Var Energi Asa · OSL:VAR
Var Energi Asa — Investor Day (February 2023)
78 slides from Var Energi Asa's investor day presentation, Feb 16, 2023
Slide 1: Growth and value creation
Growth and value creation Capital markets update 16 February 2023
Slide 2: Disclaimer
Disclaimer The Materials speak only as of their date, and the views expressed are subject to change based on a number of factors, including, without limitation, macroeconomic and equity market conditions, investor attitude and demand, the business prospects of the Group and other specific issues. Th
Slide 3: Agenda Capital Markets Update
Agenda Capital Markets Update Today’s presenters 10:00 – 10:05 Welcome Ida Marie Fjellheim, VP Investor Relations 10:05 - 10:15 Q4 and full-year 2022 results Stefano Pujatti, CFO Moderators Torger Rød Stefano Pujatti 10:15 – 11:30 A leading E&P independent on the attractive NCS Torger Rød, CEO CEO C
Slide 4: A leading E&P independent on the attractive NCS
A leading E&P independent on the attractive NCS Growth on track, Path to Strong cash flow, sustained value creation ESG leadership attractive distributions Robust Strong gas High value Exploration Partner of World class portfolio position growth excellence choice capabilities
Slide 5: Q4 2022 results
Q4 2022 results
Slide 6: Fourth quarter 2022 highlights
Fourth quarter 2022 highlights Safe and stable production Q4 production 214 kboepd, 220 kboepd for the full-year 2022 Gas share of 37% in the quarter Continued focus on operational improvements High realised gas prices Average realised price of ~115 USD/boe in the quarter, gas 182 USD/boe
Slide 7: Key performance indicators
Key performance indicators Q4 2022 vs. Q3 2022 Actual serious incidents frequency1 Production Cash flow from operations 0.1 214 kboepd USD 443m (0.1) (215) (1 503) CO 2 emissions intensity Production cost per boe Dividend for the quarter 10.5 kg/boe USD 14.1 USD 300m (10.4) (13.4) (290) 1. 12 months
Slide 8: Safe operations
Safe operations TRIF1 and SIF2 3.7 3.2 3.2 1.3 1.3 1.0 FY 2021 Q3 2022 Q4 2022 TRIF SIF No serious incidents in the quarter Improvement seen on key safety metrics over the quarter Focus on reversing the trend through implemented initiatives, shared learnings and strengthened safety culture 1.
Slide 9: Stable production with continued strong gas position
Stable production with continued strong gas position Production, production efficiency1 and product mix Goliat kboepd Production efficiency of >96% in Q4 1,0 Well integrity issues resolved 92% 87% 82% 0,9 Balder 0,8 Production up 4 kboepd following restoration of shut-in production 259 0,7
Slide 10: Continued exploration success
Continued exploration success High-value exploration near existing hubs Strong results in 2022 exploration campaign High-value exploration near existing hubs Skavl Stø Adjacent to Johan Castberg Discovery rate Contingent resources 1 Unit exploration cost Lupa ~65 ~0.2 Snøfonn Adjacent to Goliat 57%
Slide 11: Key financials
Key financials USD million Q4 2022 Q3 2022 Q4 2021 FY 2022 FY 2021 Petroleum revenues 2 354 2 520 2 282 9 781 6 043 EBIT 1 531 1 363 1 249 6 369 3 059 Profit before taxes 1 793 1 071 1 137 5 856 2 647 Production cost (USD/boe) 14.1 13.4 13.4 13.5 12.0 Operating CF before tax 2 094 2 027 1 523 8 369
Slide 12: Strong gas price realisations
Strong gas price realisations Total petroleum revenues Q4 2022 gas revenues USD million 9 780 Oil Gas NGL Month and day ahead sales weighted towards France and Germany with ~30% of volumes exposed to high Month ahead prices 4 669 Fixed price sales included contracts with Gas Year Ahead pricing 6
Slide 13: CFFO impacted by higher tax payments and payment to Exxon
CFFO impacted by higher tax payments and payment to Exxon Cash flow development Q4 2022 CFFO and Capex USD million USD million 67 5 682 3.5 3.0 4 580 2 026 2.5 2.0 (1 650) 443 1 499 2 585 2 593 1.5 (814) 1.0 (163) (300) 70 445 0.5 (290) 0.0 Cash at end- CFFO Working Taxes paid CFFO Cash flow Net fin
