Var Energi ASA (VARRY) Q3 2026 Earnings Call Transcript

Good morning, everyone, and a warm welcome to Voila Nashi's third quarter 2026 results presentation. I'm gathered here today with Nick and Carla, who will take you through our results, and afterwards we will open up to questions. With that, I'll hand it over to Nick.

Well, thank you, Ida, and good morning to you all, and great to have you all join us today for our third quarter 2026 results presentation. I'm pleased to report strong financial results in the third quarter, which is supported by high realised oil and gas prices. As a result of the strong performance, we're increasing shareholder returns, and we're doing this whilst continuing to build long-term value. So now let us look at the highlights for the third quarter. Production in the quarter of 369,000 barrels of oil equivalent per day was impacted by planned turnarounds and some unplanned outages, which are now resolved. We saw solid performance at our operated assets, and we expect higher production in the fourth quarter now that our main turnarounds are completed and with new projects and wells coming on stream. We continue to strengthen our financial position with significant CFFO post-tax in the quarter of $1.5 billion. We completed a successful issuance of $2.5 billion bonds and a record-high available liquidity of $7.5 billion. And we have increased resilience. We have materially reduced net debt over the year to $3.1 billion, and our leverage ratio is down to 0.3 net debt to EBITDAX. And we're well positioned to capture further upside from the continued higher commodity prices. And we continue to unlock long-term value. The combination with Blue Nord is on track to complete around year end. We completed both the D&O swap and the Pandian acquisition in the quarter, strengthening our positions in the Yoa and Asgard areas and consolidating our position in the Ringhorn North Discovery. Our King development in the Boulder area started up on schedule and is producing as expected. And we're pleased to announce a high-impact exploration collaboration, which was established between Boer Energy, Equinor, and ACABP, with the aim of targeting the next major NCS discovery. And lastly, we're increasing our dividend with an extraordinary component. As a result of the continued high prices and our strong financial results, we confirm an increased dividend distribution for the third quarter of $400 million, compared to guidance of $350 million, with the additional $50 million representing the extraordinary component. And we're guiding the same also for the fourth quarter. Both the third and fourth quarter dividends will be attributable to shareholders of the combined company following the Blue Nord transaction pending closing. And this means for the full year, we will have paid $1.45 billion compared to $1.2 billion for 2025. And delivering attractive and sustainable dividends over the cycle is a key priority for management. And we remain committed to our long-term dividend policy of 25% to 30% of cash flow from operations after tax over the cycles. And we have a track record of delivering this, having paid stable or growing dividends now for the last 19 quarters. A recap on the combination of Vort Energy and Blue Nord, which we announced in the summer. This is a complementary transaction for both sets of shareholders. And we've seen both companies outperform the market since the combination was announced. And the merger creates a stronger, more diversified company with increased scale. And you can see it adds growth with the strategic assets on the highly compatible Danish continental shelf. It adds value with a raised long-term production target of around 450,000 barrels per day. It increases returns with limited near-term additional investments. And we're leveraging VortEnergy's strong balance sheet to create significant financial synergies. The transaction is accretive on a per-share basis to reserves, production, cash flow, and dividend capacity. And as I mentioned already, we're on track to complete around year-end with the transaction subject to customary conditions precedent, including partner and authority approvals. And the combination of VortEnergy and Blue Nord builds the largest independent producer of oil and gas in Europe. It increases our exposure to the European gas markets and strengthens the company position as a reliable and secure supplier of energy to Europe. And on the NCS, Vort Energy has a diversified asset base in all areas of the basin. And our portfolio is opportunity rich, providing the basis for growth and long-term value creation, and we're moving at pace to realize this value. And so now looking at some of the details, starting with 2026 production. Production for the first nine months averaged 383,000 barrels per day. Second and third quarters, production reflects the impacts of planned turnarounds, with all major turnarounds now completed. Additionally, production in the third quarter was impacted by operational issues at the Johan Kasberg FPSO due to outage of the power generation system. An extended turnaround at Jotun FESO due to failure of the gas compressor requiring a replacement to be installed, and production irregularities at the Asgard area due to containments at the cost of onshore gas processing plant. And the issues at Johan Kassberg and the Jotun FESO were all resolved by early August. And none of these main production impacts are resurrected and have been managed effectively. We have three new project startups this year. Elfisk North in the Ecofisk area came on stream in the second quarter and is producing as planned. Our King development and extended reach well from the Ringhorn platform came on stream as planned in August and is also producing as expected. And also in the Boulder area, our Boulder Phase 6 project is on track to start up in the fourth quarter. So far this year, we've started up 34 new production wells, which is in line with plan, although some key wells started up a little later than scheduled. And we remain on track to start up a total of over 50 new production wells during the year, with many of the remaining wells in the final stages of completion. And so we expect higher production in the fourth quarter and a strong exit rate for the year, now that our main turnarounds are completed and with projects and wells coming on stream. As we announced in our trading update, we now expect full-year production of around 390,000 barrels per day, compared to the original guidance of 390,000 to 410,000 barrels per day. And looking now at operational performance, you can see we're continuing our trend of improving our deliveries. We've seen strong safety performance during the year across a range of metrics. We've now had zero material incidents for over two years. This takes hard work every day. We continue our trend of reducing carbon emissions intensity, and we're ranked in the top 15% of the industry globally. And we continue to be recognized for our ESG leadership, having recently received our first ranking by MSCI at AA leader level. For production efficiency on our operated assets, we continue the strong trend with 91% for the first nine months, noting that the year-to-date figure is disproportionately impacted by the planned turnarounds. On production costs, we achieved $10.9 per barrel in the first nine