I will now hand the word over to Nick.

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 to join us today for our second quarter 2025 results presentation. I'm pleased to report strong results for the quarter. Our key growth projects have been delivered as expected, which means we're on track to meet our plans for transformational growth in 2025. And we're moving forward a pipeline of quality new projects at pace that will sustain value creation in the longer term. And on the back of this strong performance and the resilience of the company to manage through the volatile markets, we continue to provide attractive and predictable dividend distributions. So now let us look at the highlights for the quarter. Production is on track to meet the midpoint of the full year guidance range. We deliver production of 288,000 barrels of oil equivalent per day in the second quarter. The Jotun FPSO at the Boulder Field is successfully on stream as expected and is ramping up. Johan Casberg is now producing at plateau levels. Our major turnarounds for the year will be behind us at the end of July and we're now producing above 350,000 barrels per day with more to come very soon. And we've strengthened our financial position. with CFFO post-tax in the quarter at $766 million. We maintain our strong focus on cost discipline, with reducing operating costs on track to be around $10 per barrel by the fourth quarter, as guided. And our gas sales strategy continues to create value, with 25% of volumes locked in for the second quarter at $92 per BOE. And during the first half of 2025, our financial position has been strengthened through the successful refinancing of credit facilities, issuance of senior notes, totalling $5.2 billion, reducing cost of debt and providing significant available liquidity. And to further improve the resilience and competitiveness of our business in a volatile market, we're reducing 2025-2026 spend by $500 million in total, while maintaining our long-term production outlook. And we're delivering on our transformational growth targets and plans to unlock future value. We're adding around 180,000 barrels of oil equivalent per day at peak for nine project startups this year. And with the key projects now online, we expect to reach around 430,000 barrels per day in the fourth quarter this year. We're on track to sustain production of 350 to 400,000 barrels per day towards 2030, which will be achieved by developing our portfolio of around 30 early phase projects. We sanctioned four projects so far this year and expect a total of over 10 project sanctions by the end of the year. And our leading exploration track record continues with three commercial discoveries so far this year, generating new projects. And lastly, we continue to provide attractive shareholder distributions. We confirm a dividend distribution for the second quarter of $300 million, which means we've paid stable or growing dividends for the last 14 quarters. And we're providing dividend guidance for 2025 full year of $1.2 billion. And now that our key new projects are online, we're also guiding $1.2 billion for the full year 2026. And given the resilient financial outlook and level of liquidity for the company, we're able to maintain this dividend guidance under any realistic price scenario. And we have a resilient and flexible business that provides competitive advantage in the current volatile market conditions. And we continue to improve this resilience, incrementally getting better and better all the time. And if you look back over the last few years, you'll see this thread running through how the company has performed. We have a cash flow break even around $40 per barrel, averaged over the period 2025 to 2030. This means that $40 per barrel, we're covering all our costs and funding our growth plans. So anything above $40 per barrel is available to fund dividends or debt repayments. And as I said, we've refinanced the business with $5.2 billion, reducing costs of financing and extending debt maturity profile. Our available liquidity today stands at $3.5 billion. I think this shows the strong confidence in the company's outlook. Around one-third of our production is gas, which provides a natural hedge to our financial outlook. And we're using our gas sales strategy to create additional value, with around 20% of our volumes this summer period locked in at $90 per barrel. And all of our major projects are now online, and what is ahead of us is a series of high-value tie-back projects. With around 65% of our future capital spend uncommitted, this provides us with flexibility to manage the business through the cycles. And we're taking this opportunity in the cycle to improve our business and use some of our flexibility. We're reducing spend by a total of around $500 million over 2025-26. This is being done without any impact on the long-term production outlook for the company. So now looking at some of the details. VoEnergy is one of the fastest growing EMPs globally and we're the third largest oil and gas producer in Norway. And we've built a business, built 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. And we're also one of the largest exporters of gas from Norway. This amazing portfolio, which provides lots of optionality, is driving our growth and sustained production. And we're stepping up the pace to realise this value. The mantra, as I've said before, is more faster, and you'll see some further examples of increased pace in our presentation today. And we're delivering transformational production growth in 2025. From 280,000 barrels of oil equivalent per day in 2024, we'll grow to around 430,000 barrels per day in the fourth quarter this year. That is double 2023 levels. This is driven by nine project startups during the year, adding around 180,000 barrels per day of new production at peak levels. And we're also guiding approximately 400,000 barrels per day in 2026. And with our high quality portfolio with significant upside, we can organically sustain production at 350,000 to 400,000 barrels per day towards 2030. And now looking at 2025 production, where we're on track to meet the midpoint of the full year guidance range of 330,000 to 360,000 barrels of oil equivalent per day. First half 2025 production came in at 280,000 barrels per day, which was at a lower end of expectations. This is due to the later start-up and slower ramp-up to plateau at Johan Casberg than it initially anticipated. We continued with excellent performance at our operated assets, with production efficiency better than target at 95% for the first half of the year. Second quarter production was impacted by 30,000 barrels per day of reductions due to planned turnarounds. All of our major turnarounds for the year will be complete by the end of July, with reduced impact for the rest of the year. And our key