Slide 14: Continued attractive dividend distribution
Continued attractive dividend distribution Dividend distribution Dividend policy of 20-30% of cash flow from USD million operations after tax over the cycle 300 290 Dividend guiding for Q1 2023 of USD 270 260 270 million (~0.11 USD per share) compared to USD 225 million in Q1 2022 225 For 2023
Slide 15: Growth and value creation
Growth and va lue- _ creation
Slide 16: Celebrating one year as a listed company
Celebrating one year as a listed company Market cap1 Dividend for 2022 ~80 1,075 NOK billion USD million vs. guidance at IPO USD 800 million Number of shareholders1 High engagement ~30,000 >80% ~19,000 at IPO of employees own Vår Energi share 1. Per 14.02.23
Slide 17: Creating value as a leading pure-play E&P independent on the attractive NCS
Creating value as a leading pure-play E&P independent on the attractive NCS Material and diversified production base Maximising value creation with hub-centred strategy World-class capabilities, with tangible growth and track record Credible path to net zero (scope 1 and 2) by 2030 Material cash flo
Slide 18: The Norwegian Continental Shelf is an ideal foundation for value creation
The Norwegian Continental Shelf is an ideal foundation for value creation... Cost competitive1 Lowest CO2 footprint1 Reliable framework Significant resources2 Opex per boe 2022 (USD) Carbon intensity 2022 (kg CO2/boe produced) Score “Transparency International’s” Corruption Total ~100bn boe Percepti
Slide 19: A stable and secure energy supplier to Europe
...and a stable and secure energy supplier to Europe Barents Sea Norway is the largest gas supplier to Europe1 Gas imports to Europe, MMcmd 400 Norwegian Sea 350 Norway pipeline 300 North Sea 250 200 US LNG Balder Area Other LNG 150 St. Fergus 100 Russia pipeline Russia LNG Easington 50 Qatar LNG Do
Slide 20: Vår Energi has a leading position on the NCS
Vår Energi has a leading position on the NCS One of the largest independent NCS producers1 ... ... with a solid reserve base and R/P2 2022FY production (kboepd) 2022YE reserves (mmboe) Gas share R/P of production Aker BP Aker BP 10 17% Vår Energi 220 37% Vår Energi 1 070 13 TotalEnergies 41% TotalEn
Slide 21: Robust portfolio and value-enhancing hub-centred strategy
Robust portfolio and value-enhancing hub-centred strategy 158 licenses 36 assets 1 37% gas share 53 as operated 4 as operator FY 2022 Strong diversification across four hub areas Production split FY 2022 2P reserves split YE 20222 Production split per operator FY 2022 13% 10% 15% 18% 22% 29% 220 1,0
Slide 22: On track for strong production growth
On track for strong production growth De-risked path to >350 kboepd by end-2025... ...and a plan for sustaining production kboepd and create value beyond Base >50% Sanctioned projects >350 World-class exploration Sanctioned, de-risked projects capabilities and track record well into execution includ
Slide 23: 50+ years of value creation on the NCS continues
50+ years of value creation on the NCS continues Realising our potential Updated growth and value creation strategy Preparing and executing a successful IPO and listing Debt refinancing and Investment Grade rating New organisation and management Creating a leading pure-play E&P on the NCS Vår Energi
Slide 24: A partner of choice
A partner of choice Partnerships and innovative collaboration models… …drive performance Industry collaboration Supply chain management Strategic partnerships Strong owners Improved safety and efficiency Reduced costs Lower emissions Access to competence Exploration expertise and M&A capabilities
Slide 25: ESG at the core of all activities
ESG at the core of all activities Ambition to be the safest operator 1 Credible path to net zero (scope 1 and 2) by 2030 -50% emissions from operated assets by 2030 1. Take time, Involve, Report