months, compared to our guidance of around $10 for the full year. The increase was primarily driven by strengthening Norwegian kroner, and we are updating our full year guidance to around $11 per barrel. And we have good control on underlining costs on an absolute level. Long-term, including Blue Nord, we expect operating costs to be in the range of $10 to $11 per barrel. And technology is moving fast, and we're moving with it to continue to transform our delivery. By combining new ways of working technology and AI, we are delivering SIVNIG front value. It's what we call our best initiative. Our production factory approach is a great example of this, where we are significantly reducing project cycle times and increasing value creation, and we have momentum across the whole value chain, which will continue to transform how we deliver on our strategy. And our material resource base underpins our value creation. Following the Blue-Nord combination, 2P reserves will stand at 1.5 billion barrels, which supports current production levels. But we are much more than that, with 2C contingent resources of around 900 million barrels, where development plans are being progressed. And we also have an exciting NCS exploration portfolio of around 700 million barrels of net risk prospective resources. And so putting this together, the combined portfolio has over 3 billion barrels of resource potential. And crucially, with over 50% of this yet to be developed. And there's more to come. We have a track record of continuously growing reserves and resources with around 280% replacement ratio over the last three years. And for 2026, we see that we will have an organic 2P reserve replacement of over 100% for this year. And developing this material resource space is how we will deliver on our increased long-term production targets of around 450,000 barrels per day for the combined company. And you can see the levers that will drive this, maximizing recovery from our high-quality producing assets, delivering on our portfolio of projects in execution, progressing our significant portfolio of early-phase projects towards sanction, and then unlocking more value with our focused NCS exploration program that is adding new projects all the time. I'm continuing to add to our portfolio a value-accretive M&A, such as the Blue Nord combination and the six transactions we've announced so far this year to high-grade our NCS portfolio. And we're delivering all of this at pace. Looking now at how we deliver on our long-term production target, we have 15 high-value projects in execution. All of these are subsea tiebacks or facility enhancement projects, and you can see developing around 370 million barrels net with strong economics, where the average breakeven is around $30 per barrel and rates of return are around 35%. So far this year, two projects have started up, King and Elphys North, with performance in line with expectations. All ongoing projects are progressing on track as communicated. And realising the value from our portfolio is enabled by our project factory approach, which combines standardised solutions, parallel working, pre-commitments and strategic partnerships. And our Boulder Phase 6 project, as you can see here, is a great example of this approach in action. While the Phase 6 was sanctioned in June in 2025, it is now in the final stages of completion for start-up before the end of the year, so around 18 months from sanctioned to First Oil, with the project generating significant value, with a break-even of around $30 a barrel in payback in less than one year. And we've repeated this short cycle approach with the recent sanctions in June of the Boulder Next New Wells project and our UAE subsea projects, where for both projects we'll see first production in 2027. I think you already know we have a large portfolio of around 30 early phase projects that are moving towards sanction. Also, these are subsidy tiebacks to existing infrastructural facility enhancement projects, and you can see low cost, short time to market, high returns, with average break-evens of around $35 per barrel and rates of return above 25%. And I'm pleased to say we built significant momentum with the sanctioning of 10 projects in 2025 and a further four projects so far this year. And we're working towards a further four potential project sanctions by the end of the year. And when we look forward to 2027, we expect to sanction around a further eight projects, providing more than 100% organic reserve replacement also in 2027. These projects demonstrate our ability to mature and execute a portfolio of high-quality developments, and we have the people, the equipment, the contracts in place to deliver the planned project programme. And delivering on this portfolio will develop, as you can see, around 500 million barrels of contingent resources, and will deliver on our long-term production target. And now turning to our exploration programme, where you can see we have a strong track record of unlocking value. And we've continued its success in the first nine months of the year with four commercial infrastructure-led discoveries out of eight wells drilled. And we have six exploration wells remaining in the year, with three wells in the Boulder area and three wells to be completed in the Yoa area. In August, as I mentioned earlier, we're pleased to announce the establishment of a high-impact exploration collaboration between Vore Energy, Equinor, and AkaBP, targeting the next major NCS discoveries. We've agreed to combine expertise, data, technology, and exploration capacity, and over the next five years, the companies plan to mature and test a portfolio of approximately 20 to 25 exploration opportunities, with our ambition to drill around five high-impact exploration wells annually. This programme will start from 2028. Looking ahead, we have a significant exploration position in all areas of the NCS, and we will have an exciting exploration program in 2027 with some important high-impact wells. 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, everyone. Let's start by summarizing the key financial highlights of the third quarter. We achieved an average generalized price of $103 per BOE and generated a significant cash flow from operation after tax of $1.5 billion. Our financial position continues to strengthen. Available liquidity reached a record high level at $7.5 billion, with net debt further reduced and our leverage ratio improved to 0.3. During the quarter, we successfully issued $2.5 billion of senior notes at an attractive pricing, further strengthening our liquidity position and extending the maturity profile of our debt portfolio. Such issuance materially contributes to the early achievement of the financial synergies announced in relation to the BlueNord transaction. Pre-cash flow was approximately $0.8 billion in the quarter. We continue to deliver attractive returns to our shareholders. Underpinned by continued high prices, strong financial performance, and our strength and balance sheet, we're acting on our decision for an extraordinary distribution and we're increasing the dividend to $400 million for the third quarter and got the same level for the fourth quarter for the combined set of shareholders, each quarter consisting of $350 million based dividend and $50 million in extraordinary dividend. This $100 million extraordinary