Earnings Call: Q1 2017

Jun 13, 2017

In the 2017. And it seems like the activity program is continually ramping up. Now production in the first quarter was up about 15% compared to the previous quarter to 145,000 barrels of oil equivalent per day. The main contributors to this performance was solid production from the Alvheim area and ramp up ahead of expectation on Ivarosn. Now first quarter EBITDA thus landed at $487,000,000 equivalent to an earnings of about $0.20 per share. The free cash flow in the quarter was USD 168,000,000 or roughly $0.50 per share. The Board has resolved to disperse a quarterly dividend of $0.06 $25 which is equivalent to $0.01 $85 per share, which will be paid out in May. This is in line with the previously communicated strategy of an annual dividend of USD $250,000,000. Now on operations, I must say that both operations and projects are progressing very well. Ivarosn ramp up is ahead of expectations. The redevelopment of Tamba has recently been sanctioned, And we have passed concept selection and are on track for PDO submission for Snad, which is a tieback to Skarv, for the Valhall West Flank and for Storklaken later this year. And finally, in February, the license announced an oil discovery at Filikudi in the Barents Sea. I will now, as usual, turn over to Alexander to take you through the financials. Thank you, Karla. Good morning, everyone. As usual, I will take you through the income statement, the balance sheet and the cash flows in the quarter. We recorded petroleum revenues of $647,000,000 this quarter on a production of $145,300 per day. We realized an oil price of $54 per barrel, and we had a gas price of $0.21 per standard cubic meter. Out of the $647,000,000 in revenues, five forty seven million of this stems from oil sales, million from gas and then NOK6 million in tariff income. Production costs were $121,000,000 this quarter. This equals to $9.2 per barrel, and this includes a shipping and handling costs of $2.7 When looking at the various hubs this quarter, we have production costs at Alvheim for $4.3 per barrel. We have Ivarosn of around $9 per barrel. We have Skarv at around $10 per barrel and then Valhall Hod at $17 per barrel. Other OpEx, which includes costs such as preparations for operations at Ivarosen and corporate overhead costs amounted to $8 this quarter or $0.60 per barrel. We expensed some exploration costs this quarter, 30,000,000, and this reflects acquisitions of Seismic for 10 We had dry hole costs and area fees collectively for $6,000,000 This includes the dry Tonner well. And then we had other exploration expenses, including field evaluation costs of $14,000,000 We then had EBITDA come in at NOK $487,000,000. Depreciation was 184,000,000 this quarter. This equals around $14 per barrel, in line with previous quarter. And also in this quarter, we recorded an impairment of $30,000,000 This mainly relates to impairment of technical goodwill booked to Valhall Hodt and Ula Tambar. EBIT then was $273,000,000 We then had net financial items of a negative 47,000,000 in the quarter. We had accretion expenses of NOK 32,000,000, while net interest expenses were NOK 30,000,000. This is around NOK 10,000,000 higher quarters. And this is perhaps not a surprise as we, for accounting purposes, are capitalizing less interest in the first quarter compared to previous quarters since Ivarosn started production at the end of last year. Since the U. S. Dollar NOK FX rate has been unusually stable during this quarter, we have limited currency effects or movements in the valuation of our FX derivatives. Profit before tax were then $227,000,000. The tax expense for the period was NOK 158,000,000. This equals a tax rate of around 70%. Out of this, tax payable estimated at NOK39 million, while change in deferred taxes was NOK120 million. So net profit for the quarter, therefore, was NOK69 million or NOK0.20 per share. Our balance sheet has not changed materially during the 2017. At the end of the quarter, we had goodwill booked at NOK 1,820,000,000.00. This is just a net decrease of NOK 30,000,000 due to the aforementioned impairments of technical goodwill. Other intangible assets, 1,660,000,000.00. That is also just a net decrease of 64,000,000 from the previous quarter. This decrease is mainly related to depreciation of software and the fact that a concept selection was passed at Storklaken, which means that we have moved all costs booked on Storklaken into PP and E. We then had capitalized some exploration on Gouta and Filikudi, which then partly offsets that effect. Moving to PP and E, that balance increased SEK 158,000,000 during the quarter. The most significant investments this quarter were Johan Sverdrup of around SEK 100,000,000, Ivar Rosen at SEK 45,000,000 and we spent around NOK 40,000,000 in the Alvheim area. Receivables and other assets were at NOK $678,000,000 at the end of the quarter. This is a decrease of about NOK 44,000,000 from the previous quarter. This decrease is mainly due to timing on payments on petroleum sales, and this gives a decrease in accounts receivable this quarter. We recorded a short term tax receivable of $395,000,000. And on the other side of the balance sheet, we have an accrual for tax payable of NOK 120,000,000. The receivable relates to an expected payout of tax losses carry forward in BP Nordica once petroleum