growth projects have been delivered as expected, with four of the nine projects to come on stream this year already online. Johan Casberg is producing at full capacity. The Jotun FPSO at the Boulder Fields and Holton East are both ramping up. And Ormolanga Phase 3 has started ahead of plan. And the remaining five projects are on track to start up as planned in the second half of the year. Current production is above 350,000 barrels per day. This is before the restart of Snorvit following the completion of the turnaround at the end of July. and only includes low volumes from the start of Jotun FPSO. So there are more volumes to come very soon. And we expect to produce around 430,000 barrels per day in the fourth quarter ahead of our guidance, which means we're on track to meet the midpoint of the production guidance range for the year. Turning now to our two key project startups that are the main catalyst for our transformational growth this year. Production through the Yoten FPSO at the Boulder Field was successfully started in June, in line with expectations. And this marks the start of a new era for the Boulder Field, extending the life of the first production licence on the NCS to 2045 and beyond. Production will ramp up as the 14 completed new wells are brought on stream. Commissioning of these is currently running ahead of schedule. We now expect to reach peak production during September of around 80,000 barrels of oil per day gross. This is on top of the 30,000 barrels per day currently being produced through the Boulder FPU and Ringhorn facilities. And the project is developing gross recoverable reserves of around 150 million barrels with a further 45 to 50 million barrels coming from phases five and phase six. And this is produced with low operating costs of around $5 a barrel. Together with Boulder phase five, the project has a payback of around two years from production startup. we're making good progress on phase five the first dual lateral well has now been successfully drilled and we'll start to see the phase five wells come on stream from the fourth quarter this year and with the yoten fpso install as an area host we're actively working to bring new volumes through the facility to create additional value and you'll hear more on this later And Johan Casberg started up at the end of the first quarter, and in June reached plateau production levels of 220,000 barrels of oil per day gross, with Vore Energy's net share being 66,000 barrels per day. And these are large volumes in our portfolio, with an export tanker lifting from the field taking place every three to four days. Also, these are very high-quality volumes trading at material premium versus Brent. The initial field development is for gross recoverable reserves of between 450 and 650 million barrels of oil, which will be produced with low operating costs of around $4 a barrel. The field will be produced for more than 30 years, contributing to significant growth and value creation with a payback time of less than two years from start-up. And the Johan Casberg area is highly prospective, and several new discoveries made in recent years are being moved to development, including an extensive infill drilling programme planned to sanction this year. The Johan Casberg cluster 1 development, consisting of two phases, is targeting sanctions of the first phase, being the Isfrak discovery, by the end of the year. And we recently announced the Dremis Tobion discovery in the area, which is assessed to be commercial. In total, there are between 250 and 550 million barrels of additional gross unrisked recovery resources identified in the area, which we anticipate will enable us to keep the facilities full towards 2030. So we see Johan Casberg as a key driver for sustaining production long term. And now looking at operational performance, you can see that we have a strong trend of continuous improvement. Overall, we have a good safety record, which is generally getting better. In the first half of the year, with a good outturn, with zero actual serious incidents, this performance takes strong focus every single day. On production costs, we achieved $12.2 per barrel in the first half of the year, which is within expectations. And looking forward, we're on track to reduce production costs to around $10 a barrel in the fourth quarter this year. And we target to sustain at this level long term, which is around 30% reduction from 2023 levels. And this is driven by the new fields coming on stream that have OPEX of around $4 a barrel and continued high focus on realizing cost synergies and improvements. And you can also see we have a strong improving trend on production efficiency for our operation assets, which was 95% in the first half of the year and ahead of our target. And I think these elements go hand in hand. Strong safety focus drives good operational discipline and is a good example of the incremental improvements I talked about earlier. And we're positioning the company to adapt to the energy transition to ensure relevance and investability long term, and we're delivering on our decarbonisation plan. We're top quartile in the industry globally on carbon emissions intensity, and our methane emissions continue to be at the near zero level. So we're already doing very well, but we want to go further, and we're aiming to be carbon neutral in our net equity operational emissions by 2030. And we'll achieve this through further investments in electrification of our key assets and direct investment in natural carbon capture projects to offset what we can't reduce. We have a plan in place to achieve this objective. And I'm also pleased that we're getting recognition for our ESG leadership. Stainalytics continue to rank us as a top rated company. This puts us in the top 15% of global oil and gas industry. And we continue to be, including the Oslo Stock Exchange ESG Index, as the only oil and gas company. I think this is leveraging to how the company is viewed. And Vol Energy has an amazing portfolio with lots of optionality and growth opportunities. Our 2P reserves stand, as you can see, at 1.2 billion barrels. This is either in production or under development and underpins our transformational growth. But we're much more than that. We have 2C contingent resources of around 900 million barrels, and we're moving forward around 30 early phase projects accounting for approximately 600 million barrels. We also have an exciting exploration portfolio of over 1 billion barrels of net risk resources, where we expect to drill out about 50% of this over the next four years. And so putting this together, we have over 3 billion barrels of resource potential, with 60% yet to be developed. And that is how we will organically sustain production long term. And we're working at pace to create value for this opportunity. And we have