Slide 26: Clear framework for shareholder value creation
Clear framework for shareholder value creation High-value Low-cost >350 kboepd by end-2025 and sustained value creation production barrels beyond growth Cost discipline and plan for USD ~81 per barrel production cost USD 3.1 billion of free cash flow generated in 2022 Investment Grade balance sheet
Slide 27: Delivering growth and operational excellence
Delivering growth and operational excellence
Slide 28: Continuous focus on operational efficiencies
Continuous focus on operational efficiencies Medium-term ambition of ~8 USD/boe Key cost reduction enablers Production cost per barrel (USD/boe) 15 14.5-15.5 13.5 Sanctioned projects coming on stream with average unit cost of ~4 USD/boe 10 Continued cost reductions from improvement program ~8 1 Acti
Slide 29: De-risked project portfolio driving production growth
De-risked project portfolio Mid-term target of >350 kboepd driving production growth supported by 17 sanctioned development projects, well into kboepd execution with committed >50% investments >350 220 210-230 2022A 2023 guiding End-2025E ambition Base production Balder X Breidablikk Johan Castberg
Slide 30: Resilient and low-risk project portfolio with strong economics
Resilient and low-risk project portfolio with strong economics Existing production and sanctioned developments First oil field extension First oil new field development Key Areas Operator 2P mmboe 2023 2024 2025 >500 mmboe Balder 212 Balder X reserves in development portfolio Grane 100 Breidablikk G
Slide 31: Balder X de-risked and on schedule
Balder X de-risked and on schedule According to revised schedule Jotun FPSO >70% complete SPS/SURF >85% complete Drilling >35% complete HSE performance improved According to plan Optimised drilling sequence Engineering close to completion Remaining work well matured Construction ramped up 1967 1999
Slide 32: Breidablikk a highly attractive subsea tie-back
Breidablikk a highly attractive subsea tie-back Breidablikk Operated by Equinor Cost-effective subsea tie-back leveraging Grane infrastructure Grane Operated by Equinor Topside modification on Grane and subsea installations Stavanger on track, drilling ahead of schedule On track for first oil in Q1
Slide 33: Strengthening the Barents Sea hub area
Strengthening the Barents Sea hub area Skavl Stø discovery (2022) Potential tie-back to Johan Castberg Snøfonn North discovery (2022) Johan Castberg Potential tie-back to Johan Johan Castberg - major partner-operated development in the highly Operated by Equinor Castberg prosperous Barents Sea Golia
Slide 34: Remaining sanctioned projects securing high-return barrels
Remaining sanctioned projects securing high-return barrels in core areas Åsgard A Low Wellhead Pressure Verdande Åsgard Subsea Compression ph. II Smørbukk North Åsgard B Low Pressure Phase 3 Kristin South Remaining project portfolio targeting Halten East >60 kboepd in 2025 OL Subsea Compression Baug
Slide 35: Sustaining value creation beyond 2025
Sustaining value creation beyond 2025
Slide 36: Capturing opportunities for long-term high value creation
Capturing opportunities for long-term high value creation Long-term ambition of sustaining production kboepd >350 Value accretive M&A Continued exploration success Maturing a high value project portfolio Operational excellence - Infill drilling and continuous recovery 2026 2030
Slide 37: Efficient drilling and improved recovery
Efficient drilling and Operational excellence improved recovery Proven results from increased recovery and technology Continuous improvement in production efficiency3 Total resources Reserve replacement ratio >1.6 >160% ~80% ~88% >93% billion boe1 average 2019-2022 2018-2019 2020-2022 2025+ ambition
Slide 38: Maturing a high value project portfolio