dividend distribution comes on top to the Q2 dividend increase, where we added for existing shareholders $50 million to our previous run rate. This brings total shareholder distribution for 2026 to $1.45 billion, up from $1.2 billion in 2025. Our long-term dividend policy of 25% to 30% of CFF after-tax over the cycles remains intact. We generated revenues of approximately $3.6 billion in the quarter, 70% higher from the same quarter last year, driven by higher volume sold and higher prices, achieving a weighted average realized price of $103 per billy. How I realized the crude oil price was $103 per billy per barrel, representing a premium of approximately $6 per barrel to the red brand. Towards the end of the quarter, premium differentials for medium and light-sweet oil qualities from the NCS have materially increased, and since this grade represents approximately 50% of our crude oil portfolio, we are well-positioned to benefit from such increase. As cargos are normally sold weeks ahead of delivery, those premiums will be reflected in our four-quarter results. Should the market situation continue, as in being so far in October, differentials are expected to be in the range of $6 to $10 per barrel for the forequarter. Varenergy has always had a proactive and forward approach to shipping. This approach is protecting us from the material shipping rates increase apparently affecting the market, while maintaining freight availability to support our lifting plan. We have secured ample shipping capacity beyond 2030, at an average shipping cost of $2 to $3 per barrel. The rise price for gas was $108 per buoy in the quarter, approximately $18 below the average spot market reference price. This was due to a combination of volume sold forward on a fixed-price basis and volume sold with a month ahead indexation in a rising market, whereas the impact will be the opposite in a descending market. For the gas year ahead that has started 1st of October, we have sold around 18% of our gas volumes at year-end contracts at around $76 per BOE, running until the end of the third quarter 2027. Including additional fixed-price tranches, approximately 30% of our gas production for the fourth quarter 2026 and the first quarter 2027 is sold at an average price of around $82 per BOE. A brief update on our financial aging position. We continue to retain significant exposure to price upside through a disciplined edging strategy. For the four-quarter, 13% of our post-tax oil production is protected through caller options, with an average floor of $75 per barrel and an average cap of approximately $140 per barrel. For gas, 15% of the four-quarter post-tax production is protected at an average floor of approximately $83 per barrel, with a cap of approximately $220 per barrel. We're also taking advantage of the current supportive market environment to secure attractive aging levels for the first three quarters of 2027. Through the use of callers and three-way option structures, the company has protected approximately 12% and 11% of its post-tax oil and gas production, respectively. Our 2027 edges protect an average floor of $71 per barrel and $83 per BOE for oil and gas, respectively. For edge volumes, the gas prices are capped at $206 per barrel, while the oil is maintaining partial price participation above $100 per barrel. Boar Energy generated material cash flow in the third quarter. Cash flow from operations after tax was approximately $1.5 billion, down from the previous quarter mainly reflecting higher trade receivables resulting from the strong prices realized for our September sales that are already collected as we speak, and higher cash tax payments. CAPEX for the quarter, including exploration, was $725 million. The strong operating cash flow covered the CAPEX with a solid margin, And CFFO to CAPES coverage was 2.1 in the quarter. Our full 2026 development CAPES guidance remains unchanged at $2.5 to $2.7 billion. Our liquidity position strengthened farther during the quarter. We ended the quarter with a significant cash balance of approximately $4.75 billion and a record high available liquidity of $7.5 billion. Looking at the development of our cash position in the quarter, we generated $3.1 billion of cash flow before tax and working capital's movements. Working capital had a negative impact of approximately $440 million due to higher trade receivable at the end of the quarter, which have already been collected. Taxes paid amounted to $1.1 billion. We had a cash outflow of $828 million in investment into our high-value project portfolio, including approximately $100 million related to the pandion acquisition that you know as well. In the fourth quarter, we expect to close the previously announced investments in Fenni and Goliath, resulting in a cash consideration to be received of up to $350 million. During the quarter, we raised $2.5 billion from the issuance of U.S. dollar senior notes and repaid $500 million of bonds maturing in 2027. The average weighted coupon for these issuance is approximately 5.8%, hence materially contributing and risking the early achievement of the financial synergies announced in relation to the Blue North transaction. Also in September, we distributed as planned $250 million in dividends related to our second quarter results. The company ends the third quarter with a very strong financial position. We continue to reduce our leverage ratio, and interest bearing debt over EBITDAX is now down to 0.3 at the end of the quarter, significantly reduced from 0.8 in the same quarter last year, and remaining well below our over-the-cycle target of below 1.3. We remain committed to maintaining investment-grade credit ratings and continue to hold the rating from Moody's Standard & Poor & Fish, all with a stable outlook. In the third quarter, we paid approximately $1.1 billion in cash taxes related to 2026 result, while for the fourth quarter, we expect cash tax payments of approximately $1.7 billion. For the first half of next year, we give sensitivities based on 2026 estimated profits at different price scenarios. We remain committed to delivering long-term attractive returns to our shareholder, and our track record now demonstrates 19 quarters of stable or growing dividends. Underpinned by continued high commodity prices, strong financial performance, and on the back of the Bluenart transaction, we are acting upon our decision for an extraordinary dividends, and we are increasing shareholder distribution for the third quarter to $400 million, and at the same level for the fourth quarter. It's comprising $50 million of extraordinary component, and it's subject to audited financial results with sufficient equity and general meeting approval of dividend. The $100 million extraordinary distribution comes on top of the Q2 dividend increase, where we added for the existing shareholders $50 million to our previous run rate, bringing the total 2026 dividend at $1.45 billion, compared to $1.2 billion in 2025. We continue to maintain a disciplined approach. We will continue guiding dividend level on a quarterly basis, in line with our long-term dividend policy of 25% to 30% of CFO after tax over the cycle. Vorenergy continues to build resilience and flexibility, supporting long-term value creation, and attractive shareholder returns. With that, I hand it back to Nick for final remarks.