activities have ceased in that legal entity and also an exploration refund for 2016. The accrued accrued tax payable on the equities and liabilities side is related to all tax cases and payable tax recorded during the quarter. Cash and cash equivalents were then 183,000,000 at the end of the quarter. And quickly, on the other side of the balance sheet, equity, 2,450,000,000.00 at the end of the quarter, in line with previous quarters, reflecting the net profits, but also being reduced with the dividend paid in the quarter. The book equity is then stable at 26%. Other provisions for liabilities were 2,330,000,000.00 at the March. That is also in line with previous quarters. Deferred taxes increased with SEK 119,000,000 during the quarter. Book value of our interest bearing debt was SEK 2,510,000,000.00 at the end of the quarter, And this is made up of NOK 2,000,000,000 on the RBL and $513,000,000 on the Detno two and Detno three bonds. Other current liabilities then decreased to $760,000,000 at the end of the quarter. This reflects decrease in accounts payable, but partially offset by an increase in abandonment liabilities and current liabilities. On the back of a strong production this quarter, we generated cash flows from operations of $438,000,000 Cash flow from investing activities was then $270,000,000 This reflects investments in fixed assets of $232,000,000 We have investments in intangible assets of 30,000,000 and we had decommissioning expenses of SEK 8,000,000. Thus, free cash flow from the quarter was SEK 168,000,000. We repaid around NOK 35,000,000 on the RBL during the quarter for cash management purposes, and we then paid out NOK 62,500,000.0 in dividends. The March cash balance was 183,000,000, and we had net interest bearing debt of NOK 2,330,000,000.00, down almost NOK 100,000,000 the end of last year. At the end of the quarter, we then had net debt over EBITDAX decrease from SEK 1,600,000,000.0 at the end of the year to SEK 1,300,000,000.0 at the end of this quarter. And we also had available liquidity of SEK 2,600,000,000.0, which provides us with ample financial flexibility going forward. The Board has declared a dividend to be paid out in May, 62,500,000.0 again, and this implies an annualized dividend yield of around 4.5%. Finally, a look at the full year guidance for 2017. Now we make no changes to the guidance regarding parameters that we provided at the Capital Markets Day back in January. CapEx for the first guidance quarter amounted to $214,000,000, whereas we expect the total spend this year still to be in the NOK 900,000,000 to NOK $915,000,000 range. Cash spent on exploration was NOK 59,000,000 in the quarter with a run rate below our full year guidance at NOK $280,000,000 to NOK 300,000,000. This is driven by the fact that we have a higher equity in the wells planned during summer in the North Of Alvheim area. Despite the high production in the first quarter, we keep the full year guidance of 128,000 to 135,000 barrels per day. Q1 production was partially driven by high production from Waipa Kobra as well as a strong ramp up at Ivarosn. During this year, however, we expect a decrease in production from Waipa Kubra, which will likely bring down the production from the Greater Alvheimko area compared to the first quarter. There is also planned maintenance at Valhall and Skarov in the third quarter. Therefore, we make no changes to the full year production guidance at this point. But based on the high Q1 twenty seventeen production, we do see the possibility of production coming in towards the high end of the guided range. Production cost was $9.2 per barrel in the first quarter, below the $11 we guided. Again, as a large portion of the production costs are fixed, the lower cost per barrel was driven by the high volumes produced in the quarter and the fact that we did not have any maintenance work carried out this quarter. As for decommissioning costs, cash spend was only NOK 8,000,000 this quarter. Also here, we are keeping our guided range of NOK 100,000,000 to NOK 110,000,000 for the full year as we are about to take over the Masjk Invincible rig, which will then conduct P and A activities at Valhall. That concludes my financial section, and Karl will walk you through the operational section. Thank you, Alexander. Yes. So let's I'll walk you through the operations and the assets and the production and the projects going forward and try to provide some color to both our activity program and the production set that we've seen so far. Now if we start with the oil and gas production in the quarter, as this graph illustrates, we've had a significant increase in production from the previous quarter, approximately 15% to a total production of 145,000 barrels of oil equivalents per day. Predominantly, this production increase over the expectation is driven by extremely strong production from Waipa Kubra and ramp up of Ivarosun ahead of expectations. Now the Vaipal Kubra story is all about rapid decision making and turnaround capabilities. As you may recall, these are tie ins to the Alvheim field, where we changed the well concept, extended one well and changed one well from a single lateral to a dual lateral. The last design change process was done in a week. That ability has had a tremendous impact on the production in 2017 in the first quarter and underlines our focus