VÅR ENERGI ASA (VAR) Q2 2026 Earnings Call Transcript

Good morning, everyone, and welcome to Void and Lashi's second quarter 2026 results webcast. Today, we will cover both our second quarter results and the announced BlueNord transaction. We will begin with a quarter results presentation, followed by a presentation of the proposed transaction. Following both presentations, we will open the line for questions. I'm also pleased to welcome Ewan Sherlo, CEO of BlueNord, who will be joining us for the Q&A session. With that, let me hand over to our CEO, Nick Walker.

Well, 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 for joining us today. We've had a very active quarter with lots to report on this morning. First, we'll cover our second quarter results, and then we'll review the Blue Nord transaction details. And of course, I'm pleased to have you and Sherlock with us, who will make a few comments at the end and participate in the Q&A session. I'm pleased to report record financial results for the second quarter, supported by operational delivery as planned and high realised prices. We continue delivering strong momentum across Vort Energy, and I'm excited about the company's outlook. We're improving outcomes, increasing the pace of delivery, and optimising the portfolio, which is increasing resilience and unlocking significant long-term value. And we're excited to announce today the combination of Vort Energy and Blue Nord, creating the largest independent producer of oil and gas in Europe. The combined business will have increased production target of around 450,000 barrels of oil equivalent per day and reinforces our role as a reliable and secure supplier of energy to Europe. Together, we're creating a stronger, more diversified company with increased scale, resilience and cash generation. The combination increases production, reserves and resources, underpinning our ability to deliver long-term value to our shareholders. And so now let us look at the highlights for the second quarter. Production is on track to meet full-year guidance, with production in the first half of the year at 391,000 barrels of oil equivalent per day. This is supported by strong performance from our operated assets. And we expect production in the second half to be higher as our major plan turnarounds are now complete and with new projects and wells coming on stream. And as I said, we delivered record financial results in the quarter with significant CFO post-tax of $2.1 billion. We have increased resilience with net debt reduced to $3.4 billion and our leverage ratio is down to 0.4 net debt to EBITDAX. we completed successful issuance of 750 million euro hybrid bond in the quarter and of high available liquidity of 5.3 billion dollars and you can see we received a credit rating from fitch of triple b with stable outlook to go with existing investment grade ratings from smp and moody's and we continue to lock long unlock long-term value firstly with the combination with blue nord that we announced today we are building the largest independent emp in europe During the quarter, we sanctioned key projects in the Boulder and Yowa areas, developing 110 million barrels of net reserves. We see strong performance of the breeder bit field. This will see reserves increase by 50% since the PDO and lead to the next phase of development. And we've been actively managing our NCS portfolio with five transactions announced in the quarter, unlocking value creation and extending field life. and lastly we continue to deliver long-term attractive shareholder returns as a result of the expected value creation from the blue node combination and our strong financial results we're increasing shareholder returns we confirm a dividend distribution for the second quarter of 350 million dollars to be paid exclusively to existing vort energy shareholders this means we've paid stable or growing dividends for the last 18 quarters, and we're providing dividend guidance of $350 million for the third quarter to the shareholders of the combined company. 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. so now looking at some of the details starting with 2026 production first half production came at 391 000 barrels of oil equivalent per day and we're on track to meet the full year guidance range of 390 to 410 000 barrels per day we continue to see strong performance out of operated assets with production with high production efficiency and as we advised at the start of the year, the second quarter was impacted by planned turnarounds. And when the Boulder-Jolton turnaround is completed during July, all of our major turnarounds for the year are behind us. Additionally, in late second quarter, Johan Casper production was impacted by issues with the power generation system on the FPSO. A solution has been established and production was back to normal levels from mid-July. And looking forward, we're starting up four new projects during the year. Firstly, the Elphys North project in the Ecofysk area came on stream in the second quarter as planned, with production in line with expectations. And in the second half, we're on track to start up three projects in the Boulder area, the Yolton FPSOD bottlenecking, the King development, and Boulder Phase 6. And we have a large portfolio of over 50 production wells that are planned to start up during this year. So far, we're on target with around 50% already in production, meaning we will see higher production in the second half of the year as our major plan turnarounds are completed and with new projects and wells coming on stream. And looking now at operational performance, you can see that we're continuing our strong trend of incrementally improving our deliveries. We've seen strong improvement in safety performance during the year across a range of metrics. And we've now had zero material incidents over the last two years. This takes hard work every day. And we continue, as you can see, our trend of reducing carbon emissions intensity. And we're ranked in the top 15% of the industry globally. And our methane emissions continue at the near zero level. And we continue to be recognised for our ESG leadership and are ranked by both Sustainalytics and S&P Global in the top 15% of the global oil and gas industry. For production efficiency on our operative assets, you can see a strong improving trend. We achieved 94% in the first half of the year. This is inclusive of the impact of planned turnarounds and was better than we expected. and on production costs we achieved $10.8 per barrel in the first half compared to our guidance of $10 for the full year. The increase was primarily driven by strengthening Norwegian krona and adjusting for this reduces the first half opex to $10.3 per barrel in line with the guidance for the year. We have ambitious targets to deliver further operational improvements which over time will create significant further value and as I mentioned at the start during the quarter, we announced a series of transactions, high-grading our NCS portfolio to strengthen long-term value creation. Firstly, the acquisition of Pandian's assets to secure long-term production growth in the Yoa and Asgard areas. Secondly, swap a range agreement with DNO to align interests in the Ringhorn North development and consolidate positions in the Yoa area. And thirdly, divestments in equity interest in the Goliath and Fenya fields to accelerate value creation from recent exploration success and reduce capital commitments without meaningful near-term production impact. And lastly, an asset exchange with Equinor, strengthening the company's position around Yoa by taking an interest and operatorship in the large Pion gas discovery with the plan to tie it back to the Yoa facilities, extending the field lifetime. And the strategic rationale for these transactions is multiple. It's about high grading in core areas, increasing ownership in key assets, expanding into high value opportunities, extending field lifetime, accelerating value realisation from exploration success and flexibility in capital allocation. Combined, these transactions do not materially impact the company's short-term production target, but materially strengthen our long-term outlook. And I think these are great examples of how we're continuously high grading the portfolio to create long-term value. We're now looking at how we deliver on our long-term production target. With recent project sanctions, we now have 16 high-value projects in execution. These are all subsea tiebacks or facility enhancement projects. And you can see they're developing around 380 million barrels net and with strong economics, where the average breakeven is around $30 per barrel and rates of return are around 35%. And because these projects all leverage existing facilities, the average unit production cost is very low, at around $3 per barrel. All of these projects are progressing on track as communicated. And during the quarter, we sanctioned two important new operated projects, Boulder Next New Wells and Yowa Subsea projects. which means so far this year we've sanctioned four projects developing total reserves around 170 million barrels net adjusted for the transactions that we announced in the quarter this gives us high confidence that we will once again have an organic reserve replacement this year well above 100 percent these project sanctions demonstrate our ability to mature and execute a portfolio of high quality developments supporting production growth and long-term value creation and now i want to look at the two sanctioned projects in the quarter firstly the boulder next new wells project is the next phase of development in the boulder area and is enabled by existing infrastructure and available capacity the project comprise the first phase of seven wells tied back to the yotan fpso with expected startup in q4 2027 and provision is being made for future phases drilling with the subsea facilities having capacity for an additional lime wells the initial project is developing gross 2p reserves of 86 million barrels and of course we have a high working interest here with 90 percent so it's material to us and you can see strong economics with a break-even of around 30 dollars per barrel and rates of return above 35 percent this project also supports the planned consolidation of infrastructure including decommissioning of the boulder fpu from 2028 which reduces operating costs and emissions. And we continue to see a significant resource upside in the boulder area where we're deploying our subsurface expertise and technology to unlock this opportunity, such as newly acquired seismic and advanced horizontal drilling and completion technology. Our aim here is to keep facilities full in the long term. The remaining boulder phase five wells and the initial king well will start up this quarter and phase six will come on stream in the fourth quarter and then we have boulder next further boulder next drilling full development of king ring on north ring on vision all being progressed towards sanction we see a lifetime for boulder well beyond 2045 and we'll be drilling in this area for many years to come and then on to the subsea projects where vor energy is the operator this comprises the development of the Ophelia, Yoa Nord and Sarisa discoveries in three licences as a coordinated subsea development tied back to the Yoa hub. First production is expected from Sarisa already in the third quarter of 2027, followed by startup of Ophelia and Yoa Nord in the second half of 2028. And this project includes development of total gross 2p reserves of 76 million barrels of oil equivalent. And as can see strong economics again with break even below 35 dollars per barrel and a rate of return above 25 percent and this project is enabled by our project factory approach combining standardized solutions coordinated execution and utilization of existing facilities to excel accelerate development and the project will be executed through a coordinated drilling and installation campaign, leveraging existing supplier partnerships, realising synergies and efficient execution. Now, Yoa is a core operated hub in Vaughan Energy's portfolio, and we've been working to extend field lifetime. The Yoa subsea projects, combined with the planned development of the recently acquired Pion gas discovery through the hub, is expected to extend field lifetime beyond 2045. We also see material exploration prospectivity near to Yoa, with six operated exploration wells to be drilled in the next 18 months. We see exciting opportunities to continue to create significant further value in the viewer hub area. And we still have a large portfolio of around 30 high return early phase projects that are moving towards sanction. All of these are subsea tiebacks to existing infrastructure or facility enhancement projects with low costs, short time to market and high returns. With average break-evens, as you can see, around $35 dollars per barrel and rates of return above 25 percent and we've built significant momentum with our project factory approach with the sanction of 10 projects in 2025 and a further four projects so far this year and you can see that we're working towards a further five potential project sanctions in 2026 which means we're on track to deliver on our target of up to eight project sanctions this year and while we've been moving projects forward into execution we're continually replenishing the early phase project hopper as we further de-risk the potential of our exciting portfolio. We have the people, the equipment, the contracts in place to deliver the planned project programme. And delivering on this project portfolio will develop around 500 million barrels of contingent resources and 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. We've continued this success in the first half of the year with three commercial infrastructure-led discoveries out of six wells drilled. One of these discoveries, Frida Kahlu, is already in production and the other two are being matured towards development. Now the majority of our exploration program in 2026 is in the second half of the year and we have some exciting wells to come. Seven exploration wells remaining with three in the Boulder area, three important wells in the Yoa area, and a high-impact well in the Asgard area. And it's going to be exciting to see these results come in. And looking ahead, we have a significant exploration position in all areas of the NCS. And we have an exciting program already lined up for 2027 with some important high-impact wells. So that rounds off my operational update, and I'll now hand over to Carlo to review the financials.