a resilient and flexible portfolio of around 30 early phase projects that we're progressing towards development. These are mostly subsidy tiebacks to existing infrastructure with low costs and short time to market. And we're creating a subsea factory with standardisation, pre-commitments and strategic partnerships to reduce costs, improve predictability and speed up time to first production. And we've created real momentum here with four project sanctions so far this year, including the recent commitments to the Fram Soor and Boulder Phase 6 subsea tieback projects. In total, we're expecting to sanction over 10 projects by year end, as indicated on the chart. The portfolio has strong economics with average break-evens of around $35 a barrel and good rates of return. And we're using the opportunity of the lower prices to rework some projects to make them even better and improve economics. And we're having success at this. And we've just announced the sanction of the Fram Soor subsea tieback project delivering high-value barrels. This is the next phase of development in the prolific Fram licence, where Vore Energy has a 40% interest. FramShore is a combined development of several discoveries that will export oil and gas via the Troll Sea platform. And the project will develop net reserves around 50 million barrels of oil equivalent and contribute with around 20,000 barrels per day net to Vore Energy at peak once the project starts up at the end of 2029. Project economics are strong and fulfilled for energy's investment criteria for new developments. And building on recent exploration success, a series of foreign exploration targets in the Fram licence are set to be drilled in the coming years, unlocking potential further upside. For energy estimates that the remaining prospective unreached resources in the area are more than 200 million barrels gross, so there's lots more to come from this prolific licence. And we've also recently sanctioned the Boulder Phase 6 project, a fast-track development that will be an important contributor to sustaining long-term, high-value production through the newly installed Yoten FPSO. The project consists of one multilateral production well, installation of new subsea templates and a flowline that will be tied into the Yoten FPSO and is developing gross reserves of 15 million barrels. By using equipment held in inventory, we're able to fast track this project, which will start up by the end of 2026, only 18 months from sanction. And this project has strong economics with a break even well below $35 per barrel and an IRR above 35%. In addition, the Boulder has several early phase projects that are also being progressed. including what we're calling Boulder Next, which is targeting gross resources of up to 50 million barrels and consists of four elements. First of all, decommissioning the Boulder FPU, transferring selected FPU wells to the Yoten FPSO, accelerating production stream, de-boltonizing the Yoten FPSO, and then also drilling new production wells. And this rationalisation of the facilities in the Boulder area will drive significant OPEX and carbon emissions reductions. With the Oton FPSO serving as a new area host, production from the Boulder field is expected to remain at 70,000 to 80,000 barrels per day gross towards 2030. now turning to our exploration program our leading exploration track record continues with three commercial discoveries so far this year generating new projects yesterday we announced the commercial gas condensate discovery at the vision ridge very close to war energies operated fenya field in the norwegian sea the vision ridge has the potential to hold gross recoverable resources of up to 100 million barrels of oil equivalent where more energy is the operator with a material 75% interest. The vision discovery well confirmed growth to recover resources of 25 to 40 million barrels of oil equivalent in high quality reservoirs. The remaining potential of the ridge will be assessed through an appraisal programme to facilitate a subsea tieback development. And as I've already mentioned, we made another discovery Drives to burn close to young Casper, which is commercial to tie back to the facilities. And as we announced earlier in the year, we continue to build on the Goliath rich success in the Barents Sea, where we're operator with a material 65% interest with estimated growth discovered plus prospective recovery resources above 200 million barrels. This potentially is as big as the Goliath development. To assess the exciting Goliath Ridge discovery further, we've recently finished shooting a new 3D seismic survey, and we'll follow that with two further appraisal wells in the second half of this year, with the aim to progress the fast-track development of the Goliath Ridge through the Goliath FPSO, where there is plenty of available capacity. Pulling this together, so far this year we've confirmed 40 to 60 million barrels of net discovered commercial resources from our exploration programme. but the upside is significantly higher from the further appraisal of these discoveries. And we continue with an active exploration programme for the remainder of the year, with nine further wells to drill, targeting over 110 million barrels of net unrisked resources. It's going to be exciting to see these results come in. And so we're making significant progress, maturing our upside resource potential into value through committing to new projects and making new commercial discoveries. 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 to all. I would like to start by summarizing the key financial highlights of the second quarter. We have achieved robust realized prices compared to spot and peers, with a weighted average price of $70 per BOE. We generated strong revenues and an operating cash flow after tax of $766 million in Q2. We confer the second quarter dividend of $300 million, and on the back of the incoming material production growth and the maturation of our very high-quality project portfolio, we plan to sustain this level for the remaining of 2025 and 2026. In the quarter, we successfully issued $1.5 billion of senior notes and refinanced our credit facilities, reducing cost and extending maturity of our debt portfolio. Our balance sheet remains strong and resilient with $3.5 billion in available liquidity, and a leverage ratio at 0.9 net debt to EBITDAX. Even in a lower price environment, as we are maturing our high-quality reserves base, we are adding value to our assets and increasing their financial resilience to impairment, strengthening our balance sheet. We are successfully progressing towards a transformational year for more energy. I will now go into the details of our second quarter financial performance. We obtained a robust pricing for our products in the quarter, both relative to spot and