strategically on execution capabilities. Now the oil was sold at $54 per barrel. Gas was sold at an average price of $0.22 per standard cubic meter in the first quarter. I'm actually also quite pleased to see that we are continuing to deliver high uptime across our assets, supporting the strong production this quarter. And I'm particularly proud of the operations team alongside our many vendors who are working diligently to execute an ever growing activity program while maintaining high uptime and high production efficiency. This is at the core of our execution strategy. Now moving into the assets and starting with the Alvheim area. The Alvheim FPSO and the area, in particular, continues to deliver stable and high production. Particularly, the contribution from Waipa Kubra, as previously stated, was a big part of the increased production in this quarter compared to the previous quarter. Transocean Arctic is currently drilling infill wells at Volhun, and the team has completed the first well and are now drilling the second well at Trilateral once again. We expect drilling operations to continue towards the summer and then subsequent offshore diving and hookup campaign to be able to put the two wells in production towards the back end of the summer. The results of the drilling operations at Alvheim so far is in line with our expectations. Now following the completion of the Wollen wells, Tran socean Arctic will move on to drill the West Wollen exploration well before continuing the infill campaign with two Bua wells. You may recall that we drilled a well called Bua Kam North with two targets being vectored in by pilots. These two targets are now being drilled out, again, underlying our ability to turn around quickly and implement changes to increase production. Our subsurface team is also continuing to mature new drilling opportunities in the Alvheim area to fill the FPSO in years to come. And the data collection strategy in the area has paid off its dividends and are continuing to do so. In the surrounding area, the Storklakken project passed concept selection in March, and we are further maturing this project to a PDO towards the 2017. Storklaken will be developed as a subsea tieback to Alvheim via Ville, the Ville template, with expected first oil in 2020. Now in March, Aker BP sold 35% of its owner interest in Stuklakken, which was previously 100%, taking us down to 65% and in line with our ownership on Alvheim. Now moving into Ivarosn. And you've heard me talk about Ivarosn in just about every quarterly presentation I've had so far. And it's with extreme pleasure, can say that we have started up Erosen, and production performance is strong, uptime is extremely good. Following the Erosen startup at Christmas Eve, we have seen continued strong performance in operations. The current production efficiency for the first quarter landed at 91%. And if we exclude downtime related to issues with third parties, we're seeing production efficiency of 96% in the first quarter of production. In my mind, that's a pretty reasonable result. The production ramp up has broadly been in line with the delivery agreement with Grigg and therefore, ahead of our expectations, which was more dominated by lower production efficiency in the early stages of the ramp up. Remaining project scope include commissioning work on water injection, which is now about to be completed. But the facility, as such, is handed over to operations. In March, Musk Interceptor commenced drilling of the remaining drilling scope, following functioning as an accommodation unit for the commissioning personnel. The remaining scope consists of five wells, including completion of the West Cable oil producer. And the drilling team at Ivarosn continues to impress. In April, the drilling team set a new record of one hundred and seventy two forty two meters drilled in the 12.25 inches section in twenty four hours. That's more than a meter a minute. That's quite a significant achievement. The whole section was completed in less than a week, underlying strong well operation performance on behalf of the Maersk Interceptor team. Johan Sverdrup is progressing according to plan. Platform construction is ongoing and progressing well. The predrilling campaign is ahead of schedule with drilling of the first water injectors ongoing. During the first quarter, the cost estimates for both Phase one and the full field development continued to come down with breakeven prices below USD 20 and USD 25, respectively. Concept selection of Phase two was improved in March, and the project is on track to deliver the Phase two PDO at the 2018. Now moving on to assets that we're currently working on to release the upsides. At Valhall, we are moving ahead with several projects to increase both production and recovery, in line with our improvement strategy. At Valhall West Flank, the project has passed concept selection and will be developed as an unmanned wellhead platform with 12 well slots tied back to the Valhall field center. PDO is planned towards the 2017, with production expected to start up in 2020. Valhall North Frank water injection is being accelerated currently towards a planned concept selection in the second quarter, and we're currently carrying out data acquisition activities on that project. Following a two year drilling break at Valhall, we have just started up the