Well, thank you, Carla. I have just one final slide to summarize. We've strengthened our investment proposition, building the largest independent producer of oil and gas in Europe when the combination with Blue Nord closes. You can see we have increased reserves and resources of 2.4 billion barrels, which supports increased long-term production of around 450,000 barrels per day. And we're opportunity rich and are investing in a large NCS portfolio of high-value short-cycle projects that will increase returns. And we have stronger cash flow generation of between eight to $13 billion of free cash flow over the period 2026 to 2032. We continue to improve the business for increased resilience and flexibility, with a free cash flow breakeven of around $40 per barrel, supporting investments through the cycle. And we've increased our dividend payout again for this year. And you can see that we have the capacity to fund long-term attractive shareholder returns. On completion of the Blue Nord transaction, our share free float will increase from 37% to around 43%, increasing the liquidity of our stock and potentially increasing the weight in the various stock exchange indexes. And finally, the global conflicts amplify the strategic importance of Norway and Denmark as secure and responsible suppliers of energy to Europe. All of these factors have combined to deliver significant shareholder value, with a total shareholder return since the IPO four and a half years ago of around 270%. These are our third quarter 2026 results and other reasons to be invested in Vora Energy. I will finish there, and thank you for your time, and we'd now like to open up for your questions. Thank you.