pierce. In the quarter, we generated more than $1.8 billion of revenue, in line with the previous quarter, notwithstanding the lower price. The realized oil price in the quarter was $68 per BOE, above average Brent in the quarter, due to lifting schedule. With the ramp-up of Young-Casberg, the significant volume addition to our oil production is at material premium versus Brent, contributing to high-grade our entire portfolio. The realized gas price was $79 per BOE, well above spot pricing, as a result of optimization of indexes and fixed price transactions in our gas sales contracts. Going forward, we have used our flexible gas sales contracts to lock in high prices in the summer months. We have already executed fixed price transactions with customers, and for Q3, we have sold approximately 18% of our volumes at $90 per BOE. For the next gas year, starting 1st of October, we have locked in around 15% of volumes with pricing estimated to be around $80 per BOE until end of QT 2026. We continue to have a robust gas sales portfolio with access to several markets. And we continue to have flexibility in the contracts to decide the split between month ahead, day ahead and fixed price. I also like to mention that our oil production is fully edged on a post-tax basis for the remaining of 2025, with monthly poor option and strike price of $50 per BOE. Vole Energy generated solid cash flow in the second quarter. Cash flow from operation after tax in the quarter was $766 million, a decrease from the previous quarter, mainly due to higher tax payments and temporary negative working capital effect. Our capex for the quarter, including exploration, was $761 million, where Baldur X and Johan Casberg continues to be the largest contributor of the total spent. The 2025 development capex guidance of $2.3 to $2.5 billion is unchanged. Our resilient and strong liquidity position continued to improve in the quarter. Here we see the development in our cash position from Q1 2025 to the end of Q2 2025. We generated approximately $1.4 billion in CFFO before tax and working capital movements. Working capital impacted negatively with around $120 million, mainly as a result of higher receivables at the end of the second quarter compared to the first quarter. We paid as planned, higher taxes in the quarter amounting to around $500 million, up from $213 million in the previous quarter. We further had a cash outflow of $781 million in investment in our high-value growth projects. We distributed as planned $300 million in dividend related to the first quarter 2025. As a result of the successful issuance of $1.5 billion in your notes and the refinancing of the revolving credit facilities, we substantially increased the available liquidity. and we are maintaining a diversified long-term capital structure aligned with our business needs. At the end of the quarter, we have a cash balance of $718 million and an overall available liquidity of around $3.5 billion. In the first half of 2025, we have strengthened our financial position through the successful refinancing of credit facilities and issuance of senior notes, totaling $5.2 billion. By doing this, we have reduced the cost of debt, increased our available liquidity, extended the maturity profile, and strengthened our core bank group. Our leverage ratio net interest bearing debt on EBITDAX ended at 0.9, which is a slight increase from the previous quarter, but continues to be well below our over the cycle target of below 1.3. In light of the production growth in the second half of the year, we expect the debt ratio to scale back during the remaining part of 2025. Our debt portfolio is well diversified, with a weighted average time to maturity of 5 years, when excluding the 60 years hybrid. This is supporting the execution of our growth strategy towards 2030 and beyond. We have BAA3 rating from Moody's and Treble B rating from Standard & Poor's, both with a stable outlook, and we are committed to maintain our investment grade rating. Our strong financial position and our resilient and flexible project portfolio lay a solid foundation for continued material shareholder distribution and growth, and it is a unique investment proposition that Born Energy offers. Now let's look at the task guidance for 2025 estimated profits, where half is paid in the year and half will be paid in the next year. Please note that from now on, we will move from paying 60 installments per year to 10 installments per year. In the first half of 2025, we paid around 7 billion NOC in three installments, one in Q1 and two in Q2. For the second half of 2025, we expect to pay around 13 billion NOC, with two installments in the third quarter and three in the fourth quarter. We have included a tax sensitivity for the first half of 2026, which is giving the cash tax estimate at a different price scenario, where the middle case is giving around $1.6 billion. while the sensitivity is between $0.6 and $2.6 billion, according to the indicated price range. Vorenergy has a strong track record of delivering value to our shareholders. Since the IPO, we have returned more than $3.8 billion in dividend, maintaining stable payments over the last 14 quarters. Considering the current macro environment, the solid financial performance in the second quarter of 2025, the transformative production growth on stream, and our high-quality, resilient and flexible project portfolio, we can continue to support attractive and predictable dividends going forward. On the back of this, I am pleased to confirm a dividend of $300 million for the second quarter and guide a total dividend distribution of $1.2 billion for the full year 2025 and $1.2 billion for the full year 2026. Finally, I will summarize our full year 2025 long-term guidance. For 2025 our production guidance is 330 to 360,000 barrels per day, reaching more than 400,000 barrels per day by Q4 2025. This is up from the previous guiding. We will maintain approximately 400,000 barrels per day in 2026, and further we will sustain 350 to 400,000 barrels per day until 2030. 2025 production cost is expected to come at $11 to $12 per barrel, down to around $10 per barrel by Q4 as we ramp up production. Capacity guidance is maintained at $2.3 to $2.5 billion in 2025, going down to $2 to $2.5 billion thereafter. Exploration expenses in ABEX will be in the range of $200 to $300 million and $150 million respectively in the medium to long term. For this year, we plan to invest around $380 million in exploration activities and we expect abandonment expenditures to be around $100 million. We are guiding $300 million in dividend for Q3 and Q4 2025, resulting in a full-year dividend of $1.2 billion. Demonstrating strength, we're also guiding dividend for 2026 of $1.2 billion paid quarterly. With that, I hand it back to Nick for concluding remarks. Thank you.