Maturing a high value Barents Sea project portfolio Goliat tie-backs Johan Castberg tie-backs Barents gas solution Standardised factory approach on tie-backs Disciplined, robust and countercyclical Norwegian Sea Åsgard IORs Kristin South phases Maintaining ambition of 30 USD/boe break-even1 Åsgard -
Slide 39: Best-in-class exploration capabilities
Best-in-class exploration capabilities Top performer on resources discovered Leading on cost Generating significant returns Average mmboe discovered per well drilled1 Exploration cost USD per boe2 USD in return per USD spent on exploration3 7 22 NCS average 3 Peer Vår 2 3 4 5 6 7 8 9 10 11 Vår Peer
Slide 40: 2023 campaign targeting high-value barrels
2023 campaign targeting high-value barrels Venus – Q4 Countach - Q1 Discovery Pre-drill unrisked mmboe1,2: 94 Pre-drill unrisked mmboe: 27 Hub-focused exploration Risked resources1 8 firm wells >50 3 contingent wells mmboe (net) Rondeslottet – Q1/Q2 Pre-drill unrisked mmboe: 348 Exploration capex AP
Slide 41: Exploration strategy supporting long-term value creation
Exploration strategy supporting long-term value creation Targeting infrastructure-led (ILX) wells ... ... and high-impact wells Indicated drilling campaigns 2023-2026 8-10 per year 1-2 per year Extend production plateau of existing hubs Deliver new standalone production hubs High-margin barrels clos
Slide 42: Pursuing accretive M&A opportunities
Pursuing accretive M&A opportunities Key criteria – supporting the strategy Strengthen positions in Optimising assets for value Increase operatorships to existing core areas to creation and building realise our strategy and high-grade the portfolio exploration potential potential across areas Strong
Slide 43: Becoming an ESG leader
Becoming an ESG leader
Slide 44: Committed to deliver a better future
Committed to deliver a better future Pathway to net zero Responsible Safest High performing Local value Responsibility, integrity resource use operator organisation creation and transparency ENVIRONMENTAL SOCIAL GOVERNANCE Net zero scope 1 and 2 and 50% reduction in scope 1 Local ripple effects of >
Slide 45: Clear path to net zero scope 1 and 2 for operated assets by 2030
Clear path to net zero scope 1 and 2 for operated assets by 2030 tCO2-eg 400 2005 Baseline >50% emission reduction by 2030 1 Electrification of the Balder/Grane area in collaboration -50% with Equinor Jotun FPSO & Balder FPU off field within 2030 Ringhorne electrification Jotun FPSO on field Balder
Slide 46: Key decarbonisation initiatives
Key decarbonisation initiatives Early phase Execution Delivered Balder and Sleipner Goliat Grane Fenja and Ormen Lange Snorre Bauge (Njord)1 Power from shore Heidrun Fram (Troll C)1 Statfjord Snorre Ekofisk Waste heat Hywind Tampen, Flare gas recovery recovery offshore wind & energy optimisation Åsg
Slide 47: Financial Framework
gee Financial Framework
Slide 48: A strong foundation to deliver value to shareholders
A strong foundation to deliver value to shareholders High-value production Low-cost barrels Diversified production of 220 kboed in High-margin barrels with further 2022 including material gas share with OPEX reductions targeted to reach growth to >350 kboepd by end 2025 USD 8 per boe¹ Investment Gra
Slide 49: Attractive combination of resilience, growth and distributions
Attractive combination of resilience, growth and distributions Capital allocation framework Sustain production of existing portfolio Fund capex of existing developments and new value-creating projects Maintain an investment grade balance sheet Pay dividends according to stated policy Use additional
Slide 50: Strong cash flow potential during current investment period
Strong cash flow potential during current investment period Indicative cumulative free cash flow generation 2023-2025 USD billion Clearly defined investment program with sanctioned projects Non-committed investments reflect maturing unsanctioned projects Robust headroom to maintain dividend policy t
Slide 51: Robust cash generation across various price scenarios
