Var Energi Asa · OSL:VAR
Var Energi Asa — Corporate Update (January 2022)
55 slides from Var Energi Asa's corporate update, January 2022
Slide 1: We are Vår Energi
We are Vår Energi Corporate Update January 2022
Slide 2: Disclaimer
Disclaimer IMPORTANT: Please read the following before continuing. The following applies to the slides that follow (the “Materials”) which have been prepared by Vår Energi AS (the “Company”, and jointly, together with its subsidiaries, the “Group”). The Materials have been prepared by the Company fo
Slide 3: Disclaimer (cont’d)
Disclaimer (cont’d) The Materials may constitute or include forward-looking statements. Forward-looking statements are statements that are not historical facts and may be identified by words such as “plans”, “targets”, “aims”, “believes”, “expects”, “projects”, “anticipates”, “intends”, “estimates”,
Slide 4: Highly attractive investment proposition
Highly attractive investment proposition >50 years of successful operations with heritage from Track record world-class operators Leading pure-play E&P independent on the attractive Scale & Focus NCS with material gas production Excellence Diversified and robust portfolio focused on hub strategy Hig
Slide 5: A 50-year success story continues
Track Record Scale & Focus Excellence Growth Environment Returns A 50-year success story continues Creation of a leading NCS pure-play independent Tier 1 operator heritage • Leading technology and exploration expertise • A leader in executing low carbon strategies Established in 1971: 2016: Norway s
Slide 6: Leading pure-play independent on the NCS with material gas production
Track Record Scale & Focus Excellence Growth Environment Returns Leading pure-play independent on the NCS with material gas production One of the largest NCS producers1… …with a leading reserves base with attractive R/P 2020FY production2 (kboepd) Gas % of 2020YE reserves3 (mmboe) production4 Based
Slide 7: An excellent portfolio with a value-enhancing hub strategy
Track Record Scale & Focus Excellence Growth Environment Returns An excellent portfolio with a value-enhancing hub strategy Overview of key hubs Key metrics Total dividends Åsgard Area Barents Sea Area Latest production1 247 kboepd USD 3.1bn Morvin 2019-2021 Johan Åsgard Castberg Kristin Goliat 2P r
Slide 8: Diversified across all NCS regions with balanced production mix
Track Record Scale & Focus Excellence Growth Environment Returns Diversified across all NCS regions with balanced production mix >70% production from four Balanced commodity mix Robust portfolio with a material presence in all regions1 major hubs with substantial gas share Norwegian Sea Barents Sea
Slide 9: Material presence across large and robust hubs
Track Record Scale & Focus Excellence Growth Environment Returns Material presence across 4 large and robust hubs Production, kboepd 2P reserves, mmboe1,2 b 100 a Balder/Grane Area 50 29% 329 Vår operated: Balder & Ringhorne mmboe Equinor operated: Grane, - Breidablikk 2019 2020 2021 2022 2023 2024
Slide 10: Diverse and robust portfolio positioned for value-adding growth
Track Record Scale & Focus Excellence Growth Environment Returns Diverse and robust portfolio positioned for value-adding growth Visible and de-risked production growth to >350 kboepd by 2025 Growth levers kboepd Material, long-lived resources Existing production and sanctioned developments +50% ~1.