Well, thank you, Carlo. I've just one final slide to summarize. I'm pleased to report we once again delivered strong results in the quarter. Our key growth projects have been delivered as planned, and as a consequence, production this year is expected to be at the midpoint of the full year guidance range. And we're meeting our plans for transformational growth in 2025 and unlocking future value by moving forward at pace our early phase project portfolio. Which means we're on track to sustain 350 to 400,000 barrels per day towards 2030. And we continue to strengthen and improve the resilience of our financial position, incrementally improving the business all the time, allowing us to navigate successfully through the cycles. And as a result of our strong performance, we continue to provide predictable and attractive dividend distributions, meaning we're delivering on our strategy for growth and value creation. These are our second quarter 2025 results and the reasons to be invested in VOR Energy. Thank you for your time. And with that, we'd now like to open up for your questions.

Thank you. We'll now start the Q&A session. If you wish to ask a question, please press five star on your telephone keypad. To redraw your question, you may do so by pressing five star again. There'll be a brief pause while questions are being registered. The first question will be from the line of Matt Smith from Bank of America. Please go ahead. Your line will now be unmuted.

Hi there. Good morning, Nick. Good morning, Carla. Thanks for taking my questions. I had a couple, please. The first day, sort of a granular one on the production outlook that you show on slide six. And I guess you continue to guide the expectations for production for the full year to be in line with the midpoint. And I suppose that's... slightly in contrast with the Q1 and Q2 performance being towards the lower end of your range shown. So I just wanted to check what was giving you the confidence, what have you seen so far in 3Q to sort of correct and get back to the midpoint of the guidance. So that would be the first one on production. And then the second one, I wanted to come back to the sort of CAPEX comments because on the one hand we're talking about you know, doing more, moving faster, all with the goal to sort of sustain production into the 2030s. But on the other hand, you've announced a, you know, 500 million of cost savings. I think part of that is CapEx and project deferrals. So could you talk us through the moving parts here, what's changing, what's not, and also the thinking, given that the commodity price environment has held up reasonably well so far? Thanks.