Thank you, Nick, and good morning, everyone. A quarter presentation reached the best today. Before we go into the details of the combination with Blue Nord, let's look at our second quarter 2026, where we actually delivered record financial results. We achieved an average realized price of $101 per BOE and generated a significant cash flow from operation after tax of $2.1 billion. Our financial position continues to strengthen. We reduced net debt from $5.2 billion in Q1 to $3.6 billion in Q2 and further improved our leverage ratio to 0.4, with a record high level of available liquidity of $5.3 billion. During the quarter, we successfully issued a 750 million euros every bond, and we were assigned with a AAA rating by Fitch with a stable outlook, highlighting for Energy's strong credit profile. Pre-cash flow in the quarter was $1.4 billion. We continued to deliver attractive returns to our shareholder, and on the back of a solid operational performance, continuous project sanctioning, record financial results, and in conjunction with a non-school mission with Blue Nord, which is expected to complete around then 2026, we raise the dividend level for Q2 at $350 million and also guide the same level for Q3. Our long-term dividend policy of 25% to 30% of the CFF after tax over the cycles remains intact. We generated record revenue of $3.7 billion in the quarter, more than doubling from the same quarter last year, driven by both higher production and higher prices. We realized an average price of $101 per barrel in the quarter, with average oil price at $110 per barrel, approximately $6 per barrel above the added brand. The realized gas price of $91 per buoy was approximately $1 above the average spot market reference price. A brief update also on our aging position. With regards to oil, for the remainder of 2026, 23% of our post-tax-adjusted oil production is protected with an average floor of $70 per barrel, assuring at the same time continued and substantial exposure to the price upside. For approximately 8% of our post-tax-adjusted oil production, we are using collar options, which provide market participation up to $140 per barrel with a floor of $75 per barrel. We also have in place three-way option structures with a cap loss potential of approximately $5 million. With regard to the gas, approximately 8% of the third and fourth quarter 2026 and 9% of the first quarter 2027 gas production has been edged using collar options, issuing a floor at around $85 per BOE, with a cap at around $175 per BOE. Considering both our fixed price gas sales and our gas aging, approximately 35% of our gas sales for the remainder of the year have a floor price at around $83 per B.O.E. What energy generated material cash flow in the second quarter? Cash flow from operation after tax in the quarter was $2.1 billion, almost doubling from the previous quarter, driven by higher prices and higher lifted volumes. CAPEX for the quarter, including exploration, was $645 million. The strong operating cash flow covered the CAPEX with a solid margin, and CFO2 CAPEX coverage was 3.2 in the quarter. Our full year 2026 development CAPEX guidance remains unchanged at $2.5 to $2.7 billion. We expect activity levels to be somewhat higher in the second half of the year, reflecting higher dealing activity, more final investment decisions, and project start-up. Our liquidity and financial position has significantly strengthened during the quarter, with a healthy cash balance of around $2.5 billion and a record high total available liquidity of $5.3 billion. Looking at the development of our cash position in the quarter, we generated above $3 billion before tax and working capital movements, up nearly 50% compared to the previous quarter, driven by higher prices and higher sold volumes. Working capital impact has been slightly negative by $96 million, mainly due to a reduction in payables. Taxes paid amounted to $850 million, related to 2025 results, with a cash outflow of $681 million in investments into our high-value project portfolio. In April, we successfully issued a 750 million euros hybrid bond, increasing our available liquidity. Also, in June, we distributed as planned $300 million in dividends related to our Q1 2026 results. The company has this quarter with a very strong financial position. We continued to reduce our leverage duration net interest bearing debt on EBITDAX to 0.4, significantly reduced from 0.7 in the previous quarter and remaining well below our over-the-cycle target of below 1.3. We are committed to maintaining an investment grade rating. In addition to our BAA3 rating from Moody's and BBB rating from Standard & Poor, but with a stable outlook, we have also obtained a AAA rating from Fitch, also with a stable outlook, strengthening our overall credit profile. Now, let's look at the tax guidance for the remainder of 2026 and first half 2027. In the second half of the year, we will pay taxes related to 2026 results, and we are expecting to pay approximately 25 billion NOC. For the first half of the next year, we give sensitivities based on 2026 estimated profits at different price scenarios. In the second quarter, we paid approximately 8 billion NOC in taxes related to 2025 results, and we paid a total of approximately 40 billion NOC in the first half of this year. We continuously pursue value generation through our business model. We continue investing in our opportunity-rich portfolio. We capitalize on exploration successes and we pursue accretive and many opportunities as the deals we announced in the second quarter and the growth of transactions we are announcing today demonstrate. We remain committed to deliver long-term attractive dividends to our shareholders as our third record demonstrates with 18 quarters of stable or growing On the back of a solid operational performance continuous project sanctioning, record financial results, and in conjunction with the announced combination with Bluenor, which is expected to complete around the end of 2016, we raise the second quarter dividend to $350 million, and we guide $350 million also for the third quarter, which is subject to audited financial results with sufficient equity and general meeting approval of dividend. We're in a volatile world, as the last few months have clearly shown to us. We continue to maintain a disciplined approach, and we will continue guiding dividend level on a quarterly basis, allowing our long-term dividend policy of 25% to 30% of CFFO after tax over the cycle. We will continue assessing the situation towards your end, as indicated during our previous quarterly call. The company continues to strengthen and progress in its growth plan, maintaining discipline and focus on value generation for longer. With that, I hand it back to Nick to go through the details of the combination with BluNord.