Robust cash generation across various price scenarios Indicative cash flow generation 2023-2027 USD billion, cumulative 25 USD 110/bbl High free cash flow generation in capex-light years oil price 20 USD 90/bbl Flexible investment plans for end-of decade organic oil price growth Free cash flow USD 7
Slide 52: Disciplined investments in high-value barrels
Disciplined investments in high-value barrels Indicative capex 2023-2030 USD billion, annual average 2.5 2.4 – 2.7 Stable capex in 2023 and 2024 Breidablikk Breidablikk J. Castberg J. Castberg Current project portfolio well into execution, with majority of capex covered under committed contracts Bal
Slide 53: Maintaining an Investment Grade balance sheet
Maintaining an Investment Grade balance sheet Leverage ratio below target High financial flexibility Solid debt financing structure 10.0 USD billion 4 USD million 9.5 3.2x 9.0 8.5 3 Ongoing diversification of maturities, 2.6x 8.0 28 26 currencies, and instruments 7.5 7.0 2 24 600 6.5 22 Successful i
Slide 54: Attractive dividend policy maintained
Attractive dividend policy maintained Dividends USD million 1 075 Dividend policy of 20-30% of cashflow from operations after tax over the cycle 950 800 Robust returns with flexibility over the cycle 20-30% of CFFO (after tax) (illustrative) 450 Dividend guidance Planned dividend for Q1 2023 2023 27
Slide 55: 2023 operational and financial outlook
2023 operational and financial outlook Production 210-230 kboepd Production cost USD 14.5-15.5 per boe USD 2.4-2.7 billion excl. exploration and abandonment Capex Exploration USD ~200 million Abandonment USD ~50 million Other Cash tax payments of USD ~1.8¹ billion in first half 2023 Through-the-cycl
Slide 56: A leading E&P independent on the attractive NCS
A leading E&P independent on the attractive NCS Growth on track, Path to Strong cash flow, sustained value creation ESG leadership attractive distributions Robust Strong gas High value Exploration Partner of World class portfolio position growth excellence choice capabilities
Slide 57: Technology, drilling & subsurface
Technology, drilling & subsurface Capital Markets Update 16 February
Slide 58: Driving for drilling excellence
Driving for drilling excellence Excelling already in 2023 Operated wells: 9 production and 4 exploration Performance towards best in industry Develop high performing organisation Redesign well delivery process Strategic partnerships Partner of choice and optimised rig utilisation Continu
Slide 59: Agile adopter – increased competitiveness
Agile adopter – increased competitiveness Big ticket items – realising our potential Digital agenda supporting improvement program Safe and sustainable operations Data driven safety Digital field worker Operational excellence and sustainability High-performing organisation Optimised drilling Product
Slide 60: Commercial Excellence
Commercial Excellence Capital Markets Update 16 February
Slide 61: Diversified crude oil portfolio with reliable offtakes
Diversified crude oil portfolio with reliable offtakes Natural hedges with robust sales mix of crude oil qualities Offtake agreements offering premium prices Indicated sales mix crude oil qualities USD per barrel 100% 75% 102 101 50% 25% 0% 2023 2024 2025 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Average 2022
Slide 62: Robust gas sales strategy with flexible index pricing
Robust gas sales strategy with flexible index pricing Indicative gas sales portfolio – current year1 Gas sales split (%) 100% UK Access to several markets for robustness 75% France Flexible sales arrangements at several exit points in Europe 50% Germany and Netherlands ~30% of the gas portfolio sold
Slide 63: Optimising gas sales through exit point arbitrage
Optimising gas sales through exit point arbitrage Barents Sea Large price differentials between hubs during 20221 ... EUR/MWh 240 TTF DA2 PEG DA NBP DA Norwegian Sea 180 120 North Sea 60 Balder Area 0 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 St. Fergus ...c