Yeah, good questions, Matt, and thanks for joining that. You know, on the production side, I mean, it's been quite a complicated year to forecast this year, given the nine projects coming online with 180,000 barrels a day. And, of course, going into the year, we recognized some of that uncertainty in the range and the thinking that we came up with. You know, as I commented, the first half has been at the bottom end of the range. Most of that's because, or pretty well all of that's because Jorn Kasper came on a little later than we anticipated and the ramp-up took a little bit longer. But... But, you know, where we are now is all of our key projects are online. So, you know, yes, there are two big ones, but, you know, in Boulder, Jotun and Casper, but Halton East came online well, is producing well, and the Ormolanga Phase 3 has also come online. And they're all online. And the ramp-up's going, I would say, the stability in those assets is rather good, and I would say we're also ramping up rather well on Boulder. And Where we see today and where we are today is we're producing over 350,000 barrels a day. You'll also recognize that we also saw some upside in this year, which we didn't talk about too much at our capital markets day. So when we put everything together, we now see that we're going to be able to produce around 430,000 barrels a day in Q4. And that's a bit more than we'd sort of guided or the expectation is. So when you put that together, You know, the second half, I think, from what we see today, is going to be rather strong. And, you know, Yolton is ramping up rather quickly. And where we stand today, we think we're going to get that on to peak rates in September. And so we think you put that together, we can be in the middle of the guidance range for the year. And then on your second question about cost savings, I think... On this, you know, it's savings across the board. And, you know, it's natural when the price comes down, activities drop, the opportunity is to use some of that time to look at how we're spending money in the business and can we do it more efficiently, can we take costs out. And we've looked across our whole business. And determine that we can do some things slightly differently and rephrase some things that we can achieve the same outcomes basically with less money. Some of it's cost savings, so where we read big contracts recently and we've got lower pricing. Some of it we've chosen to rework some projects to make them better. But, you know, we keep adding projects all the time. When we talked to our capital markets, there was 25 projects. Now we've got 30. And, you know, we made it announced another exploration discovery yesterday. We keep adding to this. And there's an opportunity to optimize all of that and make it better. And we're using this opportunity to do that. And that's why we feel confident of taking some cost out, but at the same time maintaining the long-term outlook on production for the business. Hopefully that sort of helps you understand how we're looking at this, Matt.

Very good. Thank you, Nick.

Happy to pass it on.

Thank you, Matt. The next question will be from the line of Theodore Nielsen from SB1 Market. Please go ahead. Your line will now be unmuted.

Good morning, Conor. Thanks for taking my questions. I have a few questions for me. First, I just want to follow up on the cost-saving question and the $500 million. You're specifically talking about RTP. They're talking about cost inflation generally in the industry. I just want to know how you see that. Are you seeing the same as RTP cost inflation, and how is that included in your $500 million cost reduction? Second question, that is on dividend. Nick, you said that the $1.2 billion dividend for 2026 is safe within most realistic oil and gas price scenarios. I just wanted to know where you see net debt increases at which oil and gas price level, and assuming that you do keep the $1.2 billion dividend. Final question for me, that is the leads in discovery. Congrats on that. Looks promising. Could you share any thoughts around potential development solutions and a timeline on that? That would be useful. Thanks.

So I'll cover the first and the last question, and Carlo can talk about dividends for you. So cost savings. I mean, you know, our big projects have come to an end, and we're into looking forward and committing to new projects. And You know, if you go back six months, I would say there was cost pressure in the industry in a number of areas. But as I look today, I think that cost pressure feels to me to be taken out. And, in fact, we're seeing that. As we commit to new things, we're able to take cost out just through the market sitting where it is today. You know, rig rates have gone down. We see that the rates for things have gone down where we've awarded new contracts recently. We've been able to do it at lower pricing. So what I would say is as I look forward and, you know, I think we're seeing less activity in the world and an opportunity. Yes, Norway is a bit more increased, but there aren't many new projects coming to market. And I think we can play into that and see a lower price outlook and we're getting the benefit of that we've reworked some projects we've gone around the contracts a bit and we've taken cost out so i i i don't feel the same inflationary cost pressures and uh today that that might have been there six six months ago and i think that just reflects the uncertainty in the market not just within norway but internationally. A lot of the equipment that we buy is not just bought in Norway, it's bought internationally. And then maybe I'll just talk about VidSim before Carlo talks about the dividends. I mean, it's a great discovery. It sits very close to Fenya, where we operate. We have 75% of it. I think it's a gas condensate discovery. Fenya ties into uh into the new york facility and new york has capacity to develop this gas condensate through there so that would be the natural host it's not that far away whether we go through the fenya facility or have a direct tie back it's too early to say we've discovered in the first well uh 25 to 40 million barrels of gas condensate and uh in in very high quality reservoir and there's uh on this ridge there's a couple two or three other prospects and we're I think we can very simply appraise those. We've got new seismic over the area too, so we'll be moving forward like we have with everything else to move this forward at pace. It's quite material to us because we've got 75% here, so it's an exciting outcome and I think very good. We have other things in the area too, so it's very positive, I would say, as a good outcome from our exploration programme. So hopefully that gives you a bit of color around that. It's a bit early to talk too much about the development, given that we've just finished it well. But we'll move that forward at pace, and perhaps in the coming months we can be clearer about that.