Good, and well, thank you, Carlo. And moving on to now the details of the combination with Vore Energy and Blue Nord, which we were excited to announce this morning. You know, as Vore Energy continues to grow, it's natural evolution of our strategy to step outside of Norway. And Denmark offers a low risk, stable operating and fiscal regime with similar offshore characteristics to the NCS. The combination increases our exposure to European gas markets and strengthens the company's position as a reliable and secure supplier of energy to Europe. This is a complementary transaction for both sets of shareholders, where the companies together are creating a stronger, more diversified company with increased scale, resilience, cash generation and shareholder returns. It adds growth with strategic assets in 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 investments. And we're leveraging Vore Energy's strong balance sheet to create significant financial synergies, together supporting resilient cash generation and strengthening Vore Energy's long-term dividend capacity. This transaction is accretive on a per-share basis to reserves, production, cash flow from operations, free cash flow and dividend capacity. And the combination of Vore Energy with Blue Nord builds the largest independent producer of oil and gas in Europe. and the fifth production hub area for the company and the Danish Underground Consortium, or DUC, further diversifying Vort Energy's portfolio. And we're maintaining our balanced commodity mix at around 65% oil, 35% gas. And it's increased our exposure to European gas markets and expands access to European gas infrastructure and entry points, strengthening the company's position as a reliable and secure supplier of energy to Europe. And now, summarising the transaction details, Vorenergy is to combine with Blue Nord in a four-share and cash transaction. The consideration is 248.4 million new shares in Vorenergy, representing a share issuance of 9.95%, and $204 million in cash. This equates to 9.7153 shares in bought energy plus 76.83 Norwegian kroner in cash for each share held in Blue Nord And the Blue Nord shareholders to be compensated in cash for any dividend paid pre-completion from the third quarter 2026 onwards The transaction is subject to approvals by Blue Nord shareholders and relevant authorities and licensed partners and we expect closing around the end of the year. Post-closing, the VoEnergy free float will increase to around 43%, which is posited towards higher liquidity and increased index weightings. And E&I will remain the long-term strategic majority shareholder with approximately 57% ownership post-transaction. And this transaction represents another key step in our successful growth journey. We've built a high-quality portfolio through a series of transactions and then have successfully focused on exploiting the upside opportunities. Since the company's inception in 2018, we've increased production over two and a half times. And we've created significant shareholder value. Since the IPO just over four years ago, total shareholder return has been around 190%. And you can see some of the metrics from the transaction here. It increases scale and value creation with an increased long-term production target of around 450,000 barrels per day. Reserves and resources grow to 2.4 billion barrels, with a long reserve and resource life at 15 years. We maintain low operating costs of $10 to $11 per barrel, and we continue with top quartile emissions intensity. And the Blue Nord assets are high quality with long life. The assets are part of the DUT consortium located in close proximity to our existing assets in the southern part of the NCS and with similar geology. Reserves and resources stand at 195 million barrels net and current production is around 45,000 barrels per day. These are de-risked assets with low near-term capital requirements and with low decline rates, which is complementary to our existing portfolio. and the Danish offshore areas are low risk and stable operating and fiscal regime with similar characteristics to the NCS and so the assets provide a strong strategic fit with our existing NCS portfolio and the blue node combination adds to our material resource base the combined company's 2p reserves will stand at 1.5 billion barrels which underpins current production levels and we're 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 with over 50 of this yet to be developed this opportunity rich portfolio underpins our value creation developing our material resource base is how we will deliver our increased long-term production target for the combined company of around 450,000 barrels per day. The levers that drive this are maximising production 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 unlocking more value with our focused NCS exploration programme that is adding new projects all the time, and continuing to add to our portfolio with value accretive M&A, such as the BlueNord transaction that we announced today. And with that, I'll hand over to Carla to provide more details on how we create value from the transaction.