And thank you very much, sir. As I said, sir, now we'll start our Q&A session. If you'd like to ask a question, please press star 1 on your telephone keypad. If you wish to withdraw it, you may do so by pressing star 2. Please respect only two questions for participants, and afterwards, you can re-enter the queue for more questions. There will be a brief pause while we register questions. Our very first question today is coming from Tianyang Bai of Citi. Please go ahead. Your line is open.

Morning, guys. Thanks for taking my questions. The first one, Nick, there's obviously been plenty of speculation around a potential transaction in Norway, And I appreciate there may be limits on what you can say. But if we take a step back, how do you think about Voir's long-term strategy around Ecofisk? You've consistently increased your ownership in and around the hub over time. Does that strategy ultimately include an ambition to pursue operatorship of Ecofisk? And a second question, perhaps, for Carlo. On cash taxes, you're getting to around $1.7 billion in 4Q, but looking back, both seem to have made additional tax payments in late 2022, which helped reduce cash tax obligations in subsequent quarters. How should we think about that flexibility today, and is there any scope for further prepayments that could influence the cash tax profile into 2027? Thank you.

Good. Well, thanks for the leading question. And I mean, what I will say is that we don't comment on acquisition activity. So I can't say any more than that on that. So, Carlo?

Okay. When it comes to the tax cash, yes, you're right. In 2022, this was managed at the end of the year. It's not a straightforward process because the process in country is quite regulated when we can revise our tax schedule, and this has been already done when possible exactly to reflect an increase in trend, so we'll see whether there's a possibility with the tax authority. But it will be out of the process, so I'm not guiding or anticipating anything with that regard.

If I just may add to that, we've already increased the second half this year from 25 billion NOC to 27 billion NOC, so we've taken up the payment somewhat.

We took already the window. Clearly, the price is continuing going on the higher end, so we can't keep the pace all the time.

Okay.

Thank you very much. Thank you, sir. Next question will be coming from Victoria McCulloch of RBC. Please go ahead.

Morning. Thanks very much. And thanks for the colour on new production and wells being added in 4Q that helps us bridge to revised guidance. But can you help us a bit with the colour as to how much your existing production is expected to increase in 4Q due to the lack of interruptions? And maybe connected to this, when do you expect Orman-Lange to subsea compression issues to be resolved? And I guess somewhat connected to this, my second question, how much of OPEX is FX-related in 3Q? And how much was it, or I guess was the difference from the $10 BOE guidance versus the unplanned interruptions, which I expect had an impact on OPEX as well? Thanks very much.

So, Victoria, good morning. And just to cover off Ormond Langer, I think it's expected to start up around the end of the year, is our understanding. So, but, you know, if you look to fourth quarter, all the turnarounds are behind us. And actually, we have new projects coming online. Boulder Phase 6, for example, will come online very, very shortly. And we have a lot of production wells coming online this year. Some have been a bit later than expected, but we're actually on track in terms of total numbers so far, and so we've got 34 online, and we expect around 50 by the end, or actually over 50 by the end of the year, and many of those are in the final stages of being completed, so we've got good visibility on that. So we're going to see higher production in the fourth quarter. We've set out that we can be around 390,000 barrels a day for the year, which is the bottom end of our original guidance. And you can do the sums as well as I can, which says we have to be around 410,000 barrels a day in Q4. I think we're in good shape to be able to do that. And we will see good exit rates from the year, actually, because a lot of things coming online towards the end of the year. That's sort of how I would characterize our production in the fourth quarter. And Carla, maybe pick up the OPEX question.

Your question about the OPEX, we have a near-to-date an account which is around $11 per BOE, and approximately $0.50 is due purely to forex effect. Thank you, Victoria.

Next question, we're coming from Theodor Svin-Nielsen, calling from SB1 Markets. Please go ahead.

Good morning, and thanks for taking my questions. First question, that is on the exploration collaboration with the Kanoda, which, by the way, looks like a very positive initiative. But do you expect, or how do you expect that collaboration to impact your total exploration spending over the next few years? And second question, that is on third quarter cash flow. Looks like you made some significant working capital investments in this quarter. Is that purely related to higher oil and gas prices? And should we expect that effect to reverse over the next couple of quarters? Thanks.

Yeah, good, Teodor. You know, I think, you know, the ambition is that between us that we drill, you know, up to five wells, high impact wells a year. Each of us had an exploration strategy, which was around 20% of our exploration spend directed towards high impact opportunities. The reality is, we haven't been fulfilling that because for various reasons, we didn't necessarily get partner support to do things. And it's precisely why we put this collaboration together, which is the three of us wish to go and do these things. And so we're going to work together to build the license position to be able to make it happen. The first wells will come in 2028. And, you know, I don't see a material uptick in our exploration plan. I mean, our exploration budget, it goes in cycles a little bit, depending on the quality of the opportunities and how they come forward. But I would expect us to sort of work within the sort of range that we have. And, you know, the more success we have, the more we can spend, and the less success we have, the less we do. And so we adjust as we go. And then, Carlo, do you want to deal with the...

Yeah, sure. The working capital, Thiero, yes, I confirm with your understanding, the increase of working capital is absolutely mainly driven just by the increase of price versus June, where you remember the price was actually a bit going down, and then it picked up again. And I mean, if you look at our financials for the quarter and the retail of working capital, you can pick this up very, very quickly. That's why it's a pure temporary effect. And as I As I was mentioning, those receivables have obviously already been collected as we speak because there is no risk under that perspective. So that's the reason. Okay, that's clear. Thank you.