Slide 64: Exploration & Production
Exploration & Production Capital Markets Update 16 February
Slide 65: Actively improving performance
Actively improving performance Operated portfolio – Pursuing operational excellence Strong 2022 performance on Goliat Subsea sites on Balder restored after riser/flowline repairs Ringhorne drilling performance improvement program Partner operated portfolio - Strong base for 2023 performance
Slide 66: Hub strategy – optimising development of key hubs
Hub strategy – optimising development of key hubs Synergies - maximise value of existing infrastructure and deliver future growth Targeted prioritisation - cost and resources Long-term value creation - timely exploration and resource maturation to ensure optimal field development Partner of choice –
Slide 67: Long-term value creation from the hubs
Long-term value creation from the hubs Long-term ambition of sustaining production Balder – growth and opportunities kboepd Exploration and increased recovery key >350 Integrating area development plans – gas, electrification, tie-ins Value accretive M&A Barents - the last frontier Infill dril
Slide 68: Project Development and Supply Chain Management
Project Development and Supply Chain Management Capital Markets Update 16 February
Slide 69: Balder X de-risked and on schedule
Balder X de-risked and on schedule According to revised schedule Jotun FPSO >70% complete SPS/SURF >85% complete Drilling >35% complete HSE performance improved According to plan Optimised drilling sequence Engineering close to completion Remaining work well matured Construction ramped up Sustained
Slide 70: Maturing a high value project portfolio
Maturing a high value Barents Sea project portfolio Goliat tie-backs Johan Castberg tie-backs Barents gas solution Standardised factory approach on tie-backs Norwegian Sea Åsgard IORs Disciplined, robust and countercyclical Kristin South phases Åsgard - Bjørnene Maintaining ambition of 30 USD/boe br
Slide 71: Strategic supplier partnerships
Strategic supplier partnerships Subsea Partnership established 2022 SPS – Aker Solutions SURF – Ocean Installer and Saipem Strategic partnership ambitions for 2023 Drilling & Well partnerships - Mobile drilling unit (Rig) & Integrated drilling services Subsea IMR services Topside Maintenan
Slide 72: Appendix
Appendix
Slide 73: Price sensitivities
Price sensitivities Indicated effect on 2023 results1 USD million 524 115 + 10 USD/bbl oil price + 1 USD/mmbtu gas price 134 29 0 100 200 300 400 500 600 EBITDAX Net income 1. Based on USD/NOK 9.5
Slide 74: Price assumptions
Price assumptions Unless otherwise specified, all numbers are run on 2023 2024 2025 Thereafter forward prices Oil Price $/bbl 85 77 72 70 Assuming forward prices as of 30 January and contracted gas forward sales Gas Price $/bbl 134 119 107 74 Prices in real 2023 Exchange Rate USD/NOK 9.5 9.0 9
Slide 75: Debt maturities
Debt maturities Maturity profile1 USD million 1 500 1 500 1 100 1 000 1 000 500 500 600 2023 2024 2025 2026 2027 2028 2032 Senior Notes Bridge to Bond W/C Facility Bilateral RCFs Syndicated RCF 1. As of January 2023
Slide 76: Tax guidance
Tax guidance Tax payments - Sensitivity for 2023 USD million 1 500 Q1 and Q2 related to 2022 tax payments $110/162 boe Tax for 2023 is paid in 6 installments: oil/gas price One payment in Q3 and two in Q4 2023. 1 000 Remaining installments to be paid in H1 2024 $90/140 boe oil/gas price $110/162
Slide 77: Exploration campaign for 2023
Exploration campaign for 2023 Pre-drill unrisked Pre-drill unrisked Area License Prospect Operator Vår Energi share Timing mmboe mmboe VE Barents Sea PL 229 Countach Vår Energi 65% 41 27 Q1 North Sea PL 554 Angulata Equinor 30% 58 17 Q1 Norwegian Sea PL 1005 Rondeslottet Aker BP 40% 871 348 Q1/Q2 Ba
Slide 78: var energi
=r var energi