Valhall IP drilling program with seven wells to be drilled in the first phase, of which three is expected to be drilled and completed in 2017. The first well just reached the reservoir and is significantly ahead of schedule. The Maaske Invincible jackup has arrived in Norway, and we expect that the rig will be mobilized to the field shortly to commence and continue commence operations and continue the P and A campaign on the drilling platform at Valhall. Now moving on to the Ula Tambar Complex. The Tambar real development has been improved and production increased at Ula Tamba in the first quarter compared to the fourth quarter last year. The main drivers for the increased production was increased water alternating gas. We're injecting gas and water alternating to increase recovery at Ula and then two wells rather than one available for production at Tambor. The recently approved redevelopment project of Tambor consists of drilling of two new infill wells and installation of gas lift at the existing wells. The license target and expectation of 27,000,000 barrels in gross additional recovery reserves over the Tambor license. The drilling will be utilizing the Maask interceptor and is expected to commence in fourth quarter this year with first oil expected in first quarter twenty eighteen. The breakeven price for this project is estimated to be below 20,000,000 barrels per $20 per barrel. And with first oil already in 2018, the payback for this project is short. Again, in line with our strategy to execute and improve the assets that we're working on. Now moving on to the north. There's another value increasing project ongoing, which is the snug tieback to the Skar field. The production performance at Skarv in the quarter has been solid with a production efficiency of 98% in the quarter and therefore, increased production compared to the previous quarter. The partnership has agreed to collect additional data for this area and shoot new seismic, four d seismic during the summer. The Snard project, which I initially started on, is progressing according to plan with concept selection being completed in March and continues to be matured towards the PDO in the 2017. The development consists of six subsea wells tied back to the Skarv FPSO, and first gas is expected in 2020. As presented at our Capital Markets Day in January, we have a quite extensive exploration program for 2017. And so far, we have received the results for Filikudi in the Barents Sea, which was a discovery, and I will come back to Filikudi for more detail shortly. And in addition, Statoil drilled Tonja prospect in the Johan Sverdrup area, which was evaluated to be noncommercial. In addition, the appraisal drilling at Gotha is currently ongoing, and we expect results shortly. We are not only investing in exploration wells. We are also investing heavily in other data acquisition activities, and I'll draw your attention to recent seismic activities. Yesterday, we announced that we had entered into a two plus two years frame agreement with West End Gecko for four d seismic data collection. Four surveys will be collected this year with Alvheim, Beyla, Skarv, Snad and Ula being the focal points. The contract also covers three d data collection should that be required. In addition, we have acquired three d seismic from PGS and TGS, covering 12,007 square kilometers, respectively. And also, please note that we have now put a name to the wells we plan to drill in the North Of Alvheim area. In the third quarter, we are planning to drill the Norfjaller prospect and then a subsequent sidetrack to the Delta discovery in production license 442. The Nufjallek prospect, as it's shown on the slide, is evaluated as a stand alone basis. However, the prospect may be in communication with other prospects in the area that will result in an additional upside. The goal of the appraising at Delta is to reduce uncertainty and influence mean volumes and is a part of the data acquisition program moving forward to DG2 in the Noah area towards the 2017. Now in February, we announced that together with Lundin as an operator, we had made a discovery in the Fulikudi prospect in the Barents Sea. The well encountered sandstone of 129 meters in vertical thickness in Jurassic and Triassic targets with high quality. The gross estimate is currently assessed to be in the range of 35,000,000 to 100,000,000 barrels. But probably the most interesting is that this discovery derisks other prospects in the $5.33 license, prospects with a gross prospective unrisked resource potential of up to USD 700,000,000 barrels. We're currently evaluating whether to drill two up to two additional targets this year, named Hofsah and Hurri, and I apologize for the names. These prospects will continue to work, and our mine has been derisked by the previous Filikudi discovery. Now we continue to work the improvement program and continue to follow our strategy of reorganizing the value chain, focusing on alliances as key measure to increase flow efficiency and reduce waste. As you may recall, we have subsequent we're previously engaged in an alliance on subsea with Subsea seven and Aker Solutions. And we are continuing this strategy now with the long term frame agreements with key suppliers of engineering services, construction, electro IT control room systems as well as transport and installation