Thank you, Nick. As previously said, the combination between VoyNergy and BlueNord is a complementary transaction for both sets of shareholders, where the companies together are creating a stronger, more diversified company with increased scale, resilience, stronger cash generation, and shareholder returns. We expect to create material financial synergies. We expect to reduce the financial cost that Brunel currently has, capitalizing on what energy investment grade balance sheet. We also see synergies from reduced overheads and strengthen our gas sales portfolio. We're expecting to realize $250 to $300 million in synergies. That will contribute to strengthen our balance sheet and enhance our dividend capacity. In addition to that, there is a material value generation potential upside from the maturation of the remaining 2C resources in the DCS portfolio. The combination will be accretive on all the key metrics on a per-share basis after the capital increase, production, reserves, CFF after-tax, pre-cash flow, and dividend capacity. The deal structure with a combination of shares and cash is a proof of our commitment to maintain our investment grain rating. We strengthen our balance sheet thanks to the share issuance while maintaining the pro-form adaptation at interest-bearing debt on a big tax well below our target of below 1.3 over the cycle with a minimal impact on the current metric our attractive long-term dividend policy at 25 to 30 percent of the cffo after tax over the cycles is maintained and underpinned by the increased dividend capacity post combination i will now summarize the key highlights of our strengthened investment proposal after combination with blue north we will increase our reserves and resource base to 2.4 billion which means a solid 15 years reserves and resource life. The long-term production outlook is raised by more than 10% to around 450,000 barres per day long-term. Our CAPEX guidance remains unchanged at approximately $2.5 billion average per year and our portfolio remains characterized by short-cycle investment with quick cash conversion leveraging on limited near-term CAPEX associated with the DCS portfolio. We maintain a very resilient cash flow generation capacity, being free cash flow neutral at 40 donors per BOE. Our dividend capacity increases and will give additional support to our attractive long-term dividend policy at 25-30% of the CFFO after tax over the cycles. Finally, our free float will go from about 37% to about 43%. This will increase the liquidity of our stock and potentially increase the weight in the various stock exchange indexes where we are currently included. We look forward to expanding our shareholder base with BlueNord shareholders. And with that, I hand it back to Nick for concluding remarks.

Thank you, Carlo. And we're excited to announce the transaction today. We're excited to work towards BlueNord being part of the company and having the employees join us and also excited to have some new shareholders join us. But before we go to questions, I'd like to ask you and Shola, I'm delighted that he's here today, to say a few remarks before we open up for your questions.