Slide 11: Resilient and low risk growth projects
Track Record Scale & Focus Excellence Growth Environment Returns Resilient and low risk growth projects Undeveloped discoveries planned as tie- Existing production and sanctioned developments backs to existing hubs 2P Key Areas Op. mmboe 2021 2022 2023 2024 2025 9 USD <30 projects /boe Balder 216 Ri
Slide 12: Disciplined approach to field development
Track Record Scale & Focus Excellence Growth Environment Returns Disciplined approach to field development Disciplined approach to field development… …ensuring that growth is capex-efficient Near-field drilling 80% Focused exploration on infrastructure- led wells to build on existing assets Targeted
Slide 13: Best-in-class and value-accretive exploration capabilities
Track Record Scale & Focus Excellence Growth Environment Returns Best-in-class and value-accretive exploration capabilities World-class exploration capabilities Annual targeted exploration activity1 Unique screening process Strong Vår Exploration using a proprietary ~887 Budget of ~USD 140m per year
Slide 14: Exploration campaign delivering outstanding results
Track Record Scale & Focus Excellence Growth Environment Returns Exploration campaign delivering outstanding results Strong results in 2021 campaign1… High-value exploration near existing hubs Discovery rate 6 discoveries adding 135 mmboe in contingent resources 2 2022 campaign Snøfonn 75% mmboe dis
Slide 15: Our key strategic beliefs
Track Record Scale & Focus Excellence Growth Environment Returns Our key strategic beliefs ESG and climate are global and national priorities, a pathway to net zero will be required Oil & Gas will continue to be a part of the energy mix long term; gas to increase share of NCS production The NCS will
Slide 16: NCS is an ideal foundation for value creation
Track Record Scale & Focus Excellence Growth Environment Returns NCS is an ideal foundation for value creation Cost competitive Significant resources Positive long-term outlook for the NCS Opex per boe (USD) ~100 bnboe1 ✓ Growing forecast production 18 17 100% Undiscovered ✓ Continued investment in
Slide 17: Clearly defined ESG agenda at the core of our strategy
Track Record Scale & Focus Excellence Growth Environment Returns Clearly defined ESG agenda at the core of our strategy Strong Sustainalytics ESG rating Strategic focus SDGs Other relevant SDGs ESG-rated by Sustainalytics in the top 9th percentile of E&P companies (ranked 14 out 155) Climate & emiss
Slide 18: Vår Energi’s approach to decarbonisation
Track Record Scale & Focus Excellence Growth Environment Returns Vår Energi’s approach to decarbonisation Scope 1, 2 and 3 decarbonisation strategy Organisational awareness and mind-set • Optimising oil and gas production to be as climate efficient as • Electrification • Cold venting and fugitive em
Slide 19: A strong foundation to deliver value to shareholders
Track Record Scale & Focus Excellence Growth Environment Returns A strong foundation to deliver value to shareholders Significant production Low-cost barrels Diversified production base with High-margin barrels with numerous organic growth further OPEX reductions projects and upsides targeted Underp
Slide 20: Focused on delivering attractive and sustainable returns
Track Record Scale & Focus Excellence Growth Environment Returns Focused on delivering attractive and sustainable returns Safe and sustainable operations High-value portfolio Attractive returns Target paying attractive minimum Safest operator Resilient FCF1,2 generation dividend3 of 0 injuries USD 1
Slide 21: Balanced capital allocation framework
Track Record Scale & Focus Excellence Growth Environment Returns Balanced capital allocation framework Waterfall of capital allocation priorities Key criteria for capex and M&A decisions • Regular maintenance capex schedule and growth capex related to Sustain production of existing portfolio develop
Slide 22: Vår Energi benefits from having a robust sales portfolio
Track Record Scale & Focus Excellence Growth Environment Returns Vår Energi benefits from having a robust sales portfolio Positioned to capitalise on strong gas market… … with optimised sales contracts • Selling ~50% of the gas linked to daily spot market • 70% of gas sold into longer term agreement
Slide 23: NCS petroleum tax changes expected to be implemented in 2022
Track Record Scale & Focus Excellence Growth Environment Returns NCS petroleum tax changes expected to be implemented in 2022 Boosting near-term liquidity Comparison of key fiscal regime terms • Proposed changes to the petroleum tax Current regular regime Temporary rules Proposed new rules system an
Slide 24: Material free cash flow generation track record
Track Record Scale & Focus Excellence Growth Environment Returns Material free cash flow generation track record Capex plans well covered by cash from operations Strong year-to-date free cash flow generation3,4 USDbn 1 2 USDbn CFFO Capex Capex coverage (x) 4.3 1.9 2.4 3.5 1.7 1.8 1.8 1.5 1.3 1.2 1.0