Thank you very much. Next question will be coming from Alejandra Magana of JPMorgan. Please go ahead.

Hi, good morning. Thank you for taking my questions. On the 3Q production interruptions, you provided some additional color and prepared remarks, but can you help us understand what should give us confidence that these were isolated events rather than pointing to any recurring reliability issues? And then my second question is on Blue Nord. With closing still targeted around your end, has anything from the integration planning changed your confidence in either the synergy target or the timing of realisation? Thank you.

Good. You know, we mentioned three main events that impacted Q3 production. First of all, at Jorn Kassberg, we've had some challenges with the power generation system. I think, you know, we're in just over a year from startup. It's the time that you start to see sort of issues with the facility that come evident. And I think that's what we've seen. So that issue is managed and behind us. And, you know, we don't see a risk from it looking forward. The second issue was around the Yolton FPSO. We had an extended shutdown. And the reason we extended it is that when we started up, we had a failure of the gas compressor and we had a spare, which we do have, and it just required us to replace it. So actually, we've had a good track record with compression there. So it was a bit disappointing, but I think that issue is also behind us. And at Asgard, the majority of the issues here have been around some curtailment from the onshore gas processing plant, which again has a good trend of uptime, but we had a problem with the valve and some other problems at the terminal, and I think, again, those issues are behind us. And none of these are reservoir related. They're all sort of one off facilities issues. And I think I think we should be comfortable. So these things will get managed properly going forward. Your second question. Perhaps you repeat that. Yeah, just a transaction. Look, you know, we are expecting closing around the end of the year. I think we're in good place to achieve that. And we've seen nothing out of what we've seen so far that makes us think there's anything more, you know, any less positive than we were when we announced it. I'm sure we're going to create a lot more value out of this when we get it. But we can't really start to work that until we become the owner of it. And as I say, that'll happen around the end of the year.

Maybe on this, if we can just highlight again that, if you remember, when we announced the transaction and we got the $250 to $300 million synergies, the material part of it was driven by the refinancing, and actually on that, we took an early action, because we issued back in September a very compelling coupon. So, at this point, we also see those synergies to be very much the system, I would say, realized.

I appreciate the caller.

Thank you very much. Our next question, we come from John Olaisen of ABG. Please go ahead, John. Your line is open.

Thanks for taking my questions, everybody. Two questions for me. The first one is regarding the Balderfield. I just wonder, will there be any production interruptions in Q4 when Balder 6 is being hooked up? That was my first question. And then the second question is regarding tax payments. And the question is related to slide number 18. You have quite a wide spread in the potential payments in the first half of 27. And I realize that is all related to the tax. It's payable tax for the tax year 26. So I just wondered the scenarios you have with different oil and gas prices. Are those oil and gas prices average prices for 26? Or is it average prices for the remaining of the year?

Good. I'll deal with the bolder question. You know, we would generally expect no disruption from the startup of the well. And actually, we did earlier on see disruption, but we've put in some processes to manage that for future startups. So I'm hopeful that we won't see disruption as a consequence of starting up the boulder phase six. And Carlo, do you want to deal with the tax question?

Yes, yes. I mean, referring to the slide you just were referring to, so slide 18, if you look at full note, price assumptions are reflecting the average generalized price for the year, because as you know, we make an accrual estimate for the entire year, and then we pay half of it. So I appreciate that there is a relatively wide range. On the other hand, the price are moving up, but this can be quickly down. So that's the reason why I have the wide range, but it's the average expected price for the year, not just for the quarter.

Thank you.

Thank you, sir. We'll now move to Nash Kui of Barclays. Please go ahead, Nash.

Hey, good morning, everyone. Thanks for taking my questions. The first question is on distribution. Nick, you previously suggested a potential special DV was more likely to come at Q4 results. I wonder what has changed to give you the confidence to bring that forward, and how should investors think about the sustainability of this higher distribution level? And do you think there's even more room for more special DV this year? And then my second question is on oil realizations. We realized $6 per barrel premium to dated brand in Q3. I would like to hear your view on whether this premium can be more structural. And if I hear it correctly, Carlo mentioned that VAR Energy has locked shipping costs around $2 to $3 per barrel, which is really great. But is that for your entire sales volume? Thank you.