Fantastic. Thank you, Nick. So I'll start by saying that one of the nice things about joining another company's results call, even if these will soon be our results too, is that you get to bask in the glow of a strong quarter without having had to have done any of the work needed to deliver it. So the least I can do is say congratulations to the VOR team. It's a really great set of results. But I think importantly with this morning's announcement, today is about much more than just one quarter. It's a day that brings our two companies together, strengthens both of us, and opens up an exciting future. And what I'll do is I'll come back to why I think the combination makes so much sense, but I would like to start just by briefly touching on the Blue Nord story. So Bluenord became a partner in the Danish Underground Consortium in 2019, and since then our team has been focused on two things that have really defined the company we are The first was delivering the tyre redevelopment, giving one of Europe's most important gas fields a new lease of life, and also creating an asset that will continue producing strongly and at relatively stable levels well into the 2040s. The second, and above all, was that we focused on delivering for our shareholders. So we built a capital returns policy with exactly that objective in mind. And in just over a year, we've returned close to $800 million to our shareholders. And that brings us to today. So for me, combining with Vora Energy feels like a very natural next step in our journey. We've already shown what a focused company with one core area can do. And now, when part of the enlarged VOR energy, our shareholders will benefit from a business with a broader portfolio, a longer term returns profile, and the support of an investment grade balance sheet. And I genuinely believe that this is a case of stronger together. The combination brings VOR into Denmark through a world class asset, and it reinforces the role of both our companies have always played, providing reliable, responsibly produced energy to Europe. So whether you've been a VOR shareholder for many years or you'll become one through this transaction, from today, we're all invested in the same future. A larger, more diversified company with greater resilience and an even stronger ability to deliver through cycle. So that's the thought I'd like to leave you with. Even if it was already sunny, the future looks just that little bit brighter today than it did yesterday. Thank you.

Good. Thanks, Ewan. I think with that, we'll open up for questions. I think the operator is going to run this process.

Thank you. Ladies and gentlemen, we'll now start the question and answer session. If you do wish to ask questions, please press star 1 on your telephone keypad. If you wish to withdraw, you may do it by pressing star 2. Please respect only one question per participant, and afterwards you can re-enter the queue for another one. There will be a brief pause while questions are being registered. Thank you. We'll now take off question from Tianhong B of Citi. Your line is open. Please go ahead.

Hi. Morning, guys. Thanks for taking my questions and congrats on the transaction. The question is on the combined capex outlook. You are keeping your capex unchanged at 2.5 billion, while Blue Nord had previously got it to around 100 to 150 million of capex per year through 2030. Is that additional spend being fully offset by the synergies or does keeping the overall capex unchanged require any of our current projects to be delayed or deprioritized? Thank you.

Yes, thanks for the question. So when it comes to our average capex, as you for sure know, we got an average capex over our plan which is 2026-2032 of an average of 2.5 and Blue Nord has guided what you said for a shorter period and what we see is that an average over this period is not really changing the 2.5 so you might have a gain one year when you have 100 million more but as a matter of fact the average over the plan period remains pretty much unchanged And reflecting that 100 million dollars is a small percentage of 2.5 billion dollars too so yeah we're talking about small numbers uh the characteristic of the dcs portfolio is actually to have a relatively a small amount of capex and that's the i mean this is one of the beauty i

think the point here is it's very complementary profile because uh the development capital is being spent uh on uh on the uh danish assets and all the blue nord assets and so the decline rates currently below and there's a relatively small capital has to go in whereas we as a company, yes, our big projects are behind us, but as we've announced, we've got almost 50 projects that we're moving forward to sustain long-term production. And that requires investment. So when you put the two companies together, our cash flow profile is strengthened as a company because we have more cash flow and reduced capital with the combined company. So I think there's a lot of synergies putting the two together. Thank you.

Thank you. Next question will be from the line of Thank you very much for your time.

Can you just talk us through the strategic thinking on this expansion to the Danish continental shelf? And maybe in particular in relation to this, Nick, you said it was a natural evolution of VOR's strategy to step outside of Norway. What other geographical areas do you see as a step outside of Norway that you're targeting as part of your wider M&A strategy for the longevity of the business? And given this one question each, I'll leave it there.

No, thanks for the question. I knew that question was coming. So, look, you know, we're a big company. We're producing 400,000 barrels a day. And really, there's been a lot of consolidation of activity in Norway. 10 years ago there were 50 companies active in Norway now there's half that number and of course we have been a big part of that consolidation and you know we've created a business before Blue Nord of producing above 400,000 barrels a day long term but we shouldn't be satisfied with that as a company we want to continue to grow and we are still focused on trying to grow within Norway and I think there are opportunities to do that and you saw us announce for example five transactions in the quarter, one of which was the acquisition of the remaining assets of Pandion, a relatively small deal, but it's another good example of consolidation. And I think there's still things to do here. But I think we have to be realistic. There's a finite limit to this. And we should not be satisfied as a company with just producing above 400,000 barrels, 400,000 barrels as long as we can, and then declining. We have to continue to create growth and value long term but where we go is not quite so easy because Norway is a low risk regime which is very supportive investment into the industry and is you know reflected in who we are as a company and so you know what I said is the natural evolution for our strategy and I think stepping into Denmark is a very similar risk profile to us it's very similar geology. It's not very far away. The fiscal regime is very similar. And I think it's a great fit with us. Now, you know, it does say we were prepared to go outside of Norway. And, you know, I think we would be prepared to go elsewhere. But we have to find a place that's compatible with our risk profile as a company. And, you know, that's not that easy. So we will keep looking. and I think the key thing about M&A is you have to be opportunistic about this and it has to fit our strategy and we have to be able to do it where we can create shareholder value and those are how we look at this.

Thanks very much. Thank you and the next question will be from Theodore Sveenielsen of SB1M. Jolani Sipin, please go ahead.

Good morning and thanks for my question and also congrats on the which looks to be for both parties I believe.

That's on 2C resources Nick what will you do with the 2C resources of Brunor that the team in Brunor has not been able to do this far Well you know we took a perspective on that thinking about the transaction and we would hope that we could unlock these things and I think you know I think Brunor has done a fantastic job in creating value and but i think there's an opportunity here for us to work with the operator to create value out of this and uh and you've seen what we've been doing in norway and i think we've got the capability and uh and and uh and and push to try and create value out of those but i mean you know we haven't valued it on this basis but but it is an upside in our transaction that we we see as as an opportunity to create further value and you know you know we should be looking to maximise production and value out of these assets, and I'm sure that's what will happen in due course. Okay, thanks. Does that help to you all?