Slide 25: Outlook towards material cash flow generation and dividends
Track Record Scale & Focus Excellence Growth Environment Returns Outlook towards material cash flow generation and dividends Potential for strong cash flow generation ahead… …driving robust returns to shareholders1 USDbn USDm USD 3.1bn in total dividends distributed 20 Vår Energi cash flow generatio
Slide 26: Forward looking guidance
Track Record Scale & Focus Excellence Growth Environment Returns Forward looking guidance Production • Production target in 2022 of 230-245 kboepd (~35% gas) • Targeting opex/boe of USD 12.5-USD 13.5/boe in 2022 Opex • Opex/boe expected to decline over the medium term towards USD 8/boe as new projec
Slide 27: Corporate update
Corporate update Continued supportive gas market dynamics… …creating value crystallisation opportunities Brent and TTF prices, USD/boe, as of 4 January, 2021 Gas revenues for 4Q 2021 expected to come in at 250 USD 1.1-1.2bn, exceeding 3Q 2021 by ~100% Forward-sold excess gas for 2Q-3Q 2022 that woul
Slide 28: Corporate update (cont’d)
Corporate update (cont’d) Updates on preliminary financials1 Strong Sustainalytics ESG rating USD 200m ~260 kboed2 dividend for Q1 2022 Q4 2021 production Top 9th percentile of E&P companies ~USD 4.9bn1 ~USD 205m1 Ranked 14 out of 155 2021YE debt3 2021YE cash Increased resource base Barents Blue inf
Slide 29: Concluding Remarks
fos, Var energi Concluding Remarks
Slide 30: A leading NCS pure-play independent
A leading NCS pure-play independent Material and diversified production base with longevity, in partnership with world-class operators Maximising value creation with hub-centred strategy on the NCS World-class capabilities, with tangible growth and track record of successful development and explorat
Slide 31: Summary Financials
PR var energi Summary Financials
Slide 32: Consolidated statement of comprehensive income
Consolidated statement of comprehensive income Nine Months Ended Nine Months Ended USDm, IFRS1 30 September 2021 30 September 2020 2020 2019 Commentary Petroleum revenues 3,761 2,078 2,869 2,821 Production costs Other operating income 37 18 25 44 • For the nine months ended 30 September 2021, costs
Slide 33: Consolidated balance sheet statement
Consolidated balance sheet statement USDm, IFRS 30.09.2021 31.12.2020 31.12.2019 ASSETS Non-current assets Intangible assets Goodwill 2,707 2,821 4,862 Capitalised exploration wells 192 113 88 Other intangible assets 105 108 105 Tangible fixed assets Property, plant and equipment 15,051 15,594 14,59
Slide 34: Consolidated balance sheet statement (cont’d)
Consolidated balance sheet statement (cont’d) USDm, IFRS 30.09.2021 31.12.2020 31.12.2019 EQUITY AND LIABILITIES Equity Share capital 46 46 46 Share premium 2,905 3,593 4,043 Other equity (1,425) (1,784) (35) Total equity 1,526 1,855 4,054 Non-current liabilities Interest-bearing loans and borrowing
Slide 35: Consolidated statement of cash flow
Consolidated statement of cash flow Nine Months Ended Nine Months Ended USDm, IFRS 2020 2019 30 September 2021 30 September 2020 Profit / (loss) before income taxes 1,374 (2,024) (2,204) 451 Adjustments to reconcile profit before tax to net cash flows: - Depreciation and amortisation 1,235 1,264 1,7
Slide 36: Consolidated statement of cash flow (cont’d)
Consolidated statement of cash flow (cont’d) Nine Months Ended Nine Months Ended USDm, IFRS 2020 2019 30 September 2021 30 September 2020 Cash flows from investing activities Expenditures on exploration and evaluation assets (97) (32) (41) (40) Expenditures on property, plant and equipment (1,778) (
Slide 37: Other Supporting Materials
fos, Var energi Other Supporting Materials
Slide 38: Comprehensive CO2 emission reduction targets
Comprehensive CO2 emission reduction targets Ambitious reductions across Scope 1, 2 and 3 NCS leading the way on reducing emissions intensity Vår Energi GHG emission intensity operated assets4 (kg CO2 eq. per boe) Emission category Reduction ambitions Target year 18.0 Operated assets Scope 1 (direct
Slide 39: Core area with identified upsides and production for decades to come
Balder/Grane Area Vår Energi operated Core area with identified Equinor operated upsides and production for Discovery Ringhorne decades to come Ringhorne East King/Prince • High value assets with a material resource base – The first license on the NCS – PL001 – Grane and Balder are among the largest
Slide 40: Balder & Ringhorne is among the largest fields on the NCS
Balder/Grane Area Balder & Ringhorne is among the largest fields on the NCS Balder X redevelopment extending expected production beyond 2045 Balder & Ringhorne fields Area infrastructure following redevelopment Overview of fields Balder FPU Jotun FPSO Ringhorne platform Life extension 2030 approved
Slide 41: Capturing value from prolific oil areas in the Barents Sea