for fixed facilities offshore, and thus complementing the same strategy on subsea. Duration is fixed at six years with options to extend for four more years, so a total capability of ten years. The intent of the Frame Agreement is that Aker BP in the company's field development projects will develop and execute a much more integrated project delivery model. We call this a platform alliance for each project. The Valhall license has approved already the use of the alliance model for the Valhall West Flank development. And again, this is fully in line with Aker BP's strategy to increase flow efficiency and reduce cost, cut bureaucracy and increase quality. You may also recall that we previously stated a target to reduce engineering hours per tonne by 50% and reduce execution time by 25%. This applies about a reduction of about one hundred and ninety man years for a 5,000 tonne topside, which is approximately what we target at the Valhall West Flank, thus giving you an idea of the value creation potential in this kind of process alone. Now moving on to summary. Our focus and strategy remain firm, and we are continuing to work on the execution, our improvement and our growth agenda, as I think you can now see as we are moving these strategies into tangible activities. We will continue to mature and subsequently drill new infill opportunities at the Alvheim area. We will continue to focus on safe and efficient ramp up of production at the Evarossen and completion of the drilling program. We are going to continue the drilling program at Valhall and add new production over the next years, both from infill drilling and from new projects. And we are going to continue and commence commence and continue P and A operations in Valhall as soon as we take over the Maersk Invincible rig. We are going to continue our strategy to collect data to support production enhancement operations wherever we can, and we are going to collect four four d surveys of Alvheim, Beyla, Skarsnad, Ula and Valhall this year. And we are going to continue to mature the projects and have been through Snad, Valhall West Flank, Storklakken towards PDO in year end. The new the quarterly dividend at USD 62,500,000.0 or equivalent to $0.08 5 per share will be paid out in May, and we are maintaining our strategy of USD $250,000,000 as a floor for dividend until the commencement of production at Johan Sverdrup. And we continue to assess the capital structure to improve flexibility and support further organic or inorganic growth. And lastly, not to be mistaken, we are still pursuing M and A opportunities to enhance production and increase dividends going forward. That concludes our first quarter presentation of 2017. And we'll now open up for questions. And I ask Alexander to join me so he can take all the difficult ones. Kartik Kurvejian from ABG. I just wondered if you could elaborate somewhat on the scope and the production shortfall in Q3 from the Valhall and Skarv maintenance. Elaborate on the production. Well, both these areas will need turnaround at Q3, which means that we will shut down these assets for a period of time impacting production. The drivers are a little bit different. In Valhall, we need to do brownfield work in order to tie in The U. S. Flag project. And in Skarv, we are preparing for further maintenance and integrity work. So that's why these two assets will be impacted production wise in Q3. And in terms of it's a full production shortfall during the entire quarter or for? No, no. It's a few days at both facets. Thanks. Anders Holter from Danske Bank. A few questions, if I may. First, on the Filikudi discovery. Just wanted to know your thoughts on what you see as the key risk in that area and what you're looking for to advance the drilling plants further. Second, we have seen for quite some time now that you have your capital structure under review. Just wanted to see if we could get a bit more color on that. And lastly, there's been a lot of, I guess, meanings and opinions in the press on the M and A side and how you see the movements from the seller side and if you also see an increase in deal availability or a decrease? Thank you. Okay. Let's start with Filicuri. You want to do Filicuri and I can do capital structure? Okay. Let's start with the Filicuri discovery. I think the key assessment that we're doing now is which target to drill first and where to place the wells. I think so far, it's quite clear that there is oil migration into the area. We have proven reservoir quality both in Jurassic and Triassic. And we are highly supportive of further drilling activity in the area. So it's more a decision of operational planning from my perspective. And then maybe you can dive into capital structure. Yes. On capital structure, nothing has really changed from previous quarters. We're still sticking with the dividend level that we've said. But we are just evaluating what the various options are, what's the right structure mix between secured, unsecured debt, how do we factor in organic inorganic opportunities and what's the right flexible structure for the company. So we don't necessarily feel very rushed, and we're just taking the time that we feel is appropriate to assess these options. And then a few comments maybe on the M and A side. There's definitely a lot of activity out there. I think previously, we've been quite