Thank you, and we'll now move on to our next question from Naj3 of Barclays. Your line is open. Please go ahead.

Hi, good morning, everyone. Congratulations for the deal. One question for me, please. Bar Energy paid limited premium on Blue Knot shares, and could you comment on the bidding process or probably just how was the competition level in bidding resources in the wider North State region, please?

So maybe I can start by taking that one. So there wasn't a bidding process, so to speak. We had a bilateral engagement with VOR. I think we went through a very helpful diligence process where we both understood our asset bases better. And I think from our perspective, the real point here is that we think there is a significant value uplift from being part of the combined VOR entity. So we think it's a stronger combination. We think there is a much more resilient outlook for distributions. We think that with a production profile that is above 400,000 barrels a day into the 2030s, that there's really significant potential there that our shareholders will continue to benefit from, particularly because the consideration is 80% stock. Our shareholders aren't really giving up upside. They still get to participate in that and they get to participate that in a much stronger base. and i would just echo the point that nick made before in relation to the 2c question there is a lot of potential that still remains within the blue nord balance sheet sorry within the blue nord portfolio but it's really about making sure that you're able to deliver that and that's something where i think based on the experience that vor has demonstrated in norway there will be some good operational synergies and what as well in terms of being able to take that experience and exercise it in Denmark.

Perfect. This is very helpful. Thank you so much, Julian. Thank you.

Thank you. And we'll now take our next question from John Eliason of ABG. Your line is... Please go ahead.

Hey, good morning. I wonder, do you have any pre-commitments from the Blue Nor shareholders?

So we have Sober AS who are represented on our board. They have supported the transaction and they hold under 10%, but that is the commitments that we have so far.

Have you been in contact with Blunar shareholders?

We have since the transaction has been announced, obviously had a dialogue with our shareholders and that will continue in the near term.

Are they positive to the transaction and do you expect the deal to come through without having to adjust the bid offer?

I think it's difficult for me to comment on that in the way that I think you're looking for exactly but what I can say based on the conversations that we have had with Sober who sit on our board and I think there's no reason to think that they aren't representative of the broader shareholder base there has certainly been a strong recognition of the rationale for the transaction and participating as a shareholder in the combined and what the combined has the potential to deliver okay thank you thank you thank you as a reminder please press star 1 to ask question kindly be reminded you may ask some of two questions thank you now move

on to our next question from Sassikan Chilokaro of Jefferies your line is open please go ahead hi a question regarding through the appendix of the deal.

It mentions that material Danish tax losses year-end 2025 of $336 million value post-tax. I was just wondering how that could be realized and how quickly those tax losses could be monetized.

So the tax loss position that we have is almost entirely Chapter 3 tax losses. So that That is effectively the hydrocarbon tax regime that they have within Denmark. It depends on commodity prices, how quickly those are realised. But I think within the near term, within the next 12 to 24 months, is a reasonable expectation.

Thank you. And a question regarding gas prices, gas volumes, or sale of gas volumes from the deal. Is it fair to assume that this would form a part of the overall gas volumes that were market? No distinction in terms of how the gas could be marketed post the combination?

When it comes to this, as you said, this gas, of course, will become part of our overall gas portfolio. Clearly, there are contracts in place that will be honoured and maintained as they are, but there are flexibilities we can find in our own portfolio, optimizing the overall portfolio because our approach, again, is on a portfolio basis. So having more volumes allow us to find opportunities, directly or indirectly, within the overall gas sales and gas production we have. I don't know if you answered your question, but this is the way we're looking at it when it comes to the opportunity side.

That's good. Thank you very much.

Thank you, Wilna. A follow-up question from Tiananong B of Citi. Yolani Sertan, please go ahead.

Thanks, guys, for picking my questions again. This one is on shareholder returns. You obviously have raised Q2 and Q3 dividends, but your earnings release and presentation no longer mention a special dividend. Should we therefore assume that the higher base dividend has effectively replaced the special dividend previously expected in 4Q, or does that option remain open?

Now, of course, we have lifted our dividends today, and this reflects also the two things. It reflects the higher prices that we've seen recently since the start of the conflict in the Middle East in March and also record financials and, of course, the deal that we've done today, which is value accretive. And so we have lifted the deal then and increased them. And we remain open to the idea that, you know, if we see high prices going forward, that we will make a decision at the end of the year on a potential extraordinary dividend. But, you know, it's all dependent on how we see the market going forward and what the results are when we get to February next year. You know, you'll appreciate there's a lot of volatility. And, you know, I thought it was coming to an end a few weeks ago and now it feels like it's not. and so it's quite uncertain what the outlook is going to be and let's see where we are in February and we'll decide then.

Thank you so much for the call. Thank you.

Thank you and we'll now take our next follow-up question from Victoria McCulloch of RBC. Please go ahead, the line is open.

Hi, thanks very much. A couple more from me. Could you help us to quantify the impact on 3Q production of the Johan Kaspersburg production issues due to the power problems there. And then, enlisted Blue Nord, can you give us a bit more detail on the bond, the remaining bond, with the synergies coming, I guess, from a financial perspective? Are you required to wait until 2031 to redeem the remainder of this? Thanks very much.