So, Nashal, good morning, and I'll deal with the distribution. I think we wanted to take you by surprise by giving a bit more in this quarter. I mean, the reality is that we're almost at the end of the year. And what we said is that if the higher prices continue, then we would look at an extraordinary dividend when we came out with Q4. And, you know, we're actually almost at the end of the year. So we chose that now was a good time to do it. You know, we will continue to announce dividends on a quarterly basis and guide on a quarterly basis. So, you know, this time around, we've increased from, you know, we increased at the last quarter results to account for the Blue Nord transaction from 300 to 350, which was accretive on a, well, which is paid just to the existing shareholders. And then we guided 350 for this quarter, and now we've lifted it by $50 million to $400 million, which is, you know, $50 million of extraordinary dividend. We're guiding Q4 at $400 million, which is, you know, if you take the run rate of 350, it's another 50. So, you know, overall for the year, we'll be going from, we will be a payout if we do the guidance level at $1.45 billion compared to $1.2 billion last year. I think what we will do is, as usual, we will look at where we are in the quarter end, which will be in February, and think about where the business is at and the outlook is at and make judgments then as to what to do. But this is how we see it today. And we're not going to get ahead of ourselves guiding forward. But I just remind, we've delivered 19 quarters now of stable or growing dividends. It is our focus as a company to continue that trend long term. I think we have the capacity and resilience of a company to do that. And that's what we intend to aim to do. And Carlo, do you want to deal with shipping costs?

Sure. Realization and shipping costs. So, to your point, we see, again, a premium in our whole portfolio. It's going to be structural. If you remember, when we were discussing Q1, when we were starting to see this premium coming for April and May, we had the same discussion, and we saw it was very much linked to how the geopolitical tensions were evolving. And in fact, it went down during the summer, and then it picked up again while the geopolitical tension continues to, and the warm-up situation is continuing to impact. So I believe that it's very difficult to predict whether this premium will remain structurally for a longer period or for a long period. We don't factor this in our analysis. What I believe you can consider a structural positioning for us is into things. First of all, is the exposure to the lightweight oil quality that has proved to be positively reacting to this, and this is because it's part of our oil mix. And then, as you were mentioning about our shipping cost, we have a $2 to $3 average on the entire portfolio, matters through a number of arrangements and contracts on a long-term basis. So what we wanted to give assurance is that as a company, we have both the fleet capacity, so we don't see any risk when it comes to the availability of vessels for our lifting plan, and at the same time, at a competitive price, so we don't get exposure to what is happening now in the market. And this, I believe, is positive for shareholders and investors in terms of resilience, also in this specific part of the value chain.

This is very helpful. Thanks, Nick. Thanks, Carlo.

I mean, I think, might add, we locked all these shipping rates in for our volumes some while ago, before the spike in prices that we saw in February or March, and we have them under long-term contract. So, we're in a very advantageous position on this as a company.

Yeah, great. That's a good call.

Thank you. Thank you for your questions, Anash. Would I move to Tom Eric Christensen calling from Pareto. Please go ahead.

Thank you. First question to you, Nick. On the exploration and cooperation, of course, it's good to see big companies coming together and more wealth being drilled. At the same time, could you talk a bit about how you find these targets? Because through a time in London, for instance, the giant cider field was discovered because someone was able to think differently. So is it kind of risky that you get too much of a cooperation between the three big companies and too much consensus thinking within that part of the creation work that you get to a few of these special voices that find something that has been overlooked before? And the second question on finances. The long-term dividend guidance has unchanged 25% to 30% of operating cash flow through the cycle. In an upcycle where we clearly are now, how strong would you allow the balance it to become? How much cash would you build before we have to put it out there? Is there a net debt kind of level on an absolute basis that we should look at or some kind of metric compared to a more normalized oil and gas price in that kind of term of kind of seeing how we should think about dividends, especially going into next year? Thank you.

Okay, on the exploration collaboration, you know, I think the three companies that have come together to do this, you know, we each realize that actually not many of these wells are getting drilled. And, you know, we, first of all, you can't drill wells 100% here in Norway, but we found that we were each getting licenses and various reasons we weren't able to move them forward. And, you know, the way we're working is that we're joining together with our expertise and our data and ideas, putting it together to come up with a portfolio. And the company that brings the idea forward is going to operate it. And, and so, you know, we have applied in the recent APA round, which will get awarded next year for some blocks we had previously that we wanted to drill, but we weren't able to do because we couldn't persuade the partnership that we had at the time to do it. So we're going to get to drill those actually on a lower working interest than we probably would have had previously. So I think it's a really positive thing to do. I mean, the reality is you've got to do these things. You don't find oil unless you drill wells. And I think we've stepped out to say we're going to do this. And I think, you know, yes, you can see a negative that we're joining forces and doing it together. But I think it's actually far more positive than that, because we're sharing ideas and we're backing each other's ideas. But fundamentally, we're going to make things happen and build some wells. And then on dividend debt, you know, we want to maintain long term stable or growing dividends. And we want to maintain investment grade balance sheet long term. And within those parameters and within the parameters of the cycles of the oil price, we'll manage the company to achieve long term resilience. We're not going to get ahead of ourselves and project dividends, and we're not going to get ahead of ourselves and project debt levels outside of that. But, you know, we've looked to deleverage a bit, which we will clearly do this year and have done so far. And we'll balance those two objectives, you know, really balancing three objectives. One is funding our growth, maintaining an investment-grade balance sheet, and then maintaining a stable or growing dividends long-term. And that's, you know, we will find the right space within that to achieve those three objectives.