clear that the lenses which we view the M and A through is quite selective. And to repeat, we are looking for more oil than we are looking for gas. We are looking for operational assets rather than non op assets. And most importantly, we are looking for financial accretive transaction increasing our production and our dividend levels. And then if you put that on the backdrop of where we are in terms of production level, production cost and financial efficiency, it's quite clear that the number of these transactions did not make sense for Aker BP to do. And hence, we have not done them. So we will continue to work this space. We are continuing to be selective in the transactions we carry out. Have I seen increased activity? I think the answer is generally yes. But probably more tire kicking than actual getting results. So but there has been a couple of transactions that are closed previously. Oliver Nygard from SEB. Following up a bit on the last questions. A month ago, we saw Point buying an asset package from Exxon. I'm curious to hear your reflections on that specific deal. And was it the assets, the price or the combination of the two that didn't make Acre BP the highest bidder on those? Well, first of all, I'm really happy at point one. So I'm looking forward to the competition. I truly believe that the increased competition on the Norwegian continental shelf is a positive for all parties, and we really welcome that competition. And then there was a number of factors that made that acquisition not the right acquisition for Aker BP, but I won't dive into details on our assessment of neither the field nor the acquisition target. All right. On Filakudi, you said Hofstad and Hari have lower COS after the Filakudi discovery. Can you say something about the risk or the chance of success you're putting on those two prospects? I think our interest in drilling those wells indicate that we are optimistic as to the changes chance of discovery. And then I'll leave it to the operator to communicate the facts and figures surrounding those. But we are clearly more optimistic now than we were previous to the Filikudu discovery. And so higher COS, not lower? Sorry about that. Lastly, on DD and A. Last few quarters, we have seen DD and A per barrel of around $14 per barrel. Should we expect the same level going forward? Or any changes to that? Yes. No, we would expect to be in that neighborhood going forward, yes. You. Taylor Riesen. One question on production. You clearly outlined that first quarter production was very strong. And also, do you expect production to come in, in that, Brendon, current guiding? What kind of production do we need to see in the second quarter to trigger increased guiding? If you see, like This is a difficult question. So this is one for you, Alexander. Yes. No. So hard to say, and it would be depend on which fields you would see higher or lower production. But given obviously, the strong production has been from the Alvheim area predominantly, and the Viper Cobra wells have been producing tremendously. So that is the big reason for the hike. Will you see a decrease in production or increased water in that field, monitoring that will be important. And then also, we still have when maintenance season is coming up and how many days will be shut down on Valhall and Skarv in the third quarter are still uncertain factors. So hard to say it a little on which fields to what level and what will that mean in terms of updating the guidance. It's hard to give an answer today on that one. Well, let's say, will be 145,000 barrels in the second quarter as well. Could that justify to increase the guiding? Yes, that would be a good argument for increasing the guiding if we can stick with the same production in the second quarter, obviously. Okay. And then on the well currently being drilled. Do you think you will be in a position to provide an updated resource estimate after that well? Or do we need more wells to see a new resource estimate? Well, that definitely depends on the results on the Gotha exploration well. The target, of course, within the press well is to reduce the uncertainty level in the estimates. So it's definitely my hope that after results of these wells, we'll see a reduction in uncertainty levels at Gotham. Okay. And then finally from me, you mentioned that you're currently acquiring a lot of seismic. Just to put that in perspective, how many how much seismic did you acquire last year in terms of kilometers compared to what you acquired year to date? Last year, we did not acquire seismic on Aker BP Keel, but we did acquire seismic as part of group shoots. And I think this is about 3x as much this year as last year. Okay. And what do you pay compared to what you did last year? That's a good question. Significantly less is the generic answer. Okay. Thank you. Okay. We'll take questions from the web starting with Rafal Goutaj at Bank of America Merrill Lynch. Can you comment on the progress around capacity testing on the Evergrig facilities? And how much of a factor this was in your strong production from the Ivara Ossen field? And secondly, can you comment on what is impacting your operations efficiency on some of the assets like Valhall, Ula and Ivarosun? Okay. When it comes to capacity testing at Edvard Grieg, I'll leave that to the operator of the Edvard Grieg field. But there