So on the operational issues that you're on, Kasper, I mean, there were some problems with the power generation system. We've started in late June. We're now back at full production, you know, and we have a solution to manage this. So it's obviously had an impact. I mean, what I said, and we're not going to comment in the individual fields and details like that, but, you know, on an overall basis, our second half production is going to be higher than our first half because we're basically all of our shutdowns are behind us by now and uh and we're bringing on new projects as i listed and uh and we've got quite a lot of new uh quite high impact wells to come on so second half production is going to be higher and we're we're on track to deliver our annual guidance uh outlook of uh 390 to 410 000 pounds a day and then uh i don't know who wants to answer the problem maybe i can answer and then i leave eventually i will answer to you victoria then if there is need for some more detail probably you know we can actually take

a follow-up so when it comes to the uh blunard outstanding bonds it's clearly our intention at the due time and of course subject to market condition to refinance those bonds so we will follow what the bonds the constructor tools and the contractor tests provide for and this will be done as soon as practicable because we clearly see financial synergies coming from the refinancing of the existing structure, capital structure of BNOR. So I don't know if there is any, from your side, if you need any more detail but that's our intention post-closing.

Maybe Victoria, I could just address one of the specific things which you said about the bonds having to be outstanding until 2031, which I think you were referring to the maturity of BNOR 18. So that is an instrument that has the maturity in 2031, but it also has a cold period before that. So that will be something that will aid the refinancing process when VOR gets to that stage.

Super, thanks for that colour. It was really helpful.

Thank you. We'll now take our next follow-up question from Nesri of Bargwais, please.

Yeah, hi. Just two follow-up questions, if that's OK. The first one is, the deal increases exposure to European gas for viral energy, and we know that the market is worried about a warm winter, a war of LNG coming next year. And I want to ask, perhaps to Nick, that what's your opinion on European gas and whether the Blue Knot deal will change any of your gas hedging strategy? And then I have a second question, if that's okay. I wonder if the Blue Knot shareholders have a lock-up period, or can this is the opposite deal closing. Thank you.

In terms of gas, you know, I've been quite bullish on European gas for a long time, well before the war, actually. And so I was more sort of a view that not all of this gas is going to come and of the fact that there could be disruptions in the world. I wasn't anticipating the war in the Middle East, but it's a big disruption. And it's very unclear how that's going to to to translate if you look at the forward curve it drops substantially uh the end of q q1 next year but actually we're starting to see that lift um so so actually uh you know i actually continue to be in a place where i'm looking and we feel that we're going to see higher prices for longer uh because the world needs a lot of energy. And that's one aspect of this. The second piece is that we went into this conflict largely unhedged as a company in terms of financial hedges. And we've put in place since then some policy to put in place both on the oil side, as Carlo mentioned, but also on the gas side. And really what we're doing here is to try and protect the bottom of the market and keep ourselves exposed to the higher end of the market. So at this present time, at the right prices, we're layering in some financial hedges. We also use our contractual mechanisms in our long-term gas sales contracts to also put in fixed prices. And we've been doing that and layering that in as progressively as we've communicated. So as I look out, I think we will see stronger prices. But what I will also say is that the Blue Nill portfolio is robust to uh to variable prices so and our business is robust to low prices and uh and we have to expect that uh this is a cyclical business and we have to manage through highs and lows and but long term we're positive towards uh the world demand for oil and gas uh looking out maybe if i can just add only one addition because uh uh also i think it's worth to consider that if you look at the combined company, our mixed oil and gas portfolio combined basis remains pretty much the same because the North is more or less 50-50.

It represents approximately 10% of our current production level. So if you look then on the combined company, the mix we have remains very much stable. So the exposure to the gas, U2P and gas market with all the pros and potentially the cons does not really change in terms of oil and oil profile.

Maybe I could just add and Carlo made very eloquently one of the points that I was about to say. But I think just the other piece, when we think about the continued exposure to Blue Nord shareholders, I think anybody who was invested in Blue Nord probably took a relatively constructive view or had a relatively constructive view on the outlook for the European gas market. I think just building on Carlo's point, I don't think that changes given the commodity mix is very consistent.

Perfect.

And how about the second question, please? whether if there's a the Blue Knot shareholders have a lockup or can they just sell post a deal closing? There's no lockup. Perfect. Thanks for the confirmation. Very helpful.

Thank you. We'll now take our next follow-up question from Chardo Sveen-Nilson. Your line is open. Please go ahead.

A few follow-up from me. First, can you shed some light on the discussion that I've been around the mix of new shares and cash-tailed in the deal. Second question, that is specifically on second quarter financials.

Was it only cost-back issues that draw up the production cost this quarter, or are there any other factors you can highlight? okay i'll capture the uh i'll capture the uh uh the the opex one first uh theodore i mean you know you saw that uh opex uh for the first half was 10.8 uh but of course we discharged uh or completed a lot of turnarounds in the in the in the second quarter so that results in slightly lower production and also some costs associated with that so that's one aspect but also we've seen the strengthening of the Norwegian Krona. And as I went through my discussion, if we recalibrate the 10.8 with the exchange rate change, we go to 10.3. So that gives you the sense of that. In terms of mix of new shareholders, I think there's quite a few shareholders that have shares in both companies, which is obviously very positive to this. And I think in terms of the mix of uh shares and cash in this deal i think we looked at this and recognized that you know from a vor perspective we wanted to use shares as this deal i think the only way this deal was ever going to get done is with with shares largely shares and i think what happens after this is that the the blue nord shareholders share in the broader company which is very positive but also get a cash component now. It's roughly 84.16 is the split. And, you know, I think, you know, what we're doing is really trading high-value shares on both sides to create a win-win deal here. There's another side to this. Also, I think, broadens our free flow, which is very important. And, you know, we go to roughly 44% free float. And so that's very positive in terms of demand for the shares, but also from the index fund, passive index fund.