So Carlo on dividends. Yes, thank you for your question when it comes to the dividend and 2026 guidance. Clearly the big picture where we are now, as we move forward our main projects, is farther than it is compared to a few months ago. Production is coming, growth is coming, and 2026 as well will be a strong year, as we got it, and of course the production that is coming is giving additional tangibility to it. And we already voiced over our ability to generate a significant cash over the longer term at various price scenarios during the CMU. I believe that also another element to look at, again, is our ability to flex the capex, and as we are doing, we voiced a lot over, and we are now implementing this ability to flex capex without impacting our long-term view on production. And also our leverage ratio, because if you look at the leverage ratio we have, which is 0.9, and we are expecting this to scale back during the course of the year, there is quite a big headroom when it comes to our target of being well below 1.3. As such, if I get correct to your question, our ability to sustain the dividend will not – relies also on a significant headroom when it comes to our financial – our financial and debt ratio. So we have quite a significant buffer, I would say, when it comes to the ability of sustaining dividend even on price, which is lower than we see now. And the debt ratio won't move significantly. We still remain well below the 1.3. So I hope that this answers your question, if I got correctly.

Well, yeah, not precisely, but partially. When you say there's a lot of headroom, it's at like $10, $20, $30 per barrel oil price before you need to increase net debt. Do you want to comment on that?

Yeah, but we're not going to say we can sustain dividends at a certain price. I think the way to look at this is that we have a resilient business. We need to look at it over the long term. We can sustain production long term. Our CAPEX is coming down, our OPEX is coming down. And we have a lot of resilience. We have a lot of liquidity in the company. And I think you have to look at pricing in the long term. And realistic pricing levels to sustain world oil and gas pricing means that we believe that we can sustain our dividend levels at realistic pricing levels in the way we've guided. And I think that's the way to look at this.

Okay. Understood. That's all for me. Have a nice summer. Thanks.

Thank you.

Thank you. The next question is from the line of Victoria McCulloch from RBC. Please go ahead. You will now be unmuted.

Thanks for your time for questions this morning. A couple for me on Q3 and then one on Goliath. So, first of all, on OPEX, it was obviously higher in 2Q. Can I just confirm that's symptomatic of the ramp-ups and that we should expect to see similar higher OPEX in Q3 with Yotun ramping up? Then, secondly, on maintenance in Q3, you highlighted that the turnarounds are expected to be completed by July. I know that certainly is the case with Snowbit. Is that across the wider portfolio until we should see a more muted maintenance impact on the non-ramping up or non-new fields for Q3? And then just on the Goliath work that you're drilling in the second half of this year, you mentioned the fast track development. Would that be a development that you'd be looking to sanction in 2026 or is that something that could fall into 2025? Thanks very much.

Good, maybe I capture those. I think, you know, the OPEX, higher OPEX in this quarter is driven by a few things. One is, you know, Kassberg is in the ramp-up phase, so you get all of the OPEX, but not much of the production. And secondly, we've got a disproportionate amount of the turnarounds in the quarter, which obviously carry quite a lot of costs, which goes into OPEX too. And, of course, you get a bit lower production as a consequence of those turnarounds. So, You know, this was always expected in this quarter at this level and in our forecast. So it's not outside of what we would expect. I think when you go into Q3, of course, we've got much more production. And we're going to see the – and that new production, you know, Kasperg's $4 a barrel plateau. So we're going to see that I think Q3 is going to be lower OPEX than the – than Q2, of course. And then, of course, we've got the ramp up of the barrels from Yorton, which is also going to drive it down further. So, you know, we are very confident that by the end of the year that we are going to be at the $10 range that we set out, which as we've guided, given the new volumes coming on and the focus on cost control in the business. I think in terms of maintenance activity, in terms of turnarounds, as I commented in my notes, 30,000 barrels a day impact in Q2. And snow bit will be complete by the end of July. And so most of the big turnarounds have happened. But there is still some things going on in Q3. I think it represents about 13,000 barrels a day potential impact in Q3. But most of it is skewed this year into Q2. And then as far as Goliath goes, I mean, this is exciting and we're driving this forward as quickly as we can. And we just finished shooting a new 3D seismic survey over the whole structure. We are working to get processed data by the end of the year, so fast track to get there. The importance of this is that the current seismic is over 25 years old and you can't really see much on it and so we're hopeful with new seismic we can start to understand the subsurface a lot better. And that's one of the reasons this hasn't perhaps moved forward in the past. And then we're going to drill in the second, towards the end of this year, two further appraisal wells. our aim is to have enough of the subsurface data in our hands to start development planning uh uh in earnest at the end of the year although we've got a team already mobilized on to moving this forward and and and it is my aim that just sometime during next year that we start to commit to uh long lead equipment to move this project forward i think it's a bit early for us to say the time frame for this but i i'm very confident this is going to turn into a project And we'll sort of come to timing, I think, a bit later in the year as to when we think we might be able to sanction something and get it on production. But we're aiming to move forward very quickly here. You know, there's a big opportunity at Goliath. There's a lot of capacity available there. And the resource here are, I believe, quite significant. And so it's going to be exciting when we see these further wells and the seismic to understand the real scale of this opportunity. So hopefully that gives you a bit of color on those three items, Victoria.