are obviously activities ongoing. When it comes to being ahead of schedule on Ivorosn, it's not much of an impact so far as we're currently filling the contractual obligation contractual relationship between Evarosen and Edvard Grieg. The ramp up has been more the increase in ramp up has been more due to much higher production efficiency in the quarter than we assumed. And then what is impacting operational efficiency? Well, both on Valhall and at Ula, we are carrying out a lot of well work, particularly related to on Ula to reclaim Vag efficiency, which have had a positive impact on production and get gas injectors back on production and also get high pressure gas producers into the facility. That has meant that we've had to do significant testing on the facilities and thus reducing the production efficiency, but increasing production. On Valhall, it's also impacted by significant well work. Again, this is related to shutdown activities of wells that are meant to increase production in the quarters to come. And then I think it's important to say that when we regard production efficiency, there are basically four chokes. So you've got the well, you've got the transport systems, you've got the production facility and the exports. We are carrying out a significant amount of well work in order to increase production and thus impacting production efficiency. Operational efficiency in these two assets are on the rise and will continue to be on the rise in the years to come as we are honing the operational discipline and operational efficiency in these two assets. But we are going to continue well work activity, and we are going to continue modification and maintenance activity where we can see a value increasing potential. Think Okay. Those were the two Yes. And then we'll move on to Nikky Kuzmanov at Jefferies. Question number one, Volleun. What has been behind the 85% sequential decline quarter on quarter? And what is the scope to increase production post the two infill wells offsetting some of the expected Vipokobra declines? Vaipokobra is produced through the same manifold. They're two different licenses. So there exists a contractual right of production between the Vaipokobra license and Alvheim license owning the Vaipokobra. The reduction is due to an increase in production capacity on behalf of Waipa Cobra across the Valhoun Manifoil. So it's a pure contractual production optimization scheme and not related to reservoir performance across that pipeline. And so that is the explanation for why this is the Wollong production has decreased significantly. And then, of course, as the Wallen infill wells come onstream and are able to backfill the production pipeline with oil rather than water, we will optimize the situation across the Wallen Manifold to make sure that production is as high as possible. And obviously, new wells at Valhoun will increase the Valhoun production potential and decrease the water cut at Valhoun, allowing optimization across the Valhoun manifold. So that's a good catch. Okay. And I guess a question on capital structure again. What are the main drivers behind your thoughts on forward capital structure and increasing the USD $250,000,000 per annum dividend floor? Effectively, what are the things that you're waiting for before committing to a capital structure in the interim before Johan Sverdrup? So questions about oil prices, Ivaros and ramp up inorganic opportunities and so on. Yes. I think it would be pretty much the same answer as Anders to his question. So not waiting on anything specific, but again, it's about finding the right capital structure, which has that flexibility. And then Niki mentioned many of the items that impacts the thinking around that. So not waiting for something specific in that regard to know. And the dividend floor, I think we've commented on before as well. For now, it's a floor that's set. It was set before Christmas, and the thinking hasn't changed around keeping that floor. One more question from Rafal Gataj at BAML regarding Sveidrip. Could you comment on what you're seeing from the vertical well penetrations on Johan Sveidrip? Are these showing you any potential for reservoir volume uplift? Okay. Well, I think I'll leave it to Sato to comment on performance from the well penetrations at Svalbard, but I'll just leave a general comment that we're quite pleased with both the drilling performance and the results from the well. Okay. And a question from Alwyn Thomas at Exane related to Ivaros and then grid capacity again. But the question is, how is the capacity sharing with Evergrig working so far? And is there any opportunity to reach plateau earlier? Well, generally, we have an excellent relationship between Edvard Grieg and Ivaros. And from an operational perspective, I think this is as good as it we can hope it become this almost a seamless process between the two offshore operations. And then we are continuing to participate and work on production optimization of the total process scheme across the two platforms. And then we'll see towards the after summer, whether or not we're able to increase production above the contractual ramp up that are coming now in 10/01/2017. So I'll come back to that question towards the end of the summer. Okay. I think the other questions have been answered around those themes. So that concludes our web questions.