So, you know, I think there's a lot of benefits all around for this. and also if i can just start this also structuring that as you can imagine is preserving the quality of the balance sheet and investment grade as you can imagine because the use of debt is fairly limited so yeah understood and then just a follow-up on that one um of course the book well equity will increase by the scale is it correct and will increase by around 1.1 million dollars or are there any other account fees that we should have in mind yeah but i didn't get uh yeah the book equity is going to increase of course i think you mentioned 1.1 billion

it's correct but i didn't get the question sorry or are there any other accounting effects okay so book value equity purely from a deal will increase by 1.1 billion dollars approximately yeah that's what i respect okay perfect thanks yeah i have it over there thank you thank you thank you we'll now take our next follow-up from john eliza and a baby g you feel the height yeah uh thanks for the follow-up question letting me take the follow-up question um i wonder the a little bit on this the synergies 250 300 million dollars is quite a high

amount in in relation to the value of the deal and you mentioned three areas three kind of synergies the lower financing cost overheads and gas sales optimization is it possible to split it gives some indication of how the 250 300 million will will fall on those into those three categories please yeah sure that's fine i think you can easily consider the financial synergies coming from a reduction of that cost and still financial synergies when it comes to the guarantee structures in place account for the 85 to 90 percent of the total amount let's say maybe 80 to 85 so it's absolutely the most important material part then we see also again overhead and commercial upside from the portfolio but this is a split you can consider when it comes to the and this is driven from our very strong balance sheet that we have that drives this opportunity we can really appreciate the debt that is going to be refinanced with respect to refinance and if you look at the differential in the cost it's around 300 basis points so it's somewhat intuitive to see this value makes sense thanks a lot for taking my question and I'd just like to add to all the other and follow all the other analysts congratulating you with this

creative and creative deal have a good day thank you so much thank you thank you thank you as there are no more audio questions I'll hand it back to Iida for questions over to you Iida thank you we've got a couple more questions that's coming in writing follow up on the synergies from Alejandro Magana JP Morgan the announced synergies are predominantly financing and overhead related Looking beyond those, where do you see the greatest operational or commercial upside from combining the portfolios that isn't yet reflected in the 250 to 300 million guidance?

I'll take this. As I was mentioning, when it comes to the commercial upside in the gas portfolio, an initial estimate is reflected. Of course, we will look more into the portfolio and see what we can combine. So we are reflecting a relatively small portion of the total 250 to 300. When it comes to the upside linked to the development of the 2C resources, it is actually not included in the 250 to 300. So there is a potential further upsides that, of course, will take a bit of time for us to mature together with the operator. But going to your point before is where we believe as more energy, we can bring experience. We can bring, of course, the willingness to invest in creating value.

So it's not in the 250, 300. is eventually on top but we see some material possibility in there as well good thank you next question from on the should also learn at scb you say the transaction is a creative on reserves per share but you're incurring a material amount of debt as well could you talk about the debt you're incurring in terms of total amount will be refinanced etc and also is the transaction also creative on an enterprise value to reserve spaces thank you yes so when it comes to the debt yes we will take approximately 1.4 billion dollars which is the that we expect to refinance

this is not really impacting our if not minimal our current leverage ratio our current debt ratio so that's a very big tax uh we are currently 0.4 on a pro forma basis we should be between 0.4 and 0.5 so pretty much in material i would say very well within the 1.3 which is our long-term target of being below 1.3 so this is when it comes to the to the depth that we intend to refinance and also of course it goes together with the synergies we expect so i would say a pretty material a pretty non-material impact and when it comes to the accretion on the um was it ev2 research yes this is also something that we see. I think you have to consider we are talking about two different kind of portfolios. DCS is a portfolio where you have low near-term CAPEX, year-end CAPEX. It's basically mostly production and OPEX with a lower tax rate. So if you look only at the volumes that you put together with EVs, we're probably, I think, also to consider the lower tax rate, which is actually quite accretive in a context where CAPEX are low. And it's different, of course from Norway where you invest a lot, a different tax system may provide for a better financial return.

So that's the way you should look at it. It's also worth just saying that Blue Nord has tax losses that will cover the hydrocarbon tax in 2026 at least, which will further enhance the accretion on a reserves basis. Good point, yeah, absolutely.

And it's very significantly accreted on a cash flow basis in 27 and 28.

It's very complementary because the support in the investment phase we have, so that's very complementary.

Next question. The acquisition for Blue Nord is stated as a cash and stock deal, but the cash aspect, how is this being funded? I.e. is there debt financing or will this be funded from existing liquidity or new borrowings? And how might this transaction impact current credit ratings for the company and the outlook?

I think I would refer a bit to what I was saying before. The cash component of the deal is approximately $200 million, so I would say relatively low, and I mean, we have available liquidity of $5.3 billion and cash balance of $2.5 billion, because without saying that this is absolutely manageable within the existing liquidity. When it comes to the...

Have you sold some assets this quarter, which cover this in its entirety?

Yes, so this perspective is absolutely manageable within the existing framework, When it comes to the investment gain rating, we've done, of course, our own analysis. We see no impact at all. And actually, the structuring with shares and cash, with the majority, actually, of shares, is, I would say, quite a friendly credit rating structuring, because it reduces the limit, the utilization of debt. So, I don't see any credit card in this.

Great.

I'll finish off with a question for you, Nick. can you throw some colour on the pipeline of investment opportunity that you evaluated before reaching a deal with Blue Nord did you see asset portfolios in the Gulf of America competing on operational costs and economics look we continue to look opportunistically at opportunities that fit with our strategy and where we can create shareholder value and as I said earlier in answering a question I think it's important that has to fit with the risk profile that we have in Norway and I think that's what people have invested into and Denmark fits very well with that and that's how we see this and where else and what else we might do, we'll have those considerations in mind and as I said, we look to continue to grow the business long term, creating shareholder value and that's what we're about.

Thank you. That concludes their Q2 presentation call. We wish you all a good summer.