Thanks, Nick. Thanks very much.

Thank you, Victoria. The next question will be from the line of John O'Lison from APG. Please go ahead. Your line will now be unmuted.

Good morning, and thanks for taking my question. Sorry for coming back to the cost savings of $500 million. It's a huge amount. The production costs going forward would probably be around $1.5 billion, and I assume the $500 million is not only cost savings from production. I assume there's some cut in CapEx and exploration as well. Is it possible to split up the $500 million? How much will we see going forward in the lower production costs? and how much is the impact on CapEx and expiration. It does help to give a split on how the $500 million is cut down. Please break down.

John, I think Carlo will give a bit of color on this.

Okay. Thank you for your question, John. So when it comes to the $500 million cost reduction, what we expect is to have roughly 20% of it, which is impacting the operating cost, and the remaining part, which is CapEx, mostly, of course, uh between the early phase project and the base capex that we have part of exploration as well so as you mentioned is an important amount but is what we can deploy as part of our flexibility that was a lot over since our cmu and is not impacting our production outlook this is very important because as you can imagine those costs those activities were foreseen in 2026 that would have been contribute to production later on in the plan and sometimes is even a small impact in 28 or 29. And we are taking this opportunity to make these projects better, to mature them further without impacting again our longer production. So I hope this granularity gives a bit more insight of where we see this reduction.

Yeah. So you said 20% cost in production costs and the rest is capex and expiration. Is that right? Are you right? Yeah. And then And is it possible to say of those 80% that are not cost cuts, how much is cut in expiration and how much is in capex?

I mean, you know, we will scale back expiration a little bit next year. I think just naturally, given the prospects that we have and the opportunities we have, I think it goes up and down. But we'll still have a material expiration program next year. And we've guided that we will drill 60 wells over a four-year period. We're still going to meet that target. We're doing a bit 20 this year. I think next year will be a little bit less. So we think about $70 million is the sort of order that we might take out of exploration for next year, compared with what we've guided. and then the rest is into the capital side of things. You know, we've got 30 projects that we're moving forward and there's real opportunity to optimize which ones we move forward in which place, you know, we can't do all of them at once. So we're actually in a unique place where we can optimize the projects and make them better. And what we're finding is that by taking a bit more time to sanction things, we can take cost out. We can change the project scope a little bit. We can also use this current environment to reduce cost, and that's also part of it.

But you do not make any change, or at least right now, in the long-term guidance when it comes to CapEx and expiration. Is that right? Because you're giving guidance for CapEx.

No, we haven't changed the long-term guidance, no. And I think we will update the guidance when we come to our capital markets update next year. You know, I think it's fair to say, you know, I've talked about incremental improvements in our business. And if you look back over a few years and compare what we say today with what we said two years ago, there's a lot of change and all in the right direction. Our production's got better. Our costs have come down. And we're seeing that trend. You know, what I see, you know, we set out 350,000 to 400,000 barrels a day long term. You know, what I see is upside in that. And I see upside in that for the same cost base from what we look at. And so, actually, I think as we move forward, we're going to make the business look better than it looks today. And that gives us opportunity to optimize things, to perhaps slow some things down, to maintain the same outlook and reduce costs associated with it.

Thank you.

My second question goes to the use of cash flow going forward. You say that you'll be free cash flow breaking even at $40. I assume that is post-interest payments and post-lease payments. First, could you confirm that? And then, yeah, maybe confirm that, please, that's post-interest payments and post-lease payments.

Yeah, $40. And everything...

That will be for dividend or deleveraging.

It's confirmed. It's correct. What you said is correct. The $40 breakeven is the company breakeven, so it's including clearly the breakeven of each single project, as mentioned, $35 for the subsidiary back, and includes also the service of debt, corporate cost, G&A,

And, you know, just on that, John, I would like to see we can make this better. A year ago, that was 45, that number. Now it's 40. And I think as we look forward, you know, we're committing to projects that have break-evens below $35 a barrel. We do infill wells at $30 a barrel. Our OPEX is coming down. I think we're going to be able to reduce that number over time and again make the business progressively more robust.

Do you plan to deliver the balance sheet for the next one to two years? Or will everything go to dividend?

I think a lot depends on balancing the outcomes here. So, you know, we intend to fund the growth program we've got ahead of us and sustain production long term, because I think that's what drives revenue. We intend to fund the dividends. We intend to maintain an investment-grade balance sheet. And then, depending on the price outlook, we might choose to flex those things and, you know, if there's high prices, of course, we can maybe It would.