Thank you very much. Can I have one short follow-up there? All the companies that you previously saw that, you know, were not, that you had as partners, that you were not able to move this wealth forward with, which, of course, seems like a very good reason to do this collaboration, of course, and the obvious one. Was that mainly, call it, international large companies, majors, that wanted to hold back on spending but still had interest in those licenses? Or was it kind of the smaller, independent, North Sea-focused companies that didn't have the capital or didn't want to take the risk of drilling these more speculative wells?

It's a bit of both, really. I just don't want to comment too much on the specifics, but I mean, it's the reality is that, you know, we've, it's getting alignment on doing these things, and you just have to look at the market. I mean, who's drilling exploration wells here? I mean, there's really three very active players, which is ourselves, Zaki Bipi and Equinor, and then there's a few other players that are participating, but most of them are not doing the high-impact activity, and so that's why we've aligned together.

Thank you, sir. We'll now go to Alice Winograd of Morgan Stanley. Please go ahead, Alice.

Hi, thank you, and good morning. A follow-up on the dividend, please, if I may. So, regarding the new $400 million run rate or the $100 million special for full years, How do I reconcile it with the 25 to 30% CFFO payout range? Because just thinking of what you're likely to achieve for a full year 26 CFFO, it strikes me that a 100 million special is definitely less than what you could afford, and maybe even below the 25% payout floor. But simultaneously, maybe the $400 million is too high for a new permanent run rate. So, can you maybe spell this out a bit more? What's the bar for the $400 million to go up and down, ultimately, if commodity prices normalize? Thank you.

Okay, sure. Thanks, Alice. I'll take this. It's a good question, and it's also an opportunity to clarify this. We have a policy which is over the cycle, 25 to 30 percent over the cycle, and in particular, I believe that we all appreciate high prices or the big discontinuity in prices can create a lot of variances, and specifically what happens is very driven by how the Norwegian tax, which is a material impact on the CFFO works. You pay 50% of the tax bill the year after. So in the year where you realize high prices, you typically have a CFFO, which is not fully discounting what is happening from a tax perspective, but it's just moved a few months after. So if you look on over-the-cycle basis, it's where you can have a temporary discrepancy, as I'm trying to say, that over-the-cycle is normalized. So the way we look at it is, again, over the cycle, knowing that there is a tax bill that will be paid immediately after in February and so on and so forth. And the price discontinuity we had this year is pretty material because compared to 2025, there's a material spike. So I hope this gives you a bit of the thinking that goes a bit beyond the 12 months specific period when it comes to the policy.

Yes, thank you.

And thank you very much, Alice. Ladies and gentlemen, as a reminder, if you have any questions or follow-up questions, please press star 1 at this time. We'll be taking a question now from Anders Rosenlund of SEB. Please go ahead, Anders. Your arm is open.

Thank you for taking my question. I was wondering if you could help us on where you give indications. I certainly appreciate that you're not guiding for 2027 and 2028 yet. But the light blue air 3P reserves, how should we think about that compared to the two areas which says current forecast, which includes improved recovery and to see contingent resources in early phase, and the blue NORD volumes? Are we fair to assume that you're indicating that production will drop from 2027?

First of all, we are not guiding production for next year, Josette. This is the long-term outlook, and that's the way we've been showing it for some time. We showed this at Capital Markets Day, and what we've done since then is update current forecast and long-term outlook, and we've, of course, added Blue Nord on top since then. And we will guide in February what we see for next year. The reality is there's a range around this, and it depends on the level of activity and funding that we choose to put, and we're putting our plans together at the moment, and when we get to finalise that and with our partners, then we'll have a clear understanding of what the outlook for next year looks like and the future years. And so I think it's reflecting here that there's a range. I think you should look broadly at the base, the dark blue plus the gray as being the base, but there's an upside on this, which, depending on the amount of capital we put in, can achieve quite a bit more. So I don't really want to guide much more than that at this stage. Okay, thank you.

Thank you. I'll answer your questions, Anders. Ladies and gentlemen, as we have no further questions, I turn to call back over to Ida for additional or closing remarks. Thank you.

Thank you. That concludes the third quarter presentation for Wadan Ashi. Thank you very much for joining us today, and we wish you a good rest of your day. Thank you.