Barents Sea Area Capturing value from prolific oil areas in the Barents Sea Johan Castberg Operated by Equinor Goliat Operated by Vår Energi Working interest: 30% Working interest: 65% • Attractive assets with significant value and upside potential Isflak discovery (2021) – Vår-operated Goliat deliv
Slide 42: Driving drilling performance towards best in industry
Driving drilling performance towards best in industry Ambition to establish leading drilling position on NCS Example: Goliat 2021 drilling performance vs. NCS • Goliat drilling performance constantly better than NCS average 30000 Goliat wells drilled by Vår Energi in 2021 with 50% of wells in top qu
Slide 43: Ambition to continue to drive down production cost per barrel
Ambition to continue to drive down production cost per barrel Production cost per barrel1 – mid-term ambition Comments • A Accretive M&A and cost reduction programs – Reduced opex per barrel by ~15% through portfolio optimisation & “Realising our Potential” program delivering ~USD100M per year A • B
Slide 44: Resilient EBITDAX underpinned by production growth and low costs
Resilient EBITDAX underpinned by production growth and low costs EBITDAX1 evolution (USDbn) Commentary on 2021 performance 64 432 69 • Significant revenue generated in 2021 due to improved product prices, in particular driven by higher European gas prices in the second half of the year 38 26 93 • St
Slide 45: Production growth supported by continued investment
Production growth supported by continued investment Capex spending1 (USDbn) Commentary on 2021 capex 1.8 1.8 • Strong portfolio of resilient and low risk projects to deliver sustainable growth 0.1 0.2 0.1 and value 0.2 • Key sanctioned projects include Balder X, Johan Castberg, Breidablikk, Snorre,
Slide 46: Proposed fiscal changes accelerate tax recovery of investments
Proposed fiscal changes accelerate tax recovery of investments compared to existing permanent regime Current regular regime Temporary rules 2020-21 Proposed new rules from 2022 percent percent percent NPV @ 2/5/8% = 84.7/78.2/72.5 NPV @ 2/5/8% = 89.5/86.8/84.4 NPV @ 2/5/8% = 76.9/75.4/74.1 • 78% (CT
Slide 47: Strong balance sheet targeting Investment Grade rating
Strong balance sheet targeting Investment Grade rating Balance sheet key items and ratios Refinanced capital structure USDbn 2019 2020 Q3 2021 USDbn Cash & equivalents 0.2 0.3 0.3 0.6 Total assets 21.5 20.3 19.3 Bridge to Bond Total interest-bearing loans and borrowings (excl. lease liabilities) 4.8
Slide 48: Board of Directors
Board of Directors Thorhild Widvey Ove Gusevik Francesco Gattei Guido Brusco Chairperson Director Director Director Former Minister HitecVision Eni Eni of Petroleum and Senior Partner Chief Financial Upstream Director Energy Officer Clara Andreoletti Marica Calabrese Fabio Romeo Liv Monica Stubholt
Slide 49: Director biographies
Director biographies Thorhild Widvey Ove Gusevik Chairperson Director • Over 15 years of experience in the Norwegian public and • Senior Partner at HitecVision, which he joined in 2021 private sectors, with a focus on the energy industry from his role as Head of Investment Banking at SpareBank1 Mark
Slide 50: Director biographies (cont’d)
Director biographies (cont’d) Clara Andreoletti Fabio Romeo Director Director • Over 15 years of experience in the Oil & Gas exploration • Chairman for Oman Cables and development sector at Eni • Holds an undergraduate degree from Politecnico di • Head of Geosciences and Subsurface Operations Data M
Slide 51: HitecVision – A leading energy-focused PE firm in Europe
HitecVision – A leading energy-focused PE firm in Europe Energy focused private equity Two thoughts in mind Three offices in Europe +30 years of experience in the interface between History in oil & gas and taking a leading role on the the energy industry and finance in Europe energy transition USD E
Slide 52: HitecVision – Operating on the attractive NCS
HitecVision – Operating on the attractive NCS Long track record of building companies in North Sea oil and gas Team responsible for Vår Energi International oil New juniors and niche Tor Espedal New European Offshore Companies Senior Partner majors and Statoil players 25+ years experience in O&G, in
Slide 53: Overview of net reserves and resources per 30.09.2021
Overview of net reserves and resources per 30.09.2021 Assets in CPR scope Assets outside CPR scope Asset WI Area 2P 2C Asset WI Area 2P 2C mmboe mmboe mmboe mmboe Alke 40.0% Barents - 28 Albuskjell 12.4% Other - 6 Åsgard 22.1% Åsgard 70 1 Alpha Horst 7.0% Other 0 - Balder 90.0% Balder & Grane 214 56
Slide 54: Glossary
Glossary Abbreviation Abbreviation 2P Proven + Probable reserves NIBD Net interest-bearing debt AUM Assets under management NOK Norwegian Krone bbl Barrel of oil NPD Norwegian Petroleum Directorate bn Billion Opex Operating expenditure boe Barrel of oil equivalent p.a. Per annum Capex Capital expend
Slide 55: www.varenergi.no
fA var energi www.varenergi.no